EXECUTION COPY
EXHIBIT 10.28
CDRJ NORTH ATLANTIC (LUX) S.aR.L.
REGISTRATION AND PARTICIPATION AGREEMENT
Dated as of May 20, 2003
Table of Contents
Page
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1. Background.............................................................................................. 1
2. Definitions............................................................................................. 3
3. Registration............................................................................................ 7
3.1. Registration on Request........................................................................ 7
(a) Requests.............................................................................. 7
(b) Obligation to Effect Registration..................................................... 7
(c) Registration Statement Form........................................................... 8
(d) Expenses.............................................................................. 8
(e) Inclusion of Other Securities......................................................... 9
(f) Effective Registration Statement...................................................... 9
(g) Pro Rata Allocation................................................................... 9
3.2. Incidental Registration........................................................................ 10
3.3. Registration Procedures........................................................................ 12
3.4. Underwritten Offerings......................................................................... 17
(a) Underwritten Offerings Exclusive...................................................... 17
(b) Underwriting Agreement................................................................ 17
(c) Selection of Underwriters............................................................. 18
(d) Incidental Underwritten Offerings..................................................... 18
(e) Hold Back Agreements.................................................................. 18
(f) Cooperation........................................................................... 19
3.5. Preparation; Reasonable Investigation.......................................................... 19
3.6. Other Registrations............................................................................ 19
3.7. Indemnification................................................................................ 20
(a) Indemnification by the Company........................................................ 20
(b) Indemnification by the Sellers........................................................ 21
(c) Notices of Claims, etc................................................................ 22
(d) Other Indemnification................................................................. 22
(e) Other Remedies........................................................................ 22
(f) Officers and Directors................................................................ 23
(g) Indemnification Payments.............................................................. 23
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Table of Contents
(continued)
Page
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4. Participation Rights.................................................................................... 23
5. Miscellaneous........................................................................................... 25
5.1. (a) Rule 144.................................................................................. 25
(b) Legend on Stock Certificates.......................................................... 25
5.2. Amendments and Waivers......................................................................... 26
5.3. Nominees for Beneficial Owners................................................................. 26
5.4. Successors, Assigns and Transferees............................................................ 27
5.5. Notices........................................................................................ 27
5.6. No Inconsistent Agreements..................................................................... 29
5.7. Remedies; Attorneys' Fees...................................................................... 29
5.8. Stock Splits, etc.............................................................................. 29
5.9. Term........................................................................................... 29
5.10. Severability................................................................................... 29
5.11. Headings....................................................................................... 30
5.12. Counterparts................................................................................... 30
5.13. Governing Law.................................................................................. 30
5.14. No Third Party Beneficiaries................................................................... 30
5.15. Consent to Jurisdiction........................................................................ 30
5.16. Waiver of Jury Trial........................................................................... 30
5.17. Entire Agreement............................................................................... 30
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REGISTRATION AND PARTICIPATION AGREEMENT
REGISTRATION AND PARTICIPATION AGREEMENT, dated as of May 20, 2003,
among CDRJ North Atlantic (Lux) S.ar.l., a Luxembourg societe a responsabilite
limitee (together with its successors and permitted assigns, the "Company"),
▇▇▇▇▇▇▇, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands exempted
limited partnership (together with any successor investment vehicle managed by
▇▇▇▇▇▇▇, Dubilier & Rice, Inc., the "CD&R Fund") and the other undersigned
parties hereto.
1. Background. (a) The Company was formed as an intermediate holding
company in the corporate structure organized to acquire the Jafra Cosmetics
International business in 1998. As of the date hereof, the Company, its
subsidiaries and its former parent company, CDRJ Investments (Lux) S.A., a
Luxembourg societe anonyme ("CDRJ"), initiated a corporate reorganization (the
"Reorganization") whereby, among other things, direct and indirect subsidiaries
of the Company borrowed funds, using the proceeds thereof to repay outstanding
indebtedness and distributing proceeds remaining after such repayment to the
Company, which the Company thereafter distributed to CDRJ. The shareholders of
CDRJ then caused CDRJ to begin liquidation proceedings under Luxembourg law (the
"Liquidation") and distribute to them a portion of such proceeds. It is expected
that at the completion of the Liquidation (the "Effective Time"), the
shareholders of CDRJ will approve the final Liquidation report resulting in the
termination of the Liquidation proceedings, the dissolution of CDRJ and the
distribution to the shareholders of CDRJ the shares of Common Stock of the
Company, among other things. It is expected that, prior to the Effective Time,
the Company will convert its corporate form into a societe anonyme.
(b) In connection with the Reorganization and the Liquidation,
CDRJ has assigned to the Company several stock subscription agreements entered
into between CDRJ and its shareholders, including (i) a Stock Subscription
Agreement, dated as of April 30, 1998 (the "Fund Stock Subscription Agreement"),
between CDRJ and the CD&R Fund, pursuant to which CDRJ issued 769,600 shares of
its common stock to the CD&R Fund; (ii) separate Management Stock Subscription
Agreements (the "Management Stock Subscription Agreements"), between CDRJ and
certain senior executives or key employees of Jafra Cosmetics International,
Inc., a Delaware corporation and an indirect wholly-owned subsidiary of the
Company ("Jafra US"), or of one of its subsidiaries or affiliates (the
"Management Purchasers") and (iii) separate stock subscription agreements with
Individual Investors (the "Individual Investor Stock Subscription Agreements").
(c) As of the date hereof, Jafra US is a party to separate
Management Stock Option Agreements (the "Management Stock Option Agreements")
between Jafra US and each Management Purchaser covering options to acquire from
Jafra US up to an aggregate of 84,242 shares of common stock of CDRJ, which are
backstopped by an
Amended and Restated Stock Purchase Warrant, dated as of September 30, 1998 (the
"Warrant"), that obligates CDRJ to issue shares of its common stock to Jafra US
in order for Jafra US to be able to satisfy its obligations under the Management
Stock Option Agreements. The Company has assumed all of the obligations of CDRJ
under the Management Stock Option Agreements and has entered into a new warrant
substantially similar to the Warrant in connection with the Reorganization and
the Liquidation.
(d) The Company may in the future issue or sell shares of Common
Stock to certain directors, executives and key employees of Jafra US or one of
its subsidiaries or affiliates (the "Subsequent Management Purchasers") and
additional shares of Common Stock to certain Individual Investors or other
purchasers ("Subsequent Purchasers"), in each case, pursuant to appropriate
forms of stock subscription agreements (the "Subsequent Stock Subscription
Agreements"), or the Company or Jafra US may grant options or other rights to
purchase additional shares of Common Stock to Management Purchasers, Subsequent
Management Purchasers or Subsequent Purchasers pursuant to appropriate forms of
stock option agreements, plans or arrangements (the "Subsequent Stock Option
Agreements").
(e) The Management Purchasers, the Individual Investors, the
Subsequent Management Purchasers, the Subsequent Purchasers and any trusts
holding shares of Common Stock or options to purchase shares of Common Stock for
the benefit of relatives of any Management Purchaser, Individual Investor,
Subsequent Management Purchaser or Subsequent Purchaser who is an employee or
director of the Company or one of its subsidiaries are referred to herein
collectively as the "Management Investors." The Fund Stock Subscription
Agreement, the Management Stock Subscription Agreements, the Subsequent Stock
Subscription Agreements, the Individual Investor Stock Subscription Agreements,
the Management Stock Option Agreements and the Subsequent Stock Option
Agreements are referred to herein collectively as the "Stock Subscription
Agreements."
(f) This Agreement shall become effective only as of the Effective
Time with respect to any Registrable Securities (as hereinafter defined) upon
the issuance or sale of Common Stock to any party pursuant to any Stock
Subscription Agreement that provides such Common Stock shall be Registrable
Securities, it being understood that, with respect to Registrable Securities to
be issued in the future, any such Stock Subscription Agreement will provide that
the shares of Common Stock sold thereunder are entitled to the rights and
subject to the obligations created hereunder, provided that such issuance or
sale shall have been consented to in writing by the Board of Directors of the
Company (the "Board").
NOW, THEREFORE, the parties hereto hereby agree as follows:
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2. Definitions. For purposes of this Agreement, the following terms
have the following respective meanings:
"Affiliate": With respect to any Person, any other Person
directly or indirectly Controlling, Controlled by or under common
Control with such first Person, provided that any director or member of
management or other employee of the Company or any of its subsidiaries
shall not be deemed to be an Affiliate of the CD&R Fund.
"Board": See Section 1(f).
"Business Day": A day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required to close.
"CD&R": ▇▇▇▇▇▇▇, Dubilier & Rice, Inc., a Delaware
corporation.
"CD&R Fund": See the introduction to this Agreement.
"CDRJ": See Section 1(a).
"Common Stock": The common stock, par value $2.00 per share of
the Company.
"Company": See the introduction to this Agreement.
"Control": The power to direct the affairs of a Person by
reason of ownership of voting stock, by control or otherwise.
"Effective Time": See Section 1(a).
"Excess Number": See Section 4(b).
"Exchange Act": The Securities Exchange Act of 1934, as
amended, or any successor Federal statute, and the rules and
regulations thereunder which shall be in effect at the time. Any
reference to a particular section thereof shall include a reference to
the corresponding section, if any, of any successor Federal statute,
and the rules and regulations thereunder.
"Fund Stock Subscription Agreement": See Section 1(b).
"Individual Investors": Directors or senior executives of
corporations in which entities managed or sponsored by ▇▇▇▇▇▇▇,
Dubilier & Rice, Inc. have or have had investments or other individuals
designated by CD&R as "friends of the firm."
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"Individual Investor Stock Subscription Agreement": See
Section 1(b).
"Jafra US": See Section 1(b).
"Liquidation": See Section 1(a).
"Management Investors": See Section 1(e).
"Management Purchasers": See Section 1(b).
"Management Stock Option Agreement": See Section 1(c).
"Management Stock Subscription Agreements": See Section 1(b).
"NASDAQ": The NASD Automated Quotation System.
"Person": Any natural person, firm, partnership, association,
corporation, company, trust, business trust, governmental entity or
other entity and any successor (by merger or otherwise) of such entity.
"Public Market": A "Public Market" for the Company's Common
Stock shall be deemed to have been established at such time as 30% of
the Common Stock (on a fully diluted basis) has been sold to the public
pursuant to an effective registration statement under the Securities
Act or pursuant to Rule 144.
"Public Offering": An underwritten public offering of Common
Stock led by at least one underwriter of nationally recognized
standing.
"Qualifying Number": 38,142 shares of Common Stock (excluding
any sales or transfers by the CD&R Fund to Management Investors and
Individual Investors).
"Qualifying Sale": See Section 4(b).
"Registrable Securities": (a) Any shares of Common Stock
issued pursuant to any Stock Subscription Agreement, including any
Common Stock received as a liquidating distribution for shares of CDRJ
initially issued pursuant to a Stock Subscription Agreement and any
shares of Common Stock delivered by Jafra US upon exercise of options
granted pursuant to the Warrant and Management Stock Option Agreements
or the Subsequent Stock Option Agreements, if such Stock Subscription
Agreement provides that such Common Stock shall be Registrable
Securities, except for any such Common Stock issued pursuant to an
effective registration statement under the Securities Act on Form ▇-▇,
▇▇▇▇ ▇-▇, Form S-1 or any successor form to any thereof (unless such
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Common Stock is held by a Management Investor who is an Affiliate of
the Company), (b) any shares of Common Stock issued pursuant to the
terms of, and under the circumstances set forth in, Section 5, and (c)
any securities issued or issuable with respect to any Common Stock
referred to in the foregoing clauses (i) upon any conversion or
exchange thereof, (ii) by way of stock dividend or stock split, (iii)
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or (iv) otherwise, in all cases
subject to the penultimate paragraph of Section 3.3. As to any
particular Registrable Securities, once issued, such securities shall
cease to be Registrable Securities when (A) a registration statement
(other than a Special Registration pursuant to which such securities
were issued by the Company to a Management Investor who is an Affiliate
of the Company) with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement,
(B) such securities shall have been distributed to the public in
reliance upon Rule 144, (C) subject to the relevant provisions of the
Company's Articles of Incorporation and the Stock Subscription
Agreement pursuant to which such securities shall have been issued,
such securities shall have been otherwise transferred, new certificates
for such securities not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent disposition of
such securities shall not require registration or qualification of such
securities under the Securities Act or any similar state law then in
force, (D) except for purposes of Sections 4 and 5, such securities
have been held, or deemed, by virtue of tacking holding periods as
contemplated by Rule 144, to be held for a period of two years by a
Person who is not an Affiliate of the Company, (E) such securities
shall have ceased to be outstanding, (F) except for purposes of
Sections 4 and 5, with respect to any such securities acquired by a
Management Investor pursuant to the exemption from the registration
requirements of the Securities Act contained in Rule 701 (or any
successor provision) thereunder, at any time following the date the
Company registers a class of equity securities under Section 12 of the
Exchange Act so long as such Management Investor is not a "affiliate"
of the Company within the meaning of such Rule or (G) except for
purposes of Sections 4 and 5, the Company shall have registered the
Common Stock under Section 12 of the Exchange Act and such securities
are held by a Person who is not an Affiliate of the Company; provided
that (x) for purposes of clauses (D) and (G) above, (1) securities held
by a Person who was not an Affiliate of the Company at the time of the
event specified in such clauses but who thereafter becomes an Affiliate
of the Company shall be and remain Registrable Securities for so long
as such Person is an Affiliate of the Company and (2) securities held
by a Person who was an Affiliate of the Company at the time of the
event specified in such clauses shall remain Registrable Securities for
only so long as such Person remains an Affiliate of the Company and (y)
with respect to any securities that were formerly Registrable
Securities the Board may, under such circumstances as
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it deems appropriate, designate such securities as Registrable
Securities for purposes of this Agreement.
"Registration Expenses": All expenses incident to the
Company's performance of its obligations under or compliance with
Section 3, including, but not limited to, all registration and filing
fees, all fees and expenses of complying with securities or blue sky
laws, all fees and expenses associated with listing securities on
exchanges or NASDAQ, all fees and other expenses associated with
filings with the NASD (including, if required, the fees and expenses of
any "qualified independent underwriter" and its counsel), all printing
expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, and the expenses of any special
audits made by such accountants required by or incidental to such
performance and compliance and the fees and disbursements of one law
firm (but not more than one) retained by the holders holding a majority
(by number of shares) of the Registrable Securities but not including
any underwriting discounts or commissions or any transfer taxes payable
in respect of the sale of Registrable Securities by the holders
thereof.
"Reorganization": See Section 1(a).
"Requisite Percentage of Stockholders": The holder or holders
of at least (a) as to the initial request under Section 3.1, 50% (by
number of shares) of the Registrable Securities held at the time
outstanding or (b) as to any other request, 20% (by number of shares)
of the Registrable Securities at the time outstanding.
"Rule 144": Rule 144 (or any successor provision) under the
Securities Act.
"Rule 144A": Rule 144A (or any successor provision) under the
Securities Act.
"Sale Notice": See Section 4(a).
"Securities Act": The Securities Act of 1933, as amended, or
any successor Federal statute, and the rules and regulations thereunder
which shall be in effect at the time. Any reference to a particular
section thereof shall include a reference to the corresponding section,
if any, of any successor Federal statute, and the rules and regulations
thereunder.
"Securities and Exchange Commission": The Securities and
Exchange Commission or any other Federal agency at the time
administering the Securities Act or the Exchange Act.
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"Special Registration": (a) The registration of shares of
equity securities and/or options or other rights in respect thereof to
be offered to directors, members of management, employees, consultants
or sales agents, distributors or similar representatives of the Company
or its direct or indirect Subsidiaries or Individual Investors or (b)
the registration of equity securities and/or options or other rights in
respect thereof solely on Form S-4 or S-8 or any successor form.
"Stock Subscription Agreements": See Section 1(e).
"Subsequent Management Purchasers": See Section 1(d).
"Subsequent Purchasers": See Section 1(d).
"Subsequent Stock Option Agreements": See Section 1(e).
"Subsequent Stock Subscription Agreements": See Section 1(d).
"Subsidiary": With respect to any Person, any corporation or
Person, a majority of the outstanding voting stock or other equity
interests of which is owned, directly or indirectly, by that Person.
3. Registration.
3.1. Registration on Request.
(a) Requests. Subject to the provisions of Section 3.6, at any
time or from time to time the Requisite Percentage of Stockholders shall have
the right to make one or more written requests that the Company effect the
registration under the Securities Act of all or part of the Registrable
Securities of the holder or holders making such request, which requests shall
specify the intended method of disposition thereof by such holder or holders and
the approximate number of Registrable Securities requested to be registered.
(b) Obligation to Effect Registration. Upon receipt by the Company
of any request for registration pursuant to Section 3.1(a), the Company will
promptly give written notice of such requested registration to all holders of
Registrable Securities, and thereupon will use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register pursuant to Section 3.1(a), and
(ii) all other Registrable Securities which the Company
has been requested to register by the holders thereof by written
request given to the Company within 30 days after the Company has given
such written notice (which
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request shall specify the intended method of disposition of such
Registrable Securities),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the preceding sentence:
(x) the Company shall not be required to effect a registration
requested pursuant to Section 3.1 if the aggregate number of
Registrable Securities referred to in clauses (i) and (ii) of this
Section 3.1(a) included in such registration shall be less than 20% of
the Registrable Securities at the time outstanding; and
(y) if the Board determines in its good faith judgment, after
consultation with a firm of nationally recognized underwriters, that
there will be an adverse effect on a then contemplated initial public
offering of the Common Stock, the Requisite Percentage of Stockholders
shall be given notice of such fact and shall be deemed to have
withdrawn such request and such registration shall not be deemed to
have been effected or requested pursuant to this Section 3.1.
(c) Registration Statement Form. Each registration requested
pursuant to this Section 3.1 shall be effected by the filing of a registration
statement on Form S-1, Form S-2 or Form S-3 (or any other form which includes
substantially the same information as would be required to be included in a
registration statement on such forms as presently constituted), unless the use
of a different form is (i) required by law or (ii) permitted by law and agreed
to in writing by holders holding at least a majority (by number of shares) of
the Registrable Securities as to which registration has been requested pursuant
to this Section 3.1. At any time after the Company has issued and sold any
shares of its capital stock registered under an effective registration statement
under the Securities Act, or after the Company shall have registered any class
of equity securities pursuant to Section 12 of the Exchange Act, it will use its
best efforts to qualify for registration on Form S-2 or Form S-3 (or any other
comparable form hereinafter adopted). If the holders of a majority (by number of
shares) of the Registrable Securities proposed to be sold in such registration
(or, if such registration involves an underwritten public offering, the managing
underwriter) shall notify the Company in writing that, in the judgment of such
holders (or, if applicable, such managing underwriter), the inclusions of
additional information not required by Form S-2 or Form S-3 as specified in such
notice is material importance to the success of the public offering of such
Registrable Securities, such information shall be so included.
(d) Expenses. The Company will pay all Registration Expenses in
connection with the first three registrations which are effected as requested
under Section 3.1(a). The Registration Expenses in connection with each other
registration, if any, requested under this Section 3.1 shall be apportioned
among the holders whose Registrable
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Securities are then being registered, on the basis of the respective amounts (by
number of shares) of Registrable Securities then being registered by them or on
their behalf. However, in the case of all registrations requested under Section
3.1(a), the Company shall pay all amounts in respect of (i) any allocation of
salaries of personnel of the Company and its Subsidiaries or other general
overhead expenses of the Company and its Subsidiaries or other expenses for the
preparation of financial statements or other data normally prepared by the
Company and its Subsidiaries in the ordinary course of its business, (ii) the
expenses of any officers' and directors' liability insurance, (iii) the expenses
and fees for listing the securities to be registered on each exchange on which
similar securities issued by the Company are then listed or, if no such
securities are then listed, on an exchange selected by the Company and (iv) all
fees associated with filings required to be made with the NASD (including, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel as may be required by the rules and regulations of the NASD).
Notwithstanding the provisions of this Section 3.1(d) or of Section 3.2, each
seller of Registrable Securities shall pay all Registration Expenses to the
extent required to be paid by such seller by applicable law.
(e) Inclusion of Other Securities. The Company shall not register
securities (other than Registrable Securities) for sale for the account of any
Person other than the Company in any registration requested pursuant to Section
3.1(a) unless permitted to do so by the written consent of holders holding at
least a majority (by number of shares) of the Registrable Securities proposed to
be sold in such registration.
(f) Effective Registration Statement. A registration requested
pursuant to Section 3.1(a) will not be deemed to have been effected unless it
has become effective for the period specified in Section 3.3(b). Notwithstanding
the preceding sentence, a registration requested pursuant to Section 3.1(a)
which does not become effective after the Company has filed a registration
statement with respect thereto solely by reason of the refusal to proceed of the
holder or holders of Registrable Securities requesting the registration shall be
deemed to have been effected by the Company at the request of such holder or
holders.
(g) Pro Rata Allocation. If the holders of a majority (by number
of shares) of the Registrable Securities for which registration is being
requested pursuant to Section 3.1(a) determine, based on consultation with the
managing underwriters or, in an offering which is not underwritten, with an
investment banker, that the number of securities to be sold in any such offering
should be limited due to market conditions or otherwise, then (x) all holders of
Registrable Securities proposing to sell their securities in such registration
shall share pro rata in the number of securities being offered (as determined by
the holders holding a majority (by number of shares) of the Registrable
Securities for which registration is being requested in consultation with the
managing underwriters or investment banker, as the case may be) and registered
for their account, such sharing to be based on the number of Registrable
Securities as to which registration
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was requested by such holders, respectively and (y) thereafter, if permitted
hereunder, other securities requested to be included in such request shall be
included in a manner determined by the Company.
3.2. Incidental Registration. If the Company at any time proposes
to register any of its equity securities (as defined in the Exchange Act) under
the Securities Act (other than pursuant to Section 3.1 or pursuant to a Special
Registration), whether or not for sale for its own account, and the registration
form to be used may be used for the registration of Registrable Securities, it
will each such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under this
Section and, upon the written request of any holder of Registrable Securities
given to the Company within 30 days after the Company has given any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such holder and the intended method of disposition thereof), the Company
will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register
by the holders thereof, to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, provided that:
(a) if such registration shall be in connection with the
initial public offering of Common Stock, the Company shall not include
any Registrable Securities in such proposed registration if the Board
shall have determined, after consultation with the managing
underwriters for such offering, that it is not in the best interests of
the Company to include any Registrable Securities in such registration,
provided that, if the Board makes such a determination, the Company
shall not include in such registration any securities not being sold
for the account of the Company;
(b) if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of
such determination to each holder of Registrable Securities or other
securities that was previously notified of such registration and,
thereupon, shall not register any Registrable Securities in connection
with such registration (but shall nevertheless pay the Registration
Expenses in connection therewith), without prejudice, however, to the
rights of any holder or holders of Registrable Securities to request
that a registration be effected under Section 3.1;
(c) if the Company shall be advised in writing by the
managing underwriters (or, in connection with an offering which is not
underwritten, by an investment banker) (and the Company shall so advise
each holder of Registrable Securities requesting registration of such
advice) that in their or its opinion the
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number of securities requested to be included in such registration
(whether by the Company, pursuant to this Section 3.2 or pursuant to
any other rights granted by the Company to a holder or holders of its
securities to request or demand such registration or inclusion of any
such securities in any such registration) exceeds the number of such
securities which can be sold in such offering,
(i) the Company shall include in such
registration the number (if any) of Registrable Securities so
requested to be included which in the opinion of such
underwriters or investment banker, as the case may be, can be
sold and shall not include in such registration any securities
(other than securities being sold by the Company, which shall
have priority in being included in such registration) so
requested to be included other than Registrable Securities
unless all Registrable Securities requested to be so included
are included therein, and
(ii) if in the opinion of such underwriters or
investment banker, as the case may be, some but not all of the
Registrable Securities may be so included, all holders of
Registrable Securities requested to be included therein shall
share pro rata in the number of shares of Registrable
Securities included in such public offering on the basis of
the number of Registrable Securities requested to be included
therein by such holders, provided that, in the case of a
registration initially requested or demanded by a holder or
holders of securities other than Registrable Securities, the
holders of the Registrable Securities requested to be included
therein and the holders of such other securities shall share
pro rata (based on the number of shares if the requested or
demanded registration is to cover only Common Stock and, if
not based on the proposed offering price of the total number
of securities included in such public offering requested to be
included therein),
and the Company shall so provide in any registration agreement
hereinafter entered into with respect to any of its securities; and
(d) if prior to the effective date of the registration
statement filed in connection with such registration, the Company is
informed by the managing underwriter (or, in connection with an
offering which is not underwritten, by an investment banker) that the
price at which such securities are to be sold is a price below that
price which the Requesting Holders shall have indicated to be
acceptable, the Company shall promptly notify the Requesting Holders of
such fact, and each such Requesting Holder shall have the right to
withdraw its request to have its Registrable Securities included in
such registration statement.
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The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 3.2.
No registration effected under this Section 3.2 shall relieve the Company from
its obligation to effect registrations upon request under Section 3.1.
3.3. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 3.1 and 3.2, the
Company will promptly:
(a) subject to clauses (x) and (y) of Section 3.1(b),
prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities, make all
required filings with the NASD and use best efforts to cause such
registration statement to become effective;
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith and such
other documents as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such registration
statement, but in no event for a period of more than six months after
such registration statement becomes effective;
(c) furnish to counsel (if any) selected by the holders
of a majority (by number of shares) of the Registrable Securities
covered by such registration statement copies of all documents proposed
to be filed with the Securities and Exchange Commission in connection
with such registration, which documents will be subject to the review
of such counsel;
(d) furnish to each seller of such securities, without
charge, such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case,
including all exhibits and documents filed therewith (other than those
filed on a confidential basis), except that the Company shall not be
obligated to furnish any seller of securities with more than two copies
of such exhibits and documents), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus) in conformity with
the requirements of the Securities Act, and such other documents, as
such seller may reasonably request in order to facilitate the
disposition of the securities owned by such seller;
12
(e) use its best efforts (x) to register or qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
request, (y) to keep such registration or qualification in effect for
so long as such registration statement remains in effect and (z) to do
any and all other acts and things which may be necessary or advisable
to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified, subject itself to taxation in any jurisdiction
wherein it is not so subject, or take any action which would subject it
to general service of process in any jurisdiction wherein it is not so
subject;
(f) in connection with an underwritten public offering
only, furnish to each seller a signed counterpart, addressed to the
sellers, of
(i) an opinion of counsel for the Company
experienced in securities law matters, dated the effective
date of the registration statement and dated the date of the
closing under the underwriting agreement, and
(ii) a "comfort" letter, dated the effective date
of the registration statement (and the date of closing under
the underwriting agreement) signed by the independent public
accountants who have issued an audit report on the Company's
financial statements included in the registration statement,
subject to such seller having executed and delivered to the
independent public accountants such certificates and documents
as such accountants shall reasonably request and provided that
such accountants shall be permitted by the standards
applicable to certified public accountants to deliver a
"comfort" letter to such seller,
covering substantially the same matters with respect to the
registration statement (and the prospectus included therein) and, in
the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of securities;
(g) (i) notify each holder of Registrable Securities
covered by such registration statement if such registration statement,
at the time it or any amendment thereto became effective, (x) contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading upon discovery by the Company of such material
misstatement or omission or (y) upon discovery by the Company of the
happening of any event as a result of which the Company
13
believes there would be such a material misstatement or omission, and,
as promptly as practicable, prepare and file with the Securities and
Exchange Commission a post-effective amendment to such registration
statement and use best efforts to cause such post-effective amendment
to become effective such that such registration statement, as so
amended, shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii)
notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, if the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, upon discovery by the Company of such material misstatement
or omission or upon discovery by the Company of the happening of any
event as a result of which the Company believes there would be a
material misstatement or omission, and, as promptly as is practicable,
prepare and furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement of the Company complying
with the provisions of Section 11(a) of the Securities Act and Rule 158
under the Securities Act;
(i) notify each seller of any securities covered by such
registration statement (i) when such registration statement, or any
post-effective amendment to such registration statement, shall have
become effective, or any amendment of or supplement to the prospectus
used in connection therewith shall have been filed, (ii) of any request
by the Securities and Exchange Commission to amend such registration
statement or to amend or supplement such prospectus or for additional
information, (iii) of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of such
registration statement or of any order preventing or suspending the use
of any preliminary prospectus, and (iv) of the suspension of the
qualification of such securities for offering or sale in any
jurisdiction, or of the institution of any proceedings for any of such
purposes;
14
(j) use its best efforts (i) (A) to list such securities
on any securities exchange on which the Common Stock is then listed or,
if no Common Stock is then listed, on an exchange selected by the
Company, if such listing is then permitted under the rules of such
exchange or (B) if such listing is not practicable or the Board
determines that quotation as a NASDAQ National Market System security
is preferable, to secure designation of such securities as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1
under the Exchange Act and (ii) to provide and cause to be maintained a
transfer agent and registrar for such Registrable Securities not later
than the effective date of such registration statement;
(k) use every reasonable effort to obtain the lifting of
any stop order that might be issued suspending the effectiveness of
such registration statement or of any order preventing or suspending
the use of any preliminary prospectus or suspending the qualification
or any securities included in such registration statement for sale in
any jurisdiction, provided that if the Company is unable to obtain the
lifting of any such stop order in connection with a registration
pursuant to Section 3.1(a), the request for registration shall not be
deemed exercised for purposes of determining whether such registration
has been effected for purposes of Section 3.1(a) or (d);
(l) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter,
material financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information, and
participate in due diligence sessions, in each case reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(m) permit any holder of Registrable Securities which
holder, in its sole and exclusive judgment, might be deemed to be an
underwriter or a controlling person of the Company, to participate in
the preparation of such registration or comparable statement and to
require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such holder and its
counsel and the Company and its counsel should be included; and
(n) use its commercially reasonable best efforts to cause
such Registrable Securities covered by such registration statement to
be registered with or approved by such other governmental agencies or
authorities as may be
15
necessary to enable the sellers thereof to consummate the disposition
of such Registrable Securities.
The Company may require each seller of any securities as to which any
registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith, which
refers to any seller of any securities covered thereby by name, or otherwise
identifies such seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably withheld unless
such disclosure is required by law, in which case (i) such seller shall be
promptly informed of any impending filing or amendment and (ii) no such consent
shall be required.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company pursuant to Section 3.3(g), such holder will promptly
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such holder
shall have received, in the case of clause (i) of Section 3.3(g), notice from
the Company that such registration statement has been amended, as contemplated
by Section 3.3(g), and, in the case of clause (ii) of Section 3.3(g), copies of
the supplemented or amended prospectus contemplated by Section 3.3(g). If so
directed by the Company, each holder of Registrable Securities will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, in such holder's possession of the prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event that the Company
shall give any such notice, the period mentioned in Section 3.3(b) shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 3.3(g).
Although shares of Common Stock issuable upon the exercise of options
are included in the definition of Registrable Securities, the Company shall, in
respect of any such Registrable Securities requested to be registered pursuant
hereto, be required to include in any registration statement only shares of
Common Stock issuable upon conversion of or pursuant to such Registrable
Securities and only if the Company has
16
received assurances, reasonably satisfactory to it, that such options will be
exercised promptly after such registration statement has become effective or the
sale to an underwriter has been consummated so that only Common Stock shall be
distributed to the public under such registration statement.
Notwithstanding any other provision of this Agreement, the parties
hereto acknowledge that the Company shall have no obligation to prepare or file
any registration statement prior to the time that financial information required
to be included therein is available for inclusion therein.
3.4. Underwritten Offerings. The provisions of this Section 3.4 do
not establish additional registration rights but instead set forth procedures
applicable, in addition to those set forth in Sections 3.1 through 3.3, to any
registration which is an underwritten offering.
(a) Underwritten Offerings Exclusive. Whenever a registration
requested pursuant to Section 3.1 is for an underwritten offering, only
securities which are to be distributed by the underwriters may be included in
the registration.
(b) Underwriting Agreement. If requested by the underwriters for
any underwritten offering by holders of Registrable Securities pursuant to a
registration requested under Section 3.1(a), the Company shall enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the holders of a majority
(by number of shares) of the Registrable Securities to be covered by such
registration and to the underwriters and to contain such representations and
warranties by the Company and such other terms and provisions as are customarily
contained in agreements of this type, including, but not limited to, indemnities
to the effect and to the extent provided in Section 3.7, provisions for the
delivery of officers' certificates, opinions of counsel and accountants'
"comfort" letters and hold-back arrangements. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the agreements on the part of, the
Company to and for the benefit of such underwriters be made to and for the
benefit of such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement shall also be conditions precedent to the obligations of
such holders of Registrable Securities. In the event that any condition to the
obligations under any such underwriting agreement are not met or waived, and
such failure to be met or waived is not attributable to the fault of the selling
stockholders requesting a demand registration pursuant to Section 3.1(a), such
request for registration shall not be deemed exercised for purposes of
determining whether such registration has been effected for purposes of Section
3.1(a) or (d). No holder of Registrable Securities shall be required by the
Company to make any representations or warranties to, or agreements with, the
Company
17
or the underwriters other than as set forth in Sections 3.4(e) and 3.7(b),
representations, warranties or agreements regarding such holder and such
holder's intended method of distribution and any other representations required
by applicable law.
(c) Selection of Underwriters. Whenever a registration requested
pursuant to Section 3.1(a) is for an underwritten offering, the Company will
have the right to select the managing underwriters to administer the offering,
which managing underwriters shall be underwriters of nationally recognized
standing. If the Company at any time proposes to register any of its securities
under the Securities Act for sale for its own account and such securities are to
be distributed by or through one or more underwriters, the Company will have the
right to select the managing underwriters to administer the offering, at least
one of which shall be an underwriter of nationally recognized standing.
(d) Incidental Underwritten Offerings. Subject to the provisions
of the proviso to the first sentence of Section 3.2, if the Company at any time
proposes to register any of its equity securities under the Securities Act
(other than pursuant to Section 3.1 or pursuant to a Special Registration),
whether or not for its own account, and such securities are to be distributed by
or through one or more underwriters, the Company will give prompt written notice
to all holders of Registrable Securities of its intention to do so and, if
requested by any holder of Registrable Securities, will use its best efforts to
arrange for such underwriters to include the Registrable Securities to be
offered and sold by such holder among those to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of the underwriters under such
underwriting agreement shall also be conditions precedent to the obligations of
such holders of Registrable Securities. No such holder of Registrable Securities
shall be required by the Company to make any representations or warranties to,
or agreements with, the Company or the underwriters other than as set forth in
Sections 3.4(e) and 3.7(b), representations, warranties or agreements regarding
such holder and such holder's intended method of distribution and any other
representations required by applicable law.
(e) Hold Back Agreements. If and whenever the Company proposes to
register any of its equity securities under the Securities Act, whether or not
for its own account (other than pursuant to a Special Registration), or is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 3.1 or 3.2, each holder
of Registrable Securities (whether or not such securities have ceased to be
Registrable Securities) agrees by acquisition of such Registrable Securities not
to effect (other than pursuant to such registration) any public sale or
distribution, including, but not limited to, any sale pursuant to Rule 144 or
18
Rule 144A, of any Registrable Securities, any other equity securities of the
Company or any securities convertible into or exchangeable or exercisable for
any equity securities of the Company for 180 days after, and during the 20 days
prior to, the effective date of such registration and the Company agrees to
cause each holder of any equity security, or of any security convertible into or
exchangeable or exercisable for any equity security, of the Company purchased
from the Company at any time other than in a Public Offering to enter into a
similar agreement with the Company. The Company further agrees not to effect
(other than pursuant to such registration or pursuant to a Special Registration)
any public sale or distribution, or to file any registration statement (other
than such registration or a Special Registration) covering any, of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, during the 20 days prior to, and for 180 days after, the
effective date of such registration if required by the managing underwriter.
(f) Cooperation. In connection with any underwritten offering that
includes any of the Registrable Securities, the Company shall participate fully,
and use its best efforts to cause its management to participate fully, in
efforts to sell the Registrable Securities under the offering (including,
without limitation, participating in "roadshow" meetings with prospective
investors) that would be customary for underwritten primary offerings of a
comparable amount of equity securities by the Company.
3.5. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of such
Registrable Securities so to be registered and their underwriters, if any, and
their respective counsel and accountants the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Securities and Exchange Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have issued audit reports on
its financial statements as shall be necessary, in the opinion of such holders'
and such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
3.6. Other Registrations. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 3.1 or 3.2, and if such
registration shall not have been withdrawn or abandoned, the Company shall not
be obligated to and shall not file any registration statement with respect to
any of its securities (including Registrable Securities) under the Securities
Act (other than a Special Registration), whether of its own accord or at the
request or demand of any holder or holders of such securities, until a period of
six months shall have elapsed from the effective date of such previous
registration; and the Company
19
shall so provide in any registration rights agreement with respect to any of its
equity securities.
3.7. Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any Registrable Securities under the Securities Act pursuant to
Section 3.1 or 3.2, the Company will and will cause each of its Subsidiaries to
agree to indemnify and hold harmless each seller of such securities, its
directors, officers, principals, members, partners, agents, advisors,
representatives, affiliates and employees, each other person who participates as
an underwriter, broker or dealer in the offering or sale of such securities and
each other person, if any, who controls such seller or any such participating
person within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, against any and all losses, claims, damages, expenses or
liabilities, joint or several ("Losses"), to which such seller or any such
director, officer, principals, members, partners, agents, advisors,
representatives, affiliates, employee, participating person or controlling
person may become subject under the Securities Act or otherwise (including,
without limitation, the reasonable fees and expenses of legal counsel incurred
in connection with any Loss), insofar as such Loss (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a fact contained in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein or related
thereto, or any amendment or supplement thereto, together with any document
incorporated therein by references; or (ii) any omission or alleged omission to
state a fact required to be stated in any such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company or any of its Subsidiaries of any
federal, state, foreign or common law rule or regulation and relating to action
or inaction in connection with any such registration, disclosure document or
other document, and the Company will reimburse such seller and each such
director, officer, principals, members, partners, agents, advisors,
representatives, affiliates, employee, participating person and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such Loss, action or proceeding,
provided that the Company shall not be liable in any such case to the extent
that any such Loss arises out of or is based upon an untrue statement or
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
seller or participating person expressly for use in the preparation thereof and
provided, further, that the Company shall not be liable in any such case to the
extent that any such Loss arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the prospectus, if
such untrue statement or alleged untrue statement or omission or alleged
omission is
20
completely corrected in an amendment or supplement to the prospectus and the
seller of Registrable Securities thereafter fails to deliver such prospectus as
so amended or supplemented prior to or concurrently with the sale of Registrable
Securities to the person asserting such Loss after the Company had furnished
such seller with a sufficient number of copies of the same or if the seller
received notice from the Company of the existence of such untrue statement or
alleged untrue statement or omission or alleged omission and the seller
continued to dispose of Registrable Securities prior to the time of the receipt
of either (A) an amended or supplemented prospectus which completely corrected
such untrue statement or omission or (B) a notice from the Company that the use
of the existing prospectus may be resumed. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or any such director, officer, employee, participating person or
controlling person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by the Sellers. In the event of any
registration of any Registrable Securities under the Securities Act pursuant to
Section 3.1 or 3.2, each of the prospective sellers of such securities will
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall sign such registration statement, each other
person who participates as an underwriter, broker or dealer in the offering or
sale of such securities and each other person, if any, who controls the Company
or any such participating person within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any and all Losses or
liabilities, joint or several, to which the Company or any such director,
officer, principals, members, partners, agents, advisors, representatives,
affiliates, employee, participating person or controlling person may become
subject under the Securities Act or otherwise (including, without limitation,
the reasonable fees and expenses of legal counsel incurred in connection with
any claim for indemnity hereunder), insofar as such Losses, (or actions or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a fact contained in, or any omission or
alleged omission to state a fact with respect to such seller required to be
stated in, any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein or related thereto, or any
amendment or supplement thereto, if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by such seller expressly for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; and the seller will reimburse the Company and each such
director, officer, employee, participating person and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such Loss, action or proceeding, provided that
the liability of each such seller will (i) be individual, not joint and several
and (ii) be in proportion to and limited to the net amount received by such
seller (after deducting any underwriting discount and expenses) from the sale of
Registrable Securities pursuant to such registration statement. Such indemnity
21
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any such director, officer, participating person or
controlling person and shall survive the transfer of such securities by such
seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of a claim or the commencement of any action or
proceeding involving a claim referred to in the preceding paragraphs of this
Section 3.7, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party hereunder, give written notice to the latter
of such claim or the commencement of such action or proceeding, provided that
the failure of any indemnified party to give notice as provided therein shall
not relieve the indemnifying party of its obligations under the preceding
paragraphs of this Section 3.7 to the extent such failure as not prejudiced the
indemnifying party. In case any such claim, action or proceeding is made or
brought against an indemnified party, the indemnifying party will be entitled to
participate therein and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, provided that if such indemnified
party and the indemnifying party reasonably determine, based upon advice of
their respective independent counsel, that a conflict of interest may exist
between the indemnified party and the indemnifying party with respect to such
claim, action or proceeding and that it is advisable for such indemnified party
to be represented by separate counsel, such indemnified party may retain other
counsel, reasonably satisfactory to the indemnifying party, to represent such
indemnified party, and the indemnifying party shall pay all reasonable fees and
expenses of such counsel. No indemnifying party, in the defense of any such
claim, action, proceeding or litigation, shall, except with the consent of such
indemnified party, which consent shall not be unreasonably withheld, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Section 3.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
such Registrable Securities under any Federal or state law or regulation of
governmental authority other than the Securities Act.
(e) Other Remedies. If for any reason the foregoing indemnity
under Section 3.7(a) or (b) is unavailable, or is insufficient to hold harmless
an indemnified party, other than by reason of the exceptions provided therein,
then the indemnifying party and the indemnified party under Section 3.7(a) or
(b) shall contribute to the amount
22
paid or payable by the indemnified party as a result of such Losses, (i) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, or
provides a lesser sum to the indemnified party than the amount hereinafter
calculated, in such proportion as is appropriate to reflect not only the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other but also the relative benefits received by the indemnifying
party and the indemnified party from the offering of Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each such party) as well as any other relevant equitable considerations. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Any party's obligation
to contribute pursuant to this Section 3.7(e) is several (in proportion to the
relative value of their Registrable Securities covered by a registration
statement) and not joint with the obligations of any other party. No party shall
be liable for contribution under this Section 3.7(e) except to the extent and
under such circumstances as such party would have been liable to indemnify under
this Section 3.7 if such indemnification were enforceable under applicable law.
(f) Officers and Directors. As used in this Section 3.7, the terms
"officers" and "directors" shall include the partners and members of the holders
of Registrable Securities which are partnerships or limited liability companies,
as the case may be.
(g) Indemnification Payments. The indemnification and contribution
required by this Section 3.7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred; provided that in the
event it is ultimately determined that any amounts so paid were not subject to
indemnification or contribution hereunder, the recipient thereof shall promptly
return such amounts to payor thereof.
4. Participation Rights. So long as any Registrable Securities remain
outstanding and a Public Market has not been established with respect to the
Common Stock, the CD&R Fund hereby agrees not to make any sale or transfer of
Common Stock owned by the CD&R Fund which would constitute a Qualifying Sale (as
defined below), except pursuant to the following provisions of this Section 4:
(a) Procedures for Qualifying Sales. At least 30 days
prior to making any Qualifying Sale, the CD&R Fund will deliver a
written notice (the "Sale Notice") to the Company and the other holders
of Registrable Securities. The Sale Notice will fully disclose the
identity of the prospective transferee and the terms and conditions of
the proposed Qualifying Sale, including the number of shares of Common
Stock that the prospective transferee is willing to purchase and the
intended consummation date of such Qualifying Sale. The CD&R Fund
23
agrees not to consummate any Qualifying Sale until at least 30 days
after the related Sale Notice has been given to each holder of
Registrable Securities, unless the CD&R Fund shall have received a
notice from each holder of Registrable Securities indicating whether or
not such holder has elected to participate in such Qualifying Sale and
the number of shares of Common Stock to be sold by each such holder so
electing to participate has been finally determined pursuant hereto
prior to the expiration of such 30-day period. Each holder of
Registrable Securities may elect to participate in the contemplated
Qualifying Sale by giving written notice to the CD&R Fund and the
Company within 30 days after the CD&R Fund has given the related Sale
Notice to such holder. If a holder of Registrable Securities elects to
participate, such holder will be entitled to sell in the contemplated
Qualifying Sale, at the same price and on the same terms and conditions
as set forth in the related Sale Notice, an amount of Registrable
Securities equal to the product of (i) the quotient determined by
dividing (A) the percentage of Registrable Securities held by such
holder of Registrable Securities so electing to participate at the time
he so elects by (B) the aggregate percentage of Registrable Securities
represented by the Registrable Securities then held by the CD&R Fund
and all holders of Registrable Securities so electing to participate
and (ii) the number of shares of Registrable Securities such transferee
has agreed to purchase in the contemplated sale (or in the case of a
"Qualifying Sale" within the meaning of clause (ii) of Section 4(b),
the Excess Number of shares which such transferee has agreed to
purchase), unless all such holders otherwise agree themselves to a
different allocation. If such right to participate in a Qualifying Sale
shall not have been exercised prior to the expiration of the 30-day
period, then at any time during the 90 days following the expiration of
the 30-day period, subject to extension for not more than an additional
60 days to the extent reasonably required to comply with applicable
laws in connection with such purchase, the CD&R Fund may sell to the
prospective transferee the number of shares of Common Stock and at the
price and on the terms and conditions indicated in the Sale Notice.
Upon receipt of a Sale Notice, the Company will provide the CD&R Fund
with a current list of holders of Registrable Securities and their
addresses.
(b) Qualifying Sale Defined. The term "Qualifying Sale"
shall mean (i) any sale or transfer of Common Stock proposed to be made
by the CD&R Fund at any time after the CD&R Fund has sold or
transferred in the aggregate at least the Qualifying Number of the
shares of Common Stock or (ii) in the event that prior to the sale or
transfer by the CD&R Fund of an aggregate of the Qualifying Number of
shares of Common Stock, the CD&R Fund proposes to sell or transfer a
number of shares of Common Stock which when combined with any prior
sales or transfers of such shares by the CD&R Fund exceeds the
Qualifying Number, the sale or transfer of a number of shares (the
"Excess Number") equal to the excess of (A) the sum of any shares
previously sold or transferred by the
24
CD&R Fund and the aggregate number of shares proposed to be sold or
transferred in such contemplated sale, over (B) the Qualifying Number
of shares. In determining whether there is a "Qualifying Sale,"
equitable adjustments shall be made to reflect any stock split, stock
dividend, stock combination, recapitalization or similar transaction.
(c) Exclusion from Qualifying Sale. The obligation of the
CD&R Fund and the rights of the holders of Registrable Securities
pursuant to this Section 4 will not apply to any sale or transfer by
the CD&R Fund pursuant to a distribution to the public (whether
pursuant to a registered Public Offering or pursuant to Rule 144 or
otherwise (but not pursuant to Rule 144A under the Securities Act or
any successor provision)). Any shares referred to, or covered by any
sale, transfer or distribution referred to, in the preceding sentence
shall not be included in the computation of "Qualifying Sale."
5. Miscellaneous.
5.1. (a) Rule 144. If the Company shall have filed a registration
statement pursuant to Section 12 of the Exchange Act or a registration statement
pursuant to the Securities Act relating to any class of equity securities (other
than a registration statement pursuant to a Special Registration), the Company
covenants that it will file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
Securities and Exchange Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available such information as necessary to
permit sales pursuant to Rule 144), and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144, as such rule may be amended from
time to time, or (b) any successor rule or regulation hereafter adopted by the
Securities and Exchange Commission.
(b) Legend on Stock Certificates. In addition to such other
legends as may be required by the Company's Certificate of Incorporation or any
Stock Subscription Agreement pursuant to which Registrable Securities are
issued, each certificate or certificates representing Registrable Securities
shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO
THE BENEFITS OF AND ARE BOUND BY THE OBLIGATIONS SET FORTH IN
A REGISTRATION AND PARTICIPATION AGREEMENT, DATED AS OF MAY
20, 2003, AND ANY AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS
THERETO, AMONG THE COMPANY AND CERTAIN
25
STOCKHOLDERS OF THE COMPANY AND NEITHER THIS CERTIFICATE NOR
THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE
TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
REGISTRATION AND PARTICIPATION AGREEMENT, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
HOLDBACK PROVISIONS CONTAINED IN SECTION 3.4(e) OF THE
REGISTRATION AND PARTICIPATION AGREEMENT AND IN THE COMPANY'S
ARTICLES OF INCORPORATION, WHICH PROVISIONS PROHIBIT ANY
TRANSFER OF SUCH SHARES DURING THE 20 DAYS PRIOR TO AND THE
180 DAYS AFTER THE EFFECTIVE DATE OF ANY REGISTRATION
STATEMENT (SUBJECT TO CERTAIN LIMITED EXCEPTIONS) FILED BY THE
COMPANY FOR ANY OF THE SHARES OF THE COMPANY, WITHOUT REGARD
TO THE APPLICABILITY OF RULE 144 OR RULE 144A UNDER THE
SECURITIES ACT."
The Company agrees that it will not issue new certificates for shares formerly
representing Registrable Securities without a legend unless (a) such shares have
been sold to the public pursuant to an effective registration statement under
the Securities Act or Rule 144 or (b) the requesting holder shall have delivered
to the Company an opinion of counsel in form and substance satisfactory to the
Company that no such legend is required under applicable securities or other
similar laws.
5.2. Amendments and Waivers. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of at least a majority of the shares of Registrable Securities. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any consent authorized by this Section 5.2, whether or not such
Registrable Securities shall have been marked to indicate such consent.
5.3. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election and unless notice is otherwise
given to the Company by the record owner, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
26
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
5.4. Successors, Assigns and Transferees. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of, or are binding upon the parties hereto other than the Company
shall also be for the benefit of, binding upon and enforceable by any subsequent
holder of any Registrable Securities, subject to the provisions respecting the
minimum numbers or percentages of shares of Registrable Securities required in
order to be entitled to certain rights, or to take certain actions, contained
herein.
5.5. Notices. All notices, requests, demands or other
communications provided for hereunder shall be in writing and shall be deemed to
have been duly given to any party (a) when delivered personally (by courier
service or otherwise), (b) when delivered by facsimile and confirmed by receipt
of the proper facsimile confirmation, (c) five days after being mailed by
first-class mail, postage prepaid (registered or certified mail, return receipt
requested), (d) when receipt acknowledged, if telecopied, or (e) the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery, in each case to the applicable address
set forth beneath its name on the schedules hereto, or to such other address as
such party may have designated to the Company in writing, or if to any other
holder of Registrable Securities at the address of such holder in the stock
record books of the Company, and if to the Company or the CD&R Fund to the
following addresses:
(i) if to the Company, to:
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
with a copy to:
Jafra Cosmetics International, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
(ii) if to the CD&R Fund, to:
27
▇▇▇▇▇▇▇, Dubilier & Rice
Fund V Limited Partnership
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Partner
or at such other address or addresses as the Company or the CD&R Fund, as the
case may be, may have designated in writing to each holder of Registrable
Securities at the time outstanding. Copies of any notice or other communication
given under the Agreement shall also be given to:
▇▇▇▇▇▇▇, Dubilier & Rice, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and
Debevoise & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Copies of any notice or other communication given under the Agreement given to
any Management Investor shall also be given to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ & Associates, P.A.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Any party may give any notice or other communication in connection herewith
using any other means (including, but not limited to, personal delivery,
messenger service, facsimile, telex or ordinary mail), but no such notice or
other communication shall be deemed to have been duly given unless and until it
is actually received by the individual for whom it is intended.
28
5.6. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities by this
Agreement.
5.7. Remedies; Attorneys' Fees. Each holder of Registrable
Securities, in addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any provision of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate. In any action or proceeding brought to enforce any provision of this
Agreement, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and other available
remedy.
5.8. Stock Splits, etc. Each party hereto agrees that it will vote
to effect a stock split (forward or reverse, as the case may be) with respect to
any Registrable Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that is
not underwritten, if an investment banker shall advise the Company in writing)
that in their or its opinion such a stock split would facilitate or increase the
likelihood of success of the offering. Each party hereto agrees that any number
of shares of Common Stock referred to in this Agreement shall be equitably
adjusted to reflect any stock split, stock dividend, stock combination,
recapitalization or similar transaction.
5.9. Term. This Agreement shall be effective as of the date hereof
and shall continue in effect thereafter until the earliest of (a) its
termination by the consent of the parties hereto or their respective successors
in interest, (b) the date on which no Registrable Securities remain outstanding
and (c) the final dissolution, liquidation or winding up of the Company (other
than a dissolution, liquidation or winding up for purposes of effecting a
corporate reorganization that does not result in a change of Control of the
Company).
5.10. Severability. If any provision of this Agreement is
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences, clauses,
Sections or subsections of this Agreement shall not affect the remaining
portions of this Agreement.
29
5.11. Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
5.12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
5.13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING, BUT NOT LIMITED TO, AS TO VALIDITY, INTERPRETATION AND
EFFECT, BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAWS WHICH WOULD REQUIRE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION.
5.14. No Third Party Beneficiaries. Except as provided in Sections
1(d), 3.7 and 5.4, nothing in this Agreement shall confer any rights upon any
Person other than the parties hereto and each such party's respective heirs,
successors and permitted assigns.
5.15. Consent to Jurisdiction. Each party irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern District
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby (and agrees not to
commence any such suit, action or proceeding except in such courts). Each party
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any such suit, action or proceeding. Each party
irrevocably and unconditionally waives any objection to the laying of venue of
any such suit, action or proceeding in (i) the Supreme Court of the State of New
York, New York County, and (ii) the United States District Court for the
Southern District of New York, that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.
5.16. Waiver of Jury Trial. Each party hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any suit, action or proceeding arising out of this Agreement or any
transaction contemplated hereby. Each party (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties have been induced to enter into the Agreement by, among other things,
the mutual waivers and certifications in this Section 5.16.
5.17. Entire Agreement. This Agreement constitutes the entire
agreement and, as of the Effective Time, supersedes all prior agreements and
understandings, both
30
written and oral, among the parties with respect to the subject matter hereof
including that certain Registration and Participation Agreement, dated as of
April 30, 1998, among CDRJ, the CD&R Fund and the other parties thereto.
31
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
or caused this Agreement to be executed on its behalf as of the date first
written above.
CDRJ NORTH ATLANTIC (LUX) S.aR.L.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, III
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Title: Fonde de pouvoir
▇▇▇▇▇▇▇, DUBILIER & RICE
FUND V LIMITED PARTNERSHIP
By: CD&R Associates V Limited
Partnership, the general partner
By: CD&R Investment Associates II, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President and Treasurer
32