EXHIBIT 10.7
CONFORMED COPY
REGISTRATION AND PARTICIPATION AGREEMENT
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REGISTRATION AND PARTICIPATION AGREEMENT, dated as of April 30, 1998,
among CDRJ Investments (LUX) S.A., a Luxembourg societe anonyme (the "Company"),
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and ▇▇▇▇▇▇▇, 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
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undersigned parties hereto.
1. Background. (a) The Company is party to an Acquisition Agreement,
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dated as of January 26, 1998, as amended from time to time (the "Acquisition
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Agreement"), with ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a Delaware corporation ("▇▇▇▇▇▇▇▇"),
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pursuant to which the Company and its subsidiaries have agreed to acquire the
worldwide Jafra cosmetics business from ▇▇▇▇▇▇▇▇ (the "Acquisition").
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(b) In connection with the Acquisition, the Company is or will be
party to (i) a Stock Subscription Agreement, dated as of the date hereof (the
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"Fund Stock Subscription Agreement"), between the Company and the CD&R Fund,
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pursuant to which the Company has agreed to issue 769,600 shares of its Common
Stock (as hereinafter defined) to the CD&R Fund, (ii) separate Management Stock
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Subscription Agreements, dated as of the date hereof (the "Management Stock
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Subscription Agreements"), between the Company and certain senior executives or
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key employees of Jafra Cosmetics International, Inc., a Delaware corporation and
an indirect wholly owned subsidiary of the Company ("JCI"), or of one of its
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subsidiaries or affiliates listed on the signature page hereof (the "Management
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Purchasers") pursuant to which the Company has agreed to issue up to an
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aggregate of 44,000 shares of its Common Stock, (iii) a Capital Call Agreement,
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dated as of the date hereof, pursuant to which the Company has agreed to issue
and sell up to 30,400 additional shares of its Common Stock to the CD&R Fund
under the terms specified therein (the "Capital Call Agreement").
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(c) In connection with the Acquisition, JCI is or will be a party to
separate Management Stock Option Agreements, dated as of the date hereof (the
"Management Stock Option Agreements"), between JCI and each Management Purchaser
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covering options to acquire from JCI up to an aggregate of 88,000 shares of
Common Stock.
(d) The Company may in the future issue or sell shares of Common Stock
to certain directors, executives and key employees of JCI or one of its
subsidiaries or affiliates (the "Subsequent Management Purchasers") and
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additional shares of Common Stock to certain Individual Investors or other
purchasers ("Subsequent Purchasers"), in each case, pursuant to appropriate
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forms of stock subscription agreements (the "Subsequent Stock Subscription
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Agreements"), or the Company or JCI may grant options or other rights to
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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
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Agreements").
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(e) The Management Purchasers, 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, 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
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Subscription Agreement, the Capital Call Agreement, the Management Stock
Subscription Agreements, the Subsequent Stock Subscription Agreements, the
Management Stock Option Agreements and the Subsequent Stock Option Agreements
are referred to herein collectively as the "Stock Subscription Agreements."
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(f) This Agreement shall become effective as of the date hereof 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 Stock Subscription Agreement will provide that the shares of
Common Stock sold thereunder are entitled to rights and subject to the
obligations created hereunder, provided that such issuance or sale shall have
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been consented to in writing by the Board of Directors of the Company (the
"Board").
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2. Definitions. For purposes of this Agreement, the following terms
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have the following respective meanings:
"Acquisition": See Section 1(a).
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"Acquisition Agreement": See Section 1(a).
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"Affiliate": With respect to any Person, any other Person directly or
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indirectly Controlling, Controlled by or under common Control with such first
Person, provided that any director or member of management or other employee of
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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).
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"Business Day": A day other than a Saturday, Sunday or other day on
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which commercial banks in New York City are authorized or required to close.
"Capital Call Agreement": See Section 1(b).
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"CD&R": ▇▇▇▇▇▇▇, Dubilier & Rice, Inc., a Delaware corporation.
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"CD&R Fund": See the introduction to this Agreement.
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"Common Stock": The common stock, par value $2.00 per share of the
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Company.
"Company": See the introduction to this Agreement.
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"Control": The power to direct the affairs of a Person by reason of
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ownership of voting stock, by control or otherwise.
"Excess Number": See Section 4(b).
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"Exchange Act": The Securities Exchange Act of 1934, as amended, or
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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.
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"Fund Stock Subscription Agreement": See
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Section 1(b).
"▇▇▇▇▇▇▇▇": See Section 1(a)
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"Individual Investors": Directors or senior executives of
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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".
"Management Investors": See Section 1(e).
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"Management Purchasers": See Section 1(b).
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"Management Stock Option Agreement": See Section 1(c).
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"Management Stock Subscription Agreements": See Section 1(b).
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"NASDAQ": The NASD Automated Quotation System.
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"Person": Any natural person, firm, partnership, association,
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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
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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
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led by at least one underwriter of nationally recognized standing.
"Qualifying Number": 38,142 shares of Common Stock (excluding any
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sales or transfers by the CD&R Fund to Management Investors and Individual
Investors)
"Qualifying Sale": See Section 4(b).
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"Registrable Securities": (a) Any shares of Common Stock issued
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pursuant to any Stock Subscription Agreement, including shares of Common Stock
delivered by JCI upon exercise of options granted pursuant to the Management
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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 Common Stock is held by a
Management Investor who is an Affiliate of the Company), (b) any shares of
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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
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any Common Stock referred to in the foregoing clauses (i) upon any conversion or
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exchange thereof, (ii) by way of stock dividend or stock split, (iii) in
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connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or (iv) otherwise, in all cases subject to the
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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
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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
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reliance upon Rule 144, (C) subject to the relevant provisions of the Company's
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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
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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
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outstanding, (F) except for purposes of Sections 4 and 5, with respect to any
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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
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a "affiliate" of the Company within the meaning of such Rule or (G) except for
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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
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clauses (D) and (G) above, (1) securities held by a Person who was not an
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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
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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
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respect to any securities that were formerly Registrable Securities the Board
may, under such circumstances as it deems appropriate, designate such securities
as Registrable Securities for purposes of this Agreement.
"Registration Expenses": All expenses incident to the Company's
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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.
"Requisite Percentage of Stockholders": The holder or holders of at
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least (a) as to the initial request under Section 3.1, 50% (by number of shares)
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of the Registrable Securities held at the time outstanding or (b) as to any
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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
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Securities Act.
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"Rule 144A": Rule 144A (or any successor provision) under the
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Securities Act.
"Sale Notice": See Section 4(a).
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"Securities Act": The Securities Act of 1933, as amended, or any
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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
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Commission or any other Federal agency at the time administering the Securities
Act or the Exchange Act.
"Special Registration": (a) The registration of shares of equity
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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
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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).
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"Subsequent Management Purchasers": See Section 1(d).
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"Subsequent Purchasers": See Section 1(d).
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"Subsequent Stock Option Agreements": See Section 1(e).
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"Subsequent Stock Subscription Agreements": See Section 1(d).
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"Subsidiary": With respect to any Person, any corporation or Person,
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a majority of the outstanding voting stock or other equity interests of which is
owned, directly or indirectly, by that Person.
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3. Registration.
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3.1 Registration on Request.
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(a) Requests. Subject to the provisions of Section 3.6, at any time
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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.
(b) Obligation to Effect Registration. Upon receipt by the Company
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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 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
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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
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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
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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).
(d) Expenses. The Company will pay all Registration Expenses in
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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 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
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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
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directors' liability insurance, (iii) the expenses and fees for listing the
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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
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required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel as
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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
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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
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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
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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, 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 was requested by such holders, respectively.
3.2 Incidental Registration. If the Company at any time proposes to
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register any of its equity securities (as defined in the Exchange Act) under the
Securities Act
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(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:
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(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
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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;
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(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 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
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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),
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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.
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
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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
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than six months after such registration statement be comes 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;
(e) use its best efforts (x) to register or qualify the securities
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covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each seller shall request, (y) to
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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
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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;
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(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
(ii) a "comfort" letter 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
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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
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registration statement if such registration statement, at the time it or
any amendment thereto became effective, (x) contained an untrue statement
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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
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of which the Company 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
15
(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;
16
(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; and
(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, 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).
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, except
that no such consent shall be required for any disclosure that is required by
law.
17
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 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
18
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 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 dis-
19
tribution 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.
20
(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 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.
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 there to, 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 con-
21
duct 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 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 hereby does indemnify and hold harmless each seller
of such securities, its directors, officers, 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 or liabilities, joint or several, to which such seller or any
such director, officer, 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,
claims, damages or liabilities (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 amendent or supplement thereto, 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
22
necessary to make the statements therein not misleading; and the Company will
reimburse such seller 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,
claim, liability, action or proceeding, provided that the Company shall not be
--------
liable in any such case to the extent that any such loss, claim, damage,
liability or expense 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, claim, damage, liability or expense 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 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, claim, damage, liability or expense 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 under-
23
writer, 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, claims, damages or liabilities, joint
or several, to which the Company or any such director, officer, 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, claims, damages or liabilities (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, claim, liability, action or
proceeding, provided that the liability of each such seller will 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 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 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 the
commencement of such action, provided that the failure of any indemnified party
--------
to give
24
notice as provided therein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Section 3.7. In case any
such action is 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 action 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 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 paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such pro-
-
portion 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 pro-
25
portion 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
26
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 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
27
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 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
28
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 APRIL 30, 1998, AND ANY
AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS THERETO, AMONG THE COMPANY AND
CERTAIN 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 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."
29
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
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
30
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 telex and confirmed by receipt of the proper
-
telex answerback, (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:
▇▇▇▇▇▇▇, 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
31
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.
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
32
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, re-
capitalization 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 dissolution, liquidation or winding up 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 sub-
sections of this Agreement shall not affect the remaining portions of this
Agreement.
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.
33
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 supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
34
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 INVESTMENTS (LUX) S.A.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Secretary and Director
▇▇▇▇▇▇▇, DUBILIER & RICE
FUND V LIMITED PARTNERSHIP
By: CD&R Associates V
Limited Partnership,
the general partner
By: CD&R Investment Associates II,
Inc., its managing general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President, Assistant
Secretary and Assistant
Treasurer