INVESTOR RIGHTS AGREEMENT

EXHIBIT 10.26

CONFIDENTIAL TREATMENT

PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMMISSION PURSUANT TO THE REGISTRANT’S APPLICATION OBJECTING TO DISCLOSURE AND REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24b-2; THE OMITTED PORTIONS HAVE BEEN MARKED WITH BRACKETS.

INVESTOR RIGHTS AGREEMENT

THIS INVESTOR RIGHTS AGREEMENT (the “Agreement”) is made as of October 27, 2005, among Radnor Holdings Corporation, a Delaware corporation (the “Company”), the shareholders of the Company listed on the signature pages hereof under the heading “Management Shareholders” (the “Management Shareholders”) and the holders of the Investor Securities (as defined below) listed on Exhibit A hereto (together with their direct and indirect transferees, the “Investors”).

Recitals :

WHEREAS, the Company and the Investors are parties to the Purchase Agreement of even date herewith (the “Purchase Agreement”); and

WHEREAS, in order to induce the Company to enter into the Purchase Agreement and to induce the Investors to invest funds in the Company pursuant to the Purchase Agreement, the Investors, the Management Shareholders and the Company desire to enter into this Agreement setting forth certain rights regarding registration of shares issuable to the Investors, the provision of information about the Company, participation in certain future equity offerings by the Company, governance of the Company and certain other matters as set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

SECTION 1

CERTAIN DEFINITIONS

1.1 Certain Definitions .

“Affiliate” shall mean, with respect to any party, any Person directly or indirectly controlling or controlled by or under direct or indirect common control with such party including any estate or trust under will of such party. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided , however , that

beneficial ownership of 5% or more of the voting securities of a Person shall be deemed to be control.

“Aggregate Liquidation Preference” shall mean, at any time, the aggregate liquidation preference of the Preferred Stock outstanding at such time.

“Board” shall mean the board of directors of the Company.

“Capital Stock” means, with respect to any Person, any common stock, preferred stock and any other capital stock of such Person and shares, interests, participations or other ownership interest (however designated), of any Person and any rights (other than debt securities convertible into, or exchangeable for, capital stock), warrants or options to purchase any of the foregoing, including (without limitation) each class of common stock and preferred stock of such Person if such Person is a corporation and each general and limited partnership interest of such Person if such Person is a partnership.

“Capitalized Lease Obligation” means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP.

“Common Stock” shall mean the Company’s Voting Common Stock, its Nonvoting Common Stock, par value $.10 per share and its Class B Nonvoting Common Stock, par value $0.01 per share, and any other class or series of the Company’s common stock into which the foregoing may be converted or exchanged pursuant to a recapitalization thereof.

“Consolidated Interest Expense” means, for any period, the total interest expense of the Company and the Subsidiaries, on a consolidated basis, plus, to the extent not included in such interest expense, (i) interest expense attributable to Capitalized Lease Obligations, (ii) amortization of debt discount and debt issuance cost, (iii) non-cash interest expense, (iv) commissions, discounts and other fees and charges owed, in each case, with respect to letters of credit and bankers’ acceptance financing, (v) interest actually paid by the Company or any such Subsidiary under any guarantee of Indebtedness, (vi) net costs associated with Hedging Obligations (including fees and amortization of discounts), and (vii) preferred stock dividends in respect of all redeemable stock of the Company held by Persons other than the Company or a Subsidiary (to the extent reflected on the Company’s statement of income or operations for such period).

“Consolidated Net Income” means, for any period, the aggregate net income (loss) of the Company and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that (i) the net income of any Person that is not a Subsidiary of the Company but that is consolidated with the Company or a consolidated Subsidiary or is accounted for by the Company or a consolidated Subsidiary by the equity method of accounting shall be included only to the extent of the amount of cash dividends or cash distributions actually paid to the Company or a consolidated Subsidiary, (ii) all gains and losses that are extraordinary or are either unusual or nonrecurring (including any gain or loss realized upon the termination of any employee pension benefit plan and any gain or loss from the sale or other disposition of

 

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assets other than in the ordinary course of business or from the issuance or sale of any Equity Interests) shall be excluded; and (iii) the net income from any entity acquired (whether by assets acquisition, merger, share purchase or otherwise) by the Company or any of the consolidated Subsidiaries from the date hereof until December 31, 2006 shall be excluded.

“Control of the Company” shall mean the sale or disposition in a single transaction or a series of related transactions of at least fifty percent (50)% of the issued and outstanding Common Stock or securities representing at least fifty percent (50)% of the voting power of the Company.

“Controlling Shareholder” shall mean, collectively, Michael T. Kennedy and any trusts created by him for the benefit of his children or as a grantor retained annuity trust.

“EBITDA” means, for any fiscal year subsequent to the fiscal year ended December 29, 2006, the Consolidated Net Income of the Company and the Subsidiaries for such fiscal year, plus, without duplication, the following to the extent included in calculating such Consolidated Net Income: (i) Consolidated Interest Expense, (ii) consolidated income tax expense and (iii) consolidated depreciation and amortization expense. EBITDA shall be calculated by reference to the audited consolidated financial statements of the Company and its consolidated Subsidiaries for such fiscal year.

“Equity Interests” means shares, interests, participations or other equivalents (however designated) of Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act.

“GAAP” means accounting principles generally accepted in the United States of America.

“Hedging Obligations” means the obligations of any Person or entity pursuant to any swap or cap agreement, exchange agreement, collar agreement, option, futures or forward hedging contract or other similar agreement or arrangement designed to protect such Person or entity against fluctuations in interest rates.

“Indebtedness” with respect to any Person means, at any time, without duplication, (i) all liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable preferred stock, (ii) all liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property), (iii) all synthetic lease obligations and all liabilities appearing on its balance sheet in accordance with GAAP in respect of capital leases, (iv) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities);

 

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and (v) all liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money). Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (i) through (v) of the foregoing sentence to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, unless such Indebtedness is, by its terms, non-recourse to the assets of such Person other than as a result of customary exclusions.

“Independent Director” means a director of the Company other than a director (i) who (apart from being a director of the Company or any of its Subsidiaries) is an employee, insider, associate or Affiliate of the Company or any of its Subsidiaries or has held any such position during the previous year or (ii) who is a director, an employee, insider, associate or Affiliate of another party to the transaction in question.

“Initiating Investors” has the meaning given thereto in Section 2.1(b) hereof.

“Investor Securities” means (i) the Preferred Stock, (ii) the Warrants, and/or (iii) the Registrable Securities.

“Investor” has the meaning given thereto in the first paragraph hereof.

“Kennedy Employment Agreement” shall mean that certain Employment Agreement, dated as of October 26, 2005, by and between the Company and Michael T. Kennedy.

“Lien” means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement, capital lease or synthetic lease, upon or with respect to any Property of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements) or other preferential arrangement having the practical effect of any of the foregoing.

“Management Shareholders” has the meaning given thereto in the first paragraph hereof.

“Necessary Action” shall mean, with respect to a specified result, all actions (to the extent such actions are permitted by law) necessary to cause such result, including (i) voting or providing a written consent or proxy with respect to the Common Stock, (ii) causing the adoption of shareholders’ resolutions or proxies with respect to the Common Stock, (iii) causing members of the Board (to the extent such members were nominated or designated by the Person obligated to take such Necessary Action, and subject to any fiduciary duties that such members may have as directors of the Company) to act in a certain manner or causing them to be removed in the event that they fail to act in such a manner, (iv) executing agreements and instruments to effect such result and (v) making, or causing to be made, with governmental, administrative or

 

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regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.

“Offered Shares” has the meaning given thereto in Section 5.1(a) hereof.

“Participating Investors” has the meaning given thereto in Section 5.1(a) hereof.

“Percentage Interest” means, in respect of any proposed sale of Offered Shares by the Company, with respect to any Person and as of any time of determination, the percentage of the issued and outstanding Voting Common Stock that would be held by such Person as of such time if, immediately prior to such time, (i) all of the Warrants had been exercised and (ii) all of the Preferred Stock had been converted into Voting Common Stock, at a price per share of Voting Common Stock established or implied by the price at which such Offered Shares are offered.

“Permitted Holders” means Michael T. Kennedy, R. Radcliffe Hastings, John P. McNiff and any trusts created by any of the foregoing for the benefit of his children or as a grantor retained annuity trust.

“Permitted Investment” shall have the meaning given thereto in Section 1 of Exhibit C hereto.

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof.

“Preemptive Rights Notice” has the meaning given thereto in Section 5.1(a) hereof.

“Preferred Stock” means the Company’s Series A Convertible Preferred Stock, par value $.10 per share.

“Property” means, unless otherwise specifically limited, real, personal or mixed assets or property of any kind, tangible or intangible, choate or inchoate.

“Qualified IPO” means the initial firm commitment underwritten public offering by the Company of shares of its Common Stock pursuant to a registration statement under the Securities Act, which results in aggregate proceeds to the Company of at least $50.0 million (before deducting underwriting discounts and commissions and offering expenses).

“Register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

 

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“Registrable Securities” means (i) the shares of Common Stock issued upon conversion of the Preferred Stock, (ii) shares of Common Stock issued or issuable upon the exercise of the Warrants, (iii) shares of Common Stock issued or issuable upon the conversion of the Common Stock described in subclause (ii), above and (iv) any other shares of Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such shares; provided however, a Registrable Security shall cease to be a Registrable Security when a registration statement covering such Registrable Security has been declared effective by the SEC and it has been disposed of pursuant to such effective registration statement.

“Required Investors” shall mean, at any time, Investors holding a majority of the Preferred Stock outstanding at such time.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shelf Registration” shall have the meaning given thereto in Section 2.4(b) hereof

“Subsidiary” means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries. Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company.

“Tag-Along Notice” shall have the meaning given thereto in Section 5.2 hereof.

“Transfer” shall mean, with respect to any shares of Common Stock, a direct or indirect transfer, sale, exchange, assignment, pledge, hypothecation or other encumbrance or other disposition of such shares of Common Stock, including the grant of an option or other right, whether directly or indirectly, whether voluntarily, involuntarily or by operation of law.

“2006 Audited Financial Statements” means the audited consolidated financial statements of the Company and its consolidated Subsidiaries for the fiscal year ended December 29, 2006, duly certified by the Chief Financial Officer of the Company.

“2006 EBITDA” means the Consolidated Net Income of the Company and the Subsidiaries for the fiscal year ended December 29, 2006, plus, without duplication, the following to the extent included in calculating such Consolidated Net Income: (i) Consolidated Interest Expense, (ii) consolidated income tax expense and (iii) consolidated depreciation and amortization expense. 2006 EBITDA shall be calculated on March 31, 2007. If the 2006 Audited Financial Statements are available as of March 31, 2007, 2006 EBITDA shall be calculated based on the 2006 Audited Financial Statements. If the 2006 Audited Financial Statements are not available as of March 31, 2007, 2006 EBITDA shall be calculated based on

 

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the unaudited consolidated financial statements most recently provided by the Company in good faith to the Company’s independent auditors on or before March 31, 2007.

“Voting Common Stock” shall mean the Company’s Voting Common Stock, par value $.10 per share.

“Warrants” means the Warrants dated the date hereof in the name of the Investors and any replacement, adjustments or balance warrants hereafter issued by the Company with respect thereto.

SECTION 2

REGISTRATION RIGHTS

2.1 Investor Request for Registration .

(a) If, at any time after the expiration of six months following a Qualified IPO, the Company shall receive a written request from the Investors holding a majority of the Registrable Securities that the Company file a registration statement under the Securities Act covering the registration of Registrable Securities where the anticipated aggregate offering price, before deduction of underwriting discounts and commissions, of Registrable Securities to be sold by such Investors is at least $5,000,000, then the Company shall, within 10 days of the receipt thereof, give written notice of such request to all Investors and shall, subject to the limitations of subsection 2.1(b), use its commercially reasonable efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities which the Investors request to be registered within 20 days of the mailing of such notice by the Company in accordance with Section 6.7 hereof.

(b) If the Investors initiating the registration request hereunder (“Initiating Investors”) intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.1 and the Company shall include such information in the written notice referred to in subsection 2.1(a). The underwriter will be selected by a majority in interest of the Initiating Investors and shall be reasonably acceptable to the Company. In such event, the right of any Investor to include such Investor’s Registrable Securities in such registration shall be conditioned upon such Investor’s participation in such underwriting and the inclusion of such Investor’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Investors and such Investor) to the extent provided herein. All Investors proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 2.1, if the underwriter advises the Initiating Investors in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Investors shall so advise all Investors of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Investors thereof, including the Initiating Investors, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Investor; provided , however, that the

 

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number of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.

(c) Notwithstanding the foregoing, if the Company shall furnish to the Initiating Investors a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed or become effective at such time, the Company shall have the right to defer such filing for a period of not more than 90 days after receipt of the request of the Initiating Investors; provided , however, that the Company may not utilize this right more than once in any twelve-month period.

(d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 2.1:

(i) If the Company delivers in good faith a written notice to the Initiating Investors within 10 days after receipt of the registration request from the Initiating Investors that the Company intends to file a registration statement for a public offering, then during the period commencing with the date of the giving of such notice, and ending 90 days thereafter;

(ii) During the period ending 180 days after the effective date of any registration statement pertaining to a public offering of the Company’s Common Stock; or

(iii) After the Company has effected two registrations pursuant to this Section 2.1 and such registrations have been declared effective.

(e) The Company shall provide notice to the Investors in the event that it intends to permit securities that are not Registrable Securities to be included in any registration statement filed pursuant to this Section 2.1. If, in respect of any underwritten offering pursuant to this Section 2.1, the underwriter advises the Investors that marketing factors require a limitation of the amount of securities to be underwritten, the number of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.

(f) The Investors holding a majority of Registrable Securities may, at any time prior to the effective date of any registration statement, revoke such request by providing a written notice to the Company revoking such request. Any request made pursuant to this Section 2.1 so withdrawn shall not be counted for purposes of determining the number of requests for registration to which the holders of Registrable Securities are entitled pursuant to this Section 2, so long as the revoking Investors pay the Company’s reasonable expenses in connection with the preparation of such abandoned registration.

2.2 Company Registration .

(a) If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for securityholders other than the Investors) any of its equity securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration statement on Form S-4 or S-8

 

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or any successor forms thereto, any registration statement filed in connection with an exchange offer of securities solely to the Company’s existing security holders, or any registration statement filed in connection with a Qualified IPO (as to which Section 2.2(b) hereof shall govern)), the Company shall, at such time, promptly give each Investor written notice of such registration. Upon the written request of each Investor given within 20 days after mailing of such notice by the Company in accordance with Section 6.7 hereof, the Company shall, subject to the provisions of Section 2.7, use its commercially reasonable efforts to cause to be registered under the Securities Act all of the Registrable Securities that each such Investor has requested to be registered.

(b) If (but without any obligation to do so) the Company proposes to register its Common Stock under the Securities Act in order to effect a Qualified IPO, the Company shall, at least 30 days prior to the filing of any registration statement related to such Qualified IPO, give each Investor written notice of such registration. Upon the written request of any Investor given within 15 days after mailing of such notice by the Company in accordance with Section 6.7 hereof, the Company shall include in the Qualified IPO all of the Common Stock into which the Preferred Stock of such Investor indicated in such Investor’s written request is convertible at the occurrence of the Qualified IPO, on the same terms, including underwriting arrangements, as shares of Common Stock sold by the Company in the Qualified IPO are so included. The foregoing shall not limit the Company’s ability to abandon any proposed Qualified IPO at any time prior to the consummation thereof.

2.3 Form S-3 Registration .

(a) If, at any time after the expiration of six months following the initial public offering of the Company’s Common Stock, the Company shall receive a written request from any Investor or Investors that the Company file a registration on Form S-3 for a public offering of Registrable Securities, the Company will:

(i) promptly give written notice of the proposed registration to all other Investors; and

(ii) as soon as practicable, use its commercially reasonable efforts to effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Investors’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Investor or Investors joining such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 2.3: (A) if Form S-3 is not available for such offering by the Investors; (B) if the Investors, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (before deduction of any underwriters’ discounts or commissions) of less than $3,000,000; (C) if the Company shall furnish to the Investors a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at

 

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such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 90 days after receipt of the request of the Investor or Investors under this Section 2.3; provided , however, that the Company shall not utilize this right more than once in any twelve month period; (D) at any time that the Company has effected two registrations pursuant to this Section 2.3 in the preceding twelve month period and such registrations have been declared effective; or (E) if the Company delivers in good faith a written notice to the Investors requesting registration pursuant to this Section 2.3 within 10 days after receipt of such request that the Company intends to file a registration statement for a public offering, during the period commencing with the date of giving such notice and ending 90 days thereafter.

(b) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request of the Investors. Registrations effected pursuant to this Section 2.3 shall not be counted as demands for registration or registrations effected pursuant to Section 2.1.

(c) The Company shall provide notice to the Investors in the event that it intends to permit securities that are not Registrable Securities to be included in any registration statement filed pursuant to this Section 2.3. If, in respect of any underwritten offering pursuant to this Section 2.3, the underwriter advises the Investors that marketing factors require a limitation of the amount of securities to be underwritten, the number of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.

(d) The Investors holding a majority of Registrable Securities may, at any time prior to the effective date of any registration statement, revoke such request by providing a written notice to the Company revoking such request, so long as the revoking Investors pay the Company’s reasonable expenses in connection with the preparation of such abandoned registration.

2.4 Obligations of the Company .

Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities on the appropriate form for the registration and sale, in accordance with the intended method or methods of distribution of such Registrable Securities;

(b) use its commercially reasonable efforts to cause such registration statement to become effective and keep such registration statement continuously effective and usable for the resale of the Registrable Securities covered thereby (i) in the case of a Registration that is not a shelf registration as defined by Rule 415 of the Securities Act (a “Shelf Registration”), for a period of 120 days from the date on which the SEC declares such Registration Statement effective and (ii) in the case of a Shelf Registration, for a period of two years from the date on which the SEC declares such Registration Statement effective, or in

 

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either case, if sooner, until all of the Registrable Shares covered by such Registration Statement have been sold pursuant to such Registration Statement.

(c) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement;

(d) furnish without charge to each Investor, at least three business days prior to the pertinent sale or sales by such Investor, such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them and included in such registration;

(e) register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Investors; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

(f) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering, provided that each Investor participating in such underwriting shall also enter into and perform its obligations under such an agreement;

(g) as promptly as practicable notify each Investor holding Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon learning of the happening of any event as a result of which 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 not misleading in the light of the circumstances then existing and, at the request of the Investors, the Company shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading in the light of the circumstances then existing;

(h) cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed, or on the Nasdaq Stock Market system if similar securities issued by the Company are then listed on the Nasdaq Stock Market system, and if such similar securities are designated as Nasdaq “national market system securities” within the meaning of Rule 11Aa2-1 of the SEC, to cause the Registered Securities to be so designated;

(i) make available for inspection by the Investors, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by the Investors or such underwriter, all financial and other

 

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records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information in each case as may reasonably be requested by the Investors or such underwriter, attorney, accountant or agent in connection with such registration statement, subject to such reasonable confidentiality requirements as may be requested the Company;

(j) provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

(k) otherwise comply with all applicable rules and regulations of the SEC applicable to the Company, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company’s first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(l) permit an Investor, if such Investor reasonably believes it 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;

(m) in the event of the issuance of any order suspending the effectiveness of any registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any equity securities included in such registration statement for sale in any jurisdiction, the Company shall use commercially reasonable efforts to promptly obtain the lifting or withdrawal of any such order;

(n) make available its senior management to participate in any “road shows” scheduled in connection with the offering of any Registrable Securities pursuant to such registration, with all reasonable out-of-pocket costs and expenses incurred by the Company in connection with such attendance and participation to be paid by the Company;

(o) if such offering is an underwritten offering, enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other appropriate and reasonable actions requested by the participating Investors (including those reasonably requested by the managing underwriters) in order to expedite or facilitate the disposition of such Registrable Securities; and

(p) furnish to the underwriters, if such securities are being sold through underwriters, at the request of such underwriters, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, and (ii) a comfort letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in

 

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an underwritten public offering, addressed solely to the underwriters, which letter specifies the parties entitled to rely thereon.

2.5 Furnishing Information .

It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.1, 2.2 or 2.3 that the selling Investors shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of distribution of such securities and such other information as shall be reasonably required to effect the registration of their Registrable Securities.

2.6 Expenses of Registration .

(a) Demand Registration . All expenses other than underwriting discounts and commissions with respect to the Registrable Securities incurred in connection with registrations, filings or qualifications pursuant to Section 2.1, including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and out-of-pocket disbursements of one counsel for the selling Investors selected by them (such counsel’s fees not to exceed $50,000) for each such registered offering initiated pursuant to Section 2.1, shall be borne by the Company.

(b) Company Registration . All expenses other than underwriting discounts and commissions with respect to the Registrable Securities incurred in connection with registrations, filings or qualifications pursuant to Section 2.2, including (without limitation) all registration, filing, and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and out-of-pocket disbursements of one counsel for the selling Investors selected by them (such counsel’s fees not to exceed $50,000) for each such registered offering in which the selling Investors participate pursuant to Section 2.2(a) or 2.2(b), shall be borne by the Company.

(c) Registration on Form S-3 . All expenses other than underwriting discounts and commissions with respect to the Registrable Securities incurred in connection with two registrations, filings or qualifications pursuant to Section 2.3, including (without limitation) all registration, filing, and qualification fees, printers’ and accounting fees, the reasonable fees and disbursements of counsel for the Company and the reasonable fees and out-of-pocket disbursements of one counsel for the selling Investors selected by them (such counsel’s fees not to exceed $50,000) for each such registered offering initiated pursuant to Section 2.3, shall be borne by the Company. All such expenses incurred with respect to the third and any subsequent registration pursuant to Section 2.3 shall be borne by the selling Investors.

2.7 Underwriting Requirements .

(a) In connection with any offering involving an underwriting of shares of the Company’s capital stock (other than a Qualified IPO), the Company shall not be required under Section 2.2(a) to include any of the Investors’ Registrable Securities in such underwriting unless they accept the terms of the underwriting (which terms shall be reasonable and customary as to

 

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the selling stockholders in such offering) as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering (other than a Qualified IPO) exceeds the amount of securities sold by parties other than the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders); provided, however, that the number of Registrable Securities to be included in any such underwriting shall not be reduced unless all securities that are not (i) Registrable Securities, (ii) owned by holders who exercised a right to request the registration in which the Investors are joining or (iii) offered by the Company are first entirely excluded from the underwriting. Notwithstanding the foregoing, in no event shall the amount of Registrable Securities held by all Investors included in the offering be reduced below 25% of the total number of securities included in such offering unless such offering is the Company’s initial public offering and such offering is not a Qualified IPO.

(b) In connection with a Qualified IPO, the Company shall not be required under Section 2.2(b) to include any of the Investors’ Common Stock in such underwriting unless they accept the terms of the underwriting (which terms shall be customary and reasonable as to the selling stockholders in the Qualified IPO) as agreed upon between the Company and the underwriters selected by it.

2.8 Indemnification .

(a) The Company will indemnify each Investor, each of its officers, directors and partners, members, stockholders, employees, agents (including such Investor’s legal counsel and independent accountants), and each person controlling such Investor within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (or actions in respect thereof, including any of the foregoing incurred in settlement of any litigation, arising out of or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or (ii) any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance and will reimburse each such Investor, each of its officers, directors and partners, members, stockholders, employees, agents and such Investor’s legal counsel and independent

 

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accountants, and each person controlling such Investor, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action; provided that the Company will not be liable (a) to such Investor in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Investor and stated to be specifically for use therein, (b) to such Investor in respect of a sale of Registrable Securities by such Investor pursuant to a Shelf Registration, to the extent such claim, loss, damage, liability or expense arises out of or is based on the failure of such Investor to effectively cause the prospectus delivery requirement of the Securities Act to be satisfied, provided that the Company has complied with its obligations under Section 2.4(d) of this Agreement, or (c) to such underwriter in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such underwriter and stated to be specifically for use therein.

(b) Each Investor will, severally and not jointly, if Registrable Securities held by such Investor are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, stockholders, employees and agents (including its legal counsel and independent accountants), each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Investor, each of its officers and directors and each person controlling such Investor within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, arising out of or based on the following (a “Violation”): (1) any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Investor and stated to be specifically for use therein, or (2) solely in respect of Registrable Securities sold by an Investor pursuant to a Shelf Registration, any failure by such Investor to effectively cause the prospectus delivery requirement of the Securities Act to be satisfied, provided that the Company has complied with its obligations under Section 2.4(d) of this Agreement. In the event of a Violation, such Investor will reimburse the Company, such Investors, such directors, officers, stockholders, employees and agents (including its legal counsel and independent accountants), underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action for which such Investor is obligated to provide indemnification pursuant to the foregoing; provided, however , that the obligations of such Investor under this Section 2.8(b) shall be limited to an amount

 

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equal to the net proceeds (after expenses, discounts and commissions) received by such Investor holding Registrable Securities sold in the registered offering in which such Violation arose.

(c) Each party entitled to indemnification under this Section 2.8 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party’s expense; and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, except to the extent, but only to the extent, that the Indemnifying Party’s ability to defend against such claim or litigation is materially adversely affected as a result of such failure to give notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, 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) If the indemnification provided for in paragraphs (a) and (b) of this Section 2.8 is unavailable or insufficient to hold harmless an Indemnified Party under such paragraphs in respect of any losses, claims, damages or liabilities or actions in respect thereof referred to therein, then each Indemnifying Party shall in lieu of indemnifying such Indemnified Party contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or actions in such proportion as appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or actions as well as any other relevant equitable considerations, including the failure to give any notice under paragraph (c) of this Section 2.8. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the Indemnifying Party, on the one hand, or the Indemnified Party, on the other hand, and to the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Investors holding Registrable Securities participating in the relevant offering agree that it would not be just and equitable if contributions pursuant to this paragraph were determined by pro rata allocation (even if all of the Investors holding Registrable Securities participating in the relevant offering were treated as one entity for such purpose) or by any other method of allocation which did not take account of the equitable considerations referred to above in this paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages, liabilities or action in respect thereof, referred to above in this paragraph, shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this paragraph, an Investor selling Registrable Securities shall not be required to contribute any amount in excess of the net proceeds (after expenses, discounts and commissions) received by such Investor selling Registrable Securities sold as contemplated herein. No person guilty of fraudulent misrepresentations (within the meaning of Section 11(f)

 

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of the Securities Act), shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation.

(e) The indemnification of underwriters provided for in this Section 2.8 shall be on such other terms and conditions as are at the time customary and reasonably required by such underwriters. In that event the indemnification of the Investors holding Registrable Securities in such underwriting shall at the sellers’ request be modified to conform to such terms and conditions.

2.9 Reports Under Securities Laws .

With a view to making available to the Investors the benefits of Rule 144 promulgated by the SEC under the Securities Act and any other rule or regulation of the SEC that may at any time permit an Investor to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the date of this Agreement until all Registrable Securities have been sold under an effective registration statement hereunder or until the obligations under this Section 2 have terminated in full as to all Investors holding Registrable Securities under Section 2.10;

(b) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Investors to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its Common Stock to the general public is declared effective;

(c) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(d) furnish to any Investor, as long as the Investor owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act (at any when the Company is subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Investor of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.

2.10 Limitation on Registration Obligations . Notwithstanding any other provision of this Section 2 to the contrary, the Company shall have no obligation to include any Registrable Securities in a registration statement filed by the Company under the Securities Act if the Investor holding such Registrable Securities as to which such registration has been so requested may sell all such Registrable Securities in any three (3)-month period without registration in reliance upon, and in compliance with, Rule 144 under the Securities Act.

 

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2.11 Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of the Investors holding at least 66  ² / 3 % of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company other than a Permitted Holder that would grant such holder “piggyback” registration rights that would reduce the number of Registrable Securities includable by the Investors in a Company registration pursuant to Section 2.2(a) hereof.

2.12 Market-Standoff Agreement .

(a) Market-Standoff Period; Agreement . In connection with any underwritten offering of the Company’s equity securities, each Investor agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any of its Registrable Securities or securities convertible into Common Stock (other than those included in the registration or transfers to affiliates under common control) without the prior written consent of the managing underwriter for such offering for such period of time (not to exceed 180 days with respect to a Qualified IPO and not to exceed 90 days with respect to any secondary underwritten equity offering) from the effective date of such registration and to execute an agreement reflecting the foregoing if requested by the underwriters at such time.

(b) Limitations . The foregoing restrictions of Section 2.12(a) shall only be applicable to Investors (i) if all officers and directors of the Company and beneficial owners of more than 5% of the Company’s outstanding Common Stock (prior to the offering and without giving effect to the conversion of the Preferred Stock) enter into similar agreements, (ii) if the underwriters for such offering do not release any officer or director of the Company from the provisions of such agreements unless all persons are released, (iii) if, at the time the registration statement for such underwritten offering is filed, the Investors collectively beneficially own greater than 5% of the Company’s Common Stock then outstanding, and (iv) only for a period not to exceed the period applicable to all such officers, directors and 5% stockholders. The obligations described in Section 2.12(a) shall not apply to a registration relating solely to employee benefit plans, or to a registration relating solely to a transaction pursuant to Rule 145 under the Securities Act.

(c) Stop-Transfer Instructions . In order to enforce the foregoing covenants, the Company may impose stop-transfer instructions with respect to the securities of each Investor (and the securities of every other person subject to the restrictions in Section 2.12(a)).

SECTION 3

GOVERNANCE

3.1 Board Representation .

(a) For so long as the Aggregate Liquidation Preference of the outstanding Preferred Stock is at least $12,500,000, the Management Shareholders, the Investors and the Company shall take all Necessary Action to cause the Board to have at least one director who shall be designated by the Required Investors.

 

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(b) If 2006 EBITDA is equal to or less than US $[        ] million, the Management Shareholders, the Investors and the Company shall take all Necessary Action to cause at least 40% of the members of the Board to be designees of the Required Investors until the earlier of such time as (i) the Aggregate Liquidation Preference of the outstanding Preferred Stock is less than $12,500,000 and (ii) the Company delivers written notice (which notice shall attach the relevant audited consolidated financial statements) to the Investors that EBITDA for any fiscal year subsequent to the fiscal year ended December 29, 2006 is greater than US $[        ] million.

3.2 Observer Rights . For so long as the Aggregate Liquidation Preference of the outstanding Preferred Stock is at least $12,500,000, the Required Investors shall have the right to designate one observer to attend meetings of the Board (and the committees thereof) and to receive all information provided to members of the Board as if such observer were an acting member of the Board.

3.3 Expenses . The Company shall reimburse any director designated pursuant to Section 3.1 hereof and any observer appointed pursuant to Section 3.2 hereof for all reasonable and documented out-of-pocket expenses incurred in connection with such director or observer’s attendance at and participation in meetings of the Board, including without limitation, travel, lodging and meal expenses.

3.4 Affiliate Transactions .

(a) For so long as the Aggregate Liquidation Preference of the outstanding Preferred Stock is at least $5,000,000, the Company and its consolidated Subsidiaries shall not, without the approval or written consent of the member of the Board appointed by the Required Investors pursuant to Section 3.1(a) (or, if no such member has been appointed, the Required Investors), directly or indirectly, enter into any transaction or series of related transactions with or for the benefit of any of their respective Affiliates other than with, between or among the Company and any consolidated Subsidiaries, except on an arm’s-length basis and if (i) (x) in the case of any such transaction in which the aggregate remuneration, rental value or other consideration (including the value of a loan), together with the aggregate remuneration, rental value or other consideration (including the value of a loan) of all such other transactions consummated in the year during which such transaction is proposed to be consummated, exceeds $2,000,000, the Company delivers board resolutions to the Investors evidencing that the Board and the Independent Directors that are disinterested each have (by a majority vote) determined in good faith that such transaction is in the best interests of the Company and that the aggregate remuneration, rental value or other consideration (including the value of any loan) inuring to the benefit of such Affiliate from any such transaction is not greater than that which would be charged to or extended by the Company or its Subsidiaries, as the case may be, on an arm’s- length basis for similar properties, assets, rights, goods or services by or to a Person not affiliated with the Company or its Subsidiaries, as the case may be, and (y) in the case of any such transaction in which the aggregate remuneration, rental value or other consideration (including the value of any loan), together with the aggregate remuneration, rental value or other consideration (including the value of any loan) of all such other transactions consummated in the year during which such transactions are proposed to be consummated, exceeds $10,000,000, in addition to the requirements set forth in clause (i)(x) above, the Company delivers to the

 

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Investors an opinion evidencing that a nationally recognized investment banking firm, unaffiliated with the Company and the Affiliate that is party to such transaction, has determined that the aggregate remuneration, rental value or other consideration (including the value of a loan) inuring to the benefit of such Affiliate from any such transaction is not greater than that which would be charged to or extended by the Company or its Subsidiaries, as the case may be, on an arm’s-length basis for similar properties, assets, rights, goods or services by or to a Person not affiliated with the Company or its Subsidiaries, as the case may be, and (ii) all such transactions referred to in clauses (i)(x) and (y) of this Section 3.4(a) are entered into in good faith. Any transaction required to be approved by Independent Directors pursuant to the preceding paragraph must be approved by at least one such Independent Director.

(b) The provisions of the preceding paragraph do not prohibit (i) any Restricted Payment that would be permitted under Section 2 of Exhibit C hereto, except any such Restricted Payments that would not be permitted under Section 2 of Exhibit C hereto if subclause (3)(iii) of the first paragraph thereof were deleted, (ii) any Permitted Investment (other than as contained in clause (vi) of such definition), (iii) except as set forth herein or in the Certificate of Designations for the Preferred Stock, any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board, (iv) loans or advances to employees in the ordinary course of business consistent with past practices, not to exceed $1,000,000 aggregate principal amount outstanding at any time, and (v) except as set forth herein or in the Certificate of Designations for the Preferred Stock, the payment of fees and compensation to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any of its Subsidiaries, as determined by the Board in good faith and as paid or provided pursuant to agreements or arrangements entered into in the ordinary course of business.

(c) Notwithstanding the foregoing Sections 3.4(a) and (b), for so long as the Aggregate Liquidation Preference of the outstanding Preferred Stock is at least $10,000,000, the approval or written consent of such member (or, if no such member has been appointed, the Required Investors) shall be required for any amendment to the Kennedy Employment Agreement.

3.5 Transactions Requiring Required Investors’ Approval . For so long as the Aggregate Liquidation Preference of the outstanding Preferred Stock is at least $5,000,000, without the approval or written consent of the Required Investors, the Company shall not, and shall cause each of its Subsidiaries not to:

(a) file any registration statement related to, or consummate, an initial public offering of the Company other than a Qualified IPO;

(b) hire any officer or enter into new, or modify any existing, employment agreements of the Company with any officer unless, in either case, such officer (i) does not own ten percent or more of any class of the Company’s capital stock at the time such officer is hired or enters into or modifies such employment agreement, as applicable, and (ii) will not, pursuant to the terms of any such employment agreement or modification thereto, be entitled or become

 

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entitled to own ten percent or more of any class of the Company’s capital stock (calculated based on the Company’s capital stock outstanding as of the date of such agreement or modification);

(c) sell or otherwise dispose of all or substantially all of the assets of the Company, unless the holders of the Preferred Stock would receive the full amount to which they are entitled upon liquidation of the Company under the Certificate of Designation for the Preferred Stock in cash or cash equivalents; or

(d) merge or consolidate with any entity (unless immediately after consummation of such a transaction, the stockholders of the Corporation immediately prior to the consummation of such transaction shall hold at least 50% of the outstanding capital stock of the entity surviving such merger or consolidation), unless the holders of the Preferred Stock would receive the full amount to which they are entitled upon liquidation of the Company under the Certificate of Designation for the Preferred Stock in cash or cash equivalents.

3.6 Representation and Agreement of the Management Shareholders .

(a) Each Management Shareholder hereby represents and warrants that, as of the date hereof, no family member or Affiliate of such Management Shareholder (other than the Company or another Management Shareholder) legally or beneficially owns any Voting Common Stock.

(b) Each Management Shareholder hereby agrees that it shall not Transfer any Voting Common Stock to any family member or Affiliate of such Management Shareholder unless such Transfer is conditioned upon such transferee becoming, and such transferee becomes, bound by the terms hereof as a Management Shareholder.

SECTION 4

INFORMATION RIGHTS

At all times that the Company (a) is required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act or otherwise files such reports, or (b) is contractually obligated to file with the SEC the annual reports, quarterly reports and other documents that the Company would have been required to file with the SEC pursuant to such Section 13(a) or 15(d) if the Company were so subject, the Company shall transmit by mail to each Investor, at such Investor’s address set forth in, or notified to the Company in accordance with, Section 6.7 hereof, without cost to such Investor, copies of each annual report, quarterly report and other document that the Company is, or would be, required to file with the SEC, within 15 days of the date by which such report or document is, or would be, required to be filed with the SEC.

 

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SECTION 5

PREEMPTIVE RIGHTS; TRANSFERS OF STOCK

5.1 Preemptive Rights .

(a) Subject to Section 5.1(b), if the Company proposes to issue additional Common Stock of the Company, or of securities convertible into or exchangeable for or otherwise valued by reference to such Common Stock or carrying rights (including voting rights) equivalent to any class or series of Common Stock (such securities, the “Offered Shares”), the Company shall deliver to each Investor a written notice (the “Preemptive Rights Notice”) of such proposed issuance at least 20 days prior to the date of the proposed issuance, which notice shall include (i) the proposed issuance date, (ii) the material terms and conditions of the securities proposed to be issued, (iii) the issue price per security and (iv) the material terms and conditions of the issuance. Subject to Section 5.1(b), each Investor shall have the option, exercisable within 10 days following delivery of the Preemptive Rights Notice by delivery of written notice to the Company, to subscribe for not more than such Investor’s Percentage Interest of the securities to be issued at the price per security set forth in the Preemptive Rights Notice and on terms no less beneficial to the purchaser than those set forth in the Preemptive Rights Notice. In the event that any Investor does not elect to acquire its aggregate Percentage Interest of such securities, the Company shall deliver a second notice, not more than 15 days following the delivery of the Preemptive Rights Notice, to each of the Investors that elected to acquire its full Percentage Interest of securities (the “Participating Investors”), indicating the number of securities for which the other Investors did not subscribe. The Participating Investors may, by notice in writing to the Company on or prior to the 20 ^th day following the delivery of the Preemptive Rights Notice, elect to acquire any or all of the remaining securities at the price per security set forth in the Preemptive Rights Notice and on terms no less beneficial to the purchaser than those set forth in the Preemptive Rights Notice, which securities shall be allocated among the Participating Investors based on their relative Percentage Interests.

(b) Section 5.1(a) shall not apply to (i) the issuance or grant of Common Stock of the Company, or of securities convertible into or exchangeable for or otherwise valued by reference to such Common Stock or carrying rights equivalent to any such securities to officers, directors or employees of the Company or any subsidiary thereof pursuant to any management equity rights plan or other equity-based employee benefits plan or arrangement that has been duly authorized by the Board; (ii) the issuance or sale of equity securities of the Company, or of securities convertible into or exchangeable for such securities or carrying rights equivalent to any such securities, in connection with an acquisition of a Person (other than an Affiliate of the Company) that has been duly authorized by the Board; (iii) the issuance of Common Stock in connection with the conversion or exercise of preferred stock, options, warrants or similar securities that have been issued in accordance with this Section 5.1 or that are outstanding as of October 27, 2005; and (iv) the issuance of Common Stock in connection with the Qualified IPO.

5.2 Tag-Along Rights . In the event that the Controlling Shareholder proposes to sell all or a portion of any class or classes of its capital stock of the Company, and such Transfer, together with all prior Transfers by the Controlling Shareholder, would cause the Controlling Shareholder to have Transferred shares of the Company such that the Controlling Shareholder no longer holds a majority in interest of the voting power of or economic interest in the Company as of the date of the proposed Transfer, the Controlling Shareholder shall deliver written notice (the

 

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“Tag-Along Notice”) to each Investor at least ten (10) business days prior to such proposed Transfer, which notice shall set forth the proposed material terms and conditions of such Transfer (including price per share of capital stock). Each Investor shall have the right to elect, by delivery of written notice to the Controlling Shareholder within five (5) business days from delivery of the Tag-Along Notice, to sell to the proposed transferee a number of shares of each class of capital stock of the Company, not to exceed (a) the number of shares of such class of capital stock held by such Investor (or to be held by such Investor u