SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT

Exhibit 10.1

EXECUTION COPY

SECURITYHOLDERS AND
REGISTRATION RIGHTS AGREEMENT

BETWEEN

DORAL HOLDINGS DELAWARE, LLC

AND

DORAL FINANCIAL CORPORATION

Dated as of July 19, 2007

 

Table of Contents

				Page
ARTICLE I DEFINITIONS				1
Section 1.1.		Certain Defined Terms		1
Section 1.2.		Terms Generally		6
ARTICLE II SHARE OWNERSHIP AND TRANSFER				7
Section 2.1.		Going Private Transactions		7
Section 2.2.		Stock Purchase Rights		7
Section 2.3.		Company Share Repurchases		8
Section 2.4.		Limitation on Transfer of Majority Interest		8
ARTICLE III CORPORATE GOVERNANCE				9
Section 3.1.		Composition of the Board		9
Section 3.2.		Committees		10
Section 3.3.		Comparable Rights at Significant Subsidiaries		11
Section 3.4.		No Voting Limitations		11
Section 3.5.		Certificate of Incorporation and Bylaws to be Consistent		11
Section 3.6.		Holdings Information Rights		11
ARTICLE IV REGISTRATION RIGHTS				12
Section 4.1.		Demand Registrations		12
Section 4.2.		Piggyback Registrations		14
Section 4.3.		Shelf Take-Downs		15
Section 4.4.		Lock-Up Agreements; Restrictions on the Company		16
Section 4.5.		Registration Procedures		17
Section 4.6.		Indemnification		22
Section 4.7.		Rule 144; Rule 144A		24
Section 4.8.		Underwritten Registrations		25
Section 4.9.		Registration Expenses		25
Section 4.10.		Other Agreements		26
Section 4.11.		Securities Held by the Company or its Subsidiaries		26
ARTICLE V MISCELLANEOUS				26
Section 5.1.		Conflicting Agreements		26
Section 5.2.		Termination		26
Section 5.3.		Notice of Dilution; Certain Calculations		26
Section 5.4.		Amendment and Waiver		27
Section 5.5.		Severability		27
Section 5.6.		Entire Agreement		27
Section 5.7.		Successors and Assigns		27
Section 5.8.		Counterparts; Execution by Facsimile Signature		28
Section 5.9.		Remedies		28
Section 5.10.		Notices		28
Section 5.11.		Governing Law; Consent to Jurisdiction		30

- i -

Index of Principal Terms

Defined Term		Page(s)
Action			1
Adverse Disclosure			1
Affiliate			2
Agreement			2
Beneficial Ownership			2
Beneficially Own			2
Board			2
Business Day			2
By-Laws			2
Capital Stock			2
Closing			1
Common Stock			1
Company			1
Company Indemnitees			23
Company Process Agent			30
control			2
controlled by			2
Demand Notice			12
Demand Registration			12
Demand Suspension			13
Director			2
Exchange Act			2
Fair Market Value			2
Going Private Transaction			3
Governmental Entity			3
Group			3
Holder Indemnitees			22
Holders			3
Holders’ Representative			3
Holdings			1
Holdings Director			3
Holdings Related Parties			28
indemnified party			23
indemnifying party			23
Inspectors			20
Law			3
Losses			22
Other Securities			3
Ownership Percentage			4
Person			4
Piggyback Notice			14
Piggyback Registration			14
Plan Asset Regulations			4

- ii -

Defined Term		Page(s)
PRGCL			27
Pro Rata Amount			4
Prospectus			4
Purchased Stock			1
Qualifying Transaction			4
Records			21
Registrable Securities			4
Registration Statement			5
Rule 144			5
SEC			5
Securities Act			5
Selling Holder			5
Shelf Demand			12
Shelf Period			5
Shelf Registration Statement			5
Shelf Take-Down Notice			15
Shelf Underwritten Offering			15
SPA			1
Stock Purchase			1
Subsidiary			5
Total Voting Power			6
Transfer			6
Transferee			6
Unaffiliated Stockholder Approval			6
under common control with			2
Voting Securities			6

- iii -

SECURITYHOLDERS AND
REGISTRATION RIGHTS AGREEMENT

     SECURITYHOLDERS AND REGISTRATION RIGHTS AGREEMENT dated as of July 19, 2007, by and between Doral Holdings Delaware, LLC, a Delaware limited liability company (“ Holdings ”) and Doral Financial Corporation, a corporation organized under the laws of the Commonwealth of Puerto Rico (the “ Company ”).

     WHEREAS, the Company and Holdings (and, to the extent provided therein, Doral Holdings, L.P.) have entered into a Stock Purchase Agreement, dated as of May 16, 2007 (as amended, supplemented, restated or otherwise modified from time to time, the “ SPA ”), pursuant to and subject to the terms and conditions of which, among other things, the Company has agreed to sell to Holdings and Holdings has agreed to purchase from the Company (the “ Stock Purchase ”) 968,253,968 shares (subject to adjustment as provided therein, the “ Purchased Stock ”) of common stock, par value (upon the Closing) $0.01 per share of the Company (the “ Common Stock ”);

     WHEREAS, upon the closing of the Stock Purchase (the “ Closing ”), Holdings will Beneficially Own (as defined herein), directly and/or through its Subsidiaries (as defined herein), approximately 90% of the issued and outstanding Common Stock; and

     WHEREAS, the parties hereto desire to enter into this Agreement to establish certain arrangements with respect to the Common Stock to be Beneficially Owned by Holdings following the Closing, as well as restrictions on certain activities in respect of the Common Stock, corporate governance and other related corporate matters.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

          Section 1.1. Certain Defined Terms . Capitalized terms used but not defined herein shall have the meaning described thereto in the SPA. As used herein, the following terms shall have the following meanings:

     “ Action ” means any legal, administrative, regulatory or other suit, action, claim, audit, assessment, arbitration or other proceeding, investigation or inquiry.

     “ Adverse Disclosure ” means the disclosure of any material transaction that (x) has not been, and is not otherwise required to be, disclosed to the public, and (y) the premature disclosure of which would be materially detrimental to the Company or would materially interfere with any material financing, acquisition, corporate reorganization or merger or other transaction involving the Company.

     “ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such specified Person, for so long as such Person remains so associated to the specified Person.

     “ Agreement ” means this Securityholders and Registration Rights Agreement as it may be amended, supplemented, restated or modified from time to time.

     “ Beneficial Ownership ” by a Person of any securities includes ownership by any Person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (i) voting power which includes the power to vote, or to direct the voting of, such security; and/or (ii) investment power which includes the power to dispose, or to direct the disposition, of such security; and shall otherwise be interpreted in accordance with the term “beneficial ownership” as defined in Rule 13d-3 adopted by the SEC under the Exchange Act; provided , that for purposes of determining Beneficial Ownership, in no event will Holdings be deemed to Beneficially Own any securities which it has the right to acquire pursuant to this Agreement unless, and then only to the extent that, Holdings shall have actually exercised such right. The term “ Beneficially Own ” shall have a correlative meaning.

     “ Board ” means the Board of Directors of the Company.

     “ Business Day ” means any day other than a Saturday, Sunday or any other day on which banks in New York, New York or San Juan, Puerto Rico are required or authorized to close.

     “ By-Laws ” means the By-Laws of the Company, as amended or supplemented from time to time.

     “ Capital Stock ” means, with respect to any Person at any time, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of capital stock, partnership interests (whether general or limited) or equivalent ownership interests in or issued by such Person.

     “ control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

     “ Director ” means any member of the Board (other than any advisory, honorary or other non-voting member of the Board).

     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC from time to time thereunder.

     “ Fair Market Value ” means, as to any securities or other property, the cash price at which a willing seller would sell and a willing buyer would buy such securities or property in an arm’s length negotiated transaction without time constraints. With respect to any securities that are traded on a national securities exchange, Fair Market Value shall mean (i) the arithmetic average of the closing prices of such securities on their principal market for the 10 consecutive

trading days immediately preceding the applicable date of determination or (ii) if a determination of value by an investment banking firm is requested by either a majority of the Directors that are disinterested in the applicable transaction or Holdings, the lesser of (x) the value determined pursuant to clause (i) above and (y) the value determined by an investment banking firm of nationally recognized standing selected by a majority of the Directors that are disinterested in the applicable transaction and that is, in the reasonable judgment of a majority of such Directors, independent of the Company and Holdings. The Fair Market Value of any property or assets, other than securities described in the preceding sentence, with an estimated value of less than $5 million shall be determined by the Board (acting through a majority of the Directors that are disinterested in the applicable transaction) in its good faith judgment. The Fair Market Value of all other property or assets not otherwise addressed by the preceding sentences shall be determined by an investment banking firm of nationally recognized standing selected by a majority of the Directors that are disinterested in the applicable transaction and that is, in the reasonable judgment of a majority of such Directors, independent of the Company and Holdings. The fees and expenses of any investment bank retained in accordance with the provisions of this definition shall be paid by the Company. If at any time there are no disinterested directors, any determination that would otherwise be made pursuant to this paragraph by a majority of the disinterested directors shall be made by a majority of the entire Board of Directors).

     “ Going Private Transaction ” means any transaction that would constitute a “Rule 13e-3 transaction” under paragraph (a)(3) of Rule 13e-3 promulgated under the Exchange Act as in effect on the date of this Agreement.

     “ Governmental Entity ” means any court, administrative agency or commission or other federal, state, local (which, for all purposes of this Agreement, shall include the Commonwealth of Puerto Rico and any subdivision thereof) or foreign governmental authority or instrumentality or self-regulatory organization.

     “ Group ” has the meaning assigned to it in Section 13(d)(3) of the Exchange Act.

     “ Holders ” means Holdings and any Transferee of Registrable Securities.

     “ Holders’ Representative ” means Holdings or any or any other Holder designated by Holdings as a Holders’ Representative.

     “ Holdings Director ” means any Director designated for nomination by Holdings and elected or appointed as a Director; provided that the individual then serving (or serving at the time of such nomination) as chief executive officer of the Company shall in no event be considered a Holdings Director.

     “ Law ” means any applicable statute, law, code, ordinance, rule, regulation or listing requirement of any Governmental Entity.

     “ Other Securities ” means shares of Common Stock or shares of other Capital Stock which are contractually entitled to registration rights or which the Company is registering pursuant to a registration statement covered by Section 4.2.

     “ Ownership Percentage ” means, at any time, the quotient, expressed as a percentage, of (i) the Total Voting Power of all Voting Securities Beneficially Owned by Holdings divided by (ii) the Total Voting Power of all Voting Securities then outstanding.

     “ Person ” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivisions thereof or any group (within the meaning of Section 13(d)(3) of the Exchange Act) comprised of two or more of the foregoing.

     “ Pro Rata Amount ” means, as of any date, the number of shares of Common Stock equal to the product of (i) the total number of shares of Common Stock Beneficially Owned by all holders of shares of Common Stock other than Holdings and (ii) the fraction determined by dividing (A) the total number of shares of Common Stock proposed to be Transferred by Holdings pursuant to the applicable transaction (or if the applicable transaction involves the indirect Transfer of shares of Common Stock by means of a Transfer of interests in another Person, the number of shares of Common Stock equal to the product of (x) the total number of shares of Common Stock Beneficially Owned by such Person and (y) the percentage of the total equity interests of such Person proposed to be Transferred pursuant to such transaction) by (B) the total number of shares of Common Stock Beneficially Owned by Holdings.

     “ Prospectus ” means the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities (and if applicable, Other Securities) covered by such Registration Statement, any free writing prospectus related thereto, and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.

     “ Qualifying Transaction ” means a securities purchase, tender offer, exchange offer, merger or other business combination transaction involving the acquisition of or offer to acquire, in addition to the securities proposed to be Transferred pursuant to such transaction, shares of Common Stock representing at least the Pro Rata Amount (calculated as of the date that is 3 Business Days prior to execution of the definitive agreement relating to such transaction or, if no such agreement exists, the date that is 3 Business Days prior to consummation of the applicable Transfer) and made proportionately to all holders of Common Stock other than Holdings and at the same price per share of Common Stock that is received by Holdings (or, if the applicable transaction involves the Transfer of interests in another Person, the implied price per share of Common Stock received by the applicable transferor, taking into account the capital structure and other assets and liabilities of the Person the interests of which are the subject of such Transfer).

     “ Registrable Securities ” means, with respect to the Holders, (i) shares of Common Stock, including shares issued or issuable upon the conversion, exchange or exercise of any security convertible into or exchangeable or exercisable for shares of Common Stock, (ii) any Capital Stock or other securities into which or for which such Common Stock may hereafter be changed, converted or exchanged and (iii) any other shares or securities issued to the Holders in

respect of such Common Stock (or such shares or other securities into which or for which such shares are so changed, converted or exchanged) upon any reclassification, share combination, share subdivision, share dividend, share exchange, merger, consolidation or similar transaction or event. As to any particular Registrable Securities, such Registrable Securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale by the Holder thereof shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) they shall have been distributed to the public in accordance with Rule 144 or (iii) they shall have ceased to be outstanding.

     “ Registration Statement ” means any registration statement of the Company under the Securities Act which permits the public offering of any of the Registrable Securities (and, if applicable, Other Securities) pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

     “ Rule 144 ” means Rule 144 under the Securities Act.

     “ SEC ” means the United States Securities and Exchange Commission.

     “ Securities Act ” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC from time to time thereunder.

     “ Selling Holder ” means each Holder of Registrable Securities included in a registration pursuant to Article IV.

     “ Shelf Period ” means, with respect to any Shelf Registration Statement, a period of 12 months from the date of effectiveness of such Shelf Registration Statement plus the period of time, if any, during which use of such Shelf Registration Statement has been postponed or suspended pursuant to Section 4.1(e) and/or Section 4.5 or such shorter period in which all Registrable Securities included in such Shelf Registration Statement have actually been sold.

     “ Shelf Registration Statement ” means a Registration Statement of the Company filed with the SEC on Form S-3 (or any successor form or other appropriate form under the Securities Act) for an offering to be made on a continuous or delayed basis pursuant to Rule 415 under the Securities Act covering Registrable Securities.

     “ Subsidiary ” means, with respect to any Person, (i) any corporation of which a majority of the securities entitled to vote generally in the election of directors thereof, at the time as of which any determination is being made, are owned by such Person, either directly or indirectly, and (ii) any joint venture, general or limited partnership, limited liability company or other legal entity in which such Person is the record or beneficial owner, directly or indirectly, of a majority of the voting interests or the general partner.

     “ Total Voting Power ” means the total number of votes entitled to be cast by the holders of the outstanding Common Stock and any other securities entitled, in the ordinary course, to

vote generally in the election of Directors and not solely upon the occurrence and/or during the continuation of certain specified events.

     “ Transfer ” means, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition.

     “ Transferee ” means any of (i) the transferee of all or any portion of the Registrable Securities held by Holdings or (ii) the subsequent transferee of all or any portion of the Registrable Securities held by any Transferee; provided , that no Transferee shall be entitled to any benefits of a Transferee hereunder unless such Transferee executes and delivers to the Company an instrument substantially in the form provided as Exhibit A attached hereto.

     “ Unaffiliated Stockholder Approval ” means approval by the holders of (or, in the case of a tender or exchange offer, the tender of) a majority of the outstanding shares of Common Stock not Beneficially Owned by Holdings.

     “ Voting Securities ” means at any time shares of any class of Capital Stock or other securities of the Company, which are then entitled to vote generally in the election of Directors and not solely upon the occurrence and/or during the continuation of certain specified events, and any securities convertible into or exercisable or exchangeable for such shares of Capital Stock.

          Section 1.2. Terms Generally . The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, unless the context expressly provides otherwise. All references herein to Sections, paragraphs, subparagraphs, clauses, Exhibits or Schedules shall be deemed references to Sections, paragraphs, subparagraphs or clauses of, or Exhibits or Schedules to this Agreement, unless the context requires otherwise. Unless otherwise expressly defined, terms defined in this Agreement have the same meanings when used in any Exhibit or Schedule hereto. Unless otherwise specified, the words “this Agreement”, “herein”, “hereof”, “hereto” and “hereunder” and other words of similar import refer to this Agreement as a whole (including the Schedules and Exhibits) and not to any particular provision of this Agreement. The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. Unless expressly stated otherwise, any Law defined or referred to herein means such Law as from time to time amended, modified or supplemented, including by succession of comparable successor Laws and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

ARTICLE II

SHARE OWNERSHIP AND TRANSFER

          Section 2.1. Going Private Transactions . Neither Holdings nor any of its Affiliates shall consummate a Going Private Transaction unless the Directors who are disinterested in such transaction (if any) shall have been authorized, at the Company’s expense, to retain independent financial and legal advisors, and either:

          (a) a majority of the Directors who are disinterested in such transaction approve the Going Private Transaction; or

          (b) the Going Private Transaction receives Unaffiliated Stockholder Approval.

          Section 2.2. Stock Purchase Rights . So long as Holdings Beneficially Owns Voting Securities representing at least 25% of the Total Voting Power, if the Company at any time shall propose to issue any shares of Common Stock (whether for financings, acquisitions or otherwise but excluding such issuances pursuant to the exercise of employee stock options, stock appreciation rights or similar instruments of the type covered by Section 2.3), Holdings shall have the option to purchase for cash directly from the Company up to a sufficient number of shares of Common Stock at the same purchase price (including any assumed indebtedness which is part of the purchase price and valuing any non-cash consideration at its Fair Market Value) as the price for the additional shares of Common Stock to be issued so that, after the issuance, Holdings would Beneficially Own the same Ownership Percentage as was Beneficially Owned by Holdings immediately prior to the issuance of such additional shares of Common Stock. The Company shall provide such information, to the extent available, relating to any non-cash consideration as Holdings may reasonably request in order to evaluate any non-cash consideration paid in respect of any such issuance.

          (b) So long as Holdings Beneficially Owns Voting Securities representing at least 25% of the Total Voting Power, in the event that the Company shall propose to issue options (other than employee stock options, stock appreciation rights or similar instruments of the type covered by Section 2.3) or warrants that are exercisable for, or debt or equity securities that are convertible into or exchangeable or exercisable for, shares of Common Stock, the Company shall offer Holdings the opportunity to purchase for cash up to its Ownership Percentage, as of the time of such issuance, of such options, warrants or convertible debt or equity securities at the same purchase price as is offered to the other purchasers thereof. To the extent that Holdings elects to purchase such options, warrants or convertible debt or equity securities, Holdings shall not have the right to purchase pursuant to paragraph (a) above the corresponding number of shares of Common Stock underlying such options, warrants or convertible debt or equity securities in connection with the issuance of such underlying shares of Common Stock.

          (c) The Company shall provide Holdings with at least 20 days prior written notice of any proposed issuance subject to this Section 2.2, and Holdings may exercise its rights under this Section 2.2 by providing written notice to the Company within 15 days after receiving such written notice from the Company (or, if later, 15 days after the receipt by Holdings of

notice of the determination of the applicable Fair Market Value in accordance with this Agreement). In the event that, in connection with any proposed issuance by the Company, Holdings gives notice of its intent to exercise its option under this Section 2.2, and it has not purchased the applicable shares of Common Stock, options, warrants or convertible debt or equity securities concurrently with the related issuance of such securities by the Company for reasons not relating primarily to actions or omissions of the Company, Holdings shall be deemed to have waived its rights to purchase such securities under this Section 2.2 with respect to such proposed issuance (but such waiver shall not affect its rights under this Section 2.2 with respect to any future issuance of securities by the Company).

          Section 2.3. Company Share Repurchases . So long as Holdings Beneficially Owns Voting Securities representing less than 60%, but at least 25%, of the Total Voting Power, if the Company shall issue shares of Common Stock (i) upon exercise of any option, warrant, stock appreciation right or other similar instrument granted to its directors, officers, employees, consultants or others, or (ii) in the form of restricted shares or similar instruments, in either case pursuant to any compensation, retention, incentive or similar program or arrangement in effect from time to time, then the Company shall give notice of such issuance to Holdings and shall, at the request of Holdings, unless prohibited by Law, use its reasonable best efforts to repurchase a corresponding number of shares of Common Stock in the open market within 120 days after any such issuance so that the net total number of outstanding shares of Common Stock are not increased by such issuance, provided that the Company shall have no repurchase obligation under this Section 2.3 in the event that the issuances of shares subject hereto, together with any prior issuances contemplated by this Section 2.3 with respect to which the Company has not yet effected repurchases hereunder, do not exceed 2.5% of the outstanding Common Stock in the aggregate. The Company’s obligation under this Section 2.3 shall be subject to the receipt of any required regulatory approval, and in the event of any such requirement the 120-day period referred to above shall not commence until the receipt of such regulatory approval. In the event that the Company is unable to complete the repurchases contemplated hereby within the 120-day period, the Company shall use its reasonable best efforts to complete such repurchases as promptly as practicable thereafter. The Company shall also be permitted to meet its obligations hereunder by means of an ongoing regular stock repurchase plan, in which case offsetting repurchases may occur prior to the related issuance of Common Stock hereunder.

          Section 2.4. Limitation on Transfer of Majority Interest . So long as Holdings Beneficially Owns Voting Securities representing a majority of the Total Voting Power, Holdings may not Transfer to any Person in one transaction or series of related transactions shares of Common Stock representing more than 50% of the outstanding Common Stock, and Doral Holdings, L.P. or its limited partners may not directly or indirectly Transfer to any Person in one transaction or a series of related transactions interests representing more than 50% of the total equity of Holdings, in either case unless such Transfer is a Qualifying Transaction; provided , however , that the provisions of this Section 2.4 shall not apply to a Transfer (i) to one or more Affiliates of Holdings who agree in writing to be bound by this provision with respect to future Transfers that are subject to this provision, (ii) to one or more Affiliates of Holdings on a substantially pro rata basis or (iii) on a pro rata basis by Doral Holdings, L.P. (or any successor) to its limited partners other than, in the case of clause (iii), such a Transfer the purpose of which is to effect a subsequent Transfer in avoidance of this provision.

ARTICLE III

CORPORATE GOVERNANCE

          Section 3.1. (a)(i) Composition of the Board . Immediately following the Closing, the authorized number of Directors comprising the Board shall be eleven, comprised of the individuals specified as provided in Section 5.12 of the SPA. Effective as of the Closing and for so long as Holdings Beneficially Owns Voting Securities representing a majority of the Total Voting Power, Holdings shall be entitled, but not required, to designate all nominees for election as Directors (other than any Directors entitled to be designated by the holders of any then-outstanding Preferred Stock of the Company); provided that (x) such nominees satisfy any applicable requirements of Law and (y) Holdings shall cause one of such nominees to be the individual then serving as the chief executive officer of the Company, unless such individual has otherwise been so nominated. Any director not so designated for nomination by Holdings shall be nominated in accordance with the certificate of incorporation and bylaws of the Company.

(ii) At any time and from time to time when Holdings Beneficially Owns Voting Securities representing a majority of the Total Voting Power, Holdings may propose that the Board be expanded to provide for the addition of such number of directors designated by Holdings as Holdings shall elect, and the Board, subject to the provisions of the certificate of incorporation and bylaws of the Company and applicable Law, shall so expand the size of the Board and elect such additional designees of Holdings to fill such newly created vacancies.

          (b) (i) So long as Holdings Beneficially Owns Voting Securities representing more than 4.99%, but less than a majority, of the Total Voting Power, in connection with any election of Directors of the Company, Holdings shall have the right to designate for nomination, and, subject to applicable Law, the Company shall cause the nomination of, (x) if Holdings Beneficially Owns Voting Securities representing less than 10% of the Total Voting Power, one Director and (y) if Holdings Beneficially Owns Voting Securities representing 10% or more of the Total Voting Power, such number of directors of the Company such that after such election (assuming all such Holdings designees are elected to the Board), the number of Holdings Directors will be equal to the product of (1) the Total Voting Power of the Company Beneficially Owned by Holdings multiplied by (2) the total number of Directors constituting the whole Board, rounded up to the nearest whole number.

     (ii) At any time and from time to time when Holdings Beneficially Owns Voting Securities representing less than a majority of the Total Voting Power and Holdings has not designated the full number of directors to which it is entitled pursuant to this Section 3.1(b), (x) to the fullest extent permitted by applicable Law, the Company shall use its reasonable best efforts to solicit from its stockholders proxies in order to effectuate, if necessary, any amendment of its certificate of incorporation and/or bylaws to ensure that there are a sufficient number of authorized Directors permitted under its certificate of incorporation and bylaws to allow Holdings to designate the full number of Directors to which it is entitled pursuant to this Section 3.1(b) and (y) Holdings may propose that the Board be expanded to provide for the addition of up to the maximum incremental number of Directors designated by Holdings to which Holdings is entitled

pursuant to this Section 3.1(b), taking into account such expansion of the Board, and subject to the provisions of the certificate of incorporation and bylaws of the Company and applicable Law, the Board shall so expand the size of the Board and elect such additional designees of Holdings to fill such newly created vacancies.

     (iii) If at any time the total number of Directors of the Company is increased or decreased, the number of Directors that Holdings shall have the right to designate for nomination pursuant to this Section 3.1(b), shall be increased or decreased so that the number of Holdings Directors is not less than the number of Directors which Holdings is then entitled to designate for nomination in accordance with the provisions of this Section 3.1(b) (calculated as of the date of such increase or decrease) taking into account the adjusted total number of Directors. In such event, subject to Section 3.1(e), the Company shall take all steps necessary to effectuate this increase or decrease of Holdings Directors as promptly as reasonably possible.

          (c) If a vacancy occurs or exists on the Board at any time, including but not limited to a vacancy because of the death, disability, retirement, resignation or removal of any Director for cause or otherwise, and the vacant position was held by a Holdings Director, and Holdings is otherwise entitled pursuant to this Section 3.1 to designate an individual to fill such directorship, then Holdings shall have the sole right to designate an individual to fill such vacancy, and, subject to the fiduciary duties of the Directors, the Board shall elect such nominee to fill such vacancy.

          (d) To the fullest extent permitted by Law, the Company shall use its reasonable best efforts to solicit from the stockholders of the Company eligible to vote for the election of Directors proxies in favor of the nominees designated by Holdings in accordance with this Section 3.1.

          (e) Except as otherwise provided in this Section 3.1, the number of Holdings Directors entitled to be designated pursuant to this Section 3.1 shall be determined as of the date which is 60 days prior to the date of the anniversary of the immediately preceding annual meeting of the Company’s stockholders. Any reduction in the number of Holdings Directors entitled to be designated for nomination shall not result in the requirement that any Director tender his resignation at any time prior to the following annual meeting of the Company’s stockholders.

          Section 3.2. Committees . For so long as Holdings Beneficially Owns Voting Securities representing at least 15% of the Total Voting Power, the Company shall cause Holdings Directors specified by Holdings (provided that such specified Holdings Directors satisfy all requirements of Law for membership on such committee) to be designated as members of each committee of the Board so that after such appointment(s), the ratio of Holdings Directors who are members of such committee to the total number of members of such committee is not less than the ratio of the number of Directors then entitled to be designated by Holdings pursuant to Section 3.1 to the total number of Directors comprising the entire Board, and in any event at least one Holdings Director shall be appointed to each such committee.

          Section 3.3. Comparable Rights at Significant Subsidiaries . Subject to applicable Law, the provisions of Sections 3.1 and 3.2 shall apply, mutatis mutandis , to Holdings’ right to designate directors and committee members of each of the Company’s Significant Subsidiaries (as defined in Rule 1.02 of Regulation S-X promulgated by the SEC).

          Section 3.4. No Voting Limitations . Nothing contained in this Agreement shall limit or restrict Holdings from voting or otherwise exercising its rights with respect to the shares of Capital Stock of the Company held by it, including acting by written consent, to the fullest extent permitted under the Company’s certificate of incorporation and bylaws and applicable Law.

          Section 3.5. Certificate of Incorporation and Bylaws to be Consistent . The Board shall take or cause to be taken all lawful action necessary or appropriate to ensure that at all times the certificate of incorporation and the bylaws of the Company contain provisions consistent with the terms of this Agreement and none of the certificate of incorporation or the bylaws of the Company or any of the corresponding constituent documents of the Company’s Subsidiaries contain any provisions inconsistent therewith or which would in any way nullify or impair the terms of this Agreement or the rights and obligations of the Company or Holdings hereunder. None of the Company, the Board, any committee thereof or Holdings shall take or cause to be taken any action inconsistent with the terms of this Agreement or Holdings’ or the Company’s rights and obligations hereunder. Without limiting the generality of the foregoing, any stockholders’ rights plan or other anti-takeover measure adopted by the Company shall exclude Holdings and its Affiliates from its operation in all respects, and shall not impair in any respect the rights of Holdings or any of its Affiliates hereunder.

          Section 3.6. Holdings Information Rights . (a) The Company shall provide Holdings, on an ongoing and current basis, such access to and information with respect to the Company’s business, operations, plans and prospects as Holdings may from time to time reasonably determine it requires in order to appropriately manage and evaluate its investment in the Company.

          (b) Without limiting the generality of the foregoing, as soon as reasonably practicable following the end of each fiscal quarter and fiscal year of the Company, the Company shall furnish to Holdings the consolidated and consolidating financial statements of the Company (including providing draft statements as such statements become available and, with respect to fiscal years, audit reports as such reports become available), together with such supporting detailed information as Holdings may reasonably request to enable it to prepare its own consolidated financial statements. In addition, the Company shall furnish to Holdings, promptly after the end of each calendar month, copies of internal management financial reports regarding the Company’s financial results and operations, containing such information as Holdings may reasonably request from time to time.

          (c) Subject to applicable Law, for so long as Holdings Beneficially Owns Voting Securities representing less than a majority of the Total Voting Power, Holdings shall keep confidential all information and documents obtained pursuant to this Section 3.6 unless such information (i) at the time of disclosure or thereafter is generally known by or available to the public (other than as a result of disclosure by Holdings in violation of this Section 3.6(c)); (ii)

was or becomes available to Holdings on a non-confidential basis from a Person not otherwise known to Holdings to be bound by a confidentiality agreement with the Company or prohibited from transmitting the information to Holdings by a contractual, legal or fiduciary obligation owed to the Company, (iii) was available to Holdings prior to its disclosure by or on behalf of the Company or (iv) has been or is independently conceived or discovered by Holdings.

ARTICLE IV

REGISTRATION RIGHTS

          Section 4.1. Demand Registrations . (a) At any time after the six-month anniversary of the consummation of the Stock Purchase pursuant to the SPA, the Holders’ Representative shall have the right by delivering a written notice to the Company (a “ Demand Notice ”) to require the Company to, pursuant to the terms of this Agreement, register under and in accordance with the provisions of the Securities Act the number of Registrable Securities Beneficially Owned by any Holders and requested by such Demand Notice to be so registered (a “ Demand Registration ”); provided , however , that a Demand Notice may only be made if the sale of the Registrable Securities requested to be registered by the Holders’ Representative (x) relates to at securities representing at least 5% of the then-outstanding shares of Common Stock or (y) is reasonably expected to result in aggregate gross cash proceeds in excess of $25,000,000 (without regard to any underwriting discount or commission). A Demand Notice shall also specify the expected method or methods of disposition of the applicable Registrable Securities. Following receipt of a Demand Notice, the Company shall use its reasonable best efforts to file, as promptly as reasonably practicable, but not later than 30 days (or, if the Company is not then eligible to use Form S-3, 90 days) after receipt by the Company of such Demand Notice (subject to paragraph (e) of this Section 4.1), a Registration Statement relating to the offer and sale of the Registrable Securities requested to be included therein by the Holders thereof in accordance with the methods of distribution elected by such Holders (to the extent not prohibited by applicable Law) and shall use its reasonable best efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof; provided that if such Demand Notice relates to a Shelf Demand, the provisions of paragraph (b) of this Section 4.1 shall apply.

          (b) The Holders’ Representative shall have the right to elect in the Demand Notice for any Demand Registration to be made pursuant to a Shelf Registration Statement, if the Company is then eligible to file a Shelf Registration Statement (a “ Shelf Demand ”), in which event the Company shall file with the SEC, as promptly as reasonably practicable, but not later than 30 days after receipt by the Company of such Demand Notice (subject to paragraph (e) of this Section 4.1), a Shelf Registration Statement relating to the offer and sale of the Registrable Securities requested to be included therein by the Holders thereof from time to time in accordance with the methods of distribution elected by such Holders (to the exten