STOCKHOLDERS' AGREEMENT

TABLE OF CONTENTS

				Page
SECTION 1.		DEFINITIONS		1
SECTION 2.		RESTRICTION ON TRANSFERS		10
SECTION 3.		APPROVED SALE; TAG ALONG TRANSACTION		10
SECTION 4.		REPURCHASE RIGHT		13
SECTION 5.		INVOLUNTARY TRANSFERS		16
SECTION 6.		REPURCHASE DISABILITY		16
SECTION 7.		COOPERATION		18
SECTION 8.		BOARD OF DIRECTORS		18
SECTION 9.		REPRESENTATIONS AND WARRANTIES		21
SECTION 10.		INFORMATION RIGHTS; COVENANTS		21
SECTION 11.		REGISTRATION RIGHTS		23
SECTION 12.		NON-SOLICITATION; NON-HIRE; NON-COMPETE; NON-DISPARAGEMENT; CONFIDENTIALITY		34
SECTION 13.		TERMINATION		37
SECTION 14.		MISCELLANEOUS		37
SECTION 15.		EFFECTIVENESS		43

 

Schedule

 

Schedule I             Stockholders’ names and number of Restricted Shares owned

 

Exhibit

 

Exhibit A                Amended and Restated Certificate of Incorporation

 

Exhibit B                Form of Joinder to Stockholders’ Agreement

 

 

 

                STOCKHOLDERS’ AGREEMENT dated as of July 21, 2006 (this “ Agreement ”), by and among REXNORD HOLDINGS, INC. , a Delaware corporation (the “ Company ”), REXNORD ACQUISITION HOLDINGS I, LLC , a Delaware limited liability company (“ SPV I ”), REXNORD ACQUISITION HOLDINGS II, LLC , a Delaware limited liability company (“ SPV II ”; together with SPV I, “ Apollo ”), and the other Stockholders of the Company from time to time party hereto, which Persons as of the date hereof are set forth on Schedule I hereto (collectively, the “ Non-Apollo Holders ”).

WHEREAS , Chase Acquisition I, Inc. (“ Acquiror ”), a Delaware corporation and wholly-owned subsidiary of the Company, Chase Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror, RBS Global, Inc., a Delaware corporation (“ RBS ”), and TC Group, L.L.C., a Delaware limited liability company, entered into that certain agreement and plan of merger dated as of May 24, 2006 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Agreement and Plan of Merger ”);

WHEREAS , following the consummation of the merger contemplated by the Agreement and Plan of Merger (the “ Merger ”), the Stockholders shall own all of the issued and outstanding capital stock of the Company; and

WHEREAS , as a material inducement to Acquiror to enter into the Agreement and Plan of Merger and to consummate the Merger and the other transactions contemplated thereby, without which Acquiror would not have entered into the Agreement and Plan of Merger or agree to consummate the Merger and the other transactions contemplated thereby, the Company and the Non-Apollo Holders agree to provide the rights and be subject to the obligations and restrictions set forth herein.

NOW, THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1.              Definitions .

As used in this Agreement, the following terms shall have the following meanings:

“ Accountants ” has the meaning set forth in Section 10(a)(iii)(C) .

“ Acquiror ” has the meaning set forth in the recitals.

“ Affiliate ” means (i) with respect to any individual, (A) a spouse or descendant of such individual and (B) any trust or family partnership or other entity whose beneficiaries shall solely be such individual and/or such individual’s spouse and/or any Person related by blood or adoption to such individual or such individual’s spouse and (ii) with respect to any Person that is not an individual, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person.  As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).

 

 

“ Agreement ” has the meaning set forth in the caption hereto.

“ Agreement and Plan of Merger ” has the meaning set forth in the recitals.

“ Apollo ” has the meaning set forth in the caption hereto.

“ Apollo Directors ” has the meaning set forth in Section 8(a)(ii) .

“ Apollo Nominee ” has the meaning set forth in Section 3(a)(ix) .

“ Approved Sale ” has the meaning set forth in Section 3(a)(i) .

“ Approved Sale Notice ” has the meaning set forth in Section 3(a)(i) .

“ Authorized Representatives ” has the meaning set forth in Section 12(d) .

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

“ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

“ Business Combination ” has the meaning set forth in the definition of “Sale of the Company”.

“ Bylaws ” means the Bylaws of the Company, as amended from time to time.

“ Cause ” means (i) for a Non-Apollo Holder party to an Employment Agreement or an Option Agreement in effect at any time prior to the date of such Non-Apollo Holder’s termination of employment or other professional relationship with the Company or any Subsidiary of the Company, as the case may be, “Cause” as defined in such Employment Agreement or Option Agreement, and (ii) for each other Non-Apollo Holder, a termination of employment or other professional relationship with the Company or a Subsidiary of the Company after the occurrence of any of the following on the part of such Non-Apollo Holder:  (a) commission of a felony; (b) intentional violation of law (excluding moving violations or by reason of vicarious liability) or intentional undertaking of any activity toward another employee or service provider of the Company or any of its Subsidiaries that is punishable by civil penalty; (c) dishonesty, bad faith, gross negligence, willful misconduct, fraud or willful or reckless disregard of duties in connection with the performance of any services on behalf of the Company or any of its Subsidiaries; (d) intentional failure to comply with any reasonable directive by a supervisor in connection with the performance of any services on behalf of the Company or any of its Subsidiaries following written notice that failure to comply shall constitute “Cause” for termination; (e) intentional breach of any material provision of any agreement with the Company or any of its Subsidiaries; (f) intentional violation of any lawful and reasonable material written policy adopted by the Company or any of its Subsidiaries governing the conduct of persons performing services on behalf of the Company; or (g) the taking of or omission to take any action that has caused or contributed to a material deterioration in the business or reputation of the Company or any of its Subsidiaries, or that was otherwise materially disruptive of its or their

 

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business or affairs, other than actions taken or omitted in good faith consistent with the best interests of the Company and its Subsidiaries.

“ Closing ” has the meaning set forth in the Agreement and Plan of Merger.

“ Closing Date ” has the meaning set forth in the Agreement and Plan of Merger.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Commission ” means the Securities and Exchange Commission or any other Governmental Authority at the time administering the Securities Act.

“ Common Stock ” means the Common Stock of the Company, par value $0.01 per share.

“ Company ” has the meaning set forth in the caption hereto.

“ Company Confidential Information ” has the meaning set forth in Section 10(b) .

“ Competitive Business ” has the meaning set forth in Section 12(b) .

“ Confidential Information ” has the meaning set forth in Section 12(d) .

“ Cypress Stockholders’ Agreement ” means the Stockholders’ Agreement dated as of the date hereof by and among the Company, SPV I, SPV II, Cypress Industrial Holdings, LLC and George M. Sherman.

“ Demand Party ” has the meaning set forth in Section 11(a) .

“ Demand Notice ” has the meaning set forth in Section 11(a) .

“ Disability ” means (i) for a Non-Apollo Holder party to an Employment Agreement or an Option Agreement in effect at any time prior to the date of such Non-Apollo Holder’s termination of employment or other professional relationship with the Company or any Subsidiary of the Company, as the case may be, “Disability” (or term of similar import) as defined in such Employment Agreement or Option Agreement and (ii) for each other Non-Apollo Holder, “Disability” as defined in Section 22(e)(3) of the Code.

“ Disability Notice ” has the meaning set forth in Section 6(b) .

“ Employment Agreement ” means, with respect to any Person, such Person’s most recent employment agreement with the Company or any Subsidiary of the Company entered into on or after the Closing Date, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“ Equity Incentive Plan ” means any plan or agreement approved by the Board for the purposes of issuing equity-linked Securities to any employee, officer, consultant or director of the Company or any of its Subsidiaries as incentive or bonus compensation.

 

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“ Equity Securities ” means (a) any equity Securities of the Company (including Common Stock but excluding any option, warrant, or similar equity-linked Security of the Company) purchased or otherwise acquired by any Stockholder or (b) any Securities issued or issuable directly or indirectly with respect to the Securities referred to in clause (a) above by way of conversion, exercise or exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, reclassification, merger, consolidation, reorganization or other similar event.

“ Exchange Act ” means the Securities Exchange Act of 1934, and the Rules and Regulations, all as the same shall be in effect from time to time.

“ Family Group ” means, with respect to any natural Person, such natural Person’s spouse and/or lineal descendants (whether by blood relationship or adoption), and any other Person as to which such natural Person is a lineal descendant (whether by blood relationship or adoption), and any trust or other entity solely for the benefit of such Person and/or any of the foregoing.

“ Financing Documents ” has the meaning set forth in Section 6(a)(iii) .

“ Fund VI ” means Apollo Investment Fund VI, L.P., a Delaware limited partnership.

“ Good Reason ” means, with respect to any Non-Apollo Holder that is a party to an Employment Agreement or Option Agreement at any time prior to the date of such Non-Apollo Holder’s termination of employment or other professional relationship with the Company or any Subsidiary of the Company, as the case may be, “Good Reason” (or a concept of similar import) as defined therein; provided , however , that the termination of an employment or other professional relationship with the Company or any Subsidiary of the Company by a Non-Apollo Holder not a party to such an Employment Agreement or Option Agreement shall be deemed to be a termination without Good Reason.

“ Governmental Authority ” means any Federal, state, municipal, local or foreign government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, court, tribunal, arbitrator or arbitral body.

“ Hitt ” has the meaning set forth in Section 8(a)(iii) .

“ Information ” has the meaning set forth in Section 11(i)(xi) .

“ Inspectors ” has the meaning set forth in Section 11(i)(xi) .

“ Involuntary Transfer ” has the meaning set forth in Section 5(a) .

“ Involuntary Transferee ” has the meaning set forth in Section 5(a) .

“ Involuntary Transfer Notice ” has the meaning set forth in Section 5(a) .

 

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“ Involuntary Transfer Repurchase Notice ” has the meaning set forth in Section 5(b) .

“ Involuntary Transfer Repurchase Price ” has the meaning set forth in Section 5(b) .

“ Involuntary Transfer Repurchase Right ” has the meaning set forth in Section 5(b) .

“ Issuer Free Writing Prospectus ” means each “free writing prospectus” (as defined in Rule 405) prepared by or on behalf of the Company or used or referred to by the Company in any offering of Restricted Shares pursuant to Section 11 .

“ Joinder ” has the meaning set forth in Section 2(c) .

“ Material Transfer ” means a Transfer for consideration by Apollo of more than 10% of the Restricted Shares held by Apollo as of the Closing Date to a Person who is not an Affiliate of Apollo.

“ Merger ” has the meaning set forth in the recitals.

“ NASD ” means the National Association of Securities Dealers, Inc.

“ Non-Apollo Director ” has the meaning set forth in Section 8(a)(iv) .

“ Non-Apollo Holder ” has the meaning set forth in the caption hereto.

“ Non-Compete Period ” has the meaning set forth in Section 12(b) .

“ Option Agreement ” means, with respect to any Person, such Person’s agreement with the Company evidencing the grant of options to purchase shares of Common Stock first entered into at or after the Closing (excluding any such agreement with respect to Rollover Options).

“ Order ” means all judgments, injunctions, orders and decrees of all Governmental Authorities in any legal, administrative or arbitration action, suit, complaint, charge, hearing, mediation, inquiry, investigation or proceeding in which the person in question is a party or by which any of its properties or assets are bound.

“ Outstanding Company Voting Securities ” has the meaning set forth in the definition of “Sale of the Company”.

“ Permitted Issuer Information ” means any “issuer information” (as defined in Rule 433 of the Rules and Regulations) used with the prior written consent of the Company in any offering of Restricted Shares pursuant to Section 11 .

 “ Person ” shall be construed broadly and shall include, without limitation, an individual, a partnership, a limited liability partnership, an investment fund, a limited liability

 

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company, a corporation, an association, a joint stock corporation, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“ Preliminary Prospectus ” means any preliminary prospectus relating to an offering of Restricted Shares pursuant to Section 11 .

“ Proportionate Percentage ” means with respect to Apollo and each other Stockholder in respect of Restricted Shares, a fraction (expressed as a percentage) the numerator of which is the number of Restricted Shares held by Apollo or such other Stockholder, as the case may be, and the denominator of which is (i) in a situation where the Proportionate Percentage is being calculated with respect to all Stockholders, the total number of Restricted Shares outstanding at the time in question and (ii) in a situation where the Proportionate Percentage is being calculated with respect to a group of Stockholders, the total number of Restricted Shares held by the members of such group of Stockholders.

“ Prospectus ” means the final prospectus relating to any offering of Restricted Shares pursuant to Section 11 , including any prospectus supplement thereto, as filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations.

“ Public Sale ” means any sale of Equity Securities to the public pursuant to an offering registered under the Securities Act or to the public effected through a broker, dealer or market maker pursuant to the provisions of Rule 144 (if such rule is available) under the Securities Act (or any similar rule or rules then in effect).

“ Qualified Public Offering ” means an underwritten public offering of Equity Securities of the Company pursuant to an effective Registration Statement filed by the Company with the Securities and Exchange Commission (other than on Forms S-4 or S-8 or successors to such forms) under the Securities Act, pursuant to which the aggregate offering price of the Equity Securities sold in such offering (whether sold by the Company or selling stockholders) is at least $75,000,000.

“ RBS ” has the meaning set forth in the recitals.

“ RBS Stockholders’ Agreement ” means the Stockholders Agreement dated November 25, 2002 by and among RBS Global, Inc., Carlyle Partners III, L.P., CP III Coinvestment, L.P., Carlyle High Yield Partners, L.P., and certain other stockholders named therein (as amended, modified, restated or supplemented from time to time).

“ Records ” has the meaning set forth in Section 11(i)(xi) .

“ Registration Expenses ” has the meaning set forth in Section 11(j) .

“ Reinstatement Notice ” has the meaning set forth in Section 6(b) .

“ Repurchase Date ” has the meaning set forth in Section 4(a) .

“ Repurchase Disability ” has the meaning set forth in Section 6(a) .

 

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“ Repurchase Event ” means, with respect to any Non-Apollo Holder, the termination of such Non-Apollo Holder’s employment or other professional relationship with the Company and all of its Subsidiaries for any reason (including upon death or Disability).

“ Repurchase Notice ” has the meaning set forth in Section 4(a) .

“ Repurchase Price ” has the meaning set forth in Section 4(a) .

“ Repurchase Right ” has the meaning set forth in Section 4(a) .

“ Resignation Event ” has the meaning set forth in Section 8(a)(iii) .

“ Restated Certificate ” means the Amended and Restated Certificate of Incorporation to be filed with the Secretary of State of Delaware, in the form attached hereto as Exhibit A .

“ Restricted Shares ” means at any time, with respect to Apollo or any Non-Apollo Holder, the shares of Common Stock held by Apollo or such Non-Apollo Holder; provided , however , that any (a) Common Stock that is sold in a public offering pursuant to an effective Registration Statement under the Securities Act or a sale pursuant to Rule 144 thereunder or that may be sold without restriction as to volume or otherwise pursuant to Rule 144(k) under the Securities Act shall not be Restricted Shares for purposes of Section 11 , and (b) any Person who holds any Common Stock, all of which can be sold pursuant to Rule 144 under the Securities Act, shall not be deemed to hold any Restricted Shares for purposes of Section 11 and shall have no rights to effect the registration of such securities under Section 11 .

“ Road Show Material ” has the meaning set forth in Section 11(k) .

“ Rollover Options ” means the options to purchase shares of common stock (to the extent vested) of RBS Global, Inc. in existence immediately prior to the date hereof held by each Rollover Optionholder (as defined in the Agreement and Plan of Merger) that are subject to a Stock Option Assumption Agreement entered into by and among such Rollover Optionholder, the Company and RBS Global, Inc. in connection with transactions contemplated by the Agreement and Plan of Merger providing that such options shall be exercisable for shares of Common Stock or other Equity Interests of the Company pursuant to the terms of the Agreement and Plan of Merger.

“ Rule 144 ” means Rule 144 of the Rules and Regulations or any successor rule thereto or any complementary rule thereto.

“ Rule 405 ” means Rule 405 of the Rules and Regulations or any successor rule thereto or any complementary rule thereto.

“ Rule 433 ” means Rule 433 of the Rules and Regulations or any successor rule thereto or any complementary rule thereto.

“ Rules and Regulations ” means the rules and regulations of the Commission, as the same shall be in effect from time to time.

 

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“ Sale Notice ” has the meaning set forth in Section 3(b)(i) .

“ Sale of the Company ” means:

(a)           Approval by the Stockholders (or, if no stockholder approval is required, by the Board alone) of the complete dissolution or liquidation of the Company, other than in the context of a Business Combination (as defined below) that does not constitute a Sale of the Company under paragraph (c) below;

(b)           The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Company Voting Securities ”); provided , however , that, for purposes of this paragraph (b), the following acquisitions shall not constitute a Sale of the Company; (A) any acquisition directly from the Company or any of its Subsidiaries, (B) any acquisition by the Company or any of its Subsidiaries, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Affiliates or a successor, (D) any acquisition by any Person pursuant to a Business Combination, (E) any acquisition by a Person who is the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the Outstanding Company Voting Securities on the Closing Date (or an Affiliate, heir or descendant of such Person) or (F) any acquisition by Apollo or one of its Affiliated investment funds; or

(c)           Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a “ Business Combination ”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own more than 50% of the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Person resulting from such Business Combination (including, without limitation, a Person that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets directly or through one or more Subsidiaries of the Company, and (2) no Person (excluding any Person described in clauses (C), (E) or (F) of paragraph (b) above) beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) more than 50% of the combined voting power of the then-outstanding voting securities of such Person, except to the extent that the ownership in excess of 50% existed prior to the Business Combination;

provided , however , that an underwritten public offering of the securities of the Company or any of its Subsidiaries shall in no event constitute a Sale of the Company for purposes of this Agreement.

 

“ Securities ” means “securities” as defined in Section 2(1) of the Securities Act and includes capital stock or other equity interests or any options, warrants or other securities that are directly or indirectly convertible into, or exercisable or exchangeable for, capital stock or

 

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other equity interests. Whenever a reference herein to Securities is referring to any derivative Securities, the rights of a holder shall apply to such derivative Securities and all underlying Securities directly or indirectly issuable upon conversion, exchange or exercise of such derivative Securities.

“ Securities Act ” means the Securities Act of 1933, and the Rules and Regulations, all as the same shall be in effect from time to time.

“ Sellers’ Counsel ” has the meaning set forth in Section 11(i)(ii) .

“ SPV I ” has the meaning set forth in the caption hereto.

“ SPV II ” has the meaning set forth in the caption hereto.

“ Stockholder ” means Apollo, each Person listed on Schedule I and any other Person from time to time that holds Equity Securities acquired in accordance with the terms of this Agreement or the Cypress Stockholders’ Agreement.

“ Subsidiary ” means, with respect to any Person, any other Person of which 50% or more of the voting power of the equity securities or equity interests sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there is no such voting power, 50% or more of the equity securities or equity interests) is owned, directly or indirectly, by such Person.

“ Tag-Along Transaction ” means a transaction involving a Transfer by Apollo of more than 10% of the Restricted Shares held by Apollo as of the Closing Date to a Person who is not an Affiliate of Apollo in which individual Non-Apollo Holders may elect in their discretion to participate in accordance with Section 3(b) ; provided , however , that a “Tag-Along Transaction” shall not include, and none of the rights of the Non-Apollo Holders set forth in Section 3(b) shall be triggered by, a Transfer by Apollo to any limited partnership or other Person which has directly or indirectly invested in, or otherwise has ownership, equity or profits interests in, Fund VI or one of its Affiliated investment funds, as part of a distribution to such Person; provided , however , that such distribution is made on a pro rata basis to all such Persons.

“ Transaction Documents ” has the meaning set forth in the Agreement and Plan of Merger.

“ Transfer ” means any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation, encumbrance or other disposition, or any interest therein whatsoever, or any other transfer of beneficial ownership, whether voluntary or involuntary, including (a) as a part of any liquidation of assets or (b) as a part of any reorganization pursuant to the United States or other bankruptcy law or other similar debtor relief laws, but excluding any transfer of Equity Securities of the Company by employees of the Company or its Subsidiaries upon a termination of employment.

“ Transferee ” means any Person acquiring or intending to acquire Equity Securities through a Transfer.

 

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“ Underwritten Offering ” means a sale of Equity Securities to an underwriter for reoffering to the public.

Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Agreement and Plan of Merger.

Section 2.              Restriction on Transfers .

(a)           Except as otherwise set forth below, the Non-Apollo Holders shall not at any time Transfer any Equity Securities.  Any purported Transfer in violation of the provisions of this Section 2 shall be null and void and shall have no force or effect.

(b)           The restrictions contained in this Section 2 shall not apply with respect to any Transfer of Equity Securities (i) to the Company, Apollo or any of their respective Affiliates (which term, for purposes of this Section 2(b) , shall not include any other Stockholder or such other Affiliates of such Stockholder other than the Company and Apollo) or (ii) pursuant to applicable laws of descent or to such Stockholder’s executors, administrators, testamentary legatees and beneficiaries upon such Stockholder’s death or to any member of such Non-Apollo Holder’s Family Group.

(c)           Each Non-Apollo Holder agrees that, as a condition precedent to any Transfer permitted under Section 2(b) , each Transferee of such Equity Securities shall have executed a joinder agreement (“ Joinder ”) substantially in the form of Exhibit B attached hereto, pursuant to which such Transferee agrees to become party hereto, a Non-Apollo Holder and have his, her or its Equity Securities subject to, the terms of this Agreement.  Any failure by a Non-Apollo Holder to obtain a Joinder from the Transferee as required under this Section 2(c) shall render such Transfer null and void; provided that, in the case of a Transfer upon a Stockholder’s death or Disability, (i) the Transferee shall be deemed to have executed, and shall be deemed to be bound by, a Joinder as of the date of such Stockholder’s death or Disability and (ii) the Transferee shall be given a reasonable period of time (not to exceed 90 days from the date of such Stockholder’s death or Disability) to execute such Joinder.

(d)           This Section 2 shall not apply to an Approved Sale under Section 3 or a Transfer under Section 4 .

Section 3.              Approved Sale; Tag Along Transaction .

(a)           Approved Sale; Sale of the Company .

(i)            At any time prior to the consummation of a Qualified Public Offering that Apollo proposes a Material Transfer of its Restricted Shares, Apollo shall be entitled to deliver notice (an “ Approved Sale Notice ”) to the Company and the Non-Apollo Holders that Apollo requires the Non-Apollo Holders to Transfer an amount of their Restricted Shares that is equal to the portion of Apollo’s Restricted Shares that Apollo proposes to Transfer in the Material Transfer (an “ Approved Sale ”); provided , however , that if the proposed Transferee desires to purchase an amount of Restricted Shares that is less than the aggregate amount of Restricted Shares of Apollo and the Non-Apollo Holders that would otherwise be Transferred in the Approved Sale, then Apollo

 

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may elect to cancel such Approved Sale, or Apollo and the Non-Apollo Holders shall sell in the Approved Sale only that number of Restricted Shares equal to the product of (x) the total number of Restricted Shares such proposed Transferee desires to purchase and (y) such Stockholder’s Proportionate Percentage; and provided , further , that any such Approved Sale Notice shall include the name of the parties to the proposed Approved Sale, a summary of the material terms and conditions of the proposed Approved Sale, and the proposed amount and form of consideration and the terms and conditions of payment contemplated by the proposed Approved Sale.

(ii)           Upon receipt of an Approved Sale Notice, each Non-Apollo Holder and the Company shall consent to and raise no objections against the Approved Sale, and if the Approved Sale is lawful and is structured as (A) a merger or consolidation of the Company or any of its Subsidiaries, or a sale of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole, each Non-Apollo Holder shall, and hereby does, waive any dissenter’s rights, appraisal rights or similar rights in connection with such merger or consolidation or sale of all or substantially all of the assets and hereby instructs the Board to vote in favor of such Approved Sale and to submit, if required by law, to a vote of the Stockholders of the Company or request a written consent as promptly as possible, and hereby agrees to vote in favor of such Approved Sale at any annual or special meeting of the Stockholders of the Company or to execute a written consent approving such Approved Sale, or (B) a sale of Restricted Shares, each Non-Apollo Holder shall, and hereby does agree to, sell his, her or its Proportionate Percentage of his, her or its Restricted Shares on the terms and conditions approved by Apollo; provided , in the case of each of the foregoing clause (A) and (B), that the terms and conditions upon which each Non-Apollo Holder’s Restricted Shares are sold are the same terms and conditions that apply to Apollo.

(iii)          All Non-Apollo Holders and the Company shall take all necessary and desirable actions in connection with the consummation of the Approved Sale, including the execution of such agreements and such instruments and other actions reasonably necessary to (1) provide the representations, warranties, indemnities, covenants, conditions, escrow agreements and other provisions and agreements relating to such Approved Sale; provided , however , that the Non-Apollo Holders shall not be required to provide any representations, warranties, indemnities, covenants, conditions, escrow agreements or other provisions or agreements which are different from those made by Apollo in connection with such Approved Sale and (2) effectuate the allocation and distribution of the aggregate consideration upon the consummation of the Approved Sale.  At the closing of the sale of any Restricted Shares pursuant to this Section 3(a) , each Non-Apollo Holder shall deliver at such closing, against payment of the purchase price therefor, certificates representing their Restricted Shares to be sold, duly endorsed for Transfer or accompanied by duly endorsed stock powers, evidence of good title to the Restricted Shares to be sold, the absence of liens, encumbrances and adverse claims with respect thereto and such other documents as are deemed reasonably necessary by the Company for the proper Transfer of such Restricted Shares on the books of the Company.

 

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(iv)          Apollo shall deliver any Approved Sale Notice to the Company and the Non-Apollo Holders at least ten (10) days prior to the consummation of the Approved Sale.

(v)           If any Stockholders are given an option as to the form and amount of consideration to be received in an Approved Sale, all Stockholders shall be given the same option.

(vi)          No Non-Apollo Holder shall be obligated to pay more than his, her or its Proportionate Percentage of reasonable expenses incurred in connection with a consummated Approved Sale to the extent such expenses are incurred for the benefit of all Stockholders and are not otherwise paid by the Company or the acquiring party (it being agreed that expenses incurred by or on behalf of Apollo or a Non-Apollo Holder for his, her or its sole benefit shall not be considered expenses incurred for the benefit of all Stockholders).

(vii)         No Stockholder shall be required to make any representations or warranties that are joint and several or that pertain to matters other than title to Securities held by such Stockholder, such Stockholder’s capacity, authority or power to consummate the transaction in question, conflicts with laws, conflicts with contracts, organizational documents and Orders applicable to such Stockholder, broker and similar fees payable by such Stockholder, other representations and warranties customary for the type of transaction being consummated and representations and warranties with respect to any other matters particular to such Stockholder.

(viii)        Any indemnification obligations for breaches of representations, warranties and covenants made by the Company and its Subsidiaries (but not by or on behalf of any Stockholder individually) shall be shared pro rata among the Stockholders (based on such Stockholder’s Proportionate Percentage) based on the aggregate consideration payable with respect to the Restricted Shares, and in no event shall a Stockholder be required to incur indemnification or contribution obligations with respect to such breaches that are joint and several or exceed the aggregate consideration payable with respect to such Stockholder’s Restricted Shares Transferred in the Approved Sale.

(ix)           Each Non-Apollo Holder and the Company hereby grants an irrevocable proxy and power of attorney which, it is agreed, is coupled with an interest, to any nominee of Apollo (the “ Apollo Nominee ”) to take all necessary actions and execute and deliver all documents deemed necessary and appropriate by such Person to effectuate the consummation of any Approved Sale.  To the extent a Non-Apollo Holder fails to comply with the provisions of this Section 3(a) , such Non-Apollo Holder hereby indemnifies, defends and holds the Apollo Nominee harmless (severally in accordance with his, her or its pro rata share of the consideration received in any such Approved Sale (and not jointly and severally)) against all liability, loss or damage, together with all reasonable costs and expenses (including reasonable legal fees and expenses), relating to or arising from its exercise of the proxy and power of attorney granted hereby.

 

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(x)            The Non-Apollo Holders shall not be required to comply with, and shall have no obligations under, Section 2 in connection with any Approved Sale.

(b)           Tag-Along Transaction .

(i)            Subject to the provisions of Section 3(a) above, prior to the consummation of a Qualified Public Offering, if Apollo desires to effect a Tag-Along Transaction, Apollo shall give written notice to the Non-Apollo Holders offering such Non-Apollo Holders the option to participate in such Tag-Along Transaction (a “ Sale Notice ”) on the terms and conditions set forth in the Sale Notice (and, in any event, on the same terms and conditions as Apollo).  The Sale Notice shall include the name of the parties to the proposed Tag-Along Transaction, a summary of the material terms and conditions of the proposed Tag-Along Transaction, and the proposed amount and form of consideration and the terms and conditions of payment contemplated by the proposed Tag-Along Transaction.  Each Non-Apollo Holder may, by written notice to Apollo delivered within ten (10) days of the date of the Sale Notice, elect to sell in such Tag-Along Transaction, on the terms and conditions approved by Apollo (which terms and conditions shall be the same as those on which Apollo’s Restricted Shares are sold and shall be consistent with the terms and conditions set forth in the Sale Notice); provided , however , that if the proposed Transferee desires to purchase an amount of Restricted Shares that is less than the aggregate amount of Restricted Shares proposed to be Transferred by Apollo and the Non-Apollo Holders in the Tag-Along Transaction, then Apollo may elect to cancel such Tag-Along Transaction, or Apollo and the Non-Apollo Holders shall be permitted to sell only that number of Restricted Shares equal to the product of (x) the total number of Restricted Shares subject to the proposed Tag-Along Transaction and (y) such Stockholder’s Proportionate Percentage.  No Transfer permitted under this Section 3(b) shall be subject to the requirements of Section 2 .

(ii)           Upon the closing of the sale of any Restricted Shares pursuant to paragraph (b)(i) above, each Non-Apollo Holder shall deliver at such closing, against payment of the purchase price therefor, certificates representing their Restricted Shares to be sold, duly endorsed for Transfer or accompanied by duly endorsed stock powers, evidence of good title to the Restricted Shares to be sold, the absence of liens, encumbrances and adverse claims with respect thereto and such other documents as are deemed reasonably necessary by the Company for the proper Transfer of such Restricted Shares on the books of the Company.

Section 4.              Repurchase Right .

(a)           From and after a Repurchase Event, the Company shall have the right, but not the obligation, to repurchase all or any portion of the Equity Securities held by such Non-Apollo Holder (including any Equity Securities received upon a distribution from any deferred compensation plan or other Equity Incentive Plan or any Equity Securities issuable upon exercise of any option, warrant or similar equity-linked Security of the Company held by such Non-Apollo Holder) in accordance with this Section 4 (the “ Repurchase Right ”), in each case, at a price (the “ Repurchase Price ”) equal to “fair market value,” but subject to Section 4(b) , and subject further to any provisions to the contrary contained in such Non-Apollo Holder’s

 

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Employment Agreement or Option Agreement, as applicable.  The Company may exercise the Repurchase Right, by written notice (a “ Repurchase Notice ”) to such Non-Apollo Holder, within six months after the Repurchase Event; provided , however , that with respect to Equity Securities acquired by a Non-Apollo Holder, after such Repurchase Event (whether by exercise of any option, warrant or similar equity-linked Security of the Company, distribution of shares from any deferred compensation plan or otherwise), the Company may exercise the Repurchase Right by delivering a Repurchase Notice to such Non-Apollo Holder within six months after the acquisition of such Equity Securities by such Non-Apollo Holder (each date on which any such purchase is closed with respect to the subject Equity Securities, the “ Repurchase Date ”).  The determination date for purposes of determining the fair market value shall be the Repurchase Date applicable to the subject Equity Securities.  Subject to Section 6 below, the Repurchase Date with respect to any repurchase of Equity Securities pursuant to the exercise of the Repurchase Right shall take place on the later of (i) the date specified by the Company, which shall in no event be later than thirty (30) days following the date of the Repurchase Notice and (ii) within ten (10) days following the receipt by the Company of all necessary government approvals.

(b)           Notwithstanding anything contained herein to the contrary, unless otherwise provided in the applicable Employment Agreement or Option Agreement of a Non-Apollo Holder, in the event a Non-Apollo Holder’s employment or consulting relationship with the Company or any of its Subsidiaries is terminated for Cause by the Company or any of its Subsidiaries or by the Non-Apollo Holder without Good Reason and before the second anniversary of the Closing Date (or in the case of Hitt, the fifth anniversary of the Closing), then the Company may exercise the Repurchase Right by delivering a Repurchase Notice to such Non-Apollo Holder within the time periods set forth in Section 4(a) above at a price equal to the lesser of (i) in the case of Common Stock, $ ___ per share of Common Stock, subject to adjustment by the Company to reflect any stock split, recapitalization or similar adjustment to the Common Stock (or, for shares of Common Stock acquired after the Closing Date and not upon exercise of a Rollover Option, the original acquisition cost to such Non-Apollo Holder of such shares of Common Stock) and (ii) the fair market value of such Equity Securities.  The determination date for purposes of determining the fair market value shall be the closing date of the purchase of the applicable Equity Securities.

(c)           The Company shall give prompt written notice to Apollo stating whether the Company will exercise the Repurchase Rights pursuant to Section 4(a) or Section 4(b) above.  If such notice states that the Company will not exercise such Repurchase Rights for all or any portion of the applicable Equity Securities subject thereto, Apollo (or its designee) shall have the right (exercisable by delivery of written notice to such Non-Apollo Holder on or before the later of (i) the 30 ^th day following the receipt of such notice or (ii) six months after the Repurchase Event) to purchase any such Equity Securities not purchased by the Company on the same terms and conditions as the Company set forth in Section 4(a) or Section 4(b) .

(d)           The Repurchase Date shall take place on a date designated by the Company or Apollo, as applicable, in accordance with Section 4(a) or Section 4(c) , respectively; provided , however , that the Repurchase Date may be deferred to a date designated by the Company  or Apollo, as applicable, or, to the extent required to avoid liability under applicable securities laws, the Non-Apollo Holder, until such time as the subject Non-Apollo Holder has

 

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held the Equity Securities for a period of at least six months and one day.  The Company or Apollo, as applicable, may effect such repurchase of Equity Securities and the Company shall record such Transfer on its books whether or not such Non-Apollo Holder attends such closing or delivers certificates representing such Equity Securities to the Company.  Each Non-Apollo Holder hereby grants an irrevocable proxy and power of attorney which, it is agreed, is coupled with an interest to any nominee of the Company or Apollo, as applicable, to take all necessary actions and execute and deliver all documents deemed necessary and appropriate by such nominee to effect such repurchase of Equity Securities.  Any Non-Apollo Holder who fails to take all necessary actions and execute and deliver all documents necessary and appropriate to fulfill his, her or its obligations under this Section 4 shall indemnify, defend and hold such nominee harmless against all liability, loss or damage, together with all reasonable costs and expenses (including reasonable legal fees and expenses), relating to or arising from such nominee’s exercise of the proxy and power of attorney granted hereby.  In addition, any such Non-Apollo Holder shall immediately lose all rights such holder may have under Section 8 in the event of any such purchase.

(e)           For purposes of this Section 4 , Section 5 and Section 6 , the “fair market value” of any Equity Securities shall be determined as follows:

(i)            if the Equity Securities are listed on one or more National Securities Exchanges (within the meaning of the Exchange Act), each share shall be valued at the average closing price per share on the principal exchange on which such shares are then trading for the 10 trading days immediately preceding the date of determination;

(ii)           if the Equity Securities are not traded on a National Securities Exchange but are quoted on the NASDAQ Stock Market or a successor quotation system and the shares are listed as a National Market issue under the National Market System, each share shall be valued at the average of the last sales price per share for the 10 trading days immediately preceding the date of determination as reported by the NASDAQ Stock Market or any such successor quotation system; or

(iii)          if the Equity Securities are not listed on a National Securities Exchange and are not traded on the NASDAQ Stock Market and listed as a National Market issue under the National Market System, the fair market value shall be determined by the Board in good faith based on its good faith determination of the fair market value of the Company and its subsidiaries as a whole without regard to the percentage of shares represented by the shares subject to such determination or any minority discount or control premium.

Notwithstanding the foregoing, if a Person whose Equity Securities are being valued hereunder pursuant to clause (iii) above disagrees with the valuation determined by the Board, such Person may elect to choose within five Business Days of being advised of the determination of the Board to have the fair market value determined by and independent appraiser, the selection of which shall be subject to the mutual agreement of the Company and such Person.  The fees and expenses of any such independent appraiser shall be borne equally by the Company and the Person whose Equity Securities are being

 

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valued hereunder and the determination by the independent appraiser selected in accordance with this Section 4(e) shall be final and binding.

Section 5.              Involuntary Transfers .

(a)           In the case of any Transfer of title or beneficial ownership of Equity Securities upon default, foreclosure, forfeit, divorce, court order or otherwise, other than by a voluntary decision on the part of a Non-Apollo Holder (each, an “ Involuntary Transfer ”), the Non-Apollo Holder shall promptly (but in no event later than two days after the Involuntary Transfer) furnish written notice (the “ Involuntary Transfer Notice ”) to the Company indicating that the Involuntary Transfer has occurred, specifying the name of the Person to whom the Equity Securities were transferred (the “ Involuntary Transferee ”), giving a detailed description of the circumstances giving rise to, and stating the legal basis for, the Involuntary Transfer.

(b)           Upon the receipt of the Involuntary Transfer Notice, and for 60 days thereafter, the Company shall have the right to repurchase, and the Involuntary Transferee shall have the obligation to sell, all (but not less than all) of the Equity Securities acquired by the Involuntary Transferee for a repurchase price equal to the “fair market value” (as determined in accordance with Section 4(e)) of such Equity Securities as of the date of the Involuntary Transfer (the “ Involuntary Transfer Repurchase Price ” and such right, the “ Involuntary Transfer Repurchase Right ”).  The Involuntary Transfer Repurchase Right shall be exercised by written notice (the “ Involuntary Transfer Repurchase Notice ”) to the Involuntary Transferee given in accordance with Section 14(k) of this Agreement on or prior to the last date on which the Involuntary Transfer Repurchase Right may be exercised by the Company.

(c)           Subject to Section 6 below, the repurchase of Equity Securities pursuant to the exercise of the Involuntary Transfer Repurchase Right shall take place on a date specified by the Company, but in no event following the later of the 60th day following the date of the date of the Involuntary Transfer Repurchase Notice or the 10th day following the receipt by the Company of all necessary governmental approvals.  On such date, the Involuntary Transferee shall transfer the Equity Securities subject to the Involuntary Transfer Repurchase Notice to the Company, free and clear of all liens and encumbrances, by delivering to the Company the certificates representing the Equity Securities to be purchased, duly endorsed for transfer to the Company or accompanied by a stock power duly executed in blank, and the Company shall pay to the Involuntary Transferee the Involuntary Transfer Repurchase Price.  The Involuntary Transferee and the Non-Apollo Holder shall use all commercially reasonable efforts to assist the Company in order to expedite all proceedings described in this Section 5 .  If the Involuntary Transferee does not transfer the Equity Securities to the Company as required, the Company will cancel such Equity Securities and deposit the funds in a non-interest bearing account and make payment upon delivery.

Section 6.              Repurchase Disability .

(a)           Notwithstanding anything to the contrary herein, except as otherwise provided by Section 6(c) , the Company shall not be permitted to purchase any Equity Securities held by any Non-Apollo Holder or Involuntary Transferee upon exercise of the Repurchase Right or the Involuntary Transfer Repurchase Right if the Board reasonably determines that:

 

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(i)            the purchase of Equity Securities would render the Company or its Subsidiaries unable to meet their obligations in the ordinary course of business at any time during the one year period commencing on the date such purchase of Equity Securities would otherwise be required taking into account any pending or proposed transactions, capital expenditures or other budgeted cash outlays by the Company and its Subsidiaries which are reasonably likely to be consummated or paid, as the case may be, within such one year period, including, without limitation, any proposed acquisition of any other entity by the Company or any of its Subsidiaries which is reasonably likely to be consummated within such one year period;

(ii)           the Company is prohibited from purchasing the Equity Securities by applicable law restricting the purchase by a corporation of its own shares; or

(iii)          the purchase of Equity Securities would constitute a breach of, default, or event of default under, or is otherwise prohibited by, the terms of any loan agreement or other agreement or instrument representing indebtedness to which the Company or any of its Subsidiaries is a party (collectively, the “ Financing Documents ”) or the Company or its applicable Subsidiaries is not able to obtain the requisite consent of any of its senior lenders to the purchase of the Equity Securities.

The events described in (i) through (iii) above each constitute a “ Repurchase Disability .”

(b)           Except as otherwise provided by Section 6(c) , in the event of a Repurchase Disability, the Company shall notify in writing the Non-Apollo Holder or Involuntary Transferee with respect to whom the Repurchase Right or the Involuntary Transfer Repurchase Right has been exercised (a “ Disability Notice ”).  The Disability Notice shall specify the nature of the Repurchase Disability.  The Company shall thereafter repurchase the Equity Securities described in the Repurchase Notice or Involuntary Transfer Repurchase Notice as soon as reasonably practicable after all Repurchase Disabilities cease to exist (or the Company may elect, but shall have no obligation, to cause its nominee to repurchase the Equity Securities while any Repurchase Disabilities continue to exist); provided , however , that if some, but not all of the Equity Securities to be repurchased can be so repurchased without creating a Repurchase Disability, then the Company shall consummate such repurchase to the fullest extent it is able without causing a Repurchase Disability in accordance with the terms of this Agreement (without giving effect to this Section 6 ).  In the event the Company suspends its obligations to repurchase the Equity Securities pursuant to a Repurchase Disability, (i) the Company shall provide written notice to each applicable Non-Apollo Holder or Involuntary Transferee as soon as practicable after all Repurchase Disabilities cease to exist (the “ Reinstatement Notice ”); (ii) the fair market value of the Equity Securities subject to a Repurchase Notice or Involuntary Transfer Repurchase Notice shall be equal to the greater of the fair market value (as determined in accordance with Section 4(e) ) of the Equity Securities as of the date of the date of the Repurchase Notice or the Involuntary Transfer Repurchase Notice, as the case may be, and the fair market value (as determined in accordance with Section 4(e) ) determined as of the date the Reinstatement Notice is delivered to the Non-Apollo Holder or Involuntary Transferee, which fair market value shall be used to determine the Repurchase Price or Involuntary Transfer Repurchase Price in the manner described above; and (iii) the repurchase shall occur on a date

 

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specified by the Company within 10 days following the determination of the fair market value of the Equity Securities to be repurchased as provided in clause (ii) above.

Section 7.              Cooperation .

(a)           In the event that Apollo exercises its rights pursuant to Section 3(a) or Section 3(b) , each Non-Apollo Holder shall consent to and raise no objections (other than to challenge the lawfulness of any transaction to be consummated in connection with Apollo’s exercise of such rights, but only in the event that such Non-Apollo Holder would be required to violate applicable law in connection with the consummation of such transaction) against the transaction, and shall take all actions that the Board reasonably deems necessary or desirable in connection with the consummation of the transaction.  Without limiting the generality of the foregoing, each Non-Apollo Holder agrees to (i) consent to and raise no objections (other than to challenge the lawfulness of any transaction to be consummated in connection with Apollo’s exercise of such rights, but only in the event that such Non-Apollo Holder would be required to violate applicable law in connection with the consummation of such transaction) against the transaction; (ii) execute any stock purchase agreement, merger agreement or other agreement entered into with the third party purchaser with respect to the transaction setting forth the terms and any ancillary agreement with respect to such transaction; (iii) vote the Equity Securities held by such Non-Apollo Holder in favor of the transacti