Exhibit 10.6


 


EXECUTION COPY


 


 




 





STOCKHOLDERS’ AGREEMENT


 


dated as of July 21, 2006


 


among


 


REXNORD HOLDINGS, INC.,


 


REXNORD ACQUISITION HOLDINGS I, LLC,


 


REXNORD ACQUISITION HOLDINGS II, LLC


 


CYPRESS INDUSTRIAL HOLDINGS, LLC


 


and 


 


GEORGE M. SHERMAN




 





 

















 


TABLE OF
CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  RESTRICTION ON TRANSFERS

  	
  9

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  APPROVED SALE; TAG ALONG
  TRANSACTION

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  REPURCHASE RIGHT

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  INVOLUNTARY TRANSFERS

  	
  15

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  PUT RIGHT

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  REPURCHASE DISABILITY

  	
  17

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  COOPERATION

  	
  19

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  BOARD OF DIRECTORS

  	
  19

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
  INFORMATION RIGHTS;
  COVENANTS

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
  REGISTRATION RIGHTS

  	
  25

  
	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
  TERMINATION

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
  MISCELLANEOUS

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
  EFFECTIVENESS

  	
  42

  



 


i

















 


Schedule


 


Schedule I                                        Cypress Holder Equity Securities


 


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”), CYPRESS INDUSTRIAL HOLDINGS, LLC, a Maryland limited liability
company (“CIH”), and George M. Sherman, individually (“Sherman”
and, together with CIH, each a “Cypress Holder” and collectively with
their permitted transferees, the “Cypress 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 Cypress 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 11(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 9(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 11(b).


 


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


 


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


 


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


 


 “Cause” has the meaning set forth in
the Consulting Agreement.


 


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


 


“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 11(b).


 


2

















 


“Consulting
Agreement” means that certain management consulting agreement, dated as of
the date hereof, by and among Rexnord Corporation, a Delaware corporation (“Rexnord”),
Sherman, Cypress Group, LLC, a Maryland limited liability company (“Cypress
Group”), and CIH.


 


“Cypress
Group” has the meaning set forth in the definition of “Consulting Agreement”.


 


“Cypress
Holder” has the meaning set forth in the caption hereto.


 


 “Demand Party” has the meaning set
forth in Section 12(a).


 


“Demand
Notice” has the meaning set forth in Section 12(a).


 


“Disability”
means “Disability” as defined in Section 22(e)(3) of the Code.


 


“Disability
Notice” has the meaning set forth in Section 7(b).


 


“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.


 


“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 7(a)(iii).


 


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


 


“Good
Reason” has the meaning set forth in the Consulting Agreement.


 


“Governmental
Authority” means any Federal, state, municipal, local or foreign
government, governmental authority, regulatory or administrative agency,
governmental


 


3

















 


commission, department,
board, bureau, agency or instrumentality, court, tribunal, arbitrator or
arbitral body.


 


“Information”
has the meaning set forth in Section 12(i)(xi).


 


“Inspectors”
has the meaning set forth in Section 12(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).


 


“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 12.


 


“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 9(a)(iv).


 


“Option”
has the meaning set forth in the Option Agreement.


 


“Option
Agreement” means that certain non-qualified stock option agreement, dated
as of July 21, 2006, by and between the Company and Sherman.


 


“Option
Assumption Agreement” means that certain stock option assumption agreement,
dated as of July 21, 2006, by and among the Company, RBS and CIH.


 


“Order”
means all judgments, injunctions, orders and decrees of all Governmental
Authorities in any legal, administrative or arbitration action, suit,
complaint, charge, hearing,


 


4

















 


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 12.


 


 “Person” shall be construed broadly and
shall include, without limitation, an individual, a partnership, a limited
liability partnership, an investment fund, a limited liability 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 12.


 


“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 12, 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).


 


“Put
Notice” has the meaning set forth in Section 6(a).


 


“Put
Price” has the meaning set forth in Section 6(a).


 


“Put
Right” has the meaning set forth in Section 6(a).


 


“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


 


5

















 


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/Cypress
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 CIH (as amended,
modified, restated or supplemented from time to time).


 


“Records”
has the meaning set forth in Section 12(i)(xi).


 


“Registration
Expenses” has the meaning set forth in Section 12(j).


 


“Reinstatement
Notice” has the meaning set forth in Section 7(b).


 


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


 


“Repurchase
Disability” has the meaning set forth in Section 7(a).


 


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


 


“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 9(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 Cypress Holder,
the shares of Common Stock held by Apollo or such Cypress 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 12,
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 12 and shall have no
rights to effect the registration of such securities under Section 12.


 


6

















 


“Rexnord
Stockholders’ Agreement” means that certain Stockholders’ Agreement dated
as of the date hereof by and among the Company, SPV I, SPV II and certain other
stockholders of the Company named therein.


 


“Road
Show Material” has the meaning set forth in Section 12(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 the 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.


 


“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


 


7

















 


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 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 12(i)(ii).


 


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


 


“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, CIH, Sherman and any other Person from time to time that holds
Equity Securities acquired in accordance with the terms of this Agreement or
the Rexnord Stockholders’ Agreement.


 


8

















 


“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 each Cypress Holder may elect
in his or its 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 Cypress 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.


 


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


 


“Vested
Options” has the meaning set forth in Section 6(a).


 


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
Cypress 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), (ii) pursuant to


 


9

















 


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 a Cypress
Holder’s Family Group, (iii) to any member of CIH upon dissolution of CIH
or (iv) to any limited liability company, limited partnership, corporation
or other entity formed by Sherman or a member of Sherman’s Family Group and
that is controlled by Sherman or Sherman and members of Sherman’s Family Group
(for purposes of this definition, “control” being defined as the ownership of
more than 50% of both the voting and economic interests of such entity) for the
primary purpose of holding Sherman’s Restricted Shares, other equity interests
in the Company and other equity interests of Sherman and Sherman’s Family
Group.


 


(c)                                  Each Cypress 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 Cypress Holder and have his, her or its Equity Securities subject to,
the terms of this Agreement.  Any failure
by a Cypress 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(a), a Transfer permitted under Section 3(b) 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 Cypress Holders that Apollo requires
the Cypress 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 Cypress Holders that would otherwise be Transferred in
the Approved Sale, then Apollo may elect to cancel such Approved Sale, or
Apollo and the Cypress 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 Cypress Holder’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.


 


10

















 


(ii)                                  Upon receipt of an Approved Sale Notice, each
Cypress 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 Cypress 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 Cypress Holder
shall, and hereby does agree to, sell his or its Proportionate Percentage of
his 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 Cypress Holder’s Restricted Shares are sold are
the same terms and conditions that apply to Apollo.


 


(iii)                               All Cypress 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 Cypress 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 Cypress 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.


 


(iv)                              Apollo shall deliver any Approved Sale Notice
to the Company and the Cypress 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 Cypress Holder shall be obligated to pay
more than his 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


 


11

















 


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 Cypress
Holder for his 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 Cypress 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 Cypress
Holder fails to comply with the provisions of this Section 3(a),
such Cypress Holder hereby indemnifies, defends and holds the Apollo Nominee
harmless (severally in accordance with his 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.


 


(x)                                   The Cypress 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 Cypress
Holders offering such Cypress 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


 


12

















 


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
Cypress 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 Cypress Holders in the
Tag-Along Transaction, then Apollo may elect to cancel such Tag-Along
Transaction, or Apollo and the Cypress 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 Cypress Holder
shall deliver at such closing, against payment of the purchase price therefor,
certificates representing his or its 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)                                  Unless otherwise provided in the Consulting
Agreement, in the event of the termination of the Consulting Agreement (i) by
the Company or any of its Subsidiaries as a result of the failure of Sherman
substantially to satisfy reasonable performance standards (after taking into
account macroeconomic factors affecting the Company and its Subsidiaries) but
not under circumstances constituting Cause, (ii) by Sherman without Good Reason
or (iii) on account of the death or Disability of Sherman (each, 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 each Cypress
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 each Cypress Holder) in
accordance with this Section 4 (the “Repurchase Right”).  Any repurchase described in the immediately
preceding sentence shall be for fair market value (as determined in accordance
with Section 4(e)), but subject to Section 4(b).  The Company may exercise the Repurchase Right
by written notice (a “Repurchase Notice”) to the Cypress Holders within
six months after the Repurchase Event; provided, however, that
with respect to Equity Securities acquired by any Cypress 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 Cypress Holder within six months
after the acquisition of such Equity Securities by such Cypress Holder (each
date on which any such


 


13

















 


repurchase is executed 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 7 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 Consulting Agreement, in the
event the Consulting Agreement is terminated by the Company or any of its
Subsidiaries for Cause, then the Company may exercise the Repurchase Right by
delivering a Repurchase Notice to the Cypress Holders 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 the applicable
Cypress Holder of such shares of Common Stock) and (b) 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 Cypress Holder on or
before the later of (i) the 30th 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 Cypress Holder, as applicable, until such time
as the subject Cypress Holder has held the Equity Securities for a period of at
least six months and one day.  The
purchase price shall be paid on the Repurchase Date in the form of a check,
wire transfer of immediately available funds or by cancellation of money
purchase indebtedness of such Cypress Holder, as determined in the sole
discretion of the Company or Apollo, as applicable.  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 Cypress Holder attends such closing
or delivers certificates representing such Equity Securities to the
Company.  Each Cypress 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 purchase of Equity
Securities.  Any Cypress Holder (with
respect to Sherman, either


 


14

















 


on behalf of himself or on
behalf of CIH) who fails to take all necessary actions and execute and deliver
all documents necessary and appropriate to fulfill his 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, each
Cypress Holder shall immediately lose all rights each may have under Section 9
of this Agreement in the event of any such purchase.


 


(e)                                  For purposes of this Section 4, Section 5,
Section 6 and Section 7, 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 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 Cypress Holder (each, an “Involuntary Transfer”), the


 


15

















 


Cypress 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 7 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 Cypress
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.                                          Put Right.


 


(a)                                  Each Cypress Holder shall have the right (but
not the obligation), subject to the terms and conditions of this Section 6
and of Section 7, to sell in one or more transactions in connection
with the termination of the Consulting Agreement (i) by the Company or one
of its Subsidiaries without Cause or (ii) by the Sherman, CIH or Cypress
Group for Good Reason, and the Company shall be obligated to purchase (x) all
or any shares of Common Stock held by such Cypress Holder as of the termination
of the Consulting Agreement (whether or not acquired upon exercise of the
Option) and (y) all or any portion of the options to purchase Common Stock
(including, without limitation, the Option) held by such Cypress Holder that is
or becomes vested (collectively, the “Vested Options”), in each case at
the applicable Put Price (as defined below) (the “Put Right”).  To exercise the Put Right, such Cypress
Holder must give written notice thereof to the Company (the “Put Notice”).  The Put Notice is irrevocable and must (1) be
in writing and signed by such Cypress Holder, (2) set forth the intent to
exercise the Put Right and


 


16

















 


contain the total number of
shares of Common Stock and Vested Options to be sold to the Company pursuant to
the Put Right and (3) be delivered to the Company within 120 days
following the termination of the Consulting Agreement.


 


(b)                                 The Company shall have no obligation to
repurchase shares of Common Stock or Vested Options pursuant to the exercise of
the Put Right unless the repurchase will not violate any loan covenants or
other agreements imposed or required by any entity as part of the extension of
financing to the Company.  If the
repurchase of Common Stock or Vested Options pursuant to the Put Right is
prohibited by the Company’s financing arrangements, the Company shall deliver
written notice to the applicable Cypress Holder, upon or as soon as administratively
practicable after the first date on which such repurchase would not violate the
Company’s financing arrangements, and, in order to exercise the Put Right, the
such Cypress Holder, must again deliver a Put Notice to the Company in
accordance with Section 6(a), with such Put Right to be exercised
within 120 days following the receipt of such notice from the Company.  Notwithstanding anything to the contrary
contained herein, no Cypress Holder shall have a Put Right if (i) the
shares of Common Stock or Vested Options are subject to any lien, encumbrance,
pledge, or other interest of any third party or have been transferred in
violation of applicable law, or the restrictions on transfer contemplated by
this Agreement or (ii) the repurchase would violate applicable laws,
regulations or exchange listing rules restricting corporate distributions
to stockholders.


 


(c)                                  The price to be paid by the Company upon
settlement of the Put Right shall equal (i) with respect to shares of
Common Stock, the fair market value (as determined in accordance with Section 4(e))
of a share of Common Stock as of the date of the closing of the repurchase, and
(ii) with respect to Vested Options, the fair market value (as determined
in accordance with Section 4(e)) of the shares of Common Stock
issuable upon exercise of the Vested Options as determined under this Agreement
as of the date of the closing of the repurchase, less the aggregate exercise
price of such Vested Options (the price under clause (i) or (ii) above,
as applicable, is referred to herein as the “Put Price”).


 


(d)                                 The closing of any repurchase under this Section 6
shall be at a date to be specified by the Company, such date to be no later
than 30 days after the date of the applicable Put Notice.  The Put Price shall be paid at the closing in
the form of a check, wire transfer of immediately available funds or by
cancellation of money purchase indebtedness of the applicable Cypress Holder
against surrender by such Cypress Holder of a stock certificate evidencing the
shares of Common Stock with duly endorsed stock powers, or such other
instrument of transfer or cancellation of such shares and Vested Options as may
be reasonably requested by the Company.


 


(e)                                  The Put Right shall terminate to the extent
that it is not exercised prior to a Qualified Public Offering.


 


Section 7.                                          Repurchase Disability.


 


(a)                                  Notwithstanding anything to the contrary
herein, except as otherwise provided by Section 7(c), the Company
shall not be permitted to purchase any Equity Securities held by any Cypress
Holder or Involuntary Transferee upon exercise of the Repurchase Right,


 


17

















 


the Involuntary Transfer
Repurchase Right or the Put Right (as applicable) if the Board reasonably
determines that:


 


(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 7(c),
in the event of a Repurchase Disability, the Company shall notify in writing
the Cypress Holder or the Involuntary Transferee with respect to whom 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, Involuntary Transfer
Repurchase Notice or Put Notice, as applicable, 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 7).  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 the Cypress
Holder or Involuntary Transferee, as applicable, 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, Involuntary Transfer Repurchase Notice or Put 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, Involuntary Transfer Repurchase Notice or Put
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 Cypress Holder or the Involuntary


 


18

















 


Transferee, which fair
market value shall be used to determine the Repurchase Price, Involuntary
Transfer Repurchase Price or Put Price, as applicable, in the manner described
above; and (iii) the repurchase shall occur on a date 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 8.                                          Cooperation.


 


(a)                                  In the event that Apollo exercises its rights
pursuant to Section 3(a) or Section 3(b), each
Cypress 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 Cypress
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 Cypress 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 Cypress 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 Cypress Holder in favor of the transaction; and (iv) refrain
from the exercise of dissenters’ or appraisal rights with respect to the
transaction.


 


(b)                                 If the Company or the holders of the Company’s
securities enter into any negotiation or transaction for which Rule 506
(or any similar rule then in effect) promulgated under the Securities Act,
may be available with respect to the negotiation or transaction (including a
merger, consolidation, or other reorganization), each Cypress Holder shall, if
necessary, appoint a purchaser representative (as defined in Rule 501 of
the Securities Act) reasonably acceptable to the Company.  If the purchaser representative is designated
by the Company, the Company shall pay the fees of the purchaser representative,
but if any Cypress Holder appoints another purchaser representative, the
Cypress Holder shall be responsible for the fees of the purchaser
representative so appointed.


 


(c)                                  Each Cypress Holder shall bear its pro
rata share of the costs of any transaction in which it sells Equity
Securities (based upon the net proceeds received by such Cypress Holder in such
transaction) to the extent such costs are incurred for the benefit of all
holders of Equity Securities 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 Cypress Holder for his or its sole benefit shall not be considered
expenses incurred for the benefit of all Stockholders).


 


19

















 


Section 9.                                          Board of Directors.


 


(a)                                  Number of Directors; Nomination; Removal;
Committees.


 


(i)                                     The Company and the Stockholders shall take
such corporate actions as may be required to ensure that (A) the number of
directors constituting the Board is at all times five (5), and (B) the
presence of three (3) directors (including a majority of Apollo Directors
(as defined below)) is required to constitute a quorum of the Board.


 


(ii)                                  For so long as Apollo owns any shares of
Common Stock (or equity-linked Securities convertible or exchangeable into
shares of Common Stock), (A) Apollo shall have the right to nominate two (2) Persons
to serve as directors on the Board and propose the removal of such nominees and
(B) Fund VI shall have the right to nominate one (1) Person to serve
as director on the Board and propose the removal of such nominee (the Persons
nominated pursuant to clause (A) and (B) of this paragraph, the “Apollo
Directors”).  Each such nomination or
proposal shall be made by Apollo or Fund VI, as the case may be, delivering a
written notice to the Company.  As
promptly as practicable, but in any event within five (5) days, after
delivery of such notice, the parties hereto shall take or cause to be taken
such corporate actions as may be reasonably required to cause the election or
removal proposed in such notice, and the Stockholders agree to vote their
shares in favor of such proposal.  Such
corporate actions may include calling a meeting or soliciting a written consent
of the Board, or calling a meeting or soliciting a written consent of the
Stockholders of the Company.  The Apollo
Directors initially shall be Laurence Berg, Steven Martinez and Peter P.
Copses, it being acknowledged and agreed that Fund VI has nominated Peter P.
Copses to serve as an Apollo Director.


 


(iii)                               Sherman shall have the right to serve as a
director until he (A) resigns as a director or (B) ceases, for any
reason, to serve the Company under the Consulting Agreement (each such event,
with respect to Sherman, a “Resignation Event”).  In the event of any such Resignation Event,
Sherman agrees to resign as a director of the Company and each Subsidiary of
the Company immediately pursuant to a written resignation notice delivered to
the Board.  In the event Sherman fails to
so resign following a Resignation Event, the Stockholders agree to vote their
shares to remove Sherman as a director pursuant to the terms of this Agreement
immediately.  Sherman acknowledges and
agrees that he shall have no right to be appointed to the Board following
removal therefrom pursuant to this Section 9.


 


(iv)                              While serving as a director in accordance
with this Section 9, Sherman shall be a “Non-Apollo Director.”  In the event Sherman loses his right to serve
as a director, his replacement shall be appointed by the holders of a majority
of the Common Stock of the Company owned by Shareholders other than Apollo and
Affiliates of Apollo and such replacement shall be a “Non-Apollo Director.”


 


(v)                                 The majority of the members of each committee
created by the Board shall be Apollo Directors, and each Stockholder shall vote
his, her or its Equity Securities, and the Company and the Stockholders shall
take such corporate actions as may be required, to effectuate the provisions of
this Section 9(a)(v).


 


20

















 


(b)                                 Meetings; Expenses; Compensation.


 


(i)                                     The Company agrees to cause the Bylaws to
provide, at all times from and after the Closing, that meetings of the Board or
any committee thereof may be conducted by teleconference and that Board action
may be taken by unanimous written consent.


 


(ii)                                  The Company shall convene meetings of the
Board at least once every three months. 
Upon any failure by the Company to convene any meeting required by this
paragraph, a director nominated under Section 9(a)(ii) shall
be empowered to convene such meeting.


 


(iii)                               The Company shall reimburse each director for
his or her reasonable out-of-pocket expenses (including travel and related
expenses) incurred in connection with (i) attending the meetings of the
Board and all committees thereof and (ii) conducting any other Company
business requested by the Company.  The
Company shall maintain directors and officers indemnity insurance coverage
reasonably satisfactory to Apollo, and the Restated Certificate and By-laws
shall provide for indemnification and exculpation of directors to the fullest
extent permitted under applicable law.


 


(iv)                              The Company shall pay each Apollo Director
and each independent director appointed by Apollo (A) a director’s fee in
the amount of $40,000 per year; (B) an attendance fee in the amount of
$2,000 for each meeting of the board of directors attended in person by such
director; and (C) an attendance fee in the amount of $1,000 for each
meeting of the board of directors attended telephonically by such director.


 


(c)                                  Increase of Number of Directors.  In
the event that, and at such time as, the number of directors constituting the
Board is increased to more than five (5), Apollo shall have the right (for so
long as Apollo owns any shares of Common Stock (or equity-linked Securities
convertible into shares of Common Stock)) to nominate additional directors such
that the majority of the directors comprising the Board shall be Apollo
Directors, and the Company and Stockholders shall take all corporate actions as
may be required to ensure that (x) nominees of Apollo constitute a majority of
the directors of the Board and (y) the presence of a majority of directors
(including a majority of directors appointed by Apollo) is required to
constitute a quorum of the Board.


 


(d)                                 Subsidiaries.  The
provisions of this Section 9 shall apply, mutatis mutandis, to the board of
directors of each Subsidiary of the Company.


 


(e)                                  Inconsistency; Termination.


 


(i)                                     In the event that any provision of the Bylaws
or Restated Certificate is inconsistent with any provision of this Section 9,
the Stockholders shall take such action as may be necessary to amend any such
provision in the Bylaws or Restated Certificate to reflect the terms and
provisions of this Section 9.


 


(ii)                                  The provisions of this Section 9
shall terminate automatically and be of no further force and effect upon the
consummation of a Qualified Public Offering.


 


21

















 


Section 10.                                   Representations and
Warranties.


 


Each
Cypress Holder, severally and not jointly, hereby represents and warrants that (a) effective
as of the Closing, such Cypress Holder is the record owner of the number and
type of Equity Securities of the Company set forth opposite his or its name on Schedule I
attached hereto, (b) this Agreement has been duly authorized, executed and
delivered by such Cypress Holder and constitutes the valid and binding
obligation of such Cypress Holder, enforceable in accordance with its terms,
and (c) such Cypress Holder has not granted and is not a party to any
proxy, voting trust or other agreement which is inconsistent with or conflicts
with the provisions of this Agreement, and each Cypress Holder covenants that
he or it shall not grant any proxy or become party to any voting trust or other
agreement which is inconsistent with or conflicts with the provisions of this
Agreement.


 


Section 11.                                   Information Rights;
Covenants.  


 


(a)                                  For so long as Apollo owns any Equity
Securities, it shall be entitled to receive regular and suitable business (e.g.
sales, marketing and technology), financial and other information reasonably
appropriate to monitor and manage its ownership interests and such other
information as it may reasonably request, from time to time.  Such information will include, without
limitation, the following:


 


(i)                                     Access to Records.  The
Company shall, and shall cause each Subsidiary of the Company to, afford to
Apollo and its officers, employees, advisors, counsel and other authorized
representatives, during normal business hours, reasonable access, upon
reasonable advance notice, to all of the books, records and properties of the
Company and each such Subsidiary and all officers and employees of the Company
and each such Subsidiary.


 


(ii)                                  Hiring of Advisors.  In
connection with any possible Sale of the Company or any transactions permitted
or contemplated herein, and upon the request of Apollo, subject to the
fiduciary duties of the directors of the Company, the Company shall hire any (A) investment
bank, (B) legal advisor, (C) financial or accounting advisor, or (D) other
such advisor(s) on terms and conditions satisfactory to Apollo.


 


(iii)                               Financial Reports.  The
Company shall furnish Apollo with the following:


 


(A)                              Monthly Reports.  As
soon as available, but not later than 30 days after the end of each fiscal
month, a consolidated balance sheet of the Company as of the end of such period
and consolidated statements of income of the Company for such period and for
the period commencing at the end of the previous fiscal year and ending with
the end of such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal
year, and including comparisons to the budget or business plan and an analysis
of the variances from the budget or plan, all prepared in accordance with
generally accepted accounting principals consistently applied (except for the
absence of footnotes and year-end adjustments).


 


22

















 


(B)                                Quarterly Reports.  As
soon as available, but not later than 45 days after the end of each quarterly
accounting period, (1) a consolidated balance sheet of the Company as of
the end of such period and consolidated statements of income, cash flows and
changes in stockholders’ equity for such quarterly accounting period and for
the period commencing at the end of the previous fiscal year and ending with
the end of such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal
year, and including comparisons to the budget or business plan and an analysis
of the variances from the budget or plan, all prepared in accordance with
generally accepted accounting principals consistently applied and (2) a
report by management of the Company of the operating and financial highlights
of the Company and its Subsidiaries for such period, which shall include (x) a
comparison between operating and financial results and budget and (y) an
analysis of the operations of the Company and its Subsidiaries for such period.


 


(C)                                Annual Audit.  As
soon as available, but not later than 90 days after the end of each fiscal year
of the Company, audited consolidated financial statements of the Company, which
shall include statements of income, cash flows and changes in stockholders’ equity
for such fiscal year and a balance sheet as of the last day thereof, each
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by the report of a the firm of
independent certified public accountants selected by the Board (the “Accountants”).  The Company and its Subsidiaries shall
maintain a system of accounting sufficient to enable its Accountants to render
the report referred to in this Section 11.


 


(D)                               Miscellaneous. 
Promptly upon becoming available, the Company shall provide to Apollo:


 


(1)                                  copies of all financial statements, reports,
press releases, notices, proxy statements and other documents sent by the
Company or its Subsidiaries to Apollo or its or their stockholders generally or
released to the public and copies of all regular and periodic reports, if any,
filed by the Company or its Subsidiaries with the Securities and Exchange
Commission, any securities exchange or the NASD;


 


(2)                                  notification in writing of any litigation or
governmental proceeding in which it or any of its Subsidiaries is involved and
which might, if determined adversely, materially and adversely effect the
Company or any of its Subsidiaries;


 


(3)                                  notification in writing of the existence of
any default under any material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which any of their assets are bound;


 


23

















 


(4)                                  upon request, copies of all reports prepared
for or delivered to the management of the Company or its Subsidiaries by its or
their accountants; and


 


(5)                                  upon request, any other routinely collected
financial or other information available to management of the Company or its
subsidiaries (including, without limitation, routinely collected statistical
data).


 


(b)                                 Apollo shall, and shall cause its Affiliates,
employees, counsel and authorized representatives (collectively, “Authorized
Representatives”) to, hold in confidence all Company Confidential
Information (as defined below) of the Company and its Subsidiaries and
Affiliates provided or made available to, or otherwise known by or in the
possession of, Apollo; provided, however, that the foregoing
provision shall not apply to information which: (i) is or becomes
generally known to the industry or the public (other than as a result of the
breach of this Section 11 by Apollo); or (ii) is or becomes
available to Apollo on a non-confidential basis from a source other than the
Company or its Subsidiaries or Affiliates or their respective directors,
officers, employees or agents.  As used
in this Agreement, the term “Company Confidential Information” means
information that is not generally known to the public and that is used,
developed or obtained by the Company or any of its Subsidiaries in connection
with their respective businesses, including processes, ideas, inventions
(whether patentable or not), know-how, schematics, trade secrets, trademarks,
copyrights, patents, designs and all other intellectual property and
proprietary information, books, records, financial statements, customer lists,
details regarding products and services, marketing information, sales
information and all other technical, business, financial, customer and product
development plans, forecasts, strategies and information, previously,
presently, or subsequently disclosed to Apollo or its Affiliates or Authorized
Representatives, in each case to the extent not generally known to the
public.  Notwithstanding the terms of this
Agreement, Company Confidential Information may be disclosed by Apollo and its
Authorized Representatives when compelled by governmental rule or
regulation, or compelled by legal process or court order if Apollo (and/or its
Authorized Representatives) has given the Company prompt written notice of such
request or order and the Company Confidential Information to be disclosed as
far in advance of its disclosure as reasonably possible so that the Company may
seek an appropriate protective order or waive compliance by Apollo.  For purposes of the preceding sentence,
Apollo and its Authorized Representatives shall be entitled to rely
conclusively on an opinion of its nationally recognized outside counsel that
Apollo or its Authorized Representative is compelled by governmental rule or
regulation, or compelled by legal process or court order, to disclose any such
Company Confidential Information.


 


(c)                                  Notwithstanding the disclosure obligations
set forth in Section 11(a), to the extent applicable to the
Company, the Company shall comply in all material respects with the applicable
requirements and provisions of Regulation FD (17 C.F.R. § 243.100, as
amended, modified, restated or supplemented from time to time).


 


24

















 


Section 12.                                   Registration Rights.


 


(a)                                  Right to Demand; Demand Notices. 
Subject to the provisions of this Section 12, at any time
and from time to time, Apollo (the “Demand Party”) shall have the right
to make two (2) written requests in any 12-month period to the Company for
registration under and in accordance with the provisions of the Securities Act
of all or part of its Restricted Shares. 
All requests made pursuant to this Section 12 will specify
the aggregate amount of Restricted Shares to be registered, and will also
specify the intended method of Transfer thereof (a “Demand Notice”),
including, if such Transfer is pursuant to an Underwritten Offering, whether
such offering shall be a “firm commitment” underwriting.  Subject to Section 12(e),
promptly upon receipt of any such Demand Notice, the Company will use its best
efforts to effect, as soon as possible, but in any event within 90 days, such
registration under the Securities Act of the Restricted Shares that the Company
has been so requested to register.


 


(b)                                 Company’s Right to Defer Registration.  If
the Company is requested to effect a Demand Registration and the Company
furnishes to the Demand Party a copy of a resolution of the Board certified by
the secretary of the Company stating that in the good faith judgment of the
Board it would be materially adverse to the Company for such Registration
Statement to be filed on or before the date such filing would otherwise be
required hereunder, the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the request for such
registration from such Demand Party.  If
the Company shall so postpone the filing of a Registration Statement and if the
Demand Party within thirty (30) days after receipt of the notice of
postponement advises the Company in writing that such Demand Party has
determined to withdraw such request for registration, then such Demand
Registration shall be deemed to be withdrawn and shall not be deemed to have
been requested for purposes of Section 12(a).  If the effective date of any Registration
Statement filed would otherwise be at least forty-five (45) calendar days, but
fewer than ninety (90) calendar days, after the end of the Company’s fiscal
year, and the Securities Act requires the Company to include audited financials
as of the end of such fiscal year, the Company may delay the effectiveness of
such Registration Statement for such period (up to a maximum of 45 days) as is
reasonably necessary to include therein audited financial statements for such
fiscal year.


 


(c)                                  Registration Statement Form. 
Registrations under this Section 12 shall be on such
appropriate registration form of the Commission (i) as shall be selected
by the Company and as shall be reasonably acceptable to the Demand Party and (ii) as
shall permit the Transfer of Restricted Shares in accordance with the intended
method or methods of Transfer specified in the Demand Party’s Demand
Notice.  If, in connection with any
registration under this Section 12 that is proposed by the Company
to be on Form S-3 or any successor form, the managing underwriter, if any,
shall advise the Company in writing that in its opinion the use of another
permitted form is of material importance to the success of the offering, then
such registration shall be on such other permitted form.


 


(d)                                 Effective Registration Statement.  The
Company shall be deemed to have effected a Demand Registration if (i) the
Registration Statement relating to such Demand Registration is declared
effective by the Commission; provided, however, that no Demand
Registration shall be deemed to have been requested for purposes of Section 12(a) if
(x) such registration, after it has become effective, is or becomes subject to
any stop order, injunction or


 


25

















 


other Order of the
Commission or other Governmental Authority or court by reason of an act or
omission by the Company and such interference is not cured within twenty (20)
Business Days or (y) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied because of an act or omission by the Company
(other than a failure of the Company or any of its officers or employees to
execute or deliver any closing certificate by reason of facts or circumstances
existing due to actions of Apollo) or (ii) at any time after the Demand
Party delivers a Demand Notice to the Company and prior to the effectiveness of
the Registration Statement, the preparation of such Registration Statement is
discontinued or such Registration Statement is withdrawn or abandoned at the
request of the Demand Party (other than as contemplated by Section 12(e))
unless the Demand Party has elected to pay and has paid to the Company in full
the Registration Expenses (as set forth in Section 12(j)) in
connection with such Registration Statement.


 


(e)                                  Cutbacks.  If the managing underwriter
advises the Company that the inclusion of all such Restricted Shares proposed
to be included in any registration would interfere with the successful
marketing (including pricing) of the Equity Securities of the Company to be
offered thereby, then the number of Restricted Shares proposed to be included
in such registration shall be allocated among the Company and the selling
Stockholders in the following order of priority:


 


(i)                                     first, the Restricted Shares to be offered by
the Company; and


 


(ii)                                  second, the amount of Restricted Shares which
all other Stockholders have requested to be included in such registration (that
the managing underwriter believes can be sold without interfering with the
successful marketing (including pricing) of the Equity Securities of the
Company), pro  rata based upon the number of Restricted Shares
proposed to be sold by each such Stockholder in such registration.


 


(f)                                    Piggyback Registration.  If
the Company at any time proposes for any reason to register Restricted Shares
under the Securities Act (other than on Form S-4 or Form S-8
promulgated under the Securities Act or any successor forms thereto) including,
without limitation, pursuant to Section 12(a) or Section 12(g),
it shall promptly give written notice to each Stockholder of its intention to
register the Restricted Shares and, upon the written request, given within 15
days after delivery of any such notice by the Company, of any such Stockholder
to include in such registration Restricted Shares (which request shall specify
the number of Restricted Shares proposed to be included in such registration),
the Company shall use its best efforts to cause all such Restricted Shares to
be included in such registration on the same terms and conditions as the
Restricted Shares otherwise being sold in such registration, and in any event,
subject to Section 12(e) the Company shall include the
Restricted Shares if the registration is effected pursuant to Section 12(a) or
Section 12(g) on the same terms and conditions as the
Restricted Shares otherwise being sold in such registration.


 


(g)                                 Registrations on Form S-3. 
Notwithstanding anything contained in this Agreement to the contrary, at
such time as the Company shall have qualified for the use of Form S-3
promulgated under the Securities Act or any successor form thereto, Apollo
shall have the right to request in writing an unlimited number of Demand
Registrations on Form S-3 or such


 


26

















 


successor form of Restricted
Shares held by Apollo, which request or requests shall (i) specify the
number of Restricted Shares intended to be sold or otherwise Transferred and (ii) state
the intended method of Transfer of such Restricted Shares.  Promptly (and in any event within 5 days)
after receipt of any such request, the Company shall give written notice of
such proposed registration to the other Stockholders and, subject to Section 12(e),
shall include in such proposed registration any Restricted Shares requested to
be included in such proposed registration by such Stockholders who respond in
writing to the Company’s notice within 15 days after delivery of such Notice
(which response shall specify the number of Restricted Shares proposed to be
included in such registration).


 


(h)                                 Holdback Agreement.  If
the Company at any time shall register any shares of Common Stock under the
Securities Act (including any registration pursuant to Section 12(a))
for sale to the public, Apollo and the Cypress Holders shall not sell, make any
short sale of, grant any option for the purchase of, or otherwise Transfer, any
Restricted Shares (other than those Restricted Shares included in such registration
pursuant to Section 12(a)) without the prior written consent of the
Company for a period designated by the Company in writing to Apollo and the
Cypress Holders, which period shall not begin more than 10 days prior to the
effectiveness of the Registration Statement pursuant to which such public
offering shall be made and shall not exceed 90 days (or 180 days in the case of
the initial public offering) after the effective date of such Registration
Statement.


 


(i)                                     Preparation and Filing.  If
and whenever the Company is under an obligation pursuant to the provisions of
this Agreement to use its best efforts to effect the registration of any
Restricted Shares, the Company shall, as expeditiously as practicable:


 


(i)                                     use its best efforts to cause a Registration
Statement that registers such Restricted Shares to become and remain effective
for a period of 90 days or until all of such Restricted Shares have been
Transferred (if earlier);


 


(ii)                                  furnish, at least five Business Days before
filing a Registration Statement that registers such Restricted Shares, any
Preliminary Prospectus and the Prospectus relating thereto or any amendments or
supplements relating to such a Registration Statement or such prospectuses, to
one counsel acting on behalf of all selling Stockholders selected by Apollo
(the “Sellers’ Counsel”), copies of all such documents proposed to be
filed (it being understood that such five Business Day period need not apply to
successive drafts of the same document proposed to be filed so long as such
successive drafts are supplied to such counsel in advance of the proposed
filing by a period of time that is customary and reasonable under the
circumstances), and shall use its best efforts to reflect in each such
document, when so filed with the Commission, such comments as the Stockholders
whose Restricted Shares are to be covered by such Registration Statement may
reasonably propose;


 


(iii)                               prepare and file with the Commission such
amendments and supplements to such Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for at least a period of 90 days or until all of such
Restricted Shares have been Transferred (if earlier)


 


27

















 


and
to comply with the provisions of the Securities Act with respect to the sale or
other Transfer of such Restricted Shares;


 


(iv)                              promptly notify the Sellers’ Counsel in
writing (A) of the receipt by the Company of any notification with respect
to any comments by the Commission with respect to such Registration Statement,
any Preliminary Prospectus, the Prospectus or any Issuer Free Writing
Prospectus, or any request by the Commission for the amending or supplementing
thereof or for additional information with respect thereto, (B) of the
receipt by the Company of any notification with respect to the issuance by the
Commission of any stop order suspending the effectiveness of such Registration
Statement, Preliminary Prospectus, Prospectus or Issuer Free Writing Prospectus
or any amendment or supplement thereto or the initiation of any proceedings for
that purpose and (C) of the receipt by the Company of any notification
with respect to the suspension of the qualification of such Restricted Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purposes;


 


(v)                                 use its best efforts to register or qualify
such Restricted Shares under such other securities or blue sky laws of such
jurisdictions as any selling Stockholder reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
the holders of such Restricted Shares to consummate the Transfer in such
jurisdictions.


 


(vi)                              without limiting subsection (v) above,
use its best efforts to cause such Restricted Shares to be registered with or
approved by such other Governmental Authorities as may be necessary by virtue
of the business and operations of the Company to enable the holders of such
Restricted Shares to consummate the Transfer of such Restricted Shares;


 


(vii)                           furnish to each selling Stockholder and the
underwriters, if any, such number of copies of such Registration Statement, any
amendments thereto, any exhibits thereto or documents incorporated by reference
therein (but only to the extent not publicly available on EDGAR or the Company’s
website), any Preliminary Prospectus, any Issuer Free Writing Prospectus and
the Prospectus (each in conformity with the requirements of the Securities
Act), and such other documents as such selling Stockholder or underwriters may
reasonably request in order to facilitate the public offering and sale or other
Transfer of such Restricted Shares;


 


(viii)                        notify in writing on a timely basis each
selling Stockholder at any time when the Prospectus is required to be delivered
under the Securities Act, of the happening of any event as a result of which
the Prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and, at the request
of such Stockholder, prepare and furnish to such Stockholder a number of copies
reasonably requested by such Stockholder of a supplement to or an amendment of
such Prospectus as may be necessary so that, as thereafter delivered to the
offerees of such Restricted Shares, such Prospectus shall not include an untrue
statement of a material fact or omit to state a


 


28

















 


material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;


 


(ix)                                prevent the issuance of an Order suspending
the effectiveness of a Registration Statement, and if one is issued, use its
best efforts to obtain the withdrawal of any Order suspending the effectiveness
of a Registration Statement as soon as possible;


 


(x)                                   retain in accordance with the Rules and
Regulations all Issuer Free Writing Prospectuses not required to be filed
pursuant to the Rules and Regulations; and if at any time after the date
hereof any event shall have occurred as a result of which any Issuer Free
Writing Prospectus, as then amended or supplemented, would conflict with the
information in the Registration Statement, the most recent Preliminary
Prospectus or the Prospectus or would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, if for any other reason it shall be necessary to amend or
supplement any Issuer Free Writing Prospectus effect compliance with the
Securities Act and the Rules and Regulations, to notify promptly in
writing the selling Stockholders and underwriters and, upon request, to file
such document and to prepare and furnish without charge to each selling
Stockholder and underwriter as many copies as each such selling Stockholder and
underwriter may from time to time reasonably request of an amended or
supplemented Issuer Free Writing Prospectus that will correct such conflict,
statement or omission or effect compliance with the Securities Act and the Rules and
Regulations;


 


(xi)                                make available for inspection by the selling
Stockholders, the Sellers’ Counsel or any underwriter participating in any
Transfer pursuant to such Registration Statement and any attorney, accountant
or other agent retained by any such seller or underwriter (collectively, the “Inspectors”),
all pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the “Records”), as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, managers and employees to
supply all information (together with the Records, the “Information”)
reasonably requested by any such Inspector in connection with such Registration
Statement.  Any of the Information that
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, shall not be disclosed by the
Inspectors unless (i) the disclosure of such Information is necessary to
avoid or correct a misstatement or omission in the Registration Statement, (ii) the
release of such Information is ordered pursuant to a subpoena or other Order
from a Governmental Authority or (iii) such Information has been made
generally available to the public.  The
selling Stockholders agree that they will, upon learning that disclosure of
such Information is sought by a Governmental Authority, give prompt written
notice to the Company and use their reasonable commercial efforts to allow the
Company, at the Company’s expense, to undertake appropriate action to prevent
disclosure of the Information deemed confidential;


 


29

















 


(xii)                             in the case of an Underwritten Offering, use
its best efforts to obtain, from its Accountants, a “cold comfort” letter in
customary form and covering such matters of the type customarily covered by
cold comfort letters;


 


(xiii)                          use its best efforts to obtain, from its
counsel, an opinion or opinions in customary form (which shall also be
addressed to the Stockholders selling Restricted Shares in such registration)
and, in the case of an Underwritten Offering, use its best efforts to obtain,
from its counsel, an opinion or opinions in customary form;


 


(xiv)                         provide a transfer agent and registrar (which
may be the same entity) for such Restricted Shares and a CUSIP number for such
Restricted Shares, in each case no later than the effective date of such
registration;


 


(xv)                            upon the request of any underwriter, issue to
any underwriter to which any selling Stockholder may sell Restricted Shares in
such offering, certificates evidencing such Restricted Shares;


 


(xvi)                         upon the request of Apollo, list such
Restricted Shares on any national securities exchange on which any shares of
Common Stock are listed or, if no such shares are listed on a national
securities exchange, use its best efforts to qualify such Restricted Shares for
inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc. (the “NASD”) or such other national
securities exchange as Apollo shall request;


 


(xvii)                      in connection with an Underwritten Offering,
participate, to the extent requested by the managing underwriter for the
offering or Apollo, in customary efforts to sell the Restricted Shares being
offered, cause such steps to be taken as to ensure the good faith participation
of senior management officers of the Company in “road shows” as is customary
and take such other actions as the underwriters or Apollo may request in order
to expedite or facilitate the Transfer of Restricted Shares;


 


(xviii)                   cooperate with each Stockholder and each
underwriter participating in the Transfer of Restricted Shares and their
respective counsel in connection with any filings required to be made with the
NASD, including, if appropriate, the pre-filing of the Prospectus as part of a
shelf Registration Statement in advance of an Underwritten Offering;


 


(xix)                           make available to its security holders, as
soon as reasonably practicable but not later than eighteen (18) months after
the effective date, earnings statements (which need not be audited) covering a
period of twelve (12) months beginning within three (3) months after the
effective date of the Registration Statement, which earnings statements shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;


 


(xx)                              during the period when the Prospectus is
required to be delivered under the Securities Act, promptly file all documents
required to be filed with the Commission, including pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act;


 


30

















 


(xxi)                           otherwise use its best efforts to comply with
all applicable Rules and Regulations; and


 


(xxii)                        use its best efforts to take all other steps
necessary to effect the registration of such Restricted Shares contemplated
hereby.


 


(j)                                     Expenses.  All expenses incident to the
Company’s performance of, or compliance with, this Section 12,
including (a) all registration and filing fees, and any other fees and
expenses associated with filings required to be made with any stock exchange,
the Commission and the NASD (including, if applicable, the fees and expenses of
any “qualified independent underwriter” and its counsel as may be required by
the rules and regulations of the NASD); (b) all fees and expenses of
compliance with state securities or “blue sky” laws (including fees and
disbursements of counsel for the underwriters or Stockholders in connection
with “blue sky” qualifications of the Restricted Shares and determination of
their eligibility for investment under the laws of such jurisdictions as the
managing underwriters may designate); (c) all printing and related
messenger and delivery expenses (including expenses of printing certificates
for the Restricted Shares in a form eligible for deposit with The Depository
Trust Company (or any other depositary or transfer agent/registrar) and of
printing any Preliminary Prospectus, any Issuer Free Writing Prospectus and the
Prospectus and any amendments thereto), all fees and disbursements of counsel
for the Company and of all independent certified public accountants of the
issuer (including the expenses of any special audit and “cold comfort” letters
required by or incident to such performance); (d) Securities Act liability
insurance if the Company so desires or the underwriters so require; (e) all
fees and expenses incurred in connection with the listing of the Restricted
Shares on any securities exchange (including NASDAQ) and all rating agency
fees; (f) all fees and disbursements of the Sellers’ Counsel to represent
the selling Stockholders in connection with such registration; and (g) reasonable
fees and expenses of outside counsel and advisors retained by the Company (all
such expenses being herein called “Registration Expenses”), will be
borne by the Company, regardless of whether the Registration Statement becomes
effective; provided, however, that all underwriting discounts and
selling commissions applicable to the Restricted Shares shall not be borne by
the Company, but shall be borne by the seller or sellers thereof, in proportion
to the number of Restricted Shares sold by such seller or sellers.  In addition, the Company will, in any event,
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any audit and the fees and expenses of any Person, including
special experts, retained by the Company.


 


(k)                                  Indemnification.


 


(i)                                     In connection with any registration of any
Restricted Shares under the Securities Act pursuant to this Agreement, the
Company shall indemnify and hold harmless each seller of such Restricted
Shares, each underwriter, broker or any other Person acting on behalf of such
seller and each other Person, if any, who controls any of the foregoing Persons
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing Persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (1) any untrue statement or alleged untrue statement of a
material fact contained in (A) any


 


31

















 


Preliminary
Prospectus, the Registration Statement, the Prospectus or in any amendment or
supplement thereto, (B) any Issuer Free Writing Prospectus or in any
amendment or supplement thereto or (C) any Permitted Issuer Information
used or referred to in any “free writing prospectus” (as defined in Rule 405)
used or referred to by any underwriter or (D) any “road show” (as defined
in Rule 433) not constituting an Issuer Free Writing Prospectus, when
considered together with the most recent Preliminary Prospectus (collectively, “Road
Show Material”), (2) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer
Free Writing Prospectus or in any amendment or supplement thereto or in any
Permitted Issuer Information or any Road Show Material any material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Preliminary Prospectus, Issuer Free Writing Prospectus, Road
Show Material and the Prospectus, in the light of the circumstances under which
they were made) not misleading, or any violation by the Company of the
Securities Act or state securities or blue sky laws applicable to the Company
and relating to action or inaction required of the Company in connection with
such registration or qualification under such state securities or blue sky
laws; and shall reimburse such seller, such underwriter, such broker or such
other Person acting on behalf of such seller and each such controlling Person
for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing
Prospectus or in any such amendment or supplement thereto or in any Permitted
Issuer Information or any Road Show Material in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such seller or underwriter specifically for use in the preparation
thereof; and provided, further, however, that the
foregoing indemnity agreement shall not inure to the benefit of any indemnified
party if (w) such loss, claim, damage, liability or judgment arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus or any amendment or
supplement thereto, as the case may be, (x) the Company informed such sellers
and underwriters of such untrue statement or alleged untrue statement or
omission or alleged omission prior to the confirmation of sales of the Shares,
(y) such untrue statement or alleged untrue statement or omission or alleged omission
was corrected in an amended or supplemented Preliminary Prospectus (or, where
permitted by law, an Issuer Free Writing Prospectus) and such corrected
Preliminary Prospectus (or Issuer Free Writing Prospectus) was provided to the
underwriters such that the underwriters had a reasonably sufficient amount of
time to deliver such corrected Preliminary Prospectus (or Issuer Free Writing
Prospectus) to the Persons to whom the underwriters offered the Restricted
Shares and (z) the timely delivery of such amended Preliminary Prospectus (or
Issuer Free Writing Prospectus) to such Person would have constituted a
complete defense to the losses, claims, damages, liabilities and judgments
asserted by such Person.


 


(ii)                                  In connection with any registration of Restricted
Shares under the Securities Act pursuant to this Agreement, each seller of
Restricted Shares shall


 


32

















 


indemnify
and hold harmless (in the same manner and to the same extent as set forth in
the preceding paragraph of this Section 12(k)) the Company, each
officer of the Company who shall sign such Registration Statement, each
underwriter, broker or other Person acting on behalf of such seller, each
Person who controls any of the foregoing Persons within the meaning of the
Securities Act and each other seller of Restricted Shares under such
Registration Statement with respect to any statement or omission from any
Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer
Free Writing Prospectus or in any amendment or supplement thereto or in any
Road Show Material, if such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company or such
underwriter through an instrument duly executed by such seller specifically for
use in connection with the preparation of such Preliminary Prospectus,
Registration Statement, Prospectus, Issuer Free Writing Prospectus or in any
amendment or supplement thereto or in Road Show Material; provided, however,
that the maximum amount of liability in respect of such indemnification shall
be, limited, in the case of each seller of Restricted Shares, to an amount
equal to the net proceeds actually received by such seller from the sale of
Restricted Shares effected pursuant to such registration.


 


(iii)                               Indemnification similar to that specified in Sections
12(k)(i) and (k)(ii) shall be given by the Company and
each seller of Restricted Shares (with such modifications as may be
appropriate) with respect to any required registration or other qualification
of their Securities under any Federal or state law or regulation of
Governmental Authority other than the Securities Act.


 


(iv)                              Promptly after receipt by an indemnified
party of notice of the commencement of any action involving a claim referred to
in the preceding paragraphs of this Section 12(k), such indemnified
party will, if a claim in respect thereof is made against an indemnifying
party, give written notice to the latter of the commencement of such action (provided,
however, that an indemnified party’s failure to give such notice in a
timely manner shall only relieve the indemnification obligations of an
indemnifying party to the extent such indemnifying party is materially
prejudiced by such failure).  In case any
such action is brought against an indemnified party, the indemnifying party
will be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be responsible
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof; provided, however, that if
any indemnified party shall have reasonably concluded that there may be one or
more legal or equitable defenses available to such indemnified party which are
additional to or conflict with those available to the indemnifying party, or
that such claim or litigation involves or could have an effect upon matters
beyond the scope of the indemnity agreement provided in this Section 12(k),
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party and such indemnifying party shall
reimburse such indemnified party and, any Person controlling such indemnified
party for that portion of the fees and expenses of any counsel retained


 


33

















 


by
the indemnified party which are reasonably related to the matters covered by
the indemnity agreement provided in this Section 12(k).


 


(v)                                 If the indemnification provided for in this Section 12(k)
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage or liability referred
to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amounts paid or payable by
such indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in such loss, claim,
damage or liability as well as any other relevant equitable considerations; provided,
however, that the maximum amount of liability in respect of such
contribution shall be limited, in the case of each seller of Restricted Shares,
to an amount equal to the net proceeds actually received by such seller from
the sale of Restricted Shares effected pursuant to such registration.  The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.  No Person
guilty of fraud shall be entitled to indemnification or contribution hereunder.


 


(vi)                              The indemnification and contribution provided
for under this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party and will survive
the Transfer of Restricted Shares.


 


(l)                                     Underwritten Offerings. 
Notwithstanding anything to the contrary set forth in this Agreement:


 


(i)                                     to the extent that all the holders selling
Restricted Shares in a proposed registration shall enter into an underwriting
or similar agreement, which agreement contains provisions covering one or more
issues addressed in this Section 12, the provisions contained in
this Section 12 addressing such issue or issues shall be of no
force or effect with respect to such registration.  If any offering pursuant to a Demand
Registration or pursuant to Section 12(g) involves an
Underwritten Offering, Apollo shall have the right to select the managing
underwriter or underwriters to administer the offering, which managing
underwriters shall be a firm of nationally recognized standing and reasonably
satisfactory to the Company in which case the Company shall enter into an
agreement with such firm for the underwriting of such offering containing terms
and conditions reasonably satisfactory to Apollo and the Company; and


 


(ii)                                  no Stockholder may participate in any
registration hereunder that is underwritten unless such Stockholder agrees (A) to
sell such Stockholder’s Restricted Shares proposed to be included therein on
the basis provided in any underwriting arrangement(s) acceptable to Apollo and
the Company and consistent with the terms hereof and (B) as expeditiously
as possible, to notify the Company of the occurrence of


 


34

















 


any
event concerning such Stockholder as a result of which any Preliminary
Prospectus, any Issuer Free Writing Prospectus or the Prospectus contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.


 


(m)                               Information by Holder.  Each
holder of Restricted Shares to be included in any registration shall furnish to
the Company such written information regarding such holder and the distribution
proposed by such holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in this Agreement.


 


(n)                                 Exchange Act Compliance.  From
and after the date a Registration Statement filed by the Company pursuant to
the Exchange Act relating to any class of the its Securities shall have become
effective, the Company shall comply with all of the reporting requirements of
the Exchange Act (whether or not it shall be required to do so) and shall
comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the
sale of Restricted Shares.  The Company
shall cooperate with each holder in supplying such information as may be
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of Rule 144 or any comparable successor rules).  The Company shall furnish to any holder of
Restricted Shares upon request a written statement executed by the Company as
to the steps it has taken to comply with the current public information
requirement of Rule 144 (or such comparable successor rules).  After the consummation of a Qualified Public
Offering, subject to the limitations on Transfers imposed by this Agreement,
the Company shall use its best efforts to facilitate and expedite transfers of
Restricted Shares pursuant to Rule 144 under the Securities Act, which
efforts shall include timely notice to its transfer agent to expedite such
transfers of Restricted Shares.


 


(o)                                 No Conflict of Rights.  The
Company represents and warrants to Apollo and the Cypress Holders that the
registration rights granted in this Agreement do not conflict with any other
registration rights granted by the Company. 
The Company shall not, after the date hereof, grant any registration
rights which conflict with or impair, or have any priority over, the
registration rights granted hereby.


 


(p)                                 Termination.  The provisions of this Section 12
shall terminate and be of no further force or effect when there shall not be
any Restricted Shares, provided, however, that Sections 12(j)
and (k) shall survive the termination of this Agreement indefinitely.


 


(q)                                 Rexnord Stockholders’ Agreement.  Each
of the parties to this Agreement acknowledge that the Rexnord Stockholders’
Agreement contains provisions comparable to the provisions of this Section 12,
including provisions relating to piggyback registration rights.  Nothing in this Section 12 shall
limit or in any way restrict the rights of the parties to the Rexnord
Stockholders’ Agreement thereunder.


 


35

















 


Section 13.                                   Termination.  


 


Subject
to the terms of Section 12(p), this Agreement shall terminate on
the first to occur of:


 


(a)                                  the date the Company consummates a Qualified
Public Offering;


 


(b)                                 the complete liquidation of the Company and
its Subsidiaries or the sale, lease or other disposition by the Company of all
or substantially all of the assets of the Company and its Subsidiaries, taken
as a whole; and


 


(c)                                  the execution of a resolution of the Board
terminating this Agreement.


 


Section 14.                                   Miscellaneous.


 


(a)                                  Restrictive Legends.


 


(i)                                     Each certificate for Restricted Shares
(unless otherwise permitted by the provisions of Section 14(a)(ii))
shall include a legend in substantially the following form:


 


“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS.  THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT OR LAWS.  THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A STOCKHOLDERS AGREEMENT
DATED AS OF JULY 21, 2006 BY AND AMONG REXNORD HOLDINGS, INC. (THE “COMPANY”)
AND THE OTHER PARTIES NAMED THEREIN.  THE
TERMS OF SUCH STOCKHOLDERS AGREEMENT INCLUDE, AMONG OTHER THINGS, RESTRICTIONS
ON TRANSFER.  A COPY OF SUCH AGREEMENT
WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST.”


 


(ii)                                  Subject to Section 14(b), any
holder of Restricted Shares registered that are pursuant to the Securities Act
and qualified under applicable state securities laws may exchange any
certificate or other evidence of ownership of such Restricted Shares for a
certificate or other evidence of ownership with respect to the Common Stock so
registered that shall not bear the legend set forth in clause (i) of this Section 14(a).


 


36

















 


(b)                                 Compliance with Securities Laws.  Upon
any proposed Transfer of Restricted Shares, the Company shall not be obligated to
register the Transfer of such Restricted Shares on the stock transfer books of
the Company until the Company shall have received (i) to the extent
required to ensure compliance with the Securities Act and any other applicable
laws, an opinion of counsel reasonably satisfactory to the Company, to the
effect that the proposed Transfer of Restricted Shares may be effected without
registration under the Securities Act or any such other applicable laws and/or (ii) representation
letters in form and substance reasonably satisfactory to the Company to ensure
compliance with the provisions of the Securities Act and any other applicable
laws.  Each certificate evidencing
Restricted Shares transferred as above provided shall bear the legend set forth
in Section 14(a)(i), except that such certificate shall not bear
such legend if neither such legend nor the restrictions on Transfer in Section 14(a) and
Section 14(b) are required in order to ensure compliance with
the provisions of the Securities Act.


 


(c)                                  Severability. 
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, and such invalid, void or otherwise unenforceable
provisions shall be null and void.  It is
the intent of the parties, however, that any invalid, void or otherwise
unenforceable provisions be automatically replaced by other provisions which
are as similar as possible in terms to such invalid, void or otherwise
unenforceable provisions but are valid and enforceable to the fullest extent
permitted by law.


 


(d)                                 Entire Agreement; Termination of RBS/Cypress
Stockholders’ Agreement.


 


(i)                                     This Agreement constitutes the entire
agreement among the parties hereto and supersedes any other agreements, whether
written or oral, that may have been made or entered into by or among any of the
parties hereto relating to the subject matter hereof (including (A) the
RBS/Cypress Stockholders’ Agreement and (B) the provisions set forth
across from the sub-heading “Shareholder Agreement” in that certain Management
Incentive Compensation Term Sheet, dated as of May 24, 2006, by and among
CIH, Sherman, Cypress Group and Acquiror), except for the Option Agreement and
Option Assumption Agreement.


 


(ii)                                  The Stockholders hereby acknowledge and agree
that, effective as of the Closing, notwithstanding anything to the contrary
contained in the RBS/Cypress Stockholders’ Agreement, and with no further
action on the part of any party thereto or hereto, the RBS/Cypress Stockholders’
Agreement shall terminate and be of no further force or effect, and none of the
parties hereto or thereto shall have any further liability or obligation
thereunder whether arising prior to, on or after the date hereof.


 


(e)                                  Successors and Assigns.  This
Agreement shall bind and inure to the benefit of the Company, Apollo and the
Cypress Holders and their respective successors and permitted assigns.  Except as otherwise expressly permitted
pursuant to the terms of this Agreement (or with the prior written consent of
Apollo), neither the Company nor the Cypress


 


37

















 


Holders shall assign or
otherwise Transfer their rights or obligations hereunder.  Apollo shall have the right to assign or
otherwise Transfer its rights and obligations hereunder to its Affiliates.


 


(f)                                    Modifications; Amendments.  The
terms and provisions of this Agreement may not be modified, amended or waived,
except pursuant to a writing signed by the Company, and the holders of a
majority of the Common Stock; provided, however, that any such
modification, amendment or waiver that adversely affects any Stockholder and is
prejudicial to such Stockholder relative to all of the other Stockholders shall
not be effected without the consent of such Stockholder.


 


(g)                                 Waiver.  No course of dealing between
the Company, Apollo and the Cypress Holders (or any of them) or any delay in
exercising any rights hereunder will operate as a waiver of any rights of any
party to this Agreement.  The failure of
any party hereto to enforce any of the provisions of this Agreement will in no
way be construed as a waiver of such provisions and will not affect the right
of such party thereafter to enforce each and every provision of this Agreement
in accordance with its terms.


 


(h)                                 Table of Contents and Headings.  The
table of contents and section headings of this Agreement are included for
reference purposes only and shall not affect the construction or interpretation
of any of the provisions of this Agreement.


 


(i)                                     Counterparts; Facsimile Signatures.  This
Agreement may be executed in any number of original or facsimile counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.


 


(j)                                     Remedies.


 


(i)                                     Apollo and each Cypress Holder shall have all
rights and remedies reserved for Apollo or such Cypress Holder pursuant to this
Agreement and the Restated Certificate and the Bylaws and all rights and
remedies which Apollo or such Cypress Holder has been granted at any time under
any other agreement or contract and all of the rights which such holder has
under any law or equity.  Any Person
having any rights under any provision of this Agreement will be entitled to
enforce such rights specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law
or equity.


 


(ii)                                  The parties hereto agree that if any parties
seek to resolve any dispute arising under this Agreement pursuant to a legal
proceeding, the prevailing parties to such proceeding shall be entitled to
receive reasonable fees and expenses (including reasonable attorneys’ fees and
expenses) incurred in connection with such proceedings.


 


(iii)                               It is acknowledged that it will be impossible
to measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved Person will be irreparably damaged and will not
have an adequate remedy at law.  Any such
Person shall, therefore, be entitled to injunctive relief, including specific


 


38

















 


performance,
to enforce such obligations, and if any action should be brought in equity to
enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.


 


(k)                                  Notices.  All notices, requests,
consents and other communications hereunder to any party hereto shall be deemed
to be sufficient if contained in a written instrument and shall be deemed to
have been duly given when delivered in person, by telecopy, by
nationally-recognized overnight courier, or by first class registered or
certified mail, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
the addressee to the addressor:


 


(i)                                     if to the Company, to:


 


Rexnord
Holdings, Inc.

c/o RBS Global, Inc. 

4701 Greenfield Avenue


Milwaukee,
WI 53214


Fax:
(414) 643-2510


Attention:
Patricia Whaley, Esq.


 


with
a copy to:


 


O’Melveny & Myers LLP


Times
Square Tower


7
Times Square


New
York, New York 10036

Fax:  (212) 326-2061


Attention:  John M. Scott, Esq.


 


(ii)                                  if to Apollo, to:


 


Apollo
Management VI, L.P.

c/o Apollo Management, L.P.

9 West 57th Street, 43rd Floor

New York, NY 10019

Fax:  (212) 515-3288

Attention:                                         Mr. Laurence Berg


Mr. Steven
Martinez


 


with
a copy to:


 


O’Melveny & Myers LLP


Times
Square Tower


7
Times Square


New
York, New York 10036

Fax:  (212) 326-2061


Attention:  John M. Scott, Esq.


 


39

















 


(iii)                               if to CIH or Sherman:


 


Cypress
Industrial Holdings, LLC

c/o Cypress Group, LLC

111 South Calvert Street

Suite 7200


Baltimore,
MD 21202

Fax: (410) 385-0105


Attention:
George M. Sherman


 


with
a copy to:


 


King &
Spalding LLP

1700 Pennsylvania Avenue, N.W.


Washington,
D.C.  20006-4706


Fax:
(202) 626-3737


Attention:
Glenn C. Campbell, Esq.


 


All such notices, requests,
consents and other communications shall be deemed to have been delivered (a) in
the case of personal delivery or delivery by telecopy, on the date of such
delivery, (b) in the case of nationally-recognized overnight courier, on
the next Business Day and (c) in the case of mailing, on the third
Business Day following such mailing if sent by certified mail, return receipt
requested.


 


(l)                                     Arbitration.  EXCEPT AS SET FORTH BELOW,
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS
OR PRINCIPLES THEREOF THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. 
ALL MATTERS WHICH ARE THE SUBJECT OF THIS AGREEMENT RELATING TO MATTERS
OF INTERNAL GOVERNANCE OF THE COMPANY SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY
LAW OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF DELAWARE TO BE APPLIED.  Any dispute or
controversy arising under, out of, or in connection with or in relation to this
Agreement shall be finally determined and settled by arbitration in New York,
New York in accordance with the applicable rules of the American
Arbitration Association, and judgment upon the award may be entered in any
court having jurisdiction.  Within 20
days of the conclusion of the arbitration hearing, the arbitrator shall prepare
written findings of fact and conclusions of law.  It is mutually agreed that the written decision
of the arbitrator shall be valid, binding, final and non-appealable; provided, however, that the parties hereto
agree that the arbitrator shall not be empowered to award punitive damages
against any party to such arbitration. 
To the extent permitted by law, the arbitrator’s fees and expenses will
be borne equally by each party.  In the
event that an action is brought to enforce the provisions of this Agreement
pursuant to this Section 14(l), each party shall pay its own
attorney’s fees and expenses regardless of whether in the opinion of the court
or arbitrator deciding such action there is a prevailing party.  EACH OF THE PARTIES HERETO HEREBY


 


40

















 


IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL, INCLUDING TRIAL BY JURY, IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT.


 


(m)                               Interpretive Matters. 
Unless the context otherwise requires, (i) all references to
articles, sections, schedules or exhibits are to Articles, Sections, Schedules
or Exhibits of or to this Agreement, (ii) each accounting term not
otherwise defined in this Agreement has the meaning assigned for it in
accordance with GAAP, (iii) words in the singular or plural include the
singular and plural, and pronouns stated in either the masculine, feminine or
neuter gender shall include the masculine, feminine and neuter, and (iv) the
term “including” and any variation thereof shall mean by way of example and not
by way of limitation.  The parties hereto
have participated jointly in the negotiation and drafting of this
Agreement.  In the event an ambiguity or
question of intent arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.


 


(n)                                 Further Assurances.  Each
party hereto shall do and perform or cause to be done and performed all such
further acts and things and shall execute and deliver all such other
agreements, certificates, instruments, and documents as any other party hereto
reasonably may request in order to carry out the provisions of this Agreement
and the consummation of the transactions contemplated hereby.


 


(o)                                 Third Party Beneficiaries.  The
covenants of the Company contained in this Agreement (i) are being given
by the Company as an inducement to the Stockholders to enter into this
Agreement (and the Company acknowledges that the Stockholders have expressly
relied thereon) and (b) are solely for the benefit of the
Stockholders.  Accordingly, except as
expressly set forth herein (including in Section 9(b)(iii) with
respect to directors and officers indemnity insurance), no third party
(including, without limitation, any holder of Equity Securities of the Company)
or anyone acting on behalf of any thereof, other than the Stockholders and
their permitted assignees, shall be a third party or other beneficiary of such
covenants and no such third party shall have any rights of contribution against
the Stockholders or the Company with respect to such covenants or any matter
subject to or resulting in indemnification under this Agreement or otherwise.


 


(p)                                 Stock Splits, Mergers, etc.  If,
and as often as, there are any changes in any Equity Securities, as applicable,
by way of stock split, stock dividend, combination or reclassification, or
through merger, consolidation, reorganization or recapitalization, or by any
other means, appropriate adjustment shall be made in the provisions of this Agreement,
as may be required, so that the rights, privileges, duties and obligations
hereunder shall continue with respect to the Equity Securities, as so changed.


 


(q)                                 No Right to Employment.  None
of the provisions hereof shall create, or be construed or deemed to create, any
right to employment in favor of any Person by the Company or any of its
Subsidiaries.


 


41

















 


Section 15.                                   Effectiveness.


 


This
Agreement shall become effective as of the Closing.  In the event that the Agreement and Plan of
Merger is terminated pursuant to its terms and the Closing does not occur, this
Agreement shall be null and void and of no force and effect.


 


* * * * *


 


42

















 


IN WITNESS WHEREOF, the parties hereto have executed this Stockholders’ Agreement on the
date first written above.


 


	
   

  	
  REXNORD HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas Jansen

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas Jansen

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  REXNORD ACQUISITION HOLDINGS I, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia Navis

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Patricia Navis

  
	
   

  	
   

  	
  Title:

  	
  Authorized Person

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  REXNORD ACQUISITION HOLDINGS II,

  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia Navis

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Patricia Navis

  
	
   

  	
   

  	
  Title:

  	
  Authorized Person

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CYPRESS INDUSTRIAL HOLDINGS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George M. Sherman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  George M. Sherman

  
	
   

  	
   

  	
  Title:

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ George M. Sherman

  	
   

  
	
   

  	
  George M. Sherman

  
					



 

















 


Schedule I


 


	
  Stockholder

  	
   

  	
  Restricted Shares Owned

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cypress Industrial Holdings, LLC

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  George M. Sherman

  	
   

  	
   

  	
   

  



 

















 


Exhibit A


 


Amended and Restated Certificate of Incorporation of
the Company


 


See attached


 

















 


Exhibit B


 


FORM OF JOINDER TO

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT


 


THIS JOINDER (this “Joinder” to that certain Stockholders Agreement dated as
of          ,           ,
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”), Cypress Industrial Holdings,
LLC, a Maryland limited liability company and George M. Sherman, individually
(the “Agreement”), is made and entered into as of [                    ]
by and between the Company and [Holder]
(“Holder”).  Capitalized terms
used but not otherwise defined herein shall have the meanings set forth in the
Agreement.


 


WHEREAS, Holder has acquired certain shares of Common Stock, and the Agreement
and the Company requires Holder, as a holder of Common Stock, to become a party
to the Agreement, and Holder agrees to do so in accordance with the terms
hereof.


 


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 to this Joinder hereby agree as follows:


 


1.                                       Agreement to be Bound. 
Holder hereby agrees that upon execution of this Joinder, [he, she or it] shall become a party to the
Agreement and shall be fully bound by, and subject to, all of the covenants,
terms and conditions of the Agreement as though an original party thereto and
shall be deemed [Cypress](1) for all purposes thereof.  In addition, Holder hereby agrees that all
Common Stock held by Holder shall be deemed Restricted Shares for all purposes
of the Agreement.


 


2.                                       Successors and Assigns. 
Except as otherwise provided herein, this Joinder shall bind and inure
to the benefit of and be enforceable by the Company and its successors and
assigns and Holder and any subsequent holders of Common Stock and the
respective successors and assigns of each of them, so long as they hold any
shares of Common Stock.


 


3.                                       Counterparts.  This
Joinder may be executed in separate counterparts, including by facsimile, each
of which shall be an original and all of which taken together shall constitute
one and the same agreement.


 


4.                                       Notices.  For purposes of Section 14(k)
of the Agreement, all notices, demands or other communications to the Holder
shall be directed to:


 


[Name]

[Address]

[Attention]

[Facsimile Number]


 






(1) Discuss.


 

















 


5.                                       Governing Law.  EXCEPT AS SET FORTH BELOW, THIS JOINDER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS OR PRINCIPLES THEREOF THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.


 


6.                                       Descriptive Headings.  The
descriptive headings of this Joinder are inserted for convenience only and do
not constitute a part of this Joinder.


 


* * * * *


 


2

















 


IN
WITNESS WHEREOF, the parties hereto have executed this Joinder as of the date
first above written.


 


	
   

  	
  REXNORD
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [HOLDER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: