Document:

Exhibit
10.5

 

AMENDMENT
TO

STOCKHOLDERS AGREEMENT

 

This
Amendment (this “Amendment”) to that certain Stockholders Agreement (the
“Stockholders Agreement”), dated as of September 28, 2001, by and among
Cellu Paper Holdings, Inc., a Delaware corporation (the “Company”),
Charterhouse Equity Partners III, L.P., a Delaware limited partnership (“Charterhouse”),
Chef Nominees Limited, a United Kingdom entity (“Chef”), Wayham Capital,
LLC, a Delaware limited liability company and the persons listed on the
Schedule of Management Stockholders attached hereto as Schedule A, is
made as of September    , 2002, by and among the Company,
Charterhouse, Chef and Russell C. Taylor (the “Majority Non-CEP Stockholder”).

 

WHEREAS,
pursuant to Section 11.12(a) of the Stockholders Agreement, the Company,
Charterhouse, Chef and the Majority Non-CEP Stockholder wish to amend certain
provisions of the Stockholders Agreement.

 

NOW,
THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereby agree as follows:

 

1.             Section 11.5 of the Stockholders
Agreement is hereby amended by deleting all of the text in such Section and
replacing it with the following in substitution therefor:

 

“11.5 Management Fee. The parties to this Agreement acknowledge
that pursuant to the terms of that certain Financial Advisory and Management
Services Agreement, dated as of September    , 2002, among
Charterhouse Group International, Inc., a Delaware corporation (“CGI”), and
Cellu Tissue Holdings, Inc., a Delaware corporation, CGI (or its designee)
shall be paid a management fee in an amount equal to Four Hundred Fifty
Thousand Dollars ($450,000.00) per calendar year.”

 

2.             THIS
AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES
THEREOF.

 

3.             This Amendment may be executed in
any number of counterparts, each of which shall be deemed to be an original,
and all of which together shall constitute one and the same document. This
Amendment may be executed by facsimile signatures.

 

4.             Except as specifically set forth
herein, the terms and provisions of the Stockholders Agreement, as amended or
modified hereby, shall remain in full force and effect.

 

 

[END OF TEXT. SIGNATURE PAGE FOLLOWS.]

 

 

IN WITNESS WHEREOF, the parties hereto have
executed this Amendment as of the day and year first above written.

 

 

	
   

  	
  CELLU PAPER HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hugu E. Vivero

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CHARTERHOUSE EQUITY
  PARTNERS III, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  CHUSA Equity Investors
  III, L.P.,

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Charterhouse Equity III,
  Inc.,

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Phyllis Haberman

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CHEF NOMINEES LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Charterhouse Group
  International, Inc.,

  Attorney-in-fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Phyllis Haberman

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Russel C. Taylor

  	
   

  
	
   

  	
   

  	
  Russell C. Taylor

  

 

 

Schedule
A

 

List
of Management Stockholders

 

Russell
Taylor

 

Hugo
Vivero

 

Thomas
Moore

 

Stephen
Martineau

 

Alex
Volpe

 

Kevin
French

 

Steve
Crawley

 

 

 

STOCKHOLDERS AGREEMENT

 

among

 

CHARTERHOUSE EQUITY PARTNERS
III, L.P.

 

CHEF NOMINEES LIMITED

 

WAHYAM CAPITAL, LLC

 

CELLU PAPER HOLDINGS, INC.

 

and

 

THE OTHER PARTIES LISTED
HEREIN

 

 

Dated as of September 28,
2001

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  

  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  RESTRICTIONS ON TRANSFER;

  RIGHTS OF FIRST REFUSAL

  	
   

  
	
   

  	
   

  
	
  2.1

  	
  Restrictions
  on Transfer

  	
   

  
	
  2.2

  	
  Rights of First
  Refusal Generally

  	
   

  
	
  2.3

  	
  Apportionment
  of Shares Among Stockholders in the Event of Over-Subscription

  	
   

  
	
  2.4

  	
  Apportionment
  of Shares Among Stockholders in the Event of Failure to Purchase

  	
   

  
	
  2.5

  	
  Transfer
  Mechanics

  	
   

  
	
  2.6

  	
  Transfers to Third
  Parties after the Company and Stockholders Decline Rights of First Refusal

  	
   

  
	
  2.7

  	
  Exceptions
  to Rights of First Refusal

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  TAG-ALONG RIGHTS

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Tag-Along Rights Generally

  	
   

  
	
  3.2

  	
  Allocation of Shares of
  Tag-Along Stock

  	
   

  
	
  3.3

  	
  Transfer Mechanics

  	
   

  
	
  3.4

  	
  Transfers after
  Stockholders Decline Tag-Along Rights

  	
   

  
	
  3.5

  	
  Exceptions
  to Tag-Along Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  RIGHTS TO COMPEL SALE OR IPO EVENT

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Rights to Compel Sale
  Generally

  	
   

  
	
  4.2

  	
  Compelled
  Sale Pursuant to a Sale of Company Stock

  	
   

  
	
  4.3

  	
  Compelled Sale
  Other Than Pursuant to a Sale of Company Stock

  	
   

  
	
  4.4

  	
  Cooperation
  in Connection with Compelled Sale

  	
   

  
	
  4.5

  	
  Notice of Consummation
  of Sale

  	
   

  

 

 

	
  4.6

  	
  Rights to Compel IPO Event

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  PREEMPTIVE RIGHTS

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Preemptive
  Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  CALL RIGHTS ON MANAGEMENT STOCK

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Call Rights

  	
   

  
	
  6.2

  	
  Obligation to Sell Several

  	
   

  
	
  6.3

  	
  Payment for Stock

  	
   

  
	
  6.4

  	
  Miscellaneous

  	
   

  
	
  6.5

  	
  Proxy and Escrow of
  Company Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  REGISTRATION RIGHTS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Demand Registration Rights

  	
   

  
	
  7.2

  	
  Piggyback Registration
  Rights

  	
   

  
	
  7.3

  	
  Priority in
  Piggyback Registrations

  	
   

  
	
  7.4

  	
  Expenses

  	
   

  
	
  7.5

  	
  Restrictions
  on Public Sale by Stockholders and Company

  	
   

  
	
  7.6

  	
  Indemnification by the
  Company

  	
   

  
	
  7.7

  	
  Indemnification
  by the Stockholders and Underwriters

  	
   

  
	
  7.8

  	
  Notices of Claims, Etc.

  	
   

  
	
  7.9

  	
  Other
  Indemnification

  	
   

  
	
  7.10

  	
  Registration
  Procedure

  	
   

  
	
  7.11

  	
  Rule 144

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  ADDITIONAL STOCKHOLDERS

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Transferees of
  Stockholders or the Company

  	
   

  
	
  8.2

  	
  New Stockholders

  	
   

  
	
  8.3

  	
  Supplemental
  Agreements

  	
   

  

 

 

	
  ARTICLE IX

  STOCK LEGENDS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Stock
  Certificate Legend

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  TERM OF AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Term

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Confidentiality

  	
   

  
	
  11.2

  	
  Specific
  Performance

  	
   

  
	
  11.3

  	
  Consent to Jurisdiction,
  Etc.

  	
   

  
	
  11.4

  	
  Attorneys’ Fees

  	
   

  
	
  11.5

  	
  Management Fee

  	
   

  
	
  11.6

  	
  Transaction Fees

  	
   

  
	
  11.7

  	
  Headings; No
  Third Party Beneficiaries

  	
   

  
	
  11.8

  	
  Entire Agreement

  	
   

  
	
  11.9

  	
  Notices

  	
   

  
	
  11.10

  	
  Applicable Law

  	
   

  
	
  11.11

  	
  Severability

  	
   

  
	
  11.12

  	
  Successors;
  Assigns; Transferees; Amendments; Waivers

  	
   

  
	
  11.13

  	
  Defaults; No
  Circumvention of Agreement

  	
   

  
	
  11.14

  	
  Further
  Assurances

  	
   

  
	
  11.15

  	
  Counterparts

  	
   

  
	
  11.16

  	
  Recapitalization, Etc.

  	
   

  
	
  11.17

  	
  Performance
  Bonuses

  	
   

  

 

 

STOCKHOLDERS AGREEMENT

 

STOCKHOLDERS
AGREEMENT dated as of September 28, 2001 (this “Agreement”), by and among Cellu
Paper Holdings, Inc., a Delaware corporation (the “Company”), Charterhouse
Equity Partners III, L.P., a Delaware limited partnership (“Charterhouse”),
Chef Nominees Limited, a United Kingdom entity (“Chef” and together with
Charterhouse, “CEP”), Wahyam Capital, LLC, a Delaware limited liability company
(“Wahyam”) and the persons listed on the Schedule of Management Stockholders
attached hereto as Schedule A (such persons, together with any employees of the
Company or its subsidiaries who become parties to this Agreement pursuant to
the terms and conditions of this Agreement and each of their respective
Permitted Transferees (as defined herein), are referred to herein,
collectively, as the “Management Stockholders” and together with Wahyam, as the
“Non-CEP Stockholders”; the Non-CEP Stockholders and CEP being referred to
herein collectively as the “Stockholders”), and such other persons or entities
who or which become parties to this Agreement pursuant to the terms and
conditions of this Agreement.

 

BACKGROUND

 

WHEREAS,
in September 2001, the Company acquired Cellu Tissue Holdings, Inc. (“Cellu
Tissue”) in connection with a restructuring of Cellu Tissue (the “2001
Recapitalization”) to significantly reduce the amount of indebtedness
outstanding, revise the terms of the remaining indebtedness, and require the
stockholders of Cellu Tissue to make an additional equity capital contribution
to Cellu Tissue; and

 

WHEREAS,
the 2001 Recapitalization was effectuated through a merger of Cellu Tissue and
Cellu Paper Holdings Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of the
Company, in accordance with the terms of the Merger Agreement dated September
28, 2001 (the “Merger Agreement”), pursuant to which Merger Sub merged with and
into Cellu Tissue, with Cellu Tissue continuing as the surviving corporation
and a wholly owned subsidiary of the Company and all outstanding shares of
common stock and preferred stock of Cellu Tissue were cancelled and retired;
and

 

WHEREAS,
in connection with the 2001 Recapitalization, the Company issued to a syndicate
of senior lenders to Cellu Tissue (the “Bank Group”) warrants to acquire 10% of
the fully diluted equity of the Company, contingent warrants to acquire an
additional 5% of the fully diluted equity of the Company and $5.0 million of
senior indebtedness; and

 

WHEREAS,
the Stockholders believe it to be in their best interests and in the best
interests of the Company that they enter into this Agreement providing for
certain

 

1

 

rights and restrictions with respect to the Company Stock owned by them
or their Permitted Transferees (as defined herein); and

 

WHEREAS,
the Company may from time to time offer and sell Company Stock to employees of
the Company and its subsidiaries pursuant to stock-based incentive plans or
otherwise, which employees will, to the extent they are not otherwise parties
hereto, be required as a condition of such sale to become parties to this
Agreement pursuant to Article VIII hereof;

 

NOW,
THEREFORE, in consideration of the mutual covenants and obligations set forth
in this Agreement, the parties hereto agree as follows:

 

ARTICLE
I

 

DEFINITIONS

 

1.1  Definitions.
As used in this Agreement, the following terms shall have the meanings ascribed
to them below (such terms to be equally applicable to both singular and plural
forms of the terms defined or referred to):

 

(a)           The term “Affiliate” or “affiliate”
shall mean, with respect to any specified person, any director or officer of
such specified person, or any other person directly or indirectly controlling,
controlled by, or under common control with, such specified person, at any time
during the period for which the determination of affiliation is being made; provided
that in the case of a person who is an individual, such terms shall also
include members of such specified person’s immediate family (as defined in
Instruction 2 of Item 404(a) of Regulation S-K under the Securities Act); provided
further, that for purposes of this Agreement, none of the Management
Stockholders shall be deemed Affiliates of CEP.

 

(b)           The term “Board” shall mean
the Board of Directors of the Company.

 

(c)           The term “Bona Fide Offer”
shall mean any cash offer by a Third Party in writing, setting forth a specific
cash purchase price and a closing date of no more than thirty days therefrom,
which is fully financed and not subject to any material conditions.

 

(d)           The term “Business Day” shall
mean any calendar day which is not a Saturday, Sunday or public holiday under
the laws of the State of New York.

 

2

 

(e)           The term  “Cause”  shall
mean, with respect to any Management Stockholder, (i) the continuing, repeated
and willful refusal and failure (other than during periods of illness,
disability or vacation) to perform his duties under his respective employment
agreement with the Company or under any lawful directive of the Board
(consistent with the terms of the applicable employment agreement), (ii) the
Management Stockholder’s willful misconduct or gross neglect in the performance
of his duties under his respective employment agreement which in either case is
materially injurious to the Company, monetarily or otherwise, (iii) the willful
material breach of his employment agreement, (iv) the final, non-appealable conviction
of the Management Stockholder of any felony or the Management Stockholder’s
pleading guilty to any felony, other than motor vehicle offenses, or (v) the
indictment of the Management Stockholder for any felony on account of action
taken by the Management Stockholder constituting theft or embezzlement from the
Company or other fraudulent action against the Company.

 

(f)            The term “CEO” shall mean the
Chief Executive Officer of the Company.

 

(g)           The term “Common Stock” shall
mean the Common Stock, par value $.01 per share, of the Company.

 

(h)           The term “Company” shall mean
the person named as the “Company” in the first paragraph of this Agreement, and
any successor or assign thereof.

 

(i)            The term “Company Stock”
shall mean the capital stock of any class or series of the Company, and any
securities of the Company convertible into, or exercisable or exchangeable for,
any such capital stock of the Company (including, without limitation, (i)
shares of Common Stock issued or issuable under outstanding options pursuant to
the Company Stock Option Plan or any other stock option plan or employee
benefit or other incentive plan which may be adopted by the Company on or after
the date hereof, (ii) shares of Common Stock issued (or issuable) upon exercise
of any warrants or upon exercise of preemptive rights granted by the Company,
(iii) any warrants or options to purchase Common Stock, and (iv) shares of
Common Stock issued and outstanding prior to the date hereof. The term “Company
Stock” shall also include, except as otherwise provided herein, any and all
shares of capital stock or other securities of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets or
otherwise), which may be issued in respect of, in exchange for, or in
substitution for any  shares of
Company Stock, by reason of any stock dividend, split, reverse split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise.

 

(j)            The term “Company Stock Option
Plan” shall mean that certain plan or plans or arrangements, adopted by the
Board of the Company for the benefit of directors, officers and/or other
employees of the Company and its subsidiaries, providing

 

3

 

for the grant of stock options and/or restricted stock in accordance
with the terms and conditions therein stated or stated in any accompanying
agreements; provided, that such plans in the aggregate shall relate to
the issuance or potential issuance of not more than 15% of the shares of
Capital Stock of the Company on a Fully-Diluted Basis.

 

(k)           The term “control”, when used
with respect to any person, shall mean the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

 

(1)           The term “Credit Agreement”
shall mean that certain Amended and Restated Credit Agreement, dated as of
January 13, 1998, as amended and restated as of March 24, 1998, and as further
amended and restated as of September 28, 2001, by and among the Company, Cellu
Tissue Holdings, Inc. and certain of its subsidiaries named therein as
borrowers, the lending institutions named therein, Bankers Trust Company as
administrative agent and Deutsche Bank AG, Canada Branch, as Canadian Agent, as
the same may be amended and restated from time to time.

 

(m)          The term “Duly Endorsed” shall
mean (i) duly endorsed in blank by the person or persons in whose name a stock
certificate or certificate representing a debt security is registered or (ii)
accompanied by a duly executed stock or security assignment separate from the
certificate, in each case with the signature(s) thereon guaranteed by a
commercial bank or trust company or a member of a national securities exchange
or of the National Association of Securities Dealers, Inc.

 

(n)           The term “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

(o)           The term “Fair Market Value”,
used in connection with the value of (x) a share of Company Stock, shall mean
the fair market value as determined by the Board and (y) a share of Company
Stock subject to an option, shall mean the positive difference between Fair
Market Value as calculated pursuant to clause (x) of this definition and the
applicable exercise price per share of Company Stock of such option.

 

(p)           The term “Fully-Diluted Basis”
shall mean, with respect to any calculation of the outstanding number of shares
of Company Stock or the outstanding amount of common equity of the Company (as
the case may be), an amount equal to the total outstanding number of shares of
Company Stock, calculated without duplication and assuming the conversion of
all outstanding shares of convertible capital stock and securities of the
Company and the exercise of all warrants, options and other rights (including,
without limitation, employee stock options pursuant to the Company Stock Option
Plan (except that, with respect to such options and warrants, if any such
options are

 

4

 

finally determined to be less than 100% vested or if any such warrants
are finally determined to be less than 100% exercisable, only those shares of
Company Stock which may be exercised following such final determination shall
be included in such calculation) to purchase shares of Company Stock.

 

(q)           The term “GAAP” shall mean
U.S. generally accepted accounting principles, as in effect on the date any
calculation thereunder is made, applied on a basis consistent with prior
periods.

 

(r)            The term “Good Reason” shall
mean the Board’s objection to a proposed transferee because of (i) potential
interference with the Company’s strategy and (ii) any reasonably foreseeable
potential adverse effects on the Company or any of its stockholders.

 

(s)           The term “IPO Event” shall
mean an initial public offering of capital stock by the Company involving the
Registration and sale of an aggregate of $35 million or more of common equity
of the Company, whether involving a primary offering or a combined primary and
secondary offering, and pursuant to which the Company becomes listed on a
national securities exchange or on the Nasdaq Stock Market or Nasdaq National
Market; provided that in the event that CEP consents to an initial
public offering that involves the Registration and sale of less than $35
million of common equity of the Company, then an IPO Event shall be deemed, for
purposes of this Agreement, to mean a Registration which, when taken together
with all other Registrations, constitutes a sale by the Company, its
stockholders or any combination thereof, of $35 million or more of common
equity of the Company (as calculated in the manner set forth above).

 

(t)                                    The term “Permitted Transferee” of a
Stockholder shall mean the Company and:

 

(i)   in the case of
Charterhouse or Chef, (A) any limited partner or general partner of
Charterhouse or Chef, as the case may be, and in respect of any distribution to
its equity holders, any entity which is a general partner, limited partner or
equity holder of any general partner or limited partner of Charterhouse or
Chef, as the case may be, and any further distribution by any such general
partner, limited partner or equity holder to its general or limited partners or
equity holders (B) any director, officer, managing director or other employee
of Charterhouse or Chef, as the case maybe, or any affiliate of Charterhouse or
Chef, as the case may be (collectively, the “CEP  Associates”), (C) the lineal descendants, heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any CEP
Associate and (D) any trust, the beneficiaries of which, or corporation or
partnership, the stockholders or general or limited partners

 

5

 

of
which, include only a CEP Associate, his or her spouse, members of his or her
immediate family and his or her lineal descendants, to which any general
partner or limited partner of Charterhouse or Chef, any affiliate of
Charterhouse or Chef or any CEP Associate has transferred shares of Company
Stock;

 

(ii)   in the case of any
Management Stockholders (A) the lineal descendants, heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any such
Management Stockholder and (B) any trust, the beneficiaries of which, or a
corporation or partnership, the stockholders or general or limited partners of
which, include only any such Management Stockholder, his or her spouse,
parents, siblings, children (including adopted children), grandchildren
(including adopted grandchildren) or direct lineal descendants of grandchildren
of any such Management Stockholder which any such Management Stockholder has
transferred shares of Company Stock; and

 

(iii)   in the case of a
Management Stockholder (excluding the CEO as a transferor), any other
Management Stockholder;

 

provided that
in each case (1) each such transferor has obtained the prior written consent of
the Company (which consent shall not be withheld unless, in the opinion of the
Company, such transfer together with all other transfers of Company Stock made
after the date hereof could result in or create a significant risk (as defined
below) that the Company may become subject to, or after any Registration will
continue to be subject to, the informational requirements of the Exchange Act),
(2) each such transferee (other than the Company) has agreed in writing, in
accordance with Article VIII hereof, to be bound by the terms and conditions of
this Agreement to the same extent and in the same manner as the Stockholder
transferring such shares of Company Stock, (3) each such transferee of
Charterhouse (other than the Company) has agreed in writing to be bound by the
terms and conditions of the CEP Limited Partnership agreement and each such
transferee of Chef (other than the Company) has agreed in writing to be bound
by the terms of the Chef limited partnership agreement, as the case may be; provided
further, that the transfer to any such person is in compliance with all
applicable federal, state and foreign securities laws.

 

(u)           The term “person” shall mean
an individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, or other entity of whatever
nature.

 

(v)           The term “Piggyback Securities”
shall mean those Registrable Securities which are requested to be sold by any
Stockholder pursuant to Section 7.2 hereof.

 

6

 

(w)          The term “Registrable Securities”
shall mean shares of Common Stock (including, without limitation, shares of
Common Stock issued pursuant to the Company Stock Option Plan or any other
stock option plan or employee benefit or other incentive plan which may be
adopted by the Company after the date hereof, shares of Common Stock issued
upon exercise of any Warrants or options or upon exercise of preemptive rights
granted by the Company and any other equity securities of the Company or any
successor corporation issued in exchange for or in respect of such shares of
Common Stock. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities when (i) such securities shall have
been registered under the Securities Act, the registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of pursuant to such
effective registration statement, (ii) such securities shall have been
distributed pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act, (iii) such securities shall have been otherwise
transferred, if new certificates or other evidences of ownership for them not
bearing a legend restricting further transfer and not subject to any stop
transfer order or other restrictions on transfer shall have been delivered by
the Company and subsequent disposition of such securities shall not require
registration or qualification of such securities under the Securities Act or
any state securities laws then in force or (iv) such securities shall cease to
be outstanding.

 

(x)            The term “Registration” shall
mean a bona  fide public offering of the Company’s securities
pursuant to an effective registration statement under the Securities Act and in
compliance with all applicable state securities laws.

 

(y)           The term “Registration Expenses”
shall mean all expenses of the Company incident to the Company’s performance of
or compliance with Article VII hereof, including, without limitation, all SEC
and stock exchange or National Association of Securities Dealers, Inc. (“NASD”)
registration, filing and listing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), rating agency
fees, all fees and expenses of the transfer agent and registrar for the Company
Stock, printing expenses, messenger and delivery expenses, the reasonable fees
and expenses incurred in connection with the listing of the securities to be
registered on each securities exchange or national market system on which
Registrable Securities are to be listed or on which similar securities issued
by the Company are to be listed in connection with such transaction, reasonable
fees and disbursements of counsel for the Company and all independent certified
public accountants for the Company (including the expenses of any annual audit,
special audit and reasonable and customary “cold comfort” letters required in
connection therewith or incident thereto), securities laws liability insurance
(if the Company so desires or if the underwriters so desire), the reasonable
fees and disbursements of underwriters customarily paid by issuers or sellers
of securities, all fees and expenses of any qualified independent underwriter
or

 

7

 

any person acting in a similar capacity under the rules of the NASD,
all fees and expenses associated with “road shows” for marketing purposes, the
reasonable fees and disbursements of one counsel retained in connection with
each such registration by the Stockholders who hold a majority of the
Registrable Securities being registered, the reasonable fees and expenses of
any special experts retained by the Company in connection with such
registration, and fees and expenses of other persons retained by the Company
(but not including any underwriting discounts or commissions or transfer taxes,
if any, attributable to the sale of Registrable Securities by the holders of
such Registrable Securities).

 

(z)           The term “Representative”
shall mean, with respect to a particular person, any director, officer, general
partner, limited partner, co-owner, member, nominee, managing director or
controlling person of such person.

 

(aa)         The term “Securities
Act” shall mean the Securities Act of 1933, as amended from time to time,
and the rules and regulations promulgated thereunder.

 

(bb)        The term “SEC”
shall mean the United States Securities and Exchange Commission.

 

(cc)         The term “Stockholders”
shall mean each of (i) Charterhouse, (ii) Chef, (iii) Wahyam, (iv) the
Management Stockholders, (v) persons who or which have acquired shares of the
Company’s capital stock from, and are Permitted Transferees of, any of them,
and any combination of them, and (vi) such other persons who or which become
parties to this Agreement pursuant to the terms and conditions of this
Agreement.

 

(dd)        The term “subsidiary”
of a person means any corporation, limited liability company or other entity of
which capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors, the manager or other persons
performing similar functions are at the time directly or indirectly owned by
the person. Unless the context otherwise requires, references to one or more
subsidiaries are references to subsidiaries of the Company.

 

(ee)         The term “Third
Party” shall mean, with respect to any Stockholder, any person other than
(i) such Stockholder’s Permitted Transferees or Affiliates and (ii) the
Company.

 

(ff)          The term “Transfer”
shall mean any direct or indirect sale, assignment, mortgage, transfer, pledge,
gift, hypothecation or other disposition of or transfer of Company Stock (other
than any bona  fide pledge or hypothecation of Company Stock to a
financial institution(s) in connection with any loan from such financial
institution(s)).

 

8

 

(gg)        The term “Violation”
shall mean, with respect to any purchase of shares of Company Stock, any event
or circumstance pursuant to which the purchase of such shares (together with
any other purchases of Company Stock pursuant to this Agreement of which the
Company has at such time been given or has given notice) would (i) conflict
with or result in a violation of or breach (or any event which with lapse of
time or the occurrence of any act or event or otherwise would constitute or
result in any of the foregoing) any law, statute, rule, regulation, order,
writ, injunction, decree or judgment promulgated or entered by any federal,
state, local or foreign court or governmental authority applicable to the
Company or its subsidiaries or any of their properties or assets or (ii)
violate or conflict with or constitute a breach or default, or an event
creating rights of acceleration or termination (in each case, whether upon
lapse of time or the occurrence of any act or event or otherwise), under any
agreement to which the Company or any of its subsidiaries is a party or by
which any of their properties or assets may be bound.

 

ARTICLE II

 

RESTRICTIONS ON TRANSFER;

RIGHTS OF FIRST REFUSAL

 

2.1  Restrictions
on Transfer.

 

(a)           Prior to the occurrence of an IPO
Event, no Company Stock now or hereafter owned by any Stockholder or any
interest therein may be Transferred without the prior written approval of the
Board, which may be withheld only for Good Reason, except (i) for the sale by
CEP to a Third Party of any or all (subject to any percentage reduction arising
as a result of the exercise of any “tag-along” rights pursuant to Article III
hereof) of its equity interests in the Company, (ii) for any sale of shares in
connection with the exercise by CEP of its rights under Sections 4.1 through
4.6 hereof, or (iii) upon the exercise by the Company (or its designee) or any
Stockholder of any call rights pursuant to Article VI hereof.

 

(b)           Any Transfer of Company Stock made
pursuant to this Section 2.1 to a Permitted Transferee shall be effective only
if such Permitted Transferee shall agree in writing to be bound by the terms
and conditions of this Agreement pursuant to the provisions of Article VIII
hereof. No Transfer of Company Stock in violation of this Agreement shall be
made or recorded on the books of the Company and any such Transfer shall be
void and of no effect.

 

9

 

2.2  Rights of First Refusal Generally.

 

(a)           Subject to the restrictions
of Section 2.1 hereof and the limitations of Section 2.7 hereof, if, at any
time during the term of this Agreement, any Stockholder (the “Offering
Stockholder”) receives a Bona  Fide Offer which such Offering
Stockholder wishes to accept (a “Transfer Offer”) from any Third Party (the
“Offerer”) to purchase Company Stock then owned by the Offering Stockholder
(together with any Tag-Along Stock (as defined herein) in substitution for an
equal portion of such Company Stock after the exercise of tag-along rights
pursuant to Article IV, the “Transfer Stock”), the Offering Stockholder shall
provide a written notice (the “Right of First Refusal Notice”) of such Transfer
Offer to the Company (which shall contain a copy of the Bona Fide Offer), and
the Company shall provide written notice of such Transfer Offer to each of the
other Stockholders (the “Stockholder Offerees” and, together with the Company,
the “Transfer Offerees”) in the manner set forth in Section 11.9 hereof. The
Right of First Refusal Notice shall also contain an irrevocable offer to sell
the Transfer Stock to the Transfer Offerees (in the manner set forth below) at
the same price and upon substantially the same terms and conditions as the
terms and conditions contained in the Transfer Offer and shall be accompanied
by a true and correct copy of the Transfer Offer (which shall identify the
Offerer, the Transfer Stock, the price contained in the Transfer Offer and all
the other terms and conditions of the Transfer Offer); provided that (x)
the Right of First Refusal Notice may be combined with a Tag-Along Notice and
(y) references herein to a Right of First Refusal Notice shall be deemed to
include any such combined Tag-Along Notice/Right of First Refusal Notice.

 

(b)          The Transfer Offerees
shall have the right and option, within 30 days after the date the Right of
First Refusal Notice is received by such Transfer Offerees, to accept
irrevocably such offer (subject to the priorities and pro  rata
adjustments set forth in Sections 2.3 and 2.4), in the aggregate, as to all,
but not less than all (unless otherwise consented to by the relevant Offering
Stockholders), shares of Transfer Stock. Each Transfer Offeree which desires to
exercise such option shall provide the Offering Stockholder with written notice
(specifying the number of shares of the Transfer Stock as to which each
Transfer Offeree is accepting the offer) within such 30 day period. Unless the
relevant Offering Stockholders shall have otherwise consented to the purchase
of less than all of the shares of Transfer Stock, no Transfer Offeree shall
have the right to acquire such shares of Transfer Stock unless all such shares
are being acquired by Transfer Offerees pursuant to the provisions of this
Article II.

 

(c)           Notwithstanding
anything to the contrary contained in this Article II, there shall be no
liability on the part of the Offering Stockholder to any Stockholder in the
event that the sale of Transfer Stock contemplated pursuant to this Article II
is not consummated for any reason whatsoever. Whether a sale of Transfer Stock

 

10

 

contemplated pursuant to this Article II is effected by the Offering
Stockholder is in the sole and absolute discretion of the Offering Stockholder.

 

2.3  Apportionment of Shares Among
Stockholders in the Event of Over-Subscription.

 

(a)           If
the aggregate number of shares of Transfer Stock as to which notices of
acceptance are provided by all Transfer Offerees exceeds the number of shares
of Transfer Stock, the right to purchase the Transfer Stock shall be allocated
(i) first, to the Company and (ii) second, to the Stockholder Offerees with
respect to any shares of Transfer Stock as to which a notice of acceptance have
not been provided by the Company (the “Excess Transfer Stock”).  Each Stockholder Offeree which provided a
notice of acceptance shall be allocated the lesser of (A) the number of shares
of Transfer Stock which such Stockholder Offeree agreed to purchase and (B) the
number of shares of Transfer Stock equal to the full number of shares of Excess
Transfer Stock multiplied by a fraction, (i) the numerator of which shall be
the number of shares of Common Stock held or deemed to be held by such
Stockholder Offeree as of the date of the Right of First Refusal Notice (for
the purpose of such calculation, a Stockholder Offeree shall be deemed to hold
the number of shares of Common Stock which would be issuable, as of the date of
the Right of First Refusal Notice, to such Stockholder Offeree upon conversion,
exercise or exchange of all securities then held by such Stockholder Offeree
that are then convertible, exercisable or exchangeable (but excluding any
unvested options) into or for (whether directly or indirectly) shares of Common
Stock) and (ii) the denominator of which shall be the aggregate number of
shares of Common Stock (calculated as aforesaid) held or deemed to be held on
such date by all Stockholder Offerees who accepted the offer contained in the
Right of First Refusal Notice. After giving effect to the initial allocation of
Excess Transfer Stock to Stockholder Offerees pursuant to the preceding
sentence, the balance of the shares of Excess Transfer Stock (if any) offered
shall be reallocated among the Stockholder Offerees accepting the offer
contained in the Right of First Refusal Notice in the same proportion as set
forth in the preceding clause (i)(B) (provided that no Stockholder Offeree
shall be obligated to purchase more than the number of shares of Transfer Stock
which such Stockholder Offeree initially agreed to purchase) in continuous
reallocations until all such remaining shares have been reallocated fully among
such Stockholder Offerees; provided that all allocations referred to herein
shall be determined in good faith by the Company in accordance with the
provisions of this Section 2.3 and any share amounts so determined shall be
rounded to avoid fractional shares.

 

2.4  Apportionment
of Shares Among Stockholders in the Event of Failure to Purchase. If any shares of Transfer Stock are not purchased by a Stockholder
Offeree who or which previously delivered a written notice of acceptance
relating thereto and was allocated Transfer Stock in accordance with Section
2.3 (collectively, the “Transfer Default Stock”), such shares of Transfer
Default Stock may be purchased (i) first, by the Company

 

11

 

at its option and (ii) if
the Company declines to purchase such shares, by the other Stockholder Offerees
purchasing Transfer Stock (the “Default Offerees”) allocated among such Default
Offerees in proportion to the number of shares of Transfer Stock otherwise
being purchased by those of such Default Offerees who agree to purchase
Transfer Default Stock; provided  further, that the provisions of
this Section 2.4 shall not excuse the failure by any such Stockholder Offeree
to purchase the shares of Transfer Default Stock with respect to which it
previously delivered a written notice of acceptance relating thereto and was
allocated stock in accordance with Section 2.3; provided  further,
that, all allocations referred to herein shall be determined in good faith by
the Company in accordance with the provisions of this Section 2.4 and any share
amounts so determined shall be rounded to avoid fractional shares. The provisions
of the last sentence of Section 2.2(b) shall apply if the Default Offerees and
the Company do not in the aggregate purchase all of the Transfer Default Stock.

 

2.5  Transfer
Mechanics. The closing of the purchase of the Transfer Stock by the
Transfer Offerees who have exercised the option pursuant to Section 2.2 hereof
shall take place at the principal executive offices of the Company on the tenth
Business Day after the expiration of the 30-day period after the giving of the
Right of First Refusal Notice (or such other date as may be mutually agreed to
by the parties to such transaction). At such closing, each Transfer Offeree
shall deliver to the Offering Stockholder (and to any holder of Tag-Along Stock
that is selling together with the Offering Stockholder) the appropriate per
share cash consideration pursuant to a bank, cashier’s or certified check or by
wire transfer of immediately available funds (unless otherwise specified in the
Right of First Refusal Notice provided to the Transfer Offerees), against
delivery of certificates representing the Transfer Stock so purchased Duly
Endorsed. Any transfer (other than to a Third Party) pursuant to this Article
II shall be made without any representations, warranties, covenants or
indemnities; except, that, each transferor shall be deemed to have represented
that (i) the transfer has been duly authorized by it, (ii) that it has the
capacity, power and authority to transfer such shares and (iii) that the
acquirer shall obtain good title to such shares, free and clear of any defects,
encumbrances and adverse interests (other than as provided for in this
Agreement).

 

2.6  Transfers
to Third Parties after the Company and Stockholders Decline Rights
of First Refusal. Subject to the restrictions of Section 2.1, if at the end
of the 30-day period following the giving of the Right of First Refusal Notice,
the Transfer Offerees (including, without limitation, the Company) shall not
have collectively accepted the offer contained in such notice as to all shares
of Transfer Stock covered thereby (unless otherwise consented to by the
relevant Offering Stockholders), the Offering Stockholder shall have 60 days in
which to sell the Transfer Stock to the Offeror, at a price not less than that
contained in the Right of First Refusal Notice and on terms and conditions not
more favorable to the Offeror than were contained in the Right of First Refusal
Notice. No sale may be made to any Offeror unless such Offeror agrees in
writing to be bound by the terms

 

12

 

and conditions of this Agreement pursuant to the provisions of Article
VIII hereof. Promptly after any sale pursuant to this Section 2.6, the Offering
Stockholder shall notify the Company of the consummation thereof and shall
furnish such evidence of the completion (including time of completion) of such
sale and of the terms and conditions thereof as the Company may reasonably
request. If, at the end of such 60 day period, the Offering Stockholder has not
completed the sale of the Transfer Stock, such Stockholder shall no longer be
permitted to sell such shares pursuant to this Section 2.6 without again fully
complying with the provisions of this Article II and all the restrictions on
Transfer contained in this Agreement shall again be in effect with respect to
all such person’s shares of Company Stock, including the Transfer Stock.

 

2.7 Exceptions to
Rights of First Refusal. The provisions of Sections 2.2 through
2.6 shall not be applicable to any Transfer of Company Stock (a) from any
Stockholder to any Permitted Transferee, or from any Permitted Transferee of
such Stockholder to such Stockholder, provided that in any Transfer to a
Permitted Transferee such Permitted Transferee must agree in writing to be
bound by the terms and conditions of this Agreement pursuant to the provisions
of Article VIII hereof, (b) made pursuant to a public offering of Company Stock
in connection with the exercise by any Stockholder of its rights pursuant to
Article VII hereof or in connection with the exercise by CEP of its rights
pursuant to Section 4.6 hereof, or (c) by CEP.

 

ARTICLE
III

 

TAG-ALONG RIGHTS

 

3.1  Tag-Along Rights Generally.

 

(a)           Subject to the restrictions of
Section 2.1 hereof and the limitations of Section 3.5 hereof, any Stockholder
or Stockholders may, individually or collectively, in any one transaction or
any series of similar transactions, Transfer any shares of Company Stock to any
Third Party (the “Buyer”), but only if the Stockholder or Stockholders desiring
to so transfer their Company Stock (collectively, the “Transferor”), first
offer to each of the other Stockholders (the “Tag-Along Offerees”) to include,
at the option of each Tag-Along Offeree, in the sale or other disposition to
the Buyer, such number of shares of Company Stock (collectively, the “Tag-Along
Stock”) as shall be determined in accordance with this Article III.  Additionally, proposed Transfers of Company
Stock by CEP must comply with the tag-along rights provisions set forth in
Article IX of that certain Warrant Agreement, dated as of September 28, 2001
(the “Warrant Agreement”), by and among the Company and the Warrantholders
named therein.

 

13

 

(b)           Upon the receipt by any Transferor or
Transferors of a Bona Fide Offer to purchase or otherwise acquire shares
of its or their Company Stock from a Buyer (other than a Transfer which
pursuant to Section 3.5 hereof would not be subject to the provisions of
Sections 3.1 through 3.4 hereof) which such Transferor or Transferors desire to
accept, such Transferors shall provide a copy of such written notice of such
Buyer’s offer (the “Tag-Along Notice”) to the Company (which shall contain a
copy of the Bona Fide Offer), and the Company shall provide a copy of the
Tag-Along Notice to each of the Tag-Along Offerees in the manner set forth in
Section 11.9 hereof. The Tag-Along Notice must contain an offer to purchase or
otherwise acquire shares of Tag-Along Stock from the Tag-Along Offerees
according to the terms and conditions of this Article III and upon
substantially the same terms and conditions as the terms and conditions
contained in the Buyer’s offer and shall be accompanied by a true and correct
copy of the Buyer’s offer; provided that (x) the Tag-Along Notice may be
combined with a Right of First Refusal Notice and (y) references herein to a
Tag-Along Notice shall be deemed to include any such combined Tag-Along
Notice/Right of First Refusal Notice.

 

(c)           At any time within 30 days after its
receipt of the Tag-Along Notice, each of the Tag-Along Offerees may irrevocably
accept the Buyer’s offer included in the Tag-Along Notice for up to such number
of shares of Tag-Along Stock as is determined in accordance with the provisions
of this Article III by furnishing written notice of such acceptance to the
Transferor and the Buyer; such written notice of acceptance must be accompanied
by the certificate or certificates representing the shares of Tag-Along Stock
(which shall be free and clear of liens), Duly Endorsed, to be sold or
otherwise disposed of pursuant to such offer by such Tag-Along Offeree,
together with a limited power-of-attorney authorizing the Transferor to sell or
otherwise dispose of such shares of stock pursuant to the terms and conditions
set forth in the Tag-Along Notice and the terms and conditions of this Article
III.

 

(d)           Notwithstanding anything to the
contrary contained in this Article III, there shall be no liability on the part
of the Transferor to any Stockholder in the event that the sale of Company Stock
to the Buyer contemplated pursuant to this Article III is not consummated for
any reason whatsoever. Whether a sale of Company Stock to the Buyer
contemplated pursuant to this Article III is effected is in the sole and
absolute discretion of the Transferor.

 

3.2  Allocation
of Shares of Tag-Along Stock. Each Tag-Along Offeree shall have
the right to sell pursuant to the Buyer’s offer a number of shares of Tag-Along
Stock up to the product of (x) the total number of shares of Company Stock to
be acquired by the Buyer as set forth in the Tag-Along Notice (or such higher
number of shares as such Buyer may agree to), and (y) a fraction, the numerator
of which shall be the number of shares of Common Stock held or deemed to be
held by such Tag-Along Offeree as of the date of the Tag-Along Notice (for the
purpose of such calculation, a Tag-Along Offeree

 

14

 

shall be deemed to hold the number of shares of Common Stock which
would be issuable, as of the date of the Tag-Along Notice, to such Tag-Along
Offeree upon conversion, exercise or exchange of all securities then held by
such Tag-Along Offeree that are then convertible, exercisable or exchangeable
(but excluding any unvested options) into or for (whether directly or
indirectly) shares of Common Stock) and (2) the denominator of which shall be
the aggregate number of shares of Common Stock (calculated as aforesaid) held
or deemed to be held on such date by all Stockholders; provided that all
allocations referred to herein shall be determined in good faith by the Company
in accordance with the provisions of this Section 3.2 and any share amounts so
determined shall be rounded to avoid fractional shares.

 

3.3  Transfer
Mechanics.  The purchase from
the Tag-Along Offerees pursuant to this Article III shall be on the same terms
and conditions, including any representations, warranties, covenants and
indemnities, the per share price (which shall be paid by bank, cashier’s or
certified check or by wire transfer of immediately available funds, unless
otherwise specified in the Tag-Along Notice provided to the Tag-Along Offerees
by the Company) and the date of sale or other disposition (provided that if a
right of first refusal has been exercised such date shall be determined by
Section 2.5), as are received by the Transferor and stated in the Tag-Along
Notice provided to the Tag-Along Offerees by the Company. As promptly as
practicable (but in no event later than five Business Days) after the
consummation of the sale or other disposition of Company Stock of the
Transferor and Tag-Along Stock of the Tag-Along Offerees to the Buyer
(including a sale to a Transfer Offeree or Transfer Offerees pursuant to
Article II), the Transferor shall notify the Tag-Along Offerees thereof, shall
remit to each Tag-Along Offeree who accepted the Buyer’s offer in accordance
with the provisions of this Article III the total sales price of the shares of
Tag-Along Stock of such Tag-Along Offeree sold or otherwise disposed of
pursuant thereto (together with any excess shares of Tag-Along Stock of such
Tag- Along Offeree which are not sold or otherwise disposed of pursuant
thereto), and shall furnish such other evidence of the completion and time of
completion of such sale or other disposition and the terms and conditions
thereof as may be reasonably requested by the Tag-Along Offerees.

 

3.4  Transfers
after Stockholders Decline Tag-Alone Rights. Subject to the
restrictions of Section 2.1, if within 30 days after the receipt of the
Tag-Along Notice, any Tag-Along Offeree has not accepted the offer contained in
the Tag-Along Notice, such Tag-Along Offeree will be deemed to have waived any
and all rights with respect to the sale or other disposition of Tag-Along Stock
described in the Tag-Along Notice and the Transferor shall have 60 days in
which to sell or otherwise dispose of the shares of Company Stock described in
the Buyer’s offer, on terms and conditions not more favorable to the Transferor
than were set forth in the Tag-Along Notice. If, at the end of such 60-day
period, the Transferor has not completed the sale or other disposition of
Company Stock of the Transferor and Tag-Along Stock of any Tag-Along Offeree in
accordance with the

 

15

 

terms and conditions of the Buyer’s offer, the Transferor shall return
to such Tag-Along Offeree all certificates representing shares of Tag-Along
Stock which such Tag-Along Offeree delivered for sale or other disposition
pursuant to this Article III, and all the restrictions on Transfer contained in
this Agreement with respect to Company Stock owned by the Transferor shall
again be in effect.

 

3.5  Exceptions
to Tag-Along Rights. The provisions of this Article III shall
not be applicable to any Transfer of Company Stock (a) from any Stockholder to
any Permitted Transferee, or from any Permitted Transferee of such Stockholder
to such Stockholder, provided that in any Transfer to a Permitted Transferee
such Permitted Transferee must agree in writing to be bound by the terms and
conditions of this Agreement pursuant to the provisions of Article VIII hereof,
(b) made pursuant to a public offering of Company Stock in connection with the
exercise by any Stockholder of its rights pursuant to Article VIII hereof or in
connection with the exercise by CEP of its rights pursuant to Section 4.6
hereof, (c) made in connection with the exercise by CEP of a Compelled Sale
Right or (d) where the aggregate value of the Company Stock owned by the
Transferor is less than $100,000.

 

ARTICLE IV

 

RIGHTS TO COMPEL SALE OR IPO EVENT

 

4.1  Rights to Compel Sale Generally.  CEP shall have the right (the “Compelled
Sale Right”) to cause the sale of all or substantially all of the Company to a
Third Party (the “Third Party Purchaser”), whether pursuant to a sale of
Company Stock, merger, consolidation, stock swap, business combination, sale of
assets or similar transaction (any such sale, the “Compelled Sale”). If CEP
proposes to exercise its Compelled Sale Right, CEP shall send written notice of
the exercise of its Compelled Sale Right to each of the remaining Stockholders,
setting forth the consideration to be paid by the Third Party Purchaser and the
other terms and conditions of such transaction (such notice, the “Compelled
Sale Notice”).

 

4.2  Compelled Sale Pursuant to a Sale of
Company Stock.

 

(a)           In the event that CEP determines to
exercise its Compelled Sale Right pursuant to a sale of Company Stock to the
Third Party Purchaser, then CEP may, at its option, require the remaining
Stockholders and their respective Permitted Transferees to sell Company Stock
held by them to the Third Party Purchaser for the same consideration per share
(appropriately adjusted in the case of securities such as options and warrants)
and otherwise on the same terms and conditions upon which CEP sells its Company
Stock. The amount of Company Stock that CEP may require each remaining

 

16

 

Stockholder or his or her respective Permitted Transferees to sell
pursuant to the preceding sentence shall be equal to the product of (x) the
number of shares of Common Stock held or deemed to be held by each such
Stockholder or Permitted Transferee as of the date of the Compelled Sale Notice
(for purpose of such calculation, a Stockholder or Permitted Transferee is
deemed to hold the number of shares of Common Stock which would be issuable, as
of the date of the Compelled Sale Notice, to such Stockholder or Permitted
Transferee upon the conversion, exercise or exchange of all securities then
held by such Stockholder or Permitted Transferee that are then convertible,
exercisable or exchangeable into shares of Common Stock) and (y) a fraction the
numerator of which is the number of shares of Common Stock being sold by CEP
(and its Permitted Transferees) and the denominator of which is the total
number of shares of Common Stock held by CEP and its Permitted Transferees on
the date of the Compelled Sale Notice. Within 10 days following the date on
which CEP delivers the Compelled Sale Notice, each of the remaining
Stockholders shall deliver to a representative of CEP designated in the
Compelled Sale Notice, certificates representing shares of Company Stock
required to be sold under this Section 4.2(a) (along with all rights to acquire
Company Stock and similar interests) held by such Stockholder, Duly Endorsed,
together with all other documents required to be executed in connection with
such transaction.

 

(b)           In the event that a remaining
Stockholder and its Permitted Transferees should fail to deliver such
certificates and documents to CEP, then (i) the Company shall cause the books
and records of the Company to show that such shares are bound by the provisions
of this Article IV and that such shares may be transferred only to the Third
Party Purchaser and (ii) such remaining Stockholder and each of its Permitted
Transferees shall not be entitled to the consideration it is to receive under
this Section 4.2 until it cures such failure either by delivery of the share
certificates or a lost stock affidavit (provided that after curing such failure
it shall be so entitled to such consideration without interest).

 

(c)           If, within nine months after CEP
gives such notice, CEP has not completed the sale of all the shares of Company
Stock (along with all rights to acquire Company Stock and similar interests) of
the Stockholders in accordance herewith, CEP shall return to each of the
remaining Stockholders all certificates representing shares of Company Stock
that such Stockholder delivered for sale pursuant hereto and that were not
purchased pursuant to this Article IV.

 

(d)           Stockholders who deliver to CEP
certificates representing shares of Company Stock in accordance with this
Section 4.2 or otherwise pursuant to a Compelled Sale shall retain full voting
control (to the extent such shares are entitled to vote) and any other rights
and incidents of ownership associated with such Stockholder’s ownership of such
shares until the applicable Compelled Sale has been completed or such

 

17

 

shares have been returned in accordance with the provisions of this
Article IV and such shares will be held by CEP as agent for the benefit of such
Stockholder until such time.

 

4.3  Compelled Sale Other Than Pursuant to a
Sale of Company Stock. In the event that CEP determines to exercise its
Compelled Sale Right pursuant to a merger, consolidation, stock swap, business
combination, sale of assets or similar transaction, then CEP may, at its
option, require the remaining Stockholders and their respective Permitted
Transferees to vote in favor of such transaction. In particular, in the event
of any such proposed transaction, upon any request by CEP, each of the
Stockholders shall use its respective commercially reasonable best efforts (i)
to call, or cause the appropriate officers and directors of the Company to
call, a special meeting of stockholders of the Company to consider approval of
such proposed transaction, and (ii) vote in favor of such proposed transaction
all of the shares of Company Stock owned or held of record by such Stockholder
(to the extent entitled to vote), at each regular or special meeting of the
stockholders of the Company called for the purpose of voting on such matter, or
in any written consent executed in lieu of such a meeting of stockholders, and
shall take all actions reasonably necessary, to ensure that all necessary
stockholder approvals for such transaction are obtained.

 

4.4  Cooperation in Connection with
Compelled Sale. Each Stockholder shall reasonably cooperate with CEP in
the event that CEP determines to exercise its Compelled Sale Right pursuant to
this Article IV and shall take all reasonably necessary and appropriate actions
in connection with any such Compelled Sale as may be reasonably requested by
CEP (including, without limitation, entering into such agreements and
instruments in connection with any such Compelled Sale as may be requested by
CEP).

 

4.5  Notice
of Consummation of Sale. Promptly upon the consummation of any sale
transaction contemplated pursuant to Section 4.1 hereof, CEP shall remit to
each of the remaining Stockholders the total transaction proceeds to which such
Stockholders are entitled pursuant thereto (less any holdback amount or any
proceeds to be held in escrow pursuant to the terms of such sale transaction) ,
and shall furnish such other evidence of the completion and time of completion
of such sale or other disposition and the terms and conditions thereof as may
be reasonably requested by such Stockholders.

 

4.6  Rights
to Compel IPO Event.

 

(a)           CEP may, in its sole discretion,
cause the Company to effect an IPO Event (which may include, at the option of
CEP, the secondary sale of shares of Company Stock then held by CEP); provided
that CEP’s election to include any of its shares of Company Stock in such
public offering shall entitle the Non-CEP Stockholders to participate in such
offering; provided  further, that both CEP and the Non-CEP
Stockholders shall participate in the IPO Event in accordance with (and subject
to the

 

18

 

restrictions
applicable to) the “piggyback” registration rights provisions of Article VII
hereof.

 

(b)           In the event that CEP, elects to
exercise its rights pursuant to Section 4.6(a) above, the Board shall have the
right to designate all of the material terms of such IPO Event (e.g.,
the underwriters, if any, to be retained by the Company in connection
therewith, the securities exchanges or national market systems, if any, where
the Company’s equity would be listed for trading, the price, timing and other
terms of the proposed public offering, etc.). In addition, in the event that
CEP elects to exercise rights contemplated pursuant to Section 4.6(a) above,
then CEP may, at its option, require the remaining Stockholders and their
respective Permitted Transferees to vote in favor of any amendments to the
Certificate and By-Laws which are reasonably requested by any underwriter
retained in connection with such IPO Event. In particular, in the event of any
such proposed IPO Event, upon any request by CEP, each of the Stockholders
shall (i) use its respective commercially reasonable best efforts to call, or
cause the appropriate officers and directors of the Company to call, a special
meeting of stockholders of the Company to consider approval of such proposed
amendment(s), and (ii) vote in favor of such proposed amendments all of the
shares of Company Stock owned or held of record by such Stockholder (to the
extent entitled to vote), at each regular or special meeting of the
stockholders of the Company called for the purpose of voting on such matter, or
in any written consent executed in lieu of such a meeting of stockholders, and
shall take all additional actions reasonably necessary, to ensure that all
necessary stockholder approvals for such amendments and such IPO Event are
obtained.

 

ARTICLE
V

 

PREEMPTIVE RIGHTS

 

5.1  Preemptive Rights.

 

(a)           The Company hereby grants to each of
CEP, Wahyam and the Management Stockholders (and their respective Permitted
Transferees) (each, a “Preempting Stockholder”) a right of first refusal to
purchase with respect to the issuance by the Company of new or additional
equity securities for cash, that portion of such new or additional equity
securities as may be necessary in order to permit such Stockholder to maintain
his relative ownership of the aggregate amount of the Company’s total common
equity (calculated on a Fully-Diluted Basis). Such right of first refusal shall
be offered to each Preempting Stockholder (such offer, the “Preemptive Rights
Offer”) pursuant to a written notice from the Company offering each Preempting
Stockholder such securities on the same terms and conditions as offered to the
other Offeree(s) (such written notice, the “Preemptive Rights Notice”). Each Preempting
Stockholder would have 15 days from the

 

19

 

date of the Company’s delivery of the Preemptive Rights Notice to
notify the Company in writing of its binding acceptance of such Preemptive
Rights Offer with respect to all (but not less than all) equity securities
which are offered to such Preempting Stockholder pursuant to such Preemptive
Rights Offer.

 

(b)           If a Preempting Stockholder accepts
the Preemptive Rights Offer in accordance with the provisions of the preceding
sentence, the Company and any such accepting party shall have 30 days in which
to consummate such binding agreement. In the event that a Preempting
Stockholder does not accept the Preemptive Rights Offer within such 15-day
period in accordance with the provisions of the preceding sentence or fails to
consummate any such purchase within such 30-day period, the Company would have
the right, but not the obligation, to issue such securities on terms and
conditions in the aggregate no more favorable to the other offeree(s) than
those set forth in the Preemptive Rights Notice, pursuant to a definitive
agreement to be entered into no later than 120 days after such date.

 

(c)           Notwithstanding anything to the
contrary contained herein, no rights of first refusal pursuant to Section 5.1
(a) above would apply in the event of (i) any issuances or grants of equity
securities to the officers, directors or employees of the Company or any of its
subsidiaries, (ii) the exercise of any employee or director options or the
exercise or conversion of any options, warrants or convertible securities in
existence as of the date hereof or the issuance of any securities to the
employees or directors of the Company or its subsidiaries pursuant to any
restricted stock or other incentive plan of the Company or any of its
subsidiaries whether in existence now or hereafter created or the issuance upon
the conversion or exercise of convertible securities or warrants the issuance
of which was subject to this Article V, (iii) the issuance of equity
securities, either directly or indirectly, in connection with the acquisition,
strategic business combination or investment in the Company by any party which
is not prior to such transaction an Affiliate of either the Company or any of
the Stockholders (whether by merger, consolidation, stock swap, sale of assets
or securities, or otherwise, (iv) the issuance of securities (including any
convertible securities or options and the conversion or exercise thereof) to
any third party which is at such time a creditor of the Company, in connection
with the refinancing or restructuring of any indebtedness owed to such third
party, (v) an issuance of securities by the Company in connection with an IPO
Event or any other Registration, (vi) an issuance of securities by the Company
in connection with any Compelled Sale Right, (vii) the distribution by the
Company of its securities to all of its stockholders on a pro  rata basis
or (viii) the issuance by the Company of equity securities, up to a maximum
Fair Market Value of $l,000,000.

 

20

 

ARTICLE
VI

 

CALL RIGHTS ON MANAGEMENT STOCK

 

6.1  Call Rights.

 

(a)           Termination. If, prior to an
IPO Event, a Management Stockholder’s employment with the Company and its
subsidiaries is terminated in any manner (including, without limitation,
dismissal, resignation, retirement or disability), then the Company (or its
designee) shall have the right, for 90 days following the date of the
termination of such employment (the “Call Notice Period”), to purchase from
such Management Stockholder or the personal representatives of a Management
Stockholder who has died following a termination (together, the  “Terminated Management Stockholder”) and his
or her Permitted Transferees, and such Terminated Management Stockholder and
his or her Permitted Transferees shall be required to sell on one occasion to
the Company (or its designee), all Company Stock then held by such person(s) at
a price equal to the Fair Market Value or, if such Terminated Management
Stockholder elects, the Appraisal (as defined in Section 6. l(b)). If the
Company declines to exercise its call right pursuant to this Section 6.1(a) by
written notice to all Stockholders (a “Call Decline Notice”), the same call right
shall then be available to all of the Stockholders (excluding the Terminated
Management Stockholder), and each Stockholder shall be permitted to purchase,
at a price equal to Fair Market Value or, if such Terminated Management
Stockholder elects, the Appraisal, the lesser of (A) the number of shares of
Company Stock which such Stockholder agrees to purchase in such Stockholder’s
Exercise Notice (as defined below) and (B) the number of shares of Company
Stock equal to the number of shares of Company Stock held by the Terminated
Management Stockholder multiplied by a fraction, (i) the numerator of which
shall be the number of shares of Common Stock held or deemed to be held by such
Stockholder as of the date of the Call Decline Notice (for the purpose of such
calculation, a Stockholder shall be deemed to hold the number of shares of
Common Stock which would be issuable, as of the date of the Call Decline
Notice, to such Stockholder upon conversion, exercise or exchange of all
securities then held by such Stockholder that are then convertible, exercisable
or exchangeable (but excluding any unvested options) into or for (whether
directly or indirectly) shares of Common Stock) and (ii) the denominator of
which shall be the aggregate number of shares of Common Stock (calculated as
aforesaid) held or deemed to be held on such date by all Stockholders providing
Exercise Notices.

 

(b)           Appraisal.  In the event that a Terminated Management
Stockholder disagrees with the Board’s determination of Fair Market Value pursuant
to the exercise of call rights under Section 6.1 (a), then an independent
appraiser shall be retained and jointly selected by the Company and the
Terminated Management Stockholder to value the Company Stock held by such
Terminated Management Stockholder. If such

 

21

 

independent appraiser’s appraisal (the “Appraisal”) of such Terminated
Management Stockholder’s Company Stock exceeds the Fair Market Value (as
determined by the Board) of such Company Stock by more than 20%, then the
Company shall pay all reasonable costs and expenses incurred in connection with
the Appraisal. In the event that the Appraisal does not exceed Fair Market
Value by more than 20%, then such Terminated Management Stockholder and the
Company shall each pay one-half of such costs and expenses.

 

(c)           Notice of Exercise; Closing.  If the Company or any Stockholder pursuant
to Section 6.1 (a) (collectively, the “Purchaser”) desires to exercise its
option to purchase shares of Company Stock pursuant to its rights under this
Section 6.1, the Purchaser shall, not later than the expiration date of the
Call Notice Period, send written notice of its intention to purchase, (i) in
the case of the Company, all of the shares of Company Stock held by the
Terminated Management Stockholder and his or her Permitted Transferees or (ii)
in the case of any Stockholder exercising call rights, any number of the shares
of Company Stock held by the Terminated Management Stockholder and his or her
Permitted Transferees (an “Exercise Notice”). The closing of the purchase shall
take place at the principal office of the Company on (i) if the Company has
sent an Exercise Notice, the tenth day following the giving of the Company’s
Exercise Notice or as soon thereafter as practicable but in no event later than
twenty days after the giving of such Exercise Notice or (ii) if any Stockholder
has sent an Exercise Notice in accordance with his or her rights under Section
6.1(a), the tenth day following the expiration of the Call Notice Period. The
purchase price shall be paid in accordance with Section 6.3 hereof.

 

6.2           Obligation to Sell Several.  In the event that any Terminated Management
Stockholder has transferred any shares of Company Stock to any Permitted
Transferees, the failure of any one member of such group to perform its
obligations hereunder shall not excuse or affect the obligations of any other
member thereof, and the closing of the purchases from such other members by the
Company (or its designee) shall not excuse, or constitute a waiver of the
Company’s rights against, the defaulting member(s).

 

6.3           Payment for Stock.  The purchase price of shares of Company Stock to be purchased by
the Company pursuant to this Article VI will be paid by (a) at the Board’s option,
the cancellation of indebtedness owing from the Terminated Management
Stockholder to the Company or any of its subsidiaries, if any, and (b) then by
the Company’s delivery of, at the Board’s option (x) a bank cashier’s check or
certified check or (y) a promissory note of the Company with a five year term
yielding the then-current rate of five year (or such longer period as may be
required by any financing agreement to which the Company is a party) U.S.
Treasury Notes, prepayable by the Company without penalty and substantially in
the form attached hereto as Exhibit A (such promissory note, the

 

22

 

“Management Repurchase Note”), for the remainder of the purchase price,
if any, against delivery of the certificates or other instruments representing
the Company Stock so purchased, Duly Endorsed. The purchase price of shares of
Company Stock to be purchased by a Purchaser that is a Stockholder pursuant to
this Article VI will be paid by such Purchaser’s delivery of a bank cashier’s
check or a certified check for the entire purchase price against delivery of
the certificates or other instruments representing the Company Stock so
purchased, Duly Endorsed. The Company shall have the rights set forth in
subsection (a) and (b) of the first sentence of this Section 6.3 whether or not
any Permitted Transferee(s) of the Terminated Management Stockholder owing
amounts to the Company or any of its subsidiaries, if applicable, is itself an
obligor of the Company or any of its subsidiaries.

 

6.4  Miscellaneous.
Notwithstanding anything to the contrary set forth in this Agreement, (a) the
Company shall be permitted to reach any agreement with any Terminated
Management Stockholder (or his estate, as the case may be) concerning the
purchase of such Terminated Management Stockholder’s shares of Company Stock,
and (b) the Company, in its sole discretion, shall have the right, but not the
obligation, to assign any of its rights, and delegate any of its obligations,
to purchase any shares of Company Stock of any Terminated Management
Stockholder (or his estate, as the case may be) pursuant to Article VI hereof
to any employee stock ownership plan or similar compensation or benefit plan
that the Company may have, or to any subsidiary or employee of the Company (or
any combination of the foregoing); provided, however, that only
the Company may issue a Management Repurchase Note and any other purchaser must
pay the entire purchase price as if such purchaser were a Purchaser as provided
in Section 6.3.

 

6.5  Proxy
and Escrow of Company Stock.

 

(a)           In the event that the Purchaser does
not exercise its rights under Section 6.1 to purchase all shares of Company
Stock held by a Terminated Management Stockholder, the Company may, at its
option, require such Terminated Management Stockholder to execute and deliver
to the Secretary of the Company irrevocable proxies (which proxies shall be
deemed to be coupled with an interest and which shall terminate upon an IPO
Event) in such form and as the Company may from time to time prescribe, in
favor of such person as the Board may from time to time prescribe, entitling
such person to vote such shares, if at all, on matters in direct proportion to
the affirmative and negative votes and abstentions of all other voting
securities then outstanding.

 

(b)           Each Management Stockholder agrees
that he or she will, upon termination of such Management Stockholder’s
employment for any reason, or prior to termination at the request of the
Company, deliver to the Secretary, to be held by the

 

23

 

Secretary of the Company for the benefit of such Management
Stockholder, the certificates representing all shares of Company Stock of such
Management Stockholder.

 

ARTICLE
VII

 

REGISTRATION RIGHTS

 

7.1  Demand
Registration Rights.

 

(a)           Upon written notice from a
Stockholder entitled to request Registration pursuant to Section 7.1 (c) below
(the “Requesting Stockholder”), the Company shall use commercially reasonable
efforts in good faith to effect promptly and maintain the registration under
the Securities Act of offers and sales of Common Stock by the Requesting
Stockholder (and no offers and sales of any other securities by any other
person shall be registered with such Common Stock of the Requesting Stockholder
without the Requesting Stockholder’s prior consent), its Permitted Transferees
and any underwriter with respect to such stock, in accordance with the intended
method or methods of disposition specified by the Requesting Stockholder
(including, but not limited to, an offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule) promulgated under the Securities
Act); provided that if, after a Registration request pursuant to this
Section 7.1 has been made, (i) the outside legal counsel of the Company has
determined in good faith that the filing of a Registration request would
require the disclosure of material information which the Company has a bona
fide business purpose for preserving as confidential or (ii) the Board decides
in its good faith judgement that the filing of the Registration request would
otherwise not be in the best interests of the Company and its stockholders, the
Company shall not be obligated to effect a Registration pursuant to this
Section 7.1 until 120 days after receipt of the Registration request by the
Requesting Stockholder (the “Deferral Period”); provided  further,
that if outside legal counsel continues to determine in good faith, after such
Deferral Period has expired, that the filing of a Registration request would
require the disclosure of material information which the Company has a bona
fide business purpose for preserving as confidential, the Company shall not be
obligated to effect a Registration until the date upon which such material
information is disclosed to the public or ceases to be material; and provided
further, that no Requesting Stockholder(s) may request any such
Registration pursuant to this Section 7.1 (x) until at least 12 months after
the anniversary of the closing of the last Registration and sale of Company
securities and (y) unless the Registrable Securities sought to be registered
have an aggregate value, determined using a price at the middle of the range at
which the offering is proposed to be priced, of at least $25,000,000. The
Requesting Stockholder(s) requesting a Registration under this Section 7.1 may,
at any time prior to the effective date of the registration statement relating
to such Registration, revoke such request by providing written notice thereof
to the Company.

 

24

 

(b)           In connection with any Registration
requested pursuant to this Section 7.1, subject to the provisions of Section
7.1(a), the Company shall take such other actions, including, without
limitation, listing such shares for trading on any securities exchange or
national market system and registering or qualifying such shares under state
securities laws, as may be reasonably requested by the Requesting Stockholder.  If the Requesting Stockholder consents to
the inclusion of offers and sales of any other securities in a Registration of
Common Stock by the Requesting Stockholder pursuant to this Section 7.1 and the
underwriters retained in connection with such Registration advise the Company
in writing that such offering would be materially and adversely affected by the
inclusion of such securities, the Requesting Stockholder may in its sole
discretion exclude all or some of such securities from such offering.

 

(c)           After the occurrence of an IPO Event:

 

(i) CEP will have the right to request Registration of Common Stock of
CEP as a Requesting Stockholder pursuant to this Section 7.1 an aggregate of
three times; provided that if CEP had elected, pursuant to Section 4.6
hereof, to cause the Company to effect the IPO Event, such election will not be
a request for Registration of Common Stock for purposes of this Section 7.l(c)
hereof;

 

provided that
any Registration requested by any Requesting Stockholder pursuant to this
Section 7.1 shall not be deemed to have been effected (and, therefore, not
requested for purposes of this Section 7.1(c)), (A) unless it has become
effective, provided that a Registration which does not become effective after
the Company has filed a registration statement with respect thereto solely by
reason of the refusal to proceed by the Requesting Stockholder (other than a
refusal to proceed based upon the advice of counsel relating to a matter with
respect to the Company) shall be deemed to have been effected by the Company at
the request of such Requesting Stockholder unless the Requesting Stockholder
shall have elected to pay all Registration Expenses in connection with such
registration, (B) if after it has become effective such Registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by the Requesting Stockholder and, as a result
thereof, the Common Stock requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the
related registration statement, (C) if the closing pursuant to the purchase
agreement or underwriting agreement entered into in connection with such Registration
does not occur, or (D) if the number of shares of Common Stock of the
Requesting Stockholder that are included in such Registration is less than the
number of shares of Common Stock requested by the Requesting Stockholder to be
included therein pursuant to Section 7.3(b) hereof. Any Registration effected
pursuant to Section 7.2 shall not be deemed to have been requested by a
Requesting Stockholder for purposes of this Section 7.1(c).

 

25

 

7.2  Piggyback
Registration Rights. If at any time following the completion of an IPO
Event the Company proposes to effect another Registration, whether or not for
sale for its own account and (subject to the provisions of Section 7.1 above)
whether or not pursuant to the exercise of any of the demand registration
rights referred to in Section 7.1 hereof, in a manner which would permit
Registration of Registrable Securities for sale to the public under the
Securities Act, it will each such time, subject to the provisions of Sections
7.1 and 7.2(c) hereof, give prompt written notice to all Stockholders of record
of Registrable Securities of its intention to do so and of such Stockholders’
rights under this Article VII, at least twenty-five (25) days prior to the anticipated
filing date of the registration statement relating to such Registration. Such
notice shall offer all such Stockholders, subject to the limitations set forth
in Article VI of the Warrant Agreement, the opportunity to include in such
registration statement such number of Registrable Securities as each such
Stockholder may request. Upon the written request of any such Stockholder made
within 20 days after the receipt of the Company’s notice (which request shall
specify the number of Registrable Securities intended to be disposed of by such
Stockholder and the intended method of disposition thereof), the Company will
use commercially reasonable efforts to effect the Registration under the
Securities Act and the qualification under any applicable state securities or
“Blue Sky” laws of all Registrable Securities which the Company has been so
requested to register by the Stockholders thereof, to the extent required to
permit the disposition (in accordance with such intended methods thereof) of
the Registrable Securities so requested to be registered; provided that:

 

(a)           if such Registration involves an
underwritten public offering, all Stockholders requesting that their
Registrable Securities be included in the Company’s Registration must, upon
request by the underwriter(s), sell their Registrable Securities to such
underwriter(s) selected by the Company (or the Requesting Stockholders in
accordance with Section 7.1, as the case may be) on the same terms and
conditions as apply to the Company or any selling securityholder (or on
equivalent terms and conditions, in the event that such requesting Stockholders
hold different securities from those being sold by the Company or such selling
securityholder), including, without limitation, executing and delivering such underwriting
agreements or other related agreements to which the Company or any such selling
securityholder has agreed to execute and deliver;

 

(b)           if, at any time after giving written
notice of its intention to register any securities pursuant to this Section 7.2
and prior to the effective date of the registration statement filed in
connection with such Registration, the Company shall determine for any reason
not to register such securities, the Company shall give written notice to all
Stockholders of Registrable Securities and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
Registration (without prejudice, however, to the rights of the Stockholders
immediately to request that such registration be effected as a Registration
under Section 7.1);

 

26

 

(c)           if a Registration pursuant to this
Section 7.2 involves an underwritten public offering, any Stockholder of
Registrable Securities requesting to be included in such Registration may
elect, in writing at least 10 days prior to the effective date of the
registration statement filed in connection with such Registration, not to
register such securities in connection with such Registration;

 

(d)           the Company shall not be required to
effect any Registration of Common Stock under this Section 7.2 incidental to
the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock option or
other executive or employee benefit or compensation plans (including, without
limitation, any registration of securities on a Form S-4 or S-8 registration
statement or any successor or similar forms); and

 

(e)           no Registration of Common Stock
effected under this Section 7.2 shall relieve the Company of its obligation to
effect a Registration of shares of Common Stock pursuant to Section 7.1.

 

7.3  Priority in Piggyback Registrations.

 

(a)           If at any time following an IPO Event
the Company proposes to effect another Registration in connection with an
underwritten offering (other than any Registration pursuant to the exercise of
any of the demand registration rights referred to in Section 7.1 hereof),
including any Registration for the Company’s account, and the managing
underwriter(s) advise the Company in writing that, in its or their judgement,
the number of shares of equity securities of the Company (including all shares
of Registrable Securities) which the Company, the Stockholders and any other
persons intend to include in such Registration exceeds the largest number of
securities which can be sold without having an adverse effect on such offering,
including the price at which such securities can be sold, the Company shall,
subject to the limitations set forth in Article VI of the Warrant Agreement,
include in such Registration: (i) first, all securities the Company proposes to
sell for its own account (the “Company Securities”), (ii) second, to the extent
that the number or dollar amount of the Company Securities to be offered by the
Company is less than the number of shares of securities which the Company has
been advised can be sold in such offering without having the adverse effect
referred to above, the number of Piggyback Securities requested to be sold by CEP,
(iii) third, to the extent that the number of Company Securities and Piggyback
Securities in clauses (i) and (ii) above is less than the number of shares of
securities which the Company has been advised can be sold in such offering
without having the adverse effect referred to above, the number of Piggyback
Securities requested to be sold by any other Stockholder (provided that if the
number of the Company Securities and Piggyback Securities exceeds the number of
shares of securities which the Company has been advised can be sold in such
offering without having the adverse effect referred to above, the number of
such Piggyback Securities to be included

 

27

 

pursuant to this clause (iii) shall be allocated pro  rata
among all such requesting other Stockholders of such Piggyback Securities on
the basis of the relative number or amount of Piggyback Securities each such
holder has requested to be included in such Registration), and (iv) fourth, to
the extent that the number of Company Securities and Piggyback Securities held
by Stockholders is less than the number of shares of securities which the
Company has been advised can be sold in such offering without having the
adverse effect referred to above, the equity securities requested to be sold
for the account of any other persons (allocated among the persons holding such
other securities in such proportions as such persons and the Company may
agree).

 

(b)           If at any time following an IPO Event
the Company proposes to effect another Registration in connection with an
underwritten offering pursuant to the exercise of any of the demand
registration rights referred to in Section 7.1 hereof, and the managing
underwriter(s) advise the Company in writing that, in its or their judgement,
the number of shares of equity securities of the Company (including all shares
of Registrable Securities) which the Company, the Stockholders and any other
persons intend to include in such Registration exceeds the largest number of
securities which can be sold without having an adverse effect on such offering,
including the price at which such securities can be sold, the Company shall,
subject to the limitations set forth in Article VI of the Warrant Agreement,
include in such Registration (i) first, all securities which are proposed to be
sold by the Stockholders or other persons who are exercising the demand
registration rights referred to in Section 7.1 hereof (the “Demand
Securities”), (ii) second, to the extent that the number or dollar amount of
the Demand Securities is less than the number of shares of securities which the
Company has been advised can be sold in such offering without having the
adverse effect referred to above, the number of Piggyback Securities requested
to be sold by CEP, (iii) third, to the extent that the number of Company
Securities and Piggyback Securities in clauses (i) and (ii) above is less than
the number of shares of securities which the Company has been advised can be
sold in such offering without having the adverse effect referred to above, the
number of Piggyback Securities requested to be sold by any other Stockholder
(provided that if the number of the Demand Securities and Piggyback Securities
exceeds the number of shares of securities which the Company has been advised
can be sold in such offering without having the adverse effect referred to
above, the number of such Piggyback Securities to be included pursuant to this
clause (iii) shall be allocated pro  rata among all such
requesting other Stockholders of such Piggyback Securities on the basis of the
relative number or amount of Piggyback Securities each such holder has
requested to be included in such Registration), and (iv) fourth, to the extent
that the number of Demand Securities and Piggyback Securities held by
Stockholders is less than the number of shares of securities which the Company
has been advised can be sold in such offering without having the adverse effect
referred to above, the equity securities requested to be sold for the account
of any other persons (allocated among the persons holding such other securities
in such proportions as such persons and the Company may agree).

 

28

 

(c)           The parties to this Agreement
acknowledge and agree that to the extent that any of the provisions set forth
in this Section 7.3 directly conflict with the Company’s obligations pursuant
to Article VI of the Warrant Agreement, the provisions of Article VI of the
Warrant Agreement shall be controlling.

 

7.4  Expenses.  The Company will pay all Registration
Expenses in connection with each Registration of Registrable Securities
requested pursuant to this Article VII (including any Registration deemed not
to be “effected” under Section 7.1(c) or not consummated as contemplated by
Section 7.2 (b)) and any other actions that may be taken in connection with any
such Registration as contemplated by this Article VII; provided that the
Company will not be obligated to pay any underwriting discounts or commissions
or transfer taxes, if any, relating to the sale or disposition of shares sold
by persons other than the Company pursuant to any such Registration.

 

7.5  Restrictions on Public Sale by
Stockholders and Company.

 

(a)           In connection with any offering of
securities of the Company, including, without limitation, any offering
contemplated by this Article VII, each Stockholder agrees that, whether or not
such Stockholder’s Registrable Securities are included in such Registration, it
will consent and agree to comply with any “hold back” restriction, relating to
Common Stock or any other securities of the Company then owned by such holder,
that may be reasonably requested by the underwriter(s) or placement or other
selling agent(s) of such offering. 
Without limitation of the foregoing, each Stockholder shall, upon
request by such underwriter(s) or agent(s), agree not to effect any public sale
or distribution, including any sale pursuant to Rule 144 under the Securities
Act, of any Registrable Securities, and not to effect any such public sale or
distribution of any other equity security of the Company or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (in each case, other than as part of such underwritten public offering)
during the 30 days prior to, and during the 180 day period or such shorter
period as the underwriter recommends, beginning on, the effective date of such
registration statement (except as part of such Registration).

 

(b)           If any Registration of Registrable
Securities pursuant to Article VII shall be in connection with an underwritten
public offering, the Company agrees, if requested by the underwriter(s) or
placement or other selling agent(s), (i) not to effect any public sale or
distribution of any of its equity securities or of any security convertible
into or exchangeable or exercisable for any equity security of the Company
(other than any such sale or distribution of such securities in connection with
any merger or consolidation by the Company or a subsidiary of the Company or in
connection with the purchase of all or substantially all the assets of any
other person or in connection with an employee stock option or other benefit
plan) during the 30 days prior to, and during the 180 day period beginning on, the
effective date of such registration statement (except as part

 

29

 

of such Registration) and (ii) that any agreement entered into after
the date of this Agreement pursuant to which the Company issues or agrees to
issue any privately placed equity securities shall contain a provision under
which holders of such securities agree not to effect any public sale or
distribution of any such securities during the period referred to in the
foregoing clause (i) or during any of the periods referred to in Section 7.5(a)
above, including any sale pursuant to Rule 144 under the Securities Act (except
as part of such Registration, if permitted).

 

(c)           In connection with any offering of
securities of the Company contemplated by this Article VII, the Company shall
take such other actions in connection therewith as may be necessary or
appropriate, including, without limitation, entering into customary
underwriting arrangements and agreeing to indemnify any Requesting Stockholder
or any other Stockholder selling Common Stock in such offering.

 

7.6  Indemnification
by the Company. In the event of any Registration of any securities of
the Company under the Securities Act pursuant to Article VII, the Company will,
and it hereby does, indemnify and hold harmless, to the full extent permitted
by law, each of the Stockholders holding any Registrable Securities covered by
such registration statement, its Representatives, each other person who
participates as an underwriter in the offering or sale of such securities and
each other person, if any, who controls, is controlled by or is under common
control with such Stockholder or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, and expenses (including any amounts paid in any settlement
effected with the Company’s consent, which consent shall not be unreasonably
withheld) to which such Stockholder, any such Representative or any such
underwriter or controlling person may become subject under the Securities Act,
state securities or blue sky laws, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) or expenses arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary, final or summary prospectus contained therein, or any
amendment or supplement thereto, (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any violation by the Company of any
federal, state or common law rule or regulation applicable to the Company and
relating to action required of or inaction by the Company in connection with
any such Registration, and the Company will reimburse such Stockholder and each
such Representative or underwriter and controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending such loss, claim, liability, action or proceeding; provided
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expenses arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such

 

30

 

registration statement or amendment or supplement thereto or in any
such preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Stockholder or any such Representative or
underwriter specifically stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Stockholder or any such
Representative or underwriter and shall survive the transfer of such securities
by such Stockholder.

 

7.7  Indemnification by the Stockholders
and Underwriters. The Company may require, as a condition to
including any Registrable Securities in any registration statement filed in
accordance with Article VII, that the Company shall have received an
undertaking reasonably satisfactory to it from the Stockholders of such
Registrable Securities and any underwriter, to indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 7.6) the Company
and its Representatives and all other prospective sellers and their respective
Representatives, and their respective controlling persons with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or its
representatives through an instrument duly executed by or on behalf of such
Stockholder or underwriter, as the case may be, specifically stating that it is
for use in the preparation of such registration statement, preliminary, final
or summary prospectus or amendment or supplement thereto, or a document
incorporated by reference into any of the foregoing. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any of the Stockholders, underwriters or any of their
respective Representatives or controlling persons and shall survive the
transfer of such securities by such Stockholder; provided that no such
Stockholder shall be liable under this Section 7.7 for any amounts
exceeding the product of the purchase price per Registrable Security and the
number of Registrable Securities being sold pursuant to such registration
statement or prospectus by such Stockholder (net of any underwriters’ or
placement agents’ fees, discounts or commissions related thereto).

 

7.8  Notices of
Claims. Etc. Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or proceeding
with respect to which a claim for indemnification may be made pursuant to this
Article VII, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, promptly give written notice to the
latter of the commencement of such action; provided, however,
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the preceding
subsections of this Article VII, except to the extent that the indemnifying
party is actually materially prejudiced by such failure to give notice. In case
any such action is brought

 

31

 

against an indemnified party, unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
will be entitled to participate in and, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, to the extent that it
may wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof, unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of
the defense thereof, and the indemnifying party will not be subject to any
liability for any settlement made without its consent (which consent shall not
be unreasonably withheld). No indemnifying party will consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.

 

7.9  Other
Indemnification. Indemnification similar to that specified in the
preceding Sections of this Article VII (with appropriate
modifications) shall be given by the Company and each Stockholder of
Registrable Securities with respect to any required Registration or other
qualification of securities under any federal or state law or any regulation of
a governmental authority other than arising under the Securities Act.

 

7.10  Registration
Procedure.

 

(a)           If and whenever the Company is
required to effect or cause the Registration of any Registrable Securities
pursuant to this Article VII, the Company will, as expeditiously as possible:

 

(1)           Prepare in cooperation with the
sellers (and, in the event of an underwritten public offering, with the
underwriter(s), which the Company shall have the right to designate), and file
with the SEC, in a manner consistent with the provisions of this Article VII, a
registration statement with respect to such Registrable Securities on any form
for which the Company then qualifies or which counsel for the Company shall
deem appropriate as the case may be, and which form shall be available for the
sale of the Registrable Securities in accordance with the intended methods of

 

32

 

distribution thereof, and use commercially reasonable efforts to cause
such registration statement to become and remain effective; provided
that before filing with the SEC a registration statement or prospectus or any
amendments or supplements thereto, the Company will (i) furnish to one counsel
selected by the Requesting Stockholder(s), in the event of a Registration
effected pursuant to Section 7.1 hereof, or selected by the holders of a
majority of the Registrable Securities covered by such registration statement,
in the event of any other Registration, copies of all such documents proposed
to be filed, which documents will be subject to the timely review of such counsel,
and (ii) notify each holder of Registrable Securities covered by such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.

 

(2)           Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may he necessary to keep such registration
statement effective for a period of not less than 120 days or such shorter
period which will terminate when all Registrable Securities covered by such
registration statement have been sold (but not before the expiration of the
90-day period referred to in Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable) and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement.

 

(3)           Furnish to each holder of Registrable
Securities covered by the registration statement and to each underwriter, if
any, of such Registrable Securities, such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto), and the prospectus included in such registration statement
(including each preliminary prospectus), and such other documents, as such
person may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such holder.

 

(4)           Use commercially reasonable efforts
to register or qualify such Registrable Securities covered by such registration
statement under such other securities or “Blue Sky” laws of such jurisdictions
as any holder, and underwriter, if any, of Registrable Securities covered by
such registration statement shall reasonably request, and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; provided that the Company shall not for
any such purpose be required to (A) qualify to do business as a foreign corporation
in any jurisdiction where, but for the requirements of this Section 7.10, it is
not then so qualified, (B) subject itself to taxation in any such jurisdiction,
or (C) take any action which would subject it to consent to general or
unlimited service or process not then so subject.

 

33

 

(5)           Use commercially reasonable efforts
to cause such Registrable Securities covered by such registration statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Company to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities.

 

(6)           Immediately notify each seller of Registrable
Securities covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event which comes to the Company’s attention if as
a result of such event the prospectus included in such registration statement,
as then in effect, includes any untrue statement of a material fact or omits to
state a material, fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading
and at the request of any such seller, deliver a reasonable number of copies of
an amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.

 

(7)           Otherwise use commercially reasonable
efforts to comply with all applicable rules and regulations of the SEC and make
available to its security holders, in each case as soon as practicable, an
earnings statement covering a period of at least 12 months, beginning with the
first month after the effective date of the registration statement (as the term
“effective date” is defined in Rule 158(c) under the Securities Act), which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act including, at the option of the Company, Rule 158 thereunder.

 

(8)           Use commercially reasonable efforts
to cause all such Registrable Securities to be listed on such national
securities exchange or the National Association of Securities Dealers National
Market System as may be reasonably requested by the Requesting Stockholder(s),
and if any similar securities issued by the Company are then listed on any
securities exchanges or national market systems, to also list all such
Registrable Securities on such securities exchanges or national market systems,
and enter into such customary agreements including a listing application and
indemnification agreement in customary form, provided that the applicable
listing requirements are satisfied, and to provide a transfer agent and
registrar for such Registrable Securities covered by such registration
statement no later than the effective date of such registration statement.

 

(9)           Use commercially reasonable efforts
to obtain a “cold comfort” letter from the independent public accountants for
the Company in customary

 

34

 

form and covering matters of the type customarily covered by such
letters as may be reasonably requested by the Requesting Stockholder(s), in the
event of a Registration effected pursuant to Section 7.1 hereof, or by the
holders of a majority of the Registrable Securities covered by such
registration statement, in the event of any other Registration.

 

(10)         Execute and deliver all instruments and
documents (including in an underwritten offering an underwriting agreement in
customary form) and take such other actions and obtain such certificates and
opinions as sellers of a majority of the Registrable Securities being sold
reasonably request in order to effect an underwritten public offering of such
Registrable Securities. The Company may require each holder of Registrable
Securities as to which any Registration is being effected to furnish to the
Company such information regarding such holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably request
in writing in connection with effecting such offering.

 

(11)         Make available senior management
personnel to participate
in, and cause them to cooperate with the underwriters in connection with, “road
show” and other customary marketing activities, including “one-on-one” meetings
with prospective purchasers of the Registrable Securities.

 

(b)           Each holder of Registrable Securities
will, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 7.10(a)(6), forthwith discontinue disposition
of the Registrable Securities pursuant to the registration statement covering
such Registrable Securities until such holder’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 7.10(a)(6), and, if
so directed by the Company, such holder will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies, then in such
holder’s possession, of the prospectus covering such Registrable Securities at
the time of receipt of such notice.

 

7.11  Rule 144.
If the Company shall have filed a registration statement pursuant to the
requirements of Section 12 of the Exchange Act or a registration statement
pursuant to the requirements of the Securities Act, the Company covenants that
it will file the reports required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the SEC
thereunder (or, if the Company is not required to file such reports, it will,
upon the request of any holder of Registrable Securities, make publicly
available other information), and it will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any holder of Registrable

 

35

 

Securities, the Company will deliver to such holder a written statement
as to whether it has complied with such requirements.

 

ARTICLE VIII

 

ADDITIONAL STOCKHOLDERS

 

8.1  Transferees of Stockholders or the Company.  No Transfers of shares of Company Stock may
be made (and shall not be effective) to a Permitted Transferee or to any Third
Party, unless in each case prior to such Transfer any such transferee agrees in
writing to be bound (to the same extent as contemplated with respect to the
Stockholder (or the Permitted Transferee(s) thereof) transferring such shares
of Company Stock) by the terms and conditions of this Agreement pursuant to a
supplementary agreement reasonably satisfactory in form and substance to the
Company. The Company may, as a condition to any original issuance of Company Stock
to a person who or which is not at such time a Stockholder, require that such
person agree in writing to be bound by the terms and conditions of this
Agreement pursuant to a supplementary agreement reasonably satisfactory in form
and substance to the Company.  Upon
entering into such supplementary agreement, such transferee or purchaser of
Company Stock shall be deemed to be a Stockholder for all purposes of this
Agreement. The provisions of this Section 8.1 shall not apply to any Transfer
(a) made pursuant to a public offering of Company Stock, including in
connection with the exercise by any Stockholder of its rights pursuant to
Article VII hereof or in connection with the exercise by CEP of its rights
pursuant to Section 4.6 hereof, or (b) made in connection with the exercise by
Charter of a Compelled Sale Right.

 

8.2  New
Stockholders. Each member of management or other employee of the
Company, its subsidiaries or any Affiliate of the Company or its subsidiaries
who becomes a holder of Company Stock after the date hereof, shall be deemed,
upon the execution of a supplementary agreement described below, to have the
same rights and obligations as a Stockholder for purposes of this Agreement.
The Company shall not issue Company Stock to any member of management or other
employee of the Company or any of its subsidiaries unless the person to whom
the Company Stock is to be issued or transferred agrees in writing to be bound
by the terms and conditions of this Agreement pursuant to a supplementary
agreement reasonably satisfactory in form and substance to the Company; upon
entering into such agreement, such member of management or other employee of
the Company or any of its subsidiaries shall be deemed to be a Management
Stockholder for all purposes of this Agreement. The parties hereto acknowledge
and agree that the Company Management Incentive Plan (or the agreements entered
into in connection therewith) shall provide that persons granted options or
similar awards thereunder will be required to become parties to this Agreement
upon any exercise of

 

36

 

options or such other awards granted thereunder, as a condition to the
exercise of such options or such other awards,

 

8.3  Supplemental
Agreements. Each supplementary agreement referred to in Sections 8,1
and 8.2 above, shall become effective upon its execution by the Company and the
new holder of Company Stock, and it shall not require the signatures or the
consent of the other Stockholders (or their respective Permitted Transferees).
The supplementary agreement between the Company and any new holder of Company
Stock may modify some of the terms and conditions of this Agreement as they
affect the rights and obligations of the new holder of Company Stock, provided
that the modified terms and conditions shall be no less favorable to the other
Stockholders (or their respective Permitted Transferees) than the terms and
conditions set forth in this Agreement. The Schedule of Management Stockholders
attached hereto shall be updated from time to time to include each Management
Stockholder who becomes a party to this Agreement after the date hereof.

 

ARTICLE
IX

 

STOCK LEGENDS

 

9.1  Stock
Certificate Legend. A copy of this Agreement shall be filed with the
Secretary of the Company and kept with the records of the Company. Each of the
Stockholders agrees that the following two legends shall be placed on the
certificates representing any shares of Company Stock owned by them:

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND CERTAIN OTHER CONDITIONS, AS SPECIFIED IN A STOCKHOLDERS AGREEMENT
(THE “STOCKHOLDERS AGREEMENT”) DATED AS OF SEPTEMBER 28, 2001 (COPIES OF WHICH
ARE ON FILE WITH THE SECRETARY OF CELLU PAPER HOLDINGS, INC. (TOGETHER WITH ITS
SUCCESSORS, THE “COMPANY”) AND WHICH WILL BE FURNISHED WITHOUT CHARGE WITHIN
FIVE DAYS AFTER RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR). THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT.

 

NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT PURSUANT TO THE

 

37

 

PROVISIONS
OF SUCH STOCKHOLDERS AGREEMENT AND, EXCEPT AS OTHERWISE PROVIDED
IN SUCH AGREEMENT, (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS IN
EFFECT THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS (SUCH
FEDERAL AND STATE LAWS, THE “SECURITIES LAWS”) OR (B) IF THE COMPANY HAS BEEN
FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS
EXEMPT FROM THE PROVISIONS OF THE SECURITIES LAWS.”

 

All
Stockholders shall be bound by the requirements of such legends to the extent
that such legends are applicable. Upon a Registration of any shares of Company
Stock, the certificate representing such shares shall be replaced, at the
expense of the Company, with certificates bearing only the first of the two
legends referred to above.

 

ARTICLE
X

 

TERM OF AGREEMENT

 

10.1  Term. This
Agreement shall terminate, and be of no further force or effect, automatically
without any further action on the part of any parties hereto, upon the earlier
of (a) the ten (10) year anniversary of the date hereof, (b) an IPO Event, (c)
a sale of all or substantially all of the assets or equity interests in the
Company to a Third Party (whether by merger, consolidation, sale of assets or
securities or otherwise), (d) approval by those Stockholders who collectively
hold at least two thirds of the total amount of the then-outstanding Common
Stock held by Stockholders at such time, or (e) CEP (together with its
Permitted Transferees) ceasing to own at least 25% of the total outstanding
number of shares of Common Stock (calculated on a Fully-Diluted Basis), unless
CEP and any holders of at least 20% of the shares of the then outstanding
Common Stock held by the Non-CEP Stockholders agree not to terminate this
Agreement; provided that in the event of an IPO Event, the provisions of
Articles VII, IX, and XI (other than Section 11.1) of this Agreement shall
continue in full force and effect until the earliest to occur of the events set
forth in clauses (a), (c), (d) or (e).

 

38

 

ARTICLE XI

 

MISCELLANEOUS

 

11.1  Confidentiality.

 

(a)           Except with the prior written consent
of the Company (which consent may not be unreasonably withheld) and except as
otherwise required by law or the listing requirements of any securities
exchange on which the securities of such Stockholder are then traded, each
Stockholder shall, and shall cause each of its Representatives to (x) hold in
strict confidence all confidential, proprietary or other non-public information
or trade secrets relating to the Company or its subsidiaries or their
respective assets or operations (the “Confidential Information”), and (y) not
release or disclose in any manner whatsoever to any other person any such
Confidential Information; provided that (i) the foregoing provisions
shall not apply to any disclosure, to the extent reasonably required, to (A)
those of such Stockholder’s auditors, attorneys and other representatives who
agree to be bound by the provisions of this Section 11.1 and (B) any other
persons in connection with any actions to be taken pursuant to Article IV of
this Agreement, (ii) the foregoing provisions shall not apply where such
Stockholder or any of its Representatives is compelled to disclose such
Confidential Information, by judicial or administrative process or, in the
reasonable opinion of its counsel, by other requirements of law (provided that
prior written notice of such disclosure is given to the Company and any such
disclosure is limited to only that portion of the Confidential Information
which such person is compelled to disclose), (iii) the term “Confidential
Information” shall not include information (A) which is or becomes generally
available to the public other than as a result of disclosure of such
information by such Stockholder or any of its Representatives, (B) becomes
available to the recipient of such information on a non-confidential basis from
a source which is not, to the recipient’s knowledge, bound by a confidentiality
or other similar agreement, or by any other legal, contractual or fiduciary
obligation which prohibits disclosure of such information to the other parties
hereto, or (C) which can be demonstrated to have been developed independently
by the representatives of such recipient which representatives have not had any
access to any information which would otherwise be deemed to be “Confidential
Information” pursuant to the provisions of this Section 11.1, and (iv) each of
the Stockholders acknowledges and agrees that any information they may receive
from the Company in its reports to stockholders is confidential, proprietary
and non-public in nature.

 

11.2  Specific
Performance.  Each of the
Stockholders acknowledges and agrees that in the event of any breach of this
Agreement, the non-breaching party or parties would be irreparably harmed, no
adequate remedy at law would exist and damages would be difficult to determine.
It is accordingly agreed that (x) in the event of a breach of any provision of
this Agreement, the aggrieved party shall be entitled to specific performance

 

39

 

of
this Agreement and to enjoin any continuing breach of this Agreement (without
the necessity of proving actual damages and without posting bond or other
security), in addition to any other remedy to which such aggrieved party may be
entitled at law or in equity, and (y) the Stockholders will waive the defense
in any action for specific performance or other equitable relief that a remedy
at law would be adequate.

 

11.3  Consent
to Jurisdiction. Etc. Each of the parties hereto irrevocably and
unconditionally (a) agrees that all suits, actions or other legal proceedings
arising out of this Agreement or any of the transactions contemplated hereby (a
“Suit”) shall be brought and adjudicated solely in the United States District
Court in the State of New York, or, if such courts will not accept
jurisdiction, in any court of competent civil jurisdiction sitting in the State
of New York, (b) submits to the exclusive jurisdiction of any such court for
the purpose of any such Suit and (c) waives and agrees not to assert by way of
motion, as a defense or otherwise in any such Suit, any claims that it is not
subject to the jurisdiction of the above courts, that such Suit is brought in
an inconvenient forum or that the venue of such Suit is improper. Each of the
parties hereto also irrevocably and unconditionally consents to the service of
any process, summons, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 11.9 hereof and agrees that any such form
of service shall be effective in connection with any such Suit; provided
that nothing contained herein shall affect the right of any party to serve
process, pleadings, notices or other papers in any other manner permitted by
applicable Law. Each of the parties hereto also agrees that any final and
unappealable judgment against a party hereto in any Suit shall be conclusive
and binding on such party and that such judgment may be enforced in any other
jurisdiction, either within or outside of the United States, by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence
of the fact and amount of such judgment.

 

11.4  Attorneys’
Fees. In any legal action or proceeding (including, without limitation,
any arbitration proceeding) brought to enforce any provision of this Agreement,
or where any provision hereof is validly asserted as a defense, or because of
an alleged dispute, breach or default in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys’ fees and other costs incurred in that
action or proceeding, in addition to any other available remedy or relief to
which such party or parties may be entitled.

 

11.5  Management
Fee. The parties to this Agreement acknowledge that (a) for so long as
any indebtedness under the New A Term Loan, the New B Term Loan and US
Revolving Loans (each as defined in the Credit Agreement) remains outstanding
and until the US Revolving Commitments (as defined in the Credit Agreement)
have been terminated at a time when no Event of Default (as defined in the
Credit Agreement) exists, then the payment of any annual management fees by the
Company to Charterhouse Group International, Inc. (“CGI”) (or any other person
designated by CGI), shall be governed by

 

40

 

the provisions set forth in Section 9.09 of the Credit Agreement and
(b) after such time, the Company shall pay to CGI (or any other person
designated by CGI) (i) an annual management fee of $100,000, payable in full at
the end of each fiscal year (prorated for each fiscal year of fewer than 12
months), (ii) an additional annual management fee of $150,000, payable in full
at the end of each fiscal year (prorated for each fiscal year of fewer than 12
months) and (iii) such additional fees as shall be negotiated between the
Company and CGI; provided that the management fees described in clauses
(i) and (ii) above shall be contingent upon and shall not accrue for a given
fiscal year unless the Consolidated EBITDA (as defined in the Credit Agreement)
of the Company for such fiscal year meets the amount projected therefor in the
Projections (as defined in the Credit Agreement) for such fiscal year; provided
further that the total annual management fee payable from the Company to
CGI (or any other person designated by CGI) shall not exceed $350,000.

 

11.6  Transaction
Fees. The parties to this Agreement acknowledge that the Company shall
pay Charterhouse Group International, Inc. (or any other person designated by
Charterhouse Group International, Inc.), a fee upon the consummation of any
acquisitions or other investments by the Company or its Affiliates which are
managed by the Management Stockholders. Each such payment shall be in an amount
equal to two percent of the total consideration paid for each such acquisition
or investment.

 

11.7  Headings: No Third Party
Beneficiaries. The headings and captions contained herein are for
convenience of reference only and shall not control or affect the meaning or
construction of any of the provisions hereof. Except as otherwise expressly
provided herein, the covenants, agreements and other provisions contained in
this Agreement are for the sole benefit of the parties hereto and their
permitted successors and assigns, and they shall not be construed as
conferring, and are not intended to confer, any rights, remedies or other
benefits hereunder on any other persons. Neither this Agreement nor any
purchase or sale of Company Stock shall create, or be construed or deemed to
create, any right to employment in favor of the Management Stockholder or any
other person by the Company or any subsidiary of the Company.

 

11.8  Entire
Agreement. This Agreement constitutes the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein, and there are no restrictions, promises, representations, warranties,
covenants or undertakings with respect to the subject matter hereof, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.

 

11.9  Notices.
All notices, requests, instructions or and other communications to be given
hereunder by any party hereto to another party hereto shall be in writing and,
unless otherwise provided herein, shall be deemed duly given if delivered

 

41

 

personally, telecopied (which is confirmed) or sent by registered or
certified mail (postage prepaid, return receipt requested) or by Federal
Express or other similar courier service (i) to the Company, any partner of CEP
at the addresses set forth below, (ii) in the case of a Permitted Transferee, to
the address set forth in the written agreement executed pursuant to Article
VIII hereof, (iii) if to a Management Stockholder, as listed on the signature
page hereto, or, if not so listed, to it at its address as reflected in the
stock records of the Company, as provided below or (iv) in the case of any
member of management or other employee of the Company or any of its
subsidiaries who becomes a holder of Company Stock or options to acquire
Company Stock after the date hereof, to the address set forth in the written
agreement executed pursuant to Article VIII hereof:

 

If
to the Company, at:

 

Cellu
Paper Holdings, Inc.

Two
Forbes Street

East
Hartford, CT 06108

Attention:
Chief Executive Officer

Fax:
(860) 528-0339

 

With
copies to:

 

Skadden,
Arps, Slate, Meagher & Flom LLP

Four
Times Square

New
York, NY 10036

Attention:
Alan G. Straus, Esq.

Fax:
(212) 735-2000

 

If
to CEP or any partner of CEP, to:

 

Charterhouse
Equity Partners III, L.P.

1209
Orange Street

Wilmington,
Delaware 19801

Attention:
Bonnie Schuman

Fax:
(302) 658-2919

 

With
copies to:

 

Charterhouse
Group International, Inc.

535
Madison Avenue

New
York, NY 10022

Attention:
Phyllis Haberman

Fax:
(212) 750-9704

 

42

 

Skadden,
Arps, Slate, Meagher & Flom LLP

Four
Times Square

New
York, NY 10036

Attention:
Alan G. Straus, Esq.

Fax:
(212) 735-2000

 

provided that
in the event any of the parties referred to above desires to designate another
address to which such notices should be sent to such party, such party may
designate such other address by giving notice to the other parties hereto in
writing as set forth in this Section 11.9 (provided that any change of address
shall be effective only upon receipt thereof).

 

11.10  Applicable
Law. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THE PARTIES SUBJECT HERETO SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES
THEREOF.

 

11.11  Severability.
The invalidity or unenforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.

 

11.12  Successors; Assigns; Transferees; Amendments;
Waivers.

 

(a)           The
provisions of this Agreement shall be binding upon and accrue to the benefit of
the parties hereto and their respective heirs, successors and permitted
assigns. Notwithstanding the foregoing, this Agreement may not be amended,
modified or supplemented, no waivers of, consents to or departures from the
provisions hereof may be given, and neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or any Stockholder without the prior written consent
of (i) each of the Company and CEP (and their respective Permitted Transferees)
and (ii) the Non-CEP Stockholders owning a majority of the shares of the
Company Stock owned by all the Non-CEP Stockholders;

 

provided that
this Agreement may be amended, modified or supplemented by the Company, and
waivers of, consents to or departures from the provisions hereof may be given
by the Company, in order to cure any ambiguity, defect or inconsistency in this
Agreement, so long as (x) such action does not adversely affect the rights of
any

 

43

 

Stockholder in any material respect and (y) the Company promptly
notifies each Stockholder in accordance with the provisions of Section 11.9
hereof of such action; provided  further, however, that
except as provided below, Section 10.1 of this Agreement may not be amended,
modified or supplemented without the prior written consent of (i) CEP (and its
respective Permitted Transferees) and (ii) the Non-CEP Stockholders owning
two-thirds of the Company Stock owned by all the Non-CEP Stockholders; provided
further, however, that Section 10.1(d) may not be amended, modified
or supplemented without the prior written consent of CEP and by those Non-CEP
Stockholders who collectively hold at least two thirds of the total amount of
the then-outstanding Common Stock held by Non-CEP Stockholders.

 

(b)           The rights and remedies of the
Stockholders and the Company under this Agreement shall be cumulative and not
exclusive of any rights or remedies which either would otherwise have hereunder
or at law or in equity or by statute, and no failure or delay by either party
in exercising any right or remedy shall impair any such right or remedy or operate
as a waiver of such right or remedy, nor shall any single or partial exercise
of any power or right preclude such party’s other or further exercise or the
exercise of any other power or right.

 

11.13  Defaults; No Circumvention of
Agreement. A default by any party to this Agreement in such party’s
compliance with any of the conditions or covenants hereof or performance of any
of the obligations of such party hereunder shall not constitute a default by
any other party. No Stockholder or any of its Permitted Transferees may do
indirectly, through the sale of capital stock of its or their subsidiaries or
otherwise, that which is not permitted by this Agreement (including, without
limitation, the provisions of Articles II, III and IV hereof).

 

11.14  Further
Assurances. Each party hereto or person subject 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 or person subject hereto may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.

 

11.15  Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same Agreement.

 

11.16  Recapitalization,
Etc.  Except as otherwise provided
in this Agreement, the provisions of this Agreement shall apply to any and all
shares of capital stock or other securities of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in

 

44

 

respect of, in exchange for, or in substitution of, any shares of
Company Stock by reason of any reorganization, any recapitalization,
reclassification, merger, consolidation, partial or complete liquidation, sale
of assets, spin-off, stock dividend, split, distribution to stockholders or
combination of the shares of Company Stock or any other change in the Company’s
capital structure, in order to preserve fairly and equitably as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.

 

11.17  Performance
Bonuses. The Board will annually consider the possibility of a
performance bonus for each Management Stockholder based on the achievement by
the Company of satisfactory results.

 

45

 

IN
WITNESS WHEREOF, this Agreement has been duly executed by each of the parties
hereto as of the date first written above.

 

	
   

  	
  CELLU PAPER HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Phyllis Haberman

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHARTERHOUSE EQUITY
  PARTNERS III, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  CHUSA
  Equity Investors III, L.P.,

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Charterhouse
  Equity III, Inc.,

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Phyllis Haberman

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHEF NOMINEES LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Charterhouse
  Group International, Inc.,

  Attorney-in-fact

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Phyllis Haberman

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  WAHYAM CAPITAL, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert P. CROZER

  	
   

  
	
   

  	
   

  	
  Name:  Robert P. Crozer

  
	
   

  	
   

  	
  Title:  Chairman

  

 

 

Schedule A

 

Schedule of Management
Stockholders

 

	
  Management
  Stockholder

  	
   

  	
  Shares

  	
   

  	
  Options

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT A

 

PROMISSORY NOTE

 

No.     

 

	
  $                           

  	
  [Date]

  

 

FOR
VALUE RECEIVED, CELLU PAPER HOLDINGS, INC. a Delaware corporation (the
“Payor”), hereby promises to pay to
                       
(the “Terminated Management Stockholder”), the principal sum of
                        
dollars ($               )
(the “Principal Amount”), by
                         
(the “Maturity Date”).

 

The
unpaid Principal Amount outstanding from time to time shall bear interest at a
rate equal to    % per annum, until paid in full. Such
interest shall be payable in lawful money of the United States of America on
the Maturity Date.

 

1.             Optional Prepayments. The
Payor may, at any time and from time to time, without premium or penalty,
prepay, in whole or part, the then outstanding principal balance hereof,
together with all interest accrued and unpaid hereunder through the date of
such prepayment, provided that any partial payment shall be credited
first against any interest accrued and unpaid, then to the outstanding
principal balance hereof.

 

2.             Miscellaneous. This Note shall be deemed to have been made under and
shall be governed by the internal laws of the State of New York in all
respects, without regard to its  provisions
relating to conflicts of law. None of the terms or provisions hereof
may be waived, altered, modified or amended except as the parties hereto may
consent in writing.

 

3.             Subordination. Any and all
amounts owing by, or obligations of, the Payor under this Note shall be, and
hereby are, expressly made subordinate in right of payment to all obligations
of the Payor under any indebtedness incurred by Payor.

 

 

IN
WITNESS WHEREOF, the Payor has executed and delivered this Note to the
Terminated Management Stockholder as of the date first above written.

 

 

	
   

  	
  CELLU PAPER HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED AND AGREED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [TERMINATED MANAGEMENT
  STOCKHOLDER]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:Exhibit
10.6

 

CELLU PAPER HOLDINGS,
INC.

2001 STOCK INCENTIVE PLAN

 

1.                                     Purpose
of Plan.  The name of this plan is
the Cellu Paper Holdings, Inc. 2001 Stock Incentive Plan (the “Plan”).    The Plan was adopted by the Board (as
hereinafter defined) on September 17, 2001 and approved by the Company’s
stockholders on October 4, 2001.  The
purpose of the Plan is to provide additional incentive to those officers,
employees, non-employee directors and consultants of the Company and its
Subsidiaries (as hereinafter defined) whose contributions are essential to the
growth and success of the Company’s business, in order to strengthen the
commitment of such persons to the Company and its subsidiaries, motivate such
persons to faithfully and diligently perform their responsibilities and attract
and retain competent and dedicated persons whose efforts will result in the
long-term growth and profitability of the Company and its subsidiaries.  To accomplish such purposes, the Plan provides
that the Company may grant Options, Restricted Stock, Stock Bonuses and Other
Awards (each as hereinafter defined).  
It is the intention of the Company that the Plan qualify as a “written
compensatory benefit plan” as defined in Rule 701 promulgated under the
Securities Act (as hereinafter defined), and the Plan shall be construed and
administered so to comply.    From and
after the consummation of an Initial Public Offering (as hereinafter defined),
the Board may determine that the Plan is intended, to the extent applicable, to
satisfy the requirements of section 162(m) of the Code (as hereinafter defined)
and shall be interpreted in a manner consistent with the requirements thereof.

 

2.                                    Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:

 

(a)                                 “Administrator”
means the Board, or if and to the extent the Board does not administer the
Plan, the Committee in accordance with Section 3.

 

(b)                                “Award”
means an award of Options, Restricted Stock, Stock Bonuses or Other Awards
granted under the Plan.

 

(c)                                 “Award
Agreement” means, with respect to each Award, the written agreement between
the Company and the Participant setting forth the terms and conditions of the
Award.

 

(d)                                “Board”
means the Board of Directors of the Company.

 

(e)                                 “Cause”
means, unless defined in an individual employment, severance or other similar
agreement with the Company or one of its subsidiaries, in which case “Cause”
shall have the meaning set forth in such agreement, (1) the continued failure
by the Participant substantially to perform his or her duties and obligations
to the Company or any of its subsidiaries, including without limitation
repeated refusal to follow the reasonable directions of the Participant’s
employer, knowing violation of law in the course of performance of the duties
of Participant’s employment with the Company or any of its subsidiaries,
repeated absences from work without a reasonable excuse, and

 

 

intoxication with alcohol or illegal drugs while on the Company’s
premises or that of any of the Company’s subsidiaries during regular business
hours (other than any such failure resulting from his or her incapacity due to
physical or mental illness); (2) fraud or material dishonesty against the
Company or any of its subsidiaries; or (3) a conviction or plea of guilty or
nolo contendre for the commission of a felony or a crime involving material
dishonesty. Determination of Cause shall be made by the Administrator in its
sole discretion.

 

(f)                                   “Change
in Capitalization” means any increase, reduction, or change or exchange of
Shares for a different number or kind of shares or other securities or property
by reason of a reclassification, recapitalization, merger, consolidation,
reorganization, issuance of warrants or rights, stock dividend, stock split or
reverse stock split, combination or exchange of shares, repurchase of shares,
change in corporate structure or otherwise; or any other corporate action that
in the determination of the Administrator affects the capitalization of the
Company.

 

(g)                                “Change
in Control” means the consummation of a transaction or series of
transactions, whereby any Person (other than Charterhouse Equity Partners III
L.P. or any of its affiliates) becomes the “beneficial owner” (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly from the
Company) representing 50% or more of the combined voting power of the Company’s
then outstanding securities; provided
that a Public Offering shall not constitute a Change in Control.

 

(h)                                    “Code”
means the Internal Revenue Code of 1986, as amended from time to time, or any
successor thereto.

 

(i)                                       “Committee”
means any committee or subcommittee the Board may appoint to administer the
Plan. If at any time or to any extent the Board shall not administer the Plan,
then the functions of the Administrator specified in the Plan shall be
exercised by the Committee.  From and
after the consummation of an Initial Public Offering, the composition of the
Committee shall at all times consist solely of persons who are (i) “Nonemployee
Directors” as defined in Rule 16b-3 promulgated under the Exchange Act, and
(ii) unless otherwise determined by the Board, “outside directors” as defined
in section 162(m) of the Code.

 

(j)                                       “Common
Stock” means the common stock, par value $0.01 per share, of the Company.

 

(k)                                     “Company”
means Cellu Paper Holdings, Inc., a Delaware corporation (or any successor
corporation).

 

(l)                                        “Disability”
means (1) any physical or mental condition that would qualify a Participant for
a disability benefit under any long-term disability plan maintained by the
Company; or (2) such other condition as may be determined in the sole
discretion of the Administrator to constitute Disability.

 

2

 

(m)                                  “Eligible
Recipient” means an officer, director, employee, consultant or advisor of
the Company or any of its subsidiaries.

 

(n)                                    “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended from time
to time.

 

(o)                                    “Exercise
Price” means the per share price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

 

(p)                                    “Fair
Market Value” as of a particular date shall mean the fair market value of a
share of Common Stock as determined by the Administrator in its sole
discretion; provided that (i) if
the Common Stock is admitted to trading on a national securities exchange, fair
market value of a share of Common Stock on any date shall be the closing sale
price reported for such share on such exchange on the last day preceding such
date on which a sale was reported, (ii) if the Common Stock is admitted to
quotation on the National Association of Securities Dealers Automated Quotation
(“Nasdaq”) System or other comparable quotation system and has been designated
as a National Market System (“NMS”) security, fair market value of a share of
Common Stock on any date shall be the closing sale price reported for such
share on such system on the last date preceding such date on which a sale was
reported, or (iii) if the Common Stock is admitted to quotation on the Nasdaq
System but has not been designated as an NMS security, fair market value of a
share of Common Stock on any date shall be the average of the highest bid and
lowest asked prices of such share on such system on the last date preceding
such date on which both bid and ask prices were reported.

 

(q)                                    “Incentive
Stock Option” means an option intended to qualify as an “incentive stock
option” within the meaning of section 422 of the Code.

 

(r)                                       “Initial
Public Offering” means an underwritten public offering of Shares by the
Company that is registered with the Securities and Exchange Commission.

 

(s)                                     “Non-Qualified
Stock Option” means an option not intended to be an Incentive Stock Option.

 

(t)                                       “Option”
means an Incentive Stock Option or Non-Qualified Stock Option granted under the
Plan.

 

(u)                                    “Other
Award” means an Award granted pursuant to Section 10.

 

(v)                                    “Participant”
means any Eligible Recipient selected by the Administrator, pursuant to the
Administrator’s authority in Section 3, to receive an Award.

 

(w)                                  “Person”
shall have the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of

 

3

 

such securities, or (iv) a corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.

 

(x)                                     “Public
Offering” means any underwritten public offering of Shares by the Company,
including but not limited to an Initial Public Offering.

 

(y)                                    “Restricted
Stock” means Shares subject to certain restrictions granted pursuant to
Section 8.

 

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

 

(aa)                               “Shares”
means shares of Common Stock and any successor security.

 

(bb)                             “Stockholders
Agreement” means that certain Stockholders Agreement among Charterhouse
Equity Partners III, L.P., Chef Nominees Limited, Wayham Capital, LLC, Cellu
Paper Holdings, Inc. and the other parties thereto, dated as of September 28,
2001.

 

3.                                    Administration.

 

(a)                                     The
Plan shall be administered by the Board or, at the Board’s sole discretion, by
the Committee, which shall serve at the pleasure of the Board. Pursuant to the
terms of the Plan, the Administrator shall have the power and authority,
without limitation:

 

(i)                                     to
select those Eligible Recipients who shall be Participants;

 

(ii)                                  to
determine whether and to what extent Awards are to be granted to Participants;

 

(iii)                               to
determine the number of Shares to be covered by each Award;

 

(iv)                              to
determine the terms and conditions, not inconsistent with the terms of the
Plan, of each Award;

 

(v)                                 to
determine the terms and conditions, not inconsistent with the terms of the
Plan, which shall govern all written instruments evidencing Awards;

 

(vi)                              to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; and

 

4

 

(vii)                           to
interpret the terms and provisions of the Plan and any Award and Award
Agreement, and to otherwise supervise the administration of the Plan.

 

(b)                                    The
Administrator may, in its absolute discretion, without amendment to the Plan,
(i) accelerate the date on which any Option granted under the Plan becomes
exercisable, waive or amend the operation of Plan provisions respecting
exercise after termination of employment or otherwise adjust any of the terms
of such Option, and (ii) accelerate the lapse of restrictions, or waive any
condition imposed hereunder or otherwise adjust any of the terms applicable to
any Award; provided that no action under this Section 3(b) shall adversely
affect any outstanding Award without the consent of the holder thereof.

 

(c)                                     All
decisions made by the Administrator pursuant to the provisions of the Plan
shall be final, conclusive and binding on all persons, including the Company
and the Participants.   No member of the
Board or the Committee, nor any officer or employee of the Company acting on
behalf of the Board or the Committee, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Committee and each and
any officer or employee of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.

 

4.                                     Shares
Reserved for Issuance Under the Plan.

 

(a)                                     The
total number of shares of Common Stock reserved and available for issuance
under the Plan shall be 3,315 Shares. 
Such Shares may consist, in whole or in part, of authorized and unissued
Shares or treasury shares.

 

(b)                                    To
the extent that (i) an Option expires or is otherwise cancelled or terminated
without being exercised, or (ii) any Shares subject to any other Award are
forfeited, the Shares subject to such Award shall again be available for
issuance in connection with future Awards granted under the Plan. If any Shares
have been pledged as collateral for indebtedness incurred by a Participant in
connection with the exercise of an Option and such Shares are returned to the
Company in satisfaction of such indebtedness, such Shares shall again be
available for issuance in connection with future Awards granted under the Plan.

 

(c)                                     From
and after the date that the Plan is intended to comply with the requirements of
Section 162(m) of the Code, the aggregate number of Shares with
respect to which Awards may be granted to any individual Participant during any
fiscal year shall not exceed 3,315.

 

5.                                     Equitable
Adjustments.  In the event of any
Change in Capitalization, an equitable substitution or proportionate adjustment
shall be made in (i) the aggregate number and/or kind of shares of common stock
reserved for issuance under the Plan, (ii) the kind, number and/or purchase
price of shares of stock or other property subject to

 

5

 

outstanding Options granted under the Plan, and (iii) the kind, number
and/or purchase price of shares of stock or other property subject to other
outstanding Awards, in each case as may be determined by the Administrator in
its sole discretion. Such other equitable substitutions or adjustments shall be
made as may be determined by the Administrator in its sole discretion. Without
limiting the generality of the foregoing, in connection with a Change in
Capitalization, the Administrator may provide in its sole discretion for the
cancellation of any outstanding Awards in exchange for payment in cash or other
property having the Fair Market Value of the Shares covered by such Awards, reduced,
if applicable, by the purchase price thereof.

 

6.                                   Eligibility.
The Participants under the Plan shall be selected from time to time by the
Administrator, in its sole discretion, from among Eligible Recipients.  The Administrator shall have the authority
to grant to any Eligible Recipient any type of Award permissible under the
Plan.

 

7.                                   Options.

 

(a)                                     General.   Options may be granted alone or in addition
to other Awards granted under the Plan. The provisions of each Option need not
be the same with respect to each Participant.  
A Participant who is granted an Option shall enter into an Award
Agreement with the Company, in such form as the Administrator shall determine,
which Award Agreement shall set forth, among other things, the Exercise Price
of the Option, the term of the Option and provisions regarding exercisability
of the Option granted thereunder.  The
Options granted under the Plan may be Incentive Stock Options or Non-Qualified
Stock Options.   More than one Option
may be granted to the same Participant and be outstanding concurrently
hereunder.  Options granted under the
Plan shall be subject to the terms and conditions set forth in paragraphs
(b)-(m) of this Section 7 and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator
shall deem desirable.

 

(b)                                    Exercise
Price. The per share Exercise Price of Shares purchasable under an Option
shall be determined by the Administrator in its sole discretion at the time of
grant but shall not be less than 100% of the Fair Market Value per Share on
such date.

 

(c)                                     Option
Term.  The term of each Option shall
be fixed by the Administrator, but no Option shall be exercisable more than ten
years after the date such Option is granted.

 

(d)                                    Exercisability.  An Option shall be exercisable at such time
or times and subject to such terms and conditions, including the attainment of
preestablished corporate performance goals, as shall be determined by the
Administrator in the Award Agreement at or after the time of grant, provided
that no action under this Section 7(d) following the time of grant shall
adversely affect any outstanding Option without the consent of the holder
thereof, and provided, further, that (to the extent required at the time of
grant by California “blue sky” laws), Options granted to individuals other than
officers, directors or consultants of the Company shall be exercisable at the
rate of at least 20% per year over five years from the date of grant. The
Administrator may also provide

 

6

 

that any Option shall be exercisable only in installments, and the
Administrator may waive such installment exercise provisions at any time, in
whole or in part, based on such factors as the Administrator may determine in
its sole discretion.

 

(e)                                     Method
of Exercise.  An Option may be
exercised in whole or in part by giving written notice of exercise to the
Company specifying the number of Shares to be purchased, accompanied by payment
in full of the aggregate Exercise Price of the Shares so purchased in cash or
its equivalent, as determined by the Administrator.   As determined by the Administrator, in its sole discretion,
payment in whole or in part may also be made (i) by means of any broker’s
cashless exercise procedure approved by the Administrator, (ii) in the form of
whole unrestricted Shares or Restricted Stock already owned by the Participant
which, (x) in the case of unrestricted Shares acquired upon exercise of an
Option, have been owned by the Participant for more than six months on the date
of surrender, and (y) have a Fair Market Value on the date of surrender equal
to or less than the aggregate option price of the Shares as to which such
Option shall be exercised, (iii) loans pursuant to paragraph (g) of this
Section 7, (iv) any other form of consideration approved by the Administrator
and permitted by applicable law or (v) any combination of the foregoing.   If payment of the Exercise Price is made in
whole or in part in the form of Restricted Stock, the Shares received upon the
exercise of such Option shall be restricted in accordance with the original
terms of the Restricted Stock Award in question, except that the Administrator
may direct that such restrictions shall apply only to that number of Shares
equal to the number of shares of Restricted Stock surrendered upon the exercise
of such Option.

 

(f)                                       Rights
as Stockholder.    A Participant
shall have no rights to dividends or any other rights of a stockholder with
respect to the Shares subject to an Option until the Participant has given
written notice of exercise, has paid in full for such Shares, has satisfied the
requirements of Section 13 and, if requested, has given the representation
described in paragraph (b) of Section 15.

 

(g)                                    Loans.
The Company may, or may cause one of its subsidiaries to make, loans available
to a Participant for the payment of the exercise price of an outstanding
Option.  Such loans shall (i) be
evidenced by a promissory note entered into by the Participant in favor of the
Company or, if applicable, one of its subsidiaries, (ii) bear interest at the
applicable federal interest rate or such other rate as the Administrator shall
determine, (iii) be subject to such other terms and conditions, not
inconsistent with the Plan, as the Administrator shall determine, and (iv) be
subject to Board approval (or to approval by the Administrator to the extent
the Board may delegate such authority). Unless the Administrator determines
otherwise, when a loan is made, Shares having an aggregate Fair Market Value at
least equal to the principal amount of the loan shall be pledged by the
Participant to the Company as security for payment of the unpaid balance of the
loan, and such pledge shall be evidenced by a pledge agreement, the terms of
which shall be determined by the Administrator, in its sole discretion;
provided that each loan shall comply with all applicable laws, regulations and
rules of the Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.

 

7

 

(h)                                     Nontransferability
of Options. A Participant shall not be permitted to sell, transfer, pledge
or assign any Option other than by will and the laws of descent and
distribution (including by instrument to an inter vivos or testamentary trust
in which the Option is to be passed to beneficiaries upon the death of the
Participant) and any Option shall be exercisable during the Participant’s
lifetime only by the Participant.

 

(i)                                         Termination
of Employment or Service. If a Participant’s employment with or service as
an employee, director, consultant or advisor to the Company and its
subsidiaries terminates for any other reason than Cause, (i) any Option granted
to such Participant, to the extent exercisable at the time of such termination,
shall remain exercisable until the date set forth in the Award Agreement, or
such later date as is otherwise determined by the Administrator, but in no
event shall such exercise period be less than 30 days after the effective date
of such termination (six months in the case of termination by reason of death
or Disability), on which date it shall expire, and (ii) any Option granted to
such Participant, to the extent not exercisable at the time of such termination,
shall expire as of the effective date of such termination. The 30-day period
described in clause (i) of the preceding sentence shall be extended to six
months from the effective date of such termination in the event of the
Participant’s death or Disability during such 30-day period. Notwithstanding
the foregoing, no Option shall be exercisable after the expiration of its term.
In the event of the termination of a Participant’s employment for Cause, all
outstanding Options granted to such Participant shall expire on the date of
such termination.

 

(j)                                         Acceleration
Upon Change in Control. Each Option outstanding at the time of a Change in
Control shall immediately become fully vested and exercisable as of such date
and shall remain fully exercisable throughout its term.

 

8.                                       Restricted
Stock.

 

(a)                                     General.
Awards of Restricted Stock may be issued either alone or in addition to other
Awards granted under the Plan and shall be evidenced by an Award Agreement. The
Administrator shall determine the Eligible Recipients to whom, and the time or
times at which, Awards of Restricted Stock shall be made; the number of Shares
to be awarded; the price, if any, to be paid by the Participant for the
acquisition of Restricted Stock; and the Restricted Period (as defined in
Section 8(d)) applicable to Awards of Restricted Stock. The provisions of Award
Agreements relating to Restricted Stock need not be the same with respect to
each Recipient.

 

(b)                                    Purchase
Price. The price per Share, if any, that a Recipient must pay for Shares
purchasable under an Award of Restricted Stock shall be determined by the
Administrator in its sole discretion at the time of grant.

 

(c)                                     Awards
and Certificates. The Recipient of an Award of Restricted Stock shall not
have any rights with respect to such Award, unless and until such Recipient has
executed an Award Agreement evidencing the Award and delivered a fully executed
copy thereof to the Company, within such period as the Administrator may
specify after the award date.   Each
Participant who is granted an award of Restricted

 

8

 

Stock shall be issued a stock certificate in respect of such shares of
Restricted Stock, which certificate shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award; provided that the Company may require that
the stock certificates evidencing Restricted Stock granted hereunder be held in
the custody of the Company until the restrictions thereon shall have lapsed,
and that, as a condition of any Award of Restricted Stock, the Participant
shall have delivered a stock power, endorsed in blank, relating to the Shares
covered by such Award.

 

(d)                                    Nontransferability.  Awards of Restricted Stock shall be subject
to the restrictions on transferability set forth in this paragraph (d).  During such period as may be set by the
Administrator in the Award Agreement (the “Restricted Period”), the Recipient
shall not be permitted to sell, transfer, pledge, hypothecate or assign shares
of Restricted Stock awarded under the Plan except by will or the laws of
descent and distribution; provided that
the Administrator may, in its sole discretion, provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part based on such factors and such circumstances as the
Administrator may determine in its sole discretion.  The Administrator may also impose such other restrictions and
conditions, including the achievement of preestablished corporate performance
goals, on an Award of Restricted Stock as it deems appropriate. In no event
shall the Restricted Period end with respect to a Restricted Stock Award prior
to the satisfaction by the Participant of any liability arising under Section
13. Any attempt to dispose of any shares of Restricted Stock in contravention
of any such restrictions shall be null and void and without effect.

 

(e)                                     Rights
as a Stockholder.   Except as
provided in Section 8(d), the Participant shall possess all incidents of
ownership with respect to Shares of Restricted Stock during the Restricted
Period, including the right to receive or reinvest dividends with respect to
such Shares and to vote such Shares. 
Certificates for unrestricted Shares shall be delivered to the
Participant promptly after, and only after, the Restricted Period shall expire
without forfeiture in respect of such awards of Restricted Stock except as the
Administrator, in its sole discretion, shall otherwise determine.

 

(f)                                       Termination
of Employment.  The rights of a
Participant who has been granted an Award of Restricted Stock with respect to
such Participant’s termination of employment or service as a director,
consultant or advisor to the Company and its subsidiaries for any reason during
the Restricted Period shall be set forth in the Award Agreement governing such
Award.

 

(g)                                    Loans.   In the sole discretion of the
Administrator, loans may be made to Participants in connection with the
purchase of Restricted Stock under substantially the same terms and conditions
as provided in Section 7(i) of the Plan with respect to the exercise of
Options.

 

(h)                                    Effect
of Change in Control. Each Award of Restricted Stock outstanding at the
time of a Change in Control shall immediately become fully vested and free of
restrictions as of such date.

 

9

 

9.                                     Stock
Bonuses.  In the event that the
Administrator grants a Stock Bonus, a certificate for the shares of Company
Stock comprising such Stock Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such Stock Bonus is payable.

 

10.                               Other
Awards. Other forms of Awards (“Other Awards”) valued in whole or in part
by reference to, or otherwise based on, Common Stock may be granted either
alone or in addition to other Awards under the Plan.   Subject to the provisions of the Plan, the Administrator shall
have sole and complete authority to determine the Eligible Recipients to whom
and the time or times at which such Other Awards shall be granted, the number
of Shares to be granted pursuant to such Other Awards and all other conditions
of such Other Awards.

 

11.                               Amendment
and Termination. The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that would impair the
rights of a Participant under any Award theretofore granted without such
Participant’s consent.   Unless the
Board determines otherwise, the Board shall obtain approval of the Company’s
stockholders for any amendment that would require such approval in order to
satisfy the requirements of section 162(m) or 422 of the Code, stock exchange
rules or other applicable law.  The
Administrator may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 5, no such amendment
shall impair the rights of any Participant without his or her consent.

 

12.                               Unfunded
Status of Plan. The Plan is intended to constitute an “unfunded” plan for
incentive compensation.    With respect
to any payments not yet made to a Participant by the Company, nothing contained
herein shall give any such Participant any rights that are greater than those
of a general creditor of the Company.

 

13.                               Withholding
Taxes.  Whenever cash is to be paid
pursuant to an Award, the Company shall have the right to deduct therefrom an
amount sufficient to satisfy any federal, state and local withholding tax
requirements related thereto.   Whenever
Shares are to be delivered pursuant to an Award, the Company shall have the
right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy any federal, state and local withholding tax requirements
related thereto.   Subject to the
approval of the Administrator, a Participant may satisfy the foregoing
requirement by electing to have the Company withhold from delivery Shares or by
delivering already owned unrestricted Shares, in each case, having a value
equal to the minimum amount of tax required to be withheld. Such Shares shall
be valued at their Fair Market Value on the date as of which the amount of tax
to be withheld is determined. Fractional Share amounts shall be settled in
cash. Such a election (subject to the approval of the Administrator) may be
made with respect to all or any portion of the Shares to be delivered pursuant
to an Award.

 

14.                               Stockholders
Agreement. As a condition to being issued Shares under the Plan, a
Participant shall execute the Stockholders Agreement, which agreement sets
forth such additional terms and conditions to the ownership of Shares as shall
be determined by the Company in its discretion, including but not limited to
the Company’s rights to

 

10

 

repurchase Shares acquired by a Participant through the grant, vesting
or exercise of an Award granted hereunder.

 

15.                                 General
Provisions.

 

(a)                                     Shares
shall not be issued pursuant to the exercise of any Award granted hereunder
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act, the Exchange Act and the requirements
of any stock exchange upon which the Common Stock may then be listed, and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.

 

(b)                                    The
Administrator may require each person acquiring Shares to represent to and
agree with the Company in writing that such person is acquiring the Shares
without a view to distribution thereof.  
The certificates for such Shares may include any legend that the
Administrator deems appropriate to reflect any restrictions on transfer.

 

(c)                                     All
certificates for Shares delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Administrator may deem
advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Common
Stock may then be listed, and any applicable federal or state securities law,
and the Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.

 

(d)                                    Nothing
contained in the Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval, if such approval is
required; and such arrangements may be either generally applicable or
applicable only in specific cases.   The
adoption of the Plan shall not confer upon any Eligible Recipient any right to
continued employment or service with the Company or any Parent or Subsidiary,
as the case may be, nor shall it interfere in any way with the right of the
Company or any of its subsidiaries to terminate the employment or service of
any of its Eligible Recipients at any time.

 

(e)                                     To
the extent applicable, pursuant to the provisions of Section 260.140.46 of
Title 10 of the California Code of Regulations, the Company shall provide to
each Participant and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Participant or
purchaser has one or more awards granted under the Plan outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of the Company’s annual
financial statements. The Company shall not be required to provide such
statements to key employees of the Company whose duties in connection with the
Company assure their access to equivalent information.

 

11

 

(f)                                       To
the extent applicable, the provisions of Sections 260.160.41, 260.140.42 and
260.140.45 of Title 10 of the California Code of Regulations are incorporated
herein by reference.

 

(g)                                    This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware.

 

16.                                 Effective
Date and Term of Plan. The Plan shall be effective as of October 4, 2001
(the “Effective Date”). No Award shall be granted pursuant to the Plan on or
after the tenth anniversary of the Effective Date, but Awards theretofore
granted may extend beyond that date.

 

12

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