Document:

Exhibit 10.1

 

STOCKHOLDERS’ AGREEMENT

 

Dated as
of June 9, 2005

 

among

 

Pathmark Stores, Inc.

 

and

 

The
Investors Identified on the Signature Pages Hereto

 

 

Table of Contents

 

	
  ARTICLE 1

  CERTAIN DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01

  	
  Certain Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  CORPORATE GOVERNANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01

  	
  Composition of the Board

  	
   

  
	
  SECTION 2.02

  	
  Vacancies

  	
   

  
	
  SECTION 2.03

  	
  Committees

  	
   

  
	
  SECTION 2.04

  	
  Certificate of Incorporation and By-Laws to
  Be Consistent

  	
   

  
	
  SECTION 2.05

  	
  Approval of the Investor Group Required for
  Certain Actions

  	
   

  
	
  SECTION 2.06

  	
  Approval of Independent Directors Required
  for Certain Actions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  VOTING OF SHARES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01

  	
  Agreement with Respect to Voting of Common
  Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  STANDSTILL, ACQUISITIONS

  OF SECURITIES AND OTHER MATTERS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01

  	
  Acquisitions of Common Stock

  	
   

  
	
  SECTION 4.02

  	
  No Participation in a Group or Solicitation
  of Proxies

  	
   

  
	
  SECTION 4.03

  	
  Rights to Purchase New Securities

  	
   

  
	
  SECTION 4.04

  	
  Takeover Proposals by the Investor Group

  	
   

  
	
  SECTION 4.05

  	
  Affiliate Transactions

  	
   

  
	
  SECTION 4.06

  	
  Termination of Standstill Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  RESTRICTIONS ON TRANSFERABILITY OF SECURITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01

  	
  General

  	
   

  
	
  SECTION 5.02

  	
  Improper Sale or Encumbrance

  	
   

  
	
  SECTION 5.03

  	
  Restrictive Legends

  	
   

  
	
  SECTION 5.04

  	
  Sales of Significant Interests

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  CORPORATE OPPORTUNITIES AND RELATED MATTERS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01

  	
  Similar Activities or Lines of Business

  	
   

  

 

i

 

	
  ARTICLE 7

  REPRESENTATIONS AND WARRANTIES

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01

  	
  Representations of the Company

  	
   

  
	
  SECTION 7.02

  	
  Representations of the Members of the
  Investor Group

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  CONFIDENTIALITY

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01

  	
  Confidentiality

  	
   

  
	
  SECTION 8.02

  	
  Furnishing of Information

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01

  	
  Termination

  	
   

  
	
  SECTION 9.02

  	
  Notices

  	
   

  
	
  SECTION 9.03

  	
  No Third Party Beneficiaries

  	
   

  
	
  SECTION 9.04

  	
  Expenses

  	
   

  
	
  SECTION 9.05

  	
  Governing Law

  	
   

  
	
  SECTION 9.06

  	
  Waiver of Jury Trial

  	
   

  
	
  SECTION 9.07

  	
  Specific Performance

  	
   

  
	
  SECTION 9.08

  	
  Counterparts

  	
   

  
	
  SECTION 9.09

  	
  Entire Agreement

  	
   

  
	
  SECTION 9.10

  	
  Assignment

  	
   

  
	
  SECTION 9.11

  	
  Amendment

  	
   

  
	
  SECTION 9.12

  	
  Waiver

  	
   

  
	
  SECTION 9.13

  	
  Severability

  	
   

  
	
  SECTION 9.14

  	
  No Partnership

  	
   

  
	
  SECTION 9.15

  	
  Public Announcements

  	
   

  
	
  SECTION 9.16

  	
  Cumulative Remedies

  	
   

  
	
  SECTION 9.17

  	
  Interpretation; Headings

  	
   

  
	
  SECTION 9.18

  	
  Construction

  	
   

  
	
  SECTION 9.19

  	
  Director Duties

  	
   

  
	
  SECTION 9.20

  	
  Investors Rights

  	
   

  

 

ii

 

STOCKHOLDERS’ AGREEMENT

 

This Stockholders’ Agreement (this “Agreement”)
is made as of June 9, 2005, among Pathmark Stores, Inc., a Delaware
corporation (the “Company”), and the Investors identified on the
signature pages hereto (collectively, the “Investors”).

 

RECITALS

 

WHEREAS, the Company and the Investors have entered
into the Securities Purchase Agreement dated as of March 23, 2005 (the “Securities
Purchase Agreement”);

 

WHEREAS, upon consummation of the transactions
contemplated by the Securities Purchase Agreement, the Investors will own an
aggregate of 20,000,000 investment units (“Units”), consisting of an
aggregate of 20,000,000 shares (the “Shares”) of common stock, par value
$0.01 per share, of the Company (the “Common Stock”), 10,060,000 Series A
warrants (the “Series A Investor Warrants”) to purchase additional
shares of Common Stock and 15,046,350 Series B warrants (the “Series B
Investor Warrants”; together with the Series A Investor Warrants, the “Investor
Warrants”) to purchase additional shares of Common Stock (the Units, Shares
and the Investor Warrants are collectively referred to herein as the “Purchased
Securities”);

 

WHEREAS, the parties hereto wish to enter into this
Agreement to set forth their agreement as to the matters set forth herein; and

 

WHEREAS, the execution and delivery of this Agreement
is a condition to the obligations of the Investors and the Company under the
Securities Purchase Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and
the mutual agreements and covenants hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE 1

CERTAIN DEFINITIONS

 

SECTION 1.01                    Certain Definitions.  As used in this Agreement, the following
terms shall have the following respective meanings:

 

“affiliate” means, with respect to a specified person,
a person that directly, or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such specified person.

 

“beneficial owner” (and the related terms “beneficially
owned”, “beneficial owner” and “beneficial ownership”) has
the meaning ascribed to such term in Rule 13d-3 under the Exchange
Act.

 

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

 

 

“By-Laws” means the Amended and Restated By-Laws
of the Company, effective April 16, 2004, as they may hereafter be amended
from time to time.

 

“Cash Equivalents” means (a) marketable
direct obligations issued or unconditionally guaranteed by the United States
government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the
date of acquisition thereof, (b) marketable direct obligations issued by
any state of the United States or any political subdivision of any such state
or any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having the highest rating
obtainable from either Standard & Poor’s Ratings Services or Moody’s
Investors Service, Inc., (c) commercial paper maturing not more than
one year from the date of issuance thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor’s
Ratings Services or Moody’s Investors Service, Inc., (d) certificates
of deposit or bankers’ acceptances maturing within one year from the date of
acquisition thereof issued by any bank organized under the Laws of the United
States or any state thereof having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000, (e) demand deposit
accounts maintained with any bank organized under the Laws of the United States
or any state thereof so long as the amount maintained with any individual bank
is less than or equal to $100,000 and is insured by the Federal Deposit
Insurance Corporation and (f) investments in money market funds
substantially all of whose assets are invested in the types of assets described
in clauses (a) through (e) above.

 

“Certificate of Incorporation” means the Amended
and Restated Certificate of Incorporation of the Company, dated as of September 19,
2000, as it may hereafter be amended from time to time.

 

“Closing” means the closing of the issuance, purchase
and sale of the Units contemplated by the Securities Purchase Agreement.

 

“Commission” means the Securities and Exchange
Commission.

 

“Confidentiality Agreement” means the
Confidentiality Agreement, dated as of January 7, 2005, between an affiliate
of the Investors and the Company.

 

“control” (including the terms “controlled
by” and “under common control with”) means the possession, directly
or indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, as trustee or executor, by contract, credit
agreement or otherwise, including, without limitation, the ownership, directly
or indirectly, of securities having the power to elect a majority of the board
of directors or similar body governing the affairs of such person.

 

“Discriminatory Transaction”  means any corporate action that would (a )
impose material limitations on the legal rights of any member of the Investor
Group as a holder of a class of voting stock, including any action that would
impose material restrictions that are based on the size of security holding, any
business in which a security holder is engaged or any other considerations applicable
to any member of the

 

2

 

Investor Group and not to holders of the same class of
voting stock generally, or (b) deny any material benefit to any member of
the Investor Group proportionately as a holder of any class of voting stock
that is made available to other holders of that same class of voting stock
generally.

 

“Encumbrance” (including correlative terms such
as “Encumber”) means any security interest, pledge, mortgage, lien,
charge, adverse claim of ownership or use, hypothecation, violation, condition
or restriction of any kind or other encumbrance of any kind.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

 

“Fair Market Value” means, for any applicable
measurement date, the closing price of the Common Stock on Nasdaq or, in the
event that trading hours on Nasdaq are extended past 4:00 p.m. New York
Time, the last sale price at 4:00 p.m. New York Time.

 

“Fully Diluted Basis” means, in respect of the
Common Stock or warrants to purchase shares of Common Stock, the method of
calculating the number of shares of Common Stock outstanding on an applicable
measurement date, pursuant to which the following shares shall be deemed to be
outstanding:  (i) all shares of
Common Stock outstanding on such measurement date and (ii) all shares of
Common Stock issuable pursuant to any stock options of the Company or warrants
outstanding at such time which are or may become exercisable (assuming all
other conditions to or limitations on such exercise were satisfied) for shares
of Common Stock at an exercise price at or below the then current Fair Market
Value of the Common Stock.

 

“Geographic Region” means the States of Maine,
New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New
Jersey, Pennsylvania, Delaware, Maryland and Virginia and the District of
Columbia.

 

“group” means a “group” within the meaning of Section 13(d)(3) of
the Exchange Act.

 

“Independence Standard” means the standard of
independence necessary for a director to qualify as an “Independent Director”
as such term (or any replacement term) is used under the rules and listing
standards of Nasdaq as such rules and listing standards may be amended
from time to time.

 

“Investor Designated Director” means such
person as is so designated by the Investors prior to the Closing, or the Investor
Group after the Closing, from time to time in accordance with this Agreement,
to serve as a member of the Board and who is elected or appointed to serve as a
member of the Board pursuant to Section 2.01 hereof.

 

“Investor Group” means the Investors and any
Permitted Transferee of the Investors that has become a party to this Agreement
in accordance with the provisions of Section 5.01(c) hereof.

 

“Law” means any statute, law, ordinance,
regulation, rule, code, executive order, injunction, judgment, decree or other
order issued or promulgated by any national, supranational, state, federal,
provincial, local or municipal government or any administrative or regulatory
body with authority therefrom with jurisdiction over the Company or any member
of the Investor Group, as the case may be (including any requirements under the
Exchange Act).

 

3

 

“Management Agreement” means the Management
Agreement dated as of March 23, 2005, between the Company and an affiliate
of the Investors, as it may hereafter be amended from time to time.

 

“Marketable Securities” means securities that
are (a) (i) securities of or other interests in any person that are
traded on a United States national securities exchange or quoted on the Nasdaq
Stock Market or (ii) debt securities on market terms of an issuer that has
debt or equity securities that are so traded or so reported on and in which
Marketable Securities a nationally recognized securities firm has agreed to
make a market, and (b) not subject to restrictions on transfer as a result
of any applicable contractual provisions or the provisions of the Securities
Act or, if subject to such restrictions under the Securities Act, are also
subject to registration rights reasonably acceptable to the person receiving
such Marketable Securities as consideration in a transaction pursuant to Section 4.03.

 

“Nasdaq” means The Nasdaq Stock Market, Inc.

 

“Nasdaq Regulation” means the rules and
regulations of Nasdaq or any other applicable securities exchange on which the
Common Stock is then listed.

 

“New Securities” means any capital stock of the
Company, whether now authorized or not, and rights, options or warrants to
purchase such capital stock, and securities of any type whatsoever (including,
without limitation, convertible debt securities) that are, or may become,
convertible into or exchangeable or exercisable for capital stock of the
Company; provided that the term “New Securities”
does not include (i) capital stock or rights, options or warrants to
acquire capital stock of the Company issued to the employees, consultants,
officers or directors of the Company, or which have been reserved for issuance,
pursuant to employee stock option, stock purchase, stock bonus plan, or other
similar compensation plan or arrangement approved by the Board, (ii) securities
of the Company issued to all then-existing stockholders in connection with any
stock split, stock dividend, reclassification or recapitalization of the
Company, (iii) securities of the Company issued upon the exercise of
warrants that are outstanding as of the date of this Agreement, (iv) securities
of the Company issued in connection with a transaction of the type described in
Rule 145 under the Securities Act, and (v) securities of the Company
issued pursuant to a bona fide underwritten public offering.

 

“Permitted Transferee” means, with respect to a
specified person, any affiliate of such person, provided
that such person is not a Restricted Person.

 

“person” means any individual, corporation,
partnership, limited partnership, limited liability company, syndicate, person
(including, without limitation, a “person” or “group” within the meaning of Section 13(d)(3) of
the Exchange Act), trust, association, or entity or government, political
subdivision, agency or instrumentality of government.

 

The terms “register,” “registered” and “registration”
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement by the Commission.

 

4

 

“Related Agreements” means the Securities
Purchase Agreement and the Management Agreement, together with that certain Registration
Rights Agreement and that certain Warrant Agreement among the parties hereto and
dated as of the date hereof.

 

“Representative” means, as to any person, such person’s
affiliates and its and their directors, officers, employees, agents, advisors
(including, without limitation, financial advisors, counsel and accountants)
and such person’s financing sources.

 

“Restricted Person” means any person that
derives at least 20% of its consolidated revenues from the operation by it of
retail supermarkets which are located in the Geographic Region.

 

“Rule 144” means Rule 144 (or any
successor provisions) under the Securities Act.

 

“Sale” means, in respect of any Common Stock,
Investor Warrants, or any other voting capital stock, any sale, assignment,
transfer, distribution or other disposition thereof or of a participation
therein, or other conveyance of legal or beneficial interest therein, or any
short position in a security or any other action or position otherwise reducing
risk related to ownership through hedging or other derivative instruments,
whether voluntarily or by operation of Law.

 

“Securities Act” means the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.

 

“Sell” and “Sold” means to complete a
Sale.

 

“subsidiary” or “subsidiaries” of any person
means any corporation, partnership, limited liability company, joint venture,
association or other legal entity of which such person (either alone or
together with any other subsidiary) owns, directly or indirectly, more than 50%
of the stock or other equity interests, the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.

 

A “Substantial Portion” of any person means, as
of any date of determination, more than 10% of the total consolidated assets of
such person and its subsidiaries as of the end of its most recent fiscal
quarter ending prior to the date of such determination.

 

Each of the following terms is defined in the Section set
forth opposite such term:

 

	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Change of Control
  Proposal

  	
   

  	
  4.04

  
	
  Common Stock

  	
   

  	
  Recitals

  

 

5

 

	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Company

  	
   

  	
  Preamble

  
	
  Confidential
  Information

  	
   

  	
  8.01(b)

  
	
  Covered Securities

  	
   

  	
  5.01(a)

  
	
  Credit Facility

  	
   

  	
  2.05(f)

  
	
  Independent Directors

  	
   

  	
  2.01(a)

  
	
  Initial Restricted
  Period

  	
   

  	
  5.01(a)

  
	
  Investor Warrants

  	
   

  	
  Recitals

  
	
  Investors

  	
   

  	
  Preamble

  
	
  Notice of Issuance

  	
   

  	
  4.03(b)

  
	
  Purchased Securities

  	
   

  	
  Recitals

  
	
  Securities Purchase
  Agreement

  	
   

  	
  Recitals

  
	
  Series A Investor
  Warrants

  	
   

  	
  Recitals

  
	
  Series B Investor
  Warrants

  	
   

  	
  Recitals

  
	
  Shares

  	
   

  	
  Recitals

  
	
  Special Committee

  	
   

  	
  4.04(b)

  
	
  Subsidiary Board

  	
   

  	
  2.01(f)

  
	
  Units

  	
   

  	
  Recitals

  
	
   

  	
   

  	
   

  

 

ARTICLE 2

CORPORATE GOVERNANCE

 

SECTION 2.01                                Composition of the
Board.  (a)  Immediately after
the Closing, the By-Laws shall be amended to provide that the authorized number
of directors comprising the Board shall be eleven, unless changed in accordance
with the provisions of this Agreement and the By-Laws.  The Board shall initially be composed of (i) five
directors, who shall be designated by the Investors prior to the Closing in
accordance with Section 6.08 of the Securities Purchase Agreement and Section 9.20
of this Agreement, and (ii) up
to six directors, who shall be designated by the Board prior to the Closing in
accordance with Section 6.08 of the Securities Purchase Agreement and who
are individuals who comply with the Independence Standards (together with their
successors elected in accordance with Section 2.02, the “Independent
Directors”).  In the event that,
immediately after the Closing, there are less than six Independent Directors,
the vacancies shall be filled in the manner set forth in Section 2.02,
except that the individual(s) selected shall be subject to the consent of the Investor
Group, which consent shall not be unreasonably withheld.  The Investor Designated Directors and the
Independent Directors shall serve in a manner consistent with the terms of the
Certificate of Incorporation and By-Laws.

 

(b) From and after the Closing, the
parties hereto shall use all reasonable efforts under applicable Law and Nasdaq
Regulations to cause there to be (i) so long as the Investor
Group beneficially owns 30% or more of the Common Stock, a number of Investor
Designated Directors that is one less than the majority of the number of
then-authorized directors of the Board; (ii) so long as the Investor
Group beneficially owns less than 30% but 20% or more of the Common Stock, a
number of Investor Designated Directors that is two less than the majority of
the number of then-authorized directors of the

 

6

 

Board;
and (iii) so long as the Investor Group beneficially
owns less than 20% but 10% or more of the Common Stock, a number of Investor
Designated Directors that is three less than a majority of the number of
then-authorized directors of the Board.  In
the event that, at any time, the number of Investor Designated Directors then
in office exceeds the number set forth in the preceding sentence, at the
request of the majority of the Independent Directors then in office, an
appropriate number of Investor Designated Directors shall resign from
office.  In the event the Investor
Group beneficially owns less than 10% of the Common Stock, the Investor
Group shall have no right to designate any Investor Designated Director, and,
at the request of a majority of the Independent Directors then in office, shall
cause any Investor Designated Directors then in office to resign immediately
upon such event.  For purposes of the
calculations of the percentages set forth in this Section 2.01(b), any
shares of voting equity securities issued after the date of this Agreement (other
than shares of Common Stock issued upon exercise of the Investor Warrants) shall
not be included in the computations of beneficial ownership for purposes of
this Section 2.01(b).

 

(c) At each stockholders’ meeting of the
Company at which directors will be elected, the Investor
Group shall be entitled, any time prior to the mailing of the applicable proxy
statement of the Company, to propose and nominate that number of Investor Designated
Directors as set forth in Section 2.01(b) as members of the
Board.  The Independent Directors to be
nominated and elected at any such stockholders’ meeting shall be nominated by a
majority of the Independent Directors then in office.  The Company and the Board will include the
persons so nominated by the members of the Investor
Group and the Independent Directors in each slate of directors proposed,
recommended or nominated for election by the Company or the Board and will
recommend and use all reasonable efforts to cause the election of such persons nominated.  The Company agrees to use all reasonable
efforts to solicit proxies for such nominees for director from all holders of
voting stock entitled to vote thereon. 
Such nominees shall serve in a manner consistent with the terms of the
Certificate of Incorporation and By-Laws.

 

(d) To the extent required by Nasdaq
Regulations, those members of the Board that are not Investor Designated
Directors shall at all times satisfy the Independence Standard.

 

(e) The Board shall take all necessary
action, including amending the By-Laws, to provide that at every meeting of the
Board, a majority of the directors constituting all of the then-authorized
total number of directors shall constitute a quorum.

 

(f) At any time after the Closing, upon
the request of the Investor Group, the
Company and the Board shall take all actions necessary so that the composition
of the board of directors, general partner, managing member (or controlling
committee thereof) or any other board or committee serving a similar function
with respect to each of the Company’s subsidiaries (each a “Subsidiary Board”)
and each committee of each Subsidiary Board shall be proportionate to the
composition requirements of the Board and of each committee thereof such that members
of the Investor Group shall have the same proportional
representation (rounded to the nearest whole number of directors, but in no
event less than one) on each Subsidiary Board and committee thereof as the members
of

 

7

 

the
Investor Group have the right to designate to the
Board and committees thereof.  The quorum
and action requirements of each Subsidiary Board and of each committee of each
Subsidiary Board shall, to the extent requested by the Investor
Group, be the same as the quorum and action requirements of the Board and each
committee thereof.

 

SECTION 2.02                    Vacancies.  In the event of any vacancy for any reason in
any Board seat reserved for Investor Designated Directors, the Investor Group
shall have the sole right to nominate another individual to serve as an
Investor Designated Director.  In the
event of any vacancy for any reason in any Board seat reserved for Independent
Directors, a majority vote of the Independent Directors then in office shall
have the sole right to nominate another individual to serve as an Independent
Director, so long as he or she complies with the Independence Standard, and
such new director, when appointed or elected, shall be an Independent Director
for purposes of this Agreement.  In each
case, to the extent permitted by the Certificate of Incorporation and By-Laws,
the Board shall elect each such person so nominated as soon as possible after
the occurrence of the nomination to fill such vacancy.  No Investor Designated Director shall be
removed as a director of the Company without cause, without the approval of a
majority of the other Investor Designated Directors then in office.  No Independent Director shall be removed as a
director of the Company without cause, without the approval of a majority of
the other Independent Directors then in office.

 

SECTION 2.03                    Committees.  (a)  At Closing, the Board shall have such
committees as may be required by Law or Nasdaq Regulation, and such other committees
as the Board may from time to time establish. 
Each such committee and the Board shall take all actions necessary so
that each such committee shall be comprised of not less than three
directors.  To the extent permitted by Nasdaq
Regulation, and subject to Section 2.03(b), a number of Investor
Designated Directors equal to one less than a majority of all directors serving
on each committee shall be appointed to such committee.

 

(b) To the extent that no Investor
Designated Director is permitted under Nasdaq Regulations to serve on a
particular committee of the Board, the Company and the Board shall take all
necessary action to permit at least one Investor Designated Director to attend
each meeting of such committee as a non-voting observer, in each case to the
extent permitted by such Nasdaq Regulation, and such observer shall be provided
with such notice of the meeting and information regarding the meeting as is
provided to members of such committee.

 

SECTION 2.04                    Certificate of Incorporation and
By-Laws to Be Consistent.  The Board
shall take or cause to be taken all lawful action necessary or appropriate to
ensure that none of the Certificate of Incorporation or the By-Laws or any of
the corresponding constituent documents of the Company’s subsidiaries contain
any provisions inconsistent with this Agreement or which would in any way
nullify or impair the terms of this Agreement or the rights of the Company or
of the Investor Group hereunder.

 

SECTION 2.05                    Approval of the Investor Group Required
for Certain Actions.  In addition to
any approval by the Board required by the Certificate of Incorporation, the
By-Laws, applicable Law or Nasdaq Regulation, the prior written approval of the

 

8

 

Investor Group shall be
required in order for the Board to validly approve and authorize any of the
following:

 

(a) the entry by the Company or any of
its subsidiaries into any merger or consolidation, or the acquisition (whether
by merger, consolidation, purchase of assets or stock or otherwise) by the
Company or any of its subsidiaries of any business or assets, if the value of
the consideration to be paid or received by the Company and/or its stockholders
in any such individual transaction, or in such transaction when added to the
aggregate value of the consideration paid or received by the Company and/or its
stockholders in all other such transactions approved by the Board during the
preceding 12 months, exceeds a Substantial Portion of the Company;

 

(b) the authorization or issuance of any
equity securities or any securities convertible into or exercisable for equity
securities of the Company or any subsidiary of the Company (other than options
or warrants outstanding on the date of this Agreement or pursuant to employee or
director stock option or incentive compensation or similar plans approved by
the Board or a duly authorized committee of the Board after the date of this
Agreement, including by at least one of the Investor Designated Directors on
such Board or committee);

 

(c) any sale, asset exchange, lease,
exchange, mortgage, pledge, transfer or other disposition by merger or
otherwise by the Company or any of its subsidiaries (in one transaction or a
series of related transactions) of any securities or assets of the Company or
any subsidiary thereof which constitutes a Substantial Portion of the Company;

 

(d) any amendment to the Certificate of
Incorporation or By-Laws, or the adoption of or amendment to the certificate of
incorporation or by-laws of any subsidiary of the Company;

 

(e) any change in the authorized number
of directors of the Board of the Company or the establishment or abolition of
any Board Committee;

 

(f) any incurrence or repayment (prior
to scheduled maturity) of indebtedness (including capitalized leases) in an
aggregate amount greater than $10,000,000, except for borrowings under the
Company’s existing amended and restated credit facility dated as of October 1,
2004 (the “Credit Facility”) as such Credit Facility may be amended,
restated, refinanced or replaced, in whole or in part, from time to time with
the prior written approval of the Investor
Group;

 

(g) any action to repurchase, retire,
redeem or otherwise acquire any equity securities of the Company or any subsidiary
of the Company, pursuant to self-tender offers, stock repurchase programs, open
market transactions, privately-negotiated purchases or otherwise;

 

(h) the entry by the Company or any of
its subsidiaries into any Discriminatory Transaction;

 

9

 

(i) take any action to declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock or enter into
any agreement with respect to the voting of its capital stock;

 

(j) any appointment or termination of any person
as the Chief Executive Officer, President or Chief Financial Officer of the
Company; or

 

(k) any action to adopt, propose to adopt, or
maintain any shareholders’ rights plan, “poison pill” or other similar plan or
agreement (or any other plan or arrangement that could reasonably be expected
to disadvantage any stockholder on the basis of the size or voting power of its
shareholding).

 

The Company shall not, and shall not permit any of its
subsidiaries to, take any of the actions specified above without the Investor
Group approvals required above. Notwithstanding the foregoing, no approval of
the Investor Group shall be required for the Board to approve or authorize (a) the
payment of any dividend or the making of any other distributions by any
subsidiary of the Company to the Company or another subsidiary of the Company, (b) the
payment by any subsidiary of the Company of any indebtedness owed to the
Company, (c) the making of any loans by, or advances from, any subsidiary
of the Company to the Company, or (d) the transfer by any subsidiary of
the Company of any of its property or assets to the Company.

 

SECTION 2.06                    Approval of Independent
Directors Required for Certain Actions. 
In addition to any approval by the Board required by the Certificate of
Incorporation, the By-Laws, applicable Law or Nasdaq Regulations, the vote of
at least one of the Independent Directors then in office shall be required in
order for the Board to approve and authorize any action; provided,
however,  that, at any time
when the number of Independent Directors then in office on the Board is five or
more, the vote of at least two of the Independent Directors then in office
shall be required in order for the Board to approve and authorize any of the
following actions:

 

(a) any amendment to the certificate of
incorporation or by-laws, or the adoption of or amendment to the certificate of
incorporation or by-laws of any subsidiary of the Company (other than to file any
amendment that would increase the amount of the Company’s authorized Common Stock or one or more certificates of designation to establish
one or more series of preferred stock);

 

(b) any change in the authorized number
of directors of the Board or the establishment or abolition of any Board committee;

 

(c) the entry by the Company or any of
its subsidiaries into any merger or consolidation, or the acquisition (whether
by merger, consolidation, purchase of assets or stock or otherwise) by the
Company or any of its subsidiaries of any business or assets, if the value of
the consideration to be paid or received by the Company and/or its subsidiaries
and/or the Company’s stockholders in any such transaction exceeds $100 million;

 

10

 

(d) take any action to declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock or enter into
any agreement with respect to the voting of it’s capital stock;

 

(e) any incurrence of indebtedness
(including capitalized leases) which would, when combined with all other
indebtedness of the Company and its subsidiaries then outstanding, as reflected
on the most recent available consolidated balance sheet of the Company plus
indebtedness incurred after the date of such balance sheet, exceed $750 million
in the aggregate; and

 

(f) any action to repurchase, retire,
redeem or otherwise acquire any equity securities of the Company or any subsidiary
of the Company, pursuant to self- tender offers, stock repurchase programs,
open market transactions, privately negotiated purchases or otherwise to the
extent that the aggregate payments made by the Company therefor after the date
of this Agreement exceed $100 million.

 

Notwithstanding the foregoing, no approval of any
Independent Directors shall be required for the Board to approve or authorize (a) the
payment of any dividend or the making of any other distributions by any
subsidiary of the Company to the Company or another subsidiary of the Company, (b) the
payment by any subsidiary of the Company of any indebtedness owed to the
Company, (c) the making of any loans by, or advances from, any subsidiary
of the Company to the Company, or (d) the transfer by any subsidiary of
the Company of any of its property or assets to the Company.

 

ARTICLE 3

VOTING OF SHARES

 

SECTION 3.01                                Agreement with
Respect to Voting of Common Stock.  (a) 
In any election of directors at a meeting of the stockholders of the Company,
the Investor Group shall cause all shares of Common Stock held by them to be
represented at such meeting either in person or by proxy and shall vote their
shares of voting stock for all nominees nominated by the Independent Directors,
in proportion to the votes cast by the holders of Common Stock (other than the Investor
Group); provided, however, that, in their sole
and absolute discretion, the Investor Group shall be permitted to cast a
greater number of votes held by them in excess of such proportion in favor of the
nominees nominated by the Independent Directors.

 

(b) With respect to all matters
submitted to a vote of holders of Common Stock (except as provided in
Sections 3.01(a)), the Investor Group may vote,
or abstain from voting, or fail to vote, some or all shares of Common Stock
held by them, in their sole and absolute discretion.

 

(c) The Investor
Group shall not execute any written consent pursuant to Section 228 of the
Delaware General Corporation Law as to any shares beneficially owned by them,
except for any written consent approved by a majority of the Independent
Directors.

 

11

 

ARTICLE 4

STANDSTILL, ACQUISITIONS

OF SECURITIES AND OTHER MATTERS

 

SECTION 4.01                    Acquisitions of Common Stock.  After the Closing and until the fifth anniversary
thereof, without the prior approval of a majority of the Independent Directors
then in office, the Investor Group shall not purchase or otherwise acquire,
directly or indirectly, beneficial ownership of any shares of Common Stock such
that the aggregate beneficial ownership of the Investor Group, after giving
effect to any such acquisition, is in excess of 49.9% (or such greater percentage
as the Investor Group may beneficially own immediately following the exercise,
in whole or in part, of the Series B Investor Warrants) of the Common
Stock of the Company, except (i) by way of stock splits, stock dividends, reclassifications,
recapitalizations, or other distributions by the Company to holders of the Common
Stock, (ii) pursuant to the exercise of the Investor Warrants in
accordance with the terms thereof, (iii) by acquisition of any New
Securities pursuant to Section 4.03, or (iv) pursuant to Section 4.04.

 

SECTION 4.02                    No Participation in a Group or
Solicitation of Proxies.  Except for actions
permitted by, or taken in compliance with, Sections 4.01, 4.03 and 4.04
and its exercise of rights pursuant to the provisions of this Agreement, the Investor
Group agrees that, prior to the fifth anniversary of the Closing, it will not,
without the prior approval of a majority of the Independent Directors then in
office, directly or indirectly:

 

(a) acquire, offer to acquire, or agree
to acquire, directly or indirectly, by purchase or otherwise, any securities or
direct or indirect rights to acquire any securities of the Company or any subsidiary
thereof, or of any successor to or person in control of the Company, or any
assets of the Company or any division thereof or of any such successor or
Controlling Person;

 

(b) make or in any way participate,
directly or indirectly, in any “solicitation” of “proxies” (as such terms are
used in the rules of the Commission) to vote any voting securities of the
Company or any subsidiary thereof; provided, however, that
the prohibition in this Section 4.02(b) shall not apply to solicitations
exempted from the proxy solicitation rules by Rule 14a-2 under
the Exchange Act or any successor provision;

 

(c) submit to the Board a written proposal
for or offer of (with or without conditions), any merger, recapitalization,
reorganization, business combination or other extraordinary transaction
involving the Company or any subsidiary thereof or any of their securities or
assets, or make any public announcement with respect to such a proposal or
offer;

 

(d) enter into any discussions,
negotiations, arrangements or understandings with any third party (other than
any person that would be a Permitted Transferee) with respect to any of the
foregoing, or otherwise form, join or in any way engage in discussions relating
to the formation of, or participate in, a group with any third party (other
than any person that would be a Permitted Transferee), in connection with any
of the foregoing; or

 

12

 

(e) request the Company or any of its
Representatives, directly or indirectly, to amend or waive any provision of
this paragraph (including this sentence);

 

provided, however, that none of
the foregoing (i) shall prevent, restrict, Encumber or in any way limit
the exercise of the fiduciary rights and obligations of any Investor Designated
Director as a director or prevent, restrict, Encumber or in any way limit the
ability of any Investor Designated Director to vote on matters, influence officers,
employees, agents, management or the other directors of the Company, take any
action or make any statement at any meeting of the Board or any committee
thereof, or otherwise to act in their capacity as directors; (ii) shall
prevent any member of the Investor Group from Selling any Covered Securities
held by it or voting its Common Stock; (iii) shall apply to or restrict
any discussions or other communications between or among directors, members, officers,
employees or agents of any member of the Investor Group or any affiliate
thereof; (iv) shall prohibit any member of the Investor Group from
soliciting, offering, seeking to effect or negotiating with any person with
respect to transfers of Covered Securities otherwise permitted by Section 5.01
or (v) restrict any disclosure or statements required to be made by any Investor
Designated Director or the Investor Group under applicable Law or Nasdaq
Regulation.

 

SECTION 4.03                    Rights to Purchase New
Securities.  (a)  In the event
that the Company proposes to issue New Securities, each member of the Investor
Group shall have the right to purchase, in lieu of the person to whom the
Company proposed to issue such New Securities, in accordance with paragraph (b) below,
a number of New Securities equal to the product of (i) the total number or
amount of New Securities which the Company proposes to issue at such time and (ii) a
fraction, the numerator of which shall be the total number of shares of Common
Stock which such member owns at such time on a Fully Diluted Basis, and the
denominator of which shall be the total number of shares of Common Stock then
outstanding on a Fully Diluted Basis.

 

(b) In the event that the Company
proposes to undertake an issuance of New Securities, it shall give written
notice (a “Notice of Issuance”) of its intention to each of the members
of the Investor Group, describing the material terms of
the New Securities, including the price thereof, and the material terms upon
which the Company proposes to issue such New Securities.  The members of the Investor
Group shall have 30 days from the date of receipt of the Notice of Issuance to
agree to purchase all or a portion of such member’s pro rata share of such New
Securities (as determined pursuant to paragraph (a) above) for the same
consideration, if such proposed consideration shall consist solely of cash, or,
if such consideration consists of property or assets other than cash, for cash,
Cash Equivalents or Marketable Securities having an equivalent value (as
reasonably determined by a majority of the Independent Directors) to the consideration
payable by the person to whom the Company proposes to issue such New Securities
at the time of payment, and otherwise upon the terms specified in the Notice of
Issuance by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased by such member of the Investor
Group and the allocation of such New Securities among the members.  The rights given by the Company under this Section 4.03(b) shall
terminate if unexercised within 30 days after receipt of the Notice of Issuance
referred to in this paragraph (b).

 

13

 

(c) The Company and each member of the Investor
Group, if it elects to purchase the New Securities to be sold by the Company,
shall select a date not later than 20 days (or longer if required by Law) after
the expiration of the 30-day notice period referenced in Section 4.03(b) for
the closing of the purchase and sale of the New Securities.  In the event any purchase by the members of
the Investor Group is not consummated, other than as a
result of the fault of the Company, within the provided time period, the
Company may issue the New Securities subject to purchase by such member free
and clear from the restrictions under this Section 4.03.  Any New Securities not elected to be
purchased by such members may be sold by the Company to the person to which the
Company intended to sell such New Securities on terms and conditions no less
favorable to the Company than those offered to such members.

 

SECTION 4.04                    Takeover Proposals by the Investor
Group.  No member of the Investor
Group shall, without the prior approval of a majority of the Independent
Directors then in office, submit a proposal to acquire a majority of the Common
Stock owned by persons other than the Investor Group (a “Change of Control
Proposal”) to any person unless either of the following conditions are
satisfied:

 

(a) The Change of Control Proposal shall
contemplate either (i) a tender offer for all outstanding shares of Common
Stock not owned by the Investor Group and must
be conditioned upon a majority of such Common Stock not owned by the Investor
Group being tendered, or (ii) a merger, combination, asset sale or other
similar transaction which conditioned upon the holders of a majority of the
Common Stock not owned by the Investor Group present,
in person or by proxy, at a meeting of stockholders, voting in favor of such
transaction.  In the case of either (i) or
(ii), the same consideration must be offered to all of the Company’s stockholders
(other than the Investor Group); or

 

(b) The Change of Control Proposal shall
contemplate that a special committee of the Board shall be created consisting only
of the Independent Directors (the “Special Committee”), the Special
Committee shall retain a nationally recognized investment banking firm to
advise the Special Committee with respect to the fairness of the Change of
Control Proposal to the stockholders of the Company (other than the Investor
Group), and the Change of Control Proposal shall be approved by the Special
Committee, which shall not give its approval unless it has received an opinion
from such investment banking firm that the Change of Control Proposal is fair,
from a financial point of view, to the stockholders of the Company other than any
member of the Investor Group.

 

SECTION 4.05                    Affiliate Transactions.  No member of the Investor Group shall engage
in any transaction with the Company without the prior approval of a majority of
the Independent Directors then in office;  provided, however, that the
foregoing provision shall not apply to any transactions contemplated by this
Agreement or any of the Related Agreements or to any transactions involving the
purchase or sale of goods or services in the ordinary course of business which
are consistent with guidelines adopted by the Board from time to time and
approved by a majority of the Independent Directors then in office.

 

14

 

SECTION 4.06                    Termination of Standstill
Provisions.  The provisions of
Sections 4.01, 4.02 and 4.04 of this Agreement shall terminate without any
further action by any party upon the earlier of:

 

(i)                                     180 days after such time as the Investor Group beneficially owns less than 10%
of the outstanding Common Stock of the Company;

 

(ii)                                  such date as the Board determines to
solicit, or publicly announces, whether by press release, filing with the
Commission or otherwise, its intention to solicit, an Acquisition Proposal (as
defined in the Securities Purchase Agreement);

 

(iii)                               such date as the Board publicly
approves, accepts, authorizes or recommends to the Company’s stockholders their
approval of, or their conveyance of any Common Stock or other securities
pursuant to, any Acquisition Proposal;

 

(iv)                              such date that the Company or any
affiliate thereof has entered into a letter of intent, agreement in principle,
definitive agreement, or any other agreement with any party, with respect to an
Acquisition Proposal for the Company;

 

(v)                                 such date that any person or group,
other than the Investor
Group or any of its affiliates, shall have acquired or announced its intention
to acquire, including by commencement of a tender offer or exchange offer) beneficial
ownership of 20% of the Company’s outstanding Common Stock;

 

(vi)                              such date as the Company, the Board
or any committee of the Board takes any action, or fails to take appropriate
action, which action, or failure to take action, results in a breach of any
provision of Section 2.05; and

 

(vii)                           such date as the Company breaches
this Agreement in that the number of Investor Designated Directors on the
Board, any committee thereof or on any subsidiary Board or any committee
thereof, is less than the number of directors to which the Investor Group is entitled at such time
pursuant to Article 2, subject to notice from the members of the Investor Group and the expiration of a 30-day
period in which to cure such action or failure to act (if such action or
failure to act is reasonably capable of being cured).

 

ARTICLE 5

RESTRICTIONS ON TRANSFERABILITY OF SECURITIES

 

SECTION 5.01                    General.  (a)  Each member of the Investor Group
understands and agrees that the shares of Common Stock acquired pursuant to the
Securities Purchase Agreement have not been registered and are restricted
securities under the Securities Act. 
During the period ending six months after the Closing (the “Initial
Restricted Period”), no member of the Investor Group shall make or solicit
any Sale of, or create, incur or assume any Encumbrance with respect to, the
Units, the Investor Warrants or any shares of Common Stock now owned or
hereafter acquired by it (collectively, the “Covered Securities”); provided, however, that members of the

 

15

 

Investor
Group may, during the Initial Restricted Period, make or solicit a Sale to a
Permitted Transferee or as described in clauses (v), (vii) and (viii) below.

 

(b) After the Initial Restricted Period
(other than with respect to clauses (v), (vii) and (viii) below which
may occur at any time), each member of the Investor Group agrees that neither
it nor any of its affiliates will make any Sale of, or create, incur or assume
any Encumbrance with respect to, any of the Covered Securities except for a
Sale:

 

(i)                                     in compliance with Rule 144
under the Securities Act;

 

(ii)                                  (x) 
pursuant to a bona fide public offering registered under the Securities
Act, or

 

(y) in one or more block trades or privately
negotiated transactions exempt from the registration requirements of the
Securities Act;

 

provided, however, that in each case no Sale under
this clause (ii) is made, to the actual knowledge of such member of the Investor
Group (without inquiry in the case of a Sale pursuant to the preceding clause
(x)) to any person or group that, after giving effect to such Sale, would have
beneficial ownership of Common Stock representing more than 5% of the voting
power of the Company’s outstanding capital stock (except that, in the case of a
transfer to a person specified in Rule 13d-1(b)(1)(ii) promulgated
under the Exchange Act that would be eligible based on such person’s status and
passive intent with respect to the ownership, holding and voting of such
Covered Securities to report such person’s ownership of Covered Securities on Schedule 13G
(assuming such person owned a sufficient number of such Covered Securities to
require such filing), no Sale under this clause (ii) is made to any such
person that, after giving effect to such Sale, would have beneficial ownership
of Covered Securities representing 10% or more of the voting power of the
Company’s outstanding capital stock); and, provided,
further, that in the case of any Sale in an underwritten public
offering pursuant to clause (x) above, the members of the Investor Group shall
be deemed to have fulfilled their obligations hereunder if they have instructed
the underwriter(s) of such offering to use their reasonable efforts to prevent
any purchase of Covered Securities in such offering by any person or group that
would, upon such purchase, exceed the foregoing thresholds, as applicable;

 

(iii)                               to Permitted Transferees in
accordance with Section 5.01(c) hereof;

 

(iv)                              of 15% or less of the Common Stock
on a Fully Diluted Basis to any person, other than any person which is a
Restricted Person in a Sale in which the certificates representing such Covered
Securities issued to the transferee (x) bear the legend provided in Section 5.03(a),
if required by such Section and (y) the transferee (if

 

16

 

not already a party hereto) has executed and
delivered to the Company, as a condition precedent to such Sale, an instrument
or instruments, reasonably acceptable to the Company, confirming that such
transferee agrees to be bound by the obligations of such member of the Investor
Group under this Agreement.

 

(v)                                 transfers (i) pursuant to any
business combination, tender or exchange offer to acquire Common Stock or other
extraordinary transaction that the Board has recommended, or (ii) pursuant
to a tender or exchange offer that the Board has not recommended but only after
such time as a majority of the shares of Common Stock outstanding (other than
those owned by the Investor Group) have been tendered into such offer and after
all material conditions with respect to such offer (including any financing
condition, any minimum condition with respect to number of shares tendered and
any condition with respect to removal of any anti-takeover protections) have
been satisfied or irrevocably waived by the offeror; provided,
however, that no Investor Group securities shall be tendered into
any tender offer or exchange offer not recommended by the Board prior to the
time all such material conditions (other than any such condition that can be
satisfied only at the closing of such offer) have been satisfied or irrevocably
waived by the offeror;

 

(vi)                              transfers to the Company or a
subsidiary of the Company;

 

(vii)                           swaps, exchanges, hedges or other
similar agreements or arrangements designed to protect against fluctuations in
the value of the equity securities of the Company and not entered into with the
purpose of circumventing the provisions of this Section 5.01;

 

(viii)                        pledges of Covered Securities in
connection with any margin loan or other extensions of credit from a
broker-dealer, bank or other financial institution and not entered into with
the purpose of circumventing the provisions of this Section 5.01; or

 

(ix)                                in accordance with and subject to Section 5.04.

 

(c) No Sale of Covered Securities to a
Permitted Transferee shall be effective until such time as such Permitted
Transferee has executed and delivered to the Company, as a condition precedent
to such Sale, an instrument or instruments, reasonably acceptable to the
Company, confirming that such Permitted Transferee agrees to be bound by all
obligations of the Investor Group hereunder. 
The Investor Group shall not transfer control of a Permitted Transferee
to any person that is not also a Permitted Transferee if a direct sale of
Covered Securities to such person would violate the provisions of Section 5.01
of this Agreement.

 

SECTION 5.02                    Improper Sale or Encumbrance.  Any attempt not in compliance with this
Agreement to make any Sale of, or create, incur or assume any Encumbrance with
respect to, any Covered Securities shall be null and void and of no force and
effect, the purported transferee shall have no rights or privileges in or with
respect to the Company, and the Company shall not give any effect in the
Company’s stock records to such attempted Sale or Encumbrance.

 

17

 

SECTION 5.03                    Restrictive Legends.  (a)  Each certificate evidencing the
Covered Securities shall be stamped or otherwise imprinted with legends in
substantially the following form (in addition to any legends required by
agreement or by applicable state securities Laws):

 

(i)            THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF.  SUCH SECURITIES
GENERALLY MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

(ii)           THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN
RESTRICTIONS UNDER THE TERMS OF THE STOCKHOLDERS’ AGREEMENT DATED AS OF
JUNE 9, 2005, AS AMENDED FROM TIME TO TIME, BETWEEN THE ISSUER AND THE
HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE TERMS OF THAT AGREEMENT.

 

(b) Each certificate evidencing any
shares of Common Stock or other securities of the Company acquired by any
member of the Yellowstone Group other than the Covered Securities shall be stamped
or otherwise imprinted with legends in substantially the following form (in
addition to any legends required by agreement or by applicable state securities
Laws):

 

THE SECURITIES EVIDENCED HEREBY ARE SUBJECT
TO CERTAIN RESTRICTIONS UNDER THE TERMS OF THE STOCKHOLDERS’ AGREEMENT DATED AS
OF JUNE 9, 2005, AS AMENDED FROM TIME TO TIME, BETWEEN THE ISSUER AND THE
HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE TERMS OF THAT AGREEMENT.

 

(c) Each member of the Investor Group
consents to the Company making a notation on its records and giving
instructions to any transfer agent of its capital stock in order to implement
the restrictions on transfer established in this Agreement.

 

(d) The Company shall, at the request of
a holder of Purchased Securities, remove from each certificate evidencing
Purchased Securities transferred in compliance with the terms of Section 5.01
and with respect to which no rights or obligations under this Agreement shall
transfer, the legend described in Sections 5.03(a)(ii) and (b), and shall
remove from each certificate evidencing such Purchased Securities the legend
described in Section 5.03(a)(i) if, at the request of the Company,
such requesting holder provides, at its

 

18

 

expense,
an opinion of counsel satisfactory to the Company that the securities evidenced
thereby may be transferred without the imposition of such legend.

 

SECTION 5.04                    Sales of Significant Interests.  Each member of the Investor Group may Sell
Covered Securities to a person that would, following the consummation of such
Sale, beneficially own more than 20% of the Common Stock; provided,
however, that, in the event that such Sale is not otherwise permitted
to be made pursuant to Section 5.01 above, such member of the Investor
Group conditions such Sale by them to such person upon such person
contemporaneously therewith acquiring, or offering to acquire, on the same
price and other financial terms and conditions as are applicable to such member
of the Investor Group in such Sale, a number of shares of Common Stock owned by
stockholders of the Company other than the Investor Group equal to the product
of (A) the aggregate number of shares of Common Stock owned by
stockholders of the Company other than the Investor Group, multiplied by (B) a
fraction, the numerator of which is the number of shares of Common Stock
(including Common Stock issuable upon the exercise of warrants) proposed to be
Sold by such member of the Investor Group to such person, and the denominator
of which is the aggregate number of shares of Common Stock (including shares of
Common Stock issuable upon the exercise of warrants) owned by such member of
the Investor Group on a Fully Diluted Basis on the date of such Sale.  In order for the conditions in the preceding
proviso to be satisfied, (A) such person shall make such offer in
compliance with applicable Law, including, if applicable, Section 14(d)(1) of
the Exchange Act and Regulation 14D promulgated thereunder and (B) if as a
result of such Sale, such person would, following such Sale, beneficially own
shares of Common Stock representing in the aggregate more than 20% of the
Common Stock but less than 90% of the shares of Common Stock then outstanding,
such person must, in connection with the closing of such transaction, agree to
be bound by the obligations of the Investor Group under this Agreement.  The provisions of this Section 5.04
shall only apply for as long as the Investor Group beneficially owns at least
25% of the shares of Common Stock.

 

ARTICLE 6

CORPORATE OPPORTUNITIES AND RELATED MATTERS

 

SECTION 6.01                    Similar Activities or Lines of
Business.   

 

(a) The Company may from time to time
enter into and perform, one or more agreements (or modifications or supplements
to pre-existing agreements) with a member of the Investor Group pursuant to
which the Company, on the one hand, and such member, on the other hand, agree
to engage in transactions of any kind or nature with each other and/or agree to
compete, or to refrain from competing or to limit or restrict their
competition, with each other, including to allocate and to cause their
respective Representatives (including any who are directors, officers or
employees of both) to allocate opportunities between or to refer opportunities
to each other.  Subject to this Section 6.01, no such agreement, or
the performance thereof by the Company or the members of the Investor Group,
shall, to the fullest extent permitted by Law, be considered contrary to (i) any
fiduciary duty that a member of the Investor Group may owe to the Company or to
any stockholder of the Company by reason of the Investor Group being a
controlling or significant stockholder of the Company or participating in the
control of the

 

19

 

Company
or (ii) any fiduciary duty of any director or officer of the Company who
is also a director, officer, member or employee of a member of the Investor
Group to the Company or to any stockholder thereof.  Subject to this Section 6.01,
to the fullest extent permitted by Law, a member of the Investor Group, as a
stockholder of the Company, or as a participant in control of the Company,
shall not have or be under any fiduciary duty to refrain from entering into any
agreement or participating in any transaction referred to above and no
director, officer or employee of the Company who is also a director, officer or
employee of a member of the Investor Group shall have or be under any fiduciary
duty to the Company, to refrain from acting on behalf of the Company or of a
member of the Investor Group in respect of any such agreement or transaction or
performing any such agreement in accordance with its terms.

 

(b) Except as otherwise agreed in
writing between the Company and the Investor Group or as provided in paragraph (d) below,
each member of the Investor Group shall to the fullest extent permitted by Law
have no duty to refrain from serving as an officer or director of, or investing
in, any person which is (i) engaged in the same or similar business as the
Company or (ii) doing business with any client, customer or vendor of the
Company and such member of the Investor Group shall not, to the fullest extent
permitted by Law, be deemed to have breached its or his fiduciary duties, if
any, to the Company solely by reason of engaging in any such activity.  Except as otherwise agreed in writing between
the Company and the Investor Group or as provided in paragraph (d) below,
in the event that any member of the Investor Group acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both a
member of the Investor Group and the Company, such member of the Investor Group
shall to the fullest extent permitted by Law have no duty to communicate or
offer such corporate opportunity to the Company and shall not, to the fullest
extent permitted by Law, be liable to the Company or its stockholders for
breach of any fiduciary duty as a stockholder of the Company by reason of the
fact that such member of the Investor Group acquires or seeks such corporate
opportunity for itself, directs such corporate opportunity to another person or
entity, or otherwise does not communicate information regarding such corporate
opportunity to the Company, and the Company to the fullest extent permitted by
Law shall renounce any interest or expectancy in such business opportunity and
shall waive any claim that such business opportunity constituted a claim that
should have been presented to the Company.

 

(c) Except as otherwise agreed in
writing between the Company and the Investor Group or as provided in paragraph (d) below,
in the event that a director or officer of the Company who is also an officer,
director, member or employee of a member of the Investor Group acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both the Company and a member of the Investor Group, such
director or officer shall to the fullest extent permitted by Law have fully
satisfied and fulfilled his or her fiduciary duty with respect to such
corporate opportunity, and the Company to the fullest extent permitted by Law
shall renounce any interest or expectancy in such business opportunity and
shall waive any claim that such business opportunity constituted a corporate
opportunity that should have been presented to the Company or any of its
affiliates, if such director or officer acts in a manner consistent with the
following policy: (i) a corporate opportunity offered to any person who is
an officer of

 

20

 

the
Company and who is also a director but not an officer of a member of the Investor
Group shall belong to the Company, unless such opportunity is expressly offered
to such person solely in his or her capacity as a director of a member of the Investor
Group, in which case such opportunity shall belong to such member of the Investor
Group; (ii) a corporate opportunity offered to any person who is a
director but not an officer of the Company and who is also a director or
officer of a member of the Investor Group shall belong to the Company only if
such opportunity is expressly offered to such person solely in his or her
capacity as a director of the Company and otherwise shall belong to such member
of the Investor Group; and (iii) a corporate opportunity offered to any
person who is an officer of both the Company and Investor Group shall belong to
the Company unless such opportunity is expressly offered to such person solely
in his or her capacity as an officer of a member of the Investor Group, in
which case such opportunity shall belong to such member of the Investor Group.

 

(d) No member of the Investor Group nor
any of their respective affiliates (other than the Company or their respective
subsidiaries) shall, directly or indirectly, enter into, or agree or commit to
enter into, any material investment, in or otherwise exploit any business
opportunity primarily related to, any Restricted Person (other than an
investment in the shares of any public company representing less than 20% of
such company’s fully diluted common equity) except with the approval of a
majority of the Independent Directors then in office.

 

(e) As used in this Section 6.01,
the term “Company” includes all of its subsidiaries, and the term “Investor
Group” includes all of its affiliates (other than the Company).

 

ARTICLE 7

REPRESENTATIONS AND WARRANTIES

 

SECTION 7.01                    Representations of the Company.  The Company hereby represents and warrants to
the Investor Group that:

 

(a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company’s power
and authority and have been duly authorized by all necessary corporate action.  This Agreement constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.

 

(b) The execution, delivery and
performance by the Company of this Agreement requires no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, other than (i) compliance with any applicable requirements of
the federal securities Laws; and (ii) compliance with any applicable
foreign or state securities or blue sky Laws.

 

(c) The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not and will not (i) contravene
or conflict with the Certificate of Incorporation or

 

21

 

the
By-Laws, and (ii) assuming compliance with the matters referred to in Section 7.01(b),
contravene or conflict with or constitute a violation of, provision of any Law
applicable to the Company.

 

SECTION 7.02                    Representations of the Members
of the Investor Group.  Each member
of the Investor Group hereby represents, jointly and severally, that:

 

(a) The execution, delivery and
performance by such member of the Investor Group of this Agreement and the
consummation by such member of the Investor Group of the transactions
contemplated hereby are within each such member’s power and authority and have
been duly authorized by all requisite action on the part of such member. This
Agreement constitutes a valid and binding agreement of each member of the Investor
Group, enforceable against such member of the Investor Group in accordance with
its terms.

 

(b) The execution, delivery and
performance by such member of the Investor Group of this Agreement require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority, other than (i) compliance with any applicable
requirements of the federal securities Laws; and (ii) compliance with any
applicable foreign or state securities or blue sky Laws.

 

(c) The execution, delivery and
performance by such member of the Investor Group of this Agreement and the
consummation by such member of the Investor Group of the transactions
contemplated hereby do not and will not (i) contravene or conflict with
the organizational documents of such member, and (ii) assuming compliance
with the matters referred to in Section 7.02(b), contravene or conflict
with or constitute a violation of, provision of any Law.

 

ARTICLE 8

CONFIDENTIALITY

 

SECTION 8.01                                Confidentiality.  (a)  Unless otherwise agreed to in
writing by the Company, each member of the Investor Group, on behalf of itself
and its Representatives, agrees (i) except as required by Law, to keep
confidential and not to disclose or reveal any Confidential Information (as defined
below) to any person (other than such member’s Representatives), (ii) not
to use Confidential Information for any purpose other than in connection with
its ownership of Company securities and not in any way detrimental to the
Company or its stockholders and (iii) except as required by Law, not to
disclose to any person (other than such member’s Representatives) any
Confidential Information.  In the event
that any member of the Investor Group or its Representatives are requested
pursuant to, or required by, Law to disclose any Confidential Information, such
member of the Investor Group agrees that it will provide the Company with
prompt notice of such request or requirement in order to enable the Company to
seek an appropriate protective order or other remedy (and if the Company seeks
such an order, such person will provide such cooperation as the Company shall
reasonably request) or to consult with such member with respect to the Company
taking steps to resist or narrow the scope of such request or legal process.

 

22

 

(b) “Confidential Information”
means all information about the Company furnished by the Company, whether
furnished before or after the date hereof, whether oral or written, and
regardless of the manner or form in which it is furnished, including, without
limitation, all notes, analyses, compilations, studies, forecasts,
interpretations or other documents prepared by any member of the Investor Group
or its Representatives which contain, reflect or are based upon, in whole or in
part, the information furnished to any member of the Investor Group or its
Representatives.  Confidential
Information does not include, however, information which (i) is or becomes
generally available to the public other than as a result of a disclosure by any
member of the Investor Group or its Representatives in violation of this
Agreement, the Confidentiality Agreement or other obligation of
confidentiality, (ii) was available to any member of the Investor Group on
a non-confidential basis prior to its disclosure by the Company to such member,
or (iii) becomes available to any member of the Investor Group on a
non-confidential basis from a person (other than the Company) who is not
prohibited from disclosing such information to any member of the Investor Group
by a legal, contractual or fiduciary obligation to the Company.

 

(c) Notwithstanding anything to the
contrary contained in this Agreement, any Investor Designated Director shall be
permitted to provide to members of the Investor Group and their Representatives
information concerning the Company that such individuals receive in their
capacity as directors;  provided, however, that with respect to any such information
provided, the Investor Group and its Representatives shall be bound by the same
restrictions on disclosure and use of confidential information as apply to such
Investor Designated Directors in their capacity as directors, in addition to
any applicable restrictions under this Article VIII.

 

(d) As used in this Article VIII,
the term “Company” includes the Company and all of its subsidiaries, and the
term “Investor Group” includes the members of the Investor Group and all of
their respective affiliates (other than the Company).

 

SECTION 8.02                    Furnishing of Information.  The Company shall furnish or make available
to each member of the Investor Group and its Representatives any documents
filed by the Company pursuant to each of Sections 13, 14 and 15(d) of the
Exchange Act and all annual, quarterly or other reports furnished to the
Company’s public security holders and all such other information concerning the
Company and its subsidiaries as such member of the Investor Group may
reasonably request.  The Company shall provide each member of the Investor
Group and its Representatives with reasonable access to the books and records
of the Company and its subsidiaries during normal business hours upon
reasonable notice, including without limitation, financial data (including
projections) and operating data covering each of such entities, their
businesses, operations and financial performance.

 

ARTICLE 9

MISCELLANEOUS

 

SECTION 9.01                    Termination.   This Agreement shall terminate upon the
earliest to occur of:

 

23

 

(i)                                     written agreement to that effect,
signed by all parties hereto or all parties then possessing any rights
hereunder;

 

(ii)                                  the Investor Group ceasing to
beneficially own at least 10% of the Common Stock on a Fully Diluted Basis; provided that prior to such termination the Investor
Designated Directors shall have resigned if required to do so under Section 2.01(b) of
this Agreement;

 

(iii)                               the Investor Group becoming the
beneficial owner of 90% or more of the Common Stock on a Fully Diluted Basis;
and

 

(iv)                              on the date that is the fifth
anniversary of the date of this Agreement;.

 

provided that no termination of
this Agreement pursuant to this Section 9.01 shall affect the right of any
party to recover damages for any breach of the representations, warranties or
covenants herein that occurred prior to such termination; and, provided, further, that the provisions of Article VIII
shall continue in effect for a period of 18 months following any such
termination.

 

SECTION 9.02                    Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by recognized overnight courier service to the respective parties
at the following addresses (or at such other address for a party as shall be
specified by notice given in accordance with this Section 9.02):

 

(a) if to the Company:

 

Pathmark
Stores, Inc.

200 Milik Street

Carteret, New Jersey 07008

Attention:  Marc A. Strassler

 

with a copy to:

 

Shearman & Sterling LLP

599 Lexington Avenue

New York, New York  10022

Telecopy No.:  (212) 848-7179

Attention:  W. Jeffrey Lawrence

 

(b) if to any member of the Investor
Group:

 

9130 W. Sunset Boulevard

Los Angeles, California 90069

Attention:  Robert P. Bermingham

 

24

 

with a copy to:

 

Latham & Watkins LLP

633 West Fifth Street, Suite 4000

Los Angeles, CA  90071-2007

Telecopy No.:  (213) 891-8763

Attention:  Thomas C. Sadler

 

SECTION 9.03                    No Third Party Beneficiaries.  This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and, to the extent permitted
by this Agreement, their respective successors and permitted assigns, and
nothing herein, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.

 

SECTION 9.04                    Expenses.  Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs or expenses.

 

SECTION 9.05                    Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of New York, except as to
matters governed by the internal corporation Laws of the State of Delaware.  All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined exclusively in any New
York state or federal court, in each case sitting in the Borough of
Manhattan.  The parties hereto hereby (a) submit
to the exclusive jurisdiction of any New York state or federal court, in each
case sitting in the Borough of Manhattan, for the purpose of any action or
proceeding arising out of or relating to this Agreement brought by any party
hereto, and (b) irrevocably waive, and agree not to assert by way of
motion, defense, or otherwise, in any such action or proceeding, any claim that
it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
action or proceeding is brought in an inconvenient forum, that the venue of the
action or proceeding is improper, or that this Agreement or the transactions
contemplated hereby may not be enforced in or by any of the above-named courts.

 

SECTION 9.06                    Waiver of Jury Trial.  Each of the parties hereto hereby waives to
the fullest extent permitted by applicable Law any right it may have to a trial
by jury with respect to any litigation directly or indirectly arising out of,
under or in connection with this Agreement or the transactions contemplated
hereby.  Each of the parties hereto (a) certifies
that no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce that foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
Agreement and the transactions contemplated hereby, as applicable, by, among
other things, the mutual waivers and certifications in this Section 9.06.

 

SECTION 9.07                    Specific Performance.  The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties hereto shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at Law or in equity.

 

25

 

SECTION 9.08                    Counterparts.  This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.

 

SECTION 9.09                    Entire Agreement.  This Agreement and the Related Agreements
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, (including, without limitation the
Confidentiality Agreement and that certain Exclusivity Agreement dated as of March 9,
2005), among the parties, or any of them, with respect to the subject matter
hereof and thereof.

 

SECTION 9.10                    Assignment.  This Agreement shall not be assigned by
operation of Law or otherwise without the express written consent of the
parties hereto (which consent may be granted or withheld in the sole discretion
of any party) and any such assignment or attempted assignment without such
consent shall be void.

 

SECTION 9.11                    Amendment.  This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the
Company and each member of the Investor Group or (b) by a waiver in
accordance with Section 9.12.

 

SECTION 9.12                    Waiver.  Any party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other party or (c) waive compliance with any of the agreements of the
other party or conditions to such party’s obligations contained herein.  Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby.  Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement.  The
failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of any of such rights. 
All rights and remedies existing under this Agreement are cumulative to,
and not exclusive of, any rights or remedies otherwise available.

 

SECTION 9.13                    Severability.  If any term or other provision of this
Agreement is held to be invalid, illegal or incapable of being enforced by any rule of
Law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect for so long as the economic
or legal substance of the transactions is not affected in any manner materially
adverse to any party.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.

 

SECTION 9.14                    No Partnership.  No partnership, joint venture or joint
undertaking is intended to be, or is, formed among the parties hereto or any of
them by reason of this Agreement or the transactions contemplated herein.

 

26

 

SECTION 9.15                    Public Announcements.  Except as required by Law, no party to this
Agreement shall make, or cause to be made, any press release or public
announcement in respect of this Agreement or otherwise communicate with any
news media without the prior written consent of the other parties, and the
parties shall cooperate as to the timing and contents of any such press release
or public announcement.

 

SECTION 9.16                    Cumulative Remedies.  The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies.  Said rights and remedies are given in
addition to any other rights the parties may have by Law or otherwise.

 

SECTION 9.17                    Interpretation; Headings.  Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or
plural, whichever shall be applicable. 
Unless otherwise specified, all references herein to “Articles”,
“Sections” and paragraphs shall refer to corresponding provisions of this
Agreement.  The descriptive headings and
subheadings in this Agreement are included for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Agreement
or any provision hereto.

 

SECTION 9.18                    Construction.  Each party hereto acknowledges and agrees it
has had the opportunity to draft, review and edit the language of this
Agreement and that no presumption for or against any party arising out of
drafting all or any part of this Agreement will be applied in any controversy,
claim or dispute relating to, in connection with or involving this
Agreement.  Accordingly, the parties
hereto hereby waive the benefit of any rule of Law or any legal decision
that would require, in cases of uncertainty, that the language of a contract
should be interpreted most strongly against the party who drafted such
language.

 

SECTION 9.19                    Director Duties.  Notwithstanding anything to the contrary in
this Agreement, no provision hereof shall prevent, restrict, Encumber or in any
way limit the exercise of the fiduciary rights and obligations of any Investor
Designated Director as a director, or his or her ability to vote on matters,
influence management or the other directors or otherwise to discharge their
fiduciary or other duties as directors. 
The Company shall not approve or recommend to its stockholders any
transaction or resolution, or approve, recommend or take any other action
(other than those expressly contemplated by this Agreement) that would restrict
the right of any Investor Designated Director to vote on any matter as such
director believes appropriate in light of his or her duties as a director or
the manner in which an Investor Designated Director may participate in his or
her capacity as a director in deliberations or discussions at meetings of the
Board or any committee thereof.

 

SECTION 9.20                    Investors Rights.  For purposes of this Agreement, all actions
which the Investors or members of the Investor Group are permitted to take
shall be effected by the Investors or such members, as the case may be, holding
a majority of the Purchased Securities then held by all the Investors or such
members, as the case may be.  In
addition, the rights of the Investors under this Agreement shall be allocated
among them in such manner as they shall agree from time to time.  Notwithstanding the foregoing, the parties
hereto acknowledge and agree that, for so long as the Investor Group has the
right to nominate two or more Investor Designated Directors, Yucaipa American
Alliance Fund I, L.P. and Yucaipa

 

27

 

American Alliance
(Parallel) Fund I, L.P. shall each be entitled to designate one of such
Investor Designated Directors and to fill any vacancies created if such
director designated by it ceases to serve for any reason, and any additional
Investor Designated Directors shall be designated by the members of the Investor
Group holding a majority of the Purchased Securities then held by all of such
members.

 

(signature
page follows)

 

28

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  PATHMARK STORES, INC., a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank Vitrano

  	
   

  
	
   

  	
  Name: 

  	
  Frank Vitrano

  
	
   

  	
  Title: 

  	
  President and Chief Financial Officer

  

 

S-1

Stockholders’ Agreement

 

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
  YUCAIPA CORPORATE INITIATIVES FUND I, L.P., a 

  
	
   

  	
   

  	
  Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa Corporate Initiatives Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  YUCAIPA AMERICAN ALLIANCE

  
	
   

  	
   

  	
  (PARALLEL) FUND I, L.P., a Delaware

  
	
   

  	
   

  	
  limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa American Alliance Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  YUCAIPA AMERICAN ALLIANCE FUND I,

  
	
   

  	
   

  	
  L.P., a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa American Alliance Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
							

 

S-2

Stockholders’ AgreementExhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

Dated as of June 9, 2005

 

among

 

Pathmark Stores, Inc.

 

and

 

The Holders of Registrable
Securities

 

 

REGISTRATION RIGHTS AGREEMENT

 

THIS
REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into
as of June 9, 2005 by and among Pathmark Stores, Inc., a Delaware corporation
(the “Company”), and each of the holders of Registrable Securities (as
hereinafter defined) executing this Agreement (each a “Holder” and
collectively, the “Holders”).

 

RECITALS

 

WHEREAS,
this Agreement is made pursuant to that certain Securities Purchase Agreement
dated as of March 23, 2005 (the “Purchase Agreement”) by and
between the Company and the Holders, under which the execution and delivery of
this Agreement is a condition to the closing of the transactions contemplated
thereby.

 

AGREEMENT

 

NOW
THEREFORE, in consideration of the mutual covenants herein contained and for
other good and valuable consideration, the parties hereto agree as follows:

 

SECTION 1.1                          DEFINITIONS.
 Capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Purchase
Agreement.  In addition, the following
capitalized terms shall have the meanings ascribed to them below:

 

“Affiliate,”
as applied to any specified Person, shall mean any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and, in the case of a Person who is an
individual, shall include (i) 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) and (ii) trusts, the trustee and all beneficiaries of which are
such specified Person or members of such Person’s immediate family as determined
in accordance with the foregoing clause (i). 
For the purposes of this definition, “control,” when used with respect
to any Person, means 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.

 

“Business
Day” means any day that is not a Saturday, Sunday or a day on which banking
institutions in New York, New York or Los Angeles, California are not required
to be open.

 

“Closing
Date” means the date on which Company Common Stock and Warrants are first
issued under the Purchase Agreement.

 

“Company
Common Stock” means the common stock, par value $.01 per share, of the
Company.

 

“Deferral
Period” is defined in Section 2.1.

 

“Demand
Notice” is defined in Section 2.1.

 

 

“Demand
Registration” is defined in Section 2.1.

 

“Demanding
Holder” means any Holder initiating a registration request in compliance
with Section 2.1(a); provided that any action required or permitted to be
taken under this Agreement by any Demanding Holders shall be taken by action of
the holders of a majority of the Registrable Securities held by such Demanding
Holders.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

 

“Holders”
means the holders of Company Common Stock and of the Warrants who have executed
this Agreement, and the permitted transferees of each of them.

 

“Person”
means an individual, partnership, corporation, limited liability company, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.

 

“Piggyback
Registration” is defined in Section 2.2.

 

“Piggyback
Holder” is defined in Section 2.2.

 

“Prospectus”
means the prospectus included in a Registration Statement, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.

 

“Public
Distribution” shall mean any bona fide underwritten public distribution of
Stock pursuant to an effective registration statement under the Securities Act
or any other applicable law, or any bona fide public sale in an open market
transaction under Rule 144 of the Securities Act (or any successor rule) if
such sale is in compliance with the requirements of paragraphs (c), (d), (e),
(f) and (g) of such Rule (notwithstanding the provisions of paragraph (k) of such
Rule).

 

“Public
Offering” shall mean any bona fide underwritten public distribution of
Stock pursuant to an effective registration statement under the Securities Act
or any other applicable law.

 

“Registrable
Securities” means each share of Stock held by the Holders, or acquired by
the Holders after the date hereof, until (i) it has been effectively registered
under the Securities Act and disposed of by such Holders pursuant to an
effective registration statement, or (ii) it is sold by such Holders pursuant
to Rule 144 (or any similar provisions then in force) under the Securities
Act.  “Registrable Securities” shall
include all shares of Company Common Stock issued or issuable upon exercise of
the Warrants.

 

“Registration
Statement” means any registration statement of the Company relating to a
Demand Registration pursuant to Section 2.1, a Piggyback Registration
pursuant to Section 2.2, or a Shelf Registration pursuant to Section 2.3,
in each case, including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments) and all exhibits and
material incorporated by reference therein.

 

3

 

“SEC”
means the Securities and Exchange Commission.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Selling
Holder” means a Holder who sells or proposes to sell Registrable Securities
pursuant to a Registration Statement under the Securities Act.

 

“Shelf
Registration” or “Shelf Registration Statement” is defined in Section 2.3.

 

“Stock”
means the following securities (i) the Company Common Stock or (ii) any
security or other instrument (a) received as a dividend on, or other payment
made to the holders of, the Company Common Stock (or any other security or
instrument referred to in this definition) or (b) issued in connection with a
split of the Company Common Stock (or any other security or instrument referred
to in this definition) or as a result of any exchange or reclassification of
the Company Common Stock (or any other security or instrument referred to in
this definition), reorganization, consolidation, merger or recapitalization.

 

“Underwritten
Registration” or “Underwritten Offering” means a registration in
which Stock of the Company is sold to an underwriter for re-offering to the
public.

 

“Warrants”
means the Warrants issued pursuant to the Purchase Agreement.

 

ARTICLE II

REGISTRATION RIGHTS

 

SECTION 2.1                          DEMAND
REGISTRATIONS.

 

(a)  Request for Registration.  At any time and from time to time on or after
the 180th day following the Closing Date the holders of at least 40%
of the Registrable Securities held by the Holders may make three written
requests of the Company for registration with the SEC, under and in accordance
with the provisions of the Securities Act, of all or part (but not less than
one million (1,000,000) shares of Registrable Securities) of their Registrable
Securities (a “Demand Registration”) by giving written notice to the
Company of such demand (a “Demand Notice”), provided that the Company
shall be required to effect only one Demand Registration during any six-month
period.  Each such Demand Notice will
specify the number of Registrable Securities proposed to be sold pursuant to
such Demand Registration and will also specify the intended method of
disposition thereof.

 

The
Company shall give written notice, of any Demand Notice by any Holder, which
request complies with this Section 2.1(a), within 5 days after the receipt
thereof, to each Holder who did not initially join in such request.  Within 10 days after receipt of such notice,
any such Holder may request in writing that its Registrable Securities be
included in such registration, and the Company shall include in the Demand
Registration the Registrable Securities of each such Holder requested to be so
included, subject to the provisions of Section 2.1(e).  Each such request shall specify the number of
shares of Registrable Securities proposed to be sold and the intended method of
disposition thereof.

 

4

 

Promptly
after receipt of any Demand Notice, but in no event later than 60 days after
receipt of such Demand Notice, the Company shall file a Registration Statement
with the SEC with respect to the Registrable Securities included in the Demand
Notice and shall use its reasonable best efforts to have such Registration
Statement declared effective as promptly as practicable; provided,
however, that the Company may postpone
the filing of such Registration Statement for a period of up to 90 days (the “Deferral
Period”) if the Board of Directors reasonably determines that (i) such a
filing would adversely affect any proposed financing, acquisition, divestiture
or other material transaction by the Company or (ii) such a filing would
otherwise represent an undue hardship for the Company.  The Company shall not be entitled to request
more than one such deferral (two in the case of events of the type described in
clause (i) above) with respect to any Demand Registration within any 365-day
period.  If the Company does elect to
defer any such Demand Registration, the Holders requesting such Demand
Registration may, at their election by written notice to the Company, (i)
confirm their request to proceed with such Demand Registration upon the
expiration of the Deferral Period or (ii) withdraw their request for such
Demand Registration in which case no such request for a Demand Registration
shall be deemed to have occurred for purposes of this Agreement.

 

(b)
 Effective Registration.  Except as provided in subsection (c)
below, a registration will not be deemed to have been effected as a Demand
Registration unless it has been declared effective by the SEC; provided that
if, after it has become effective, the offering of Registrable Securities
pursuant to such registration is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other governmental
or administrative agency, or if any court prevents or otherwise limits the sale
of Registrable Securities pursuant to the registration (for any reason other
than the acts or omissions of the Holders), such registration will be deemed
not to have been effected.  If (i) a
registration requested pursuant to this Section 2.1 is deemed not to have
been effected in accordance with the provisions of the preceding sentence or
(ii) the registration requested pursuant to this Section 2.1 does not
remain continuously effective for a period of at least 90 days beyond the
effective date thereof (or such shorter period as is required to complete the
distribution by the Holders of the Registrable Securities included in such
registration statement) (the “Demand Registration Statement”), then such
Demand Registration Statement shall not count as a Demand Registration that may
be requested by the Demanding Holder(s) and the Company shall continue to be
obligated to effect a registration pursuant to this Section 2.1.

 

(c)
 Withdrawal.  The Demanding Holders may withdraw all or any
part of the Registrable Securities from a Demand Registration at any time
(whether before or after the filing or effective date of the Demand
Registration Statement), and if all such Registrable Securities are withdrawn,
to withdraw the demand related thereto. 
If at any time a registration statement is filed pursuant to a Demand
Registration, and subsequently a sufficient number of Registrable Securities
are withdrawn from the Demand Registration so that such Demand Registration
Statement does not cover at least the required amounts specified by Section 2.1(a),
and an additional number of Registrable Securities is not so included, the
Company may (or shall, if requested by the Demanding Holders) withdraw such
Demand Registration Statement; provided that such withdrawn registration
statement will count as a Demand Registration unless the Demanding Holders
elect to bear the expenses associated with such withdrawn registration
statement.  If the Demanding Holders
elect to bear such expenses, such expenses shall be borne

 

5

 

by the Demanding Holder(s) whose withdrawal of Registrable Securities
resulted in such Demand Registration Statement not covering the specified
required amounts.

 

(d)
 Selection of Underwriter.  If the Demanding Holders so elect, the
offering of Registrable Securities pursuant to a Demand Registration shall be
in the form of an Underwritten Offering. 
The Demanding Holders and the Company shall jointly select one or more
nationally recognized firms of investment bankers to act as the managing underwriter
or underwriters in connection with such offering and shall select any
additional investment bankers and managers to be used in connection with such
offering; provided that in the event that the
Company and the Demanding Holders are unable to jointly agree on such
investment bankers and managers, such investment bankers and managers shall be
selected by the Demanding Holders and shall be reasonably satisfactory to the
Company.  The Company shall (together with
all Holders of Registrable Securities proposing to distribute such Registrable
Securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting in the manner set forth above.

 

(e)
 Priority on Demand Registrations.  If, in any Demand Registration involving an
Underwritten Offering the managing underwriter or underwriters thereof advise
the Demanding Holders or the Company in writing that in its or their reasonable
opinion the number of Registrable Securities proposed to be sold in such Demand
Registration exceeds the number that can be sold in such offering or will
adversely affect the success of such offering (including, without limitation,
an impact on the selling price or the number of Registrable Securities that any
participant may sell), the Company shall include in such registration only the
number of Registrable Securities, if any, which in the opinion of such
underwriter or underwriters can be sold without having an adverse effect on the
success of the offering and in accordance with the following priority:  (i) first, Registrable Securities held by
Demanding Holders, allocated pro rata among such group (based upon the number
of Registrable Securities requested to be included in such Demand Registration)
and (ii) second, pro rata (based upon the number of Registrable Securities
requested to be included in such registration by such Holders) among the other
Holders of Registrable Securities who have requested to include Registrable
Securities in such registration.  If all
Registrable Securities requested to be sold in the Underwritten Offering are
included therein, the Company may include other shares of Stock in such offering
in accordance with the following priority, but not to exceed the number
recommended by the managing underwriter or underwriters:  (x) first, pro rata among any other
stockholders of the Company having piggyback or other similar registration
rights and (y) second, shares of Stock proposed to be sold by or for the
account of the Company.

 

SECTION 2.2                          PIGGYBACK
REGISTRATIONS.

 

(a)
 Right to Participate in Registration.  If at any time the Company proposes to file a
registration statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any holders of any class
of common equity securities (other than (i) a registration statement on Form
S-4 or S-8 (or any substitute form that may be adopted by the SEC) or (ii) a
registration statement filed in connection with a Demand Registration or a
Shelf Registration or (iii) a registration statement filed in connection with
an offering of securities solely to the Company’s existing securityholders),
then the Company shall give written notice of such proposed filing to the
Holders as soon as practicable (but in no event

 

6

 

less than 20 days before the anticipated filing date), and such notice
shall offer such Holder the opportunity to register such number of shares of
Registrable Securities as each such Holder may request, which request shall
specify the Registrable Securities intended to be disposed of by such Holder
and the intended method of distribution thereof (or, if the offering is a
proposed Underwritten Offering, that such Holder elects to have the number of
Registrable Securities so specified included in such Underwritten Offering) (a “Piggyback
Registration”).

 

The
Company shall use its reasonable best efforts to cause the managing underwriter
or underwriters of a proposed Underwritten Offering to permit the Registrable
Securities requested by the Holders thereof to be included in a Piggyback
Registration (the “Piggyback Holders”) to be included on the same terms
and conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
distribution thereof.

 

No
registration effected under this Section 2.2 and no failure to effect a
registration under this Section 2.2(a), shall relieve the Company of its
obligations pursuant to Section 2.1, and no failure to effect a
registration under this Section 2.2(a) and complete the sale of shares in
connection therewith shall relieve the Company of any other obligation under
this Agreement (including, without limitation, the Company’s obligations under
Sections 3.2 and 4.1).

 

(b)
 Priority on Piggyback Registrations.  Unless the registration statement is being
filed pursuant to a Demand Registration (in which case the priority of
piggyback rights shall be as provided in Section 2.1(e) above), if the
managing underwriter or underwriters advise the Company in writing that in its
or their reasonable opinion the number of equity securities of the Company
proposed to be sold in such registration (including Registrable Securities to
be included pursuant to subsection (a) above) will adversely affect the
success of such offering (including, without limitation, an impact on the
selling price or the number of equity securities of the Company that any
participant may sell), the Company shall include in such registration the
number of equity securities of the Company, if any, which in the opinion of
such underwriter or underwriters can be sold without having an adverse effect
on the offering and in accordance with the following priority:  (i) first, the securities the Company
proposes to sell for its own account, and (ii) second, pro rata based on the
number of Registrable Securities that each Holder or other Person having
similar rights shall have requested to be included therein.

 

(c)
 Withdrawal.  The Piggyback Holders may withdraw all or any
part of the Registrable Securities from a Piggyback Registration at any time
(before but not after the effective date of such registration statement), by
delivering written notice of such withdrawal request to the Company, unless
such Piggyback Registration is underwritten, in which case Registrable
Securities may not be withdrawn after the effective date of the Registration
Statement.

 

(d)
 Termination of Registration by the
Company.  If the Company shall
determine for any reason (x) not to register or (y) to delay a registration
which includes Registrable Securities pursuant to this Section 2.2, the
Company may, at its election, give written notice of such determination to the
Holders of the Registrable Securities and, thereupon (i) in the

 

7

 

case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses (as
defined below) in connection therewith), without prejudice, however, to the
rights, if any, of any Holder or Holders of Registrable Securities to request
that such registration be effected as a Demand Registration under Section 2.1,
and (ii) in the case of a delay in registering, shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other shares.

 

SECTION 2.3                          SHELF
REGISTRATION.

 

(a)
 Filing and Effectiveness.  Upon the request of the Demanding Holders at
any time after the 180th day following the Closing Date, the Company
shall cause to be filed with the SEC as promptly as practicable after such
request, but in no event later than 90 days thereafter, a shelf registration
statement pursuant to Rule 415 under the Securities Act (a “Shelf
Registration” or a “Shelf Registration Statement”), which Shelf
Registration Statement shall provide for resales of all Registrable Securities
held by Holders who shall have provided the information required pursuant to Section 3.1(b).  The Company shall use its reasonable best
efforts to have such Shelf Registration declared effective, subject to Section 2.3(c)
below, and to keep such Shelf Registration Statement continuously effective,
supplemented and amended to the extent necessary to ensure that it is available
for resales of Registrable Securities by such Holders, and to ensure that it
conforms with the requirements of this Agreement, the Securities Act and the
policies, rules and regulations of the SEC as announced from time to time, for
a period of at least two (2) years following the date on which such Shelf
Registration Statement becomes effective under the Securities Act.  A request of the Demanding Holders under this
Section 2.3(a) shall be deemed to be a request for a Demand Registration
under Section 2.1 above.

 

(b)
 Effective Registration.  A registration will not be deemed to have
been effected as a Shelf Registration unless it has been declared effective by
the SEC and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if, after
it has become effective, the offering of Registrable Securities pursuant to
such registration is or becomes the subject of any stop order, injunction or
other order or requirement of the SEC or any other governmental or administrative
agency, or if any court prevents or otherwise limits the sale of Registrable
Securities pursuant to the registration (for any reason other than the acts or
omissions of the Holders), such registration will be deemed not to have been
effected.  If (i) the Shelf Registration
is deemed not to have been effected in accordance with the provisions of the
preceding sentence or (ii) the Shelf Registration does not remain continuously
effective for the period described in subsection (a) above, then such
Shelf Registration Statement shall not count as a Shelf Registration and the
Company shall continue to be obligated to effect a registration pursuant to
this Section 2.3.

 

(c)
 Suspension.  With respect to any Shelf Registration that
has been declared effective (i) the Company may suspend use of such Shelf
Registration at any time if the continued effectiveness thereof would require
the Company to disclose a material financing, acquisition or other corporate
transaction, which disclosure the Board of Directors of the Company shall have
determined in good faith is not in the best interests of the Company and its
stockholders, and (ii) the Company may suspend use of such Shelf Registration
during any

 

8

 

period if each of the Company and the holders of a majority of the
Registrable Securities included in such Self Registration consents in writing
to such suspension for such period.

 

ARTICLE III

REGISTRATION PROCEDURES

 

SECTION 3.1                          REGISTRATION
PROCEDURES.

 

(a)
 General Provisions.  In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Registrable Securities, the Company shall:

 

(1)                                  prepare and file with the SEC a registration
statement with respect to such Registrable Securities within the time periods
specified herein, make all required filings with the NASD and use its best
efforts to cause such registration statement to become effective as promptly as
practicable (subject to the Company’s right to withdraw the registration
statement under the circumstances described in Sections 2.1(c) or 2.2(d));

 

(2)                                  promptly prepare and file with the SEC such
amendments and post-effective amendments to the Registration Statement as may
be necessary to keep the Registration Statement effective for the applicable
period set forth in Sections 2.1, 2.2 or 2.3, as applicable, or such shorter
period as will terminate when all Registrable Securities covered by such
Registration Statement have been sold (subject to Section 2.3(c)); cause
the Prospectus to be supplemented by a required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Securities Act, and
to comply fully with the applicable provision of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus;

 

(3)                                  use its reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Sections 2.1, 2.2 or 2.3, as
applicable (subject to Section 2.3(c)); upon the occurrence of any event
that would cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not to
be effective and usable for resale of Registrable Securities during the period
required by this Agreement, the Company shall file as promptly as practicable an
appropriate amendment to such Registration Statement, in the case of clause
(A), correcting any such misstatement or omission, and, in the case of either
clause (A) or (B), use its reasonable best efforts to cause such amendment to
declared effective and such Registration Statement and related Prospectus to
become usable for their intended purposes(s) as soon as practicable thereafter;

 

(4)                                  provide (A) the Holders of Registrable
Securities participating in the registration, (B) the underwriters (which term,
for purposes of this Agreement, shall

 

9

 

include a Person deemed to be an underwriter within the meaning of Section 2(11)
of the Securities Act), if any, of the Registrable Securities to be registered,
(C) the sale or placement agent therefor, if any, (D) counsel for such underwriters
or agent, and (E) counsel for the Holders thereof, as selected by Holders
of a majority of the Registrable Securities covered by such registration
statement, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the SEC,
and each amendment or supplement thereto, and for a reasonable period prior to
the filing of such registration statement, and throughout the period specified
in Section 3.4(b) hereof, make available for inspection by the parties
referred to in (A) through (E) above such financial and other information and
books and records of the Company, provide access to properties of the Company
and cause the officers, directors, employees, counsel and independent certified
public accountants of the Company to respond to such inquiries as shall be
reasonably necessary to conduct a reasonable investigation within the meaning
of Section 11 of the Securities Act;

 

(5)                                  advise the underwriters, if any, and Selling
Holders promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement or
any post-effective amendment thereto, when the same has become effective, (B)
of any request by the SEC for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement under the Securities Act or of
the suspension by any state securities commission of the qualification of the
Registrable Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make the statements
therein not misleading.  If at any time
the SEC shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Registrable Securities under state securities or Blue Sky
laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;

 

(6)                                  furnish to each Selling Holder named in any
Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, such number of copies of any Registration
Statement or Prospectus included therein or any amendments or supplements to
any such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement and all exhibits filed therewith), reasonably requested by such
Person;

 

(7)                                  if requested by any selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include in any
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as

 

10

 

such selling Holders and such underwriter(s), if any, may reasonably
request to have included therein, including, without limitation, information
relating to the “Plan of Distribution” of the Registrable Securities,
information with respect to the principal amount of Registrable Securities
being sold to such underwriter(s), the purchase price being paid therefor and
any other terms of the offering of the Registrable Securities to be sold in
such offering, and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is notified
of the matters to be included in such Prospectus supplement or post-effective
amendment;

 

(8)                                  deliver to each Selling Holder and each of
the underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons reasonably may request; the Company hereby consents to the use
of the Prospectus and any amendment or supplement thereto by each of the
Selling Holders and each of the underwriter(s), if any, in connection with the
offering and the sale of the Registrable Securities covered by the Prospectus
or any amendment or supplement thereto;

 

(9)                                  in connection with any Underwritten Offering
pursuant to a Demand Registration, enter into an underwriting agreement with
one or more underwriter designated in accordance with this Agreement, such
agreement to be of the form, scope and substance as is customary in
underwritten offerings, and take all such other actions as are reasonably
requested by the managing underwriter(s) in order to expedite or facilitate the
disposition of such Registrable Securities and in such connections (i) make
such representations and warranties to the underwriters in form, scope and
substance as are customarily made by issuers to underwriters in underwritten
offerings with respect to the business of the Company; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the managing
underwriter(s)) addressed to the managing underwriter(s) covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by the underwriters; (iii) obtain “comfort”
letters and updates thereof from the Company’s independent certified public
accountants addressed to the underwriters, such “comfort” letters to be in
customary form and covering matters of the type customarily covered in “comfort”
letters in connection with underwritten offerings; (iv) deliver such documents
and certificates as may be reasonably requested by the managing underwriter(s)
to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.  The above shall be done at each closing under
such underwriting or similar agreement;

 

(10)                            prior to any public offering of Registrable
Securities, cooperate with the Selling Holders, the underwriter(s), if any, and
their respective counsel in connection with the registration and qualification
of the Registrable Securities under the securities or Blue Sky laws of such
jurisdictions as the Selling Holders or underwriter(s), if any, may request and
do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions or the Registrable Securities covered by the
applicable Registration Statement; provided, however, that the Company shall not be required to register
or qualify as a foreign corporation where it is not now so qualified or to take
any

 

11

 

action that would subject it to the service of process in suits or to
taxation, except as is required as a result of the Registration Statement, in
any jurisdiction where it is not now so subject;

 

(11)                            in connection with any sale of Registrable
Securities that will result in such securities no longer being Registrable
Securities, cooperate with the Selling Holders and the underwriter(s), if any,
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends; and
to register such Registrable Securities in such denominations and such names as
the Selling Holders or the underwriter(s), if any, may request at least two
Business Days prior to such sale of Registrable Securities;

 

(12)                            if requested by the Selling Holders, provide
a CUSIP number for all Registrable Securities not later than the effective date
of the Registration Statement covering such Registrable Securities and provide
the Company’s transfer agent(s) and registrar(s) for the Registrable Securities
with printed certificates for the Registrable Securities;

 

(13)                            cooperate and assist in any filings required
to be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any “qualified independent
underwriter”) that is required to be retained in accordance with the rules and
regulations of the NASD), and use their best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Selling Holders or underwriters,
if any, to consummate the disposition of such Registrable Securities;

 

(14)                            otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make generally available
to its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 under the Securities Act (which
need not be audited) covering a period of at least twelve month periods, but
not more than eighteen months, beginning with the first month of the Company’s
first quarter commencing after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act; and

 

(15)                            cause all Registrable Securities covered by
the Registration Statement to be listed on each securities exchange on which
securities of the same class issued by the Company are then listed if requested
by the Selling Holders holding a majority of the Registered Securities or the
managing underwriter(s), if any.

 

Each
Selling Holder, upon receipt of any notice from the Company of the happening of
any event described in subsection (5)(B), (C), or (D) of Section 3.1(a)
or in Section 2.3(c) (a “Suspension Notice”), shall forthwith
discontinue disposition of the Registrable Securities pursuant to the
Registration Statement relating thereto until such Selling Holder receives
copies of the supplemented or amended Prospectus contemplated hereby or until
it is advised in writing (the “Advice”) by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemented filings that are incorporated

 

12

 

by reference in the Prospectus, and, if so directed by the Company,
such Selling Holder will, or will request the managing underwriter or
underwriters, if any, to deliver to the Company (at the Company’s expense) all
copies, other than permanent file copies then in such Selling Holder’s
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice.  The
period from the date on which any Holder receives a Suspension Notice to the
date on which any Holder receives either the Advice or copies of the
supplemented or amended Prospectus contemplated hereby relating to such notice
shall hereinafter be referred to as the “Suspension Period.”  If the Company shall give any Suspension
Notice, (i) the Company shall use its reasonable best efforts and take such
actions as are reasonably necessary to render Advice and end the Suspension
Period as promptly as practicable and (ii) the time periods for which a
Registration Statement is required to be kept effective pursuant to Sections
2.1, 2.2 or 2.3, as the case may be, shall be extended by the number of days
during the period from and including the date of the giving of such Suspension Notice
to and including the date when each Selling Holder shall have received (A) the
copies of the supplemented or amended Prospectus contemplated by Section 3.1
(a) or (B) the Advice.

 

(b)
 Provision by Holders of Certain
Information.  No Holder of Registrable
Securities may include any of its Registrable Securities in any Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor,
such information as the Company may reasonably request specified in item 507 of
Regulation S-K under the Securities Act for use in connection with any
Registration Statement or Prospectus or preliminary Prospectus included
therein.  Each Holder as to which any
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.

 

SECTION 3.2                          REGISTRATION
EXPENSES.

 

(a)  All expenses incident to the Company’s
performance of or compliance with this Section 3.2 will be paid by the
Company, regardless of whether any registration statement required hereunder
becomes effective, including, without limitation:

 

(1)                                  all registration and filing fees;

 

(2)                                  fees and expenses of compliance with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters or Holders of
Registrable Securities being sold may designate);

 

(3)                                  printing (including, without limitation,
expenses of printing or engraving certificates for the Registrable Securities
in a form eligible for trading on the Nasdaq or for deposit with the Depository
Trust Company and of printing prospectuses), messenger, telephone and delivery
expenses;

 

(4)                                  reasonable fees and disbursements of counsel
for the Company;

 

13

 

(5)                                  reasonable fees and disbursements of all
independent certified public accountants of the Company (including, without
limitation, the expenses of any special audit and “cold comfort” letters
required by or incident to such performance);

 

(6)                                  fees and expenses of other Persons retained
by the Company; and

 

(7)                                  fees and expenses associated with any NASD
filing required to be made in connection with the registration of the Registrable
Securities, including, if applicable, the reasonable fees and expenses of any “qualified
independent underwriter” (and its counsel) that is required to be retained in
accordance with the rules and regulations of the NASD (all such expenses being
herein called “Registration Expenses”).

 

(b)
 The Company will, in any event, pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the fees and expenses incurred in connection with the
listing of the Registrable Securities to be registered on Nasdaq or on each
national securities exchange on which similar securities issued by the Company
are then listed and the fees and expenses of any Person, including special
experts, retained by the Company.

 

SECTION 3.3                          PARTICIPATION
IN UNDERWRITTEN REGISTRATIONS.  No
Holder may participate in any Underwritten Registration hereunder unless such
Holder (i) agrees to sell its Registrable Securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all reasonable
questionnaires, powers of attorney, underwriting agreements, hold-back
agreements letters and other documents customarily required under the terms of
such underwriting arrangements. 
Notwithstanding the foregoing, (x) no Selling Holder shall be required
to make any representations or warranties except those which relate solely to
such Holder and its intended method of distribution, and (y) the liability of
each such Holder to any underwriter under such underwriting agreement will be
limited to liability arising from misstatements or omissions regarding such
Holder and its intended method of distribution and any such liability shall not
exceed an amount equal to the amount of net proceeds such Holder derives from
such registration; provided, however, that in an offering by the Company in which any
Holder requests to be included in a Piggyback Registration, the Company shall
use its best efforts to arrange the terms of the offering such that the
provisions set forth in clauses (x) and (y) of this Section 3.3 are
true.  Nothing in this Section 3.3
shall be construed to create any additional rights regarding the registration
of Registrable Securities in any Person otherwise than as set forth herein.

 

SECTION 3.4                          HOLD-BACK
AGREEMENTS.

 

(a)  Restrictions on Public Distribution by
Holder of Registrable Securities. 
Upon the written request of the managing underwriter or underwriters of
a Public Offering, each Holder of Registrable Securities shall not effect any
Public Distribution of such securities, or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the Securities Act (except as part of such Public Offering),
during the 14-day period prior to, and during the 90-day period following, the
offering date for each Public Offering made pursuant to such registration
statement (as identified by such underwriter or

 

14

 

underwriters or the Company in good faith).  The foregoing provisions shall not apply to
any Holder that is prevented by applicable statute or regulation from entering
into any such agreement; provided, however, that any such Holder shall undertake not to effect
any Public Distribution of the class of securities covered by such registration
statement (except as part of such Underwritten Offering) during such period unless
it has provided 60 days’ prior written notice of such Public Distribution to
the managing underwriter.

 

(b)
 Restrictions on Public Distribution
by the Company and Others.  The
Company agrees and it shall use its reasonable best efforts to cause its Affiliates
(other than Persons who are Holders hereunder) to agree:  (1) not to effect any Public Distribution of
any securities being registered in accordance with Article II hereof, or
any securities convertible into or exchangeable or exercisable for such
securities, during the 14-day period prior to, and during the 90-day period
following, the offering date for each Public Offering made pursuant to a
registration statement filed under Article II hereof, if requested in
writing by the managing underwriters (except as part of such Public Offering or
pursuant to registrations in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock options or
other employee benefit plans); and (2) to use its reasonable best efforts to
cause each Holder of its privately placed Registrable Securities that are
issued by the Company at any time on or after the date of this Agreement to
agree not to effect any Public Distribution, including a sale pursuant to Rule
144 under the Securities Act, of any Registrable Securities during the period
set forth in clause (1) above (except as part of such Public Offering, if and
to the extent permitted).

 

ARTICLE IV

INDEMNIFICATION AND CONTRIBUTION

 

SECTION 4.1                          INDEMNIFICATION
BY THE COMPANY.  The Company agrees
to indemnify and hold harmless each Selling Holder, each person, if any, who
controls such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) (hereinafter referred to as a “controlling
person”), the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person, solely in
their capacities as such (each an “Indemnified Holder”), to the fullest
extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (or any amendment or
supplement thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or
alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to any of the Holders furnished in writing
to the Company by any of the Holders expressly for use therein.

 

15

 

SECTION 4.2                          INDEMNIFICATION
BY HOLDERS OF REGISTRABLE SECURITIES.  Each Selling Holder agrees, severally and not
jointly, to indemnify and hold harmless the Company and its directors, officers
and any person controlling (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the Company and its
respective officers, directors, partners, employees, representatives and agents
of each such person, to the same extent as the foregoing indemnity from the
Company to each of the Indemnified Holders, but only with respect to losses, claims,
damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to the
Company) directly or indirectly caused by, related to, based upon, arising out
of or in connection with any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (or any
amendment or supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information relating to such Holder
furnished in writing by such Holder expressly for use in any Registration
Statement or Prospectus.  In case any
action or proceeding shall be brought against the Company or its directors or
officers or any such controlling person in respect of which indemnity may be
sought against a Holder of Registrable Securities, such Holder shall have the rights
and duties given the Company, and the Company or its directors or officers or
such controlling person shall have the rights and duties given to each Holder
by the preceding paragraph.  Each Selling
Holder also agrees to indemnify and hold harmless each other Selling Holder or
underwriters participating in the distribution on substantially the same basis
as that of the indemnification of the Company provided in this Section 4.2.  In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation. 
The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information so furnished in writing by such Persons specifically for
inclusion in any Registration Statement or Prospectus.

 

SECTION 4.3                          CONDUCT
OF INDEMNIFICATION PROCEEDINGS.  Any
Person entitled to indemnification hereunder (an “Indemnified Party”)
will (i) promptly give notice of any claim, action or proceeding (including any
governmental or regulatory investigation or proceeding) or the commencement of
any such action or proceeding to the Person against whom such indemnity may be
sought (an “Indemnifying Party”); provided that
the failure to give such notice shall not relieve the Indemnifying Party of its
obligations pursuant to this Agreement except to the extent that such
Indemnifying Party has been prejudiced in any material respect by such failure,
and (ii) permit the Indemnifying Party to assume the defense of such claim with
counsel reasonably satisfactory to such Indemnified Party; provided
that the Indemnified Party shall have the right to employ separate counsel and
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (a) the
Indemnifying Party has agreed to pay for such fees and expenses, or (b) the
Indemnifying Party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Indemnified Party or (c) in the
reasonable

 

16

 

judgment of such Indemnified Party, based upon advice of its counsel, a
conflict of interest may exist between such Indemnified Party and the
Indemnifying Party with respect to such claims. 
If such defense is not assumed by the Indemnifying Party, the
Indemnifying Party will not be subject to any liability for any settlement of
any such claim effected without the Indemnifying Party’s prior written consent,
which consent shall not be unreasonably withheld.  The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify and hold harmless any Indemnified
Party from and against any loss, claim damage, liability or expense by reason
of any settlement of any such claim or action. 
No Indemnifying Party shall, without the prior written consent of each
Indemnified Party, settle or compromise or consent to the entry of judgment in
or otherwise seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not any Indemnified Party is a party
thereto), unless such settlement, compromise, consent or termination includes
an unconditional release of each Indemnified Party from all liability arising
out of such action, claim, litigation or proceeding.  An Indemnifying Party who is not entitled to,
or elects not to, assume the defense of the 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 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.

 

SECTION 4.4                          CONTRIBUTION.  If the indemnification provided for in this Article IV
is unavailable to an Indemnified Party (other than by reason of exceptions
provided in those Sections) in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each applicable Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall have a joint and
severable obligation to contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party, on the one hand, and of the Indemnified Party, on the
other, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations.  The relative
fault of the Indemnifying Party, on the one hand, and of the Indemnified Party,
on the other, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.  The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 4.1, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.

 

The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.4 were determined by pro rata allocation (even
if the Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph.  The

 

17

 

amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.  Notwithstanding the provisions
of this Section 4.4, none of the Indemnified Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
net proceeds received by such Holder with respect to the Registrable Securities
exceeds the greater of (A) the amount paid by such Holder for its Registrable
Securities and (B) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.  The Holders’ obligation to contribute
pursuant to this Section 4.4 are several in proportion to the respective
number of Registrable Securities held by each of the Holders hereunder and not
joint.

 

For
purposes of this Article IV, each controlling person of a Holder shall
have the same rights to contribution as such Holder, and each officer,
director, and person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as the Company, subject in each case to the
limitations set forth in the immediately preceding paragraph.  Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Article IV, notify
such party or parties from whom contribution may be sought, but the omission to
so notify such party or parties shall not relieve the party or parties from who
contribution may be sought from any obligation it or they may have under this Article IV
or otherwise except to the extent that it has been prejudiced in any material
respect by such failure.  No party shall
be liable for contribution with respect to any action or claim settled without
its written consent; provided, however, that such written consent was not unreasonably
withheld.

 

SECTION 4.5                          ADDITIONAL
INDEMNITY.  The indemnity,
contribution and expense reimbursement obligations under this Article IV
shall be in addition to any liability each Indemnifying Party may otherwise
have; provided, however,
that any payment made by the Company which results in an Indemnified Party
receiving from any source(s) indemnification, contribution or reimbursement for
an amount in excess of the actual loss, liability or expense incurred by such
Indemnified Party, shall be refunded to the Company by the Indemnified Party
receiving such excess payment.

 

ARTICLE V

MISCELLANEOUS

 

SECTION 5.1                          RULE
144.  The Company agrees it will file
in a timely manner all reports required to be filed by it pursuant to the
Securities Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder and will take such further action as any Holder of
Registrable Securities may reasonably request in order that such Holder may
effect sales of Registrable Securities without registration within the
limitations of the exemptions

 

18

 

provided by Rule 144, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the SEC.  At any reasonable time and upon the request
of a Holder of Registrable Securities, the Company will furnish such Holder with
such information as may be necessary to enable the Holder to effect sales of
Registrable Securities pursuant to Rule 144 under the Securities Act and will
deliver to such Holder a written statement as to whether it has complied with
such information and requirements.

 

SECTION 5.2                          SPECIFIC
PERFORMANCE.  Each Holder, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.

 

SECTION 5.3                          OTHER
AGREEMENTS.  The Company will not on
or after the date of this Agreement enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof.

 

SECTION 5.4                          CHARTER
AMENDMENTS AFFECTING THE COMPANY’S COMMON STOCK.  The Company will not amend its Certificate of
Incorporation in any respect that would materially and adversely affect the
rights of the Holders hereunder.

 

SECTION 5.5                          AMENDMENTS
AND WAIVERS.  The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of a majority of the outstanding shares of Registrable
Securities.

 

SECTION 5.6                          NOTICES.  Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to
the others shall be made in writing, by hand-delivery, telegraph, telex,
telecopier, registered first-class mail or air courier guaranteeing overnight
delivery as follows:

 

if
to the Company, to:

 

Pathmark Stores, Inc.

200 Milik Street

Carteret, New Jersey
07008

Attention:  Marc A. Strassler

 

if
to any Holder:

 

to
the address specified below such Holder’s name on the signature pages hereto;

 

19

 

or
to such other place and with such other copies as any party hereto may
designate as to itself by written notice to the others.  All such notices and communications shall be
deemed to have been duly given:  at the
time delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied:  and on the next Business Day if timely
delivered to an air courier guaranteeing overnight delivery.

 

SECTION 5.7                          SUCCESSORS
AND ASSIGNS.  This Agreement shall
inure to the benefit of and be binding upon the successors and permitted assigns
of each of the parties, including without limitation and without the need for
an express assignment, subsequent holders of Registrable Securities or of the
Warrants, provided that the Company may not assign
its rights or obligations under this Agreement to any other person or entity
without the written consent of a majority of the outstanding shares of
Registrable Securities.

 

SECTION 5.8                          COUNTERPARTS.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

SECTION 5.9                          HEADINGS.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

SECTION 5.10                    GOVERNING
LAW.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to the choice of law provisions thereof.

 

SECTION 5.11                    SEVERABILITY.  In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.  Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated hereby
be consummated as originally contemplated to the fullest extent possible.

 

SECTION 5.12                    ENTIRE
AGREEMENT.  This Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Registrable Securities.  This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.

 

SECTION 5.13                    PRONOUNS.  Whenever the context may require, any
pronouns used herein shall be deemed also to include the corresponding neuter,
masculine or feminine forms.

 

20

 

SECTION 5.14                    ATTORNEY’S
FEES.  In any action or proceeding
brought to enforce any provision of this Agreement, the successful party shall
be entitled to recover reasonable attorney’s fees in addition to its costs and
expenses and any other available remedy.

 

SECTION 5.15                    SECURITIES
HELD BY THE COMPANY OR ITS SUBSIDIARIES. 
Whenever the consent or approval of Holders of a specified percentage or
Registrable Securities is required hereunder, Registrable Securities held by
the Company or its Subsidiaries shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.

 

SECTION 5.16                    FURTHER
ASSURANCES.  Each party shall
cooperate and take such action as may be reasonably requested by another party
in order to carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby.

 

SECTION 5.17                    TERMINATION.  Unless sooner terminated in accordance with
its terms or as otherwise herein provided, including specifically in Section 2.3(a),
this Agreement shall terminate upon the earlier to occur of (i) the mutual agreement
by the parties hereto, (ii) with respect to any Holder, such Holder ceasing to
own any Registrable Securities, or (iii) the tenth anniversary of the Closing.

 

(signature
page follows)

 

21

 

IN
WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first written above.

 

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  PATHMARK STORES, INC., a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank Vitrano

  	
   

  
	
   

  	
  Name: Frank Vitrano

  
	
   

  	
  Title:   President and Chief Financial
  Officer

  

 

 

S-1

Registration Rights Agreement

 

 

 

	
   

  	
  HOLDERS:

  
	
   

  	
   

  
	
   

  	
  YUCAIPA CORPORATE INITIATIVES FUND I,

  L.P., a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa Corporate Initiatives Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  YUCAIPA AMERICAN ALLIANCE

  (PARALLEL) FUND I, L.P., a Delaware limited

  partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa American Alliance Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  YUCAIPA AMERICAN ALLIANCE FUND I,

  L.P., a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Yucaipa American Alliance Fund I, LLC

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert P. Bermingham

  	
   

  
	
   

  	
  By: Robert P. Bermingham

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notices to the Investors:

  
	
   

  	
   

  
	
   

  	
  9130 W. Sunset Boulevard

  
	
   

  	
  Los Angeles, California 90069

  
	
   

  	
  Attention: Robert P. Bermingham

  
				

 

S-2

Registration Rights Agreement

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