Form SC 13D BEACON ROOFING SUPPLY Filed by: CD&R Boulder Holdings, L.P.

January 4, 2018 11:51 AM

 

 

UNITED STATES

 

 

SECURITIES AND EXCHANGE COMMISSION

 

 

Washington, D.C. 20549

 

 


 

 

SCHEDULE 13D

 

 

Under the Securities Exchange Act of 1934

 


 

Beacon Roofing Supply Inc.

(Name of Issuer)

 

Common Stock, $0.01 par value

(Title of Class of Securities)

 

073685109

(CUSIP Number)

 

CD&R Boulder Holdings, L.P.

c/o Clayton, Dubilier & Rice, LLC

Attention: Theresa A. Gore

375 Park Ave, New York NY 10152

(212) 407-5227

 

with a copy to:

 

Paul S. Bird

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York 10022

Telephone: (212) 909-6000

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

 

January 2, 2018

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because § 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g) check the following box o.

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7(b) for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 



 

CUSIP No. 073685109

 

 

 

 

1

Name of Reporting Persons
CD&R Boulder Holdings, L.P.

 

 

2

Check the Appropriate Box if a Member of a Group (See Instructions)

 

 

(a)

 o

 

 

(b)

 o

 

 

3

SEC Use Only

 

 

4

Source of Funds (See Instructions)
OO

 

 

5

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o

 

 

6

Citizenship or Place of Organization
Cayman Islands

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With

7

Sole Voting Power
9,694,619 (1)

 

8

Shared Voting Power
0

 

9

Sole Dispositive Power
9,694,619 (1)

 

10

Shared Dispositive Power
0

 

 

11

Aggregate Amount Beneficially Owned by Each Reporting Person
9,694,619 (1)

 

 

12

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)   o

 

 

13

Percent of Class Represented by Amount in Row (11)
12.5% (2)

 

 

14

Type of Reporting Person (See Instructions)
PN

 


(1) The total number of shares of common stock, par value $0.01 per share (the “Common Shares”), reported includes, on an as-converted basis (based on the initial conversion price of $41.26, as adjusted), Common Shares that are issuable upon the conversion, at the option of the holder, of 400,000 Shares of Series A Cumulative Convertible Participating Preferred Stock (the “Preferred Shares”) that, as of the date hereof, are held directly by CD&R Boulder Holdings, L.P. (“CD&R Holdings”). Each Preferred Share is entitled to vote with holders of the Common Shares on an as-converted basis, based on the initial conversion price of $41.26, as adjusted, and accrued dividends through the date of conversion. All of these Common Shares may be deemed to be beneficially owned by CD&R Investment Associates IX, Ltd., as the general partner of CD&R Holdings (“CD&R Holdings GP”).

 

(2) CD&R Holdings’ voting percentage is 12.5%, calculated using a fraction, the numerator of which is the number of Common Shares described in footnote (1) above and the denominator of which is 77,429,084 (calculated by adding the 67,734,465 Common Shares outstanding as of October 31, 2017, as reported in the Issuer’s Form 10-K, filed November 11, 2017, plus the number of Common Shares described in footnote (1) above).

 

2



 

SCHEDULE 13D

 

CUSIP No. 073685109

 

 

 

 

1

Name of Reporting Persons
CD&R Investment Associates IX, Ltd.

 

 

2

Check the Appropriate Box if a Member of a Group (See Instructions)

 

 

(a)

 o

 

 

(b)

 o

 

 

3

SEC Use Only

 

 

4

Source of Funds (See Instructions)
OO

 

 

5

Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o

 

 

6

Citizenship or Place of Organization
Cayman Islands

 

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With

7

Sole Voting Power
9,694,619 (1)

 

8

Shared Voting Power
0

 

9

Sole Dispositive Power
9,694,619 (1)

 

10

Shared Dispositive Power
0

 

 

11

Aggregate Amount Beneficially Owned by Each Reporting Person
9,694,619 (1)

 

 

12

Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)   o

 

 

13

Percent of Class Represented by Amount in Row (11)
12.5% (2)

 

 

14

Type of Reporting Person (See Instructions)
CO

 


(1) The total number of Common Shares reported includes, on an as-converted basis (based on the initial conversion price of $41.26, as adjusted), Common Shares that are issuable upon the conversion, at the option of the holder, of 400,000 Preferred Shares that, as of the date hereof, are held directly by CD&R Holdings. Each Preferred Share is entitled to vote with holders of the Common Shares on an as-converted basis, based on the initial conversion price of $41.26, as adjusted, and accrued dividends through the date of conversion. All of these Common Shares may be deemed to be beneficially owned by CD&R Holdings GP.

 

(2) CD&R Holdings GP’s voting percentage is 12.5%, calculated using a fraction, the numerator of which is the number of Common Shares described in footnote (1) above and the denominator of which is 77,429,084 (calculated by adding the 67,734,465 Common Shares outstanding as of October 31, 2017, as reported in the Issuer’s Form 10-K, filed November 11, 2017, plus the number of Common Shares described in footnote (1) above).

 

3



 

EXPLANATORY NOTE

 

Item. 1.  Security and Issuer

 

This Statement on Schedule 13D (this “Statement”) relates to the shares of common stock, par value $0.01 (the “Common Shares”), of Beacon Roofing Supply, Inc., a Delaware corporation (the “Issuer”). The Issuer’s principal executive offices are located at 505 Huntmar Park Drive, Suite 300, Herndon, VA 20170.

 

The Reporting Persons (as defined in Item 2(a)-(c)) beneficially own shares of Series A Cumulative Convertible Participating Preferred Stock, par value $0.01, of the Issuer (the “Preferred Shares”). Each Preferred Share is entitled to vote with holders of Common Shares on an as-converted basis. Each Preferred Share is convertible at any time, at the option of the holder, into a number of Common Shares, with the precise number determined by a formula in the Preferred Certificate of Designations, Preferences and Rights of Cumulative Convertible Participating Preferred Stock of the Issuer (the “Certificate of Designations”). Consequently, the Reporting Persons may be deemed to beneficially own the Common Shares into which the Preferred Shares held by the Reporting Persons are convertible, without regard to the number of authorized Common Shares available for issuance.

 

Item. 2.  Identity and Background

 

(a) - (c)   This Schedule 13D is filed jointly on behalf of: (i) CD&R Boulder Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R Holdings”), and (ii) CD&R Investment Associates IX, Ltd. (“CD&R Holdings GP”) (together with CD&R Holdings, collectively, the “Reporting Persons”). The Reporting Persons have entered into a Joint Filing Agreement, dated as of January 4, 2018, a copy of which is attached hereto as Exhibit 99.1.

 

The address for each of the Reporting Persons is c/o M&C Corporate Services Limited, PO Box 309, Ugland House, South Church Street, George Town, Grand Cayman, KY1-1104, Cayman Islands, British West Indies.

 

The securities are held directly by CD&R Holdings. CD&R Holdings GP is the general partner of CD&R Holdings.

 

To the knowledge of the Reporting Persons, the name, business address, citizenship, and principal occupation or employment of each director and officer of each of the Reporting Persons, and any other information concerning the Reporting Persons and other persons and entities as to which such information is required to be disclosed in response to General Instruction C to Schedule 13D are set forth in Schedule A and incorporated herein by this reference.

 

(d)           During the last five years, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

 

(e)           During the last five years, none of the Reporting Persons has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

 

(f)            CD&R Holdings and CD&R Holdings GP are organized under the laws of the Cayman Islands.

 

Item. 3.  Source and Amount of Funds or Other Consideration

 

The aggregate purchase price for the 400,000 Preferred Shares acquired by CD&R Holdings on January 2, 2018 was $400,000,000.

 

CD&R Holdings obtained funds from capital contributions of its partners.

 

4



 

Item. 4.  Purpose of Transaction

 

The information set forth in Item 6 hereof is hereby incorporated by reference into this Item 4.

 

The Reporting Persons beneficially own an aggregate of 400,000 Preferred Shares.  Such shares may be converted at any time at the option of the holder into 9,694,619 Common Shares  representing approximately 12.5% of the Issuer’s outstanding Common Shares (as of October 31, 2017 and assuming no adjustment to the initial conversion price of $41.26 per share).  See “Item 5. Interest in Securities of the Issuer.”

 

As of the date of this filing, pursuant to the Investment Agreement (as defined below in “Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.”), the Issuer’s board of directors (the “Board”) has elected the Purchaser Designees (as described below in “Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.”), Philip K. Knisely, an operating advisor to the funds managed by Clayton, Dubilier & Rice, LLC (“CD&R”), and Nathan K. Sleeper, a partner of CD&R, to serve as directors of the Issuer.  In their capacity as directors of the Issuer, Messrs. Knisely and Sleeper or any successor Purchaser Designee may take an active role in working with the Issuer’s management on operational, financial and strategic initiatives.

 

Other than as described above, each of the Reporting Persons reports that neither it nor, to its knowledge, any of the other persons named in Item 2 of this Schedule 13D, currently has any plan or proposal which relates to, or may result in, any of the matters listed in Items 4(a)-(j) of this Schedule 13D, although each Reporting Person expects to evaluate on an ongoing basis the Issuer’s financial condition and prospects and its interest in, and intentions with respect to, a variety of transactions that could create shareholder value, including business combinations, acquisitions and refinancing opportunities. Accordingly, each Reporting Person reserves the right to change its plans and intentions at any time, as it deems appropriate

 

In particular, each Reporting Person may, subject to the limitations set forth in the Investment Agreement (as described below in “Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.”), at any time and from time to time, in privately negotiated transactions or otherwise, acquire additional securities of the Issuer; dispose of all or a portion of the securities of the Issuer that the Reporting Persons now own or may hereafter acquire; and/or enter into derivative transactions with institutional counterparties with respect to the Issuer’s securities. In addition, the Reporting Persons may, subject to the limitations set forth in the Investment Agreement, engage in discussions with management, the Board, other stockholders of the Issuer and other relevant parties concerning the business, operations, Board composition, management, strategy and future plans of the Issuer. Pursuant to the Investment Agreement, the Reporting Persons directly holding Preferred Shares or Common Shares are entitled to designate, nominees to the Board, which will afford access to, and participation in, deliberations of the Board regarding the business, operations, Board composition, management, strategy and future plans of the Issuer.

 

As a result of these activities, and subject to the limitations set forth in the Investment Agreement, one or more of the Reporting Persons may suggest or take a position with respect to potential changes in the operations, management, or capital structure of the Issuer as a means of enhancing shareholder value. Such suggestions or positions may include one or more plans or proposals that relate to or would result in any of the actions required to be reported herein, including, without limitation, such matters as disposing of one or more businesses; selling the Issuer or acquiring another company or business; changing operating or marketing strategies; adopting, not adopting, modifying, or eliminating certain types of anti-takeover measures; restructuring the Issuer’s capitalization; reviewing dividend and compensation policies; entering into agreements with third parties relating to acquisitions of securities issued or to be issued by the Issuer; entering into agreements with the management of the Issuer relating to acquisitions of shares by members of management, issuance of equity awards to management, or their employment by the Issuer.

 

Except as described in Item 6 of this Schedule 13D which is incorporated herein by reference, the Reporting Persons have no present plans or proposals that relate to or would result in any of the actions required to be reported herein.

 

5



 

Item 5.   Interest in Securities of the Issuer.

 

(a)

 

(i) CD&R Holdings is the beneficial owner of 9,694,619 Common Shares on an as-converted basis (based on the initial conversion price of $41.26, as adjusted), which are issuable upon conversion, at the option of the holder, of the 400,000 Preferred Shares that, as of the date hereof, are held directly by CD&R Holdings. Taking into account this beneficial ownership, CD&R Holdings’ voting interest is approximately 12.5% of the voting power of the Issuer, based on (x) the initial conversion price of $41.26 and (y) 67,734,465 Common Shares outstanding as of October 31, 2017, as reported in the Issuer’s Form 10-K, filed November 11, 2017.

 

(ii) CD&R Holdings GP, as the general partner of CD&R Holdings, may be deemed to beneficially own the Preferred Shares in which CD&R Holdings has beneficial ownership. CD&R Holdings GP expressly disclaims beneficial ownership of the Preferred Shares in which CD&R Holdings has beneficial ownership. Investment and voting decisions with respect to the Preferred Shares or Common Shares held by CD&R Holdings or CD&R Holdings GP are made by an investment committee comprised of more than ten investment professionals of Clayton, Dubilier & Rice, LLC, or the “Investment Committee.” All members of the Investment Committee disclaim beneficial ownership of the shares shown as beneficially owned by CD&R Holdings or CD&R Holdings GP.

 

(iii) CD&R Holdings GP is managed by a two-person board of directors. Donald J. Gogel and Kevin J. Conway, as the directors of CD&R Holdings GP, may be deemed to share beneficial ownership of the Preferred Shares directly held by CD&R Holdings. Such persons expressly disclaim such beneficial ownership.

 

(b) In addition to the description set forth above in Item 5(a), see the cover pages of this Schedule 13D for indications of the respective voting powers and disposition powers of the Reporting Persons.

 

The responses set forth in Items 4 and 6 are incorporated by reference in their entirety.

 

(c) Except as set forth herein, each of the Reporting Persons reports that neither it, nor to its knowledge, any other person named in Item 2 of this Schedule 13D, has effected any transactions in Common Shares or Preferred Shares during the past 60 days, other than the acquisition by CD&R Holdings on January 2, 2018 of 400,000 Preferred Shares pursuant to the Investment Agreement.

 

(d) Except as otherwise described in Item 2 and this Item 5, no one other than the Reporting Persons has the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, any of the securities of the Issuer beneficially owned by the Reporting Persons as described in this Item 5.

 

(e) Not applicable.

 

Item 6.   Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

 

Joint Filing Agreement

 

A Joint Filing Agreement, dated January 4, 2018, by and among the Reporting Persons has been executed by the Reporting Persons, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Investment Agreement

 

On August 24, 2017 the Issuer entered into a definitive purchase agreement to acquire, for approximately $2.625 billion, all of the issued and outstanding shares of capital stock of Allied Building Products Corp. and an affiliated entity (together with its and their respective subsidiaries, “Allied”) on the terms and subject to the conditions set forth in the stock purchase agreement related thereto (the “Allied Acquisition”).  On August 24, 2017, in connection with the execution of such stock purchase agreement, the Issuer entered into an investment agreement (the “Investment Agreement”) with CD&R Holdings (together with its affiliated funds, the “CD&R Investors”) and Clayton, Dubilier & Rice Fund IX, L.P. (solely for the purpose of limited provisions therein) for the purchase of  Preferred Shares in order to partially finance the Allied Acquisition.

 

The Preferred Shares are perpetual participating preferred stock of the Issuer, with an initial conversion price of $41.26 per share, and accrue dividends at a rate of 6.0% per annum (payable in cash or in-kind, subject to specified limitations).  If the Issuer issues additional Preferred Shares as “in-kind” dividend payments that, together with the 400,000 Preferred Shares issued to CD&R Holdings at closing on January 2, 2018, represent in excess of 12,071,937 Common Shares on an as-converted basis, and in certain other circumstances as provided in the

 

6



 

Certificate of Designations, a “Triggering Event” would occur. Upon the occurrence of a “Triggering Event,” the dividend rate will increase to 9.0% per annum for so long as the Triggering Event remains in effect.  If the Issuer declares or pays a cash dividend on the Common Shares, the Issuer will be required to declare and pay a dividend on the outstanding Preferred Shares on a pro rata basis with the Common Shares determined on an as-converted basis (without giving effect to any limitations on conversion or convertibility).

 

The Preferred Shares may be converted to Common Shares at any time following issuance thereof at the option of the holder.  Pursuant to the Investment Agreement, upon closing of the Allied Acquisition on January 2, 2018, CD&R Holdings purchased 400,000 Preferred Shares with an aggregate initial liquidation preference of $400 million, at a purchase price of $1,000 per share. Such Preferred Shares may be converted at any time at the option of the holder into 9,694,619 Common Shares representing approximately 12.5% of the Issuer’s outstanding Common Shares (as of October 31, 2017, assuming no adjustment to the initial conversion price of $41.26 per share and without giving effect to any accrued and unpaid dividends). In addition, the Issuer may, at its option, require conversion of all (but not less than all) of the outstanding Preferred Shares to Common Shares if at any time the Common Shares trading price exceeds 200% of the then-effective conversion price for at least 75 out of 90 trailing trading days.  The conversion price of the Preferred Shares is subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar event.

 

The maximum number of Common Shares into which the Preferred Shares may be converted (taking into account any Preferred Shares issued as in-kind dividend payments) is limited to 12,071,937 Common Shares, which represents 19.99% of the total number of shares of Common Shares issued and outstanding immediately prior to the execution of the Investment Agreement, unless and until the Issuer obtains stockholder approval of such issuance under the NASDAQ listing rules.

 

Holders of the Preferred Shares generally are entitled to vote with the holders of Common Shares on all matters submitted for a vote of holders of Common Shares (voting together with the holders of Common Shares as one class on an as-converted basis, subject to the limitation on conversion described above). The prior written consent of the holders of a majority of the Preferred Shares is also required to, among other things, (i) amend or modify the Issuer’s charter, by-laws or the Certificate of Designations to adversely affect the Preferred Shares or (ii) amend the Issuer’s debt agreements to, among other things, adversely affect the Issuer’s ability to pay dividends on the Preferred Shares, subject to certain exceptions.

 

The holders of Preferred Shares have the right to receive a liquidation preference entitling them to be paid out of the Issuer’s assets available for distribution to shareholders in connection with a liquidation, dissolution or winding up, before any payment may be made to holders of Common Shares, an amount equal to the greater of (a) 100% of the liquidation preference thereof plus all accrued and unpaid dividends or (b) the amount that such holder would have been entitled to receive upon the Issuer’s liquidation, dissolution and winding up if all outstanding Preferred Shares had been converted into Common Shares immediately prior to such liquidation, dissolution or winding up, without regard to any limitations on conversion or convertibility.

 

Furthermore, the holders of Preferred Shares have certain redemption rights upon certain change of control events involving the Issuer, which, if exercised, would require the Issuer to repurchase all of the outstanding Preferred Shares for cash at the original purchase price of the Preferred Shares plus all accrued and unpaid dividends thereon.

 

The Investment Agreement provides that the CD&R Investors  (i) may designate two Issuer directors, for so long as the CD&R Investors hold Preferred Shares (or Common Shares issued upon conversion of the Preferred Shares) representing at least 50% of the Preferred Shares initially issued to the CD&R Holdings at closing, and (ii) may designate one Issuer director, for so long as the CD&R Investors hold Preferred Shares (or Common Shares issued upon conversion of the Preferred Shares) representing less than 50%, but at least 25%, of such Issuer shares so received by CD&R Holdings (such directors, the “Purchaser Designees”).

 

For so long as the CD&R Investors hold Preferred Shares (or Common Shares issued upon conversion of the Preferred Shares) representing at least 25% of the Preferred Shares initially issued to CD&R Holdings at the closing, the CD&R Investors will have customary preemptive rights to participate in future equity and equity-linked issuances by the Issuer up to the extent necessary to maintain its pro rata ownership percentage in the Issuer, subject to customary exceptions.

 

7



 

The Investment Agreement further provides that, for the longer of 24 months post-closing and six months after the date on which the CD&R Investors no longer have a designee on the Board, subject to customary exceptions and an exception for additional Common Shares to the extent acquired solely from cash dividends received on the Preferred Shares, the CD&R Investors will be subject to customary standstill restrictions.

 

The CD&R Investors are restricted from transferring to a non-affiliate Preferred Shares or any Common Shares received upon conversion thereof until July 2, 2019.  The CD&R Investors are also restricted at any time from transferring Preferred Shares initially issued to CD&R Holdings or any Common Shares received upon conversion thereof to certain prohibited transferees, including persons who beneficially own five percent (5%) or more of any class or series of equity investors of the Issuer, certain specified competitors and certain potential activist investors, subject to specified exceptions.

 

At each meeting of the stockholders of the Issuer, the CD&R Investors are required to use reasonable best efforts to cause each of their respective affiliates and representatives to vote all of the Preferred Shares and Common Shares beneficially owned, directly or indirectly, by Clayton, Dubilier & Rice Fund IX, L.P. (i) in favor of each director nominated and recommended by the Board (which nomination and recommendation shall include the Purchaser Designees) and (ii) against any stockholder nominations for director or other stockholder proposals which are not approved and recommended by the Board.

 

Registration Rights Agreement

 

On January 2, 2018, the Issuer entered into a registration rights agreement with CD&R Holdings, attached hereto as Exhibit 99.3 (the “Registration Rights Agreement”), pursuant to which the Issuer has agreed to file a resale shelf registration statement for the benefit of CD&R Holdings and its permitted transferees (collectively, the “CD&R Stockholders”) promptly upon the expiration of the 18-month post-closing lock-up period, and pursuant to which the CD&R Stockholders may make up to four requests (only two of which may require a customary “road show” or other substantial marketing efforts) that the Issuer conduct an underwritten offering of, or register, Common Shares received upon conversion of Preferred Shares held by the CD&R Stockholders and eligible for registration thereunder (“registrable securities”). The CD&R Stockholders also have customary piggyback registration rights and may request that the Issuer include their registrable securities in certain future registration statements or offerings of Common Shares by the Issuer. These registration rights will terminate when the CD&R Stockholders no longer own any registrable securities or Preferred Shares.

 

The foregoing descriptions of the Investment Agreement and the Registration Rights Agreement do not purport to be complete and are subject to, and qualified in its entirety by, the full text of each of such agreements, which are attached hereto as Exhibits 99.2 and 99.3.

 

The responses set forth in Items 4 and 5 are incorporated by reference in their entirety. Except as otherwise described above, there are no contracts, arrangements, understandings or relationships among the Reporting Persons (or, to the best of such Reporting Person’s knowledge, any other persons identified on the respective Schedules attached hereto with respect to the Reporting Persons), or between any Reporting Person (or, to the best of such Reporting Person’s knowledge, any other person identified on the respective Schedule attached hereto with respect to such Reporting Person) and any other person with respect to any securities of the Issuer.

 

Item 7.   Material to be Filed as Exhibits.

 

Exhibit Number

 

Description of Exhibit

 

 

 

1

 

Exhibit 99.1 — Joint Filing Agreement

 

 

 

2

 

Exhibit 99.2 — Investment Agreement, dated as of August 24, 2017, by and among Beacon Roofing Supply, Inc., CD&R Boulder Holdings, L.P. and Clayton, Dubilier & Rice Fund IX, L.P. (solely for purposes of Sections 4.13 and 4.14 thereof), including the form of Certificate of Designations and Registration Rights Agreement attached as Exhibits A and B thereto, respectively (incorporated by reference to Exhibit 10.1 of the Current Report on

 

8



 

 

 

Form 8-K of Beacon Roofing Supply, Inc. filed on August 27, 2014).

 

 

 

3

 

Exhibit 99.3 — Registration Rights Agreement, dated as of January 2, 2018, by and among Beacon Roofing Supply, Inc., CD&R Boulder Holdings, L.P. and any Person who becomes a party thereto pursuant to Section 8(d) thereto.

 

9



 

SIGNATURES

 

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

Dated: January 4, 2018

 

 

CD&R BOULDER HOLDINGS, L.P.

 

 

 

 

By:

CD&R Investment Associates IX, Ltd.,
its general partner

 

 

 

 

 

 

 

 

By:

/s/ Theresa A. Gore

 

 

 

 

Name: Theresa A. Gore

 

 

 

 

Title: Vice President, Treasurer and Assistant Secretary

 

 

 

 

CD&R INVESTMENT ASSOCIATES IX, Ltd.

 

 

 

 

 

 

 

 

By:

/s/ Theresa A. Gore

 

 

 

 

Name: Theresa A. Gore

 

 

 

 

Title: Vice President, Treasurer and Assistant Secretary

 

10



 

SCHEDULE A

 

The business address for each of the persons listed below is c/o Clayton, Dubilier & Rice, LLC, 375 Park Avenue, 18th Floor, New York, New York 10152, and the business telephone number of each such person is 212-407-5200.

 

Name

 

Title/Principal Occupation or Employment

 

Citizenship

Donald J. Gogel

 

Mr. Gogel is a director and officer of CD&R Investment Associates IX, Ltd.

 

United States of America

 

 

 

 

 

Kevin J. Conway

 

Mr. Conway is a director and officer of CD&R Investment Associates IX, Ltd.

 

United States of America

 

 

 

 

 

Theresa A. Gore

 

Ms. Gore is an officer of CD&R Investment Associates IX, Ltd.

 

United States of America

 

11


EXHIBIT 99.1

 

JOINT FILING AGREEMENT

 

Pursuant to Rule 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, as amended, the undersigned agree that the Statement on Schedule 13D to which this exhibit is attached is filed on behalf of each of them in the capacities set forth below.

 

Dated: January 4, 2018

 

[Signature on following page]

 



 

 

CD&R BOULDER HOLDINGS, L.P.

 

 

 

 

By:

CD&R Investment Associates IX, Ltd.,
its general partner

 

 

 

 

 

 

 

 

By:

/s/ Theresa A. Gore

 

 

 

 

Name: Theresa A. Gore

 

 

 

 

Title: Vice President, Treasurer and Assistant Secretary

 

 

 

 

CD&R INVESTMENT ASSOCIATES IX, Ltd.

 

 

 

 

 

 

 

 

By:

/s/ Theresa A. Gore

 

 

 

 

Name: Theresa A. Gore

 

 

 

 

Title: Vice President, Treasurer and Assistant Secretary

 


Exhibit 99.3

 

 

 

REGISTRATION RIGHTS AGREEMENT

 

of

 

BEACON ROOFING SUPPLY, INC.

 

dated as of January 2, 2018

 

 

 



 

TABLE OF CONTENTS

 

 

 

 

 

Page

1.

Definitions

1

 

 

 

2.

Registration Rights

5

 

 

 

 

(a)

Shelf Registration

5

 

 

 

 

 

(b)

Shelf Takedowns

5

 

 

 

 

 

(c)

Cooperation with Shelf Takedowns

6

 

 

 

 

 

(d)

Automatic Shelf Registration Statements

6

 

 

 

 

 

(e)

Demand Rights

6

 

 

 

 

 

(f)

Effectiveness of Demand Registration

7

 

 

 

 

 

(g)

Continued Effectiveness

7

 

 

 

 

 

(h)

Priority on Registration

7

 

 

 

 

 

(i)

Postponements in Requested Registrations

8

 

 

 

 

 

(j)

Registration Expenses

9

 

 

 

 

 

(k)

Registration Statement Form

9

 

 

 

 

 

(l)

Selection of Underwriters

9

 

 

 

3.

Piggyback Restrictions

9

 

 

 

 

(a)

Right to Piggyback

9

 

 

 

 

 

(b)

Underwritten Registration

10

 

 

 

 

 

(c)

Piggyback Registration Expenses

10

 

 

 

 

 

(d)

Priority on Primary Registrations

10

 

 

 

 

 

(e)

Priority on Secondary Registrations

11

 

 

 

4.

Registration Procedures

11

 

 

 

5.

Indemnification

16

 

 

 

 

(a)

Indemnification by the Company

16

 

 

 

 

 

(b)

Indemnification by CD&R Stockholder of Registrable Securities

17

 

 

 

 

 

(c)

Conduct of Indemnification Proceedings

18

 

i



 

TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

(d)

Contribution

18

 

 

 

 

 

(e)

Deemed Underwriter

19

 

 

 

 

 

(f)

Other Indemnification

19

 

 

 

 

 

(g)

Non-Exclusivity

19

 

 

 

6.

Registration Expenses

19

 

 

 

7.

Rule 144

20

 

 

 

8.

Certain Additional Agreements

21

 

 

 

9.

Miscellaneous

21

 

 

 

 

(a)

Termination

21

 

 

 

 

 

(b)

Holdback Agreement

21

 

 

 

 

 

(c)

Amendments and Waivers

21

 

 

 

 

 

(d)

Successors, Assigns and Transferees

21

 

 

 

 

 

(e)

Notices

22

 

 

 

 

 

(f)

Further Assurances

23

 

 

 

 

 

(g)

No Inconsistent Agreements

23

 

 

 

 

 

(h)

Entire Agreement; No Third Party Beneficiaries

23

 

 

 

 

 

(i)

Governing Law; Jurisdiction and Forum; Waiver of Jury Trial

23

 

 

 

 

 

(j)

Severability

24

 

 

 

 

 

(k)

Enforcement

24

 

 

 

 

 

(l)

Titles and Subtitles

24

 

 

 

 

 

(m)

No Recourse

25

 

 

 

 

 

(n)

Counterparts; Facsimile Signatures

25

 

ii



 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of January 2, 2018, by and among Beacon Roofing Supply, Inc., a Delaware corporation (the “Company”), CD&R Boulder Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R Investor”), and any Person who becomes a party hereto pursuant to Section 8(d) (each such party and CD&R Investor, a “CD&R Stockholder” and collectively, the “CD&R Stockholders”).  Capitalized terms used herein shall have the meaning assigned to such terms in the text of this Agreement or in Section 1.

 

WHEREAS, on or prior to the date hereof, the Company has adopted and filed with the Secretary of State of the State of Delaware the Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Participating Preferred Stock in the form attached hereto as Exhibit A (the “Certificate of Designations”) in order to create a series of preferred stock, par value $0.01 per share, designated as Series A Cumulative Convertible Participating Preferred Stock (the “Preferred Stock”);

 

WHEREAS, pursuant to the Investment Agreement, dated as of August 24, 2017, by and among the Company, CD&R Investor and Clayton, Dubilier & Rice Fund IX, L.P. (solely for purposes of Sections 4.13 and 4.14 thereof) (as such agreement may be amended from time to time, the “Investment Agreement”), CD&R Investor acquired from the Company, and the Company issued to CD&R Investor, an aggregate of 400,000 shares of Preferred Stock;

 

WHEREAS, pursuant to the Certificate of Designations, the Preferred Stock may be converted into a certain number of shares of Common Stock, on the terms and subject to certain conditions specified in the Certificate of Designations; and

 

WHEREAS, the Company desires to provide to the CD&R Stockholders rights to registration under the Securities Act of Registrable Securities, on the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises hereinafter set forth, the parties hereto agree as follows:

 

AGREEMENT

 

1.                                      Definitions.  As used in this Agreement, the following capitalized terms shall have the following respective meanings:

 

Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, such person.

 

Agreement” has the meaning given to such term in the Preamble.

 

Automatic Shelf Registration Statement” has the meaning given to such term in Section 2(d).

 



 

Block Sale” means the sale of shares of Common Stock to one or several purchasers in a registered transaction by means of a bought deal, a block trade or a direct sale.

 

Board” means the Board of Directors of the Company.

 

Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in New York City.

 

CD&R Investor” has the meaning given to such term in the Preamble.

 

CD&R Stockholders” has the meaning given to such term in the Preamble.

 

Certificate of Designations has the meaning given to such term in the Recitals.

 

Closing” means the closing of the transactions contemplated by the Investment Agreement.

 

Closing Date” means the date on which the Closing occurs.

 

Common Stock” means the common stock, par value $0.01 per share, of the Company, including any shares of capital stock into which the Common Stock may be converted (as a result of recapitalization, share exchange or similar event) or are issued including with respect to any stock split or stock dividend, or a successor security.

 

Company” has the meaning given to such term in the Preamble.

 

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

 

Covered Person” has the meaning given to such term in Section 5(a).

 

Demand Registration” has the meaning given to such term in Section 2(e).

 

Demand Request” has the meaning defined in Section 2(e).

 

Effective Period” has the meaning given to such term in Section 2(g).

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor statute thereto and the rules and regulations of the SEC promulgated thereunder.

 

FINRA” means the Financial Industry Regulatory Authority.

 

Free Writing Prospectus” has the meaning given to such term in Section 4(a).

 

2



 

Holdback Period” means, with respect to any registered offering covered by this Agreement 90 days after (or such shorter period as may be agreed to by the managing underwriter(s) for such offering) and during the 10 days before, the effective date of the related Registration Statement or, in the case of an underwritten takedown from a Shelf Registration Statement, 90 days after (or such shorter period as may be agreed to by the managing underwriter(s) for such offering) the date of the Prospectus supplement filed with the SEC in connection with such takedown and during such prior period (not to exceed 10 days) as the Company has given reasonable written notice to the CD&R Stockholders holding Registrable Securities.

 

including” means “including without limitation”.

 

Indemnified Party” has the meaning given to such term in Section 5(c).

 

Indemnifying Party” has the meaning given to such term in Section 5(c).

 

Investment Agreement” has the meaning given to such term in the Recitals.

 

Lock-Up Period” means the period commencing on the Closing Date and ending on the date that is eighteen (18) months after the Closing Date.

 

Losses” has the meaning given to such term in Section 5(a).

 

Marketed Underwritten Offering” means (i) an Underwritten Offering pursuant to a Demand Registration or (ii) a Marketed Underwritten Shelf Offering.

 

Marketed Underwritten Shelf Offering” has the meaning given to such term in Section 2(b).

 

“Permitted Rights Transferee” means, for the purposes of this Agreement, any Person to whom CD&R Investor transfers shares of Preferred Stock or Common Stock in accordance with Section 4.9 of the Investment Agreement.

 

Person” means any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government or any department or agency thereof or any other entity.

 

Piggyback Registration” has the meaning given to such term in Section 3(a).

 

Piggybacking Holder” has the meaning given to such term in Section 2(h)(iii).

 

Preferred Stock has the meaning given to such term in the Recitals.

 

Prospectus” means the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, relating to Registrable Securities, and all other amendments and supplements

 

3



 

to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.

 

Registration Expenses” has the meaning given to such term in Section 6.

 

Registrable Securities” means, as of any date of determination, (a)(i) any shares of Common Stock held by a CD&R Stockholder and (ii) any shares of Common Stock issuable upon conversion of shares of Preferred Stock (including shares of Preferred Stock issued as dividends thereon as permitted under the terms of the Certificate of Designations) held by a CD&R Stockholder and (b) any equity securities or other equity interests issued or issuable, directly or indirectly, with respect to the shares of Common Stock described in clause (a) by way of conversion or exchange thereof or stock dividends, stock splits or in connection with a combination of shares, reclassification, recapitalization, merger, consolidation or other reorganization.  As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities when (i) they are disposed of pursuant to an effective Registration Statement under the Securities Act, (ii) they are sold to the public pursuant to Rule 144 or Rule 145 (or other exemption from registration under the Securities Act), (iii) they shall have ceased to be outstanding, or (iv) they have been sold in a private transaction.

 

Registration Statement” means any registration statement of the Company filed with the SEC under the Securities Act which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including any Prospectus, Free Writing Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

 

Rule 144” means Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

Rule 145” means Rule 145 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

Rule 405” means Rule 405 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

SEC” means the U.S. Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.

 

Securities Act” means the Securities Act of 1933, as amended, and any successor statute thereto and the rules and regulations of the SEC promulgated thereunder.

 

Selling Expenses” means all underwriting and brokerage discounts, selling commissions, transfer taxes, if any, and the fees and expenses of separate counsel and other advisors and agents, if any, to the CD&R Stockholders associated with the CD&R

 

4



 

Stockholders effecting any sales of Registrable Securities under any Registration Statement.

 

Shelf Registration Statement” has the meaning given to such term in Section 2(a).

 

Shelf Takedown” has the meaning given to such term in Section 2(b).

 

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

 

Underwritten Offering” means an offering registered under the Securities Act in which securities of the Company are sold to one or more underwriters on a firm-commitment basis for reoffering to the public.

 

WKSI” has the meaning given to such term in Section 2(d).

 

2.                                      Registration Rights.

 

(a)           Shelf Registration.  The Company shall file with the SEC and thereafter use its reasonable best efforts to cause to be declared effective promptly upon the expiration of the Lock-Up Period a registration statement on Form S-3 or any comparable or successor form or forms or any similar short-form registration constituting a “shelf” registration statement providing for the registration of, and the sale by the CD&R Stockholders on a continuous or delayed basis of, all of the Registrable Securities, pursuant to Rule 415 or otherwise (a “Shelf Registration Statement”).

 

(b)           Shelf Takedowns.  Subject to the provisions of Section 2(c) hereof, the CD&R Stockholders shall be entitled, at any time and from time to time when a Shelf Registration Statement is effective, to sell such Registrable Securities held by them as are then registered pursuant to a Shelf Registration Statement (each, a “Shelf Takedown”).  The number of Shelf Takedowns that the CD&R Stockholders may effect pursuant to this Section 2(b) shall not be limited, provided that the number of Underwritten Offerings that may be effected hereunder shall be limited to a total of four (4) (less any Demand Requests made pursuant to Section 2(e)), with only two (2) such Underwritten Offerings where the plan of distribution contemplates a customary “road show” (including an “electronic road show”) or other substantial marketing effort by the Company and the underwriters (any such Underwritten Offering, a “Marketed Underwritten Shelf Offering”).  Any such Shelf Takedown may be made in the United States by and pursuant to any method or combination of methods legally available to the CD&R Stockholders (including an underwritten offering, a direct sale to purchasers, a sale to or through brokers, dealers or agents, a sale over the internet, Block Sales, derivative transactions with third parties, sales in connection with short sales and other hedging transactions).  The Company shall comply with the applicable provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Shelf Registration Statement in

 

5



 

accordance with the intended methods of disposition by the CD&R Stockholders participating in such Shelf Takedown.  The CD&R Stockholders selling any Registrable Securities pursuant to a Shelf Takedown shall give the Company prompt written notice of the consummation of each Shelf Takedown (whether or not such Shelf Takedown constitutes an Underwritten Offering).

 

(c)           Cooperation with Shelf Takedowns.  Upon receipt of prior written notice by the CD&R Stockholders that they intend to effect a Shelf Takedown, the Company shall use its reasonable best efforts to cooperate in such Shelf Takedown, whether or not such Shelf Takedown constitutes an Underwritten Offering, by amending or supplementing the Prospectus related to such Shelf Registration Statement as may be reasonably requested by the CD&R Stockholders for so long as any CD&R Stockholders hold Registrable Securities; provided that the Company shall not be obligated to cooperate in an Underwritten Offering to be effected by means of a Block Sale if notice of such Underwritten Offering has not been delivered to the Company at least seven (7) Business Days prior to the intended launch of such Block Sale.

 

(d)           Automatic Shelf Registration Statements.  To the extent the Company is a well-known seasoned issuer (as defined in Rule 405) (a “WKSI”) at a time when it is obligated to file a Shelf Registration Statement pursuant to this Agreement, the Company shall file an automatic shelf registration statement (as defined in Rule 405) on Form S-3 (an “Automatic Shelf Registration Statement”) in accordance with the requirements of the Securities Act and the rules and regulations of the SEC thereunder, that covers the Registrable Securities.  The Company shall pay the registration fee for all Registrable Securities to be registered pursuant to an Automatic Shelf Registration Statement at the time of filing of the Automatic Shelf Registration Statement and shall not elect to pay any portion of the registration fee on a deferred basis. The Company shall use its reasonable best efforts to remain a WKSI (and not to become an ineligible issuer (as defined in Rule 405)) during the period during which any Automatic Shelf Registration Statement is effective. If at any time following the filing of an Automatic Shelf Registration Statement when the Company is required to re-evaluate its WKSI status the Company determines that it is not a WKSI, the Company shall use its reasonable best efforts to post-effectively amend the Automatic Shelf Registration Statement to a Shelf Registration Statement that is not automatically effective or file a new Shelf Registration Statement or, if the Company is not eligible at such time to file a Shelf Registration Statement, a Registration Statement on Form S-1; have such Registration Statement declared effective by the SEC; and keep such Registration Statement effective during the period during which such Shelf Registration Statement or Registration Statement on Form S-1 is required to be kept effective in accordance with Section 2(g) hereof.

 

(e)           Demand Rights.  After the expiration of the Lock-up Period, in the event the Company ceases to be eligible to register Registrable Securities on Form S-3 or has failed to perform its obligations under Section 2(a), the CD&R Stockholders shall have the right on three (3) occasions (provided, that the aggregate number of such rights effected pursuant to this Section 2(e) plus the number of any Marketed Underwritten Shelf Offerings effected pursuant to Section 2(b) shall not exceed four (4)) to require the Company to file a registration statement under the Securities Act in respect of all or a portion of Registrable Securities owned by the CD&R Stockholders (so long as such request covers at least $25,000,000 worth of the then current value of shares of Common Stock (including, for purposes of such determination, any shares of Common Stock issuable upon conversion of shares of Preferred Stock (including shares

 

6



 

of Preferred Stock issued as dividends thereon as permitted under the terms of the Certificate of Designations))), by delivering to the Company written notice stating that such right is being exercised, specifying the number of Registrable Securities owned by the CD&R Stockholders to be included in such registration, and describing the intended method of distribution thereof (each, a “Demand Request” and any registration effected pursuant thereto, a “Demand Registration”).  Notwithstanding the foregoing, the Company shall not be required to file any Registration Statement pursuant to a Demand Request within 90 days after the effective date of a previous Demand Registration or any previous Registration Statement in which the holders of Registrable Securities were given piggyback rights pursuant to Section 3 in which there was no reduction in the number of Registrable Securities to be included, and in each case, in which the sale of the Registrable Securities included therein was consummated.  The Company shall comply with the applicable provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Demand Registration in accordance with the intended methods of disposition by the CD&R Stockholders.

 

(f)            Effectiveness of Demand Registration.  As promptly as practicable, but in no event later than 20 Business Days after the Company receives a Demand Request pursuant to Section 2(e) hereof, the Company shall file with the SEC and thereafter use its reasonable best efforts to cause to be declared effective promptly a registration statement on the appropriate form (it being agreed that, subject to Section 2(l) hereof, such Registration Statement shall be an Automatic Shelf Registration Statement, if then available to the Company) providing for the registration of such number of Registrable Securities the CD&R Stockholders shall have requested be registered for distribution in accordance with such intended method of distribution; provided, however, no sale shall be made by any CD&R Stockholder pursuant to any Demand Registration prior to the expiration of the Lock-Up Period, except with the prior written consent of the Company. The Company shall comply in all material respects with the applicable provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by any such registration statement in accordance with the intended method or methods of disposition by the CD&R Stockholders.

 

(g)           Continued Effectiveness.  The Company shall use its reasonable best efforts to keep (A) any Shelf Registration Statement filed pursuant to this Agreement continuously effective and usable for the resale of the Registrable Securities covered thereby until the earlier of (i) three (3) years from the effective date of such Shelf Registration Statement and (ii) the date on which all of the Registrable Securities covered by such Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement and (B) any Registration Statement filed pursuant to a Demand Request effective for a period of at least 180 days after the effectiveness thereof or such shorter period during which all Registrable Securities included therein shall have actually been sold (such period, the “Effective Period”); provided, however, that in the event the Company suspends, postpones or delays the filing of a Registration Statement required to be filed pursuant to this Agreement, the Effective Period shall be extended by the duration of each such applicable suspension, postponement or delay.

 

(h)           Priority on Demand Registration or Shelf Takedown.   If any of the Registrable Securities registered pursuant to a Demand Request or a Shelf Takedown are to be sold in a Marketed  Underwritten Offering, and the managing underwriter(s) advise the CD&R Stockholders that in its good faith opinion the total number or dollar amount of Registrable

 

7



 

Securities proposed to be sold in such Marketed Underwritten Offering (including securities proposed to be included by other holders of securities entitled to include securities in such Registration Statement pursuant to incidental or piggyback registration rights), is such as to adversely affect the success of such offering, then there shall be included in such Marketed Underwritten Offering the number or dollar amount of Registrable Securities that in the good faith opinion of such managing underwriter(s) can be sold without adversely affecting such offering, and such number of Registrable Securities shall be allocated as follows, unless the underwriters require a different allocation:

 

(i)            first, to the CD&R Stockholders requesting such registration pro rata on the basis of the percentage of Registrable Securities owned by each such CD&R Stockholder relative to the number of Registrable Securities owned by all CD&R Stockholders, until with respect to each such CD&R Stockholder, all Registrable Securities requested for registration by such Holders have been included in such registration;

 

(ii)           second, the securities for which inclusion in such Registration Statement was requested by the Company; and

 

(iii)          third, Common Stock requested by other holders of Common Stock (each, a “Piggybacking Holder”) to be included in such Marketed Underwritten Offering, on a pro rata basis or in such other manner as such Piggybacking Holders shall agree.

 

Notwithstanding the foregoing, no securities other than Registrable Securities held by the CD&R Stockholders shall be eligible for inclusion in the total number or dollar amount of Registrable Securities proposed to be sold in any Block Sale effected pursuant to Section 2(b) or Section 2(e) of this Agreement.

 

(i)            Postponements in Requested Registrations.  If the filing, initial effectiveness or continued use of a Registration Statement, including a Shelf Registration Statement, filed hereunder would require the Company to make a public disclosure of material non-public information, which disclosure in the good faith judgment of the Board (after consultation with external legal counsel) (i) would be required to be made in any Registration Statement so that such Registration Statement would not be materially misleading, (ii) would not be required to be made at such time but for the filing, effectiveness or continued use of such Registration Statement and (iii) would reasonably be expected to adversely affect in any material respect the Company or its business or the Company’s ability to effect a bona fide material proposed acquisition, disposition, financing, reorganization, recapitalization or similar transaction, then the Company may, upon giving prompt written notice of such action to the CD&R Stockholders participating in such registration, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement; provided that the Company shall not be permitted to do so (x) more than once in any 6-month period or (y) for any single period of time in excess of 90 days, or for periods exceeding, in the aggregate, 90 days during any 12-month period.  In the event that the Company exercises its rights under the preceding sentence, such CD&R Stockholders agree to suspend, promptly upon receipt of the notice referred to above, the use of any Prospectus relating to such registration in connection with any sale or offer to sell Registrable Securities.  If the Company so postpones the filing of a Prospectus or the

 

8



 

effectiveness of a Registration Statement, the demanding CD&R Stockholder shall be entitled to withdraw such request and, if such request is withdrawn, such registration request shall not count for the purposes of the limitations set forth in Section 2(e).  The Company shall promptly give the CD&R Stockholders requesting registration thereof pursuant to this Section 2 written notice of any postponement made in accordance with the preceding sentence.

 

(j)            Registration Expenses.  The Company shall pay, and shall be responsible for, all Registration Expenses in connection with any registrations and offerings pursuant to this Section 2, including any underwritten offering, direct sales to purchasers, sales to or through brokers, dealers or agents, derivative transactions with third parties, sales in connection with short sales and other hedging transactions, that are effectuated pursuant to this Section 2; provided, however, that the CD&R Stockholders shall pay all Selling Expenses, if any, with respect to Registrable Securities sold by them.

 

(k)           Selection of Underwriters.  The lead underwriters of any Underwritten Offering effected pursuant to a Demand Registration or a Shelf Takedown shall be selected by the CD&R Stockholders, subject to the consent, not to be unreasonably withheld, of the Company.  If the CD&R Stockholders intend that the Registrable Securities requested to be covered by a Demand Registration shall be distributed by means of an Underwritten Offering, the CD&R Stockholders shall so advise the Company in writing.  The right of any CD&R Stockholder to participate in an Underwritten Offering pursuant to this Section 2 will be conditioned upon such CD&R Stockholder’s participation in such underwriting and the inclusion of such CD&R Stockholder’s Registrable Securities in the underwriting and each such CD&R Stockholder will (together with the Company and any Piggybacking Holder distributing its securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting (including pursuant to the terms of any over-allotment or “green shoe” option requested by the managing underwriter(s)), provided that (A) no CD&R Stockholder shall be required to sell more than the number of Registrable Securities that such CD&R Stockholder has requested the Company to include in any registration and (B) if any CD&R Stockholder disapproves of the terms of the underwriting, such CD&R Stockholder may elect to withdraw therefrom by written notice to the Company, the managing underwriter(s) and, in connection with an Underwritten Offering pursuant to this Section 2, the other CD&R Stockholders, provided, further, that no such Person (other than the Company) shall be required to make any representations or warranties other than (x) those related to the title and ownership of, and power and authority to transfer, Registrable Securities and (y) those related to the accuracy and completeness of statements made in a Registration Statement, Prospectus or other document in reliance upon, and in conformity with, written information prepared and furnished to the Company or the managing underwriter(s) by such Person pertaining exclusively to such CD&R Stockholder.  Notwithstanding the foregoing, no CD&R Stockholder shall be required to agree to any indemnification obligations on the part of such CD&R Stockholder that are greater than its obligations pursuant to Section 5.

 

3.                                      Piggyback Restrictions.

 

(a)           Right to Piggyback.  Whenever the Company proposes to register any of its securities for its own account (other than (x) a registration pursuant to this Agreement or (y) a registration relating solely to employee benefit plans, or relating to a registration relating solely

 

9



 

to the sale of debt or convertible debt instruments) and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give written notice at least fifteen (15) days before the anticipated filing date to the CD&R Stockholders of its intention to effect such a registration and will include in such registration all Registrable Securities held by the CD&R Stockholders with respect to which the Company has received from the CD&R Stockholder a written request for inclusion therein within ten (10) days after the date of the Company’s notice (a “Piggyback Registration”).  If the CD&R Stockholder has made such a written request, it may withdraw its or any Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter(s), if any, on or before the fifth (5th) day prior to the planned effective date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section 3 prior to the effectiveness of such registration, whether or not the CD&R Stockholder has elected to include Registrable Securities in such registration, and, except for the obligation to pay Registration Expenses pursuant to Section 3(c), the Company will have no liability to the CD&R Stockholder in connection with such termination or withdrawal.

 

(b)           Underwritten Registration.  If the registration referred to in Section 3(a) is proposed to be an Underwritten Offering, the Company will so advise the CD&R Stockholders as a part of the written notice given pursuant to Section 3(a). In such event, the right of any CD&R Stockholder to registration pursuant to this Section 3 will be conditioned upon such CD&R Stockholder’s participation in such underwriting and the inclusion of such CD&R Stockholder’s Registrable Securities in the underwriting, and any CD&R Stockholder that holds Registrable Securities that are to be sold in such offering will (together with the Company and any other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such offering by the Company. If the CD&R Stockholder disapproves of the terms of the underwriting, the CD&R Stockholder may elect to withdraw therefrom by written notice to the Company and the managing underwriter(s).

 

(c)           Piggyback Registration Expenses.  The Company will pay all Registration Expenses in connection with any Piggyback Registration, whether or not any registration or prospectus becomes effective or final; provided, however, that the CD&R Stockholders shall pay all Selling Expenses, if any, with respect to Registrable Securities sold by them.

 

(d)           Priority on Primary Registrations.  If a Piggyback Registration relates to a primary Underwritten Offering on behalf of the Company, and the managing underwriter(s) advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold without adversely affecting the marketability of such offering, the Company will include in such registration or prospectus only such number of securities that in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, which securities will be so included in the following order of priority: (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration by the CD&R Stockholders on a pro rata basis relative to the total number of Registrable Securities requested to be included therein by all CD&R Stockholders, until with respect to each such CD&R Stockholder, all Registrable Securities requested for registration by such CD&R Stockholders have been included in such registration and (iii) third, Common Stock requested by any other persons to be included

 

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in the Piggyback Registration, on a pro rata basis relative to the total number of Registrable Securities requested to be included in the Piggyback Registration by such other requesting persons, or in such other manner as such other requesting persons shall agree.

 

(e)           Priority on Secondary Registrations.  If a Piggyback Registration relates to a secondary Underwritten Offering on behalf of other holders of the Company’s securities, and the managing underwriter(s) advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold without adversely affecting the marketability of the offering, the Company will include in such registration only such number of securities that in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, which securities shall include securities requested to be included therein by the holder(s) making demand for such Underwritten Offering together with any Registrable Securities requested to be included in such registration by the CD&R Stockholders on a pro rata basis relative to the number of total shares of Common Stock requested to be included therein by such other holder(s) and the number of Registrable Securities requested to be included therein by the CD&R Stockholders.

 

4.                                      Registration Procedures.  If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 2, the Company shall effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall cooperate in the sale of such Registrable Securities and shall, as expeditiously as possible:

 

(a)           prepare and file, in each case as promptly as practicable, with the SEC a Registration Statement or Registration Statements on such form as shall be available for the sale of the Registrable Securities by the CD&R Stockholders thereof or by the Company in accordance with the intended method or methods of distribution thereof, make all required filings with FINRA, and, if such Registration Statement is not automatically effective upon filing, use its reasonable best efforts to cause such Registration Statement to be declared effective as soon as practicable and to remain effective as provided herein; provided, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including free writing prospectuses under Rule 433 (each a “Free Writing Prospectus”)), the Company shall furnish or otherwise make available to the CD&R Stockholders, their counsel and the managing underwriter(s), if any, copies of all such documents proposed to be filed (including exhibits thereto), which documents will be subject to the reasonable review and comment of such counsel, and such other documents reasonably requested by such counsel, including any comment letter from the SEC, and, if requested by such counsel, provide such counsel reasonable opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein and such other opportunities to conduct a reasonable investigation within the meaning of the Securities Act, including reasonable access to the Company’s books and records, officers, accountants and other advisors.  The Company shall not file any such Registration Statement or Prospectus, or any amendments or supplements thereto (including Free Writing Prospectuses) with respect to a Demand Registration to which CD&R Stockholders or the managing

 

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underwriter(s), if any, shall reasonably object, in writing, on a timely basis, unless, in the opinion of the Company, such filing is necessary to comply with applicable law;

 

(b)           prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith and such Free Writing Prospectuses and Exchange Act reports as may be necessary to keep such Registration Statement continuously effective during the period provided herein and comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; and cause the related Prospectus to be supplemented by any Prospectus supplement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of the securities covered by such Registration Statement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act in each case, until such time as all of such securities have been disposed of in accordance with the intended method or methods of disposition by the seller or sellers thereof set forth in such Registration Statement;

 

(c)           notify each selling CD&R Stockholder of Registrable Securities, its counsel and the managing underwriter(s) of any Underwritten Offering (i) when a Registration Statement, pre-effective amendment to any Registration Statement, Prospectus or any Prospectus supplement or post-effective amendment or any Free Writing Prospectus has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) if at any time the Company has reason to believe that the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated by Section 4(n) below cease to be true and correct, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of such Registrable Securities for sale in any jurisdiction, or the initiation of any proceeding for such purpose, and (vi) of the happening of any event that makes any statement made in such Registration Statement or related Prospectus, Free Writing Prospectus, amendment or supplement thereto, or any document incorporated or deemed to be incorporated therein by reference, as then in effect, untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (which notice shall notify the selling CD&R Stockholders only of the occurrence of such an event and shall provide no additional information regarding such event to the extent such information would constitute material non-public information);

 

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(d)                                 use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction at the earliest date reasonably practical;

 

(e)                                  if requested by the CD&R Stockholders, or, in the case of an Underwritten Offering, the managing underwriter(s) of such Underwritten Offering, promptly include in a Prospectus supplement or post-effective amendment such information as the CD&R Stockholders or such managing underwriter(s), as the case may be, may reasonably request in order to facilitate the disposition of the Registrable Securities in accordance with the intended method or methods of distribution of such securities set forth in the Registration Statement and make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received such request; provided, however, that the Company shall not be required to take any actions under this Section 4(e) that are not, in the opinion of counsel for the Company, in compliance with applicable law;

 

(f)                                   deliver to each selling CD&R Stockholder of Registrable Securities, its counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of Prospectus) and each amendment or supplement thereto (including any Free Writing Prospectus) as such Persons may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities in accordance with the intended method or methods of disposition thereof; and the Company, subject to the last paragraph of this Section 4, hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling CD&R Stockholders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any such amendment or supplement thereto;

 

(g)                                  use its reasonable best efforts to register or qualify or cooperate with the selling CD&R Stockholders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions within the United States as any seller or underwriter reasonably requests in writing and to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and to take any other action that may be necessary or advisable to enable such CD&R Stockholders of Registrable Securities to consummate the disposition of such Registrable Securities in such jurisdiction in accordance with the intended method or methods of disposition thereof; provided, however, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(g), (ii) subject itself to taxation in any jurisdiction wherein it is not so subject or (iii) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject;

 

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(h)                                 cooperate with the selling CD&R Stockholders of Registrable Securities and the managing underwriter(s), if any, to facilitate the timely preparation and delivery of certificates (not bearing any legends) representing Registrable Securities to be sold after receiving written representations from each CD&R Stockholder of such Registrable Securities that the Registrable Securities represented by the certificates so delivered by such CD&R Stockholder will be transferred in accordance with the Registration Statement, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriter(s), if any, or CD&R Stockholders may request at least two Business Days prior to any sale of Registrable Securities in a firm commitment public offering, but in any other such sale, within 10 Business Days prior to having to issue the securities;

 

(i)                                     upon the occurrence of any event contemplated by Section 4(c)(vi) above, prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(j)                                    provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities from and after the effective date of such Registration Statement;

 

(k)                                 use its reasonable best efforts to cause all shares of Registrable Securities covered by any Registration Statement to be listed on each primary national securities exchange (if any) on which shares of the particular class of Registrable Securities are at that time listed;

 

(l)                                     in the case of any Underwritten Offering in which any CD&R Stockholder participates, enter into an underwriting agreement containing such provisions (including provisions for indemnification, lockups, opinions of counsel and comfort letters), and take all such other customary and reasonable actions as the managing underwriters of such offering may request in order to facilitate the disposition of such Registrable Securities, including adding information requested by the managing underwriters to the Prospectus, and making such representations and warranties to the holders of such Registrable Securities and the underwriters, if any, with respect to the business of the Company and its material subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and, if true, confirm the same if and when requested;

 

(m)                             in the case of any Underwritten Offering in which any CD&R Stockholder participates, (A) make reasonably available, for inspection by the managing underwriters of such Underwritten Offering and one law firm and accounting firm acting for such

 

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managing underwriters, pertinent corporate documents and financial and other records of the Company and its subsidiaries and controlled Affiliates, (B) cause the Company’s officers and employees to supply information reasonably requested by such managing underwriters or law firm or accounting firm in connection with such offering, (C) make the Company’s independent auditor available for any such managing underwriters’ due diligence and have them provide customary comfort letters to such underwriters in connection therewith and to each CD&R Stockholder selling Registrable Securities in such offering (unless such accountants shall be prohibited from so addressing such letters by applicable standards of the accounting profession) and (D) cause the Company’s outside counsel to furnish customary legal opinions and updates thereof (which legal opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriter(s)) to such underwriters and to each CD&R Stockholder selling Registrable Securities in such offering in connection therewith (subject to delivery to outside counsel of each such CD&R Stockholder’s representation that it is knowledgeable with respect to the due diligence review process that an underwriter would perform in connection with an offering of securities registered pursuant to the Securities Act), covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such counsel and underwriters; provided, however, that any such records and other information provided under clauses (A) and (B) above that is not generally publicly available shall be subject to such confidential treatment as is customary for underwriters’ due diligence reviews;

 

(n)                                 in the case of any Underwritten Offering in which any CD&R Stockholder participates, cause its management to use their reasonable best efforts to support the marketing of the Registrable Securities covered by the Registration Statement (including participation in such number of “road shows” as the underwriter(s) reasonably request, and in any management diligence meetings or teleconferences as the underwriter(s) or their counsel reasonably request);

 

(o)                                 cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the FINRA; and

 

(p)                                 otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company’s first full calendar quarter after the effective date of any Registration Statement, which earnings statement will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

The Company may require each CD&R Stockholder of Registrable Securities as to which any registration is being effected to furnish to the Company in writing such information required in connection with such registration regarding such seller and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request and the Company may exclude from such registration the Registrable Securities of any CD&R Stockholder who unreasonably fails to furnish such information within a reasonable time after receiving such request.

 

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The Company agrees not to file or make any amendment to any Registration Statement with respect to any Registrable Securities, or any amendment of or supplement to the Prospectus or any Free Writing Prospectus used in connection therewith, that refers to any CD&R Stockholder covered thereby by name, or otherwise identifies such CD&R Stockholder as the holder of any securities of the Company, without first furnishing or otherwise making available to such CD&R Stockholder a copy of any such amendment or supplement no less than five Business Days prior to the filing of such amendment or supplement (unless and to the extent such amendment or supplement is required by law to be filed earlier) and including all comments reasonably and timely requested by such CD&R Stockholder thereon.

 

If the Company files any Shelf Registration Statement for the benefit of the holders of any of its securities other than the CD&R Stockholders, the Company agrees that it shall use its reasonable best efforts to include in such registration statement such disclosures as may be required by Rule 430B under the Securities Act (referring to the unnamed selling security holders in a generic manner by identifying the initial offering of the securities to the CD&R Stockholders) in order to ensure that the CD&R Stockholders may be added to such Shelf Registration Statement at a later time through the filing of a Prospectus supplement rather than a post-effective amendment.

 

Each CD&R Stockholder holding Registrable Securities agrees if such CD&R Stockholder has Registrable Securities covered by such Registration Statement that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections 4(c)(ii), 4(c)(iii), 4(c)(iv), 4(c)(v) and 4(c)(vi) hereof, such CD&R Stockholder will promptly discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such CD&R Stockholder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(i) hereof, or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus; provided, however, that the time periods under Section 2 with respect to the length of time that the effectiveness of a Registration Statement must be maintained shall automatically be extended by the amount of time the CD&R Stockholder is required to discontinue disposition of such securities.

 

5.                                      Indemnification.

 

(a)                                 Indemnification by the Company.  The Company shall, without limitation as to time, indemnify and hold harmless, to the fullest extent permitted by law, each CD&R Stockholder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus, the officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees of each of them, each Person who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) each such CD&R Stockholder and the officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees of each such controlling person, each underwriter, if any, and each Person who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) such underwriter (each such person being referred to herein as a “Covered Person”), from and against any and all losses, claims, damages, liabilities, costs (including costs of preparation and reasonable attorneys’ fees and any legal or other fees or

 

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expenses incurred by such party in connection with any investigation or proceeding), expenses, judgments, fines, penalties, charges and amounts paid in settlement (collectively, “Losses”), as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Prospectus, Registration Statement or Free Writing Prospectus or any amendment thereof or supplement thereto or any document incorporated by reference therein or based on any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation thereunder applicable to the Company and relating to any action or inaction in connection with the related offering of Registrable Securities, and will reimburse each such Covered Person for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such Loss, provided that the Company will not be liable in any such case to the extent that any such Loss arises out of or is based on any untrue statement or omission by such Covered Person relating to such Covered Person or its Affiliates (other than the Company or any of its Subsidiaries), but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, Prospectus, Free Writing Prospectus or any amendment thereof or supplement thereto, or any document incorporated by reference therein, in each case in reliance upon and in conformity with written information furnished to the Company by such Covered Person with respect to such Covered Person for use therein.  It is agreed that the indemnity agreement contained in this Section 5(a) shall not apply to amounts paid in settlement of any such Loss or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

 

(b)                                 Indemnification by CD&R Stockholder of Registrable Securities.  As a condition to including any Registrable Securities in any Registration Statement filed in accordance with Section 4 hereof, the Company shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities to indemnify, to the fullest extent permitted by law, severally and not jointly with any other CD&R Stockholders holding Registrable Securities, the Company, its directors and officers and each Person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) the Company and all other prospective sellers, from and against all Losses arising out of or based on any untrue or alleged untrue statement of a material fact contained in any such Registration Statement, Prospectus or Free Writing Prospectus or any amendment thereof or supplement thereto, or any document incorporated by reference therein, 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, and will reimburse the Company, such directors, controlling persons and prospective sellers for any legal or any other expenses reasonably incurred in connection with investigating or defending any such Loss, in each case to the extent, but only to the extent, that such untrue statement or omission is made in such Registration Statement, Prospectus or Free Writing Prospectus or any amendment thereof or supplement thereto, or any document incorporated by reference therein, in each case in reliance upon and in conformity with written information furnished to the Company by such CD&R Stockholder with respect to such CD&R Stockholder for inclusion in such Registration Statement, Prospectus or Free Writing Prospectus or any amendment thereof or supplement thereto, or any document incorporated by reference therein; provided, however, that the obligations of such CD&R Stockholder hereunder shall not apply to amounts paid in settlement of any such Losses (or

 

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actions in respect thereof) if such settlement is effected without the consent of such CD&R Stockholder (which consent shall not be unreasonably withheld); and provided, further, that the liability of such CD&R Stockholder of Registrable Securities shall be limited to the net proceeds received by such selling CD&R Stockholder from the sale of Registrable Securities covered by such Registration Statement.

 

(c)                                  Conduct of Indemnification Proceedings.  If any Person shall be entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall give prompt notice to the party from which such indemnity is sought (the “Indemnifying Party”) of any claim or of the commencement of any proceeding with respect to which such Indemnified Party seeks indemnification or contribution pursuant hereto; provided, however, that the delay or failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any obligation or liability except to the extent that the Indemnifying Party has been materially prejudiced by such delay or failure.  The Indemnifying Party shall have the right, exercisable by giving written notice to an Indemnified Party promptly after the receipt of written notice from such Indemnified Party of such claim or proceeding, to, unless in the Indemnified Party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, assume, at the Indemnifying Party’s expense, the defense of any such claim or proceeding, with counsel reasonably satisfactory to such Indemnified Party; provided, however, that an Indemnified Party shall have the right to employ separate counsel in any such claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless: (i) the Indemnifying Party agrees to pay such fees and expenses; or (ii) the Indemnifying Party fails promptly to assume, or in the event of a conflict of interest cannot assume, the defense of such claim or proceeding or fails to employ counsel reasonably satisfactory to such Indemnified Party; in which case the Indemnified Party shall have the right to employ counsel and to assume the defense of such claim or proceeding at the Indemnifying Party’s expense; provided, further, however, that the Indemnifying Party shall not, in connection with any one such claim or proceeding or separate but substantially similar or related claims or proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one firm of attorneys (together with appropriate local counsel) at any time for all of the Indemnified Parties, or for fees and expenses that are not reasonable.  Whether or not such defense is assumed by the Indemnifying Party, such Indemnifying Party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld).  The Indemnifying Party shall not consent to entry of any judgment or enter into any settlement that (x) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release, in form and substance reasonably satisfactory to the Indemnified Party, from all liability in respect of such claim or litigation for which such Indemnified Party would be entitled to indemnification hereunder or (y) involves the imposition of equitable remedies or the imposition of any obligations on the Indemnified Party or adversely affects such Indemnified Party other than as a result of financial obligations for which such Indemnified Party would be entitled to indemnification hereunder.

 

(d)                                 Contribution.  If the indemnification provided for in this Section 5 is unavailable to an Indemnified Party in respect of any Losses (other than in accordance with its terms), then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such

 

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Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of such Indemnifying Party, on the one hand, and Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made (or omitted) by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), an Indemnifying Party that is a selling CD&R Stockholder holding Registrable Securities shall not be required to contribute any amount in excess of the amount that such Indemnifying Party has otherwise been, or would otherwise be, required to pay pursuant to Section 5(b) 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.

 

Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

(e)                                  Non-Exclusivity.  The obligations of the parties under this Section 5 shall be in addition to any liability which any party may otherwise have to any other party.

 

6.                                      Registration Expenses.  All fees and expenses incurred in the performance of or compliance with this Agreement by the Company including (i) all registration and filing fees (including fees and expenses (A) with respect to filings required to be made with the SEC, all applicable securities exchanges and/or FINRA and (B) of compliance with securities or blue sky laws, including any fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities pursuant to Section 4(g)), (ii) printing expenses (including expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriter(s), if any, of an Underwritten Offering, or by the CD&R Stockholders, (iii) messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) expenses of the Company incurred in connection with any road show, and (vi) fees and disbursements of all independent registered public accounting firms referred to in Section 4(m) hereof (including the expenses of any “cold comfort” letters required by this Agreement) and any other persons, including special experts retained by the Company, shall be borne by the Company whether or not any Registration Statement is filed or becomes effective (all such expenses, “Registration Expenses”). In addition, the Company shall pay its internal expenses (including all salaries and expenses of its officers

 

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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 securities to be registered on any securities exchange on which similar securities issued by the Company are then listed and rating agency fees and the fees and expenses of any Person, including special experts, retained by the Company.

 

The Company shall not be required to pay (i) fees and disbursements of any counsel retained by any CD&R Stockholder holding Registrable Securities or by any underwriter, (ii) any underwriter’s fees (including discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals) relating to the distribution of the Registrable Securities (other than with respect to Registrable Securities sold by the Company), (iii) expenses (other than the Company’s internal expenses) in connection with any offering pursuant to a Demand Request or Shelf Takedown begun pursuant to Section 2, the request of which has been subsequently withdrawn by the demanding CD&R Stockholder unless (x) the withdrawal is based upon (A) any fact, circumstance, event, change, effect or occurrence that individually or in the aggregate with all other facts or circumstances, events, changes, effects or occurrences has a material adverse effect on the Company or (B) material adverse information concerning the Company that the Company had not publicly disclosed at least forty-eight (48) hours prior to such registration request or that the Company had not otherwise notified, in writing, the demanding CD&R Stockholder of at the time of such request, (y) the CD&R Stockholder issuing such Demand Request or requesting such Shelf Takedown, as applicable, has not withdrawn two Demand Requests relating to Underwritten Offerings of a type not covered by the foregoing clauses (iii)(x)(A) or (iii)(x)(B) or (z) after the demanding CD&R Stockholder’s withdrawal of two such Demand Requests where such withdrawal is not covered by clauses (iii)(x)(A) or (iii)(x)(B), such demanding CD&R Stockholder agrees to forfeit its right to one Demand Registration pursuant to Section 2 with respect to the limit set forth in Section 2(e) or (iv) any other expenses of the CD&R Stockholders holding Registrable Securities not specifically required to be paid by the Company pursuant to the first paragraph of this Section 6.

 

7.                                      Rule 144.  The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of any of the CD&R Stockholders, make publicly available such information so long as necessary to permit sales of Registrable Securities pursuant to Rule 144), and it will take such further action as any CD&R Stockholder of Registrable Securities (or, if the Company is not required to file reports as provided above, any of the CD&R Stockholders) may reasonably request, all to the extent required from time to time to enable such CD&R Stockholder to sell shares of Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.  Upon the request of any CD&R Stockholder of Registrable Securities, the Company will deliver to such CD&R Stockholder a written statement as to whether it has complied with such requirements and will, within the limitations of the exemption provided by Rule 144 (as such rule may be amended from time to time) or any similar rule enacted by the SEC, instruct the transfer agent to remove the restrictive legend affixed to any Common Stock to enable such shares to be sold in compliance with Rule 144 (as such rule may be amended from time to time) or any similar rule enacted by the SEC.

 

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8.                                      Miscellaneous.

 

(a)                                 Termination.  The provisions of this Agreement (other than Section 5) shall terminate upon the earliest to occur of (i) its termination by the written agreement of all parties hereto or their respective successors in interest, (ii) the date on which the CD&R Stockholders cease to own any Registrable Securities or shares of Preferred Stock and (iii) the dissolution, liquidation or winding up of the Company.  Nothing herein shall relieve any party from any liability for the breach of any of the agreements set forth in this Agreement.

 

(b)                                 Holdback Agreement.  In consideration for the Company agreeing to its obligations under this Agreement, each CD&R Stockholder agrees in connection with any Underwritten Offering of the Company’s Common Stock (whether or not such CD&R Stockholder is participating in such transaction) upon the request of the Company and the underwriter(s) managing such Underwritten Offering, not to effect (other than pursuant to such registration) any public sale or distribution of Common Stock, including, but not limited to, any sale pursuant to Rule 144, or make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of, or enter into any swap or other arrangement that transfers to another Person any of the economic consequences of ownership of, any Common Stock, any other equity securities of the Company or any securities convertible into or exchangeable or exercisable for any equity securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, during the Holdback Period.

 

If any registration pursuant to Section 2 of this Agreement shall be in connection with any Underwritten Offering, the Company will not effect any public sale or distribution of any common equity (or securities convertible into or exchangeable or exercisable for common equity) (other than a registration statement (i) on Form S-4, Form S-8 or any successor forms promulgated for similar purposes or (ii) filed in connection with an exchange offer or any employee benefit or dividend reinvestment plan) for its own account, during the Holdback Period.

 

(c)                                  Amendments and Waivers.  This Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if any such amendment, action or omission to act, has received the written consent of the Company and each of the CD&R Stockholders.  The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.  Any CD&R Stockholder may waive (in writing) the benefit of any provision of this Agreement with respect to itself for any purpose.  Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the CD&R Stockholder granting such waiver in any other respect or at any other time.

 

(d)                                 Successors, Assigns and Transferees.  This Agreement may not be assigned without the prior written consent of the Company. Notwithstanding the foregoing, (i) the CD&R Investor may assign any of its rights, interests and obligations hereunder to any Permitted Rights Transferee, and (ii) in the event of any such assignment, such assignee shall agree in writing to be bound by the provisions of this Agreement, including the rights, interests

 

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and obligations so assigned.  The CD&R Stockholders acknowledge that no limited partner of an investment fund managed by Clayton, Dubilier & Rice, LLC or any portfolio company thereof (excluding the Company and its subsidiaries) will be deemed to be a CD&R Stockholder for purposes of this Agreement.  Notwithstanding the foregoing, any notice (or Demand Request, as applicable) of a CD&R Stockholder to register Registrable Securities pursuant to a registration statement under the Securities Act pursuant to, and in accordance with, Section 2(b), Section 2(e) or Section 3(a) shall be deemed to include, and the Company shall register (subject to the limitations and conditions otherwise applicable to the CD&R Stockholder), any portion of such Registrable Securities that are transferred to a Permitted Rights Transferee prior to the execution of an underwriting agreement in connection with an Underwritten Offering, provided that the notice (or Demand Request, as applicable) described in Section 2(b), Section 2(e) or Section 3(a), as applicable, includes the identity of such Permitted Rights Transferee, the relationship (if any) of such Permitted Rights Transferee with the Company, their beneficial ownership of Common Stock, the Registrable Securities held by such Permitted Rights Transferee to be included in such registration and the intended method of distribution thereof, and any other information reasonably requested by the Company and/or the managing underwriter(s) for inclusion in the applicable Registration Statement, Prospectus, Free Writing Prospectus or any amendment thereof or supplement thereto.

 

(e)                                  Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given:

 

If to the Company, to:

 

Beacon Roofing Supply, Inc.

6701 Democracy Blvd., Suite 200

Bethesda, Maryland 20817

Attention: Ross D. Cooper, Executive Vice President, General Counsel & Secretary

Fax: (301) 272-2125

Email: rcooper@becn.com

 

with a copy (which shall not constitute notice) to:

 

Sidley Austin LLP

One South Dearborn

Chicago IL 60603

Attention: Jeffery N. Smith; Michael P. Heinz

Fax:  (312) 853-7036

Email: jnsmith@sidley.com; mheinz@sidley.com

if to a CD&R Stockholder, to:

 

c/o Clayton, Dubilier & Rice, LLC
375 Park Avenue

 

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18th Floor
New York, New York 10152
Attention:                       Nate Sleeper; JL Zrebiec

Fax:  (212) 407-5252

Email: nsleeper@cdr-inc.com; jzrebiec@cdr-inc.com

 

with a copy (which shall not constitute notice) to:

 

Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Attention: Paul S. Bird; Uri Herzberg
Email: psbird@debevoise.com; uherzberg@debevoise.com

 

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.

 

All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.

 

(f)                                   Further Assurances.  At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

 

(g)                                  No Inconsistent Agreements.  The Company shall not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement.

 

(h)                                 Entire Agreement; No Third Party Beneficiaries.  This Agreement (i) constitutes the entire agreement among the parties with respect to the subject matter of this Agreement and supersede any prior discussions, correspondence, negotiation, proposed term sheet, agreement, understanding or agreement and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to in this Agreement and (ii) except as provided in Section 5 with respect to an Indemnified Party, is not intended to confer in or on behalf of any Person not a party to this Agreement (and their successors and assigns) any rights, benefits, causes of action or remedies with respect to the subject matter or any provision hereof.

 

(i)                                     Governing Law; Jurisdiction and Forum; Waiver of Jury Trial.

 

(i)                                     This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed and to be performed

 

23



 

wholly within such State and without reference to the choice-of-law principles that would result in the application of the laws of a different jurisdiction.

 

(ii)                                  Each party to this Agreement irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York or any court of the State of New York located in such district any suit, action or other proceeding arising out of or relating to this Agreement, and hereby irrevocably agrees that all claims in respect of such suit, action or proceeding may be heard and determined in such court.  Each party to this Agreement hereby irrevocably waives, to the fullest extent that it may effectively do so, the defense of an inconvenient forum to the maintenance of such suit, action or other proceeding.  The parties further agree, to the extent permitted by law, that final and unappealable judgment against any of them in any suit, action or other proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which shall be conclusive evidence of the fact and amount of such judgment.

 

(iii)                               EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(j)                                    Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto.  Upon such a determination, the parties 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.

 

(k)                                 Enforcement.  Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof.  In any action or proceeding brought to enforce any provision of this Agreement, the successful party shall be entitled to recover reasonable attorneys’ fees in addition to its costs and expenses and other available remedies.

 

(l)                                     Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and will not affect the meaning or interpretation of this Agreement.

 

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(m)                             No Recourse.  Notwithstanding anything that may be expressed or implied in this Agreement, the Company and each CD&R Stockholder covenant, agree and acknowledge that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any current or future director, officer, employee, shareholder, general or limited partner or member of any CD&R Stockholder or of any Affiliate or assignee thereof, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current or future director, officer, employee, shareholder, general or limited partner or member of any CD&R Stockholder or of any Affiliate or assignee thereof, as such for any obligation of any CD&R Stockholder under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.

 

(n)                                 Counterparts; Facsimile Signatures.  This Agreement may be executed in any number of counterparts (including via facsimile and electronic transmission), each of which shall be an original, but all of which together shall constitute one instrument.  This Agreement may be executed by facsimile signature(s).

 

[Remainder of page left intentionally blank]

 

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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this Agreement to be duly executed on its behalf as of the date first written above.

 

 

BEACON ROOFING SUPPLY, INC.

 

 

 

 

 

By:

/s/ Ross D. Cooper

 

Name:

Ross D. Cooper

 

Title:

Executive Vice President, General Counsel & Secretary

 

[Signature Page to Registration Rights Agreement]

 



 

 

CD&R BOULDER HOLDINGS, L.P.

 

 

 

 

 

By:

/s/ Theresa A Gore

 

 

Name:

Theresa A Gore

 

 

Title:

Vice President, Treasurer & Assistant Secretary

 

[Signature Page to Registration Rights Agreement]

 



 

Exhibit A

 

Form of Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Participating Preferred Stock

 

[attached]

 



 

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK OF BEACON ROOFING SUPPLY, INC.

 


 

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware



 

The undersigned, pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify that, pursuant to the authority expressly vested in the Board of Directors of Beacon Roofing Supply, Inc., a Delaware corporation (the “Corporation”), by the Certificate of Incorporation, the Board of Directors has by resolution duly provided for the issuance of and created a series of preferred stock of the Corporation, par value $0.01 per share, and in order to fix the designation and amount and the voting powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of such series of preferred stock, has duly adopted resolutions setting forth such rights, powers and preferences, and the qualifications, limitations and restrictions thereof, of such series of preferred stock as set forth in this Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Participating Preferred Stock (this “Certificate”).

 

Section 1.  Number of Shares and Designation.  650,000 shares of preferred stock of the Corporation shall constitute a series of preferred stock designated as Series A Cumulative Convertible Participating Preferred Stock (the “Preferred Stock”). Subject to and in accordance with the provisions of Section 11(b), the number of shares of Preferred Stock may be increased (to the extent of the Corporation’s authorized and unissued preferred stock) by further resolution duly adopted by the Board of Directors and the filing of a certificate of increase with the Secretary of State of the State of Delaware.

 

Section 2.  Rank.  Each share of Preferred Stock shall rank equally in all respects and shall be subject to the provisions herein. The Preferred Stock shall, with respect to payment of dividends, redemption payments, rights (including as to the distribution of assets) upon liquidation, dissolution or winding up of the affairs of the Corporation, or otherwise (i) rank senior and prior to the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), and each other class or series of equity securities of the Corporation, whether currently issued or issued in the future, that by its terms does not expressly rank senior to, or on parity with, the Preferred Stock as to payment of dividends, redemption payments, rights (including as to the distribution of assets) upon liquidation, dissolution or winding up of the affairs of the Corporation, or otherwise (all of such equity securities, including the Common Stock, are collectively referred to herein as “Junior Securities”), (ii) rank junior to each class or series of equity securities of the Corporation, whether currently issued or issued in the future without violation of this Certificate, that by its terms expressly ranks senior to the Preferred Stock as to payment of dividends, redemption payments, rights (including as to the distribution of assets) upon liquidation, dissolution or winding up of the affairs of the Corporation, or otherwise (all of such equity securities are collectively referred to herein as “Senior Securities”), and (iii) rank on parity with each class or series of equity securities of the Corporation, whether currently issued or issued in the future without violation of this Certificate, that expressly provides that it ranks

 



 

on parity with the Preferred Stock as to payment of dividends, redemption payments or rights (including as to the distribution of assets) upon liquidation, dissolution or winding up of the affairs of the Corporation (all of such equity securities are collectively referred to herein as “Parity Securities”).  The respective definitions of Junior Securities, Senior Securities and Parity Securities shall also include any securities, rights or options exercisable or exchangeable for or convertible into any of the Junior Securities, Senior Securities or Parity Securities, as the case may be.

 

Section 3.  Definitions.

 

(a)                                 As used herein, the following terms shall have the meanings set forth below or in the section cross-referenced below, as applicable, whether used in the singular or the plural:

 

Accrued Dividends” means, as of any date, with respect to any share of Preferred Stock, all dividends that have accrued pursuant to Section 4(a)(ii) but that have not been paid as of such date.

 

Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, such Person.

 

Base Amount” means, with respect to any share of Preferred Stock, as of any date, the sum of (x) the Liquidation Preference and (y) the Base Amount Accrued Dividends with respect to such share.

 

Base Amount Accrued Dividends” means, with respect to any share of Preferred Stock, as of any date, (i) if a Preferred Dividend Payment Date has occurred since the issuance of such share, the Accrued Dividends with respect to such share as of the preceding Preferred Dividend Payment Date (taking into account the payment of Preferred Dividends in respect of such period ending on such preceding Preferred Dividend Payment Date, if any, as of such Preferred Dividend Payment Date) or (ii) if no Preferred Dividend Payment Date has occurred since the issuance of such share, zero.

 

Base Dividend Rate” means, for any day, 6.00% per annum.

 

Beneficially Own” and “Beneficial Ownership” has the meaning given such term in Rule 13d-3 under the Exchange Act, and a Person’s beneficial ownership of Capital Stock of any Person shall be calculated in accordance with the provisions of such rule, but without taking into account any contractual restrictions or limitations on voting or other rights; provided, however, that for purposes of determining beneficial ownership, a Person shall be deemed to be the beneficial owner of any security which may be acquired by such Person, whether within sixty (60) days or thereafter, upon the conversion, exchange or exercise of any warrants, options, rights or other securities.

 

Board of Directors” means the board of directors of the Corporation or any committee thereof duly authorized to act on behalf of such board of directors for the purposes in question.

 

2



 

Business Day” means any day that is not a Saturday, a Sunday or any other day on which commercial banks are generally required or authorized by Law to be closed in New York City, New York.

 

By-laws” means the Amended and Restated By-Laws of the Corporation, as amended from time to time.

 

Capital Stock” of any Person means any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, but excluding any debt securities convertible into such equity.

 

Certificate” has the meaning set forth in the preamble.

 

Certificate of Incorporation” means the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended from time to time.

 

Change of Control” means the occurrence, directly or indirectly, of any of the following:

 

(i)            any purchase, merger, acquisition or other transaction or series of related transactions immediately following which any Person or Group (excluding the Investor or its Affiliates or any Group including the Investor or its Affiliates) shall Beneficially Own, directly or indirectly, Voting Stock entitling such Person to exercise more than 50% of the total voting power of all classes of Voting Stock of the Corporation, other than as a result of any such transaction in which (x) the holders of securities that represented 100% of the Voting Stock of the Corporation immediately prior to such transaction are substantially the same as the holders of securities that represent a majority of the total voting power of all classes of Voting Stock of the surviving Person or any parent entity thereof immediately after such transaction and (y) the holders of securities that represented 100% of the Voting Stock of the Corporation immediately prior to such transaction own directly or indirectly Voting Stock of the surviving Person or any parent entity thereof in substantially the same proportion to each other as immediately prior to such transaction;

 

(ii)           any transaction or series of related transactions immediately following which the Persons who Beneficially Own the Voting Stock of the Corporation immediately prior to such transaction or transactions cease to Beneficially Own more than 50% of the Voting Stock of the Corporation, any successor thereto or any parent entity thereof immediately following such transaction or transactions; or

 

(iii)          (x) the Corporation merges or consolidates with or into any other Person, another Person merges with or into the Corporation, or the Corporation conveys, sells, transfers or leases all or substantially all of the Corporation’s assets to another Person or (y) the Corporation engages in any recapitalization, reclassification or other transaction in which all or substantially all of the Common Stock is exchanged for or converted into cash, securities or other property, in each case other than a merger or consolidation:

 

(A)          that does not result in a reclassification, conversion, exchange or cancellation of the outstanding Common Stock;

 

3



 

(B)          which is effected solely to change the Corporation’s jurisdiction of incorporation and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of common stock of the surviving entity; or

 

(C)          where the Voting Stock outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such merger or consolidation).

 

Change of Control Effective Date” has the meaning set forth in Section 8(a).

 

Change of Control Sale” has the meaning set forth in Section 8(a).

 

Common Stock” has the meaning set forth in Section 2.

 

Common Stock Dividend Record Date” has the meaning set forth in Section 4(a)(iv).

 

Common Stock Trading Price” means, as of any Trading Day, the closing price of a share of Common Stock on such Trading Day (as reported on Bloomberg, based on composite transactions for the NASDAQ).

 

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

 

Conversion Date” has the meaning set forth in Section 6(b)(iv).

 

Conversion Notice” has the meaning set forth in Section 6(b)(i).

 

Conversion Option” has the meaning set forth in Section 6(a)(i)(A).

 

Conversion Option Date” has the meaning set forth in Section 6(a)(i)(A).

 

Conversion Option Measurement Period” has the meaning set forth in Section 6(a)(i)(A).

 

Conversion Price” means, as of any date, the Initial Conversion Price, as adjusted pursuant to Section 9.

 

Conversion Right” has the meaning set forth in Section 6(a)(i)(B).

 

Convertible Securities” means indebtedness or shares of Capital Stock convertible into or exchangeable for Common Stock.

 

Corporation” has the meaning set forth in the preamble.

 

4



 

Debt Financing Documents” means (i) the Term Loan Credit Agreement, dated as of January 2, 2018, by and among the Corporation, as the Borrower, the lenders from time to time party thereto, as lenders, and Citibank, N.A., a national banking association, as Administrative Agent for such lenders, (ii) the Amended and Restated Credit Agreement, dated as of January 2, 2018, by and among the Corporation, as a guarantor, the subsidiaries of the Corporation parties thereto as US Borrowers, Beacon Roofing Supply Canada Company, an unlimited liability company organized under the laws of Nova Scotia, as a Canadian Borrower, the lenders from time to time party thereto, as lenders, and Wells Fargo Bank, National Association, a national banking association, as Administrative Agent for such lenders, (iii) the Indenture, dated as of October 1, 2015, as supplemented by the Supplemental Indenture, dated as of October 1, 2015, and the Second Supplemental Indenture, dated as of January 2, 2018, by and among the Corporation, the subsidiaries of the Corporation party thereto as Subsidiary Guarantors and U.S. Bank National Association, as trustee, and (iv) the Indenture, dated as of October 25, 2017, as supplemented by the Supplemental Indenture, dated as of January 2, 2018, by and among the Corporation, the subsidiaries of the Corporation party thereto as Subsidiary Guarantors and U.S. Bank National Association, as trustee, in each case, as the same may be amended, restated, supplemented, modified, refinanced or replaced from time to time.

 

DGCL” has the meaning set forth in the preamble.

 

Dividend Payment Record Date” has the meaning set forth in Section 4(a)(iv).

 

Dividend Rate” means, for any day, the Base Dividend Rate as increased by the Noncompliance Additional Rate, if any, applicable on such day pursuant to Section 4(b).

 

Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

Excess Conversion Shares” means, prior to receipt of any Requisite Stockholder Approval, in connection with any conversion of shares of Preferred Stock (disregarding for this purpose the last sentence of Section 6(a)(i)(B)), those shares of Common Stock (if any) that would result in the number of shares of Common Stock issued in such conversion (when taken together with all shares of Common Stock previously issued in connection with any conversion of shares of Preferred Stock) exceeding 12,071,937.

 

Excess PIK Dividends” means, prior to receipt of any Requisite Stockholder Approval, additional shares of Preferred Stock paid as dividends on the Purchased Shares (and on any shares of Preferred Stock issued as dividends thereon) to the extent such additional shares of Preferred Stock would, when taken together with the Purchased Shares (and any shares of Preferred Stock issued as dividends thereon), upon conversion of all such shares of Preferred Stock into shares of Common Stock (disregarding for this purpose the last sentence of Section 6(a)(i)(B)), cause the number of shares of Common Stock issued in such conversion (when taken together with all shares of Common Stock previously issued in connection with any conversion of shares of Preferred Stock) to exceed 12,071,937.

 

Exchange Property” has the meaning set forth in Section 7(a).

 

5



 

Ex-Date” means, when used with respect to any distribution, the first date on which the Common Stock or other securities in question do not have the right to receive the distribution giving rise to an adjustment to the Conversion Price.

 

Group” means any “group” as such term is used in Section 13(d)(3) of the Exchange Act.

 

Holder” means, at any time, any Person in whose name shares of Preferred Stock are registered, which may be treated by the Corporation as the absolute owner of such shares of Preferred Stock for the purpose of making payment and settling the related conversions and for all other purposes.

 

Implied Quarterly Dividend Amount” means, with respect to any share of Preferred Stock, as of any date, the product of (a) the Base Amount of such share of Preferred Stock as of the first day of the applicable Payment Period and (b) one-fourth of the Dividend Rate applicable to such share on such date.

 

Initial Conversion Price” means (i) with respect to each share of Preferred Stock issued on the Original Issuance Date, $41.26 per share of Common Stock and (ii) with respect to each share of Preferred Stock issued as payment of a Preferred Dividend in accordance with Section 4, the Conversion Price in effect immediately prior to the issuance of such share.

 

Investment Agreement” means that certain Investment Agreement, dated as of August 24, 2017, by and among the Corporation, CD&R Boulder Holdings, L.P. and Clayton, Dubilier & Rice Fund IX, L.P. (solely for purposes of Sections 4.13 and 4.14 thereof), as the same may be amended from time to time.

 

Investor” means, collectively, one or more investment vehicles affiliated with or managed by Clayton, Dubilier & Rice, LLC who acquire shares of Preferred Stock pursuant to the Investment Agreement.

 

Issuance Date” means, with respect to a share of Preferred Stock, the date of issuance of such share of Preferred Stock.

 

Junior Securities” has the meaning set forth in Section 2.

 

Law” has the meaning set forth in the Investment Agreement.

 

Liquidation” means the voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

 

Liquidation Preference” means, with respect to each share of Preferred Stock, $1,000.00 per share.

 

Market Price” means, with respect to any particular security on any particular date, (i) if such security is listed or quoted on a principal U.S. national or regional securities exchange or traded on an over-the-counter market, the volume weighted average price per share (as reported on Bloomberg based, in the case of a listed security, on composite transactions for the principal U.S. national or regional securities exchange on which such security is listed or

 

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quoted) of such security for the period of ten (10) consecutive Trading Days preceding the date of determination (or for any other period specified for this purpose in the applicable provision of this Certificate), or (ii) if such security is not listed or quoted on a principal U.S. national or regional securities exchange or traded on an over-the-counter market, the fair market value of such security on the date of determination, as determined by a nationally recognized independent investment banking firm that has for this purpose (x) been selected by the Board of Directors and (y) been consented to by Holders of a majority of the outstanding shares of Preferred Stock.

 

NASDAQ” means the NASDAQ Stock Market (or its successor).

 

Noncompliance Additional Rate” means 3.00% per annum.

 

Options” means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

Original Issuance Date” means the date of closing pursuant to the Investment Agreement.

 

Parity Securities” has the meaning set forth in Section 2.

 

Participating Dividends” has the meaning set forth in Section 4(a)(i).

 

Payment Period” means, with respect to a share of Preferred Stock, the period beginning on the day after the preceding Preferred Dividend Payment Date (or if no Preferred Dividend Payment Date has occurred since the Issuance Date of such Preferred Share, the day that would have been the day after the preceding Preferred Dividend Payment Date had the Issuance Date with respect to such Preferred Share occurred prior to such date) to and including the next Preferred Dividend Payment Date.

 

Person” means an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

 

Preferred Dividend Payment Date” means January 15, April 15, July 15 and October 15 of each year (each, a “Quarterly Date”), commencing on the first Quarterly Date immediately following the Original Issuance Date; provided, that if any such Quarterly Date is not a Business Day then the “Preferred Dividend Payment Date” shall be the next Business Day immediately following such Quarterly Date.

 

Preferred Dividends” has the meaning set forth in Section 4(a)(ii).

 

Preferred Stock” has the meaning set forth in Section 1.

 

Pro Rata Repurchase” means any purchase of shares of Common Stock by the Corporation or any Affiliate thereof (other than, if applicable, the Investor or any of its Affiliates) pursuant to any tender offer or exchange offer subject to Section 13(e) of the Exchange Act, or pursuant to any other offer available to substantially all holders of Common Stock, whether for cash, shares of capital stock of the Corporation, other securities of the Corporation, evidences of indebtedness of the Corporation or any other Person or any other property (including shares of capital stock, other securities or evidences of indebtedness of a

 

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Subsidiary of the Corporation), or any combination thereof, effected while any shares of Preferred Stock are outstanding; provided, however, that “Pro Rata Repurchase” shall not include any purchase of shares by the Corporation or any Affiliate thereof made in accordance with the requirements of Rule 10b-18 as in effect under the Exchange Act.  The “Effective Date” of a Pro Rata Repurchase means the date of acceptance of shares for purchase or exchange under any tender or exchange offer which is a Pro Rata Repurchase or the date of purchase with respect to any Pro Rata Repurchase that is not a tender or exchange offer.

 

Purchased Shares” has the meaning set forth in Section 9(a)(iv).

 

Redemption Date” has the meaning set forth in Section 10(a).

 

Redemption Notice” has the meaning set forth in Section 10(a).

 

Redemption Price” has the meaning set forth in Section 10(a).

 

Register” means the securities register maintained in respect of the Preferred Stock by the Corporation, or to the extent the Corporation has engaged a transfer agent, such transfer agent.

 

Reorganization Event” means any of the following transactions:

 

(i)            any reorganization, consolidation, merger, share exchange, statutory exchange, tender or exchange offer or other similar business combination involving the Corporation with or into another Person, in each case, pursuant to which the Common Stock will be converted into, or exchanged for, cash, securities or other property of the Corporation or another Person;

 

(ii)           any reclassification, recapitalization or reorganization of the Common Stock into securities other than the Common Stock; or

 

(iii)          any direct or indirect sale, assignment, conveyance, transfer, lease or other disposition (including in connection with any Liquidation) by the Corporation of all or substantially all of its assets or business, in each case under this clause (iii), pursuant to which the Common Stock will be converted into cash, securities or other property.

 

Requisite Stockholder Approval” means the affirmative vote of a majority of the votes cast at a regular or special meeting of the stockholders of the Corporation (at which a quorum is present), in accordance with the NASDAQ Listing Rule 5635(d) for the approval of the conversion and the voting of Excess Conversion Shares in accordance with this Certificate.

 

Securities Act” means the Securities Act of 1933, as amended.

 

Senior Securities” has the meaning set forth in Section 2.

 

Subsidiary” or “Subsidiaries” means, with respect to any Person, any other Person of which (i) if a corporation, a majority of the total voting power of shares of capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly,

 

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by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more other Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons owns a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entity’s gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation).  For the purposes hereof, the term “Subsidiary” shall include all Subsidiaries of such Subsidiary.

 

Trading Day” means a day on which the NASDAQ is open for the transaction of business.

 

Transfer Restrictions” means the restrictions on Transfer (as defined in the Investment Agreement) set forth in Section 4.9 of the Investment Agreement.

 

Triggering Event” means: (i) the Corporation’s failure to pay any Participating Dividends when required pursuant to, and in accordance with, Section 4(a)(i) or to pay Preferred Dividends on each Preferred Dividend Payment Date pursuant to, and in accordance with, Section 4(a)(ii) and Section 4(a)(iii); (ii) the Corporation’s failure to comply with its obligations to effect the conversion of shares of Preferred Stock (including to reserve and keep available for issuance the requisite number of shares of Common Stock and Preferred Stock) in compliance with Section 6, (iii) the Corporation’s failure to comply with its obligations to repurchase shares of Preferred Stock in compliance with Section 8, (iv) the Corporation’s violation of any restrictions set forth in this Certificate relating to payment of dividends or distributions to the holders of Common Stock or other Capital Stock, (v) the Corporation taking any action described in Section 11(b) without the prior affirmative vote or written consent of the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, voting as a separate class, (vi) the Corporation’s failure to maintain the listing of the Common Stock on the NASDAQ (or its successor) or another U.S. national securities exchange or automated inter-dealer quotation system (or its successor), or (vii) the payment of any shares of Preferred Stock paid as dividends pursuant to, and in accordance with, Section 4(a)(ii) and Section 4(a)(iii) that would constitute Excess PIK Dividends (for so long as any outstanding shares of Preferred Stock so paid as dividends would constitute Excess PIK Dividends).

 

Voting Stock” means Capital Stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances (determined without regard to any classification of directors) to elect one or more members of the Board of Directors (without regard to whether or not, at the relevant time, Capital Stock of any other class or classes (other than Common Stock) shall have or might have voting power by reason of the happening of any contingency).

 

(b)           In addition to the above definitions, unless the context requires otherwise:

 

(i)            any reference to any statute, regulation, rule or form as of any time shall mean such statute, regulation, rule or form as amended or modified and shall also include any successor statute, regulation, rule or form from time to time;

 

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(ii)           the word “including” shall be deemed to be followed by the words “without limitation”;

 

(iii)          references to “$” or “dollars” means the lawful coin or currency the United States of America; and

 

(iv)          references to “Section” are references to Sections of this Certificate.

 

Section 4.  Dividends.

 

(a)           Holders of the issued and outstanding shares of Preferred Stock shall be entitled to receive, out of assets legally available for the payment of dividends, dividends on the terms described below:

 

(i)            Holders of shares of Preferred Stock shall be entitled to participate equally and ratably with the holders of shares of Common Stock in all dividends paid on the shares of Common Stock (other than dividends paid in the form of Common Stock, Convertible Securities or Options) as if immediately prior to each Common Stock Dividend Record Date, all shares of Preferred Stock then outstanding were converted into shares of Common Stock (including any Excess Conversion Shares and disregarding for this purpose the last sentence of Section 6(a)(i)(B)).  Dividends payable pursuant to this Section 4(a)(i) (the “Participating Dividends”) shall be payable on the same date that such dividends are payable to holders of shares of Common Stock, and no dividends shall be payable to holders of shares of Common Stock unless the full dividends contemplated by this Section 4(a)(i) are paid at the same time to the Holders of the Preferred Stock.

 

(ii)           In addition to any dividends pursuant to Section 4(a)(i), the Corporation shall pay, if, as and when declared by the Board of Directors, out of funds legally available therefor, on each Preferred Dividend Payment Date dividends on each outstanding share of Preferred Stock (the “Preferred Dividends”) at a rate per annum equal to the Dividend Rate as further specified in this Section 4(a)(ii) and in accordance with Section 4(a)(iii) below.  Preferred Dividends on each share of Preferred Stock shall accrue and accumulate on a daily basis from the Issuance Date of such share, whether or not declared and whether or not the Corporation has funds legally available for the payment of such dividends, shall compound quarterly on each Preferred Dividend Payment Date (to the extent not paid on such Preferred Dividend Payment Date) and shall be payable quarterly in arrears, if, as and when so authorized and declared by the Board of Directors, on each Preferred Dividend Payment Date, commencing on the first Preferred Dividend Payment Date following the Issuance Date of such share.  The amount of Preferred Dividends accruing with respect to any share of Preferred Stock for any day shall be determined by dividing (x) the Implied Quarterly Dividend Amount as of such day by (y) the actual number of days in the applicable Payment Period; provided that if, during any current Payment Period, Accrued Dividends are paid in respect of one or more prior Payment Periods, then after the date of such payment, the amount of Preferred Dividends accruing with respect to any share of Preferred Stock for any day shall be determined by dividing (x) the Implied Quarterly Dividend Amount (recalculated to take into account such payment of Accrued Dividends) by (y) the actual number of days in such current Payment Period.  The amount of Preferred Dividends payable with respect to any share of Preferred Stock for any Payment Period

 

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shall equal the sum of the Preferred Dividends accrued in accordance with the prior sentence of this Section 4(a)(ii) with respect to such share during such Payment Period.  Preferred Dividend payments shall be aggregated per Holder and shall be made to the nearest cent (with $.005 being rounded upward).

 

(iii)          The Preferred Dividends may, at the option of the Corporation, be paid in cash or by issuing fully paid and nonassessable shares of Preferred Stock; provided that (A) Preferred Dividends paid on any date shall be paid by issuing fully paid and nonassessable shares of Preferred Stock to the extent payment in cash on such date would be prohibited under the terms, conditions or provisions of any of the Debt Financing Documents and (B) any Base Amount Accrued Dividends shall be paid by issuing fully paid and nonassessable shares of Preferred Stock; and provided further that, if the Corporation elects to pay any Preferred Dividends in shares of Preferred Stock with respect to any Payment Period, the Corporation shall make the same election with respect to all Preferred Dividends paid with respect to such Payment Period.  If the Corporation pays any Preferred Dividend in shares of Preferred Stock, the number of shares of Preferred Stock to be paid in respect of such Preferred Dividend will be equal to the number of shares (including fractional shares) that have an aggregate Liquidation Preference equal to the amount of such Preferred Dividend.

 

(iv)          Each Participating Dividend or Preferred Dividend shall be paid pro rata to the Holders of shares of Preferred Stock entitled thereto.  Each Participating Dividend or Preferred Dividend shall be payable to the Holders of Preferred Stock as they appear on the Register at the close of business on the record date designated by the Board of Directors for such dividends (each such date, a “Dividend Payment Record Date”), which (i) with respect to Participating Dividends, shall be the same day as the record date for the payment of dividends to the holders of shares of Common Stock (the “Common Stock Dividend Record Date”), and (ii) with respect to Preferred Dividends, shall be not more than thirty (30) days nor less than ten (10) days preceding the applicable Preferred Dividend Payment Date.  Notwithstanding the foregoing, but subject to the proviso in the first sentence of Section 4(a)(iii), the Base Amount Accrued Dividends may be declared and paid in cash or in shares of Preferred Stock at any time to Holders of record on the Dividend Payment Record Date therefor.

 

(b)           Upon the occurrence of a Triggering Event, the Dividend Rate shall increase by the Noncompliance Additional Rate from and including the date on which the Triggering Event shall occur and be continuing through but excluding the date on which all then occurring Triggering Events are no longer continuing.  The Dividend Rate shall not be increased further pursuant to this Section 4(b) for a subsequent Triggering Event occurring while the Dividend Rate is already increased pursuant to this Section 4(b).

 

(c)           At any time during which a Triggering Event shall be occurring, without the consent of the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, no dividends shall be declared or paid or set apart for payment, or other distributions declared or made, upon any Junior Securities, nor shall any Junior Securities be redeemed, purchased or otherwise acquired for any consideration (nor shall any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such Junior Securities) by the Corporation, directly or indirectly (except, subject to and in accordance with the provisions of Section 6 hereof, by conversion into or exchange for Junior Securities or the payment of cash in lieu of fractional shares in connection therewith).

 

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(d)           Without the consent of the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, the Corporation shall not (i) declare, pay or set aside for payment any dividends or distributions upon any Junior Securities or (ii) repurchase, redeem or otherwise acquire any Junior Securities (other than repurchases of shares of Common Stock from employees, officers or directors of the Corporation in the ordinary course of business) for any consideration or pay any moneys or make available for a sinking fund for the redemption of any shares of such Junior Securities, unless, in each case, (A) immediately before and after the taking of such action, the fair value of the Corporation’s assets would exceed the sum of its debts (including for this purpose the aggregate Liquidation Preference and the aggregate Accrued Dividends of the Preferred Stock), (B) immediately after the taking of such action, the Corporation, in its good faith judgment, would be able to pay all of its debts (including the aggregate Liquidation Preference and the aggregate Accrued Dividends of the Preferred Stock) as they are reasonably expected to come due and (C) such action is otherwise in compliance with applicable Law.

 

(e)           For the avoidance of doubt, the consequences described in Sections 4(b), (c) and (d) above shall constitute the sole and exclusive remedies of the Holders upon the occurrence of the Triggering Event described in clause (vii) of the definition thereof.

 

Section 5.  Liquidation Rights.

 

(a)           In the event of any Liquidation, each Holder shall be entitled to receive liquidating distributions out of the assets of the Corporation legally available for distribution to its stockholders, before any payment or distribution of any assets of the Corporation shall be made or set apart for holders of any Junior Securities, including the Common Stock, for such Holder’s shares of Preferred Stock in an amount equal to the greater of (i) the sum of (A) the aggregate Liquidation Preference and (B) the aggregate Accrued Dividends of such shares as of the date of the Liquidation and (ii) the amount such Holder would have received had such shares of Preferred Stock, immediately prior to such Liquidation, been converted into shares of Common Stock (including in respect of any Excess Conversion Shares and disregarding for this purpose the last sentence of Section 6(a)(i)(B)) pursuant to Section 6, without regard to any of the limitations on conversion or convertibility contained therein.

 

(b)           In the event the assets of the Corporation available for distribution to stockholders upon a Liquidation shall be insufficient to pay in full the amounts payable with respect to all outstanding shares of Preferred Stock pursuant to Section 5(a), such assets, or the proceeds thereof, shall be distributed among the Holders ratably in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled upon such Liquidation.

 

(c)           Neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the assets, capital stock or business of the Corporation (other than in connection with the liquidation, dissolution or winding up of the Corporation) nor the merger, consolidation, share exchange, statutory exchange or any other business combination transaction of the Corporation into or with any other Person shall by itself be deemed to be a Liquidation for purposes of this Section 5.

 

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Section 6.  Conversion.

 

(a)           Conversion of Preferred Stock.

 

(i)            Subject to and in accordance with the provisions of this Section 6, shares of Preferred Stock may be converted into shares of Common Stock as follows:

 

(A)          If (a) at any time after the Original Issuance Date, the Common Stock Trading Price exceeds 200% of the then applicable Conversion Price for at least 75 Trading Days (whether or not consecutive) during any 90 consecutive Trading Day period (such period, the “Conversion Option Measurement Period”) and (b) the Corporation, at its option, delivers a written notice to the Holders of the Preferred Stock within 10 Business Days following the conclusion of the applicable Conversion Option Measurement Period, then each share of Preferred Stock outstanding shall be converted (the “Conversion Option “), as of the Business Day immediately prior to the date of such notice (the “Conversion Option Date”), into such number of fully paid and non-assessable shares of Common Stock (calculated as to each conversion to the nearest 1/10,000th of a share) equal to the quotient of (A) the sum of (1) the Liquidation Preference and (2) the Accrued Dividends on such share as of the Conversion Option Date, divided by (B) the Conversion Price of such share in effect as of the Conversion Option Date; provided that if any shares of Common Stock issuable in connection with any Conversion Option would constitute Excess Conversion Shares, the Corporation may not exercise the Conversion Option until after the Requisite Stockholder Approval has been obtained.

 

(B)          Subject to the last sentence of this Section 6(a)(i)(B), each Holder of shares of Preferred Stock shall have the right (the “Conversion Right”), at any time and from time to time, at such Holder’s option, to convert all or any portion of such Holder’s shares of Preferred Stock into fully paid and non-assessable shares of Common Stock.  Upon a Holder’s election to exercise its Conversion Right, each share of Preferred Stock for which the Conversion Right is exercised shall be converted into such number of shares of Common Stock (calculated as to each conversion to the nearest 1/10,000th of a share) equal to the quotient of (A) the sum of (1) the Liquidation Preference and (2) the Accrued Dividends on such share as of the Conversion Date, divided by (B) the Conversion Price of such share in effect at the time of conversion.  Notwithstanding anything to the contrary contained in this Certificate, prior to the Requisite Stockholder Approval, in no event shall the number of shares of Preferred Stock converted pursuant to this Section 6(a)(i)(B) result in the issuance of any Excess Conversion Shares (when taken together with all shares of Common Stock previously issued in connection with any conversion of shares of Preferred Stock).

 

(ii)           No fractional shares of Common Stock shall be issued upon the conversion of any shares of Preferred Stock.  If more than one share of Preferred Stock subject to conversion is held by the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the sum of (A) the aggregate Liquidation Preference and (B) the aggregate Accrued Dividends as of the Conversion Date on all shares of Preferred Stock so subject.  If the conversion of any share or shares of Preferred Stock results in a fractional share of Common Stock issuable after application of the immediately preceding sentence, the Corporation shall pay a cash amount in lieu of issuing such fractional share in an amount equal to the value of such fractional interest multiplied by the Market Price of a share of Common Stock on the Trading Day immediately prior to the Conversion Date.

 

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(iii)          The Corporation will at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting conversions of the Preferred Stock into shares of Common Stock, a number of shares of Common Stock equal to 110% of the number of shares of Common Stock issuable upon conversion of all then outstanding shares of Preferred Stock (including any Excess Conversion Shares and disregarding for this purpose the last sentence of Section 6(a)(i)(B)).  The Corporation shall take all action permitted by Law, including calling meetings of stockholders of the Corporation and soliciting proxies for any necessary vote of the stockholders of the Corporation, to amend the Certificate of Incorporation to increase the number of authorized and unissued shares of Common Stock, if at any time there shall be insufficient authorized and unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Preferred Stock (including any Excess Conversion Shares and disregarding for this purpose the last sentence of Section 6(a)(i)(B)).  The Corporation covenants that the Preferred Stock and all Common Stock that may be issued upon conversion of Preferred Stock shall upon issuance be duly authorized, fully paid and non-assessable and will not be subject to preemptive rights or subscription rights of any other stockholder of the Corporation.  The Corporation further covenants that the Corporation shall, if permitted by the rules of the NASDAQ, at its sole expense, cause to be authorized for listing or quotation on the NASDAQ, all Common Stock issuable upon conversion of the Preferred Stock, subject to official notice of issuance.  The Corporation will use its reasonable best efforts to ensure that such Common Stock may be issued without violation of any applicable Law or regulation.

 

(b)           Mechanics of Conversion.

 

(i)            If the Corporation exercises the Conversion Option and delivers notice thereof in accordance with Section 6(a)(i)(A), the Corporation shall notify the Holders of Preferred Stock in writing of the Conversion Option promptly following the Conversion Option Date by delivery of written notice to such Holders and shall update or cause to be updated the Register, effective as of the Conversion Option Date, to reflect the shares of Common Stock held by such Holders as a result of the Conversion Option and shall, as promptly as practicable thereafter, issue or cause to be issued to each such Holder the number of validly issued, fully paid and non-assessable shares of Common Stock to which such Holder shall be entitled and deliver or cause to be delivered to each such Holder evidence of such issuance reasonably satisfactory to such Holders.

 

(ii)           The Conversion Right of a Holder of Preferred Stock shall be exercised by the Holder by delivering written notice to the Corporation that the Holder elects to convert all or a portion of the shares of Preferred Stock held by such Holder (a “Conversion Notice”) and specifying the name or names (with address or addresses) in which shares of Common Stock are to be issued and (if so required by the Corporation or the Corporation’s transfer agent, if any) by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation or the transfer agent, as applicable, duly executed by the Holder or its legal representative.

 

(iii)          As promptly as practicable after the receipt of the Conversion Notice, and the payment of required taxes or duties pursuant to Section 12(i), if applicable, and in no event later than three Trading Days thereafter, the Corporation shall update or cause to be updated the Register to reflect the shares of Common Stock held by such Holder as a result of

 

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such conversion and shall issue and shall deliver or cause to be issued and delivered to such Holder, or to such other Person on such Holder’s written order (A) evidence of such issuance reasonably satisfactory to such Holder, and (B) cash for any fractional interest in respect of a share of Common Stock arising upon such conversion settled as provided in Section 6(a)(ii).

 

(iv)          The conversion of any share of Preferred Stock shall be deemed to have been made (i) in connection with any Conversion Option, at the close of business on the Conversion Option Date, and (ii) in connection with any exercise of the Conversion Right, at the close of business on the date of giving the Conversion Notice (the “Conversion Date”).  Until the Conversion Date with respect to any share of Preferred Stock has occurred, such share of Preferred Stock will remain outstanding and will be entitled to all of the powers, designations, preferences and other rights provided herein, including that such share shall (A) accrue and accumulate Preferred Dividends and participate in Participating Dividends pursuant to Section 4 and (B) entitle the Holder thereof to the voting rights provided in Section 11; provided, however, that any such shares that are repurchased pursuant to Section 8 or redeemed pursuant to Section 10 shall not be entitled to be converted.

 

(c)           Corporation’s Obligations to Issue Common Stock.  Subject to the last sentence of Section 6(a)(i)(B), the Corporation’s obligations to issue and deliver shares of Common Stock or Preferred Stock (as applicable) upon conversion of shares of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by any Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by any Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of Law by any Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to any Holder in connection with the issuance of such shares of Common Stock or Preferred Stock (as applicable).

 

Section 7.  Reorganization Events.

 

(a)           Treatment of Preferred Stock Upon a Reorganization Event.  Subject to applicable Law, upon the occurrence of any Reorganization Event, (i) if the Corporation is the surviving company in such Reorganization Event, each share of Preferred Stock outstanding immediately prior to such Reorganization Event shall remain outstanding following such Reorganization Event (or be exchanged for an equivalent share of Preferred Stock governed by the terms herein); provided, that (x) each share of Preferred Stock shall become convertible into the kind and amount of securities, cash and other property that the Holder of such share of Preferred Stock (other than the counterparty to the Reorganization Event or an Affiliate of such other party) would have received in such Reorganization Event had such share of Preferred Stock, immediately prior to such Reorganization Event, been converted into the applicable number of shares of Common Stock using the Conversion Price immediately prior to such Reorganization Event (including in respect of any Excess Conversion Shares and disregarding for this purpose the last sentence of Section 6(a)(i)(B)) (such securities, cash and other property, the “Exchange Property”), without interest on such Exchange Property, and (y) appropriate adjustments shall be made to the conversion provisions set forth in Section 6 and the adjustment to conversion price provisions set forth in Section 9 as determined reasonably and in good faith by the Board of Directors to place the Holders in as nearly as equal of a position as possible with

 

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respect to such matters following such Reorganization Event as compared to immediately prior to such Reorganization Event, or (ii) if the Corporation is not the surviving company in such Reorganization Event or will be dissolved in connection with such Reorganization Event, each share of Preferred Stock outstanding immediately prior to such Reorganization Event shall be converted or exchanged into a security of the Person surviving such Reorganization Event or such other continuing entity in such Reorganization Event having rights, powers and preferences, and the qualifications, limitations and restrictions thereof, as nearly equal as possible to those provided herein (with such adjustments as are appropriate to place the Holders in as nearly as equal of a position as possible following such Reorganization Event as compared to immediately prior to such Reorganization Event).

 

(b)           Form of Consideration.  In the event that shares of Preferred Stock are converted into Exchange Property and the holders of Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the Exchange Property shall be based on the types and amounts of consideration received by the holders of Common Stock on a pro rata basis; provided, however, that, to the extent the applicable transaction agreement provides for adjustments to such elected types and amounts of consideration that are generally applicable to holders of Common Stock making such elections, the Exchange Property will be subject to such adjustments.

 

(c)           Successive Reorganization Events.  The provisions of this Section 7 shall similarly apply to successive Reorganization Events.

 

(d)           Notice of Reorganization Events.  The Corporation (or any successor) shall, within 10 days following the consummation of any Reorganization Event, provide written notice to the Holders of such consummation of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property.  Failure to deliver such notice shall not affect the operation of this Section 7.

 

(e)           Requirements of Reorganization Events.  The Corporation shall not, without consent of the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, enter into any agreement for, or consummate, any transaction or series of transactions constituting a Reorganization Event unless (i) such agreement provides for or does not interfere with or prevent (as applicable) conversion of the Preferred Stock into the Exchange Property in a manner that is consistent with and gives effect to this Section 7, and (ii) to the extent that the Corporation is not the surviving company in such Reorganization Event or will be dissolved in connection with such Reorganization Event, proper provision shall be made in the agreements governing such Reorganization Event for the conversion of the Preferred Stock into a security of the Person surviving such Reorganization Event or such other continuing entity in such Reorganization Event.

 

(f)            Change of Control.  For the sake of clarity, if a Reorganization Event constitutes a Change of Control, then Section 8 shall take precedence over this Section 7 to the extent there is any inconsistency between such sections.

 

Section 8.  Change of Control Sale.

 

(a)           Change of Control Sale.  In the event of a Change of Control, each Holder of shares of Preferred Stock shall have the option, during the period beginning on the effective

 

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date of the Change of Control (the “Change of Control Effective Date”) and ending on the date that is 20 Business Days after the later of (x) receipt of written notice contemplated by Section 8(c) and (y) the Change of Control Effective Date, to require the Corporation (or the successor thereto) to purchase, to the extent permitted by applicable Law, all or any portion of its shares of Preferred Stock at a purchase price per share, payable in cash, equal to the sum of (A) the Liquidation Preference and (B) the Accrued Dividends of each such share of Preferred Stock as of the date of such purchase (a “Change of Control Sale”).

 

(b)           Initial Change of Control Notice.  On or before the 20th Business Day prior to the date on which the Corporation anticipates consummating any Change of Control (or, if later, promptly after the Corporation discovers that the Change of Control will occur or has occurred), the Corporation shall deliver to each Holder (as appearing in the Register of the Corporation) a written notice setting forth a description of the anticipated Change of Control and the date on which the Change of Control is anticipated to be effected (or, if applicable, the date on which a Schedule TO or other schedule, form or report disclosing a Change of Control was filed).

 

(c)           Final Change of Control Notice.  On the Change of Control Effective Date (or, if later, promptly after the Corporation discovers that the Change of Control has occurred), the Corporation shall deliver to each Holder a written notice setting forth:

 

(i)            the date, which shall be no earlier than the 20th Business Day after the Change of Control Effective Date (or, if later, the date of delivery of such notice), by which the Change of Control Sale option must be exercised;

 

(ii)           the amount of cash payable per share of Preferred Stock in accordance with Section 8(a) and the purchase date for such shares, which shall be no greater than 10 Business Days following the expiration of the twenty (20) Business Day period referred to in Section 8(a) (which purchase date will be the effective date of such Change of Control Sale if such option is exercised); and

 

(iii)          the instructions (which shall be reasonable and consistent with this Section 8) a Holder must follow to exercise its Change of Control Sale option in connection with such Change of Control.

 

(d)           Change of Control Sale Procedure.  To exercise a Change of Control Sale option, a Holder must, no later than 5:00 p.m., New York City time, on the date specified in the written notice referred to in Section 8(c)(i) by which such option must be exercised, notify the Corporation in writing of the number of shares of Preferred Stock as to which such Change of Control Sale option is being exercised.

 

(e)           Delivery upon Change of Control Sale.  Upon a Change of Control Sale, the Corporation shall deliver or cause to be delivered to the Holder by wire transfer the purchase price payable upon the purchase by the Corporation of such Holder’s shares of Preferred Stock in accordance with this Section 8 substantially concurrently with the Change of Control Sale.  Subject to the payment of the purchase price for shares of Preferred Stock to be purchased pursuant to this Section 8 substantially concurrently with a Change of Control Sale, from and after the Change of Control Sale, the dividend, voting and other powers, designations,

 

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preferences and rights provided herein with respect to such repurchased shares of Preferred Stock shall cease.

 

(f)            Insufficient Legally Available Funds.  If, on the date on which the Change of Control Sale is otherwise to occur in accordance with this Section 8, the Corporation does not have sufficient legally available funds to purchase all shares of Preferred Stock surrendered in connection with such Change of Control Sale in accordance with this Section 8, then (i) the Corporation shall purchase the maximum number of shares of Preferred Stock that may be purchased, on a pro rata basis, with such legally available funds and (ii) except to the extent a Holder withdraws its exercise of the Change of Control Sale option with respect to unpurchased shares, shall purchase any remaining shares, on a pro rata basis, as soon as it has any additional legally available funds.  Notwithstanding the foregoing, if the Corporation does not have legally available funds that are available to purchase all shares of Preferred Stock that Holders have elected to be purchased, or otherwise fails to comply with any provisions of Section 8, the price per share for any share of Preferred Stock purchased pursuant to clause (ii) above after the date on which the Change of Control Sale is otherwise to occur in accordance with this Section 8 (disregarding this Section 8(f)) shall be increased by the amount of any Accrued Dividends accruing between the date on which the Change of Control Sale is otherwise to occur and the date of such purchase.

 

(g)           Senior Indebtedness. Notwithstanding anything in this Section 8 to the contrary, in the event that the Corporation is also required upon a Change of Control to repurchase or repay amounts outstanding under the Debt Financing Documents (and the holders of rights to receive payment of such amounts have not waived such rights and have not otherwise failed to exercise such rights), the rights of holders of debt obligations of the Corporation to receive payments under the Debt Financing Documents in the event of such Change of Control will be senior pursuant to and to the extent provided by applicable law to the rights of each Holder of such shares of Preferred Stock to receive the purchase price payable in respect of such shares of Preferred Stock surrendered in connection with a Change of Control Sale in accordance with this Section 8 (it being understood that the foregoing shall not limit the rights of the Holders in any voluntary or involuntary bankruptcy, reorganization, insolvency or liquidation proceeding).

 

(h)           Partial Change of Control Sale.  If a portion, but less than all, of the shares of Preferred Stock held by any Holder are purchased in accordance with this Section 8 on any particular date, the Corporation shall promptly thereafter reflect in the Register the remaining shares of Preferred Stock held by such Holder.

 

Section 9.  Adjustments to Conversion Price.

 

(a)           Adjustments to Conversion Price.  Except as provided in Section 9(d), the Conversion Price shall be subject to the following adjustments:

 

(i)            Stock Dividends and Distributions.  If the Corporation declares a dividend or makes a distribution on the Common Stock payable in shares of Common Stock, then the Conversion Price in effect at the opening of business on the Ex-Date for such dividend or distribution shall be adjusted to the price determined by multiplying the Conversion Price at the opening of business on such Ex-Date by the following fraction:

 

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Where,

 

OS0 =  the number of shares of Common Stock outstanding at the close of business on the Business Day immediately preceding the Ex-Date for such dividend or distribution.

 

OS1 =  the sum of the number of shares of Common Stock outstanding at the close of business on the Business Day immediately preceding the Ex-Date for such dividend or distribution plus the total number of shares of Common Stock constituting such dividend or distribution.

 

If any dividend or distribution described in this Section 9(a)(i) is declared but not so paid or made, the Conversion Price shall be readjusted, effective as of the date and time the Board of Directors determines not to make such dividend or distribution, to such Conversion Price that would be in effect if such dividend or distribution had not been declared.

 

(ii)           Subdivisions, Splits and Combination of the Common Stock.  If the Corporation subdivides, splits or combines the shares of Common Stock, then the Conversion Price in effect immediately prior to the effective date of such share subdivision, split or combination shall be adjusted to the price determined by multiplying the Conversion Price in effect immediately prior to the effective date of such share subdivision, split or combination by the following fraction:

 

 

Where,

 

OS0 = the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, split or combination.

 

OS1 = the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, split or combination.

 

If any subdivision, split or combination described in this Section 9(a)(ii) is announced but the outstanding shares of Common Stock are not subdivided, split or combined, the Conversion Price shall be readjusted, effective as of the date the Board of Directors determines not to subdivide, split or combine the outstanding shares of Common Stock, to such Conversion Price that would be in effect if such subdivision, split or combination had not been announced.

 

(iii)          Other Distributions.  If the Corporation distributes to all holders of shares of Common Stock any Convertible Securities or Options or any other assets for which there is no corresponding distribution in respect of the Preferred Stock pursuant to Section 4(a)(i)

 

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(which excludes, for the avoidance of doubt, any distribution of cash or non-cash property for which there is a corresponding distribution in respect of the Preferred Stock pursuant to Section 4(a)(i)), then the Conversion Price in effect immediately prior to the Ex-Date for such distribution shall be adjusted to the price determined by multiplying the Conversion Price in effect immediately prior to the Ex-Date for such distribution by the following fraction:

 

 

 

Where,

 

SP0 = the Market Price of a share of Common Stock on the date immediately prior to the Ex-Date for such distribution.

 

FMV = the fair market value of the portion of the distribution applicable to one share of Common Stock on the Ex-Date for such distribution, in the case of a non-cash distribution or with respect to the non-cash portion of a distribution, if any, as determined (i) by the good faith determination of the Board of Directors or (ii) if, within five Business Days following notice from the Corporation of the value determined by the Board of Directors pursuant to clause (i), the Holders of a majority of the outstanding shares of Preferred Stock object in good faith to such determination, then the fair market value will be determined by a nationally recognized independent investment banking firm that has for this purpose (x) been selected by the Board of Directors, and (y) is reasonably acceptable to Holders of a majority of the outstanding shares of Preferred Stock; provided, that such value, whether determined pursuant to the foregoing clause (i) or (ii), shall not for the purposes hereof in any event be equal to or greater than the Market Price of a share of Common Stock on such date.

 

In a “spin-off,” where the Corporation makes a distribution to all holders of shares of Common Stock consisting of capital stock of any class or series, or similar equity interests of, or relating to, a Subsidiary of the Corporation or other business unit, the Conversion Price will be adjusted on the 15th Trading Day after the effective date of the distribution by multiplying such Conversion Price in effect immediately prior to such 15th Trading Day by the following fraction:

 

 

Where,

 

MP0 = (i) if the Common Stock is listed or quoted on a principal U.S. national or regional securities exchange or traded on an over-the-counter market, the Market Price of a share of Common Stock for the period ending on and including the tenth Trading Day following the effective date of such distribution, or (ii) if the Common Stock is not listed or quoted on a principal U.S. national or regional securities exchange or traded on an over-the-counter market, the Market Price of a share of Common Stock on the effective date of such distribution.

 

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MPs = (i) if the capital stock or equity interests distributed to the holders of shares of Common Stock are listed or quoted on a principal U.S. national or regional securities exchange or traded on an over-the-counter market, an amount equal to the product of (x) the number of shares of such capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock and (y) the Market Price of such capital stock or equity interests for the period ending on and including the tenth Trading Day following the effective date of such distribution, or (ii) if such capital stock or equity interests are not listed or quoted on a principal U.S. national or regional securities exchange or traded on an over-the-counter market, the Market Price of the capital stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on the effective date of such distribution (after giving effect to such distribution).

 

In the event that such distribution described in this Section 9(a)(iii) is not so paid or made, the Conversion Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay or make such dividend or distribution, to the Conversion Price that would then be in effect if such dividend or distribution had not been declared.

 

(iv)          Certain Repurchases of Common Stock.  If the Corporation effects a Pro Rata Repurchase of Common Stock that involves the payment by the Corporation of consideration per share of Common Stock that exceeds the Market Price of a share of Common Stock on the Effective Date of such Pro Rata Repurchase (provided that if part or all of the consideration is not cash, the fair market value of the non-cash consideration shall be determined by a nationally recognized independent investment banking firm that has for this purpose (x) been selected by the Board of Directors, and (y) been consented to by Holders of a majority of the outstanding shares of Preferred Stock, voting as a separate class, then the Conversion Price in effect immediately prior to the Effective Date of such Pro Rata Repurchase shall be adjusted (such adjustment to become effective immediately prior to the opening of business on the day following the Effective Date of such Pro Rata Repurchase) by multiplying the Conversion Price in effect immediately prior to the Effective Date of such Pro Rata Repurchase by the following fraction:

 

 

Where,

 

SP0 = the Market Price of a share of Common Stock on the Trading Day immediately preceding the first announcement of the intent to effect such Pro Rata Repurchase.

 

OS0 = the number of shares of Common Stock outstanding at the Effective Date of such Pro Rata Repurchase, including, if applicable, any shares validly tendered and not withdrawn or exchanged shares.

 

OS1= the number of shares of Common Stock outstanding at the Effective Date of such Pro Rata Repurchase, including, if applicable, any shares validly tendered or exchanged and not withdrawn, minus the number of shares purchased in such Pro Rata

 

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Repurchase (which shares shall equal the Purchased Shares (as defined below) if such Pro Rata Repurchase is effected pursuant to a tender offer or exchange offer).

 

AC = the aggregate cash and fair market value of the other consideration payable in such Pro Rata Repurchase, and in the case of non-cash consideration, as determined by a nationally recognized independent investment banking firm that has for this purpose (x) been selected by the Board of Directors, and (y) been consented to by Holders of a majority of the outstanding shares of Preferred Stock, voting as a separate class, based, in the case of a tender offer or exchange offer, on the number of shares actually accepted for purchase (the “Purchased Shares”).

 

In the event that the Corporation, or one of its Affiliates, is obligated to purchase shares of Common Stock pursuant to any such Pro Rata Repurchase, but the Corporation, or such Affiliate, is permanently prevented by applicable Law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Price shall be readjusted to be such Conversion Price that would then be in effect if such Pro Rata Repurchase had not been made.

 

(v)           Rights Plans.  To the extent that the Corporation has a rights plan in effect with respect to the Common Stock on any Conversion Date, upon conversion of any shares of the Preferred Stock into Common Stock, the Holders will receive, in addition to the shares of Common Stock, the rights under the rights plan, unless, prior to such Conversion Date, the rights have separated from the shares of Common Stock, in which case the Conversion Price will be adjusted at the time of separation as if the Corporation had issued the rights to all holders of the Common Stock in an issuance triggering an adjustment pursuant to Section 9(a)(iii), subject to readjustment in the event of the expiration, termination or redemption of such rights.

 

(b)           Other Adjustments.

 

(i)            The Corporation may make decreases in the Conversion Price, in addition to any other decreases required by this Section 9, if the Board of Directors deems it advisable to avoid or diminish any income tax to holders of the Common Stock resulting from any dividend or distribution of shares of Common Stock (or issuance of Options for Common Stock) or from any event treated as such for income tax purposes.

 

(ii)           If the Corporation takes any action affecting the Common Stock, other than an action described in Section 9(a), which upon a determination by the Board of Directors, in its good faith discretion (such determination intended to be a “fact” for purposes of Section 151(a) of the DGCL), would materially adversely affect the conversion rights of the Holders of shares of Preferred Stock, the Conversion Price shall be adjusted, to the extent permitted by Law, in such manner, if any, and at such time, as the Board of Directors determines in good faith to be equitable in the circumstances.

 

(c)           Successive Adjustments.  Successive adjustments in the Conversion Price shall be made, without duplication, whenever any event specified in Section 9(a) or Section 9(b) shall occur.

 

(d)           Rounding of Calculations; Minimum Adjustments.  All adjustments to the Conversion Price shall be calculated to the nearest one-tenth (1/10th) of a cent.  No adjustment in the Conversion Price shall be required if such adjustment would be less than $0.01; provided,

 

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that any adjustments which by reason of this Section 9(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, further that on any Conversion Date adjustments to the Conversion Price will be made with respect to any such adjustment carried forward and which has not been taken into account before such date.

 

(e)           Statement Regarding Adjustments; Notices.  Whenever the Conversion Price is to be adjusted in accordance with one or more of Section 9(a) or Section 9(b), the Corporation shall:  (i) compute the Conversion Price in accordance with Section 9(a) or Section 9(b), taking into account the one cent threshold set forth in Section 9(d); (ii) (x) in the event that the Corporation shall give notice or make a public announcement to the holders of Common Stock of any action of the type described in Section 9(a) (but only if the action of the type described in Section 9(a) would result in an adjustment to the Conversion Price or a change in the type of securities or property to be delivered upon conversion of the Preferred Stock), the Corporation shall, at the time of such notice or announcement, and in the case of any action which would require the fixing of a record date, at least ten (10) days prior to such record date, give notice to each Holder by mail, first class postage prepaid, at the address appearing in the Register, which notice shall specify the record date, if any, with respect to any such action, the approximate date on which such action is to take place and the facts with respect to such action as shall be reasonably necessary to indicate the effect on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon conversion or redemption of the Preferred Stock or (y) in the event that the Corporation does not give notice or make a public announcement as set forth in subclause (x) of this clause (ii), the Corporation shall, as soon as practicable following the occurrence of an event that requires an adjustment to the Conversion Price pursuant to one or more of Section 9(a) or Section 9(b), taking into account the one cent threshold set forth in Section 9(d) (or if the Corporation is not aware of such occurrence, as soon as practicable after becoming so aware), provide, or cause to be provided, a written notice to the Holders of the occurrence of such event, in the same manner and with the same detail as the notice set forth in subclause (x) of this clause (ii); and (iii) whenever the Conversion Price shall be adjusted pursuant to one or more of Section 9(a) or Section 9(b), the Corporation shall, as soon as practicable following the determination of the revised Conversion Price, (x) file at the principal office of the Corporation, a statement showing in reasonable detail the facts requiring such adjustment, the Conversion Price that shall be in effect after such adjustment and the method by which the adjustment to the Conversion Price was determined and (y) cause a copy of such statement to be sent in the manner set forth in subclause (x) of clause (ii) to each Holder.

 

(f)            Certain Adjustment Rules.  If an adjustment in the Conversion Price made hereunder would reduce the Conversion Price to an amount below par value of the Common Stock, then such adjustment in Conversion Price made hereunder shall reduce the Conversion Price to the par value of the Common Stock.  As a condition precedent to the taking of any action which would require an adjustment pursuant to this Section 9, the Corporation shall use its reasonable best efforts to take any and all actions which may be necessary, including obtaining regulatory, NASDAQ (or such exchange or automated quotation system on which the Common Stock is then listed) or stockholder approvals or exemptions, in order that the Corporation may thereafter validly and legally issue as fully paid and nonassessable all shares of Common Stock issuable upon conversion of the Preferred Stock in compliance with the applicable listing standards of NASDAQ (or such exchange or automated quotation system on which the Common Stock is then listed).

 

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Section 10.  Optional Redemption.

 

(a)                                 Subject to and in accordance with the provisions of this Section 10, the Corporation shall have the right, at its option, at any time (subject to Section 10(c)), to redeem, out of funds legally available therefor, (i) all or (ii) any portion of the shares of Preferred Stock then outstanding at a redemption price per share in cash (the “Redemption Price”) equal to two times (2x) the sum of (A) the Liquidation Preference and (B) the Accrued Dividends of each such share of Preferred Stock as of the date of such redemption; provided, that any Accrued Dividends that have accrued since the most recent Preferred Dividend Payment Date shall instead be calculated at one times (1x) the amount of such current period Accrued Dividends; provided, further, that any redemption under this Section 10 for less than all of the shares of Preferred Stock then outstanding must be for no less than one-third (1/3) of the total number of shares of Preferred Stock initially issued to the Investor on the Original Issuance Date and must not result in the Investor’s Beneficial Ownership of the Common Stock (on an as-converted to Common Stock basis) falling below five percent (5%) of the Common Stock then outstanding as of the Redemption Date (on an as-converted to Common Stock basis).  The Corporation may exercise its right to require redemption under this Section 10 by sending a written notice to each Holder of Preferred Stock (the “Redemption Notice”) specifying (x) the date on which the redemption shall occur (the “Redemption Date”), which shall be a Business Day that is no earlier than 30 days and no later than 60 days from the date the Redemption Notice is sent and (y) the aggregate number of shares of Preferred Stock which are being redeemed pursuant to such redemption. If fewer than all of the shares of Preferred Stock then outstanding are to be redeemed pursuant to this Section 10(a), then such redemption shall occur on a pro rata basis with respect to all Holders of Preferred Stock based on the total number of shares of Preferred Stock then held by such Holder relative to the total number of shares of Preferred Stock then outstanding.  Notwithstanding anything to the contrary in this Section 10(a), each Holder of shares of Preferred Stock to be redeemed by the Corporation may elect to convert all or any portion of the shares of Preferred Stock held by such Holder into Common Stock in accordance with the provisions of Section 6 (taking into account the limitation in the last sentence of Section 6(a)(i)(B), applied ratably with respect to each outstanding share of Preferred Stock) at any time prior to the applicable Redemption Date.

 

(b)                                 Redemption pursuant to Section 10(a) shall become effective on the Redemption Date and the aggregate Redemption Price for such redeemed shares shall be due and payable in cash to the record Holder of the shares of Preferred Stock being redeemed on such date. If a Redemption Notice has been delivered in accordance with Section 10(a) and if the funds necessary for redemption have been paid to the Holders of shares of Preferred Stock being redeemed, then from and after the applicable Redemption Date, dividends and distributions will cease to accrue on such redeemed shares of Preferred Stock, such redeemed shares of Preferred Stock shall no longer be deemed outstanding and all rights of the Holders with respect to such redeemed shares of Preferred Stock will terminate, except the right to receive the aggregate Redemption Price for such redeemed shares of Preferred Stock held by each such Holder.

 

(c)                                  The Corporation’s optional redemption right provided by Section 10(a) shall not be available to the Corporation at any time at which:

 

(i)                                     the Common Stock Trading Price has exceeded 200% of the then applicable Conversion Price (x) for more than five (5) Trading Days during the 30-Trading Day

 

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period immediately preceding the date of delivery of the Redemption Notice or (y) for any Trading Day during the five (5) consecutive Trading Day period immediately preceding the date of delivery of the Redemption Notice; or

 

(ii)                                  the Corporation is, or was during the five (5) consecutive Trading Day period immediately preceding the date of delivery of the Redemption Notice, in possession of material non-public information relating to the Corporation, that, if publicly disclosed, would be reasonably expected to have a material and positive effect on the Common Stock Trading Price on the Trading Day immediately following the date on which such information is publicly disclosed relative to the Common Stock Trading Price on the Trading Day immediately preceding the date on which such information is publicly disclosed (assuming such information is publicly disclosed pre-market open on a Trading Day or on a day that is not a Trading Day).

 

Section 11.  Voting Rights.

 

(a)                                 General.  The Holders of shares of Preferred Stock shall be entitled to vote with the holders of the Common Stock on all matters submitted to a vote of stockholders of the Corporation, except as otherwise provided herein or as required by applicable Law, voting together with the holders of Common Stock as a single class.  For such purposes, each Holder shall be entitled to a number of votes in respect of the shares of Preferred Stock owned of record by it equal to the number of shares of Common Stock into which such shares of Preferred Stock could be converted (taking into account the limitation in the last sentence of Section 6(a)(i)(B), applied ratably with respect to each outstanding share of Preferred Stock) as of the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, as of the date such vote is taken or any written consent of stockholders is solicited.  For the avoidance of doubt, the Holders of shares of Preferred Stock shall not be entitled to any voting rights in respect of any Excess Conversion Shares prior to the Requisite Stockholder Approval.  The Holders of shares of Preferred Stock shall be entitled to notice of any stockholders’ meeting in accordance with the Certificate of Incorporation and the By-laws as if they were holders of record of Common Stock for such meeting.

 

(b)                                 Class Voting Rights. So long as any shares of Preferred Stock are outstanding, in addition to any other vote required by applicable Law, the Corporation may not take any of the following actions (including by means of merger, consolidation, reorganization, recapitalization or otherwise) without the prior affirmative vote or written consent of the Holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock, voting as a separate class:

 

(i)                                     amend, alter, repeal or otherwise modify any provision of the Certificate of Incorporation, this Certificate or the By-laws in a manner that would alter or change the terms or the powers, preferences, rights or privileges of the Preferred Stock as to affect them adversely;

 

(ii)                                  authorize, create, increase the authorized amount of, or issue (x) any class or series of Senior Securities, Parity Securities or Junior Securities (other than Common Stock) or any security convertible into, or exchangeable or exercisable for any of the foregoing (other than Common Stock) that could have the “result of the receipt of property by some shareholders” within the meaning of Section 305(b)(2)(A) of the

 

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Internal Revenue Code of 1986, as amended from time to time, including but not limited to (A) any non-participating preferred stock (including by means of merger, consolidation, reorganization, recapitalization or otherwise) or (B) any debt securities convertible into shares of Capital Stock by their terms or (y) any other class or series of Senior Securities or Parity Securities;

 

(iii)                               increase or decrease the authorized number of shares of Preferred Stock (except for the cancellation and retirement of shares set forth in Section 13(c) or as necessary for the payment of Preferred Dividends in kind in accordance with Section 4(a)) or issue additional shares of Preferred Stock (except for shares of Preferred Stock issuable as payment of a Preferred Dividend in accordance with Section 4);

 

(iv)                              (1) amend, restate, supplement, modify or replace the Debt Financing Documents in any manner that would (i) include provisions relating to the ability of the Corporation or its Subsidiaries to pay cash dividends pursuant to this Certificate or any amounts due pursuant to Section 7 or Section 8 that are more restrictive in any material respect than those set forth in the Debt Financing Documents in effect as of the Original Issuance Date or (ii) restrict the ability of the Corporation to pay Preferred Dividends in kind in accordance with Section 4(a), or (2) enter into any agreements or arrangements relating to indebtedness or otherwise (a) containing provisions relating to the ability of the Corporation or its Subsidiaries to pay cash dividends pursuant to this Certificate or any amounts due pursuant to Section 7 or Section 8 that are more restrictive in any material respect than those set forth in the Debt Financing Documents as of the Original Issuance Date or (b) that would restrict the ability of the Corporation to pay Preferred Dividends in kind in accordance with Section 4(a) (or subsequently amend, restate, supplement or otherwise modify any such agreements in any manner that would (x) include provisions relating to the ability of the Corporation or its Subsidiaries to pay cash dividends pursuant to this Certificate or any amounts pursuant to Section 7 or Section 8 that are more restrictive in any material respect than those set forth in such agreements or (y) restrict the ability of the Corporation to pay Preferred Dividends in kind in accordance with Section 4(a)); or

 

(v)                                 adopt any plan of liquidation, dissolution or winding up of the Corporation or file any voluntary petition for bankruptcy, receivership or any similar proceeding.

 

(c)                                  The consent or votes required in Section 11(b) shall be in addition to any approval of stockholders of the Corporation which may be required by Law or pursuant to any provision of the Certificate of Incorporation or the By-laws. Each Holder of shares of Preferred Stock will have one vote per share on any matter on which Holders of shares of Preferred Stock are entitled to vote separately as a class, whether at a meeting or by written consent.

 

Section 12.  Transfer Agent.

 

(a)                                 The Corporation may appoint a transfer agent and remove its transfer agent in accordance with the agreement between the Corporation and such transfer agent; provided that the Corporation shall appoint a successor transfer agent of recognized standing who shall accept such appointment prior to the effectiveness of such removal. Upon any such

 

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removal or appointment, the Corporation shall send notice thereof by first-class mail, postage prepaid, to the Holders.  When a Holder requests to register the transfer of shares of Preferred Stock, the Corporation or the Corporation’s transfer agent, as applicable, shall register the transfer as requested if its reasonable requirements for such transaction are met.

 

Section 13.  Miscellaneous.

 

(a)                                 Taxes. The issuance or delivery of shares of Preferred Stock, shares of Common Stock or other securities issued on account of Preferred Stock pursuant hereto, or certificates representing such shares or securities, shall be made without charge to the Holder for such shares or certificates or for any tax in respect of the issuance or delivery of such certificates or the securities represented thereby, including any share transfer, documentary, stamp or similar tax; providedhowever, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Preferred Stock, shares of Common Stock or other securities in a name other than that in which the shares of Preferred Stock with respect to which such shares or other securities were issued, delivered or registered, or in respect of any payment to any Person other than a payment to the Holder thereof, and the transferee or payee, as the case may be, shall pay or bear the cost of any such tax, and the Corporation shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

 

(b)                                 Good Faith.  The Corporation shall not, by amendment of the Certificate of Incorporation or through reorganization, consolidation, merger, dissolution, sale of assets, or otherwise, avoid or seek to avoid the observance or performance of any of the terms of this Certificate, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders of Preferred Stock against dilution or other impairment as set forth in this Certificate.

 

(c)                                  Status of Shares.  Shares of Preferred Stock which have been converted, redeemed, repurchased or otherwise cancelled shall be retired and, following the filing of any certificate required by the DGCL, have the status of authorized and unissued shares of Preferred Stock, without designation as to series until such shares are once more, subject to and in accordance with the provisions of Section 11, designated as part of a particular series of Preferred Stock by the Board of Directors.

 

(d)                                 Notices.  All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (or by first class mail if the same shall be specifically permitted for such notice under the terms of this Certificate) with postage prepaid, addressed:  (i) if to the Corporation, to its office at 505 Huntmar Park Drive, Suite 300, Herndon, Virginia 20170, Attention:  General Counsel, or to any transfer or other agent of the Corporation designated to receive such notice as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the Register or (iii) to such other address as the Corporation or any such Holder, as the case may be, shall have designated by written notice similarly given.

 

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(e)                                  Severability.  If any right, preference or limitation of the Preferred Stock set forth in this Certificate (as amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of Law or public policy, all other rights, preferences and limitations set forth in this Certificate (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein.

 

(f)                                   Other Rights.  Except as expressly provided in any agreement between a Holder and the Corporation, the shares of Preferred Stock shall not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable Law.

 

(g)                                  Headings.  The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.

 

(h)                                 Effectiveness.  This Certificate shall become effective upon the filing thereof with the Secretary of State of the State of Delaware.

 

[Remainder of this page intentionally left blank]

 

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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed and acknowledged by its undersigned duly authorized officer this 29th day of December, 2017.

 

 

 

BEACON ROOFING SUPPLY, INC.

 

 

 

 

 

 

By:

/s/ Ross D. Cooper

 

Name:

Ross D. Cooper

 

Title:

Executive Vice President, General Counsel & Secretary

 

[Signature Page to the Certificate of Designations]

 


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