Exhibit 10.5
INVESTORS AGREEMENT
THIS INVESTORS AGREEMENT (this "Investors Agreement") is made as of
this 10th day of December, 1999, by and among Haights Cross Communications, Inc,
a Delaware corporation (the "Company"), Haights Cross Operating Company, a
Delaware corporation ("HCOC"), the existing stockholders of the Company
identified as such on the signature pages hereto (the "Existing Stockholders"),
the persons identified on the signature pages hereto as the DUMB Investors and
any assignees or transferees thereof (each, "a "DLJMB Investor" and,
collectively, the ."DLJMB Investors"), the persons identified on the signature
pages hereto as the DLJIP Investors and any assignees or transferees thereof
(each a "DLJIP Investor" and collectively, the "DLJIP Investors" and
collectively with the DLJMB Investors, the "Investors", each individually an
"`Investor"), and any other stockholder or optionholder who from time to time
becomes party' to this Agreement by execution of a Joinder Agreement in
substantially the form attached hereto as Exhibit A (the "Other Stockholders").
The Existing Stockholders and the Other Stockholders are herein referred to
collectively as the "Stockholders", and individually as a "Stockholder."
WHEREAS, reference is, made to the Senior Subordinated Notes, Preferred
Stock and Warrants. Subscription Agreement, dated as of the date hereof, among
the parties listed on the signature pages thereto (the "Subscription
Agreement"), pursuant to which (i) the DLJMB Investors have agreed to purchase
from the Company shares of Series B Senior Preferred Stock, par value $ .001 per
share, of the Company (the Series B Preferred Stock"), warrants to purchase
shares of Common Stock, par value $.001 per 'share of the Company and warrants
to purchase shares of Series A Preferred Stock, par value $.001 per share, of
the Company (the "Series A Preferred Stock" and, together with the Series B
Preferred Stock, the "Preferred Stock") and (ii) the DLJIP Investors have,
agreed to purchase from HCOC its Senior Subordinated Notes Due 2009 and to
purchase from the Company warrants to purchase shares of its Common Stock, par
value $.001 per share, and warrants to purchase shares of its Series A Preferred
Stock;
WHEREAS, the execution and delivery of this Investors Agreement is a
condition precedent to the transactions contemplated by the Subscription
Agreement; and
WHEREAS, the parties hereto desire to agree, among other things, upon
the terms on which the securities of the Company, now or hereafter outstanding,
and held by them will be held transferred and voted.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CONSTRUCTION OF TERMS. As used herein, the masculine,
feminine or gender neutral, and the singular or plural number, shall be deemed
to be or to include the other genders or number, as the case may be, whenever
the context so indicates or requires.
SECTION 1.2 TERMS NOT DEFINED. Capitalized terms used herein and not
Otherwise defined. shall have the meanings ascribed to them in the Subscription
Agreement.
SECTION 1.3 NUMBER OF SHARES OF STOCK. Whenever any provision of this
Investors Agreement calls for any calculation based on a number of shares of
capital stock held by a Stockholder or an Investor, the number of shares deemed
to be held by that Stockholder or Investor shall be the total number of shares
of capital stock then owned by the Stockholder or Investor.
SECTION 1.4 DEFINED TERMS. The following capitalized terms, as used in
this Investors Agreement, shall have the meanings set forth below.
An "AFFILIATE" of any Person (as defined herein) means a Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the first mentioned Person. A
Person shall be deemed to control another Person if such first Person possesses,
directly or indirectly, the power to direct, or cause the direction of, the
management and policies of the second Person, whether through the ownership of
voting securities, by contract or otherwise.
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"BONA-FIDE SALE" means a sale in which (i) the sale by the Stockholders
and the Investors would be on the same terms and conditions and for the same
type of consideration as is to be received by the Majority Group, (ii) the
Offeror is purchasing in an arm's-length transaction and (iii) the consideration
to be paid to each Stockholder and each Investor in connection with such
transaction consists solely of cash, Freely Tradeable Securities or cash and
Freely Tradeable Securities.
"COMMON STOCK" shall refer to the Common Stock and any other common
equity securities issued by the Company, and any other shares of stock issued or
issuable with respect thereto (whether by way of a stock dividend or stock split
or in exchange for or upon conversion of such shares or otherwise in connection
with a combination of shares, recapitalization, merger, consolidation or other
corporate reorganization), including, without limitation, the Shares (as
hereinafter defined).
"COMPANY" shall refer to the Company and any successor or successors
thereto.
"FREELY TRADEABLE SECURITIES" means securities (a) which are of a class
(i) of securities issued or fully guaranteed by the United States of America or
any agency thereof and entitled to the full faith and credit of the United
States of America, for which price quotations are routinely quoted and for
which, there is a ready liquid market; or (ii) both registered pursuant to
either Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
(the "Commission") promulgated thereunder (the "Exchange Act") and either
listed on a national securities exchange or on the NASDAQ National Market; and
(b) which may be resold in the public markets by the Stockholders and the
Investors
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without requirement of further registration under the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder
(the "Securities Act") (excluding the impact of Rule 145 under the Securities
Act, if applicable).
"HCOC" shall refer to HCOC and any successor or successors thereto.
"INITIAL PUBLIC OFFERING" shall mean the Company's first public
offering of Common Stock registered on Form S-1 (or any successor or equivalent
form) under the Securities Act.
"MAJORITY INTEREST" means the Stockholders or the Investors, as the
case may be, holding not less than a majority of the outstanding Shares (as
hereinafter defined) held by all of the Stockholders or the Investors.
"PERSON" means an individual, a corporation, an association, a joint
venture, a partnership, a limited liability company, an estate, a trust, an
unincorporated organization and any other entity or organization, governmental
or otherwise.
"PUBLIC MARKET DATE" means the first day upon which Common Stock of the
Company with an aggregate market value of not less than $30,000,000 has been
sold in all public offerings of Common Stock by the Company pursuant to
effective registration statements under the Securities Act (other than
registration statements on Form S-8 or any successor forms).
"REQUIRED HOLDERS" means (i) in the event the DLJMB Investors own in
the aggregate at least 10% of the total Securities (as defined in the
Subscription Agreement) initially purchased by such DLJMB Investors pursuant to
the Subscription Agreement (the "DLJMB Initial Ownership"), all of the DLJMB
Investors, (ii) in the event the DLJMB Investors own in the aggregate less than
10% of the DLJMB Initial Ownership, a Majority Interest of the DLJMB Investors,
(iii) in the event the DLJIP Investors own in the aggregate at least 10% of the
total Warrants (including the shares issued upon exercise of such Warrant, if
any such Warrants shall have been exercised) initially purchased by such DLJIP
Investors pursuant to the Subscription Agreement (the "DLJIP Initial
Ownership"), all of the DLJIP Investors or (iv) in the event the DLJIP Investors
own in the aggregate less than 10% of the DLJIP Initial Ownership, a Majority
Interest of the DLJIP Investors.
"SHARES" means (i) with respect to the Investors, the shares of Common
Stock subject to acquisition upon the exercise of the Warrants at the relevant
time (such number being subject to possible adjustment in accordance with the
terms of such Warrants), together with the shares of Common Stock held by the
Investors at the relevant time if exercise of any of the Warrants has then
occurred, (ii) with respect to the Stockholders, all shares of Common Stock then
held by the Stockholders, and (iii) any other common equity securities now or
hereafter issued by the Company, together with any options thereon and any other
shares of stock issued or issuable with respect thereto (whether by way of a
stock dividend, stock split or in exchange for or upon conversion of such shares
or otherwise in connection with a combination of shares, recapitalization,
merger, consolidation or other corporate reorganization).
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"TAG-ALONG PORTION" means (i) where the Selling Stockholder is selling
Series A Preferred Stock, the number of shares of Series A Preferred Stock held
(or, without duplication acquirable under the Warrants) by the Tagging Person or
the Selling Stockholder, as the case may be, multiplied by a fraction, the
numerator of which is the number of shares of Series A Preferred Stock proposed
to be sold in the Tag-Along Sale pursuant to Section 2.2 and the denominator of
which is the aggregate number of shares of Series A Preferred Stock owned by
such Selling Stockholder and (ii) where the Selling Stockholder is selling
Shares, the number of shares held (or, without duplication, acquirable under the
Warrants) by the Tagging Person or the Selling Stockholder, as the case may be,
multiplied by a fraction, the numerator of which is the number of shares
proposed to be sold in the Tag-Along Sale pursuant to Section 2.2 and the
denominator of which is the aggregate number of Shares owned by such Selling
Stockholder.
"TRANSFER" means any direct transfer, donation; sale, assignment,
pledge, hypothecation, grant of a security interest in or other disposal or
attempted disposal of all or any portion of a security or of any rights.
"Transferred" means the accomplishment of a Transfer, and "Transferee" means the
recipient of a Transfer.
"WARRANTS" means the warrants to purchase shares of Common Stock of the
Company and the warrants to purchase shares of Series A Preferred Stock issued
to the Investors pursuant to the Subscription Agreement.
ARTICLE II
RIGHT OF FIRST REFUSAL; CO-SALE PROVISIONS
The following provisions of this Article II shall terminate immediately
upon the Public Market Date and shall not apply with respect to sales pursuant
to any public offering of Common Stock by the Company pursuant to an effective
registration statement under the Securities Act:
SECTION 2.1 TAKE ALONG OPTION OF MAJORITY GROUP. Each Stockholder and
Investor hereby agrees, if requested by a Majority Interest of the Existing
Stockholders (a "Majority Group") in response to an offer from any Person other
than an Existing Stockholder or any of their respective Affiliates or any
Affiliate of the Company or HCOC (an "Offeror") to purchase Shares in a single
transaction or in a series of related transactions, (a "Transaction Offer") that
would constitute a Bona Fide Sale, to Transfer for value a specified percentage
(the "Sale Percentage") of the Shares held by such Stockholder or Investor to
such Offeror in the manner and on the terms set forth in this Section 2 .1 in
connection with the sale by such Majority Group of such Sale Percentage of such
Majority Group's Shares to such Offeror (a "Sale"); provided, however, that such
Majority Group shall not be entitled to so require any Stockholder or Investor
to participate in any Sale pursuant to this Section 2.1 unless (i) the Majority
Group proposes that there be transferred in such Sale a number of shares that is
equal to at least 90% of the Shares then outstanding and (ii) all of the
Stockholders and the Investors shall be required to sell Shares in such Sale.
Subject to the foregoing proviso, the Sale Percentage applicable to each
Stockholder and each Investor shall be equal to the aggregate number of Shares
of the Majority Group
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proposed to be transferred in such Sale divided by the aggregate number of
Shares held by the Majority Group, the result of which shall be multiplied by
100.
(a) If the Majority Group elects to exercise its
rights under this Section 2.1, a notice (the "Take Along Notice") shall be
furnished by the Majority Group to each Stockholder and Investor, not later than
the 20th day prior to the proposed Sale. The Take Along Notice shall set forth
the principal terms of the proposed Sale insofar as it relates to the Shares,
including, without limitation, the number of Shares to be purchased from each
Stockholder and Investor, the number of Shares to be sold in such Sale by the
Majority Group, the date on which the Sale is proposed to be consummated, the
Sale Percentage, the maximum and minimum purchase price, including on a per
Share basis, and the name of the Offeror. If the Majority Group consummates
the Sale referred to in the Take Along Notice on substantially the terms set
forth in the Take-Along Notice, so long as such terms constitute a Bona Fide
Sale and are consistent with the proviso to Section 2.1, each Stockholder and
Investor shall be bound and obligated to Transfer the Sale Percentage of its
Shares in the Sale on the same terms and conditions (subject to all of the
provisions of this Investors Agreement) with respect to each type of Share sold,
as the Majority Group shall Transfer each such Share in the Sale.
(b) Each participating Stockholder and Investor
shall effect its participation in any Transaction Offer under this Section 2.1
by delivery to the Offeror, or to the Majority Group for delivery to the
Offeror, of one or more instruments or certificates, properly endorsed for
transfer, representing the Shares it is required to sell pursuant hereto. No
Stockholder or Investor shall be required to make any representations or
warranties in connection with the Sale (except representations and warranties as
to its title to and authority to convey the Shares sold by it) and shall only be
required to provide customary indemnities in connection therewith. At the time
of consummation of the Transaction Offer, the Offeror shall remit directly to
each participating Stockholder and Investor that portion of the Sale proceeds to
which the participating Stockholder and Investor is entitled by reason of its
participation with respect thereto (less any adjustments due to the conversion
of any convertible securities or the exercise of any exercisable securities).
In connection therewith, any Stockholder or Investor that is a holder of a
convertible or exercisable security shall have the opportunity to either (i)
exercise such securities (if then exercisable) and participate in such Sale as
holders of the Common Stock issuable upon such exercise, or (ii) upon the
consummation of the Sale, receive in exchange for such securities (to the extent
exercisable at the time of such Sale) consideration equal to the amount (if
greater than zero) determined by multiplying (A) the same amount of
consideration per Share received by the holders of the Common Stock of the same
class of Common Stock for which the security is convertible or exercisable in
connection with the Sale less the exercise price per share of such security by
(B) the number of shares of Common Stock of such class issuable upon exercise of
such security.
(c) The closing of a Sale pursuant to
Section 2.1 shall take place at such time and place as the Majority Group shall
specify by notice to each Stockholder and Investor but no later than ninety (90)
days following the date of the effectiveness of the Take Along Notice.
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(d) Promptly after such Transfer, the Majority
Group shall notify the Company, which in turn shall promptly notify the
Investors and Stockholders, of the consummation of the Sale pursuant to the Take
Along Notice and shall furnish such evidence of the completion and time of
completion of the Transfer and of the terms thereof. So long as the Offeror is
neither a party nor an Affiliate of or relative of a party to this Investors
Agreement, such Offeror shall take the Shares so Transferred free and clear of
any further restrictions of this Article II. In the event that the Transaction
Offer is not consummated within the period required by Section 2.1(c) or the
Offeror fails timely to remit to each participating Stockholder and Investor
its respective portion of the sale proceeds, the Take Along Notice shall be
deemed to lapse and the Stockholders and Investors shall not be required to
Transfer any Shares pursuant thereto, and any Transfer of Shares pursuant to
such Take Along Notice shall be deemed to be in violation of the provisions of
this Investors Agreement unless the Majority Group once again complies with the
provisions of this Section 2.1 hereof with respect to such Transaction Offer.
(e) All expensess and costs of any Sale incurred
by the Investors, including the fees of one counsel to the Investors related
to such Sale, shall be for the account of and paid by the Company.
SECTION 2.2 CO-SALE OPTION OF STOCKHOLDERS AND INVESTORS. In the
event that a Stockholder or a group of Stockholders (collectively, the "Selling
Stockholders") proposes to Transfer (other than Transfers to the Company, or to
an Affiliate of such Stockholder or any Affiliate of the Company or HCOC) an
aggregate number of shares of Common Stock or Series A Preferred Stock, as the
case may be, equal to or exceeding, on the date of the proposed transfer, (i) 15
% of the outstanding Common Stock or (ii) 15 % of the outstanding Series A
Preferred Stock, in each case in a single transaction or in a series of related
transactions (a "Tag-Along Sale"), and the rights of such Selling Stockholder,
if any, are not exercised under Section 2.1 above, each Stockholder and
Investor may, at its option, elect to exercise its rights under this
Section 2.2.
(a) In the event of a Tag-Along Sale, the
Selling Stockholders shall deliver to each Stockholder and Investor a written
notice of the terms and conditions of such Tag-Along Sale (a "Tag-Along
Notice") and offer each Stockholder and Investor the opportunity to participate
in such Tag-Along Sale on the same terms and conditions, subject to the same
agreements and for the same per share consideration as the Selling
Stockholders. The Tag-Along Notice shall identify the number and type of Shares
and the number of shares of Series A Preferred Stock held by such Selling
Stockholders that the Selling Stockholders propose to Transfer in the Tag-Along
Sale, the per share consideration at which the Tag-Along Sale is proposed to be
made, all other material terms and conditions of the Tag-Along Sale (and shall
include the form of the proposed agreement, if any) and the date on which the
Tag-Along Sale is proposed to be consummated.
(b) From the date of the Tag-Along Notice until
the date that is ten days thereafter (the "Tag-Along Notice Period"), each
Stockholder and Investor shall have the right (a "Tag-Along Right"), exercisable
by written notice delivered to the Selling Stockholders, to request that the
Selling Stockholders include in the Tag-Along Sale the number of Shares and
shares of
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Series A Preferred Stock held by such Person as is specified in such notice
(each Purchaser so requesting, a "Tagging Person"); provided however, that, if
the aggregate number of Shares and shares of Series A Preferred Stock proposed
to be sold by the Selling Stockholders and all Tagging Persons in the Tag-Along
Sale exceeds the number of such shares which can be sold on the terms and
conditions set forth in the Tag-Along Notice, then (x) only the Tag-Along
Portion of such shares of each Tagging Person and the Selling Stockholders shall
be sold pursuant to the Tag-Along Offer and (y) the Selling Stockholders shall
also be entitled to sell such additional shares as is permitted by Section
2.2(f).
(c) Closing of Tag-Along Sale. If any Tagging
Person exercises its Tax-Along Right hereunder with respect to a Tag-Along
Sale, on the closing date for such Tag-Along Sale such Tagging Person shall
deliver (i) to the purchaser specified in the Tag-Along Notice for such
Tag-Along Sale a certificate or certificates representing the Shares and the
shares of Series A Preferred Stock which it has elected to sell (net of any
reduction pursuant to Section 2.2(b)), together with appropriate instruments of
transfer duly endorsed in blank, against payment by such purchaser of the
aggregate consideration payable for such shares at the per share consideration
specified in such Tag-Along Notice and (ii) to the Selling Stockholders all
costs, expenses and other amounts to be paid by such Tagging Person in
connection with such Tag-Along Sale pursuant to Section 2.2(g).
(d) Non-Participants. If at the termination of
the Tag-Along Notice Period, any Tagging Person shall not have delivered
written notice to the Selling Stockholders of its election to participate in the
Tag-Along Sale, such Tagging Person will have waived its Tag-Along Right with
respect to such Tag-Along Sale.
(e) Certain Allocations. If any Tagging Person
(i) declines to exercise or waives its Tag-Along Right (by express waiver or by
failure to deliver written notice of its intent to participate) with respect
to any Tax-Along Sale or (ii) elects to exercise its Tag-Along Right with
respect to less than its Tag-Along Portion with respect to any Tag-Along Sale,
the Selling Stockholders shall be entitled to transfer in such Tag-Along Sale,
in addition to their Tag-Along Portion with respect to such Tag-Along Sale, a
number of Shares and shares of Series A Preferred Stock, as applicable, equal to
the number of Shares and shares of Series A Preferred Stock, as applicable,
constituting the portion of such Tagging Person's Tag-Along Portion with respect
to which such Tagging Person's Tag-Along Right was not exercised.
(f) Permitted Sale. The Selling Stockholders and
any Tagging Person who exercises its Tag-Along Right with respect to a proposed
Tag-Along Sale pursuant to this Section 2.2 may sell the Shares and the shares
of Series A Preferred Stock subject to the Tag-Along Offer with respect to such
Tag-Along Sale on the terms and conditions set forth in such Tag-Along Notice
within sixty (60) days following the date of the effectiveness of the Tag-Along
Notice.
(g) Expense of Sale. All out-of-pocket costs
and expenses incurred by the Tagging Persons in connection with a Tag-Along Sale
(including, without limitation, fees and
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disbursement of any counsel retained by the Tagging Persons) shall be paid by
the Tagging, Persons. All direct selling expenses, discounts or commissions of
brokers paid to any Person on a per share basis in connection with such
Tag-Along Sale shall be paid ratably by the Tagging Persons and the Selling
Stockholders (in proportion to each Tagging Person's and the Selling
Stockholder's Tag-Along Portion). All other fees and expenses in connection
with such Tag-Along Sale shall be paid by the Selling Stockholders.
SECTION 2.3 ASSIGNMENT. Subject to Section 4.11 and Section 4.13
hereof, each Stockholder and Investor shall have the right to assign its rights
to any transferee of such Stockholder's or Investor's Shares, and shall further
have the right to assign and transfer such Stockholder's or Investor's right to
accept particular Transaction Offers or to participate in Tag-Along Sales, as
the case may be, as contemplated by this Article II, and any such transferee
shall be deemed within the definition of a, "Stockholder" or "Investor," as the
case may be, for purposes of this Article II.
SECTION 2.4 SALE OF SHARES OF PREFERRED STOCK. The provisions of
this Article II shall terminate as to any Shares and as to any shares of
Preferred Stock when such shares have been (i) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering such Shares or (ii) distributed to the public pursuant to Rule 144 or
Rule 144A (or any successor provision) under the Securities Act.
SECTION 2.5 PROHIBITED TRANSFERS. If any Transfer is made or
attempted contrary to the provisions of this Investors Agreement, such purported
Transfer shall be void ab initio, and the Company shall have the right to refuse
to recognize any Transferee as one of its stockholders for any purpose.
ARTICLE III
ELECTION OF DIRECTORS; INFORMATION AND OBSERVATION RIGHTS
SECTION 3.1 BOARD COMPOSITION OF THE COMPANY AND HCOC;
OBSERVATION RIGHTS.
(a) Each Investor and each Stockholder agrees
to vote, or execute written consents with respect to, as the case may be, all of
his, her or its Shares and shares of Series A Preferred Stock having voting
power (and any other shares over which he, she or it exercises voting control),
to the extent it holds such voting stock at the relevant time, in connection
with the election of Directors to the Board of Directors of the Company and to
elect and continue in office as Directors of the Company, the following:
(i) up to the greater of (A) three (3)
individuals, or (B) a number of individuals constituting a majority of
the members of the Board of Directors, in each case designated by a
Majority Interest of the Existing Stockholders (the "Existing
Stockholders' Designee"), two of whom shall initially be Xxxxxxxxxxx X.
Xxxxxxx and Xxxxxxx X. Xxxxxxx; and
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(ii) one individual designated by DLJ
Merchant Banking II, L.P. ("DLJMB") (the "Investors' Designee") who
shall initially be Xxxxxxx X. Xxxxxx; Jr.
(b) The Company agrees to vote, or execute
written consents with respect to, as the case may be, all of its shares of
common stock of HCOC (and any other shares over which it has voting control), in
connection with the election of directors to the board of directors of HCOC,
and to elect and continue in office as directors of HCOC all Persons otherwise
designated as provided above and serving as Directors of the Company.
SECTION 3.2 REMOVAL; VACANCIES.
(a) Each Investor and each Stockholder agrees to
vote, or execute written contents with respect to, as the case may be, all of
his, her or its Shares and shares of Series A Preferred Stock having voting
power (and any other shares over which he, she or it exercises voting control),
to the extent he, she or it holds such voting stock at the relevant time, for
the removal of any Director upon the request of the Persons then entitled to
designate such Director and for the election to the Board of Directors of a
substitute designated by such Persons in accordance with the provisions hereof.
Each Investor and each Stockholder further agrees to vote, or execute written
contents with respect to, as the case may be, all of his, her or its Shares and
shares of Series A Preferred Stock having voting power (and any other shares
over which he, she or it exercises voting control) in such manner as shall be
necessary or appropriate to ensure that any vacancy on the Board of Directors
occurring for any reason shall be filled only in accordance with the provisions
of this Article III. Once serving on the Board of Directors and the board of
directors of HCOC, the Existing Stockholders' Designees shall not be removed
from either office without the consent of a Majority Interest of the Existing
Stockholders and the Investors' Designee shall not be removed from either
office without the consent of DLJMB.
(b) The Company agrees to vote, or execute
written consents with respect to, as the case may be, all of its shares of
common stock of HCOC (and any other shares over which it has voting control) for
the removal of any director of HCOC upon the request of the Persons then
entitled to nominate such director and for the election to the board of
directors of HCOC of a substitute designated by such Persons in accordance with
the provisions hereof. The Company further agrees to vote, or execute written
consents with respect to, as the case may be, all of its shares of common stock
of HCOC (and any other shares over which it has voting control) in such manner
as shall be necessary or appropriate to ensure that any vacancy on the board of
directors of HCOC occurring for any reason shall be filled only in accordance
with the provisions of this Article III. Once serving on the board of directors
of HCOC, the Existing Stockholders' Designees shall not be removed from office
without the consent of a Majority of the Existing Stockholders and the
Investors' Designee shall not be removed from office without the consent of
DLJMB.
SECTION 3.3 ACTIONS REQUIRING CONSENT OF INVESTORS' DESIGNEE. The
Board of Directors of the Company and the board of directors of HCOC shall not
take any of the following actions, and shall not permit any of their respective
subsidiaries to take such actions, without the
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approval of a majority of the Board of Directors of the Company, including the
Investors' Designee:
(a) with respect to the Company, amend in any
respect its organizational documents in a manner adversely affecting the
Investors;
(b) with respect to the Company, effect,
directly or indirectly, any (i) sale or transfer of all or substantially all of
the Company's assets to (A) Media/Communications Partners III Limited
Partnership ("M/C III"), (B) to any Affiliate of M/C III, (C) to Xxxxx X.
Xxxxxx and/or Xxxx X. Xxxxxx, (D) to any Person (other than an individual) of
which in excess of 50% of the voting power is owned, directly or indirectly, by
Xxxxx X. Xxxxxx and/or Xxxx X. Xxxxxx, on an individual or combined basis
(collectively, the "Restricted Persons"), or (E) any Person in which any
Restricted Person, on an individual or combined basis, directly or indirectly,
controls in excess of 50% of the voting power of such Person (collectively with
the Restricted Persons, the "Restricted Entities"), (ii) recapitalization of
the Company following which Xxxxx X. Xxxxxx or Xxxx X. Xxxxxx, on an
individual or combined basis, own in excess of 50% of the Shares, or (iii)
consolidation or merger of the Company with or into any Restricted Entity in
which consolidation or merger the holders of in excess of 50% of the Shares
prior to such transaction do not own in excess of 50% of the Shares after such
transaction;
(c) with respect to the Company, incur, assume
or guarantee any indebtedness for borrowed money, other than such indebtedness
incurred pursuant to the Credit Documents or the DLJIP Documents; and
(d) with respect to HCOC or any subsidiary of
HCOC, issue any equity securities.
SECTION 3.4 RIGHTS TO OBJECT. Each Investor agrees that, in the
event the Board of Directors has made a determination or calculation concerning
any adjustments that is required to be made pursuant to the terms of the
Warrants issued pursuant to the Subscription Agreement and the Investors'
Designee, has concurred with the Board of Directors in such determination, such
Investors will have no further rights under the terms of the Warrants to object
to such determination or calculation made by the Board of Directors.
SECTION 3.5 OBSERVATION RIGHTS. In the event that the Investors'
Designee is unable to attend a meeting of the Board of Directors of the Company
or of HCOC, the Investors may designate a representative to attend such meeting
as observer only, which observer will have no right to vote or otherwise
actively participate in such meeting.
SECTION 3.6 FINANCIAL AND BUSINESS INFORMATION. The Company
shall deliver to each Investor holding any Shares or shares of Preferred Stock:
(a) Quarterly Financial Statements. As soon as
practicable after the end of each quarterly fiscal period in each
fiscal year of the Company (other than the last quarterly fiscal period
of such fiscal year), and in any event within 45 days thereafter:
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(i) a balance sheet as at the end of such
quarter; and
(ii) an income statement and statement of cash
flow for such quarter, and, the comparable information for the
portion of the fiscal year ending with such quarter and a
comparison to relevant budget amounts for such quarter;
for the Company and its subsidiaries (on a consolidated basis), setting
forth in each case, in comparative form, the financial statement for
the corresponding periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP") applicable to quarterly financial
statements generally, and certified as complete and correct by a senior
financial officer of the Company; provided however, that should the
Company become subject to or agree with any Person to comply with the
provisions of Section 13 of the Exchange Act, delivery or copies of the
Company's Quarterly Report on Form 10-Q filed with the Commission
within 45 days after the end of such quarterly fiscal period shall be
deemed to satisfy the requirements of this Section 3.5(a)
(b) Monthly Financial Statements. As soon as practicable
after the end of each month in each fiscal year of the Company (other
than the last month of each such fiscal year), and in any event within
30 days thereafter, the financial statements required to be provided
pursuant to Section 3.5(a) shall also be provided on a monthly basis
but the proviso to such Section 3.5(a) shall not be applicable to the
provision of such monthly financial statements and the Company shall
not be required to provide any comparative information.
(c) Annual Financial Statements. As soon as practicable
after the end of each fiscal year of the Company, and in any event
within 90 days thereafter:
(i) a consolidated balance sheet as at the end
of such year; and
(ii) a consolidated income statement and
statement of cash flows for such year;
for the Company and its subsidiaries, together with the notes thereto,
setting forth in each case, in comparative form, the financial
statement for the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP, and accompanied by:
(A) an audit report thereon of independent
certified public accountants of recognized national standing,
which report shall state that such financial statements fairly
present in all material respects the consolidated financial
condition of the Parent as at such date and the consolidated
results of its operations and cash flows for such period in
conformity with GAAP; and
(B) a certification by a senior financial
officer of the Company that such financial statements are
complete and correct;
11
;provided however, that should the Company become subject to or agree
with any Person to comply with the delivery provisions of Section 13
of the Exchange Act, the delivery of the Company's Annual Report on
Form 10-K for such fiscal year filed with the Commission within 90 days
after the end of such fiscal year shall be deemed to satisfy the
requirements of this Section 3.5(c).
(d) Commission and Other Reports. Promptly upon their becoming
available:
(i) each financial statement, report, notice or proxy
statement sent by the Company or any of its subsidiaries to
stockholders generally;
(ii) each regular or periodic report (including without
limitation each Form 10-K, Form 10-Q and Form 8-K), any
registration statement which shall have become effective
(other than any registration statement on Form S-4 or S-8 or
any successor forms thereto) and each final prospectus and all
amendments thereto (other than any prospectus or amendment
relating to a registration statement on Form S-4 or Form S-8
or any successor form thereto) filed by the Company or any of
its subsidiaries with the Commission or on a publicly
available basis with any securities exchange (including
without limitation any electronic stock quotation system);
and
(iii) all press releases and other statements made
available by the Company or any of its subsidiaries to the
public concerning material developments in the business of the
Company or any of its subsidiaries.
(e) Requested Information. Prior to the Public Market Date, with
reasonable promptness, such other data and information as from time to
time may be reasonably requested by any Investor holding Shares or
shares of Preferred Stock.
SECTION 3.7 ASSIGNMENT. Each Investor and Stockholder agrees, as
a condition to any Transfer of his, her or its Shares, to cause the Transferee
to agree to the provisions of this Article III, whereupon such Transferee shall
be subject to the provisions hereof to the same extent as the Investors and the
Stockholders, as applicable, in connection with its ownership of the Shares
Transferred for purposes of this Article III.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1 SURVIVAL OF COVENANTS. Each of the parties hereto
agrees that each covenant and agreement made by it in this Investors Agreement
is material, shall be deemed to have been relied upon by the other parties and
shall remain operative and in full force and effect after the date hereof
regardless of any investigation. This Investors Agreement shall not be construed
so as to confer any right or benefit upon any Person other than the parties
hereto and their respective successors and permitted assigns to the extent
contemplated herein.
12
SECTION 4.2 LEGEND ON SECURITIES. The Company, the Investors and
the Stockholders acknowledge and agree that the following legend shall be typed
on each certificate evidencing any of the securities issued hereunder held at
any time by any of the Stockholders:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
CERTAIN INVESTORS AGREEMENT, DATED AS OF DECEMBER 10, 1999, INCLUDING CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT COPY OF SUCH
AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND
WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
SECTION 4.3 AMENDMENT AND WAIVER; ACTIONS OF THE BOARD. Any
party may waive any provision hereof intended for its benefit in writing. No
failure or delay on the part of any party hereto in exercising any right,
power or remedy hereunder shall operate as a waiver thereof. The remedies
provided for herein are cumulative and are not exclusive of any remedies that
may be available to any party hereto at law or in equity or otherwise. This
Investors Agreement may be amended with the prior written consent of the (i)
Company, (ii) a Majority Interest of the Stockholders, and (iii) the Required
Holders. Any consent given as provided in the preceding sentence shall be
binding on all Stockholders and all Investors, respectively, and no Stockholder
or Investor shall have any cause of action against any other Person for any
action taken by such Person in reliance upon such consent. All actions by the
Company hereunder shall be taken by or upon the direction of a majority of the
members of the Board of Directors of the Company.
SECTION 4.4 NOTICES. All notices and other communications
provided for herein shall be in writing and shall be deemed to have been duly
given, delivered and received (a) if delivered personally or (b) if sent by
facsimile, registered or certified mail (return receipt requested) postage
prepaid, or by courier guaranteeing next day delivery, in each case to the
party to whom it is directed at the following addresses (or at such other
address for any party as shall be specified by notice given in accordance with
the provisions hereof, provided that notices of a change of address shall be
effective only upon receipt thereof). Notices delivered personally shall be
effective on the day so delivered, notices sent by registered or certified mail
shall be effective five days after mailing, notices sent by facsimile shall be
effective when receipt is acknowledged, and notices sent by courier guaranteeing
next day delivery shall be effective on the earlier of the second business day
after timely delivery to the courier or the day of actual delivery by the
courier:
13
If to the Company or HCOC:
Haights Cross Communications, Inc.
00 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
At.: President and Chief Executive Officer
With a copy to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Att.: Xxxxx X. Xxxxx, P.C.
If to any Investor:
At such Person's address for notice set forth on the signature pages
hereto.
With a copy to (with respect to the Investors other than Caravelle
Investment Fund L.L.C.):
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx Xxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Att.: Xxxxxx X. Xxxxx, Xx., Esq.
With a copy to (with respect to Caravelle Investment Fund L.L.C.):
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Att.: Xxxxx Xxxxxxx
If to the Existing Stockholders or any Other Stockholder:
At such Person's address for notice as set forth on the signature pages
hereto or at the more recent address set forth in the books and
records of the Company.
SECTION 4.5 HEADINGS. The Article and Section headings used or
contained in this Investors Agreement are for convenience of reference only and
shall not affect the construction of this Investors Agreement.
14
SECTION 4.6 COUNTERPARTS. This Investors Agreement may be
executed in one or more counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which together shall be deemed to constitute one and the same
agreement.
SECTION 4.7 REMEDIES; SEVERABILITY. It is specifically understood
and agreed that any breach of the provisions of this Investors Agreement by any
Person subject hereto will result in irreparable injury to the other parties
hereto, that the remedy at law alone will be an inadequate remedy for such
breach, and that, in addition to any other legal or equitable remedies which
they may have, such other parties may enforce their respective rights by actions
for specific performance (to the extent permitted by law) and the Company may
refuse to recognize any unauthorized Transferee as one of its stockholders for
any purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Investors Agreement. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions contained herein shall not be in
any way impaired thereby, it being intended that all of the rights and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.
SECTION 4.8 ENTIRE AGREEMENT. This Investors Agreement,
collectively with the Subscription Agreement, the Investors' Registration Rights
Agreement, the Notes Registration Rights Agreement, and any other agreements and
documents specifically contemplated hereby or thereby, is intended by the
parties as a final expression of their agreement and intended to be complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This Investors
Agreement and the Subscription Agreement and other agreements specifically
contemplated hereby and thereby (including the exhibits hereto and thereto)
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
SECTION 4.9 ADJUSTMENTS. All references to share prices and
amounts herein shall be equitably adjusted to reflect stock splits, reverse
stock splits, stock dividends, recapitalizations and similar changes affecting
the capital stock of the Company.
SECTION 4.10 LAW GOVERNING. This Investors Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of New York (without giving effect to principles of conflicts of law). Each
party also waives trial by jury in any action relating to this Investors
Agreement.
SECTION 4.11 SUCCESSORS AND ASSIGNS. This Investors Agreement
shall be binding upon and inure to the benefit of the respective successors and
permitted assigns of the parties hereto as contemplated herein, and any
successor to the Company by way of merger or otherwise shall specifically agree
to be bound by the terms hereof as a condition of such succession; provided,
15
however, that the rights and obligations of the parties under Section 3.1 and
Section 3.3 shall not be assignable without the prior written consent of the
other parties hereto.
SECTION 4.12 TERM. This Investors Agreement shall terminate on the
earlier of (a) the date on which (i) the DLJMB Investors hold less than 5% of
the outstanding common equity securities of the Company, calculated on a fully
diluted basis and assuming the exercise of all unexercised Warrants (including
for purposes of this calculation the Series A Preferred Stock and the Warrants
exercisable therefor as common equity securities of the Company), and (ii) the
Series B Preferred Stock has been redeemed in full in accordance with the terms
thereof, and (b) the tenth anniversary of this Investors Agreement if not
earlier terminated; provided, that (A) Section 3.3(b) shall terminate upon
the Public Market Date, and (B) Sections 3.3(a), 3.3(c), and 3.3(d) shall
terminate following the Public Market Date at such time as all of the
outstanding Series B Preferred Stock has been redeemed in full by the Company
pursuant to the terms thereof.
SECTION 4.13 SPECIFIC PERFORMANCE. The parties agree that the
Company and the other parties hereto shall have, in addition to any other legal
or equitable remedies which they may have, the right to enforce the provisions
of this Investors Agreement by actions for specific performance (to the extent
permitted by law).
[SIGNATURE PAGE FOLLOWS]
16
IN WITNESS WHEREOF, the parties hereto have caused this Investors
Agreement to be duly executed as of the date first set forth above.
THE COMPANY:
HAIGHTS CROSS COMMUNICATIONS, INC.
By:_________________________________________
Name: Xxxx X. Xxxxxx
Title: Chief Operating Officer,
Chief Financial Officer
and Treasurer
HCOC:
HAIGHTS CROSS COMMUNICATIONS, INC.
By:_________________________________________
Name: Xxxx X. Xxxxxx
Title: Chief Operating Officer,
Chief Financial Officer
and Treasurer
EXISTING STOCKHOLDERS:
MEDIA/COMMUNICATIONS PARTNERS III
LIMITED PARTNERSHIP
By: M/C III L.L.C.
By:_________________________________________
Name: Xxxxxxxxxxx X. Xxxxxxx
Title: Manager
Address for notice:
c/o Great Hill Partners, LLC
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Att.: Xxxxxxxxxxx X. Xxxxxxx
[SIGNATURE PAGE TO INVESTORS AGREEMENT]
M/C INVESTORS L.L.C.
By:_________________________________________
Name: Xxxxxxxxxxx X. Xxxxxxx
Title: Manager
Address for notice:
c/o Great Hill Partners, LLC
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Att.: Xxxxxxxxxxx X. Xxxxxxx
FLEET MEZZANINE CAPITAL, INC.
By:_________________________________________
Name:
Title:
Address for notice:
Xxx Xxxxxxx Xxxxxx
Mail Stop: MAOFD03D
Xxxxxx, XX 00000
____________________________________________
Xxxxx X. Xxxxxx
Address for notice:
c/o Haights Cross Communications, Inc.
00 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
____________________________________________
Xxxx X. Xxxxxx
Address for notice:
c/o Haights Cross Communications, Inc.
00 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
[SIGNATURE PAGE TO INVESTORS AGREEMENT]
DLJMB INVESTORS:
DLJ MERCHANT BANKING PARTNERS II, L.P.,
a Delaware Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
DLJ MERCHANT BANKING PARTNERS
II-A, L.P., a Delaware Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
[SIGNATURE PAGE TO INVESTORS AGREEMENT]
DLJ OFFSHORE PARTNERS II, C.V.,
a Netherlands Antilles Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as advisory general partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax 000-000-0000
DLJ DIVERSIFIED PARTNERS, L.P.,
a Delaware Limited Partnership
By: DLJ Diversified Partners, Inc.,
as managing general partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax : 000-000-0000
[SIGNATURE PAGE TO INVESTORS AGREEMENT]
DLJ DIVERSIFIED PARTNERS-A, L.P.,
a Delaware Limited Partnership
By: DLJ Diversified Partners, Inc.,
as managing general partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
DLJ MILLENNIUM PARTNERS, L.P.,
a Delaware Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
[SIGNATURE PAGE TO INVESTORS AGREEMENT]
DLJ MILLENNIUM PARTNERS-A, L.P.,
a Delaware Limited Partnership
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
DLJMB FUNDING II, INC.,
a Delaware Corporation
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
[SIGNATURE PAGE TO INVESTORS AGREEMENT]
DLJ FIRST ESC, L.P.,
a Delaware Limited Partnership
By: DLJ LBO Plans Management Corporation,
as manager
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
DLJ EAB PARTNERS, L.P.,
a Delaware Limited Partnership
By: DLJ LBO Plans Management Corporation,
as managing general partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
[SIGNATURE PAGE TO INVESTORS AGREEMENT]
DLJ ESC II, L.P.,
a Delaware Limited Partnership
By: DLJ LBO Plans Management Corporation,
as manager
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
CARAVELLE INVESTMENT FUND, L.L.C.
By: Caravelle Advisors, L.L.C., its
Investment Manager and Attorney-in-Fact
By:_________________________________________
Name: Xxxxx X. Block
Title: Executive Director
Address: 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
000-000-0000
[SIGNATURE PAGE TO INVESTORS AGREEMENT]
DLJIP Investors
DLJ INVESTMENT PARTNERS II, L.P.,
a Delaware Limited Partnership
By: DLJ Investment Partners II, Inc.
as Managing General Partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: c/o DLJ Investment Partners, Inc.
attn: Xxxx Xxxxxxxx.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
DLJ INVESTMENT PARTNERS, L.P.,
a Delaware Limited Partnership
By: DLJ Investment Partners, Inc.,
as Managing General Partner
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: x/x XXX Investment Partners, Inc.
attn. Xxxx Xxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
DLJ INVESTMENT FUNDING II, INC.,
a Delaware corporation
By:_________________________________________
Name: Xxxxxxx Xxxxxx
Title:
Address: x/x XXX Investment Partners, Inc.
attn. Xxxx Xxxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
EXHIBIT A
FORM OF JOINDER AGREEMENT
The undersigned hereby agrees, effective as of the date hereof, to
become a party to that certain Investors Agreement (the "Agreement") dated as of
December ___, 1999, by and among Haights Cross Communications, Inc. (the
"Company") and the parties named therein and for all purposes of the Agreement,
the undersigned shall be included within the term "Stockholder" (as defined in
the Agreement). The address and facsimile number to which notices may be sent to
the undersigned is as follows:
________________________________________________________________________________
Facsimile No._____________________.
_________________________________________
Name:
Title:
