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EXECUTION COPY
SHAREHOLDER AGREEMENT dated as of November
17, 1999 (this "AGREEMENT"), among WRC Media Inc., a
Delaware corporation (the "RIPPLEWOOD SHAREHOLDER"),
PRIMEDIA Inc., a Delaware corporation (the "PRIMEDIA
SHAREHOLDER" and, together with the Ripplewood
Shareholder and their respective Transferees, the
"SHAREHOLDERS"), and Weekly Reader Corporation, a
Delaware corporation (the "COMPANY").
WHEREAS each Shareholder owns the number of shares of
Common Stock, par value $.01 per share ("COMPANY COMMON STOCK"), of the
Company set forth opposite such Shareholder's name on Schedule I attached
hereto.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, and other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS AND USAGE
SECTION 1.01. DEFINED TERMS. The following terms shall
have the following meanings:
"AFFILIATE" means, with respect to any specified Person,
any other Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, means the direct or
indirect possession of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
"AGREEMENT" has the meaning set forth in the preamble to
this Agreement.
"BOARD OF DIRECTORS" means the Board of Directors of the
Company.
"COMPANY" has the meaning set forth in the
preamble to this Agreement.
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"COMPANY COMMON STOCK" has the meaning set forth
in the recitals to this Agreement.
"DGCL" means the Delaware General Corporation Law (Title 8
of the Delaware Code Annotated), as amended from time to time and any
successor statute thereto.
"DIRECT TRANSFER" means a Transfer (without giving effect
to the second sentence of the definition of "Transfer").
"DRAG-ALONG NOTICE" has the meaning set forth in Section
2.01(f).
"EAC III" means EAC III L.L.C., a Delaware limited
liability company, and the holder of a majority of the WRC Media Shares.
"INVOLUNTARY TRANSFER" means any Transfer by any
Shareholder of any Shares, or of any beneficial ownership thereof, upon
death, appointment of a guardian, default, foreclosure, forfeit, bankruptcy
(voluntary or involuntary), court order, levy of attachment, execution or
otherwise than voluntarily by the Transferor; PROVIDED that a Transfer
required pursuant to Section 2.01(f) or (h) shall not be deemed an
Involuntary Transfer.
"FAIR MARKET VALUE" means the fair market value of a Share,
determined in accordance with Section 2.01(g).
"PERMITTED TRANSFEREE" means, (i) with respect to the
Ripplewood Shareholder or EAC III, (A) an Affiliate of Ripplewood, (B) a
shareholder, partner, member or employee of Ripplewood or any Affiliate of
Ripplewood or (C) an employee of the Company or any of its subsidiaries and
(ii) with respect to the PRIMEDIA Shareholder, any wholly owned subsidiary of
the PRIMEDIA Shareholder (it being understood that, in the event such
subsidiary ceases to be wholly owned by the PRIMEDIA Shareholder, any Shares
held by such subsidiary shall be deemed to have been Transferred).
"PERSON" means any individual, corporation, partnership,
trust, association, limited liability company, joint venture, joint-stock
company or any other entity or organization, including a government or
governmental agency.
"PRIMEDIA PLEDGE AGREEMENT" means the Security and Pledge
Agreement dated as of the date hereof, as amended, waived or modified from time
to time, between the PRIMEDIA Shareholder and Bank of America, N.A., as
Administrative Agent (the "AGENT"). The PRIMEDIA Pledge Agreement shall
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provide that, if at any time all or any portion of the Ripplewood
Shareholder's Shares (including any beneficial ownership thereof) which are
pledged pursuant to the Ripplewood Pledge Agreement shall be released from
such pledge (other than in connection with a Transfer of Shares Transferred
to a Transferee following which such shares are immediately pledged by such
Transferee pursuant to the Ripplewood Pledge Agreement) then the same
proportion of the PRIMEDIA Shareholder's Shares shall be released from its
pledge pursuant to the PRIMEDIA Pledge Agreement. The PRIMEDIA Pledge
Agreement shall also provide for (i) the release of all the PRIMEDIA
Shareholder's Shares on the third anniversary of this Agreement and (ii) the
release of all Shares upon the termination of this Agreement pursuant to
Section 4.10.
"REGISTRATION EXPENSES" means all (a) registration and
filing fees of the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. and any securities exchanges, (b)
fees and expenses of complying with state securities or blue sky laws
(including fees and disbursements of counsel for any underwriters in
connection with blue sky qualifications), (c) printing, messenger and
delivery expenses, (d) fees and expenses incurred in connection with the
listing of Shares on any securities exchange, (e) fees and disbursements of
counsel for the Company and of its independent public accountants and (f)
fees and expenses of any special experts retained in connection with a
registration.
"RIPPLEWOOD" means Ripplewood Partners, L.P.
"RIPPLEWOOD PLEDGE AGREEMENT" means the Security and Pledge
Agreement dated as of the date hereof, as amended, waived or modified from
time to time, among the Ripplewood Shareholder, certain other subsidiaries of
the Ripplewood Shareholder and the Agent.
"RIPPLEWOOD SHAREHOLDER" has the meaning set forth in the
preamble to this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SHARES" means the shares of Company Common
Stock held by a Shareholder.
"SHAREHOLDERS" has the meaning set forth in the
preamble to this Agreement.
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"TAG-ALONG NOTICE" has the meaning set forth in Section
2.01(e).
"THIRD PARTY PURCHASER" means, with respect to any proposed
sale of Shares by a Shareholder, a Person, other than an Affiliate of such
Shareholder, who offers to purchase from such Shareholder such Shares
pursuant to a bona fide written offer.
"TRANSFER" means any transfer, sale, conveyance,
assignment, gift, hypothecation, pledge or other disposition, whether
voluntary or by operation of law, of a Share. Notwithstanding the foregoing,
any transfer, sale, conveyance, assignment, gift, hypothecation, pledge or
other disposition, whether voluntary or by operation of law, of any stock,
partnership interest, membership interest or any other ownership interest in
any entity that is a direct or indirect beneficial or record owner of any
Share (including any disposition by means of a merger, consolidation or
similar transaction) or any other transaction that has the economic effect of
a Transfer of a Share (including the designation of any beneficiary of any
trust that is a direct or indirect beneficial or record owner of any Share)
shall be deemed to be a Transfer of such Share by the Shareholder directly
owning such Share.
"TRANSFEREE" means the transferee in a Transfer.
"TRANSFEROR" means the transferor in a Transfer.
"WRC MEDIA SHARES" means shares of common stock, par value
$.01 per share, of the Ripplewood Shareholder.
SECTION 1.02. OTHER DEFINITION PROVISIONS. Capitalized
terms used but not defined herein shall have the meanings set forth in the
Redemption, Stock Purchase and Recapitalization Agreement, dated as of August
13, 1999, between the Ripplewood Shareholder and the PRIMEDIA Shareholder
(the "Purchase Agreement"). Wherever required by the context of this
Agreement, the singular shall include the plural, and vice versa, and the
masculine gender shall include the feminine and neuter genders, and vice
versa, and references to any agreement, document or instrument shall be
deemed to refer to such agreement, document or instrument as amended,
supplemented or modified from time to time. When used herein, (i) the word
"or" is not exclusive and (ii) the words "including," "includes," "included"
and "include" are deemed to be followed by the words "without limitation."
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ARTICLE II
TRANSFERS OF SHARES; TRANSACTIONS
BETWEEN RIPPLEWOOD SHAREHOLDER AND THE COMPANY
SECTION 2.01. TRANSFERS OF THE COMPANY SHARES. (a)
GENERALLY. (i) No Shareholder may Transfer all or any portion of its Shares
(or any beneficial ownership thereof) unless (A) such Transfer is in
accordance with this Section 2.01, (B) in the case of a Direct Transfer
(other than pursuant to Section 2.01(e), (f), (g) or (j)), the Transferee
executes and delivers a counterpart of the signature page of this Agreement
(or other appropriate assumption agreement) and (C) except for a Transfer in
accordance with Section 2.01(e), (f), (g), (i) or (j), the Transferee
executes and delivers any other agreements, documents or instruments
reasonably specified by the Board of Directors. Any Transfer made in
violation of this Section 2.01(a) shall be null and void and shall be subject
to Section 2.01(d).
(ii) Whenever a Transfer (other than pursuant to Section
2.01(g)) is to be consummated by any Person on a specified date under this
Section 2.01, such Transfer shall take place at 10:00 a.m., Eastern Time, on
such date (or, if such date is not a business day, the next following
business day) at the New York offices of Cravath, Swaine & Xxxxx, or at such
other time, date and place as the Company and the parties to such Transfer
may agree. Except for a Transfer in accordance with Section 2.01(e), (f),
(g), (i) or (j), such Transfer shall only be effective following due
execution and delivery of the agreements, documents and instruments specified
in Section 2.01(a)(i)(B) and of such other agreements, documents and
instruments as the Board of Directors or the parties to such Transfer may
reasonably require.
(iii) Upon compliance with the requirements of Section
2.01(a), in the case of a Direct Transfer (other than pursuant to Section
2.01(e), (f), (g), (i) or (j)), each Transferee shall have all of the
economic rights, and shall be subject to the restrictions and liabilities, of
its Transferor hereunder. Immediately following any Direct Transfer in which
the Transferor has Transferred all of its Shares pursuant to this Section
2.01, such Transferor shall cease to be a Shareholder.
(b) TRANSFERS BY THE RIPPLEWOOD SHAREHOLDER. Subject to
Section 2.01(a) and, with respect to a Transfer to any Person other than a
Permitted Transferee of the Ripplewood Shareholder, Section 2.01(e), the
Ripplewood
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Shareholder (and its Permitted Transferees) shall have the right to Transfer
at any time all or any portion of its Shares (including any beneficial
ownership thereof) to any Person without the prior consent of any Person.
(c) TRANSFERS BY THE PRIMEDIA SHAREHOLDER. (i) Subject to
Section 2.01(a), the PRIMEDIA Shareholder (and its Permitted Transferees)
shall have the right to Transfer at any time all or any portion of its Shares
(including any beneficial ownership thereof) to any of its Permitted
Transferees without the prior consent of any Person.
(ii) The PRIMEDIA Shareholder (and its Permitted
Transferees) shall not have the right to Transfer all or any portion of its
Shares (including any beneficial ownership thereof) to any Person other than
the Ripplewood Shareholder or the Company except in accordance with Section
2.01(a) and (A) pursuant to Section 2.01(c)(i), (e), (f), (g), (i) or (j) or
Section 2.03 or (B) with the prior written consent of the Board of Directors
(which consent shall not be unreasonably withheld).
(d) INVOLUNTARY AND IMPERMISSIBLE TRANSFERS. If an
Involuntary Transfer or a Transfer in violation of this Agreement shall occur
with respect to the PRIMEDIA Shareholder and, in the case of a Transfer in
violation of this Agreement, such violation has not been cured within 30 days
after notice to the applicable Transferor or Transferee, the Company shall
give notice to the Ripplewood Shareholder offering the Ripplewood Shareholder
the right, exercisable by delivery of written notice to such Transferee
within 90 days following the day on which such notice is given, to purchase
all of the Shares acquired by such Transferee at a purchase price equal to,
in the case of an Involuntary Transfer, 100% or, in the case of a Transfer in
violation of this Agreement, 90% of the Fair Market Value thereof, determined
in good faith by the Board of Directors as of the date of such Transfer (or,
if lower, as of the date of such determination). The closing date of any
purchase described in this Section 2.01(d) shall be on the date specified by
the Company that shall not be later than the 30th day after a determination
of the Fair Market Value of the Shares to be purchased is made.
(e) TAG-ALONG RIGHTS. If the Ripplewood Shareholder desires
to Transfer all (or any portion in excess of 35%) of its Shares to a
prospective Transferee (or Transferees) other than (x) to the Agent in a
Transfer in accordance with the terms of the Ripplewood Pledge Agreement or
(y) to a Permitted Transferee of the Ripplewood Shareholder, the Ripplewood
Shareholder shall, as a condition
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to such Transfer, (i) provide a notice to the PRIMEDIA Shareholder in writing
(a "TAG-ALONG NOTICE") of the material terms of the proposed Transfer at
least 10 days prior to such Transfer and (ii) permit the PRIMEDIA Shareholder
(or cause the PRIMEDIA Shareholder to be permitted) to sell (either to the
prospective Transferee of the Ripplewood Shareholder's Shares or to another
financially reputable Transferee reasonably acceptable to the PRIMEDIA
Shareholder) the same proportion of its Shares on the same terms and
conditions, subject to the same agreements and at the same price as the sale
by the Ripplewood Shareholder, which sale shall take place on the date the
Ripplewood Shareholder's Shares (or such portion) are Transferred to such
Transferee (or Transferees). The PRIMEDIA Shareholder shall have five days
from the date of receipt of a Tag-Along Notice to exercise its right to sell
pursuant to clause (ii) above by delivering written notice to the Ripplewood
Shareholder of its intent to exercise such right. The right of the PRIMEDIA
Shareholder to sell pursuant to the above shall terminate if not exercised
within such five-day period; PROVIDED that if the terms and conditions of the
proposed transfer materially differ from those set forth in the Tag-Along
Notice then the Ripplewood Shareholder shall notify the PRIMEDIA Shareholder
of such change and such five-day period shall be extended for a further five
days from the date of such notification. If the PRIMEDIA Shareholder elects
to exercise its right to sell pursuant to this Section 2.01(e), it shall
share, on a pro rata basis, the legal, investment banking and other expenses
of the Ripplewood Shareholder incurred in connection with such Transfer.
(f) DRAG-ALONG RIGHTS. If at any time the Ripplewood
Shareholder desires to Transfer all (or any portion in excess of 35%) of its
Shares to any Third Party Purchaser (or Purchasers), the Ripplewood
Shareholder shall have the right to require that the PRIMEDIA Shareholder
Transfer the same proportion of its Shares to such Third Party Purchaser (or
Purchasers) on the same terms and conditions, subject to the same agreements
and at the same price as the sale by the Ripplewood Shareholder. The
Ripplewood Shareholder shall provide a notice to the PRIMEDIA Shareholder in
writing (a "DRAG-ALONG NOTICE") of such sale at least 10 days prior to such
Transfer, and the Drag-Along Notice shall identify such Third Party Purchaser
(or Purchasers), all material terms of the sale and the date of closing. Upon
the closing of any sale by the Ripplewood Shareholder of all (or such
portion) of its Shares as described in a Drag-Along Notice, such Third Party
Purchaser (or Purchasers) shall pay to the PRIMEDIA Shareholder the
consideration payable to the PRIMEDIA Shareholder in connection with such
sale of all (or such portion) of its
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Shares to such Purchaser (or Purchasers), net of the PRIMEDIA Shareholder's
proportionate share of the legal, investment banking and other expenses of
the Ripplewood Shareholder incurred in connection with such sale, and the
Shares (or such portion) of the PRIMEDIA Shareholder shall be deemed
Transferred to such Third Party Purchaser (or Purchasers).
(g) PIGGY-BACK REGISTRATION RIGHTS. If the Company proposes
to file a registration statement under the Securities Act with respect to an
initial public offering by the Company that includes all or any portion of
the Ripplewood Shareholder's Shares, then the Company shall give written
notice of such proposed filing to the PRIMEDIA Shareholder at least 10 days
before the filing date, and such notice shall offer the PRIMEDIA Shareholder
the opportunity to register such number of Shares as the PRIMEDIA Shareholder
may request up to a proportionate amount of the PRIMEDIA Shareholder's
Shares. If such offer is accepted by written notice to the Company from the
PRIMEDIA Shareholder within 5 days of the giving of the written notice
provided for in the preceding sentence, the Company shall use its best
efforts to cause the managing underwriter or underwriters thereof to permit
the Shares the PRIMEDIA Shareholder requested to be included in such offering
to be included in such offering on the same terms and conditions as the
corresponding Shares of the Ripplewood Shareholder included therein; PROVIDED
that (i) if, at any time after giving written notice of its intention to
register any Shares and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to proceed with the proposed registration, the
Company may, at its election, give written notice of such determination to
the PRIMEDIA Shareholder and thereupon shall be relieved of its obligation to
register any Shares in connection with such registration and (ii) the
PRIMEDIA Shareholder must sell its Shares to underwriters who shall have been
selected by the Company on the same terms and conditions as apply to the
Ripplewood Shareholder. The PRIMEDIA Shareholder may elect in writing, prior
to the effective date of the registration statement filed in connection with
such registration, to withdraw its request and not to have its Shares
registered in connection with such registration. If the managing underwriter
or underwriters advise the Company in writing that, in their opinion, (i) the
number of Shares which the PRIMEDIA Shareholder intends to include in such
registration exceeds the largest number of such Shares which can be sold in
such offering without having an adverse effect on such offering (including,
but not limited to, the price at which such Shares can be sold) or (ii) the
inclusion of the Shares in such registration would have an adverse effect on
such offering, then the Company
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will include in such registration (A) first, 100% of the Shares proposed to
be sold by the Company and any other shareholder whose shares the Company is
obligated to include in such registration in priority to the Ripplewood
Shareholder and the PRIMEDIA Shareholder and (B) second, to the extent that
the number of Shares requested to be included in such registration can, in
the opinion of such managing underwriter, be sold without having the adverse
effect referred to above, the number of Shares which the Ripplewood
Shareholder and the PRIMEDIA Shareholder have requested to be included in
such registration, such amount to be allocated pro rata among the Ripplewood
Shareholder and the PRIMEDIA Shareholder on the basis of the relative number
of Shares the Ripplewood Shareholder and the PRIMEDIA Shareholder have
requested for registration. The Company may require the PRIMEDIA Shareholder
to furnish the Company with such information regarding the PRIMEDIA
Shareholder and pertinent to the disclosure requirements relating to the
registration and distribution of the PRIMEDIA Shareholder's Shares as the
Company may from time to time reasonably request in writing. The Company
shall pay all Registration Expenses in connection with registration of Shares
subject to this Section 2.01(g). The PRIMEDIA Shareholder shall pay all (x)
underwriting discounts and commissions and transfer taxes, if any, (y)
internal administrative and similar costs of the PRIMEDIA Shareholder and (z)
fees and disbursements of counsel for the PRIMEDIA Shareholder, in each case
relating to the registration, sale or disposition of the PRIMEDIA
Shareholder's Shares pursuant to a registration statement effected pursuant
to this Section 2.01(g).
(h) FAIR MARKET VALUE. In determining the "FAIR MARKET VALUE"
of any Shares (or any portion thereof) pursuant to this Section 2.01 or Section
2.03(b), the Board of Directors shall give due consideration to such factors as
it deems appropriate, including the earnings and certain other financial and
operating information of the Company and its subsidiaries in recent periods, its
potential value and that of its subsidiaries as a whole, its future prospects
and that of its subsidiaries and the industries in which they compete, its
history and management and that of its subsidiaries, the general condition of
the securities markets and the fair market value of securities of privately
owned companies (with transfer restrictions) engaged in businesses similar to
the Company and its subsidiaries. The Fair Market Value, as determined by the
Board of Directors in good faith shall be binding and conclusive upon all
parties hereto.
(i) TRANSFERS TO THE AGENT. Subject to Section 2.01(a), each
Shareholder shall have the right to Transfer at any time all or any portion of
its Shares to the
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Agent in accordance with the terms of the Ripplewood Pledge Agreement or the
PRIMEDIA Pledge Agreement, as applicable, without the prior consent of any
Person.
(j) REGISTRATION ON REQUEST. (1) REQUEST BY THE PRIMEDIA
SHAREHOLDER. At any time after 180 days following an initial public offering
by the Company, upon the written request of the PRIMEDIA Shareholder
requesting that the Company effect the registration under the Securities Act
of all or part of the PRIMEDIA Shareholder's Shares and specifying the amount
and intended method of disposition thereof, the Company will, as
expeditiously as possible, use its reasonable best efforts to effect the
registration under the Securities Act of such Shares which the Company has
been so requested to register by the PRIMEDIA Shareholder to the extent
necessary to permit the disposition (in accordance with the intended method
thereof as aforesaid) of the Shares so to be registered; PROVIDED that the
Company shall not be obligated to effect more than one registration of Shares
under this subsection (j); PROVIDED, FURTHER, that the Company shall not be
obligated to effect any registration under this subsection (j) unless the
PRIMEDIA Shareholder requests that the Company register all of the Shares
then held by it; and PROVIDED, FURTHER, that the Company shall not be
obligated to file a registration statement relating to any registration
request under this subsection (j) if, with respect thereto, the managing
underwriter, the Securities Act or the rules and regulations thereunder, or
the form on which the registration statement is to be filed would require the
conduct of an audit other than the regular audit conducted by the Company at
the end of its fiscal year, in which case the filing may be delayed until the
completion of such regular audit.
(2) EXPENSES. The Company will pay all Registration
Expenses in connection with the registration of Shares pursuant to this
subsection (j).
(3) EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this subsection (j) will not be deemed to have been
effected unless it has become effective; PROVIDED that if, within 180 days
after it has become effective, the offering of Shares pursuant to such
registration is interfered with by any stop order, injunction or other order
or requirement of any governmental agency or court, such registration will be
deemed not to have been effected.
(4) SELECTION OF UNDERWRITERS. If a requested registration
pursuant to this subsection (j) involves an underwritten offering, the
Company shall have the right to
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select the investment banker or bankers and managers to administer the
offering; PROVIDED, HOWEVER, that such investment banker or bankers and
managers shall be reasonably satisfactory to the PRIMEDIA Shareholder.
(5) PRIORITY IN REQUESTED REGISTRATIONS. If a requested
registration pursuant to this subsection (j) involves an underwritten
offering and the managing underwriter or underwriters advises the Company in
writing that, in its opinion, the number of Shares requested to be included
in such registration (including Shares to be issued by the Company and Shares
held by the Ripplewood Shareholder) exceeds the number which can be sold in
such offering without having an adverse effect on the offering, the Company
will include in such registration (A) first, 100% of the Shares proposed to
be sold by the PRIMEDIA Shareholder and (B) second, Shares of other Persons
in accordance with their registration rights to the extent, in the opinion of
such managing underwriter or underwriters, such Shares can be sold without
having the adverse effect referred to above.
SECTION 2.02. AFFILIATE TRANSACTIONS. Except for the
transactions contemplated by the management consulting and financial advisory
services agreement to be dated as of the date hereof between the Company and
Ripplewood Holdings L.L.C. (the "MANAGEMENT AGREEMENT"), attached hereto as
Exhibit I, unless otherwise agreed by the PRIMEDIA Shareholder in writing,
the Ripplewood Shareholder will not enter into any agreement or engage in any
business transaction with the Company or its subsidiaries after the date
hereof which is not entered into on an arm's length commercially reasonable
basis. Notwithstanding the foregoing, the PRIMEDIA Shareholder explicitly
agrees that the Ripplewood Shareholder may at any time, in its sole
discretion, undertake a reorganization completed in connection with an
initial public offering pursuant to which the Ripplewood Shareholder shall
transfer, or cause to be transferred, all or substantially all its assets
(including all the capital stock and debt securities of the Company held by
the Ripplewood Shareholder) to the Company in exchange for the assumption by
the Company of all or substantially all the liabilities of the Ripplewood
Shareholder, the issuance to the Ripplewood Shareholder by the Company of new
securities (including common and preferred stock of the Company), and, at the
option of the Ripplewood Shareholder, the distribution of (x) the Company's
preferred stock to the holders of the Ripplewood Shareholder's preferred
stock in exchange for the Ripplewood Shareholder's preferred stock and/or (y)
an equivalent number of shares of the new common stock of the Company to
certain holders of the Ripplewood Shareholder's
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common stock in exchange for the shares of the Ripplewood Shareholder's
common stock held by such holders.
SECTION 2.03 SALE OF WRC MEDIA SHARES. (a) If EAC III
desires to Transfer all (or any portion in excess of 35%) of its WRC Media
Shares to a prospective Transferee (or Transferees) other than to a Permitted
Transferee of EAC III, the provisions of Section 2.01(e) and (f) shall apply
to such Transfer in accordance with their terms, except that the percentage
of the PRIMEDIA Shareholder's shares that it has the right or obligation, as
the case may be, to sell and the price to be paid therefor shall be
determined in good faith by the Board of Directors on a basis that shall, as
nearly as reasonably practicable, provide the PRIMEDIA Shareholder economic
treatment comparable to that which it would have been provided under Section
2.01(e) or (f), as the case may be, in the event of Transfer of an
economically equivalent portion of the Shares.
(b) If an initial public offering of WRC Media Shares shall
occur, then the PRIMEDIA Shareholder shall have the right to, and the
Ripplewood Shareholder shall, exchange all or any portion of the PRIMEDIA
Shareholder's Shares for WRC Media Shares having an aggregate fair market
value equal to the aggregate Fair Market Value of the exchanged Shares.
ARTICLE III
STOCK REGISTRATION; LEGEND
SECTION 3.01. STOCK REGISTRATION. (a) Each Shareholder
hereby represents and warrants to the other Shareholder and the Company that
such Shareholder understands that the Company Common Stock has not been
registered under the Securities Act.
(b) Each Shareholder agrees that such Shareholder will not
offer, sell, transfer, pledge, hypothecate or otherwise dispose of any shares
of Company Common Stock except:
(i) pursuant to an exemption from registration under the
Securities Act and in accordance with any applicable laws of any state
of the United States governing the offer and sale of securities; or
(ii) pursuant to an effective registration statement under the
Securities Act (it being understood that the Company, the other
Shareholder and their Affiliates are under no obligation to effect such
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registration except, in the case of the Company, pursuant to Section
2.01(g)) and in accordance with any applicable state laws; or
(iii) pursuant to the Ripplewood Pledge Agreement
or the PRIMEDIA Pledge Agreement, as applicable.
SECTION 3.02. LEGEND. Each Shareholder agrees that any
and all certificates representing such Shareholder's Shares will have
inscribed conspicuously on the front or back of such certificates the
following legend: "THE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF
WEEKLY READER CORPORATION REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ONE
OR MORE AGREEMENTS AMONG SHAREHOLDERS OR AGREEMENTS BETWEEN SHAREHOLDERS AND
WEEKLY READER CORPORATION, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE THEREWITH. COPIES OF ANY SUCH AGREEMENT MAY BE OBTAINED
AT THE PRINCIPAL EXECUTIVE OFFICES OF WEEKLY READER CORPORATION."
SECTION 3.03 OTHER REGISTRATION-RELATED MATTERS. In the
event of a registration of Shares of the PRIMEDIA Shareholder pursuant to
Section 2.01(g):
(a) the Company will furnish to the PRIMEDIA Shareholder such
number of copies of the applicable registration statement and of each
amendment or supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the Securities Act,
and such other documents as may reasonably be requested in order to
facilitate the disposition of Shares by the PRIMEDIA Shareholder;
(b) the Company will notify the PRIMEDIA Shareholder at any
time when a prospectus relating to its Shares is required to be
delivered under the Securities Act promptly after the Company becomes
aware that the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing, and at the request of the PRIMEDIA
Shareholder, prepare and furnish to the PRIMEDIA Shareholder a
reasonable number of copies of an amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the purchasers of
such Shares, such prospectus will not
14
include 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 not misleading in the light of the circumstances
then existing; and
(c) the Company will make available for inspection by the
PRIMEDIA Shareholder and by any attorney, accountant or other agent
retained by the PRIMEDIA Shareholder, all pertinent financial and other
records, pertinent corporate documents and properties of the Company,
and cause all of the Company's officers, directors and employees to
supply all information reasonably requested by the PRIMEDIA
Shareholder, or any such attorney, accountant or agent in connection
with such registration statement.
In the event of a registration of Shares of the PRIMEDIA
Shareholder pursuant to subsection 2.01(j):
(V) the Company will comply with clauses (a) through
(c) above;
(W) the Company will prepare and, in any event within
120 days after the date on which the PRIMEDIA Shareholder gives a
request for registration to the Company, file with the Securities and
Exchange Commission (the "SEC") a registration statement with respect
to such Shares and use its reasonable best efforts to cause such
registration statement to become effective;
(X) the Company will prepare and file with the SEC
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective until the earlier of (i) such
time as all of the Shares registered thereby have been disposed of in
accordance with the intended method of distribution and (ii) 180 days
after the date such registration statement became effective and to
comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations of the SEC thereunder with respect to the
disposition of all Shares covered by such registration statement during
such period in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement;
PROVIDED that before filing a registration statement or prospectus, or
any amendments or supplements thereto, the Company will
15
furnish to counsel for the PRIMEDIA Shareholder copies of all
documents proposed to be filed;
(Y) use its reasonable best efforts to register or
qualify the Shares covered by such registration in such jurisdictions
as the PRIMEDIA Shareholder shall reasonably request, and do any and
all other acts and things which may be reasonably necessary or
advisable to enable the PRIMEDIA Shareholder to consummate the
disposition in such jurisdictions of its Shares, except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction where, but
for the requirements of this clause (Y), it would not be obligated to
be so qualified, to subject itself to taxation in any such jurisdiction
or to consent to general service of process in any such jurisdiction;
and
(Z) use its reasonable best efforts to cause the
Shares covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the PRIMEDIA Shareholder to consummate the
disposition of its Shares;
SECTION 3.04 INDEMNIFICATION. (a) INDEMNIFICATION BY THE
COMPANY. In the event of any registration of any Shares of the PRIMEDIA
Shareholder under the Securities Act pursuant to Section 2.01(g), the Company
hereby indemnifies and agrees to hold harmless, to the extent permitted by
law, the PRIMEDIA Shareholder, each Affiliate of the PRIMEDIA Shareholder and
their respective directors and officers or general and limited partners and
members (and the directors, officers, affiliates and controlling Persons
thereof) and each other Person, if any, who controls the PRIMEDIA Shareholder
within the meaning of the Securities Act (collectively, the "Indemnified
Parties"), against any and all losses, claims, damages or liabilities, joint
or several, and expenses to which such Indemnified Party may become subject
under the Securities Act, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof,
whether or not such Indemnified Party is a party thereto) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act or any preliminary, final
or summary prospectus contained therein, or any amendment or supplement
thereto, or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in
16
the light of the circumstances then existing, and the Company will reimburse
such Indemnified Party for any legal or other expenses reasonably incurred by
it in connection with investigating or defending any such loss, claim,
liability, action or proceeding; PROVIDED that the Company will not be liable
to any Indemnified Party in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration
statement, in any such preliminary, final or summary prospectus, or any
amendment or supplement thereto in reliance upon and in conformity with
written information with respect to such Indemnified Party furnished to the
Company by such Indemnified Party for use in the preparation thereof. Such
indemnity will remain in full force and effect regardless of any
investigation made by or on behalf of the PRIMEDIA Shareholder or any
Indemnified Party and will survive the Transfer of such securities by the
PRIMEDIA Shareholder.
(b) INDEMNIFICATION BY THE HOLDERS AND UNDERWRITERS. The
Company may require, as a condition to including any Shares of the PRIMEDIA
Shareholder in any registration statement filed in accordance with Section
2.01(g), that the Company shall have received an undertaking reasonably
satisfactory to it from the PRIMEDIA Shareholder to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
3.04(a)) the Company, all other shareholders participating in such offering
or any prospective underwriter, as the case may be, and any of their
respective Affiliates, directors, officers, general and limited partners and
members (and the directors, officers, affiliates and controlling Persons
thereof) and controlling Persons, with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information with respect to the PRIMEDIA Shareholder furnished to the
Company by the PRIMEDIA Shareholder expressly for use in the preparation of
such registration statement, preliminary, final or summary prospectus or
amendment or supplement, or a document incorporated by reference into any of
the foregoing. Such indemnity will remain in full force and effect regardless
of any investigation made by or on behalf of the Company or any of the
shareholders, or any of their respective affiliates, directors, officers,
general and limited partners (and the directors, officers, affiliates and
17
controlling Persons thereof) or controlling Persons and will survive the
Transfer of such securities by the PRIMEDIA Shareholder.
(c) PROCEDURES. The procedures governing any
indemnification pursuant to this Section 3.04 shall be as set forth in
Sections 7.04 and 7.05 of the Purchase Agreement.
(d) CONTRIBUTION. If recovery is not available under the
foregoing indemnification provisions of this Section 3.04 for any reason
other than as expressly specified therein, the parties required to provide
indemnification by the terms thereof will contribute to liabilities and
expenses of the indemnified party except to the extent that contribution is
not permitted under Section 11(f) of the Securities Act. In determining the
amount of contribution to which the respective parties are entitled,
consideration will be given to the relative benefits received by each party
from the offering of the Shares (taking into account the portion of the
proceeds realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any misstatement or omission
and any other equitable considerations appropriate under the circumstances.
(e) NON-EXCLUSIVITY. The obligations of the parties under this
Section 3.04 will be in addition to any liability which any party may otherwise
have to any other party.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01. ENTIRE AGREEMENT. This Agreement sets forth
the entire understanding among the parties relating to the subject matter
contained herein and merges all prior discussions among them. This Agreement
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
SECTION 4.02. AMENDMENTS. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
SECTION 4.03. NOTICES. All notices and other communications
required or permitted by this Agreement shall be made in writing and any such
notice or communication shall be deemed delivered when delivered in person,
transmitted by telecopier, confirmation of transmission received, or one
18
business day after it has been sent by a nationally recognized overnight
courier, at the address or addresses for notices to the recipient designated
on Schedule II. Each Shareholder may from time to time change its address for
notices under this Section 4.03 by giving at least five days' notice of such
changed address to the other Shareholder.
SECTION 4.04. INTERPRETATION. When a reference is made in
this Agreement to Sections, such reference shall be to a Section to this
Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 4.05. SEVERABILITY. If any one or more of the
provisions contained in this Agreement or in any document executed in
connection herewith shall be invalid, illegal or unenforceable in any respect
under any applicable law, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired; PROVIDED that in such case the parties hereto shall endeavor to
amend or modify this Agreement to achieve to the extent reasonably
practicable the purpose of the invalid provision.
SECTION 4.06. GOVERNING LAW. This Agreement and all actions
contemplated hereby shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of New York, except to the
extent that the provisions of the DGCL may be mandatorily applicable.
SECTION 4.07. COUNTERPARTS. This Agreement may be
executed in one or more counterparts, all of which shall be considered one
and the same agreement.
SECTION 4.08. ASSIGNMENT. Except pursuant to Section
2.01(a), neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part by
the Ripplewood Shareholder without the prior written consent of the PRIMEDIA
Shareholder or by the PRIMEDIA Shareholder without the prior written consent
of the Ripplewood Shareholder, and any purported assignment without such
consent shall be void. Subject to the preceding sentences, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by the
parties and their respective successors and assigns.
SECTION 4.09. SPECIFIC PERFORMANCE. The parties hereby
declare that irreparable damage would occur as a result of the failure of any
party hereto to perform any of its obligations under this Agreement in
accordance with the
19
specific terms hereof. Therefore, all parties hereto shall have the right to
specific performance of the obligations of the other parties under this
Agreement and if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, any Person against whom such action or
proceeding is brought hereby waives the claim or defense therein that such
party has an adequate remedy at law. The right to specific performance should
be in addition to any other remedy to which a party hereto may be entitled at
law or in equity.
SECTION 4.10. TERMINATION. This Agreement shall
automatically terminate upon the closing of an initial public offering of
shares of Company Common Stock or WRC Media Shares, except for the provisions
of Section 2.01(j), which shall terminate 180 days after a registration
deemed to have been effected pursuant to Section 2.01(j)(3) has become
effective.
20
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
WRC MEDIA INC.,
by /s/ Xxxxxxx Xxxxxx
-------------------------
Name: /s/Xxxxxxx Xxxxxx
Title: Secretary
PRIMEDIA INC.,
by
-------------------------
Name:
Title:
WEEKLY READER CORPORATION,
by
-------------------------
Name:
Title:
21
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
WRC MEDIA INC.,
by
------------------------
Name:
Title:
PRIMEDIA INC.,
by /s/Xxxxxxx X. Xxxxx
------------------------
Name: Xxxxxxx X Xxxxx
Title: Vice Chairman
WEEKLY READER CORPORATION,
by /s/ Xxxxxxx X. Xxxxx
------------------------
Name: Xxxxxxx X Xxxxx
Title: Vice Chairman
SCHEDULE I
SHARES OF COMPANY
SHAREHOLDER COMMON STOCK
WRC Media Inc. 2,685,670
PRIMEDIA Inc. 144,330
SCHEDULE II
SHAREHOLDER ADDRESS
WRC Media Inc. c/o Ripplewood Holdings L.L.C.
Xxx Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxx
Xx. Xxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
PRIMEDIA Inc. 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxx Xxxxxxx
Phone (000) 000-0000
Fax: (000) 000-0000
with a copy to:
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxx X. Xxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
