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EXHIBIT 10.21
GOOD CATALOG COMPANY
STOCKHOLDERS AGREEMENT
This Stockholders Agreement ("Agreement") is made and entered into as
of this 15th day of September, 1999, by and among GOOD CATALOG COMPANY, a
Delaware corporation (the "Company"), THE READER'S DIGEST ASSOCIATION, a
Delaware corporation ("RDA"), and XXXXXX.XXX, INC., a Delaware corporation
("Domain").
In consideration of the mutual benefits to be derived herefrom and of
the mutual agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
Definitions
Certain defined terms used in this Agreement have the following
meanings:
Agreement. The "Agreement" shall mean this Stockholders Agreement, as
the same may be amended or restated from time to time hereafter.
Affiliate. An "Affiliate" of a Person shall mean a Person directly or
indirectly controlling, controlled by or under common Control with such Person.
Board of Directors. The "Board of Directors" shall mean the Board of
Directors of the Company as the same may be constituted from time to time
hereafter pursuant to applicable law, the Certificate of Incorporation and the
By-Laws.
Board Termination Event. "Board Termination Event" shall mean the first
to occur of an Initial Public Offering, a merger or consolidation of the
Company, or a sale of all or substantially all of the Company's business and
assets in which the stockholders of the Company immediately prior to such merger
or consolidation or sale do not own a majority of the outstanding shares of the
surviving entity or the entity to which such sale is made.
Bona Fide Offer. A "Bona Fide Offer" shall mean an offer in writing to
RDA, offering to purchase all or any part of the Shares owned by RDA and setting
forth all the relevant terms and conditions of the proposed purchase, from an
offeror who is ready, willing and able to consummate the purchase and who is not
a permissible transferee pursuant to Section 3.3.
By-Laws. The "By-Laws" shall mean the By-Laws of the Company in effect
as of the date hereof and as the same may be modified from time to time
hereafter pursuant to applicable law and the Certificate of Incorporation.
Certificate of Incorporation. The "Certificate of Incorporation" shall
mean the Certificate of Incorporation of the Company in effect as of the date
hereof and as the same may
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be modified, amended or replaced from time to time hereafter in compliance with
applicable law and the Company's other obligations with respect thereto.
Commission. The "Commission" shall mean the Securities and Exchange
Commission and any successor commission or agency having similar powers.
Common Stock. The "Common Stock" shall mean the Company's Common Stock,
$1.00 par value per share.
Company. The "Company" shall mean Good Catalog Company, a Delaware
corporation.
Control. "Control" shall mean the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of an
entity, whether through the ownership of voting securities, by contract or
otherwise.
GAAP. "GAAP" shall mean generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the balance
sheet and other financial statements are prepared.
Initial Public Offering. "Initial Public Offering" shall mean an
initial public offering by the Company or any Stockholder of Shares pursuant to
the Securities Act of 1933, as amended.
Outstanding Common Stock. "Outstanding Common Stock" shall mean the
then issued and outstanding shares of the Company's Common Stock, on an
undiluted basis, without regard to outstanding convertible securities or any
options, warrants and rights to acquire Common Stock.
Person. A "Person" shall mean any entity, corporation, company,
association, joint venture, joint stock company, partnership, limited liability
company, trust, organization, individual (including personal representatives,
executors and heirs of a deceased individual), nation, state, government
(including agencies, departments, bureaus, boards, divisions and
instrumentalities thereof), trustee, receiver or liquidator.
Securities Act. The "Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations thereunder.
Shares. The "Shares" shall mean the shares of the Common Stock and
other securities (including, without limitation, options, warrants and other
rights to acquire capital stock) of the Company held by the Stockholders,
together with any other shares of the Common Stock of the Company hereafter
acquired by any Stockholder (whether by purchase, exercise of options or
warrants, or otherwise) and any other shares or securities thereafter issued in
respect of such shares in any reorganization, recapitalization,
reclassification, readjustment or other change in a capital structure of the
Company.
Stockholder. A "Stockholder" shall mean RDA and Domain.
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Transfer. A "Transfer" of Shares or any interest of a Stockholder
therein shall mean any sale, assignment, transfer, disposition, pledge,
hypothecation or encumbrance, whether direct or indirect, voluntary, involuntary
or by operation of law, and whether or not for value, of such Shares or such
interest of a Stockholder therein.
ARTICLE II
Corporate Governance
2.1. Board of Directors.
(a) From and after the date hereof, until the occurrence of a
Board Termination Event, each Stockholder shall take all actions necessary to
cause the Board of Directors to consist of at least five (5) directors.
(i) Prior to the occurrence of a Board Termination Event,
representation of RDA and Domain on the Board of Directors shall be, and each of
the Stockholders shall vote all its Shares to elect members of the Board of
Directors of the Company proportionate to each party's ownership of Shares;
provided, however, that, as long as Domain maintains ownership of at least 2% of
the voting equity of the Company, Domain will have the right to designate at
least one member of the Board of Directors.
(ii) The initial Chairman of the Board of Directors shall be
Xxxxxx X. Xxxxx and the initial Vice Chairman of the Board of Directors shall be
A. Xxxxx Xxxxxxxxxx, Xx.
(b) On the date hereof, the following directors have been elected:
Xxxxxx X. Xxxxx (designated by RDA)
A. Xxxxx Xxxxxxxxxx, Xx. (designated by Domain)
Xxxxxx X. Xxxxxxx (designated by RDA)
Xxxxxx X. Scimare (designated by RDA)
Xxxxxx X. Xxxxxxx (designated by RDA)
2.2. Voting Following an Initial Public Offering. Following an Initial
Public Offering, each Stockholder shall vote all Outstanding Common Stock owned
by such Stockholder for election to the Board of Directors of the number of
Directors designated by the other Stockholder which represent the percentage of
the total number of Board of Directors as the shares of Outstanding Common Stock
owned by such other Stockholder represents of the total Outstanding Common
Stock. Neither RDA nor Domain shall be obligated to vote its Shares in favor of
the other Stockholder's designee at any time after such Other Stockholder's
ownership of Outstanding Common Stock falls below five percent (5%) of the then
Outstanding Common Stock. At any time after a Stockholder is no longer entitled
to elect at least one director under this Section 2.2, and until such time as
such Stockholder owns less than one percent (1%) of the Outstanding Common
Stock, the Company shall grant such Stockholder Board of Directors observer
status.
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2.3. Removal of Directors; Vacancies. No Stockholder shall vote to
remove any director, except (i) for bad faith or willful misconduct or (ii) with
or without cause at the written instruction of the Person(s) entitled to
designate such director. Upon receipt of such written instruction, each
Stockholder shall take any necessary action to cause the removal of the director
so designated for removal. In the event any director is so removed, or if a
vacancy is created by the death, disability, retirement, resignation or removal
of any director, the vacancy so created shall be filled in accordance with
Section 2.1 hereof by a designee selected by the Person(s) entitled to designate
the director whose position shall have become vacant.
2.4. Covenant to Vote. Prior to a Board Termination Event, each
Stockholder shall take all actions necessary to call, or cause the Company and
the appropriate officers and directors of the Company to call, a special or
annual meeting of stockholders of the Company and, at all times during the term
of this Agreement, to vote all Shares owned or held of record by such
Stockholder at any such annual or special meeting in favor of, or take all
actions by written consent in lieu of any such meeting necessary to cause, the
election as members of the Board of Directors of those individuals so designated
in accordance with, and otherwise to effect the intent of, this Article II. At
all times during the term of this Agreement, each Stockholder shall vote the
Shares owned or held of record by such Stockholder upon any other matter arising
under this Agreement submitted to a vote of the stockholders of the Company in a
manner so as to implement the terms of this Agreement. Except as provided
herein, each Stockholder may vote his Shares on any and all matters presented to
the stockholders of the Company as he may, in his sole discretion, determine.
Nothing herein shall be deemed to create any ownership interest on the part of
any party in any Shares held by any of the other parties.
2.5. Officers. Until the occurrence of a Board Termination Event, RDA
shall have the right to propose the President and Chief Executive Officer for
election to the Company's Board of Directors. RDA will consult with Domain prior
to making such proposal.
2.6. Minority Stockholder Rights.
(a) Domain shall have the right to veto any proposed sale by the
Company of the right, title and interest in and to the domain name and URL
xxx.xxxxx.xxx if such sale is to take place without the concomitant sale of the
online business of the Company related thereto at the time.
(b) Unless the Company first obtains the written consent of
Domain, the Company shall not enter into a transaction in which RDA, in its
capacity as a Stockholder, is granted rights by the new investor and/or the
Company that are not granted to Domain including, without limitation, rights of
first refusal, co-sale rights, first offer rights, registration rights or put
rights. The foregoing shall not limit the grant to RDA, in its capacity as a
Stockholder, of any additional rights, preferences, privileges, priorities or
agreements in connection with any purchase by RDA of Offered Securities (as
defined in Section 5.2(b)) in a transaction governed by Article V hereof. In
addition, the Company must obtain written consent of Domain in order to effect
any amendment to the Company's certificate of incorporation, recapitalization,
merger, sale or consolidation of the Company, unless such transaction provides
rights for Domain as a Stockholder which are identical to those granted to RDA
as a Stockholder.
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2.7. Corporate Opportunities.
(a) The parties hereto agree to the provisions of Section 2.7(b)
and further agree that, at the time the Company changes its name in accordance
with Section 4.2 of the Contribution Agreement, dated as of September 15, 1999,
among RDA, Domain, StarTek, Inc. and the Company, they shall amend the
Certificate of Incorporation of the Company (or its successor as contemplated in
such Section) to insert in such Certificate of Incorporation the provisions set
forth in Section 2.7(b).
(b) For purposes of this Section 2.7(b) "Applicable Stockholder"
shall mean each of RDA and Domain, and each of their respective successors, by
way of merger, consolidation or sale of all or substantially all its assets, and
all corporations, partnerships, joint ventures, associations and other entities
(each a "Subsidiary Entity") in which such Person owns, directly or indirectly,
fifty percent (50%) or more of the outstanding voting stock, voting power or
similar voting interests ("Voting "Interest"), but shall not include the Company
or any Subsidiary Entity in which the Company beneficially owns, directly or
indirectly, fifty percent (50%) or more of the outstanding Voting Interest.
(i) In anticipation that:
(w) Each Applicable Stockholder will remain, for some period
of time, a stockholder of the Company;
(x) the Company and each Applicable Stockholder may engage in
the same or similar activities or lines of business and may have an
interest in the same or similar areas of corporate opportunities;
(y) there will be benefits derived by the Company through its
continued contractual, corporate and business relations with either
Applicable Stockholder (including, without limitation, service of
officers and employees of either Applicable Stockholder as directors,
officers or employees of the Company); and
(z) there will be benefits in providing guidelines for
directors, officers and employees of each Applicable Stockholder and
the Company with respect to the allocation of corporate opportunities
and other matters;
The provisions of this Section 2.7(b) are set forth to regulate, define and
guide the conduct of certain affairs of the Company as they may involve each
Applicable Stockholder and its officers and directors, and the powers, rights,
duties and liabilities of the Company and its directors, officers and employees,
and stockholders in connection therewith.
(ii) Except as an Applicable Stockholder may otherwise
agree in writing, each Applicable Stockholder shall have the right to, and shall
have no duty not to, (1) engage in the same or similar business activities or
lines of business as the Company, (2) do business with any potential or actual
customer or supplier of the Company, or (3) employ or otherwise engage any
officer or employee of the Company. Neither Applicable Stockholder shall be
liable to the Company or its stockholders for breach of any fiduciary duty by
reason of
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any such activities (set forth in the preceding sentence) or of the
participation therein of such Applicable Stockholder. In the event either
Applicable Stockholder acquires knowledge of a potential transaction or matter
that may be a corporate opportunity for such party and the Company, such
Applicable Stockholder shall have no duty to communicate or present such
corporate opportunity to the Company nor shall such Applicable Stockholder be
liable to the Company or its stockholders for breach of any fiduciary duty as a
stockholder of the Company by reason of the fact that such Applicable
Stockholder pursues or acquires such corporate opportunity for itself, directs
such corporate opportunity to another Person, or does not present such corporate
opportunity to the Company.
(iii) In the event that a director, officer or employee of
the Company who is also a director, officer or employee of an Applicable
Stockholder acquires knowledge of a potential transaction or matter that may be
a corporate opportunity for both the Company and such Applicable Stockholder,
such director, officer or employee of the Company (1) shall have fully satisfied
and fulfilled the fiduciary duties of such director, officer or employee to the
Company and its stockholders with respect to such corporate opportunity, (2)
shall not be liable to the Company or its stockholders for breach of any
fiduciary duty by reason of the fact that it pursues or acquires such corporate
opportunity for such Applicable Stockholder or directs such corporate
opportunity to another Person or does not communicate information regarding such
corporate opportunity to the Company, (3) shall be deemed to have acted in good
faith and in a manner such Person reasonably believes to be in and not opposed
to the best interests of the Company, and (4) shall be deemed not to have
breached his or her duty of loyalty to the Company or its stockholders and not
to have derived an improper benefit therefrom, if such director, officer or
employee acts in a manner consistent with the following policy:
(x) a corporate opportunity available to any Person who is a
director but not an officer or employee of the Company and who is also
an officer or employee (whether or not a director) of an Applicable
Stockholder shall belong to such Applicable Stockholder unless such
opportunity is expressly offered in writing to such Person solely in
his or her capacity as a director of the Company, in which case such
opportunity shall belong to the Company;
(y) a corporate opportunity available to any Person who is an
officer or employee (whether or not a director) of the Company and who
is also a director but not an officer or employee of an Applicable
Stockholder shall belong to the Company, unless such opportunity is
expressly offered in writing to such Person solely in his or her
capacity as a director of such Applicable Stockholder, in which case
such opportunity shall belong to such party; and
(z) a corporate opportunity available to any other Person who
is an officer, employee or director of the Company and an Applicable
Stockholder shall belong to such Applicable Stockholder or to the
Company if such opportunity is expressly offered in writing to such
Person solely in his or her capacity as an officer, employee or
director of such Applicable Stockholder or of the Company,
respectively; otherwise, such opportunity shall belong to such
Applicable Stockholder.
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(iv) Any corporate opportunity that belongs to an
Applicable Stockholder or the Company pursuant to the foregoing policy shall not
be pursued by the other, or directed by the other to another Person, unless and
until such Applicable Stockholder or the Company, as the case may be, determines
not to pursue the opportunity. Notwithstanding the preceding sentence, if the
Person to whom the corporate opportunity belongs does not within a reasonable
period of time begin to pursue, or thereafter continue to pursue, such
opportunity diligently and in good faith, the other affected Person may then
pursue such opportunity or direct it to another Person.
(v) For purposes of this Section 2.7(b), "corporate
opportunities" shall consist of business opportunities which (1) the Company is
financially able to undertake, (2) are, from their nature, in the line or lines
of the Company's business and are of practical advantage to it, and (3) are ones
in which the Company has an interest or reasonable expectancy. In addition,
"corporate opportunities" shall not include any transaction in which the Company
or an Applicable Stockholder is permitted to participate pursuant to (a) any
agreement between the Company and such Applicable Stockholder in effect as of
the time any equity security of the Company is held of record by any Person
other than such Applicable Stockholder, as may be amended thereafter with the
approval of a majority of disinterested directors or (b) any subsequent
agreement between the Company and such Applicable Stockholder approved by a
majority of disinterested directors, it being acknowledged that the rights of
the Company under any such agreement shall be deemed to be contractual rights
and shall not be corporate opportunities of the Company for any purpose;
provided, however, that no presumption or implication as to corporate
opportunities relating to any transaction not explicitly covered by such an
agreement shall arise from the existence or absence of any such agreement.
(vi) Any person purchasing or otherwise acquiring any
interest in any shares of stock of the Company shall be deemed to have notice of
and consented to the provisions of this Section 2.7(b).
(vii) For purposes of this Section 2.7(b), the "Company"
shall mean Good Catalog Company and its successors by way of merger,
consolidation or sale of all or substantially all of its assets, and all
corporations, partnerships, joint ventures, associations and other entities in
which the Company beneficially owns, directly or indirectly, fifty percent (50%)
or more of the outstanding voting stock, voting power or similar voting
interests.
(viii) If any contract, agreement, arrangement or
transaction between the Company and an Applicable Stockholder involves a
corporate opportunity and satisfies the criteria set forth in this Section
2.7(b) hereof, then such Applicable Stockholder and its officers and directors
shall also, for the purposes of this Section 2.7(b) and the other provisions of
this Agreement, be deemed to have fully satisfied and fulfilled any fiduciary
duties they may have to the Company and its stockholders. Any such contract,
agreement, arrangement or transaction involving a corporate opportunity not so
approved shall not by reason thereof result in any such breach of any fiduciary
duty, but shall be governed by the other provisions of this Section 2.7(b), this
Agreement, the Bylaws, the applicable corporation law of the jurisdiction of
incorporation of the Company and other applicable law.
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(ix) For purposes of this Section 2.7(b), a Director of
the Company who is Chairman of the Board of Directors of the Company, Vice
Chairman of the Board of Directors of the Company or the Chief Executive Officer
of the Company shall not be deemed to be an officer of the Company by reason of
holding such position (regardless of whether such position is deemed an office
of the Company under the Bylaws of the Company), unless such Person is a
full-time employee of the Company.
ARTICLE III
Restriction on Transfer of Shares
3.1. No Transfer of Shares. No Shares and no interest of a Stockholder
in any Shares may be Transferred except in accordance with the terms of this
Agreement. Any such attempted Transfer in violation of this Agreement shall be
null and void ab initio, and neither the Company nor any transfer agent of the
Company shall give effect to any such attempted Transfer in its stock records or
for any other purpose.
3.2. Restrictions Under Securities Laws. The Shares have been issued in
a non-public offering pursuant to the private offering exemptions under Section
4(2) of the Securities Act and various exemptions from registration requirements
under applicable state securities laws. Accordingly, the Shares have not been
qualified or registered with any federal or state securities regulatory
authority. Notwithstanding anything to the contrary stated in this Agreement, no
Shares may be Transferred unless and until (i) counsel for the Company shall
have determined, or the transferring Stockholder shall have delivered to the
Company an opinion of such Stockholder's counsel reasonably satisfactory to the
Company, that the intended Transfer does not violate the Securities Act or the
rules and regulations of the Commission thereunder, and any applicable state
securities laws; or (ii) the intended Transfer is the subject of a "no-action"
letter from the staff of the Commission and any applicable state securities
regulatory agency to the effect that the intended Transfer without registration
or qualification will not result in a recommendation by the staff of the
Commission or applicable state securities regulatory agency that civil or
criminal action be taken with respect thereto; or (iii) the Shares have been
validly registered under the Securities Act and all applicable state securities
laws. All costs and expenses of counsel to the Company in reviewing the
foregoing matters with respect to an intended Transfer of any Shares shall be
borne by the Stockholder owning such Shares.
3.3. Permissible Transfers. Notwithstanding anything to the contrary
set forth in this Agreement, provided that the Stockholder has first given the
Company written notice of any such Transfer, the restrictions on Transfer
specified herein (other than as set forth in Section 3.2) shall not apply to any
Transfer (a) in connection with a merger, reorganization or the sale of all or
substantially all of the assets of a Stockholder, or (b) to an Affiliate of any
Stockholder. Any permitted transferee shall, prior to such transfer, execute an
instrument in form reasonably satisfactory to the Company, agreeing to be bound
by the terms of this Agreement, with such modifications hereto as the remaining
Stockholder and the Company deem necessary to continue to effectuate the
purposes hereof. In addition, any permitted transferee who is a married natural
person shall also deliver to the Company, prior to transfer, a Spousal Consent
executed by his or her spouse, in the form of Exhibit 1 hereto.
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3.4. Right of First Refusal. Except as provided in Section 3.3, if
either Stockholder ("Selling Stockholder") shall decide to Transfer all or any
part of his Shares or any interest therein ("Offered Shares") for value pursuant
to a bona fide offer from a third party (an "Offer"), the Selling Stockholder
shall first deliver to the Company and the other Stockholder a written notice
(the "Stockholder Sale Notice") of the Selling Stockholder's Offer, together
with all material terms for the Offer and copies of all related agreements and
documents prepared to effect the Offer. Upon receipt of the Stockholder Sale
Notice, the other Stockholder (the "Remaining Stockholder") shall then have the
right and opportunity (the "Right of First Refusal"), for a period ending thirty
(30) days following delivery of the Stockholder Sale Notice, to accept the
Offer. The Right of First Refusal shall be exercised, if at all, by delivery of
written notice to the Selling Stockholder within such thirty (30) day period (an
"Exercise Notice"). The Exercise Notice shall constitute the irrevocable
obligation of the exercising Remaining Stockholder and the Selling Stockholder
to complete the purchase and sale of the Offered Shares in accordance with the
terms of the Offer. The closing of the Transfer of the Offered Shares pursuant
to the terms hereof shall take place not later than the later of the date of
closing set forth in the Stockholder Sale Notice (if any) and sixty (60) days
after the date of delivery of the Stockholder Sale Notice, except as extended by
mutual agreement of the parties thereto.
Notwithstanding the foregoing, however, if the Remaining Stockholder
does not deliver an Exercise Notice within the period required herein, then the
Selling Stockholder shall have the right, for a period of one hundred eighty
(180) days after the date of the Stockholder Sale Notice, to Transfer all of the
Offered Shares to one or more Persons on terms and conditions no less favorable
to the Selling Stockholder than those set forth in the Offer; provided, however,
that any such transferee(s) of the Offered Shares shall take and hold the
Offered Shares subject to this Agreement and to all of the obligations and
restrictions arising hereunder upon the Selling Stockholder and no such Transfer
to a transferee not already a party hereto shall be effective until such
transferee has executed and delivered to the Company an instrument in the form
prescribed by the Company agreeing to be bound by this Agreement, with such
modifications hereto as the remaining Stockholder and the Company deem necessary
to continue to effectuate the purposes hereof. If such transferee is a married
natural person, such transferee shall also deliver a duly executed Spousal
Consent in the form of Exhibit 1 hereto. If no such Transfer is effected within
said one hundred eighty (180) day period, the Offered Shares shall once again be
subject to the provisions of this Section 3.4.
ARTICLE IV
Co-Sale Rights
If RDA proposes to sell any of its Shares pursuant to a Bona Fide
Offer, in a single transaction or a series of related transactions, it shall
comply with the following provisions.
4.1. Notice of Sale. RDA shall deliver or cause to be delivered a
written notice (the "Notice of Sale") to Domain at least thirty (30) days prior
to making any such sale. The Notice of Sale shall state (i) RDA's bona fide
intention to sell, (ii) the name and address of the prospective transferee(s)
(the "Purchase Offeror"), (iii) the number of Shares to be sold, (iv) the
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terms and conditions (including price) of the contemplated sale and (v) the
expected closing date of the transaction.
4.2. Option to Participate. Domain may elect to participate in the
contemplated sale by delivering a written notice (an "Election Notice") to RDA
within twenty (20) days after receipt of such Notice of Sale, and Domain may
elect to sell in the contemplated transaction up to that number of Shares owned
by it as is equal to the number of Shares which RDA proposes to sell multiplied
by a fraction, the numerator of which shall be the number of Shares owned by
Domain, and the denominator of which shall be the aggregate number of Shares
held by Domain and RDA (determined on a fully-diluted, as converted basis). If
Domain fails to timely deliver an Election Notice to RDA, it shall be deemed to
have waived any right to participate in the sale. To the extent that Domain
exercises such right of co-sale in accordance with the terms and conditions
hereof, the number of Shares that RDA may sell shall be correspondingly reduced.
4.3. Consummation of Sale. Any sale made pursuant to this Article IV
shall be consummated within ninety (90) days of the date of the Notice of Sale
given pursuant to Section 4.1. Notwithstanding anything to the contrary set
forth herein, RDA shall have no liability to Domain if any sale proposed to be
made pursuant to this Article IV is not consummated. Nothing contained in this
Article IV shall affect the Right of First Refusal afforded to Domain pursuant
to Section 3.4.
ARTICLE V
First Offer
5.1. First Offer.
(a) In the event the Company proposes to sell any Offered
Securities (as hereinafter defined) in a private financing, each Stockholder
shall have a right of first offer (the "Right of First Offer") to purchase, on
the same terms and conditions as are being offered to other investors, any
number of such Offered Securities up to its Pro Rata Share (as hereinafter
defined) of such Offered Securities.
(b) The Company shall give notice (the "First Offer Notice") to
the Stockholders of the Company's proposed sale of Offered Securities pursuant
to this Section 5.1 specifying the number of such Offered Securities the Company
intends to sell and range of prices, terms and conditions of the proposed sale.
Each Stockholder may exercise its Right of First Offer by delivering notice of
irrevocable acceptance of the proposed sale on the terms specified in the First
Offer Notice to the Company within fifteen (15) business days of receipt of the
First Offer Notice (the "Initial Exercise Period"). The Company shall deliver
the First Offer Notice to the Stockholders as promptly as practicable following
its determination of the terms of such private financing, but in no event shall
the Company deliver the First Offer Notice less than fifteen (15) business days
prior to the completion of the sale of the Offered Securities subject to this
Section 5.1. In the event there is a material change in the terms of any such
private financing following delivery of the First Offer Notice, the Company will
issue a new First Offer Notice and the Stockholders each will have the longer of
(i) the remainder of the Initial Exercise
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Period or (ii) five (5) business days from the date of issuance of the new First
Offer Notice to deliver a new notice of irrevocable acceptance to purchase the
Offered Securities on the new terms specified in such new First Offer Notice.
5.2. Definitions.
(a) "Pro Rata Share" shall mean, with respect to any Stockholder,
a number of Offered Securities determined by multiplying the total number of
Offered Securities offered pursuant to Section 5.1 by a fraction, the numerator
of which is the total number of shares of Outstanding Common Stock owned by such
Stockholder and the denominator of which is the total number of shares of
Outstanding Common Stock at the time, prior to giving effect to the issuance and
sale of such Offered Securities, and rounding such product to the nearest whole
number.
(b) "Offered Securities" shall mean any equity securities of the
Company or any securities, convertible into or exchangeable for equity
securities in the Company, provided, however, that Offered Securities shall not
include (i) options, warrants, rights or shares of Common Stock exercisable
therefor, issued to employees, consultants, vendors or service providers as
compensation for services provided or as incentives to employees or consultants;
(ii) shares of Common Stock issuable upon exercise of options, rights or
warrants which were Offered Securities subject to Section 5.1 at the time of
original issuance; (iii) shares of Common Stock issuable upon the conversion or
exchange of convertible or exchangeable securities which were Offered Securities
subject to Section 5.1 at the time of original issuance or are outstanding as of
the date hereof; and (iv) shares of Common Stock issued as consideration,
whether in whole or in part, for the acquisition of assets or capital stock of
any other Person.
ARTICLE VI
Termination of Agreement
6.1. Termination of Entire Agreement. This Agreement shall
terminate, and the certificates representing the Shares shall be released from
the terms of this Agreement upon the first to occur of the following events:
(a) Liquidation. The liquidation and dissolution of the
Company; or
(b) Bankruptcy. The commencement of proceedings in bankruptcy
or receivership of the Company.
6.2. Termination of Certain Provisions. The provisions of Article
III-VII shall terminate upon the completion of an Initial Public Offering of the
Company's Common Stock pursuant to the Securities Act.
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ARTICLE VII
Legends On Share Certificates
Each of the certificates representing the Shares issued on or
after the date hereof shall bear the following legends:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act") or
under any state securities laws. No transfer, sale, assignment, or
other disposition of the shares represented by this certificate or any
interest therein may be made except (a) pursuant to an effective
registration statement under the Securities Act and compliance with
applicable state securities laws or (b) if the Company has been
furnished with an opinion of counsel for the holder, satisfactory to
the Company, to the effect that no registration is required because of
the availability of an exemption from registration under the Securities
Act and applicable state securities laws."
"None of the Shares represented by this certificate may be sold,
assigned, transferred, pledged, hypothecated or in any other way
disposed of or encumbered, voluntarily or involuntarily, by gift,
bankruptcy, operation of law, winding up of a corporation or otherwise,
except in accordance with the provisions of a Stockholders Agreement,
dated as of September 15, 1999, as amended or restated from time to
time, a copy of which may be inspected at the principal office of this
Company. All of the provisions of such Stockholders Agreement are
incorporated herein by this reference."
A copy of this Agreement shall be delivered to the Secretary of the Company and
shall be shown by the Secretary to any Person making inquiry concerning it.
ARTICLE VIII
Recapitalizations
In the event the Company is a party to any reorganization,
recapitalization, reclassification, readjustment or other change in its capital
structure wherein any other shares or securities of the Company are issued in
respect of all or part of the Shares, then such other shares or securities shall
likewise be subject to all of the terms and provisions of this Agreement.
ARTICLE IX
Notices
All notices, requests and other communications hereunder shall be
in writing and shall be deemed effectively given (a) upon personal delivery to
the party to be notified, (b) three (3) days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid, or (c)
when received if given by telecopier addressed to the party to be notified at
the
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address indicated on Schedule A, or at such other address or number as such
party may designate by ten (10) days' advance written notice to the other
parties.
ARTICLE X
Financial Statements
Until an Initial Public Offering, the Company shall deliver to
each Stockholder as soon as available but in no event later than forty-five (45)
days after the end of each month, an unaudited balance sheet as of such month
end and statements of income and of cash flows for such month, prepared in
accordance with GAAP (subject to the absence of period end accruals and
footnotes).
ARTICLE XI
General Provisions
11.1. Effectiveness. This Agreement shall become effective only at
such time as it has been executed by the Company and each Stockholder.
11.2. Press Releases.
(a) Neither Stockholder will, nor will it permit any of its
Affiliates (other than the Company) to, issue any press release or make any
public announcement relating in any way whatsoever to this Agreement, the
Contribution Agreement, dated as of September 15, 1999, among the parties hereto
(the "Contribution Agreement") or any transactions contemplated in the
Contribution Agreement without the consent of the other Stockholder and the
Company (which consent shall not be unreasonably withheld or delayed), unless
required by law or the rules of an applicable stock exchange or over-the-counter
market. If a press release or announcement of this Agreement, the Contribution
Agreement or such transaction is required as aforesaid, the Stockholder issuing
such release will consult with the other Stockholder in advance as to the
contents and timing thereof.
(b) The Company will use its best efforts to not issue any
press release without consulting with the Stockholders in advance as to the
contents thereof.
11.3. Waiver. No waiver of any provision of this Agreement in any
instance shall be, or for any purpose be deemed to be, a waiver of the right of
any party hereto to enforce strict compliance with the provisions hereof in any
subsequent instance.
11.4. Agreement to Perform Necessary Acts. Each party hereto and
the heirs, executors or administrators of the Stockholders shall perform any
further acts and execute and deliver any documents or procure any court orders
that may reasonably be necessary or appropriate to carry out the provisions of
this Agreement.
11.5. Attorneys' Fees. In the event of any litigation or other
proceeding between the parties hereto to enforce any provision or right
hereunder, the unsuccessful party to
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such proceeding shall pay to the prevailing party therein all costs and expenses
actually incurred therein, including, but not limited to, reasonable attorneys'
fees and court costs.
11.6. Modification. Except as otherwise provided herein, this
Agreement may not be modified or amended except by a writing signed by each
Stockholder and by an officer duly authorized to act on behalf of the Company.
In the event of the amendment or modification of this Agreement in accordance
with its terms, the Stockholders shall cause the Board of Directors to meet as
soon as practicable following such amendment or modification for the purpose of
adopting any amendment to the Certificate of Incorporation and By-Laws that may
be required as a result of such amendment or modification to this Agreement,
and, if required, proposing such amendments to the Stockholders entitled to vote
thereon.
11.7. Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original of the
party or parties who executed such counterpart but all of which together shall
constitute one and the same instrument. A facsimile signature of a counterpart
executed copy of this Agreement shall be treated as an original. In making proof
of this Agreement, it shall not be necessary to produce or account for more than
one counterpart or more than a facsimile signature evidencing execution by each
party hereto.
11.8. Severability. Each provision and part thereof of this
Agreement is intended to be severable and if any term or all or part of any
provision hereof is held by judicial decision to be invalid, such invalidity
shall not affect the validity of the remainder of this Agreement, unless the
effect thereof would be to alter materially the effect of this Agreement on the
parties hereto.
11.9. Entire Agreement; Termination of Prior Arrangements. This
Agreement is intended by the parties hereto as a final expression of their
agreement and understanding with respect to the subject matter hereof and as a
complete and exclusive statement of the terms thereof and supersedes any and all
prior and contemporary agreements and understandings.
11.10. Governing Law; Jurisdiction and Venue. This Agreement shall
be construed and interpreted in accordance with the laws of the State of New
York. The parties irrevocably and unconditionally (i) agree that any suit,
action or proceeding against such party arising out of this Agreement may be
brought in any New York State or Federal court sitting in New York, New York or
Westchester County, New York, or any Colorado State or Federal court sitting in
the City and County of Denver, Colorado, (ii) waive, to the fullest extent such
party may effectively do so, any objection that such party may have to laying of
venue of any such suit, action or proceeding and (iii) submit to the
non-exclusive jurisdiction of such courts in any suit, action or proceeding and
agree that any process or notice of motion or other application to any court may
be served on such party within or outside such court's territorial jurisdiction
by registered or certified mail or by personal service at such party's address
set forth above.
11.11. Injunctive Relief. The parties acknowledge and agree that a
violation of any of the terms of Articles II, III, IV, V or X of this Agreement
will cause the parties irreparable injury for which adequate remedy at law is
not available. Therefore, the parties agree that each party shall be entitled to
an injunction, restraining order or other equitable relief from any court
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of competent jurisdiction, restraining any party from committing any violations
of the provisions of such Articles of this Agreement.
11.12. Section Headings. The headings of the several sections of
this Agreement are inserted solely for convenience of reference and are not a
part of and are not intended to govern, limit or aid in the construction of any
term or provision hereof.
11.13. Construction. When necessary, the masculine shall include
the feminine or neuter and vice versa, and the singular shall include the plural
and vice versa.
11.14. Binding Effect. Subject to the restrictions on Transfer
contained herein, this Agreement shall be binding on and shall inure to the
benefit of, the parties hereto and their respective heirs, legal
representatives, successors and assigns. In accordance with the provisions of
Section 11.7 hereof, this Agreement shall be binding upon all of the
Stockholders at the time specified in Section 11.1 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first hereinabove written.
THE COMPANY
GOOD CATALOG COMPANY
By: /s/ Xxxxx X. Xxxxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: President
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THE STOCKHOLDERS
THE READER'S DIGEST ASSOCIATION, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President,
Business Planning and
Development
XXXXXX.XXX, INC.
By: /s/ A. Xxxxx Xxxxxxxxxx, Xx.
-------------------------------
Name: A. Xxxxx Xxxxxxxxxx, Xx.
Title: Chairman
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Exhibits and Schedules not filed
