SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT (the "Agreement") is
made and entered into as of this 24th day of September,
1999, by and among the XxXxxx Xxxxxxx-Reader's Digest Fund,
Inc., a New York not-for-profit corporation (the "XxXxxx
Xxxxxxx Fund"), the Xxxx Xxxxxxx-Reader's Digest Fund, Inc.,
a New York not-for-profit corporation (the "Xxxx Xxxxxxx
Fund"; each of the XxXxxx Xxxxxxx Fund and the Xxxx Xxxxxxx
Fund is hereinafter referred to as a "Fund" and, together
are hereinafter referred to as the "Funds"), and The
Reader's Digest Association, Inc., a Delaware corporation
(the "Company").
WHEREAS, the Company has issued and there are
outstanding 21,716,057 shares of Class B Voting Common
Stock, par value $.01 per share (the "Class B Stock"), and,
as of June 30, 1999, the Company had issued and outstanding
85,916,832 shares of Class A Nonvoting Common Stock, par
value $.01 per share (the " Class A Stock").
WHEREAS, each Fund owns 7,750,000 shares
(constituting approximately 35.688%) of the outstanding
Class B Stock, the XxXxxx Xxxxxxx Fund owns 5,942,240 shares
(constituting approximately 6.9%) of the outstanding Class A
Stock and the Xxxx Xxxxxxx Fund owns 2,314,558 shares
(constituting approximately 2.7%) of the outstanding Class A
Stock.
WHEREAS, pursuant to Section 4943 of the Internal
Revenue Code of 1986, as amended, each Fund intends to
reduce its ownership of shares of Class B Stock so that, no
later than January 17, 2000, it will own no more than
twenty-five percent (25%) of the outstanding shares of Class
B Stock.
WHEREAS, in order to reduce its ownership of
shares of Class B Stock to twenty-five percent (25%) of the
outstanding shares of Class B Stock, the XxXxxx Xxxxxxx Fund
desires to exchange 4,641,946 of its 7,750,000 shares of
Class B Stock with the Company for shares of Class A Stock,
and the Xxxx Xxxxxxx Fund desires to exchange 4,641,947 of
its 7,750,000 shares of Class B Stock with the Company, in
each case on the basis of 0.865 of a share of Class A Stock
for each share of Class B Stock, in accordance with the
terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing
and the mutual representations, warranties, covenants and
agreements set forth in this Agreement, the Company and the
Funds agree as follows:
ARTICLE I
Exchange of Stock
1.1 Transfer of Class B Shares; Issuance of Class
A Shares. Effective as of the date of, and on the terms
contained in, this Agreement, (a) the XxXxxx Xxxxxxx Fund
hereby transfers and delivers to the Company, free and clear
of all liens, claims, security interests, pledges, charges
and other encumbrances (collectively, "Encumbrances"),
4,641,946 shares of Class B Stock and the Xxxx Xxxxxxx Fund
hereby transfers and delivers to the Company, free and clear
of all Encumbrances, 4,641,947 shares of Class B Stock
(collectively, the "Transferred Class B Shares") and (b) the
Company hereby issues and delivers to the XxXxxx Xxxxxxx
Fund, free and clear of all Encumbrances, 4,015,283 shares
of Class A Stock and the Company hereby sells, issues and
delivers to the Xxxx Xxxxxxx Fund, free and clear of all
Encumbrances, 4,015,284 shares of Class A Stock
(collectively, the "New Class A Shares").
1.2 Delivery of Certificates. Subject to the
terms of this Agreement, (a) the Funds shall deliver to the
Company on the date of this Agreement share certificates
representing all of the Transferred Class B Shares, fully
endorsed or with appropriate stock powers in form sufficient
for transfer of such shares to the Company, and a true and
complete copy of the resolutions duly and validly adopted by
the Board of Directors and the Members of each Fund
authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby and
(b) the Company shall deliver to each Fund on the date of
this Agreement duly executed share certificates representing
all of such Fund's New Class A Shares duly registered in the
name of such Fund, and a true and complete copy of the
resolutions duly and validly adopted by the Board of
Directors of the Company, upon the recommendation of a
Special Committee of directors who are independent of the
Funds (the "Special Committee"), authorizing the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby. The certificates
representing such New Class A Shares shall bear the same
legend as other certificates representing shares of Class A
Stock issued to the Funds. The Funds shall be responsible
for the payment of any stock transfer taxes in connection
with the exchange contemplated by this Section 1.2.
ARTICLE II
The Closing of the Exchange
2.1 Closing. Upon the terms of this Agreement,
the closing of the exchange contemplated hereby (the
"Closing") shall take place simultaneously with the
execution of this Agreement at the offices of Shearman &
Sterling, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
ARTICLE III
Representations and Warranties of the Company
In order to induce the Funds to enter into this
Agreement, the Company hereby represents and warrants to
each Fund as follows:
3.1 Title to Shares. The New Class A Shares to be
issued hereunder, when issued, exchanged and delivered in
accordance with the terms hereof, will be free and clear of
any Encumbrances created by the Company.
3.2 Corporate Power and Authority. The Company
is duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has
all requisite corporate power and authority to enter into
and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated by
this Agreement. The execution, delivery and performance of
this Agreement by the Company have been duly authorized by
all necessary corporate action on the part of the Company.
This Agreement has been duly executed and delivered by the
Company and (assuming due authorization, execution and
delivery by each Fund) constitutes the legal, valid and
binding obligation of the Company enforceable against the
Company in accordance with its terms subject to (a)
applicable bankruptcy, insolvency, fraudulent conveyance and
other similar laws and (b) general principles of equity,
including equitable defenses and limits as to the
availability of equitable remedies, whether such principles
are considered in a proceeding at law or in equity.
3.3 Capitalization of the Company. As of the
date of this Agreement, the Company's authorized capital
stock consists solely of (a) 200,000,000 shares of Class A
Stock, (b) 25,000,000 shares of Class B Stock, (c) 40,000
shares of Preferred Stock, par value $1.00 per share (the
"First Preferred Stock "), (d) 120,000 shares of Second
Preferred Stock, par value $1.00 per share (the "Second
Preferred Stock"), (e) 230,000 shares of Third Subordinated
Preferred Stock, par value $1.00 per share (the "Third
Preferred Stock"), and (f) 25,000,000 shares of Preference
Stock, par value $.01 per share (the "Preference Stock").
As of June 30, 1999, 85,916,832 shares of Class A Stock were
issued and outstanding and 33,511,640 shares of Class A
Stock were issued and held in treasury. As of the date of
this Agreement, (a) 21,716,057 shares of Class B Stock are
issued and outstanding and no shares of Class B Stock are
issued and held in treasury, (b) 40,000 shares of First
Preferred Stock are issued and outstanding, (c) 104,445
shares of Second Preferred Stock are issued and outstanding,
(d) 183,048 shares of Third Preferred Stock are issued and
outstanding and (e) no shares of Preference Stock are issued
and outstanding. Upon consummation of the transactions
contemplated by this Agreement, each of the New Class A
Shares will be duly authorized, validly issued and fully
paid and nonassessable and will not have been issued in
violation of any preemptive or similar rights. Each of the
New Class A Shares has been approved for listing on The New
York Stock Exchange, Inc., subject to official notice of
issuance.
3.4 Conflicts; Consents and Approvals. The
execution and delivery of this Agreement and the
consummation of the transactions contemplated by this
Agreement do not and will not (a) violate, conflict with, or
result in a breach of any provision of, or constitute a
default under, the Company's Restated Certificate of
Incorporation or Amended and Restated By-laws; (b) violate,
or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with the giving
of notice or lapse of time or both, would become a default)
under, or entitle any party to terminate, accelerate, modify
or call a default under, or result in the creation of any
Encumbrance upon any of the properties or assets of the
Company under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument
or obligation to which the Company is a party; (c) violate
any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company; or (d) require any
action or consent or approval of, or review by, or
registration or material filing by the Company with, any
third party or any local, state or federal court, arbitral
tribunal, administrative agency or commission or other
governmental or regulatory body, agency, instrumentality or
authority.
3.5 Board Recommendation . In accordance with
the applicable provisions of the Delaware General
Corporation Law and the Company's Restated Certificate of
Incorporation and Amended and Restated By-laws, the Board of
Directors of the Company, at a meeting duly called and held
at which a quorum was present throughout, upon the
recommendation of the Special Committee, has by a unanimous
vote adopted a resolution proposing and declaring the
advisability of the amendments to the Restated Certificate
of Incorporation of the Company set forth in Exhibit A (the
"Amendments").
ARTICLE IV
Representations and Warranties of the Funds
In order to induce the Company to enter into this
Agreement, each Fund represents and warrants to the Company
as follows:
4.1 Title to Shares. Such Fund has good title,
free and clear of all Encumbrances, to all of its
Transferred Class B Shares.
4.2 Nature of Purchase. Such Fund is acquiring
the New Class A Shares for its own account and not with a
view to distribution thereof other than pursuant to (a) an
effective registration under the Securities Act of 1933, as
amended (the "Securities Act"), or an available exemption
from such registration and (b) applicable state securities
or blue sky laws.
4.3 Corporate Power and Authority. Such Fund is
duly organized and validly existing under the laws of the
State of New York. It has all requisite corporate power and
authority to enter into and deliver this Agreement, to
perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by it has been
duly authorized by all necessary corporate action on its
part. This Agreement has been duly executed and delivered
by such Fund and (assuming due authorization, execution and
delivery by the Company) constitutes the legal, valid and
binding obligation of such Fund, enforceable against it in
accordance with its terms subject to (a) applicable
bankruptcy, insolvency, fraudulent conveyance and other
similar laws and (b) general principles of equity, including
equitable defenses and limits as to the availability of
equitable remedies, whether such principles are considered
in a proceeding at law or in equity.
4.4 Conflicts; Consents and Approvals. The
execution and delivery of this Agreement and the
consummation of the transactions contemplated by this
Agreement do not and will not (a) violate, conflict with, or
result in a breach of any provision of or, constitute a
default under, its Certificate of Incorporation or Amended
and Restated By-laws; (b) violate, or conflict with, or
result in a breach of any provision of, or constitute a
default (or an event which, with the giving of notice or
lapse of time or both, would become a default) under, or
entitle any party to terminate, accelerate, modify or call a
default under, or result in the creation of any Encumbrance
upon any of its properties or assets under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which
it is a party; (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to it; or (d)
require any action or consent or approval of, or review by,
or registration or material filing by it with, any third
party or any local, state or federal court, arbitral
tribunal, administrative agency or commission or other
governmental or regulatory body, agency, instrumentality or
authority.
ARTICLE V
Additional Covenants
5.1 Stockholders' Meeting. The Company shall
call and hold, no later than December 31, 1999, its annual
meeting of stockholders (the "Stockholders' Meeting") for
the purpose of obtaining the approval of the stockholders of
the Company (the "Stockholders") of the Amendments.
5.2 Annual Meeting. The Company shall prepare a
proxy statement in connection with the Stockholders' Meeting
(the "Proxy Statement"), which shall include the
recommendation of the Board of Directors of the Company to
the Stockholders that they vote in favor of the Amendments.
The Company agrees that it shall give the Funds and their
counsel a reasonable opportunity to review and provide
comments on any description of or reference to the Funds, or
any description of the reasons for and consequences of the
transactions contemplated by this Agreement (including,
without limitation, the Amendments), set forth in any
notice, consent solicitation or proxy statement distributed
to the Stockholders in connection with the Stockholders'
Meeting, prior to any such distribution.
5.3 No Issuance of Class B Stock. The Company
shall not, prior to the effective time of the Amendments,
issue, sell, assign or otherwise transfer or dispose of, any
shares of Class B Stock without the prior written approval
of the Funds.
5.4 Repurchases of Class B Stock. (a) So long
as the Funds own, in the aggregate, in excess of fifteen
percent (15%) of the outstanding shares of Class B Stock,
the Company shall not repurchase, redeem or otherwise
acquire (including, without limitation, by means of an
exchange transaction) any shares of Class B Stock (a "Class
B Repurchase") from any holder other than the Funds until
the Company has complied with the procedures set forth in
this Section 5.4.
(b) Except as otherwise provided in paragraph (c)
of this Section 5.4, in the event that the Company intends
to effect a Class B Repurchase, the Company shall give each
Fund written notice thereof at least 15 Business Days (as
defined below) in advance of the proposed consummation of
such Class B Repurchase (the "Repurchase Notice"). The
Repurchase Notice shall set forth the number of shares
subject to, and the proposed price and other material terms
of, the proposed Class B Repurchase. The Funds shall not
publicly disclose the information in such Repurchase Notice
until such time as the Company has done so. Each Fund shall
be entitled to participate in the proposed Class B
Repurchase on a pro rata basis with, and otherwise on the
same terms and conditions (including price) as, the other
participating holders of Class B Stock. Within ten Business
Days after the date of the Funds' receipt of the Repurchase
Notice, each Fund shall deliver to the Company a written
notice specifying whether it wishes to participate in the
proposed Class B Repurchase. If a Fund does not deliver
such written notice, it shall be deemed to have elected not
to participate in the proposed Class B Repurchase. For
purposes of this Agreement, "Business Day" means any day
that is not a Saturday, a Sunday or any other day on which
banks are required or authorized by law to be closed in the
City of New York.
(c) In the event that the Company intends to
effect a Class B Repurchase pursuant to a tender offer or
exchange offer that is made available to all holders of
Class B Stock (a "Public Class B Repurchase"), the Company
shall give each Fund written notice thereof at least 15
Business Days in advance of the public announcement of such
Public Class B Repurchase (the "Public Class B Repurchase
Notice"). The Public Class B Repurchase Notice shall set
forth the number of shares subject to, and the proposed
price and other material terms of, the proposed Public Class
B Repurchase. The Funds shall not publicly disclose the
information in such Public Class B Repurchase Notice until
such time as the Company has done so. Each Fund shall be
entitled to participate in the proposed Public Class B
Repurchase on a pro rata basis with, and otherwise on the
same terms and conditions (including price) as, the other
holders of Class B Stock.
5.5 Voting. Each Fund agrees to vote all shares
of Class B Stock then owned by it in favor of the Amendments
at the Stockholders' Meeting.
5.6 Registration Rights. Effective as of the
Closing, the Company and each Fund shall each have the
rights and obligations set forth in Exhibit B.
ARTICLE VI
Miscellaneous
6.1 Counterparts. This Agreement may be executed
in counterparts, which together shall constitute one and the
same Agreement. The parties may execute more than one copy
of the Agreement, each of which shall constitute an
original.
6.2 Entire Agreement. This Agreement constitutes
the entire agreement among the parties and supersedes all
prior agreements, understandings, arrangements or
representations by or among the parties, written and oral,
with respect to the subject matter hereof.
6.3 Third Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended or shall be
construed to create any third party beneficiaries.
6.4 Governing Law; Jurisdiction. This Agreement
shall be governed by the laws of the State of Delaware,
without giving effect to the conflict of laws principles
thereof. Each party irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the
courts of the State of Delaware and of the United States of
America, in each case located in the State of Delaware, for
any action or proceeding arising out of or relating to this
Agreement and the transactions contemplated by this
Agreement (and agrees not to commence any action except in
any such court). Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action or
proceeding in the courts of the State of Delaware or of the
United States of America, in each case located in the State
of Delaware, and further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court
that any action or proceeding brought in any such court has
been brought in an inconvenient forum. Each party
irrevocably and unconditionally waives any right it may have
to a trial by jury in connection with any action or
proceeding arising out of or relating to this Agreement and
the transactions contemplated by this Agreement.
6.5 Specific Performance . The transactions
contemplated by this Agreement are unique. Accordingly,
each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled,
each of the parties hereto is entitled to a decree of
specific performance and injunctive and other equitable
relief.
6.6 Amendment. This Agreement may not be
altered, amended or supplemented except by an agreement in
writing signed by each of the parties hereto.
6.7 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in
writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in
person, by facsimile, by courier service or by registered or
certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a
notice given in accordance with this Section 6.7):
If to the Funds, to:
Xxxx Xxxxxxx-Reader's Digest Fund, Inc.
XxXxxx Xxxxxxx-Reader's Digest Fund, Inc.
Xxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: M. Xxxxxxxxx XxXxxx
Facsimile No.: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
if to the Company, to:
The Reader's Digest Association, Inc.
Reader's Xxxxxx Xxxx
Xxxxxxxxxxxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
6.8 Assignment. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be
assigned by any of the parties (whether by operation of law
or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors
and assigns.
6.9 Expenses. The Funds shall reimburse the
Company for the reasonably documented (a) legal fees and
investment banking fees and expenses incurred by the Company
on behalf of the Special Committee in connection with the
Special Committee's review of the proposed share exchange
and the negotiation and consummation of the transactions
contemplated by this Agreement, estimates of which have
heretofore been disclosed to the Funds by the Company and
(b) incremental expenses, if any, incurred by the Company as
a result of any delay in the Stockholders' Meeting
(currently scheduled for November 12, 1999) by reason of the
inclusion in the Proxy Statement of the proposal to approve
the Amendments.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the undersigned has
caused this Agreement to be executed by its officer
thereunto duly authorized as of the date first written
above.
XXXXXX XXXXXXX-READER'S
DIGEST FUND, INC.
By: /s/ M. Xxxxxxxxx XxXxxx
Name: M. Xxxxxxxxx XxXxxx
Title: President
XXXX XXXXXXX-READER'S
DIGEST FUND, INC.
By: /s/ M. Xxxxxxxxx XxXxxx
Name: M. Xxxxxxxxx XxXxxx
Title: President
THE READER'S DIGEST ASSOCIATION, INC.
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
THE READER'S DIGEST ASSOCIATION, INC.
The undersigned, being the Chairman of the Board
of Directors and Chief Executive Officer of The Reader's
Digest Association, Inc., a Delaware corporation,
DOES HEREBY CERTIFY:
FIRST: That resolutions of the Board of
Directors of this Corporation were duly adopted
setting forth proposed amendments to the Restated
Certificate of Incorporation of this Corporation
(the "Restated Certificate") declaring said
amendments to be advisable and submitting the
amendments to the stockholders of the Corporation
for their consideration. The resolutions setting
forth the proposed amendments are as follows:
RESOLVED, that subparagraph (2) of paragraph
(b) of Article V of the Restated Certificate
be, and it hereby is, amended and restated in
its entirety to read as follows:
(a) To provide for the issuance, from
time to time, of the shares of stock of the
Corporation, whether now or hereafter
authorized, for such consideration and on
such terms and conditions as it may lawfully
fix from time to time; and all shares so
issued, the full consideration for which has
been paid, shall be deemed fully paid and
nonassessable; provided, however, that (i)
authorized but unissued shares of the capital
stock of the Corporation having any voting
rights in addition to those prescribed by law
shall only be issued if such issuance is
approved by vote of the holders of shares of
Class B Voting Common Stock and (ii) issued
shares of capital stock of the Corporation
having any voting rights in addition to those
prescribed by law which are owned by the
Corporation shall only be sold, assigned,
transferred or otherwise disposed of by the
Corporation if such sale, assignment,
transfer or other disposition is approved by
vote of the holders of shares of Class B
Voting Common Stock, except that no such
approval shall be required in the case of
either clause (i) or (ii) for (A) the
issuance or sale, assignment, transfer or
other disposition of shares of Class B Voting
Common Stock to the holders of shares of
Class B Voting Common Stock in payment of a
dividend or other distribution declared by
the Board of Directors upon the common stock
of the Corporation that is payable in common
stock of the Corporation, or (B) the issuance
or sale, assignment, transfer or other
disposition of Preference Stock having only
the voting rights described in paragraph
(k)(B)(ii) of Article IV.
SECOND: That thereafter, pursuant to
resolution of its Board of Directors, the officers
of the Corporation submitted the proposed
amendments to a vote of the stockholders entitled
to vote thereon at the annual meeting of
stockholders of the Corporation.
THIRD: That the amendments were duly adopted
in accordance with the provisions of Section 242
of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Chairman of the Board of
Directors and Chief Executive Officer of the Corporation has
executed this certificate on this ____ day of ________,
1999.
By:
Name: Xxxxxx X. Xxxxx
Title: Chairman of the Board of Directors
and Chief Executive Officer
ATTEST:
Secretary
EXHIBIT B
REGISTRATION RIGHTS
(a) The Funds shall have the right at any time
after the Closing to make one request of the Company in
writing for registration under the Securities Act of shares
of Class A Stock owned by the Funds. The Company shall use
all reasonable efforts to cause the shares of Class A Stock
to be registered under the Securities Act as soon as
reasonably practicable after receipt of such request so as
to permit promptly the sale thereof and, in connection
therewith, the Company shall prepare and file, on such
appropriate form as the Company in its reasonable discretion
shall determine, a registration statement under the
Securities Act to effect such registration. The Company
shall use all reasonable efforts to list all shares of Class
A Stock covered by such registration statement (to the
extent not then already listed) on any national securities
exchange on which the Class A Stock is then listed or, if
the Class A Stock is not then listed on any national
securities exchange, to list such shares of Class A Stock on
the National Association of Securities Dealers, Inc.
Automated Quotation National Market. Each Fund hereby
undertakes to provide all such information and materials and
take all such action as may be required in order to permit
the Company to comply with all applicable requirements of
the Securities and Exchange Commission (the "Commission")
and to obtain any desired acceleration of the effective date
of such registration statement. Any registration statement
filed at the Funds' request hereunder will not count as a
requested registration unless effectiveness is maintained
until the earlier of the completion of the offering and the
date that is three months following the effective date of
such registration statement. Notwithstanding the foregoing,
the Company shall be entitled to postpone for a reasonable
period of time (not to exceed 60 days) the filing of any
registration statement otherwise required to be prepared and
filed by the Company if (i) the Company is, at such time,
conducting, or proposing to file with the Commission within
60 days a registration statement with respect to, an
underwritten public offering for the account of the Company
of equity securities (or securities convertible into equity
securities) and is advised in writing by its managing
underwriter or underwriters (with a copy to the Funds) that
such offering would, in its or their opinion, be materially
and adversely affected by the registration so requested,
(ii) the Company is, at such time, subject to a contractual
obligation not to engage in a public offering or (iii) the
Company determines, in good faith, that effecting the
registration at such time might (A) adversely affect a
pending or contemplated financing, acquisition, disposition
of assets or stock, merger or other significant transaction
or (B) require the Company to make public disclosure of
information the public disclosure of which at such time the
Company in good faith believes would not be in the Company's
best interest to disclose. No securities, other than shares
of Class A Stock owned by any of the organizations
identified on Schedule 1 to this Exhibit B (the "Supporting
Organizations"), may be registered on a registration
statement requested by the Funds pursuant to this paragraph
(a) without the Funds' express written consent, unless the
amount of such securities is subject to reduction prior to
any reduction in the number of shares of Class A Stock
originally requested to be registered by the Funds in the
event that the managing underwriter of the related offering
believes that the success of such offering would be
materially and adversely affected by inclusion of all the
securities requested to be included therein. If such
managing underwriter believes that the success of such
offering would be materially and adversely affected by
inclusion of all the shares of Class A Stock requested to be
registered by the Funds and the Supporting Organizations,
then the number of shares of Class A Stock to be included in
such registration by each Fund and each Supporting
Organization shall be reduced pro rata, on the basis of the
number of shares of Class A Stock each Fund and each
Supporting Organization requested to be included in such
registration. If the Funds request that the Company
register shares of Class A Stock pursuant to this paragraph
(a), they shall give prompt written notice of such request
to the Supporting Organizations, and such notice shall offer
each Supporting Organization the opportunity to register
such number of shares of Class A Stock as such Supporting
Organization requests, on the same terms and conditions as
the registration of the Funds' shares of Class A Stock.
Within five Business Days of the Funds' delivery of such
notice to the Supporting Organizations, each Supporting
Organization shall deliver to the Funds and the Company a
written notice specifying whether it wishes to participate
in the registered offering of shares of Class A Stock and,
if so, the number of shares of Class A Stock it wishes to
register. If a Supporting Organization does not deliver
such written notice, it should be deemed to have elected not
to participate in the registered offering. The Company
shall use all reasonable efforts to cause the shares of
Class A Stock requested to be registered by the Funds and
the Supporting Organizations to be registered under the
Securities Act.
(b) In connection with any offering of shares of
Class A Stock registered pursuant to this Exhibit B, the
Company (i) shall furnish to the Funds and any Supporting
Organizations selling shares of Class A Stock in the
offering (the "Selling Stockholders ") such number of copies
of any prospectus (including any preliminary prospectus) as
they may reasonably request in order to effect the offering
and sale of the shares of Class A Stock, but only while the
Company shall be required under the provisions hereof to
cause the registration statement to remain current and (ii)
shall take such action as shall be necessary to qualify the
shares of Class A Stock under such "blue sky" or other state
securities laws for offer and sale as the Selling
Stockholders shall reasonably request; provided, however,
that the Company shall not be obligated to qualify as a
foreign corporation to do business under the laws of any
jurisdiction in which it shall not then be qualified or to
file any general consent to service of process in any
jurisdiction in which such a consent has not been previously
filed. If applicable, the Company shall enter into an
underwriting agreement with a managing underwriter or
underwriters selected by the Funds and reasonably
satisfactory to the Company containing representations,
warranties, indemnities and agreements then customarily
included by an issuer in underwriting agreements with
respect to secondary distributions; provided, however, that
such underwriter or underwriters shall agree to use its or
their best efforts to ensure that the offering results in a
distribution of the shares of Class A Stock sold in
accordance with the terms of this Exhibit B. In connection
with any offering of shares of Class A Stock registered
pursuant to this Exhibit B, the Company (x) shall furnish to
the underwriter or underwriters, at the Company's expense,
unlegended certificates representing ownership of the shares
of Class A Stock being sold in such denominations as
reasonably requested and (y) shall instruct any transfer
agent and registrar of the Class A Stock to release any stop
transfer orders with respect to such Class A Stock. Upon
any registration becoming effective pursuant to this Exhibit
B, the Company shall use all reasonable efforts to keep such
registration statement current for such period as shall be
required for the disposition of all of the shares of Class A
Stock included therein; provided, however, that such period
need not exceed three months.
(c) In connection with a requested registration
pursuant to paragraph (a) of this Exhibit B, the Selling
Stockholders shall pay (on a pro rata basis, based upon the
number of shares of Class A Stock owned by each Selling
Stockholder) all underwriting discounts and commissions,
filing fees, printing fees, accounting fees and all
out-of-pocket expenses of the Company relating to the
registration and the offering of such registered shares.
(d) In the case of each offering registered
pursuant to this Exhibit B, the Company agrees to indemnify
and hold each Selling Stockholder, each underwriter of Class
A Stock under such registration and each person who controls
any of the foregoing within the meaning of Section 15 of the
Securities Act, and the directors, officers and members of
the Selling Stockholders, harmless against any and all
losses, claims, damages, liabilities or actions to which
they or any of them may become subject under the Securities
Act or any other statute or common law or otherwise, and to
reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating any claims
and defending any actions, insofar as any such losses,
claims, damages, liabilities or actions shall arise out of
or shall be based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the
registration statement relating to the sale of such Class A
Stock, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary
to make the statements therein, in light of the
circumstances under which they were made, not misleading or
(ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus (as
amended or supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto),
if used prior to the effective date of such registration
statement, or contained in the prospectus (as amended or
supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto), or
the omission or alleged omission to state therein a material
fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading; provided, however, that the indemnification
agreement contained in this paragraph (d) shall not apply to
such losses, claims, damages, liabilities or actions which
shall arise from the sale of shares of Class A Stock by the
Selling Stockholders if such losses, claims, damages,
liabilities or actions shall arise out of or shall be based
upon any such untrue statement or alleged untrue statement,
or any such omission or alleged omission, (x) made in
reliance upon and in conformity with information furnished
in writing to the Company by the Selling Stockholders or any
such underwriter specifically for use in connection with the
preparation of the registration statement or any preliminary
prospectus or prospectus contained in the registration
statement or any such amendment thereof or supplement
thereto or (y) made in any preliminary prospectus, and the
prospectus contained in the registration statement in the
form filed by the Company with the Commission pursuant to
Rule 424(b) under the Securities Act shall have corrected
such statement or omission and a copy of such prospectus
shall not have been sent or given to such person at or prior
to the confirmation of such sale to him.
(e) In the case of each offering registered
pursuant to this Exhibit B, the Selling Stockholders and
each underwriter participating therein shall agree, in the
same manner and to the same extent as set forth in paragraph
(d) of this Exhibit B, severally to indemnify and hold
harmless the Company and each person, if any, who controls
the Company (other than the Funds) within the meaning of
Section 15 of the Securities Act, and the directors and
officers of the Company, and in the case of each such
underwriter, the Selling Stockholders, each person, if any,
who controls a Selling Stockholder within the meaning of
Section 15 of the Securities Act and the directors, officers
and members of the Selling Stockholders, with respect to any
statement in or omission from such registration statement or
any preliminary prospectus (as amended or as supplemented,
if amended or supplemented as aforesaid) or prospectus
contained in such registration statement (as amended or as
supplemented, if amended or supplemented as aforesaid), if
such statement or omission shall have been made in reliance
upon and in conformity with information furnished in writing
to the Company by the Selling Stockholders or such
underwriter specifically for use in connection with the
preparation of such registration statement or any
preliminary prospectus or prospectus contained in such
registration statement or any such amendment thereof or
supplement thereto.
(f) Each party indemnified under paragraph (d) or
(e) of this Exhibit B shall, promptly after receipt of
notice of the commencement of any action against such
indemnified party in respect of which indemnity may be
sought hereunder, notify the indemnifying party in writing
of the commencement thereof. The failure of any indemnified
party to so notify an indemnifying party of any such action
shall not relieve the indemnifying party from any liability
in respect of such action which it may have to such
indemnified party on account of the indemnity agreement
contained in paragraph (d) or (e) of this Exhibit B, unless
and only to the extent that the indemnifying party was
prejudiced by such failure, and in no event shall relieve
the indemnifying party from any other liability which it may
have to such indemnified party. In case any such action
shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate
therein and, to the extent that it may desire, jointly with
any other indemnifying party similarly notified, to assume
the defense thereof, and, after notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be
liable to such indemnified party under paragraph (d) or (e)
of this Exhibit B for any legal or other expenses
subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable
costs of investigation; provided, however, that if there
exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the judgment of
the indemnified party, in its sole and absolute discretion,
for the same counsel to represent both the indemnified party
and the indemnifying party, then the indemnified party shall
be entitled to retain its own counsel, in each jurisdiction
for which the indemnified party determines counsel is
required, at the expense of the indemnifying party. No such
third party claim may be settled by the indemnifying party
or the indemnified party (unless such settlement includes an
unconditional release of the indemnified party from all
liability arising out of such claim or proceeding) without
the prior written consent of the other, which consent shall
not be unreasonably withheld.
(g) If the indemnification provided for under
paragraph (d) or (e) of this Exhibit B shall for any reason
be held by a court to be unavailable to an indemnified party
under paragraph (d) or (e) hereof in respect of any loss,
claim, damage or liability, or any action in respect
thereof, then, in lieu of the amount paid or payable under
paragraph (d) or (e) hereof, the indemnified party and the
indemnifying party under paragraph (d) or (e) hereof shall
contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably
incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative
fault of the Company and the prospective seller of
securities covered by the registration statement which
resulted in such loss, claim, damage or liability, or action
in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any
other relevant equitable considerations or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as shall be appropriate
to reflect the relative benefits received by the Company and
such prospective seller from the offering of the securities
covered by such registration statement. No person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. In addition, no person shall
be obligated to contribute hereunder any amounts in payment
for any settlement of any action or claim effected without
such person's consent, which consent shall not be
unreasonably withheld.
(h) Capitalized terms used and not defined in
this Exhibit B shall have the meanings set forth in the
Agreement.
SCHEDULE 1 TO
EXHIBIT B
SUPPORTING ORGANIZATIONS
XxXxxx Xxxxxxx Fund for Colonial Williamsburg
XxXxxx Xxxxxxx Fund for Macalester College
XxXxxx Xxxxxxx Fund for Memorial Xxxxx-Xxxxxxxxx Cancer Center
Xxxx Xxxxxxx Xxxxxxx Fund for The Metropolitan Museum of Art
Xxxx Xxxxxxx Xxxxxxx Fund for the New York Zoological Society
Xxxx Xxxxxxx and XxXxxx Xxxxxxx Fund for the Xxxxxx Highlands
Xxxx Xxxxxxx and XxXxxx Xxxxxxx Fund for Lincoln Center
Community Funds, Inc.
