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EXHIBIT 10.3
PC FLOWERS & GIFTS, INC.
STOCKHOLDERS AGREEMENT
THIS AGREEMENT is made as of July 9, 1998, by and among PC FLOWERS &
GIFTS, INC., a Delaware corporation (the "Corporation"), Xxxxxxx X. Xxxxx, a
stockholder and an employee of PC Flowers & Gifts, Inc. ("Xxxxx"), and Fingerhut
Companies, Inc., a Minnesota corporation ("Fingerhut"). Xxxxx and Fingerhut are
sometimes collectively referred to as the "Stockholders" and individually as a
"Stockholder." Capitalized terms used herein are defined in Section 18.
Contemporaneously with the execution of this Stockholders Agreement,
Fingerhut will purchase shares of the Corporation's Common Stock, without par
value (the "Common Stock"), pursuant to an Investor Subscription Agreement
between the Fingerhut, Tobin and the Corporation dated as of the date hereof
(the "Investment Agreement") and the Corporation is entering into a Warrant
Agreement with Fingerhut dated as of the date hereof (the "Warrant Agreement")
pursuant to which Fingerhut has the right to purchase additional shares of
Common Stock.
The Corporation and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) assuring continuity in the management and
ownership of the Corporation, (ii) limiting the manner and terms by which the
Stockholder Shares may be transferred, and (iii) providing Xxxxx with certain
registration rights. The execution and delivery of this Agreement is a condition
to the Investor's purchase of the Common Stock pursuant to the Investment
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Restrictions on Transfer of Executive Shares. The restrictions set
forth in this Section 1 shall apply to all Stockholder Shares until a Qualified
Public Offering or an Approved Sale of the Corporation (but shall not apply to
such Qualified Public Offering or Approved Sale).
(a) Prohibition Against Transfer of Stockholder Shares. No Stockholder
shall sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose
of (collectively, a "Transfer") any interest in any Stockholder Shares or
Options unless pursuant to either (i) a Public Sale, (ii) the provisions of
Sections 1(b) through l(e) hereof, (iii) a Transfer to the Other Stockholders,
or (iv) the Transfer in connection with a sale of securities pursuant to Section
2 or Section 3.
(b) Corporation Right of First Refusal. At least forty five (45) days
prior to making any Transfer of any Stockholder Shares (other than through
l(a)(i), (iii) or (iv) or to a Permitted Transferee), the transferring
Stockholder (the "Transferring Stockholder") shall deliver an Offer Notice to
the Corporation and the other Stockholders (the "Other Stockholders"). The Offer
Notice shall be deemed to be an offer of the subject Stockholder Shares to the
Corporation and
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the Other Stockholders on the same terms and conditions as proposed by the third
party. The Corporation may elect to purchase all, but not less than all, of the
Stockholder Shares specified in the Offer Notice at the price and on the terms
specified therein by delivering written notice of such election to the
Transferring Stockholder within twenty (20) days after the delivery of the Offer
Notice (the "Election Period"). The Corporation may also assign its right to
purchase all or a part of the Stockholder Shares subject to the Offer Notice to
Other Stockholders pursuant to the procedures in Section 1(c) hereof. The
purchase of the subject Stockholder Shares shall be made in accordance with
Section l(d) hereof.
(c) Other Stockholders Right of First Refusal. In the event the
Corporation does not elect to purchase all of the Stockholder Shares subject to
the Offer Notice, the Other Stockholders shall have the right, but not the
obligation, to purchase any remaining Stockholder Shares subject to the Offer
Notice. Upon the expiration of the Election Period, the Other Stockholders shall
have an additional five (5) days to notify the Transferring Stockholder of their
intention to acquire such remaining Stockholder Shares. Each Other Stockholder
may purchase his pro rata portion ("Pro Rata Portion") of such Stockholder
Shares by multiplying the number of such Stockholder Shares by a fraction, the
numerator of which is the number of Shares held by such Other Stockholder and
the denominator of which is the number of Shares held by all Other Stockholders.
If one or more of the Other Stockholders elects not to purchase its Pro Rata
Portion of such Shares (the "Remaining Shares"), the Other Stockholders who have
elected to purchase their Pro Rata Portion may also purchase their Pro Rata
Portion of the Remaining Shares in successive rounds until all such Remaining
Shares have been purchased; provided, however, that no such purchases shall be
made unless all such Stockholder Shares are to be purchased. The purchase of the
subject Stockholder Shares shall be made in accordance with Section 1(d) hereof.
(d) Procedures for Acquiring Stockholder Shares. If the Corporation (or
the Other Stockholders) has elected to purchase Stockholder Shares from the
Transferring Stockholder, the Transfer of such shares shall be consummated as
soon as practical after the delivery of the election notices, but in any event
within fifteen (15) days after the expiration of the Election Period. To the
extent that the Corporation (or the Other Stockholders) has not elected to
purchase all of the Stockholder Shares being offered, the Transferring
Stockholder may, within sixty (60) days after the expiration of the Election
Period, transfer the Shares subject to such notice to one or more third parties
at a price no less than the price per share specified in the Offer Notice and on
other terms no more favorable to the transferees than offered to the Corporation
in the Offer Notice, and such purchases shall be conditioned upon all purchasers
of Stockholder Shares executing a counterpart of this Agreement. In the event
the Offer Notice provides for any noncash consideration for the Stockholder
Shares, the Corporation and the Transferring Stockholder shall negotiate in good
faith to determine the all cash equivalent of the consideration proposed in the
Offer Notice. The Corporation and/or the Other Stockholders shall only be
required to pay cash for the Stockholder Shares acquired from the Transferring
Stockholder. At the closing of the purchase of Stockholder Shares, the
Transferring Stockholder shall provide representations and warranties as to his
title to such securities and that there are no liens or encumbrances on such
securities and shall sign such stock powers and other documents as may
reasonably be requested by the Corporation and/or the Other Stockholders.
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(e) Permitted Transfers. The restrictions contained in this Section 1
shall not apply to any Transfer of Stockholder Shares by Xxxxx pursuant to
applicable laws of descent and distribution or among such Xxxxx'x Family Group
or to Other Stockholder (a "Permitted Transferee"), provided that, in the case
of any of the foregoing Transfers the transferees of such Stockholder Shares
shall have agreed in writing to be bound by the provisions of this Agreement
affecting the Stockholder Shares so transferred.
(f) Put and Call of Stockholder Shares.
(i) If a Qualified Public Offering has not occurred prior to June
30, 2000, or if Xx. Xxxxxxx Xxxxxxx ceases to be President of Fingerhut,
Tobin shall have the right, at his discretion, exercisable within sixty
(60) days following the occurrence of either such event, to require the
Corporation to purchase at least one-half of the Stockholder Shares held
by Xxxxx and Xxxxx'x Family Group in the aggregate, at their fair market
value. For purpose of this Section 1(f), "fair market value" shall be
determined by two appraisers, one selected by Fingerhut and one selected
by Xxxxx, if they are the only Stockholders, or if they are not, then one
selected by the Transferring Stockholder and one by the Corporation. If
such two appraisers do not agree on the fair market value then the two
appraisers shall select a third appraiser whose determination of the fair
market value shall be binding. The closing on such purchase shall occur
within thirty (30) days following the final determination of the fair
market value.
(ii) If Xxxxx or Xxxxx'x Family Group exercises his put rights with
respect to less than all of the Stockholder Shares under subsection
(f)(i), then not later than one year after he has exercised such rights he
may require the Corporation to purchase all remaining Stockholder Shares
at the same price per share paid pursuant to subsection (f)(i). The
closing shall occur within thirty days after Xxxxx has given notice that
he has exercised such additional put right.
(iii) If Xxxxx or Xxxxx'x Family Group fails to exercise any rights
he has to require the Corporation to purchase his Stockholder Shares under
subsection (f)(ii), then within ninety days following September 1, 2001,
the Corporation has the right to require Xxxxx and Xxxxx'x Family Group to
sell to the Corporation all Stockholder Shares held by such persons at
their fair market value at September 1, 2001, determined as provided in
Section (f)(i).
(iv) If a Qualified Public Offering has not occurred prior to
September 1, 2001, the Corporation has the right within ninety days
following September 1, 2001 to require Xxxxx and Xxxxx'x Family Group to
sell to the Corporation all Stockholder Shares held by such persons at
their fair market value at September 1, 2001, determined as provided in
Section (f)(i).
(v) If Xxxxx breaches the provisions of Section 7 of the Employment
Agreement, the Corporation has the right to require Xxxxx and Xxxxx'x
Family Group to sell to the Corporation all Stockholder Shares held by
such persons at their fair market value at the date of such event,
determined as provided in Section (f)(i).
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(vi) If Xxxxx or Xxxxx'x Family Group exercises his put right with
respect to less than all of the Stockholder Shares under Subsection
(f)(i), then any rights which Xxxxx or Xxxxx'x Family Group may have under
Sections 4 and 6 shall terminate.
(g) Termination of Restrictions. The restrictions on the Transfer of
Stockholder Shares set forth in this Section 1 shall continue with respect to
each Stockholder Share until the date on which such Stockholder Share has been
transferred in a Public Sale or pursuant to Section 2 or 3, or the Corporation's
consummation of a Qualified Public Offering.
2. Drag-Along Rights.
(a) In the event of an Approved Sale to an Independent Third Party, the
Corporation shall deliver twenty (20) days' prior written notice thereof to each
Stockholder. Each holder of Stockholder Shares shall vote for, consent to and
raise no objections to, bring a claim against or contest such Approved Sale. If
the Approved Sale is structured as (i) a merger or consolidation, each holder of
Stockholder Shares shall waive any dissenters rights, appraisal rights or
similar rights in connection with such merger or consolidation; or (ii) a sale
of stock, each holder of Stockholder Shares shall (A) agree to sell all of his
Stockholder Shares and rights to acquire Stockholder Shares on the terms and
conditions approved by the Board and the holders of a majority of the
Stockholder Shares then outstanding so long as such terms and conditions are as
least as favorable as for all Stockholders and (B) execute such purchase
agreement and other documents as executed by the holders of a majority of the
Stockholder Shares. Each holder of Stockholder Shares shall take such other
necessary or desirable actions in connection with the consummation of the
Approved Sale as reasonably requested by the Corporation.
(b) The obligations of the holders of Stockholder Shares with respect to
the Approved Sale of the Corporation are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, each
holder of Stockholder Shares shall receive for his Stockholder Shares the same
form of consideration and the same amount of consideration as the holders of
Stockholder Shares receive for each of their Stockholder Shares; (ii) if any
holders of a class of Common Stock are given an option as to the form and amount
of consideration to be received, each holder of such class of Common Stock shall
be given the same option; and (iii) each holder of then currently exercisable
rights to acquire shares of a class of Common Stock shall be given an
opportunity to either (A) exercise such rights prior to the consummation of the
Approved Sale or (B) receive in exchange for such rights consideration equal to
the amount determined by multiplying (1) the same amount of consideration per
share of a class of Common Stock received by holders of such class of Common
Stock in connection with the Approved Sale less the exercise price per share of
such class of Common Stock of such rights to acquire such class of Common Stock
by (2) the number of shares of such class of Common Stock represented by such
rights.
3. Tag-Along Rights. If (a) any Stockholder proposes to Transfer (other
than pursuant to a Public Sale or pursuant to Section 1(e)) at any time any of
its shares of Common Stock to any Independent Third Party, (b) the Corporation
has not exercised any rights pursuant to Section 1(b), and (c) the Other
Stockholders have not exercised their rights pursuant to Section 1(c), then the
Transferring Stockholder may transfer his Stockholder Shares provided it
complies
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with the provisions of this Section 3. First (to the extent not already done so
pursuant to Section 1(b)), the Transferring Stockholder shall first give to the
Corporation and the Other Shareholders an Offer Notice. The Offer Notice shall
be an offer by the Transferring Stockholder to allow the Other Stockholders to
participate, upon the purchase by the proposed transferee of any shares of
Common Stock owned by the Transferring Stockholder and for the same per share
consideration and on the same terms and conditions. Each Stockholder shall have
the right, for a period of fifteen (15) days after the expiration of the
Election Period, to accept such offer in whole, exercisable by delivering a
written notice to the Transferring Stockholder and the Corporation within such
15-day period. Prior to the earlier of (x) the end of such 15-day period or (y)
the acceptance or rejection by each Stockholder of the Transferring
Stockholder's offer, as the case may be, the Transferring Stockholder shall not
complete any sale of shares of Common Stock to the proposed transferee.
At the end of such fifteen (15) day period the Corporation shall calculate
the total number of Stockholder Shares that are proposed to be sold. Each
Stockholder shall be entitled to sell to the proposed transferee that number of
Stockholder Shares (or if such number is not an integral number, the next
integral number which is greater than such number) which shall be the product of
(x) the aggregate number of Stockholder Shares proposed to be sold by such
Stockholder and (y) a fraction, the numerator of which shall be the number of
shares of Common Stock indicated in the Offer Notice as subject to purchase by
the proposed transferee and the denominator of which shall be the total number
of Stockholder Shares proposed to be sold by all Stockholders. Thereafter, for a
period of 120 days, the Transferring Stockholder may sell to the proposed
transferee for the consideration stated and on terms no more favorable to the
proposed transferee than those set forth in the Offer Notice, shares of Common
Stock stated in the Offer Notice as subject to purchase by the proposed
transferee; provided that the proposed transferee, as the case may be, shall
simultaneously purchase the number of shares of Common Stock as calculated above
from those Stockholders who have accepted the Transferring Stockholder's offer.
Any purchaser of Stockholder Shares pursuant to this Section 3 shall be subject
to, and have the rights and benefits of, the terms and conditions of this
Agreement.
4. Stockholder Preemptive Rights. Subject to Section 4(d), prior to the
earlier of a Qualified Public Offering or a Sale of the Corporation, and for so
long as any Stockholder owns any Stockholder Shares, each time the Corporation
proposes to sell shares of its capital stock, or securities convertible into
capital stock, for cash, the Corporation shall also make an offering of such
shares or securities to the Stockholders in accordance with the following
provisions:
(a) The Corporation shall deliver a notice to each Stockholder stating the
number of shares to be offered and the price and the terms on which it proposes
to offer such shares. Such notice shall be sent to the addresses set forth in
the records of the Corporation.
(b) Within 15 days after delivery of the notice, each Stockholder may
elect to purchase, at the price and on the terms specified in the notice, up to
its Pro Rata Portion of such shares by delivering written notice of such
election to the Corporation within such 15 calendar days.
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(c) Any shares referred to in the notice that are not elected to be
purchased as provided in subsection (b) above may, during the 180-day period
thereafter, be offered by the Corporation to any other person or persons at a
price not less than, and on terms no more favorable to the offeree than, those
specified in the notice.
(d) The preemptive rights set forth in this Section 4 shall not be
applicable to the issuance of (i) up to 188 shares, (which represents
approximately 7% of the fully diluted outstanding shares as of the date hereof)
(appropriately adjusted for any stock dividend, stock split or recapitalization)
of Common Stock to directors, officers, or employees of the Corporation pursuant
to the Corporation's stock option plans, (ii) shares of Common Stock issuable
upon exercise of the Warrants, (iii) capital stock in connection with a merger,
acquisition, plan of exchange or consolidation of the Corporation, or (iv) any
sale of securities to be issued pursuant to a registration statement filed
pursuant to the Securities Act with the Securities and Exchange Commission, or
(v) shares of Common Stock issued to consultants to the Corporation as payment
for services rendered.
5. Special Voting Requirements.
(a) From and after the date hereof and until the earlier to occur of a
Qualified Public Offering or a Sale of the Corporation, each Stockholder shall
vote all of his Stockholder Shares and any other voting securities of the
Corporation over which such Stockholder has voting control and shall take all
other necessary or desirable actions within his control (whether in his capacity
as a stockholder, director, member of a Board of Directors committee or officer
of the Corporation or otherwise, and including, without limitation, attendance
at meetings in person or by proxy for purposes of obtaining a quorum and
execution of written consents in lieu of meetings), and the Corporation shall
take all necessary and desirable actions within its control (including, without
limitation, calling special board and stockholder meetings), to effect the
following:
(i) The number of directors on the Board shall be five
directors.
(ii) The following persons shall be elected to the Board:
(A) three representatives designated by Xxxxx until such
time as Fingerhut owns more than fifty percent (50%) of the
outstanding shares of Common Stock, and thereafter two
directors; and
(B) two representative designated by Fingerhut until
such time as Fingerhut owns more than fifty percent (50%) of
the outstanding shares of Common Stock, and thereafter three
directors.
(iii) Nothing herein shall preclude the Board or the
Stockholders from removing a Director for cause under Delaware law.
(iv) In the event that any representative designated hereunder
by Fingerhut or Xxxxx for any reason ceases to serve as a member of
the Board during his term of office, the resulting vacancy on the
Board shall be filled by a
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representative designated by Fingerhut or by Xxxxx, respectively, as
provided hereunder; provided that any representative removed for
cause shall not be designated again as a member of the Board.
(v) The Board shall not appoint any committee with the
authority to act on behalf of the Board without the consent of the
Directors designated by Fingerhut and Xxxxx.
(b) From and after the date hereof until the earlier to occur of a
Qualified Public Offering, a Sale of the Corporation or the exercise by
Fingerhut of all of its rights to purchase Common Stock pursuant to the Warrant
Agreement, each of the following actions shall require the approval of Xxxxx and
Fingerhut, or their designated directors, as applicable:
(i) the pledge or sale of all or substantially all of the
assets of the Corporation;
(ii) the merger of the Corporation with or into another
corporation or legal entity;
(iii) any amendment of the certificate of incorporation or
by-laws of the Corporation;
(iv) the issuance of any shares of Common Stock or securities
unavailable into Common Stock;
(v) the selection of officers of the Corporation; or
(vi) the entering into line of business other than the sale of
flowers and gifts.
(c) The rights of Xxxxx under this paragraph 5 shall terminate at such
time as he or his Permitted Transferees cease to hold 10% in the aggregate of
the outstanding shares of Common Stock or upon payment by the Corporation for
Stockholder Shares under Section 1(f)(i).
(d) Actions Consistent with Agreement. The Corporation shall not
circumvent this Agreement by taking any action through a subsidiary or affiliate
that would be prohibited under this Agreement.
6. Demand Registrations.
(a) Requests for Registration. At any one time Xxxxx may request
registration under the Securities Act of all or part of his Stockholder Shares
in a number not less than ten percent (10%) of the Stockholder Shares originally
issued to Xxxxx and not to exceed fifty percent (50%) of such number. A
registration requested pursuant to this paragraph 6(a) is referred to herein as
the "Demand Registration." The request for a Demand Registration shall specify
the approximate number of Stockholder Shares requested to be registered and the
requested per share price range,
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if any, for such offering. The Demand Right is not exercisable during the period
specified in Section 8 hereof.
(b) Priority on Demand Registrations. Upon the Corporation's commencement
of a Demand Registration the Corporation shall mail notice thereof to all
Stockholders and the Stockholders shall have twenty (20) days after such mailing
date to notify the Corporation of the number of shares they desire to sell in
such offering. If a Demand Registration is an underwritten offering and the
managing underwriters advise the Corporation in writing that in their opinion
the number of registrable securities and, if permitted hereunder, other
securities requested to be included in such offering exceeds the number of
securities which can be sold in an orderly manner in such offering within a
price range acceptable to Xxxxx, the Corporation shall include in such
registration prior to the inclusion of any securities which are not Stockholder
Shares owned by Xxxxx the number of Stockholder Shares owned by Xxxxx requested
to be included which in the opinion of such underwriters can be sold in an
orderly manner within the price range of such offering. Any persons other than
Xxxxx who participate in Demand Registrations which are not at the Corporation's
expense must pay their share of the Registration Expenses as provided in Section
10 hereof.
(c) Restrictions on the Demand Registration. The Corporation shall not be
obligated to effect any Demand Registration within six (6) months after the
effective date of a previous underwritten registration of equity securities. The
Corporation may postpone for up to six (6) months the filing or the
effectiveness of a registration statement for a Demand Registration if the
Corporation notifies Xxxxx that such Demand Registration would reasonably be
expected to have an adverse effect on any business plan of the Corporation or
any of its subsidiaries; provided that in such event, Xxxxx will be entitled to
withdraw such request and, if such request is withdrawn, such Demand
Registration will not count as the permitted Demand Registrations hereunder and
the Corporation shall pay all Registration Expenses in connection with such
registration.
(d) Selection of Underwriters. The Corporation will have the right to
select the investment banker(s) and manager(s) to administer any offerings.
7. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Corporation proposes to register any
of its Common Stock under the Securities Act (other than the initial public
offering, pursuant to a Demand Registration, an acquisition of or a merger with
another entity including, without limitation, a purchase of stock or assets or a
transaction described under Rule 145 of the Securities Act, a transaction
registering securities convertible into Common Stock or pursuant to Form S-8 or
its successor forms) and the registration form to be used may be used for the
registration of the Stockholder Shares of the Stockholders (a "Piggyback
Registration"), the Corporation shall give prompt written notice to the
Stockholders of its intention to effect such a registration and will include in
such registration the Stockholder Shares of the Stockholders with respect to
which the Corporation has received written requests for inclusion therein within
fifteen (15) days after the receipt of the Corporation's notice.
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(b) Piggyback Expenses. The Registration Expenses of the Stockholders
shall be paid by the Corporation in all Piggyback Registrations.
(c) Proration of Eligible Shares. In the event of any registration
pursuant to this Section 7 the full amount of the Stockholder Shares requested
to be included in such registration cannot be included in full, then the number
of Stockholder Shares available for registration shall be allocated among such
group pro rata based upon the number of Stockholder Shares requested to be
included in such registration.
8. Lockup Agreement.
Each Stockholder agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of the Corporation,
or any securities convertible into or exchangeable or exercisable for such
securities, during the 30-day period prior to and the 180-day period beginning
on the effective date of any (i) underwritten Demand Registration or any
underwritten Piggyback Registration in which Stockholder Shares are included
(except as part of such underwritten registration) or (ii) the initial public
offering, in each case unless the underwriters managing the registered public
offering and the Corporation otherwise agree.
9. Registration Procedures. Whenever a Stockholder has requested that any
securities be registered pursuant to this Agreement, the Corporation shall use
its best efforts to effect the registration and the sale of such securities in
accordance with the intended method of disposition thereof, and pursuant thereto
the Corporation shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Corporation shall furnish to the counsel selected by the
Stockholder covered by such registration statement copies of all such documents
proposed to be filed, which documents will be subject to the review and comment
of such counsel);
(b) prepare and file with the Securities and Exchange Commission 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 for a period of not less than six months and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) keep the Stockholder fully informed and provide copies of all material
correspondence and drafts of documents related to such registration and furnish
to each seller of securities such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as such seller may reasonably request in order to facilitate the
disposition of the securities owned by such seller;
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(d) use its best efforts to register or qualify such securities under such
other securities or blue sky laws of such jurisdictions as any seller reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the securities owned by such seller (provided that the
Corporation shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction);
(e) notify each seller of Stockholder Shares, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Corporation shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Stockholder Shares, such prospectus will not contain an untrue statement
of a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) provide a transfer agent and registrar for all such securities not
later than the effective date of such registration statement;
(g) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Investor or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such securities (including, without limitation, effecting a
stock split or a combination of shares);
(h) make available for inspection by any seller of securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Corporation, and cause the Corporation's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(i) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Corporation's first full calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(j) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Corporation shall use its best efforts promptly to obtain the
withdrawal of such order; and
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(k) obtain a cold comfort letter from the Corporation's independent public
accountants in customary form and covering such matters of the type customarily
covered by cold comfort letters.
10. Registration Expenses.
(a) All expenses incident to the Corporation's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Corporation and all independent certified
public accountants, underwriters (excluding discounts and commissions) and other
persons retained by the Corporation (all such expenses being herein called
"Registration Expenses"), shall be borne as provided in this Agreement, except
that the Corporation shall, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange on
which similar securities issued by the Corporation are then listed or on the
Nasdaq-related system.
(b) To the extent Registration Expenses are not required to be paid by the
Corporation, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
11. Indemnification.
(a) The Corporation agrees to indemnify, to the extent permitted by law,
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Corporation by Xxxxx expressly for use
therein or by Xxxxx'x failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Corporation has
furnished Xxxxx with a sufficient number of copies of the same. In connection
with an underwritten offering, the Corporation shall indemnify such
underwriters, their officers and directors and each person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of Xxxxx.
(b) In connection with any registration statement in which Xxxxx is
participating, Xxxxx shall furnish to the Corporation in writing such powers of
attorney, custody agreements and letters of direction and other information and
affidavits as the Corporation reasonably requests for use in connection with any
such registration statement or prospectus and, to the extent permitted by law,
shall only have to indemnify the Corporation, its directors and officers
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and each person who controls the Corporation (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, a prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in writing by
Xxxxx to the Corporation for specific use in such registration statement,
prospectus or amendment or supplement thereto and which remained in the final
prospectus delivered to the purchaser of such securities.
(c) Any person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party shall not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent shall not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim shall not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and shall survive the transfer of securities. The Corporation
also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Corporation's
indemnification is unavailable for any reason.
12. Participation in Underwritten Registrations. No person may participate
in any registration hereunder which is underwritten unless such person (i)
agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the person or persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of securities included in any underwritten registration shall be required
to make any representations or warranties to the Corporation or the underwriters
other than representations and warranties regarding such holder and such
holder's intended method of distribution.
13. Legend. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the Transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN AN INVESTOR SUBSCRIPTION AGREEMENT AND/OR A
STOCKHOLDERS AGREEMENT. A COPY OF SUCH AGREEMENTS MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE. "
The Corporation shall imprint such legend on certificates evidencing
outstanding Stockholder Shares. The legend set forth above shall be removed from
the certificates evidencing any shares which cease to be Stockholder Shares
pursuant to a Public Sale.
14. Confidentiality. All materials and information obtained by any
Stockholder pursuant to this Agreement or otherwise delivered by the Corporation
to any Stockholders shall be kept confidential and shall not be disclosed to any
third party except (a) as has become generally available to the public (other
than through disclosure by such Stockholder in contravention of this Agreement),
(b) to such Stockholder's directors, officers, trustees, partners, employees,
agents and professional consultants on a need to know basis, (c) to any other
holder of Common Stock, (d) to any person to which such Stockholder offers to
sell or transfer any shares of Common Stock, provided, that the prospective
transferee shall agree to be bound by the provisions of this Section 14, (e) in
any report, statement, testimony or other submission to any governmental
authority having or claiming to have jurisdiction over such Stockholder, or (f)
in order to comply with any law, rule, regulation or order applicable to such
Stockholder, or in response to any summons, subpoena or other legal process or
formal or informal investigative demand issued to such Stockholder in the course
of any litigation, investigation or administrative proceeding.
15. Conflicting Agreements. Each Stockholder represents that it has not
granted and is not a party to any proxy, voting trust or other agreement which
is inconsistent with or conflicts with the provisions of this Agreement, and no
holder of Stockholder Shares shall grant any proxy or become party to any voting
trust or other agreement which is inconsistent with or conflicts with the
provisions of this Agreement. No Stockholder shall act, for any reason, as a
member of a group or in concert or enter into any agreement or arrangement with
any other person in connection with the acquisition, disposition or voting of
Stockholder Shares in any manner which is inconsistent with the provisions of
this Agreement.
16. Actions Consistent with Agreement. The Corporation shall not
circumvent this Agreement by taking any action through a subsidiary or affiliate
that would be prohibited under this Agreement. The certificate of incorporation
and bylaws of the Corporation may be amended in any manner permitted thereunder,
except that neither the certificate nor the bylaws shall be
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amended in any manner that would conflict with, or be inconsistent with, the
provisions of this Agreement.
17. Transfer. Prior to transferring any Stockholder Shares (other than in
a Public Sale) to any person or entity pursuant to the terms of this Agreement,
the Transferring Stockholder shall cause the prospective transferee to execute
and deliver to the Corporation and the other Stockholders a counterpart of this
Agreement. Each such counterpart shall be deemed to be an original part of this
Agreement as though executed on the date hereof. Upon the execution of this
Agreement (a) the transferee shall be treated as an Investor if the majority of
its shares were acquired from the Investors and shall be counted in all votes or
actions of the Investors or (b) the transferee shall be treated as an Executive
if the majority of its shares were acquired from the Executives and shall be
counted in all votes or actions of the Executives.
18. Definitions.
"Approved Sale" means a disposition of the Corporation, whether
pursuant to a merger, consolidation or sale of the Common Stock, to an
Independent Third Party, which disposition is approved by the Board of Directors
of the Corporation and the holders of a majority of the outstanding shares of
Common Stock.
"Common Stock" is defined in the preamble to the Agreement.
"Corporation" is defined in the preamble and shall include all of
the Corporation's subsidiaries.
"Demand Registration" is defined in Section 6(a).
"Director" is defined Section 5(a)(ii).
"Election Period" is defined in Section l(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Family Group" means a Stockholder's spouse and descendants (whether
natural or adopted) and any trust solely for the benefit of the Stockholder
and/or the Stockholder's spouse and/or descendants.
"Fingerhut" is defined in the preamble.
"Independent Third Party" means any person who, immediately prior to
the contemplated transaction, does not directly or indirectly own in excess of
5% of the Corporation's Common Stock on a fully-diluted basis (a "5% Owner)",
who is not controlling, controlled by or under common control with any such 5%
Owner and who is not the spouse or descendent (by birth or adoption) of any such
5% Owner or a trust for the benefit of such 5% Owner and/or such other persons.
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"Investment Agreement" is defined in the preamble.
"Nasdaq" is defined in Section 9(f).
"Offer Notice" means the notice required to be given by a
Transferring Stockholder to the Corporation and/or the Other Stockholders
describing a proposed Transfer. At a minimum, the Offer Notice shall be in
writing and shall contain (i) the number of shares of Common Stock that the
Transferring Stockholder proposes to sell; (ii) the name and address of the
proposed transferee; (iii) the proposed purchase price, terms of payment and
other material terms and conditions of such proposed transfer; and (iv) an
estimate, in the Transferring Stockholder's reasonable judgment, of the fair
market value of any non-cash consideration offered by the proposed transferee.
"Option" means any right, warrant, option or arrangement which
allows a person to acquire securities of the Corporation or requires the
Corporation to issue any securities to a Person.
"Other Stockholders" is defined in Section l(b).
"Permitted Transferee" is defined in Section l(e).
"Piggyback Registration" is defined in Section 7(a).
"Pro Rata Portion" is defined in Section l(c).
"Public Sale" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"Qualified Public Offering" means the sale in one or more
underwritten public offerings registered under the Securities Act of shares of
the Corporation's Common Stock having an aggregate value of at least $25
million.
"Registration Expenses" is defined in Section 10(a).
"Remaining Shares" is defined in Section l(c).
"Sale of the Corporation" means the sale of the Corporation to an
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Corporation possessing
the voting power under normal circumstances to elect a majority of the
Corporation's Board of Directors (whether by merger, consolidation or sale or
transfer of the Corporation's capital stock) or (ii) all or substantially all of
the Corporation's assets determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
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"Stockholder" is defined in the preamble and includes permitted
successors and assigns.
"Stockholders" is defined in the preamble.
"Stockholder Shares" means (i) any Common Stock purchased or
otherwise acquired by any Stockholder, (ii) any equity securities issued or
issuable directly or indirectly with respect to the Common Stock referred to in
clause (i) above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of any class or series of capital
stock of the Corporation held by a Stockholder. As to any particular shares
constituting Stockholder Shares, such shares shall cease to be Stockholder
Shares when they have been sold to the public through a Public Sale even if
thereafter they are reacquired by a Stockholder.
"Xxxxx" is defined in the preamble.
"Transfer" is defined in Section l(a).
"Transferring Stockholder" is defined in Section l(b).
"Warrant Agreement" is defined in the preamble.
19. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Corporation shall not record such Transfer on
its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
20. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Corporation, Fingerhut or Xxxxx unless such modification,
amendment, termination or waiver is approved in writing by the Corporation,
Fingerhut or Xxxxx; provided, however, that the Corporation may from time to
time add additional shareholders of the Corporation to this Agreement without
the consent or additional signatures of the parties hereto (and amend and/or
restate the Agreement to reflect such additions) and upon the Corporation's
receipt of such additional stockholders' signature pages, such additional
stockholders shall be deemed to be a party hereto and such additional signature
pages shall be a part of this Agreement. The failure of any party to enforce any
of the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
21. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
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22. Entire Agreement. This document embodies the complete agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
23. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Corporation and its successors and assigns and the Stockholders and any
permitted subsequent holders of Stockholder Shares and the respective successors
and permitted assigns of each of them, so long as they hold Stockholder Shares.
24. Counterparts. This Agreement may be executed in separate counterparts
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
25. Remedies. The Corporation, Fingerhut and Xxxxx shall be entitled to
enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that the Corporation, Fingerhut and Xxxxx may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
26. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed first class mail (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) to the
Corporation at the address set forth below and to any other recipient at the
address indicated on Schedule 1 hereto and to any subsequent holder of
Stockholder Shares subject to this Agreement at such address as indicated by the
Corporation's records, or at such address or to the attention of such other
person as the recipient party has specified by prior written notice to the
sending party. Notices will be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service. The Corporation's
address is:
PC Flowers & Gifts, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
27. Governing Law. This Agreement will be construed and interpreted in
accordance with and governed by the laws of the State of Delaware.
28. Termination. The provisions of Sections 1, 2, 3, 4, 5, 14 and 15 shall
terminate on the date on which any of the following events first occurs: (i) a
Qualified Public Offering (or, with respect to an individual Stockholder Share,
the date such Stockholder Share has been transferred in a Public Sale), (ii) a
Sale of the Corporation or (iii) the tenth anniversary of the
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date of this Agreement. The remaining sections of this Agreement expire on the
tenth anniversary of the date of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement on the day and year first above written.
FINGERHUT COMPANIES, INC.
By: /s/ Xxxxxxx Xxxxxxx JP
---------------------------------
PC FLOWERS & GIFTS, INC.
By: /s/ Xxxxxxx X. Xxxxx Pres
---------------------------------
/s/ Xxxxxxx X. Xxxxx
------------------------------------
Xxxxxxx X. Xxxxx
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SCHEDULE 1
List of Shareholders
Name Address
---- -------
Xxxxxxx X. Xxxxx PC Flowers & Gifts, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fingerhut Companies, Inc. 0000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
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