Exhibit 10.26.1
SHAREHOLDER AGREEMENT dated as of January 1,
2000 (this "Agreement"), among EAC III L.L.C., a
Delaware limited liability company (the "Ripplewood
Shareholder"), each individual (each a "Management
Shareholder" and, collectively with the Ripplewood
Shareholder, the "Shareholders") listed on Schedule I
attached hereto ("Schedule I") and WRC Media Inc.
(formerly named EAC II Inc.), a Delaware corporation
(the "Company").
In consideration of the mutual agreements herein contained,
and other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS, USAGE AND EQUITY INVESTMENT
SECTION 1.01. DEFINED TERMS. The following terms
shall have the following meanings:
"Affiliate" means, with respect to any specified Person, any
other Person that directly or indirectly, through one or more intermediaries,
Controls, is Controlled by, or is under Common Control with, such specified
Person. For purposes of this definition, "Control (including, with correlative
meanings, the terms "Controlled by" and "under Common Control with"), as used
with respect to any Person, means the direct or indirect possession of the power
to direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Board of Directors" means the Board of Directors of the
Company.
"Change of Control" has the meaning set forth in Section 1.03.
"Closing Date" means November 17, 1999.
"Company Common Stock" has the meaning set forth in Section
1.03.
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"Direct Transfer" means a Transfer (without giving effect to
the second sentence of the definition of "Transfer").
"Drag-Along Notice" has the meaning set forth in Section
2.01(f).
"Employment Agreement" means, with respect to each Management
Shareholder, the Employment Agreement between such Management Shareholder and
the Company or that subsidiary of the Company employing such Management
Shareholder.
"Executive" has the meaning set forth in the Executive
Shareholder Agreement.
"Executive Shareholder Agreement" means the Shareholder
Agreement dated as of November 17, 1999, among the Ripplewood Shareholder,
Xxxxxx Xxxxxx and the Company.
"Fair Market Value" means the fair market value of a Share,
determined in accordance with Section 2.01(g).
"GCL" means the General Corporation Law of the State of
Delaware (8 Del. C. Section 101, ET SEQ.), as amended from time to time and
any successor statute thereto.
"Involuntary Transfer" means any Transfer by any Shareholder
of any Shares, or of any beneficial ownership thereof, upon death, appointment
of a guardian, default, foreclosure, forfeit, bankruptcy (voluntary or
involuntary), court order, levy of attachment, execution or otherwise than
voluntarily by the Transferor; PROVIDED that a Transfer required pursuant to
Section 2.01(f) shall not be deemed an Involuntary Transfer.
"Management Shareholder" has the meaning set forth in the
preamble to this Agreement.
"Other Management Shareholders" means those persons listed on
Schedule I to the Other Management Shareholder Agreement.
"Other Management Shareholder Agreement" means the Shareholder
Agreement dated as of November 17, 1999, among the Ripplewood Shareholder, the
Other Management Shareholders and the Company.
"Permitted Transferee" means, (i) with respect to the
Ripplewood Shareholder, (A) Ripplewood or an Affiliate of Ripplewood, (B) a
shareholder, partner, member or
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employee of Ripplewood or any Affiliate of Ripplewood or (C) an employee of the
Company or a Subsidiary of the Company and (ii) with respect to each Management
Shareholder, (A) another Shareholder, (B) the Executive, (C) the Company or (D)
such Management Shareholder's spouse or lineal descendants or any trust the
beneficiaries of which include only such Management Shareholder's spouse or
lineal descendants.
"Person" means any individual, corporation, partnership,
trust, association, limited liability company, joint venture, joint-stock
company or any other entity or organization, including a government or
governmental agency.
"Preferred Stock" means the 15% Senior Exchangeable Preferred
Stock Due 2011, par value $0.01 per share, of the Company.
"Purchase Agreement" means the Redemption, Stock Purchase and
Recapitalization Agreement dated as of August 13, 1999, between PRIMEDIA Inc., a
Delaware corporation, and the Company, as amended.
"Ripplewood" means Ripplewood Partners, L.P.
"Ripplewood Shareholder" has the meaning set forth in the
preamble to this Agreement.
"Shares" means the shares of Company Common Stock held by a
Shareholder.
"Shareholders" has the meaning set forth in the preamble to
this Agreement.
"Subsidiary" means, with respect to any specified Person,
another Person, an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect at least a majority
of its board of directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first Person or by another Subsidiary of such
first Person.
"Tag-Along Notice" has the meaning set forth in Section
2.01(e).
"Third Party Purchaser" means, with respect to any proposed
sale of Shares by a Shareholder, a Person, other than an Affiliate of such
Shareholder, who offers to purchase from such Shareholder such Shares pursuant
to a bona fide written offer.
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"Transfer" means any transfer, sale, conveyance, assignment,
gift, hypothecation, pledge or other disposition, whether voluntary or by
operation of law, of a Share. Notwithstanding the foregoing, any transfer, sale,
conveyance, assignment, gift, hypothecation, pledge or other disposition,
whether voluntary or by operation of law, of any stock, partnership interest,
membership interest or any other ownership interest in any entity that is a
direct or indirect beneficial or record owner of any Share (including any
disposition by means of a merger, consolidation or similar transaction) or any
other transaction that has the economic effect of a Transfer of a Share
(including the designation of any beneficiary of any trust that is a direct or
indirect beneficial or record owner of any Share) shall be deemed to be a
Transfer of such Share by the Shareholder directly owning such Share.
"Transferee" means the transferee in a Transfer.
"Transferor" means the transferor in a Transfer.
SECTION 1.02. OTHER DEFINITION PROVISIONS. Wherever required
by the context of this Agreement, the singular shall include the plural, and
vice versa, and the masculine gender shall include the feminine and neuter
genders, and vice versa, and references to any agreement, document or instrument
shall be deemed to refer to such agreement, document or instrument as amended,
supplemented or modified from time to time. When used herein, (i) the word "or"
is not exclusive and (ii) the words "including," "includes," "included" and
"include" are deemed to be followed by the words "without limitation."
SECTION 1.03. (a) EQUITY INVESTMENT. As of the date hereof,
pursuant to each Management Shareholder's Employment Agreement, each Management
Shareholder is purchasing from EAC IV L.L.C., a Delaware limited liability
company, at a price of $18.60065 per share in cash the number of shares of
common stock, par value $0.01 per share ("Company Common Stock"), of the Company
set forth opposite such Management Shareholder's name under the column entitled
"Shares of Company Common Stock" on Schedule I.
(b) VOTING AGREEMENTS. Each Management Shareholder hereby
agrees with the Ripplewood Shareholder that from and after the date hereof: (a)
such Management Shareholder shall vote all of the Shares held by such Management
Shareholder (including shares acquired after the date hereof) in the same manner
as the Shares held by the Ripplewood Shareholder are voted on all matters acted
upon at any annual or special meeting of shareholders or by
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written consent in lieu of a meeting and (b) such Management Shareholder
irrevocably constitutes and appoints the Ripplewood Shareholder such Management
Shareholder's proxy to vote all of the Shares held by such Management
Shareholder in the same manner as the Shares held by the Ripplewood Shareholder
are voted on all matters acted upon at any annual or special meeting of
shareholders or by written consent in lieu of a meeting; PROVIDED that this
Section 1.03(b) shall be inapplicable with respect to any matters which would
both adversely affect the rights of the Shares held by such Management
Shareholder and treat such Management Shareholder differently from other holders
of shares of Company Common Stock. The voting agreements and proxies granted
pursuant to this Section 1.03(b) are coupled with an interest and shall be valid
for the term of this Agreement. Each Management Shareholder represents that such
Management Shareholder has not granted and is not a party to any proxy, voting
trust or other agreement which in each case is inconsistent with or conflicts
with the provisions of this Agreement, and such Management Shareholder shall not
grant any proxy or become a party to any voting trust or other agreement which
in each case is inconsistent with or conflicts with the provisions of this
Agreement. The provisions of this Section 1.03(b) shall terminate as to any
Shares held by a Management Shareholder upon any Transfer of such Shares after,
or upon, completion of an initial public offering of shares of Company Common
Stock and the termination of any lock up period agreed to by such Management
Shareholder with the underwriters in connection therewith.
(c) OPTIONS. Each Management Shareholder is hereby granted a
nonqualified option to purchase that number of shares of Company Common Stock
set forth opposite such Management Shareholder's name under the column entitled
"Options" on Schedule I, at an exercise price per share of $18.60065 per share.
To the extent such Management Shareholder continues employment under the
Employment Agreement of such Management Shareholder, such option shall vest 33%
immediately, 33% on December 31, 2000 and, if the Company renews such Management
Shareholder's Employment Agreement as set forth in Section 2 of such Employment
Agreement for an additional one-year period ending on December 31, 2002, 34% on
December 31, 2001; PROVIDED that such option shall terminate in its entirety in
the event that such Management Shareholder's employment by the Company or the
applicable subsidiary of the Company is terminated by the Company or such
subsidiary with Good Cause (as defined in such Management Shareholder's
Employment Agreement) (other than pursuant to clause (v) thereof). Such option
shall vest immediately in the event that such Management
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Shareholder's employment under such Employment Agreement is terminated (x)
pursuant to clause (v) of the definition of Good Cause in such Employment
Agreement or (y) prior to December 31, 2001 by the Company for any reason other
than Good Cause following a Change of Control (as defined below). Such
Management Shareholder may exercise the vested portion of such option either (i)
by notifying the Company of the number of shares of Company Common Stock to be
purchased under such option and delivering with such notice an amount equal to
the aggregate exercise price for such number of shares in cash or (ii) by
notifying the Company that such Management Shareholder desires to make a
cashless exercise of such option with respect to a specified number of shares of
Company Common Stock, in which case such option shall be deemed exercised with
respect to such specified number of shares but such Management Shareholder shall
only be entitled to receive a number of shares of Company Common Stock equal to
the product of (A) such specified number multiplied by (B) the quotient of (1)
the aggregate Fair Market Value of such specified number of shares of Company
Common Stock (determined as of the date the Company receives such notice in
accordance with Section 2.01(g)) minus the aggregate exercise price for such
specified number of shares divided by (2) such aggregate Fair Market Value. Such
option shall not be transferable or assignable by such Management Shareholder,
otherwise than by will or the laws of descent and distribution, and no such
option shall be subject to execution, attachment or other similar process. In no
event shall any such option be exercisable on or after the tenth anniversary of
the Closing Date. In the event of changes in outstanding Company Common Stock by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations or
other changes in capitalization occurring after the date hereof, the number of
shares and exercise price under such option shall be equitably adjusted by the
Board of Directors of the Company. Any amount payable under such option shall be
subject to applicable withholding taxes. "CHANGE OF CONTROL" shall mean the
acquisition of direct or indirect Control of the Company by any Person (other
than the Ripplewood Shareholder, SGC Partners II LLC ("SGC") or any of their
Affiliates or any group (other than any group including the Ripplewood
Shareholder or SGC or any of their Affiliates).
(d) RULE 701. To the extent permitted by applicable law, the
shares of Company Common Stock to be issued to each Management Shareholder upon
exercise of the options granted to such Management Shareholder pursuant to
Section 1.03(c) shall be offered and sold to such Management Shareholder
pursuant to the exemption from the registration
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requirements of the Securities Act of 1933, as amended (the "Securities Act")
provided for by Rule 701 ("Rule 701") of the Securities Act.
ARTICLE II
TRANSFERS OF SHARES; TRANSACTIONS
BETWEEN RIPPLEWOOD SHAREHOLDER AND THE COMPANY
SECTION 2.01. TRANSFERS OF THE COMPANY SHARES.
(a) GENERALLY. (i) No Shareholder may Transfer all or any
portion of its Shares (or any beneficial ownership thereof) unless (A) such
Transfer is in accordance with this Section 2.01, (B) in the case of a Direct
Transfer (other than pursuant to Section (e) or (f) or if the Board of Directors
shall otherwise agree), the Transferee executes and delivers a counterpart of
the signature page of this Agreement (or other appropriate assumption agreement)
in which the Transferee agrees to be bound by the provisions of this Agreement
to the same extent as the Transferor and providing the address for notices of
such Transferee and (C) the Transferee executes and delivers any other
agreements, documents or instruments reasonably specified by the Board of
Directors. Any Transfer made in violation of this Section 2.01(a) shall be null
and void and shall be subject to Section 2.01(d).
(ii) Whenever a Transfer is to be consummated by any Person on
a specified date under this Section 2.01, such Transfer shall take place at
10:00 a.m. Eastern Time on such date (or, if such date is not a business day,
the next following business day) at the principal office of Ripplewood,
presently located at One Rockefeller Plaza, New York, New York, or at such other
time, date and place as the Company and the parties to such Transfer may agree.
The consideration for such Transfer shall be paid by delivery to the applicable
Transferor of a certified or bank check made payable to such Transferor or by
wire transfer of immediately available funds to a bank account designated by
such Transferor, against due execution and delivery of the agreements, documents
and instruments specified in Section 2.01(a)(i), such other agreements,
documents and instruments as the parties to such Transfer may reasonably require
including certificates or other instruments representing the Shares so
purchased, appropriately endorsed by such Shareholder, free and clear of all
security interests, liens, claims, encumbrances, charges, options, restrictions
on transfer, proxies and voting and other
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agreements of whatever nature other than those created hereunder.
(iii) The provisions of this Section 2.01, other than Section
2.01 (e), (f), (g), (h) and (i), shall terminate upon the completion of an
initial public offering of shares of Company Common Stock by the Company and the
termination of any lockup period agreed to by the Management Shareholders with
the underwriters in connection therewith.
(b) TRANSFERS BY THE RIPPLEWOOD SHAREHOLDER. Subject to
Section 2.01(a) and, with respect to a Transfer to any Person other than a
Permitted Transferee of the Ripplewood Shareholder, Section 2.01(e), the
Ripplewood Shareholder (and its Permitted Transferees) shall have the right to
Transfer at any time all or any portion of its Shares (including any beneficial
ownership thereof) to any Person without the prior consent of any Person.
(c) TRANSFERS BY OTHER SHAREHOLDERS. (i) Subject to Section
2.01(a), any other Shareholder (and its Permitted Transferees) shall have the
right to Transfer at any time all or any portion of its Shares (including any
beneficial ownership thereof) to any of its Permitted Transferees without the
prior consent of any Person.
(ii) No Shareholder other than the Ripplewood Shareholder (or
the Ripplewood Shareholder's Permitted Transferees) shall have the right to
Transfer all or any portion of its Shares (including any beneficial ownership
thereof) to any Person other than another Shareholder or the Company except in
accordance with Section 2.01(a) and (A) pursuant to Section 2.01(c)(i), (e) or
(f) or (B) with the prior written consent of the Ripplewood Shareholder.
(d) INVOLUNTARY AND IMPERMISSIBLE TRANSFERS. If an Involuntary
Transfer or a Transfer in violation of this Agreement shall occur with respect
to any Shareholder other than the Ripplewood Shareholder and, in the case of a
Transfer in violation of this Agreement, such violation has not been cured
within 30 days after notice to the applicable Transferor or Transferee, the
Company shall give notice to the Ripplewood Shareholder, offering the Ripplewood
Shareholder (or its designee) the right, exercisable by delivery of written
notice to the Transferee with respect to such Involuntary Transfer or Transfer
in violation of this Agreement, within 90 days following the day on which such
notice is given, to purchase all of the Shares acquired by such Transferee at a
purchase price equal to, in the case of an Involuntary Transfer, 100% or, in the
case of a Transfer in violation of this Agreement, 90% of the Fair Market Value
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thereof, determined in accordance with Section 2.01(g) as of the date of such
Transfer (or, if lower, as of the date of such determination). The closing date
of any purchase described in this Section 2.01 shall be on the date specified by
the Company that shall not be later than the 30th day after a determination of
the Fair Market Value of the Shares to be purchased is made. The Ripplewood
Shareholder may assign its rights under this Section 2.01(d) to any person.
(e) TAG-ALONG RIGHTS. If the Ripplewood Shareholder desires to
Transfer in excess of 5% of its Shares to a prospective Transferee (or
Transferees) other than to a Permitted Transferee of the Ripplewood Shareholder
and, after giving effect to such Transfer, the Ripplewood Shareholder shall have
Transferred in excess of 35% in the aggregate of its Shares to a Transferee (or
Transferees) other than Permitted Transferees of the Ripplewood Shareholder, the
Ripplewood Shareholder shall, as a condition to such Transfer, (i) provide a
notice to all other Shareholders in writing (a "Tag-Along Notice") of the
material terms of the proposed Transfer at least 15 days prior to such Transfer
and (ii) permit all other Shareholders (or cause all other Shareholders to be
permitted) to sell (either to the prospective Transferee of the Ripplewood
Shareholder's Shares or to another financially reputable Transferee reasonably
acceptable to such other Shareholders) the same portion of their respective
Shares as that Transferred by the Ripplewood Shareholder in the aggregate to
Transferees other than Permitted Transferees of the Ripplewood Shareholder
(after giving effect to such proposed Transfer) on the same terms and
conditions, subject to the same agreements and at the same price as the proposed
sale by the Ripplewood Shareholder, which sale shall take place on the date the
Ripplewood Shareholder's Shares (or such portion) are Transferred to such
Transferee (or Transferees). Each other Shareholder shall have five days from
the date of receipt of a Tag-Along Notice to exercise its right to sell pursuant
to clause (ii) above by delivering written notice to the Ripplewood Shareholder
of its intent to exercise such right. The right of the other Shareholders to
sell pursuant to clause (ii) above shall terminate if not exercised within such
five-day period. Each other Shareholder electing to exercise its right to sell
pursuant to clause (ii) shall share, on a pro rata basis, the legal, investment
banking and other expenses of the Ripplewood Shareholder incurred in connection
with such Transfer.
(f) DRAG-ALONG RIGHTS. If at any time the Ripplewood
Shareholder desires to Transfer all (or any portion in excess of 35%) of its
Shares to any Third Party Purchaser (or Purchasers), the Ripplewood Shareholder
shall
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have the right to require that all other Shareholders Transfer the same portion
of their respective Shares to such Third Party Purchaser (or Purchasers) on the
same terms and conditions, subject to the same agreements and at the same price
as the sale by the Ripplewood Shareholder. The Ripplewood Shareholder shall
provide a notice to all other Shareholders in writing (a "Drag-Along Notice") of
such sale at least 10 days prior to such Transfer, and the Drag-Along Notice
shall identify such Third Party Purchaser (or Purchasers), all material terms of
the sale and the date of closing. Upon the closing of any sale by the Ripplewood
Shareholder of all (or such portion) of its Shares as described in a Drag-Along
Notice, such Third Party Purchaser (or Purchasers) shall pay to each other
Shareholder the consideration payable to such Shareholder in connection with
such sale of all (or such portion) of its Shares to such Purchaser (or
Purchasers), net of such Shareholders' proportionate share of the legal,
investment banking and other expenses of the Ripplewood Shareholder incurred in
connection with such sale, and the Shares (or such portion) of all such other
Shareholders shall be deemed Transferred to such Third Party Purchaser (or
Purchasers).
(g) FAIR MARKET VALUE. (i) If a determination of the Fair
Market Value of any shares of Company Common Stock is required by this Agreement
when there is no public trading market for the shares of Company Common Stock,
such "Fair Market Value" shall be such amount as is determined in good faith by
the Board of Directors as of the date such Fair Market Value is required to be
determined hereunder. In making a determination of such Fair Market Value, the
Board of Directors shall give due consideration to such factors as it deems
appropriate, including, without limitation, the earnings and certain other
financial and operating information of the Company and its subsidiaries in
recent periods, its potential value and that of its subsidiaries as a whole, its
future prospects and that of its subsidiaries and the industries in which they
compete, its history and management and that of its subsidiaries, the general
condition of the securities markets and the fair market value of securities of
privately owned companies (with transfer restrictions) engaged in businesses
similar to those of the Company and its subsidiaries, if any. The Fair Market
Value, as determined by the Board of Directors in good faith, shall be binding
and conclusive upon all parties hereto.
(ii) If a determination of the Fair Market Value of any shares
of Company Common Stock is required by this Agreement when there is a public
trading market for shares of Company Common Stock, such "Fair Market Value"
shall mean the average daily closing sales price of the shares of Company
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Common Stock for the ten consecutive trading days preceding the date the Fair
Market Value of the shares of Company Common Stock is required to be determined
hereunder. The closing price for each day shall be the last reported sales price
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the principal national securities exchange on which the shares of Company
Common Stock are listed and admitted to trading, or, if not listed and admitted
to trading on any such exchange, on the NASDAQ National Market System, or, if
not quoted on the National Market System, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of Directors for
that purpose.
(h) COMPANY OPTION UPON TERMINATION. In the event that any
Management Shareholder's employment by the Company or the applicable subsidiary
of the Company is terminated for any reason, including the nonrenewal of such
Management Shareholder's Employment Agreement, the Company or its designees
shall have an option to purchase (the "Company Option") all or any portion of
(i) the Shares then held by such Management Shareholder (including any of such
Shares acquired upon exercise of the nonqualified option granted to such
Management Shareholder pursuant to Section 1.03(c)) at a purchase price equal to
the Fair Market Value of such Shares, as determined in accordance with Section
2.01(g) as of the date of such termination, and (ii) the nonqualified option
granted to such Management Shareholder pursuant to Section 1.03(c) at a purchase
price equal to the product of (A) the number of shares of Company Common Stock
with respect to which such option has vested and the Company has elected to
exercise the Company Option and (B) the greater of (1) the difference between
the Fair Market Value of a share of Company Common Stock (determined in
accordance with Section 2.01(g) as of the date of such termination) and
$18.60065 and (2) $0. The Company must exercise its rights arising under the
Company Option, if at all, within 90 days of such date of termination; PROVIDED
that, if such rights arise as a result of the death of a Management Shareholder,
such rights must be exercised by the Company, if at all, within 9 months of such
termination. If the Company elects to exercise the Company Option, the Company
shall within 90 days (9 months in the case of the death of a Management
Shareholder) of such date of termination give notice in writing to such
Management Shareholder of its election to exercise the Company Option, which
notice shall set forth the portion, if any, of the Shares and such nonqualified
option that the Company elects to purchase. The purchase of the Shares and such
nonqualified option shall take place on the
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date specified by the Company (not later than the later of the twentieth
business day following the receipt by such Management Shareholder of the
required notice from the Company and the satisfaction of any legal requirements
to the purchase of the Shares and such nonqualified option).
(i) MANAGEMENT SHAREHOLDER OPTION UPON TERMINATION. In the
event that (i) any Management Shareholder suffers from financial hardship,
determined in good faith by the Board of Directors, or (ii) any Management
Shareholder's employment by the Company or the applicable subsidiary of the
Company is terminated (A) by the Company or such subsidiary other than with Good
Cause (as defined in such Management Shareholder's Employment Agreement) (OTHER
THAN PURSUANT TO CLAUSE (v) THEREOF) or (B) because of a notice of nonrenewal
given by the Company or such subsidiary, such Management Shareholder or, in the
case of termination of employment by death, such Management Shareholder's estate
shall have the right to require the Company to purchase all or any portion of
such Management Shareholder's Shares (other than, in the case of the foregoing
clause (i), any of such Shares acquired upon exercise of the nonqualified-option
granted to such Management Shareholder pursuant to Section 1.03(c) the exercise
date of which was within six months of the date that such Management Shareholder
makes a claim of financial hardship to the Company) at a purchase price equal to
the Fair Market Value of such Shares, determined as of the date of such
determination of financial hardship or termination in accordance with Section
2.01(g); PROVIDED that, if the Board of Directors determines in good faith that
the Company has insufficient cash flow, and cannot obtain third party financing
on terms reasonably acceptable to the Board of Directors, to purchase such
Management Shareholder's Shares for cash, the Company may purchase such
Management Shareholder's Shares in exchange for junior subordinated notes of the
Company which (1) bear interest at a variable rate per annum equal to The Chase
Manhattan Bank's prime lending rate per annum, payable quarterly in arrears, (2)
provide for the repayment in full of principal on the earlier of the fifth
anniversary of the issuance of such notes and the date on which the Board of
Directors determines in good faith that the Company has sufficient cash flow, or
can obtain third party financing on terms reasonably acceptable to the Board of
Directors, to repay in full such principal and (3) are otherwise on terms
reasonably acceptable to such Management Shareholder; PROVIDED FURTHER that, to
the extent that the Board of Directors reasonably determines that such purchase,
if made, would (x) cause the Company to be or remain in default under any
agreements with lenders, despite commercially reasonable efforts by the Company
to obtain consents or amendments necessary to permit
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such purchase, or (y) conflict with the terms (including with respect to
priority of payment) of the Preferred Stock, the Company shall be relieved of
its obligations to make such purchase under this Section 2.01(i) while and to
the extent such conditions continue to exist. Such Management Shareholder or, if
applicable, such Management Shareholder's estate shall have 90 days from the
date of such termination during which to give notice in writing to the Company
of its election to exercise or not to exercise such right (unless such right
arises as a result of the death of such Management Shareholder, in which case
such right must be exercised, if at all, within 9 months of such termination),
which notice must set forth the portion, if any, of the Shares that such
Management Shareholder or, if applicable, such Management Shareholder's estate
elects to sell. If no such notice has been given within such 90 days (or, if
applicable, nine months), such Management Shareholder or, if applicable, such
Management Shareholder's estate shall be deemed to not have exercised such
option. Such Management Shareholder may withdraw his election to exercise such
right for any reason up until the time that such Management Shareholder tenders
to the Company, pursuant to this Section, any Shares held by such Management
Shareholder. The purchase of such Shares shall take place on or prior to the
90th day, as determined by the Board of Directors, following the receipt by the
Company of such notice. Subject to any restriction in this Agreement or any
other agreement to which the Company or any of its Affiliates are party, the
Company may designate any other Person to fulfill its obligation under this
Section 2.01(i).
ARTICLE III
STOCK REGISTRATION; LEGEND; CAPITAL STOCK
SECTION 3.01. STOCK REGISTRATION. (a) Each Management
Shareholder hereby represents and warrants to the Ripplewood Shareholder and the
Company that:
(i) Such Management Shareholder has had access to all
information that such Management Shareholder deemed necessary to
adequately evaluate whether to purchase any shares of Company Common
Stock;
(ii) Such Management Shareholder understands that the Company
Common Stock has not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and shares of Company Common Stock
will be offered and sold to such Management Shareholder (including upon
exercise of stock options) in reliance
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upon an exemption from the registration requirements of the Securities
Act afforded by Rule 701; and
(iii) any shares of Company Common Stock acquired by such
Management Shareholder shall be acquired only for such Management
Shareholder's own account, for investment purposes only and not with a
view to its resale, distribution or other disposition.
(b) Each Management Shareholder agrees that such Management
Shareholder will not offer, sell, transfer, pledge, hypothecate or otherwise
dispose of any Shares except:
(i) pursuant to an exemption from registration under the
Securities Act, as confirmed in a satisfactory opinion of legal counsel
delivered to the Company, and in accordance with any applicable laws of
any state of the United States governing the offer and sale of
securities; or
(ii) pursuant to an effective registration statement under the
Securities Act (it being understood that the Company, the Ripplewood
Shareholder and their Affiliates are under no obligation to effect such
registration) and in accordance with any applicable state laws.
(c) In the event that the Company files a registration
statement on Form S-8 of the Securities and Exchange Commission, the Company
shall, to the extent permitted by applicable law, include in such registration
statement shares of Company Common Stock issuable upon exercise of the then
unexercised options that were granted to each Management Shareholder pursuant to
Section 1.03(c) of this Agreement.
SECTION 3.02. LEGEND. Each Shareholder agrees that any and all
certificates representing such Shareholder's Shares will have inscribed
conspicuously on the front or back of such certificates the following legend:
"THE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF WRC MEDIA INC.
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ONE OR MORE AGREEMENTS AMONG
SHAREHOLDERS OR AGREEMENTS BETWEEN SHAREHOLDERS AND WRC MEDIA INC. AND MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH. COPIES OF SUCH
AGREEMENT OR AGREEMENTS MAY BE OBTAINED FROM THE SECRETARY OF WRC MEDIA INC. AT
THE PRINCIPAL EXECUTIVE OFFICES OF RIPPLEWOOD HOLDINGS L.L.C. THESE SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE REOFFERED OR RESOLD, DIRECTLY OR INDIRECTLY,
EXCEPT IN ACCORDANCE WITH THE
15
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION
THEREFROM AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES."
SECTION 3.03. CAPITAL STOCK; PRICE. The Company hereby
represents and warrants to each Management Shareholder that: The authorized
capital stock of the Company consists of 20,000,000 shares of Company Common
Stock, of which 6,855,853 shares are issued and outstanding (including 4,848,635
shares owned by the Ripplewood Shareholder) and 20,000,000 shares of Preferred
Stock, of which 3,000,000 shares are issued and outstanding. Except for the
shares specified in the preceding sentence, shares reserved for issuance
pursuant to options granted to the Management Shareholders, the Other Management
Shareholders and to the Executive and shares reserved for issuance pursuant to
the Preferred Stock and Warrants Subscription Agreement dated November 17, 1999,
among the Corporation, Weekly Reader Corporation, JLC Learning Corporation and
the purchasers named therein, there are no shares of capital stock or other
equity securities of the Company issued, reserved for issuance or outstanding.
The purchase price per share for the shares of Company Common Stock being
acquired by the Management Shareholders pursuant to Section 1.03(a) is the same
as the purchase price per share paid by the Ripplewood Shareholder and other
Persons who acquired shares of Company Common Stock simultaneously with the
Ripplewood Shareholder.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01. ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding among the parties relating to the subject matter contained
herein and merges all prior discussions among them. This Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
SECTION 4.02. AMENDMENTS. This Agreement may not be amended
except by an instrument in writing signed by the Ripplewood Shareholder and
Management Shareholders holding a majority of the Shares held by all Management
Shareholders.
SECTION 4.03. NOTICES. All notices and other communications
required or permitted by this Agreement shall be made in writing and any such
notice or communication shall be deemed delivered when delivered in person,
transmitted by telex or telecopier, confirmation of transmission received, or
one business day after it has been sent by a nationally
16
recognized overnight courier, at the address or addresses for notices to the
recipient designated on Schedule II attached hereto. Communications by telex or
telecopier also shall be sent concurrently by first class mail or overnight
courier, but shall in any event be effective as stated above. Any Shareholder or
the Company may from time to time change its address for notices under this
Section 4.03 by giving at least five days' notice of such changed address to the
other Shareholders.
SECTION 4.04. INTERPRETATION. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 4.05. SEVERABILITY. If any one or more of the
provisions contained in this Agreement or in any document executed in connection
herewith shall be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired;
PROVIDED, HOWEVER, that in such case the parties hereto shall endeavor to amend
or modify this Agreement to achieve to the extent reasonably practicable the
purpose of the invalid provision.
SECTION 4.06. GOVERNING LAW. This Agreement and all actions
contemplated hereby shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York (without regard to conflict
of laws principles), except to the extent that the provisions of the GCL may be
mandatorily applicable.
SECTION 4.07. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement. This Agreement shall become effective against the Ripplewood
Shareholder when one or more counterparts have been signed by the Ripplewood
Shareholder and delivered to each other Shareholder. This Agreement shall become
effective against any other Shareholder when one or more counterparts have been
executed by such Shareholder and delivered to the Ripplewood Shareholder. This
Agreement shall become effective against the Company when one or more
counterparts have been signed by the Company and delivered to each other
Shareholder. Each party need not sign the same counterpart.
SECTION 4.08. ASSIGNMENT. Except pursuant to
Section 2.01(a),(d),(h) and (i) neither this Agreement nor
any of the rights, interests or obligations under this
17
Agreement shall be assigned, in whole or in part, by the Ripplewood Shareholder
without the prior written consent of the Ripplewood Shareholder and Management
Shareholders holding a majority of the Shares held by all Management
Shareholders or by any other Shareholder without the prior written consent of
the Ripplewood Shareholder, and any purported assignment without such consent
shall be void. Subject to the preceding sentences, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 4.09. SPECIFIC PERFORMANCE. The parties hereby declare
that irreparable damage would occur as a result of the failure of any party
hereto to perform any of its obligations under this Agreement in accordance with
the specific terms hereof. Therefore, all parties hereto shall have the right to
specific performance of the obligations of the other parties under this
Agreement and if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, any Person against whom such action or proceeding
is brought hereby waives the claim or defense therein that such party has or
have an adequate remedy at law exists. The right to specific performance shall
be in addition to any other remedy to which a party hereto may be entitled at
law or in equity.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
EAC III L.L.C.,
by RIPPLEWOOD PARTNERS, L.P.,
its Member,
by RIPPLEWOOD HOLDINGS L.L.C.,
its General Partner,
by________________________
Name:
Title:
________________________
Xxxxxx Xxxxxxx
________________________
Xxxxx Xxxxxxxxx
18
________________________
Xxx Xxxxxxxxx
________________________
Xxxx Xxxxx
________________________
Xxxxx Xxxxxxxx
________________________
Xxxxxx Xxxxx
________________________
Xxxxx Xxxx
________________________
Xxxxxx Xxxxxx
________________________
Xxxxx Xxxxx
________________________
Xxxxxx Xxxxxxxxxx
________________________
Xxxxx Xxxxxxx
________________________
Xxx Xxxx
19
WRC MEDIA INC.,
by________________________
Name:
Title:
SCHEDULE I
Shares of
Company
Shareholder Common Stock Options
-------------------------------------------------------------------
Xxxxxx Xxxxxxx 4,032 2,688
-------------------------------------------------------------------
Xxxxx Xxxxxxxxx 538 358
-------------------------------------------------------------------
Xxx Xxxxxxxxx 538 358
-------------------------------------------------------------------
Xxxx Xxxxx 452 301
-------------------------------------------------------------------
Xxxxx Xxxxxxxx 538 358
-------------------------------------------------------------------
Xxxxxx Xxxxx 1,075 717
-------------------------------------------------------------------
Xxxxx Xxxx 1,344 896
-------------------------------------------------------------------
Xxxxxx Xxxxxx 2,150 1,434
-------------------------------------------------------------------
Xxxxx Xxxxx 2,688 1,792
-------------------------------------------------------------------
Xxxxx Xxxxxxx 1,075 717
-------------------------------------------------------------------
Xxxxxx Xxxxxxxxxx 1,613 1,075
-------------------------------------------------------------------
Xxx Xxxx 1,613 1,075
-------------------------------------------------------------------
SCHEDULE II
Shareholder Address
----------- --------
EAC III L.L.C. c/o Ripplewood Holdings L.L.C.
Xxx Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxx
Xx. Xxxxxxx X. Xxxxxx
Fax: 212) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
WRC Media Inc. c/o Ripplewood Holdings L.L.C.
Xxx Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxx
Xx. Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Xx. Xxxxxx Xxxxxxx 200 First Stamford Place
XX Xxx 000000
Xxxxxxxx, XX 00000-0000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xx. Xxxxx Xxxxxxxxx 000 Xxxxx Xxxxxxxx Xxxxx
XX Xxx 000000
Xxxxxxxx, XX 00000-0000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xx. Xxx Xxxxxxxxx 000 Xxxxx Xxxxxxxx Xxxxx
XX Xxx 000000
Xxxxxxxx, XX 00000-0000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xx. Xxxx Xxxxx 200 First Stamford Place
XX Xxx 000000
Xxxxxxxx, XX 00000-0000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xxxxx Xxxxxxxx 200 First Stamford Place
XX Xxx 000000
Xxxxxxxx, XX 00000-0000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xx. Xxxxxx Xxxxx 0000 Xxxxxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xx. Xxxxxx Xxxxxx 0 Xxxxxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Mr. Xxxxx Xxxxx 0000 Xxxxx Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xx. Xxxxxx Xxxxxxxxxx 0000 Xxxxx Xxxxx Xxxxxx Xxxxx,
Xxxxx 000
Xxxxxxxxx, XX 00000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xx. Xxxxx Xxxxxxx 00000 Xxx Xxxxxxx
Xxxxxxxxx, XX 00000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Xx. Xxx Xxxx 00 Xxxx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Rubin, Baum, Xxxxx, Constant &
Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
