Exhibit 10.6
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "AGREEMENT"), dated as of November 17,
1999, among WRC Media Inc., a Delaware corporation (the "COMPANY"), Weekly
Reader Corporation, a Delaware corporation ("WEEKLY READER"), and JLC Learning
Corporation, a Delaware corporation ("JLC LEARNING" and, together with the
Company and Weekly Reader, the "ISSUERS"), EAC III L.L.C. (collectively, and
together with any Affiliate thereof, the "PRINCIPALS" (as further defined
herein)) and Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation and Banc of
America Securities LLC (each, an "INITIAL PURCHASER" and collectively, the
"INITIAL PURCHASERS").
This Agreement is made pursuant to the Purchase Agreement (the
"PURCHASE AGREEMENT"), dated as of November 10, 1999, by and among the Issuers,
the Note Guarantors set forth therein and the Initial Purchasers. In order to
induce the Initial Purchasers to purchase the Units, the Principals and the
Issuers have agreed to provide the registration rights set forth in this
Agreement and have agreed to the tag-along and drag-along provisions set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the obligations of the Initial Purchasers set forth in Section 3 of the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Purchase Agreement.
Pursuant to the Purchase Agreement, the Company has issued 205,656
shares of its common stock, par value $0.01 per share (the "COMMON STOCK")
issued as part of the Units (the "UNIT COMMON STOCK").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall
have the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BUSINESS DAY: Any day other than a Saturday, Sunday or day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed.
CLOSING DATE: The date hereof.
DEMAND EVENT: The earlier to occur of (a) 180 days after the date on
which an Initial Public Offering is consummated and (b) the date on which any
class of common stock of either the Company or Weekly Reader is listed on a
national securities exchange or authorized for quotation on the Nasdaq National
Market System, other than in connection with the Public Equity Offering referred
to in clause (a) of this definition.
DEMAND REGISTRATION: As defined in Section 6 of this Agreement.
DEMAND REQUEST: As defined in Section 6 of this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE COMMON STOCK: Shares of Weekly Reader Class A Non-Voting
Common Stock issuable upon exchange of shares of Unit Common Stock.
EXCHANGE RATIO: On any Exchange Date, the Exchange Ratio is equal to
the product of (1) the total number of shares of Weekly Reader Common Stock
owned by WRC Media on any Exchange Date on a fully diluted basis times (2) a
fraction, the numerator of which is one (1) and the denominator of which is the
total number of shares of Common Stock outstanding on a fully diluted basis on
such Exchange Date.
HOLDER: A person who owns Registrable Securities or has the right to
acquire Registrable Securities, whether or not such acquisition has actually
been effected.
INITIAL PUBLIC OFFERING: An issuance or sale of common stock
pursuant to an underwritten public offering (whether on a firm commitment basis
or a best efforts basis if such best efforts are successful) thereof pursuant to
an effective registration statement filed with the SEC pursuant to the Act
(other than a registration statement on Form S-8 or otherwise relating to equity
securities issuable under any employee benefit plan of the Company or Weekly
Reader, as applicable, and other than any offering registered on Form S-4 or its
equivalent).
INITIATING HOLDERS: One or more Holders owning individually or
in the aggregate not less than the Requisite Securities.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
PIGGY-BACK REGISTRATION. As defined in Section 7 of this Agreement.
PRINCIPALS: EAC III L.L.C., a Delaware limited liability
corporation, or such other person as Ripplewood Partners, L.P. maintains its
equity investment in the Company through; provided that if Ripplewood Partners,
L.P. has a direct equity investment in the Company or any of its subsidiaries,
Principals shall include Ripplewood Partners, L.P.
PRO RATA PORTION. Pro Rata Portion means with reference to any
Holder at any time, a fraction, the numerator of which is the total number of
shares of common stock held by such Holder and the denominator of which is the
total number of shares of common stock held by all stockholders participating as
sellers in such transaction, adjusted, in the case of the Exchange Common Stock
for the applicable Exchange Ratio initially used to exchange such stock.
PROSPECTUS: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such prospectus.
2
PUBLIC EQUITY OFFERING: means an underwritten offering of common
stock of either the Company or Weekly Reader pursuant to a registration
statement that has been declared effective by the SEC pursuant to the Act (other
than a registration statement on Form S-8 or otherwise relating to equity
securities issuable under any employee benefit plan of the Company or Weekly
Reader, as applicable, and other than any offering registered on Form S-4 or its
equivalent).
REGISTRABLE SECURITIES: means (1) any shares of Unit Common Stock
and Exchange Common Stock and (2) any other securities issued or issuable with
respect to the Unit Common Stock or Exchange Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, securities shall cease to be
Registrable Securities when (1) a registration statement with respect to the
offering of such securities by the Holder thereof shall have been declared
effective under the Act and such securities shall have been disposed of by such
Holder pursuant to such registration statement, (2) such securities have been
sold to the public pursuant to Rule 144(k) (or any similar provision then in
force, but not Rule 144A) promulgated under the Act, (3) such securities shall
have been otherwise transferred by the Holder thereof and new certificates for
such securities not bearing a legend restricting further transfer shall have
been delivered by the Company or Weekly Reader, as applicable, or its transfer
agent and subsequent disposition of such securities shall not require
registration or qualification under the Act or any similar state law then in
force or (4) such securities shall have ceased to be outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's and
Weekly Reader's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees and
expenses of compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities),
preparing, printing, filing, duplicating and distributing the Registration
Statement and the related prospectus, the cost of printing stock certificates,
the cost and charges of any transfer agent, rating agency fees, printing
expenses, messenger, telephone and delivery expenses, reasonable fees and
disbursements of counsel for the Company and Weekly Reader and all independent
certified public accountants, the fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (but not including any
underwriting discounts or commissions or transfer taxes, if any, attributable to
the sale of Registrable Securities by Selling Holders), and reasonable fees and
expenses of one counsel for the Holders.
REGISTRATION STATEMENT: Any registration statement of the Company or
Weekly Reader, as applicable, relating to the registration for resale of
Registrable Securities that is filed pursuant to the provisions of this
Agreement and including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments) and all exhibits and
all material incorporated by reference therein.
REORGANIZATION TRANSACTION: A reorganization at the sole discretion
of the Company completed in connection with the Initial Public Offering of
Weekly Reader pursuant to which the Company shall transfer, or cause to be
transferred, all or substantially all its assets (including all the capital
stock and debt securities of the subsidiaries of the Company (including Weekly
Reader)) to Weekly Reader in exchange for the assumption by Weekly Reader of all
or substantially all the liabilities of the Company, the issuance to the Company
by Weekly Reader of new securities (including common
3
and preferred stock) of Weekly Reader and, at the option of the Company, the
distribution by the Company of (i) the new preferred stock of Weekly Reader to
the holders of preferred stock of the Company in exchange for such preferred
stock of the Company and/or (ii) Exchange Common Stock to the Holders of Unit
Common Stock as described in Section 2(a)(ii) of this Agreement.
REQUISITE SECURITIES: A number of Registrable Securities equal to
not less than 25% of the Registrable Securities held in aggregate by all Holders
on the date hereof.
SEC: The Securities and Exchange Commission.
SELLING HOLDER: A Holder who is selling Registrable Securities in
accordance with the provisions of this Agreement.
SHELF REGISTRATION: As defined in Section 8.
WEEKLY READER CLASS A NON-VOTING COMMON STOCK: The class A
non-voting common stock, par value $0.01 per share, of Weekly Reader. Upon the
occurrence of an Initial Public Offering of Weekly Reader, the Weekly Reader
Class A Non-Voting Common Stock will automatically convert into Weekly Reader
Voting Common Stock.
WEEKLY READER COMMON STOCK: The common stock of Weekly Reader of all
classes.
WEEKLY READER VOTING COMMON STOCK: The voting common stock, par
value $0.01 per share, of Weekly Reader.
SECTION 2. EXCHANGE RIGHTS
(a) (i) Subject to the provisions of this Section 2, each Holder of
the Unit Common Stock, at its option, may at any time on any Business Day in
connection with the Initial Public Offering of Weekly Reader cause the Company
(if such exchange shall occur in connection with a Reorganization Transaction)
or Weekly Reader in any other case to exchange all, but not less than all,
outstanding shares of Unit Common Stock owned by such Holder for a number of
shares of Weekly Reader Class A Non-Voting Common Stock then owned by the
Company (if such exchange shall occur in connection with a Reorganization
Transaction) or Weekly Reader in any other case determined by multiplying the
number of such Holder's shares of Unit Common Stock by the Exchange Ratio.
Dividends on Unit Common Stock exchanged for Weekly Reader Class A Non-Voting
Common Stock which have been declared but have not been paid as of the date of
exchange (the "EXCHANGE DATE") shall be deemed to have accrued on the Exchange
Common Stock in equivalent adjusted amounts.
(ii) Subject to the provisions of this Section 2, the Company, at
its option, in connection with the Reorganization Transaction may distribute to
the Holders of Unit Common Stock in exchange for such stock a number of shares
of Weekly Reader Class A Non-Voting Common Stock determined by multiplying the
number of such shares of Unit Common Stock by the Exchange Ratio; PROVIDED that
if the Initial Public Offering of Weekly Reader or the Reorganization
Transaction is not consummated within ten business days after such exchange then
the Exchange Common Stock will be converted back to Unit Common Stock using the
inverse of the Exchange Ratio used for the initial exchange and the Company and
the Holders shall then have the same rights to cause the Unit of Common Stock to
be exchanged for Exchange Common Stock as prior to such exchange, and such
shares of Unit
4
Common Stock shall have been deemed to have been outstanding as if such shares
had never been exchanged for such Exchange Common Stock for all purposes,
including with respect to dividends and other distributions payable with respect
to the Company's Common Stock. Dividends on Unit Common Stock exchanged for
Weekly Reader Class A Non-Voting Common Stock which have been declared but have
not been paid as of the Exchange Date shall be deemed to have accrued on the
Exchange Common Stock in equivalent adjusted amounts.
(b) (i) In the event of an exchange pursuant to Section 2(a) of the
Unit Common Stock for Exchange Common Stock, notice of such exchange specifying
the Exchange Date therefor shall be given (x) if at the option of a Holder of
Unit Common Stock, to the Company and Weekly Reader, not less than 30 days nor
more than 60 days prior to the Exchange Date or (y) if at the option of the
Company, to the Holders of Unit Common Stock not less than 10 nor more than 60
days prior to the Exchange Date.
(ii) Notice having been given as aforesaid, from and after the
Exchange Date (unless default shall be made by Weekly Reader issuing Exchange
Common Stock or by the Company in distributing Exchange Common Stock, as
applicable, in exchange for Unit Common Stock), all rights of the Holders as
stockholders of the Company (except the right to receive the Exchange Common
Stock) shall cease. In the case of an exchange pursuant to Section 2(a)(i), upon
surrender to Weekly Reader in accordance with said notice of the certificates
for the Unit Common Stock (properly endorsed or assigned for transfer), Weekly
Reader shall issue and deliver, or the Company shall deliver, as applicable, the
Exchange Common Stock to the applicable Holder(s) certificates therefor
registered in the name of such Holder(s). In the case of an exchange pursuant to
Section 2(a)(ii), the exchange shall be deemed to have been effected immediately
after the close of business on the Exchange Date, and the Holder(s) in whose
names the Exchange Common Stock shall be issuable upon such exchange shall be
deemed to have become the Holders of record of the Exchange Common Stock
represented thereby at such time on the Exchange Date. In connection with an
exchange pursuant to Section 2(a)(ii), if the Company causes new shares of
Weekly Reader Class A Non-Voting Common Stock to be issued to Holders of Unit
Common Stock in connection with such exchange in lieu of exchanging such shares
for existing shares of Exchange Common Stock, then the Exchange Ratio shall be
adjusted so that after giving effect to such new issuance of shares of Exchange
Common Stock, the Holders of Exchange Common Stock are in the same economic
position as they would have been had no new shares of Exchange Common Stock been
issued.
(iii) Prior to the issuance of the Exchange Common Stock by
Weekly Reader and the delivery thereof by Weekly Reader or the Company, as the
case may be, Weekly Reader and the Company shall comply with all applicable
Federal and state laws and regulations which require action to be taken by them
with respect to such issuance and delivery (it being understood that neither
Weekly Reader nor the Company shall be required to file a registration statement
covering such shares with the SEC). Holders of Unit Common Stock will be able to
exchange their Weekly Reader Class A Non-Voting Common Stock for Exchange Common
Stock only if the exchange of such securities is exempt from the registration
requirements of the Act, and such securities are qualified for sale or exempt
from qualification under the applicable securities laws of the states in which
the various Holders of securities reside.
5
(c) Weekly Reader will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issuance or delivery of
certificates evidencing the Exchange Common Stock other than those resulting
from transfers to third parties.
(d) Weekly Reader will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Weekly Reader Common Stock or its authorized and issued Weekly Reader Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Exchange Common Stock upon exchange of Unit Common Stock,
the maximum number of shares of Weekly Reader Common Stock which may then be
deliverable upon the exchange of all shares of Unit Common Stock.
SECTION 3. TAG-ALONG RIGHTS.
(a) If any Principal or Principals proposes to sell or otherwise
transfer, directly or indirectly, in a single transaction or a series of related
transactions, shares of Common Stock or Weekly Reader Common Stock (other than
(i) sales for which Holders have "PIGGY BACK REGISTRATION" rights (pursuant to
Section 7 hereof), (ii) transfers to Affiliates of the Principals and (iii)
sales to persons other than Affiliates of the Principals that do not exceed, in
the aggregate, 20% of the shares of common stock of the Company and Weekly
Reader then owned by the Principals) (a "TAG-ALONG SALE"), each Holder shall
have the option to elect to exercise its rights under this Section 3.
(b) In the event of a Tag-Along Sale, one or more of the Principals
shall deliver to each Holder of Unit Common Stock and Exchange Common Stock a
written notice (A "TAG-ALONG NOTICE") of the number of shares of common stock to
be transferred and the price and other material terms on which the shares are to
be transferred. Any Holder of Unit Common Stock and Exchange Common Stock may
elect to participate in such Tag-Along Sale (a "TAG-ALONG RIGHT") by giving
written notice to the Principals on or prior to the fifteenth day following
receipt of the Tag-Along Notice (the "TAG-ALONG NOTICE PERIOD").
(c) The number of shares of Unit Common Stock and Exchange Common
Stock that any Holder electing to participate in the Tag-Along Sale shall be
eligible to sell pursuant thereto shall be that Holder's Pro Rata Portion of the
aggregate number of shares of common stock to be transferred in such Tag-Along
Sale.
(d) Any shares of Unit Common Stock or Exchange Common Stock
purchased from the Holders pursuant to the exercise of a Tag-Along Right shall
be paid for at the same price per share of common stock and upon the same terms
and conditions as such proposed transfer of common stock by the Principals,
adjusted in the case of the Exchange Common Stock, for the applicable Exchange
Ratio initially used to exchange such stock.
(e) On the closing date for any Tag-Along Sale, any person
exercising Tag-Along Rights (each, a "TAGGING PERSON") shall deliver (i) to the
purchaser specified in the Tag-Along Notice for such Tag-Along Sale a
certificate or certificates representing the shares of common stock of the
applicable company that it has elected to sell, together with appropriate
instruments of transfer duly endorsed in blank, against payment by such
purchaser of the total purchase price payable for such shares as set forth in
clause (d) immediately above, and (ii) to the applicable Principal or Principals
all costs, expenses and other
6
amounts to be paid by such Tagging Person in connection with such Tag-Along Sale
pursuant to Section 3(i).
(f) If at the termination of the Tag-Along Notice Period any Holder
shall not have delivered written notice to the Principals of its election to
participate in the Tag-Along Sale, such Holder will have waived its Tag-Along
Right with respect to such Tag-Along Sale.
(g) If (i) any Holder declines to exercise or waives its Tag-Along
Right with respect to any Tag-Along Sale or (ii) any Tagging Person elects to
exercise its Tag-Along Right with respect to less than its Pro Rata Portion with
respect to any Tag-Along Sale, the Principals shall be entitled to transfer in
such Tag-Along Sale, in addition to their Pro Rata Portion with respect to such
Tag-Along Sale, a number of shares of Common Stock or Weekly Reader Common
Stock, as applicable, equal to the number of shares of Common Stock or Weekly
Reader Common Stock, as applicable, constituting the portion of such Holder's or
Tagging Person's Pro Rata Share with respect to which such Holder or Tagging
Person's Tag-Along Right was not exercised.
(h) The Principals and any Tagging Person who exercises its
Tag-Along Right with respect to a proposed Tag-Along Sale pursuant to this
Section 3 may sell the shares of Common Stock or Weekly Reader Common Stock, as
applicable, subject to the Tag-Along Notice with respect to such Tag-Along Sale
on the terms and conditions set forth in such Tag-Along Notice within 120 days
of the date on which the Tag-Along Rights with respect to such Tag-Along Sale
shall have been waived, exercised or expired.
(i) All out-of-pocket costs and expenses incurred by the Holders in
connection with a Tag-Along Sale (including, without limitation, fees and
disbursements of any counsel retained by the Holders) shall be paid by the
Holders. All direct selling expenses, discounts or commissions or brokers paid
to any Person on a per share basis in connection with such Tag-Along Sale shall
be paid ratably by each Tagging Person and the Principals (in proportion to each
Tagging Person's and the Principals' Pro Rata Portion). All other fees and
expenses in connection with such Tag-Along Sale shall be paid by the applicable
Principals.
SECTION 4. DRAG-ALONG RIGHTS.
(a) If any Principal or Principals, directly or indirectly, approve
or authorize a sale or exchange (the "COMPANY SALE") of more than 80% of the
then outstanding capital stock of Weekly Reader or the Company in a bona fide
arm's-length transaction to a third party that is not an Affiliate of any
Principal or of the Company or Weekly Reader (an "INDEPENDENT THIRD PARTY"),
then the Principal or Principals (directly or through one or more Affiliates)
shall have the right, subject to all the provisions of this Section 4 (the
"DRAG-ALONG RIGHT"), to require each of the Holders of Unit Common Stock and
Exchange Common Stock to sell, transfer and deliver or cause to be sold,
transferred and delivered to such Independent Third Party all Unit Common Stock
and Exchange Common Stock owned by them; PROVIDED, HOWEVER, that if the
Principals agree to sell less than all of their shares to such Independent Third
Party, each of the other Holders shall only be required to sell, transfer and
deliver to such Independent Third Party an amount of Unit Common Stock and
Exchange Common Stock equal to the product obtained by multiplying the amount by
such Holder's Pro Rata Portion.
7
(b) If one or more of the Principals desire to exercise Drag-Along
Rights, it shall give written notice to the Holders (the "DRAG-ALONG NOTICE") of
the Company Sale, setting forth the name and address of the transferee, the date
on which such transaction is proposed to be consummated (which shall be not less
than 20 days after the date such Drag-Along Notice is given), and the proposed
amount and form of consideration and terms and conditions of payment offered by
such transferee, including, without limitation, the material terms of any debt
or equity securities proposed to be included as part of such consideration,
identifying the issuer or issuers thereof. If such consideration includes any
non-cash consideration, such notice shall also state the fair market value of
such non-cash consideration and shall describe in reasonable detail the method
by which such value shall have been determined.
(c) The consideration to be received by the Holders of Unit Common
Stock and Exchange Common Stock shall be at the same price per share of common
stock (net, in the case of any options, warrants or rights, of any amounts
required to be paid by the Holder upon exercise thereof) and upon the same terms
and conditions as such proposed transfer of common stock of the Company and
Weekly Reader by the Principals, adjusted in the case of Exchange Common Stock,
for the applicable Exchange Ratio initially used to exchange such stock. Such
consideration shall be of the same type of consideration received by the
Principals. If the securities to be purchased in the Company Sale includes
securities other than common stock, the price to be paid for such securities to
the Holders shall be the same price per share or other denomination paid
received by the Principals for such securities purchased from the Principals.
(d) On the closing date for a sale pursuant to the exercise of
Drag-Along Rights, each Holder shall deliver to the transferee specified in the
Drag-Along Notice for such Company Sale a certificate or certificates
representing all of such Holder's Unit Common Stock and Exchange Common Stock,
or, if the Principals agree to sell less than all of their shares in such
Company Sale, a certificate or certificates representing an amount of Unit
Common Stock and Exchange Common Stock equal to the product obtained by
multiplying the amount by such Holder's Pro Rata Portion, together with
appropriate instruments of transfer duly endorsed in blank, against payment by
such transferee of the total purchase price for such shares as set forth in
clause (c) immediately above.
SECTION 5. REGISTRATION PROCEDURES.
In connection with any Demand Registration, Piggy-Back Registration
or Shelf Registration, the Company or Weekly Reader, as applicable, shall
(provided that it will not be required to take any action pursuant to this
Section 5 that would, in the written opinion of counsel for the Company or
Weekly Reader, as applicable, violate applicable law or rules, regulations or
policies of the SEC).
(a) Use commercially reasonable best efforts to effect such
registration to permit the sale of the Registrable Securities being sold in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company or Weekly Reader, as applicable, will prepare and
file with the SEC a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Registrable Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof;
8
(b) Promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or related Prospectus,
provide copies of such document to each Initial Purchaser in connection with
such sale;
(c) Make available, at reasonable times, for inspection by a
representative of, and counsel for, Holders of at least 25% in aggregate
principal amount of Registrable Securities being sold, all relevant financial
and other records and pertinent corporate documents of the Company or Weekly
Reader, as applicable, and use its commercially reasonable best efforts to cause
the Company's or Weekly Reader's, as applicable, officers, directors and
employees to supply all relevant information reasonably requested by any such
representatives in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and prior to
its effectiveness;
(d) If requested by any Selling Holders in connection with such
exchange or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Selling Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan of
Distribution" of the Registrable Securities, and make all required filings of
such Prospectus supplement or post-effective amendment as soon as practicable
after the Company or Weekly Reader, as applicable, is notified of the matters to
be included in such Prospectus supplement or post-effective amendment;
(e) In connection with any Demand Registration and, to the extent
the participants other than Holders of Registrable Securities in a Piggy-Back
Registration receive any items set forth in this Section 5(e), in connection
with a Piggy-Back Registration, upon the request of the Holders of not less than
a majority of the then Registrable Securities held in aggregate by all Holders
(the "MAJORITY HOLDERS"), make such customary representations and warranties and
take all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Registrable Securities pursuant to any
applicable Registration Statement contemplated by this Agreement as may be
reasonably requested such Holders in connection with any sale or resale pursuant
to any applicable Registration Statement. In such connection, the Company or
Weekly Reader, as applicable, shall:
(i) upon request of the Majority Holders furnish to each
Selling Holder, upon the effectiveness of the Registration
Statement, a certificate, dated such date, signed on behalf of the
Company or Weekly Reader, as applicable, by (x) the President or any
Vice President and (y) a principal financial or accounting officer
of the Company or Weekly Reader, as applicable, confirming, as of
the date thereof, the matters set forth in Sections 6(kk) (as to the
Registration Statement) and 9(a) (as to the representations and
warranties contained herein) of the Purchase Agreement and such
other similar matters as such Holders may reasonably request;
(f) Use its commercially reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 6 or 7 of this
Agreement, as applicable. Upon the occurrence of any event that would cause any
such Registration Statement or the Prospectus contained therein (i) to contain
an untrue statement of material fact or omit to state any material fact
necessary to make the statements therein (in the case of the Prospectus only, in
the light of the circumstances under which they were made) not misleading or
(ii) not to be effective and usable for resale of Registrable Securities during
the period required by this Agreement, the Company or Weekly Reader, as
applicable, to the extent required after the Recommencement Date, shall file
promptly an appropriate amendment to such Registration Statement
9
curing such defect, and, if SEC review is required, use their respective
commercially reasonable best efforts to cause such amendment to be declared
effective as soon as practicable;
(g) Prepare and file with the SEC such amendments and post-effective
amendments to the applicable Registration Statement as may be necessary to keep
such Registration Statement effective for the applicable period set forth in
Section 6 or 7 hereof, as the case may be; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424,
430A and 462, as applicable, under the Act in a timely manner; and comply with
the provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(h) Advise each Holder promptly (if requested by such Holder, in the
case of clause (i) and (ii)) (i) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to any
applicable Registration Statement or any post-effective amendment thereto, when
the same has become effective, (ii) of any request by the SEC for amendments to
the Registration Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (iii) of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement under the
Act or of the suspension by any state securities commission of the qualification
of the Registrable Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (iv) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the SEC
shall issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Registrable Securities under state securities or Blue Sky
laws, the Company or Weekly Reader, as applicable, shall use its commercially
reasonable best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(i) Subject to Section 5(f), if any fact or event contemplated by
Section 5(h)(iv) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Registrable
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(j) Furnish to each Initial Purchaser in connection with such
exchange or sale, if any, before filing with the SEC, copies of any Registration
Statement or any related Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing of such
Registration Statement), use its commercially reasonable best efforts to reflect
in each such document, when so filed with the SEC, such comments as any initial
Purchaser may reasonably propose;
10
(k) furnish to each Holder of Registrable Securities included within
the coverage of any Shelf Registration Statement, without charge, at least one
conformed copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and, if any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference);
(l) during the Shelf Registration Period, promptly deliver to each
Holder of Registrable Securities included within the coverage of any Shelf
Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereof as such Holder may reasonably
request; and the Company and Weekly Reader, as applicable, consent to the use of
such Prospectus or any amendment or supplement thereto by each of the selling
Holders of Registrable Securities in connection with the offer and sale of the
Registrable Securities covered by such Prospectus or any amendment or supplement
thereto;
(m) furnish to any other Holder who so requests, without charge, at
least one conformed copy of any Registration Statement and any post-effective
amendment thereto, including financial statements and schedules and, if any
Initial Purchaser or any such Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference);
(n) Prior to any public offering of Registrable Securities,
cooperate with the Selling Holders and their counsel in connection with the
registration and qualification of the Registrable Securities under the
securities or Blue Sky laws of such jurisdictions as the Majority Holders may
request and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable Registration Statement; PROVIDED, HOWEVER,
that neither the Company nor Weekly Reader, shall be required to register or
qualify as a foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to taxation
in any jurisdiction where it is not now so subject;
(o) In connection with any sale of Registrable Securities that will
result in such securities no longer being Registrable Securities, cooperate with
the Selling Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and to register such Registrable Securities in such
denominations and such names as the Selling Holders may request in writing at
least three Business Days prior to such sale of Registrable Securities;
(p) Use its commercially reasonable best efforts to cause the
disposition of the Registrable Securities covered by the Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities, subject to the
proviso contained in clause (n) above;
(q) Provide a CUSIP number for all Registrable Securities not later
than the effective date of a Registration Statement covering such Registrable
Securities and provide the transfer agent with printed certificates for the
Registrable Securities that are in a form eligible for deposit with The
Depository Trust Company;
(r) Otherwise use its commercially reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make generally
available to its security holders with regard to any
11
applicable Registration Statement, as soon as practicable after the effective
date of such Registration Statement, a consolidated earnings statement meeting
the requirements of Rule 158 (which need not be audited) covering a twelve-month
period beginning after the effective date of the Registration Statement (as such
term is defined in paragraph (c) of Rule 158 under the Act);
(s) Provide promptly to each Holder, upon written request, each
document filed by the Company or Weekly Reader, as applicable, with the SEC
pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act
during any period of time when the Company or Weekly Reader, as applicable is
required to maintain the effectiveness of a Registration Statement; and
(t) Use its commercially reasonable best efforts to cause the common
stock being registered to be quoted or listed on any exchange, if any, upon
which the Company's or Weekly Reader's, as applicable, common stock is then
quoted or listed.
The Company or Weekly Reader, as applicable, may require each
Selling Holder as to which any registration is being effected to furnish to the
Company or Weekly Reader, as applicable, such information regarding such Selling
Holder and the distribution of such Registrable Securities as is required by law
to be disclosed in the applicable Registration Statement, and the Company or
Weekly Reader, as applicable, may exclude from such registration the Registrable
Securities of any Selling Holder who fails to furnish such information promptly
after receiving such request.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder or any securities of the Company or Weekly Reader, as
applicable, then such Holder shall have the right to require (i) the insertion
therein of language, in form and substance reasonably satisfactory to such
Holder, to the effect that the holding by such Holder of such securities is not
to be construed as a recommendation by such Holder of the investment quality of
the Company's or Weekly Reader's, as applicable, securities covered thereby and
that such holding does not imply that such Holder will assist in meeting any
future financial requirements of the Company or Weekly Reader, as applicable, or
(ii) in the event that such reference to such Holder by name or otherwise ceases
to be required by the Act or any similar Federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Subject to Section 10(a) hereof, each Holder agrees by acquisition
of a Registrable Security that, upon receipt of (i) the notice referred to in
Section 5(h)(iii), (ii) any notice from the Company or Weekly Reader, as
applicable, of the existence of any fact of the kind described in Section
5(h)(iv) hereof or (iii) any notice issued by the Company or Weekly Reader, as
applicable, for valid business reasons, including without limitation, a
potential acquisition, divestiture of assets or other material corporate
transaction, that a Registration Statement is no longer effective or the
Prospectus included therein is no longer usable for offers and sales of
Registrable Securities (in each case, a "SUSPENSION NOTICE"), such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
applicable Registration Statement until (i) such Holder has received copies of
the supplemented or amended Prospectus contemplated by Section 5(i) hereof, or
(ii) such Holder is advised in writing by the Company or Weekly Reader, as
applicable, that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company or Weekly Reader,
12
as applicable, with more recently dated Prospectuses or (ii) deliver to the
Company or Weekly Reader, as applicable, (at the Company's or Weekly Reader's,
as applicable, expense) all copies, other than permanent file copies, then in
such Holder's possession of the Prospectus covering such Registrable Securities
that was current at the time of receipt of the Suspension Notice. The time
period regarding the effectiveness of such Registration Statement set forth in
Section 6 or 7 hereof, as applicable, shall be extended by a number of days
equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the Recommencement Date.
Notwithstanding any of the foregoing provisions of this Section 5
and subject to Section 7 hereof, in the case of any Piggy-Back Registration, the
Company or Weekly Reader, as applicable, shall be deemed to have complied with
the requirements of this Section 5 in respect of the Holders of Registrable
Securities if (i) the Company or Weekly Reader, as applicable, follows the same
registration procedures with respect to the Registrable Securities subject to
such Piggy-Back Registration as the Company or Weekly Reader, as applicable,
follows with respect to the other securities included in such registration
(including any securities offered by the Company or Weekly Reader, as
applicable) and (ii) only if there are participants in the Piggy-Back
Registration other than the Company or the Holders of the Registrable
Securities, the Company or Weekly Reader, as applicable, provides the Holders of
such Registrable Securities with the same rights with respect such registration
procedures as are provided to the other participants in such Piggy-Back
Registration.
SECTION 6. DEMAND REGISTRATION.
(a) After the occurrence of a Demand Event, one or more Initiating
Holders owning individually or in the aggregate not less than the Requisite
Securities may request in writing that the Company, if the Demand Event is in
connection with its Initial Public Offering or listing, or Weekly Reader, if the
Demand Event is in connection with its Initial Public Offering or listing,
effect the registration under the Act of all or part of the Registrable
Securities of the Company or Weekly Reader, as the case may be, held by such
Initiating Holders and shall specify the number of Registrable Securities
proposed to be sold and the intended method of disposition thereof (the "DEMAND
REQUEST"). Only the first Demand Event will give rise to any obligation for
either Weekly Reader or the Company to effect a Demand Registration and such
obligation shall solely be the obligation of the entity for which the Initial
Public Offering or listing has occurred. The Company or Weekly Reader, as
applicable, shall give prompt written notice of the Demand Request to all other
Holders of Registrable Securities. Within 120 days of receipt of the Demand
Request the Company or Weekly Reader, as applicable, will, subject to the terms
of this Agreement, file a Registration Statement and use its best efforts to
effect the registration under the Act:
(i) the Registrable Securities which the Company or Weekly
Reader, as applicable, has been so requested to register by such
Initiating Holders for disposition in accordance with the intended
method of disposition stated in such request;
(ii) all other Registrable Securities, the Holders of which
shall have made a written request to the Company or Weekly Reader,
as applicable, for registration thereof within 20 days after the
giving of such written notice by the Company or Weekly Reader, as
applicable, (which request shall specify the number of Registrable
Securities proposed to be sold and the intended method of
disposition of such Registrable Securities); and
13
(iii) all shares of securities that the Company or Weekly
Reader, as applicable, or any other stockholder may elect to
register in connection with the offering of Registrable Securities
pursuant to this Section 6,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional securities so to be registered.
Notwithstanding the foregoing, neither the Company nor Weekly Reader, as
applicable, shall be required to effect a Demand Registration (as defined below)
unless the gross aggregate offering price of all Registrable Securities to be
included in such Demand Registration shall exceed $2,000,000, or such Demand
Registration includes all Registrable Securities held by the Initiating Holders
of the class and issuer of such Registrable Securities proposed to be sold in
such Demand Registration.
(b) Registration under this Section 6 (the "DEMAND REGISTRATION")
shall be on such appropriate registration form of the SEC (i) as shall be
selected by the Company or Weekly Reader, as applicable, and (ii) as shall
permit the disposition of such Registrable Securities in accordance with the
intended method or methods of disposition specified in their request for such
registration.
(c) The Company or Weekly Reader, as applicable, will pay all
Registration Expenses in connection with any registration requested pursuant to
this Section 6. The Selling Holders shall pay the underwriting discounts,
commissions, and transfer taxes, if any, in connection with the Registration
Statement requested under this Section 6, which costs shall be allocated PRO
RATA among all Selling Holders on whose behalf Registrable Securities of the
Company or Weekly Reader, as applicable, are included in such registration on
the basis of the respective amounts of the Registrable Securities then being
registered on their behalf.
(d) The Holders shall be entitled to request one (1) registration
pursuant to this Section 6. A Registration Statement requested pursuant to this
Section 6 shall not be deemed to have been effected (i) unless a Registration
Statement with respect thereto has been declared effective by the SEC and (ii)
the Company or Weekly Reader, as applicable, has complied in a timely manner and
in all material respects with all of its obligations under this Agreement;
PROVIDED, (i) if, after such Registration Statement has become effective, such
Registration Statement is or becomes subject to any stop order, injunction or
other order or requirement of the SEC or other governmental or administrative
agency or court that prevents, restrains or otherwise limits the sale of
Registrable Securities under such Registration Statement for any reason, other
than by reason of some act or omission by any Holder participating in such
registration, and does not become effective within a reasonable period of time
thereafter, such period not to exceed 60 days from the date of such stop order,
injunction, or other governmental order or requirement or (ii) the Registration
Statement does not remain effective under the Act until at least the earlier of
(A) an aggregate of 180 days after the effective date thereof or (B) the
consummation of the distribution by the Selling Holders of all of the
Registrable Securities covered thereby. For purposes of calculation the 180-day
period referred to in the preceding sentence, any period of time during which
such Registration Statement was not in effect shall be excluded. The Holders
shall be permitted to withdraw all or any part of the Registrable Securities
from a Demand Registration at any time prior to the effective date of such
Demand Registration.
(e) If a requested registration pursuant to this Section 6 involves
an underwritten offering, and the managing underwriter or underwriters shall
advise the Company or Weekly Reader, as applicable, in writing (with a copy to
each Holder requesting registration) that, in such managing
14
underwriter's or underwriters' opinion, the number of securities requested to be
included in such registration (including securities of the Company or Weekly
Reader, as applicable, which are not Registrable Securities) is such as to
adversely affect the success of such offering, including the price at which such
securities can be sold, then the Company or Weekly Reader, as applicable, will
include in such registration, to the extent of the number which the Company or
Weekly Reader, as applicable, is so advised can be sold in such offering, (i)
first, Registrable Securities requested to be included in such registration by
the Holders, PRO RATA among such holders requesting such registration on the
basis of the number of such securities requested to be included by such Holders
and (ii) second, securities held by other Persons, including the Company or
Weekly Reader, as applicable. If Registrable Securities are to be disposed of in
an underwritten public offering requested pursuant to this Section 6, the
underwriters (including, without limitation, the lead and managing underwriters)
of such offering shall be one or more underwriting firms of recognized standing
selected by the Initiating Holders and reasonably acceptable to the Company or
Weekly Reader, as applicable. For the avoidance of doubt, the holders of
Registrable Securities other than the Initiating Holders shall have no right to
select the underwriters of any Demand Registration.
(f) If the Company or Weekly Reader, as applicable, receives a
Demand Request during a "lock-up" or "black out" period (the "LOCK UP PERIOD")
imposed on the Company or Weekly Reader, as applicable, pursuant to or in
connection with any underwriting or purchase agreement relating to a Rule 144A
offering or a registered public offering of common stock of the Company or
Weekly Reader, as applicable, or securities convertible into or exchangeable for
common stock of the Company or Weekly Reader, as applicable, the Company or
Weekly Reader, as applicable, shall not be required to notify holders of
Registrable Securities pursuant to Section 6(a) hereof or file a Registration
Statement prior to the end of the Lock Up Period.; PROVIDED, that such Lock Up
Period shall not exceed 90 days or, in the case of an Initial Public Offering,
180 days. The Company or Weekly Reader, as applicable, shall use all
commercially reasonable best efforts to cause the Registration Statement to
become effective no later than the later of (i) 180 days after receipt of the
Demand Request or (ii) 60 days after the end of the Lock Up Period The Company
or Weekly Reader, as applicable, shall notify the Holders of Registrable
Securities within 10 days of the imposition of any Lock Up Period on the Company
or Weekly Reader.
SECTION 7. PIGGY-BACK REGISTRATION.
(a) If the Company or Weekly Reader, as applicable, proposes to file
a Registration Statement under the Act with respect to an offering by the
Company or Weekly Reader, as applicable, for its own account or for the account
of any of the holders of any class of common stock of the Company or Weekly
Reader, as applicable, (other than (i) a Registration Statement on Form S-4 or
S-8 (or any substitute form that may be adopted by the SEC), (ii) a Registration
Statement filed in connection with an exchange offer or offering of securities
solely to the Company's or Weekly Reader's, as applicable, existing security
holders or (iii) a Registration Statement concerning common stock offered to
employees of the Company or Weekly Reader, as applicable, or its subsidiaries),
then the Company or Weekly Reader, as applicable, shall give written notice of
such proposed filing to the Holders as soon as practicable (but in no event
fewer than 10 days before the anticipated filing date), and such notice shall
offer such Holders the opportunity to register such number of Registrable
Securities as each such Holder may request in writing within 20 days after
receipt of such written notice from the Company or Weekly Reader, as applicable,
(which request shall specify the shares of common stock of the Company or Weekly
Reader, as applicable, intended to be disposed of by such Selling Holder) (a
"PIGGY-BACK REGISTRATION"). Upon the written request of any such Holder made
within 20 days after the receipt of any
15
such notice (which request shall specify the number of Registrable Securities
intended to be disposed of by such Holder and the intended method of disposition
thereof), the Company or Weekly Reader, as applicable, will, subject to the
terms of this Agreement, effect the registration under the Act of all
Registrable Securities which the Company or Weekly Reader, as applicable, has
been so requested to register by the Holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion of
such Registrable Securities in the registration statement that covers the
securities which the Company or Weekly Reader, as applicable, proposes to
register, PROVIDED that, if at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
or Weekly Reader, as applicable, shall determine for any reason either not to
register or to delay registration of such securities, the Company or Weekly
Reader, as applicable, may, at its election, give written notice of such
determination to each Holder and, thereupon, (i) in the case of a determination
not to register shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities
entitled to do so to request that such registration be effected as a
registration under Section 6, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration effected under this Section 7 shall relieve the Company or Weekly
Reader, as applicable, of its obligation to effect any registration upon request
under Section 6, nor shall any such registration hereunder be deemed to have
been effected pursuant to Section 6. The Company or Weekly Reader, as
applicable, shall use its best efforts to keep such Registration continuously
effective under the Act until the earlier of (A) an aggregate of 90 days after
the effective date thereof or (B) the consummation of the distribution by the
Holders of all of the Registrable Securities covered thereby.
(b) The Company or Weekly Reader, as applicable, shall use its
reasonable efforts to cause the managing underwriter or underwriters of such
proposed offering to permit the Registrable Securities requested to be included
in a Piggy-Back Registration to be included in the same terms and conditions as
any similar securities of the Company or Weekly Reader, as applicable, or any
other security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. The Selling Holders shall enter into reasonable
and customary underwriting agreements in connection with any such underwritten
registration. Any Selling Holder shall have the right to withdraw its request
for inclusion of its Registrable Securities in any Registration Statement
pursuant to these provisions by giving written notice to the Company or Weekly
Reader, as applicable, of its request to withdraw prior to the effective date of
such registration statement. The Company or Weekly Reader, as applicable, may
withdraw a Piggy-Back Registration at any time prior to the time it becomes
effective or the Company or Weekly Reader, as applicable, may elect to delay the
registration; PROVIDED, HOWEVER, that the Company or Weekly Reader, as
applicable, shall give prompt written notice thereof to participating Holders.
(c) The Company or Weekly Reader, as applicable, will pay all
Registration Expenses in connection with registration of Registrable Securities
requested pursuant to this Section 7 and the Selling Holders shall pay the
underwriting discounts, commissions, and transfer taxes, if any, relating to the
sale of such Selling Holders' Registrable Securities pursuant to this Section 7,
such costs being allocated PRO RATA among all Selling Holders on whose behalf
Registrable Securities of the Company or Weekly Reader, as applicable, are
included in such registration on the basis of the respective amounts of
Registrable Securities then being registered on their behalf.
16
(d) PRIORITY IN PIGGY-BACK REGISTRATIONS. If a registration pursuant
to this Section 7 involves an underwritten offering of the securities so being
registered, whether or not for sale for the account of the Company or Weekly
Reader, as applicable, the Company or Weekly Reader, as applicable, will, if
requested by any Holder and subject to the provisions of this Section 7, use its
reasonable efforts to arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such Holder among the
securities to be distributed by such underwriters. Notwithstanding anything to
the contrary, if the managing underwriter of such underwritten offering shall,
in writing, inform the Holders requesting such registration and the holders of
any of the Company's or Weekly Reader's, as applicable, other securities which
shall have exercised registration rights in respect of such underwritten
offering of its belief that the number of securities requested to be included in
such registration (including securities of the Company or Weekly Reader, as
applicable, that are not Registrable Securities) is such as to adversely affect
the success of such offering, including the price at which such securities can
be sold in (or during the time of) such offering, then the Company or Weekly
Reader, as applicable, will be required to include in such registration
statement only the amount of securities that it is so advised should be included
in such registration. In such event, (x) in cases initially involving the
registration for sale of securities for the Company's or Weekly Reader's, as
applicable, own account, securities shall be registered in such offering in the
following order of priority: (i) first, the securities that the Company or
Weekly Reader, as applicable, proposes to register, and (ii) second, the
securities that have been requested to be included in such registration by
Holders and by Persons entitled to exercise "piggy-back" registration rights
pursuant to contractual commitments of the Company or Weekly Reader, as
applicable, (PRO RATA on the amount of securities sought to be registered by
such Holders and Persons) and (y) in cases not initially involving the
registration for sale of securities for the Company's or Weekly Reader's, as
applicable, own account, securities shall be registered in such offering as
follows: (i) first, the securities of any person whose exercise of a "demand"
registration right pursuant to a contractual commitment of the Company or Weekly
Reader, as applicable, is the basis for the registration (provided that if such
person is a Holder, there shall be no priority as among Holders and Registrable
Securities sought to be included by Holders shall be included PRO RATA based on
the amount of securities sought to be registered by such persons), (ii) second,
the securities that have been requested to be included in such registration by
Holders and other persons entitled to exercise "piggy-back" registration rights
pursuant to contractual commitments (PRO RATA based on the amount of securities
sought to be registered by such Holders and persons) and (iii) third, the
securities which the Company or Weekly Reader, as applicable, proposes to
register.
SECTION 8. SHELF REGISTRATION
(a) SHELF REGISTRATION. If a Demand Event occurs with respect to an
Initial Public Offering of Weekly Reader that does not include or occur after a
Reorganization Transaction, then the Company shall:
(x) use its commercially reasonable best efforts to cause to be
filed, on or prior to 45 days after the earlier of the date of such Initial
Public Offering (the "SHELF REGISTRATION FILING DEADLINE"), a shelf registration
statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION"),
relating to all Registrable Securities issued by the Company, and
(y) use its commercially reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline (such 90th day the "SHELF REGISTRATION EFFECTIVENESS TARGET
DATE").
17
To the extent necessary to ensure that the Shelf Registration is
available for sale of Registrable Securities by the Holders thereof entitled to
the benefit of this Section 8, the Company shall use its commercially reasonable
best efforts to keep any Shelf Registration Statement required by this Section 8
continuously effective, supplemented, amended and current as required by and
subject to the provisions of and in conformity with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period ending on the earlier of: (i) two
years from the date of such Initial Public Offering or such shorter period as
will terminate when all Registrable Securities covered by such Shelf
Registration Statement have been sold pursuant thereto and (ii) the date on
which the shares of Common Stock become eligible for resale without volume
restrictions pursuant to Rule 144 under the Act.
SECTION 9. ADJUSTMENT OF NUMBER OF SHARES OF EXCHANGE COMMON STOCK ISSUABLE
AND EXCHANGE RATIO.
The number of shares of Exchange Common Stock issuable upon exchange
of Unit Common Stock and the Exchange Ratio are subject to adjustment from time
to time upon the occurrence of the events enumerated in this Section 9. For
purposes of this Section 9, "COMMON STOCK" means shares now or hereafter
authorized of any class of common stock of the Company or Weekly Reader, as
applicable, and any other stock of the Company or Weekly Reader, as applicable,
however designated, that has the right (subject to any prior rights of any class
or series of preferred stock) to participate in any distribution of the assets
or earnings of the Company or Weekly Reader, as applicable, without limit as to
per share amount.
(a) Adjustment for Change in Common Stock.
If Weekly Reader (i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock, (ii) subdivides or splits its
outstanding shares of Common Stock into a greater number of shares, (iii)
combines or reclassifies its outstanding shares of Common Stock into a smaller
number of shares, (iv) makes a distribution on its common stock in shares of its
capital stock other than Common Stock or (v) issues by reclassification of its
Common Stock any shares of its capital stock, then the number of shares of
Exchange Common Stock issuable upon exchange of Unit Common Stock, and the
Exchange Ratio in effect, immediately prior to such action shall be
proportionately adjusted so that the Holder of any Unit Common Stock thereafter
shall be entitled to the aggregate number and kind of shares of Common Stock of
Weekly Reader immediately following such action equal to that number of shares
of capital Stock that such Holder would have been entitled to had such Holder
exchanged his shares of Unit Common Stock immediately prior to such action
(subject to changes in such Holder's percentage ownership of the Company and in
the Company's ownership of Weekly Reader), PROVIDED, HOWEVER, that no adjustment
shall be made for the issuance of Common Stock pursuant to any Common Stock
related employee compensation plan or agreement of Weekly Reader or the Company
as applicable approved by the applicable Board of Directors.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a Holder of Unit Common Stock may receive shares of two
or more classes of Common Stock of Weekly Reader, Weekly Reader shall determine,
in good faith, the allocation between the classes of Common Stock. After such
allocation, the Exchange Ratio and the number of shares Exchange Common Stock,
as applicable, shall thereafter be subject to adjustment on
18
terms comparable to those applicable to Common Stock in this Section 9. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) Adjustment for Rights Issue.
If Weekly Reader distributes to all Holders of Common Stock any
rights, options (other than pursuant to any Common Stock related employee
benefit plan or agreement of Weekly Reader approved by its Board of Directors)
or warrants entitling them to subscribe for Common Stock or other securities
convertible into, or exchangeable or exercisable for, Common Stock at a price
per share less than the Fair Value (as defined below) per share on that record
date (other than pursuant to any Common Stock-related employee compensation plan
or agreement of Weekly Reader approved by its Board of Directors), the Exchange
Ratio shall be adjusted so that the holder of any Unit Common Stock thereafter
shall be entitled to the aggregate number of shares of Common Stock of Weekly
Reader which will provide such holder the same economic interest in Weekly
Reader as such holder would have had, had such rights, options or warrants been
issued with an exercise price per share equal to the Fair Value per share on the
applicable record date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exchange Ratio shall be immediately readjusted
based upon the number of shares actually issued.
(c) Adjustment for Other Distributions.
If Weekly Reader distributes to all holders of its Common Stock any
of its assets (excluding ordinary cash dividends), debt securities, preferred
stock or any rights or warrants to purchase any such securities or other
securities of Weekly Reader (excluding securities issued in transactions
referred to in Section 9(a) above) of Weekly Reader, the Exchange Ratio shall be
adjusted so that the holder of any Unit Common Stock thereafter shall be
entitled to the aggregate number of shares of Common Stock of Weekly Reader
which will provide such holder the same economic interest in Weekly Reader as
such holder had prior to such distribution.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This Section 9(c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of Weekly Reader prepared in accordance with generally accepted
accounting principles. Also, this Section 9(c) does not apply to rights, options
or warrants referred to in Section 9(b) hereof.
(d) Adjustment for Common Stock Issue.
If Weekly Reader issues shares of Common Stock (other than pursuant
to any Common Stock-related employee benefit plan or agreement of Weekly Reader
approved by its Board of Directors) for a consideration per share less than the
Fair Value per share on the date Weekly Reader fixes the
19
offering price of such additional shares, the Exchange Ratio shall be adjusted
so that the holder of any Unit Common Stock thereafter shall be entitled to the
aggregate number of shares of Common Stock of Weekly Reader which will provide
such holder the same economic interest in Weekly Reader as such holder would
have had, had such Common Stock been issued at a price equal to the Fair Value
per share.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
Notwithstanding the foregoing, no adjustment to the Exchange Ratio shall be made
as a result of the issuance of shares of Weekly Reader Common Stock in bona fide
public offerings that are underwritten or offerings in which a private placement
agent is retained by Weekly Reader.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections
(a), (b) and (c) of this Section 9,
(2) the exercise of warrants, or the conversion or
exchange of other securities convertible or exchangeable for
common stock the issuance of which caused an adjustment to be
made under Section 9(e),
(3) common stock issued to Weekly Reader's employees (or
employees of its subsidiaries) under bona fide employee
compensation plans or agreements with employees adopted by its
Board of Directors, if such common stock would otherwise be
covered by this subsection (d),
(4) common stock of Weekly Reader issued to shareholders
of any person which merges into Weekly Reader, as applicable,
or with a subsidiary of the Company or Weekly Reader in
proportion to their stock holdings of such person immediately
prior to such merger, upon such merger, provided that if such
person is an Affiliate of Weekly Reader the Board of Directors
of Weekly Reader shall have obtained a fairness opinion from a
nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of Weekly Reader,
stating that the consideration received in such merger is fair
to Weekly Reader from a financial point of view, or
(5) the issuance of shares of common stock of Weekly
Reader pursuant to rights, options or warrants which were
originally issued in a Non-Affiliate Sale (as defined below)
together with one or more other securities as part of a unit
at a price per unit.
(e) Adjustment for Convertible Securities Issue.
If Weekly Reader issues any securities convertible into or
exchangeable for Common Stock (other than pursuant to any Common Stock-related
employee benefit plan or agreement of Weekly Reader approved by the Board of
Directors of Weekly Reader) and other than securities issued in transactions
described in subsections (a), (b) and (c) of this Section 9) for a conversion or
exchange price plus consideration per share received upon issuance of less than
the Fair Value per share on the date of issuance of such securities, the
Exchange Ratio shall be adjusted so that the holder of any Unit Common
20
Stock thereafter shall be entitled to the aggregate number of shares of Common
Stock of Weekly Reader which will provide such holder the same economic interest
in Weekly Reader as such holder would have had if such securities were
convertible into or exchangeable for Common Stock for a consideration per share
equal to the Fair Value per share of such securities. The adjustment shall be
made successively whenever any such issuance is made, and shall become effective
immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange
of such securities have not been issued when such securities are no longer
outstanding, then the Exchange Ratio shall promptly be readjusted to the
Exchange Ratio which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of common stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to convertible securities issued
to shareholders of any person which merges into Weekly Reader with a subsidiary
of Weekly Reader in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger, provided that if such person
is an Affiliate of Weekly Reader the Board of Directors of Weekly Reader shall
have obtained a fairness opinion from a nationally recognized investment
banking, appraisal or valuation firm, which is not an Affiliate of Weekly
Reader, stating that the consideration received in such merger is fair to the
Company from a financial point of view.
(f) Consideration Received.
For purposes of any computation respecting consideration received
pursuant to subsections (d), and (e) of this Section 9, the following shall
apply:
(1) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be made for
any commissions, discounts or other expenses incurred by
Weekly Reader for any underwriting of the issue or otherwise
in connection therewith;
(2) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the
fair market value thereof as determined in good faith by the
Board of Directors of Weekly Reader (irrespective of the
accounting treatment thereof), whose determination shall be
conclusive, and described in a Board resolution;
(3) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock,
the aggregate consideration received therefor shall be deemed
to be the consideration received by Weekly Reader for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by Weekly Reader upon
the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in
clauses (1) and (2) of this subsection); and
(4) in the case of the issuance of shares of Common
Stock pursuant to rights, options or warrants which rights,
options or warrants were originally
21
issued together with one or more other securities as part of a
unit at a price per unit, the consideration shall be deemed to
be the fair value of such rights, options or warrants at the
time of issuance thereof as determined in good faith by the
Board of Directors of Weekly Reader whose determination shall
be conclusive and described in a Board resolution plus the
additional minimum consideration, if any, to be received by
Weekly Reader upon the exercise, conversion or exchange
thereof (as determined in the same manner as provided in
clauses (1) and (2) of this subsection).
(g) Fair Value.
In Sections 9 (b), (c), (d) and (e) hereof, the "FAIR VALUE" per
security at any date of determination shall be (1) in connection with a sale by
Weekly Reader to a party that is not an Affiliate of Weekly Reader in an
arm's-length transaction (a "NON-AFFILIATE SALE"), the price per security at
which such security is sold and (2) in connection with any sale by Weekly Reader
to an Affiliate of Weekly Reader (a) the last price per security at which such
security was sold in a Non-Affiliate Sale within the three-month period
preceding such date of determination or (b) if clause (a) is not applicable, the
fair market value of such security determined in good faith by (i) a majority of
the Board of Directors of Weekly Reader, including any Disinterested Directors,
and approved in a Board resolution or (ii) a nationally recognized investment
banking, appraisal or valuation firm, which is not an Affiliate of Weekly
Reader, in each case taking into account, among other factors deemed relevant by
the Board of Directors of Weekly Reader or such investment banking, appraisal or
valuation firm, the trading price and volume of such security on any national
securities exchange or interdealer quotation system on which such security is
traded. Notwithstanding the foregoing, any sale to Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation or Banc of America Securities LLC (or any successors
thereto) pursuant to an underwritten public offering registered under the Act
shall be deemed to be and treated as a Non-Affiliate Sale.
For purposes of this Section 9(g), "DISINTERESTED DIRECTOR" means,
in connection with any issuance of securities that gives rise to a determination
of the Fair Value thereof, each member of the Board of Directors of Weekly
Reader who is not an officer, employee, director or other Affiliate of the party
to whom Weekly Reader is proposing to issue the securities giving rise to such
determination.
(h) When De Minimis Adjustment May Be Deferred.
All calculations under this Section 9 shall be made to the nearest
1/100th of a share, as the case may be.
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to Section
9(a), (b), (c), (d), (e) or (f) hereof, if Holders are to participate (without
being required to exercise their shares) in the transaction on a basis, and with
notice that the Board of Directors of Weekly Reader determines to be fair and
appropriate in light of the basis and notice, on which other holders of Common
Stock participate in the transaction. No adjustment need be made for (i) rights
to purchase Common Stock pursuant to a plan of Weekly Reader for reinvestment of
dividends or interest or (ii) a change in the par value or no par value of the
Common Stock.
22
(j) Notice of Adjustment.
Whenever the Exchange Ratio is adjusted, the Company shall provide
the notices required by Section 11 hereof.
(k) Notice of Certain Transactions.
If (i) Weekly Reader takes any action that would require an
adjustment in the Exchange Ratio pursuant to Section 9(a), (b), (c), (d), (e) or
(f) hereof and if Weekly Reader does not arrange for Holders to participate
pursuant to Section 9(i) hereof, (ii) Weekly Reader takes any action that would
require issuance of new shares of Exchange Common Stock pursuant to Section 9(l)
hereof or (iii) there is a liquidation or dissolution of Weekly Reader then
Weekly Reader shall mail to Holders a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. Weekly Reader shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(l) Reorganization of Weekly Reader.
Immediately after the date hereof, if Weekly Reader consolidates or
merges with or into, or transfers or leases all or substantially all its assets
to, any person, upon consummation of such transaction shares of Unit Common
Stock shall automatically become exchangeable for the kind and amount of
securities, cash or other assets which the Holder would have owned immediately
after the consolidation, merger, transfer or lease if the Holder had exchanged
his shares of Unit Common Stock immediately prior to the consolidation, merger,
transfer or lease. Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if other
than Weekly or the person to which such sale or conveyance shall have been made,
which shall be subject to adjustments that are nearly equivalent as may be
practical to the adjustments provided for in this Section 9(l). The successor
company shall mail to Holders a notice describing the provisions governing the
new shares. If this Section 9(l) applies, Sections 9(a), (b), (c), (d), (e) and
(f) hereof do not apply.
(m) Determination of Weekly Reader Final.
Any determination that Weekly Reader or its Board of Directors must
make pursuant to Section 9(a), (b), (c), (d), (e), (f), (g), (h) or (i) hereof
is conclusive.
(n) Adjustments to the number of shares of Exchange Common Stock
issuable upon exchange for Unit Common Stock will be made at the time of such
exchange to the extent the events described in Sections 9(b), 9(d) or 9(e) occur
with respect to the Company's Common Stock on or prior to such exchange using
similar methodologies as those set forth in Sections 9(b), 9(d) or 9(e), as
applicable.
SECTION 10. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS.
The obligations of the Company or Weekly Reader, as applicable,
described in Sections 6, 7 and 8 of this Agreement are subject to each of the
following limitations, conditions and qualifications:
23
(a) Subject to the next sentence of this paragraph, the Company or
Weekly Reader, as applicable, shall be entitled to postpone, for a reasonable
period of time, the filing or effectiveness of, or suspend the rights of any
Holder to make sales pursuant to, any Registration Statement otherwise required
to be prepared, filed and made and kept effective by it under the registration
covenants described in Section 6 or Section 8 hereof; PROVIDED, HOWEVER, that
the duration of such postponement or suspension may not exceed 90 days in any
twelve-month period. Such postponement or suspension may only be effected if (i)
the SEC issues any stop order suspending the effectiveness of the Registration
Statement under the Act or the suspension by any state securities commission of
the qualification of the Registrable Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (ii) any fact exists or any event occurs that makes any statement of a
material fact made in such Registration Statement, Prospectus any amendment or
supplement or any document incorporated by reference therein untrue, or that
requires the making of additions to or changes in the Registration Statement in
order to make the statements therein not misleading, or that requires the making
of any additions to or changes in the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading or (iii) the Company or Weekly Reader, as applicable, so determines
for valid business reasons, including without limitation, as a result of a
potential acquisition, divestiture of assets or other material corporate
transaction, that a Registration Statement is no longer effective or the
Prospectus included therein is no longer usable for offers and sales of
Registrable Securities. If the Company or Weekly Reader, as applicable, shall so
postpone the filing or effectiveness of, or suspend the rights of any Holders to
make sales pursuant to, a Registration Statement it shall, as promptly as
possible, notify any Selling Holders of such determination, and the Selling
Holders shall (x) have the right, in the case of a postponement of the filing or
effectiveness of a Registration Statement, upon the affirmation vote of the
Selling Holders of not less than a majority of the Registrable Securities to be
included in such Registration Statement, to withdraw the request for
registration by giving written notice to the Company or Weekly Reader, as
applicable, within 10 days after receipt of such notice, or (y) in the case of a
suspension of the right to make sales, receive an extension of the registration
period equal to the number of days of the suspension (as set forth in Section
5). Any Demand Registration as to which the withdrawal election referred to in
the preceding sentence has been effected shall not be counted for purposes of
the Demand Registration referred to in Section 6 hereof. The time period
regarding the effectiveness of any Registration Statement pursuant to Section 6,
7 or 8 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the suspension period described in this Section 10(a).
(b) The Company or Weekly Reader, as applicable, shall not be
required by this Agreement to include securities in a Registration Statement
relating to a Piggy-back Registration above if (i) in the written opinion of
outside counsel to the Company or Weekly Reader, as applicable, addressed to the
Holders seeking registration and delivered to them, the Holders of such
securities seeking registration would be free to sell all such securities within
the succeeding three-month period, without registration, under Rule 144 under
the Act, which opinion may be based in part upon the representation by the
Holders of such securities seeking registration, which registration shall not be
unreasonably withheld, that each such Holder is not an affiliate of the Company
or Weekly Reader, as applicable, within the meaning of the Act, and (ii) all
requirements under the Act for effecting such sales are satisfied at such time.
(c) The Company's or Weekly Reader's, as applicable, obligations
shall be subject to the obligations of the Selling Holders to furnish all
information and materials and to take any and all actions as may be required
under Federal and state securities laws and regulations to permit the Company or
24
Weekly Reader, as applicable, to comply with all applicable requirements of the
SEC and to obtain any acceleration of the effective date of such Registration
Statement.
(d) The Company or Weekly Reader, as applicable, shall not be
obligated to cause any special audit to be undertaken in connection with any
registration pursuant to this Agreement.
(e) Each Holder of Registrable Securities agrees, if and to the
extent reasonably requested by the managing underwriter or underwriters in a
Public Equity Offering, not to effect any public sale or distribution of
Registrable Securities, including a sale pursuant to Rule 144 (except as part of
such Public Equity Offering), during the 90-day period beginning on the closing
date of any such Public Equity Offering (which period shall be 180 days in the
case of the Company's or Weekly Reader's, as applicable, Initial Public
Offering), to the extent timely notified in writing by the Company or Weekly
Reader, as applicable, or such managing underwriter or underwriters. In the
event that the Company or Weekly Reader, as applicable, is not otherwise in
compliance with the registration provisions of this Agreement at the time the
Holders receive any notice pursuant to this Section 10(e), the Holders shall not
be required to comply with this Section 10(e). In addition, the provisions of
this Section 10(e) shall not apply to any Holder of Registrable Securities if
such Holder is prevented by, on the written advice of outside counsel,
applicable statute or regulation from entering into any such agreement;
PROVIDED, that any such Holder shall undertake not to effect any public sale or
distribution of any Registrable Securities commencing on the closing date of any
such Public Equity Offering unless it has provided 45 days' prior written notice
of such sale or distribution to the managing underwriter or underwriters.
SECTION 11. REGISTRATION EXPENSES.
The Company or Weekly Reader, as applicable, shall pay all
Registration Expenses.
SECTION 12. INDEMNIFICATION.
(a) The Company and Weekly Reader agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers, employees,
representatives and agents and each Person, if any, who controls such Holder
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
from and against any and all losses, claims, damages, liabilities and judgments
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company or Weekly
Reader to any Holder or any prospective purchaser of Registrable Securities, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are caused by
an untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to any of the Holders furnished in writing to
the Company or Weekly Reader by any of the Holders; provided that, the indemnity
agreement contained in this Section 12(a) shall not inure to the benefit of any
Holder from whom the person asserting any such loss, claim, damage, liability or
action received Registrable Securities if the final Prospectus (as then amended
or supplemented) was not sent or given to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of such
Registrable Securities to such person and if the final Prospectus (as amended or
supplemented) would have corrected any such untrue statement of a material fact
contained
25
in and each omission or alleged omission of a material fact from the related
preliminary Prospectus giving rise to such losses, claims, damages, liabilities
or actions unless such failure is the result of non-compliance by the Company or
Weekly Reader, as applicable, with 5(k), (l) or (m).
(b) Each Holder of Registrable Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company and Weekly Reader, and their
respective directors, officers, employees, representatives and agents and each
person, if any, who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) the Company or Weekly Reader, to the same extent
as the foregoing indemnity from the Company and Weekly Reader set forth in
section (a) above, but only with reference to information relating to such
Holder furnished in writing to the Company or Weekly Reader by such Holder
expressly for use in any Registration Statement. In no event shall any Holder,
its directors, officers or any Person who controls such Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Registrable Securities
pursuant to a Registration Statement exceeds (i) the amount paid by such Holder
for such Registrable Securities and (ii) the amount of any damages that such
Holder, its directors, officers or any Person who controls such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 12(a) or 12(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 12(a) and 12(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 12(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 12(a), and
by the Company, in the case of parties indemnified pursuant to Section 12(b). No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent, but if settled with its written consent,
which consent will not unreasonably be withheld, the indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any
26
action effected with its written consent. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 12 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
Weekly Reader, on the one hand, and the Holders, on the other hand, from their
sale of Registrable Securities or (ii) if the allocation provided by clause
12(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
12(d)(i) above but also the relative fault of the Company and Weekly Reader, on
the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and Weekly Reader, on the one
hand, and of the Holder, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and Weekly Reader, on the one hand, or by
the Holder, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and judgments referred to above shall be deemed to
include, subject to the limitations set forth in the second paragraph of Section
12(a), any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company and Weekly Reader and each Holder agree that it would
not be just and equitable if contribution pursuant to this Section 12(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any matter,
including any action that could have given rise to such losses, claims, damages,
liabilities or judgments. Notwithstanding the provisions of this Section 12, no
Holder, its directors, its officers or any Person, if any, who controls such
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total received by such Holder with respect to the
sale of Registrable Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Registrable Securities plus (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section
27
12(d) are several in proportion to the respective principal amount of
Registrable Securities held by each Holder hereunder and not joint.
SECTION 13. RULE 144A AND RULE 144.
The Company and Weekly Reader agree with each Holder, for so long as
any Registrable Securities remain outstanding and during any period in which the
Company or Weekly Reader, as applicable, (i) is not subject to Section 13 or
15(d) of the Exchange Act, to make available, upon request of any Holder, to
such Holder or beneficial owner of Registrable Securities in connection with any
sale thereof and any prospective purchaser of such Registrable Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Registrable
Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of
the Exchange Act, to make all filings required thereby in a timely manner in
order to permit resales of such Registrable Securities pursuant to Rule 144.
SECTION 14. MISCELLANEOUS.
(a) REMEDIES. The Company and Weekly Reader acknowledge and agree
that any failure by either the Company or Weekly Reader to comply with its
obligations under Sections 6, 7 and 8 hereof may result in material irreparable
injury to the Holders for which there is no adequate remedy at law, that it will
not be possible to measure damages for such injuries precisely and that, in the
event of any such failure, the any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 6, 7
and 8 hereof. The Company further agrees to waive the defense in any action for
specific performance as contemplated by this Section 14(a) that a remedy at law
would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor Weekly
Reader will on or after the date of this Agreement enter into or amend any
agreement with respect to its securities that conflicts with the rights granted
to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. Except as disclosed in the Offering
Memorandum, neither the Company, Weekly Reader have previously entered into any
agreement granting any registration rights of its securities to any Person, and
the rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's or
Weekly Reader's securities under any other agreement in effect on the date
hereof. It is understood and agreed by the Holders that the Company and Weekly
Reader may in the future grant registration rights to any person not
inconsistent with the rights granted in this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company and Weekly Reader have
obtained the written consent of Holders of a majority of the then outstanding
Registrable Securities (excluding Registrable Securities held by the Company,
Weekly Reader or any of their Affiliates). Notwithstanding the foregoing, a
waiver or consent to departure from the provisions hereof that relates
exclusively to the rights of Holders of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and that does not affect
directly or indirectly the rights of other Holders whose Registrable Securities
are not being sold pursuant to a Registration Statement may be given by the
Holders of at least a majority of the Registrable Securities being sold.
28
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and Weekly
Reader, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar
under the Indenture; and
(ii) if to the Company or Weekly Reader:
WRC Media Inc.
Weekly Reader Corporation
0 Xxxxxxxxxxx Xxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Warrant Agent at the
address specified in the Warrant Agreement.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders; PROVIDED, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms hereof or of the Purchase Agreement. If any transferee
of any Holder shall acquire Registrable Securities in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be held subject
to all of the terms of this Agreement, and by taking and holding such
Registrable Securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
29
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
[Signature Page Follows]
30
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
WRC MEDIA, INC.
By:
--------------------------------
Name:
Title:
WEEKLY READER CORPORATION.
By:
--------------------------------
Name:
Title:
JLC LEARNING CORPORATION
By:
--------------------------------
Name:
Title:
EAC III L.L.C.
By:
--------------------------------
Name:
Title:
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
By: Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation
By:
------------------------------
Name: D. Xxxx Xxxxxxxx, XX
Title: Vice President
