Exhibit 10.2
AUTOMOTIVE.COM,
INC.
STOCKHOLDERS
AGREEMENT
Dated as of November 15,
2005
Confidential
TABLE OF CONTENTS
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STOCKHOLDERS
AGREEMENT
This
Stockholders Agreement (
“ Agreement ” ), by and among PRIMEDIA
Inc., a Delaware corporation (“ Primedia
”), Automotive.com, Inc., a Delaware corporation (the “
Company ”), each holder of common stock, par
value $0.001 per share, of the Company (the “ Common
Stock ”) listed under the heading “Original
Stockholder” on Schedule A (each an “
Original Stockholder ,” and collectively, the
“ Original Stockholders ”), each holder
of options to purchase Common Stock listed under the heading
“Optionholder” on Schedule A (each an “
Optionholder ,” and collectively, the “
Optionholders ”) and each Person who, after the
date hereof, acquires shares of and joins in and becomes a party to
this Agreement by executing and delivering to the Company a
counterpart signature page to this Agreement is entered into as of
the 15th day of November, 2005.
RECITALS
Whereas
, pursuant to that certain Stock
Purchase Agreement, dated of even date herewith, by and among
Primedia, the Company and the Original Stockholders (the “
Stock Purchase Agreement ”), Primedia has
purchased from the Original Stockholders 10,493,930 shares of
Common Stock (the “ Primedia Closing Shares
”);
Whereas,
each Original Stockholder continues
to hold the number of shares of Common Stock set forth next to his
or her name on Schedule A ;
Whereas,
pursuant to the Contribution
Agreement, dated of even date herewith, by and among Primedia and
the Company (the “ Contribution Agreement
”), Primedia will contribute the assets associated with its
online automotive operations as set forth in the Contribution
Agreement to the Company in exchange for the issuance of new shares
of Common Stock; and
Whereas,
the parties hereto desire to enter
into this Agreement for the purpose of establishing certain of
their rights and obligations with respect to their equity interests
in the Company;
AGREEMENT
Now,
Therefore, in
consideration of the mutual covenants and agreements contained in
this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound, the parties agree as
follows:
ARTICLE 1.
DEFINITIONS
1.1
Definitions.
The following terms used in this
Agreement shall have the following meanings (unless otherwise
expressly provided herein):
“Affiliate,”
with respect to any Person, shall
mean any other Person directly or indirectly controlling,
controlled by or under common control with, such Person. For
purposes of this Agreement, “control”
(including with correlative meanings, the terms
“controlling” , “controlled
by” or “under common control
with” ) as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by
contract or otherwise.
“Board of
Directors” shall mean the Board of Directors of the
Company.
“Bylaws” shall mean the Bylaws of the Company in effect
as of the date hereof, as the same may hereafter be amended from
time to time pursuant to and in accordance with this
Agreement.
“Capital Call
Notice” has the
meaning set forth in Section 3.2(a).
“Certificate of
Incorporation” shall mean the Certificate of Incorporation of
the Company, as filed with the Secretary of State of the State of
Delaware and in effect as of the date hereof, as the same may
hereafter be amended from time to time pursuant to and in
accordance with this Agreement.
“Company
Option” shall
mean an option to purchase Common Stock held by an
Optionholder.
“ Contribution
Agreement” has the meaning set forth in the Recitals
to this Agreement.
“Employment
Agreement” means the written employment agreement between
an individual and the Company, dated of even date herewith, as the
same may be modified, amended or supplemented by the parties
thereto.
“Entity” shall mean any corporation (including any
non-profit corporation), general partnership, limited partnership,
limited liability partnership, joint venture, estate, trust,
cooperative, foundation, society, political party, union, company
(including any limited liability company or joint stock company),
firm or other enterprise, association, organization or
entity.
“Founding
Stockholders” shall mean Gary Fudge, Jason Phillips and Joshua
Speyer.
“GAAP” shall mean United States generally accepted
accounting principles in effect at the applicable time.
“Legal
Requirement” shall mean any federal, state, foreign, local or
municipal law, statute, legislation, constitution, ordinance, code,
edict, rule, regulation, ruling, directive, pronouncement, or
interpretation issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or
under the authority of any governmental body.
“License
Agreement” shall mean that certain License Agreement, dated
of even date herewith, between Primedia and the Company.
“ Minority
Stockholders ” shall mean the holders of Common
Stock, other than Primedia or its Affiliates or successors, who are
or become a party to this Agreement.
“Optionholder”
has the meaning set forth in the
Recitals to this Agreement.
“Person” shall mean any individual or Entity.
“ Qualifying
Termination ” means a termination of employment of an
individual by the Company For Cause (as defined in the applicable
Employment Agreement) or by the employee without Good Reason (as
defined in the applicable Employment Agreement).
“Shared Services
Agreement” shall mean that certain Shared Services
Agreement, dated of even date herewith, by and between the Company
and Primedia.
“Shares” shall mean the shares of Common Stock held by
any Stockholder.
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“Stockholder”
shall mean Primedia and each
Minority Stockholder.
“Stockholder
Representatives” means those natural Persons appointed by the
Original Stockholders as Stockholder Representatives pursuant to
that certain Stockholder Representatives Agreement by and among the
Original Stockholders dated as of November 15, 2005.
“Stock Purchase
Agreement” has
the meaning set forth in the Recitals to this Agreement.
“Subsidiary”
shall mean, in respect of any
Person, any Entity of which the majority of each class of voting
stock or other voting equity and the majority of each other class
of capital stock is owned by either (a) such Person or (b) another
Subsidiary of such Person.
“Supermajority
Vote” shall
mean the affirmative vote of a majority of the members of the Board
of Directors, including at least one (1) Primedia Designated
Director and at least one (1) Minority Designated
Director.
ARTICLE 2.
COMPANY MANAGEMENT
2.1
Board of
Directors.
(a)
Appointment
. Except as set forth in
Section 4.8, the Board of Directors shall be comprised of seven
members: four members designated by Primedia (the “
Primedia Designated Directors ”) and three
members designated by a majority vote of the Stockholder
Representatives (the “ Minority Designated
Directors , and together with the Primedia Designated
Directors, the “ Designated Directors
”). The initial Primedia Designated Directors shall be
Dean Nelson, Steve Parr, Scott Wagner and Sheila Spence. The
initial Minority Designated Directors shall be Joshua Speyer, Jason
Phillips and Gary Fudge.
(b)
Compensation Committee
. The Board of Directors shall
promptly designate a Compensation Committee, which shall at all
times consist solely of one Primedia Designated Director and one
Minority Designated Director.
(c)
Audit Committee.
The Board of Directors shall
promptly designate an Audit Committee, which shall at all times
consist solely of one Primedia Designated Director and one Minority
Designated Director.
(d)
Contribution Agreement
Committee. The Board of
Directors shall promptly designate a Contribution Agreement
Committee, which shall at all times consist solely of three
Minority Designated Directors. This Contribution Agreement
Committee shall be delegated exclusive and irrevocable authority to
control the Company’s enforcement of its indemnity
protections under the Contribution Agreement.
(e)
Tenure and
Qualification. Each Designated Director shall hold office
until his or her death, disability, resignation in accordance with
Section 2.1(f) below or removal in accordance with Section 2.1(g)
below.
(f)
Resignation. Any
Designated Director may resign from the Board of Directors at any
time by giving written notice to the Company. The
resignation of any Designated
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Director shall take effect upon receipt of such
notice by the Company or at such later time as shall be specified
in the notice.
(g)
Removal. No
Primedia Designated Director may be removed from the Board of
Directors without the written consent of Primedia. No
Minority Designated Director may be removed from the Board of
Directors without the unanimous written consent of the Stockholder
Representatives.
(h)
Vacancies. Upon
the death, disability, resignation or removal of a Primedia
Designated Director, Primedia shall designate a replacement
Primedia Designated Director to fill the vacancy. Upon the
death, disability, resignation or removal of a Minority Designated
Director, the Stockholder Representatives , by
majority vote, shall designate a replacement Minority Designated
Director to fill the vacancy. Each of Primedia and the
Stockholder Representatives shall cause their respective Designated
Directors to appoint such replacement Designated Directors to the
Board of Directors.
(i)
Stockholder
Cooperation. Each of the Stockholders shall vote all Shares
held by such Stockholder in favor of the election to the Board of
Directors of the Designated Directors designated by Primedia and
the Stockholder Representatives, and each Stockholder agrees to
take all such steps as may be necessary, including through the
exercise of their respective voting power, to both elect and remove
directors and to give effect to the composition of the Board as
contemplated in this Section 2.1.
(j)
Organizational
Documents .
Concurrently with the execution of this Agreement, the Bylaws of
the Company shall be amended to read as set forth in Schedule
B attached hereto. Neither Primedia nor the Minority
Stockholders, in their capacity as stockholders, shall vote in
favor of any further amendment of the Certificate of Incorporation
or Bylaws of the Company unless such amendment is approved by a
Supermajority Vote of the Board of Directors or unless such
amendment is necessary to carry out the intent of Section
4.8.
(k)
Term of Section 2.1
. The rights and obligations
of the parties under this Section 2.1 shall terminate as of the
earlier of (i) the Call Closing Date (or, the Select Call Closing
Date, should it occur) or the Put Closing Date, as applicable, or
(ii) December 31, 2010.
2.2
Directors’ Liability and
Indemnification. The Certificate of Incorporation and Bylaws
shall at all times provide (a) for elimination of the
liability of directors and executive officers of the Company to the
maximum extent permitted by law and (b) for indemnification of
directors and executive officers of the Company for acts taken by
such persons on behalf of the Company to the maximum extent
permitted by law.
2.3
Special Voting
Requirements. In
addition to any requirement in the Company’s Certificate of
Incorporation or Bylaws, a Supermajority Vote of the Board of
Directors at a duly called meeting or by written consent in lieu of
a meeting shall be required for the Company to undertake any of the
following actions on or before the earlier of the Call Closing Date
(or, the Select Call Closing Date, should it occur) or the Put
Closing Date, as applicable, or December 31, 2010:
(a)
any increase or decrease in the
number of Designated Directors that Primedia or the Stockholder
Representatives are entitled to designate pursuant to Section
2.1(a) or Section 4.8;
(b)
the dissolution, winding up or
liquidation of the Company;
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(c)
the filing of a voluntary bankruptcy
petition or the filing of a petition or an answer seeking a
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any Legal
Requirement on behalf of the Company or any Subsidiary holding a
majority of the assets of the Company and its Subsidiaries, taken
as a whole;
(d)
any disposition (whether by sale,
exchange, merger, consolidation, license or otherwise, directly or
indirectly) of all or any significant portion of the assets of the
Company or of any Company Subsidiary in a single transaction or
series of related transactions;
(e)
incurrence by the Company or any
Company Subsidiary of any liability, direct or indirect, actual or
contingent, with respect to any indebtedness for borrowed money, or
any mortgage, deed of trust, pledge or other security device
securing any such liability or the refunding, refinancing,
increasing, modification, consolidation or extension of the
maturity of any of the foregoing other than any such obligations as
would not be significant to the business of the Company as a
whole;
(f)
any acquisition by the Company or
any Company Subsidiary of any business or other Person (including
any minority interest therein), whether by way of stock purchase,
asset purchase, merger, consolidation or otherwise;
(g)
any delivery to Stockholders of a
Capital Call Notice;
(h)
entering into, amending, extending,
renewing or waiving any Company rights under any agreement between
the Company and Primedia; and
(i)
any termination without Cause (as
defined in the applicable Employment Agreement) of the Chief
Executive Officer or Chief Operating Officer.
2.4
Officers.
The Company shall have a Chief
Executive Officer, President and Chief Operating Officer (the
“ Senior Executive Officers ” ) and such
other executive officers as the Board of Directors shall
determine. Initially, the Chief Executive Officer and
President shall be Joshua Speyer and the Chief Operating Officer
shall be Jason Phillips, each of whom shall serve in such capacity
through the earlier of the Call Closing Date (or, the Select Call
Closing Date, should it occur) or the Put Closing Date, as
applicable, or December 31, 2010, unless his employment is earlier
terminated pursuant to the terms of his Employment Agreement.
In the absence of any contrary determination by the Board of
Directors, the Senior Executive Officers shall have general
supervision, direction and control of the officers, employees,
business and affairs of the Company.
2.5
Operating Plan.
(a)
The Senior Executive Officers, in
consultation with the Board of Directors, shall prepare an
operating plan (each, an “ Operating Plan
”) for each of calendar years 2006, 2007, 2008 and 2009,
which for years 2007, 2008 and 2009 shall be prepared prior to the
commencement of the calendar year to which it applies. Among
other things, the Operating Plans may designate staffing levels and
limitations on capital expenditures, research and development
expenses, marketing expenses, travel and entertainment expenses and
other budgetary items.
(b)
The Company shall be operated for
calendar years 2006, 2007, 2008 and 2009 in accordance with the
Operating Plan for that year; provided, however , that (i)
interim changes to the Operating Plan may be made upon the approval
of both the Senior Executive Officers and the Board of Directors
and (ii) the following actions by the Company may not be taken or
included in an Operating Plan without the approval of the Board of
Directors:
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(i)
Incurrence by the Company or any
Company Subsidiary of any material liability, direct or indirect,
actual or contingent, with respect to any indebtedness for borrowed
money, or any mortgage, deed of trust, pledge or other security
device securing any such liability or the refunding, refinancing,
increasing, modification, consolidation or extension of the
maturity of any such liability.
(ii)
any material change by the Company
in its operating structure or business purpose; or
(iii)
operating the Company at a cash flow
deficit for a period in excess of 30 days.
(c)
Any new hires or changes in
compensation in any period that are in conflict with the headcount
and compensation parameters outlined in the Operating Plan for such
period shall be approved in advance by the Compensation
Committee.
(d)
The Senior Executive Officers shall
provide written notice to, and seek pre-approval from, the Board of
Directors (or any Primedia Designated Director as determined by the
Board of Directors) for any new contract, contract extension or
renewal requiring the expenditure of greater than $500,000 in any
12-month period and for any real estate lease. The Board of
Directors (or any Primedia Designated Director as determined by the
Board of Directors) shall have seven calendar days after its
receipt of such written notice to respond to any such
request. If the Board of Directors (or any Primedia
Designated Director as determined by the Board of Directors) does
not object to the applicable contract, renewal, extension or lease
within such seven calendar day period, the Senior Executive
Officers shall have authority to enter into such contract, renewal,
extension or lease.
(e)
The Company will be operated in a
manner which is consistent with Primedia’s (i) codes of
conduct and business ethics, as amended from time to time, (ii)
requirements for financial reporting, including, without
limitation, applicable regulations for purposes of consolidating
the Company’s financial statements and participating in
Primedia’s corporate audit conducted by Primedia’s
auditors and (iii) obligations under the Sarbanes-Oxley Act of
2002, as amended (“ SOX ”), including
maintaining necessary internal controls for the Company to comply
with SOX (the “ Internal Controls ”);
provided that if participating in the Primedia audit and
maintaining such Internal Controls results in additional costs to
the Company, such costs shall be excluded from the calculation of
EBITDA hereunder.
2.6
Financial
Statements.
(a)
The Company’s monthly,
quarterly and annual financial statements shall be prepared under
the direction and management of the Company’s Chief Financial
Officer, with oversight from the Company’s Audit Committee,
provided that, subject to the provisions of Section 2.5(e) above,
such financial statements shall be prepared in accordance with
Primedia’s requirements for financial reporting, including,
without limitation, applicable regulations for purposes of
consolidating the Company’s financial statements and
obligations under SOX. The Company’s Chief Financial
Officer shall be required to certify the accuracy of the
Company’s financial statements for each quarterly period
beginning with the quarter ended December 31, 2005 and ending with
the quarterly period ended December 31, 2008 or, if the Put/Call
Extension Notice is given, December 31, 2009.
(b)
The Company shall ensure that its
annual consolidated financial statements for calendar years 2005,
2006, 2007, 2008 and, if the Put/Call Extension Notice is
delivered, 2009 are audited by a reputable independent auditing
firm, which firm shall issue a report containing its unqualified
opinion that the financial statements have been prepared in
accordance with GAAP,
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consistently applied. The
Company shall use its best efforts to cause such independent
auditor to complete the audit and issue its opinion with respect to
each such calendar year within 75 calendar days of the end of such
calendar year and in no event later than 120 calendar days after
the end of such calendar year. In addition to the foregoing,
the Company shall participate in Primedia’s corporate audit
as requested by Primedia; provided that if participating in the
Primedia corporate audit results in additional costs to the
Company, such costs shall be excluded from the calculation of
EBITDA hereunder.
ARTICLE 3.
ADDITIONAL PAYMENTS; DIVIDENDS; CASH CONTRIBUTIONS
3.1
Additional
Payments.
(a)
The Company agrees to, and Primedia,
the Stockholder Representatives and each of the Stockholders agree
to use their best efforts to cause the Company to, distribute to
the Company stockholders in the form of dividends all Remaining
Free Cash Flow (as defined below), of the Company generated in the
following periods: from the date hereof through December 31, 2005;
calendar year 2006; calendar year 2007; calendar year 2008; and, if
the Put/Call Extension Notice is delivered, calendar year
2009. These dividends shall be paid quarterly to all holders
of record of the Common Stock at the end of the applicable calendar
quarter on a pro rata basis in accordance with their percentage
ownership of the Common Stock at the end of such calendar
quarter. The dividend payment date for each such quarter
shall be between 30 and 45 calendar days after the end of such
quarter, provided that the payment date for the dividend for the
last quarter of a calendar year shall be between 30 and 45 calendar
days after the date on which the Company’s independent
auditor shall have issued its report containing its opinion as to
the consolidated audited financial statements of the Company for
the prior calendar year; provided, however, that, in the
event that the Company’s independent auditor fails to issue
its report within 90 calendar days following the applicable
calendar year end, the dividend payment date shall be the 95
th calendar day following such calendar year end.
Within 45 calendar days of the Call Trigger Date, all dividends
accrued hereunder and not paid to the applicable holders of record
of Common Stock shall be paid to those holders of record of Common
Stock.
(b)
For purposes of this Section 3.1,
“ Remaining Free Cash Flow ” shall mean
the cash on hand at the close of each quarter, excluding all cash
held by the Company which has been specifically funded in respect
of the 2005 Employee Bonus or the Recognition Payments (as each of
those terms is defined in the Stock Purchase Agreement) less (i)
outstanding checks, (ii) one month’s average cash expenses
and (iii) for the quarter prior to the payment of accrued bonuses
(other than the 2005 Employee Bonus and the Recognition Payments),
the amount of any such accrued bonuses.
3.2
Dividends Payable to
Primedia. During
such time, if any, that Primedia is in breach of any of its payment
obligations under Section 4.1, 4.2 or 4.3 of this Agreement or
Section 2.02 of the Stock Purchase Agreement (collectively, the
“ Primedia Payment Obligations ”), any
distributions or dividends in respect of the Common Stock held by
Primedia shall be remitted to the Minority Stockholders to reduce
the amount of the Primedia Payment Obligations. In
furtherance of the foregoing, solely in the event, and only during
such time, that Primedia is in breach of any of the Primedia
Payment Obligations, Primedia hereby assigns to the Minority
Stockholders its rights to receive any such distributions or
dividends in respect of the Common Stock held by
Primedia.
3.3
Cash
Contributions.
(a)
If the Board of Directors delivers
to Stockholders a notice requesting the contribution by
Stockholders of a specified amount of cash to fund the
Company’s operations (a “ Capital Call
Notice ”), the Company and the Founding Stockholders
shall contribute, on a pro rata basis based on
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their ownership of Common Stock,
such amount of cash. If Primedia contributes cash (the
“ Initial Primedia Contributed Amount ”)
and the Founding Stockholders do not contribute their pro rata
share on behalf of themselves, then Primedia shall have the right
to contribute additional funds in an amount equal to what the
Founding Stockholders should have contributed on their behalf (the
“ Additional Primedia Contributed Amount
”, and together with the Initial Primedia Contributed Amount,
the “ Primedia Contributed Amount
”). If the Founding Stockholders contribute cash on
behalf of themselves (the “ Initial Founders
Contributed Amount ”) and Primedia does not
contribute their pro rata share, then the Founding Stockholders
shall have the right to contribute additional funds in an amount
equal to what Primedia should have contributed (the “
Additional Founders Contributed Amount , and together
with the Initial Founders Contributed Amount, the “
Founders Contributed Amount ”). For
purposes of this Section 3.3, the aggregate of the Primedia
Contributed Amount and the Founders Contribu
