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Exhibit 10.112 STOCKHOLDERS AGREEMENT
OF THE RUSS COMPANIES, INC. Dated as of
December 23, 2008
STOCKHOLDERS AGREEMENT OF THE RUSS COMPANIES,
INC. This STOCKHOLDERS AGREEMENT (this "
Agreement ") is entered into and shall be effective
as of December 23, 2008 (the " Effective Date
"), by and among The Russ Companies, Inc. , a Delaware
corporation (the " Company "), and those persons
listed on Schedule A hereto as stockholders, as
such Schedule may be amended from time to time (each a "
Stockholder " and collectively, the "
Stockholders "). RECITALS WHEREAS, on
December 23, 2008, the Company has entered into that certain
Purchase Agreement (the " Purchase Agreement ") with
Russ Berrie and Company, Inc. (" RB "), pursuant to
which RB has sold to the Company, and the Company has acquired from
RB, its Gift Business (as defined in the Purchase Agreement); and
WHEREAS, entering into this Agreement is a condition to closing the
transactions contemplated by the Purchase Agreement; and WHEREAS,
pursuant to the provisions of the Purchase Agreement, RB has been
issued 199 shares of the Common Stock, par value $.001 per share,
of the Company (the " Common Stock "), having such
rights, preferences and privileges as set forth in the Certificate
and in this Agreement; and WHEREAS, the Company has authorized
1,000 shares of Common Stock, 1000 shares of which are issued and
outstanding: 199 of such shares are owned by RB and 801 of such
shares of owned by Encore Investors II, Inc. (" EI
"), all as set forth on Schedule A attached hereto; and
WHEREAS, the Stockholders and the Company wish to make arrangements
concerning transfers of Company Capital Stock, the election of
Directors, registration rights and certain other matters relating
to the operation and governance of the Company. NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties hereto agree as follows:
ARTICLE I DEFINED TERMS Section 1.1 Defined
Terms . In addition to terms defined elsewhere in this
Agreement, the following terms have the meanings set forth below.
Capitalized terms used but undefined herein shall have the meanings
ascribed to them in the Purchase Agreement.
" Affiliate " means, with respect to a specified
Person: (a) any Person that directly or indirectly controls,
is directly or indirectly controlled by, or is directly or
indirectly under common control with, such specified Person,
including for this purpose each Person that serves as a director or
officer of such specified Person. For purposes of this definition,
(a) control" (including "controlling," "controlled by," and
"under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership
of voting securities, by contract or otherwise, and shall be
construed as such term is used in the rules promulgated under the
Securities Act. " Applicable Law " means, relative to
any Person, any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, Order,
ordinance, principle of common law, code, regulation, statute or
treaty. " Applicable Share Price " shall initially be
$30,150.76, as adjusted for any stock splits, stock dividends,
recapitalizations of or any other changes to the Common Stock, and
as further adjusted upon the closing of any Dilutive Transactions
as provided in Section 5.3 below. All references herein to the
Applicable Share Price shall mean the Applicable Share Price as so
adjusted. " Appraised Value " shall mean, in respect
of any share of Common Stock on any date herein specified, the fair
saleable value of such share of Common Stock (determined without
giving effect to the discount for (i) a minority interest,
(ii) a lack of voting power or (iii) any lack of
liquidity of the Common Stock or to the fact that the Company may
have no class of equity registered under the Exchange Act) as of
the last day of most recent fiscal month to end within 60 days
prior to such date specified, based on the value of the entire
equity of the Company, as determined by an investment banking firm
selected as described below, adjusted to reflect the aggregate
consideration receivable by the Company or the aggregate principal
amount of indebtedness of the Company that would be extinguished
upon the issuance of any and all securities not outstanding but
deemed to be outstanding in the computation of Fully Diluted
Outstanding shares of Common Stock, divided by the number of Fully
Diluted Outstanding shares of Common Stock. The determination of
the Appraised Value per share of Common Stock shall be made by
mutual agreement of the Company and RB, or in the absence of such
agreement, by an investment banking firm of nationally recognized
standing selected by the Company and acceptable to RB. If the
investment banking firm selected by the Company is not acceptable
to RB and the Company and RB cannot agree on a mutually acceptable
investment banking firm, then RB and the Company shall each choose
one such investment banking firm and the respective chosen firms
shall agree on another investment banking firm which shall make the
determination. The Company shall retain, at its sole cost, such
investment banking firm(s) as may be necessary for the
determination of Appraised Value. " Business Day "
means any day other than Saturday, Sunday, or any legal holiday on
which banks are required or permitted to be closed in the State of
New York.
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" Certificate " means the Certificate of
Incorporation of the Company, as filed with the Secretary of State
of the State of Delaware on July 3, 2008, as it may hereafter
be amended from time to time in accordance with the terms of this
Agreement and the DGCL. " Change of Control " means,
with respect to a Person, (i) the sale, lease, exchange or
other transfer (other than to a wholly-owned subsidiary of the
Person or to an existing stockholder thereof on the date hereof or
an Affiliate thereof) by the Person of all or substantially all of
its assets to a single purchaser or to a group of associated
purchasers; (ii) the purchase of at least a majority of the
shares of voting Company Capital Stock, in the case of the Company,
and the equivalent thereof, in the case of a Person other than the
Company, pursuant to a tender offer or exchange offer (other than
an offer by the Person or any stockholder thereof on the date
hereof or any Affiliate thereof); (iii) a merger or
consolidation pursuant to which the Person shall not survive as an
independent corporation and where existing stockholders thereof or
their Affiliates immediately prior to the consummation of such
merger or consolidation hold less than a majority of the voting
stock of the surviving company or (iv) the acquisition
(including by means of a merger) by a single purchaser or a group
of associated purchasers (other than by an existing stockholder of
such Person on the date hereof or any Affiliate thereof) of shares
of voting Company Capital Stock, in the case of the Company, and
the equivalent thereof, in the case of a Person other than the
Company, representing at least a majority of the voting power of
the then outstanding Company Capital Stock, in the case of the
Company, and the equivalent thereof, in the case of a Person other
than the Company, in one or a related series of transactions. "
Code " means the Internal Revenue Code of 1986, as
amended from time to time. " Common Stock " has the
meaning set forth in the Recitals. " Common
Stockholders " shall mean those Stockholders owning Common
Stock. " Company Capital Stock " shall mean the
Common Stock, Preferred Securities, any Convertible Securities, or
any other class of capital stock of the Company, in each case
whether owned on the date of this Agreement or acquired thereafter.
" Convertible Securities " shall mean any evidences
of indebtedness, shares of stock, warrants or other securities
(including Preferred Securities, as appropriate) which are directly
or indirectly convertible into or exchangeable for, or constitute
or provide a right to acquire, with or without payment of
additional consideration in cash or property, additional shares of
Common Stock , either immediately or upon the occurrence of
a specified date or a specified event. " Current Market
Price " shall mean, in respect of any share of Common Stock
on any date herein specified, (a) the Appraised Value per
share of Common Stock as at such date, or (b) if there shall
then be a public market for the Common Stock, the average of the
daily market prices for 30 consecutive Business Days commencing
45 days before such date. The daily market price for each such
Business Day shall be (i) the last sale price on such day on
the principal stock exchange on which such Common Stock is then
listed or admitted to trading, (ii) if no sale takes place on
such day on any such exchange, the average of the last reported
closing bid and asked prices on such day as officially quoted on
any such exchange, (iii) if the Common Stock is not then
listed or admitted to trading on any stock exchange, the average of
the last reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the National Association
of Securities Dealers Automatic Quotation System or the National
Quotation Bureau, Inc., (iv) if neither such corporation at
the time is engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of
the NASD selected mutually by the Company and RB or, if they cannot
agree upon such selection, as selected by two such members of the
NASD, one of which shall be selected by the Company and one of
which shall be selected by RB. The parties hereto agree that as of
the date of this Agreement, the Current Market Price shall equal
$30,150.76 per share.
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" DGCL " means the Delaware General Corporation
Law. " Director " means any member of the
Company’s Board of Directors. " Effective Date
" means December 23, 2008. " Encore " means The
Encore Group, Inc., a California corporation. " Exchange
Act " means the Securities Exchange Act of 1934, as
amended. " Excluded Registration " means (i) a
registration relating to the sale of Common Stock to employees of
the Company or a subsidiary pursuant to a stock option, stock
purchase, or similar plan; or (ii) a registration relating to
an SEC Rule 145 transaction. " Fair Market Value
" means, with respect to assets or non-cash consideration, the fair
market value thereof as determined in good faith by the Board of
Directors; provided, however, that if the relevant Stockholders in
good faith disagree with the Board’s valuation, and so
indicate by notice to the Company within 30 days of receipt of
such valuation, fair market value shall be as determined by an
Independent Financial Expert. " Former Encore
Stockholders " means the following individuals: Richard D.
Snow, Eldridge C. Hanes, Jose E. Munoz, Jr. Employee Retirement
Trust, Ken Siemers, Alan G. Sanford, Edward W. Sanford, III, Garyr
Frankhauser, Saverio Barbiere, Jeffrey S. Grissen and Barbara B.
Campbell. " Form S-3 " means such form under the
Securities Act as in effect on the date hereof or any registration
form under the Securities Act subsequently adopted by the SEC that
permits incorporation of substantial information by reference to
other documents filed by the Company with the SEC. " Fully
Diluted Outstanding " shall mean, when used with reference
to Common Stock, at any date as of which the number of shares
thereof is to be determined, all shares of Common Stock outstanding
at such date and all shares of Common Stock issuable in respect of
any Convertible Securities outstanding on such date which would be
deemed outstanding in accordance with GAAP for purposes of
determining book value or net income per share on a fully-diluted
basis, but excluding any shares of Common Stock issuable in respect
of Convertible Securities if including them in the calculation of
Fully Diluted Outstanding would result in an increase in book value
or net income per share.
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" GAAP " means Generally Accepted Accounting
Principles, as such term is defined by the Federal Accounting
Standards Advisory Board. " Governmental Authority "
means any: (a) nation, state, county, city, town, borough,
village, district or other jurisdiction; (b) federal, state,
local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission,
court, tribunal or other entity exercising governmental or
quasi-governmental powers); (d) multinational organization or
body; (e) body exercising, or entitled or purporting to
exercise, any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power; or
(f) official of any of the foregoing. " Independent
Financial Expert " means a nationally recognized
independent valuation or appraisal firm selected by the Board and
reasonably acceptable to the Stockholders to whom the relevant
valuation relates as having appropriate experience in valuations of
the nature required and which certifies that it does not (and the
directors and officers of which do not) have a material direct or
indirect financial interest in either the Company or the
determination of Fair Market Value. The fees and costs of any
Independent Financial Expert selected by the Company shall be paid
by the Company. " IPO " — as defined in
Section 2.3. " Order " — any order,
injunction, judgment, decree, ruling, assessment or arbitration
award of any Governmental Authority or arbitrator. "
Ownership Percentage " means, with respect to any
Stockholder, a fraction (expressed as a percentage), the numerator
of which is the total number of shares of Common Stock then owned
by such holder, and the denominator of which is the total number of
shares of Common Stock then outstanding. " Permitted
Transfer " means any Transfer of all or any part of the
shares of Common Stock; (1) pursuant to SEC Rule 144 or
pursuant to an effective registration statement under the
Securities Act, (2) by a Former Encore Stockholder (i) to
another Former Encore Stockholder or RB; (ii) to any revocable
United States trust for the benefit of such Former Encore
Stockholder of which such former Encore Stockholder is the trustee;
(iii) with respect to any such Former Encore Stockholder that
is a natural Person, to any United States trust for the benefit of
such Former Encore Stockholder’s immediate family
provided that (A) such Former Encore Stockholder or
another Former Encore Stockholder acts as trustee or co-trustee for
such trust and (B) such trust agrees to be bound, for so long
as it holds such shares of Common Stock, by the same terms and
conditions of this Agreement, as if the shares of Common Stock were
still held by such transferor; (iv) that has been approved by
the prior written consent of the Stockholders, or (v) to the
heirs of a Former Encore Stockholder upon the death of a Former
Encore Stockholder ; or (3) by RB (i) to an
affiliate of RB, (ii) to a Former Encore Stockholder or the
Company, or (iii) that has been approved by the prior written
consent of the Stockholders. Following a Permitted Transfer, the
transferee in such transfer may further transfer any shares of
Common Stock and have such further transfer constitute a "Permitted
Transfer" hereunder only to the extent such further transfer would
have been a Permitted Transfer under the foregoing definition if
made by the Person who was the transferor in such original
Transfer. Notwithstanding the foregoing, for any Transfer to be
deemed a "Permitted Transfer", such Transfer must be made in
compliance with the Securities Act and applicable state securities
laws.
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" Person " means any individual, corporation,
partnership, limited liability company, joint venture, association,
joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
" Preferred Securities " means any series or class of
equity securities of the Company other than Common Stock that has
priority in terms of operating and/or liquidating distributions
from the Company over the Common Stock. " RB " means
Russ Berrie and Company, Inc. , a New Jersey corporation. "
Registrable Securities " means, as of any date, with
respect to any Stockholder, all shares of Common Stock and shares
of Common Stock underlying any Convertible Securities owned by such
Stockholder on such date (in each case whether owned on the date
hereof or hereafter acquired), excluding in all cases, however, any
securities with respect to which registration rights have
terminated pursuant to Section 6.8 of this Agreement. "
SEC " means the Securities and Exchange Commission. "
SEC Rule 144 " means Rule 144 promulgated
by the SEC under the Securities Act, as amended, or any successor
thereto. " SEC Rule 145 " means Rule 145
promulgated by the SEC under the Securities Act, as amended, or any
successor thereto. " Securities Act " means the
Securities Act of 1933, as amended. " Selling
Expenses " means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, and
fees and disbursements of counsel for any Stockholder, except for
the fees and disbursements of the selling Stockholders’
counsel borne and paid by the Company as provided in
Section 6.5 . " Subsidiary " means, with
respect to any specified Person, any other Person of which a
majority of the outstanding voting securities or other voting
equity interests are owned, directly or indirectly, by such
specified Person. " Transfer " means, with respect to
shares of the Company Capital Stock, any direct or indirect sale,
transfer, assignment, pledge, hypothecation, mortgage or other
disposition thereof.
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ARTICLE II INFORMATION RIGHTS Section 2.1
Delivery of Financial Statements . (a) The Company
shall deliver to each Stockholder: (i) as soon as practicable,
but in any event within two business days after the required date
of delivery to the Company’s senior lender: (i) a
balance sheet as of the end of such year, (ii) statements of
income and of cash flows for such year, and (iii) a statement
of stockholders’ equity as of the end of such year, all such
financial statements shall be prepared in accordance with GAAP and
shall be audited and certified by independent public accountants of
nationally recognized standing selected by the Company, and shall
set forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year; notwithstanding
the foregoing, the Company agrees to provide the information
required under this subsection (a)(i) for fiscal year end
December 31, 2008 no later than the earlier of (x) sixty
(60) days after the end of such fiscal year of the Company or
(y) the date specified above, and (ii) as soon as
practicable (for each of the first three (3) quarters of each
fiscal year of the Company), but in any event within two business
days after the required date of delivery to the Company’s
senior lender: unaudited statements of income and of cash flows for
each such fiscal quarter, and an unaudited balance sheet and a
statement of stockholders’ equity as of the end of each such
fiscal quarter, and, in the case of the second and third quarters,
for the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all prepared in
accordance with GAAP (except that such financial statements may
(i) be subject to normal year-end audit adjustments and
(ii) not contain all notes thereto that may be required in
accordance with GAAP); and (iii) with respect to the financial
statements called for above in Sections 2.1 (a) and
(b) , an instrument executed by the chief financial officer
and chief executive officer of the Company certifying that such
financial statements were true, complete, and correct, prepared in
accordance with GAAP consistently applied with prior practice for
earlier periods, and fairly present the financial condition of the
Company and its results of operation for the periods specified
therein. (b) If, for any period, the Company has any
Subsidiary whose accounts are consolidated with those of the
Company, then in respect of such period the financial statements
delivered pursuant to the foregoing sections shall be the
consolidated and consolidating financial statements of the Company
and all such consolidated Subsidiaries. (c) If applicable, the
Company will file on or before the required date all regular or
periodic reports (pursuant to the Exchange Act) with the SEC and
will deliver to each Stockholder promptly upon their becoming
available one copy of each report, notice or proxy statement sent
by the Company to its stockholders generally, and of each regular
or periodic report (pursuant to the Exchange Act) and any
registration statement, prospectus or written communication, filed
or otherwise furnished by the Company with or to (i) the SEC
or (ii) any securities exchange on which shares of Common
Stock are listed.
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(d) Notwithstanding the foregoing, at the request of RB,
the Company shall provide to RB, as soon as practicable following
such request, any additional financial information and/or
statements readily available to the Company (and/or not
unreasonably burdensome to produce) that RB reasonably determines
in good faith is necessary or appropriate in connection with the
preparation of RB’s public filings. The Company agrees that
upon receipt of any such request, it shall in good faith use its
best efforts to produce such information sufficiently in advance of
any applicable filing deadline of RB. Section 2.2
Inspection . The Company shall permit each Stockholder, at
the Stockholder’s expense, to visit and inspect the
Company’s properties; examine its books of account and
records; and discuss the Company’s affairs, finances, and
accounts with its officers, during normal business hours of the
Company as may be reasonably requested by the Stockholder;
provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any
information the disclosure of which would adversely affect the
attorney-client privilege between the Company and its counsel. Any
such examination or audit undertaken pursuant to this
Section 2.2 shall be made only upon not less than two
(2) days’ prior written notice to the Company.
Section 2.3 Termination of Information Rights . The
covenants set forth in Sections 2.1 and 2.2 above
shall terminate and be of no further force or effect
(i) immediately after the consummation of any initial
underwritten public offering of the Company’s Common Stock
that results in the listing of such Common Stock on a national
securities exchange (an " IPO "), or (ii) when
the Company first becomes subject to the periodic reporting
requirements of Section 12(g) or 15(d) of the Exchange Act,
whichever event occurs first. Section 2.4
Confidentiality . Each Stockholder will keep confidential
and will not disclose, divulge, or use for any purpose (other than
to monitor its investment in the Company) any non-public
information of the Company obtained from the Company pursuant to
the terms of this Agreement (including notice of the
Company’s intention to file a registration statement)
("Confidential Information"), unless such Confidential Information
(a) is known or becomes known to the public in general (other
than as a result of a breach of this Section 2.4 by
such Stockholder), (b) is or has been independently developed
or conceived by the Stockholder without use of the Company’s
Confidential Information, or (c) is or has been made known or
disclosed to the Stockholder by a third party without a breach of
any obligation of confidentiality such third party may have to the
Company; provided, however, that a Stockholder may disclose
Confidential Information (i) to its attorneys, accountants,
consultants, and other professionals to the extent necessary to
obtain their services in connection with monitoring its investment
in the Company; (ii) to any prospective purchaser of any
Registrable Securities from such Stockholder, if such prospective
purchaser agrees to be bound by the provisions of this
Section 2.4 ; (iii) to any existing or prospective
Affiliate, partner, member, stockholder, or wholly owned subsidiary
of such Stockholder in the ordinary course of business,
provided that such Stockholder informs such Person that such
information is confidential and directs such Person to maintain the
confidentiality of such information; or (iv) as may otherwise
be required by law, provided that the Stockholder promptly
notifies the Company of such disclosure and takes reasonable steps
to minimize the extent of any such required disclosure.
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ARTICLE III GOVERNANCE OF THE COMPANY
Section 3.1 Board of Directors . Each Stockholder shall
vote, or cause to be voted, all shares of voting Company Capital
Stock now owned or hereafter acquired by such Stockholder, or over
which such Stockholder has voting control, from time to time and at
all times, in whatever manner as shall be necessary to ensure that
the size of the Board shall be set and remain at seven
(7) directors; provided however , that upon the
issuance of any Preferred Securities in accordance with the terms
of Section 5.1 hereof, the number of persons serving on
the Board may be increased to no more than nine (9) Directors.
Section 3.2 Board Composition . (a) Election
of Directors . Subject to Section 3.3 below and the
provisions of the License Agreement pertaining to the right of RB
to designate one additional director during any period in which
royalties under such License Agreement are in arrears, which are
incorporated by reference herein, each Stockholder shall vote, or
cause to be voted, all shares of voting Company Capital Stock now
owned or hereafter acquired by such Stockholder, or over which such
Stockholder has voting control, from time to time and at all times,
in whatever manner as shall be necessary to ensure that at each
annual or special meeting of stockholders at which an election of
directors is held, and at any adjournment or postponement thereof,
or pursuant to any written consent of the stockholders, the
following persons shall be elected to the Board: (i) Subject
to the right of the holders of any Preferred Securities issued in
accordance with Section 5.1 to elect directors, five
(5) Directors designated by the Common Stockholders other than
RB (the " Common Designees "), which individuals
shall initially include Richard Snow (" Snow ") and
Eldridge Hanes (" Hanes "). (ii) Two
(2) Directors designated by RB (the " RB
Designees "), which individuals shall initially be Bruce G.
Crain and Mario Ciampi. (b) Failure to Designate a Board
Member . In the absence of any designation from the Persons or
groups with the right to designate a director as specified above,
the director previously designated by them and then serving shall
be reelected if still eligible to serve as provided herein.
(c) Quorum and Voting . At all meetings of the
Board, a majority of the total number of Directors (whether present
in person or by telephone or other means of telecommunication)
shall constitute a quorum for the transaction of business and,
unless otherwise specified herein, or otherwise provided by law,
the act of the majority of the Directors shall be the act of the
Board. If a quorum shall not be present, the Directors present
thereat may adjourn the meeting from time to time, without notice,
other than an announcement at the meeting, until a quorum shall be
present.
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(d) Removal of Board Members . Each Stockholder
also shall vote, or cause to be voted, all shares of voting Company
Capital Stock now owned or hereafter acquired by such Stockholder,
or over which such Stockholder has voting control, from time to
time and at all times, in whatever manner as shall be necessary to
ensure that: (i) no Director elected pursuant to subsection
(a) above may be removed from office unless (A) such
removal is directed or approved by the affirmative vote of the
Stockholders entitled under subsection (a) to designate that
director, or (B) to the extent such Director is an employee of
the Company, such Director’s employment with the Company has
been terminated for Cause, or (C) such removal is for cause in
accordance with the DGCL; (ii) any vacancies created by the
resignation, removal or death of a Director elected pursuant to
subsection (a) above shall be filled pursuant to the
provisions of this Section 3.2 ; and (iii) upon
the request of any party entitled to designate a Director as
provided in subsection (a) above to remove such Director, such
Director shall be removed and replaced in accordance with the
provisions of this Section 3.2. All Stockholders shall execute
any written consents required to perform the obligations of this
Agreement, and the Company shall at the request of any party
entitled to designate Directors to call a special meeting of
stockholders for the purpose of electing Directors. In connection
therewith, the Company shall conduct a background check, at the
Company’s expense, on all persons proposed to become a member
of the Board of Directors. Section 3.3 Election of
Directors by RB pursuant to the License Agreement .
Notwithstanding the foregoing, and in addition to the rights
granted to RB pursuant to Section 3.2, in the event the
Company at any time fails to pay any royalty required under the
License Agreement pursuant to the terms thereof (a " Royalty
Default "), during the continuance of any such Royalty
Default, pursuant to the terms of the License Agreement, RB shall
have the right to appoint one of the seven directors required under
Section 3.1 above (the " Licensor Designee "),
and each Stockholder shall vote, or cause to be voted, all shares
of voting Company Capital Stock now owned or hereafter acquired by
such Stockholder, or over which such Stockholder has voting
control, as shall be necessary to ensure that the Licensor Designee
shall be elected to the Board, at the request of RB, at all times
during the continuance of a Royalty Default. Upon the curing of any
such Royalty Default by the Company, the right of RB to elect a
Licensor Designee shall cease; and thereafter, the members of the
Board shall be elected in accordance with Section 3.2 above.
At any time during a Royalty Default, notwithstanding the
provisions of Section 3.2(a)(i), the Common Stockholders other
than RB shall be entitled to designate one fewer Common Designees
than the number specified in Section 3.2(a)(i), and RB shall
be entitled to designate two (2) RB Designees and one
(1) Licensor Designee. The provisions of Section 3.2(b)
and (d) will apply to any Licensor Designee.
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Section 3.4 Dividend Restrictions . The Stockholders
agree that the Company shall not pay any dividends (other than
dividends payable solely in Common Stock) with respect to its
Common Stock: (i) until such time as all amounts outstanding
under the Seller Note shall have been paid in full,
(ii) during the existence of any Royalty Default, and
(iii) if the Licensor under the License Agreement has
exercised its option to require the Licensee thereunder to purchase
the Retained IP under Section 2.3 thereof, during any period
in which any portion of the purchase price therefor remains unpaid.
Section 3.5 Board Meetings . The Stockholders and the
Company agree that the Bylaws of the Company shall provide for the
following: (i) a minimum of four (4) meetings of the
Board of Directors which must actually be held annually,
(ii) three (3) business days’ prior written notice
will be required for any meeting of the Board of Directors; and
(iii) telephonic meetings of the Board of Directors.
ARTICLE IV TRANSFER OF SHARES Section 4.1
Transfers by Stockholders . (a) Limitations on
Transfer . From and after the Effective Date, no Stockholder
shall Transfer, directly or indirectly, all or any portion of such
Stockholder’s shares of Company Capital Stock (whether owned
on the date hereof or hereafter acquired) unless such transfer is a
Permitted Transfer or otherwise made in accordance with the
provisions of this Article IV. Any such Transfer (i) must
be made pursuant to and in accordance with this Article IV and
(ii) must be made in compliance with the Securities Act and
applicable state securities laws. No Transfer shall be recognized
by the Company, nor shall the Company be liable or responsible in
respect of any Transfer or transferee, until the requirements of
this Article IV have been complied with. (b) Notice
of Transfer, Limitations, etc . Notwithstanding anything to the
contrary set forth in this Agreement: (i) Each Stockholder
agrees, prior to any Transfer of any shares of Company Capital
Stock to give written notice to the Company of such holder’s
intention to affect such Transfer and to comply in all other
respects with the provisions of this Article IV. Each such
notice shall describe the manner and circumstances of the proposed
Transfer and shall be accompanied, if reasonably requested by the
Company, by the written opinion, addressed to the Company, of
counsel for the holder of the shares of Company Capital Stock as to
whether in the opinion of such counsel (which counsel shall be
reasonably satisfactory to the Company) such proposed Transfer
involves a transaction requiring registration of such shares of
Company Capital Stock under the Securities Act; provided ,
however, that no opinion of counsel shall be required for any
Transfer pursuant to SEC Rule 144 or an effective registration
statement under the Securities Act, provided that the
Company shall be provided with customary written representations
relating to such transaction.
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(ii) If in the opinion of such counsel (if such opinion is
required hereunder) the proposed Transfer of the shares of Company
Capital Stock may be effected without registration under the
Securities Act, the holder of the shares of Company Capital Stock
shall thereupon be entitled to Transfer the shares of Company
Capital Stock in accordance with the terms of the notice delivered
by it to the Company to the extent such Transfer is otherwise
permitted under this Article IV. (iii) No Transfer of any
Stockholder’s shares of Company Capital Stock to any
transferee or assignee (other than a transferee or assignee that
was already a Stockholder immediately prior to such Transfer; or a
Transfer pursuant to SEC Rule 144 or an effective registration
statement under the Securities Act), shall be effective until such
transferee or assignee executes and delivers to the Board of
Directors a copy of this Agreement or a counterpart hereof whereby
such transferee or assignee agrees to be bound by the provisions of
this Agreement. Any Stockholder who is admitted as a Stockholder of
the Company pursuant to an effective Transfer consummated in
accordance with this Article IV shall succeed to all the
rights and be subject to all the obligations of the transferring
Stockholder hereunder in respect of the interest as to which it was
substituted. The terms "Stockholder" and "Stockholders" used in
this Agreement shall be deemed to apply to and include each
substituted and additional Stockholder admitted as a Stockholder to
the Company pursuant to this Article IV, and Schedule A
shall be amended accordingly. (c) Notwithstanding anything
herein to the contrary, subject only to Sections 4.1(b) and
4.2, and except for a Transfer in accordance with
Section 4.4(c) or 4.5 (which shall be permitted without
limitation), RB shall be permitted to Transfer any shares of
Company Capital Stock held by it to any Person other than a direct
competitor of the Company’s gift business upon the
Company’s approval, which shall not be unreasonably withheld
or delayed (for purposes of clarity, the Company may reasonably
withhold its approval if the proposed RB transferee is a direct
competitor of the Company’s gift business). Section 4.2
Right of First Offer . (a) Transfers of Shares of
Company Capital Stock . If any Stockholder (the "
Offerer ") proposes to make a sale, other than a
Permitted Transfer or a Transfer pursuant to Section 4.4(a)
or 4.5 , of all or any portion of such Offerer’s
shares of Company Capital Stock (a " Proposed
Transfer ") to one or more Persons then, prior to engaging
in such Proposed Transfer, the Offerer shall first comply with this
Section 4.2 . (b) Notice . The Offerer
shall give written notice (the " Offering Notice ")
to each other Common Stockholder, which Offering Notice shall set
forth (i) the number of shares of Common Stock that the
Offerer desires to Transfer (the " Offered Shares ");
(ii)) the proposed selling price per share for such Offered Shares
(the " Offer Price "); (iv) a scheduled closing
date for the Proposed Transfer (the " Scheduled Closing
Date ") (which Scheduled Closing Date shall in no event be
less than forty five (45) days nor more than one hundred
twenty (120) days after the Offerer’s delivery of the
Offering Notice) and (v) the other material terms and
conditions of such Proposed Transfer. Each such Offering Notice
shall constitute an offer by the Offerer to each other Common
Stockholder (each a " ROFO Purchaser ") to sell to
each ROFO Purchaser the Offered Shares at the Offer Price per
share.
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(c) Action by Purchaser . Within thirty
(30) days of receipt of an Offering Notice (the " ROFO
Period "), each ROFO Purchaser desiring to purchase all or
any portion of the Offered Shares shall deliver to the Offerer a
written notice (a " ROFO Notice ") setting forth the
number of the Offered Shares that such ROFO Purchaser desires to
purchase. Delivery of a ROFO Notice by a ROFO Purchaser shall
constitute an irrevocable and unconditional offer by such ROFO
Purchaser to purchase the number of Offered Shares set forth
therein for the Offer Price per share in cash and upon the other
applicable terms and conditions set forth in the Offering Notice.
Failure by a ROFO Purchaser to deliver a ROFO Notice with respect
to a Proposed Transfer prior to the expiration of the applicable
ROFO Period shall be regarded as a waiver by such ROFO Purchaser of
its rights set forth in this Section 4.2 with respect
to such Proposed Transfer. (d) Transfer of Offered
Shares . In the event that, upon expiration of the ROFO Period,
the Offerer shall have received ROFO Notices which collectively
offer to purchase all of the Offered Shares, then the Offerer shall
be obligated to Transfer to each ROFO Purchaser that has delivered
a ROFO Notice the number of Offered Shares set forth in each such
ROFO Purchaser’s ROFO Notice; provided that, in the
event the Offerer shall have received ROFO Notices which
collectively offer to purchase more Offered Shares than the Offerer
is offering to sell, then the Offered Shares shall be allocated
among the ROFO Purchasers, pro rata, in accordance with their
respective Ownership Percentage (as determined immediately prior to
the relevant Proposed Transfer and as determined without giving
effect to any shares of Common Stock held by the Offerer in either
the numerator or denominator of the fraction set forth in the
definition of "Ownership Percentage"). The closing of any Transfer
pursuant to this Section 4.2 shall be held at the
principal office of the Company at 11:00 a.m. local time on a
Business Day chosen by the Company which date shall be no later
than the applicable Scheduled Closing Date; provided that
such closing may be held at such other time and place as the
Offerer and the ROFO Purchasers may agree. At such closing, the
Offerer shall deliver such instruments to the ROFO Purchasers,
executed by it and in form and substance reasonably satisfactory to
the ROFO Purchasers purchasing the Offered Shares as shall be
necessary to transfer, assign and convey the Offered Shares to such
purchasers, which Offered Shares shall be transferred free and
clear of all liens or other encumbrances (other than those imposed
under applicable securities laws and this Agreement), against
payment of the aggregate Offer Price. (e) Sale of Offered
Shares to Third Party . In the event that, upon expiration of
the ROFO Period, the Offerer shall have not received ROFO Notices
which collectively offer to purchase all of the Offered Shares,
then the Offerer shall have the right, subject to the provisions of
Section 4.3 , for a period of one hundred twenty
(120) days after the expiration of the ROFO Period (the "
Sale Period ") to enter into a binding agreement to
sell or to sell all or any portion of the Offered Shares to one or
more Persons (herein " Proposed Purchasers "), and to
Transfer such Offered Shares to the Proposed Purchasers on or prior
to the expiration of the Sale Period (A) at a price no lower
than the Offer Price per share, payable in cash at the closing and
(B) on terms in all material respects no more favorable to the
Proposed Purchasers than those contained in the Offering
Notice.
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(f) Price Below Offer Price . (i) In the event that
on or prior to the Scheduled Closing Date the Offerer receives and
desires to accept a bona fide offer from a bona fide potential
purchaser which is more favorable to the potential purchaser than
contained in the Offering Notice (the " Revised Offer
Price "), the Offerer shall give a written notice (the "
Revised Offering Notice ") to each of the remaining
Common Stockholders, which Revised Offering Notice shall set forth
the Revised Offer Price, which must be payable in cash at the
closing of the sale, and other material terms and conditions of
such proposed sale. The Revised Offering Notice shall constitute an
irrevocable offer by the Offerer to sell the Offered Shares at the
Revised Offer Price per share. Within ten (10) days of receipt
of a Revised Offering Notice (the " Revised ROFO
Period "), the remaining Stockholders may elect, in
accordance with Sections 4.2 (b), (c) and (d)
above, to purchase all, but not less than all, of the Offered
Shares at the Revised Offer Price. (ii) In the event that,
upon expiration of the Revised ROFO Period, the Offerer shall not
have received ROFO Notices which collectively offer to purchase all
of the Offered Shares, then the Offerer shall be permitted to sell
or to enter into a binding agreement to sell all or any portion of
the Offered Shares to the Proposed Purchasers, subject to the
provisions of Section 4.3, so long as the price and terms at
which the Offered Shares are actually sold to the Proposed
Purchasers are no more favorable in all material respects than
those contained in the Revised Offering Notice and the closing of
the sale to the Proposed Purchasers occurs within thirty days
following the expiration of the Revised ROFO Period. (g) If
the Offerer shall fail to consummate the Proposed Transfer as to
all of the Offered Shares on or prior to the later of the
(i) expiration of the Sale Period or (ii) the expiration
of the permitted sale period described in (f)(ii) above, if
applicable, the Offered Shares that have not been sold shall again
become subject to all of the restrictions of this Agreement,
including, without limitation, the restrictions on transfer set
forth in this Section 4.2 . (h) The Company shall
use commercially reasonable efforts to assist an Offerer and
potential purchasers of the Offered Shares by providing information
about the Company, subject to the execution of a confidentiality
agreement in form and substance satisfactory to the Company by such
potential purchasers.
14
(i) Notwithstanding the foregoing, the provisions of this
Section 4.2 shall be inapplicable to Sale of the
Company in accordance with Section 4.4(a) below.
Section 4.3 Tag Along Rights . (a) Transfers
by Common Stockholders . If one or more Common Stockholders
other than RB propose to sell at least 5% of the issued and
outstanding shares of Common Stock (the " Selling
Stockholders "), other than a Permitted Transfer or a
transaction that is subject to the provisions of Section 4.4
(a " Tag Along Transfer ", and the shares of Common
Stock so proposed to be Transferred, the " Tag Shares
") to one or more Persons (the " Tag Purchasers ")
then, after complying with the provisions of
Sections 4.2 , if applicable, but prior to engaging in
such Tag Along Transfer, the Selling Stockholders shall first
comply with this Section 4.3 . (b) Proposed
Tag Notices . The Selling Stockholders shall give written
notice (a " Proposed Tag Notice ") to each other
Common Stockholder (a " Tag Holder "), which Proposed
Tag Notice shall set forth (i) that the Selling Stockholders
are offering the Tag Holder the opportunity to participate in the
Tag Along Transfer in the manner set forth in this
Section 4.3 ; (ii) the number of Tag Shares that
the Selling Stockholders desire to Transfer in such Tag Along
Transfer; (iii) the consideration being offered by the Tag
Purchasers per share for such Tag Shares (the " Tag
Price "); (iv) a description of any non-cash
consideration being offered by the Tag Purchasers; (v) any other
material terms and conditions of the Tag Along Transfer (including,
without limitation, conditions precedent) and (vi) notice of
the proposed closing date for such Tag Along Transfer, which shall
not be less than thirty (30) days following such notice. If
the consideration offered by the Tag Purchasers consists in whole
or in part of consideration other than cash, the Selling
Stockholders will provide such information, to the extent
reasonably available to the Selling Stockholders, relating to such
consideration as each of the Tag Holders may reasonably request in
order to evaluate such non-cash consideration. (c) Tag
Elections . Within thirty (30) days of receipt of a
Proposed Tag Notice (the " Tag Along Period "), each
Tag Holder that desires to participate in such Tag Along Transfer
shall deliver to the Selling Stockholders and each other Tag Holder
a written notice (a " Tag Along Notice ") setting
forth the number of shares of Common Stock that such Tag Holder
desires to sell to the T
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