SCHOLASTIC BRANDS, INC.
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of December 16, 1996, by and among
Scholastic Brands, Inc., a Delaware corporation (the "Company"), Castle Harlan
Partners II, L.P., a Delaware limited partnership ("CHP"), Dresdner Bank AG,
Grand Cayman Branch ("Dresdner"), and Castle Harlan Offshore Partners, L.P., a
Delaware limited partnership ("Offshore"), and each of the persons who shall,
after the date hereof, acquire Warrants or shares of Common Stock or Preferred
Stock (as hereinafter defined) and join in and become a party to this Agreement
by executing and delivering to the Company an Instrument of Accession in the
form of Exhibit A hereto (CHP, Dresdner, Offshore and each such person who
executes and delivers an Instrument of Accession, as provided in Section 4(a)
hereof, are hereinafter sometimes referred to collectively as the "Stockholders"
and individually as a "Stockholder").
WHEREAS, the Company has been formed to acquire substantially all
of the assets of the scholastic products and recognition and affinity products
businesses of each of CJC Holdings, Inc., a Texas corporation ("CJC"), and L.G.
Balfour Company ("Balfour"), a Delaware corporation;
WHEREAS, prior to the execution and delivery of this Agreement, (i)
the Company, CJC and certain subsidiaries of CJC have entered into an Asset
Purchase Agreement, dated as of May 20, 1996, and amended as of November 21,
1996 (the "CJC Purchase Agreement"), pursuant to which the Company will acquire
the scholastic and recognition and affinity businesses of CJC, and (ii) the
Company, Balfour and Balfour's sole stockholder have entered into an Asset
Purchase Agreement, dated as of May 20, 1996, and amended and restated as of
November 21, 1996 (the "Balfour Purchase Agreement"), pursuant to which the
Company will acquire the scholastic and recognition and affinity businesses of
Balfour;
WHEREAS, CHP, Dresdner and Offshore have funds available to them
for the purpose of investing in the Company for the acquisition of the
above-mentioned businesses; and
WHEREAS, the Stockholders wish to subscribe for Warrants, Common
Stock and Preferred Stock as specified in Section 2 hereof, and for a purchase
price consisting of cash;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Capitalization. The capitalization of the Company currently
consists of (i) 750,000 shares of preferred stock, par value $.01 per share, of
which 100,000 shares have been designated Series A Preferred Stock (the "Series
A Preferred Stock") and of which 375,000 shares have been designated Series B
Preferred Stock (the "Series B Preferred Stock" and, together with the Series A
Preferred Stock, the "Preferred Stock"), none of which have been issued, and
(ii) 750,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), 100 shares of which have been issued to CHP. The terms of the Common
Stock and the
Preferred Stock are set forth in the Certificate of Incorporation, as amended
(including, without limitation, by Certificates of Designations for the Series A
Preferred Stock and the Series B Preferred Stock) of the Company, which has been
furnished to each of the Stockholders.
2. Subscription.
(a) Each of the Stockholders, subject to the terms and
conditions hereof, severally hereby subscribes for such number of Common Stock
Purchase Warrants of the Company exercisable for shares of Common Stock and
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock
for such purchase price, as is set forth opposite such Stockholder's name on
Exhibit B hereto. Payment for said Warrants and shares shall be made in full to
the Company at the Closing (as defined in the Purchase Agreements) in cash, by
certified check payable to the Company or by wire transfer, against receipt of a
Warrant or Warrants and a certificate or certificates registered in the name or
names indicated on Exhibit B hereto, representing the number of Warrants and
shares of Common Stock and Preferred Stock so purchased by such Stockholder, and
such shares shall be validly issued, fully paid and non-assessable. Concurrently
with the issuance of such shares to the Stockholders, CHP shall return, and the
Company shall cancel, the certificate representing 100 shares of Common Stock
heretofore issued to CHP. The Common Stock, Preferred Stock and Warrants issued
pursuant to this Agreement, and the shares of Common Stock issuable upon
exercise of the Warrants ("Warrant Shares") are sometimes collectively referred
to herein as the "Company Securities."
(b) At the time an Instrument of Accession is delivered to
the Company, Exhibit B hereto shall be amended to reflect accurately either (i)
the amount of capital contributed to the Company by each additional Stockholder,
and the number of shares of Common Stock and Preferred Stock issued to such
Stockholder or (ii) in the case of a transfer of Company Securities by a
Stockholder, the number of Warrants and/or shares of Common and/or Preferred
Stock owned by such Stockholder and its transferee. The representations set
forth in Section 3 hereof shall be deemed reconfirmed and remade by each such
Stockholder in connection with the issuance or transfer of any Warrants or
shares of Common Stock or Preferred Stock to such Stockholder after the date
hereof.
(c) References herein to Warrants and shares of Common
Stock and Preferred Stock held or owned by the Stockholders shall include the
Warrants and shares of Common Stock and Preferred Stock issued to or acquired by
Stockholders after the date hereof, whether by exercise of any warrants or
options, purchase or otherwise.
3. Stockholders' Representations.
(a) Each Stockholder severally represents and warrants that
he, she or it has acquired the Company Securities for investment for his, her or
its own account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof in violation of the Securities Act of
1933, as amended (the "Securities Act"). Each Stockholder severally agrees that
he, she or it will not, directly or indirectly, offer, transfer, sell, pledge,
hypothecate or otherwise dispose of any Company Securities (or solicit any
offers to buy, purchase, or otherwise acquire or take a pledge of any Company
Securities), except in
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compliance with the Securities Act of 1933, as amended (the "Securities Act"),
the rules and regulations promulgated thereunder, applicable state securities
laws and the provisions of this Agreement. Each Stockholder severally represents
and warrants that no other person or entity has any interest, beneficial or
otherwise, in the Company Securities subscribed for and to be held by him, her
or it.
(b) Each Stockholder severally acknowledges that he, she or
it has been advised that (i) the Company Securities are not registered under the
Securities Act, and the Company has no obligation to effectuate any such
registration, (ii) the Company Securities must be held indefinitely and the
Stockholder must continue to bear the economic risk of the investment in the
Company Securities unless it is subsequently registered under the Securities Act
or an exemption from such registration is available, (iii) Rule 144 promulgated
under the Securities Act is not presently available with respect to the sale of
any securities of the Company, and the Company has no obligation nor any
intention to make such Rule available, (iv) when and if any of the Company
Securities may be disposed of without registration in reliance on Rule 144, the
amounts that may be disposed of may be limited in accordance with the terms and
conditions of such Rule, (v) if the Rule 144 exemption is not available, public
sale without registration will require compliance with Regulation D or some
other exemption under the Securities Act, (vi) restrictive legends will be
placed on the certificates representing the Company Securities and (vii) a
notation will be made in the appropriate records of the Company indicating that
the Company Securities are subject to restrictions on transfer and, if the
Company should at some time in the future engage the services of a stock
transfer agent, appropriate stop-transfer restrictions will be issued to such
transfer agent with respect to the Company Securities.
(c) Each Stockholder agrees with each other Stockholder and
the Company that if any Company Securities are disposed of by him, her or it (i)
in reliance upon Rule 144 under the Securities Act, he, she or it shall deliver
to the Company at or prior to the time of such disposition an executed copy of
Form 144 (if required by Rule 144) and such other documentation as the Company
may reasonably require in connection with such disposition or (ii) in reliance
on Rule 144 or pursuant to another exemption from registration under the
Securities Act, he, she or it shall deliver to the Company a legal opinion,
reasonably satisfactory to the Company, as to the availability of and compliance
with such exemption.
(d) Each Stockholder severally represents and warrants that
(i) he, she or it can afford to hold the Company Securities for an indefinite
period and to suffer the complete loss of his, her or its investment in the
Company Securities, (ii) he, she or it understands and has taken cognizance of
all the risk factors related to his, her or its acquisition of the Company
Securities and (iii) his, her or its knowledge and experience in financial and
business matters is such that he, she or it is capable of evaluating the merits
and risks of acquiring the Company Securities.
4. Restrictions on Transfer.
(a) Except as provided in Sections 4 and 5 hereof, the
Stockholders shall not transfer or otherwise dispose of any Common Stock (other
than Warrant Shares the
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transfer or other disposition of which shall be governed by paragraphs (e) and
(f) below) or Series B Preferred Stock (collectively referred to herein as the
"Limited Transfer Securities") owned by such Stockholders, or any interest
therein, and any attempt by such Stockholders to effect a transfer or
disposition in violation of this Section 4 or Section 5 hereof shall be void and
ineffective for all purposes. The words "transfer" and "dispose" include the
making of any sale, exchange, assignment, gift, security interest, pledge or
other encumbrance, or any contract therefor, any voting trust or other agreement
or arrangement with respect to the transfer of voting rights or any other
beneficial interest in the Limited Transfer Securities, the creation of any
other claim thereto or any other transfer or disposition whatsoever, whether
voluntary or involuntary, affecting the right, title, interest or possession in
or to the Limited Transfer Securities.
Subject to the last sentence of this paragraph, nothing in this
Section 4 or in Section 5 hereof shall prevent the transfer or other disposition
of the Limited Transfer Securities: (i) to a personal representative or to one
or more members of any Stockholder's family or to trusts or similar entities for
their benefit, (ii) to any other Stockholder or to any person or entity
controlling, controlled by, or under common control with, any Stockholder, (iii)
upon any liquidation or any other distribution to the partners or any other
holders of a beneficial interest in any Stockholder or (iv) between or among CHP
and/or any of its affiliates; provided, however, that such transferee(s) shall
take such Limited Transfer Securities, subject to and be fully bound by this
Agreement with the same effect as if he, she or it were a party hereto and shall
execute and deliver to the Company an Instrument of Accession in the form of
Exhibit A hereto and references herein to Common Stock or Preferred Stock held
or owned by any Stockholder shall be deemed to include Common Stock or Preferred
Stock held or owned by any such transferee(s) (and the transferee shall be
deemed a Stockholder for purposes of this Agreement). As used in this Agreement,
the term "personal representative" shall mean the executor or executors of the
will or administrator or administrators of the estate, the heirs, legatees or
other beneficiaries thereunder and all other legal representatives (by operation
of law or otherwise) of a holder of Limited Transfer Securities. Notwithstanding
the foregoing, however, no such transfer shall be made, unless consented to by
the Company, to any person, group or entity that may be deemed to be a
competitor of the Company (as reasonably determined by the Board of Directors).
(b) Whenever this Agreement shall terminate as to any
Company Securities pursuant to Section 7(b) hereof, the Stockholders owning such
shares shall be entitled to receive, promptly upon presentment to the Company of
the certificate or certificates evidencing the same, a certificate or
certificates not bearing the restrictive legend provided for in Section 4(c)
hereof, provided, however, that if such termination occurs as a result of a
transfer pursuant to Rule 144A as permitted by Section 7(b)(ii) hereof, only the
first two sentences of such legend shall be removed.
(c) The parties hereto agree that each stock certificate
representing Common Stock or Preferred Stock issued to any holder bound by the
terms hereof shall bear the following legend:
SHARES OF THE COMPANY REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A SUBSCRIPTION
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AGREEMENT DATED AS OF DECEMBER 16, 1996, WHICH CONTAINS
PROVISIONS REGARDING THE RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES AND OTHER MATTERS. A COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY. THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT
REGISTERED UNDER, AND ARE SUBJECT TO, THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE SECURITIES ACT OR IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT.
(d) The parties hereto agree that each Warrant issued to
any holder bound by the terms hereof shall bear the legend required by the terms
of the Warrant.
(e) The Warrants, the Warrant Shares and the shares of
Series A Preferred Stock may not be sold, assigned, pledged, hypothecated,
encumbered or in any manner transferred or disposed of, in whole or in part,
except pursuant to an effective registration under the Securities Act or in a
transaction exempt from registration under the Securities Act and in compliance
with the provisions of the state securities or Blue Sky laws and the terms and
conditions hereof. The Company may require a legal opinion, reasonably
satisfactory to the Company, as to the availability of and compliance with such
exemptions and the state securities or Blue Sky laws.
(f) Pursuant to this Agreement, each initial Stockholder
subscribed for and purchased an equal number of shares of Series A Preferred
Stock and Warrant to purchase shares of Common Stock. Until the first
anniversary of this Agreement (the "Exercise Date"), that portion of each
Warrant representing the right to purchase one share of Common Stock shall
attach to, and be transferable only in connection with, one share of Series A
Preferred Stock purchased by each Stockholder pursuant hereto. Until the
Exercise Date, any proposed transfer of shares of Series A Preferred Stock or
Warrants must satisfy the transfer restrictions contained in paragraph (e) above
and in the Warrants and such securities may only be transferred together such
that an equal number of shares of Series A Preferred Stock and Warrants
exercisable for such number of shares of Common Stock shall be transferred
(subject to the adjustment provisions contained in the Warrant). On and after
the Exercise Date, the Warrants and shares of Series A Preferred Stock shall be
separately transferable, (i) in the case of the Warrants, subject to any
transfer restrictions contained or referenced in the Warrant, and (ii) in the
case of the Series A Preferred Stock, subject to the transfer restrictions
contained in paragraphs (b), (c) and (e) of this Section 4.
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5. Registration Rights.
(a) Registration Upon Request. If the Company shall be
requested in writing at any time or from time to time by any of CHP, Dresdner
and Offshore (hereinafter the "Initiating Stockholder"), to effect the
registration under the Securities Act of a number of shares of Common Stock or
Preferred Stock (which request shall specify the aggregate number of shares of
Common Stock and Preferred Stock intended to be offered and sold by the
Initiating Stockholder, shall describe the nature or method of the proposed
offer and sale thereof and shall contain an undertaking by the Initiating
Stockholder to cooperate with the Company in order to permit the Company to
comply with all applicable requirements of the Securities Act and the rules and
regulations thereunder and to obtain acceleration of the effective date of the
registration statement), the Company shall (i) promptly notify each of the
remaining Stockholders of such proposed registration, and (ii) use its best
efforts to effect, as expeditiously as possible, the registration (and to keep
such registration continuously effective until all of the shares covered thereby
have been distributed) on an appropriate form under the Securities Act of the
Common Stock and Preferred Stock which the Company has been requested to
register by the Initiating Stockholder and each other Stockholder requesting
registration by notice to the Company within 20 days of delivery of the
Company's notice, subject to the limitations set forth in Section 5(c)(1)
hereof.
If the Initiating Stockholder so elects, the offering of all or a
portion of such Common Stock and Preferred Stock pursuant to the registration
shall be in the form of an underwritten offering and the managing underwriter or
underwriters selected for such offering shall be selected by the Initiating
Stockholder and reasonably acceptable to the Company. The Initiating Stockholder
shall provide the Company with notice of the identify of the managing
underwriter or underwriters it has selected a reasonable time prior to the
commencement of any such underwritten offering.
(b) Piggyback Registration.
(1) If the Company at any time proposes to register
any of its shares of Common Stock or Preferred Stock under the Securities Act
(other than a registration effected solely to implement an employee benefit
plan, or a merger, acquisition or exchange offer as to which Rule 145
promulgated under the Securities Act is applicable), whether or not for sale for
its own account, it shall give prompt written notice to the Stockholders of each
such intended registration by the Company and the Stockholders shall be entitled
to request that the Company include in any such registration any number of
shares of Common Stock then owned by the Stockholders subject to the limitations
set forth in Section 5(c)(1) hereof.
(2) Upon the written request of any Stockholder made
within 20 days after the giving by the Company of any such notice of intention
to register (which request shall specify the number of shares of Common Stock
and Preferred Stock intended to be disposed of by such Stockholder), the Company
shall use its best efforts to effect the registration under the Securities Act
of all shares of Common Stock and Preferred Stock which the Company has been so
requested to register by such Stockholder (subject to the restrictions set forth
in
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Section 5(c)(1) hereof); provided, however, that (i) if at any time after giving
written notice of its intention to register any Common Stock or Preferred Stock
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register such Common Stock or Preferred Stock, the Company may, at its
election, give written notice of such determination to each such Stockholder
and, thereupon, shall be relieved of its obligation to register any shares of
Common Stock or Preferred Stock on behalf of such Stockholder in connection with
such registration and (ii) if such registration involves an underwritten
offering, such Stockholder shall sell its shares of Common Stock or Preferred
Stock to the underwriters selected by the Company on the same terms and
conditions as apply to the Company.
(c) General Provisions.
(1) If a registration pursuant to Section 5(a) or (b)
hereof involves an underwritten offering and the managing underwriter advises
the Company in writing that, in its opinion, the number of securities requested
to be included in such registration exceeds the number that can be sold in such
offering, then the Company shall include in such registration (i) first, the
securities the Company proposes to sell, and (ii) second, the number of shares
of Common Stock and Preferred Stock requested by each Stockholder and any other
selling stockholder of the Company to be included in such registration that, in
the opinion of such underwriters, can be sold, such amount to be allocated pro
rata among the Stockholders requesting registration in accordance with the
number of shares of Common Stock and Preferred Stock owned by such Stockholder.
(2) Each Stockholder shall furnish the Company such
information regarding such Stockholder and the distribution of its shares of
Common Stock and Preferred Stock as the Company may from time to time reasonably
request in writing in connection with the registration statement (and the
prospectus contained therein).
(3) In the case of a registration pursuant to Section 5(a)
or (b) hereof, the Company shall have the right to designate the managing
underwriter in any underwritten offering.
(4) All expenses incident to the Company's performance of
or compliance with this Section 5, including all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the shares of Common Stock and Preferred Stock), rating agency
fees, printing expenses, messenger and delivery expenses, the fees and expenses
incurred in connection with the listing of the securities to be registered on
securities exchanges or NASDAQ, fees and disbursements of counsel for the
Company and its independent certified public accountants, the fees and expenses
of any special experts retained by the Company in connection with such
registration and the fees and expenses of other persons retained by the Company
(all such expenses being herein called "Registration Expenses"), will be borne
by the Company. Except as provided above, the Company will not have any
responsibility for any of the expenses of any Stockholder incurred in connection
with any registration
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hereunder, including, without limitation, underwriting discounts or commissions
attributable to the sale of shares of Common Stock and Preferred Stock and
counsel fees for a Stockholder.
(5) (i) In connection with any registration of shares of Common
Stock of any Stockholder pursuant to Section 5(a) or (b) hereof, the Company
agrees to indemnify, to the full extent permitted by law, each Stockholder
against all losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees and disbursements) caused by (i) any untrue or
alleged untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus (including any amendment or
supplement thereto) or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or (iii) any act or failure to act or any alleged act or alleged
failure to act by any such person in connection with, or relating in any manner
to, the offering contemplated by such registration statement, prospectus or
preliminary prospectus (including any amendment or supplement thereto), and
which is included as part of or referred to in any loss, claim, damage,
liability or expense arising out of or based upon matters covered by clause (i)
or (ii) above (provided, that the Company shall not be liable under this clause
(iii) to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or expense
resulted directly from such acts or failures to act undertaken or omitted to be
taken by such person through its gross negligence or willful misconduct) except
insofar as the same are caused by or contained in any information with respect
to any Stockholder furnished in writing to the Company by the Stockholder
expressly for use therein or by the Stockholder's failure to deliver to a
prospective purchaser a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished the
Stockholder with a sufficient number of copies of the same.
(ii) In connection with any registration in which the
Stockholders are participating, the Stockholders will furnish to the Company in
writing such information with respect to it as the Company reasonably requests
for use in connection with any such registration statement, prospectus or
preliminary prospectus and each such Stockholder, severally and not jointly,
agrees to indemnify, to the full extent permitted by law, the Company, its
directors and officers and each person who controls the Company (within the
meaning of the Securities Act) and, in connection with an underwritten offering,
each underwriter, its directors and officers and each person who controls the
underwriters (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses (including reasonable attorneys' fees
and disbursements) caused by (i) any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus or preliminary
prospectus (including any amendment or supplement thereto) or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (iii) any act or
failure to act or any alleged act or alleged failure to act by any such person
in connection with, or relating in any manner to, the offering contemplated by
such registration statement, prospectus or preliminary prospectus (including any
amendment or supplement thereto), and which is included as part of or referred
to in any loss, claim, damage, liability or expense arising out of or based upon
matters covered by clause (i) or (ii) above (provided, that
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the Stockholder shall not be liable under this clause (iii) to the extent that
it is determined in a final judgment by a court of competent jurisdiction, that
such loss, claim, damage, liability or expense resulted directly from such acts
or failures to act undertaken or omitted to be taken by such person through its
gross negligence or willful misconduct) to the extent, but only to the extent,
that such untrue statement or omission is contained in any information with
respect to any Stockholder so furnished in writing by the Stockholder expressly
for use therein.
(iii) Any person entitled to indemnification hereunder
agrees to give prompt written notice to the indemnifying party after the receipt
by such person of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which such
person will claim indemnification or contribution pursuant to this Agreement
and, unless in the reasonable judgment of such indemnified party a conflict of
interest may exist between such indemnified party and indemnifying party with
respect to such claim, permit the indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to such indemnified party. If
the indemnifying party is not entitled to, or elects not to, assume the defense
of a claim, it will not be obligated to pay the fees and expenses of more than
one counsel with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels. The indemnifying party will not
be subject to any liability for any settlement made without its consent.
(iv) If the indemnification provided for in this Section
5(c)(5) from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the 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
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 5(c)(5)(iii), any legal
or other fees or expenses reasonably incurred by such other party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(c)(5)(iv) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation
9
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 5(c)(5), the
indemnifying parties shall indemnify the indemnified party to the full extent
provided in Sections 5(c)(5)(i) and 5(c)(5)(ii) without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 5(c)(5)(iv).
6. Management Services. At the Closing, the Company, and Castle
Harlan, Inc. are concurrently entering into a management agreement.
7. Termination.
(a) Termination as to Stockholder. This Agreement shall terminate
as to any Stockholder at such time as the Stockholder shall not hold any Company
Securities; provided, however, that the provisions of this Agreement shall
continue in effect for the purpose of enforcing all obligations and undertakings
having theretofore become operative.
(b) Termination as to Securities. This Agreement shall terminate
as to any particular shares when (i) a registration statement with respect to
the sale of such shares shall have become effective under the Securities Act and
such shares shall have been disposed of in accordance with such registration
statement, (ii) they shall have been distributed to the public pursuant to Rule
144 (or any successor provision) or to a transferee in any transaction pursuant
to Rule 144A (or any successor provision) under the Securities Act, (iii) they
shall have been otherwise transferred, and subsequent disposition of them shall
not require registration or qualification of them under the Securities Act or
any state securities or blue sky law then in full force and effect or (iv) they
shall have ceased to be outstanding.
(c) Termination of Agreement. This Agreement shall remain in
effect until the earlier to occur of (i) the Agreement being terminated as to
all Company Securities and Stockholders pursuant to paragraphs (a) and (b) of
this Section 7, (ii) except for the provisions of Section 5, at a time when CHP,
Dresdner and Offshore (together with their affiliates) shall cease to own more
than 15% of the total number of shares of Common Stock of the Company then
outstanding or (iii) except for the provisions of Section 5 hereof, upon the
consummation of an underwritten initial public offering of the securities of the
Company.
8. Further Action. Each party hereto agrees to execute and deliver
any instrument and take any action that may reasonably be requested by any other
party for the purpose of effectuating the provisions of this Agreement.
9. Assignment. Except as otherwise provided in this Section 9 or in
Section 4 hereof, no right under this Agreement shall be assignable and any
attempted assignment in violation of this provision shall be void. The Company
shall have the right to assign its rights and obligations hereunder to any
successor entity (including any entity acquiring substantially all of the assets
of the Company), whereupon references herein to the Company shall be deemed to
be to such successor. This Agreement, and the rights and obligations of the
parties hereunder,
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shall be binding upon and inure to the benefit of any and all transferees of
Company Securities subject hereto (except where expressly provided herein that
such transferred Common Stock and Preferred Stock is free of all rights and
restrictions imposed hereby), the successors, permitted assigns, personal
representatives and all other legal representatives, in whatsoever capacity, by
operation of law or otherwise, of the parties hereto, in each case with the same
force and effect as if the foregoing persons were named herein as parties
hereto.
10. Enforcement. The parties hereto recognize that irreparable damage
will result in the event that this Agreement shall not be specifically enforced.
If any dispute arises concerning the disposition of any Company Securities
hereunder, the parties hereto agree that an injunction may be issued restraining
such disposition pending determination of such controversy and that no bond or
other security may be required in connection therewith. If any dispute arises
concerning the right or obligation of the Stockholders or the Company to
purchase or sell any Company Securities subject hereto, such right or obligation
shall be enforceable by a decree of specific performance. Such remedies shall,
however, not be exclusive and shall be in addition to any other remedy which the
parties may have.
11. Miscellaneous Provisions.
(a) Applicable Law. This Agreement shall be governed by, and
construed and enforced in accordance with and subject to, the laws of the State
of Delaware applicable to agreements made and to be performed entirely within
such State.
(b) Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered personally,
telecopied with confirmed receipt, sent by certified, registered, or express
mail, postage prepaid, or sent by a national next-day delivery service to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, and shall be deemed given when so
delivered personally or telecopied, or if mailed, 2 days after the date of
mailing, or, if by national next-day delivery service, on the day after delivery
to such service as follows:
(i) if to the Company, to it:
c/o Castle Harlan, Inc.
150 East 58th Street
37th Floor
New York, New York 10155
Telecopier No.: 212-207-8042
Attention: Mr. David B. Pittaway
11
with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Telecopier No.: 212-593-5955
Attention: Janet C. Walden, Esq.
(ii) if to any Stockholder to him, her or it at his, her or
its address set forth on Exhibit B hereto.
(c) Entire Agreement; Amendments and Waivers. This Agreement sets
forth the entire understanding of the parties with respect to the subject matter
hereof, subject to any written agreements that may exist as between certain of
the Stockholders with respect to acquisition or disposition of the Company
Securities on a pari passu basis or otherwise. The failure of any party to seek
redress for the violation of or to insist upon the strict performance of any
term of this Agreement shall not constitute a waiver of such term and such party
shall be entitled to enforce such term without regard to such forbearance. This
Agreement may be amended, each party hereto may take any action herein
prohibited or omit to take action herein required to be performed by it, and any
breach of or compliance with any covenant, agreement, warranty or representation
may be waived, only by the written consent or written waiver of the Company and
the Stockholders then owning at least 51% of the Common Stock then owned by all
of the Stockholders, and then such consent or waiver shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that the consent of a Stockholder shall be required if any such
amendment or waiver will have a material adverse effect on the rights or
interests of such Stockholder.
(d) Severability. If any term, provision, covenant or restriction
of this Agreement, or any part thereof, is held by a court of competent
jurisdiction or any foreign federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority to be
invalid, void, unenforceable or against public policy for any reason, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(f) Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretations of
the Agreement.
12
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
STOCKHOLDERS:
CASTLE HARLAN PARTNERS II, L.P.
By: Castle Harlan, Inc.,
its Investment Manager
By: /s/ David B. Pittaway
--------------------------------------
Name: David B. Pittaway
DRESDNER BANK AG, GRAND CAYMAN BRANCH
By: Castle Harlan, Inc.,
its Investment Manager
By: /s/ David B. Pittaway
--------------------------------------
Name: David B. Pittaway
CASTLE HARLAN OFFSHORE
PARTNERS, L.P.
By: Castle Harlan, Inc.,
its Investment Manager
By: /s/ David B. Pittaway
--------------------------------------
Name: David B. Pittaway
COMPANY:
SCHOLASTIC BRANDS, INC.
By: /s/ David B. Pittaway
--------------------------------------
Name: David B. Pittaway
13
INSTRUMENT OF ACCESSION
The undersigned, Branford Castle Holdings, Inc., as a condition
precedent to becoming the owner or holder of record of (1) Common Stock Purchase
Warrants exercisable for One Hundred Forty-Two and 824/1000 (142.824) shares of
Common Stock, par value $.01 per share ("Common Stock"), of Commemorative
Brands, Inc., a Delaware corporation formerly known as Scholastic Brands, Inc.
(the "Company"), (2) one thousand eight hundred ninety-four (1894) shares of
Common Stock of the Company, (3) five hundred five and 930/1000 (505.930) shares
of Series A Preferred Stock, par value $.01 per share, of the Company and (4)
one thousand eight hundred ninety-four (1894) shares of Series B Preferred
Stock, par value $.01 per share, of the Company, hereby agrees to become a
Stockholder, party to and bound by that certain Subscription Agreement dated as
of December 16, 1996, by and among the Company and certain stockholders of the
Company. This Instrument of Accession shall take effect and shall become an
integral part of the said Subscription Agreement immediately upon execution and
delivery to the Company of this Instrument.
IN WITNESS WHEREOF, this INSTRUMENT OF ACCESSION has been duly
executed by or on behalf of the undersigned as of the date below written.
Signature: BRANFORD CASTLE
HOLDINGS, INC.
By: /s/ John Castle
----------------------------------
Address: ___________________________
___________________________
___________________________
Date: December 17, 1996
Accepted:
By: /s/ Jeffrey Brennan
------------------------------
Date: December 17, 1996
INSTRUMENT OF ACCESSION
The undersigned, Leonard M. Harlan, as a condition precedent
to becoming the owner or holder of record of (1) Common Stock Purchase Warrants
exercisable for seventy-one and 450/1000 (71.450) shares of Common Stock, par
value $.01 per share ("Common Stock"), of Commemorative Brands, Inc., a Delaware
corporation formerly known as Scholastic Brands, Inc. (the "Company"), (2) nine
hundred forty-seven (947) shares of Common Stock of the Company, (3) two hundred
fifty-three and 100/1000 (253.100) shares of Series A Preferred Stock, par value
$.01 per share, of the Company and (4) nine hundred forty-seven (947) shares of
Series B Preferred Stock, par value $.01 per share, of the Company, hereby
agrees to become a Stockholder, party to and bound by that certain Subscription
Agreement dated as of December 16, 1996, by and among the Company and certain
stockholders of the Company. This Instrument of Accession shall take effect and
shall become an integral part of the said Subscription Agreement immediately
upon execution and delivery to the Company of this Instrument.
IN WITNESS WHEREOF, this INSTRUMENT OF ACCESSION has been duly
executed by or on behalf of the undersigned as of the date below written.
Signature: /s/ Leonard M. Harlan
-----------------------------------
Address: c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Date: December 17, 1996
Accepted:
By: /s/ Jeffrey H. Brennan
------------------------------
Date: December 17, 1996
INSTRUMENT OF ACCESSION
The undersigned, David B. Pittaway, as a condition precedent
to becoming the owner or holder of record of (1) no Common Stock Purchase
Warrants exercisable for no shares of Common Stock, par value $.01 per share
("Common Stock"), of Commemorative Brands, Inc., a Delaware corporation formerly
known as Scholastic Brands, Inc. (the "Company"), (2) four hundred sixty-nine
(469) shares of Common Stock of the Company, (3) no shares of Series A Preferred
Stock, par value $.01 per share, of the Company and (4) four hundred sixty-nine
(469) shares of Series B Preferred Stock, par value $.01 per share, of the
Company, hereby agrees to become a Stockholder, party to and bound by that
certain Subscription Agreement dated as of December 16, 1996, by and among the
Company and certain stockholders of the Company. This Instrument of Accession
shall take effect and shall become an integral part of the said Subscription
Agreement immediately upon execution and delivery to the Company of this
Instrument.
IN WITNESS WHEREOF, this INSTRUMENT OF ACCESSION has been duly
executed by or on behalf of the undersigned as of the date below written.
Signature: /s/ David B. Pittaway
-----------------------------------
Address: c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Date: December 17, 1996
Accepted:
By: /s/ Jeffrey H. Brennan
------------------------------
Date: December 17, 1996
INSTRUMENT OF ACCESSION
The undersigned, David H. Chow, as a condition precedent to
becoming the owner or holder of record of (1) no Common Stock Purchase Warrants
exercisable for no shares of Common Stock, par value $.01 per share ("Common
Stock"), of Commemorative Brands, Inc., a Delaware corporation formerly known as
Scholastic Brands, Inc. (the "Company"), (2) two hundred thirty-four (234)
shares of Common Stock of the Company, (3) no shares of Series A Preferred
Stock, par value $.01 per share, of the Company and (4) two hundred thirty-four
(234) shares of Series B Preferred Stock, par value $.01 per share, of the
Company, hereby agrees to become a Stockholder, party to and bound by that
certain Subscription Agreement dated as of December 16, 1996, by and among the
Company and certain stockholders of the Company. This Instrument of Accession
shall take effect and shall become an integral part of the said Subscription
Agreement immediately upon execution and delivery to the Company of this
Instrument.
IN WITNESS WHEREOF, this INSTRUMENT OF ACCESSION has been duly
executed by or on behalf of the undersigned as of the date below written.
Signature: /s/ David H. Chow
----------------------------------
Address: c/o Castle Harlan, Inc.
150 East 58th St.
New York, NY 10155
Date: December 17, 1996
Accepted:
By: /s/ Jeffrey H. Brennan
--------------------------------
Date: December 17, 1996