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Exhibit 10.12
STOCK SUBSCRIPTION AND
REPURCHASE AGREEMENT dated as of
November 25, 1997, among YOUNG
AMERICA CORPORATION, a Minnesota
corporation (the "Company") and the
other party named on the signature
page hereto (the "Investor").
The Company has offered to sell certain shares of its v Class A
voting common stock, par value $1.00 per share (the "Class A Stock") to the
Investor subject to the terms and conditions contained herein, and the Investor
has agreed to purchase shares of Class A Stock, subject to the terms and
conditions contained herein.
ACCORDINGLY, in consideration of the mutual covenants and agreements
contained in this Agreement, the sufficiency of which is hereby acknowledged,
the parties hereto agree as follows.
1. Purpose; History.
(a) The Investor is currently, and has for a period of time prior to the
date hereof been, an employee of the Company. Prior to the date hereof, the
Investor has not held any shares of any class of capital stock of the Company.
(b) Simultaneous with the execution and delivery hereof, the Company is
entering into certain documents including a Recapitalization Agreement among the
Company, ▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), certain trusts established for the benefit
of certain affiliates of ▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇ Trusts" and together with
▇▇▇▇▇▇▇, the "Selling Stockholders"), BT Capital Partners, Inc. ("BT"), the
Ontario Teachers' Plan Board ("OTPB"), and the other parties named therein (the
"Recapitalization Agreement") pursuant to which the Company is (i) redeeming the
majority of the shares of outstanding capital stock of the Company held by the
Selling Stockholders, and (ii) issuing new shares of capital stock to BT and
OTPB such that BT and OTPB will become the new controlling shareholders of the
Company.
(c) In consideration of the commitment made by the Investor to remain
employed by the Company following the execution and delivery of the
Recapitalization Agreement, BT and OTPB have offered the Investor compensation
in the form of this opportunity to purchase shares of Class A Stock. The
Company's offer to sell shares of Class A Stock hereby is intended to qualify as
an exempt transaction under Rule 701 promulgated under the Securities Act of
1933, as amended.
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2. Authorization of Issuance of the Shares.
Upon the terms and subject to the conditions hereof, the Company has
authorized the issuance at the Closing of __________ shares of Class A Stock to
the Investor (the "Shares"). The Class A Stock has the rights and privileges set
forth in the Amendment and Restatement of the Articles of Incorporation of the
Company (the "Restated Articles") as filed with the Secretary of State of the
State of Minnesota on or prior to the date hereof. A copy of the Restated
Articles are attached hereto as Exhibit A.
3. Closing.
The closing of the transactions contemplated hereby (the "Closing") will
take place simultaneously with the execution and delivery of this Agreement (the
"Closing Date"). The Closing shall take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLP, ▇▇▇▇▇▇▇▇▇ Center South, ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇.
4. Sale and Purchase of Shares.
At the Closing the Company shall issue and sell to the Investor, and the
Investor shall purchase from the Company, the number of shares of Class A Stock
set forth beneath the name of such Investor on the signature page hereto.
5. Representations and Warranties of the Investor.
The Investor represents and warrants to the Company as follows.
5.1. Authorization, Etc.
(a) Such Investor has full legal right, power and authority to enter into
this Agreement and to perform his or her obligations under this Agreement. This
Agreement has been duly executed and delivered by the Investor and is the valid
and binding obligation of the Investor, enforceable against the Investor in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium, and similar Laws affecting creditors' rights generally
and subject to general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at Law). "Laws" means all laws, rules,
regulations, statutes, ordinances, orders, judgments, injunctions, decrees and
other legislative, administrative or judicial restrictions.
(b) No permit, authorization, consent or approval of or by, or
notification of or filing with, any person (governmental or private) is required
in connection with the execution or delivery
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by the Investor of, or performance by the Investor of his or her obligations
under, this Agreement, other than the actions and filings contemplated by this
Agreement.
5.2. Investment by the Investor.
(a) The Investor (i) is personally familiar with the business of the
Company as an employee of the Company (ii) has been furnished with or has had
access to the information the Investor has requested from the Company, including
without limitation, the "Investor Book" in respect of the Company which book
includes (1) three years of historical financial information for the Company,
(2) a discussion of the "risk factors" associated with the Investor's purchase
of the Shares and (3) a confidential memorandum discussing the Company prepared
by the Company's investment banker, (iii) has had an opportunity to discuss with
management of the Company the intended business and financial affairs of the
Company and (iv) has such knowledge and expertise in financial and business
matters and with respect to investments in securities to evaluate the merits and
risks of an investment in the Company and to make an informed investment
decision with respect thereto. The Investor is aware that his or her purchase of
the Shares is highly speculative and he or it is able, without impairing his or
her financial condition, to hold such Shares for an indefinite period of time
and to suffer a complete loss of his or her investment.
(b) The Investor recognizes that an investment in the Company involves
certain risks, and has taken full cognizance of, and understands all of, the
risk factors related to the purchase of the Shares. The Investor has consulted
with his or her legal advisors with respect to the consequences of his or her
participation as an Investor of the Company.
(c) The Investor is acquiring the Shares for his or her own account only
for investment and not with a view to the resale or further distribution
thereof, nor with any present intention of distributing the same, in any such
case in violation of Federal or state securities Laws. The Investor understands
that such Shares may only be transferred in compliance with the conditions
specified in Sections 4 through 7 of the Stockholders' Agreement dated hereof
among the Company, the Investor, BT, OTPB and the other parties named therein
(the "Stockholders' Agreement").
(d) The Investor understands and acknowledges that the offering of the
Shares has not been considered or approved by any governmental or other entity.
(e) The Investor understands that there is no public market for the Shares
and that the transferability of the Shares is restricted.
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(f) The Investor understands that the Shares have not been, and will not
upon issuance be, registered or qualified under the Securities Act of 1933, as
amended (the "Securities Act"), or otherwise (including under any applicable
state securities Laws) by reason of their issuance in a transaction exempt from
the registration or qualification requirements of the Securities Act and such
Laws, and that the Shares cannot be offered for sale or sold by the Investor or
by anyone acting for the Investor's account or on the Investor's behalf without
the registration of the Shares and/or the fulfillment of other regulatory
requirements.
(g) The Investor understands that the exemption from registration afforded
by Rule 144 (the provisions of which are known to the Investor) promulgated
under the Securities Act depends on the satisfaction of various conditions and
that, if applicable, Rule 144 may only afford the basis for sales under certain
circumstances only in limited amounts.
6. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Investor as follows:
6.1. Authorization; Enforceability.
The Company has full legal right, power and authority to enter into this
Agreement and to perform its obligations under this Agreement. The execution and
delivery by the Company of this Agreement and the performance of the obligations
of the Company contained herein have been duly authorized by all requisite
corporate action of the Company and when duly executed and delivered by the
Company will be a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar Laws now or hereafter in effect relating to creditors' rights and
subject to general principles of equity.
6.2. No Conflict.
The execution and delivery by the Company of this Agreement, its
consummation of the transactions contemplated hereby, and its compliance with
the provisions hereof, will not (a) violate or conflict with the Restated
Articles or the By-laws of the Company, (b) violate, conflict with, or give rise
to any right of termination, cancellation, or acceleration under any agreement,
lease, security, license, permit, or instrument to which the Company or any
subsidiary of the Company is a party, or to which they or any of their assets
are subject, (c) result in the imposition of any Encumbrance on any asset of the
Company or any subsidiary, other than the restrictions set forth in the
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Stockholders' Agreement, or (d) violate or conflict with any Laws. "Encumbrance"
means any security interest, mortgage, lien, pledge, charge, easement,
reservation, restriction, or similar right of any third party.
6.3. No Consent or Approval Required.
No consent, approval or authorization of, or declaration to or filing
with, any person is required to be made or obtained by the Company or any
subsidiary for the valid authorization, execution and delivery by the Company of
this Agreement or for the consummation of the transactions contemplated hereby
or for the valid authorization, issuance and delivery of the Shares, other than
those consents, approvals, authorizations, declarations or filings which have
been or will be timely obtained or made, as the case may be.
6.4. Offering Exemption.
Based on the truth and accuracy of the investment representations
made by the Investor in this Agreement, the offering, sale, and issuance of the
Shares are exempt from registration under the Securities Act of 1933, as amended
("Securities Act") and the rules and regulations promulgated thereunder and
applicable state securities and "blue sky" Laws. the Company has made or will
make all requisite filings and has taken or will take all action necessary to
comply with such state securities or "blue sky" Laws in connection with the
offering, sale and issuance of the Shares.
7. Conditions Precedent to the Obligations of the Investor.
The respective several obligations of the Investor to purchase and pay for
the Shares in accordance with Section 4, are subject to the following conditions
precedent.
7.1. Stockholders' Agreement.
Each of the Company and the other parties thereto shall have executed and
delivered the Stockholders' Agreement.
8. Conditions Precedent to the Obligations of the Company.
The obligation of the Company to issue, sell, and deliver the Shares, in
accordance with Section 4, is subject to the following conditions precedent.
8.1. Payment.
The Investor shall have delivered to the Company the consideration as set
forth in Section 4.
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8.2. Stockholders' Agreement.
Each of the Investor shall have executed and delivered the Stockholders'
Agreement.
9. Repurchase Agreement.
9.1. Definitions.
"Allowed Resignation" means, with respect to any Investor, the termination
by the Investor of the Investor's employment with the Company due to
circumstances determined by the Board to be "allowed" hereunder; provided,
however, that the termination by any Investor of the Investor's employment with
the Company shall be an Allowed Resignation if such termination results from (i)
the Retirement of the Investor, (ii) the Company's effort without the consent of
the Investor to relocate the Investor's employment to a location more than 50
miles from the location of the Investor's employment on the Closing Date or
(iii) a reduction in the base compensation paid to the Investor or a material
reduction (such reduction being particular to the Investor) in the aggregate
benefits then received by the Investor.
"Appraisal Procedure", if applicable, means the following procedure to
determine the Fair Value Per Share of any security. The Fair Value Per Share
shall be determined by an investment banking firm of national recognition, which
firm shall be reasonably acceptable to the Board and the Selling Investor. If
the Board and the Selling Investor are unable to agree upon an acceptable
investment banking firm within ten (10) days after the date either party
proposed that one be selected, the investment banking firm will be selected by
an arbitrator located in New York City, New York, selected by the American
Arbitration Association (or if such organization ceases to exist, the arbitrator
shall be chosen by a court of competent jurisdiction). The arbitrator shall
select the investment banking firm (within ten (10) days of his appointment)
from a list, jointly prepared by the Board and the Selling Investor, of not more
than six investment banking firms of national standing in the United States, of
which no more than three may be named by the Board and no more than three may be
named by the Selling Investor. The arbitrator may consider, within the ten-day
period allotted, arguments from the parties regarding which investment banking
firm to choose, but the selection by the arbitrator shall be made in its sole
discretion from the list of six. The Board and the Selling Investor shall submit
to the investment banking firm their respective calculations of the valuation
amount, and any supporting arguments and other data as they may desire, within
ten (10) days of the appointment of the investment banking firm, and the
investment banking firm shall as soon as practicable thereafter make its own
calculation of the valuation amount. The Fair Value Per Share for purposes
hereof shall be the average, as
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determined by the investment banking firm, of the (i) valuation amount
calculated by the investment banking firm and (ii) that valuation which is the
closer to the valuation amount calculated by the investment banking firm (the
"Closer Valuation"), as determined by the investment banking firm, from among
the valuation amount submitted by the Company and valuation amount submitted by
the Selling Investor. The determination of the Fair Value Per Share by such
investment banking firm shall be final and binding upon the parties. The fees
and expenses of the investment banking firm and arbitrator (if any) used to
determine the Fair Value Per Share shall be split among the Company and the
Selling Investor with the party that submitted the Closer Valuation paying 20%
of such amount and the other party paying the remaining 80%. If required by any
such investment banking firm or arbitrator, the Company shall execute a retainer
and engagement letter containing reasonable terms and conditions, including,
without limitation, customary provisions concerning the rights of
indemnification and contribution by the Company in favor of such investment
banking firm or arbitrator and its officers, directors, partners, employees,
agents and affiliates. Any determination of Fair Value Per Share made pursuant
to these Appraisal Procedures shall be deemed effective for any purchase of
securities that results from any event that occurred or is based upon an event
that occurred during the period ending ninety (90) days from the date of such
determination.
"Board" means the Board of Directors of the Company.
"Cause", with respect to any employee of the Company, shall be determined
in good faith by the Board and shall include, without limitation, the following:
(i) repeated neglect by such employee of any material duties of such
employee or the repeated failure or omission by such employee to carry out
lawful and reasonable directives from the Board which failures or
omissions are, in the reasonable judgment of the Board, willful and
deliberate and which failures or omissions are not cured within a
reasonable period of time following such employee's receipt of written
notice thereof from the Company;
(ii) any act or acts of personal dishonesty by such employee
intended to result in the personal enrichment of such employee at the
expense of the Company;
(iii) any willful and deliberate misconduct on the part of such
employee that is materially and demonstrably injurious to the Company;
(iv) any statement, representation or warranty made by such employee
to the Board that is materially false or misleading; and
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(v) the commitment of a felony by such employee, whether or not such
felony is committed against the Company.
"Fair Value Per Share" means, as to any security, (i) if such security is
Publicly Traded, the Market Price of such security and (ii) if such security is
not Publicly Traded, the market value thereof as reasonably determined in good
faith by the Board, using an appropriate valuation method, assuming an
arms-length sale to an independent party (not taking into account any reduction
in the value of such security due to such security representing a minority
interest in the Company or any discount based upon the illiquidity of such
security); provided, however, that if the Selling Investor shall disagree with
the valuation made by the Board and such disagreement is not resolved within ten
(10) days of the Board's determination, then Fair Value Per Share shall be
determined in accordance with the Appraisal Procedure. Any determination of Fair
Value Per Share hereunder shall be made as of the date that the right to
repurchase such Shares arises under this Section 9.
"Market Price" means, as to any security, the average of the closing
prices of such security's sales on all domestic securities exchanges on which
such security may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York City time, on such day, or, if on
any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar or successor organization (and in each such case averaged over a period
of 30 days consisting of the day as of which Market Price is being determined
and the 29 consecutive Business Days prior to such day.
"Original Cost" means with respect to the repurchase of any Share pursuant
to Section 9 hereof, the purchase price originally paid to the Company for such
Share pursuant to Section 4 hereof.
"Publicly Traded" means, with respect to any security, that such security
is (i) listed on any domestic securities exchange, (ii) a price quoted in the
NASDAQ System, or (iii) has a price quoted by the National Quotation Bureau,
Incorporated.
"Retirement" means, with respect to any Investor, the retirement of the
Investor from the Investor's employment with the Company upon the Investor
reaching the age of at least 55 years.
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"Sale Event" means, with respect to any Investor, (i) the death of the
Investor, (ii) the permanent disability of the Investor causing the Investor to
permanently cease his or her employment with the Company, (iii) an Allowed
Resignation or (iv) a Termination of Employment by the Company other than a
Termination for Cause.
"Selling Investor" means any Investor whose Shares are being repurchased
pursuant to this Section 9.
"Termination of Employment" means, with respect to any Investor, the
termination by the Company of the Investors employment with the Company.
"Termination for Cause" means, with respect to any Investor, the
termination by the Company of the Investors employment with the Company for
Cause.
9.2. Repurchase at Investor's Option.
(a) The Investor shall have the option following the occurrence of a Sale
Event and for the applicable period set forth below, to cause the Company to
purchase from the Investor all (but not less than all) of the Shares then held
by the Investor. The period following the occurrence of a Sale Event during
which the Investor shall have such option shall be:
(i) in the case of the death of such Investor, 180 days;
(ii) in the case of the permanent disability of such Investor, 60
days following the final determination of such disability; and
(iii) in the case of an Allowed Resignation or a Termination of
Employment by the Company other than a Termination for Cause, 30 days.
(b) If the Company shall receive a valid request pursuant to Section
9.2(a) hereof, the Company shall within 45 days of such receipt, purchase from
the requesting Investor all of the Shares then held by the Investor in the
manner set forth in Section 9.4.
9.3. Repurchase at Company's Option.
(a) The Company shall have the option, for a period of 45 days following
any Sale Event, to purchase from the Investor all (but not less than all) of the
Shares then held by the Investor in the manner set forth in Section 9.4.
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(b) The Company shall have the option, for a period of 45 days following
the Termination for Cause of any Investor or the termination by the Investor of
the Investor's employment with the Company for any reason (other than a Sale
Event) that does not constitute an Allowed Resignation, to purchase from the
Investor all (but not less than all) of the Shares then held by the Investor in
the manner set forth in Section 9.4.
9.4. Procedures for Repurchase.
(a) Any repurchase of Shares by the Company pursuant to Section 9.2 or
9.3(a) hereof shall be made at a purchase price per Share equal to the Fair
Value Per Share.
(b) Any repurchase of Shares by the Company pursuant to Section 9.3(b)
hereof shall be at (i) a purchase price equal to the Fair Market Value Per Share
provided that the Investor whose Shares are being repurchased shall enter into a
Non-Competition Agreement with the Company containing the terms set forth on the
Exhibit B attached hereto or, (ii) in the absence of such an agreement, at a
purchase price equal to the lesser of (x) the Original Cost or (y) the Fair
Value Per Share.
(c) The purchase price for any repurchase of Shares by the Company shall
be paid in cash (to the extent allowed by the Company's agreements with its
lenders) due upon the surrender of the Shares being repurchased. If the Company
shall not be able to pay the full purchase price in cash upon the surrender of
the Shares being repurchased, the Company shall pay at least 50% of such amount
due with the remainder payable in the form of a note of the Company that shall
bear interest at a market rate and which shall have a maximum term of three
years.
10. Parties in Interest; Assignment.
This Agreement shall bind and inure to the benefit of the Company, the
Investor, and to the respective successors and permitted assigns of the Company
and the Investor.
11. Duration of Agreement.
This Agreement shall terminate upon the earlier of the completion of an
Approved Sale and a Qualified Public Offering (each as defined within the
Stockholders' Agreement).
12. Entire Agreement.
This Agreement and the other writings and agreements referred to herein or
delivered pursuant hereto contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and
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understandings, oral or written, among the parties with respect to their subject
matter.
13. Notices.
All notices, claims, certificates, requests, demands and other
communications to any party shall be in writing and shall be deemed to have been
duly given if personally delivered or if sent by nationally-recognized overnight
courier, by telecopy, or by registered or certified mail, return receipt
requested and postage prepaid, addressed to such party at the address set forth
below or as may hereafter be designated in writing by such party to the other
parties at the address shown below (or to such other address as the party to
whom notice is to be given may have furnished to the other parties in writing in
accordance herewith):
(a) if to the Company, to:
Young America Corporation
c/o BT Capital Partners, Inc.
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Mail Stop ▇▇▇▇
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇;
with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
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Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇; and
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Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(b) if to an Investor, to the Investor at his or her address set forth
the signature page hereto.
Any such notice or communication shall be deemed to have been delivered and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of dispatch by nationally-recognized overnight courier, on the
next business day following such dispatch, (iii) in the case of telecopy
transmission, on the date of such delivery, and (iv) in the case of mailing, on
the fifth business day after the posting thereof.
14. Amendments.
The terms and provisions of this Agreement may not be modified or amended,
nor may any of the provisions hereof be waived, temporarily or permanently,
except pursuant to the prior written consent of the Company and the Investor.
15. Counterparts.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
16. Headings.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17. Governing Law.
This Agreement shall be governed by and construed in accordance with the
domestic Laws of the State of Minnesota without giving effect to any choice or
conflict of law provision or rule thereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Subscription Agreement as of the date first above written.
YOUNG AMERICA CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
INVESTOR:
/s/ ▇. ▇▇▇▇
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(Signature of Investor)
$60,000.00
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Amount of Commitment
2,757
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Number of Shares
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Please print Name, Address,
Phone and Facsimile Numbers.