Exhibit 10.1

 

This TRANSACTION AGREEMENT is made as of August 4, 2005, among GAIAM, INC. , a Colorado corporation (“ Gaiam ”) and REVOLUTION LIVING LLC, a Delaware limited liability company (“ Revolution Living ”) and LIFE BALANCE MEDIA HOLDINGS LLC , a Delaware limited liability company (“ Wisdom ”).

 

WHEREAS , Gaiam desires to issue and sell to Revolution Living, and Revolution Living desires to purchase from Gaiam, shares of Gaiam’s Class A common stock, par value $0.0001 per share (“ Class A Common Stock ”), in such amounts, on such dates and otherwise on the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS , Wisdom desires to issue and sell to Gaiam, and Gaiam desires to purchase from Wisdom, units of a newly created class of series A preferred interests (the “ Wisdom Preferred Units ”) of Wisdom, in such amounts, on such dates and otherwise on the terms and subject to the conditions set forth this Agreement and in the Wisdom LLC Agreement (as defined below);

 

WHEREAS , Gaiam, Jirka Rysavy (“ Rysavy ”), Revolution Living and Stephen M. Case (“ Case ”) are entering into a Shareholders Agreement dated as of the date of this Agreement pursuant to which, among other things, such persons are agreeing to certain matters related to the transactions contemplated by this Agreement and the operation of Gaiam and Wisdom; and

 

WHEREAS , Gaiam and Wisdom desire to enter into a Cooperation Agreement (as defined below) for the mutual benefit of Gaiam and Wisdom, on the terms and subject to the conditions set forth in the Cooperation Agreement.

 

NOW, THEREFORE , in consideration of the foregoing and the covenants, agreements, representations and warranties contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

1.1                                Definitions .

 

Capitalized terms used and not otherwise defined in this Agreement have the meaning ascribed to them below or in the other locations of this Agreement specified below:

 

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person.  Any relative or spouse (including any partner with whom such person resides on a permanent basis) of the specified Person, any relative of such spouse, any spouse of any such relative or any other Person who, directly or indirectly, is under common ownership or control with, or is owned or controlled by such spouse or relative shall be considered an Affiliate of such Person.  As used in this definition, the term “ control ” means the possession, directly or indirectly, of the power to direct the management and

 

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policies of a Person, whether through the ownership of voting securities, by contract or otherwise.  As used in this definition, the term “ relative ” means any former or current spouse, parent, grandparent, great-grandparent, great-great-grandparent, child, grandchild, great-grandchild, great-great-grandchild, sibling, first uncle, first aunt or first cousin (in each case, whether natural or adoptive).  The parties agree that the term “Affiliate” as used with respect to Case and Revolution Living does not include (i) Time Warner Inc., (ii) any Affiliates of Time Warner Inc. or (iii) any member or investor in any Affiliate of Revolution Living; provided that, absent such relationship as a member or investor in any Affiliates of Revolution Living, such member or investor is not an Affiliate of Case or Revolution Living.

 

“ Agreement ” means this Agreement together with all schedules and exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof.

 

“ Applicable Law ” means, with respect to any Person, all provisions of laws, statutes, ordinances, rules, regulations, listing requirements, permits, certificates or orders of any Governmental Authority or securities exchange applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject, and all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject.

 

“ Articles of Incorporation ” has the meaning given to it in Section 4.1(a) .

 

“ Business Day ” means each day except for Saturday, Sunday, Federal holidays and any other state-recognized holidays in the State of Colorado.

 

“ Breaching Party ” has the meaning given to it in Section 6.9 .

 

“ By-laws ” has the meaning given to it in Section 4.1(a) .

 

“ Case ” has the meaning given in the Recitals.

 

“ Claim ” means any claim, demand, assessment, judgment, order, decree, action, cause of action, litigation, suit, investigation or other Proceeding.

 

“ Class A Common Stock ” has the meaning given to it in the Recitals.

 

“ Class A Stock Purchase Agreement ” means Class A Stock Purchase Agreement, dated as of June 10, 2005 and restated as of June 16, 2005, among Gaiam and the purchasers therein.

 

“ Class B Common Stock ” means Gaiam’s Class B Common Stock, par value $0.0001 per share.

 

“ Closing ” has the meaning given to it in Section 3.1 .

 

“ Closing Date ” has the meaning given to it in Section 3.1 .

 

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“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Commission ” means the United States Securities and Exchange Commission.

 

“ Commission Filings ” means all reports, forms, registration statements, proxy statements, and other filings filed by Gaiam with the Commission (and all notes, exhibits and schedules thereto and documents incorporated by reference therein and all certificates and statements required by the Commission pursuant to Sarbanes-Oxley).

 

“ Common Stock ” means the Class A Common Stock and the Class B Common Stock.

 

“ Contract ” means any written or oral contract, agreement, credit agreement, note, bond, mortgage, indenture, lease, sublease, purchase order, instrument, permit, concession, franchise or license.

 

“ Cooperation Agreement ” means the Cooperation Agreement, substantially in the form attached hereto as Exhibit B , as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms thereof.

 

“ Documents ” means, individually or collectively, this Agreement, the Shareholders Agreement, the Cooperation Agreement, the Wisdom LLC Agreement, the Rysavy Employment Agreement, the Powers Employment Agreement and all other documents executed in connection with the transactions contemplated by this Agreement.

 

“ Equity Incentive Plan ” means Gaiam’s 1999 Long-Term Incentive Plan and Gaiam’s Employee Stock Purchase Plan, each as amended from time to time.

 

“ Exchange Act ” means the Securities and Exchange Act of 1934, as amended.

 

“ Fully-Diluted Capital Stock ” means, as of any date, without duplication, (i) the total number of shares of Common Stock outstanding on such date, plus (ii) the total number of outstanding options, warrants and other equity-linked securities that are exercisable into Common Stock on or after such date, plus (iii) the total number of shares of Common Stock reserved for issuance pursuant to obligations of Gaiam to issue shares of Common Stock, other than pursuant to obligations of Gaiam to issue shares of Common Stock under this Agreement after such date.

 

“ Fundamental Documents ” means the documents by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs.  The “Fundamental Documents” of Gaiam are the Articles of Incorporation and the By-laws.  The Fundamental Documents of Wisdom are the Certificate of Formation and the Wisdom LLC Agreement.

 

“ GAAP ” means United States generally accepted accounting principles, consistently applied.

 

“ Gaiam ” has the meaning given to it in the Preamble.

 

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“ Gaiam Accountants ” has the meaning given to it in Section 6.8 .

 

“ Gaiam Board ” means the board of directors of Gaiam.  To the extent any decision or other action in connection with this Agreement is taken by the Gaiam Board, such decision or action shall be made or taken by directors of Gaiam who not nominees of, or otherwise affiliated or associated with, Revolution Living (unless the decision or other action relates solely to a decision in which none of Revolution Living or its Affiliates has any interest, other than indirectly through its ownership of Common Stock of Gaiam).

 

“ Gaiam Financial Statements ” has the meaning given to it in Section 4.1(f)(ii) .

 

“ Governmental Authority ” means any domestic or foreign government or political subdivision thereof, whether on a Federal, state or local level and whether executive, legislative or judicial in nature, including any agency, authority, board, bureau, commission, court, department or other instrumentality thereof.

 

“ Guarantee ” means any obligation, contingent or otherwise, or any Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person in any manner, whether directly or indirectly, including any obligation of such Person direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligation, (ii) to purchase property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of payment thereof, (iii) to purchase or otherwise pay for merchandise, materials supplies, services or other property under an arrangement which provides that payment for such merchandise, materials, supplies, services or other property will be made regardless of whether delivery of such merchandise, materials, supplies, services or other property is ever made or tendered, or (iv) to maintain the working capital, equity capital or other financial statement condition of any primary obligor; provided , however , that the term Guarantee will not include endorsement of instruments for deposit and collection in the ordinary course of business.

 

“ Indebtedness ” of a Person means, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by (or which customarily would be evidenced by) bonds, debentures, notes or similar instruments, (iii) all reimbursement obligations of such Person with respect to letters of credit and similar instruments, (iv) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (v) all obligations of such Person incurred, issued or assumed as the deferred purchase price of property or services other than accounts payable incurred and paid on terms customary in the business of such Person (it being understood that “deferred purchase price” in connection with any purchase of property or assets will include only that portion of the purchase price which will be deferred beyond the date on which the purchase is actually consummated), (vi) all obligations secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (vii) all obligations of such Person under forward sales, futures, options and other similar hedging arrangements (including interest rate hedging or protection

 

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agreements), (viii) all Guarantees by such Person of obligations of others, (ix) all capitalized lease obligations of such Person and (x) the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, but only to the extent to which there is recourse to such Person for payment of such Indebtedness.

 

“ Intellectual Property Rights ” has the meaning given to it in Section 4.1(l) .

 

 “ Knowledge ” or words of similar import of any Person means (i) actual knowledge of such Person (including the actual knowledge of the officers, key employees and directors of such Person) and (ii) that knowledge which could have been acquired by such Person after making such due inquiry and exercising such due diligence as a prudent businessperson would have made or exercised in the management of his or her business affairs, including due inquiry of those key employees and professionals of such Person who could reasonably be expected to have actual knowledge of the matters in question.

 

“ Lead Investor ” has the meaning given to it in the Wisdom LLC Agreement.

 

“ Liability ” means any Indebtedness, commitment, liability or obligation, of any kind, character or nature whatsoever, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due, regardless of when asserted.

 

“ Lien ” means any security interest, pledge, lien, claim, proxy, bailment (in the nature of a pledge or for purposes of security), mortgage, deed of trust, the grant of a power to confess judgment, conditional sale or title retention agreement (including any lease in the nature thereof), charge, encumbrance, easement, reservation, restriction, cloud, right of first refusal or first offer, option, commitment or other similar arrangement or interest in real or personal property, whether oral or written.

 

 “ Material Adverse Effect ” means, with respect to any Person, a material adverse effect on the business, operations, assets, condition (financial or otherwise) or operating results, Liabilities of such Person, taken as a whole.

 

“ Material Agreements ” has the meaning given to it in Section 4.1(i)(x) .

 

“ NASD ” means the National Association of Securities Dealers, Inc..

 

“ Nasdaq ” has the meaning given to it in Section 4.1(t) .

 

“ Nonbreaching Party ” has the meaning given to it in Section 6.9 .

 

“ Orders ” means judgments, writs, decrees, injunctions, orders, compliance agreements or settlement agreements of or with any Governmental Authority or arbitrator.

 

“ Party ” means each of Gaiam, Revolution Living and Wisdom.

 

“ Permits ” means licenses, certificates and permits from Governmental Authorities.

 

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“ Permitted Liens ” means (i) liens on any Person’s furniture, fixtures and equipment granted to any of such Person’s landlords as collateral for their office and factory leases, (ii) Liens for Taxes not yet due and payable and for which an appropriate reserve has been taken, (iii) rights of way, easements and other minor defects in title which do not adversely affect in any material respect the use or value of the real property subject to such, and (iv) other Liens not to exceed $10,000 in the aggregate.

 

“ Person ” will be construed in the broadest sense and will include an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, and any other entity, including a Governmental Authority.

 

“ Powers Employment Agreement ” means the Employment Agreement between Gaiam and Lynn Powers, substantially in the form attached hereto as Exhibit E-2 , as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms thereof.

 

“ Proceeding ” means any action, suit, proceeding, complaint, charge, hearing, inquiry or investigation before or by a Governmental Authority or an arbitrator or administrator.

 

“ Revolution Living ” has the meaning given to it in the Preamble.

 

“ Rysavy ” has the meaning given in the Recitals.

 

“ Rysavy Employment Agreement ” means the Employment Agreement between Gaiam and Rysavy, substantially in the form attached hereto as Exhibit E-1 , as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms thereof.

 

“ Sarbanes-Oxley ” means the Sarbanes-Oxley Act of 2002, as amended.

 

“ Securities ” means, with respect to any Person, such Person’s “securities” as defined in Section 2(1) of the Securities Act and includes such Person’s capital stock or other equity interests or any options, warrants or other securities or rights that are directly or indirectly convertible into, or exercisable or exchangeable for, such Person’s capital stock or other equity interests.

 

“ Securities Act ” means the Securities Act of 1933, as amended.

 

“ Shareholders Agreement ” means the Shareholders Agreement, in the form executed simultaneously herewith and attached hereto as Exhibit A , as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms thereof.

 

“ Subject Gaiam Shares ” means shares of Class A Common Stock to be issued to or purchased by Revolution Living pursuant to the terms of this Agreement.

 

“ Subject Wisdom Units ” means Wisdom Preferred Units to be purchased by Gaiam pursuant to the terms of this Agreement.

 

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“ Subject Person ” has the meaning given to it in the definition of “Subsidiary”.

 

“ Subsidiary ” means, at any time, with respect to any Person (the “ Subject Person ”), any Person of which either (x) more than 50% of the Securities entitled to vote in the election of directors or comparable Persons performing similar functions (excluding Securities entitled to vote only upon the failure to pay dividends thereon or other contingencies) or (y) more than a 50% interest in the profits or capital of such Person, are at the time owned or controlled directly or indirectly by the Subject Person or through one or more Subsidiaries of the Subject Person.

 

“ Tax ” means any Taxes and the term “ Taxes ” means, with respect to any Person, (A) all income taxes (including any tax on or based upon net income, or gross income, or income as specially defined, or earnings, or profits, or selected items of income, earnings or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, alternative or add-on minimum taxes, customs duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority (domestic or foreign) on such Person and (B) any Liability for the payment of any amount of the type described in the immediately preceding clause (A) as a result of (i) being a “transferee” (within the meaning of Section 6901 of the Code or any other Applicable Law) of another Person, (ii) being a member of an affiliated, combined or consolidated group or (iii) a contractual arrangement or otherwise.

 

“ Treasury Regulations ” means pronouncements, as amended from time to time, or their successor pronouncements, which clarify, interpret and apply the provisions of the Code, and which are designated as “Treasury Regulations” by the United States Department of the Treasury.

 

“ Wisdom ” has the meaning given to it in the Preamble.

 

“ Wisdom Board ” means the board of directors of Wisdom.

 

“ Wisdom LLC Agreement ” means that certain Second Amended and Restated Limited Liability Company Agreement of Life Balance Media Holdings LLC, as amended and restated as of the date of this Agreement, by and among the members of Wisdom, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms thereof.

 

“ Wisdom Material Agreements ” has the meaning given to it in Section 5.1(h)(x) .

 

“ Wisdom Preferred Units ” has the meaning given to it in the Recitals.

 

“ Wisdom Units ” means the Preferred Units, Profits Units, Management Units and Common Units and any other unit of membership interest in Life Balance Holdings LLC.

 

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1.2                                Rules of Construction .

 

The use in this Agreement of the term “including” means “including, without limitation.”  The words “ herein ,” “ hereof ,” “ hereunder ” and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular section, subsection, paragraph, subparagraph or clause contained in this Agreement.  All references to sections, schedules and exhibits mean the sections of this Agreement and the schedules and exhibits attached to this Agreement, except where otherwise stated.  The title of and the section and paragraph headings in this Agreement are for convenience of reference only and will not govern or affect the interpretation of any of the terms or provisions of this Agreement.  The use herein of the masculine, feminine or neuter forms will also denote the other forms, as in each case the context may require or permit.  Where specific language is used to clarify by example a general statement contained herein, such specific language will not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.  The language used in this Agreement has been chosen by the Parties to express their mutual intent, and no rule of strict construction will be applied against any Party.  Unless expressly provided otherwise, the measure of a period of one month or year for purposes of this Agreement will be that date of the following month or year corresponding to the starting date, provided that if no corresponding date exists, the measure will be that date of the following month or year corresponding to the next day following the starting date.  For example, one month following February 18 is March 18, and one month following March 31 is May 1.

 

ARTICLE II
PURCHASE AND SALE OF SUBJECT GAIAM SHARES AND SUBJECT WISDOM UNITS

 

2.1                                Authorization of the Subject Gaiam Shares .

 

Gaiam has authorized the issuance to Revolution Living at the Closing of an aggregate of 2,500,000 shares of Class A Common Stock.

 

2.2                                Purchase and Sale of Securities .

 

Subject to the terms and conditions contained in this Agreement, at the Closing:

 

(a)           Gaiam will issue, sell and deliver to Revolution Living that number of the shares of Class A Common Stock set forth on Schedule I hereto at the price set forth on Schedule I.  Revolution Living will pay, to an account designated by Gaiam prior to the Closing, the amount set forth opposite Revolution Living’s name on Schedule I hereto with respect to the Class A Common Stock being purchased at the Closing by wire transfer of immediately available funds.

 

(b)           Wisdom will issue, sell and deliver to Gaiam’s wholly owned subsidiary, Gaiam Media, Inc., that number of Wisdom Preferred Units set forth on Schedule II hereto.  The Wisdom Preferred Units will have rights set forth in the Wisdom LLC Agreement set forth as Exhibit C to this Agreement.  Gaiam will cause Gaiam Media, Inc. to will pay Wisdom, to an account of Wisdom designated by Wisdom prior to the Closing, the amount set forth opposite

 

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Gaiam’s name on Schedule II hereto with respect to the Subject Wisdom Units being purchased at the Closing by wire transfer of immediately available funds.

 

ARTICLE III
THE CLOSING; DELIVERY OF DOCUMENTS AT THE CLOSINGS

 

3.1                                The Closing .

 

The closing (the “ Closing ”) hereunder and the consummation of the transactions contemplated to occur simultaneously therewith shall take place at the offices of O’Melveny & Myers LLP, 1625 Eye Street, N.W., Washington, D.C. 20006 on the second Business Day after the satisfaction or, if permissible, waiver of the applicable conditions (except those conditions which by their nature are to be satisfied as part of the Closing) set forth in this Article III and in Article VII , or at such other time and place as is otherwise agreed upon by the Parties hereto (each such date, a “ Closing Date ”).

 

3.2                                Deliveries at the Closing .

 

(a)           Deliveries by Gaiam at the Closing.

 

The obligation of Revolution Living to consummate the Closing is subject to the delivery by Gaiam of the following items or the satisfaction of the following conditions precedent (unless waived by Revolution Living):

 

(i)            Consents and Approvals .  All consents, approvals, authorizations, filings and notices required to consummate the transactions contemplated hereby with respect to the transactions to be consummated at the Closing will have been obtained, made or given and will be in full force and effect, including, without limitation, (A) the requisite consent of the Gaiam Board and (B) any filings or consents required by any Governmental Authority.

 

(ii)           Opinion of Counsel .  Revolution Living will have received a legal opinion of Bartlit Beck Herman Palenchar & Scott LLP, counsel to Gaiam, addressed to Revolution Living and dated as of the Closing Date, in substantially the form attached hereto as Exhibit D-1 .

 

(iii)          Good Standing Certificates .  Gaiam will have delivered to Revolution Living a certificate of the Secretary of State of the State of Colorado, dated as of a recent date as to the due incorporation or organization of Gaiam and its good standing in such jurisdiction.

 

(iv)          Secretary’s Certificate .  Gaiam will have delivered to Revolution Living a certificate of the Secretary or an Assistant Secretary of Gaiam, dated as of the Closing Date and certifying on behalf of Gaiam: (A) that attached thereto is a true, correct and complete copy of each of the Fundamental Documents of Gaiam as in effect on the date of such certification; (B) that attached thereto is a true, correct and complete copy of all resolutions adopted by the Gaiam Board authorizing the execution, delivery and

 

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performance of the Documents and the transactions contemplated thereby, which resolutions have been unanimously approved by the Gaiam Board, and that all such resolutions are in full force and effect; and (C) the incumbency and specimen signature of all officers of Gaiam executing the Documents, and any certificate or instrument furnished pursuant hereto.

 

(v)           Delivery of Purchase Price .  Gaiam will have delivered to Wisdom by wire transfer of immediately available funds the amount specified in Schedule II to such Wisdom bank account as Revolution Living will designate to Gaiam in writing no less than two Business Days prior to Closing.

 

(vi)          Issuance of the Class A Common Stock .  Gaiam will have delivered to Revolution Living a stock certificate representing the number of shares of Class A Common Stock being purchased by Revolution Living at the Closing as set forth on Schedule I opposite Revolution Living’s name with respect to the Closing against receipt by Gaiam of payment of the amount specified in Schedule I with respect to the Closing by wire transfer of immediately available funds to an account designated by Gaiam no less than two (2) Business Days prior to the Closing.

 

(vii)         Officer’s Certificate as to Conditions Precedent .  Gaiam will have delivered to Revolution Living an officer’s certificate certifying that the conditions precedent to Revolution Living’s obligations set forth in Sections 7.1(a) , 7.1(b) and 7.1(f) have been satisfied.

 

(b)           Deliveries by Revolution Living at the Closing.

 

The obligation of Gaiam to consummate the Closing is subject to the delivery by Revolution Living of the following items or the satisfaction of the following conditions precedent (unless waived by Gaiam):

 

(i)            Consents and Approvals .  All consents, approvals, authorizations, filings and notices required to consummate the transactions contemplated hereby with respect to the transactions to be consummated at the Closing will have been obtained, made or given and will be in full force and effect, including, without limitation, (A) the requisite consent of Revolution Living’s board of directors and (B) any filings or consents required by any Governmental Authority.

 

(ii)           Opinion of Counsel .  Gaiam will have received a legal opinion of O’Melveny & Myers LLP, counsel to Revolution Living, addressed to Gaiam and dated as of the Closing Date, in substantially the form attached hereto as Exhibit D-2 .

 

(iii)          Good Standing Certificates .  Revolution Living will have delivered to Gaiam a certificate of the Secretary of State of the State of Delaware, dated as of a recent date as to the due organization of Wisdom and Revolution Living and their good standing in such jurisdiction.

 

(iv)          Secretary’s Certificate .  Revolution Living will have delivered to Gaiam a certificate of the Secretary or an Assistant Secretary of Revolution Living, dated as of the

 

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Closing Date and certifying on behalf of Revolution Living: (A) that attached thereto is a true, correct and complete copy of each of the Fundamental Documents of Revolution Living as in effect on the date of such certification; (B) that attached thereto is a true, correct and complete copy of all resolutions adopted by the board of directors (and any committees thereof) of Revolution Living authorizing the execution, delivery and performance of the Documents and the transactions contemplated thereby, and that all such resolutions are in full force and effect; (C) the incumbency and specimen signature of all officers of Revolution Living executing the Documents, and any certificate or instrument furnished pursuant hereto; and (D) that the individuals to be designated by Gaiam to the board of directors of Wisdom pursuant to the Shareholders Agreement as of the time of the Closing Date have been duly elected and appointed to the board of directors of Wisdom.

 

(v)           Delivery of Purchase Price .  Revolution Living will have delivered to Gaiam by wire transfer of immediately available funds the amount specified in Schedule I to such bank account as Gaiam will designate to Revolution Living in writing no less than two Business Days prior to Closing.

 

(vi)          Delivery of Wisdom Preferred Units .  Wisdom will have delivered to Gaiam the Wisdom Preferred Units being purchased by Gaiam at the Closing as set forth on Schedule II hereto against receipt by Revolution Living of evidence of payment to Wisdom of the amount specified in Schedule II with respect to the Closing by wire transfer of immediately available funds to an account designated by Revolution Living no less than two (2) Business Days prior to the Closing.

 

(vii)         Officer’s Certificate as to Conditions Precedent .  Revolution Living and Wisdom, as applicable, will have delivered to Gaiam an officer’s certificate certifying that the conditions precedent to Gaiam’s obligations set forth in Sections 7.2(a) , 7.2(b) , 7.2(e) and 7.2(f) have been satisfied.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GAIAM

 

4.1          Representations and Warranties in connection with Sales of Subject Gaiam Shares .

 

Gaiam hereby represents and warrants to Revolution Living, as of the date hereof and as of the Closing Date, as follows: 

 

(a)           Organization, Power, Authority and Good Standing.

 

Each of Gaiam and its Subsidiaries is duly organized, validly existing and in good standing under the Applicable Laws of its respective jurisdiction of incorporation or formation and has all requisite corporate or other power and authority to own, lease and operate its properties and other assets and to carry on its business as presently conducted and as proposed to be conducted.  Each of Gaiam and its Subsidiaries is duly qualified, validly existing and/or in good standing to transact business as a foreign Person in those respective jurisdictions which constitute the jurisdictions in which the character of the property owned, leased or operated by

 

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Gaiam or such Subsidiary or the nature of the activities conducted by Gaiam or such Subsidiary makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect.  A copy of the Amended and Restated Articles of Incorporation of Gaiam in effect on the date hereof (the “ Articles of Incorporation ”) and Restated By-laws of Gaiam in effect on the date hereof (the “ By-laws ”) is filed as an exhibit to the Commission Filings.

 

(b)           Capitalization.

 

(i)            Immediately upon consummation of the Closing, the authorized, issued and outstanding capital stock of Gaiam will consist of:

 

50,000,000 shares of preferred stock, $0.0001 par value per share, none of which are issued and outstanding; and

 

150,000,000 shares of Class A Common Stock, of which:  (1) 12,304,295 shares were validly issued and outstanding, fully paid and nonassessable as of August 1, 2005; (2) no shares are held as treasury shares; (3) 1,876,272 shares are reserved for issuance in accordance with Gaiam’s Equity Incentive Plan; and (4) 5,400,000 shares are reserved for issuance upon conversion of the 5,400,000 outstanding shares of Class B Common Stock.

 

50,000,000 shares of Class B Common Stock, of which (1) 5,400,000 shares are validly issued and outstanding, fully paid and nonassessable; and (2) no shares are held as treasury shares or reserved for issuance.

 

(ii)           Gaiam’s Commission Filings accurately reflect the outstanding Indebtedness of Gaiam.

 

(iii)          Except as described in the Commission Filings, the Articles of Incorporation or as contemplated by the Documents, there are, and immediately after consummation of the Closing there will be, no (i) outstanding warrants, options, agreements, convertible Securities or other commitments or instruments pursuant to which Gaiam is obligated to issue, sell or otherwise transfer any of its Securities, (ii) preemptive rights or similar rights to purchase or otherwise acquire Securities of Gaiam pursuant to any Applicable Law, Gaiam’s Fundamental Documents or any Contract to which Gaiam is a party, or (iii) Liens (such as a right of first refusal, right of first offer, irrevocable proxy, voting trust or voting agreement) created by Gaiam with respect to the sale or voting of any Securities of Gaiam (whether outstanding or issuable upon the conversion, exchange or exercise of outstanding Securities).

 

(iv)          No outstanding Securities of Gaiam are entitled to any anti-dilution or similar adjustments upon the issuance of additional Securities of Gaiam or otherwise.

 

(v)           There are no obligations to redeem, repurchase or otherwise acquire shares of capital stock or other Securities of Gaiam pursuant to any Applicable Law, any Fundamental Document of Gaiam or any Contract to which Gaiam is a party or may be bound.

 

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(vi)          Except as contemplated by the Documents and the Class A Stock Purchase Agreement, no Person has any right to cause Gaiam to effect the registration under the Securities Act of any shares of Common Stock or any other Securities of Gaiam.

 

(vii)         All Securities issued by Gaiam have been either issued in transactions in accordance with, or exempt from registration under, the Securities Act and the rules and regulations promulgated thereunder and all applicable state securities or “blue sky” laws, and Gaiam has not violated the Securities Act or any applicable state securities or “blue sky” laws in connection with the issuance of any such Securities.

 

(c)           Authorization of Agreement, Etc.

 

(i)            Gaiam has any and all requisite corporate power and authority to execute and deliver the Documents and to perform its obligations under and to consummate the transactions contemplated by each such Document.  The execution, delivery and performance by Gaiam of each Document to which it is a party and the issuance, sale and delivery of the Subject Gaiam Shares has been duly authorized by all requisite corporate action by Gaiam, including the unanimous approval of the Gaiam Board, and this Agreement and each other Document has been duly executed and delivered by Gaiam.  No other corporate or shareholder action (including, without limitation, approval of the Documents and the transactions contemplated hereby by the shareholders of Gaiam) on the part of Gaiam is necessary for such authorization, execution and delivery.  Each of the Documents constitutes a legal, valid and binding obligation of Gaiam enforceable against Gaiam in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar Applicable Laws affecting creditors’ rights and remedies generally, and subject, in the case of enforceability, to general principles of equity (regardless of whether enforcement is sought in a Proceeding at law or in equity).

 

(ii)           The authorization, reservation, issuance, sale and delivery, as applicable, of the Subject Gaiam Shares have been duly and validly authorized by all requisite corporate action on the part of Gaiam.  The Subject Gaiam Shares (assuming the issuance thereof in accordance with this Agreement), will be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, free and clear of any Liens (other than those created by the holder) and, except as otherwise set forth in the Documents, with no restrictions on the voting rights thereof and not subject to any preemptive rights, rights of first refusal or other similar rights of the shareholders of Gaiam.

 

(d)           No Conflicts.

 

The execution, delivery and performance by Gaiam of this Agreement and each of the other Documents and the consummation of the transactions contemplated hereby and thereby, including without limitation, the issuance, sale and delivery of the Subject Gaiam Shares, and compliance with the provisions hereof and thereof by Gaiam, does not or will not, as the case may be, (a) violate any provision of Applicable Law or any Order applicable to Gaiam or any of its properties or assets or (b) conflict with or result in any breach of any of the terms, conditions

 

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or provisions of, or constitute (with notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of Gaiam under any Material Agreement to which it is a party or by which Gaiam or its assets or properties are or may be bound, except that consent may be required under the 2005 Amended and Restated Credit Agreement dated July 29, 2005 among Gaiam, certain of its Subsidiaries and Wells Fargo Bank, National Association, or (c) conflict with or violate any provision of the Fundamental Documents of Gaiam currently in effect.

 

(e)           Approvals.

 

Except for Commission Filings and filings with Nasdaq, no Permit or Order, authorization, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the (i) execution, delivery or performance by Gaiam of each Document to which it is a party, or (ii) issuance of the Subject Gaiam Shares at the Closing.

 

(f)            Commission Filings; Financial Statements.

 

(i)            Gaiam is a company required to file periodic reports with the Commission and has, since November 1999, filed in a timely manner all Commission Filings required to have been filed with the Commission under the Securities Act and the Exchange Act, as the case may be, and the rules and regulations of the Commission promulgated thereunder applicable thereto.  As of the respective dates of their filing with the Commission, or the date of any amendment thereto filed on or prior to the date hereof, the Commission Filings complied as to form in all material respects with the applicable provisions of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder applicable thereto and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

 

(ii)           Each of the historical consolidated financial statements of Gaiam (including any related notes or schedules) included in Gaiam’s annual report for the year ended December 31, 2004 and any annual report on Form 10-K or quarterly report on Form 10-Q filed thereafter (the “ Gaiam Financial Statements ”) was prepared (i) in accordance with the books and records of Gaiam and (ii) in accordance with GAAP (except as may be disclosed therein).  Such financial statements fairly present in all material respects the consolidated financial position of Gaiam and its Subsidiaries as of the dates thereof and the consolidated results of operations, cash flows and changes in shareholders’ equity for the periods indicated (subject, in the case of the unaudited interim financial statements, to normal, recurring year-end audit adjustments).

 

(iii)          The Gaiam Financial Statements complied, when filed, as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the Commission with respect thereto, including, but not limited to, the applicable requirements of Regulation S-X promulgated under the Exchange Act and Sarbanes-Oxley.

 

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(iv)          The Chief Executive Officer and the Chief Financial Officer of Gaiam have signed, and Gaiam has furnished to the Commission, all certifications required by Section 906 of Sarbanes-Oxley; such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither Gaiam nor any of its officers has received notice from any Governmental Authority questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications. Except as disclosed in the Commission Filings, to Gaiam’s Knowledge, each director and executive officer of Gaiam has filed with the Commission on a timely basis all statements required by Section 16(a) of the Exchange Act and the rules and regulations thereunder since January 1, 2004.

 

(g)           Accounting.

 

Gaiam maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Gaiam maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act, which controls and procedures are effective to ensure that all material information concerning Gaiam and its Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of Gaiam’s filings with the Commission and other public disclosure documents.

 

(h)           Private Offering.

 

Assuming the accuracy of the representations of Revolution Living in Section 5.2(b) , the offering, sale, issuance and delivery by Gaiam of the Subject Gaiam Shares are exempt from the registration and prospectus delivery requirements of the Securities Act and applicable state securities laws and the rules and regulations promulgated thereunder.  Neither Gaiam or its Subsidiaries, nor any Person acting on their behalf, has offered or sold or will offer or sell any Securities, or has taken or will take any other action (including, without limitation, any offering of any Securities of Gaiam under circumstances that would require, under the Securities Act or any applicable blue-sky laws, the integration of such offering with the transactions contemplated by this Agreement), which would subject the transactions contemplated by this Agreement to the registration provisions of the Securities Act.

 

(i)            Material Agreements.

 

(x)            Gaiam has filed, as an exhibit to the Commission Filings (i) any notes, bonds, mortgages, or indentures or (ii) other material written or oral Contracts, agreements, instruments and other understandings, in each case that is required to be filed as an exhibit to the Commission Filings (collectively, the “ Material Agreements ”).

 

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(y)           Each Material Agreement constitutes a valid and binding obligation of Gaiam and/or Subsidiary party thereto.  Each of Gaiam and the Subsidiaries have in all material respects performed all of the material obligations required to be performed by each of them to date pursuant to the Material Agreements, and there exists no default, or any event which upon the giving of notice or the passage of time, or both, would give rise to a claim of a default in the performance by Gaiam or any of the Subsidiaries, except where such default or event, individually or in the aggregate, has not had nor could it reasonably be expected to have a Material Adverse Effect.

 

(j)            Absence of Undisclosed Liabilities.

 

Neither Gaiam nor any of its Subsidiaries has any Liability required to be disclosed in the consolidated financial statements for Gaiam and its Subsidiaries for the fiscal year ended December 31, 2004, other than Liabilities disclosed in the Commission Filings or incurred in the ordinary course of business consistent with past practice since December 31, 2004 (none of which results from, arises out of, relates to, or was caused by, any breach of contract, breach of warranty, tort, infringement or violation of Applicable Law where such breach or event, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect).

 

(k)           Compliance with Laws.

 

Neither Gaiam nor any Subsidiary is in violation of and, to the Knowledge of Gaiam, none is under investigation by a Governmental Authority with respect to or has been threatened to be charged with or given notice of any violation of, any Applicable Law (including Sarbanes-Oxley), except violations that have not had, and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Gaiam and the Subsidiaries taken as a whole.

 

(l)            Intellectual Property Rights.

 

Gaiam has sufficient title or ownership of, or rights by license or other agreement to all of the patents, patent applications, trademarks, service marks, trademark and service mark applications and registrations, trade names, copyright applications and registrations (the “ Intellectual Property Rights ”) necessary for, or used in, the conduct of its business as presently conducted and as presently proposed to be conducted.  Such Intellectual Property Rights are not subject to any Lien or any rights of others, however evidenced or created which could reasonably be expected to have a Material Adverse Effect on Gaiam or its operations.

 

(m)          Taxes.

 

(i)            All Tax returns required to be filed by Gaiam and each of its Subsidiaries has been accurately prepared and timely filed in all material respects, and all Taxes for which Gaiam or any of its Subsidiaries may be held liable (other than the Taxes referred to in the next sentence), have been paid or accrued within the prescribed period or any extension thereof.  All Taxes required to be withheld by Gaiam or any of its Subsidiaries, including but not limited to, Taxes arising as a result of payments or distributions (or amounts allocable) to foreign Persons or to employees of Gaiam or any of its

 

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Subsidiaries, have been collected and withheld, and have been either paid to the respective Governmental Authorities, set aside in accounts for such purpose, or accrued, reserved against, and entered upon the books and records of the employer.

 

(ii)           Neither Gaiam nor any of its Subsidiaries has been notified that either the Internal Revenue Service or any other Taxing authority has raised any issues, or has an intent to raise such issues, in connection with any Taxes or Tax return of Gaiam or any of its Subsidiaries, which issues, if adversely determined, would be reasonably likely to have a Material Adverse Effect.

 

(n)           Litigation Proceedings.

 

Except as set forth in the Commission Filings, there are no Proceedings pending or, to the Knowledge of Gaiam, threatened against or involving Gaiam or any of the Subsidiaries, whether at law or in equity, whether civil or criminal in nature or by or before any Governmental Authority, which if adversely determined could individually or in the aggregate have a Material Adverse Effect on Gaiam and its Subsidiaries taken as a whole, nor to the Knowledge of Gaiam does there exist any reasonable basis therefore.

 

(o)           Insurance.

 

Each of Gaiam and the Subsidiaries carries insurance in such amounts and covering such risks as is adequate for the conduct of Gaiam’s business and the value of its properties.

 

(p)           Investment Company.

 

Neither Gaiam nor any Subsidiary is an “investment company” within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the Commission thereunder which is required to register as an investment company.

 

(q)           Brokers.

 

In connection with the transactions contemplated by this Agreement, none of Gaiam, any of Gaiam’s Subsidiaries or any of their respective officers, directors, shareholders or employees (or any Affiliate of the foregoing) has employed any broker or finder or incurred any actual or potential Liability or obligation, whether direct or indirect, for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement which would be payable by Revolution Living.

 

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(r)           Application of Takeover Protections.

 

(i)            As of the date of this Agreement, Gaiam and the Gaiam Board have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or the laws of the State of Colorado which is or could become applicable to Revolution Living as a result of the transactions contemplated by this Agreement, including, without limitation, Gaiam’s issuance of the Subject Gaiam Shares and Revolution Living’s ownership of the Subject Gaiam Shares.

 

(ii)           As of the date of this Agreement, Gaiam has not adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership on Common Stock or a change in control of Gaiam.

 

(s)           Certificates of Officers.

 

Any certificate signed by any officer or Gaiam and delivered to Revolution Living will be deemed a representation and warranty by Gaiam to Revolution Living as to the matters covered thereby.

 

(t)            Listed Securities.

 

As of the Closing, (i) Gaiam’s Class A Common Stock is quoted on the Nasdaq National Market System (“ Nasdaq ”) under the ticket symbol “GAIA” and (ii) no stop order suspending the trading of the Class A Common Stock on Nasdaq exists.

 

4.2          Representations and Warranties of Gaiam with Respect to Purchases of Subject Wisdom Units . 

 

Gaiam hereby represents and warrants to Wisdom, as of the date hereof and as of the Closing Date, on behalf of itself and any Subsidiary it designates to hold the Subject Wisdom Units, as follows:

 

(a)           Investment Representations.

 

(i)            The Subject Wisdom Units are being acquired for Gaiam’s own account, for investment and not with a view to the distribution thereof in violation of the Securities Act or applicable foreign or state securities laws.

 

(ii)           Gaiam understands that (i) the Subject Wisdom Units have not been, and will not be, registered under the Securities Act or applicable foreign or state securities laws, by reason of their sale by Wisdom in a transaction exempt from the registration requirements of the Securities Act and applicable foreign and state securities laws and (ii) the Subject Wisdom Units must be held by Gaiam indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable foreign and state securities laws or is exempt from registration thereof.

 

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(iii)          Gaiam is aware of the provisions of Rule 144 promulgated under the Securities Act that permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions.  The Subject Wisdom Units will bear a legend reflecting these conditions on transferability thereof and stop transfer instructions will be given to Wisdom’s transfer agent accordingly.

 

(iv)          Gaiam is an “accredited investor” (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act).

 

(v)           Revolution Living and/or Wisdom has made available to Gaiam or its representatives information relating to Wisdom, its ownership and management and other information about Wisdom and all agreements, documents, records and books that Gaiam has requested relating to an investment in the Subject Wisdom Units which may be acquired by Gaiam hereunder.  Gaiam has reviewed the information provided by Revolution Living and/or Wisdom and understands and accepts the risks associated with an investment in Wisdom, including the terms of this Agreement, the rights of the Lead Investor to control the Board of Directors of Wisdom, and the risk that matters described in the information provided may not materialize.  Gaiam has had an opportunity to ask questions of, and receive answers from a Person or Persons acting on behalf of Revolution Living and Wisdom concerning the terms and conditions of this investment, and answers have been provided to all of such questions to the full satisfaction of Gaiam.  Gaiam has such knowledge and experience in financial and business matters that it is capable of evaluating the risks and merits of this investment and to suffer a complete loss of its investment.

 

(vi)          Gaiam has no need for liquidity in its investment in the Subject Wisdom Units and is able to bear the economic risk of its investment in the Subject Wisdom Units and the complete loss of all of such investment.

 

(vii)         Gaiam understands that there is no public market for the Subject Wisdom Units and that the transferability of the Subject Wisdom Units is restricted.

 

(viii)        Gaiam is able to fend for itself in the transactions contemplated by this Agreement, can bear the economic risk of investment in the Subject Wisdom Units and has such knowledge and experience in financial or business matters to be capable of evaluating the merits and risks of the investment in the Subject Wisdom Units.  Gaiam is fully aware of:  (A) the speculative nature of the investment in the Subject Wisdom Units, (B) the financial risk involved, (C) the lack of liquidity for the Subject Wisdom Units, and (D) the transfer restrictions and any repurchase rights applicable to the Subject Wisdom Units.  Gaiam has consulted with its professional, tax and legal advisors with respect to the federal, state, local and foreign income tax consequences of the undersigned’s participation as a member of Wisdom.

 

(ix)           Neither Wisdom nor any other Person, including Revolution Living, will have or be subject to any liability or indemnification obligation to Gaiam or any other Person resulting from the distribution to Gaiam, or Gaiam’s use of, any information provided to Gaiam, including without limitation, the information described in clause (v),

 

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related to the business of Wisdom and any information, projections, documents or material made available to Gaiam, whether orally or in writing, or in any other form in expectation or furtherance of the transactions contemplated by this Agreement, except Wisdom to the extent that a representation or warranty in this Agreement made by Wisdom specifically identifies and addresses such information.

 

(x)            Except for the representations and warranties contained in this Agreement, Gaiam acknowledges that none of Wisdom, any of its Affiliates and any other Person makes any other express or implied representation or warranty with respect to (i) the Subject Wisdom Units, including without limitation the probable success or profitability of ownership of Subject Wisdom Units, (ii) Wisdom, including without limitation, the operation of its business by its officers, directors, managers, employees, or members, (iii) the business, assets, performance (whether historical, present or future) of Wisdom, including without limitation the probable success or profitability of Wisdom or (iv) otherwise with respect to any other information provided to Gaiam or other Persons, whether on behalf of Revolution Living, Wisdom or such other Persons.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WISDOM

 

5.1          Representations and Warranties to Gaiam in connection with Sales of Subject Wisdom Units .

 

Wisdom hereby represents and warrants to Gaiam, as of the date hereof and as of the Closing Date, as follows:

 

(a)           Organization, Power, Authority and Good Standing.

 

Wisdom was formed on December 30, 2004 and conducted no business prior to its acquisition of assets on March 17, 2005.  Each of Wisdom and its Subsidiaries is duly organized, validly existing and in good standing under the Applicable Laws of its respective jurisdiction of incorporation or formation and has all requisite corporate or other power and authority to own, lease and operate its properties and other assets and to carry on its business as presently conducted and as proposed to be conducted.  Except as set forth on Schedule 5.1(a) , each of Wisdom and its Subsidiaries is duly qualified, validly existing and/or in good standing to transact business as a foreign Person in those respective jurisdictions in which the character of the property owned, leased or operated by Wisdom or such Subsidiary or the nature of the activities conducted by Wisdom or such Subsidiary makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect.  A copy of the Wisdom LLC Agreement in effect on the date hereof has been delivered to Gaiam.

 

(b)           Capitalization.

 

(i)            Schedule 5.1(b)(i) accurately reflects the capitalization of Wisdom immediately upon consummation of the Closing.

 

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(ii)           Schedule 5.1(b)(ii) accurately reflects the capitalization of Wisdom after giving effect to the transactions contemplated by this Agreement.

 

(iii)          Except as contemplated by Wisdom’s Fundamental Documents or as otherwise set forth on
Schedule 5.1(b)(iii) , there are, and immediately after consummation of the Closing there will be, no (i) outstanding warrants, options, agreements, convertible Securities or other commitments or instruments pursuant to which Wisdom is obligated to issue, sell or otherwise transfer any Securities, (ii) preemptive rights or similar rights to purchase or otherwise acquire Securities of Wisdom pursuant to any Applicable Law, Wisdom’s Fundamental Documents or any Contract to which Wisdom is a party, or (iii) Lien (such as a right of first refusal, right of first offer, proxy, voting trust or voting agreement) created by Wisdom or, to the Knowledge of Wisdom, any of its members with respect to the sale or voting of any Securities of Wisdom (whether outstanding or issuable upon the conversion, exchange or exercise of outstanding Securities).

 

(iv)          Except as set forth in the Wisdom LLC Agreement, (x) no outstanding Securities of Wisdom are entitled to any anti-dilution or similar adjustments upon the issuance of additional Securities of Wisdom or otherwise and (y) there are no obligations to redeem, repurchase or otherwise acquire shares of capital stock or other Securities of Wisdom pursuant to any Applicable Law, any Fundamental Document of Wisdom or any Contract to which Wisdom is a party or may be bound.

 

(v)           Except as contemplated by the Wisdom Documents, no Person has any right to cause Wisdom to effect the registration under the Securities Act of any shares of Common Stock or any other Securities of Wisdom.

 

(vi)          Except for Life Balance Media LLC, a Delaware limited liability company and wholly-owned by Wisdom, Wisdom does not have any Subsidiaries, nor does it own any capital stock, any other equity or long-term Indebtedness or any equity interest, directly or indirectly, in any other Person.

 

(vii)         All Securities issued by Wisdom have been either issued in transactions in accordance with, or exempt from registration under, the Securities Act and the rules and regulations promulgated thereunder and all applicable state securities or “blue sky” laws, and Wisdom has not violated the Securities Act or any applicable state securities or “blue sky” laws in connection with the issuance of any such Securities.  To Wisdom’s Knowledge, there are no restrictions upon the voting rights associated with, or the transfer of, any of the Securities of Wisdom, except as provided by (i) United States federal or state securities laws or (ii) the terms and provisions of the Wisdom Documents.

 

(c)           Authorization of Agreement, Etc.

 

The authorization, reservation, issuance, sale and delivery, as applicable, of the Subject Wisdom Units have been duly and validly authorized by all requisite corporate or other action on the part of Wisdom.  Except as set forth in the Wisdom LLC Agreement, the Subject Wisdom Units (assuming the issuance thereof in accordance with this Agreement), will be duly and

 

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validly issued and outstanding and fully paid, with no personal liability attaching to the ownership thereof, free and clear of any Liens whatsoever and with no restrictions on the voting rights thereof, not subject to any preemptive rights, and not subject to any rights of first refusal or other similar rights of the members of Wisdom.

 

(d)           No Conflicts.

 

The execution, delivery and performance by Wisdom of this Agreement and each of the other Documents and the consummation of the transactions contemplated hereby and thereby, including without limitation, the issuance, sale and delivery of the Subject Wisdom Units, and compliance with the provisions hereof and thereof by Wisdom, does not or will not, as the case may be, (a) violate any provision of Applicable Law or any Order applicable to Wisdom or any of its properties or assets or (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of Wisdom under any material Contract to which it is a party or by which Wisdom or its assets or properties are or may be bound or (c) conflict with or violate any provision of the Fundamental Documents of Wisdom currently in effect.

 

(e)           Approvals.

 

No Permit or Order, authorization, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the (i) execution, delivery or performance by Wisdom of each Document to which it is a party or (ii) sale of the Subject Wisdom Units.

 

(f)            Accounting.

 

Wisdom maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iii) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(g)           Private Offering.

 

Assuming the accuracy of the representations of Gaiam in Section 4.2 , the offering, sale, issuance and delivery by Wisdom of the Subject Wisdom Units are exempt from the registration and prospectus delivery requirements of the Securities Act and applicable state securities laws and the rules and regulations promulgated thereunder.  Neither Wisdom nor any Person acting on its behalf has offered or sold or will offer or sell any Securities of Wisdom, or has taken or will take any other action (including, without limitation, any offering of any Securities of Wisdom under circumstances that would require, under the Securities Act or any applicable blue-sky laws, the integration of such offering with the transactions contemplated by this Agreement), which would subject the transactions contemplated by this Agreement to the registration provisions of the Securities Act.

 

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(h)           Material Agreements.

 

(x)            Except as set forth on Schedule 5.1(h) , neither Wisdom nor any of its Subsidiaries is a party to (i) any notes, bonds, mortgages, indentures or (ii) other material written or oral Contracts, agreements, instruments and other understandings, in each case that would have been required to be described in a prospectus pursuant to the Securities Act (collectively, the “ Wisdom Material Agreements ”).

 

(y)           Each Material Agreement constitutes a valid and binding obligation of Wisdom and/or Subsidiary party thereto and is enforceable against such other party in accordance with its terms.  Each of Wisdom and the Subsidiaries have in all material respects performed all of the obligations required to be performed by each of them to date pursuant to the Material Agreements, and there exists no default, or any event which upon the giving of notice or the passage of time, or both, would give rise to a claim of a default in the performance by Wisdom or any of the Subsidiaries or, to the Knowledge of Wisdom, any other party to any of the Material Agreements, except where such default or event, individually or in the aggregate, has not had nor could it reasonably be expected to have a Material Adverse Effect.

 

(i)            Absence of Undisclosed Liabilities.

 

Except as set forth on Schedule 5.1(i) , neither Wisdom nor any of its Subsidiaries has any Liability required to be disclosed in the consolidated financial statements for Wisdom and its Subsidiaries as at June 30, 2005 that was not disclosed therein, other than Liabilities incurred in the ordinary course of business consistent with past practice since March 17, 2005 (none of which results from, arises out of, relates to, or was caused by, any breach of contract, breach of warranty, tort, infringement or violation of Applicable Law where such breach or event, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect).

 

(j)            Compliance with Laws.

 

Neither Wisdom nor any Subsidiary is in violation of, and to the Knowledge of Wisdom none is under investigation by a Governmental Authority with respect to or has been threatened to be charged with or given notice of any violation of, any Applicable Law (including Sarbanes-Oxley), except violations that have not had, and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Wisdom and the Subsidiaries taken as a whole.

 

(k)           Taxes.

 

(i)            All Tax returns required to be filed by Wisdom and each of its Subsidiaries has been accurately prepared and timely filed in all material respects, and all Taxes for which Wisdom or any of its Subsidiaries may be held liable (other than the Taxes referred to in the next sentence), have been paid or accrued within the prescribed period or any extension thereof.  All Taxes required to be withheld by Wisdom or any of its Subsidiaries, including but not limited to, Taxes arising as a result of payments or distributions (or amounts allocable) to foreign Persons or to employees of Wisdom or any

 

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of its Subsidiaries, have been collected and withheld, and have been either paid to the respective Governmental Authorities, set aside in accounts for such purpose, or accrued, reserved against, and entered upon the books and records of the employer.

 

(ii)           Wisdom qualifies (and has since the date of its formation qualified), and will qualify immediately after the Closing Date, to be treated as a partnership for Federal income Tax purposes, and neither Wisdom nor any member of Wisdom has taken a position or filed any election inconsistent with such treatment, and no Taxing authority has taken a position inconsistent with such treatment.

 

(iii)          Neither Wisdom nor any of its Subsidiaries has been notified that either the Internal Revenue Service or any other Taxing authority has raised any issues, or has an intent to raise such issues, in connection with any Taxes or Tax return of Wisdom or any of its Subsidiaries, which issues, if adversely determined, would be reasonably likely to have a Material Adverse Effect.

 

(l)            Intellectual Property Rights.

 

Wisdom has sufficient title or ownership of, or rights by license or other agreement to all of the Intellectual Property Rights necessary for, or used in, the conduct of its business as presently conducted and as presently proposed to be conducted.  Such Intellectual Property Rights are not subject to any Lien or any rights of others, however evidenced or created which could reasonably be expected to have a Material Adverse Effect on Wisdom or its operations.

 

(m)          Litigation Proceedings.

 

Except as set forth on Schedule 5.1(m) , there are no Proceedings pending or, to the Knowledge of Wisdom, threatened against or involving Wisdom or any of the Subsidiaries, whether at law or in equity, whether civil or criminal in nature or by or before any Governmental Authority, which if adversely determined could individually or in the aggregate have a Material Adverse Effect on Wisdom and its Subsidiaries taken as a whole, nor to the Knowledge of Wisdom does there exist any reasonable basis therefore.

 

(n)           Insurance.

 

Each of Wisdom and the Subsidiaries carries insurance in such amounts and covering such risks as is adequate for the conduct of Wisdom’s business and the value of its properties.

 

(o)           Investment Company.

 

Neither Wisdom nor any of its Subsidiaries is an “investment company” within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the Commission thereunder require to register as an investment company.

 

(p)           Brokers.

 

In connection with the transactions contemplated by this Agreement, none of Wisdom, any of Wisdom’s Subsidiaries or any of their respective officers, directors, stockholders or

 

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employees (or any Affiliate of the foregoing) has employed any broker or finder or incurred any actual or potential Liability or obligation, whether direct or indirect, for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement which would be payable by Gaiam.

 

(q)           Certificates of Officers.

 

Any certificate signed by any officer or Wisdom and delivered to Gaiam will be deemed a representation and warranty by Wisdom to Gaiam as to the matters covered thereby.

 

5.2          Representations and Warranties in connection with Purchases of Subject Gaiam Shares .

 

Revolution Living hereby represents and warrants to Gaiam, as of the date hereof and as of the Closing Date, as follows:

 

(a)           Authorization of the Documents.

 

Revolution Living has the requisite power and authority (corporate or otherwise) to execute, deliver and perform the Documents to which it is a party and the transactions contemplated thereby, and the execution, delivery and performance by Revolution Living of the Documents to which it is a party have been duly authorized by all requisite action by Revolution Living and each such Document, when executed and delivered by Revolution Living, constitutes a legal, valid and binding obligation of Revolution Living, enforceable against Revolution Living in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar Applicable Laws affecting creditors’ rights and remedies generally, and subject, in the case of enforceability, to general principles of equity (regardless of whether enforcement is sought in a Proceeding at law or in equity).

 

(b)           Investment Representations.

 

(i)            The Subject Gaiam Shares are being acquired for Revolution Living’s own account, for investment and not with a view to the distribution thereof in violation of the Securities Act or applicable foreign or state securities laws.

 

(ii)           Revolution Living understands that (i) the Subject Gaiam Shares have not been, and will not be, registered under the Securities Act or applicable foreign or state securities laws, by reason of their issuance by Gaiam in a transaction exempt from the registration requirements of the Securities Act and applicable foreign and state securities laws and (ii) the Subject Gaiam Shares must be held by Revolution Living indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable foreign and state securities laws or is exempt from registration thereof

 

(iii)          Revolution Living is aware of the provisions of Rule 144 promulgated under the Securities Act that permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions.  The Subject Gaiam Securities will bear a legend reflecting these conditions on transferability thereof and stop transfer instructions will be given to Gaiam’s transfer agent accordingly.

 

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(iv)          Revolution Living is an “accredited investor” (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act).

 

(v)           Gaiam has made available to Revolution Living or its representatives information relating to Gaiam, its ownership and management and other information about Gaiam and all agreements, documents, records and books that Revolution Living has requested relating to an investment in the Subject Gaiam Shares which may be acquired by Revolution Living hereunder.  Revolution Living has reviewed the information provided by Gaiam and understands and accepts the risks associated with an investment in Gaiam, including the terms of this Agreement, and the risk that matters described in the information provided may not materialize.  Revolution Living has had an opportunity to ask questions of, and receive answers from a Person or Persons acting on behalf of Gaiam concerning the terms and conditions of this investment, and answers have been provided to all of such questions to the full satisfaction of Revolution Living.  Revolution Living has such knowledge and experience in financial and business matters that it is capable of evaluating the risks and merits of this investment and to suffer a complete loss of its investment.

 

(vi)          Revolution Living is able to bear the economic risk of its investment in the Subject Gaiam Shares and the complete loss of all of such investment.

 

(vii)         Revolution Living is able to fend for itself in the transactions contemplated by this Agreement, can bear the economic risk of investment in the Subject Gaiam Shares and has such knowledge and experience in financial or business matters to be capable of evaluating the merits and risks of the investment in the Subject Gaiam Shares.  Revolution Living is fully aware of the speculative nature of the investment in the Subject Gaiam Shares and the financial risk involved.  Revolution Living has consulted with its professional, tax and legal advisors with respect to the federal, state, local and foreign income tax consequences of the undersigned’s investment in Gaiam. thereto.

 

(viii)        Revolution Living has not employed or otherwise retained any broker or finder in connection with the transactions contemplated by this Agreement

 

(ix)           Revolution Living is not purchasing the Subject Gaiam Securities as a result of any advertisement, article, notice or other communication regarding the Subject Gaiam Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(x)            Neither Gaiam nor any other Person will have or be subject to any liability or indemnification obligation to Revolution Living or any other Person resulting from the distribution to Revolution Living, or Revolution Living’s use of, any information provided to Gaiam, including without limitation, the information described in clause (v), related to the business of Gaiam and any information, projections, documents or material made available to Revolution Living, whether orally or in writing, or in any other form in expectation or furtherance of the transactions contemplated by this Agreement, except

 

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Gaiam to the extent that a representation or warranty in this Agreement made by Gaiam specifically identifies and addresses such information.

 

(xi)           Except for the representations and warranties contained in this Agreement, Revolution Living acknowledges that none of Gaiam, its Affiliates and any other Person makes any other express or implied representation or warranty with respect to (i) the Subject Gaiam Shares, including without limitation the probable success or profitability of ownership of Subject Gaiam Shares, (ii) Gaiam, including without limitation, the operation of its business by its officers, directors, managers, employees, or shareholder, (iii) the business, assets, performance (whether historical, present or future) of Gaiam, including without limitation the probable success or profitability of Gaiam or (iv) otherwise with respect to any other information provided to Revolution Living or other Persons, whether on behalf of Gaiam or such other Persons.

 

(c)           No Conflicts.

 

The execution, delivery and performance by Revolution Living of this Agreement and each of the other Documents and the consummation of the transactions contemplated hereby and thereby, and compliance with the provisions hereof and thereof by Revolution Living, does not or will not, as the case may be, (a) violate any provision of Applicable Law or any Order applicable to Revolution Living or any of its properties or assets or (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of Revolution Living under any material Contract to which it is a party or by which Revolution Living or its assets or properties are or may be bound or (c) conflict with or violate any provision of the Fundamental Documents of Revolution Living currently in effect.

 

(d)           Approvals.

 

No Permit or Order, authorization, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the (i) execution, delivery or performance by Revolution Living of each Document to which it is a party or (ii) sale of the Subject Wisdom Units to Gaiam.

 

(e)           No Short Position.

 

Neither Revolution nor any of its Affiliates has an open short position in the Class A Common Stock, and Revolution agrees that it will not, and that it will cause its Affiliates not to, engage in any short sales of, or hedging transactions with respect to the Class A Common Stock.

 

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ARTICLE VI
ADDITIONAL COVENANTS

 

6.1                                Advice of Changes; Filings .

 

To the extent requested by Revolution Living, Gaiam shall confer with Revolution Living on a regular and frequent basis as reasonably requested by Revolution Living, report on operational matters and promptly advise Revolution Living orally and, if requested by Revolution Living, in writing of any material change with respect to Gaiam or any Subsidiary.  Gaiam shall promptly provide to Revolution Living (and its counsel) copies of all filings made by Gaiam or any Subsidiary with any Governmental Authority (other than the Commission Filings) in connection with this Agreement and the transactions contemplated hereby.  This Section 6.1 shall terminate upon the earlier to occur of (i) the expiration of the Option (as defined in the Shareholders Agreement), and (ii) expiration of Revolution Living’s right to invoke the buy/sell procedures under Section 5.4 of the Shareholders Agreement.

 

6.2                                Reasonable Efforts; Notification .

 

Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agrees to use all commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Party in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including (i) ensuring that all conditions to the Closing set forth in this Agreement are satisfied as soon as reasonably practical, including executing and delivering all documents required to be delivered by such Party at any the Closing and taking any and all actions which may be necessary on its part to cause each other Party to the Documents to so execute and deliver each Document, (ii) the obtaining of all necessary actions or non-actions, waivers, consents and approvals from Governmental Authorities and the making of all necessary registrations and filings (including filings with Governmental Authorities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority, (iii) the obtaining of all necessary consents, approvals or waivers from third parties, (iv) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of any of the transactions contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed, and (v) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement.  In connection with and without limiting the foregoing, Gaiam and the Gaiam Board shall (x) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to this Agreement or any of other transactions contemplated by this Agreement and (y) if any state takeover statute or similar statute or regulation becomes applicable to any transaction contemplated by this Agreement, take all action not prohibited by such statute or regulation to ensure that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on this Agreement and the transactions contemplated by this

 

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Agreement.  Nothing in this Agreement shall be deemed to require Gaiam or Revolution Living to dispose of or hold separate any asset or collection of assets.

 

6.3                                NASD .

 

As soon as reasonably practical, Gaiam will file a listing application with the NASD with respect to the shares of Class A Common Stock being sold to Revolution Living pursuant to this Agreement.  Revolution Living agrees to reasonably cooperate and assist Gaiam, to the extent necessary, in the preparation of such listing application.

 

6.4                                Litigation Cooperation .

 

Should any third-party suit or Proceeding be instituted by or against Revolution Living in any manner relating to Gaiam, Gaiam shall, without expense to Revolution Living, make available Gaiam and its officers, employees and agents and Gaiam’s books and records, to the extent that Revolution Living may deem them reasonably necessary in order to prosecute or defend any such suit or Proceeding.  Should any third-party suit or Proceeding be instituted by or against Gaiam in any manner relating to Revolution Living or Wisdom, Revolution Living shall, without expense to Gaiam, make available Revolution Living and its officers, employees and agents and Revolution Living’s books and records, to the extent that Gaiam may deem them reasonably necessary in order to prosecute or defend any such suit or Proceeding.

 

6.5                                Performance of Documents; Inconsistent Agreements .

 

Each of the Parties will perform and observe all of the terms and provisions of each Document to be performed or observed by it, maintain each such Document in full force and effect, and enforce such Document in accordance with its terms. Neither Party will enter into any agreement containing any provision which could (a) be violated or breached by the exercise or performance by such Party of any of its respective rights or obligations under any Document, or (b) impair the ability of such Party to comply with the terms of the Documents.

 

6.6                                Disclosure of Transactions and Other Material Information .

 

Gaiam will file a current report of Form 8-K with the Commission describing the terms of the transactions contemplated by the Documents and including as exhibits to such Form 8-K the form of this Agreement, the Subject Gaiam Shares and the Shareholder Agreement, in the form required by the Exchange Act and within the time periods required by the Exchange Act.  Revolution Living shall file a Statement of Beneficial Ownership on Schedule 13D and a Form 3 along with such other filings as may be required by federal securities laws and the rules and regulations of the Commission, within the time periods required by such laws.

 

6.7                                Public Announcements .

 

(a)           Neither Party will make any written or other public disclosure regarding the other Party without the prior written consent of the other Party, except as may be required by Applicable Law or the rules and regulations of Nasdaq (including pursuant to Section 6.3) above) and, in such case, by first promptly notifying the other Party of such obligation and allowing the other Party to provide comment to any such disclosure prior thereto.

 

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(b)           Except as otherwise required by Applicable Law or by the rules of Nasdaq, so long as this Agreement is in effect, none of Gaiam (or any of its Subsidiaries),or Revolution Living (or any of its Subsidiaries), will issue or cause the publication of any press release or make any other public announcement with respect to the transactions contemplated by this Agreement without the consent of the other party, which consent will not be unreasonably withheld.  Gaiam and Revolution Living will cooperate with each other in the development and distribution of all press releases and other public announcements with respect to this Agreement and the transactions contemplated hereby, and will furnish the other with drafts of any such releases and announcements as far in advance as practicable.

 

(c)             This Section 6.7 shall terminate upon the earliest to occur of the expiration or exercise of the Option.

 

6.8                                Revolution Living Information Rights .

 

(a)           In the event Gaiam is no longer a reporting company under, and is no longer required to file periodic reports pursuant to, the Exchange Act, Gaiam will furnish Revolution Living with the following:

 

(i)            Quarterly Reports .  As soon as available, but not later than 45 days after the end of each quarter in each fiscal year (other than the last quarter in each fiscal year) of Gaiam, a consolidated balance sheet of Gaiam and the related consolidated statements of income, shareholders’ equity and cash flows, unaudited but prepared in accordance with GAAP consistently applied and certified by the President or the Chief Financial Officer of Gaiam, such consolidated balance sheet to be as of the end of such quarter and such consolidated statements of income, shareholders’ equity and cash flows to be for such quarter and for the period from the beginning of the fiscal year to the end of such quarter, in each case with comparative statements for the prior fiscal year.

 

(ii)           Annual Audit .  As soon as available, but not later than 90 days after the end of each fiscal year of Gaiam, audited consolidated financial statements of Gaiam, which will include a consolidated statement of cash flows and statement of operations for such fiscal year and a consolidated balance sheet as at the last day thereof, each prepared in accordance with GAAP consistently applied (except as set forth in the notes thereto), and accompanied by the report of a firm of independent certified public accountants selected by the Gaiam Board (the “ Gaiam Accountants ”).  Gaiam will maintain a system of accounting sufficient to enable the Gaiam Accountants to render the report referred to in this clause.

 

(iii)          Annual Operating Plan .  Within 60 days after the beginning of each fiscal year of Gaiam, an annual operating plan, including a qualitative summary by the President of Gaiam and an updated consolidated budget, projected income statements, balance sheets and cash flow statements (setting forth in detail the assumptions therefor) on a monthly basis for Gaiam and its Subsidiaries for such fiscal year of Gaiam.

 

(iv)          GAAP Reporting .  The financial statements and reports delivered under this subsection will fairly present in all material respects the financial position and results

 

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of operations of Gaiam at the dates thereof and for the periods then ended and will have been prepared in accordance with GAAP, in the case of unaudited financial statements, subject to normal year-end audit adjustments and the absence of footnotes.

 

(b)           Access to Records and Properties .  Gaiam will afford Revolution Living, during normal business hours and with reasonable advance notice, reasonable access to (i) visit and inspect the assets, properties and information (financial or otherwise) of Gaiam, (ii) examine upon reasonable advance notice, the books of accounts and records of Gaiam and (iii) make copies of such records and permit Revolution Living to discuss all aspects of Gaiam and each Subsidiary with any officers, employees of Gaiam and with the Gaiam Accountants, in each case consistent with the highest level of access to information and inspection rights granted by Gaiam to other shareholders; provided , however , that such investigation will not unreasonably interfere with the operations of Gaiam.  Gaiam will instruct the Gaiam Accountants to discuss such aspects of the financial condition of Gaiam with Revolution Living as Revolution Living may reasonably request, and to permit Revolution Living to inspect, copy and make extracts from such financial statements, analyses, work papers and other documents and information (including electronically stored documents and information) prepared by the Gaiam Accountants with respect to Gaiam as Revolution Living may reasonably request.  Revolution Living acknowledges that any information obtained from Gaiam or its officers and employees may be material undisclosed information under federal and state securities laws, and that Revolution Living agrees to hold all such information confidential and not trade on the basis of any material undisclosed information obtained from Gaiam or its officers and employees.

 

(c)           Termination .  This Section 6.8 shall terminate upon Revolution Living and its permitted transferees beneficially owning in the aggregate fewer than five percent (5%) of the Fully-Diluted Capital Stock.

 

6.9                                Nonsolicitation .

 

From and after the Closing Date, neither Wisdom nor Gaiam will, and neither will permits its controlled Subsidiaries to:  (i) except as otherwise provided below, solicit any material business customers of the other Party (directly or indirectly) for the express purpose of diverting existing business of such customers; (ii) solicit any content providers or licensors of the other Party (directly or indirectly) for the express purpose of causing, inviting or encouraging any such content provider to alter or terminate his, her or its business relationship with the other Party; or (iii) hire or solicit any employees of the other Party (directly or indirectly) for the purpose of causing, inviting or encouraging any such employee to alter or terminate his, her or its employment relationship with the other Party; provided , that it shall not be a violation of this provision to conduct general solicitations of employment at a career fair or similar conference for employers or in a journal, newspaper or other publication of general circulation or in trade publications or other similar media.  Each Party shall notify the other, from time to time, of the business customers, licensors and content providers it believes to be covered by the terms of this Section.  Notwithstanding clause (i) above, it shall not be a violation of this Section 6.9 to solicit any cable television multi-system operator (MSO), internet portal or service, wireless service or equipment provider, satellite service or consumer equipment provider, or other aggregator or distributor of (x) video on demand (VOD), (y) video over internet protocol (VoIP) or (z) similar mechanism or media to distribute content produced, controlled, or licensed by a Party or to

 

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engage in activities contemplated by the Cooperation Agreement.  If, at any time, either Wisdom or Gaiam, as the case may be (the “ Breaching Party ”), is in breach of its obligations to the other party (the “ Nonbreaching Party ”) under the Cooperation Agreement, the Nonbreaching Party shall be relieved of its obligations under this Section 6.9 until such breach is cured by the Breaching Party and the Breaching Party is no longer in default of its obligations under the Cooperation Agreement.  This Section 6.9 shall terminate upon termination of the Cooperation Agreement.

 

ARTICLE VII
CONDITIONS TO CLOSING

 

7.1                                Conditions to Revolution Living’s Obligations .

 

The obligation of Revolution Living to consummate the applicable Closing is subject to the satisfaction of the following conditions precedent (unless waived by Revolution Living):

 

(a)           Gaiam shall have performed its obligations under, and shall have complied with, all the covenants and agreements set forth in this Agreement in all material respects, and all representations and warranties contained in Article IV shall be true and correct in all material respects (except those representations and warranties that are qualified as to materiality, which shall be true and correct in all respects) as of the Closing Date (except for those representations and warranties which are made as of a specific date, which shall have been true and correct as of such date).

 

(b)           Gaiam and Rysavy each shall have duly executed and delivered to Revolution Living each of the Documents to which Gaiam and/or Rysavy, as the case may be, is to be a party, and such Documents shall be in full force and effect and be binding against Gaiam and/or Rysavy, as the case may be, as of the Closing.

 

(c)           No Applicable Law shall have been enacted after the date hereof and no Proceeding shall be pending which prohibits or seeks to prohibit, or materially restricts or delays the consummation of the transactions contemplated by the Documents or materially restricts or impairs the ability of Revolution Living to own Securities of Gaiam.

 

(d)           There shall be no Proceeding pending or threatened by the NASD to terminate the NASD’s quotation of the Common Stock on the Nasdaq.

 

(e)           Gaiam shall have made and/or obtained all notices, consents, approvals, and authorizations necessary to consummate the transactions contemplated hereby, including without limitation all applicable filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

(f)            Gaiam shall have in effect director and officer liability insurance with coverage of at least $10,000,000 from a nationally recognized insurance company rated “A” or above, and otherwise in form and substance reasonably satisfactory to Revolution Living.

 

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7.2                                Conditions to Gaiam’s Obligations .

 

The obligation of Gaiam to consummate the applicable Closing is subject to the satisfaction of the following conditions precedent (unless waived by Gaiam):

 

(a)           Each of Revolution Living and Wisdom shall have performed its obligations under, and shall have complied with, all the covenants and agreements set forth in this Agreement in all material respects, and all representations and warranties contained in Article V shall be true and correct in all material respects (except those representations and warranties that are qualified as to materiality, which shall be true and correct in all respects) as of the Closing Date (except for those representations and warranties which are made as of a specific date, which shall have been true and correct as of such date).

 

(b)           Revolution Living and Case each shall have duly executed and delivered to Gaiam each of the Documents to which Revolution Living and/or Case, as the case may be, is to be a party, and such Documents shall be in full force and effect and be binding against Revolution Living and/or Case, as the case may be, as of the Closing.

 

(c)           No Applicable Law shall have been enacted after the date hereof and no Proceeding shall be pending which prohibits or seeks to prohibit, or materially restricts or delays the consummation of the transactions contemplated by the Documents or materially restricts or impairs the ability of Gaiam to own Securities of Wisdom.

 

(d)           Revolution Living shall have made and/or obtained all notices, consents, approvals, and authorizations necessary to consummate the transactions contemplated hereby, including without limitation all applicable filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

(e)           Any requisite consent of investors in Wisdom (other than Revolution Living) to the terms of this Agreement and the other Documents shall have been obtained.

 

(f)            The requisite members of Wisdom will have executed and delivered the Wisdom LLC Agreement.

 

ARTICLE VIII
ISSUANCES AND TRANSFER OF SECURITIES

 

8.1                                Restrictive Legends .

 

Each certificate evidencing the Subject Gaiam Shares or the Subject Wisdom Units, and each certificate for any such securities issued to subsequent transferees of any such certificate, will (unless otherwise permitted by the Shareholders Agreement) be stamped or otherwise imprinted with a legend in substantially the following form:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS.  THESE

 

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SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED OR PLEDGED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS, OR IF THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR REGISTRATION OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.  THESE SECURITIES ARE SUBJECT TO THE TERMS AND PROVISIONS OF THE TRANSACTION AGREEMENT, DATED AS OF AUGUST 4, 2005, AS AMENDED FROM TIME TO TIME, AND THE HOLDER OF THIS CERTIFICATE IS ENTITLED TO THE BENEFITS THEREOF.  COPIES OF SUCH AGREEMENTS MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER HEREOF.”

 

8.2                                Removal of Legend .

 

Each certificate or other instrument evidencing the securities issued upon the transfer of any Subject Gaiam Shares or Subject Wisdom Units, as the case may be (and each certificate or other instrument evidencing any untransferred balance of such Securities) will bear the legend set forth in Section 8.1 hereof unless (i) in the opinion of counsel to the holder of such Securities registration of future transfer is not required by the applicable provisions of the Securities Act or (ii) Wisdom will have waived the requirement of such legends with respect to Subject Wisdom Units; provided , however , that such legend will not be required on any certificate or other instrument evidencing the securities issued upon such transfer in the event such transfer will be made in compliance with the requirements of Rule 144 (as amended from time to time) promulgated under the Securities Act (or successor rule thereto).

 

ARTICLE IX
TERMINATION

 

9.1                                Termination .

 

This Agreement may not be terminated (except by written agreement of all Parties hereto) after the Closing.  This Agreement may be terminated at any time prior to the Closing by:

 

(a)           the mutual written consent of each Party hereto; or

 

(b)           Revolution Living, if there has been a breach by Gaiam of any representation, warranty, covenant or agreement on the part of Gaiam contained in this Agreement which breach is material and which Gaiam fails to cure within five (5) Business Days after written notice thereof is given by Revolution Living (except no cure period will be provided for a breach which by its nature cannot be cured); or

 

(c)           Gaiam if there has been a breach by Revolution Living or Wisdom of any representation, warranty, covenant or agreement on the part of Revolution Living or Wisdom contained in this Agreement which breach is material and which Revolution Living or Wisdom

 

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fails to cure within five (5) Business Days after written notice thereof is given by Gaiam (except no cure period will be provided for a breach which by its nature cannot be cured); or

 

(d)           Revolution Living or Gaiam, if any permanent injunction or other Order of a Governmental Authority preventing the Closing will have become final and nonappealable; or

 

(e)           Revolution Living or Gaiam if the Closing does not occur on or prior to August 31, 2005;

 

provided , however , that neither Revolution Living or Gaiam will be entitled to terminate this Agreement pursuant to Section 9.1(b) , Section 9.1(c) or Section 9.1(e) if such Party’s fraud or breach of this Agreement (including Section 6.2 ) has prevented the satisfaction of a condition.

 

9.2                                Termination Procedures .

 

Any termination pursuant to Section 9.1(a) will be effected by a written instrument signed by Revolution Living and Gaiam, and any other termination pursuant to Section 9.1 will be effected by written notice from the Party or Parties so terminating to the other Party hereto, which notice will specify the Section of this Agreement pursuant to which this Agreement is being terminated.

 

9.3                                Effect of Termination .

 

In the event of the termination of this Agreement as provided in Section 9.1 , this Agreement will be of no further force or effect and there will be no liability or obligation on the part of Revolution Living or Gaiam or their respective officers, directors or Affiliates, except for this Section 9.3 , Sections 6.4 and 6.7 and Article X , each of which will survive the termination of this Agreement; provided , however , that the Liability of any Party for any breach by such party of the representations, warranties, covenants or agreements of such Party set forth in this Agreement occurring prior to the termination of this Agreement will survive the termination of this Agreement.

 

ARTICLE X
MISCELLANEOUS

 

10.1               Parties In Interest; Assignment .

 

This Agreement will bind and inure to the benefit of the Parties and their respective successors, assigns, heirs and personal representatives.  No Party may assign this Agreement or any of its rights, interests or obligations hereunder or thereunder without the prior written consent of the other Party; provided , however , that Revolution Living may assign any of its rights under this Agreement, or any other document or investment contemplated hereby to Case or any Affiliate, member or limited partner of Revolution Living controlled by Case.  Upon any transfer of any Subject Gaiam Shares, the transferee will be bound by, and entitled to the benefits of, this Agreement with respect to such transferred Securities in the same manner as the transferring Person.  Upon any transfer of any Subject Wisdom Units, the transferee will be

 

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bound by, and entitled to the benefits of, this Agreement with respect to such transferred Securities in the same manner as the transferring Person.

 

10.2               Entire Agreement .

 

This Agreement, each other Document and the other writings and agreements referred to herein or delivered pursuant hereto contain the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the Parties with respect thereto.

 

10.3               Notices .

 

All notices, demands and requests of any kind to be delivered to any party in connection with this Agreement (whether or not required to be delivered hereunder) will be in writing and will be deemed to have been duly given if personally delivered, if sent by facsimile or if sent by internationally-recognized overnight courier or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows:

 

(a)           if to Gaiam, to:

 

Gaiam, Inc.
360 Interlocken Blvd.
Broomfield, Colorado  80021
Attention:	Jirka Rysavy
Telephone:	303-222-3645
Telecopy:	303-222-3609

 

 

with a copy to:

 

Bartlit Beck Herman Palenchar & Scott LLP
1899 Wynkoop, Suite 800
Denver, Colorado 80202
Attention:	Thomas R. Stephens
Telephone:	303-592-3100
Telecopy:	303-592-3140

 

(b)           If to Revolution Living, to:

 

Revolution Living LLC
1717 Rhode Island Avenue, N.W.
Washington, D.C. 20036
Attention:	Ronald A. Klain
Telephone:	202-776-1405
Telecopy:	202-776-1499

 

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with a copy to:

 

O’Melveny & Myers LLP
1625 Eye Street, N.W.
Washington, D.C. 20006
Attention:	David G. Pommerening
Telephone:	202-383-5110
Telecopy:	202-383-5414

 

(c)           If to Wisdom, to:

 

Life Balance Media Holdings LLC
10 East 40 th Street, 26 th Floor
New York, NY 10016
Attention:	C.J. Kettler
Telephone:	212-497-8065
Telecopy:	212-213-0540

 

with a copy to:

 

O’Melveny & Myers LLP
1625 Eye Street, N.W.
Washington, D.C. 20006
Attention:	David G. Pommerening
Telephone:	202-383-5110
Telecopy:	202-383-5414

 

or to such other address as the Party to who notice is to be given may have furnished to the other Party hereto in writing in accordance with the provisions of this Section 10.3 .  Any such notice or communication will be deemed to have been received (i) in the case of personal delivery or delivery by facsimile, on the date of such delivery, (ii) in the case of internationally-recognized overnight courier, on the next Business Day after the date when sent and (iii) in the case of mailing, on the third Business Day following that on which the piece of mail containing such communication is posted.

 

10.4               Amendments .

 

This Agreement may not be modified or amended, or any of the provisions hereof waived, except by written agreement of the Parties.

 

10.5               Extension; Waiver .

 

The Parties may (a) extend the time for the performance of any of the obligations or other acts of the other Party, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement and (c) waive compliance with any of the agreements or conditions contained in this Agreement.  Any agreement on the part of a party to any such extension or waiver will be valid only if set forth in

 

S-37

 

an instrument in writing signed on behalf of such party, and any such waiver will not operate or be construed as a waiver of any subsequent breach by the other party.

 

10.6               Counterparts .

 

This Agreement may be executed in any number of original or facsimile counterparts, and each such counterpart hereof will be deemed to be an original instrument, but all such counterparts together will constitute but one agreement.  Facsimile counterpart signatures to this Agreement will be acceptable and binding.

 

10.7               Governing Law .

 

(a)           All questions concerning the construction, interpretation and validity of this Agreement will be governed by and construed and enforced in accordance with the domestic laws of the State of Colorado without giving effect to any choice or conflict of law provision or rule (whether in the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado.  In furtherance of the foregoing, the internal law of the State of Colorado will control the interpretation and construction of this Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily or necessarily apply.

 

(b)           BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.

 

10.8               No Third Party Reliance .

 

Anything contained herein to the contrary notwithstanding, the representations and warranties contained in this Agreement (a) are being given as an inducement to the other Party to enter into this Agreement and the other Documents (and each Party acknowledges that the other Party has expressly relied thereon) and (b) are solely for the benefit of the other Party.  Accordingly, no third party (including, without limitation, any holder of Securities of Gaiam, Revolution Living or Wisdom) or anyone acting on behalf of such third party (other than a Party) will be a beneficiary of such representations and warranties and no such third party will have any rights of contribution against any Party with respect to such representations or warranties or any matter subject to or resulting in indemnification under this Agreement or otherwise.

 

10.9               Submission to Jurisdiction .

 

Any Proceeding with respect to this Agreement may be brought in the courts of the State of Colorado and the United States of America for the District of Colorado and, by execution and

 

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delivery of this Agreement, each Party hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.  Each Party hereby irrevocably waives, in connection with any such action or Proceeding, any objection, including, without limitation, any objection to the venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action or Proceeding in such respective jurisdictions.  Each Party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such action or Proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address as set forth herein.  Nothing herein will affect the right of any Party to serve process in any other manner permitted by Applicable Law or to commence Proceedings or otherwise proceed against any other Party in any other jurisdiction.

 

10.10             Severability .

 

It is the desire and intent of the Parties that the provisions of this Agreement and the other Documents be enforced to the fullest extent permissible under the Applicable Law and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, in the event that any provision of this Agreement or the other Documents would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, will be ineffective, without invalidating the remaining provisions of this Agreement or such other Document or affecting the validity or enforceability of such provision in any jurisdiction.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or such other Document or affecting the validity or enforceability of such provision in any other jurisdiction.

 

10.11             Independence of Agreements .

 

All agreements and covenants hereunder will be given independent effect so that if a certain action or condition constitutes a default under a certain agreement or covenant, the fact that such action or condition is permitted by another agreement or covenant will not affect the occurrence of such default, unless expressly permitted under an exception to such covenant.  In addition, all representations and warranties hereunder will be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of or a breach of the representation and warranty first referred to in this sentence.

 

10.12             Further Assurances .

 

Each Party will duly execute and deliver, or cause to be duly executed and delivered, at its own cost and expense, such further instruments and documents and to take all such action, in each case as may be necessary or proper in the reasonable judgment of any other Party to carry out the provisions and purposes of the Agreement, the other Documents, and to comply with Applicable Law, including, but not limited to, all information necessary to effect any securities, governmental, bank regulatory or other governmental filings.

 

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10.13             Remedies .

 

In case any one or more of the representations, warranties, covenants and/or agreements set forth in this Agreement will have been breached by a Party, the other Party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Agreement.

 

 

*    *    *    *    *

 

IN WITNESS WHEREOF , each of the undersigned has duly executed this Transaction Agreement as of the date first written above.

 

		GAIAM :
			GAIAM, INC.
		By:
				Name:
				Title:
			REVOLUTION LIVING :
			REVOLUTION LIVING LLC
		By:
				Name:
				Title:
			WISDOM :
			LIFE BALANCE MEDIA HOLDINGS LLC
		By:
				Name:
				Title:

 

S-40

 

 

 

Exhibit 10.2

 

EXECUTION COPY

 

 

SHAREHOLDERS AGREEMENT

 

 

among

 

 

GAIAM, INC.,

 

 

JIRKA RYSAVY,

 

 

REVOLUTION LIVING LLC

 

 

and

 

 

STEPHEN M. CASE

 

 

Dated as of August 4, 2005

 

 

TABLE OF CONTENTS

 

ARTICLE I	DEFINITIONS; RULES OF CONSTRUCTION
1.1	Definitions
1.2	Rules of Construction
ARTICLE II	GOVERNANCE RIGHTS WITH RESPECT TO GAIAM
2.1	Election of Gaiam Board Members.
2.2	Board Meetings
2.3	Expenses
2.4	Committees
2.5	Shareholder Commitments
ARTICLE III	BOARD OF DIRECTORS OF WISDOM
3.1	Rights to Select Wisdom Board Members.
ARTICLE IV	TRANSFERS OF COMMON STOCK OF GAIAM
4.1	Standstill With Respect to Gaiam
4.2	Restrictions on Transfers of Securities of Gaiam
4.3	Rights To Subscribe For Securities
4.4	Revolution Living Option
ARTICLE V	ADDITIONAL AGREEMENTS
5.1	Inconsistent Agreements
5.2	Affirmative Covenants
5.3	Sale of Gaiam
5.4	Buy/Sell
5.5	Representations and Warranties of Rysavy and Case
5.6	Nondisparagement
ARTICLE VI	REGISTRATION RIGHTS
6.1	Required Registration
6.2	Piggyback Registration
6.3	Registrations on Form S-3
6.4	Preparation and Filing
6.5	Expenses
6.6	Indemnification
6.7	Underwriting Agreement
6.8	Suspension
6.9	Information by Holder
6.10	Exchange Act Compliance
6.11	No Conflict of Rights

 

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6.12	Transfer of Registration Rights
6.13	Termination
ARTICLE VII	MISCELLANEOUS
7.1	Amendment
7.2	Waivers; Extensions
7.3	Termination
7.4	Severability
7.5	Entire Agreement
7.6	Independence of Agreements, Covenants, Representations and Warranties
7.7	Successors and Assigns
7.8	Counterparts; Facsimile Signatures
7.9	Remedies
7.10	Notices
7.11	Governing Law; Waiver of Jury Trial.
7.12	Further Assurances
7.13	Conflicting Agreements
7.14	No Third Party Reliance

 

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This SHAREHOLDERS AGREEMENT is made as of August 4, 2005 among GAIAM, INC. , a Colorado corporation (“ Gaiam ”), JIRKA RYSAVY , an individual (“ Rysavy ”), REVOLUTION LIVING LLC , a Delaware limited liability company (the “ Revolution Living ”) and STEPHEN M. CASE , an individual (“ Case ”).  Gaiam, Rysavy, Revolution Living and Case are collectively referred to as the “Parties.”

 

WHEREAS , Gaiam desires to issue and sell to Revolution Living, and Revolution Living desires to purchase from Gaiam, shares of Gaiam’s Class A common stock, par value $0.0001 per share (“ Class A Common Stock ”), in such amounts, on such dates and otherwise on the terms and subject to the conditions set forth in a Transaction Agreement dated as of the date hereof (the “ Transaction Agreement ”) between Gaiam, Revolution Living and Life Balance Media Holdings LLC, a Delaware limited liability company (“ Wisdom ”);

 

WHEREAS , Wisdom desires to sell to Gaiam, and Gaiam desires to purchase from Wisdom units of a newly created class of preferred interests of Wisdom, in such amounts, on such dates and otherwise on the terms and subject to the conditions set forth in the Transaction Agreement and the Wisdom LLC Agreement (as defined in the Transaction Agreement); and

 

WHEREAS , as a condition of entering into the Transaction Agreement, Revolution Living, Case, Gaiam and Rysavy have agreed to certain provisions relating to the Class A Common Stock and certain other matters.

 

NOW, THEREFORE , in consideration of the mutual covenants and agreements contained in this Agreement, the sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

ARTICLE I

DEFINITIONS; RULES OF CONSTRUCTION

 

1.1          Definitions .

 

The following capitalized terms used in this Agreement have the meanings ascribed to them below:

 

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person.  Any relative or spouse (including any partner with whom such person resides on a permanent basis) of the specified Person, any relative of such spouse, any spouse of any such relative or any other Person who, directly or indirectly, is under common ownership or control with, or is owned or controlled by such spouse or relative shall be considered an Affiliate of such Person.  As used in this definition, the term “ control ” means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.  As used in this definition, the term “ relative ” means any former or current spouse, parent, grandparent, great-grandparent, great-great-grandparent, child, grandchild, great-grandchild, great-great-grandchild,

 

 

sibling, first uncle, first aunt or first cousin (in each case, whether natural or adoptive).  The parties agree that the term “Affiliate” as used with respect to Case and Revolution Living does not include (i) Time Warner Inc., (ii) any Affiliates of Time Warner Inc. or (iii) any member or investor in any Affiliate of Revolution Living; provided that, absent such relationship as a member or investor in any Affiliates of Revolution Living, such member or investor is not an Affiliate of Case or Revolution Living.

 

“ Agreement ” means this Agreement together with all schedules and exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof.

 

“ Applicable Tag Percentage ” has the meaning given it in Section 4.2(d)(ii) .

 

“ Approved Sale ” has the meaning given to it in Section 5.3 .

 

“ Bylaws ” means the Bylaws of Gaiam, as amended, modified, supplemented or restated and in effect from time to time.

 

“ Buy/Sell Notice ” has the meaning given to it in Section 5.4(a) .

 

“ Buy/Sell Price ” has the meaning given to it in Section 5.4(a) .

 

“ Case ” has the meaning given in the Preamble.

 

“ Class A Common Stock ” has the meaning given it in the Recitals.

 

“ Class B Common Stock ” means Gaiam’s Class B Common Stock, par value $0.0001 per share.

 

“ Common Stock ” means the Class A Common Stock and the Class B Common Stock.

 

“ Common Stock Equivalents ” means all shares of Common Stock outstanding and all shares of Common Stock issuable (without regard to any present restrictions on such issuance) upon the conversion, exchange or exercise of all Securities of Gaiam that are convertible, exchangeable or exercisable for Common Stock.

 

“ Company Notice ” has the meaning given to it in Section 4.3(a) .

 

“ Document(s) ” means, individually or collectively, this Agreement, the Transaction Agreement, the Cooperation Agreement (as defined in the Transaction Agreement), the Wisdom LLC Agreement (as defined in the Transaction Agreement) and all other documents executed in connection with the transactions contemplated by this Agreement.

 

“ Equity Incentive Plan ” means Gaiam’s 1999 Long-Term Incentive Plan and Gaiam’s Employee Stock Purchase Plan, each as amended from time to time.

 

“ Fully-Diluted Capital Stock ” means, as of any date, without duplication, (i) the total number of shares of Common Stock outstanding on such date, plus (ii) the total number of

 

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outstanding options, warrants and other equity-linked securities that are exercisable into Common Stock on or after such date, plus (iii) the total number of shares of Common Stock reserved for issuance pursuant to obligations of Gaiam to issue shares of Common Stock, other than pursuant to obligations of Gaiam to issue shares of Common Stock under the Transaction Agreement after such date.

 

 “ GAAP ” means generally accepted accounting principles in the United States, as in effect from time to time, consistently applied.

 

“ Gaiam ” has the meaning given to it in the Preamble.

 

“ Gaiam Appointees ” has the meaning given to it in Section 3.1(a) .

 

“ Gaiam Board ” means the board of directors of Gaiam.  To the extent any decision or other action in connection with this Agreement is taken by the Gaiam Board and such decision or action relates solely to a decision or other action in which Revolution Living or any of its Affiliates has any interest (other than indirectly through its or their ownership of Common Stock of Gaiam), then such decision or other action shall be made or taken by directors of Gaiam who are not nominees of, or otherwise affiliated or associated with, Revolution Living.  To the extent any decision or other action in connection with this Agreement is taken by the Gaiam Board and such decision or action relates solely to a decision or other action in which Rysavy or any of its Affiliates has any interest (other than indirectly through his or their ownership of Common Stock of Gaiam), then such decision or other action shall be made or taken by directors of Gaiam who are not nominees of, or otherwise affiliated or associated with, Rysavy.

 

“ Governmental Authority ” means any domestic or foreign government or political subdivision thereof, whether on a Federal, state or local level and whether executive, legislative or judicial in nature, including any agency, authority, board, bureau, commission, court, department or other instrumentality thereof.

 

“ Holder Securities ” has the meaning given to it in Section 4.2(a) .

 

“ Information ” has the meaning given to it in Section 6.4(a)(ix) .

 

“ Inspectors ” has the meaning given to it in Section 6.4(a)(ix) .

 

“ Lien ” means any security interest, pledge, lien, claim, proxy, bailment (in the nature of a pledge or for purposes of security), mortgage, deed of trust, the grant of a power to confess judgment, conditional sale or title retention agreement (including any lease in the nature thereof), charge, encumbrance, easement, reservation, restriction, cloud, right of first refusal or first offer, option, commitment or other similar arrangement or interest in real or personal property, whether oral or written.

 

“ Material Transaction ” means any material transaction in which Gaiam or any of its Subsidiaries proposes to engage or is engaged, including a purchase or sale of assets or securities, financing, merger, consolidation, tender offer or any other transaction that would require disclosure pursuant to the Exchange Act, and with respect to which the Gaiam Board has determined in good faith that compliance with this Agreement may reasonably be expected to

 

3

 

either materially interfere with the Gaiam’s or such Subsidiary’s ability to consummate such transaction in a timely fashion or require Gaiam to disclose material, non-public information prior to such time as it would otherwise be required to be disclosed.

 

“ NASD ” has the meaning given to it in Section 6.4(a)(xiv) .

 

“ NMS ” has the meaning given to it in Section 6.4(a)(xiv) .

 

“ Offered Securities ” has the meaning given to it in Section 4.3(a) .

 

“ Option ” has the meaning given to it in Section 4.4(a) .

 

“ Orders ” means judgments, writs, decrees, injunctions, orders, compliance agreements or settlement agreements of or with any Governmental Authority or arbitrator.

 

“ Other Shares ” means at any time those shares of Common Stock that do not constitute Primary Shares or Registrable Shares.

 

“ Permits ” means licenses, certificates and permits from Governmental Authorities.

 

“ Permitted Transferee ” means (i) with respect to Rysavy:  any Affiliate of Rysavy, Revolution Living and any Affiliate of Revolution Living, (ii) with respect to Revolution Living:   Case and any Affiliate of Revolution Living and (iii) with respect to Rysavy, Revolution Living and any of their Affiliates:  any financial institution to which a Party has pledged his or its Holder Securities as security and collateral (including if the financial institution exercises its rights under the pledge agreement to obtain the Holder Securities); provided that (x) with respect to Rysavy and his Permitted Transferees, any such Person acquiring Class B Common Stock is entitled to hold Class B Common Stock following the transfer in accordance with the Restated Articles as in effect as of the date hereof (i.e., the Class B Common Stock would not convert into Class A Common Stock), and (y) in each such case other than a Permitted Transferee under clause (iii), such Person complies with Section 7.7(b) .  For the avoidance of doubt, no Person who is a Permitted Transferee under clause (iii) above shall be obligated to be bound by this Agreement or any other Document and any such Permitted Transferee shall, if such Person becomes a shareholder of Gaiam, hold all shares Transferred to such Person as a Permitted Transferee hereunder free and clear of any restrictions under this Agreement, except for restrictions arising under the securities laws.

 

“ Person ” will be construed in the broadest sense and will include an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, and any other entity, including a Governmental Authority.

 

“ Potential Transaction ” has the meaning given to it in Section 4.4(c) .

 

“ Preemptive Offer Acceptance Notice ” has the meaning given to it in Section 4.3(b) .

 

“ Preemptive Offer Period ” has the meaning given to it in Section 4.3(b) .

 

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“ Primary Shares ” means, at any time, the authorized but unissued shares of Common Stock or Common Stock held by Gaiam in its treasury.

 

“ Proposed New Investor ” has the meaning given to it in Section 4.3(a) .

 

“ Prospectus ” means the prospectus included in a Registration Statement, including any prospectus subject to completion, and any such prospectus as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Shares and, in each case, by all other amendments and supplements to such prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein.

 

“ Proxy Shares ” has the meaning given to it in Section 2.5(b)(i) .

 

“ Public Offering ” means the closing of a public offering of Class A Common Stock solely for cash pursuant to a Registration Statement declared effective under the Securities Act, except that a Public Offering shall not include an offering of securities to be issued as consideration in connection with a business acquisition pursuant to Rule 145 of the Securities Act,  an offering of securities issuable pursuant to an Equity Incentive Plan, a registration in which the only stock being registered is Class A Common Stock issuable upon conversion of preferred stock or debt securities which are also being registered or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities hereunder.

 

“ Public Sale ” means any sale, occurring simultaneously with or after a Public Offering, of Securities to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker (pursuant to the provisions of Rule 144 or otherwise).

 

“ Records ” has the meaning given to it in Section 6.4(a)(ix) .

 

“ Redemption Agreement ” has the meaning given to it in Section 4.4(d) .

 

“ Registrable Shares ” means, at any time, (a) Class A Common Stock held, or hereafter acquired, by Revolution Living and its permitted assigns and (b) any Class A Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above-described securities.  Notwithstanding the foregoing, Registrable Shares shall not include any Securities sold by a Person to the public pursuant to a Registration Statement which has been declared effective or Rule 144, or sold in a private transaction in which the Transferor’s rights under Article VI of this Agreement are not assigned, in each case where the restrictive legends and transfer restrictions with respect to Class A Common Stock are removed and the Class A Common Stock in the hands of the purchaser is freely transferable without any restriction or registration under the Securities Act in any public or private transaction.

 

“ Registration Statement ” means any registration statement of Gaiam which covers any of the Registrable Shares, and all amendments and supplements to any such Registration Statement,

 

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including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

 

“ Remaining Securities ” has the meaning given to it in Section 4.3(c) .

 

“ Representative ” of a Person shall be construed broadly and shall include such Person’s partners, officers, directors, employees, agents, counsel, accountants and other representatives.

 

“ Restated Articles ” means the Amended and Restated Articles of Incorporation of Gaiam, Inc., as amended and in effect at the time of determination, including any certificates of designations filed with the Secretary of State of the State of Colorado pursuant to the terms thereof.

 

“ Restricted Holder ” has the meaning given to it in Section 4.1 .

 

“ Revolution Living ” has the meaning given to it in the Preamble.

 

“ Revolution Living Director ” has the meaning given to it in Section 2.1(b) .

 

“ Revolution Living’s Counsel ” has the meaning given to it in Section 6.4(a)(ii) .

 

“ Rule 144 ” means Rule 144 (including Rule 144(k) and all other subdivisions thereof) promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any similar or successor rule then in force.

 

“ Rysavy ” has the meaning given in the Preamble.

 

“ Sale of the Company ” means (i) any sale of all or substantially all of the assets of Gaiam and its Subsidiaries taken as a whole or (ii) any plan of reorganization, recapitalization, merger or consolidation involving Gaiam, except for a reorganization, recapitalization, merger or consolidation where the holders of the combined voting power and economics represented by the Common Stock immediately prior to such reorganization, recapitalization, merger or consolidation own directly or indirectly at least 50% of the combined voting power and economics of the outstanding voting securities of the company resulting from such reorganization, recapitalization, merger or consolidation.

 

“ Section 2.1 Notice ” has the meaning given to it in Section 2.1(d) .

 

“ Securities ” means, with respect to any Person, such Person’s “securities” as defined in Section 2(1) of the Securities Act and includes such Person’s capital stock or other equity interests or any options, warrants or other securities or rights that are directly or indirectly convertible into, or exercisable or exchangeable for, such Person’s capital stock or other equity interests.

 

“ Standstill Period ” has the meaning given to it in Section 4.1 .

 

“ Stock ” means the Common Stock and any and all other capital stock or other equity Securities (including, without limitation, derivative Securities therefor) of Gaiam.

 

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“ Subsidiary ” means, at any time, with respect to any Person (the “ Subject Person ”), any Person of which either (x) more than 50% of the Securities entitled to vote in the election of directors or comparable Persons performing similar functions (excluding Securities entitled to vote only upon the failure to pay dividends thereon or other contingencies) or (y) more than a 50% interest in the profits or capital of such Person, are at the time owned or controlled directly or indirectly by the Subject Person or through one or more Subsidiaries of the Subject Person.

 

“ Suspension Period ” has the meaning given to it in Section 6.8 .

 

“ Swap Transaction ” means, with respect to Holder Securities or other securities, any swap, participation or other arrangement that transfers to another Person, in whole or in part, any of the economic consequences of ownership thereof.

 

“ Tag-Along Right ” has the meaning given to it in Section 4.2(d)(ii) .

 

“ Tag-Along Sale ” has the meaning given to it in Section 4.2(d)(i) .

 

“ Transaction Agreement ” has the meaning given to it in the Recitals.

 

“ Transfer ” of Securities shall be construed broadly and shall include any issuance, sale, assignment, transfer, participation, gift, bequest, distribution, or other disposition thereof, or any pledge or hypothecation thereof, placement of a Lien thereon or grant of a security interest therein or other encumbrance thereon, in each case whether voluntary or involuntary or by operation of law or otherwise.

 

“ Transferor ” means a Person engaging in a Transfer of Securities, and “ Transferee ” means a Person acquiring Securities through a Transfer.

 

“ Transfer Consent ” has the meaning given to it in Section 4.2(a) .

 

“ Transfer Notice ” has the meaning given to it in Section 4.2(d)(i) .

 

“ Trigger Date ” has the meaning given to it in Section 5.4 .

 

“ Wisdom ” has the meaning given to it in the Recitals.

 

“ Wisdom Board ” means the board of directors of Wisdom.

 

1.2          Rules of Construction .

 

The term this “ Agreement ” means this agreement together with all schedules and exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof.  The use in this Agreement of the term “including” means “including, without limitation.”  The words “ herein ,” “ hereof ,” “ hereunder ” and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular section, subsection, paragraph, subparagraph or clause contained in this Agreement.  All references to sections, schedules and exhibits mean the sections of this Agreement and the

 

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schedules and exhibits attached to this Agreement, except where otherwise stated.  The title of and the headings of the sections and paragraphs in this Agreement are for convenience of reference only and shall not govern or affect the interpretation of any of the terms or provisions of this Agreement.  The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require or permit.  Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.  The language used in this Agreement has been chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.  Unless expressly provided otherwise, the measure of a period of one month or year for purposes of this Agreement shall be that date of the following month or year corresponding to the starting date, provided that if no corresponding date exists, the measure shall be that date of the following month or year corresponding to the next day following the starting date.  For example, one month following February 18 is March 18, and one month following March 31 is May 1.

 

ARTICLE II

GOVERNANCE RIGHTS WITH RESPECT TO GAIAM

 

2.1          Election of Gaiam Board Members.

 

(a)           Size of Board .  On the date of the Closing (as such term is defined in the Transaction Agreement), the number of directors constituting the Gaiam Board, as fixed from time to time by the Gaiam Board in accordance with the Bylaws, shall have been increased from seven (7) to nine (9), an increase of two directors.  Thereafter, the size of the Gaiam Board will be increased or decreased only in a manner consistent with the terms of this Agreement.

 

(b)           Directors from and after Closing .  As soon as practicable after Revolution Living notifies Gaiam of its designees as provided below, the Gaiam Board will fill the vacancy created by increasing the size of the board to nine (9) with (i) an individual designated by Revolution Living (a “ Revolution Living Director ”), who shall not be an officer, director or employee of Revolution Living and (ii) an independent director designated after consultation with Revolution Living.  Revolution Living shall consult with Rysavy in advance of making the appointment of the Revolution Living Director.  From and after the Closing, at each annual meeting of the holders of any class of Stock, and at each special meeting of the holders of any class of Stock called for the purpose of electing directors of Gaiam, and at any time at which holders of any class of Stock shall have the right to, or shall, vote for or consent in writing to the election of directors of Gaiam, then, and in each such event, Rysavy shall vote all of the shares of Stock owned by him and his Affiliates for, or consent in writing with respect to such shares in favor of, the election of the Revolution Living Director to serve as a director to the Gaiam Board.  Gaiam shall nominate for election to the Gaiam Board as the Revolution Living Director, or for the filling of any vacancies on the Gaiam Board created by such nominees, the person designated by Revolution Living pursuant to this Section 2.1(b) .  The initial Revolution Living Director shall be designated by Revolution Living within 60 days of the Closing.

 

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(c)           Directors from and after Exercise of the Option .  On the date of the exercise of the Option, if it occurs, Gaiam will cause two members of the Gaiam Board (who shall not be the incumbent Revolution Living Director) to resign and will cause the remaining members of the Gaiam Board to appoint two additional individuals designated by Revolution Living to fill the two remaining vacancies, such that there will be three Revolution Living Directors of the nine directors on the Gaiam Board.  From and after the exercise of the Option, at each annual meeting of the holders of any class of Stock, and at each special meeting of the holders of any class of Stock called for the purpose of electing directors of Gaiam, and at any time at which holders of any class of Stock shall have the right to, or shall, vote for or consent in writing to the election of directors of Gaiam, then, and in each such event, Rysavy shall vote all of the shares of Stock owned by him or his Affiliates (other than shares covered by an irrevocable proxy created pursuant to this Agreement), or consent in writing with respect to such shares in favor of, the election of the three Revolution Living Directors to serve as directors to the Gaiam Board.  Gaiam agrees to nominate for election to the Gaiam Board as the Revolution Living Directors, or for the filling of any vacancies on the Gaiam Board created by such nominees, the persons designated by Revolution Living pursuant to this Section 2.1(c) .  Revolution Living shall have the right pursuant to this Section 2.1(c)  to designate three directors, one of whom shall initially be Case.  Rysavy shall have the right pursuant to this Section 2.1(c)  to designate three directors, one of whom shall be Rysavy, who will also serve as Chairman of the Board.  From and after the exercise of the Option, at each annual meeting of the holders of any class of Stock, and at each special meeting of the holders of any class of Stock called for the purpose of electing directors of Gaiam, and at any time at which holders of any class of Stock shall have the right to, or shall, vote for or consent in writing to the election of directors of Gaiam, then, and in each such event, Revolution Living shall vote all of the shares of Stock owned by it or its Affiliates (and any shares covered by an irrevocable proxy created pursuant to this Agreement), or consent in writing with respect to such shares in favor of, the election of the three directors designated by Rysavy to serve as directors to the Gaiam Board. In addition, Revolution Living shall cause the three Revolution Living Directors to vote in favor of Rysavy’s election as Chairman of the Gaiam Board and Rysavy’s election as chief executive officer of Gaiam.  The remaining three directors shall be independent directors nominated by the Gaiam Board in satisfaction of any applicable listing standards or other Applicable Law.  Revolution Living’s rights pursuant to this Section 2.1(c) , but not its rights to designate a director under Section 2.1(b), shall terminate in the event that: (x) Revolution Living and its Affiliates beneficially own in the aggregate less than 20% of the Fully-Diluted Common Stock and (y) Revolution Living and its Affiliates beneficially own in the aggregate less than 80% of the Stock owned in the aggregate by Revolution Living and its Affiliates upon the exercise of the Option.

 

(d)           Notice of Proxy Mailing .  Gaiam shall give at least 30 days prior written notice of the date of the earliest estimated proposed mailing of proxy materials for election of directors of Gaiam.  Revolution Living shall, within 10 Business Days of receipt of such notice from Gaiam, give written notice (a “ Section 2.1 Notice ”) to Gaiam of the name of each individual that Revolution Living intends to nominate for election or reelection to the Gaiam Board and all information relating to each such individual that is required to be disclosed in any solicitation of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such individual’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected).  At the request

 

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of the Gaiam Board, any individual so nominated for election as a director shall furnish to the Secretary of Gaiam that information required to be set forth in the Section 2.1 Notice.

 

(e)           Removal; Approval by Gaiam Board .  Subject to the next sentence, the Parties agree that they shall vote, and shall cause their respective Affiliates to vote, any shares of Stock over which they have voting authority, and take any other action reasonably requested by any other Party so that (i) any director whose removal is requested by the Party or Parties with the power to designate such director shall be removed and (ii) any vacancy created by the removal, resignation or death of a director shall be filled by a nominee of the Party or Parties having the right to fill such vacancy in accordance with the provisions of this Section 2.1 .  Each of the Revolution Living Directors shall be removed only if requested by Revolution Living and each of the directors designated by Rysavy shall be removed only if requested by Rysavy.  Vacancies on the Gaiam Board shall be filled within 30 days of the date a replacement director is named by the Party with the right to fill such vacancy or immediately before the first action to be taken by the Gaiam Board after the date such replacement director is named.  Notwithstanding anything in this Agreement to the contrary, the appointment of any director designated by Revolution Living or Rysavy is conditioned upon such designee meeting qualifications typically set for directors of public companies and shall be subject to the consent of the Gaiam Board, not to be unreasonably withheld.

 

(f)            Term .  The directors to be elected pursuant to this Section 2.1 shall serve for terms extending from the date of their election and qualification until their successors shall have been elected and qualified in accordance with this Section 2.1 .

 

(g)           Information Regarding Revolution Living Directors .  Revolution Living agrees to use reasonable efforts to cause each individual serving as a Revolution Living Director to provide Gaiam, on a timely basis, with any information relating to such individual that Gaiam may be required to disclose pursuant to Applicable Law, including without limitation those rules or regulations promulgated by the NASD and the NMS.

 

2.2          Board Meetings .

 

Gaiam shall convene meetings of the Gaiam Board at least four times each fiscal year at regular time intervals.  Gaiam may use video conferencing capabilities or teleconference facilities for meetings of the Gaiam Board and any committees thereof .

 

2.3          Expenses .

 

Gaiam shall pay or reimburse each of the Revolution Living Directors for the reasonable out-of-pocket expenses incurred by such Revolution Living Director in accordance with policies relating to payment or reimbursement of expenses applicable generally to members of the Gaiam Board, including, but not limited to, reasonable travel and related expenses.

 

2.4          Committees .

 

The Gaiam Board may, from time to time, establish and maintain certain committees.  To the extent allowed under Applicable Law and rules or regulations promulgated by the NASD and

 

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the NMS, the Gaiam Board shall, upon the request of the Revolution Living Directors, appoint at least one Revolution Living Director to serve on each committee formed by the Gaiam Board.

 

2.5          Shareholder Commitments .

 

(a)           Mutual Commitments .

 

Each of Rysavy and Revolution Living agree to take all actions reasonably requested by the other Party to cause Gaiam and the Gaiam Board to comply with its obligations under the Documents so as to give effect to the intent of the Parties, including all actions reasonably requested in their respective capacities as a shareholder of Gaiam and, subject to fiduciary duties, as a member of the Gaiam Board.  Such actions shall include, without limitation, calling meetings of the Gaiam Board or any committees thereof, calling meetings of the shareholders of Gaiam, proposing actions requested by the other Party to be taken at meetings of the Gaiam Board, committees of the Gaiam Board and/or shareholders of Gaiam, voting in favor of any such actions, removing directors designated by such Party on the Gaiam Board who do not vote in favor of any such actions and proposing and adopting amendments to the Restated Articles and Bylaws of Gaiam.

 

(b)           Irrevocable Proxy Upon the Exercise of the Option .

 

(i)    In furtherance of the agreements contained in this Agreement, effective from and after the exercise of the Option, Rysavy hereby irrevocably grants to, and appoints, the Chairman of Revolution Living, in such person’s capacity as an officer of Revolution Living, and any individual who shall hereafter succeed to such office of Revolution Living, Rysavy’s proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of Rysavy, to vote a number the outstanding shares of Class B Common Stock such that Rysavy and Revolution Living shall each be able to vote the same number of shares of Stock, at any time and from time to time (such shares, the “ Proxy Shares ”), or grant a consent or approval in respect of the Proxy Shares, or execute and deliver a proxy to vote the Proxy Shares, in any matter on which shareholders of Gaiam may have a right to vote, grant a consent or approve and/or execute and deliver a proxy to vote shares, including without limitation the election of directors.  For the avoidance of doubt, the proxy granted by Rysavy pursuant to this Section 2.5(b)(i)  is not limited to matters addressed in this Agreement, the Transaction Agreement or any other Document.

 

(ii)    Rysavy hereby affirms that the irrevocable proxy set forth in Section 2.5(b)(i)  is given in connection with, and in consideration of, the execution of the Documents by Revolution Living.  Rysavy hereby further affirms that such irrevocable proxy is coupled with an interest and may under no circumstances be revoked, provided, however, that such irrevocable proxy shall terminate if Case ceases to control Revolution Living. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of the Colorado Business Corporation Act.

 

(iii)    Rysavy hereby authorizes and agrees to cause Gaiam to (x) identify, as of each applicable record date, the Proxy Shares which in the absolute discretion of Gaiam may be selected without regard as to whether Rysavy or one of his Affiliates owns such shares or

 

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when such shares were acquired, and (y) notify Gaiam’s transfer agent, inspector of elections, and other organizations, persons or officials involved in the administration or processing of proxies with respect to the subject vote, of the existence of the irrevocable proxy under Section 2.5(b)(i) , the number of shares with respect to the subject election to which the irrevocable proxy under Section 2.5(b)(i)  will apply, the identity of the Person owning such shares and the record owner of such Proxy Shares, and all such organizations, persons and officials are authorized and directed to rely on such notification.  Rysavy further agrees that he shall cause all of his Affiliates not to acquire any interest in the Stock constituting Proxy Shares or any security which represents a derivative interest therein unless prior to such acquisition Revolution Living and Gaiam is each notified of such intention to acquire and an irrevocable proxy in this form ( mutatis mutandis ) is executed and delivered to Gaiam and Revolution Living by such Affiliate.  Rysavy further agrees not to own, and to cause all of his Affiliates not to own, any Stock through a record owner other than Rysavy without complying with the requirements of this Section 2.5(b) .  Rysavy agrees to fully cooperate with Gaiam and Revolution Living to give full effect to the intentions of this Section 2.5(b)  by executing such documents and taking such actions as are reasonably requested by Gaiam and/or Revolution Living for such purpose.  Rysavy acknowledges that his obligations under this irrevocable proxy are material inducements to Revolution Living to perform its obligations under the Documents.

 

(iv)    If for any reason Revolution Living is denied the right to vote or deliver a written consent with respect to the Proxy Shares, because of Applicable Law or otherwise, then Rysavy and Gaiam shall delay the vote or written consent for a reasonable period of time so as to permit Rysavy the opportunity to vote or deliver a written consent with respect to the Proxy Shares in such manner as Revolution Living so directs Rysavy in writing to vote or deliver a written consent with respect to such shares and Rysavy hereby agrees to vote such shares in accordance with such instructions by Revolution Living, provided that Revolution Living delivers any such instructions promptly after becoming aware of any such vote or consent.  If for any reason (A) Revolution Living is denied the right to vote or deliver a written consent with respect to the Proxy Shares, because of Applicable Law or otherwise, and (B) Rysavy does not vote or deliver a written consent with respect to the Proxy Shares as directed by Revolution Living in accordance with this Section 2.5(b)(iv) , then Rysavy and Gaiam hereby (x) agree to take all actions necessary to convert the Class B Common Stock into Class A Common Stock including, without limitation, approving as soon as possible the conversion in accordance with the Restated Articles, and (y) until such time as such conversion has been effected under the Restated Articles and any Applicable Law, Rysavy agrees to renounce his right, except for purposes of satisfying any applicable quorum and voting requirements under the Restated Articles and the Bylaws of Gaiam, to vote 90% of the Class B Common Stock such that the total voting power in respect to all shares of Class B Common Stock held by him is the same as it would be if all such shares of Class B Common Stock were converted into shares of Class A Common Stock.

 

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ARTICLE III

BOARD OF DIRECTORS OF WISDOM

 

3.1          Rights to Select Wisdom Board Members .

 

Upon the Closing, Revolution Living will cause Wisdom to increase the number of directors comprising the Wisdom Board from seven (7) to nine (9).  Revolution Living will cause two individuals designated by Gaiam to be appointed to the Wisdom Board (the “ Gaiam Appointees ”).  From and after the Closing, the rights of Gaiam will be set forth in the Wisdom LLC Agreement (as defined in the Transaction Agreement).

 

ARTICLE IV

TRANSFERS OF COMMON STOCK OF GAIAM

 

4.1          Standstill With Respect to Gaiam .

 

For a period from the date hereof until the earliest of (i) the eighteen month anniversary of the Closing, if Revolution Living has not exercised the Option, and (ii) the expiration of, or irrevocable written waiver by Revolution Living delivered no earlier than fourth anniversary of the Closing, of all of Revolution Living’s rights under Section 5.4 (such period, the “ Standstill Period ”), none of Case, Revolution Living or any of their respective Subsidiaries, on the one hand, and Rysavy or any of his Subsidiaries, on the other hand (each such Person, a “ Restricted Holder ”), will, unless specifically requested or permitted in writing in advance by Rysavy (if Case, Revolution Living and/or one or more of their respective Subsidiaries is the Restricted Holder) or Revolution Living (if Rysavy and/or one or more of his Subsidiaries is the Restricted Holder) and except as set forth in this Agreement, the Transaction Agreement or the Redemption Agreement, in any manner, directly or indirectly, effect or seek, offer, propose (whether publicly or otherwise) or take any other action to effect, or cause or participate in, or in any way assist, advise or encourage any other Person to effect, seek or offer or propose (whether public or otherwise) to effect or participate in any acquisition or agreement to acquire, directly or indirectly, any securities or assets of Gaiam or any of its Subsidiaries other than the exercise by Rysavy of his options to acquire up to 200,000 shares of Class A Common Stock and other than any conversion of Class B Common Stock into Class A Common Stock, in each case so long as such Class A Common Stock remains held by Rysavy.

 

4.2          Restrictions on Transfers of Securities of Gaiam .

 

(a)           General .  Except with respect to any Transfer effected with the prior written consent of each Party to this Agreement holding Stock (the “ Transfer Consent ”), during the Standstill Period, no Party hereto (other than Gaiam) shall (i) pledge, hypothecate or otherwise encumber or Transfer (other than to a Permitted Transferee) any shares of Stock (collectively, “ Holder Securities ”), or (ii) enter into any Swap Transaction (other than with a Permitted Transferee) with respect to any Holder Securities.  Any attempt to pledge, hypothecate

 

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or otherwise encumber or Transfer any Holder Securities to anyone other than a Permitted Transferee or enter into any Swap Transaction with respect to any Holder Securities not in compliance with this Agreement shall be null and void and Gaiam shall not, and shall instruct its transfer agent not to, register upon its books any pledge, hypothecation or other encumbrance or Transfer of Holder Securities by a Party hereto (other than Gaiam) to any Person except a Transfer not restricted by, and in accordance with, this Agreement.  The foregoing shall not apply to Rysavy’s Transfers of (x) a maximum of 500,000 shares of Common Stock (adjusted from time to time as a result of any stock split, stock dividend, recapitalization or similar transaction) in the aggregate, to any charitable or nonprofit entity pursuant to a pledge in existence on the date hereof or created hereafter, and (y) his options to acquire 200,000 shares of Common Stock (adjusted from time to time as a result of any stock split, stock dividend, recapitalization or similar transaction) in the aggregate, to Lynn Powers pursuant to an assignment agreement in effect on the date hereof.

 

(b)           Legend .  Each certificate evidencing shares of Stock and each certificate issued in exchange for or upon the transfer of any Stock shall be stamped or otherwise imprinted with a legend in substantially the following form:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS CONTAINED IN A SHAREHOLDERS AGREEMENT DATED AS OF AUGUST 4, 2005 AMONG THE ISSUER OF SUCH SECURITIES (THE “ COMPANY ”) AND CERTAIN OF THE COMPANY’S SHAREHOLDERS AND OTHER PERSONS.  A COPY OF SUCH SHAREHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”

 

Gaiam shall imprint such legend on certificates evidencing Stock outstanding prior to the date hereof.

 

(c)           Permitted Transfers .  The restrictions set forth in Section 4.2(a)  shall not apply to a Transfer to a Permitted Transferee who agrees to be bound by the provisions of this Agreement in accordance with Section 7.7(b) .

 

(d)           Tag-Along Rights .

 

(i)            If Rysavy proposes to Transfer any of his shares of Stock in a Transfer to any Person (other than to a Permitted Transferee and other than the exercise or conversion of any Stock, so long as the Stock received upon such exercise or conversion remains held by Rysavy) (a “ Tag Along Sale ”), Rysavy shall provide written notice of such proposed Transfer to Revolution Living (the “ Transfer Notice ”), which notice shall identify the purchaser, the number and type of Stock proposed to be sold, the consideration offered for the Stock and any other material terms and conditions of the proposed Transfer.  If the offer price consists in part or in whole of consideration other than cash, the Rysavy will provide such information, to the extent reasonably available to the Rysavy, relating to such consideration as the

 

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Revolution Living may reasonably request in order to evaluate such non-cash consideration.

 

(ii)           Revolution Living shall have the right (the “ Tag-Along Right ”), exercisable as set forth below, to sell, pursuant to the proposed Transfer, up to and including the number of shares of Stock held by Revolution Living equal to Revolution Living’s Applicable Tag Percentage of shares of Stock proposed to be Transferred in the Tag-Along Sale, on the same terms and conditions as Rysavy and if exercising such right shall, subject to Section 4.2(d)(v) , execute and deliver all documents and instruments which are necessary or reasonably desirable to effectuate such sale.  For purposes of this Section 4.2(d) , ” Applicable Tag Percentage ” means a fraction, the numerator of which is the number of shares of Common Stock held by Rysavy and Revolution Living (assuming the exercise or conversion of all Securities exercisable or convertible into Common Stock), and the denominator of which is the number of shares of Common Stock held by Rysavy and Revolution Living (assuming the exercise or conversion of all Securities exercisable or convertible into Common Stock), unless all or substantially all of the outstanding shares of Stock are being Transferred in the Tag-Along Sale, in which case the denominator will be all shares of Stock being sold.  Each such Tag-Along Right shall be exercisable by delivering written notice to Rysavy within 15 days after receipt of the Transfer Notice.  Rysavy will have 180 days from the expiration of such 15-day period to consummate the proposed Transfer at a price or prices no greater than the price set forth in the Transfer Notice (provided that the Rysavy may not consummate the proposed Tag-Along Sale unless the transferee also purchases from the Revolution Living, assuming the Revolution Living has exercised its Tag-Along Right in accordance with this Section 4.2(d) , the shares of Stock Revolution Living is entitled to include in such sale at the price and on the other terms and conditions set forth in the Transfer Notice unless otherwise agreed by Revolution Living) and on terms and conditions no more favorable to Rysavy than those stated in the Transfer Notice.  Any shares of Stock that continue to be held by Rysavy after such 45-day period shall again be subject to the provisions of Section 4.2 , including this Section 4.2(d) .

 

(iii)          Rysavy may not grant tag-along rights that conflict with the provisions of this Section 4.2(d)  to any equity holder other than Revolution Living without the prior written consent of Revolution Living.

 

(iv)         Revolution Living’s rights under this Section 4.2(d)  shall expire upon the exercise of the Option.

 

(v)          In any Tag-Along Sale in which Revolution Living participates, Revolution Living will make appropriate and customary representations and warranties as to its title to the Holder Securities being sold by it and its power, authority, and right to enter into the pertinent transaction without contravention of law or contract.  Revolution Living will not be required to make representations and warranties concerning Gaiam, its Subsidiaries or their respective businesses, but shall be required to participate in any escrow or indemnity for matters relating to Gaiam,

 

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its Subsidiaries or their respective businesses agreed to by Rysavy in connection with the Tag-Along Sale.

 

4.3          Rights To Subscribe For Securities .

 

(a)           In the event that Gaiam proposes to issue any of its equity and/or equity-linked Securities (the “ Offered Securities ”), other than Excluded Securities, to any Person (a “ Proposed New Investor ”), Gaiam will deliver to Revolution Living a written notice (the “ Company Notice ”) (which notice will state the number or amount of the Offered Securities proposed to be issued, the purchase price or exercise price therefor (to the extent known) and any other terms or conditions of the proposed issuance) of such issuance at least 15 days prior to the date of the proposed issuance.  For purposes of this Section 4.3 , “ Excluded Securities ” means Securities offered or issued (i) to officers, directors, employees or consultants of or vendors to Gaiam (other than those offered or issued to Rysavy or his Affiliates, which shall not be Excluded Securities) pursuant to plans or arrangements the terms of which are approved by the Gaiam Board, (ii) to financial institutions or lessors in connection with commercial credit arrangements or equipment financings (so long as they are offered or issued in transactions with primarily financing purposes) the terms of which are approved by the Gaiam Board, (iii) pursuant to the conversion or exercise of convertible or exercisable Securities, (iv) in connection with bona fide acquisitions by Gaiam or its Subsidiaries, whether by merger, consolidation, acquisition of assets, acquisition or exchange of capital stock or otherwise, the terms of which are approved by the Gaiam Board, (v) pursuant to a pro rata stock split or stock dividend, or (vi) pursuant to the Transaction Agreement.

 

(b)           Revolution Living will have the option, exercisable at any time during the 15-day period (the “ Preemptive Offer Period ”) after receipt of the Company Notice, by delivering an irrevocable written notice to Gaiam (a “ Preemptive Offer Acceptance Notice ”), to subscribe for up to its pro rata share of such Offered Securities based upon the number of shares of Stock owned by Revolution Living at such time and Gaiam’s Fully-Diluted Capital Stock at such time.  In the case of derivative Securities acquired by Revolution Living as a result of the offer or issuance of any employee stock options to Rysavy or his Affiliates, Gaiam shall have the option to condition any exercise or conversion of such Securities sold to Revolution Living on Rysavy or his Affiliates exercising or converting such Securities.

 

(c)           Gaiam may issue to the Proposed New Investor all or any part of such Offered Securities as to which Revolution Living’s Preemptive Offer Acceptance Notice has not been given by Revolution Living (the “ Remaining Securities ”) within 180 days after expiration of the Preemptive Offer Period, on substantially the same terms set forth in the Company Notice, and at a price no less than 98% of the price referenced in such notice.  Upon the closing, which will include full payment to Gaiam, of the sale to the Proposed New Investor of all the Remaining Securities, Revolution Living will purchase from Gaiam, and Gaiam will sell to Revolution Living, the Offered Securities with respect to which a Preemptive Offer Acceptance Notice was delivered by Revolution Living, on the terms specified in the Preemptive Offer Acceptance Notice.  In each case, any Offered Securities not purchased by the Proposed New Investor (within such 180 day period) in accordance with this Section 4.3 may not be sold or otherwise disposed of until they are again offered to Revolution Living under the procedures specified in this Section 4.3 .

 

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(d)           Revolution Living’s rights under this Section 4.3 shall expire upon the eighteen month anniversary of the Closing if Revolution Living did not exercise the Option.

 

4.4          Revolution Living Option .

 

(a)           Rysavy hereby grants to Revolution Living an option (the “Option”), exercisable at Revolution Living’s sole discretion, to purchase from Rysavy, at a price equal to $10 per share (as equitably adjusted for any stock splits, stock dividends or similar transactions), a number of shares of Common Stock equal to (i) 50% of the sum of (x) all shares of Common Stock and securities and rights exercisable or convertible into shares of Common Stock, in each case, held by Rysavy and his Affiliates as of the date of the exercise of the Option (provided that, for this purpose, Gaiam and its Subsidiaries will not be considered Affiliates of Rysavy) and (y) the number of shares of Common Stock and securities and rights exercisable or convertible into Common Stock, in each case, held by Revolution Living and its Affiliates as of the date of the exercise of the Option (provided that, for this purpose, Gaiam and its Subsidiaries will not be considered Affiliates of Revolution Living), minus (ii) the number of shares of Class A Common Stock and securities and rights exercisable or convertible into Class A Common Stock, in each case, held by Revolution Living and its Affiliates as of the date of the exercise of the Option (provided that, for this purpose, Gaiam and its Subsidiaries will not be considered Affiliates of Revolution Living) (it being the intent of the Parties that, upon consummation of the exercise of the Option Revolution Living (and its Affiliates) and Rysavy (and his Affiliates) will have an equal amount of Stock).  The Option shall be exercisable first against shares of Class A Common Stock held by Rysavy and his Affiliates and thereafter against shares of Class B Common Stock held by Rysavy and his Affiliates, which shares of Class B Common Stock shall convert automatically into shares of Class A Common Stock upon transfer as provided in the Restated Articles.  The Option shall be exercisable at any time after the first anniversary of the date of this Agreement and until the close of business on the eighteen month anniversary of the Closing and shall expire if not exercised on such eighteen month anniversary.  In order to exercise the Option, Revolution Living shall deliver a written exercise notice to Rysavy and to Gaiam.  Such notice shall specify a closing date for the exercise of the Option and shall be delivered at least fifteen days prior to such closing date.  At the closing of the exercise of the Option, Rysavy shall sell to Revolution Living, and Revolution Living shall purchase from Rysavy, the number of shares of Class A Common Stock set forth above, and Rysavy shall deliver, or cause to be delivered, to Revolution Living any applicable stock certificates, together with such stock powers or other similar documents as are necessary or advisable to fully and unconditionally transfer such shares of Class A Common Stock to Revolution Living, and Revolution Living shall deliver to Rysavy the purchase price for such shares, by wire transfer of immediately available funds.  The shares acquired by Revolution Living pursuant to this Section 4.4 shall be free and clear of any Liens, other than Liens that have been created by Revolution Living and restrictions on transfer arising under any applicable federal or state securities laws.

 

(b)           Notwithstanding the foregoing, provided Revolution Living has made all applicable filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, at least 30 days prior to the closing date of the exercise of the Option, but Revolution Living is unable to consummate the exercise of the Option prior to such expiration date because any required consents, approvals, and authorizations necessary to consummate the exercise of the

 

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Option have not been obtained, then the expiration of the Option shall automatically be extended to permit Revolution Living to obtain such consents, approvals or authorizations.

 

(c)           Prior to the earlier of the exercise and the expiration of the Option, neither Gaiam nor its Affiliates shall enter into any agreement with any Person, other than Revolution Living or its Affiliates, relating to any acquisition of or business combination with Gaiam, whether by way of merger, purchase of capital stock, purchase of assets or otherwise, pursuant to which all or substantially all of the assets, or all or substantially all of the capital stock, of Gaiam would be transferred (a “ Potential Transaction ”) without the prior consent of Revolution Living, which consent may be withheld in its sole and absolute discretion, unless (i) Gaiam delivers written notice of the Potential Transaction at least 45 days prior to consummating the Potential Transaction, which notice includes all of the material terms of such proposed agreement, and (ii) Rysavy permits Revolution Living to exercise the Option prior to Gaiam’s consummation of the Potential Transaction (even if such exercise would otherwise be prior to the date the Option may otherwise be exercised).

 

(d)           If Gaiam has repurchased shares of Stock from Rysavy’s estate pursuant to the Insurance and Stock Redemption Agreement dated as of August 4, 2005 between Gaiam and Rysavy (the “ Redemption Agreement ”), then Gaiam and Revolution Living agree that any such shares of Stock shall be subject to the Option set forth in this Section 4.4 and the shares of Stock held by Gaiam shall be acquired first by Revolution Living upon exercise of the Option.

 

ARTICLE V

ADDITIONAL AGREEMENTS

 

5.1          Inconsistent Agreements .

 

No Party shall enter into any agreement containing any provision which would (a) be violated or breached in any material respect by the exercise or performance by any other Party of any of such other Party’s rights or obligations under any Document, (b) impose any material impairment on the ability of any Party to comply with the terms of the Documents, (c) contain any material right of termination, amendment, cancellation or acceleration of any obligation, if such right would be triggered by the exercise or performance by any other Party of any of such other Party’s rights or obligations under any Document, or (d) otherwise conflict in any material respect with the Documents.

 

5.2          Affirmative Covenants .

 

Gaiam shall observe and perform the following, except to the extent waived upon the written consent of Revolution Living:

 

(a)           Transactions with Affiliates .  Gaiam shall conduct all transactions otherwise permitted under the Documents with any of its Affiliates on terms that are fair and reasonable and no less favorable to Gaiam than it would obtain in a comparable arm’s-length transaction with a Person not an Affiliate.

 

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(b)           D&O Insurance; Indemnification .  Gaiam shall maintain director and officer liability insurance, with coverage of at least $10 million, from a nationally recognized insurance company rated “A” or above, which insurance and amount thereof shall be acceptable to Revolution Living, and shall keep such insurance in full force and effect.  Except as prohibited by Applicable Law, Gaiam’s Restated Articles and Bylaws shall at all times provide for indemnification and exculpation of the Revolution Living Directors at least as favorable to the directors as that contained Gaiam’s Restated Articles and Bylaws as of the date of this Agreement.

 

5.3          Sale of Gaiam. 

 

If a the Gaiam Board approves a Sale of the Company to an independent third party (the “ Approved Sale ”), Revolution Living and its Permitted Transferees agree that they will consent to and will not raise objections to the Approved Sale and will take all necessary and desirable actions in connection with the consummation of the Approved Sale including but not limited to the waiver of any dissenters or appraisal rights.  The obligations of Revolution Living set forth in this Section 5.3 are subject to the condition that all holders of Common Stock receive the same form and pro-rata share of the consideration from the proceeds of any Approved Sale.

 

5.4          Buy/Sell .

 

(a)           Commencing on the fourth anniversary of date of this Agreement (the “ Trigger Date ”), Revolution Living will have the right, exercisable upon delivery of written notice to the Rysavy (the “ Buy/Sell Notice ”) on or prior to 30 days after the Trigger Date, to invoke the buy/sell procedures set forth in this Section 5.4 .  The Buy/Sell Notice shall constitute an offer by Revolution Living to (x) sell all of Revolution Living’s and its Affiliates’ shares of Common Stock to Rysavy, or (y) purchase from Rysavy all shares of Common Stock owned by Rysavy and his Affiliates, in each case for cash, at a per share price not less than the average of the closing sales prices of the Class A Common Stock during the 90 calendar days prior to the delivery of the Buy/Sell Notice (the “ Buy/Sell Price ”).  The Buy/Sell Notice shall specify a closing date not fewer than 120 days or more than 150 days from delivery of the Buy/Sell Notice.  This Section 5.4 shall be binding on Rysavy’s estate.  If Gaiam has repurchased shares of Stock from Rysavy’s estate pursuant to the Redemption Agreement, then Gaiam and Revolution Living agree that any such shares of Stock shall be included in the buy/sell set forth in this Section 5.4 , and any decision by Rysavy’s estate to sell shares pursuant to this Section 5.4 shall be binding on Gaiam.  If Gaiam has purchased from Rysavy’s estate pursuant to the Redemption Agreement a majority of the shares of Stock that the estate originally received from Rysavy, then Gaiam shall make any decision on whether to buy or sell shares pursuant to this Section 5.4 , and any such decision shall be binding on Rysavy’s estate.

 

(b)           On or before the date that is 30 days after the date of delivery of the Buy/Sell Notice, Rysavy shall deliver to Revolution Living a notice either accepting its offer to purchase all shares of Common Stock owned by Rysavy and his Affiliates, or accepting the offer of Revolution Living to sell to Rysavy all shares of Common Stock held by Revolution Living and its Affiliates, in each case for the Buy/Sell Price.  If Rysavy fails to respond to the Buy/Sell Notice within such 30-day period, such failure to respond shall be deemed Rysavy’s election to

 

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accept the offer of Revolution Living to sell all of its and its Affiliates’ shares of Common Stock to Rysavy.

 

(c)           If a purchase and sale of shares under this Section 5.4 is being consummated, at the closing date (i) the purchaser will pay, to an account designated prior to the closing of such purchase by the seller(s), the applicable purchase price for the shares of Common Stock being purchased by wire transfer of immediately available funds, and (ii) the seller(s) will deliver to the purchaser one or more certificates or book entry transfers evidencing the Common Stock being sold, and all shares sold pursuant to this Section 5.4 shall be delivered to the purchaser free and clear of any Liens (other than Liens arising under federal and state securities laws and Liens created by the purchaser).  For purposes of this Section 5.4 , the Buy/Sell Price shall be equitably adjusted to reflect any stock splits, stock dividends and similar transactions occurring after the date of delivery of the Buy/Sell Notice.

 

(d)           The closing of the purchase and sale of shares under this Section 5.4 shall be conditioned upon (i) no Applicable Law shall have been enacted and no Proceeding shall be pending which prohibits or seeks to prohibit, or materially restricts or delays, the consummation of the transactions contemplated by this Section 5.4 or materially restricts or impairs the ability of the purchaser to own the shares being acquired and (ii) the purchaser and the seller(s) shall have made and/or obtained all notices, consents, approvals, and authorizations necessary to consummate the transactions contemplated by this Section 5.4 , including without limitation all applicable filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.  The failure of any such conditions to be satisfied will delay the closing until such conditions are satisfied but will not relieve any Party of its obligations hereunder to consummate the closing.

 

(e)           Both before and after the closing pursuant to this Section 5.4 , each Party agrees to use all commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Section 5.4 .

 

5.5          Representations and Warranties of Rysavy and Case .

 

(a)           Rysavy hereby represents and warrants to the other Parties as follows:

 

(i)            Rysavy is a natural person and has full capacity, right, power and authority to execute and deliver this Agreement and to perform his obligations under and to consummate the transactions contemplated by this Agreement.  The execution, delivery and performance by Rysavy of this Agreement have been duly authorized by Rysavy and this Agreement has been duly executed and delivered by Rysavy.  This Agreement constitutes a legal, valid and binding obligation of Rysavy enforceable against Rysavy in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar Applicable Laws affecting creditors’ rights and remedies generally, and subject, in the case of enforceability, to general principles of equity (regardless of whether enforcement is sought in a Proceeding at law or in equity).

 

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(ii)           The execution, delivery and performance by Rysavy of this Agreement and the consummation of the transactions contemplated hereby and compliance with the provisions hereof and thereof by Rysavy, does not or will not, as the case may be, (a) violate any provision of Applicable Law or any Order applicable to Rysavy or any of his properties or assets, (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of Rysavy under any material agreement to which he is a party or by which Rysavy or his assets or properties are or may be bound or (c) violate any provision of, or constitute a breach or default (with notice or lapse of time or both) under the Restated Articles or Bylaws of Gaiam.

 

(iii)          No Permit or Order, authorization, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the execution, delivery or performance by Rysavy of this Agreement.

 

(iv)         Immediately upon consummation of the Closing, Rysavy owns (A) 2,164,000 shares of Class A Common Stock, all of which were validly issued and outstanding, fully paid and non-assessable, (B) 5,400,000 shares of Class B Common Stock, all of which were validly issued and outstanding, fully paid and nonassessable, and (C) options to purchase 200,000 shares of Class A Common Stock, which were issued in accordance with Gaiam’s Equity Incentive Plan, which have been assigned to Lynn Powers subject to certain conditions.  Rysavy has good and marketable title to, and sole record and beneficial ownership of such shares of Class B Common Stock and sole record and beneficial ownership of such shares of Class A Common Stock, other than shares of Class A Common Stock held in one or more brokerage accounts in Rysavy’s name and over which Rysavy exercises exclusive investment authority.  The foregoing shares and options are free and clear of any Liens and, except as otherwise set forth in this Agreement, with no restrictions on the voting rights thereof and not subject to any preemptive rights, rights of first refusal or other similar rights.  Except as set forth in this Section 5.5(a)(iv) , Rysavy does not have record or beneficial ownership over any Stock.

 

(b)           Case hereby represents and warrants to the other Parties as follows:

 

(i)            Case is a natural person and has full capacity, right, power and authority to execute and deliver this Agreement and to perform his obligations under and to consummate the transactions contemplated by this Agreement.  The execution, delivery and performance by Case of this Agreement have been duly authorized by Case and this Agreement has been duly executed and delivered by Case.  This Agreement constitutes a legal, valid and binding obligation of Case enforceable against Case in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar Applicable Laws affecting creditors’ rights and remedies generally, and subject, in the case of enforceability, to general principles of equity (regardless of whether enforcement is sought in a Proceeding at law or in equity).

 

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(ii)           The execution, delivery and performance by Case of this Agreement and the consummation of the transactions contemplated hereby and compliance with the provisions hereof and thereof by Case, does not or will not, as the case may be, (a) violate any provision of Applicable Law or any Order applicable to Case or any of his properties or assets, (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of Case under any material agreement to which he is a party or by which Case or his assets or properties are or may be bound or (c) violate any provision of, or constitute a breach or default (with notice or lapse of time or both) under the charter documents or by-laws of Wisdom.

 

(iii)          No Permit or Order, authorization, consent or approval of or by, or any notification of or filing with, any Person is required in connection with the execution, delivery or performance by Case of this Agreement.

 

(iv)         Immediately upon consummation of the Closing, Revolution Living is a controlled Affiliate of Case.

 

5.6          Nondisparagement .

 

Rysavy agrees that he will not make any disclosure, issue any public statements or otherwise cause to be disclosed any information which is designed, intended or might reasonably be anticipated to be derogatory or damaging to Revolution Living or Case.  Revolution Living and Case agree that neither will make any disclosure, issue any public statements or otherwise cause to be disclosed any information which is designed, intended or might reasonably be anticipated to be derogatory or damaging to Rysavy.

 

ARTICLE VI

REGISTRATION RIGHTS

 

6.1          Required Registration .

 

(a)           If at any time from and after the expiration of the Standstill Period, Gaiam shall be requested by Revolution Living to effect the registration under the Securities Act of Registrable Shares having an aggregate gross offering price (before underwriters discounts and commissions) of at least $10,000,000, Revolution Living shall promptly give written notice to Gaiam of its requirement to so register such Registrable Shares (which notice shall specify the number of Registrable Shares proposed to be included in such registration and the intended method of distribution, but which may not be pursuant to a shelf registration), Gaiam shall, subject to Section 6.1(b)  below, promptly use its best efforts to effect such registration on an appropriate form, under the Securities Act of the Registrable Shares which Gaiam has been so requested to register.

 

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(b)           Anything contained in Section 6.1(a)  to the contrary notwithstanding, Gaiam shall not be obligated to effect pursuant to Section 6.1(a)  any registration under the Securities Act except in accordance with the following provisions:

 

(i)            Gaiam shall not be obligated to use its best efforts to file and cause to become effective (A) more than two (2) Registration Statements initiated pursuant to Section 6.1(a) , (B) any Registration Statement during the period starting with the date 60 days prior to Gaiam’s good faith estimate of the date of filing of, and ending on the date 180 days after the effective date of, any other registration statement (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Primary Shares are to be or were sold; provided , however , that in the case of clause (B) Gaiam is actively employing in good faith all reasonable efforts to cause such Registration Statement to become effective and the Investors were offered the right to have the Registrable Shares included in such registration pursuant to Section 6.2 below, or (C) more than one Registration Statement pursuant to Section 6.1(a)  in any consecutive twelve-month period;

 

(ii)           Gaiam may delay the filing or effectiveness of any Registration Statement for a period of up to 120 days after the date of a request for registration pursuant to Section 6.1(a)  if at the time of such request Gaiam is engaged in a Material Transaction; provided , however , that Gaiam may only so delay the filing or effectiveness of a registration statement pursuant to this Section 6.1(b)(ii)  on one occasion during any twelve-month period; and

 

(iii)          with respect to any registration pursuant to Section 6.1(a) , Gaiam may include in such registration any Primary Shares or Other Shares; provided , however , that if the managing underwriter advises Gaiam that the inclusion of all Registrable Shares, Primary Shares and Other Shares proposed to be included in such registration would interfere with the successful marketing (including pricing) of all such Securities, then the number of Registrable Shares, Primary Shares and Other Shares proposed to be included in such registration shall be included in the following order:

 

(A)          first , the Registrable Shares held by Revolution Living requested by Revolution Living to be included in such registration pursuant to Section 6.1(a) ;

 

(B)           second , the Primary Shares and the Other Shares, as determined by Gaiam and the holders of Other Shares.

 

(c)           A requested registration under Section 6.1(a)  may be rescinded prior to such registration being declared effective by the Commission by written notice to Gaiam from Revolution Living; provided , however , that such rescinded registration shall not count as a registration initiated pursuant to this Section 6.1 for purposes of subclause (A) of clause (i) of subsection (b) above if (x) Gaiam shall have been reimbursed for all out-of-pocket expenses incurred by Gaiam in connection with such rescinded registration, provided that each registration

 

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that may be requested under this Section 6.1 may not be rescinded pursuant to clause (x) more than two times, provided , further that such rescission may not be made more than once in any 12-month period or (y) (1) Revolution Living reasonably believed that the registration statement contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein not misleading, (2) notified Gaiam of such fact and requested that Gaiam correct such alleged misstatement or omission and (3) Gaiam has refused to correct such alleged misstatement or omission.

 

6.2          Piggyback Registration .

 

If at any time from and after the expiration of the Standstill Period, Gaiam proposes for any reason to register Primary Shares or Other Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto), it shall promptly give written notice to Revolution Living of its intention so to register the Primary Shares or Other Shares and, upon the written request, given within 15 days after delivery of any such notice by Gaiam, of Revolution Living to include in such registration Registrable Shares (which request shall specify the number of Registrable Shares proposed to be included in such registration), Gaiam shall use its best efforts to cause all such Registrable Shares to be included in such registration on the same terms and conditions as the Securities otherwise being sold in such registration; provided , however , that if the managing underwriter advises Gaiam that the inclusion of all Registrable Shares or Other Shares proposed to be included in such registration would interfere with the successful marketing (including pricing) of Primary Shares proposed to be registered by Gaiam, then the number of Primary Shares, Registrable Shares and Other Shares proposed to be included in such registration shall be included in the following order:

 

(i)            first , the Primary Shares or, if the registration is a registration on behalf of holders of Other Shares holding demand registration rights, the Other Shares requested to be included in such registration;

 

(ii)           second , the Registrable Shares held by Revolution Living and requested by Revolution Living to be included in such registration pursuant to the terms of this Section 6.2 and the Other Shares (if such holders are not exercising demand registration rights), on a pari passu basis based on the number of shares sought to be registered; and

 

(iii)          third , the Primary Shares (if the registration is a registration on behalf of holders of Other Shares holding demand registration rights).

 

6.3          Registrations on Form S-3. 

 

(a)           If the number of Registrable Shares proposed to be included in the second registration by Revolution Living as provided in Section 6.1 is reduced as a result of advice from the managing underwriter that the inclusion of all Registrable Shares proposed to be included in such registration would have interfered with the successful marketing (including pricing) of all such Registrable Shares, then for so long as Gaiam is qualified for the use of Form S-3 promulgated under the Securities Act or any successor form thereto, at any time from and after the expiration of the Standstill Period, Revolution Living shall have the right to request in

 

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writing one registration on Form S-3, or such successor form, of Registrable Shares, which request or requests shall (i) specify the number of Registrable Shares intended to be sold or disposed of, (ii) state the intended method of disposition of such Registrable Shares and (iii) relate to Registrable Shares having an aggregate gross offering price (before underwriting discounts and commissions) of at least $1,000,000, and upon receipt of such request, Gaiam shall use its best efforts promptly to effect the registration under the Securities Act of the Registrable Shares so requested to be registered.  Whenever Gaiam is required by this Section 6.3(a)  to use its best efforts to effect the registration of Registrable Shares, each of the procedures and requirements of Section 6.1 (including but not limited to the requirement that Gaiam notify all holders of Registrable Shares from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration.

 

(b)           Anything contained in Section 6.3(a)  to the contrary notwithstanding, Gaiam shall not be obligated to effect pursuant to Section 6.3(a)  any registration under the Securities Act except in accordance with the following provisions:

 

(i)            Gaiam shall not be obligated to effect such registration if it is requested within six (6) months after a registered offering of Gaiam in which Revolution Living was given the opportunity to participate; and

 

(ii)           Gaiam may delay the filing or effectiveness of any Registration Statement on Form S-3 for a period of up to 90 days after the date of a request for registration pursuant to this Section 6.3 if at the time of such request Gaiam is engaged in a Material Transaction; provided , however , that Gaiam may only so delay the filing or effectiveness of a registration statement pursuant to this Section 6.3(b)(ii)  on one occasion during any twelve-month period.

 

6.4          Preparation and Filing .

 

(a)           If and whenever Gaiam is under an obligation pursuant to the provisions of this Article VI to use its best efforts to effect the registration of any Registrable Shares, Gaiam shall, as expeditiously as practicable:

 

(i)            With respect to registrations pursuant to Sections 6.1 and 6 .2 , use its best efforts to cause a Registration Statement that registers such Registrable Shares to become and remain effective for a period of 90 days (excluding any period during which such effectiveness is suspended) or until all of such Registrable Shares have been disposed of (if earlier);

 

(ii)           furnish, at least five Business Days before filing a Registration Statement that registers such Registrable Shares, a Prospectus relating thereto and any amendments or supplements relating to such Registration Statement or Prospectus, to one counsel selected by, in the case of a Registration initiated pursuant to Section 6.1(a)  Revolution Living (“ Revolution Living’s Counsel ”), copies of all such documents proposed to be filed (it being understood that such five Business Day period need not apply to successive drafts of the same document proposed to be filed so long as such successive drafts are supplied to Revolution Living’s Counsel in

 

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advance of the proposed filing by a period of time that is customary and reasonable under the circumstances);

 

(iii)          prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for at least the period set forth in Section 6.4(a)(i)  or until all of such Registrable Shares have been disposed of (if earlier) and to comply with the provisions of the Securities Act with respect to the sale or other disposition of such Registrable Shares;

 

(iv)         notify Revolution Living’s Counsel promptly in writing (A) of any comments by the Commission with respect to such Registration Statement or Prospectus, or any request by the Commission for the amending or supplementing thereof or for additional information with respect thereto, (B) of the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement or Prospectus or any amendment or supplement thereto or the initiation of any proceedings for that purpose (and Gaiam shall use its best efforts to prevent the issuance thereof or, if issued, to obtain its withdrawal) and (C) of the receipt by Gaiam of any notification with respect to the suspension of the qualification of such Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purposes;

 

(v)          use its best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such jurisdictions as any seller of Registrable Shares reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller of Registrable Shares to consummate the disposition in such jurisdictions of the Registrable Shares owned by such seller; provided , however , that Gaiam will not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required so to do but for this clause (v);

 

(vi)         furnish to each seller of such Registrable Shares such number of copies of a summary Prospectus or other Prospectus, including a preliminary Prospectus, in conformity with the requirements of the Securities Act, and such other documents as such seller of Registrable Shares may reasonably request in order to facilitate the public sale or other disposition of such Registrable Shares;

 

(vii)        use its best efforts to cause such Registrable Shares to be registered with or approved by such other Governmental Authorities as may be necessary by virtue of the business and operations of Gaiam to enable the seller or sellers thereof to consummate the disposition of such Registrable Shares;

 

(viii)       notify on a timely basis each seller of such Registrable Shares at any time when a Prospectus relating to such Registrable Shares is required to be delivered under the Securities Act within the appropriate period mentioned in clause (i) of this Section 6.4(a)  of the happening of any event as a result of which the

 

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Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and, at the request of such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the offerees of such shares, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

 

(ix)          make available for inspection by any seller of such Registrable Shares, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other agent retained by any such seller or underwriter (collectively, the “ Inspectors ”), all pertinent financial, business and other records, pertinent corporate documents and properties of Gaiam (collectively, the “ Records ”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause Gaiam’s officers, directors and employees to supply all information (together with the Records, the “ Information ”) reasonably requested by any such Inspector in connection with such Registration Statement (and any of the Information which Gaiam determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be used by such seller or such Inspector for any purpose other than exercise of such due diligence responsibility and shall not be disclosed by the Inspectors unless (A) the disclosure of such Information is necessary to avoid or correct a material misstatement or omission in the Registration Statement, (B) the release of such Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (C) such Information has been made generally available to the public or (D) the seller of Registrable Shares agrees that it will, upon learning that disclosure of such Information is sought in a court of competent jurisdiction, give notice to Gaiam and allow Gaiam, at Gaiam’s expense, to undertake appropriate action to prevent disclosure of the Information deemed confidential);

 

(x)           use its best efforts to obtain from its independent certified public accountants a “cold comfort” letter in customary form and covering such matters of the type customarily covered by cold comfort letters;

 

(xi)          use its best efforts to obtain, from its counsel, an opinion or opinions in customary form (which shall also be addressed to Revolution Living if selling Registrable Shares in such registration);

 

(xii)         provide a transfer agent and registrar (which may be the same entity and which may be Gaiam) for such Registrable Shares;

 

(xiii)        issue to any underwriter to which any seller of Registrable Shares may sell Securities in such offering certificates evidencing such Registrable Shares;

 

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(xiv)        list such Registrable Shares on any national securities exchange on which any shares of the Common Stock are listed or, if the Common Stock is not listed on a national securities exchange, use its best efforts to qualify such Registrable Shares for inclusion on the automated quotation system of the National Association of Securities Dealers, Inc. (the “ NASD ”), National Market System (“ NMS ”), or such other national securities exchange as Revolution Living shall request if the Common Stock is not then eligible for trading on the NMS;

 

(xv)         otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, earnings statements which need not be audited covering a period of 12 months beginning within three months after the effective date of the Registration Statement, which earnings statements shall satisfy the provisions of Section 11(a) of the Securities Act; and

 

(xvi)        use its best efforts to take all other steps necessary to effect the registration of such Registrable Shares contemplated hereby.

 

(b)           Each holder of Registrable Shares that sells Registrable Shares pursuant to a registration under this Agreement agrees that during such time as such seller may be engaged in a distribution of the Registrable Shares, such seller shall comply with Regulation M promulgated under the Exchange Act and pursuant thereto it shall, among other things: (i) not engage in any stabilization activity in connection with the Securities of Gaiam in contravention of such rules; (ii) distribute the Registrable Shares under the Registration Statement solely in the manner described in the Registration Statement; and (iii) cease distribution of such Registrable Shares pursuant to such Registration Statement upon receipt of written notice from Gaiam that the prospectus covering the Registrable Shares contains any untrue statement of a material fact or omits a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.

 

6.5          Expenses .

 

All expenses incurred by Gaiam in complying with Section 6.4 , including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), fees and expenses of complying with securities and blue sky laws, printing expenses, fees and expenses of Gaiam’s counsel and accountants and reasonable fees and expenses of Revolution Living’s Counsel, shall be paid by Gaiam; provided , however , that all underwriting discounts and selling commissions applicable to the Registrable Shares and all fees and expenses of counsel for the seller or sellers (other than reasonable fees and expenses of Revolution Living’s Counsel), shall not be borne by Gaiam but shall be borne by the seller or sellers thereof, in proportion to the number of Registrable Shares sold by such seller or sellers.

 

6.6          Indemnification .

 

(a)           To the maximum extent permitted by law, in connection with any registration of any Registrable Shares under the Securities Act pursuant to this Article VI , Gaiam shall indemnify and hold harmless the seller of such Registrable Shares, each underwriter, broker

 

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or any other Person acting on behalf of such seller, each other Person, if any, who controls any of the foregoing Persons within the meaning of the Securities Act and each Representative of any of the foregoing Persons, against any losses, claims, damages or liabilities, joint or several, to which any of the foregoing Persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement under which such Registrable Shares were registered, any preliminary Prospectus or final Prospectus contained therein, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or, with respect to any Prospectus, necessary to make the statements therein in light of the circumstances under which they were made not misleading, or any violation by Gaiam of the Securities Act or state securities or blue sky laws applicable to Gaiam and relating to action or inaction required of Gaiam in connection with such registration or qualification under such state securities or blue sky laws, and Gaiam shall promptly reimburse such seller, such underwriter, such broker, such controlling Person or such Representatives for any legal or other expenses incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that Gaiam shall not be liable to any such Person to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in said Registration Statement, preliminary Prospectus, amendment, supplement or document incident to registration or qualification of any Registrable Shares in reliance upon and in conformity with written information furnished to Gaiam through an instrument duly executed by such Person, or a Person duly acting on their behalf, specifically for use in the preparation thereof; provided further , however , that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement, allegedly untrue statement, omission or alleged omission made in any preliminary Prospectus but eliminated or remedied in the final Prospectus (filed pursuant to Rule 424 of the Securities Act), such indemnity agreement shall not inure to the benefit of any indemnified party from whom the Person asserting any loss, claim, damage, liability or expense purchased the Registrable Shares which are the subject thereof, if a copy of such final Prospectus had been timely made available to such Indemnified Person and such final Prospectus was not delivered to such Person with or prior to the written confirmation of the sale of such Registrable Shares to such Person.

 

(b)           To the maximum extent permitted by law, in connection with any registration of Registrable Shares under the Securities Act pursuant to this Article VI , each seller of Registrable Shares shall indemnify and hold harmless (in the same manner and to the same extent as set forth in the paragraph (a) of this Section 6.6 ) Gaiam, each underwriter or broker involved in such offering, each other seller of Registrable Shares under such Registration Statement, each Person who controls any of the foregoing Persons within the meaning of the Securities Act and any Representative of the foregoing Persons with respect to any statement or omission from such Registration Statement, any preliminary Prospectus or final Prospectus contained therein, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, if such statement or omission was made in reliance upon and in conformity with written information furnished to Gaiam or such underwriter through an instrument duly executed by such seller or a Person duly acting on their behalf

 

29

 

specifically for use in connection with the preparation of such Registration Statement, preliminary Prospectus, final Prospectus, amendment or supplement; provided , however , that the obligation to indemnify will be several, not joint and several, among the sellers of Registrable Shares, and the maximum amount of liability in respect of such indemnification shall be in proportion to and limited, in the case of each seller of Registrable Shares, to an amount equal to the proceeds actually received by such seller from the sale of Registrable Shares effected pursuant to such registration.

 

(c)           Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this Section 6.6 , such indemnified party will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action ( provided , however , that an indemnified party’s failure to give such notice in a timely manner shall only relieve the indemnification obligations of an indemnifying party to the extent such indemnifying party is prejudiced by such failure).  In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided , however , that if any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are in addition to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section 6.6 , the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party and such indemnifying party shall reimburse such indemnified party and any Person controlling such indemnified party for that portion of the reasonable fees and expenses of any counsel ( plus appropriate special and local counsel) retained by the indemnified party which are reasonably related to the matters covered by the indemnity agreement provided in this Section 6.6 .  Notwithstanding the foregoing, the indemnity agreement set forth in Section 6.6(a)  shall not apply to amounts paid in settlement if such settlement is effected without the written consent of Gaiam (which consent shall not be unreasonably withheld).

 

(d)           If the indemnification provided for in this Section 6.6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage or liability referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, claim, damage or liability as well as any other relevant equitable considerations; provided , however , that the maximum amount of liability in respect of such contribution shall be limited, in the case of each seller of Registrable Shares, to an amount equal to the proceeds actually received by such seller from the sale of Registrable Shares effected pursuant to such registration.  The relative fault of the indemnifying party and of the indemnified

 

30

 

party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

(e)           The indemnification and contribution provided for under this Article VI will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party and will survive the transfer of Securities.

 

(f)            The indemnification required by this Section 6.6 will be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred, subject to prompt refund in the event any such payments are determined not to have been due and owing hereunder.

 

6.7          Underwriting Agreement .

 

(a)           Notwithstanding the provisions of Sections 6.4 and 6.6 , to the extent that the sellers of Registrable Shares in a proposed registration shall enter into an underwriting or similar agreement, which agreement contains provisions covering one or more issues addressed in such sections of this Article VI , the provisions contained in such sections of this Article VI addressing such issue or issues shall be of no force or effect with respect to such registration, but this provision shall not apply to Gaiam if Gaiam is not a party to the underwriting or similar agreement.

 

(b)           If any registration pursuant to Section 6.1 or Section 6.3 is requested to be an underwritten offering, Gaiam shall negotiate in good faith to enter into a reasonable and customary underwriting agreement with the underwriters thereof.  Gaiam shall be entitled to receive indemnities from lead institutions, underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement and to the extent customary given their role in such distribution.

 

(c)           No holder of Registrable Shares may participate in any registration hereunder that is underwritten unless such holder agrees (i) to sell such holder’s Registrable Shares proposed to be included therein on the basis provided in any underwriting arrangements acceptable to Gaiam and Revolution Living and (ii) as expeditiously as possible, notify Gaiam of the occurrence of any event concerning such holder as a result of which the Prospectus relating to such registration contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

6.8          Suspension .

 

Anything contained in this Article VI to the contrary notwithstanding, Gaiam may (not more than once with respect to each registration), by notice in writing to each holder of Registrable Shares to which a Prospectus relates, require such holder to suspend, for up to 90

 

31

 

days (the “ Suspension Period ”), the use of any Prospectus included in a Registration Statement filed under Section 6.1 , 6.2 or 6.3 if a Material Transaction exists that would require an amendment to such Registration Statement or supplement to such Prospectus (including any such amendment or supplement made through incorporation by reference to a report filed under Section 13 of the Exchange Act).  The period during which such Prospectus must remain effective shall be extended by a period equal to the Suspension Period.  Gaiam may (but shall not be obligated to) withdraw the effectiveness of any Registration Statement subject to this provision.

 

6.9          Information by Holder .

 

Each holder of Registrable Shares to be included in any registration shall furnish to Gaiam and the managing underwriter such written information regarding such holder and the distribution proposed by such holder as Gaiam or the managing underwriter may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Article VI.

 

6.10        Exchange Act Compliance .

 

So long as the Class A Common Stock is registered pursuant to the Exchange Act, Gaiam shall comply with all of the reporting requirements of the Exchange Act (whether or not it shall be required to do so) and shall comply with all other public information reporting requirements of the Commission, which are conditions to the availability of Rule 144 for the sale of the Common Stock, and Gaiam shall cooperate with each holder of Registrable Shares in supplying such information as may be reasonably necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of Rule 144.

 

6.11        No Conflict of Rights .

 

Gaiam represents and warrants to Revolution Living that the registration rights granted to Revolution Living hereby do not conflict with any other registration rights granted by Gaiam.  Gaiam shall not, after the date hereof, grant any registration rights which conflict with or impair, or have any priority over, the registration rights granted hereby, without the prior consent of Revolution Living (provided that this Section 6.11 shall not prohibit the grant of pari-passu rights).  In any underwritten public offering, the managing underwriter shall be a nationally recognized investment banking firm selected by Gaiam.

 

6.12        Transfer of Registration Rights.

 

The registration rights provided in this Article VII may be Transferred by Revolution Living to any Permitted Transferee of Revolution Living that acquires at least twenty-five percent (25%) of (x) all of the shares of Common Stock held by Revolution Living at the time of the Transfer and (y) any rights to acquire shares under the Transaction Agreement (so long as such Transfer does not violate any provision of this Agreement), in each case so long as Gaiam is, within a reasonable time after such transfer, furnished with written notice of the name and address of such Transferee and the securities with respect to which such registration rights are being assigned.

 

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6.13        Termination .

 

This Article VI shall terminate and be of no further force or effect, as to Revolution Living, upon such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of Revolution Living’s Registrable Shares in a single transaction without regard to volume limitations; provided , however , that Sections 6.5 and 6.6 shall survive the termination of this Article VI to the extent they continue to apply to a prior registration of Registrable Securities.

 

ARTICLE VII

MISCELLANEOUS

 

7.1          Amendment .

 

This Agreement may not be modified or amended, or any of the provisions hereof waived, except by written agreement of each of the Parties.

 

7.2          Waivers; Extensions .

 

No course of dealing between or among any Parties or any delay in exercising any rights hereunder will operate as a waiver of any rights of any Party.  The failure of any Party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

 

7.3          Termination .

 

The provisions of this Agreement, except as otherwise expressly provided in this Agreement (such as Section 6.13 hereof), shall terminate upon the first to occur of (a) the consummation of any liquidation or dissolution of Gaiam approved by each Party (other than Gaiam), (b) the approval in writing of such termination by each Party (including Gaiam), (c) Revolution Living and its Permitted Transferees beneficially owning, at any time from and after the Closing, in the aggregate fewer than five percent (5%) of the Fully-Diluted Common Stock, (d) Rysavy and his Permitted Transferees beneficially owning in the aggregate fewer than five percent (5%) of the Fully-Diluted Common Stock, (e) the eighteen month anniversary of the Closing, if Revolution Living has not exercised the Option, and (f) the termination of the Transaction Agreement pursuant to Section 9.1 thereof.  Notwithstanding the foregoing, a termination of this Agreement under clause (e) above shall not terminate the provisions of Article VI .

 

7.4          Severability .

 

It is the desire and intent of the Parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such

 

33

 

provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or such provision in any other jurisdiction.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

7.5          Entire Agreement .

 

This Agreement and the other agreements referred to herein and to be executed and delivered in connection herewith embody the entire agreement and understanding among the Parties with respect to the subject matter hereof and thereof and supersede and preempt any and all prior and contemporaneous understandings, agreements, arrangements or representations by or among the Parties, written or oral, which may relate to the subject matter hereof or thereof in any way.  Other than this Agreement, the other Documents and the other agreements referred to herein and therein to be executed and delivered in connection herewith and therewith, there are no other agreements continuing in effect relating to the subject matter hereof.

 

7.6          Independence of Agreements, Covenants, Representations and Warranties .  

 

All agreements and covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain agreement or covenant, the fact that such action or condition is permitted by another agreement or covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such initial covenant.  In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of or a breach of a representation and warranty hereunder.  The exhibits and schedules attached hereto are hereby made part of this Agreement in all respects.

 

7.7          Successors and Assigns .

 

(a)           Except as otherwise provided herein, including Section 7.7(c)  below, this Agreement will bind and inure to the benefit of and be enforceable by Gaiam and its successors and assigns and Rysavy and Revolution Living and any subsequent holders of Registrable Shares and the respective successors and assigns of each of them, so long as they hold Registrable Shares.  None of the provisions hereof shall create, or be construed or deemed to create, any right to employment in favor of any Person by Gaiam or any of its Subsidiaries.  This Agreement is not intended to create any third party beneficiaries.

 

(b)           Without limiting the generality of Section 7.7(a) , any Permitted Transferee, other than a Permitted Transferee under clause (iii) of the definition of “Permitted Transferee,” shall (i) execute and deliver to Gaiam an agreement to be bound by this Agreement reasonably satisfactory in form and substance to Gaiam, Revolution Living and Rysavy and

 

34

 

(ii) have all of the rights and be bound by all of the obligations hereunder of the Transferring Party for all purposes hereunder.

 

(c)           Notwithstanding anything to the contrary contained herein, a Transferee in a Public Sale shall not have any rights or obligations under this Agreement with respect to the Holder Securities Transferred to it.

 

(d)           In the event additional Holder Securities are issued by Gaiam to a Party at any time during the term of this Agreement, either directly or upon the exercise or exchange of any Securities convertible of exercisable into Common Stock, such additional Holder Securities shall, as a condition to such issuance, become subject to the terms and provisions of this Agreement.

 

7.8          Counterparts; Facsimile Signatures .

 

This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.  Facsimile counterpart signatures to this Agreement shall be acceptable and binding.

 

7.9          Remedies .

 

(a)           Each Party shall have all rights and remedies reserved for such Person pursuant to this Agreement and all of the rights that such holder has under any law or equity.  Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity.

 

(b)           The Parties agree that if any Party seeks to resolve any dispute arising under this Agreement pursuant to a legal proceeding.

 

(c)           It is acknowledged that it will be impossible to measure in money the damages that would be suffered by any Party if any other Party fails to comply with any of the obligations imposed on it upon them in this Agreement or in the Restated Articles or Bylaws and that in the event of any such failure, the aggrieved Party will be irreparably damaged and will not have an adequate remedy at law.  Any such aggrieved Party shall, therefore, be entitled to equitable relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the Parties shall raise the defense that there is an adequate remedy at law.

 

7.10        Notices .

 

All notices or other communications which are required or otherwise delivered hereunder shall be deemed to be sufficient and duly given if contained in a written instrument (a) personally delivered or sent by telecopier, (b) sent by nationally-recognized overnight courier guaranteeing next Business Day delivery or (c) sent by first class registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

35

 

if to Gaiam, to:

 

Gaiam, Inc.

360 Interlocken Blvd.
Broomfield, Colorado 80021

Telephone:            303-222-3645

Telecopy:              303-222-3609

Attention:              Jirka Rysavy

 

With a copy to:

 

Bartlit Beck Herman Palenchar & Scott LLP

1899 Wynkoop, Suite 800

Denver, Colorado 80202

Telephone:            303-592-3100

Telecopy:              303-592-3140

Attention:              Thomas R. Stephens

 

if to Rysavy, to:

 

Jirka Rysavy

c/o Gaiam, Inc.

360 Interlocken Blvd.
Broomfield, Colorado 80021

Telephone:            303-222-3645

Telecopy:              303-222-3609

 

With a copy to:

 

Bartlit Beck Herman Palenchar & Scott LLP

1899 Wynkoop, Suite 800

Denver, Colorado 80202

Telephone:            303-592-3100

Telecopy:              303-592-3140

Attention:              Thomas R. Stephens

 

if to the Purchaser, to:

 

Revolution Living LLC

1717 Rhode Island Avenue, N.W.

Washington, D.C. 20036

Telephone:            (202) 776-1405

Telecopier:            (202) 776-1499

Attention:              Ronald A. Klain

 

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With a copy to:

 

O’Melveny & Myers LLP
1625 Eye Street, N.W.
Washington, D.C. 20006

Telephone:            (202) 383-5110
Telecopier:            (202) 383-5414
Attention:              David G. Pommerening

 

or to such other address as the Party to whom notice is to be given may have furnished to each other Party in writing in accordance herewith.  Any such notice or communication shall be deemed to have been received (i) when delivered, if personally delivered, (ii) when sent, if sent by telecopy on a Business Day (or, if not sent on a Business Day, on the next Business Day after the date sent by telecopy), (iii) on the first Business Day after dispatch, if sent by nationally recognized, overnight courier guaranteeing next Business Day delivery and (iv) on the fifth Business Day following the date on which the piece of mail containing such communication is posted, if sent by mail.

 

7.11        Governing Law; Waiver of Jury Trial .

 

(a)           All questions concerning the construction, interpretation and validity of this Agreement shall be governed by and construed and enforced in accordance with the domestic laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether in the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.  In furtherance of the foregoing, the internal law of the State of Delaware will control the interpretation and construction of this Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.  Notwithstanding the foregoing provisions of this Section 7.11 , those provisions of this Agreement that relate to the internal governance of Gaiam, and are required by Colorado corporate law to be governed by such, shall be governed by and construed and enforced in accordance with the internal laws of the State of Colorado.

 

(b)           BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.

 

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7.12        Further Assurances .

 

Each Party shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other Party reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby.

 

7.13        Conflicting Agreements .

 

No Party shall enter into any shareholders agreements or arrangements of any kind with any Person with respect to any Securities on terms inconsistent with the provisions of this Agreement (whether or not such agreements or arrangements are with Persons that are not Parties to this Agreement), including agreements or arrangements with respect to the acquisition or disposition of Securities in a manner which is inconsistent with this Agreement.

 

7.14        No Third Party Reliance .

 

Anything contained herein to the contrary notwithstanding, the representations and warranties of Gaiam contained in this Agreement (a) are being given by Gaiam as an inducement to the other Parties to enter into this Agreement and the other Documents (and Gaiam acknowledges that such other Parties have expressly relied thereon) and (b) are solely for the benefit of such Parties.  Accordingly, no third party (including, without limitation, any other holder of capital stock of Gaiam) or anyone acting on behalf of any thereof other than the Parties (other than Gaiam), shall be a third party or other beneficiary of such representations and warranties and no such third party shall have any rights of contribution against the Parties with respect to such representations or warranties or any matter subject to or resulting in indemnification under this Agreement or otherwise.

 

*   *   *   *   *

 

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IN WITNESS WHEREOF , the undersigned have duly executed this Shareholders Agreement as of the date first written above.

 

	GAIAM:
	GAIAM, INC.
	By:
		Name:
		Title:
	RYSAVY:
	JIRKA RYSAVY
	REVOLUTION LIVING:
	REVOLUTION LIVING LLC
	By:
		Name:
		Title:
	CASE:
	STEPHEN M. CASE

 

S-1

EXHIBIT 10.3

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“ Agreement ”) is made and entered into as of August   , 2005 (the “ Effective Date ”) by and between Jirka Rysavy (“ Executive ”), and Gaiam, Inc., a Colorado corporation (“ Company ”).

 

1.             TERM OF EMPLOYMENT :   Subject to the terms of this Agreement, Company hereby agrees to employ Executive, and Executive hereby agrees to accept such employment, for the period beginning on the Effective Date and ending on the fourth anniversary of the Effective Date or such earlier date upon which employment is terminated by Company or Executive in accordance with the terms hereof (the “ Term ”).

 

2.             POSITION AND DUTIES :  During the Term, Executive shall serve as Chairman of the Board and Chief Executive Officer of Company, shall report to the Board of Directors (the “ Board ”), and shall perform such duties, consistent with such positions, as the Board may assign, delegate or limit from time to time.  Executive shall diligently devote such business time, energy and ability to the business of Company as is necessary to perform Executive’s duties, and shall perform those duties fully, faithfully, efficiently and in compliance with law.

 

3.             COMPENSATION AND BENEFITS :   Company shall pay Executive an annual base salary of $290,000 (the “ Base Salary ”), which shall be earned and shall be payable in regular installments in accordance with Company’s normal payroll practices, less required or authorized deductions.  Executive shall be eligible to participate in all of the Company’s bonus programs for executive officers.  The Board shall review Executive’s performance annually.  Executive shall be entitled to customary benefits as determined by the Board, including five weeks of paid vacation days and a certain number of paid sick days, and the right to participate in Company’s retirement plans and group health plans applicable to Executive.  Company agrees to reimburse Executive, subject to its normal policy and practices, for travel and other expenses reasonably and necessarily incurred or made by Executive in connection with Company business.

 

4.             MISCELLANEOUS :

 

(a)           Notices :   All notices hereunder shall be in writing and shall be directed to the applicable address set forth on the signature page hereto.

 

(b)           Survivability :   The expiration or termination of the employment of Executive or of this Agreement shall not operate to affect such of the provisions hereof as are expressed to remain in full force and effect notwithstanding such termination or expiration.

 

(c)           Successors; No Assignment of Agreement :   Except as otherwise provided herein, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns.  Executive acknowledges that his services are unique and personal.  Accordingly, Executive may not assign his rights or delegate his duties or obligations under this Agreement to any person or entity.

 

(d)           Additional Representations :   Executive represents and warrants that he has the full capacity, right and authority to enter into this Agreement and to render the services as

 

 

required under this Agreement, and that by signing this Agreement he is not breaching any contract or legal obligation he owes to any third party.  Executive represents and warrants to Company that he is knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, that he has read this Agreement and that he understands its terms.  Executive acknowledges that, prior to assenting to the terms of this Agreement, he had been given a reasonable time to review it, to consult with counsel of his choice, and to negotiate at arm’s length with Company as to its contents.  Company and Executive agree that the language used in this Agreement is the language chosen by the parties to express their mutual intent, and that Executive has entered into this Agreement freely and voluntarily and without pressure or coercion from anyone. Executive represents and warrants to Company that he is not bound by any agreement or subject to any restriction that would interfere with or prevent him from entering into or carrying out this Agreement.

 

(e)           Rights and Waivers :   All rights and remedies of the parties hereto are separate and cumulative, and no one of them, whether exercised or not, shall be deemed to be to the exclusion of any other rights or remedies or shall be deemed to limit or prejudice any other legal or equitable rights or remedies which either of the parties hereto may have.  No party to this Agreement shall be deemed to waive any rights or remedies under this Agreement unless such waiver is in writing and signed by such party.  No delay or omission on the part of either party in exercising any right or remedy shall operate as a waiver of such right or remedy or any other rights or remedies.  A waiver on any one occasion shall not be construed as a bar to or a waiver of any right or remedy on any future occasion.

 

(f)            Withholding :   Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

(g)           Miscellaneous:   Any provision of this Agreement may be waived or amended if, and only if, such amendment or waiver is in writing and signed by all of the parties.  This Agreement constitutes the entire agreement and understanding of the parties hereto and supersedes all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof.  This Agreement shall be governed by the laws of the State of Colorado (without regard to the choice of law provisions thereof).  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but such counterparts together shall constitute one and the same instrument.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to limit or affect any of the provisions hereof.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable under applicable law, such provision shall be ineffective only to the extent of such invalidity or unenforceability, without invalidating the remainder of this Agreement.  The parties also intend that, if a court of competent jurisdiction finds any provision of this Agreement overly restrictive or unenforceable as written, it will reform such provision to the least extent necessary and, as so reformed, will enforce such provision to the maximum degree permitted under applicable law.

 

[Remainder of page intentionally left blank]

 

2

 

IN WITNESS WHEREOF, Company and Executive, intending to be legally bound, have executed this Agreement on the day and year first above written.

 

 

EXECUTIVE:				COMPANY: GAIAM, INC.
By:				By:
	Name: Jirka Rysavy				Name:
	Address:	c/o Gaiam, Inc.			Title:
		360 Interlocken Blvd.			Address:	360 Interlocken Blvd.
		Broomfield, CO 80021				Broomfield, CO 80021
	Facsimile: 303-222-3609				Facsimile: 303-222-3609

 

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EXHIBIT 10.4

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“ Agreement ”) is made and entered into as of August   , 2005 (the “ Effective Date ”) by and between Lynn Powers (“ Executive ”), and Gaiam, Inc., a Colorado corporation (“ Company ”).

 

1.             TERM OF EMPLOYMENT :   Subject to the terms of this Agreement, Company hereby agrees to employ Executive, and Executive hereby agrees to accept such employment, for the period beginning on the Effective Date and ending on the fourth anniversary of the Effective Date or such earlier date upon which employment is terminated by Company or Executive in accordance with the terms hereof (the “ Term ”).

 

2.             POSITION AND DUTIES :  During the Term, Executive shall serve as President and Chief Executive Officer of North American Operations of Company, shall report to the Board of Directors (the “ Board ”), and shall perform such duties, consistent with such positions, as the Board may assign, delegate or limit from time to time.  Executive shall diligently devote such business time, energy and ability to the business of Company as is necessary to perform Executive’s duties, and shall perform those duties fully, faithfully, efficiently and in compliance with law.

 

3.             COMPENSATION AND BENEFITS :   Company shall pay Executive an annual base salary of $290,000 (the “ Base Salary ”), which shall be earned and shall be payable in regular installments in accordance with Company’s normal payroll practices, less required or authorized deductions.  Executive shall be eligible to participate in all of the Company’s bonus programs for executive officers.  The Board shall review Executive’s performance annually.  Executive shall be entitled to customary benefits as determined by the Board, including five weeks of paid vacation days and a certain number of paid sick days, and the right to participate in Company’s retirement plans and group health plans applicable to Executive.  Company agrees to reimburse Executive, subject to its normal policy and practices, for travel and other expenses reasonably and necessarily incurred or made by Executive in connection with Company business.

 

4.             NON-COMPETITION, NONDISPARAGEMENT :

 

(a)           Non-competition and Nondisparagement :   During Executive’s employment and thereafter, Executive will not make any disclosure, issue any public statements or otherwise cause to be disclosed any information which is designed, intended or might reasonably be anticipated to discourage suppliers, customers or employees of Company or to have a negative impact or adverse effect on Company, its major shareholders and/or any affiliate of any major shareholder.

 

Executive agrees that, without the prior written consent of the Company, signed by Company’s Chief Executive Officer, Executive will not, during the term of Executive’s employment by the Company or for a period of one year thereafter (i) accept employment with, serve as a consultant to, or accept compensation from any person, firm or corporation (including any new business started by Executive, either alone or with others) whose products and or services compete with those offered by Company, in any geographic market in which Company is then doing business or to Executive’s knowledge plans to do business, (ii) contact or solicit

 

 

any customers of the Company for the purposes of diverting any existing or future business of such customers to a competing source, (iii) contact or solicit any vendors to Company (directly or indirectly) for the purpose of causing, inviting or encouraging any such vendor to alter or terminate his, her or its business relationship with Company, or (iv) contact or solicit any employees of Company (directly or indirectly) for the purpose of causing, inviting or encouraging any such employee to alter or terminate his, her or its employment relationship with Company.

 

Executive agrees that this covenant is reasonable with respect to its duration, geographic area and scope.  It is the desire and intent of the parties that the provisions of this Section 4(a) shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular portion of this Section 4(a) shall be adjudicated to be invalid or unenforceable, this Section 4(a) shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of this Section 4(a) in the particular jurisdiction in which such adjudication is made.

 

(b)           Enforcement :   Executive acknowledges that irreparable damage would result to Company or other persons or entities who are beneficiaries of the provisions of this Section 4 if the provisions of this Section 4 are not specifically enforced, and agrees that Company shall be entitled to any appropriate legal, equitable, or other remedy, including injunctive relief, in respect of any failure to comply with the provisions of this Section 4.

 

5.             MISCELLANEOUS :

 

(a)           Notices :   All notices hereunder shall be in writing and shall be directed to the applicable address set forth on the signature page hereto.

 

(b)           Survivability :   The expiration or termination of the employment of Executive or of this Agreement shall not operate to affect such of the provisions hereof as are expressed to remain in full force and effect notwithstanding such termination or expiration.

 

(c)           Successors; No Assignment of Agreement :   Except as otherwise provided herein, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns.  Executive acknowledges that her services are unique and personal.  Accordingly, Executive may not assign her rights or delegate her duties or obligations under this Agreement to any person or entity.

 

(d)           Additional Representations :   Executive represents and warrants that she has the full capacity, right and authority to enter into this Agreement and to render the services as required under this Agreement, and that by signing this Agreement she is not breaching any contract or legal obligation she owes to any third party.  Executive represents and warrants to Company that she is knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, that she has read this Agreement and that she understands its terms.  Executive acknowledges that, prior to assenting to the terms of this Agreement, she had been given a reasonable time to review it, to consult with counsel of her choice, and to negotiate at arm’s length with Company as to its contents.  Company and Executive agree that the

 

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language used in this Agreement is the language chosen by the parties to express their mutual intent, and that Executive has entered into this Agreement freely and voluntarily and without pressure or coercion from anyone. Executive represents and warrants to Company that she is not bound by any agreement or subject to any restriction that would interfere with or prevent her from entering into or carrying out this Agreement.

 

(e)           Rights and Waivers :   All rights and remedies of the parties hereto are separate and cumulative, and no one of them, whether exercised or not, shall be deemed to be to the exclusion of any other rights or remedies or shall be deemed to limit or prejudice any other legal or equitable rights or remedies which either of the parties hereto may have.  No party to this Agreement shall be deemed to waive any rights or remedies under this Agreement unless such waiver is in writing and signed by such party.  No delay or omission on the part of either party in exercising any right or remedy shall operate as a waiver of such right or remedy or any other rights or remedies.  A waiver on any one occasion shall not be construed as a bar to or a waiver of any right or remedy on any future occasion.

 

(f)            Withholding :   Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

(g)           Miscellaneous:   Any provision of this Agreement may be waived or amended if, and only if, such amendment or waiver is in writing and signed by all of the parties.  This Agreement constitutes the entire agreement and understanding of the parties hereto and supersedes all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof.  This Agreement shall be governed by the laws of the State of Colorado (without regard to the choice of law provisions thereof).  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but such counterparts together shall constitute one and the same instrument.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to limit or affect any of the provisions hereof.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable under applicable law, such provision shall be ineffective only to the extent of such invalidity or unenforceability, without invalidating the remainder of this Agreement.  The parties also intend that, if a court of competent jurisdiction finds any provision of this Agreement overly restrictive or unenforceable as written, it will reform such provision to the least extent necessary and, as so reformed, will enforce such provision to the maximum degree permitted under applicable law.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, Company and Executive, intending to be legally bound, have executed this Agreement on the day and year first above written.

 

 

EXECUTIVE:				COMPANY: GAIAM, INC.
By:				By:
	Name: Lynn Powers				Name:
	Address:	c/o Gaiam, Inc.			Title:
		360 Interlocken Blvd.			Address:	360 Interlocken Blvd.
		Broomfield, CO 80021				Broomfield, CO 80021
	Facsimile: 303-222-3609				Facsimile: 303-222-3609

 

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Exhibit 10.5

 

INSURANCE AND STOCK REDEMPTION AGREEMENT

 

This INSURANCE AND STOCK REDEMPTION AGREEMENT (this “ Agreement ”), dated as of August 4, 2005, is made by and among Gaiam, Inc., a Colorado corporation (“ Gaiam ”) and Jirka Rysavy, on behalf of himself, his heirs and anyone claiming any interest in his estate (“ Rysavy ”).

 

WHEREAS, as of the date of this Agreement, Rysavy owns approximately 18% of the outstanding shares of Gaiam’s Class A common stock, par value $.0001 per share (the “ Class A Shares ”) and 100% of the outstanding shares of Gaiam’s Class B common stock, par value $.0001 per share (the “ Class B Shares ”), which are convertible into Class A Shares; and

 

WHEREAS, the Class A Shares are publicly traded, and Gaiam believes that the interests of Gaiam’s shareholders would be protected and shareholder valuation would be preserved and enhanced if Rysavy and Gaiam agree to an orderly mechanism for Gaiam to redeem certain of the Class A Shares and Class B Shares owned by Rysavy so as to provide liquidity to any personal representative of Rysavy’s estate to fund debts and expenses and to pay federal and state taxes of any such future estate; and

 

WHEREAS, the parties desire that any purchase of shares by Gaiam pursuant to this Agreement be treated as a redemption under Section 303 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.             Insurance Policies .  Following execution and delivery of this Agreement, Gaiam may purchase one or more term life insurance policies on the life of Rysavy in an aggregate amount as Gaiam shall determine (the “ Policies ”).  The proceeds of the Policies paid to Gaiam upon Rysavy’s death shall be for the benefit of Gaiam and for no other person.  Gaiam shall be the sole owner of the Policies, and neither Rysavy nor any of his successors, transferees, assignees, or personal representatives shall have any collateral interest in the Policies. Rysavy agrees to cooperate with Gaiam in connection with Gaiam’s purchase and maintenance of the Policies, including, but not limited to, providing Gaiam or its designees any records or information and submitting to any required medical or other examinations that are necessary or desirable in connection with the purchase of the Policies.  Rysavy shall not be obligated to contribute to Gaiam all or any portion of the premiums or related costs associated with the purchase of the Policies.  Gaiam shall not be obligated to maintain the Policies and may terminate the Policies at any time.

 

2.             Purchase of Shares .  So long as the Policies are in effect at Rysavy’s death, Gaiam agrees to purchase from Rysavy’s estate, and Rysavy’s estate shall sell to Gaiam, a number of Class A Shares, up to the number of Class A Shares acquired by Rysavy’s estate upon Rysavy’s death (including any Class A Shares acquired by Rysavy’s estate upon the exercise of derivative securities including stock options acquired by Rysavy’s estate upon Rysavy’s death), equal to (a) the proceeds of the Policies paid to Gaiam upon Rysavy’s death, net of any taxes, expenses or other costs incurred by Gaiam, including, without limitation, any alternative minimum taxes, which Gaiam may be subject to or incur as a consequence of receiving insurance proceeds upon the death of Rysavy (the “ Net Proceeds ”), divided by (b) the Purchase Price (as defined in Section 5), rounded to the nearest whole share.  If the Net Proceeds remain following such purchase, then Gaiam agrees to purchase from Rysavy’s estate, and Rysavy’s

 

 

estate shall sell to Gaiam, a number of Class B Shares, up to the number of Class B Shares acquired by Rysavy’s estate upon Rysavy’s death (including any Class B Shares acquired by Rysavy’s estate upon the exercise of derivative securities including stock options acquired by Rysavy’s estate upon Rysavy’s death), equal to (a) the remaining Net Proceeds divided by (b) the Purchase Price, rounded to the nearest whole share; provided, however, that this Section 2 shall only require Rysavy’s estate to sell Class B Shares acquired by Rysavy’s estate that exceed 3,000,000 Class B Shares (as such number is appropriately adjusted to reflect any stock splits, stock dividends or similar transactions after the date of this Agreement). Promptly after Gaiam’s receipt of the Net Proceeds or Gaiam’s determination that no Net Proceeds will be received, and in any event within thirty (30) days following such receipt or determination, Gaiam shall give the executor or other personal representative of Rysavy’s estate (the “ Executor ”) a written notice (the “ Purchase Notice ”) indicating (a) the aggregate amount of Net Proceeds, (b) the closing date of any purchase, which shall be within 10 business days of the date of the Purchase Notice, and (c) an estimate of the applicable Purchase Price and the number of Class A Shares and the number of Class B Shares being purchased by Gaiam under this Section 2.

 

Notwithstanding anything to the contrary contained in this Agreement, Gaiam shall have no obligation to purchase any securities under this Section 2 if in the reasonable opinion of Gaiam or its counsel, such purchase (i) would be prohibited by the Colorado Business Corporation Act or would violate any other law applicable federal or state laws or regulations, or (ii) would violate or result in an event of default and/or acceleration of payment of indebtedness under the provisions of any loan agreements or material contract to which Gaiam or any of its subsidiaries are a party or their assets are subject.

 

3.             Option .  Rysavy hereby grants to Gaiam an option (the “ Option ”), at Gaiam’s sole discretion, to purchase from Rysavy’s estate, at a price equal to the Purchase Price, all or any portion of the Class A Shares or Class B Shares held by Rysavy’s estate that will not be purchased by Gaiam pursuant to Section 2 (including any Class A Shares or Class B Shares acquired by Rysavy’s estate upon the exercise of derivative securities, including stock options); provided, however, that this Section 3 shall only require Rysavy’s estate to sell Class B Shares acquired by Rysavy’s estate that exceed 3,000,000 Class B Shares (as such number is appropriately adjusted to reflect any stock splits, stock dividends or similar transactions after the date of this Agreement). If Gaiam elects to exercise the Option, Gaiam shall include in the Purchase Notice delivered pursuant to Section 2 notification (a) that Gaiam has elected to exercise the Option, and (b) an estimate of the applicable Purchase Price and the number of Class A Shares and the number of Class B Shares being purchased by Gaiam pursuant to the Option. Gaiam shall first purchase all Class A Shares available for purchase pursuant to this Section 3 prior to purchasing any Class B Shares.

 

4.             Closing .  On the closing date as set forth in the Purchase Notice, Rysavy’s estate shall sell to Gaiam, and Gaiam shall purchase from Rysavy’s estate, the number of Class A Shares and Class B Shares determined pursuant to Section 2 and Section 3, and the Executor shall deliver, or cause to be delivered, to Gaiam any applicable stock certificates, together with such stock powers or other similar documents as are necessary or advisable to fully and unconditionally transfer such Class A Shares and Class B Shares to Gaiam, and Gaiam shall deliver to the Executor or the Executor’s designee(s) the applicable Purchase Price, by check or by wire transfer. The securities acquired by Gaiam pursuant to Section 2 and Section 3 shall be free and clear of any liens or encumbrances of any kind, and the Executor shall so represent and warrant in writing to Gaiam at the time of such closing.

 

5.             Purchase Price .  For purposes of this Agreement the “ Purchase Price ” means the fair market value of the Class A Shares being acquired by the Company pursuant to this Agreement, as of the date of the acquisition, as determined by a nationally recognized valuation expert that has not been

 

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employed by the Company, Rysavy or Rysavy’s estate during the previous five years and that was selected in good faith by the Board of Directors of Gaiam.

 

6.             Transfer Restriction .  Rysavy’s estate shall not sell, pledge or otherwise transfer any Class A Shares or Class B Shares or any derivative securities permitting the acquisition or disposition of any Class A Shares or Class B Shares until it is conclusively determined that such securities will not be purchased by Gaiam pursuant to Section 2 or Section 3; provided, however , that such restriction shall not prohibit Rysavy’s estate from exercising or converting any derivative securities.

 

7.             Representations and Warranties of Gaiam .  Gaiam represents and warrants to Rysavy that:

 

(a)           Organization and Qualification .  Gaiam is a Colorado corporation, duly organized, validly existing, and in good standing under the laws of Colorado.  Gaiam is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required.

 

(b)           Authorization of Transaction .  Gaiam has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and all corporate action necessary for such execution, delivery and performance has been taken.  This Agreement constitutes the valid and legally binding obligation of Gaiam, enforceable in accordance with its terms and conditions.

 

(c)           Noncontravention .  Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (a) violate any valid constitutional provision, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Gaiam is subject or any provision of its charter or bylaws; or (b) conflict with, result in a material breach of, constitute a material default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which Gaiam is a party or by which it is bound or to which any of its material assets is subject (or result in the imposition of any security interest upon any of its material assets). Gaiam does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to execute and deliver this Agreement or consummate the transactions contemplated hereby.

 

8.             Representations and Warranties of Rysavy .  Rysavy represents and warrants to Gaiam that:

 

(a)           Authorization of Transaction .  Rysavy has the power and authority to execute and deliver this Agreement and to perform his obligations hereunder and all action necessary for such execution, delivery and performance has been taken.  This Agreement constitutes the valid and legally binding obligation of Rysavy, enforceable in accordance with its terms and conditions.

 

(b)           Noncontravention .  Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (a) violate any valid constitutional provision, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Rysavy is subject; or (b) conflict with, result in a material breach of, constitute a material default under,

 

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result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which Rysavy is a party or by which he is bound or to which any of his material assets is subject (or result in the imposition of any security interest upon any of his material assets).  Rysavy does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to execute and deliver this Agreement or consummate the transactions contemplated hereby.

 

9.             Binding Effect; Third Party Beneficiaries .  This Agreement shall be binding upon and inure to the benefit of Rysavy and Gaiam and their respective heirs, representatives and successors, and shall not confer any rights or remedies upon any person other than Rysavy and Gaiam and their respective heirs, representatives and successors. Executive, in furtherance of this Agreement, shall execute a will directing his Executor to act pursuant to this Agreement and to execute such documents as may be necessary to effectuate the purposes of this Agreement, but failure to execute such a will shall not affect any rights or obligations of either the Executive or his Executor.

 

10.           Entire Agreement .  This Agreement constitutes the entire agreement between the parties and supersedes any prior understandings, agreements, or representations by or between the parties, written or oral, to the extent they related in any way to the subject matter hereof. This Agreement may be altered, amended or revoked only by subsequent written instrument executed by Gaiam and Rysavy, or, following Rysavy’s death, the Executor.

 

11.           Choice of Law .  To the extent not superseded by federal law, the laws of the state of Colorado shall control in all matters relating to this Agreement and any action relating to this Agreement must be brought in Denver, Colorado.

 

12.           Notices .  All notices, requests, demands, claims, and other communications under this Agreement shall be in writing.  Any notice, request, demand, claim, or other communication under this Agreement shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient at the address set forth below the recipient’s signature to this Agreement.  Either party to this Agreement may send any notice, request, demand, claim, or other communication under this Agreement to the intended recipient at such address using any other means (including personal delivery, expedited courier, messenger service, telecopy, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Either party to this Agreement may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner set forth in this section.

 

13.           Counterparts .  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

14.           Specific Performance . The parties acknowledge that it would be impossible to fix the amount of money damages caused by a breach of this Agreement by the other party, and, therefore, this Agreement may be enforced by specific performance.  The parties hereby waive any defense that an action to enforce this Agreement by specific performance is inappropriate because of an adequate remedy at law, provided, however , that nothing in this Section 14 is intended to prohibit any party from bringing an action for money damages for breach of this Agreement (either in lieu of or in addition to an action for specific performance).

 

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15.           Further Assurances .  Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby.

 

16.           Termination .  This Agreement shall terminate and be of no further force and effect if the Class A Shares are no longer listed on a securities exchange, quoted in the NASDAQ System, or quoted in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

 

	GAIAM, INC.
	/s/ Lynn Powers
	By: Lynn Powers
	Its: President
	JIRKA RYSAVY
	/s/ Jirka Rysavy

 

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Exhibit 10.6

 

Gaiam, Inc.

Executive Officer Salaries

 

Name		Title		Annual Base Salary
Jirka Rysavy		Chairman and Chief Executive Officer		$	290,000
Lynn Powers		President, Chief Executive Officer of North American Operations, Secretary		$	290,000
Janet Mathews		Vice President and Chief Financial Officer		$	175,000