EXHIBIT 3.1
CINEMARK, INC.
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "AGREEMENT") is
made as of December 30, 2004, among Cinemark, Inc., a Delaware corporation (the
"COMPANY"), Madison Dearborn Capital Partners IV, L.P., a Delaware limited
partnership ("MDCP"), each of the investors listed on the Schedule of Xxxxxxxx
Investors attached hereto (collectively, the "XXXXXXXX INVESTORS"), each of the
investors listed on the Schedule of Quadrangle Investors attached hereto,
(collectively, the "QUADRANGLE INVESTORS") each of the executives listed on the
Schedule of Executives attached hereto (collectively, the "EXECUTIVES"),
Northwestern University ("NWU") and Xxxx Xxxxxxx ("XXXXXXX"). MDCP, the Xxxxxxxx
Investors, the Quadrangle Investors, the Executives, NWU and Xxxxxxx are
collectively referred to herein as the "STOCKHOLDERS" and individually as a
"STOCKHOLDER." Unless otherwise specified herein, all of the capitalized terms
used herein are defined in paragraph 13 hereof.
WHEREAS, MDCP acquired shares of Class A Common Stock pursuant to the
Stock Purchase Agreement between MDCP and the Company dated as of March 12, 2004
(the "PURCHASE AGREEMENT") and NWU and Xxxxxxx subsequently acquired a portion
of such shares from MDCP pursuant to the Original Agreement (as defined below)
and are Permitted Transferees of MDCP hereunder; and
WHEREAS, the Xxxxxxxx Investors and the Executives own shares of the
capital stock of the Company and, in some cases, options to acquire shares of
Class A Common Stock; and
WHEREAS, the Company, MDCP, the Xxxxxxxx Investors and the Executives
are parties to that certain Stockholders Agreement dated March 12, 2004, (the
"ORIGINAL AGREEMENT"); and
WHEREAS, pursuant to a securities purchase agreement dated as of the
date hereof (the "QUADRANGLE PURCHASE AGREEMENT"), the Quadrangle Investors will
acquire a portion of the Class A Common Stock held by MDCP immediately prior to
the execution of the Quadrangle Purchase Agreement; and
WHEREAS, the Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) admitting the Quadrangle
Investors as a Stockholder and making certain amendments to the Original
Agreement related thereto by amending and restating the Original Agreement; (ii)
establishing the composition of the Company's Board of Directors (the "BOARD"),
(iii) assuring continuity in the management and ownership of the Company, (iv)
limiting the manner and terms by which the Stockholder Shares may be transferred
and (v) providing covenants for certain Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Board of Directors.
(a) From and after the Closing and until the provisions of this
paragraph 1 cease to be effective, each holder of Stockholder Shares shall vote
all of such holder's Stockholder Shares which are voting shares and any other
voting securities of the Company over which such holder has voting control and
shall take all other reasonably necessary or desirable actions within such
holder's control (whether in such holder's capacity as a stockholder, director,
member of a Board committee or officer of the Company or otherwise, and
including, without limitation, attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all reasonably necessary or desirable
actions within its control (including, without limitation, calling special Board
and stockholder meetings), so that:
(i) the authorized number of directors on the Board shall be
twelve;
(ii) the following individuals shall be elected to the Board:
(A) two representatives designated by the Xxxxxxxx
Investors (determined by a vote of the Xxxxxxxx Investors
owning a majority of the Stockholder Shares held by all
Xxxxxxxx Investors) (the "XXXXXXXX DIRECTORS"), who shall be
initially: Xxx Xxx Xxxxxxxx and one other individual to be
designated by Xxx Xxx Xxxxxxxx;
(B) ten representatives designated by MDCP, except
that at all times during the period the Quadrangle Investors
have the right under this Agreement to designate the
Quadrangle Director, nine representatives designated by MDCP;
and
(C) one representative designated by the Quadrangle
Investors (the "QUADRANGLE DIRECTOR"), who shall initially be
Xxxxx Xxxxxxx.
(iii) the removal from the Board of any director as a result
of a breach of such director's fiduciary duties to the Company and its
stockholders under applicable law shall be only by a vote of the
holders of a majority of the Company's outstanding Class A Common
Stock;
(iv) the removal from the Board of any director for any other
reason shall be only upon the written request of the Person or Persons
originally entitled to designate such director pursuant to this
paragraph 1(a);
(v) in the event that any representative designated hereunder
by any Stockholder ceases to serve as a director during his or her term
in office, the resulting vacancy shall be filled by the Person or
Persons originally entitled to designate such director pursuant to this
paragraph 1(a);
(vi) Xxx Xxx Xxxxxxxx shall serve as the Chairman of the
Board; provided that, if so requested by a majority of the members of
the Board (excluding the Xxxxxxxx Directors), he shall resign as
Chairman at such time as: (A) the right of the Xxxxxxxx Investors to
designate any director terminates in accordance with paragraph
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1(c)(i) or 1(c)(ii); or (B) pursuant to the Employment Agreement
between Xxx Xxx Xxxxxxxx and the Company dated as of March 12, 2004
(the "EMPLOYMENT AGREEMENT"), his employment is terminated by the
Company for Cause (as defined in the Employment Agreement) or by Xxx
Xxx Xxxxxxxx in a Voluntary Termination (as defined in the Employment
Agreement), and in the event that Xxx Xxx Xxxxxxxx ceases to serve as
the Chairman of the Board, the Chairman shall be elected by a majority
of the members of the Board;
(vii) if any party fails to designate a director to fill a
vacancy on the Board pursuant to the terms of this paragraph 1(a), such
vacant Board position shall remain open and unfilled until such time as
the party with the right to designate a director for such a vacancy
exercises such party's right to fill such position; and
(viii) notwithstanding the foregoing, in the event that a
Person loses its rights to designate a director in accordance with
paragraph 1(c) below, the director designated by such Person shall be
removed at the request of a majority of the Board (excluding such
director or directors) upon the occurrence of such event and the total
authorized number of directors shall be reduced upon such action by a
majority of the Board (excluding such director or directors) by the
number of directors that such Person loses its rights to designate.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
and any committee thereof.
(c) Notwithstanding anything to the contrary contained herein,
(i) the number of Xxxxxxxx Directors shall be reduced by one
upon the occurrence of each of the following events: (A) such time as
the Xxxxxxxx Investors and their Permitted Transferees hold in the
aggregate less than 10% of the outstanding shares of Class A Common
Stock and (B) such time as the Xxxxxxxx Investors and their Permitted
Transferees hold in the aggregate less than 4% of the outstanding
shares of Class A Common Stock; and the rights of the Xxxxxxxx
Investors under this paragraph 1 shall terminate automatically and
cease to have any further force or effect upon the occurrence of the
event described in clause 1(c)(i)(B) immediately above. In the event
that the Xxxxxxxx Investors and their Permitted Transferees hold in the
aggregate less than 4% of the outstanding shares of Class A Common
Stock, the Xxxxxxxx Investors shall have the right to designate one
observer to the Board (an "Observer"), which shall either be Xxx Xxx
Xxxxxxxx or Xxxxx Xxxxxxxx. An Observer shall be entitled to attend all
meetings of the Board but shall not be entitled to (x) attend meetings
of the Board with counsel which may constitute privileged
communications, (y) attend meetings of the Board which include topics
of discussion which may constitute a conflict of interest between the
Company and the Xxxxxxxx Investors, or (z) vote on any matters voted on
by the Board. The determination of whether a conflict of interest
exists for purpose of clause (y) in the immediately preceding sentence
shall be made by a majority of the Board. If such a determination is
made prior to a Board meeting, the Board shall provide written notice
to the Xxxxxxxx Investors setting forth in reasonable detail the basis
for such
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conflict of interest. Such a determination may be made during an
ongoing Board meeting by a majority of the Board and, upon such
determination, the Observer shall immediately leave the meeting. Upon
the conclusion of the discussion (including any action by the Board
thereon) which constitutes a conflict of interest between the Company
and the Xxxxxxxx Investors, the Observer shall be invited to return to
the meeting. No business other than the discussion (including any
action by the Board thereon) which constitutes a conflict of interest
between the Company and the Xxxxxxxx Investors may be conducted by the
Board at such an ongoing Board meeting until the Observer has been
notified in accordance with the immediately preceding sentence. The
Xxxxxxxx Investors' right to designate an Observer shall terminate
automatically and cease to have any further force or effect upon the
earlier to occur of (i) the Observer designated under this paragraph
1(c)(i) is not Xxx Xxx Xxxxxxxx or Xxxxx Xxxxxxxx and (ii) the Xxxxxxxx
Investors and their Permitted Transferees cease to hold in the
aggregate at least 2% of the outstanding shares of Class A Common
Stock. The right of the Xxxxxxxx Investors to designate an Observer
hereunder shall not be transferable or assignable under any
circumstances;
(ii) the rights of the Xxxxxxxx Investors under this paragraph
1 shall terminate automatically and cease to have any further force or
effect at such time as the Xxxxxxxx Investors and their Permitted
Transferees hold, directly or indirectly, more than a 5% interest of
any business (other than the Company) that owns, operates or manages
theatres with more than 800 movie screens in the aggregate in the
Western Hemisphere;
(iii) the rights of the Quadrangle Investors under this
paragraph 1 to designate the Quadrangle Director shall terminate
automatically and cease to have any further force or effect at such
time as the Quadrangle Investors and their Permitted Transferees hold
in the aggregate less than 4% of the outstanding shares of Class A
Common Stock. In the event that the Quadrangle Investors and their
Permitted Transferees hold in the aggregate less than 4% of the
outstanding shares of Class A Common Stock, the Quadrangle Investors
shall have the right to designate an Observer, which shall be a member
or employee of Quadrangle Group, LLC. An Observer shall be entitled to
attend all meetings of the Board but shall not be entitled to (x)
attend meetings of the Board with the Company's counsel or the Board's
special counsel which may constitute privileged communications, (y)
attend meetings of the Board which include topics of discussion which
may constitute a conflict of interest between the Company and the
Quadrangle Investors or (z) vote on any matters voted on by the Board.
The determination of whether a conflict of interest exists for purpose
of clause (y) in the immediately preceding sentence shall be made by a
majority of the Board. If such a determination is made prior to a Board
meeting, the Board shall provide written notice to the Quadrangle
Investors setting forth in reasonable detail the basis for such
conflict of interest. Such a determination may be made during an
ongoing Board meeting by a majority of the Board and upon such
determination the Observer shall immediately leave the meeting. Upon
the conclusion of the discussion (including any action by the Board
thereon) which constitutes a conflict of interest between the Company
and the Quadrangle Investors, the Observer shall be invited to return
to the meeting. No business other than the discussion (including any
action by the Board thereon) which constitutes a conflict of interest
between the Company and the Quadrangle Investors may be conducted by
the
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Board at such an ongoing Board meeting until the Observer has been
notified in accordance with the immediately preceding sentence. The
Quadrangle Investors' right to designate an Observer shall terminate
automatically and cease to have any further force or effect upon the
earlier to occur of (i) the Observer designated under this paragraph
1(c)(iii) is not a member or employee of Quadrangle Group, LLC (it
being understood and agreed that, should the current Observer at any
time cease to be a member or employee of Quadrangle Group, LLC, the
Quadrangle Investors' right to designate an Observer shall not
terminate unless the Quadrangle Investors do not designate a
replacement Observer who is a member or employee of the Quadrangle
Group, LLC within 5 business days thereof) and (ii) the Quadrangle
Investors and their Permitted Transferees cease to hold in the
aggregate at least 2% of the outstanding shares of Class A Common
Stock. The rights of the Quadrangle Investors to designate the
Quadrangle Director or an Observer hereunder shall not be transferable
or assignable under any circumstances, except to a Qualified Permitted
Transferee of the Quadrangle Investors; and
(iv) the rights of MDCP under this paragraph 1 shall terminate
automatically and cease to have any further force or effect at such
time as MDCP and its Permitted Transferees hold in the aggregate less
than 5% of the outstanding shares of Class A Common Stock provided that
MDCP may assign its right to designate (A) any number of directors that
MDCP is entitled to designate hereunder to any Person or group of
affiliated Persons who acquires more than 50% of the shares of Class A
Common Stock held by MDCP on the date of this Agreement (as such number
may be adjusted from time to time to give effect to stock splits or
other similar adjustments to the capitalization of the Company), and
(B) two of the directors MDCP is entitled to designate hereunder to any
Person or group of affiliated Persons who acquires less than 50% of the
shares of Class A Common Stock held by MDCP on the date of this
Agreement (as such number may be adjusted from time to time to give
effect to stock splits or other similar adjustments to the
capitalization of the Company).
(d) The provisions of this paragraph 1 shall terminate automatically
and cease to have any further force or effect upon the consummation of a Sale of
the Company.
2. Representations and Warranties; Voting Agreements.
(a) Each Stockholder represents and warrants that (i) after giving
effect to the transactions contemplated by the Quadrangle Purchase Agreement,
such Stockholder is the record owner of the number of Stockholder Shares set
forth opposite its name on the Schedules attached hereto, free and clear of all
liens and encumbrances, (ii) this Agreement has been duly authorized, executed
and delivered by such Stockholder and constitutes the valid and binding
obligation of such Stockholder, enforceable in accordance with its terms, (iii)
such Stockholder has not granted and is not a party to any proxy, voting trust
or other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement, (iv) as of the date hereof, the number of shares of
common stock of the Company which such Stockholder owns of record and the number
of shares of common stock of the Company issuable upon exercise of options owned
by such Stockholder are set forth opposite such Stockholder's name on the
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schedules attached hereto, (v) except as set forth on such schedules, such
Stockholder does not own any shares of capital stock issued by the Company or
any of its Subsidiaries or any other securities or rights to acquire securities
of the Company or any of its Subsidiaries, and (vi) such Stockholder has not
received and is not entitled to receive any payments or other compensation from
the Company or any of its Subsidiaries or any other party as a result of or in
connection with the transactions contemplated by the Quadrangle Purchase
Agreement. In addition, Xxx Xxx Xxxxxxxx and The Xxxxxxxx Special Trust
represent and warrant that Xxx Xxx Xxxxxxxx is one of two trustees of such
trust, and such trust is solely for the benefit of members of Xxx Xxx Xxxxxxxx'x
Family Group.
(b) No Stockholder has granted, and from and after the date hereof no
Stockholder shall grant, any proxy or become party to any voting trust or other
agreement which is inconsistent with, conflicts with or violates any provision
of this Agreement.
3. Restrictions on Transfer of Stockholder Shares.
(a) Transfer of Stockholder Shares. No holder of Stockholder Shares
shall sell, transfer, assign or otherwise dispose of (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law,
but excluding by way of merger or consolidation) any interest in his Stockholder
Shares (a "TRANSFER"), except pursuant to this Agreement. Any Transfer or
attempted Transfer of any Stockholder Shares in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
(b) Exempt Transfers.
(i) Subject to the provisions in paragraph 3(b)(ii), the
restrictions set forth in this paragraph 3 shall not apply to any
Transfer by a Stockholder with respect to any of the following
Transfers (each an "EXEMPT TRANSFER"):
(A) any Transfer of Stockholder Shares by a
Stockholder who is not a natural person to such Stockholder's
Affiliates, including, in the case of MDCP and the Quadrangle
Investors, any Transfer which constitutes an in-kind
distribution to its partners (and, in connection with or
following any such distribution, an in-kind distribution by
the general partner of MDCP or any of the Quadrangle Investors
to its partners);
(B) in the case of a Stockholder who is a natural
person, any Transfer by will or pursuant to the applicable
laws of descent and distribution and any Transfer to or among
such Stockholder's Affiliates, and members of such holder's
Family Group or such Family Group member's Affiliates;
(C) any Transfer of Stockholder Shares in connection
with an Approved Sale;
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(D) any Transfer by the Executives of their
Stockholder Shares to the Company or any of its Subsidiaries;
or
(E) any Transfer by the Company to an Executive
pursuant to paragraph 9 hereunder.
(ii) A transferee of Stockholder Shares pursuant to a Transfer
described in paragraphs 3(b)(i)(A) and (B) above is referred to herein
as a "PERMITTED TRANSFEREE." The restrictions contained in paragraph
3(a) shall continue to be applicable to the Stockholder Shares after
any Transfer pursuant to paragraphs 3(b)(i)(A), (B) and (E), and such
transferees of such Stockholder Shares shall agree in writing to be
bound by the provisions of this Agreement affecting the Stockholder
Shares so transferred. Notwithstanding the foregoing, no party hereto
shall avoid the provisions of this Agreement by making one or more
Transfers to one or more Permitted Transferees and then disposing of
all or any portion of such party's interest in any such Permitted
Transferee. Notwithstanding anything herein to the contrary, in no
event shall any Stockholder Shares be pledged unless otherwise approved
in writing by MDCP and the Xxxxxxxx Investors.
(c) First Refusal Rights upon Transfers by Stockholders other than
MDCP.
(i) If any holder of Stockholder Shares (other than MDCP or
any of its Permitted Transferees) proposes to Transfer Stockholder
Shares (other than pursuant to an Exempt Transfer), then not less than
20 days prior to the date on which such Transfer will occur (such
20-day period, the "ELECTION PERIOD"), the transferring holder (the
"TRANSFERRING STOCKHOLDER") shall deliver a written notice (an "OFFER
NOTICE") to the Company, MDCP, the Xxxxxxxx Investors and the
Quadrangle Investors. The Offer Notice shall disclose in reasonable
detail the number of Stockholder Shares proposed to be Transferred (the
"OFFERED SHARES"), the material terms and conditions of the Transfer
and the identity, background and ownership (if applicable) of the
prospective transferee(s), and the Offer Notice shall constitute a
binding offer to sell the Offered Shares in accordance with the
provisions of this paragraph 3(c), first to the Company, and then to
MDCP, the Xxxxxxxx Investors and the Quadrangle Investors.
(ii) Upon receipt of the Offer Notice, the Company may elect
to purchase all or any portion of the Offered Shares at the price and
on the terms specified therein by delivering written notice (the
"COMPANY ELECTION NOTICE") of such election to the Transferring
Stockholder, MDCP, the Xxxxxxxx Investors and the Quadrangle Investors
as soon as practical, but in any event within ten days (the "COMPANY
OFFER PERIOD") after the delivery of the Offer Notice to the Company,
MDCP, the Xxxxxxxx Investors and the Quadrangle Investors.
(iii) If and only if the Company has not elected to purchase
all of the Offered Shares within the Company Offer Period, then MDCP,
the Xxxxxxxx Investors and the Quadrangle Investors in the aggregate
may purchase all (but not less than all) of the Offered Shares not
elected to be purchased by the Company (such Offered Shares, the
"AVAILABLE SHARES") at the price and on the terms specified in the
Offer Notice. Each Stockholder electing to purchase a portion of the
Available Shares (each a "PARTICIPATING STOCKHOLDER") shall deliver
written notice (the "STOCKHOLDER ELECTION NOTICE") of such election to
the Transferring
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Stockholder and the Company within twenty days after delivery of the
Offer Notice to the Company, MDCP, the Xxxxxxxx Investors and the
Quadrangle Investors. The number of Available Shares which may be
purchased by each Participating Stockholder shall be determined by the
Company as follows:
(A) Each Participating Stockholder shall specify in
the Stockholder Election Notice the maximum number of
Available Shares such Participating Stockholder is requesting
to purchase (such number of Available Shares, that
Participating Stockholder's "REQUESTED AMOUNT").
(B) The Company shall first allocate the Available
Shares among the Participating Stockholders such that each
Participating Stockholder is allocated (such Participating
Stockholder's "INITIAL ALLOCATION") the lesser of (i) such
Participating Purchaser's Requested Amount and (ii) the
product of (A) the quotient of the number of shares of Class A
Common Stock held by such Participating Stockholder divided by
the aggregate shares of Class A Common Stock held by all
Participating Stockholders immediately prior to delivery of
the Offer Notice (such percentage, such Participating
Purchaser's "PRO RATA SHARE") multiplied by (B) the total
number of Available Shares.
(C) If the sum of each Initial Allocation for each
Participating Stockholder (the "INITIAL ALLOCATION SUM") is
less than the total number of Available Shares, then the
difference between the Initial Allocation Sum and the Number
of Available Shares (such difference, the "REMAINING AVAILABLE
SHARES") shall be allocated to the Participating Stockholders
whose Requested Amount equaled or exceeded their Pro Rata
Share (such Participating Stockholders, the "REMAINING
PARTICIPATING STOCKHOLDERS"). The Company shall allocate to
each Remaining Participating Stockholders the lesser of (i)
the difference between the amount allocated to such
Stockholder pursuant to Paragraph 3(c)(iii) (B) and such
Stockholder's Requested Amount and (ii) the product of (A) the
quotient of the number of shares of Class A Common Stock held
by such Remaining Participating Stockholder divided by the
aggregate shares of Class A Common Stock held by all Remaining
Participating Stockholders immediately prior to delivery of
the Offer Notice (such percentage, such Remaining
Participating Purchaser's "REMAINING PRO RATA SHARE")
multiplied by (B) the total number of Remaining Available
Shares.
(D) If after the allocation of Remaining Available
Shares, all Offered Shares have not been allocated because a
Remaining Participating Stockholder's Requested Amount was
less than such Remaining Participating Stockholder's Remaining
Pro Rata Share multiplied by the total number of Remaining
Available Shares, then the Company shall continue to allocate
Available Shares in accordance with Paragraph (C) immediately
above until the earlier to occur of (i) all Available Shares
are allocated among the Participating Stockholders and (ii)
all Participating Stockholders are allocated their Requested
Amount.
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(iv) If the Company and/or MDCP, the Xxxxxxxx Investors and/or
the Quadrangle Investors elect to purchase Stockholder Shares from the
Transferring Stockholder, the Transfer of such shares shall be
consummated as soon as practical after the delivery of the Company
Election Notice or the Stockholder Election Notice, as applicable, to
the Transferring Stockholder, but in any event within 45 days after the
expiration of the Election Period.
(v) To the extent that the aggregate number of Offered Shares
elected to be purchased by the Company, MDCP, the Xxxxxxxx Investors
and/or the Quadrangle Investors does not in the aggregate equal all of
the Offered Shares, then the offer to sell such Offered Shares pursuant
to Paragraph 3(c)(i) shall be automatically revoked upon the expiration
of the Election Period and the Transferring Stockholder may, within 90
days after the expiration of the Election Period and subject to the
provisions of this Agreement, Transfer such Offered Shares at a price
no less than the price per share specified in the Offer Notice and on
other terms no more favorable to the transferees thereof than those
offered to the Company, MDCP, the Xxxxxxxx Investors and the Quadrangle
Investors in the Offer Notice. Any Offered Shares not Transferred
within such 90-day period shall be reoffered to the Company, MDCP, the
Xxxxxxxx Investors and the Quadrangle Investors under this paragraph
3(c) prior to any subsequent Transfer.
(d) First Refusal Rights upon Transfers by MDCP to a Competitor.
(i) If MDCP proposes to Transfer its Stockholder Shares to a
Competitor or such Competitor's Affiliates and such Transfer will not
be effected in connection with a Sale of the Company, then not less
than 20 days prior to the date on which such Transfer will occur (such
20-day period, the "COMPETITOR SALE ELECTION PERIOD"), such Person
shall deliver a written notice (a "COMPETITOR SALE OFFER NOTICE") to
the Company, the Xxxxxxxx Investors and the Quadrangle Investors. The
Competitor Sale Offer Notice shall disclose in reasonable detail the
number of Stockholder Shares to be Transferred, the material terms and
conditions of the Transfer and the identity, background and ownership
(if applicable) of the Competitor, and the Competitor Sale Offer Notice
shall constitute a binding offer to sell such Stockholder Shares in
accordance with the provisions of this paragraph 3(d), first to the
Company, and then to the Xxxxxxxx Investors and the Quadrangle
Investors on a pro rata basis based on the number of shares of Class A
Common Stock then held by each of the Xxxxxxxx Investors and the
Quadrangle Investors as a percentage of the aggregate number of shares
of Class A Common Stock then held by the Xxxxxxxx Investors and the
Quadrangle Investors, on the terms and conditions contained in the
Competitor Sale Offer Notice.
(ii) Upon receipt of the Competitor Sale Offer Notice, the
Company may elect to purchase all (but not less than all) of the
Stockholder Shares specified in the Competitor Sale Offer Notice at the
price and on the terms specified therein by delivering written notice
(the "COMPETITOR SALE ELECTION NOTICE") of such election to MDCP, the
Xxxxxxxx Investors and the Quadrangle Investors as soon as practical,
but in any event within ten days (the "COMPETITOR SALE OFFER PERIOD")
after the delivery of the Competitor Sale Offer Notice to the Company
and MDCP.
(iii) If and only if the Company has not elected to purchase
all of the Stockholder Shares within the Competitor Sale Offer Period,
the Xxxxxxxx Investors and the
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Quadrangle Investors may elect to purchase all (but not less than all)
of the Stockholder Shares specified in the Competitor Sale Offer Notice
at the price and on the terms specified therein by delivering written
notice (the "XXXXXXXX-QUADRANGLE ELECTION NOTICE") of such election to
MDCP within 20 days after delivery of the Offer Notice to the Company,
the Xxxxxxxx Investors and the Quadrangle Investors. Any purchase by
the Xxxxxxxx Investors and the Quadrangle Investors pursuant to this
Paragraph 3(d) shall be on a pro rata basis based on the number of
shares of Class A Common Stock held by each of the Xxxxxxxx Investors
and the Quadrangle Investors as a percentage of the aggregate shares of
Class A Common Stock held by the Xxxxxxxx Investors and the Quadrangle
Investors immediately prior to such purchase. If either the Xxxxxxxx
Investors or the Quadrangle Investors do not elect to purchase their
pro rata share of the Stockholder Shares subject to the Competitor Sale
Offer Notice, the Xxxxxxxx Investors or the Quadrangle Investors, as
applicable, which have elected to purchase their pro rata share of the
Stockholder Shares subject to the Competitor Offer Sale Notice may
purchase such remaining Stockholder Shares by providing written notice
to MDCP and the Company.
(iv) If the Company and/or any of the Xxxxxxxx Investors
and/or the Quadrangle Investors elect to purchase Stockholder Shares
from MDCP, the Transfer of such shares shall be consummated as soon as
practical after the delivery of the Competitor Sale Election Notice or
the Xxxxxxxx-Quadrangle Election Notice, as applicable, to MDCP, but in
any event within 45 days after the expiration of the Competitor Sale
Election Period.
(v) To the extent that the Company, the Xxxxxxxx Investors and
the Quadrangle Investors do not elect to purchase all of the
Stockholder Shares being offered, MDCP may, within 90 days after the
expiration of the Competitor Sale Election Period and subject to the
provisions of this Agreement, Transfer such Stockholder Shares to the
Competitor (or such Competitor's Affiliates) identified in the
Competitor Sale Offer Notice at a price no less than the price per
share specified in the Competitor Sale Offer Notice and on other terms
no more favorable to the Competitor (or such Competitor's Affiliates)
than those offered to the Company, the Xxxxxxxx Investors and the
Quadrangle Investors in the Competitor Sale Offer Notice. Any
Stockholder Shares held by MDCP not Transferred within such 90-day
period shall be reoffered to the Company, the Xxxxxxxx Investors and
the Quadrangle Investors under this paragraph 3(d) prior to any
subsequent Transfer to a Competitor.
(e) Participation Rights.
(i) If MDCP proposes to Transfer any of its Stockholder Shares
(other than (i) pursuant to an Exempt Transfer or (ii) pursuant to the
Quadrangle Purchase Agreement, then not less than 20 days prior to any
such Transfer of Stockholder Shares (such 20-day period, the "MDCP SALE
PERIOD"), MDCP shall deliver a written notice (the "MDCP SALE NOTICE")
to the Company and all holders of Stockholder Shares other than MDCP
(the "OTHER STOCKHOLDERS") specifying in reasonable detail the
identity, background and ownership (if any) of the prospective
transferee(s), the number of shares to be Transferred and the terms and
conditions of the Transfer (which notice may be the same notice and
given at the same time as the Offer Notice under paragraph 3(d)).
Subject to paragraph 3(e)(iii), the Other Stockholders may elect to
participate in the contemplated Transfer at the same price per share
and on the same terms by delivering written notice (the "MDCP SALE
ELECTION NOTICE") to MDCP within the MDCP Sale
10
Period. If any of the Other Stockholders has elected to participate in
such Transfer, then MDCP and such Other Stockholder shall be entitled
to sell in the contemplated Transfer, at the same price and on the same
terms, a number of Stockholder Shares equal to the product of (A) the
quotient determined by dividing (x) the percentage of Stockholder
Shares owned by such Person by (y) the aggregate percentage of
Stockholder Shares owned by MDCP and the Other Stockholders
participating in such sale, and (B) the number of Stockholder Shares to
be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100
Stockholder Shares by MDCP, and if MDCP at such time owns 30%
of all Stockholder Shares and if the Xxxxxxxx Investors
owning 20%, Executives owning 10% and the Quadrangle
Investors owning 8% of all Stockholder Shares elect to
participate, then MDCP would be entitled to sell 44 shares
((30% / 68%) x 100 shares), the Xxxxxxxx Investors would be
entitled to sell 29 shares ((20% / 68%) x 100 shares), the
Executives would be entitled to sell 15 shares ((10% / 68%) x
100 shares) and the Quadrangle Investors would be entitled to
sell 12 shares ((8% / 68%) x 100 shares).
(ii) Any of the Other Stockholders may elect to sell in any
Transfer contemplated under this paragraph 3(e) a number of Stockholder
Shares less than any such Other Stockholder is entitled to sell
hereunder, in which case MDCP shall have the right to sell an
additional number of Stockholder Shares in such Transfer equal to the
number that all such Other Stockholders are permitted to sell but have
elected not to sell. MDCP shall use reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of the
Other Stockholders in any contemplated Transfer, and MDCP shall not
Transfer any of its Stockholder Shares to any prospective transferee if
such prospective transferee declines to allow the participation of the
Other Stockholders. Each holder Transferring Stockholder Shares
pursuant to this paragraph 3(e) shall pay such holder's pro rata share
(based on the number of Stockholder Shares to be sold) of the expenses
incurred by the holders in connection with such Transfer and shall be
obligated to join on a pro rata basis (based on the number of
Stockholder Shares to be sold) in any indemnification or other
obligations that MDCP agrees to provide in connection with such
Transfer (other than any such obligations that relate specifically to a
particular holder such as indemnification with respect to
representations and warranties given by a holder regarding such
holder's title to and ownership of Stockholder Shares); provided that
no holder shall be obligated in connection with such Transfer to agree
to indemnify or hold harmless the transferees with respect to an amount
in excess of the net consideration paid to such holder in connection
with such Transfer.
(iii) Notwithstanding the foregoing, no Executive (or any of
such Executive's Permitted Transferees) shall be entitled to
participate under this paragraph 3(e) in any Transfer made by MDCP or
any of its Permitted Transferees, unless such Transfer (together with
any related Transfers) constitutes a Sale of the Company.
(f) Transfers to Competitors. No holder of Stockholder Shares (other
than MDCP and its Permitted Transferees, subject to paragraph 3(d)) shall
Transfer any Stockholder Shares to any Competitor, except pursuant to paragraph
3(e) or paragraph 4 hereof.
11
(g) Termination of Restrictions. The restrictions on the Transfer of
Stockholder Shares set forth in this paragraph 3 shall continue with respect to
each Stockholder Share until the date on which such Stockholder Share has been
transferred in a Public Sale or in a Sale of the Company.
4. Sale of the Company.
(a) If the Board or MDCP approves a Sale of the Company and delivers
written notice to the holders of Stockholders Shares invoking the provisions of
this paragraph (any such sale, an "APPROVED SALE"), the holders of Stockholders
Shares shall consent to, vote in favor of and raise no objections against the
Approved Sale.
(b) If the Approved Sale is structured as (i) a merger or
consolidation, each holder of Stockholder Shares shall vote its Stockholder
Shares to approve such merger or consolidation, whether by written consent or at
a stockholders meeting (as requested by the Board or MDCP, as the case may be),
and waive all dissenter's rights, appraisal rights and similar rights in
connection with such merger or consolidation, (ii) a sale of stock, each holder
of Stockholder Shares shall agree to sell, and shall sell, all of its
Stockholder Shares and rights to acquire Stockholder Shares on the terms and
conditions so approved, or (iii) a sale of assets, each holder of Stockholder
Shares shall vote its Stockholder Shares to approve such sale and any subsequent
liquidation of the Company or other distribution of the proceeds therefrom,
whether by written consent or at a stockholders meeting (as requested by the
Board or MDCP, as the case may be).
(c) In furtherance of the foregoing, (i) each holder of Stockholder
Shares shall take, with respect to such holder's Stockholder Shares, all
necessary or desirable actions reasonably requested by the Board or MDCP, as the
case may be, in connection with the consummation of the Approved Sale, including
without limitation, voting to approve such transaction and executing the
applicable purchase agreement, and (ii) each holder of Stockholder Shares shall
make substantially similar representations, warranties, indemnities and
agreements as each other holder of Stockholder Shares, provided that (A) each
holder of Stockholder Shares shall be obligated to make representations and
warranties as to such Stockholder's title to and ownership of Stockholder
Shares, authorization, execution and delivery of relevant documents by such
Stockholder, enforceability of relevant agreements against such Stockholder and
other matters relating to such Stockholder, to enter into covenants in respect
of a Transfer of such Stockholder's Stockholder Shares in connection with such
Approved Sale and to enter into indemnification obligations with respect to the
foregoing, in each case to the extent that each other Stockholder is similarly
obligated, but no Stockholder shall be obligated to enter into indemnification
obligations with respect to any of the foregoing in respect of any other
Stockholder or such other Stockholder's Stockholder Shares and (B) in no event
shall any Stockholder be liable in respect of any indemnity obligations pursuant
to any Approved Sale in an aggregate amount in excess of the total consideration
payable to such Stockholder in such Approved Sale.
(d) The obligations of the holders of Stockholder Shares with respect
to an Approved Sale are subject to the satisfaction of the following conditions:
(i) except as provided
12
in the provisos in paragraphs 8(d)(iii) and 8(d)(iv) of this Agreement, upon the
consummation of the Approved Sale, each holder of Stockholder Shares will
receive the same form of consideration and the same portion of the aggregate
consideration that such holder of Stockholder Shares would have received if such
aggregate consideration had been distributed by the Company in complete
liquidation pursuant to the rights and preferences set forth in the Company's
Certificate of Incorporation as in effect immediately prior to such Approved
Sale; (ii) except as provided in the provisos in paragraphs 8(d)(iii) and
8(d)(iv) of this Agreement, if any holder of a class of Stockholder Shares is
given an option as to the form and amount of consideration to be received, each
holder of such class of Stockholder Shares will be given the same option; and
(iii) each holder of then currently exercisable rights to acquire shares of a
class of Stockholder Shares will be given an opportunity to exercise such rights
prior to the consummation of the Approved Sale and participate in such sale as
holders of such class of Stockholder Shares; provided that the condition that
each holder of Stockholder Shares receives, or is provided with the same option
to receive, the same form of consideration as set forth in clause (i) and clause
(ii) above shall be deemed satisfied with respect to (A) the Quadrangle
Investors and their Permitted Transferees, so long as the Quadrangle Investors
and their Permitted Transferees receive the same form of consideration, the same
amount of consideration per share, and the same option as to the form of
consideration as MDCP receives in the Approved Sale and (B) with respect to all
other Stockholders, even if certain holders of Stockholders Shares receive, to
the exclusion of others, securities of the entity acquiring the Company in an
Approved Sale, so long as, each holder of Stockholder Shares receives the same
amount of value, whether in cash or such securities, as of the closing of such
Approved Sale with respect to such holder's Stockholder Shares.
(e) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Stockholder Shares shall
at the request of the Company, appoint a "purchaser representative" (as such
term is defined in Rule 501) reasonably acceptable to the Company. If any holder
of Stockholder Shares appoints a purchaser representative designated by the
Company, the Company shall pay the fees of such purchaser representative.
However, if any holder of Stockholder Shares declines to appoint the purchaser
representative designated by the Company, such holder shall appoint another
purchaser representative (reasonably acceptable to the Company), and such holder
shall be responsible for the fees of the purchaser representative so appointed.
(f) Subject to paragraph 4(e), each holder of Stockholder Shares shall,
to the extent requested by the Company, pay such holder's pro rata share of the
expenses incurred by the holders in connection with an Approved Sale.
5. Holdback Agreement. No Executive or any of his Permitted Transferees
shall effect any public sale or distribution of any Stockholder Shares or of any
other capital stock or equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such stock or securities,
for such period of time from and after the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (as such
13
terms are defined in the Registration Agreement) as the Company and the
underwriters managing the registration request (the "MARKET STAND-OFF"). In
order to enforce the Market Stand-Off, the Company may impose stop-transfer
instructions with respect to Stockholder Shares until the end of the Market
Stand-Off. The restrictions on the transfer of Stockholder Shares set forth in
this paragraph 5 shall continue with respect to each Stockholder Share until the
date on which such Stockholder Share has been transferred in a Public Sale.
6. Preemptive Rights.
(a) Except for issuances of equity securities or securities or
instruments containing equity-like features (i) in the form of Class A Common
Stock or options to acquire Class A Common Stock to employees, directors or
consultants of the Company or any of its Subsidiaries, (ii) upon the conversion,
recapitalization or reorganization of any securities of the Company, (iii) as
consideration for the acquisition of or investment in another company or
business (whether through a purchase of securities, a merger, consolidation,
purchase of assets or otherwise), including, without limitation, joint ventures
and strategic alliances, (iv) pursuant to a registered public offering of Class
A Common Stock under the Securities Act, (v) as additional yield or return in
respect of institutional indebtedness for borrowed money, (vi) as a dividend or
other distribution in respect of the Company's equity securities or (vii) in
connection with a stock split or similar event, if the Company authorizes the
issuance or sale of any shares of Class A Common Stock or any other equity
securities of the Company or any securities, options or other rights to acquire
any shares of Class A Common Stock or other equity securities of the Company
(any such securities or rights referred to herein as "ADDITIONAL SECURITIES"),
the Company shall first offer to sell to each holder of Stockholder Shares
(other than shares of Class A Common Stock issued or issuable upon exercise of
stock options (such shares referred to herein collectively as "OPTION SHARES"))
a portion of such Additional Securities equal to the quotient determined by
dividing (A) the number of shares of Class A Common Stock (other than Option
Shares) held by such holder by (B) the total number of shares of Class A Common
Stock outstanding on a fully-diluted basis (assuming exercise of all outstanding
rights to acquire shares of Class A Common Stock); provided that such offer
shall be made only to the holders of Stockholder Shares that are "accredited
investors" under Regulation D of the Securities Act, or the Company otherwise
consents to such holders' participation under this paragraph 6; and provided
further that, if such Additional Securities are being offered in combination
with other securities of the Company, the Persons exercising rights pursuant to
this paragraph 6 shall also be required to purchase the same strip of securities
on the same terms and conditions as being offered by the Company. Holders of
Stockholder Shares (other than Option Shares) shall be entitled to purchase such
Additional Securities at the same price and on the same terms as such Additional
Securities are to be offered to any other Persons. The purchase price for all
Additional Securities so offered to the holders of Stockholder Shares hereunder
shall be payable in cash.
(b) In order to exercise their purchase rights hereunder, each holder
of Stockholder Shares (other than Option Shares) shall, within 10 days after
receipt of written notice from the Company describing in reasonable detail the
stock or securities being offered, the purchase price thereof, the payment terms
and such holder's percentage allotment, deliver a written notice to the Company
describing such holder's election hereunder.
14
(c) Upon the expiration of the offering period described above, the
Company shall be entitled to sell such Additional Securities that the holders of
Stockholder Shares have not elected to purchase during the 90 days following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such holders. Any such Additional Securities
offered or sold by the Company after such 90-day period shall be reoffered to
the holders of Stockholder Shares (other than Option Shares) pursuant to the
terms of this paragraph 6.
7. Anti-Takeover Measures. Prior to the commencement of the initial
public offering of shares of the Company's Class A Common Stock registered under
the Securities Act, MDCP shall request that the Board adopt reasonable and
customary anti-takeover measures, except to the extent that (i) the Board in the
observance of its fiduciary duties determines that any such measures are not in
the best interests of the Company's stockholders or (ii) the Company's
underwriters managing the public offering advise the Company that any such
measures will adversely affect execution of such offering or the price to be
obtained in such offering.
8. Covenants.
(a) Financial Statements and Other Information. The Company shall
deliver to each Investor and its Qualified Permitted Transferees (so long as
such Investor and its Permitted Transferees in the aggregate hold at least 5% of
the Company's outstanding Class A Common Stock):
(i) within 45 days after the end of each quarterly accounting
period in each fiscal year, a consolidated statement of income of the
Company and its Subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such
quarter;
(ii) within the earlier of 90 days after the end of each
fiscal year or upon filing an annual report on Form 10-K with the
Securities and Exchange Commission, annual consolidated statements of
income and cash flows of the Company and its Subsidiaries for such
fiscal year, and a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each
case comparisons to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles, consistently
applied, and accompanied by an audit opinion from an independent
accounting firm of recognized national standing;
(iii) within 30 days after the beginning of each fiscal year,
an annual budget prepared on a monthly basis for the Company and its
Subsidiaries for such fiscal year (displaying anticipated statements of
income and cash flows and balance sheets);
(iv) promptly after filing thereof, all regular and special
reports filed by the Company or any of its Subsidiaries with the
Securities and Exchange Commission or any exchange on which the Class A
Common Stock is listed; and
15
(v) promptly upon release thereof, all public announcements
made by the Company or any of its Subsidiaries.
(b) Inspection of Property. The Company shall permit any
representatives designated by any Investor, upon reasonable notice during normal
business hours and for a proper business purpose, to (i) visit and inspect any
of the properties of the Company and its Subsidiaries and examine the corporate
and financial records of the Company and its Subsidiaries, so long as such
Investor and its Permitted Transferees owns any Class A Common Stock, and (ii)
so long as such Investor and its Permitted Transferees in the aggregate own at
least 5% of the Company's outstanding Class A Common Stock, discuss the affairs,
finances and accounts of the Company with the officers of the Company.
(c) Current Public Information. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act with respect to its Class A Common Stock, the Company shall file
all material reports required to be filed by it under the Securities Act and the
Securities Exchange Act and the rules and regulations adopted by the Securities
and Exchange Commission thereunder, all to the extent required to enable the
Investors to sell shares of Class A Common Stock pursuant to Rule 144 adopted by
the Securities and Exchange Commission under the Securities Act (as such rule
may be amended from time to time) or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission.
(d) Required Approvals of the Xxxxxxxx Investors.
(1) So long as the Xxxxxxxx Investors and their Permitted
Transferees in the aggregate own at least 10% of the Company's
outstanding Class A Common Stock, the Company shall not, without the
prior written consent of the holders of a majority of the shares of
Class A Common Stock held by all of the Xxxxxxxx Investors and their
Qualified Permitted Transferees (which consent shall not be
unreasonably withheld or delayed):
(i) declare or pay any dividends or make any distributions
upon any shares of its capital stock, except for dividends declared and
paid after the third anniversary of the date of the Original Agreement
on a pro rata basis on the outstanding shares of Class A Common Stock;
(ii) redeem, purchase or otherwise acquire any shares of its
capital stock, except for repurchases after the third anniversary of
the date of the Original Agreement of Class A Common Stock made
pursuant to an offer to all holders of Class A Common Stock on a pro
rata basis and except for repurchases of Class A Common Stock from
employees, directors and consultants and former employees, directors
and consultants of the Company and its Subsidiaries in connection with
termination of employment pursuant to arrangements approved by the
Board;
(iii) merge or consolidate with any Person, unless (a)
immediately following the consummation of such transaction, the
stockholders of the Company immediately
16
prior to the consummation of such transaction continue to own in the aggregate
the outstanding capital stock of the surviving entity possessing the voting
power to elect a majority of the surviving entity's board of directors or other
governing body or (b) the consideration received by the holders of the Class A
Common Stock as a result of such transaction consists solely of cash, cash
equivalents, shares of capital stock of the surviving entity which have been
registered under the Securities Act in connection with such transaction and/or
shares of capital stock of the surviving entity which have not been registered
under the Securities Act, but which are of a class of securities registered
under the Securities Exchange Act and are entitled to demand, S-3 and piggyback
registration rights substantially similar as those contained in the Registration
Agreement (provided that if the consideration received by the Investors in such
transaction consists of cash or cash equivalents and shares of capital stock
issued by any Person engaged in the motion picture exhibition industry other
than the Company, the Xxxxxxxx Investors and their Permitted Transferees shall
be entitled to receive (at their election) 120% of the cash and cash equivalents
such Xxxxxxxx Investors and their Permitted Transferees would have otherwise
been entitled to receive on a pro rata basis and the amount of securities such
Xxxxxxxx Investors and their Permitted Transferees would have been entitled to
receive on a pro rata basis shall be correspondingly reduced);
(iv) sell all or substantially all of its assets, unless the
consideration received by the holders of the Class A Common Stock as a result of
such transaction consists solely of cash, cash equivalents, shares of capital
stock which have been registered under the Securities Act in connection with
such transaction and/or shares of capital stock which have not been registered
under the Securities Act, but which are of a class of securities registered
under the Securities Exchange Act and are entitled to demand, S-3 and piggyback
registration rights substantially similar as those contained in the Registration
Agreement (provided that if the consideration received by the Investors in such
transaction consists of cash or cash equivalents and shares of capital stock
issued by any Person engaged in the motion picture exhibition industry other
than the Company, the Xxxxxxxx Investors and their Permitted Transferees shall
be entitled to receive (at their election) 120% of the cash and cash equivalents
such Xxxxxxxx Investors and their Permitted Transferees would have otherwise
been entitled to receive on a pro rata basis and the amount of securities such
Xxxxxxxx Investors and their Permitted Transferees would have been entitled to
receive on a pro rata basis shall be correspondingly reduced);
(v) acquire (by merger, consolidation, or otherwise) any
company that is not primarily engaged in the motion picture exhibition business
or activities related to the current lines of businesses in which the Company or
any of its Subsidiaries is engaged at the time of the consummation of the
transactions contemplated by the Merger Agreement;
(vi) amend the Company's Certificate of Incorporation or the
Company's bylaws if such amendment would have an adverse effect on the terms of
the Class A Common Stock held by the Xxxxxxxx Investors and their Permitted
Transferees which is different from the adverse effect on the other holders of
Class A Common Stock;
(vii) issue or sell any shares of capital stock which are
senior to the Class A Common Stock with respect to dividends, redemption or
distributions in liquidation or which have voting rights different from the
Class A Common Stock, unless such securities are
17
issued or sold at no less than fair market value as determined by the Board in
its reasonable judgment and the Investors and their Permitted Transferees (if
such Permitted Transferees are not otherwise investors) have the right to
participate in such offering under the provisions of paragraph 6 of this
Agreement;
(viii) enter into, amend or modify any agreement, transaction,
commitment or arrangement with MDCP or any of its Affiliates, except for the
execution, delivery and performance of the Transaction Documents and the other
agreements and arrangements contemplated by this Agreement, the Merger
Agreement, or the Quadrangle Purchase Agreement, except for any agreements,
transactions, commitments and arrangements approved by a majority of the
disinterested directors on the Board who are not affiliated with MDCP and except
for the issuance of securities in which the Investors and their Permitted
Transferees (if such Permitted Transferees are not otherwise investors) have the
right to participate under paragraph 6 of this Agreement; or
(ix) incur, or permit any Subsidiary to incur, any
indebtedness for borrowed money (other than borrowings under, or refinancings or
replacements of, the loan facilities of the Company and its Subsidiaries
existing as of the effectiveness of the Merger under the Merger Agreement) which
would cause the Debt-to-EBITDA Ratio to exceed 5.25:1 prior to the first
anniversary of the Closing, 5.0:1 during the period between the first and second
anniversaries of such Closing and 4.75:1 thereafter, unless at the time of such
incurrence the Company or any of its Subsidiaries has defaulted under any of its
agreements creating indebtedness for borrowed money.
(2) So long as the Xxxxxxxx Investors and their Permitted
Transferees in the aggregate own at least 5% of the outstanding Class A Common
Stock (except in the case of clause (i) below, the required percentage shall be
1%), the Company shall not, without the prior written consent of the holders of
a majority of the shares of Class A Common Stock held by the Xxxxxxxx Investors
and their Qualified Permitted Transferees (which consent, shall not be
unreasonably withheld or delayed):
(i) amend the Company's Certificate of Incorporation or the
Company's bylaws if such amendment would have an adverse effect on the Xxxxxxxx
Investors and their Permitted Transferees which is different from any adverse
effect on any other holder of Class A Common Stock;
(ii) enter into, amend or modify any agreement, transaction,
commitment or arrangement with MDCP or any of its Affiliates, except for (A)
transactions on arm's length terms and conditions, (B) the execution, delivery
and performance of the other agreements and arrangements specifically
contemplated by this Agreement (including, without limitation, the Quadrangle
Purchase Agreement), and (c) the issuance of securities in which the Investors
and their Permitted Transferees (if such Permitted Transferees are not otherwise
investors) have the right to participate under paragraph 6 of this Agreement.
(iii) redeem, repurchase or otherwise acquire any Stockholder
Shares held by MDCP or its respective Affiliates or Permitted Transferees unless
at the same time the
18
Company offers to purchase Stockholder Shares from the Xxxxxxxx Investors and
their Permitted Transferees on the same terms and conditions and on a pro rata
basis according to the number of Stockholder Shares owned by each holder
thereof;
(iv) cause or permit the Company to be taxed other than as a
corporation for income tax purposes including, without limitation, taking any
action that would cause the Company to be taxed as a partnership (whether
general or limited), limited liability company, or other similar entity taxed
under subchapter K or subchapter S of the Code (or any comparable provision of
state, local or foreign income tax law) or otherwise treated as an entity not
generally taxed at the entity-level under the Code (or any comparable provision
of state, local or foreign income tax law); or
(v) merge or consolidate with any Person or sell all or
substantially all of the assets of the Company unless in any such merger,
consolidation or sale of all or substantially all of the assets of the Company
(A) immediately following the consummation of such transaction, the stockholders
of the Company immediately prior to the consummation of such transaction
continue to own in the aggregate the outstanding capital stock of the surviving
entity possessing the voting power to elect a majority of the surviving entity's
board of directors or other governing body (and a majority of the stockholders
of the Company immediately after the consummation of such transaction will take
reasonable actions to obtain rights for the Xxxxxxxx Investors that are
substantially similar to the rights of the Xxxxxxxx Investors under this
Agreement, provided that such post-transaction rights will be deemed to be
"substantially similar" for this purpose even if parties other than the Xxxxxxxx
Investors are granted greater rights than or the same rights with more favorable
terms (including without limitation with respect to the scope, quantity,
priority or duration of, or restrictions on, such rights) as the Xxxxxxxx
Investors have under this Agreement), (B) the Xxxxxxxx Investors receive rights
substantially similar to their rights under, and are not subject to transfer
restrictions more restrictive than those contained in, paragraphs 3, 4 and 5 of
this Agreement and under the Registration Agreement (as in effect at the time of
such transaction), (C) the Xxxxxxxx Investors receive exit rights (including
registration rights), and are subject to transfer restrictions, substantially
similar in terms and conditions (including where applicable, in proportion) to
any such rights or restrictions that MDCP and its Permitted Transferees receive
or are subject to in such merger, consolidation or sale of all or substantially
all of the assets of the Company or (D) the Xxxxxxxx Investors are given the
right to receive cash, cash equivalents or shares of capital stock which have
been registered under the Securities Act and the Xxxxxxxx Investors so elect.
(e) Required Approvals of the Quadrangle Investors. So long as
the Quadrangle Investors and their Permitted Transferees in the aggregate own at
least 5% of the outstanding Class A Common Stock (except in the case of clause
(i) below, the required percentage shall be 1%), the Company shall not, without
the prior written consent of the holders of a majority of the shares of Class A
Common Stock held by the Quadrangle Investors and their Qualified Permitted
Transferees (which consent, shall not be unreasonably withheld or delayed):
(i) amend the Company's Certificate of Incorporation
or the Company's bylaws if such amendment would have an adverse effect on the
Quadrangle Investors
19
and their Permitted Transferees which is different from any adverse effect on
any other holder of Class A Common Stock;
(ii) enter into, amend or modify any agreement,
transaction, commitment or arrangement with MDCP or any of its Affiliates,
except for (A) transactions on arm's length terms and conditions, (B) the
execution, delivery and performance of the other agreements and arrangements
specifically contemplated by this Agreement (including, without limitation, the
Quadrangle Purchase Agreement), and (C) the issuance of securities in which the
Investors and their Permitted Transferees (if such Permitted Transferees are not
otherwise investors) have the right to participate under paragraph 6 of this
Agreement;
(iii) redeem, repurchase or otherwise acquire any
Stockholder Shares held by MDCP or its Affiliates or Permitted Transferees
unless at the same time the Company offers to purchase Stockholder Shares from
the Quadrangle Investors and their Permitted Transferees on the same terms and
conditions and on a pro rata basis according to the number of Stockholder Shares
owned by each holder thereof;
(iv) cause or permit the Company to be taxed other
than as a corporation for income tax purposes including, without limitation,
taking any action that would cause the Company to be taxed as a partnership
(whether general or limited), limited liability company, or other similar entity
taxed under subchapter K or subchapter S of the Code (or any comparable
provision of state, local or foreign income tax law) or otherwise treated as an
entity not generally taxed at the entity-level under the Code (or any comparable
provision of state, local or foreign income tax law); or
(v) merge or consolidate with any Person or sell all
or substantially all of the assets of the Company unless in any such merger,
consolidation or sale of all or substantially all of the assets of the Company
(A) immediately following the consummation of such transaction, the stockholders
of the Company immediately prior to the consummation of such transaction
continue to own in the aggregate the outstanding capital stock of the surviving
entity possessing the voting power to elect a majority of the surviving entity's
board of directors or other governing body (and a majority of the stockholders
of the Company immediately after the consummation of such transaction will take
reasonable actions to obtain rights for the Quadrangle Investors that are
substantially similar to the rights of the Quadrangle Investors under this
Agreement, provided that such post-transaction rights will be deemed to be
"substantially similar" for this purpose even if parties other than the
Quadrangle Investors are granted greater rights than or the same rights with
more favorable terms (including without limitation with respect to the scope,
quantity, priority or duration of, or restrictions on, such rights), (B) the
Quadrangle Investors receive rights substantially similar to their rights under,
and are not subject to transfer restrictions more restrictive than those
contained in, paragraphs 3, 4 and 5 of this Agreement and under the Registration
Agreement (as in effect at the time of such transaction), (C) the Quadrangle
Investors receive exit rights (including registration rights), and are subject
to transfer restrictions, substantially similar in terms and conditions
(including where applicable, in proportion) to any such rights or restrictions
that MDCP and its Permitted Transferees receive or are subject to in such
merger, consolidation or sale of all or substantially all of the assets of the
Company or (D) the Quadrangle Investors are given the right
20
to receive cash, cash equivalents or shares of capital stock which have been
registered under the Securities Act and the Quadrangle Investors so elect.
(f) Confidentiality. Each Investor shall not disclose to any
Person (other than such Investor's employees, agents and advisors who have a
need to know) and shall not use for any purpose other than monitoring such
Investor's investment in the Company, and shall cause its employees, agents and
advisors to maintain the confidentiality of, all of the information obtained
pursuant to paragraphs 8(a) and (b) of this Agreement, unless (a) such
information was or becomes publicly available through no fault of such Investor,
its Affiliates or Permitted Transferees or their employees, agents or advisors
or (b) the disclosure of such information is compelled by legal proceedings. In
the event that any Investor is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand or similar process) to disclose any such
information, such Investor will notify the Board promptly of the request or
requirement so that the Company may seek an appropriate protective order or
other appropriate relief or waive compliance with this provision. In the absence
of a protective order or the Investor's receiving such waiver from the Company,
the Investor will be permitted to disclose that portion (and only that portion)
of the information that the Investor is legally compelled by the tribunal to
disclose; provided, however, that the Investor shall use commercially reasonable
efforts to obtain an order or other assurance that confidential treatment will
be accorded to such portion of the information required to be disclosed as the
Company shall designate.
(g) Termination. All of the provisions of paragraphs 8(d) and
(e) shall terminate and be of no further force or effect upon the effective date
of an Initial Public Offering of the Company's Class A Common Stock registered
under the Securities Act. The provisions of paragraphs (a), (b), (d) and (e) of
this paragraph 8 are not transferable or assignable by any Investor to any
subsequent holder of any Class A Common Stock purchased hereunder (except in the
case of a transfer to another Investor or a Qualified Permitted Transferee of
the transferor), and upon the transfer of any Investor's Class A Common Stock
(except in the case of a transfer to another Investor or a Qualified Permitted
Transferee of the transferor), such provisions shall terminate with respect to
such transferred shares. If at any time the Xxxxxxxx Investors own, directly or
indirectly, more than a 5% interest in the aggregate of any business that owns,
operates or manages theatres with more than an aggregate of 800 screens in the
Western Hemisphere, the Xxxxxxxx Investors shall not be entitled to (i) receive
any information under paragraph 8(a), except that if the Company is not a
reporting company registered under the Securities Exchange Act, the Xxxxxxxx
Investors shall continue to receive the Company's annual consolidated financial
statements together with a letter from the Company's management describing
material developments at the Company, (ii) exercise any rights under paragraph
8(b), except that the Xxxxxxxx Investors shall retain their statutory inspection
rights under Delaware law, or (iii) after the fifth anniversary of the Merger,
exercise any approval rights under paragraph 3(d).
9. Reallocation of Sale Bonus Shares. For each Executive, a portion of
the total number of shares of Class A Common Stock owned by such Executive
immediately following the effectiveness of the Merger as specified below
constitute "SALE BONUS SHARES" hereunder (including therewith all shares of
capital stock of the Company issued or issuable with respect
21
thereto by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization affecting the Class A Common Stock):
Sale Bonus Shares
-----------------
Xxxxxxx Xxxxxxxx 37,891
Xxxxxx Xxxxxx 49,901
Xxxx Xxxxx 50,149
Xxxxxxx Xxxxxx 55,826
If prior to April 2, 2007 (the "THIRD ANNIVERSARY") any Executive's employment
with the Company terminates as a result of Cause or Voluntary Termination (as
such terms are defined in each such Executive's New Employment Agreement), all
of such Executive's Sale Bonus Shares shall be automatically forfeited and the
stock certificates representing such shares shall be immediately surrendered by
Executive to the Company endorsed in blank or accompanied by an appropriate form
of assignment. Upon receipt of such certificate(s), the Company shall promptly
reissue the Sale Bonus Shares represented by such certificate(s) to the other
Executives that at such time continue to hold Sale Bonus Shares on a pro rata
basis in accordance with the number of Sale Bonus Shares owned by such
Executives immediately prior to the termination of such other Executive's
employment. Prior to the Third Anniversary, the Sale Bonus Shares may not be
transferred by any Executive (except to members of such Executive's Family
Group), and during such period, the certificates evidencing such shares shall be
imprinted with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE DESIGNATED
AS "SALE BONUS SHARES" UNDER, AND ARE SUBJECT TO THE TERMS OF,
THE AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT, DATED AS OF
DECEMBER 30, 2004, AMONG THE ISSUER OF SUCH SECURITIES (THE
"COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS, AS
AMENDED FROM TIME TO TIME. A COPY OF SUCH AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST. ANY
PURPORTED TRANSFER OF THESE SECURITIES NOT IN ACCORDANCE WITH
SUCH AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT SHALL BE
INVALID AND THE COMPANY SHALL NOT RECORD SUCH TRANSFER ON ITS
BOOKS."
Each Executive filed a Section 83(b) election with the Internal Revenue Service
with respect to such Executive's Sale Bonus Shares within 30 days of the
effectiveness of the Merger.
22
10. Legend. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT DATED AS OF
DECEMBER 30, 2004, AMONG THE ISSUER OF SUCH SECURITIES (THE
"COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS, AS
AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH AMENDED
AND RESTATED
STOCKHOLDERS AGREEMENT SHALL BE FURNISHED WITHOUT
CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST. ANY PURPORTED TRANSFER OF THESE SECURITIES NOT IN
ACCORDANCE WITH SUCH AMENDED AND RESTATED
STOCKHOLDERS
AGREEMENT SHALL BE INVALID AND THE COMPANY SHALL NOT RECORD
SUCH TRANSFER ON ITS BOOKS."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date of this Agreement, and the Stockholders shall
surrender their stock certificates to the Company for such purpose. The legend
set forth above shall be removed from the certificates evidencing any shares
which cease to be Stockholder Shares as provided in the definition of such term
in paragraph 13 hereof.
11. Transferees Bound. Prior to Transferring any Stockholder Shares
(other than in connection with a Public Sale or a Sale of the Company) to any
Person, the transferring holder of Stockholder Shares shall cause the
prospective transferee to be bound by this Agreement and to execute and deliver
to the Company and the other Stockholders a counterpart of this Agreement.
12. Effective Date. This Agreement shall become effective as to each
party hereto automatically without any further action immediately upon the
execution of this Agreement by such party, provided that this Agreement shall
not be effective against any party prior to the Closing (as defined in the
Quadrangle Purchase Agreement).
13. Definitions.
"ADDITIONAL SECURITIES" has the meaning set forth in paragraph
6(a).
"AFFILIATE" of any Person is any other Person controlled by,
controlling or under common control with such Person and in the case of any
Stockholder that is a partnership or limited liability company, any partner or
member of such Stockholder (provided that the Company shall not be deemed to be
an affiliate of any Stockholder) or in the case of any Stockholder that is a
trust, any beneficiary, trust for the benefit of the beneficiary or successor
23
trust; provided that under no circumstances shall any of the Xxxxxxxx Investors
or their Permitted Transferees be Affiliates of any of the Quadrangle Investors
or their Permitted Transferees nor shall any of the Quadrangle Investors or
their Permitted Transferees be Affiliates of any of the Xxxxxxxx Investors or
their Permitted Transferees for purposes of this Agreement.
"AVAILABLE SHARES" has the meaning set forth in paragraph
3(c)(iii).
"BOARD" has the meaning set forth in the preamble.
"CAPITAL LEASE OBLIGATIONS" shall mean the obligations of the
Company or its Subsidiaries to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on the Company or its Subsidiaries' balance
sheet under GAAP; and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP provided that Capital Lease obligations shall
exclude the application of Emerging Issues Task Force Regulation 97-10 or
similar pronouncement.
"CLASS A COMMON STOCK" means, the Company's Class A Common
Stock, par value $0.001 per share.
"CLOSING" shall have the meaning assigned to such term in the
Purchase Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the preamble.
"COMPANY ELECTION NOTICE" has the meaning set forth in
paragraph 3(c)(ii).
"COMPANY OFFER PERIOD" has the meaning set forth in paragraph
3(c)(ii).
"COMPETITOR" means any Person that directly or indirectly
owns, operates or manages theatres with an aggregate of more than 50 movie
screens, each of which movie screens is used for the primary purpose of
exhibiting commercially distributed full-length motion pictures movie theatres
and any Affiliate of such Person.
"COMPETITOR SALE ELECTION NOTICE" has the meaning set forth in
paragraph 3(d)(ii).
"COMPETITOR SALE ELECTION PERIOD" has the meaning set forth in
paragraph 3(d)(i).
"COMPETITOR SALE OFFER PERIOD" has the meaning set forth in
paragraph 3(d)(ii).
"COMPETITOR SALE OFFER NOTICE" has the meaning set forth in
paragraph 3(d)(i).
24
"CONSOLIDATED EBITDA" shall mean for any period, without
duplication, Consolidated Net Income for such period plus, to the extent
reflected as a charge in the statement of such Consolidated Net Income for such
period, the sum of (a) income tax expense, (b) Consolidated Interest Expense,
amortization or write-off of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness,
(c) depreciation and amortization expense, (d) amortization of intangibles
(including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, net losses on sales of assets outside
of the ordinary course of business), (f) any minority interest deduction, and
(g) any other non-cash charges, and minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (a)
interest income (except to the extent deducted in determining Consolidated
Interest Expense), (b) any extraordinary, unusual or non-recurring income or
gains (including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, net gains on sales of
assets outside of the ordinary course of business), and (c) any other non-cash
income, all as determined on a consolidated basis; provided that for purposes of
calculating Consolidated EBITDA of the Company and its Subsidiaries for any
period:
(i) the Consolidated EBITDA of any Person acquired by
the Company or its Subsidiaries during such period shall be included on
a pro forma basis (including any items which are permitted to be added
back to Consolidated Net Income under Regulation SX and any other
identifiable cost savings resulting from any such acquisition as well
as the incremental EBITDA associated with the annualized run-rate of
theatres operated by the acquired Person for less than one year prior
to the date of acquisition, excluding any theatres opened for less than
six months) for such period (assuming the consummation of such
acquisition and the incurrence or assumption of any Indebtedness in
connection therewith had occurred on the first day of such period and
without giving effect to clause (a) of the proviso set forth in the
definition of Consolidated Net Income) if the consolidated balance
sheet of such acquired Person and its consolidated Subsidiaries as at
the end of the fiscal year preceding the acquisition of such Person and
the related consolidated statements of income and stockholders' equity
and of cash flows for the period in respect of which Consolidated
EBITDA is to be calculated have been reported on without a
qualification arising out of the scope of the audit by independent
certified public accountants of nationally recognized standing or have
been found reasonably acceptable by the Xxxxxxxx Investors; and
(ii) the Consolidated EBITDA of any Subsidiary
disposed of by the Company or its Subsidiaries during such period shall
be excluded for such period (assuming the consummation of such
disposition and the repayment of any Indebtedness in connection
therewith had occurred on the first day of such period).
"CONSOLIDATED INTEREST EXPENSE" shall mean for any period,
total cash interest expense (including that attributable to Capital Lease
Obligations) of the Company and its Subsidiaries for such period with respect to
all outstanding Indebtedness of the Company and its Subsidiaries (including,
without limitation, all commissions, discounts and other fees and
25
charges owed by the Company with respect to letters of credit and bankers'
acceptance financing and net costs of the Company under Hedge Agreements in
respect of interest rates to the extent such net costs are allocable to such
period in accordance with GAAP).
"CONSOLIDATED NET INCOME" shall mean for any period, the
consolidated net income (or loss) of the Company and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; provided,
that in calculating Consolidated Net Income of the Company and its Subsidiaries
for any period, there shall be excluded (a) the income (or deficit) of any
Person accrued prior to the date it becomes a Subsidiary of the Company or is
merged into or consolidated with the Company or any of its Subsidiaries, and (b)
the income (or deficit) of any Person (that is not a Subsidiary) in which the
Company or any of its Subsidiaries has an ownership interest, except to the
extent that any such income is actually received by the Company or such
Subsidiary in the form of dividends or similar distributions or payment of
principal or interest of inter-company Indebtedness.
"CONSOLIDATED TOTAL DEBT" shall mean at any date, the
aggregate amount of all Indebtedness of the Company and its Subsidiaries at such
date, determined on a consolidated basis in accordance with GAAP, excluding
inter-company Indebtedness.
"DEBT-TO-EBITDA RATIO" means as at the last day of any period
of four consecutive fiscal quarters of the Company, the ratio of (a)
Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period.
"ELECTION PERIOD" has the meaning set forth in the preamble.
"EXECUTIVES" has the meaning set forth in the preamble.
"EXEMPT TRANSFER" has the meaning set forth in paragraph 3(b).
"EXISTING EMPLOYMENT AGREEMENTS" means the Employment
Agreements between Cinemark, Inc. and each of Xxxx Xxxxx, Xxxxxxx Xxxxxx, Xxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxx, Xxx Xxx Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxxx and
Xxxxxx Xxxxxxx, each dated as of June 19, 2002, and as amended on December 24,
2003.
"FAMILY GROUP" with respect to any Stockholder, means, such
Stockholder's spouse and descendants (whether natural or adopted) and any trust
that is and remains solely for the benefit of such Stockholder and/or such
Stockholder's spouse and/or descendants.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time.
"HEDGE AGREEMENTS" shall mean all interest rate or currency
swaps, caps or collar agreements, foreign exchange agreements, commodity
contracts or similar arrangements entered into by the Company or its
Subsidiaries providing for protection against fluctuations in interest rates,
currency exchange rates, commodity prices or the exchange of nominal interest
obligations, either generally or under specific contingencies. For avoidance of
doubt, Hedge Agreements shall include any interest rate swap or similar
agreement that provides for the payment by the
26
Company or any of its Subsidiaries of amounts based upon a floating rate in
exchange for receipt by the Company or such Subsidiary of amounts based upon a
fixed rate.
"INDEBTEDNESS" shall mean at any date, without duplication,
(a) all indebtedness of such Person for borrowed money, (b) all obligations of
the Company or its Subsidiaries for the deferred purchase price of Property or
services (other than trade payables incurred in the ordinary course of the
Company's or its Subsidiaries' business), (c) all obligations of the Company or
its Subsidiaries evidenced by notes, bonds, debentures or other similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to Property acquired by the
Company or its Subsidiaries (even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such Property, provided that, in such event, the amount
of such Indebtedness shall be deemed to be the value of the Property covered by
such agreement), and (e) all Capital Lease Obligations or Synthetic Lease
Obligations of the Company or its Subsidiaries. For purposes of clarification,
"Indebtedness" shall not include accounts payable or accrued operating expenses
of the Company or any of its Subsidiaries.
"INDEPENDENT THIRD PARTY" means any Person other than MDCP or
the Xxxxxxxx Investors.
"INITIAL ALLOCATION" has the meaning set forth in paragraph
3(c)(iii).
"INITIAL ALLOCATION SUM" has the meaning set forth in
paragraph 3(c)(iii).
"INITIAL PUBLIC OFFERING" means an underwritten initial public
offering of the Company's Class A Common Stock registered under the Securities
Act resulting in the sale to the public of shares with an aggregate selling
price of not less than $100 million.
"INVESTOR" means each of MDCP, and the Xxxxxxxx Investors and
their respective Permitted Transferees, and the Quadrangle Investors.
"MARKET STAND-OFF" has the meaning set forth in paragraph 5.
"MDCP" has the meaning set forth in the preamble.
"MDCP SALE ELECTION NOTICE" has the meaning set forth in the
paragraph 3(e).
"MDCP SALE NOTICE" has the meaning set forth in the paragraph
3(e). "MDCP SALE PERIOD" has the meaning set forth in the
paragraph 3(e).
"MERGER" has the meaning set forth in the preamble.
"MERGER AGREEMENT" means the Agreement and Plan of Merger,
dated as of March 12, 2004, between the Company and Popcorn Merger Corp.
pursuant to which Popcorn Merger Corp. merged with and into the Company, with
the Company continuing as the surviving corporation.
27
"MERGER CONSIDERATION" has the meaning set forth in the Merger
Agreement.
"XXXXXXXX-QUADRANGLE ELECTION NOTICE" has the meaning set
forth in paragraph 3(d)(iii).
"XXXXXXXX DIRECTORS" has the meaning set forth in paragraph
1(a)(ii)(A).
"XXXXXXXX INVESTORS" has the meaning set forth in the
preamble.
"MODIFICATION" has the meaning set forth in paragraph 15.
"NEW EMPLOYMENT AGREEMENTS" means the Employment Agreements,
dated as of the March 12, 2004, between the Company and each of Xxxx Xxxxx,
Xxxxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxxxx Xxxxxxxx.
"OFFER NOTICE" has the meaning set forth in paragraph 3(c)(i).
"OFFERED SHARES" has the meaning set forth in paragraph
3(c)(i).
"OPTION SHARES" has the meaning set forth in paragraph 6(a).
"ORIGINAL AGREEMENT" has the meaning set forth in the
preamble.
"OTHER STOCKHOLDERS" has the meaning set forth in paragraph
3(e)(i).
"PARTICIPATING STOCKHOLDER" has the meaning set forth in
paragraph 3(c)(iii).
"PERMITTED TRANSFEREE" has the meaning set forth in paragraph
3(b).
"PERSON" means 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 a governmental entity or any
department, agency or political subdivision thereof.
"PROPERTY" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock.
"PRO RATA SHARE" has the meaning set forth in paragraph
3(c)(iii).
"PUBLIC SALE" means any sale of Stockholder Shares to the
public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker on a securities exchange or in
the over-the-counter market pursuant to the provisions of Rule 144 adopted under
the Securities Act.
"PURCHASE AGREEMENT" has the meaning set forth in the
preamble.
"QUADRANGLE DIRECTOR" has the meaning set forth in paragraph
1(a)(ii)(C).
28
"QUADRANGLE GROUP, LLC" means Quadrangle Group, LLC, a
Delaware limited liability company.
"QUADRANGLE INVESTORS" has the meaning set forth in the
preamble.
"QUADRANGLE PURCHASE AGREEMENT" has the meaning set forth in
the preamble.
"QUALIFIED PERMITTED TRANSFEREE" means (i) with respect to the
Xxxxxxxx Investors, any Permitted Transferee of the Xxxxxxxx Investors and (ii)
with respect to the Quadrangle Investors, any Person under common control with
the Quadrangle Investors.
"REGISTRATION AGREEMENT" means the Registration Agreement,
dated as of March 12, 2004, among the Company, MDCP and the Xxxxxxxx Investors,
as amended by the First Amendment to Registration Agreement and Joinder dated as
of December 30, 2004 and as may be further amended from time to time.
"REMAINING AVAILABLE SHARES" has the meaning set forth in
paragraph 3(c)(iii).
"REMAINING PARTICIPATING STOCKHOLDER" has the meaning set
forth in paragraph 3(c)(iii).
"REMAINING PRO RATA SHARE" has the meaning set forth in
paragraph 3(c)(iii).
"SALE BONUS AGREEMENT" means the Sale Bonus Agreement dated as
of March 12, 2004, among the Company, the Executives and certain other
shareholders of the Company.
"SALE OF THE COMPANY" means the sale of the Company to an
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Company or the surviving
entity possessing the voting power under normal circumstances to elect a
majority of the Company's or the surviving entity's board of directors or
entitling such Person to exercise more than fifty percent (50%) of the total
voting power of the shares of capital stock of the Company or the surviving
entity entitled to vote (whether by merger, consolidation or sale or transfer of
the Company's capital stock) or (ii) all or substantially all of the Company's
assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"STOCKHOLDERS ELECTION NOTICE" has the meaning set forth in
paragraph 3(c)(iii).
"STOCKHOLDER SHARES" means (i) any Class A Common Stock owned
by any Stockholder and (ii) any capital stock or other equity securities issued
or issuable directly or indirectly with respect to the Class A Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares constituting Stockholder
Shares, such shares shall cease to be Stockholder Shares when they have been (x)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (y) sold to the public through
a broker, dealer or market maker on a
29
securities exchange or in the over-the-counter market pursuant to Rule 144 (or
any similar provision then in force) under the Securities Act.
"STOCKHOLDERS" has the meaning set forth in the preamble.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the limited liability company, partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person
or a combination thereof. For purposes hereof, a Person or Persons shall be
deemed to have a majority ownership interest in a limited liability company,
partnership, association or other business entity if such Person or Persons
shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control the
managing director or general partner of such limited liability company,
partnership, association or other business entity.
"SYNTHETIC LEASE OBLIGATIONS" shall mean all monetary
obligations of the Company or its Subsidiaries under (a) a so-called synthetic,
off-balance sheet or tax retention lease, or (b) an agreement for the use or
possession of property creating obligations which do not appear on the balance
sheet of the Company or its Subsidiaries but which, upon the insolvency or
bankruptcy of the Company or its Subsidiaries, would be characterized as the
Indebtedness of the Company or its Subsidiaries (without regard to accounting
treatment).
"TRANSFER" has the meaning set forth in paragraph 3(a).
"TRANSFERRING STOCKHOLDER" has the meaning set forth in
paragraph 3(c).
14. Additional Parties; Joinder. The Company may permit any Person who
acquires Class A Common Stock or rights to acquire Class A Common Stock after
the date hereof (the "ACQUIRED COMMON") to become a party to this Agreement and
to succeed to all of the rights and obligations of a "holder of Stockholder
Shares" under this Agreement by obtaining an executed joinder to this Agreement
from such Person in the form of Exhibit A attached hereto. Upon the execution
and delivery of the joinder by such Person, such Person's Acquired Common shall
be Stockholder Shares hereunder, and such Person shall be a "holder of
Stockholder Shares" under this Agreement with respect to the Acquired Common.
15. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement (any such
modification, amendment or waiver, referred to herein as a "MODIFICATION") shall
be effective against the Company or any holder of Stockholder Shares unless such
Modification is approved in writing by the Company and the holder or holders of
a majority of the Stockholder Shares outstanding; provided that with respect to
any Modification that adversely affects the rights hereunder of a particular
group of
30
holders of Stockholder Shares, each such group being the Xxxxxxxx Investors, the
Quadrangle Investors, the Executives and MDCP (in each case together with their
respective Permitted Transferees), in any material respect different than the
other groups of holders of Stockholder Shares, such Modification shall be
effective against such particular group only if such Modification is approved in
writing by the holder or holders of a majority of all of the Stockholder Shares
held by such group. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
16. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
17. Entire Agreement. Except as otherwise expressly set forth herein,
this Agreement embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way, including without limitation the Original Agreement.
18. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares; provided that the rights of
the Xxxxxxxx Investors under paragraph 1 hereof may not be assigned to Persons
other than Qualified Permitted Transferees without the prior written approval of
MDCP.
19. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
20. Remedies. The Company and the Stockholders shall be entitled to
enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that a breach of this Agreement would cause irreparable harm and money damages
would not be an adequate remedy for any such breach and that, in addition to
other rights and remedies hereunder, the Company and the Stockholders shall be
entitled to specific performance and/or injunctive or other equitable relief
(without posting a bond or other security) from any court of law or equity of
competent jurisdiction in order to enforce or prevent any violation of the
provisions of this Agreement.
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21. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid, return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the Company and MDCP at the addresses set
forth below and to any other recipient at the address indicated on the schedules
hereto and to any subsequent holder of Stockholder Shares subject to this
Agreement at such address as indicated by the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. Notices shall be deemed
to have been given hereunder when delivered personally, three days after deposit
in the U.S. mail and one day after deposit with a reputable overnight courier
service.
The Company's address is: Cinemark, Inc.
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx
MDCP's address is: Madison Dearborn Capital Partners IV, L.P.
Three First National Plaza, Suite 3800
00 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxxxx
22. Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of
Delaware, without giving effect to any
choice of law or conflict of law rules or provisions (whether of 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.
23. Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company's chief-executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
24. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
25. No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
26. Mutual Waiver of Jury Trial. The parties hereto hereby irrevocably
waive any and all rights to trial by jury in any legal proceeding arising out of
or related to this Agreement. Any action or proceeding whatsoever between the
parties hereto relating to this Agreement shall be tried in a court of competent
jurisdiction by a judge sitting without a jury.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
MADISON DEARBORN CAPITAL
CINEMARK, INC. PARTNERS IV, L.P.
By: Madison Dearborn Partners, IV L.P.
its General Partner
By: /s/ Xxxxxxx Xxxxxxxx By: Madison Dearborn Partners, LLC,
-------------------------------
Name: Xxxxxxx Xxxxxxxx
Its: Vice President-General Counsel
By: /s/ Xxxxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxxxx X. Xxxxxxxxx
Its: President
/s/ Xxx Xxx Xxxxxxxx THE XXXXXXXX SPECIAL TRUST
-------------------------------------
Xxx Xxx Xxxxxxxx
/s/ Xxxx Xxxxx By: /s/ Xxx Xxx Xxxxxxxx
------------------------------------- ----------------------------------
Xxxx Xxxxx Xxx Xxx Xxxxxxxx, Trustee
/s/ Xxxxxxx Xxxxxx By: /s/ Xxxx X. Xxxxxxxxxxx
------------------------------------- ----------------------------------
Xxxxxxx Xxxxxx Xxxx X. Xxxxxxxxxxx, Trustee
/s/ Xxxxxx Xxxxxx
-------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxxxx
-------------------------------------
Xxxxxxx Xxxxxxxx
NORTHWESTERN UNIVERSITY
By: /s/ Xxxxxxx X. XxXxxx
-------------------------------
Name: Xxxxxxx X. XxXxxx
Its: Vice President and CFO
33
QUADRANGLE CAPITAL PARTNERS LP
By: Quadrangle GP Investors LP
Its: General Partner
By: Quadrangle GP Investors, LLC
Its: General Partner
By: /s/ Xxxxx Xxxxxxx
----------------------------
Name: Xxxxx Xxxxxxx
Its: Managing Principal
QUADRANGLE SELECT PARTNERS LP
By: Quadrangle GP Investors LP
Its: General Partner
By: Quadrangle GP Investors, LLC
Its: General Partner
By: /s/ Xxxxx Xxxxxxx
----------------------------
Name: Xxxxx Xxxxxxx
Its: Managing Principal
QUADRANGLE CAPITAL PARTNERS A LP
By: Quadrangle GP Investors LP
Its: General Partner
By: Quadrangle GP Investors, LLC
Its: General Partner
By: /s/ Xxxxx Xxxxxxx
----------------------------
Name: Xxxxx Xxxxxxx
Its: Managing Principal
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/s/ Xxxx Xxxxxxx
----------------------------
XXXX XXXXXXX
35
