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EXHIBIT 10.3
AMENDED AND RESTATED
SHAREHOLDERS' AND VOTING AGREEMENT
by and among
HOLLYWOOD THEATER HOLDINGS, INC.,
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
and
THE OTHER SHAREHOLDERS
THAT ARE SIGNATORIES HERETO
Dated as of December __, 1997
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TABLE OF CONTENTS
Page
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Methodology for Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1. Composition of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2. Committees; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3. Vacancies; Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Non-Voting Observers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5. Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6. Board and Committee Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7. Telephonic Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8. Directors' Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9. Irrevocable Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10. Contractual Management Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.12. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4. Restrictions on Transfers of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Rights of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. Tag-Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.1. Tag-Along . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.2. Tag-Along Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4. Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7. Drag-Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1. Drag-Along . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2. Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8. Pre-emptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 9. Pledge of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 10. Transfer to Specified Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 11. Transfer Upon Death of a Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 12. Transfer Upon Death of the Spouse of a Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 13. Transfer Upon Divorce of a Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 14. Involuntary Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 15. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 16. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 17. Holdback Agreement; Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 18. Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18.1. Financial Statements and Other Information . . . . . . . . . . . . . . . . . . . . . . . . 27
18.2. Reservation of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
18.3. Public Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 19. Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 20. Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 21. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 22. Put . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 23. Duration of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 24. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 25. Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 26. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 27. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 28. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 29. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 30. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 31. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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Section 32. Governing Law; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 33. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 34. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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AMENDED AND RESTATED
SHAREHOLDERS' AND VOTING AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDERS' AND VOTING AGREEMENT (the
"Agreement") is made as of December __, 1997 by and among HOLLYWOOD THEATER
HOLDINGS, INC., a Delaware corporation (the "Company"), THE BEACON GROUP III -
FOCUS VALUE FUND, L.P., a Delaware limited partnership ("Beacon") and each of
the shareholders of the Company executing one of the signature pages attached
hereto or otherwise subject hereto.
W I T N E S S E T H:
WHEREAS, the Company and the shareholders of the Company are party to
a Shareholders and Voting Agreement dated as of October 3, 1996, as amended
(the "Prior Shareholders' Agreement"); and
WHEREAS, the parties hereto deem it to be in their best interests to
amend and restate the Prior Shareholders' Agreement in its entirety.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
Section 1. Definitions. As used herein, the following terms
shall have the following meanings :
"Accepted Shares" has the meaning assigned to it in Section 8(a).
"Adjusted Base EBITDA" means, for any period, the Base EBITDA for such
period adjusted to include the Base EBITDA attributable to (a) theaters
acquired by the Company or any of its Subsidiaries during such period
(including theaters acquired as a result of the acquisition by the Company or
any of its Subsidiaries of a Subsidiary or Subsidiaries during such period),
and (b) theaters constructed by the Company during such period to the extent
certificates of occupancy have been issued and such theaters are open for
business as of the last day of such period, in each case as if such theaters
were owned and open for business throughout the entire period. For purposes of
computing Adjusted Base EBITDA, the Base EBITDA attributable to any theater
constructed (and opened) during such period for the portion of such period
prior to the opening of such theater shall be the Base EBITDA set forth in the
projections (for the first full year of the operation) of Base EBITDA for such
theater presented to the Board of Directors of the Company in connection with
its approval of the construction of such theater.
"Agreement" has the meaning set forth in the Preamble.
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"Affiliate" means (i) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and (ii) with respect to any
individual, shall also mean the spouse, parent, sibling, child, step-child,
grandchild, niece or nephew of such Person, or the spouse thereof.
"All or Nothing Sale" has the meaning assigned to it in Section 5(a).
"Appraisal Procedure" shall mean the following procedure for
determining the Market Value of Common Stock: (a) upon receipt by the Company
of a Put Notice, the Company and the Put Holder which delivered such Put Notice
shall attempt to agree on a mutually acceptable Qualified Appraiser to value
the Common Stock, and if such parties agree on a Qualified Appraiser within ten
(10) days following the receipt of the Put Notice, such Qualified Appraiser
shall, on or before twenty (20) days following the date it is appointed,
determine the Market Value of the Common Stock, and such determination shall be
binding upon the Company and such Put Holder; (b) in the event the Company and
such Put Holder are unable to agree upon a mutually acceptable Qualified
Appraiser within ten (10) days following receipt of the Put Notice, on the
expiration of such ten (10) day period, the Company and such Put Holder shall
each appoint a Qualified Appraiser to value the Common Stock. Within twenty
(20) days following the date they are appointed, the Qualified Appraisers
appointed by the Company and such Put Holder shall determine the Market Value
of the Common Stock. In the event the values determined by the Company's
Qualified Appraiser and the Put Holder's Qualified Appraiser are within ten
percent (10%) of each other, the Market Value for purposes of such exercise of
the Put shall be the average of the values determined by such appraisers and
such determination shall be binding upon the Company and such Put Holder. In
the event such values differ by ten percent (10%) or more, such appraisers
shall in turn promptly appoint a third Qualified Appraiser who shall, within
twenty (20) days following the date it is appointed, determine the Market Value
of the Common Stock. The value which is neither the lowest nor the highest of
the values determined by the three Qualified Appraisers shall be the Market
Value of the Common Stock for purposes of such exercise of the Put and shall be
binding upon the Company and such Put Holder. In the event either the Company
or such Put Holder fails to timely appoint a Qualified Appraiser, such failing
party will be deemed to have waived its rights to appoint a Qualified
Appraiser, and the Qualified Appraiser appointed by the other party shall
determine the Market Value for purposes of such exercise of the Put which
determination shall be binding upon such Put Holder and the Company. The costs
of any mutually agreeable Qualified Appraiser referred to in (a) above and of
the third Qualified Appraiser referred to in (b) above shall be paid equally by
the Company and such Put Holder. Such Put Holder shall pay all costs of the
Qualified Appraiser appointed by it pursuant to (b) above and the Company shall
pay all costs of the Qualified Appraiser so appointed by it. For purposes of
the time periods in this definition, the Company shall be deemed to have
received the Put Notice on such date as the Company and the Put Holder
determine that they are unable to agree on the Market Value of a share of
Common Stock.
"Base EBITDA" means, for any period, the remainder of (a) all revenue
of the Company and its Subsidiaries during such period derived from theaters
owned, leased or operated by the Company and its Subsidiaries, including,
without limitation, ticket revenue, advertising
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revenue and revenue from concession sales, minus (b) the direct "theater level"
cash operating expenses incurred by the Company and its Subsidiaries during
such period in connection with the ownership, leasing and operation of movie
theaters owned, leased or operated by the Company and its Subsidiaries during
such period. As used herein, "theater level" cash operating expenses shall
expressly exclude, without limitation, corporation overhead charges, executive
officer compensation, general and administrative expenses and other expenses
not directly related to the ownership, leasing or operation of individual movie
theaters.
"Beacon" has the meaning assigned to it in the Preamble.
"Beacon Designee" has the meaning assigned to it in Section 3.1.
"Beacon Directors" has the meaning assigned to it in Section 3.1.
"Beacon Non-Voting Observer" has the meaning assigned to it in Section
3.4.
"Board" has the meaning assigned to it in Section 3.1.
"Book Value" means the book value per share of Common Stock, as
determined by dividing Total Equity as of the date of the most recent quarterly
or year-end financial statements of the Company available on the Determination
Date by the total number of shares of Common Stock issued and outstanding as of
the date of the financial statements.
"Business Day" means any day other than a Saturday, Sunday or other
day on which national banks are authorized or required by law to be closed in
Dallas, Texas.
"By-laws" means the Bylaws of the Company as in effect on the date
hereof, as they may be amended from time to time hereafter.
"Certificate" means the Restated Certificate of Incorporation of the
Company as in effect on the date hereof, as it may be amended from time to time
hereafter.
"Closing" has the meaning specified in Section 16.
"Common Stock" means the Common Stock, par value $.01 per share of the
Company and any equity securities issued or issuable with respect to the Common
Stock in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Common Stock Equivalents" means securities convertible into, or
exchangeable or exercisable for, shares of Common Stock, including, without
limitation, the Series B Preferred, the Series C Preferred and the Series D
Preferred.
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"Company" has the meaning assigned to it in the Preamble.
"Company Acceptance Period" has the meaning assigned to it in Section
5(a).
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Credit Agreement" means that certain Amended and Restated Credit
Agreement dated as of August 7, 1997 among the Company, Bank of America
National Trust and Savings Associations, as agent and the other lenders party
thereto, as the same may hereafter be amended or otherwise modified from time
to time, and any refinancings thereof.
"Deceased Shareholder" has the meaning assigned to it in Section
11(a).
"Deceased Spouse" has the meaning assigned to it in Section 12(a).
"Determination Date" means (i) in the case of a Transfer proposed to
be effected pursuant to Section 14 hereof, the date of the first Offer Notice
given in connection with such Transfer, (ii) in the case of a Transfer upon the
death of a Shareholder or the spouse of a Shareholder, the date of death, and
(iii) in the case of a Transfer upon the divorce of a Shareholder, the date of
the entry of the divorce decree.
"Divorced Shareholder" has the meaning specified in Section 13(a).
"Divorced Spouse" has the meaning specified in Section 13(a).
"Drag-Along Initiator" has the meaning assigned to it in Section 7.1.
"Excluded Securities" means (a) options issued by the Company to
employees or consultants pursuant to any stock option or similar plan (and any
shares of Common Stock issuable thereunder) approved by the Board, and (b)
shares of Common Stock issuable upon conversion, exchange or exercise of any
Common Stock Equivalent (including, without limitation, upon conversion of the
Series B Preferred, Series C Preferred and Series D Preferred) the issuance of
which is approved by the Board.
"First Offer Percentage" means, as to each Offered Shareholder, the
quotient obtained (expressed as a percentage) by dividing (i) the number of
shares of Common Stock owned by such Offered Shareholder on the first day of
the Shareholder Acceptance Period by (ii) the aggregate number of shares of
Common Stock owned on the first day of the Shareholder Acceptance Period by all
Offered Shareholders who exercise their option to purchase Refused Stock.
"First Offer Shares" has the meaning assigned to it in Section 5(b).
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"Formula Value" means the value per share of Common Stock determined
by the following formula: (a)(i) 5.0 x Base EBITDA for the trailing four fiscal
quarters of the Company as determined by reference to the most recently
available unaudited income statement of the Company (or the audited financial
statement in the case of quarters constituting a full fiscal year), prepared in
accordance with GAAP, for the period ended as of the last day of the quarter
ended immediately prior to the Determination Date less (ii) the sum of (A) the
aggregate principal and accrued but unpaid interest outstanding in respect of
debt for borrowed money of the Company (including (x) borrowed money under the
Credit Agreement, (y) the aggregate principal and accrued but unpaid interest
outstanding in respect of the Company's 10 5/8% Senior Subordinated Notes due
August 1, 2007 and (z) the present value (discounted at 10%) as of such date of
determination of the difference between the rents payable under Schedule 1 over
the rents payable under Schedule 2 of each of that certain Amendment to Lease
Agreement dated as of July 10, 1995 between ▇. ▇. ▇▇▇▇▇▇▇▇ and Hollywood
Theaters, Inc. with respect to the Grapevine lease and that certain Amendment
to Lease Agreement dated as of July 10, 1995 between ▇. ▇. ▇▇▇▇▇▇▇▇ and
Hollywood Theaters, Inc. with respect to the ▇▇▇▇▇▇▇▇ lease) and (B) the
aggregate liquidation value of any redeemable preferred stock of the Company
outstanding as of such date plus (iii) cash held by the Company as of such date
of determination divided by (b) the Total Shares as of such date of
determination.
"GAAP" means United States generally accepted accounting principles,
as in effect from time to time.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of
1976, as amended.
"▇▇▇▇ Director" has the meaning assigned to it in Section 3.1.
"▇▇▇▇ Entities" means ▇▇▇▇ Communications Partners, L.P., a Delaware
limited partnership, HCP Capital Fund, L.P., a Delaware limited partnership,
and HCP 1997 Authorized Employee Fund, L.P., a Delaware limited partnership.
"IPO" means the initial underwritten offering pursuant to which the
Common Stock becomes registered under Section 12 of the Securities Exchange
Act.
"Issuance" has the meaning assigned to it in Section 8.
"Issuance Period" has the meaning assigned to it in Section 8(b).
"Issuance Stock" has the meaning assigned to it in Section 8(a).
"Issue" has the meaning assigned to it in Section 8.
"Litigation" has the meaning assigned to it in Section 32.
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"LKCM Theater Partners" means LKCM Theater Partners, L.P.
"Major Shareholder" has the meaning assigned to it in Section 8(a).
"Market Value" means, with respect to a share of Common Stock on any
date herein specified, the fair market value of such share of Common Stock
determined as of the last day of the month most recently ended prior to such
date without giving effect to any discount for (a) a minority interest, (b) a
lack of liquidity of such Common Stock or (c) the fact that such Common Stock
is subject to this Agreement. In the event the Company and the Put Holder are
unable to agree on the Market Value, the Market Value shall be determined
pursuant to the Appraisal Procedure.
"Non-Voting Observers" has the meaning assigned to it in Section 3.4.
"Offer" has the meaning assigned to it in Section 5(a).
"Offer Notice" means a written notice of offer to sell shares of
Stock.
"Offered Shareholder" has the meaning assigned to it in Section 5(a).
"Offered Stock" means the shares of Stock offered for sale pursuant to
an Offer Notice, which shall consist of (i) in the case of a Transfer proposed
to be made pursuant to Section 14 hereof, all shares of Stock that are involved
in such Transfer, (ii) in the case of a Transfer upon the death of a
Shareholder, all shares of Stock owned or held by the Deceased Stockholder,
(iii) in the case of a Transfer upon the death of the spouse of a Shareholder,
a number of shares of Stock equal to (x) the number of shares of Stock in which
the estate of the Deceased Spouse claims an interest which have not passed to
the Surviving Shareholder free of any trust, multiplied by (y) the
proportionate interest so claimed, and (iv) in the case of a Transfer upon the
divorce of a Shareholder, the number of shares of Stock owned by the Divorced
Spouse, as determined by the divorce decree.
"Offering Price" means the proposed sale price of Stock offered for
sale pursuant to an Offer Notice given under Sections 11, 12 or 13 hereof.
"Oversubscribed Pre-emptive Shareholder" has the meaning assigned to
it in Section 8(a).
"Oversubscribed Shareholder" has the meaning assigned to it in Section
5(b).
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
"Pre-emptive Acceptance Period" has the meaning assigned to it in
Section 8(a).
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"Pre-emptive Notice" has the meaning assigned to it in Section 8(a).
"Pre-emptive Offer" has the meaning assigned to it in Section 8(a).
"Pre-emptive Percentage" means, at any time, as to each Major
Shareholder, the quotient obtained (expressed as a percentage) by dividing (i)
the number of shares of Common Stock owned by such Major Shareholder as of the
time of determination by (ii) the aggregate number of shares of Common Stock
owned by all Major Shareholders as of the time of determination.
"Public Sale" means a Transfer pursuant to a bona fide underwritten
public offering pursuant to an effective registration statement filed under the
Securities Act or pursuant to Rule 144 under the Securities Act.
"Purchase Price" has the meaning assigned in Section 15.
"Purchaser" has the meaning specified in Section 16.
"Purchasing Shareholders" means any Offered Shareholder electing to
purchase shares of Stock offered for sale pursuant to an Offer Notice.
"Qualified Appraiser" shall mean an investment banking firm or
appraisal firm (including any national accounting firm) of recognized national
or regional standing.
"Qualified IPO" means any underwritten public offering of Common Stock
(pursuant to an effective registration statement filed under the Securities
Act), (a) resulting in at least $25 million of net proceeds to the Company and
(b) reflecting a per share offering price for each share of Common Stock sold
in such offering of no less than $300 (subject to stock splits, combinations
and recapitalizations).
"Refused Stock" has the meaning assigned to it in Section 5(b).
"Registration Agreement" means the Registration Rights Agreement,
dated as of the date hereof, between the Company, Beacon and certain other
shareholders as it may be amended, modified, replaced or superseded from time
to time.
"Remaining Pre-emptive Shares" has the meaning assigned to it in
Section 8(a).
"Remaining Shares" has the meaning assigned to it in Section 5(b).
"Response Notice" means a written notice of election to purchase any
shares of Stock.
"Sale Period" has the meaning assigned to it in Section 5(c).
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"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Senior Management Shareholder" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
"Series B Preferred" means the Series B Convertible Preferred Stock,
$.01 par value per share of the Company.
"Series C Preferred" means the Series C Convertible Preferred Stock,
par value $.01 per share, of the Company.
"Series D Preferred" means the Series D Convertible Preferred Stock,
par value $.01 per share, of the Company.
"Shareholder Acceptance Period" has the meaning assigned to it in
Section 5(b).
"Shareholders" means the parties to this Agreement (other than the
Company) and any other subsequent holder of Stock who agrees to be bound by the
terms of this Agreement.
"Stated Value" means (i) $175 plus accrued and unpaid dividends in the
case of the Series B Preferred, (ii) $195 plus accrued and unpaid dividends in
the case of the Series C Preferred and (iii) $195 plus accrued and unpaid
dividends in the case of the Series D Preferred.
"Stock" means (i) any shares of Common Stock and (ii) any Common Stock
Equivalents (including, without limitation, the Series B Preferred, the Series
C Preferred and the Series D Preferred and the Common Stock issuable upon
conversion thereof), in each case, whether owned on the date hereof or acquired
hereafter.
"Stratford Director" has the meaning assigned to it in Section 3.1.
"Stratford Entities" means Stratford Capital Partners, L.P., a Texas
limited partnership and Stratford Equity Partners, L.P., a Texas limited
partnership, each a licensee under the Small Business Investment Act of 1958,
as amended, and their respective successors and assigns.
"Stratford Non-Voting Observer" has the meaning assigned to it in
Section 3.4.
"Subject Stock" has the meaning assigned to it in Section 5(a).
"Subsidiary" means with respect to any Person, (i) any corporation,
partnership or other entity of which shares of capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other similar managing body of such corporation, partnership or
other entity are at the time owned by such Person, or (ii) the management
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of which is otherwise controlled, directly or indirectly, through one or more
intermediaries by such Person.
"Surviving Shareholder" has the meaning assigned to it in Section
12(a).
"Surviving Spouse" has the meaning assigned to it in Section 11(a).
"Tag-Along Initiator" has the meaning assigned to it in Section 6.2.
"Tag-Along Notice" has the meaning assigned to it in Section 6.2.
"Tag-Along Offeree" has the meaning assigned to it in Section 6.2.
"Tag-Along Shares" has the meaning assigned to it in Section 6.2.
"Total Equity" means the sum of the par value, capital surplus and
retained earnings attributable to the Common Stock (other than any shares of
Common Stock held in treasury of the Company), as determined in accordance with
GAAP.
"Total Shares" means the total number of shares of Common Stock issued
and outstanding, assuming the exercise or conversion of all outstanding
options, rights, warrants and convertible securities.
"Transfer" as to any Stock, means to sell, or in any other way
directly or indirectly transfer, assign, distribute, pledge, encumber or
otherwise dispose of, either voluntarily or involuntarily.
"Transferee" means a Person that acquires any shares of stock, or any
interest therein, as a result of a Transfer.
"Voting Shares" means any securities of the Company the holders of
which are generally entitled to vote for members of the Board (including,
without limitation, all outstanding shares of Common Stock, Series B Preferred,
Series C Preferred and Series D Preferred).
Section 2. Methodology for Calculations. For purposes of this
Agreement, the Transfer of a Common Stock Equivalent shall be treated as the
Transfer of the shares of Common Stock into which such Common Stock Equivalent
can be converted, exchanged or exercised. Except as otherwise provided in this
Agreement, for purposes of calculating (i) the amount of outstanding Common
Stock as of any date, (ii) the amount of Common Stock owned by a Person
hereunder, and (iii) related percentages, all shares of Series B Preferred,
Series C Preferred and Series D Preferred (but no other Common Stock
Equivalents) shall be treated as having been converted, exchanged or exercised.
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Section 3. Corporate Governance.
3.1. Composition of the Board.
(a) Pre-Qualified IPO. Prior to a Qualified IPO, the Board of
Directors of the Company (the "Board") shall be composed of no more than six
members. Prior to a Qualified IPO, (i) so long as Beacon holds (x) 50% or more
of the outstanding Common Stock, Beacon shall have the right to designate three
persons to serve as members of the Board, (y) 25% or more of the outstanding
Common Stock but less than 50% of the outstanding Common Stock, Beacon shall
have the right to designate two persons to serve as members of the Board and
(z) 5% or more of the outstanding Common Stock but less than 25% of the
outstanding Common Stock, Beacon shall have the right to designate one person
to serve as a member of the Board (such members being referred to herein as the
"Beacon Directors"), (ii) so long as the Stratford Entities collectively hold
5% or more of the outstanding Common Stock, Stratford shall have the right to
designate one person to serve as a member of the Board (the "Stratford
Director"), (iii) so long as the ▇▇▇▇ Entities collectively hold 5% or more of
the outstanding Common Stock, the ▇▇▇▇ Entities shall have the right to
designate one person to serve as a member of the Board (the "▇▇▇▇ Director")
and (iv) the chief executive officer of the Company shall serve as a member of
the Board. A majority of each of (1) the Beacon Directors and (2) the
non-Beacon Directors shall constitute a quorum for the transaction of business
at any meeting of the Board. Except as otherwise expressly required by law,
the Certificate or By-laws, the act of a majority of the directors present at
any meeting of which a quorum is present shall be the act of the Board.
(b) Post Qualified IPO. From and after a Qualified IPO, the Board
shall be composed of no more than six members. From and after a Qualified IPO,
in connection with any election for members of the Board, the Company shall, at
the request of Beacon include in the slate of directors recommended by the
Board to stockholders for election as directors (i) two representatives
designated by Beacon so long as Beacon holds 25% or more of the outstanding
Common Stock and (ii) one representative designated by Beacon so long as Beacon
holds 5% or more of the outstanding Common Stock but less then 25% of the
outstanding Common Stock (such representatives designated by Beacon being
referred to herein as the "Beacon Designees"). The Company and the
Shareholders shall each use their best efforts to cause the Beacon Designees to
be elected to, and to be maintained as members of, the Board (including, (i) in
the case of the Company, recommending to the stockholders of the Company the
election of the Beacon Designees to the Board and opposing any proposal to
remove any Beacon Designee at each meeting of the stockholders of the Company
at which the election or removal of members of the Board is on the agenda and
(ii) in the case of the Shareholders, voting all of their Voting Shares in
favor of the Beacon Designees, and voting such shares against any person
opposing any Beacon Designee), and shall take no action which would diminish
the prospects of the Beacon Designees being elected to the Board or increase
the prospects of any Beacon Designee being removed from the Board.
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3.2. Committees; Subsidiaries.
(a) The Company will take all actions necessary to cause at least
one Beacon Director or Beacon Designee (and, prior to a Qualified IPO, at least
one Stratford Director and one ▇▇▇▇ Director) to be appointed to each committee
of the Board and to each of the boards of directors or other similar managing
bodies (and any committee thereof) of each of the Subsidiaries of the Company
(in each case, subject to eligibility requirements under applicable law or
stock exchange rules following a Qualified IPO).
(b) The Company shall elect as the Board of Directors of each
Subsidiary those persons who are at the time directors of the Company as
provided in Section 3.1. If any Beacon Director, Beacon Designee, Stratford
Director or ▇▇▇▇ Director serving on any committee of the Board or on any board
of directors or other similar managing body (and any committee thereof) of any
Subsidiary of the Company shall cease to serve as a member of the Board for any
reason or otherwise is unable to fulfill his or her duties on any such
committee, board of directors, or other similar managing body, as the case may
be, he or she shall be succeeded by another Person designated by Beacon, in the
case of a Beacon Director or Beacon Designee, and by the Stratford Entities in
the case of a Stratford Director, and by the ▇▇▇▇ Entities in the case of a
▇▇▇▇ Director (in each case, subject to eligibility requirements under
applicable law or stock exchange rules following a Qualified IPO).
3.3. Vacancies; Removal.
(a) If any Beacon Director, Beacon Designee, Stratford Director or
▇▇▇▇ Director shall cease to serve as a director of the Company for any reason,
the vacancy resulting thereby shall be filled by another person designated by
Beacon, in the case of a Beacon Director or Beacon Designee, and by the
Stratford Entities in the case of a Stratford Director, and by the ▇▇▇▇
Entities in the case of a ▇▇▇▇ Director.
(b) None of the Beacon Directors, any Beacon Designee, any
Stratford Director nor any Hoak Director shall be removed from office without
the consent of Beacon, in the case of a Beacon Director or Beacon Designee, by
the Stratford Entities, in the case of a Stratford Director, and by the ▇▇▇▇
Entities, in the case of a ▇▇▇▇ Director. Each Beacon Director, Beacon
Designee, Stratford Director and ▇▇▇▇ Director may be removed from office at
any time, with or without cause, at the request of Beacon, in the case of a
Beacon Director or Beacon Designee, by the Stratford Entities in the case of a
Stratford Director and by the ▇▇▇▇ Entities in the case of a Hoak Director.
3.4. Non-Voting Observers. The Company agrees that if at any
meeting for the election of directors any Beacon Director, Beacon Designee,
Stratford Director or ▇▇▇▇ Director is not elected to the Board, or if for any
other reason, at any time, neither a Beacon Director or Beacon Designee (in the
case of Beacon) nor a Stratford Director (in the case of the Stratford
Entities) nor a ▇▇▇▇ Director (in the case of the ▇▇▇▇ Entities) is a member of
the Board, Beacon (in the case of a Beacon Director or Beacon Designee), so
long as Beacon holds 5% or more of the outstanding Common Stock, will be
entitled to have one observer (a "Beacon Non-Voting Observer") selected by
Beacon present at all meetings of the Board, and the Stratford Entities (in the
case of a ▇▇▇▇▇▇▇▇▇
▇▇
▇▇
Director), so long as the Stratford Entities hold 5% or more of the outstanding
Common Stock, will be entitled to have one observer (a "Stratford Non-Voting
Observer") selected by the Stratford Entities present at all meetings of the
Board, and the ▇▇▇▇ Entities (in the case of a Hoak Director), so long as the
▇▇▇▇ Entities hold 5% or more of the outstanding Common Stock, will be entitled
to have one observer (a "▇▇▇▇ Non-Voting Observer") selected by the Hoak
Entities present at all meetings of the Board (the Beacon Non-Voting Observer,
if any, the Stratford Non-Voting Observer, if any, and the ▇▇▇▇ Non-Voting
Observer, if any, are referred to together as the "Non-Voting Observers"),
provided that following a Qualified IPO the Company shall be entitled to
require such Non-Voting Observers to enter into confidentiality arrangements no
more burdensome to the Non-Voting Observers than any confidentiality
arrangement to which the members of the Board are subject. Such observers
shall have the same access to information concerning the business and
operations of the Company and at the same time as directors of the Company and
shall be entitled to participate in discussions and consult with, and make
proposals and furnish advice to, the Board, without voting; provided, however,
that the Board shall be under no obligation to take any action with respect to
any proposals made or advice furnished by any Non-Voting Observers, other than
to give due consideration thereto. In addition to any requirements specified
in the By-laws, the Company shall notify the Non-Voting Observers, by telecopy,
of every meeting (or action by written consent) of the Board at least two days
in advance of such meeting (or distribution of written consents), or, if such
notice under the circumstances is not practicable, as soon before the meeting
(or distribution) as is practicable, provided that nothing in this Section 3.4
shall be construed in any way to authorize or allow a party hereto not to
comply with its obligations hereunder.
3.5. Representative. In the event that, after receiving proper
notice of a meeting of the Board or a meeting of any board of directors or
similar managing body of any of the Company's Subsidiaries in accordance with
such entity's by-laws, any Beacon Director, Beacon Designee, Stratford
Director, ▇▇▇▇ Director or Non-Voting Observer determines that he or she is
unable to attend such meeting, Beacon (in the case of a Beacon Director, Beacon
Designee or Beacon Non-Voting Observer) and Stratford (in the case of a
Stratford Director or Stratford Non-Voting Observer) and the ▇▇▇▇ Entities (in
the case of a Hoak Director or ▇▇▇▇ Non-Voting Observer) shall have the right
to designate a representative to attend and observe such meeting on behalf of
such Beacon Director, Beacon Designee, Stratford Director, ▇▇▇▇ Director or
Non-Voting Observer, as the case may be, who shall be entitled to fully
participate (other than the right to vote) in such meeting as if he were a
member of the Board, or a member of the board of directors or similar managing
body of the relevant Subsidiary of the Company or a Non-Voting Observer, as the
case may be.
3.6. Board and Committee Meetings. The Company shall hold regular
meetings of its Board on at least a quarterly basis. The Company agrees, and
shall cause the By-laws to be amended to the extent necessary to provide, that
any two members of the Board (including, without limitation, the Beacon
Designees, each Beacon Director, each Stratford Director and each ▇▇▇▇
Director) shall have the right, upon reasonable notice, to call meetings of the
Board and of each committee of the Board on which he or she is a member. The
Company agrees that prior to a Qualified IPO any Non-Voting Observer shall have
the right to request that the Chairman of the
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Board or the Chief Executive Officer of the Company call a meeting of the Board
and that, upon such request, the Chairman of the Board shall promptly call a
meeting of the Board to be held at such time (but not earlier than three days
from the date such request is made by the Non-Voting Observer) as shall be
requested by the Non-Voting Observer.
3.7. Telephonic Board Meetings. The Company shall take all
necessary actions, including, without limitation, causing its By-laws to be
duly amended, to allow all directors (including any Beacon Director, Beacon
Designee, Stratford Director and ▇▇▇▇ Director) and Non-Voting Observer to
telephonically attend (a) any meeting of the Board or (b) any meeting of any
board of directors or any similar managing body (and any committee thereof) of
any Subsidiary of the Company of which he or she is a member.
3.8. Directors' Indemnification.
(a) The Company shall obtain and cause to be maintained in effect,
with financially sound insurers, a policy of directors' and officers' liability
insurance covering each of the members of the Board (including, without
limitation, each Beacon Director, each Beacon Designee, each Stratford Director
and each ▇▇▇▇ Director) in an amount of at least $3,000,000 per occurrence.
(b) The Certificate, By-laws and other organizational documents of
the Company and each of its Subsidiaries shall at all times, to the fullest
extent permitted by law, provide for indemnification of, advancement of
expenses to, and limitation of the personal liability of, the members of the
Board and the members of the boards of directors or other similar managing
bodies of each of the Company's Subsidiaries and such other persons, if any,
who, pursuant to a provision of such Certificates, By-laws or other
organizational documents, exercise or perform any of the powers or duties
otherwise conferred or imposed upon members of the Board or the boards of
directors or other similar managing bodies of each of the Company's
Subsidiaries. Any Non-Voting Observer shall be entitled to indemnification
from the Company to the maximum extent permitted by law as though he or she
were a director of the Company and any of its Subsidiaries. Such provisions
may not be amended, repealed or otherwise modified in any manner adverse to any
member of the Board or any member of the boards of directors or other similar
managing bodies of any of the Company's Subsidiaries, until at least six years
following the date that Beacon is no longer entitled to designate or nominate
any Beacon Director or Beacon Designee.
(c) Each of the members of the Board (including, without
limitation, the Beacon Directors, Beacon Designees, Stratford Director and ▇▇▇▇
Director) and each Non-Voting Observer is intended to be a third-party
beneficiary of the obligations of the Company pursuant to this Section 3.8, and
the obligations of the Company pursuant to this Section 3.8 shall be
enforceable by each such individual.
3.9. Irrevocable Proxy. In order to secure each Shareholder's
obligation to vote his Voting Shares in accordance with the provisions of this
Section 3 pursuant to which Beacon has rights hereunder, each Shareholder
hereby appoints Beacon as his, her or its true and lawful proxy
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and attorney-in-fact, with full power of substitution, to vote all of his
Voting Shares of the Company for the election of each Beacon Director and each
Beacon Designee as a member of the Board and to take all such other actions as
are necessary to enforce the rights of Beacon under this Section 3. Beacon may
exercise the irrevocable proxy granted to it hereunder at any time any
Shareholder fails to comply with any provision of this Agreement granting
Beacon rights under this Section 3. The proxies and powers granted by each
Shareholder pursuant to this Section 3.9 are coupled with an interest and are
given to secure the performance of the Shareholders' obligations to Beacon
under this Section 3. Such proxies and powers will be effective until a
Qualified IPO, at which time such proxies and powers shall terminate, and shall
survive the death, incompetency and disability of each Shareholder.
3.10. Contractual Management Rights. The Company and each of the
Shareholders acknowledge that the provisions of this Agreement, including this
Section 3, are intended to provide Beacon and the ▇▇▇▇ Entities with
"contractual management rights" within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, and the regulations promulgated
thereunder.
3.11. Expenses. Subject to proper documentation being provided to
the Company, the Company shall pay the reasonable out-of-pocket expenses
incurred by each of the Beacon Directors, Beacon Designees, Stratford Director,
▇▇▇▇ Director and any Non-Voting Observer in connection with performing his or
her duties, including without limitation the reasonable out-of-pocket expenses
incurred by such person attending meetings of the Board or any committee
thereof or meetings of any board of directors or other similar managing body
(and any committee thereof) of any Subsidiary of the Company.
3.12. Cooperation. Each Shareholder shall vote all of its Voting
Shares and shall take all other necessary actions within its control
(including, without limitation, attending all meetings in person or by proxy
for purposes of obtaining a quorum, executing all written consents in lieu of
meetings and voting to remove members of the Board, as applicable), and the
Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special Board and shareholder meetings
and voting to remove members of the Board, as applicable), to effectuate the
provisions of this Section 3.
Section 4. Restrictions on Transfers of Stock.
(a) No Shareholder shall Transfer any Stock, whether owned on the
date hereof or acquired hereafter, without first complying with the provisions
of Section 5 hereof and then, in each case as applicable, complying with the
provisions of Section 6 hereof, provided that the foregoing shall not be deemed
to prohibit pledges of Stock effected by Shareholders prior to the date in
accordance with the terms of the Prior Shareholder Agreement as long as such
terms continue to be applicable to such transfers. Notwithstanding any other
provision hereof, no Senior Management Shareholder may Transfer any Stock if,
after giving effect to such Transfer, such Senior Management Shareholder shall
have Transferred in the aggregate an amount of Common Stock in excess of 5%
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of the outstanding Common Stock held by such Senior Management Shareholder as
of the date hereof, except that from and after a Qualified IPO, any Senior
Management Shareholder may Transfer Stock. Each Senior Management Shareholder
shall, prior to any Transfer of Stock pursuant to this Section 4, comply with
the provisions of Sections 5 and 6 hereof, in each case as applicable.
(b) Except in connection with a Public Sale, any transferee of
Stock (including any transferee that is an Affiliate of a transferor) who is
not a Shareholder shall upon consummation of, and as a condition to, such
Transfer execute and deliver to the Company (which the Company shall then
deliver to all other Shareholders) an agreement in form and substance
satisfactory to Beacon and the Company pursuant to which it agrees to be bound
by the terms of this Agreement for the benefit of the parties hereto and such
transferee shall thereafter be deemed to be a Shareholder for all purposes of
this Agreement.
(c) Any Transfer or attempted Transfer of Stock 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 Stock as
the owner of such Stock for any purpose.
Section 5. Rights of First Offer. In addition to and not in
limitation of any other restrictions on Transfers of Stock contained in this
Agreement, any Transfers of Stock by a Shareholder shall be consummated only in
accordance with the following procedures:
(a) The transferring Shareholder shall first deliver to the
Company and each other Shareholder (the "Offered Shareholders") a written
notice (an "Offer Notice"), which shall (i) state the transferring
Shareholder's intention to Transfer Stock to one or more Persons in a bona fide
arms' length transaction, the amount and type of Stock to be Transferred (the
"Subject Stock"), the purchase price therefor (which shall be payable in cash)
and a summary of the other material terms of the proposed Transfer and (ii)
offer the Company and the Offered Shareholders the option to acquire all or a
portion of such Subject Stock upon the terms and subject to the conditions of
the proposed Transfer as set forth in the Offer Notice (the "Offer"), provided
that such Offer may provide that it must be accepted by the Company and the
Offered Shareholders (in the aggregate) on an all or nothing basis (an "All or
Nothing Sale"). The Offer shall remain open and irrevocable for the periods
set forth below (and, to the extent the Offer is accepted during such periods,
until the consummation of the sale contemplated by the Offer). The Company
shall have the right and option, for a period of 30 days after delivery of the
Offer Notice (the "Company Acceptance Period"), to accept all or any part of
the Subject Stock at the cash purchase price and on the terms stated in the
Offer Notice. Such acceptance shall be made by delivering a written notice to
the transferring Shareholder and each of the Offered Shareholders within the
Company Acceptance Period.
(b) If the Company shall fail to accept all of the Subject Stock
offered pursuant to, or shall reject in writing, the Offer (the Company being
required to notify in writing the transferring Shareholder and each of the
Offered Shareholders of its rejection or failure to accept in the event of the
same), then, upon the earlier of the expiration of the Company Acceptance
Period or the giving of such written notice of rejection or failure to accept
such offer by the Company, each
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Offered Shareholder shall have the right and option, for a period of 30 days
thereafter (the "Shareholder Acceptance Period"), to accept all or any part of
the Subject Stock so offered and not accepted by the Company (the "Refused
Stock") at the cash purchase price and on the terms stated in the Offer Notice;
provided, however, that, if the Offer contemplated an All or Nothing Sale, the
Offered Shareholders, in the aggregate, may accept, during the Shareholder
Acceptance Period, all, but not less than all, of the Refused Stock, at the
cash purchase price and on the terms stated in the Offer Notice. Such
acceptance shall be made by delivering a written notice to the Company and the
transferring Shareholder within the Shareholder Acceptance Period specifying
the maximum number of shares such Offered Shareholder will purchase (the "First
Offer Shares"). If, upon the expiration of the Shareholder Acceptance Period,
the aggregate amount of First Offer Shares exceeds the amount of Refused Stock,
the Refused Stock shall be allocated among the Offered Shareholders as follows:
(i) first, each Offered Shareholder shall be entitled to purchase no more than
its First Offer Percentage of Refused Stock; (ii) second, if any shares of
Refused Stock have not been allocated for purchase pursuant to (i) above (the
"Remaining Shares"), each Offered Shareholder (an "Oversubscribed Shareholder")
which had offered to purchase a number of shares of Refused Stock in excess of
the amount of stock allocated for purchase to it in accordance with previous
allocations of such shares of Refused Stock, shall be entitled to purchase an
amount of Remaining Shares equal to no more than its First Offer Percentage
(treating only Oversubscribed Shareholders as Offered Shareholders for these
purposes) of the Remaining Shares; and (iii) third, the process set forth in
(ii) above shall be repeated with respect to any shares of Refused Stock not
allocated for purchase until all shares of Refused Stock are allocated for
purchase.
(c) If effective acceptance shall not be received pursuant to
Sections 5(a) and/or 5(b) above with respect to all of the Subject Stock
offered for sale pursuant to the Offer Notice, then the transferring
Shareholder may Transfer all or any portion of the Stock so offered for sale
and not so accepted (or, in the case of an All or Nothing Sale, all, but not
less than all, of the Subject Stock offered for sale pursuant to the Offer
Notice), at a cash price not less than the price, and on terms not more
favorable to the purchaser thereof than the terms, stated in the Offer Notice
at any time within 90 days after the expiration of the Shareholder Acceptance
Period (the "Sale Period"). In the event that all of the Stock is not sold by
the transferring Shareholder during the Sale Period, the right of the
transferring Shareholder to Transfer such Stock shall expire and the
obligations of this Section 5 shall be reinstated.
(d) All Transfers of Subject Stock to the Company and/or the
Offered Shareholders pursuant to this Section 5 shall be made free and clear of
all liens and shall be consummated contemporaneously at the offices of the
Company on the later of (i) a mutually satisfactory business day within 30 days
after the expiration of the later of the Company Acceptance Period or the
Shareholder Acceptance Period, as applicable, and (ii) the fifth business day
following the expiration or termination of all waiting periods under the HSR
Act applicable to such Transfers, or at such other time and/or place as the
parties may agree. The delivery of certificates or other instruments
evidencing such Subject Stock duly endorsed for transfer shall be made on such
date against payment of the purchase price for such Subject Stock.
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(e) The requirements of this Section 5 shall not apply to (i) any
Transfer of Stock by a Shareholder to an Affiliate of such Shareholder, (ii)
any Transfer of Stock pursuant to Section 7, 9 or 10 of this Agreement or (iii)
any Transfer pursuant to a Public Sale.
Section 6. Tag-Along Rights.
6.1. Tag-Along. No Shareholder shall Transfer any Stock owned by
such Shareholder without complying with the terms and conditions set forth in
this Section 6 (after having complied with the provisions of Section 5 with the
result that no Subject Stock was purchased by the Company or any Offered
Shareholder).
6.2. Tag-Along Obligations. Any Shareholder (the "Tag-Along
Initiator") desiring to Transfer any shares of Stock in one transaction or a
series of related transactions which in the aggregate represent at least 5% of
the then outstanding Common Stock shall, after expiration of all required
notice periods under Section 5, give not less than 20 days' prior written
notice of such intended Transfer to each other Shareholder ("Tag-Along
Offeree") and to the Company. Such notice (the "Tag-Along Notice") shall set
forth the terms and conditions of such proposed Transfer, including the name of
the proposed transferee, the number of shares proposed to be transferred by the
Tag-Along Initiator (the "Tag-Along Shares"), the purchase price per share
proposed to be paid therefor and the payment terms and type of transfer to be
effectuated. Within 10 days after delivery of the Tag-Along Notice by the
Tag-Along Initiator to each Tag-Along Offeree and to the Company, each
Tag-Along Offeree shall, by written notice to the Tag-Along Initiator and the
Company, have the opportunity and right to sell to the transferee in such
proposed Transfer (upon the same terms and conditions as the Tag-Along
Initiator) up to that number of shares of such Stock owned by the Tag-Along
Offeree as shall equal the product of (x) a fraction, the numerator of which is
the number of shares of such Stock owned by the Tag-Along Offeree as of the
date of the proposed Transfer and the denominator of which is the aggregate
number of shares of such Stock owned as of the date of the Tag-Along Notice by
each Tag-Along Initiator and by all other Tag-Along Offerees, times (y) the
number of Tag-Along Shares. The amount of Tag-Along Shares to be sold by any
Tag-Along Initiator shall be reduced to the extent necessary to provide for
such sales of shares by Tag-Along Offerees. No Person may Transfer shares in
any transaction that is subject to this Section 6 unless the transferee agrees
to be bound by and complies with the terms of this Agreement.
6.3. Closing. At the closing of any proposed Transfer in respect
of which a Tag-Along Notice has been delivered, the Tag-Along Initiator
together with all Tag-Along Offerees electing to sell shares, shall deliver,
free and clear of all liens, to the proposed transferee certificates evidencing
the shares to be sold thereto duly endorsed with transfer powers and shall
receive in exchange therefore the consideration to be paid or delivered by the
proposed transferee in respect of such shares as described in the Tag-Along
Notice.
6.4. Limitations. The provisions of this Section 6 shall not apply
to (x) any Public Sale, (y) any Transfer by a Shareholder to Affiliates of such
Shareholder, or (z) any Transfers pursuant to Section 5, 7, 9 or 10 of this
Agreement.
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Section 7. Drag-Along Rights.
7.1. Drag-Along. If Beacon (the "Drag-Along Initiator") determines
to Transfer or exchange (in a business combination or otherwise) in one or a
series of bona fide arms-length transactions to an unrelated and unaffiliated
third party all of the shares of Stock held by the Drag-Along Initiator at a
price of at least $200 per share of Common Stock, then, upon 30 days written
notice from the Drag-Along Initiator to the other Shareholders, which notice
shall include reasonable details of the proposed transaction, including the
proposed time and place of closing and the consideration to be received by the
Shareholders, each other Shareholder shall be obligated to, and shall, sell,
transfer and deliver, or cause to be sold, transferred and delivered, to such
third party, all of his shares of Stock in the same transaction at the closing
thereof (and will deliver certificates for all of his shares at the closing,
free and clear of all liens, claims, or encumbrances), and each Shareholder
shall receive the same consideration per share upon such transaction as is
received by the Drag-Along Initiator.
7.2. Limitations. The provisions of this Section 7 shall not apply
to (x) any Public Sale, (y) any Transfer by a Shareholder to an Affiliate of
such Shareholder or (z) any Transfer or exchange consummated prior to the third
anniversary of the date hereof.
Section 8. Pre-emptive Rights. At any time before the
completion of a Qualified IPO, and excluding any Issuance (as defined below) in
a Qualified IPO or in connection with a merger or other business combination of
the Company approved by the Board, the Company shall not issue, sell or
exchange, or agree to issue, sell or exchange (collectively, "Issue," and any
issuance, sale or exchange resulting therefrom, an "Issuance") any shares of
Stock (other than Excluded Securities), except as authorized by the Board and
in accordance with the following procedures:
(a) The Company shall deliver to each Shareholder that at the time
owns more than 5% of the Common Stock (each, a "Major Shareholder") a written
notice (a "Pre-emptive Notice"), which shall (i) state the Company's intention
to Issue Stock to one or more Persons, the amount and type of Stock to be
Issued (the "Issuance Stock"), the purchase price therefor and a summary of the
other material terms of the proposed Issuance and (ii) offer each of the Major
Shareholders the option to acquire all or any part of the Issuance Stock (the
"Pre-emptive Offer"). The Pre-emptive Offer shall remain open and irrevocable
for the periods set forth below (and, to the extent the Pre-emptive Offer is
accepted during such periods, until the consummation of the Issuance
contemplated by the Pre-emptive Offer). Each Major Shareholder shall have the
right and option, for a period of 30 days after delivery of the Pre-emptive
Notice (the "Pre-emptive Acceptance Period"), to accept all or any part of the
Issuance Stock at the purchase price and on the terms stated in the Pre-emptive
Notice. Such acceptance shall be made by delivering a written notice to the
Company by each Major Shareholder within the Pre-emptive Acceptance Period
specifying the maximum number of shares of the Issuance Stock such Major
Shareholder will purchase (the "Accepted Shares"). If, upon the expiration of
the Pre-emptive Acceptance Period, the aggregate amount of Accepted Shares
exceeds the amount of Issuance Stock, the amount of Issuance Stock,
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shall be allocated among the Major Shareholders as follows: (i) first, each
Major Shareholder shall be entitled to purchase no more than its Pre-emptive
Percentage of Issuance Stock; (ii) second, if any shares of Issuance Stock have
not been allocated for purchase pursuant to (i) above (the "Remaining
Pre-emptive Shares"), each Major Shareholder (an "Oversubscribed Pre-emptive
Shareholder") which had offered to purchase a number of shares of Issuance
Stock in excess of the amount of stock allocated for purchase to it in
accordance with previous allocations of such shares of Issuance Stock, shall be
entitled to purchase an amount of Remaining Pre-emptive Shares equal to no more
than its Pre-emptive Percentage (treating only Oversubscribed Pre-emptive
Shareholders as Major Shareholders for these purposes) of the Remaining
Pre-emptive Shares; and (iii) third, the process set forth in (ii) above shall
be repeated with respect to any shares of Issuance Stock not allocated for
purchase until all shares of Issuance Stock are allocated for purchase.
(b) If effective acceptance shall not be received pursuant to
Section 8(a) above with respect to all of the Issuance Stock offered for sale
pursuant to the Pre-emptive Notice, then the Company may Issue all or any
portion of such Stock so offered for sale and not so accepted, at a price not
less than the price, and on terms not more favorable to the purchaser thereof
than the terms, stated in the Pre-emptive Notice at any time within 90 days
after the expiration of the Pre-emptive Acceptance Period (the "Issuance
Period"). In the event that all of the Issuance Stock is not Issued by the
Company during the Issuance Period, the right of the Company to Issue such
unsold Issuance Stock shall expire and the obligations of this Section 8 shall
be reinstated.
(c) All Sales of Issuance Stock to the Major Shareholders subject
to any Pre-emptive Notice shall be consummated contemporaneously at the offices
of the Company on the later of (i) a mutually satisfactory business day within
30 days after the expiration of the Pre-emptive Acceptance Period or (ii) the
fifth business day following the expiration or termination of all waiting
periods under the HSR Act, applicable to such Issuance, or at such other time
and/or place as the Company and the Major Shareholders may agree. The delivery
of certificates or other instruments evidencing such Issuance Stock shall be
made by the Company on such date against payment of the purchase price for such
Issuance Stock.
Section 9. Pledge of Shares. A Shareholder shall have the right
to pledge any Stock owned or held by such Shareholder to the Company, a
commercial bank, savings and loan association or other lending or financial
institution as security for any indebtedness of such Shareholder; provided,
however, that no such pledge shall be made unless (i) the Person to which such
pledge is made shall have executed an appropriate document in which such Person
agrees that, in the event of realization upon such Stock, such Stock shall
continue to be subject to the terms and conditions of this Agreement and that
such Person will not effect any Transfer of such Stock except in compliance
with the provisions hereof, and (ii) such document shall have been promptly
delivered to, and shall have been approved by, the Company and Beacon prior to
the pledge of such Stock. Neither the Company nor Beacon shall unreasonably
withhold or delay its approval of any such document.
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Section 10. Transfer to Specified Persons. A Shareholder shall
have the right to effect a Transfer of any Stock owned or held by such
Shareholder to:
(a) any spouse, child (natural or adopted), spouse of any such
child, grandchild, sister, brother or parent of such Shareholder;
(b) any trust in which there are and continue to be during the
term of this Agreement no beneficiaries other than such Shareholder and one or
more Persons specified in clause (a) above;
(c) if such Shareholder is a corporation or partnership, any
Person who is a beneficial owner of an equity interest in such corporation or
partnership as of the date hereof, provided that such Shareholder may only
transfer to such Persons the number of shares of Stock owned or held by such
Shareholder which constitutes the same percentage of the total number of shares
of Stock held by such Shareholder as the percentage of the total equity
interests in such corporation or partnership held by such Person;
(d) in the case of LKCM Theater Partners, and notwithstanding
anything to the contrary in this Section 10, any Person who is an employee of
such partnership at the time of Transfer and who receives such Stock as
compensation for services rendered to the partnership;
(e) in the case of the Stratford Entities, and notwithstanding
anything to the contrary in this Section 10, any of the following:
(i) any Person who is a beneficial owner of an equity
interest in the Stratford Entities as of the date of the proposed
Transfer;
(ii) any Person (A) owned or Controlled by Stratford, (B)
which Controls the Stratford Entities, (C) which is under common
Control with the Stratford Entities, or (D) who is a beneficial owner
of an equity interest in the Stratford Entities, or in any Person
which Controls the Stratford Entities or which is under common Control
with the Stratford Entities; and
(iii) any other Person which is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the
Securities Act, provided, however, that the Stratford Entities may not
Transfer more than 10,000 shares of preferred stock pursuant to this
clause (iii);
(f) in the case of the ▇▇▇▇ Entities, and notwithstanding anything
to the contrary in this Section 10, any of the following:
(i) any Person who is a beneficial owner of an equity
interest in the ▇▇▇▇ Entities as of the date of the Transfer;
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(ii) any Person (A) owned or Controlled by the ▇▇▇▇
Entities, (B) which Controls the ▇▇▇▇ Entities, (C) which is under
common Control with the ▇▇▇▇ Entities, or (D) who is a beneficial
owner of an equity interest in the ▇▇▇▇ Entities, or in any Person
which Controls the ▇▇▇▇ Entities; and
(iii) any other ▇▇▇▇ Entity.
Section 11. Transfer Upon Death of a Shareholder.
(a) In the event of the death of a Shareholder (a "Deceased
Shareholder"), the personal representative of the estate of the Deceased
Shareholder shall, within 30 days after qualification, submit an Offer Notice
to the Company and the Offered Shareholders. The Offer Notice shall be given
concurrently to the Company and the Offered Shareholders and shall state that
the personal representative offers to sell the shares of Stock in the Company
("Offered Stock"). The Offer Notice shall also specify (i) the date of death
of the Deceased Shareholder, (ii) the number of shares of Offered Stock, (iii)
the Transferee or Transferees, if such Transferee or Transferees can then be
determined with certainty, to whom the shares of Offered Stock would be
distributed by will or by the laws of descent should the Company and the
Offered Shareholders fail to purchase any such Stock (provided, however, that
if such Transferee or Transferees cannot then be determined with certainty,
there shall be provided a list of potential Transferees to whom the Offered
Stock may be so distributed), (iv) if the personal representative proposes to
effect a Transfer of the Offered Stock otherwise than by distribution to the
Transferee or Transferees named in the Offer Notice pursuant to the preceding
clause (iii), the Offering Price, the name and address of the proposed
Transferee or Transferees and the other terms of such proposed Transfer, if
any, and (v) the address of the personal representative that is to serve as its
location for notices and other communications hereunder. If the Deceased
Shareholder is survived by a spouse (a "Surviving Spouse") with a community
property or other interest in any shares of Offered Stock, the personal
representative shall also include in the Offer Notice a statement specifying
the proposed ratio in which the Purchase Price to be paid by the Company or the
Purchasing Shareholders for the shares of Offered Stock should be divided
between the estate of the Deceased Shareholder and the Surviving Spouse. A
copy of the Offer Notice shall be sent by the personal representative to the
Surviving Spouse and, unless the Surviving Spouse objects to the ratio for
division of the Purchase Price specified therein within 30 days after receipt
thereof, the Company shall be entitled to rely upon such ratio in dividing the
Purchase Price for the shares of Offered Stock between the estate of the
Deceased Shareholder and the Surviving Spouse. If the Surviving Spouse gives
timely written notice of an objection to the ratio specified in the Offer
Notice, and if the dispute has not been resolved as of the date set for the
Closing, each of the Company and the Purchasing Shareholders shall be entitled
to hold its portion of the Purchase Price in escrow until the dispute is
resolved, and in such event, each of the Company and the Purchasing
Shareholders may continue to hold the Purchase Price in escrow until (a) the
rights of the estate of the Deceased Shareholder and the Surviving Spouse shall
have been fully and finally adjudicated by a court of competent jurisdiction or
(b) the dispute shall have been resolved by agreement between the personal
representative and the Surviving Spouse, and the Company and
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the Purchasing Shareholders shall have been notified thereof in a writing
signed by the personal representative and the Surviving Spouse.
(b) Within 30 days after receipt of the Offer Notice, the Company
shall give a Response Notice to the personal representative of the Deceased
Shareholder and the Offered Shareholders stating whether it elects to purchase
the shares of Offered Stock. If the Company does not elect to purchase all of
the shares of Offered Stock, each of the Offered Shareholders shall, within 15
days after receipt of the Response Notice of the Company, give a Response
Notice to the personal representative, the Company and the other Offered
Shareholders stating whether such Offered Shareholder elects to purchase any of
the shares of Offered Stock not to be purchased by the Company. If there is
more than one Purchasing Shareholder, the Offered Stock to be purchased by such
Purchasing Shareholder shall be allocated among the Purchasing Shareholders in
such proportions as they may mutually agree, or in the absence of such
agreement, pro rata according to the relative holdings of shares of Stock of
the Purchasing Shareholders on the applicable Determination Date.
(c) If no ratio for the division of the Purchase Price between the
estate of the Deceased Shareholder and the Surviving Spouse is specified in the
Offer Notice, at the Closing each of the Company and the Purchasing
Shareholders shall pay the entire Purchase Price to the personal representative
of the Deceased Shareholder.
(d) During the time the personal representative of any Deceased
Shareholder is holding any shares of Offered Stock, he shall be subject to the
restrictions on the Transfer of Stock contained in this Agreement. If all of
the shares of Offered Stock are not purchased by the Company or the Offered
Shareholders, or any of them, the personal representative may effect a Transfer
to the Transferee or Transferees named in the Offer Notice of the balance of
the shares of Offered Stock not purchased by the Company or the Offered
Shareholders, but only in strict compliance with the terms therein stated.
Section 12. Transfer Upon Death of the Spouse of a Shareholder.
(a) If the marital relationship of a Shareholder (a "Surviving
Shareholder") is terminated by the death of his spouse (a "Deceased Spouse")
and if the Deceased Spouse had any interest in the Stock owned or held by the
Surviving Shareholder at the time of the death of the Deceased Spouse which has
not passed to the Surviving Shareholder free of any trust, then the personal
representative of the estate of the Deceased Spouse shall, within 30 days after
qualification, submit an Offer Notice to the Surviving Shareholder, the Company
and Offered Shareholders. The Offer Notice shall be given concurrently to the
Surviving Shareholder, the Company and the Offered Shareholders and shall state
that the personal representative offers to sell the shares of Offered Stock.
The Offer Notice shall also specify (i) the date of death of the Deceased
Spouse, (ii) the number of shares of Offered Stock, (iii) the Transferee or
Transferees, if such Transferee or Transferees can then be determined with
certainty, to whom the shares of Offered Stock would be distributed by will or
by the laws of descent should the Surviving Shareholder, the Company and the
Offered
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Shareholders fail to purchase such Stock (provided, however, that if such
Transferee or Transferees cannot then be determined with certainty, there shall
be provided a list of potential Transferees to whom such shares of Offered
Stock may be distributed), (iv) if the personal representative proposes to
effect a Transfer of any shares of Offered Stock otherwise than by distribution
to the Transferee or Transferees named pursuant to the preceding clause (iii),
the Offering Price, the name and address of the proposed Transferee or
Transferees and the other terms of such proposed Transfer, if any, and (v) the
address of the personal representative that is to serve as its location for
notices and other communications hereunder. Unless the Surviving Shareholder
notifies the Company and the Purchasing Shareholders that he objects to the
specification of the number of shares of Offered Stock in the Offer Notice
within 30 days after receipt thereof, the Company and the Purchasing
Shareholders shall be entitled to rely upon such specification in determining
the Purchase Price for the shares of Offered Stock to be paid to the personal
representative. If the Surviving Shareholder gives timely written notice of an
objection to such specification of the shares of Offered Stock, and if the
dispute has not been resolved as of the date set for the Closing, each of the
Company and the Purchasing Shareholders shall be entitled to hold its portion
of the Purchase Price in escrow until the dispute is resolved, and in such
event, each of the Company and the Purchasing Shareholders may continue to hold
its portion of the Purchase Price in escrow until (a) the rights of the estate
of the Deceased Spouse and the Surviving Shareholder shall have been fully and
finally adjudicated by a court of competent jurisdiction or (b) the dispute
shall have been resolved by agreement between such personal representative and
the Surviving Shareholder, and the Company and the Purchasing Shareholders
shall have been notified thereof in a writing signed by such personal
representative and the Surviving Shareholder.
(b) Within 30 days after receipt of the Offer Notice, the
Surviving Shareholder shall give a Response Notice to the personal
representative, the Company and the Offered Shareholders stating whether he
elects to purchase the shares of Offered Stock. If the Surviving Shareholder
does not elect to purchase all of the shares of Offered Stock, the Company
shall, within 15 days after receipt of the Response Notice of the Surviving
Shareholder, give a Response Notice to such personal representative and the
Offered Shareholders stating whether it elects to purchase the shares of
Offered Stock not to be purchased by the Surviving Shareholder. If the
Surviving Shareholder and the Company, or either of them, do not elect to
purchase all of the shares of Offered Stock, each of the Offered Shareholders
shall, within 15 days after the giving of the Response Notice of the Company,
give a Response Notice to such personal representative, the Company and the
other Offered Shareholders stating whether such Offered Shareholder elects to
purchase any of the shares of Offered Stock not to be purchased by the
Surviving Shareholder or the Company. If there is more than one Purchasing
Shareholder, the shares of Offered Stock to be purchased by such Purchasing
Shareholders shall be allocated among the Purchasing Shareholders in such
proportions as they may mutually agree, or in the absence of such agreement,
pro rata according to the relative holdings of shares of Stock of the
Purchasing Shareholders on the applicable Determination Date.
(c) During the time the personal representative of the Deceased
Spouse is holding any shares of Offered Stock, the personal representative
shall be subject to the restrictions on the Transfer of such Stock contained in
this Agreement. If all of the shares of Offered Stock are not
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purchased by the Surviving Shareholder, the Company and the Offered
Shareholders, or any of them, the personal representative may effect a Transfer
to the Transferee or Transferees named in the Offer Notice of the balance of
the shares of Offered Stock not purchased by the Surviving Shareholder, the
Company or the Offered Shareholders, but only in strict compliance with the
terms therein stated. If any transfer of shares of Offered Stock described in
clause (iv) of Section 12(a) hereof that is to be effected pursuant to the
immediately preceding sentence has not been completed within 30 days following
the expiration of the time provided in Section 12(b) for the election by the
Offered Shareholders to purchase the same, the personal representative shall be
required to submit another Offer Notice in order to effect a Transfer of such
Offered Stock pursuant to this Section 12.
Section 13. Transfer Upon Divorce of a Shareholder.
(a) If the marital relationship of a Shareholder ( a "Divorced
Shareholder") is terminated by divorce and if the Divorced Shareholder does not
succeed directly to the interest, if any, of his former spouse (the "Divorced
Spouse") in any Stock owned or held by the Divorced Shareholder at the time of
the divorce, then the divorce decree shall specify the Stock owned by the
Divorced Spouse and shall require compliance with this Section 13 prior to any
Transfer of such Stock, including a Transfer thereof into the name of the
Divorced Spouse. The Divorced Spouse shall, within 30 days after the divorce
becomes final, submit an Offer Notice to the Divorced Shareholder, the Company
and the Offered Shareholders. The Offer Notice shall be given concurrently to
the Divorced Shareholder, the Company and the Offered Shareholders and shall
state that the Divorced Spouse offers to sell the Offered Stock. The Offer
Notice shall also specify (i) the date the divorce became final, (ii) the
number of shares of Offered Stock, (iii) whether the Divorced Spouse proposes
to effect a Transfer of Offered Stock not purchased by the Divorced
Shareholder, the Company or the Offered Shareholders, and if so the Offering
Price, the name and address of the prospective Transferee or Transferees and
the other terms of such proposed Transfer, if any, and (iv) the address of the
Divorced Spouse that is to be its location for notices and other communications
hereunder.
(b) Within 30 days after receipt of the Offer Notice, the Divorced
Shareholder shall give a Response Notice to the Divorced Spouse, the Company
and the Offered Shareholders stating whether such Divorced Shareholder elects
to purchase the shares of Offered Stock. If the Divorced Shareholder does not
elect to purchase all of the shares of Offered Stock, the Company shall, within
15 days after receipt of the Response Notice of the Divorced Shareholder, give
a Response Notice to the Divorced Spouse and the Offered Shareholders stating
whether it elects to purchase any of the shares of Offered Stock not to be
purchased by the Divorced Shareholder. If all of the Offered Stock is not
purchased by the Divorced Shareholder and the Company, or either of them, each
of the Offered Shareholders shall, within 15 days after the giving of the
Response Notice of the Company, give a Response Notice to the Divorced Spouse,
the Company and the other Offered Shareholders as to whether such Offered
Shareholder elects to purchase any of the shares of Offered Stock not to be
purchased by the Divorced Shareholder or the Company. If there is more than
one Purchasing Shareholder, the shares of Offered Stock to be purchased by such
Purchasing Shareholders shall be allocated among the Purchasing Shareholders in
such proportions as they may
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mutually agree, or in the absence of such agreement, pro rata according to the
relative holdings of shares of Stock of the Purchasing Shareholders on the
applicable Determination Date.
(c) If all of the Offered Stock is not purchased by the Divorced
Shareholder, the Company and the Offered Shareholders, or any of them, (i) the
Divorced Spouse may, within 30 days following the expiration of the time
provided in Section 13(b) hereof for election by the Offered Shareholders to
purchase the same, effect a Transfer to the Transferee or Transferees named in
the Offer Notice of the balance of the shares of Offered Stock not purchased by
the Divorced Shareholder, the Company or the Offered Shareholders, but only in
strict compliance with the terms therein stated, and (ii) the shares of Offered
Stock that are not purchased by the Divorced Shareholder, the Company or the
Offered Shareholders or as to which the Divorced Spouse fails to complete a
Transfer pursuant to the preceding clause (i) shall be transferred into the
name of the Divorced Spouse and shall continue to be subject to the provisions
of this Agreement.
(d) If a Transfer of Stock is ever made to a Person whose spouse
is already a Shareholder, so that following such Transfer both husband and wife
will be Shareholders, then unless otherwise expressly agreed in a written
instrument executed by both husband and wife and delivered to the Company, in
the event of the divorce of such Persons, the Person who acquired Stock as of
the earliest date shall be the Divorced Shareholder and the spouse who acquired
Stock thereafter shall be the Divorced Spouse for purposes of this Section 13.
Section 14. Involuntary Transfer. Any Transfer of Stock in
connection with any bankruptcy, insolvency or similar proceedings involving a
Shareholder or a spouse of a Shareholder or pursuant to any judicial order,
legal process, execution or attachment and any other involuntary Transfer not
otherwise expressly provided for in this Agreement shall be subject to the
restrictions set forth in this Agreement.
Section 15. Purchase Price. The purchase price per share of
Stock (the "Purchase Price") to be paid by the Company, a Purchasing
Shareholder or any other Person for the purchase of Stock pursuant to an Offer
Notice shall be as follows:
(a) for purposes of Section 14 hereof, the Purchase Price shall be
the Book Value of the shares of Common Stock and the Stated Value of the shares
of Preferred Stock;
(b) for purposes of Sections 11 and 12 hereof, the Purchase Price
shall be the lesser of (i) the Formula Value of the shares of Common Stock,
(ii) the Stated Value of the shares of Preferred Stock or (iii) the Offering
Price, if any, specified in the Offer Notice; and
(c) for purposes of Section 13 hereof, the Purchase Price shall be
the lesser of (i) the Book Value of the shares of Common Stock, (ii) the Stated
Value of the shares of Preferred Stock, (iii) the Offering Price, if any,
specified in the Offer Notice or (iv) the value per share of Stock, if any,
specified in the divorce decree.
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Section 16. Closing. The closing (the "Closing") of the purchase
and sale of any shares of Offered Stock shall be held on such date and at such
time as is specified in the Response Notice given by the Person or Persons
electing to purchase the same (each, a "Purchaser"); provided, however, that
(i) the date so specified shall be not less than 45 nor more than 60 days after
the date of such Response Notice and (ii) if there is more than one Purchaser,
the Closing shall be held on the date specified in the earliest affirmative
Response Notice. The Closing shall take place at the principal office of the
Company or at such other location as may be mutually agreed upon by the
Purchasers and the Person or Persons from which the shares of Offered Stock are
to be purchased. At the Closing, each seller of Offered Stock shall deliver a
certificate or certificates representing the shares of Offered Stock to be sold
by such seller to the Purchasers, duly endorsed in blank or accompanied by
stock powers duly executed in blank or otherwise in form acceptable for
transfer on the books of the Company, and the Purchasers shall pay to each
seller of Offered Stock an amount in cash equal to the Purchase Price for such
Stock. Each seller of Offered Stock shall cooperate in good faith with the
Purchasers in connection with the Closing. In addition, at the Closing, the
personal representative of the estate of a Deceased Shareholder or of a
Deceased Spouse, if any, shall deliver to the Purchasers (i) copies of the
letters testamentary or letters of administration evidencing his appointment
and qualification, (ii) a certificate issued by the Internal Revenue Service
pursuant to Section 6325 of the Internal Revenue Code discharging the Stock to
be sold from liens imposed by the Internal Revenue Code, and (iii) an estate
tax waiver issued by the state of domicile of the Deceased Shareholder or
Deceased Spouse.
Section 17. Holdback Agreement; Adjustments.
(a) Each Shareholder agrees that, (i) to the extent requested in
writing by a managing underwriter of an IPO or any underwritten public offering
effected pursuant to a demand registration request under the Registration
Agreement, it will not Transfer any Stock or any other equity security of the
Company or any security convertible into or exchangeable or exercisable for any
equity security of the Company (other than as part of such underwritten public
offering) during the time period reasonably requested by the managing
underwriter, not to exceed 180 days, and (ii) to the extent requested in
writing by a managing underwriter of any underwritten public offering effected
by the Company for its own account within three years after an IPO, it will not
Transfer after such offering any of the Stock or any other equity security of
the Company or any security convertible into or exchangeable or exercisable for
any equity security of the Company (other than as part of such underwritten
public offering) during the time period reasonably requested by the managing
underwriter, which period shall (x) not exceed 180 days, in the event that it
participates in such public offering pursuant to "piggyback" registration
rights granted under the Registration Agreement, and (y) not exceed 90 days, in
the event that it does not so participate in such public offering.
(b) The Company agrees that it will take all reasonable steps
necessary to effect a subdivision of shares if, with respect to any demand
registration request under the Registration Agreement, in the reasonable
judgment of the managing underwriter for the offering in respect of such demand
registration, such subdivision would enhance the marketability of the
securities
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proposed to be registered thereunder. Each Shareholder agrees to vote all of
its shares of capital stock in a manner, and to take all other actions
necessary, to permit the Company to carry out the intent of the preceding
sentence including, without limitation, voting in favor of an amendment to the
Certificate in order to increase the number of authorized shares of capital
stock of the Company.
Section 18. Certain Covenants.
18.1. Financial Statements and Other Information.
(a) From the date hereof until completion of an IPO, the Company
shall deliver to each Shareholder (so long as such Shareholder holds at least
1% of the Common Stock) and to each other subsequent holder of at least 1% of
the Common Stock:
(i) within 45 days after the end of each of the first
three quarterly accounting periods in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of
the Company for such fiscal quarter, and unaudited consolidating and
consolidated balance sheets of the Company as of the end of such
fiscal quarter, setting forth in each case comparisons to the same
quarter of the preceding fiscal year, all prepared in accordance with
GAAP, consistently applied, subject to the absence of footnote
disclosures and to normal year-end adjustments;
(ii) within 90 days after the end of each fiscal year,
audited consolidating and consolidated statements of income and cash
flows of the Company for such fiscal year, and consolidating and
consolidated balance sheets of the Company as of the end of such
fiscal year, setting forth in each case comparisons to the preceding
fiscal year, all prepared in accordance with GAAP, consistently
applied, and accompanied by, with respect to the consolidated portions
of such statements, an opinion of a "Big Six" independent accounting
firm that is unqualified with respect to the scope of such firm's
examination and the Company's status as a going concern;
(iii) promptly (but in any event within five business days)
after the discovery or receipt of notice of any default under any
material agreement to which the Company and/or any of its Subsidiaries
is a party, which default could have a material adverse effect on the
Company or any Subsidiary, an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company
has taken and proposes to take with respect thereto;
(iv) promptly (but in any event within three business
days) after transmission thereof, copies of all financial statements,
proxy statements, reports and any other general written communications
which the Company sends to its shareholders generally; and
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(v) with reasonable promptness, such other information
and financial data concerning the Company as any Person entitled to
receive information under this Section 18.1 may reasonably request.
(b) Each of the financial statements referred to in this Section
18.1 shall be true and correct in all material respects, and shall fairly and
accurately reflect the financial condition and operating results of the Company
as of the dates and for the periods stated therein, subject in the case of the
unaudited financial statements to changes resulting from normal year-end
adjustments (none of which would, alone or in the aggregate, be materially
adverse to the financial condition, operating results, assets or operations of
the Company and its Subsidiaries taken as a whole).
18.2. Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the conversion of the Series B
Preferred, Series C Preferred and Series D Preferred, such number of shares of
Common Stock issuable upon the conversion of all outstanding shares of Series B
Preferred, Series C Preferred and Series D Preferred. All shares of Common
Stock which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges. The
Company shall take all such actions as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any applicable law
or governmental regulation or any requirements of any domestic securities
exchange upon which shares of Common Stock may be listed (except for official
notice of issuance which shall be immediately transmitted by the Company upon
issuance).
18.3. Public Disclosures. Unless approved by the Board, the Company
shall not, nor shall it permit any of its Subsidiaries to, disclose any
Shareholder's name or identity as an investor in the Company or any material
information related to this Agreement in any press release or other public
announcement or in any document or material filed with any governmental entity,
without the prior written consent of such Shareholder, unless such disclosure
is required by applicable law or governmental regulations or by order of a
court of competent jurisdiction, in which case prior to making such disclosure
the Company shall give written notice to such Shareholder describing in
reasonable detail the proposed content of such disclosure and shall permit such
Shareholder to review and comment upon the form and substance of such
disclosure.
Section 19. Conflicting Agreements. Each Shareholder represents
and warrants that such Shareholder has not granted and is not a party to any
proxy, voting trust or other agreement which is inconsistent with or conflicts
with any provision of this Agreement, and no holder of Stock shall grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with or conflicts with any provision of this Agreement.
Section 20. Legend.
(a) Each Shareholder and the Company shall take all such action
necessary (including exchanging with the Company certificates representing
shares of Stock issued prior to the
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date hereof) to cause each certificate representing outstanding shares of Stock
to bear a legend containing the following words:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED,
EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF (i) UNLESS (A)
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES AND "BLUE
SKY" LAWS OR (B) AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND ANY
SUCH LAWS IS AVAILABLE AND, IN SUCH CASE, AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO HOLLYWOOD THEATER
HOLDINGS, INC. (THE "COMPANY"), SHALL HAVE BEEN DELIVERED TO THE
COMPANY TO THE EFFECT THAT THE OFFER, SALE, TRANSFER, DISPOSITION,
PLEDGE, HYPOTHECATION OR EXCHANGE THEREOF IS EXEMPT FROM REGISTRATION
UNDER THE ACT AND ANY SUCH LAWS) OR (ii) UNLESS SOLD PURSUANT TO AND
IN COMPLIANCE WITH RULE 144 OF THE ACT AND APPLICABLE SECURITIES OR
"BLUE SKY" LAWS."
"IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER AND TO THE VOTING AGREEMENTS
SET FORTH IN THE AMENDED AND RESTATED SHAREHOLDERS' AND VOTING
AGREEMENT DATED AS OF DECEMBER __, 1997 BY THE COMPANY AND THE PARTIES
THERETO, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE COMPANY."
(b) The requirement that the above securities legend be placed
upon certificates evidencing shares of Stock shall cease and terminate upon the
earliest of the following events: (i) when such shares are transferred in an
underwritten public offering, (ii) when such shares are transferred pursuant to
Rule 144 under the Securities Act or (iii) when such shares are transferred in
any other transaction if the seller delivers to the Company an opinion of its
counsel, which counsel and opinion shall be reasonably satisfactory to the
Company to the effect that such legend is no longer necessary in order to
protect the Company against a violation by it of the Securities Act upon any
sale or other disposition of such shares without registration thereunder. The
requirement that the above legend regarding this Agreement be placed upon
certificates evidencing shares of Stock shall cease and terminate upon the sale
of such shares of Stock pursuant to a Public Sale. Upon the consummation of
any event requiring the removal of a legend hereunder, the Company, upon the
surrender of certificates containing such legend, shall, at its own expense,
deliver to the holder of
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any such shares as to which the requirement for such legend shall have
terminated, one or more new certificates evidencing such shares not bearing
such legend.
Section 21. Representations and Warranties. Each party hereto
represents and warrants to the other parties hereto as follows:
(i) It has full power and authority to execute, deliver
and perform its obligations under this Agreement.
(ii) This Agreement has been duly and validly authorized,
executed and delivered by it, and constitutes a valid and binding
obligation of it, enforceable against it in accordance with its terms
except to the extent that enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally.
(iii) The execution, delivery and performance of this
Agreement by it does not (x) violate, conflict with, or constitute a
breach of or default under its organizational documents, if any, or
any material agreement to which it is a party or by which it is bound
or (y) violate any law, regulation, order, writ, judgment, injunction
or decree applicable to it.
(iv) No consent or approval of, or filing with, any
governmental or regulatory body is required to be obtained or made by
it in connection with the transactions contemplated hereby.
(v) It is not a party to any agreement which is
inconsistent with the rights of any party hereunder or otherwise
conflicts with the provisions hereof.
Section 22. Put. At any time on or after October 31, 2001, and
provided that a Qualified IPO has not then occurred, the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable Trust (the "▇▇▇▇▇▇▇ Trust") may, by written notice of such intent to
the Company (the "Put Notice"), require the Company to purchase all but not
less than all shares of the Common Stock then held by the ▇▇▇▇▇▇▇ Trust (the
"Put Holder") at the Put Price determined as of the date of the Put Notice.
The Put Notice shall set forth a date (which shall be not less than sixty 60
days, nor more than ninety 90 days after the date of the Put Notice and which
shall be a Business Day) (the "Put Closing Date") for the purchase and sale of
the shares of the Common Stock with respect to which such Put Holder is
exercising the Put (the "Put Shares"). On the Put Closing Date, the Put Holder
shall deliver the certificates evidencing the Put Shares by the Put Holder to
the Company duly endorsed, free and clear of all liens, claims and encumbrances
of any kind (other than any liens, claims and encumbrances arising under this
Agreement or under applicable federal and state securities laws), and the
Company shall pay to the Put Holder, in cash, an amount equal (i) the Market
Value multiplied by (ii) the number of Put Shares (the "Put Price"). The
amount payable by the Company to the Put Holder upon exercise of the Put shall
be paid by certified or cashier's check, by wire transfer or other immediately
available funds. The failure of the Put Holder to deliver the certificates
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evidencing the Put Shares held by the Put Holder to the Company shall not limit
or impair the right of the Put Holder to receive the consideration to be paid
to the Put Holder upon exercise of the Put. However, the Company may withhold
payment of such consideration pending receipt from the Put Holder of such
certificates or of evidence that such certificates have been mutilated, lost,
stolen or destroyed and satisfactory indemnities with respect thereto. Pending
delivery of such certificate(s) (or other evidence and indemnities), the
consideration to be paid to the Put Holder shall be held in trust by the
Company for the Put Holder and shall be set aside in a separate account for the
benefit of the Put Holder, segregated from the other assets of the Company. If
the Company is unable to purchase all Put Shares on a Put Closing Date due to
state law restrictions or restrictions in the Company's Certificate or its
agreements relating to indebtedness for borrowed money, the Company shall
purchase all Put Shares which it is then permitted to purchase without
violating such restrictions (on a pro rata basis from the Put Holder then
exercising the Put), and the Company shall purchase the remaining Put Shares as
soon thereafter as possible without violating such restrictions; provided, that
in the event the purchase of such remaining securities is postponed for more
than ninety (90) days following the original Put Closing Date, the Put Holder
shall have the right to have the Put Price redetermined as of such date and may
elect to have the Put Price be the higher of the original Put Price or the Put
Price determined at such later date.
Section 23. Duration of Agreement. The rights and obligations of
a Shareholder under this Agreement shall terminate at such time as such
Shareholder no longer is the beneficial owner of any shares of Stock. This
Agreement shall terminate upon the consummation of an IPO, except that the
terms of Sections 3.1(b) to 3.12, 17, 18.2, 18.3, 25 and 32 shall survive
until, by their respective terms, they are no longer operative.
Section 24. Further Assurances. At any time or from time to time
after the date hereof, the parties agree to cooperate with each other, and at
the request of any other party, to execute and deliver any further instruments
or documents and to take all such further action as the other party may
reasonably request in order to evidence or effectuate the consummation of the
transactions contemplated hereby and to otherwise carry out the intent of the
parties hereunder.
Section 25. Amendment and Waiver. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
shall be effective against the Company or any Shareholder unless such
modification, amendment or waiver is approved in writing by (i) the Company,
(ii) Shareholders holding at least 75% of the Common Stock (which may include
Beacon and/or the Stratford Entities and/or the ▇▇▇▇ Entities), (iii) Beacon
(as long as it holds at least 5% of the outstanding Common Stock), (iv) the
Stratford Entities (as long as they collectively hold at least 5% of the
outstanding Common Stock) and (v) the ▇▇▇▇ Entities (as long as they
collectively hold at least 5% of the outstanding Common Stock). 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.
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Section 26. 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 any other provision or 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.
Section 27. Entire Agreement. Except as otherwise expressly set
forth herein, this document and the other documents dated the date hereof
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 Prior Shareholders' Agreement which is
amended and restated in its entirety hereby.
Section 28. 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 each Shareholder
and their respective successors, assigns, heirs and personal representatives,
so long as they hold Stock. Except pursuant to a Transfer of Stock in
compliance which Section 4, no Shareholder shall have the right to assign its
rights and obligations under this Agreement, without the consent of each of the
other Shareholders. As long as its Transfer is in compliance with Section 4,
Beacon may assign its rights under Section 3.1 to designate Beacon Directors as
follows: At such time as Beacon has the right to designate three Beacon
Directors, any transferee of 33-1/3% or more of Beacon's shares shall have the
right to designate one Beacon Director. At such time as Beacon has the right
to designate one or two Beacon Directors, any transferee of 50% or more of
Beacon's shares shall have the right to designate one Beacon Director.
Section 29. Counterparts. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
Section 30. Remedies. Each Shareholder shall be entitled to
enforce its 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 money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that each party may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
Section 31. 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) or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any
other recipient at the address indicated on Schedule 31 hereto and to any
subsequent
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holder of Stock 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 will 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:
Hollywood Theater Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
Section 32. Governing Law; Consent to Jurisdiction. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without giving effect to the principles of conflicts of law.
Each of the parties hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the State of Delaware and
of the United States of America, in each case located in the County of New
Castle, for any action, proceeding or investigation in any court or before any
governmental authority ("Litigation") arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any Litigation relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
its respective address set forth in this Agreement shall be effective service
of process for any Litigation brought against it in any such court. Each of
the parties hereto hereby irrevocably and unconditionally waives any objection
to the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of Delaware or the
United States of America, in each case located in the County of New Castle, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such Litigation brought in any such court
has been brought in an inconvenient forum. Each of the parties irrevocably and
unconditionally waives, to the fullest extent permitted by applicable law, any
and all rights to trial by jury in connection with any Litigation arising out
of or relating to this Agreement or the transactions contemplated hereby.
Section 33. Miscellaneous. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement. This Agreement is intended to be a voting agreement among
stockholders as permitted by Section 218(c) of the Delaware General Corporation
Law.
Section 34. Construction. Where specific language is used to
clarify by example a general statement contained herein, such specific language
shall not be deemed to modify, limit or restrict in any manner the construction
of the general statement to which it relates. The language used in this
Agreement 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Shareholders' and Voting Agreement on the day and year first above
written.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Operating Officer
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
By: Focus Value Investors, L.L.C., its general
partner
By: Focus Value GP, Inc., its managing member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
STRATFORD CAPITAL PARTNERS, L.P.
By: Stratford Capital GP Associates, L.P.
By: Stratford Capital Corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
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STRATFORD EQUITY PARTNER, L.P.
By: Stratford Capital GP Associates, L.P.
By: Stratford Capital Corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
▇▇▇▇ COMMUNICATIONS PARTNERS, L.P.
By: HCP INVESTMENT, L.P.
By: ▇▇▇▇ PARTNERS, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Manager
HCP CAPITAL FUND, L.P.
By: ▇▇▇▇▇ ▇. ▇▇▇▇ & CO.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
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HCP 1997 AUTHORIZED EMPLOYEE FUND, L.P.
By: AUTHORIZED FUND MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
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