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EXHIBIT 10.3
SHAREHOLDERS' AND VOTING AGREEMENT
THIS SHAREHOLDERS' AND VOTING AGREEMENT (the "Agreement") is
made as of October 3, 1996 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.
W I T N E S S E T H :
WHEREAS, as of the date hereof, Beacon is purchasing shares of
Series A Convertible Preferred Stock of the Company, par value $.01 per share
("Series A Preferred"), pursuant to a Preferred Stock and Common Stock Purchase
Agreement (the "Purchase Agreement");
WHEREAS, the Purchase Agreement contemplates that, subject to
the terms and conditions thereof, Beacon will purchase, at a subsequent
closing, shares of Series B Convertible Preferred Stock of the Company, par
value $.01 per share (the "Series B Preferred") and shares of Common Stock of
the Company;
WHEREAS, the Company and certain other shareholders of the
Company are party to a Stockholders Agreement dated as of April 30, 1996 (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).
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"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.
"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
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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 the 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
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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 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.
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"Book Value" means the book value per share of Common Stock,
as determined bdividing 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 whicnational banks are authorized or required by law to be closed
in Dallas, Texas.
"By-laws" means the By-laws 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 A Preferred and the Series B Preferred.
"Company" has the meaning assigned to it in the Preamble.
"Company Acceptance Period" has the meaning assigned to it in
Section 5(a).
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"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.
"Conversion Shares" has the meaning assigned to it in the
Purchase Agreement.
"Credit Agreement" means that certain Credit Agreement dated
as of June 30, 1995 among the Company, The Provident Bank 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
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conversion of the Series A Preferred and the Series B 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).
"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) an amount equal to the original principal
amount under that certain Subordinated Promissory Note dated as of July 10,
1995 from the Company to J.C. Mitchell 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
J.C. Mitchell and Hollywood Theaters, Inc. with respect to the Grapevine lease
and that certain Amendment to Lease Agreement dated as of July 10, 1995 between
J.C. Mitchell and
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Hollywood Theaters, Inc. with respect to the Burleson 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 Hart-Scott-Rodino Antitrust Improvement
Act of 1976, as amended.
"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.
"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
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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).
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"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).
"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.
"Prior Shareholders' Agreement" means the Stockholder
Agreement dated as of April 30, 1996 by and among the Company, Stratford, and
the other shareholders that are party thereto.
"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 Agreement" has the meaning assigned to it in the
Recitals.
"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.
"Put" means the right of each holder of Series A Preferred or
Conversion Shares to require the Company to repurchase such stock pursuant to
this Agreement.
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"Put Closing Date" has the meaning set forth in Section 22.
"Put Formula Value" means, with respect to a share of Common
Stock on any date herein specified, the value determined by dividing (a) (i)
6.5 multiplied by the Adjusted Base EBITDA of the Company for the period of
twelve consecutive months ending with (and including) the month most recently
ended as of such date, less (ii) the aggregate principal and accrued but unpaid
interest outstanding in respect of debt for borrowed money of the Company
(including borrowed money under the Credit Agreement, but excluding debt
incurred to finance the construction of any movie theater owned by the Company
or any of its Subsidiaries to the extent a certificate of occupancy has not
been issued for such theater as of the last day of such period or to the extent
such theater is not open for business as of the last day of such period) plus
(ii) an amount equal to the cash balance of the Company and its Subsidiaries on
a consolidated basis as of the last day of the month most recently ended as of
such date, plus (iii) the market value of all marketable securities held by the
Company and its Subsidiaries on a consolidated basis as of the last day of the
month most recently ended as of such date (determined based on the fair market
value of such securities on the last day of such month), plus (iv) the
consideration which would be received by the Company upon an exercise of all
options, warrants and other rights to acquire Common Stock which are
outstanding on such date (only to the extent such rights are then exercisable
and only to the extent Market Value exceeds the per share exercise price
thereof) and the conversion of all securities of the Company outstanding on
such date which are convertible into Common Stock (only to the extent such
securities are then convertible and only to the extent Market Value exceeds the
per share exercise price thereof) by (b) the Total Shares (excluding all
options, warrants and other rights to
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acquire Common Stock which are outstanding on such date that are not then
exercisable and for which the Market Value is less than the per share exercise
price thereof) on such date.
"Put Holder" has the meaning set forth in Section 22.
"Put Notice" has the meaning set forth in Section 22.
"Put Price" means (a) a price mutually acceptable to the Put
Holder and the Company, or (b) if the Put Holder and the Company are not able
to agree on the Put Price (i) in the case of a Put Share consisting of Series A
Preferred , the greater of (A) the Stated Value of such share of Series A
Preferred, (B) the Market Value multiplied by the number of shares of Common
Stock into which such share of Series A Preferred is then convertible, or (C)
the Put Formula Value multiplied by the number of shares of Common Stock into
which such shares of Series A Preferred is then convertible, and (ii) in the
case of a Put Share consisting of Conversion Shares, the greater of (A) the
Market Value, or (B) the Put Formula Value.
"Put Shares" has the meaning set forth in Section 22.
"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).
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"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).
"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 Thomas W. Stephenson,
Jr.
"Series A Conversion Shares" means shares of Common Stock
issuable upon conversion of Series A Preferred.
"Series A Preferred" has the meaning assigned to it in the
Recitals.
"Series A Repurchase Offer" has the meaning assigned to it in
Section 3.1(a).
"Series B Preferred" has the meaning assigned to it in the
Recitals
"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 $100 plus accrued and unpaid dividends in
the case of the Series A Preferred and $175 plus accrued and unpaid dividends
in the case of the Series B Preferred.
"Stock" means (i) any shares of Common Stock and (ii) any
Common Stock Equivalents (including, without limitation, the Series A Preferred
and the Series B Preferred and the
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Common Stock issuable upon conversion thereof), in each case, whether owned on
the date hereof or acquired hereafter.
"Stratford" means Stratford Capital Partner, L.P., a Texas
limited partnership and licensee under the Small Business Investment Act of
1958, as amended, and its successors and assigns.
"Stratford Director" has the meaning assigned to it in Section
3.1.
"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).
"Subsequent Purchase" has the meaning assigned to it in the
Purchase Agreement.
"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 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.
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"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 and
Series B 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 A
Preferred and Series B Preferred as of the date hereof (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 five members. Prior to a Qualified IPO, (i) so long as Beacon holds
(x) 50% or more of the outstanding Common Stock or any shares of Series A
Preferred, 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 Stratford holds more than 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") and (iii) the chief executive
officer of the Company shall serve as a member of the Board. Notwithstanding
the foregoing, if the Purchase Agreement terminates without the Subsequent
Purchase (as defined in the Purchase Agreement) having been consummated, the
number of Beacon Directors shall be reduced to two as long as Beacon holds 5%
or more of the outstanding Common Stock and the number of Stratford Directors
shall be two as long as Stratford holds 5% or more of the outstanding Common
Stock, provided that the number of Beacon Directors shall be reduced to one if
(A) within six months following such termination the Company delivers to Beacon
a written offer to purchase all of Beacon's shares of Series A Preferred for a
cash purchase price equal to the sum of (x) the Initial Purchase Price (as
defined in the Purchase Agreement) and (y) the amount of all accrued but unpaid
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dividends on such shares of Series A Preferred through and including the
proposed purchase date and (z) the amount of Beacon's documented out-of-pocket
costs and expenses (including, without limitation, the fees and expenses of
Beacon's attorneys and accountants) incurred by Beacon in connection with its
due diligence review of the Company and the negotiation, execution and delivery
of this Agreement, the Purchase Agreement and related documents (a "Series A
Repurchase Offer"), and, (B) Beacon has not delivered to the Company a written
acceptance of such offer within 30 days after Beacon has received such offer.
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, provided that the Beacon
Directors shall be recused with respect to any vote regarding whether the
Company shall make a Series A Repurchase Offer to Beacon.
(b) Post Qualified IPO. From and after a
Qualified IPO, the Board shall be composed of no more than five 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,
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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.
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) 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 or
Stratford 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 Stratford in the case of a
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Stratford 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 or
Stratford 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 Stratford in the case of a Stratford Director.
(b) None of the Beacon Directors, any Beacon
Designee nor any Stratford Director shall be removed from office without the
consent of Beacon, in the case of a Beacon Director or Beacon Designee, and by
Stratford in the case of a Stratford Director. Each Beacon Director, Beacon
Designee and Stratford 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, and by Stratford in the case of a Stratford Director.
3.4. Non-Voting Observers. The Company agrees that if at
any meeting for the election of directors any Beacon Director, Beacon Designee
or Stratford 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 Stratford) 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 Stratford (in the case of a Stratford
Director), so long as Stratford holds 5% or more of the outstanding Common
Stock, will be entitled to have one observer (a "Stratford Non-Voting
Observer") selected by Stratford present
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at all meetings of the Board (the Beacon Non-Voting Observer, if any, and
Stratford 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 or Non-Voting Observer determines that he or she is unable to attend
such meeting, Beacon (in the case of a Beacon Director, Deacon Designee or
Beacon Non-Voting Observer) and Stratford (in the case of a Stratford Director
or Stratford Non-Voting Observer) shall
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have the right to designate a representative to attend and observe such meeting
on behalf of such Beacon Director, Beacon Designee, Stratford 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 and each Stratford 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 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 and Stratford 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.
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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 and
each Stratford 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 and Stratford
Director) and each Non-Voting Observer is intended to be a third-party
beneficiary of the obligations of the Company pursuant to this Section
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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 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 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 and any Non-Voting Observer in connection with
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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% 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
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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
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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 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
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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
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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.
(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
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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
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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.
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.
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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
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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.
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;
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(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; and
(e) in the case of Stratford, 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 Stratford as of the date of the proposed Transfer;
(ii) any Person (A) owned or Controlled
by Stratford, (B) which Controls Stratford, (C) which is under common Control
with Stratford, or (D) who is a beneficial owner of an equity interest in
Stratford, or in any Person which Controls Stratford or which is under common
Control with Stratford; and
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(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 Stratford may not Transfer
more than 10,000 shares of preferred stock pursuant to this clause (iii).
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
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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 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
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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
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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 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
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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
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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 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
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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
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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 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.
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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.
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
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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)
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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 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.
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(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;
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(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
(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 A Preferred and Series B Preferred, such number of shares of Common
Stock issuable upon the conversion of all outstanding shares of Series A
Preferred and Series B 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
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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.
18.4. Certain Events. In the event (i) the Purchase
Agreement terminates without the Subsequent Purchase (as defined therein)
having been consummated and (ii) the Company purchases from Beacon all shares
of Series A Preferred owned by Beacon, then immediately following such
purchase, the terms of this Agreement shall automatically and without any
further required action of the Shareholders be amended and restated in its
entirety to reflect the terms of the Prior Shareholders' Agreement.
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.
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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 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 SHAREHOLDERS' AND VOTING AGREEMENT DATED AS OF OCTOBER 3, 1996 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
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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 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.
(a) 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.
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(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.
(b) Each Shareholder represents and warrants to
Beacon as follows:
(i) Schedule 13(b) hereto sets forth a
list of all securities of the Company (including, without limitation, shares of
capital stock, convertible securities, debentures, etc.) held of record or
beneficially owned by it immediately after the date hereof.
(ii) Except as set forth on Schedule
13(b) hereto and other than this Agreement, it is not a party to any contract
or agreement, written or oral, (i) with respect to the securities of the
Company (including, without limitation, any voting agreement, voting trust,
stockholder's agreement, registration rights agreement, etc.) or (ii) otherwise
with or relating to the Company.
(c) Beacon represents and warrants to the other
parties hereto that prior to the date hereof it was not a party to any contract
or agreement, written or oral, with respect to any securities of the Company.
Section 22. Put. At any time on or after April 29, 2001, and
provided that a Qualified IPO has not then occurred, any holder of Series A
Preferred or Series A Conversion Shares 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 Series A Preferred or Series A Conversion Shares then
held by such holder (any such holder exercising such right is referred to
herein as the "Put Holder") at the Put
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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 Series A
Preferred or Series A Conversion Shares 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 such 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 such Put Holder, in cash, an amount equal (i) the
Put Price multiplied by (ii) the number of Put Shares. The amount payable by
the Company to any 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 any Put Holder to deliver the certificates evidencing
the Put Shares held by such Put Holder to the Company shall not limit or impair
the right of such Put Holder to receive the consideration to be paid to such
Put Holder upon exercise of the Put. However, the Company may withhold payment
of such consideration pending receipt from such 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 such Put Holder shall be held in trust by the Company for such
Put Holder and shall be set aside in a separate account for the benefit of such
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
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purchase all Put Shares which it is then permitted to purchase without
violating such restrictions (on a pro rata basis from each 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(s) 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. Notwithstanding any
other provision of this Agreement, the provisions of this Section 22 shall,
with respect to all Shareholders other than Richard M. Durwood, automatically,
and without any further required action on the part of the Company or any
Shareholder, terminate and cease to be of any force or effect upon the
consummation of the Subsequent Purchase (as defined in the Purchase Agreement),
provided that the terms of this Section 22 as applicable to Mr. Durwood shall
apply to Common Stock owned by Mr. Durwood and shall, upon the consummation of
the Subsequent Purchase, be automatically, and without any further required
action on the part of the Company or any Shareholder, be modified to provide
(i) that the Put Price shall at all times equal the Market Value multiplied by
the number of shares of Common Stock into which the Put Shares are then
convertible and (ii) that the Put is exercisable any time on or after the fifth
anniversary of the Subsequent Closing (as defined in the Purchase Agreement)
(rather than on or after April 29, 2001).
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,
53
54
except that the terms of Sections 3.1(b) to 3.12 (only to the extent binding on
the Company), 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 Stratford), (iii) Beacon (as long as it holds at least 5% of the
outstanding Common Stock) and (iv) Stratford (as long as it holds 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.
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
54
55
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.
55
56
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 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.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, Texas 75219
Telecopy: (214) 520-2323
Attention: Thomas W. Stephenson, Jr.
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
56
57
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.
57
58
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.
IN WITNESS WHEREOF, the parties hereto have executed this
Shareholders' and Voting Agreement on the day and year first above written.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-------------------------------------------------------
Name: Thomas W. Stephenson, Jr.
-----------------------------------------------------
Title: President
----------------------------------------------------
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/ Focus Value GP, Inc.
-------------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
STRATFORD CAPITAL PARTNERS, L.P.
By: Stratford Capital GP Associates, L.P.
By: Stratford Capital Corporation
By: /s/ Stratford Capital Corporation
-------------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
58
59
PRECEPT INVESTORS, INC.
By: /s/ Precept Investors, Inc.
-------------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
59
60
FIRST AMENDMENT
TO
SHAREHOLDERS' AND VOTING AGREEMENT
This First Amendment, dated as of November 1, 1996 (this
"First Amendment"), 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 other shareholders of
the Company executing one of the signature pages attached hereto or otherwise
subject to this First Amendment, amends that certain Shareholders and Voting
Agreement dated as of October 3, 1996 (the "Shareholders' Agreement") by and
among the Company, Beacon and each of the shareholders of the Company executing
one of the signature pages attached thereto or otherwise subject thereto.
Capitalized terms used herein but not defined herein have the meanings assigned
to such terms in the Shareholders' Agreement.
WHEREAS, the holders of in excess of 80% of the combined
voting power of the capital stock of the Company outstanding immediately prior
to the initial investment by Beacon in the Company executed the Shareholders'
Agreement to serve as an amendment and restatement of the Prior Shareholders'
Agreement and as a result thereof all shareholders signatory to the Prior
Shareholders' Agreement became subject to and bound by the Shareholders'
Agreement; and
WHEREAS, the (i) the Company, (ii) Shareholders holding at
least 75% of the Common Stock (including Beacon and Stratford), such percentage
being calculated as provided in the Shareholders Agreement, (iii) Beacon and
(iv) Stratford desire to amend the Shareholders' Agreement to clarify certain
ambiguities and in certain other respects, and as a result of such amendments
all shareholders subject the Shareholders' Agreement will continue to be
subject to the Shareholders' Agreement as amended by this First Amendment;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration the receipt of which is acknowledged, the
parties hereto agree as follows:
1. AMENDMENT TO PREAMBLE. The first paragraph of the
Shareholders' Agreement is hereby amended to include the following words to the
end thereof:
"or otherwise subject hereto"
2. AMENDMENT TO SECTION 2. Section 2 of the
Shareholders' Agreement is hereby amended and restated to read in its entirety
as follows:
"Section 2. Methodology for Calculations. For purposes
of this Agreement, the Transfer of a Common Stock Equivalent
shall be
61
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,
(x) between the date hereof and the Subsequent Closing all
shares of Series A Preferred outstanding as of the date hereof
(but no other Common Stock Equivalents) shall be treated as
having been converted, exchanged or exercised and (y) from and
after the Subsequent Closing, all shares of Series B Preferred
outstanding immediately after the Subsequent Closing (but no
other Common Stock Equivalents) shall be treated as having
been converted, exchanged or exercised."
3. AMENDMENT TO SECTION 22. Section 22 of the
Shareholders' Agreement is hereby amended by deleting the final sentence
thereof and replacing such sentence with the following:
"Notwithstanding any other provision of this Agreement, the
provisions of this Section 22 shall, with respect to all
Shareholders other than Richard M. Durwood and/or the Richard
M. Durwood Revocable Trust (collectively, "Durwood"),
automatically, and without any further required action on the
part of the Company or any Shareholder, terminate and cease to
be of any force or effect upon the consummation of the
Subsequent Purchase (as defined in the Purchase Agreement).
Upon consummation of the Subsequent Purchase, notwithstanding
the limitation in the first sentence of this Section 22 to the
holders Series A Preferred or Series A Conversion Shares, the
terms of this Section 22 shall become applicable to Durwood
as a holder of Common Stock automatically, and without any
further required action on the part of the Company or any
Shareholder, and shall apply to any and all shares of Common
Stock owned by Durwood; provided that as this Section 22
applies to Durwood, the terms of this Section 22 shall, upon
the consummation of the Subsequent Purchase, be automatically,
and without any further required action on the part of the
Company or any Shareholder, be modified to provide that (i) as
used in this Section 22, the term "Put Holder" shall mean
Durwood, (ii) as used in this Section 22, the term "Put
Shares" shall mean the shares of Common Stock owned by
Durwood, (iii) as used in this Section 22, the term "Put
Price" shall mean a price equal to the Market Value multiplied
by the number of shares of Common Stock constituting the Put
Shares and (iv) the Put
2
62
Notice may not be delivered by Durwood prior to October
31, 2001 (rather than April 29, 2001)."
4. AMENDMENT TO SECTION 23. Section 23 of the
Shareholders' Agreement is hereby amended by deleting the parenthetical phrase
"(only to the extent binding on the Company)" from the final sentence thereof.
5. GOVERNING LAW. THIS FIRST AMENDMENT 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 LAWS THEREOF.
6. COUNTERPARTS. This First Amendment 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.
IN WITNESS WHEREOF, the parties have executed this First
Amendment to Shareholders' and Voting Agreement on the day and year first above
written.
[SIGNATURE PAGES FOLLOW]
3
63
HOLLYWOOD THEATER HOLDINGS, INC.
/s/ Thomas W. Stephenson, Jr.
--------------------------------------------------
By: Thomas W. Stephenson, Jr.
President
THE BEACON GROUP III - FOCUS
VALUE FUND, L.P.
By: Focus Value Investors, L.L.C.,
Its General Partner
By: Focus Value GP, Inc.,
a Member
By: /s/ Focus Value GP, Inc.
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
PRECEPT INVESTORS, INC.
By: /s/ Precept Investors, Inc.
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
STRATFORD CAPITAL PARTNERS, L.P.
By: Stratford Capital GP Associates, L.P.
General Partner
By: Stratford Capital Corporation,
its General Partner
By: /s/ Stratford Capital Corporation
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
4
64
/s/ Thomas W. Stephenson, Jr.
--------------------------------------------------
Thomas W. Stephenson, Jr.
/s/ Jeffery L. Lightfoot
--------------------------------------------------
Jeffery L. Lightfoot
/s/ James R. McNab, Jr.
--------------------------------------------------
James R. McNab, Jr.
/s/ Mary W. McNab
--------------------------------------------------
Mary W. McNab
/s/ Esther J. McNab
--------------------------------------------------
Esther J. McNab
/s/ Elizabeth Scott McNab
--------------------------------------------------
Elizabeth Scott McNab
/s/ James R. McNab, Jr.
--------------------------------------------------
James R. McNab III UGMA,
c/o James R. McNab, Jr., Custodian
LKCM Theater Partners, L.P.
By: /s/ LKCM Theater Partners, L.P.
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
Mistral Entertainment LLC
By: Mistral Entertainment LLC
-----------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
5
65
/s/ Sidney L. Tassin
--------------------------------------------------
Sidney L. Tassin
/s/ Christopher Bancroft
--------------------------------------------------
Christopher Bancroft
/s/ Thomas G. Mendell
--------------------------------------------------
Thomas G. Mendell
/s/ Stephen P. Wilkes
--------------------------------------------------
Stephen P. Wilkes
/s/ Edward L. Thomas
--------------------------------------------------
Edward L. Thomas
/s/ Robert Feldman
--------------------------------------------------
H.V.H. 1995 Trust
By: Robert Feldman, Trustee
/s/ Robert Feldman
--------------------------------------------------
K.S.H. 1995 Trust
By: Robert Feldman, Trustee
/s/ Robert Feldman
--------------------------------------------------
A.M.H. 1995 Trust
By: Robert Feldman, Trustee
/s/ Susan Hodges
--------------------------------------------------
Susan Hodges, Custodian under the UGMA
f/b/o Holston H. Hodges
/s/ Susan Hodges
--------------------------------------------------
Susan Hodges, Custodian under the UGMA
f/b/o David F. Hodges
6
66
SECOND AMENDMENT
TO
SHAREHOLDERS' AND VOTING AGREEMENT
This Second Amendment, dated as of April 25, 1997 the "Second
Amendment"), 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 other shareholders of
the Company executing one of the signature pages attached hereto or otherwise
subject to this Second Amendment, amends that certain Shareholders' and Voting
Agreement dated as of October 3, 1996 (the "Shareholders' Agreement") by and
among the Company, Beacon and each of the shareholders of the Company executing
one of the signature pages attached thereto or otherwise subject thereto, as
amended by the First Amendment thereto, dated as of November 1, 1996.
Capitalized terms used herein but not defined herein have the meanings assigned
to such terms in the Shareholders' Agreement.
WHEREAS, the Company and Beacon have entered into a
Subscription Agreement, dated as of the date hereof, pursuant to which the
Company is issuing, and Beacon is purchasing, shares of Series C Convertible
Preferred Stock, par value $.01 per share, of the Company (the "Series C
Preferred") and Common Stock of the Company;
WHEREAS, the (i) the Company, (ii) Shareholders holding at
least 75% of the Common Stock (including Beacon and Stratford), such percentage
being calculated as provided in the Shareholders' Agreement, (iii) Beacon and
(iv) Stratford desire to amend the Shareholders' Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration the receipt of which is acknowledged, the
parties hereto agree as follows:
1. AMENDMENT TO RECITALS. The second recital of the
Shareholders' Agreement is hereby amended and restated in its entirety as
follows:
WHEREAS, the Purchase Agreement contemplates that, subject to
the terms and conditions thereof, Beacon will purchase, at a subsequent
closing, shares of Series B Convertible Preferred Stock of the Company, par
value $.01 per share and shares of Common Stock of the Company;
2. AMENDMENT TO SECTION 1. The definition of the term
"Common Stock Equivalents" set forth in Section 1 of the Shareholders'
Agreement is hereby amended and restated to read in its entirety as follows:
"Common Stock Equivalents" means securities convertible into,
or exchangeable or exercisable for, shares of Common Stock, including without
limitation, the Series A Preferred, the Series B Preferred and the Series C
Preferred.
1
67
3. AMENDMENT TO SECTION 1. The definition of the term
"Conversion Shares" set forth in Section 1 of the Shareholders' Agreement is
hereby amended and restated in its entirety as follows:
"Conversion Shares" means shares of Common Stock (i) issuable
upon the conversion of the Series A Preferred and the Series B Preferred issued
or issuable to Beacon under the Purchase Agreement or (ii) issuable upon the
conversion of the Series C Preferred issued to Beacon under the Subscription
Agreement.
4. AMENDMENT TO SECTION 1. The definition of the term
"Series B Preferred" set forth in Section 1 of the Shareholders' Agreement is
hereby amended and restated in its entirety as follows:
"Series B Preferred" means the Series B Convertible Preferred
Stock, $.01 par value per share of the Company, provided, that each share of
Series C Convertible Preferred Stock, $.01 par value per share of the Company
("Series C Preferred") shall for all purposes hereunder other than for purposes
of the definition of "Stated Value", be treated as shares of Series B
Preferred, and all references herein to Series B Preferred (other than
references in the definition of "Stated Value") shall be deemed to include both
the Series B Preferred and Series C Preferred.
5. AMENDMENT TO SECTION 1. The definition of the term
"Stated Value" set forth in Section 1 of the Shareholders' Agreement is hereby
amended and restated in its entirety as follows:
"Stated Value" means (i) $100 plus accrued and unpaid
dividends in the case of the Series A Preferred, (ii) $175 plus accrued and
unpaid dividends in the case of the Series B Preferred and (iii) $195 plus
accrued and unpaid dividends in the case of Series C Preferred.
6. AMENDMENT TO SECTION 1. Section 1 of the
Shareholders' Agreement is hereby amended to include the following:
"Subscription Agreement" means the Subscription Agreement,
dated as of April 25,1997, between the Company and Beacon, as it may be
amended, modified, replaced or superseded from time to time.
7. AMENDMENT TO SECTION 2. Section 2 of the
Shareholders' Agreement is hereby amended and restated in its entirety as
follows:
"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, (x) between the date
hereof and the Subsequent Closing all shares of Series
2
68
A Preferred outstanding as of the date hereof (but no other Common Stock
Equivalents) shall be treated as having been converted, exchanged or exercised
and (y) from and after the Subsequent Closing, all shares of Series B Preferred
outstanding immediately after the Subsequent Closing and all shares of Series C
Preferred (but no other Common Stock Equivalents) shall be treated as having
been converted, exchanged or exercised."
8. APPROVAL. The signatures of each of the parties
below shall constitute the approval of each such party for all purposes to the
form, terms and provisions of this Second Amendment to the Shareholders'
Agreement.
9. GOVERNING LAW. THIS SECOND AMENDMENT 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 LAWS THEREOF.
10. NO FURTHER AMENDMENT. Except as amended hereby, the
Shareholders' Agreement shall remain in full force and effect.
11. COUNTERPARTS. This Second Amendment 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.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment to the Shareholders' Agreement on the day and year first above
written.
HOLLYWOOD THEATER HOLDINGS, INC.
By: /s/ Thomas W. Stephenson, Jr.
-----------------------------------------
Name: Thomas W. Stephenson, Jr.
---------------------------------------
Title: President
--------------------------------------
3
69
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
By: /s/ Focus Value Investors, L.L.C.
-------------------------------------------
Focus Value Investors, L.L.C.,
Its General Partner
By: /s/ Focus Value GP, Inc.
-------------------------------------------
Focus Value GP, Inc.,
a Member
PRECEPT INVESTORS, INC.
By: /s/ Precept Investors, Inc.
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
4
70
STRATFORD CAPITAL PARTNERS, L.P.
By: /s/ Stratford Capital GP Associates, L.P.
----------------------------------------------
Stratford Capital GP Associates, L.P.
its General Partner
By: /s/ Stratford Capital Corporation
------------------------------------------------
Stratford Capital Corporation,
its General Partner
/s/ Thomas W. Stephenson, Jr.
-----------------------------------------------
Thomas W. Stephenson, Jr.
/s/ Jeffrey L. Lightfoot
---------------------------------------------------
Jeffrey L. Lightfoot
/s/ James R. McNab, Jr.
-----------------------------------------------
James R. McNab, Jr.
/s/ Mary W. McNab
----------------------------------------------
Mary W. McNab
/s/ Esther J. McNab
--------------------------------------------------
Esther J. McNab
/s/ Elizabeth Scott McNab
------------------------------------------------
Elizabeth Scott McNab
/s/ James R. McNab III UGMA
--------------------------------------------
James R. McNab III UGMA,
c/o James R. McNab, Jr., Custodian
5
71
LKCM Theater Partners, L.P.
By: /s/ LKCM Theater Partners, L.P.
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Mistral Entertainment LLC
By: /s/ Mistral Entertainment LLC
-------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
/s/ Sidney L. Tassin
----------------------------------------
Sidney L. Tassin
/s/ Christopher Bancroft
----------------------------------------
Christopher Bancroft
/s/ Thomas G. Mendell
----------------------------------------
Thomas G. Mendell
/s/ Stephen P. Wilkes
----------------------------------------
Stephen P. Wilkes
/s/ Edward L. Thomas
----------------------------------------
Edward L. Thomas
H.V.H. 1995 Trust
6
72
/s/ Robert Feldman
----------------------------------------------------
By: Robert Feldman, Trustee
K.S.H. 1995 Trust
/s/ Robert Feldman
----------------------------------------------------
By: Robert Feldman, Trustee
A.M.H. 1995 Trust
/s/ Robert Feldman
----------------------------------------------------
By: Robert Feldman, Trustee
/s/ Susan Hodges
----------------------------------------------------
Susan Hodges, Custodian under the UGMA
f/b/o Holston H. Hodges
/s/ Susan Hodges
----------------------------------------------------
Susan Hodges, Custodian under the UGMA
f/b/o David F. Hodges
RICHARD M. DURWOOD REVOCABLE TRUST
By: /s/ Richard M. Durwood
-------------------------------------------------
Richard M. Durwood,
Trustee
The undersigned hereby consents to the
foregoing agreement.
/s/ Maureen W. Durwood
----------------------------------------------------
Maureen W. Durwood
7