THIS STOCKHOLDERS
AGREEMENT (this “ Agreement ”) is made as
of August 7, 2006, among Cinemark Holdings, Inc., a Delaware
corporation (the “ Company ”), Madison
Dearborn Capital Partners IV, L.P., a Delaware limited partnership
(“ MDCP ”), each of the investors listed
on the Schedule of Mitchell Investors attached hereto
(collectively, the “ Mitchell Investors
”), each of the investors listed on the Schedule of
Quadrangle Investors attached hereto, (collectively, the
“ Quadrangle Investors ”), Syufy
Enterprises, LP, a California limited partnership (the “
Syufy Investor ”), Century Theatres Holdings,
LLC, a California limited liability company (“
CTH ”), each of the executives listed on the
Schedule of Executives attached hereto (collectively, the
“ Executives ”), Northwestern University
(“ NWU ”), K&E Investment Partners,
LLC — 2004-B DIF (“ K&E ”),
Piola Investments Ltd. (“ Piola ”) and
John Madigan (“ Madigan ”). MDCP, the
Mitchell Investors, the Quadrangle Investors, the Syufy Investor,
CTH, the Executives, NWU, K&E, Piola and Madigan are
collectively referred to herein as the “
Stockholders ” and individually as a “
Stockholder .” Unless otherwise specified
herein, all of the capitalized terms used herein are defined in
Section 13 hereof.
WHEREAS ,
MDCP acquired shares of Class A Common Stock (“
Cinemark Class A Common Stock ”) of
Cinemark, Inc., a Delaware corporation (“
Cinemark ”), pursuant to the Stock Purchase
Agreement between MDCP and the Company dated as of March 12,
2004, and NWU and Madigan subsequently acquired a portion of such
shares from MDCP in accordance with the terms of the Original
Agreement (as defined below) and are Permitted Transferees of MDCP
hereunder;
WHEREAS,
the Mitchell Investors and the Executives own shares of the capital
stock of the Company and, in some cases, options to acquire shares
of Company Class A Common Stock;
WHEREAS,
Cinemark, MDCP, the Mitchell Investors and the Executives were
parties to that certain Stockholders Agreement dated March 12,
2004, (the “ Original Agreement
”);
WHEREAS ,
pursuant to a securities purchase agreement dated as of
December 30, 2004 (the “ Quadrangle Purchase
Agreement ”), the Quadrangle Investors acquired a
portion of the Cinemark Class A Common Stock held by MDCP
immediately prior to the execution of the Quadrangle Purchase
Agreement and the Original Agreement was amended and restated to
admit the Quadrangle Investors (as so amended, the “
First Amended Agreement ”);
WHEREAS ,
pursuant to a certain securities purchase agreement dated as of
December 30, 2004, K&E acquired shares of the Cinemark
Class A Common Stock previously held by MDCP and became a
party to the First Amended Agreement by executing a joinder thereto
in accordance with Section 14 thereof;
WHEREAS ,
pursuant to a certain securities purchase agreement dated as of
July 5, 2005, Piola acquired shares of Cinemark Class A
Common Stock from Cinemark and became a
party to the
First Amended Agreement by executing a joinder thereto in
accordance with Section 14 thereof;
WHEREAS ,
pursuant to a contribution and exchange agreement dated as of the
date hereof (the “ Syufy Contribution Agreement
”), the Syufy Investor will receive 3,388,466 shares of
Company Class A Common Stock in exchange for the contribution (the
“ Syufy Contribution ”) by the Syufy
Investor of certain shares of common stock of Century Theatres,
Inc. (“ Century ”);
WHEREAS ,
the Contribution is being made in connection with the
Company’s and Cinemark USA, Inc.’s acquisition of
Century (the “ Acquisition ”) pursuant to
a Stock Purchase Agreement, dated as of the date hereof, by and
among Century, the Syufy Investor, the Company and Cinemark USA,
Inc. (the “ Century Stock Purchase Agreement
”);
WHEREAS ,
as of the date of this Agreement, CTH owns all of the issued and
outstanding shares of capital stock of Century (the “
Century Shares ”), and the Syufy Investor owns
all of the outstanding limited liability company interests of
CTH;
WHEREAS ,
prior to the closing, CTH will distribute all of the Century Shares
to the Syufy Investor and thereafter CTH will be dissolved pursuant
to the Beverly-Killea Limited Liability Company Act, as amended,
immediately after which the Syufy Investor will own all of the
Century Shares and become a Stockholder hereunder;
WHEREAS ,
upon the distribution of the Century Shares to the Syufy Investor
by CTH, CTH will cease to be a party to this Agreement and
thereafter will have no further rights or obligations
hereunder.
WHEREAS ,
immediately prior to and in connection with the Acquisition, each
Stockholder will contribute one hundred percent of such
Stockholder’s shares of Cinemark Class A Common Stock
and Cinemark Preferred Stock (if any) to the Company (the “
Cinemark Inc. Contribution ”) in exchange for
an equivalent number of shares of Company Class A Common Stock
and Company Preferred Stock, pursuant to a Contribution Agreement
dated as of the date hereof by and among the Company and the
Stockholders (the “ Company Contribution
Agreement ”); and
WHEREAS ,
the Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing
the composition of the Company’s Board of Directors (the
“ Board ”), (ii) assuring continuity
in the management and ownership of the Company, (iii) limiting the
manner and terms by which the Stockholder Shares may be transferred
and (iv) providing covenants for certain Stockholders, all to
become effective immediately following the Cinemark Inc.
Contribution and Syufy Contribution and conditioned upon the
closing of the Acquisition as more fully described
below.
NOW ,
THEREFORE , in consideration of the mutual covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
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(a) From
and after the date hereof and until the provisions of this
Section 1 cease to be effective, each holder of Stockholder
Shares shall vote all of such holder’s Stockholder Shares
which are voting shares and any other voting securities of the
Company over which such holder has voting control and shall take
all other reasonably necessary or desirable actions within such
holder’s control (whether in such holder’s capacity as
a stockholder, director, member of a Board committee or officer of
the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all reasonably necessary or
desirable actions within its control (including, without
limitation, calling special Board and stockholder meetings), so
that:
(i)
the authorized number of directors on the Board shall be
fourteen;
(ii)
the following individuals shall be elected to the Board:
(A)
two representatives designated by the Mitchell Investors
(determined by a vote of the Mitchell Investors owning a majority
of the Stockholder Shares held by all Mitchell Investors) (the
“ Mitchell Directors ”), who shall be
initially: Lee Roy Mitchell and one other individual to be
designated by Lee Roy Mitchell;
(B)
nine representatives designated by MDCP (as may be increased
pursuant to paragraph (C) of this Section) (the “
MDCP Directors ”);
(C)
one representative designated by the Quadrangle Investors (the
“ Quadrangle Director ”), who shall
initially be Peter Ezersky; provided that at such time the
Quadrangle Investors no longer have rights under this Agreement to
designate the Quadrangle Director, the number of MDCP Directors
pursuant to paragraph (B) of this Section shall be increased
by one; and
(D)
two representatives designated by the Syufy Investor (the “
Syufy Directors ”), who shall initially be
Raymond W. Syufy and Joseph A. Syufy; provided that at such time as
the Syufy Investor no longer has rights under this Agreement to
designate one or both Syufy Directors, the authorized number of
directors on the Board shall be reduced by one or two directors, as
applicable.
(iii)
the removal from the Board of any director as a result of a breach
of such director’s fiduciary duties to the Company and its
stockholders under applicable law shall be only by a vote of the
holders of a majority of the Company’s outstanding Company
Class A Common Stock;
(iv)
the removal from the Board of any director for any other reason
shall be only upon the written request of the Person or Persons
originally entitled to designate such director pursuant to this
Section 1(a);
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(v)
in the event that any representative designated hereunder by any
Stockholder ceases to serve as a director during his or her term in
office, the resulting vacancy shall be filled by the Person or
Persons originally entitled to designate such director pursuant to
this Section 1(a);
(vi)
Lee Roy Mitchell shall serve as the Chairman of the Board; provided
that, if so requested by a majority of the members of the Board
(excluding the Mitchell Directors), he shall resign as Chairman at
such time as: (A) the right of the Mitchell Investors to
designate any director terminates in accordance with
Section 1(c)(i) or 1(c)(ii); or (B) pursuant to the Employment
Agreement between Lee Roy Mitchell and the Company dated as of
March 12, 2004 (the “ Employment Agreement
”), his employment is terminated by the Company for Cause (as
defined in the Employment Agreement) or by Lee Roy Mitchell in a
Voluntary Termination (as defined in the Employment Agreement), and
in the event that Lee Roy Mitchell ceases to serve as the Chairman
of the Board, the Chairman shall be elected by a majority of the
members of the Board;
(vii)
if any party fails to designate a director to fill a vacancy on the
Board pursuant to the terms of this Section 1(a), such vacant
Board position shall remain open and unfilled until such time as
the party with the right to designate a director for such a vacancy
exercises such party’s right to fill such position;
and
(viii)
notwithstanding the foregoing, in the event that a Person loses its
right to designate a director in accordance with Section 1(c)
below, the director designated by such Person shall be removed at
the request of a majority of the Board (excluding such director or
directors) upon the occurrence of such event and the total
authorized number of directors shall be reduced upon such action by
a majority of the Board (excluding such director or directors) by
the number of directors that such Person loses its rights to
designate.
(b) The
Company shall pay the reasonable out-of-pocket expenses incurred by
each director in connection with attending the meetings of the
Board and any committee thereof.
(c) Notwithstanding
anything to the contrary contained herein,
(i)
the number of Mitchell Directors shall be reduced by one upon the
occurrence of each of the following events: (A) such time as
the Mitchell Investors and their Permitted Transferees hold in the
aggregate less than 9% of the outstanding shares of Company
Class A Common Stock and (B) such time as the Mitchell
Investors and their Permitted Transferees hold in the aggregate
less than 3% of the outstanding shares of Company Class A
Common Stock; and the rights of the Mitchell Investors under this
Section 1 shall terminate automatically and cease to have any
further force or effect upon the occurrence of the event described
in clause 1(c)(i)(B) immediately above. In the event that the
Mitchell Investors and their Permitted Transferees hold in the
aggregate less than 3% of the outstanding shares of Company
Class A Common Stock, the Mitchell Investors shall have the
right to designate one observer to the Board (an “
Observer ”),
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which shall
either be Lee Roy Mitchell or Tandy Mitchell. An Observer shall be
entitled to attend all meetings of the Board but shall not be
entitled to (x) attend meetings of the Board with counsel
which may constitute privileged communications, (y) attend
meetings of the Board which include topics of discussion which may
constitute a conflict of interest between the Company and the
Mitchell Investors, or (z) vote on any matters voted on by the
Board. The determination of whether a conflict of interest exists
for purposes of clause (y) in the immediately preceding
sentence shall be made by a majority of the Board. If such a
determination is made prior to a Board meeting, the Board shall
provide written notice to the Mitchell Investors setting forth in
reasonable detail the basis for such conflict of interest. Such a
determination may be made during an ongoing Board meeting by a
majority of the Board and, upon such determination, the Observer
shall immediately leave the meeting. Upon the conclusion of the
discussion (including any action by the Board thereon) which
constitutes a conflict of interest between the Company and the
Mitchell Investors, the Observer shall be invited to return to the
meeting. No business other than the discussion (including any
action by the Board thereon) which constitutes a conflict of
interest between the Company and the Mitchell Investors may be
conducted by the Board at such an ongoing Board meeting until the
Observer has been notified in accordance with the immediately
preceding sentence. The Mitchell Investors’ right to
designate an Observer shall terminate automatically and cease to
have any further force or effect upon the earlier to occur of (i)
the Observer designated under this Section 1(c)(i) is not Lee
Roy Mitchell or Tandy Mitchell and (ii) the Mitchell Investors
and their Permitted Transferees cease to hold in the aggregate at
least 2% of the outstanding shares of Company Class A Common
Stock. The right of the Mitchell Investors to designate an Observer
hereunder shall not be transferable or assignable under any
circumstances;
(ii)
the rights of the Mitchell Investors under this Section 1
shall terminate automatically and cease to have any further force
or effect at such time as the Mitchell Investors and their
Permitted Transferees hold, directly or indirectly, more than a 5%
interest of any business (other than the Company) that owns,
operates or manages theatres with more than 800 movie screens in
the aggregate in the Western Hemisphere;
(iii)
the rights of the Quadrangle Investors under this Section 1 to
designate the Quadrangle Director shall terminate automatically and
cease to have any further force or effect at such time as the
Quadrangle Investors and their Permitted Transferees hold in the
aggregate less than 3% of the outstanding shares of Company
Class A Common Stock. In the event that the Quadrangle
Investors and their Permitted Transferees hold in the aggregate
less than 3% of the outstanding shares of Company Class A
Common Stock, the Quadrangle Investors shall have the right to
designate an Observer, which shall be a member or employee of
Quadrangle Group, LLC. An Observer shall be entitled to attend all
meetings of the Board but shall not be entitled to (x) attend
meetings of the Board with the Company’s counsel or the
Board’s special counsel which may constitute privileged
communications, (y) attend meetings of the Board which include
topics of discussion which may constitute a conflict of interest
between the Company and the Quadrangle Investors or (z) vote
on any matters voted on by the Board. The determination of whether
a conflict of interest exists for purpose of
5
clause
(y) in the immediately preceding sentence shall be made by a
majority of the Board. If such a determination is made prior to a
Board meeting, the Board shall provide written notice to the
Quadrangle Investors setting forth in reasonable detail the basis
for such conflict of interest. Such a determination may be made
during an ongoing Board meeting by a majority of the Board and upon
such determination the Observer shall immediately leave the
meeting. Upon the conclusion of the discussion (including any
action by the Board thereon) which constitutes a conflict of
interest between the Company and the Quadrangle Investors, the
Observer shall be invited to return to the meeting. No business
other than the discussion (including any action by the Board
thereon) which constitutes a conflict of interest between the
Company and the Quadrangle Investors may be conducted by the Board
at such an ongoing Board meeting until the Observer has been
notified in accordance with the immediately preceding sentence. The
Quadrangle Investors’ right to designate an Observer shall
terminate automatically and cease to have any further force or
effect upon the earlier to occur of (i) the Observer
designated under this Section 1(c)(iii) is not a member or
employee of Quadrangle Group, LLC (it being understood and agreed
that, should the current Observer at any time cease to be a member
or employee of Quadrangle Group, LLC, the Quadrangle
Investors’ right to designate an Observer shall not terminate
unless the Quadrangle Investors do not designate a replacement
Observer who is a member or employee of the Quadrangle Group, LLC
within 5 business days thereof) and (ii) the Quadrangle
Investors and their Permitted Transferees cease to hold in the
aggregate at least 2% of the outstanding shares of Company
Class A Common Stock. The rights of the Quadrangle Investors
to designate the Quadrangle Director or an Observer hereunder shall
not be transferable or assignable under any circumstances, except
to a Qualified Permitted Transferee of the Quadrangle
Investors;
(iv)
the number of Syufy Directors shall be reduced by one upon the
occurrence of each of the following events: (A) such time as
the Syufy Investor and its Permitted Transferees hold in the
aggregate less than 7% of the outstanding shares of Company
Class A Common Stock and (B) such time as the Syufy
Investors and its Permitted Transferees hold in the aggregate less
than 3% of the outstanding shares of Company Class A Common
Stock. In addition, the rights of the Syufy Investor under this
Section 1 to designate the Syufy Directors shall terminate
automatically and cease to have any further force or effect at such
time as (1) the Syufy Investor, Raymond W. Syufy or Joseph Syufy
breach the terms of Section 3 of the Non-Competition and
Non-Disclosure Agreement, dated as of the date hereof, by and among
the Syufy Investor, Raymond W. Syufy, Joseph Syufy and the Company
(the “ Syufy Non-Competition Agreement ”)
(this clause (1), a “ Non-Curable Termination
Event ”) or (2) the Syufy Investor or its
Permitted Transferees, Raymond Syufy or Joseph Syufy (each, a
“ Syufy Person ”) holds, directly or
indirectly, any interest of any business (other than the Company)
that owns, operates or manages movie theatres that are not drive-in
theaters (a “ Competing Business ”) but
where such ownership would not violate Section 3 of the Syufy
Non-Competition Agreement (this clause (2), a “ Curable
Termination Event ”); provided that the foregoing
loss of rights upon the ownership, operation or management of a
Competing Business shall not apply to (i) holding up to a 5%
interest in any publicly traded company or (ii) holding an
ownership interest in a Competing Business that (x)
6
owns, operates
or manages less than 100 screens in the aggregate in any one or
more states in which the Company does not, at the time the Syufy
Person first acquires such ownership interest, own, operate or
manage a movie theater and/or (y) owns, operates or manages
less than 32 screens in the aggregate in any one or more states in
which the Company, at the time the Syufy Person first acquires such
ownership interest, owns, operates or manages a movie theater. For
purposes of calculating the number of screens for purposes of
clause (ii) of the foregoing sentence, movie screens acquired
by a Syufy Person following an event of default under a lease under
which the Syufy Person is the lessor and which gives such lessor
the right to regain possession of and operate such theatre shall be
disregarded unless the Syufy Person demolishes and rebuilds a new
theatre on the property. In the event that the rights of the Syufy
Investor to designate the Syufy Directors terminates by reason of a
Curable Termination Event, the Syufy Investor shall have the right
to cure such Curable Termination Event and the Syufy
Investor’s rights to designate the Syufy Directors shall be
reinstated at such time as there is no longer a Curable Termination
Event in effect. In the event that the Syufy Investor and their
Permitted Transferees hold in the aggregate less than 3% of the
outstanding shares of Company Class A Common Stock, the Syufy
Investor shall have the right to designate an Observer, which shall
be a director of the general partner of, or an executive officer
of, Syufy Enterprises; provided, however, that this right to
designate an Observer shall not be granted to the Syufy Investor if
the Syufy Investor is in violation of the terms of the preceding
sentence. An Observer shall be entitled to attend all meetings of
the Board but shall not be entitled to (x) attend meetings of
the Board with the Company’s counsel or the Board’s
special counsel which may constitute privileged communications,
(y) attend meetings of the Board which include topics of
discussion which may constitute a conflict of interest between the
Company and the Syufy Investor or (z) vote on any matters
voted on by the Board. The determination of whether a conflict of
interest exists for purpose of clause (y) in the immediately
preceding sentence shall be made by a majority of the Board. If
such a determination is made prior to a Board meeting, the Board
shall provide written notice to the Syufy Investor setting forth in
reasonable detail the basis for such conflict of interest. Such a
determination may be made during an ongoing Board meeting by a
majority of the Board and upon such determination the Observer
shall immediately leave the meeting. Upon the conclusion of the
discussion (including any action by the Board thereon) which
constitutes a conflict of interest between the Company and the
Syufy Investor, the Observer shall be invited to return to the
meeting. No business other than the discussion (including any
action by the Board thereon) which constitutes a conflict of
interest between the Company and the Syufy Investor may be
conducted by the Board at such an ongoing Board meeting until the
Observer has been notified in accordance with the immediately
preceding sentence. The Syufy Investor’s right to designate
an Observer shall terminate automatically and cease to have any
further force or effect upon the earlier to occur of (i) the
Observer designated under this Section 1(c)(iii) is not a
director of the general partner or an executive officer of Syufy
Enterprises (it being understood and agreed that, should the
current Observer at any time cease to be a director of the general
partner or an executive officer of Syufy Enterprises, the Syufy
Investor’s right to designate an Observer shall not terminate
unless the Syufy Investor does not designate a replacement Observer
who is a member of the board of directors of the general partner or
an executive officer of Syufy Enterprises
7
within 5
business days thereof) and (ii) the Syufy Investor and their
Permitted Transferees cease to hold in the aggregate at least 2% of
the outstanding shares of Company Class A Common Stock. The
rights of the Syufy Investor to designate the Syufy Directors or an
Observer hereunder shall not be transferable or assignable under
any circumstances, except to a Qualified Permitted Transferee of
the Syufy Investor; and
(v)
the rights of MDCP under this Section 1 shall terminate
automatically and cease to have any further force or effect at such
time as MDCP and its Permitted Transferees hold in the aggregate
less than 5% of the outstanding shares of Company Class A
Common Stock provided that MDCP may assign its right to designate
(A) any number of directors that MDCP is entitled to designate
hereunder to any Person or group of affiliated Persons who acquires
more than 50% of the shares of Company Class A Common Stock
held by MDCP on the date of this Agreement (as such number may be
adjusted from time to time to give effect to stock splits or other
similar adjustments to the capitalization of the Company), and
(B) two of the directors MDCP is entitled to designate
hereunder to any Person or group of affiliated Persons who acquires
less than 50% of the shares of Company Class A Common Stock
held by MDCP on the date of this Agreement (as such number may be
adjusted from time to time to give effect to stock splits or other
similar adjustments to the capitalization of the
Company).
(d) The
provisions of this Section 1 shall terminate automatically and
cease to have any further force or effect upon the consummation of
a Sale of the Company.
2.
Representations and Warranties; Voting Agreements
.
(a) Each
Stockholder represents and warrants that (i) after giving
effect to the transactions contemplated by the Syufy Contribution
Agreement, such Stockholder is the record owner of the number of
Stockholder Shares set forth opposite its name on the Schedules
attached hereto, free and clear of all liens and encumbrances,
(ii) this Agreement has been duly authorized, executed and
delivered by such Stockholder and constitutes the valid and binding
obligation of such Stockholder, enforceable in accordance with its
terms, (iii) such Stockholder has not granted and is not a
party to any proxy, voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this
Agreement, (iv) as of the date hereof, the number of shares of
common stock of the Company which such Stockholder owns of record
and the number of shares of common stock of the Company issuable
upon exercise of options owned by such Stockholder are set forth
opposite such Stockholder’s name on the schedules attached
hereto, (v) except as set forth on such schedules, such
Stockholder does not own any shares of capital stock issued by the
Company or any of its Subsidiaries or any other securities or
rights to acquire securities of the Company or any of its
Subsidiaries, and (vi) such Stockholder has not received and
is not entitled to receive any payments or other compensation from
the Company or any of its Subsidiaries or any other party as a
result of or in connection with the transactions contemplated by
the Syufy Contribution Agreement. In addition, Lee Roy Mitchell and
The Mitchell Special Trust represent and warrant that Lee Roy
Mitchell is one of two trustees of such trust, and such trust is
solely for the benefit of members of Lee Roy Mitchell’s
Family Group.
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(b) No
Stockholder has granted, and from and after the date hereof no
Stockholder shall grant, any proxy or become party to any voting
trust or other agreement that is inconsistent with, conflicts with
or violates any provision of this Agreement.
3.
Restrictions on Transfer of Stockholder Shares .
(a)
Transfer of Stockholder Shares . No holder of Stockholder
Shares shall sell, transfer, assign or otherwise dispose of
(whether with or without consideration and whether voluntarily or
involuntarily or by operation of law, but excluding by way of
merger or consolidation) any interest in his Stockholder Shares (a
“ Transfer ”), except pursuant to this
Agreement. Any Transfer or attempted Transfer of any Stockholder
Shares in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books
or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
(i) Subject
to the provisions in Section 3(b)(ii), the restrictions set
forth in this Section 3 shall not apply to any Transfer by a
Stockholder with respect to any of the following Transfers (each an
“ Exempt Transfer ”):
(A)
any Transfer of Stockholder Shares by a Stockholder who is not a
natural person to such Stockholder’s Affiliates, and in the
case of MDCP, the Quadrangle Investors, any Transfer which
constitutes an in-kind distribution to its partners (and, in
connection with or following any such distribution, an in-kind
distribution by the general partner of MDCP or any of the
Quadrangle Investors to its partners);
(B)
in the case of a Stockholder who is a natural person, any Transfer
by will or pursuant to the applicable laws of descent and
distribution and any Transfer to or among such Stockholder’s
Affiliates, and members of such holder’s Family Group or such
Family Group member’s Affiliates;
(C)
any Transfer of Stockholder Shares in connection with an Approved
Sale;
(D)
any Transfer by the Executives of their Stockholder Shares to the
Company or any of its Subsidiaries;
(E)
any Transfer by the Company to an Executive pursuant to
Section 9 hereunder; or
(F)
any Transfer of Stockholder Shares pursuant to a registered
securities distribution or sales transaction pursuant to the terms
of the Registration Agreement.
(ii)
A transferee of Stockholder Shares pursuant to a Transfer described
in Sections 3(b)(i)(A) and (B) above is referred to herein as
a “ Permitted Transferee .” The
restrictions contained in Section 3(a) shall continue to be
applicable to the Stockholder
9
Shares after
any Transfer pursuant to Sections 3(b)(i)(A), (B) and
(E), and such transferees of such Stockholder Shares shall agree in
writing to be bound by the provisions of this Agreement affecting
the Stockholder Shares so transferred. Notwithstanding the
foregoing, no party hereto shall avoid the provisions of this
Agreement by making one or more Transfers to one or more Permitted
Transferees and then disposing of all or any portion of such
party’s interest in any such Permitted Transferee.
Notwithstanding anything herein to the contrary, in no event shall
any Stockholder Shares be pledged unless otherwise approved in
writing by MDCP and the Mitchell Investors.
(c)
First Refusal Rights upon Transfers by Stockholders other than
MDCP .
(i) If
any holder of Stockholder Shares (other than MDCP or any of its
Permitted Transferees) proposes to Transfer Stockholder Shares
(other than pursuant to an Exempt Transfer), then not less than
20 days prior to the date on which such Transfer will occur
(such 20-day period, the “ Election Period
”), the transferring holder (the “ Transferring
Stockholder ”) shall deliver a written notice (an
“ Offer Notice ”) to the Company, MDCP,
the Mitchell Investors, the Quadrangle Investors and the Syufy
Investor. The Offer Notice shall disclose in reasonable detail the
number of Stockholder Shares proposed to be Transferred (the
“Offered Shares” ), the material terms
and conditions of the Transfer and the identity, background and
ownership (if applicable) of the prospective transferee(s), and the
Offer Notice shall constitute a binding offer to sell the Offered
Shares in accordance with the provisions of this Section 3(c),
first to the Company, and then to MDCP, the Mitchell Investors, the
Quadrangle Investors and the Syufy Investor.
(ii) Upon
receipt of the Offer Notice, the Company may elect to purchase all
or any portion of the Offered Shares at the price and on the terms
specified therein by delivering written notice (the “
Company Election Notice ”) of such election to
the Transferring Stockholder, MDCP, the Mitchell Investors, the
Quadrangle Investors and the Syufy Investor as soon as practical,
but in any event within 10 days (the “ Company
Offer Period ”) after the delivery of the Offer
Notice to the Company, MDCP, the Mitchell Investors the Quadrangle
Investors and the Syufy Investor.
(iii) If
and only if the Company has not elected to purchase all of the
Offered Shares within the Company Offer Period, then MDCP, the
Mitchell Investors, the Quadrangle Investors and the Syufy Investor
in the aggregate may purchase all (but not less than all) of the
Offered Shares not elected to be purchased by the Company (such
Offered Shares, the “ Available Shares ”)
at the price and on the terms specified in the Offer Notice. Each
Stockholder electing to purchase a portion of the Available Shares
(each a “ Participating Stockholder ”)
shall deliver written notice (the “ Stockholder
Election Notice ”) of such election to the
Transferring Stockholder and the Company within 20 days after
delivery of the Offer Notice to the Company, MDCP, the Mitchell
Investors, the Quadrangle Investors and the Syufy Investor. The
number of Available Shares which may be purchased by each
Participating Stockholder shall be determined by the Company as
follows:
(A) Each
Participating Stockholder shall specify in the Stockholder Election
Notice the maximum number of Available Shares such
Participating
10
Stockholder is
requesting to purchase (such number of Available Shares, that
Participating Stockholder’s “ Requested
Amount ”).
(B) The Company
shall first allocate the Available Shares among the Participating
Stockholders such that each Participating Stockholder is allocated
(such Participating Stockholder’s “ Initial
Allocation ”) the lesser of (i) such
Participating Purchaser’s Requested Amount and (ii) the
product of (A) the quotient of the number of shares of Company
Class A Common Stock held by such Participating Stockholder
divided by the aggregate shares of Company Class A Common
Stock held by all Participating Stockholders immediately prior to
delivery of the Offer Notice (such percentage, such Participating
Purchaser’s “ Pro Rata Share ”)
multiplied by (B) the total number of Available Shares.
(C) If the sum of
each Initial Allocation for each Participating Stockholder (the
“ Initial Allocation Sum ”) is less than
the total number of Available Shares, then the difference between
the Initial Allocation Sum and the Number of Available Shares (such
difference, the “ Remaining Available Shares
”) shall be allocated to the Participating Stockholders whose
Requested Amount equaled or exceeded their Pro Rata Share (such
Participating Stockholders, the “ Remaining
Participating Stockholders ”). The Company shall
allocate to each Remaining Participating Stockholders the lesser of
(i) the difference between the amount allocated to such
Stockholder pursuant to Section 3(c)(iii)(B) and such
Stockholder’s Requested Amount and (ii) the product of
(A) the quotient of the number of shares of Company
Class A Common Stock held by such Remaining Participating
Stockholder divided by the aggregate shares of Company Class A
Common Stock held by all Remaining Participating Stockholders
immediately prior to delivery of the Offer Notice (such percentage,
such Remaining Participating Purchaser’s “
Remaining Pro Rata Share ”) multiplied by
(B) the total number of Remaining Available Shares.
(D) If after the
allocation of Remaining Available Shares, all Offered Shares have
not been allocated because a Remaining Participating
Stockholder’s Requested Amount was less than such Remaining
Participating Stockholder’s Remaining Pro Rata Share
multiplied by the total number of Remaining Available Shares, then
the Company shall continue to allocate Available Shares in
accordance with Paragraph (C) immediately above until the earlier
to occur of (i) all Available Shares are allocated among the
Participating Stockholders and (ii) all Participating
Stockholders are allocated their Requested Amount.
(iv) If
the Company and/or MDCP, the Mitchell Investors, the Quadrangle
Investors and/or the Syufy Investor elect to purchase Stockholder
Shares from the Transferring Stockholder, the Transfer of such
shares shall be consummated as soon as practical after the delivery
of the Company Election Notice or the Stockholder Election Notice,
as applicable, to the Transferring Stockholder, but in any event
within 45 days after the expiration of the Election
Period.
11
(v) To
the extent that the aggregate number of Offered Shares elected to
be purchased by the Company, MDCP, the Mitchell Investors, the
Quadrangle Investors and/or the Syufy Investor does not in the
aggregate equal all of the Offered Shares, then the offer to sell
such Offered Shares pursuant to Section 3(c)(i) shall be
automatically revoked upon the expiration of the Election Period
and the Transferring Stockholder may, within 90 days after the
expiration of the Election Period and subject to the provisions of
this Agreement, Transfer such Offered Shares at a price no less
than the price per share specified in the Offer Notice and on other
terms no more favorable to the transferees thereof than those
offered to the Company, MDCP, the Mitchell Investors, the
Quadrangle Investors and the Syufy Investor in the Offer Notice.
Any Offered Shares not Transferred within such 90-day period shall
be reoffered to the Company, MDCP, the Mitchell Investors, the
Quadrangle Investors and the Syufy Investor under this Section 3(c)
prior to any subsequent Transfer.
(d)
First Refusal Rights upon Transfers by MDCP to a Competitor
.
(i) If
MDCP proposes to Transfer its Stockholder Shares to a Competitor or
such Competitor’s Affiliates and such Transfer will not be
effected in connection with a Sale of the Company, then not less
than 20 days prior to the date on which such Transfer will
occur (such 20-day period, the “ Competitor Sale
Election Period ”), such Person shall deliver a
written notice (a “ Competitor Sale Offer
Notice ”) to the Company, the Mitchell Investors, the
Quadrangle Investors and the Syufy Investor. The Competitor Sale
Offer Notice shall disclose in reasonable detail the number of
Stockholder Shares to be Transferred, the material terms and
conditions of the Transfer and the identity, background and
ownership (if applicable) of the Competitor, and the Competitor
Sale Offer Notice shall constitute a binding offer to sell such
Stockholder Shares in accordance with the provisions of this
Section 3(d), first to the Company, and then to the Mitchell
Investors, the Quadrangle Investors and the Syufy Investor on a pro
rata basis based on the number of shares of Company Class A
Common Stock then held by each of the Mitchell Investors, the
Quadrangle Investors and the Syufy Investor as a percentage of the
aggregate number of shares of Company Class A Common Stock
then held by the Mitchell Investors, the Quadrangle Investors and
the Syufy Investor, on the terms and conditions contained in the
Competitor Sale Offer Notice.
(ii) Upon
receipt of the Competitor Sale Offer Notice, the Company may elect
to purchase all (but not less than all) of the Stockholder Shares
specified in the Competitor Sale Offer Notice at the price and on
the terms specified therein by delivering written notice (the
“ Competitor Sale Election Notice ”) of
such election to MDCP, the Mitchell Investors, the Quadrangle
Investors and the Syufy Investor as soon as practical, but in any
event within 10 days (the “ Competitor Sale Offer
Period ”) after the delivery of the Competitor Sale
Offer Notice to the Company and MDCP.
(iii)
If and only if the Company has not elected to purchase all of the
Stockholder Shares within the Competitor Sale Offer Period, the
Mitchell Investors, the Quadrangle Investors and the Syufy Investor
may elect to purchase all (but not less than all) of the
Stockholder Shares specified in the Competitor Sale Offer Notice at
the price and on the terms specified therein by delivering written
notice (the “ Mitchell-Quadrangle-Syufy Election
Notice ”) of such election to MDCP within
20 days after delivery of the Offer Notice to the
12
Company, the
Mitchell Investors, the Quadrangle Investors and the Syufy
Investor. Any purchase by the Mitchell Investors, the Quadrangle
Investors and the Syufy Investor pursuant to this Section
3(d) shall be on a pro rata basis based on the number of shares
of Company Class A Common Stock held by each of the Mitchell
Investors, the Quadrangle Investors and the Syufy Investor as a
percentage of the aggregate shares of Company Class A Common
Stock held by the Mitchell Investors, the Quadrangle Investors and
the Syufy Investor immediately prior to such purchase. If the
Mitchell Investors, the Quadrangle Investors or the Syufy Investor
does not elect to purchase their pro rata share of the Stockholder
Shares subject to the Competitor Sale Offer Notice, the Mitchell
Investors, the Quadrangle Investors or the Syufy Investor, as
applicable, which have elected to purchase their pro rata share of
the Stockholder Shares subject to the Competitor Offer Sale Notice
may purchase such remaining Stockholder Shares on a pro rata basis
by providing written notice to MDCP and the Company.
(iv) If
the Company and/or any of the Mitchell Investors, the Quadrangle
Investors and/or the Syufy Investor elect to purchase Stockholder
Shares from MDCP, the Transfer of such shares shall be consummated
as soon as practical after the delivery of the Competitor Sale
Election Notice or the Mitchell-Quadrangle-Syufy Election Notice,
as applicable, to MDCP, but in any event within 45 days after
the expiration of the Competitor Sale Election Period.
(v) To
the extent that the Company, the Mitchell Investors, the Quadrangle
Investors and the Syufy Investor do not elect to purchase all of
the Stockholder Shares being offered, MDCP may, within 90 days
after the expiration of the Competitor Sale Election Period and
subject to the provisions of this Agreement, Transfer such
Stockholder Shares to the Competitor (or such Competitor’s
Affiliates) identified in the Competitor Sale Offer Notice at a
price no less than the price per share specified in the Competitor
Sale Offer Notice and on other terms no more favorable to the
Competitor (or such Competitor’s Affiliates) than those
offered to the Company, the Mitchell Investors, the Quadrangle
Investors and the Syufy Investor in the Competitor Sale Offer
Notice. Any Stockholder Shares held by MDCP not Transferred within
such 90-day period shall be reoffered to the Company, the Mitchell
Investors, the Quadrangle Investors and the Syufy Investor under
this Section 3(d) prior to any subsequent Transfer to a
Competitor.
(e)
Participation Rights .
(i)
If MDCP proposes to Transfer any of its Stockholder Shares (other
than pursuant to an Exempt Transfer, then not less than
20 days prior to any such Transfer of Stockholder Shares (such
20-day period, the “ MDCP Sale Period ”),
MDCP shall deliver a written notice (the “ MDCP Sale
Notice ”) to the Company and all holders of
Stockholder Shares other than MDCP (the “ Other
Stockholders ”) specifying in reasonable detail the
identity, background and ownership (if any) of the prospective
transferee(s), the number of shares to be Transferred and the terms
and conditions of the Transfer (which notice may be the same notice
and given at the same time as the Offer Notice under
Section 3(d)). Subject to Section 3(e)(iii), the Other
Stockholders may elect to participate in the contemplated Transfer
at the same price per share and on the same terms by delivering
written notice (the “ MDCP Sale Election Notice
”) to MDCP within the MDCP Sale Period. If any of the Other
Stockholders has elected to
13
participate in
such Transfer, then MDCP and such Other Stockholder shall be
entitled to sell in the contemplated Transfer, at the same price
and on the same terms, a number of Stockholder Shares equal to the
product of (A) the quotient determined by dividing
(x) the percentage of Stockholder Shares owned by such Person
by (y) the aggregate percentage of Stockholder Shares owned by
MDCP and the Other Stockholders participating in such sale, and
(B) the number of Stockholder Shares to be sold in the
contemplated Transfer.
For
example , if the Sale
Notice contemplated a sale of 100 Stockholder Shares by MDCP, and
if MDCP at such time owns 30% of all Stockholder Shares and if the
Mitchell Investors owning 20%, Executives owning 10%, the
Quadrangle Investors owning 8% and the Syufy Investor owning 10% of
all Stockholder Shares elect to participate, then MDCP would be
entitled to sell 38 shares ((30% ÷ 78%) x 100 shares), the
Mitchell Investors would be entitled to sell 26 shares ((20% ÷
78%) x 100 shares), the Executives would be entitled to sell 13
shares ((10% ÷ 78%) x 100 shares), the Quadrangle Investors
would be entitled to sell 10 shares ((8% ÷ 78%) x 100 shares)
and the Syufy Investor would be entitled to sell 13 shares ((10%
÷ 78%) x 100 shares).
(ii) Any
of the Other Stockholders may elect to sell in any Transfer
contemplated under this Section 3(e) a number of Stockholder Shares
less than any such Other Stockholder is entitled to sell hereunder,
in which case MDCP shall have the right to sell an additional
number of Stockholder Shares in such Transfer equal to the number
that all such Other Stockholders are permitted to sell but have
elected not to sell. MDCP shall use reasonable efforts to obtain
the agreement of the prospective transferee(s) to the participation
of the Other Stockholders in any contemplated Transfer, and MDCP
shall not Transfer any of its Stockholder Shares to any prospective
transferee if such prospective transferee declines to allow the
participation of the Other Stockholders. Each holder Transferring
Stockholder Shares pursuant to this Section 3(e) shall pay such
holder’s pro rata share (based on the number of Stockholder
Shares to be sold) of the expenses incurred by the holders in
connection with such Transfer and shall be obligated to join on a
pro rata basis (based on the number of Stockholder Shares to be
sold) in any indemnification or other obligations that MDCP agrees
to provide in connection with such Transfer (other than any such
obligations that relate specifically to a particular holder such as
indemnification with respect to representations and warranties
given by a holder regarding such holder’s title to and
ownership of Stockholder Shares); provided that no holder shall be
obligated in connection with such Transfer to agree to indemnify or
hold harmless the transferees with respect to an amount in excess
of the net consideration paid to such holder in connection with
such Transfer.
(iii) Notwithstanding
the foregoing, no Executive (or any of such Executive’s
Permitted Transferees) shall be entitled to participate under this
Section 3(e) in any Transfer made by MDCP or any of its Permitted
Transferees, unless such Transfer (together with any related
Transfers) constitutes a Sale of the Company.
(f)
Transfers to Competitors . No holder of Stockholder Shares
(other than MDCP and its Permitted Transferees, subject to
Section 3(d)) shall Transfer any Stockholder
14
Shares to any
Competitor, except pursuant to Section 3(e) or Section 4
hereof; provided, however, that this Section 3(f) shall not be
deemed to limit the ability of any holder of Stockholder Shares
from Transferring such Shares in a Public Sale or in a registered
offering of securities pursuant to the Registration
Agreement.
(g)
Termination of Restrictions . The restrictions on the
Transfer of Stockholder Shares set forth in this Section 3
shall continue with respect to each Stockholder Share until the
date on which such Stockholder Share has been transferred in a
Public Sale or in a Sale of the Company.
(a) If
the Board or MDCP approves a Sale of the Company and delivers
written notice to the holders of Stockholders Shares invoking the
provisions of this Section (any such sale, an “
Approved Sale ”), the holders of Stockholders
Shares shall consent to, vote in favor of and raise no objections
against the Approved Sale.
(b) If
the Approved Sale is structured as (i) a merger or
consolidation, each holder of Stockholder Shares shall vote its
Stockholder Shares to approve such merger or consolidation, whether
by written consent or at a stockholders meeting (as requested by
the Board or MDCP, as the case may be), and waive all
dissenter’s rights, appraisal rights and similar rights in
connection with such merger or consolidation, (ii) a sale of
stock, each holder of Stockholder Shares shall agree to sell, and
shall sell, all of its Stockholder Shares and rights to acquire
Stockholder Shares on the terms and conditions so approved, or
(iii) a sale of assets, each holder of Stockholder Shares
shall vote its Stockholder Shares to approve such sale and any
subsequent liquidation of the Company or other distribution of the
proceeds therefrom, whether by written consent or at a stockholders
meeting (as requested by the Board or MDCP, as the case may
be).
(c) In
furtherance of the foregoing, (i) each holder of Stockholder
Shares shall take, with respect to such holder’s Stockholder
Shares, all necessary or des
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