EXHIBIT 10.19
STOCKHOLDERS AGREEMENT
This
STOCKHOLDERS AGREEMENT (the “
Agreement ”)
dated as of July 21, 2006, is by and among WYNDCREST DD HOLDINGS,
INC., a Delaware corporation (the "
Company "),
FALCON MEZZANINE PARTNERS II, LP, a Delaware limited partnership
("
Falcon "),
and WYNDCREST DD INVESTMENT HOLDINGS, LLC, MICHAEL BAY, DAN MARINO,
CARL STORK, JONATHAN TEAFORD and JOHN C. TEXTOR (each, an "
Investor ",
and together the "
Investors ").
Falcon, the Investors, and their respective Permitted Transferees
(as defined below) are each referred to herein as a "
Stockholder "
and together as the "
Stockholders ".
Capitalized terms used but not otherwise defined herein shall have
the meanings set forth in Section 1 hereof.
WHEREAS,
Falcon has purchased (i) shares of the Convertible Preferred
Stock and (ii) Warrants, in each case, pursuant to a Purchase
Agreement, dated as of the date hereof, by and among the
Company, Falcon, Digital Domain, Inc., a Delaware corporation
(“
DDI ”),
and certain other parties (as amended, restated or modified from
time to time, the "
Falcon Purchase Agreement ");
WHEREAS,
the Investors have purchased shares of Common Stock prior to
the date hereof; and
WHEREAS,
the Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of
(i) establishing the composi-tion of the board of
directors of the Company (the "
Board "),
(ii) assuring continuity in the management and ownership of the
Company and (iii) limiting the manner and terms by which the
Stockholder Shares may be transferred.
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
hereby agree as follows:
1.
Definitions
. As
used herein, the following terms shall have the following
respective meanings
:
"
Affiliate "
means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and
"under common control with") shall mean possession, directly or
indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities, by contract
or otherwise).
"
Approved Sale "
means a Sale of the Company approved by a majority of the Board,
and by the holders of a majority of the shares of Common Stock and
Convertible Preferred Stock then outstanding, voting together as a
single class, pursuant to which all holders of Stockholder Shares
are to receive with respect thereto (whether in such transaction
or, with respect to an asset sale, upon a subsequent liquidation)
the same form and amount of consideration per share of Common Stock
or, if any holders are to be given an option as to the form and
amount of consideration to be received, all holders are given the
same option; provided that the purchase price per share of Common
Stock (or, with respect to an asset sale, the amount received per
share of Common Stock by such holders upon a subsequent
liquidation) in such transaction shall be not less than 1.25x the
Conversion Price (as defined in the Certificate of Designations) of
the Convertible Preferred Stock then in effect.
“
Certificate of Designations ”
means the Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of 8.0%
Senior Cumulative Convertible Preferred Stock, and Qualifications,
Limitations and Restrictions Thereof relating to the Convertible
Preferred Stock, as in effect on the date hereof.
“
Closing Date ”
has the meaning ascribed thereto in the Falcon Purchase
Agreement.
"
Common Stock "
means (i) the Company's Common Stock, par value $.0001 per share,
(ii) any other class of common stock of the Company, and (iii) any
capital stock of the Company issued or issuable with respect to the
securities referred to in clauses (i) and (ii) above, whether by
way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization.
"
Common Stock Deemed Outstanding "
means, as of any date of determination, the number of shares of
Common Stock, determined on a fully diluted basis after giving
effect to all outstanding securities convertible or exercisable
into or exchangeable for Common Stock (collectively, "
Common Stock Equivalents "),
and any options, warrants, convertible securities, and other rights
to acquire Common Stock or Common Stock Equivalents, then
outstanding.
"
Convertible Preferred Stock "
means the Company's 8.0% Senior Cumulative Convertible Preferred
Stock, par value $.0001 per share, and any other securities issued
in exchange, substitution or replacement therefor.
"
Exchange Act ”
means the Securities Exchange Act of 1934, as amended from time to
time.
"
Fair Market Value "
means fair market value, as determined by an independent appraiser,
accountant or investment bank knowledgeable in the Company’s
field of business (the "
Appraiser ")
acceptable to the Board (acting reasonably and without unreasonable
delay). The Appraiser's determination of fair market value will be
conclusive and binding for purposes of Section 4(c) this Agreement.
The Company will bear the costs of the Appraiser.
"
Falcon Securities "
means the Stockholder Shares held by Falcon and its Permitted
Transferees.
"
Family Group "
means, with respect to any natural Person, (i) such
Person’s spouse, former spouse and descendants (whether
natural or adopted), parents and their descendants, descendants of
such Person’s brothers and sisters and any spouse of the
foregoing individuals and (ii) any trust solely for the
benefit of any of the individuals listed in clause (i)
above.
“
GAAP ”
means United States generally accepted accounting
principles.
"
Independent Third Party "
means any Person who, immediately prior to the contemplated
transaction, (A) does not own in excess of 5% of the Common Stock
Deemed Outstanding, (B) is not an Affiliate of any such 5% owner of
the Common Stock Deemed Outstanding and (C) is not a member of the
Family Group of any such 5% owner of the Common Stock Deemed
Outstanding..
"
Interested Party "
means each Person who, as a result of an Involuntary Transfer,
holds an interest in any Stockholder Shares previously owned by a
Stockholder.
"
Involuntary Transfer "
means (a) any Transfer of Stockholder Shares owned by a Stockholder
that results from (i) the attachment, sequestration, garnishment,
foreclosure or other similar involuntary transfer resulting from a
bankruptcy or similar proceeding affecting such Stockholder, or
(ii) the death or involuntary dissolution of such Stockholder, or
(b) a Marital Relationship Transfer, other than any Transfer of
Stockholder Shares by an employee of the Company or any of its
Subsidiaries (or such employee’s heirs, devisees, legatees,
estate or representatives) to the Company upon the death of such
employee (an “
Involuntary Transfer to Company ”).
"
Marital Relationship Transfer "
means the transfer of any Stockholder Shares (or interest therein)
pursuant to a divorce, legal separation or similar proceeding to
which the Stockholder owning such Stockholder Shares is a party, or
a failure of the Stockholder to succeed to his or her deceased
spouse's interest (if any) in any Stockholder Shares.
"
Other Stockholders "
means, with respect to a Stockholder, all Stockholders other than
such Stockholder.
"
Permitted Transferees "
has the meaning set forth in Section 4(d).
"
Person "
means an individual, a partnership, a corpora-tion, a limited
liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization or a governmental
entity or any department, agency or political subdivision
thereof.
"
Public Sale "
means any sale of Stockholder Shares to the public pursuant to an
offering registered under the Securities Act or to the public
effected through a broker, dealer or market maker pursuant to the
provisions of Rule 144 or Rule 144A (if such rule is
available) under the Securities Act (or any similar rule or rules
then in effect).
"
Qualified Public Offering "
means the first underwritten public offering by the Company of the
Common Stock after the date hereof pursuant to a registration
statement filed with the Securities and Exchange Commission in
accordance with the Securities Act, which public offering shall
raise gross proceeds to the Company of at least
$25,000,000.
"
Sale of the Company "
means the sale of the Company, including in one or more series of
related transactions, to an Independent Third Party or group of
Independent Third Parties pursuant to which such party or parties
acquire (i) equity securities of the Company constituting a
majority of the common equity of the Company (whether by merger,
consolida-tion, sale or transfer of any or all of the
Company’s outstanding capital stock) or (ii) all or
substantially all of the Company’s assets determined on a
consoli-dated basis.
"
Securities Act "
means the Securities Act of 1933, as amended from time to
time.
“
Shares ”
means shares of capital stock of any class of the Company, whether
common or preferred, voting or nonvoting, issued or unissued, or
now authorized or authorized in the future, whether or not issued
or issuable upon the exercise of options, warrants or similar
rights. For purposes of this Agreement, other than Section 4(a)
hereof, options, warrants and other convertible securities will be
considered to be of the same class as the underlying security into
which such option, warrant or convertible security may be exercised
or converted.
“
Significant Subsidiary ”
means DDI and any Subsidiary of DDI, other than Senbazuru
Productions for so long as it engages in no material activities and
acquires no material assets except as in effect on the Closing
Date, that shall at any time have assets with a fair market value
in excess of $50,000 or revenue in excess of $50,000 in any twelve
month period.
"
Stockholder Shares "
means (i) any Common Stock or Common Stock Equivalents issued
to or acquired by the Stockholders, whether prior to, on or after
the date hereof, and (ii) any equity securi-ties issued or
issuable directly or indirectly with respect to the securities
referred to in clause (i) above by way of stock dividend or
stock split or in connec-tion with a combination of shares,
recapitaliza-tion, merger, consolidation or other reorgan-ization.
As to any particular securities constituting Stock-holder Shares,
such securities will cease to be Stockholder Shares when they have
been sold in a Public Sale.
"
Subsidiary "
means, with respect to any Person, any corporation, partnership,
association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors thereof is at the
time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a partnership, limited
liability company, association or other business entity, a majority
of the partnership or other similar ownership interests thereof is
at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a partnership,
limited liability company, association or other business entity if
such Person or Persons shall be allocated a majority of
partnership, limited liability company, association or other
business entity gains or losses or shall be or control the managing
member, managing director or general partner of such partnership,
limited liability company, association or other business
entity.
"
Transaction Documents "
means the following documents, both of which are dated as of the
date hereof, as amended from time to time: this Agreement and the
Falcon Purchase Agreement.
"
Transfer "
means any sale, transfer, assignment, pledge, hypothecation or
other disposition.
“
Warrants ”
means the warrants to purchase shares of Common Stock issued to
Falcon on the date hereof pursuant to the Falcon Purchase
Agreement.
2.
Board of Directors
.
(a)
Until
the provisions of this Section 2 cease to be effective
pursuant to Section 2(h), each Stockholder shall vote all
voting securities of the Company over which such Stockholder
has voting control or which are beneficially owned by such
Stockholder, and shall take all other necessary or desirable
actions within such Stockholder's control (whether in such
Stockholder's capacity as a stock-holder, 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 necessary and desirable actions within
its control (including, without limitation, calling special
Board and stockholder meetings), so that:
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(i)
|
the
Board shall be comprised of seven (7) directors;
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(ii)
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the
following persons will be elected to the Board:
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(A)
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the
holders of the majority of Stockholder Shares held by the Investors
will designate six (6) directors, which designees shall initially
be John C. Textor, Michael Bay, Carl Stork, and three (3) persons
to be designated by such holders after the date hereof;
and,
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(B)
|
the
holders of the majority of the Falcon Securities will designate one
(1) director, which designee shall initially be Rafael A. Fogel
(the “
Falcon Director ”);
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(iii)
any
director shall be removed from the Board (with or without
cause) at the written request of the Stockholder or
Stockholders having the right to designate such director
hereunder, but only upon such written request and under no
other circumstances (in each case, determined on the basis of
a vote or consent of the relevant Stock-holder(s));
provided ,
that the holders of a majority of the Stockholder Shares may remove
any director for cause, but a replacement director may only be
designated by the Stockholder(s) having the right to designate such
director hereunder; and
(iv)
in
the event that any representative member of the Board
desig-nated hereunder for any reason ceases to serve as a
member of the Board during such representative's term of
office, the resulting vacancy on the Board shall be filled by
a representative designated by the Stockholder(s) having the
right to designate the director who ceases to
serve.
(b)
Any
committee established by the Board shall consist of no more
than four (4) members, one of whom shall be the Falcon
Director. All actions of each committee of the Board shall
require the affirmative vote of a majority of the members of
such committee. The composition of the board of directors of
each Significant Subsidiary and each committee thereof shall,
where the appropriate Persons are willing to serve, be
identical to the composition of the Board and each
corresponding committee thereof; provided that no member of
the Board shall be required to serve as a director or
committee member of any such Significant
Subsidiary.
(c)
The
Company agrees to, and shall cause each Significant Subsidiary
to, obtain, or be an insured party pursuant to and beneficiary
pursuant to, a general liability insurance policy and a
directors’ and officers’ liability insurance
policy, in each such case on terms and conditions that are
mutually reasonably acceptable to the members of the board of
directors of such Person. The Company agrees to, and shall
cause each Significant Subsidiary to, maintain such policies
(or policies containing similar terms and conditions) in full
force and effect at all times. The Company’s and each
such Significant Subsidiary’s certificate of
incorporation, bylaws and other organizational documents shall
provide (i) for elimination of the liability of directors to
the maximum extent permitted by law and (ii) for
indemnification of directors for acts on behalf of,
respectively, the Company and each such Significant
Subsidiary, to the maximum extent permitted by
law.
(d)
The
Company shall, and shall cause each Significant Subsidiary to,
pay the reasonable out-of-pocket expenses incurred by each
director in connection with attend-ing the meetings of its
respective board of directors or any committee thereof of
which he is a member.
(e)
[reserved].
(f)
If
any party fails to designate a representative to fill a
directorship pursuant to the terms of this Section 2, the
election of a Person to such directorship shall be
accomplished in accordance with the Company's or any
Significant Subsidiary’s (as applicable) certificate of
incorporation and bylaws and applicable law (provided that
such party may subsequently remove and replace such Person in
accordance with the terms of this Section 2). In the event
that any provision of the Company's or any Significant
Subsidiary’s (as applicable) bylaws or certificate of
incorporation is inconsistent with any provision of this
Section 2, the Stockholders shall take such action as may be
necessary to amend any such provision in the Company's or such
Significant Subsidiary’s (as applicable) bylaws or
certificate of incorporation to remedy such
inconsistency.
(g)
Special Voting Requirements .
Notwithstanding anything to the contrary in the Certificate of
Incorporation or the By-laws of the Company or this Agreement, so
long as Falcon and its Permitted Transferees continue to own at
least fifty percent (50%) of the number of the Stockholder Shares
Falcon owns on the date hereof (with such securities deemed to be
continued to be so owned when exercised or converted into, or
exchanged for, shares of Common Stock), the Company and the
Stockholders agree not to cause or permit the Company or any
Subsidiary thereof to take any of the actions set forth below
without the affirmative vote or written consent of Stockholders
holding at least a majority of the Falcon Securities held by Falcon
and its Permitted Transferees in the aggregate:
(i)
except
to the extent permitted by the Falcon Purchase Agreement,
entering into any transaction or amending in any material
respect the terms of any existing transaction with any
(i) director, officer (other than as to reasonable
compensation arrangements), holder of 5% or more of any class
of securities of the Company or any Affiliate thereof (other
than a Subsidiary of the Company), (ii) individual
related by blood or marriage (a “
Related Person ”)
to such director, officer, or security holder, (iii) Affiliate
(other than the Company or any Subsidiary thereof) of such
director, officer, security holder or Related Person or
(iv) Person (other than the Company or any Subsidiary thereof)
in which such director, officer, security holder or Related Person
has an interest of greater than 5% of the equity of such
Person;
(ii)
other
than an Approved Sale, the sale (whether by merger or
otherwise) of all or substantially all of the capital stock of
the Company, or the sale (whether by merger or otherwise),
lease or other disposition of all or substantially all of the
assets of the Company and its Subsidiaries on a consolidated
basis, in any transaction or series of related
transactions;
(iii)
the
dissolution and liquidation of the Company or any Significant
Subsidiary;
(iv)
the
issuance or sale by the Company, during the period after the
Closing Date, of any of its equity interests, including Common
Stock Equivalents, to current or future directors, officers,
consultants, employees and strategic partners of the Company
and any of its Subsidiaries, in an aggregate amount
outstanding (excluding any such equity interests issued or
sold to such Persons by the Company on or prior to the Closing
Date, or after the Closing Date pursuant to the exercise,
conversion or exchange of such equity interests as are
outstanding on the Closing Date) at any such time exceeding
fifteen percent (15%) of all such then outstanding equity
interests of the Company on a fully diluted basis; provided
that such percentage shall be increased upon the repayment in
full (including upon a Legal Defeasance (as defined in the
Falcon Purchase Agreement)) of the Senior Secured Notes due
2011 of DDI to twenty percent (20%); and
(v)
the
making of any payments by Senbazuru Productions, a Subsidiary
of the Company, to any Person (other than the Company or any
Significant Subsidiary) for any reason, except in connection
with the development, production and exploitation of the
filmed entertainment project currently entitled, “A
Thousand Cranes.”
(h)
The
provisions of this Sect-ion 2 shall terminate
automatically and be of no further force and effect upon the
consummation of a Qualified Public Offering
3.
Representations and Warranties
. Each
Stockholder represents and warrants that (a) this Agreement has
been duly authorized, executed and delivered by such Stockholder
and constitutes the valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance
with its terms, and (b) 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. No holder of Stockholder Shares shall grant any such
proxy or become party to any such voting trust or other agreement
which is inconsistent with, conflicts with or violates any
provision of this Agreement. The Company represents and warrants
that the Capitalization Table of the Company attached hereto as
Exhibit A correctly sets forth the ownership of the Common Stock
and Common Stock Equivalents outstanding as of the date
hereof.
4.
Restrictions on Transfer by Stockholders/Other
Rights .
(a)
Tag-Along Rights .
Subject to Sections 4(b), 4(c), 4(d), 4(e) and 4(g) and other than
in connection with an Approved Sale in accordance with Section 5,
at least 15 days prior to any contemplated Transfer (other than an
Involuntary Transfer) by an Investor of Stockholder Shares held by
such Investor, which Stockholder Shares, together with all
Stockholder Shares previously transferred by such Investor,
constitute in aggregate more than 10 percent (10%) of the
Stockholder Shares held by such Investor on the date of this
Agreement, such Investor shall deliver a written notice (the
"
Sale Notice ")
to the Company and the Other Stockholders, specifying in reasonable
detail the identity of the prospective transferee(s) and the terms
and condi-tions of the Transfer. The Other Stockholders may elect
to participate in the contemplated Transfer by delivering written
notice to the transferring Stockholder within 10 days after
delivery of the Sale Notice. If any Other Stockholders have elected
timely to participate in such Transfer, each of the transferring
Stockholder and such Other Stockholders shall be entitled to sell
in the contemplated Transfer, at the same price and on the same
terms, a number of Stockholder Shares, of the same class of
Stockholder Shares proposed to be transferred by the Investor,
equal to the product of (i) the quotient determined by
dividing the number of Stock-holder Shares owned by such
Stockholder by the aggregate number of Stock-holder Shares owned by
the transferring Stockholder and the Other Stockholders
participating in such Transfer, and (ii) the aggregate number
of Stockholder Shares to be sold in the proposed
Transfer.
(b)
First Offer Rights .
(i)
Notice of Transfer .
Subject to Sections 4(c), 4(d), 4(e) and 4(g) and other than a
Transfer by an Other Stockholder pursuant to Section 4(a), and any
Approved Sale in accordance with Section 5, at least 30 days prior
to any voluntary Transfer of Stockholder Shares by any Stockholder,
the Stockholder making such Transfer (the "
Transferring Stockholder ")
shall deliver a written notice (the "
Transfer Notice ")
to the Company and the Other Stockholders stating that the
Transferring Stockholder intends to explore a potential Transfer of
all or a specified portion of his or its Stockholder Shares (the
“
Offered Shares ”),
shall reference this right of first offer and shall state that no
such Transfer shall be effected prior to the date that is 30 days
following the date of the Transfer Notice.
(ii)
First Option .
The Company shall have the first right and option, exercisable
within 20 days (the “
First Option Period ”)
after the delivery of the Transfer Notice to make an offer (the
“
First Offer ”)
to the Transferring Stockholder to purchase all (but not less than
all) of the Offered Shares, which First Offer shall be
unconditional, shall provide for cash payment for the Offered
Shares within 10 days of acceptance of the First Offer, and shall
specify the purchase price to be paid for the Offered Shares. Any
such First Offer shall be delivered to the Transferring Stockholder
by the Company, with a copy provided to the Other
Stockholders.
(iii)
Second Option .
If the Company has not elected to purchase all of the Offered
Shares prior to the expiration of the first Offer Period, the Other
Stockholders shall have the right and option, exercisable within 20
days after the expiration of the First Option Period (the
“
Second Option Period ”),
to make an offer (the “
Second Offer ”)
to the Transferring Stockholder to purchase in aggregate all (but
not less than all) of the Offered Shares (in such respective
amounts as are equal to their respective pro-rata portions of the
Common Stock Deemed Outstanding owned by all such Other
Stockholders, with the pro-rata over-allotment right to purchase
such amounts not purchased by any such Stockholder), which Second
Offer shall be unconditional, shall provide for cash payment for
the Offered Shares within 10 days of acceptance of the Second
Offer, and shall specify the purchase price to be paid for the
Offered Shares (and the maximum percentage of the Offered Shares
that each Other Stockholder desiring to participate in the Second
Offer is willing to purchase pursuant to said over-allotment
right). Any such Second Offer shall be delivered to the
Transferring Stockholder by each such Other Stockholder wishing to
participate in the Second Offer, and a copy provided to all of the
Other Stockholders. In the event that different purchase prices are
proposed severally by the Other Stockholders wishing to participate
in the Second Offer, the Second Offer purchase price shall be the
lowest such proposed price.
(iv)
Closing .
The Transferring Stockholder shall have the absolute right to
accept or reject the First Offer or Second Offer, as applicable,
provided however that if either such offer is rejected, the
Transferring Stockholder may only sell the Offered Shares to one or
more third parties at a purchase price greater than the price set
forth in the First Offer or Second Offer, as applicable, and to the
extent such Offered Shares are not so transferred by the
Transferring Stockholder within 90 days immediately following the
date on which the Transfer Notice has been given to the Company and
the Other Stockholders the Transferring Stockholder shall once
again become subject to the provisions of this Section 4(b) with
respect to any future Transfer of Stockholder Shares. If the
Transferring Stockholder shall accept either the First Offer or the
Second Offer, then the closing of the purchase and sale will occur
on the thirtieth (30
th )
day following the date of expiration of the First Option Period or
the Second Option Period, as applicable (or such earlier date as
may be agreed upon among the parties). If either the Company or the
Other Stockholders default in their obligation to purchase the
Offered Shares, the Transferring Stockholder shall be free to
transfer such shares without regard to any restriction on transfer
thereof set forth in this Section 4. The failure of the Company or
any Other Stockholder to advise the Transferring Stockholder of
such Person’s decision to purchase shares within the
applicable period described above shall be deemed to constitute a
notification to the Transferring Stockholder of a decision not to
exercise the first right and option described in this Section
4(b).
(c)
First Offer Rights in Connection with Involuntary
Transfers .
Upon any Involuntary Transfer of Stockholder Shares, each
Interested Party will comply with, and the Involuntary Transfer
will be subject to, the following provisions, to the maximum extent
permitted by applicable law:
(i)
Notice of Involuntary Transfer .
The Interested Party will deliver a written notice (the "
Notice of Involuntary Transfer ")
to each Stockholder and the Company (and, in the case of a Marital
Relationship Transfer, to the former owner of the Stockholder
Shares that are the subject of the Involuntary Transfer if the
former owner is not a current Stockholder) no later than thirty
(30) days after such Involuntary Transfer. The Company agrees to
promptly provide the Interested Party with a list of the names and
addresses of each Stockholder and, if applicable, the former owner,
for such purpose upon request. The Notice of Involuntary Transfer
will include (i) a description of the circumstances resulting in
the Involuntary Transfer, (ii) the name and address of each
Interested Party and (iii) the type and number of Stockholder
Shares subject to such Involuntary Transfer (the "
Subject Securities ").
Upon the failure of the Interested Party to deliver a Notice of
Involuntary Transfer within thirty (30) days of an Involuntary
Transfer, the Interested Party will be deemed to have provided such
Notice of Involuntary Transfer to the Company and each Stockholder
(and, if applicable, a former Stockholder in the case of a Marital
Relationship Transfer) and the terms of Sections 4(c)(ii) through
(v) will be applicable to any Involuntary Transfer.
(ii)
First Option .
In the case of a Marital Relationship Transfer, the Notice of
Involuntary Transfer will constitute an irrevocable offer by the
Interested Party to sell all (but not less than all) of the Subject
Securities at Fair Market Value to the former owner from whom the
Subject Securities were involuntarily transferred. The former owner
may elect to accept such offer by delivering to the Interested
Party (with a copy to the Company) written notice of his election
to accept such offer, which election will be final and irrevocable,
within thirty (30) days after his receipt of the Notice of
Involuntary Transfer. If the former owner does not so elect to
accept such offer within such thirty (30) day option period with
respect to the Subject Securities, then the Company, on behalf of
the former owner, will, immediately following the expiration of
such thirty (30) day option period, inform the Interested Party in
writing, with a copy to each Stockholder, that the former owner did
not elect to purchase the Subject Securities, and the Company will
then have the option pursuant to
Section 4(c)(iii) to
purchase all (but not less than all) of the Subject
Securities.
(iii)
Second Option .
If Section 4(c)(ii) is inapplicable, or if applicable, the former
owner does not elect to purchase all of the Subject Securities in
accordance with Section 4(c)(ii), then the Notice of Involuntary
Transfer will be deemed to constitute an irrevocable offer by the
Interested Party to sell to the Company, at Fair Market Value, all
(but not less than all) of the Subject Securities. The Company may
elect to accept such offer by delivering to the Interested Party
written notice of its election to accept such offer, which decision
will be final and irrevocable, within ten (10) days after the
expiration of the option period set forth in Section 4(c)(ii)
above.
(iv)
Third Option .
If the Company does not elect to purchase the Subject Securities in
accordance with Section 4(c)(iii), then the Notice of
Involuntary Transfer will be deemed to constitute an irrevocable
offer by the Interested Party to sell all (but not less than all)
of the Subject Securities at Fair Market Value to the Stockholders
in such respective amounts as are equal to their respective
pro-rata portions of the Common Stock Deemed Outstanding owned by
all such Stockholders, with the pro-rata over-allotment right to
purchase such amounts not purchased by any such Stockholder. Each
Stockholder may elect to accept such offer by delivering to the
Interested Party (with a copy to the Company) written notice of his
or its election to accept such offer (including therein the maximum
percentage of the Subject Securities he or it is willing to
purchase subject to such over-allotment right), which election will
be final and irrevocable, within ten (10) days after the expiration
of the ten (10) day option period set forth in Section 4(c)(iii)
above.
(v)
Closing .
If any Person validly elects to purchase Subject Securities
pursuant to this Section 4(c), then the closing of the
purchase and sale will occur on the sixtieth (60th) day following
the date on which such Person was required to elect to purchase
such Subject Securities (or such earlier date as may be agreed upon
among the parties).
(d)
Permitted Transfers .
The restrictions contained in this Section 4 shall not apply
with respect to any Involuntary Transfer to Company, or with
respect to any other Transfer (other than an Involuntary Transfer)
of Stockholder Shares by any Stockholder (i) in the case of an
individual Stockholder, (A) to any Other Stockholder(s) other than
Wyndcrest DD Investment Holdings, LLC (“Investment Holdings
LLC”), or (B) only if approved in writing by a majority of
the Board, to any member of such Stockholder's Family Group,
(ii) in the case of Falcon or any of its Permitted
Transferees, (A) to any Affiliate, managing director,
principal, limited or general partner, member, manager, employee or
retired partner of Falcon or such transferee, (B) to any Other
Stockholder(s), (C) to any pledgee that is a commercial bank or
other financial institution providing financing to Falcon or such
transferee, which pledgee is taking a security interest in the
Stockholder Shares in connection with such financing,
provided ,
that the pledgor shall at all times retain the right to vote its
Stockholder Shares, or (D) in connection with the transfer by
Falcon of any of the Senior Secured Notes due 2011 of DDI as
permitted by the terms of the Falcon Purchase Agreement, to any
transferee of such Senior Secured Notes up to the corresponding
proportionate amount of each class of Stockholder Shares then owned
by Falcon, (iii) in the case of any Stockholder, of up to no more
than 10% of the aggregate Stockholder Shares owned by such
Stockholder on the date of this Agreement, to any Person(s) other
than Investment Holdings LLC, and (iv) in the case of any
Stockholder (other than Falcon and its Permitted Transferees) that
is not a natural Person, (A) to any Affiliate, managing director,
principal, limited or general partner, member, manager, employee,
or retired partner of such Person (other than Investment Holdings
LLC), or (B) to any Other Stockholder(s) (other than Investment
Holdings LLC). The restrictions contained in this Section 4
shall continue to be applicable to such Stockholder Shares after
any such Transfer and the transferees of such Stockholder Shares
shall have agreed in writing to be bound by the provisions of this
Agreement which affect the Stockholder Shares so transferred by
executing a joinder in substantially the form attached hereto
as
Exhibit C (the
“
Joinder Agreement ”).
All transferees permitted under this Section 4(d) are collectively
referred to in this Agreement as "
Permitted Transferees ."
(e)
Restriction on Transfer of Warrants .
Notwithstanding anything to the contrary in this Agreement, neither
Falcon nor any of its Permitted Transferees, nor any other
Stockholder, shall be permitted, prior to an Event of Default (as
defined in the Falcon Purchase Agreement), to effect any voluntary
Transfer of the Warrants owned by such Person, except (i) in an
Approved Sale and (ii) in the case of Falcon and its Permitted
Transferees, to the transferees, and on the respective terms and
conditions, described in Section 4(d)(ii)(D) hereof.
(f)
Prohibition on Certain Transfers of Interests in Investment
Holdings LLC .
Notwithstanding anything to the contrary in this Agreement,
Investment Holdings LLC agrees that, without the prior written
consent of Stockholders holding at least a majority of the Falcon
Securities then held by Falcon and its Permitted Transferees in the
aggregate, at any time that Wyndcrest Holdings, LLC ceases to be
the sole manager of Investment Holdings LLC, it will not issue any
membership interest to, and will not cause or permit any of its
members to directly or indirectly transfer (except for
bona
fide family/estate
or tax planning purposes of the transferring member) any of his or
its membership interests in Investment Holdings LLC to, in each
case, any Person other than Mr. John C. Textor, any members of Mr.
John C. Textor’s Family Group, and/or any Person of which
100% of the voting and economic interests are owned by Mr. John C.
Textor and/or one or more members of Mr. John C. Textor’s
Family Group.
(g)
Termination of Restrictions .
The restrictions set forth in this Section 4 shall continue
with respect to each Stockholder Share until the earlier of
(i) the Transfer of such Stockholder Share in an Approved Sale
in accordance with Section 5, or (ii) immediately prior to the
consummation of a Qualified Public Offering.
5.
Sale of the Company .
(a)
Upon
the approval of a Sale of the Company qualifying as an
Approved Sale by the requisite majority of the Board and of
the holders of the shares of Common Stock and Convertible
Preferred Stock, each Stockholder will (i) consent to and
raise no objections against the Approved Sale or the process
pursuant to which the Approved Sale was arranged,
(ii) waive any dissenter's rights and other similar
rights arising in connection therewith, and (iii) if the
Approved Sale is structured as a sale of stock, each
Stockholder will agree to sell its Stockholder Shares on the
terms and conditions of the Approved Sale. Each Stockholder
will take all necessary and desirable actions as directed by
the Board and the holders of a majority of the Common Stock
and Convertible Preferred Stock, voting together as a single
class, in connection with the consummation of any Approved
Sale, including, without limitation, (A) executing the
applicable purchase agreement, (B) granting identical
indemnification rights (whether directly to the buyer of the
Stockholder Shares or pursuant to the provisions of a
contribution agreement) on a several and
pro rata basis
up to the net proceeds received by such Stockholder from such
Approved Sale and (C) making only those representations and
warranties relating to its ownership of the Stockholder Shares to
be sold by him or it.
(b)
If,
in the context of an Approved Sale in which it is contemplated
that the holders of the Company’s securities are to
receive securities issued by any other Person, the Company or
the holders of the Company's securities enter into any
negotiation or transaction for which Rule 506 (or any similar
rule then in effect) under the Securities Act may be available
with respect to such negotiation or transaction (including a
merger, consolidation or other reorganization), the
Stockholders (other than Falcon) will, at the request of the
Company, appoint a purchaser representative (as such term is
defined in Rule 501 under the Securities Act) reasonably
acceptable to the Company. If any Stockholder appoints a
purchaser representative designated by the Company, the
Company will pay the fees of such purchaser representative,
but if any Stockholder declines to appoint the purchaser
representative designated by the Company, such Stockholder
will appoint another purchaser representative (reasonably
acceptable to the Company), and such Stockholder will be
responsible for the fees of the purchaser representative so
appointed.
(c)
This
Section 5 shall automatically terminate upon the
consummation of a Qualified Public Offering.
6.
Preemptive Rights .
(a)
The
Company hereby grants to each Stockholder that is an
“Accredited Investor” within the meaning of
Regulation D under the Securities Act, subject to the terms
and conditions specified in this Section 6, the right to
purchase up to his or its
pro rata share
(as defined below) of all New Securities (as defined in Section
6(b) hereof) that the Company may, from time to time, propose to
sell and issue. Each Stockholder’s “
pro rata share,”
for purposes of this preemptive right, is the ratio (i) the
numerator of which is the number of Stockholder Shares held by such
Stockholder on the date of the Company’s written notice
pursuant to Section 6(c) hereof, and (ii) the denominator of which
is the number of Stockholder Shares held by all Stockholders
eligible to participate in the preemptive rights offer in
accordance with the first sentence of this Section
6(a).
(b)
“
New Securities ”
means any Shares, whether or not now authorized; provided that the
term “New Securities” does not include (i) Shares
issued or sold to persons who are, or who are to become, employees,
officers, directors, strategic partners (which may include
individuals) and/or consultants of the Company or any of its
Subsidiaries as bona fide compensation for services rendered or to
be rendered; provided, that such sales or issuances are approved in
good faith by the Board; (ii) securities issued to the seller as
part of the financing of the acquisition of another company by the
Company pursuant to a plan, agreement or other arrangement approved
in good faith by the Board; (iii) securities issued pursuant to any
stock dividend, stock split, combination or other reclassification
by the Company of any Shares treating each class or series of
Shares equally; (iv) securities issued pursuant to a bona fide
arms’ length transaction with debt financing sources, vendors
or suppliers of the Company; provided, that such issuances are
approved in good faith by the Board; (v) Shares issued upon the
exercise of options, warrants or convertible securities if the
underlying instrument is outstanding on the date of this Agreement
or was thereafter issued on the terms described in clause (i) or
otherwise in compliance with this Section 6, and (vi) Common Stock
issued in a Qualified Public Offering.
(c)
In
the event the Company proposes to undertake an issuance of
New Securities,
it will give each Stockholder written notice (the
“Preemptive Notice”) of its intention, describing
the class of New Securities, and the price, amount and the
general terms upon which the Company proposes to issue the
same. Each eligible Stockholder will have twenty (20) days
from the date of any such notice to agree to purchase up to
his or its pro rata share of such New Securities in accordance
with Section 6(a), for the price and upon the general terms
specified in the Preemptive Notice by giving written notice to
the Company and stating therein the quantity of New Securities
to be purchased.
(d)
In
the event the Company delivers a Preemptive Notice, the
Company will have ninety (90) days from the date of the first
closing specified in such written notice to sell all such New
Securities (including the New Securities, if any, to be
purchased individually by any Stockholder pursuant to this
Section 6) at a price and upon general terms no more favorable
to the purchasers thereof than the price and terms specified
in the Company's original notice to the Stockholders, and
provided that such purchasers will agree in writing to be
bound by the terms and conditions of this Agreement by
executing the Joinder Agreement and any other documents
reasonably required by the Company. In the event the Company
has not sold all such New Securities within said ninety (90)
day period, the Company will not thereafter issue or sell any
New Securities without first offering such securities
individually to the eligible Stockholders in the manner
provided by this Section 6.
(e)
In
the event that a Stockholder that has the right under this
Section 6 to purchase any New Securities declines to exercise
his or its right in full to purchase the New Securities to be
sold (each, a “Preemptive Declining Stockholder”),
by failing to give the written notice to the Company
referenced in Section 6(c) within the twenty (20) day period
specified therein, before the New Securities not purchased by
all Preemptive Declining Stockholders (the “Preemptive
Unsubscribed Portion”) are offered to any other Person,
the Company shall deliver to each Stockholder who is not a
Preemptive Declining Stockholder a written notice (the
“Second Preemptive Notice”) stating the number of
such New Securities constituting the Preemptive Unsubscribed
Portion. Each Stockholder who has timely elected to exercise
in full his or its right to so purchase the New Securities
(collectively, the “Preemptive Participating
Stockholders”) shall have the right to purchase his or
its pro rata share of the Preemptive Unsubscribed Portion
(excluding, for this purpose, the Stockholder Shares held by
the Preemptive Declining Stockholders) by providing written
notice to the Company of such Preemptive Participating
Stockholder's election to purchase his or its pro rata share
of the Preemptive Unsubscribed Portion within ten (10) days of
the date of delivery to him or it of the Second Preemptive
Notice.
(f)
This
Section 6 shall automatically terminate upon consummation
of a Qualified Public Offering.
7.
Financial Reporting
.
(a)
The
Company shall cause to be prepared and delivered to Falcon,
for so long as Falcon continues to own at least fifty percent
(50%) of the number of Stockholder Shares owned by it on the
date hereof (with such securities deemed to be continued to be
so owned when exercised or converted into, or exchanged for,
shares of Common Stock issued to Falcon), the following
financial statements:
(i)
Within
thirty (30) days after the end of each calendar month (A) a
consolidated balance sheet as of the end of such month; and
(B) the related consolidated statements of income and cash
flows for such month, each prepared in accordance with GAAP,
consistently applied (except as noted therein), with the
exception that no notes need be attached to such statements,
such statements may be condensed, and year-end audit
adjustments may not have been made;
(ii)
Within
forty-five (45) days after the end of each calendar quarter
ending on March 31, June 30 and September 30 of each fiscal
year, (A) a consolidated balance sheet as of the end of such
quarter; and (B) the related consolidated statements of income
and cash flows for the quarter then ended, each prepared in
accordance with GAAP, consistently applied (except as noted
therein), with the exception that no notes need be attached to
such statements, such statements may be condensed, and
year-end audit adjustments may not have been made;
and
(iii)
Within
one hundred twenty (120) days of the end of each fiscal year,
(A) a consolidated balance sheet of the Company as of the end
of such fiscal year, and (B) the related consolidated
s
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