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EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into this
7th day of September, 1999 by and between Silver Cinemas International, Inc., a
Delaware corporation (the "Company") and Xxxxx Xxxx ("Purchaser" or "you").
RECITALS
The Company desires to issue and sell to Purchaser, and Purchaser
desires to purchase from the Company, 10,000 shares (the "Common Shares") of
the Company's authorized but unissued Common Stock, par value $.01 per share
(the "Common Stock") subject to the vesting provisions and such other terms and
conditions contained herein.
The Company desires to grant to Purchaser in connection with the
performance of services and as an inducement to enter into an employment
agreement with the Company 3,000 shares (the "Preferred Shares") of the
Company's authorized but unissued Convertible Preferred Stock, par value $.01
per share (the "Preferred Stock"), upon the terms and conditions specified
herein. The Common Shares and Preferred Shares are hereinafter sometimes called
the "Shares."
The Company desires to have, and Purchaser is willing to grant to the
Company, the right and option to repurchase the Common Shares and Preferred
Shares upon the terms and conditions contained herein.
It is a condition precedent to the obligations of the Company under
this Agreement that Purchaser enter into that certain Stockholders' Agreement
of even date herewith (the "Stockholders' Agreement") among the Company,
Brentwood Associates Buyout Fund II, L.P. (the "Partnership") and the other
stockholders of the Company (the "Stockholders") (the Partnership, the
Stockholders and the Purchaser are collectively called the "Investors").
THEREFORE, in consideration of the premises and of the covenants and
conditions contained herein, the parties hereto agree as follows:
1. Purchase and Sale; Grant; Closing.
(a) Purchase and Sale. The Company hereby agrees to issue and sell to
Purchaser, and Purchaser hereby agrees to purchase from the Company on the
Closing Date, 10,000 shares of Common Stock for an aggregate purchase price of
Ten Thousand Dollars ($10,000). Of the Common Shares being purchased hereunder
by Purchaser, 5,000 are Eligible Time Accelerated Stock ("ETA Stock").
(b) Grant of Preferred Shares. The Company hereby agrees to issue to
Purchaser 3,000 shares of Preferred Stock in consideration for Purchaser's
execution of that certain Employment Agreement dated September 7, 1999 between
the Company and Purchaser and the performance of Purchaser's services
thereunder.
(c) The Closing. The consummation of the purchase and sale of the
Common Shares to be purchased hereunder and the grant of the Preferred Shares
hereunder (the "Closing")
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shall occur as of September 7, 1999, or at such other time as the parties may
agree (the "Closing Date"). At the Closing, the Company shall deliver to
Purchaser certificates evidencing the shares of Common Stock purchased
hereunder by Purchaser, against payment of the specified consideration
therefor. In addition, at the Closing the Company shall deliver to Purchaser
certificates evidencing the Preferred Shares granted hereunder ; provided,
however, that certificates evidencing the Common Shares purchased hereunder by
the Purchaser and the Preferred Shares granted hereunder shall be deposited
with the Escrow Agent pursuant to Section 5 hereof.
2. Vesting of the Common Stock.
(a) 33.33% of the Common Shares shall become vested on December 31,
1999 and 16.66% of the Common Shares shall become vested as of the last day of
each fiscal year of the Company (the "Fiscal Year End Date") commencing with
fiscal 2000, e.g. fiscal years 2000, 2001, 2002, and 2003, subject to the
earlier vesting of ETA Stock as described below.
All Common Shares (in excess of the 33.33% of the Common Shares
scheduled to vest in 1999 and the 16.66% scheduled to vest in any such other
year) which vest as ETA Stock under Section 2(b) will first reduce the Common
Shares then scheduled to vest as of the Fiscal Year End Date in 2000; then next
reduce the Common Shares then scheduled to vest as of the Fiscal Year End Date
in 2001; and, thereafter, will reduce in reverse chronological order the Common
Shares then scheduled to vest as of the Fiscal Year End Date in the years 2002
and 2003.
(b) Annex A, attached hereto and incorporated herein by reference,
includes vesting provisions, performance criteria (the "Performance Criteria")
for each of the periods set forth below for the ETA Stock and an example of
vesting which is applicable to ETA Stock which is eligible for accelerated
vesting. If the Company meets the Performance Criteria for fiscal 2000, 50% of
the ETA Stock shall become vested effective as of the Fiscal Year End Date in
2000; if the Company meets the Performance Criteria for fiscal 2001, an
additional 50% of the ETA Stock shall become vested effective as of the Fiscal
Year End Date in 2001. (Each of fiscal 2000 and 2001 is referred to herein as a
"Performance Year.")
Annex A also includes more detailed vesting provisions applicable to
the ETA Stock, including "Catch Up Vesting" provisions.
(c) The foregoing notwithstanding, with respect to Purchaser, no
Common Shares or shall become vested unless Purchaser has been continuously
employed by the Company, or any parent or subsidiary of the Company, from the
Closing Date until, each respective date on which the Common Shares are
eligible to vest; provided, however, that if there is a Termination of
Employment (as defined below):
(i) a pro rata portion of any Common Shares which are
scheduled to vest and are not ETA Stock shall become vested
immediately upon Termination of Employment (such pro rata portion
being equal to the ratio of the number of days of employment during
the fiscal year in question to 365); and
(ii) if the Termination of Employment occurs during a
Performance Year, and if, as of the date of Termination of Employment
(the
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"Termination Date"), the performance goals for the fiscal year to date
("Year to Date Performance") as of the last full month preceding the
Termination Date equaled or exceeded target performance goals (as set
forth on Annex A) for such period, then a pro rata portion (determined
as in Section 2(c)(i)) of the ETA Stock eligible to vest with respect
to such Performance Year shall become vested as of the Termination
Date. (It is understood that the determination of whether these shares
of ETA Stock will vest will not necessarily be able to be calculated
as of the Termination Date, but once the calculation is made, if any
such shares do in fact vest, they shall be deemed to have vested as of
the Termination Date).
(d) As used herein, "Termination of Employment" shall mean the time
when the employee-employer relationship between Purchaser and the Company is
terminated for any reason whatsoever, with or without cause. For purposes of
this Section 2(d), and elsewhere in this Agreement in the context of
employment, the term "Company" shall mean a subsidiary or parent of the Company
if Purchaser is then employed by such subsidiary or parent; provided, however,
that neither a transfer of Purchaser from the employ of the Company to the
employ of such subsidiary or parent nor the transfer of Purchaser from the
employ of such subsidiary or parent to the employ of the Company shall be
deemed a Termination of Employment.
(e) Anything in this Agreement to the contrary notwithstanding, if,
prior to an initial public offering of its equity securities, the Company is
acquired by a third party or parties through an asset purchase, merger or sale
of more than 50% (in value) of the outstanding equity securities of the Company
(an "Acquisition"), (i) all Common Shares scheduled to vest pursuant to Section
2(a) in the calendar year in which the Acquisition is closed (and not
previously repurchased by the Company pursuant to Section 3) shall vest
immediately prior to the Acquisition closing date and (ii) if the calendar year
in which the Acquisition is scheduled to close is a Performance Year, all ETA
Stock eligible to vest in such year shall vest immediately prior to the
Acquisition closing date; provided, however, that such ETA Stock shall only
vest if Year to Date Performance as of the Acquisition closing date (or a date
reasonably close and prior thereto) equaled or exceeded 90% of Plan performance
for such period.
Purchaser shall be entitled to "Catch Up Vesting" (as defined in Annex
A) with respect to a Performance Year prior to any Performance Year in which an
Acquisition is closed if ETA Stock vested for the year in which the Acquisition
is scheduled to close pursuant to Section 2(e). Shares of ETA Stock that are
eligible for Catch Up Vesting but that do not vest pursuant to the preceding
sentence shall be subject to the Company's Purchase Option provided in Section
3. In addition, the Company shall have the right to purchase pursuant to
Section 3 all shares of ETA Stock which were eligible for accelerated vesting
with respect to Performance Years prior to the calendar year in which the
Acquisition is closed which did not so accelerate pursuant to this Section 2(e)
or Section 2(b) and Annex A.
The proceeds of the Acquisition attributable to all of the Common
Shares outstanding on the closing date of the Acquisition (other than ETA Stock
repurchased pursuant to the preceding sentence) and not previously vested in
accordance with this Agreement, including the first sentence of this Section
2(e) (the "Escrowed Acquisition Proceeds"), shall be deposited with the Escrow
Agent and will be distributed to Purchaser one year after the Acquisition
closing date, if, but only if, Purchaser is then an employee of the Company or
the acquiring entity; provided, however, (i) if Purchaser is not offered the
opportunity to continue in the employ of the Company or to become an employee
of the acquiring entity (or a subsidiary or parent thereof) after the
Acquisition closing date (x) at the same or greater compensation as he
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was receiving from the Company, (y) with authority, duties and responsibilities
materially consistent with those he had with the Company prior to the
Acquisition, then the Escrowed Acquisition Proceeds shall be distributed to
Purchaser immediately following the Acquisition closing date or (ii) if
Purchaser is terminated by the Company or the acquiring entity (or a subsidiary
or parent thereof), as the case may be, then the Escrowed Acquisition Proceeds
shall then be distributed to Purchaser. Any Escrowed Acquisition Proceeds not
so distributed to Purchaser shall be paid to the other shareholders or former
shareholders of the Company in accordance with their interests.
3. Company Purchase Option.
(a) The Company shall have the unconditional right and option to
purchase any or all of the Common Shares that have not vested as provided in
Section 2 at a purchase price of $1.00 per share (the "Option Price") upon a
Termination of Employment on the terms and conditions hereinafter provided.
(b) In addition to the rights set forth in Section 3(a), prior to an
initial public offering of Common Stock, the Company shall have the
unconditional right and option to purchase any and or all of the Common Shares
that have vested, as provided in Section 2 at a per share purchase price equal
to the Fair Market Value thereof (the "Fair Market Value Price") upon a
Termination of Employment on the terms and conditions hereinafter provided. The
Company's right and option set forth in Sections 3(a) and 3(b) is referred to
herein as the "Purchase Option."
(c) The determination of whether ETA Stock has vested or has failed to
vest shall be made as of the date the Termination of Employment occurs with no
credit for the Company's performance in any subsequent Performance Years, and
there will be no "Catch Up Vesting." In the event of an Acquisition, the
Company shall be entitled to exercise the Purchase Option with respect to all
shares of ETA Stock eligible for accelerated vesting in any Performance Year
prior to the calendar year in which the Acquisition is closed, which did not
accelerate and vest pursuant to Section 2(b) above and do not accelerate and
vest as a result of the operation of the second paragraph of Section 2(e)
above.
The Purchase Option, if exercised, must be exercised no later than 60
days after a Termination of Employment. The Purchase Option may be exercised in
whole or in part. Any Common Stock which becomes subject to the Purchase Option
as provided herein but with respect to which the Purchase Option is not
exercised in accordance with the terms hereof shall become fully vested upon
expiration of the period during which the Purchase Option with respect thereto
is effective, and no such Common Stock shall at any time thereafter be subject
to the Purchase Option.
(d) The Purchase Option shall be exercised by written notice signed by
an officer of the Company and delivered or mailed to Purchaser as provided in
Section 15(c) of this Agreement and to the Escrow Agent (as defined in Section
5 hereof) as provided in the Joint Escrow Instructions (as defined in Section 5
hereof) and shall be effective immediately upon such delivery or mailing.
Amounts due to Purchaser from the Company as a result of exercise of the
Purchase Option shall be payable in cash promptly after exercise of the
Purchase Option or, in the case of ETA Stock and/or "Catch Up Vesting", as soon
as reasonably practical after determination of whether or not any applicable
Performance Criteria were met.
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(e) As used herein, "Fair Market Value" shall mean the fair market
value of a share of Common Stock, representing the price a willing buyer would
pay and at which at willing seller would sell, neither under any compulsion or
duress. Initially, the parties shall attempt to agree on Fair Market Value for
a period of thirty (30) days. If they are unable to reach agreement, each of
them shall within ten (10) days nominate an independent appraiser skilled in
valuing securities similar to the Common Stock, and the two appraisers so
nominated shall appoint a third appraiser within ten (10) days. The third
appraiser shall determine Fair Market Value, and such determination shall be
conclusive and binding on all parties. Each party shall bear the costs, if any,
of the appraiser it nominates, and the parties shall share equally the costs of
the third appraiser, which cost may be deducted by the Company from any amounts
payable to Purchaser if Purchaser has not otherwise paid his portion of the
third appraiser's costs.
4. No Employment Agreement. Nothing contained in this Agreement, or
except as provided in the Employment Agreement of even date herewith between
Purchaser and the Company, in any other agreement entered into by the Company
and Purchaser in connection with this Agreement, (i) obligates the Company, or
any subsidiary or parent of the Company, to continue employ Purchaser in any
capacity whatsoever, or (ii) prohibits or restricts the Company (or any such
subsidiary or parent) from terminating the employment of Purchaser at any time
or for any reason whatsoever, with or without cause, and Purchaser hereby
acknowledges and agrees that neither the Company nor any other person has made
any representations or promises whatsoever to Purchaser concerning Purchaser's
employment or continued employment by the Company. In the event of any
Termination of Employment, Purchaser shall have the rights set forth in the
Employment Agreement of even date herewith between Purchaser and the Company
and this Agreement and no more, and except as provided by law or in equity.
5. Escrow of Shares. As security for the faithful performance of the
terms of this Agreement and to ensure the availability for delivery of the
unvested Common Shares in case of an exercise of the Purchase Option, Purchaser
shall deliver to and deposit with the escrow agent (the "Escrow Agent") named
in the joint escrow instructions attached hereto as Annex B (the "Joint Escrow
Instructions"), stock assignments duly endorsed (with date and number of shares
blank) in the appropriate form attached hereto as Annex C, together with the
certificate or certificates evidencing the shares of Common Stock purchased
hereunder by Purchaser. Such documents are to be held by the Escrow Agent and
delivered by the Escrow Agent pursuant to the terms of the Joint Escrow
Instructions, which shall be executed by Purchaser and the Company and
delivered to the Escrow Agent concurrently with the execution of this
Agreement. As promptly as practicable after each vesting date under this
Agreement (but, with respect to ETA Stock, only after the Company is able to
determine whether or not the applicable Performance Criteria have been met),
the Company shall notify Purchaser and the Escrow Agent in writing of the
aggregate vesting and non-vesting to that date of Common Shares and ETA Stock,
and the Escrow Agent shall, within 30 days after receipt of such notice,
deliver to Purchaser certificates representing that number of Purchaser's
Common Shares that such notice states have become vested (less such shares, the
certificates for which have been previously delivered). From time to time, upon
written request of the Company, the Escrow Agent shall deliver to the Company
certificates representing that number of Common Shares which the Company shall
have purchased upon exercise of the Purchase Option, unless Purchaser objects
in the manner provided in the Joint Escrow Instructions.
In the case of any conflict or inconsistency between this Section 5
and the Joint Escrow Instructions, the Joint Escrow Instructions shall control.
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6. Change in Capitalization. If from time to time during the term of
this Agreement (i) there is any dividend of cash or property or rights to
acquire same, any liquidating dividend of cash and/or property, or any stock
dividend or stock split or other change in the character or amount of any of
the outstanding securities of the Company, or (ii) there is (a) any
consolidation, merger or sale of all, or substantially all, of the assets of
the Company or (b) a Drag-Along Sale pursuant to the Stockholders' Agreement,
then in such event any and all new, substituted or additional securities or
other property to which Purchaser may become entitled by reason of his
ownership of Common Shares shall immediately become subject to this Agreement
and shall assume the same status with respect to vesting as the Common Shares
upon which such dividend was paid or in substitution for which such additional
securities or property were distributed. Any cash or cash equivalents received
pursuant to this Section 6 shall be invested in conservative, short-term
interest bearing securities, and interest earned thereon shall likewise assume
the same status as to vesting. While the total Option Price for all Common
Shares subject to the Purchase Option shall remain the same after each such
event, the Option Price per Common Share upon exercise of the Purchase Option
shall be proportionately or otherwise appropriately adjusted as determined in
good faith by the Board of Directors of the Company.
7. Purchaser Representations and Agreements. Purchaser hereby
represents and warrants, and agrees with, the Company as set forth below.
(a) Purchaser has full power and authority to execute, deliver and
perform his obligations under this Agreement and this Agreement is a valid and
binding obligation of Purchaser, enforceable in accordance with its terms,
except that the enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and to general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law). Purchaser is not subject to any agreement not to compete or other
restriction on his ability to acquire the shares of Common Stock and Preferred
Stock being purchased or acquired pursuant to this Agreement or to become an
employee of the Company or any of its subsidiaries, and Purchaser will not
enter into any such agreement or restriction.
(b) Purchaser has received and reviewed this Agreement and all annexes
and schedules hereto, including the Stockholders' Agreement and all schedules
and exhibits attached hereto and thereto, and has received all such business,
financial and other information as he deems necessary and appropriate to enable
him to evaluate the financial risk inherent in making an investment in the
Shares and has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in
respect thereof.
(c) Purchaser is acquiring the Shares with his own funds or property
for investment, for his own account, and not as a nominee or agent for any
other person, firm or corporation, and not with a view to the sale or
distribution of all or any part thereof, and he has no present intention of
selling, granting participation in, or otherwise distributing any of the
Shares. Except as provided herein or pursuant to the Stockholders' Agreement,
Purchaser does not have any contract, undertaking, agreement or arrangement
with any person, firm or corporation to sell, transfer or grant participation
to such person, firm or corporation, with respect to any of the Shares.
(d) Purchaser understands and agrees that (i) the Shares will not be
registered under the Securities Act of 1933, as amended (the "Act"), in part
based upon an exemption from
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registration predicated on the accuracy and completeness of his representations
and warranties appearing herein and (ii) he will not be permitted to sell,
transfer or assign any of the Shares until they are registered under the Act or
an exemption from the registration and prospectus delivery requirements of the
Act is available, and (iii) there is no assurance that such an exemption from
registration will ever be available or that the Shares will ever be able to be
sold.
(e) Purchaser agrees that in no event will he make a disposition of
any Shares or any interest therein, unless such Shares are registered under the
Act or unless and until (i) he shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and (ii) he shall have
furnished the Company with an opinion of counsel reasonably satisfactory in
form and content to the Company to the effect that (A) such disposition will
not require registration of such Shares under the Act or applicable state
securities laws, or (B) that appropriate action necessary for compliance with
the Act and applicable state securities laws has been taken, or (iii) the
Company shall have waived, expressly and in writing, the provisions of clauses
(i) and (ii) of this subsection.
(f) Purchaser does not require the assistance of an investment advisor
or other purchaser representative to participate in the transactions
contemplated by this Agreement, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of his
investment in the Company, has the ability to bear the economic risks of its
investment for an indefinite period of time and has been furnished with and had
access to such information as is necessary to verify the accuracy of the
information supplied and to have all questions answered by the Company.
8. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser as set forth below.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to enter into this Agreement, to issue the Shares
and to perform its obligations hereunder.
(b) The execution and delivery of this Agreement have been duly and
validly authorized, and all necessary corporate action has been taken to make
this Agreement a valid and binding obligation of the Company, enforceable in
accordance with its terms, except that the enforcement thereof may be subject
to bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and to general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(c) When issued and paid for by Purchaser as provided for herein, the
Shares will be duly and validly issued, fully paid and non-assessable.
9. Conditions of Parties' Obligations.
The obligations of the Company to issue and sell, and of Purchaser to
purchase and pay for, the Common Shares are also subject to the fulfillment
prior to or concurrently with the Closing of the conditions set forth below.
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(a) The representations and warranties of the Purchaser and the
Company shall be true and correct on and as of the Closing Date.
(b) All permits, consents, approvals, orders and authorizations, if
any, which the Company is required to obtain from, and all registrations,
qualifications, designations, declarations and filings which the Company is
required to make with, any state or Federal governmental authority of the
United States in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly obtained or made and shall be effective on and as of the Closing
Date.
(c) Purchaser shall have received copies of such supporting documents
as Purchaser may reasonably request. The Company shall have received such
supporting documents as it may reasonably request to satisfy itself concerning
the representations of Purchaser.
(d) Purchaser shall have become a party to and agreed to be bound by
the Stockholders' Agreement, which Stockholders' Agreement is hereby
incorporated herein as if set forth in full in this Agreement.
10. Restriction on Sale or Transfer. Except as provided herein, none
of the Common Shares that have not vested pursuant hereto (or any beneficial
interest therein) shall be sold, transferred, assigned or pledged (including
transfer by operation of law) and any attempt to make any such sale, transfer,
assignment or pledge shall be null and void and of no effect.
11. Legends. In addition to any legends required by the Stockholders'
Agreement, the certificates representing the shares of Common Stock purchased
pursuant to this Agreement will bear a legend in substantially the following
form:
"The shares represented by this certificate are subject to repurchase
under certain circumstances by the issuer pursuant to a Stock Purchase
Agreement between the Issuer and the initial purchaser, to which reference is
made for a xxxxxx description of such repurchase rights."
12. Enforcement.
The parties acknowledge that the remedy at law for any breach or
violation of the provisions of Section 10 hereof shall be inadequate and that,
in the event of any such breach or violation, the Company or Purchaser, as the
case may be, shall be entitled to injunctive relief in addition to any other
remedy, at law or in equity, to which he or it may be entitled.
13. Violation of Transfer Provisions. The Company shall not be
required (a) to transfer on its books any Common Shares which shall have been
sold, transferred, assigned or pledged in violation of any of the provisions of
this Agreement or (b) to treat as owner of such Common Shares or to accord the
right to vote or to pay dividends to any purported transferee of Common Shares
in violation of any of the provisions of this Agreement.
14. Covenant Regarding 83(b) Election. Purchaser hereby covenants and
agrees that he will make an election pursuant to Treasury Regulation 1.83-2
with respect to the Shares and will furnish the Company with a copy of the form
of election Purchaser has filed and evidence that such an election has been
filed in a timely manner.
15. General Provisions.
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(a) No Assignments. Except as specifically provided to the contrary in
this Agreement, neither party shall transfer, assign or encumber any of its or
his rights, privileges, duties or obligations under this Agreement without the
prior written consent of the other party, and any attempt to so transfer,
assign or encumber shall be void; provided, however, that the Company may
assign this Agreement and its rights hereunder in connection with a sale of all
of the stock of or all or substantially all of the assets of the Company.
(b) [intentionally left blank]
(c) Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given and made and served either by personal delivery to the person
for whom it is intended (including by reputable overnight delivery services
which shall be deemed to have effected personal delivery) or by telecopy,
receipt of which is acknowledged by the telecopy number set forth below for the
applicable addressee, or if deposited, postage prepaid, registered or certified
mail, return receipt requested, in the United States mail:
(i) if to Purchaser, addressed to Purchaser at his address
shown on the stock register maintained by the Company, or at such
other address as Purchaser may specify by written notice to the
Company, or
(ii) if to the Company, addressed to Silver Cinemas
International, Inc., c/o Xxxxx X. Xxxx, Brentwood Associates, 00000
Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000 Xxx Xxxxxxx, Xxxxxxxxxx 00000, or
at such other address as the Company may specify by written notice to
the Purchaser.
Each such notice, request, consent and other communication shall be
deemed to have been given upon receipt thereof as set forth above or, if
sooner, three days after deposit as described above. The addresses for the
purposes of this Section 15(c) may be changed by giving written notice of such
change in the manner provided herein for giving notice. Unless and until such
written notice is received, the addresses provided herein shall be deemed to
continue in effect for all purposes hereunder.
(d) Choice of Law. This Agreement shall be governed by and construed
in accordance with the internal laws, and not the laws of conflicts of laws, of
the State of Delaware.
(e) Severability. The parties hereto agree that the terms and
provisions in this Agreement are reasonable and shall be binding and
enforceable in accordance with the terms hereof and, in any event, that the
terms and provisions of this Agreement shall be enforced to the fullest extent
permissible under law. In the event that any term or provision of this
Agreement shall for any reason be adjudged to be unenforceable or invalid, then
such unenforceable or invalid term or provision shall not affect the
enforceability or validity of the remaining terms and provisions of this
Agreement, and the parties hereto hereby agree to replace such unenforceable or
invalid term or provision with an enforceable and valid arrangement which in
its economic effect shall be as close as possible to the unenforceable or
invalid term or provision.
(f) Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective permitted successors and assigns of the parties hereto.
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(g) Modification, Amendment and Waiver. No modification, amendment or
waiver of any provision of this Agreement shall be effective against the
Company or Purchaser unless approved in writing, and, in the case of the
Company, authorized by its Board of Directors. The failure at any time to
enforce any of the provisions of this Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of any of the
parties thereafter to enforce each and every provision hereof in accordance
with its terms. (h) Integration. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior negotiations, understandings and agreements, written or
oral.
(i) Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
(j) Counterparts. This Agreement may be executed in counterpart with
the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
COMPANY:
SILVER CINEMAS INTERNATIONAL, INC.
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxx
--------------------------------
Title: Chairman of the Board
-------------------------------
PURCHASER:
/s/ Xxxxx X. Xxxx
---------------------------------
Xxxxx Xxxx
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ANNEX A
SILVER CINEMAS INTERNATIONAL, INC.
PERFORMANCE CRITERIA
AND VESTING EXAMPLE
This Annex A sets forth the Performance Criteria, detailed vesting
provisions and vesting example with respect to the vesting of ETA Stock, which
is a part of the Common Shares to be acquired by Purchaser pursuant to the
Stock Purchase Agreement dated as of September 7, 1999 among the Company and
the Purchaser (the "Agreement"). Capitalized terms used herein and not defined
have the meanings ascribed to them in the Agreement.
As stated in Section 2(b) of the Agreement, 16.66% of the ETA Stock
shall become eligible for vesting as of the end of each of fiscal year from
fiscal 2000 through fiscal 2002 (each of such full fiscal years being defined
in the Agreement as a Performance Year). Each installment of ETA Stock when it
becomes eligible for vesting is hereinafter referred to as the "Eligible ETA
Stock."
For each Performance Year, the amount of Eligible ETA Stock that shall
become vested (effective as of the end of the fiscal year) will be determined
by comparing the Company's actual EBITDA as of the end of such fiscal year (as
determined from its audited financial statements) to Plan EBITDA (as described
below) for such fiscal year. The percentage of Eligible ETA Stock that shall
become vested at the end of each Performance Year shall be as set forth in the
following table:
Actual Performance as a Percentage of Eligible ETA Stock
% of Plan EBITDA Stock that shall become vested
----------------------- --------------------------------
less than 85.00% 0%
88.75% 30%
92.50% 60%
96.25% 80%
100% 100%
Vesting between the percentages listed in the table above will be
linearly interpolated.
If the Company fails to achieve the dollar amount of Plan EBITDA
required to vest 100% of the Eligible ETA Stock in any one Performance Year,
but in the immediately following Performance Year the Company's actual EBITDA
exceeds Plan EBITDA, the Company shall add the dollar amount by which the
Company's EBITDA exceeds Plan EBITDA in such Performance Year to the Company's
EBITDA for the Performance Year immediately prior thereto and vest the
additional Eligible ETA Stock that would have vested in that Performance Year
with the addition of the dollar amount carried back; provided that there are
limitations in the Agreement in the case of termination of employment and
acquisitions of the
12
Company. Such vesting for the earlier Performance Year is referred to herein as
"Catch Up Vesting."
In the event of an Acquisition, any Eligible ETA Stock which shall
have failed to vest as a result of the Company's failure to achieve the dollar
amount of Plan EBITDA required to vest 100% of the then Eligible ETA Stock
shall become subject to the Company's Purchase Option in Section 3 of the
Agreement.
"EBITDA" means, for any fiscal year, consolidated pre-tax income plus
interest expense (including non-cash interest, amortization of original issue
discount and the interest component of capital leases) on indebtedness,
depreciation and amortization of goodwill, covenants not to compete and similar
intangibles, all as determined in accordance with generally accepted accounting
principles and as reflected in the Company's audited consolidated financial
statements.
"Plan EBITDA" means, for each Performance Year, the dollar amount of
EBITDA set forth in the Operating Plan approved by the Board of Directors. Plan
EBITDA will be adjusted from time to time as may be mutually agreed upon to
reflect the expected contribution to EBITDA of acquisitions or major corporate
projects.
13
ANNEX B
JOINT ESCROW INSTRUCTIONS
September 7, 1999
Xxxx Xxxxxx
c/o Brentwood Associates
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Joint Escrow Instructions
Dear Sir or Madam:
As the person identified herein as Escrow Agent for Silver Cinemas
International, Inc. (the "Company"), a Delaware corporation, and the
undersigned holder of common stock, par value $.01 per share, of the Company
and Convertible Preferred Stock, par value $.01 per share, of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Stock Purchase Agreement
(the "Agreement") dated as of September 7, 1999, to which a copy of these Joint
Escrow Instructions is attached as Annex B, in accordance with the following
instructions:
1. In the event the Company, or any assignee of the Company (referred
to collectively herein as the "Company"), shall elect to exercise the Purchase
Option (as defined and described in the Agreement), the Company shall give to
the Purchaser and you a written notice specifying the number of shares of stock
to be purchased, the purchase price and the time for a closing hereunder at the
principal office of the Company, which time shall not be less than 20 days
after the date of such written notice. Unless you shall have received written
notice from Purchaser at least five days prior to the date specified for the
closing objecting to consummation of the transaction, Purchaser and the Company
hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice
including prompt delivery of the stock certificate(s) representing the shares
purchased. Any objecting notice from Purchaser shall set forth in reasonable
detail the basis for his objections, but his failure to do so shall not affect
your duties hereunder.
2. At the closing or upon redemption of the Convertible Preferred
Stock, you are directed to (i) date a stock certificate assignment form or
forms necessary for the transfer in question, (ii) fill in the number of shares
being transferred and (iii) deliver same together with the certificate or
certificates evidencing the shares to be transferred to the Company, against
the simultaneous delivery to you of the purchase price for the number of shares
of stock being purchased pursuant to the exercise of the Purchase Option.
Promptly after the closing, the Company shall deliver to you any certificate or
certificates representing shares which were not so purchased and remain subject
to these Joint Escrow Instructions.
3. Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all
14
documents necessary or appropriate to make such securities negotiable and
complete any transaction herein contemplated, including but not limited to any
required filings with all other governmental or regulatory bodies.
4. This escrow shall terminate (i) with respect to the Common Shares,
upon termination of the Purchase Option with respect to all Common Shares under
the Agreement and (ii) with respect to Convertible Preferred Stock, upon its
redemption or conversion to Common Stock , in each case in accordance with the
Company's certificate of incorporation, as amended. Within ten days after each
date of vesting under Sections 2(a) and 2(b) of the Agreement, the Company
shall notify you and Purchaser in writing of the number of shares which have
vested on that date. Within 20 days after your receipt of such notice, you
shall deliver to Purchaser a certificate or certificates evidencing the shares,
which have so, vested. Promptly following any exercise of the Purchase Option,
you shall deliver to Purchaser a certificate or certificates representing the
number of shares of stock not theretofore repurchased by the Company pursuant
to such exercise of the Purchase Option which have vested (less such shares as
have been previously delivered).
5. If at the time of termination of this escrow you should have in
your possession any documents, securities or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged
from all further obligations hereunder. The Company hereby authorizes you at
any time and from time to time after the date hereof to comply with a written
request from Purchaser, a copy of which you shall deliver to the Company, and
unless the Company shall have given you written notice of its objection to such
request within 30 days following its receipt thereof, to deliver to Purchaser a
certificate for that many shares of stock as have become vested in accordance
with the terms of the Agreement (less such shares as have been previously
delivered).
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing by the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in acting
or refraining from acting in reliance upon any instrument reasonably believed
by you to be genuine and to have been signed or presented by the proper party
or parties. You shall not be personally liable for any act you may do or omit
to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith and in the exercise of your own good judgment, and any act
done or omitted by you pursuant to the advice of our own independent attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees or
any court. If you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such obedience or compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside vacated or found to have been entered without
jurisdiction. For purposes of this paragraph 8, an objection made pursuant to
paragraph 1 by the Purchaser shall not be deemed a warning.
15
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder or thereunder.
10. You shall be entitled to employ such independent legal counsel and
other experts as you may deem necessary properly to advise in connection with
your obligations hereunder, may rely upon the advice of such counsel and may
pay such counsel reasonable compensation therefor.
11. Your responsibilities as Escrow Agent hereunder shall terminate on
the thirtieth day following receipt by the parties of your written notice of
resignation. In the event of any such termination, the Company shall appoint a
successor Escrow Agent.
12. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such dispute shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail, by registered or certified mail with postage
and fees prepaid, addressed to each of the other parties thereunto entitled at
the following addresses, or at such other addresses as a party may designate by
ten (10) days' advance written notice to each of the other parties hereto.
Company: c/o Brentwood Associates
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention:
Notice to Purchaser shall be sent to the address set forth below Purchaser's
signature.
Escrow Agent:
Xxxx Xxxxxx
c/o Brentwood Associates
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
15. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of these Joint Escrow Instructions; you do not
become a party to the Agreement.
16
16. All liabilities, losses, costs, fees and disbursements incurred by
you in connection with the performance of your duties hereunder, including
without limitation the compensation paid pursuant to paragraph 10 hereof, shall
be borne by the Company, and the Company hereby agrees to indemnify and hold
you free and harmless in respect of all claims, actions, demands, liabilities,
losses, costs, fees and expenses incurred by you in the performance of your
duties hereunder; provided, however, that this indemnity shall not extend to
conduct which has been determined, by a final judgment of a court of competent
jurisdiction, to have been grossly negligent or to have constituted intentional
misconduct.
17. This instrument shall be governed by and construed in accordance
with the internal laws, and not the laws of conflict of law, of the State of
Delaware.
18. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
17
19. This instrument may be executed in counterpart with the same
effect as if all parties had signed the same document. All such counterparts
shall be deemed an original, shall be construed together and shall constitute
one and the same instrument.
Very truly yours,
SILVER CINEMAS INTERNATIONAL, INC.
By:
------------------------------
Purchaser:
-----------------------------------
Name: Xxxxx Xxxx
Address:
---------------------------
ESCROW AGENT:
-----------------------------------
Name: Xxxx Xxxxxx
18
ANNEX C
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement dated as of September 7, 1999 (the "Agreement"), the undersigned
hereby sells, assigns and transfers unto the person identified as Escrow Agent
in the Agreement all rights and interests in ___________________ shares of
____________ Stock of Silver Cinemas International, Inc. (the "Company"), a
Delaware corporation, represented by Stock Certificate No. _______________
herewith (the "Certificate"), which Certificate was deposited by the
undersigned with the Escrow Agent pursuant to the Joint Escrow Instructions (as
defined in the Agreement) among the undersigned, the Company and such Escrow
Agent, such Certificate standing in the undersigned's name on the books of the
Company.
The undersigned does hereby irrevocably constitute and appoint the
Escrow Agent attorney to transfer such Common Stock on the books of the
Company, with full power of substitution in the premises.
Dated: ______________, 199_ ----------------------------------
Name: Xxxxx Xxxx
