Exhibit 6(a)(ii)
STOCKHOLDERS AGREEMENT, dated as of September 30, 1996, by and among
Xxxx Xxxxxx ("Xxxxxx"), The CineMasters Group, Inc., a New York corporation (the
"Corporation"), and National Patent Development Corporation, a Delaware
corporation, Xxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx St. Xxxx Xxxxxxx and Xxxxxxx
Xxxxxxx (collectively, the "Xxxxxxx Group"). Xxxxxx and each member of the
Xxxxxxx Group are sometimes collectively referred to herein as the
"Stockholders" and individually as a "Stockholder".
W I T N E S S E T H:
WHEREAS, on the date hereof, each of the Stockholders owns the
number of shares (collectively, the "Common Shares") of common stock, par value
$.01 per share (the "Common Stock") of the Corporation and the number of vested
stock options and unvested stock options of the Corporation set forth opposite
his, her or its name on Schedule I hereto; and
WHEREAS, pursuant to, and subject to the terms and conditions of,
that certain Share Exchange Agreement, dated as of the date hereof, by and among
the Corporation, Avenue Pictures, Inc. ("Avenue") and Xxxxxx (the "Share
Exchange Agreement"), the Corporation purchased all of the issued and
outstanding shares of Avenue and Avenue became a wholly-owned subsidiary of the
Corporation, and Xxxxxx, the sole shareholder of Avenue, was issued 1,425,000
shares of the Common Stock representing a significant minority equity interest
in the Corporation; and
WHEREAS, the parties hereto desire to, among other things, restrict
the sale, assignment, transfer, encumbrance or other disposition of the Common
Shares (or interests therein); and
WHEREAS, it is deemed to be in the best interests of the Corporation
and the Stockholders that provision be made for the continuity and stability of
the business and management of the Corporation;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Term of Agreement. (a) Except as otherwise provided herein, this
Agreement shall commence on the date hereof and shall continue in full force
and effect until the earliest to occur of any of the following events, at
which time this Agreement shall automatically terminate:
(i) The mutual consent in writing of each of the parties
hereto; or
(ii) The tenth anniversary of the date of this Agreement,
unless, at any time prior to such date or prior to the expiration of any
extension hereof, an instrument in writing is signed by each of the
parties hereto extending the duration of this Agreement for as many
additional years, not to exceed ten (10) years, as they desire.
(b) Nothing contained in this Section 1 shall affect or impair any
rights or obligations arising prior to or at the time of, or that may arise by
an event causing the termination of, this Agreement pursuant to Section 1(a)
hereof.
2. Voting Agreements; Election and Removal of Directors.
(a) Number of Directors. Each of the Stockholders agrees to take
such action, including the voting of the shares of Common Stock then owned or
controlled by such Stockholder, as may be necessary to cause to be elected a
Board of Directors of the Corporation (the "Board of Directors"), all in
accordance with the provisions of this Section 2. The Board of Directors shall
be reconstituted and shall consist of six (6) directors.
(b) Election of Directors. Subject to Section 2(e) below, each of
the Stockholders shall take such action as may be necessary to nominate and
elect to the Board of Directors (i) three (3) persons (each a "Xxxxxx Director"
and collectively, the "Xxxxxx Directors") designated by Xxxxxx and (ii) three
(3) persons (each a "Xxxxxxx Group Director" and collectively, the "Xxxxxxx
Group Directors") designated by the Xxxxxxx Group.
(c) Removal. Xxxxxx shall be entitled at any time and for any reason
(or for no reason) to remove any of the Xxxxxx Directors. The Xxxxxxx Group
shall be entitled at any time and for any reason (or for no reason) to remove
any of the Xxxxxxx Group Directors.
(d) Filling Vacancies. (i) If at any time a vacancy is created on
the Board of Directors by reason of the death, removal or resignation of any of
the directors of the Corporation ("Directors"), the Stockholders agree to take
such action, within twenty (20) days of such occurrences, to approve and elect
Director(s) designated to fill such vacancy or vacancies in the following
manner:
(A) If a vacancy is created by reason of the death,
removal or resignation of any of the Xxxxxx Directors, Xxxxxx shall have
the right to designate a nominee to be elected to fill such vacancy until
the next annual meeting of Stockholders of the Corporation; and
(B) If a vacancy is created by reason of the death,
removal or resignation of any of the Xxxxxxx Group Directors, the Xxxxxxx
Group shall have the right to designate a nominee to be elected to fill
such vacancy until the next annual meeting of Stockholders of the
Corporation.
(ii) If a vacancy is created in any manner other than as
specified in Section 2(d)(i) above, whether by expansion of the size of the
Board of Directors or otherwise, the Board of Directors agree to take such
action, within twenty (20) days of such occurrences, to approve and elect
Director(s) by a majority vote thereof.
(e) Covenant to Vote. Each of the Stockholders shall vote the shares
of Common Stock then owned or controlled by such Stockholder (i) at any annual
or special meeting of Stockholders of the Corporation called for the purpose of
voting on the election or removal of Directors or (ii) by consensual action of
Stockholders of the Corporation, with respect to the election or removal of
Directors in favor of the election of the Directors nominated or the removal of
the Directors designated in accordance with this Section 2.
(f) Committees of the Board of Directors. After the election of the
Directors designated in accordance with this Section 2, the Stockholders and the
Corporation shall take such action as shall be necessary to (i) establish an
independent advisory committee, the members of which shall be mutually selected
by Xxxxxx and the Xxxxxxx Group and (ii) except as may be otherwise mutually
agreed upon, appoint one Xxxxxx Director to any committee of the Board of
Directors for each Xxxxxxx Group Director appointed to any committee of the
Board of Directors such that the number of Xxxxxx Directors on any committee of
the Board of Directors shall be equal to the number of Xxxxxxx Group Directors
on such committee.
3. Restrictions on Sale or Other Disposition of Common Shares by
Stockholders.
(a) Restrictions on Transfer. Except for transfers otherwise
contemplated or permitted by this Agreement or otherwise consented to in writing
by each Stockholder who is a party to this Agreement, no Stockholder, either
directly or indirectly, shall sell, assign, mortgage, hypothecate, transfer,
pledge, create a security interest in or lien upon, encumber, give, place in
trust, or otherwise voluntarily or involuntarily dispose of (collectively
hereinafter sometimes referred to as "Transfer") any of the shares of Common
Stock now owned or hereafter acquired by such Stockholder. No transfer of any of
the shares of Common Stock in violation of the provisions of this Agreement
shall be made or recorded on the books of the Corporation and any such purported
transfer shall be void and of no force or effect.
(b) Permitted Transfers. Notwithstanding anything to the contrary
contained in Section 3(a) or in any other Section of this Agreement, each
Stockholder shall have the right at any time to Transfer his, her or its Common
Shares as follows:
(i) Each Stockholder who is a natural person shall have the
right to transfer any or all of the Common Shares owned by him or her for
no consideration or at a price to be determined in the sole discretion of
such Stockholder, provided that (A) the transfer is made in compliance
with the Securities Act of 1933, as amended (the "Securities Act") and
applicable state securities laws or pursuant to an exemption therefrom and
is to (I) his or her spouse, his or her issue, and/or a trust or trusts
for the benefit of himself or herself or his or her spouse and/or issue,
or (II) any corporation, partnership, trust or other entity which is
wholly-owned and controlled by such transferring Stockholder; provided,
however, that if at any time such transferee entity ceases to be
wholly-owned and controlled by such transferor Stockholder, all such
Common Shares so transferred shall revert immediately and automatically to
such transferor Stockholder without any action on the part of either the
transferor Stockholder, the transferee entity or the Corporation and (B)
whether the transfer is made during his or her lifetime or by testamentary
bequest in the event of his or her death, each transferee agrees in
writing, at the time of the transfer, to be bound by all of the provisions
of this Agreement which would be applicable to the transferring
Stockholder if he or she continued to own the Common Shares so
transferred.
(ii) Each Stockholder that is not a natural person shall have
the right at any time hereafter to transfer any or all of its Common
Shares to any Affiliate (as such term is defined under the Rules and
Regulations promulgated under the Securities Act), upon such terms as may
be agreed upon by such Stockholder and its transferee; provided, however,
that any such transfer shall be made in compliance with the Securities Act
and applicable state securities laws or pursuant to an exemption therefrom
and any such transferee shall acquire the Common Shares so transferred
subject to all the terms and conditions of this Agreement and shall agree
in writing, at the time of the transfer, to be bound by all of the
provisions of this Agreement which would be applicable to the transferring
Stockholder if it continued to own the Common Shares so transferred.
(iii) Subject to Section 5 hereof, each Stockholder shall have
the right at any time to transfer any or all of its Common Shares in
connection with a sale of shares of Common Stock registered under the
Securities Act or in accordance with the requirements of Rule 144 ("Rule
144") promulgated under the Securities Act, it being understood that such
transferee shall acquire the Common Shares so transferred free and clear
of all the terms, conditions and restrictions of this Agreement. For the
purposes of this Agreement, a "Public Offering" shall mean the sale by the
Corporation of shares of Common Stock pursuant to a registration statement
under the Securities Act, which shall have been declared effective by the
Securities and Exchange Commission with respect to an underwritten public
offering of any shares of Common Stock, or the consummation of a merger by
the Corporation in which the Stockholders receive securities which are
publicly traded.
(c) Notice. In the event of any transfer in accordance with the
provisions of Section 3(b), prompt written notice of the transfer shall be
delivered by the transferring Stockholder to the Corporation and each of the
other Stockholders, and, in the case of any transfer pursuant to Section 3
hereof, references herein to "Stockholder" or "Stockholders" shall include, from
and after the date of such permitted transfer, each such permitted transferee
(transferees acquiring Common Shares pursuant to Section 3(b)(i) or (ii) are
hereinafter sometimes referred to as "Permitted Transferees").
4. Right of First Refusal; Participation Rights.
(a) If any Stockholder receives a bona fide written offer to
purchase part or all of its Common Shares in a privately negotiated transaction
which it desires to accept, such Stockholder shall not sell, transfer, or
otherwise dispose of (the "Proposed Disposition") such Common Shares (the
"Disposition Securities") to a third party (the "Purchaser"), unless, prior to
such Proposed Disposition, such selling Stockholder shall have promptly reduced
the terms and conditions, if any, of the Proposed Disposition to a reasonably
detailed writing and shall have delivered written notice (the "Disposition
Notice") of such Proposed Disposition, to the other Stockholders. The
Disposition Notice shall contain an irrevocable offer to sell all, but not less
than all, the Disposition Securities to the other Stockholders upon the same
terms (including price) and subject to the same conditions, if any, as those
contemplated by the Proposed Disposition, and shall be accompanied by a true and
correct copy of the agreement embodying the terms and conditions, if any, of the
Proposed Disposition (which shall identify the Purchaser, the Disposition
Securities, the consideration and method of payment contemplated by the Proposed
Disposition, and all other terms and conditions, if any, of the Proposed
Disposition, it being hereby acknowledged, understood and agreed that if all or
any portion of the consideration contemplated by the Proposed Disposition shall
be in a form other than cash, the non-selling Stockholders' purchase price for
the Disposition Securities shall be the cash equivalent of such non-cash
consideration, as mutually determined in good faith by Xxxxxx and the Xxxxxxx
Group, or if Xxxxxx and the Xxxxxxx Group cannot agree, by an independent
investment bank or other securities valuation expert mutually selected by Xxxxxx
and the Xxxxxxx Group).
(b) Each non-selling Stockholder shall have the irrevocable right
and option (the "Purchase Option"), within thirty (30) days after receipt of the
Disposition Notice (the "Notice Period"), to accept such irrevocable offer as to
his, hers or its pro rata portion of the Disposition Securities which are
subject to the Proposed Disposition. If any non-selling Stockholder intends to
exercise such Purchase Option, it shall deliver to the selling Stockholder
written notice (an "Exercise Notice") of his, hers or its intent to exercise
his, hers or its Purchase Option (specifying the number) of the Disposition
Securities as to which he, she or it is accepting the irrevocable offer) prior
to expiration of the Notice Period.
A non-selling Stockholder's pro rata share of the amount of Common
Shares (including vested options to purchase shares of Common Stock pursuant to
the Corporation's 1995 Non-Qualified Stock Option Plan) subject to the
Disposition Notice shall be determined in proportion to the number of Common
Shares then held by all of the non-selling Stockholders (including vested
options to purchase shares of Common Stock pursuant to the Corporation's 1995
Non-Qualified Stock Option Plan).
(c) Within five (5) days following expiration of the Notice Period,
the selling Stockholder shall give a written notice (the "Remaining Shares
Notice") to the non-selling Stockholders setting forth the number of Disposition
Securities for which the Purchase Option is not being exercised (the "Remaining
Offered Securities"). Any non-selling Stockholder who exercised its Purchase
Option under Section 4(b) to purchase any of the Disposition Securities shall
have an option (the "Second Option") to purchase such amount of the Remaining
Offered Securities as the non-selling Stockholders shall agree upon or, failing
such agreement, that proportion of the Remaining Offered Securities which the
number of Common Shares (including vested options to purchase shares of Common
Stock pursuant to the Corporation's 1995 Non-Qualified Stock Option Plan) owned
by such non-selling Stockholder bears to the aggregate number of Common Shares
owned by all such non-selling Stockholders (including vested options to purchase
shares of Common Stock pursuant to the Corporation's 1995 Non-Qualified Stock
Option Plan). A non-selling Stockholder shall exercise the Second Option, if at
all, by giving a written second Exercise Notice to the selling Stockholder
within fifteen (15) days after the selling Stockholder has given its notice
relating to the Remaining Offered Securities.
(d) Unless otherwise agreed to by the selling Stockholder, all
Exercise Notices given by non-selling Stockholders shall be deemed rescinded if
Exercise Notices have not been timely given for all of the Disposition
Securities.
(e) If the non-selling Stockholders shall have given Exercise
Notices as to all of the Disposition Securities, all certificates for the
Disposition Securities shall be delivered to the purchaser(s) thereof at a
closing held within not more than thirty (30) days nor less than twenty (20)
days after the last such Exercise Notice is given (the "Closing Date") at the
offices of Pryor, Cashman, Xxxxxxx & Xxxxx located at 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000. At the Closing, each non-selling Stockholder who has elected to
exercise the Purchase Option shall deliver to the selling Stockholder in
immediately available funds the appropriate amount of the purchase price due
against the simultaneous delivery of certificates representing the Disposition
Securities so disposed of, duly endorsed in blank or accompanied by a stock
power or powers duly endorsed in blank, and in proper form for transfer,
together with any necessary stock-transfer stamps, and such Disposition
Securities shall be delivered free and clear of all liens, security interests
and encumbrances whatsoever.
(f) If all of the Disposition Securities are not intended to be
purchased by the non-selling Stockholders, then, within ten (10) days after the
earlier of (i) the expiration of the applicable periods in which non-selling
Stockholders could have exercised the Purchase Option or, if applicable, the
Second Option, or (ii) the non-selling Stockholders shall have declined in
writing to purchase all of the Remaining Offered Securities, the selling
Stockholder shall give notice to all non-selling Stockholders and the
Corporation of the Disposition Securities not intended to be purchased pursuant
to the operation of Sections 4(b), (c) and (d) (the "Purchase Notice"). For a
period of thirty (30) days after the date the Purchase Notice is given, the
selling Stockholder may, subject to Section 4(g) below, sell the Disposition
Securities to the Purchaser; provided, however, that such Disposition Securities
are sold to the Purchaser at a price not less than that contained in the
Disposition Notice and on terms and conditions, if any, not more favorable to
the Purchaser than those contained in the Disposition Notice. If the selling
Stockholder elects not to rescind Exercise Notices pursuant to Section 4(d)
hereof, the sale of the Disposition Securities to those non-selling Stockholders
shall take place at the closing of the sale of the balance of the Disposition
Securities to the Purchaser and, unless such non-selling Stockholders otherwise
agree, shall be conditioned upon the occurrence of said closing. If the selling
Stockholder wishes to sell all or any part of the Disposition Securities on
terms other than those set forth in the Disposition Notice or does not sell such
Disposition Securities on the terms and conditions contained in the Disposition
Notice within the aforementioned thirty (30) day period, it shall again be
obligated to make new offers and re-offers to the non-selling Stockholders, in
accordance with this Section 4, before it shall be permitted to Transfer its
Common Shares, or any part thereof, to any Person.
(g) Participation Right.
(i) Any non-selling Stockholder who does not exercise all or
any part of its Purchase Option, or if such Purchase Option is rescinded
pursuant to Section 4(d) above, may elect to participate (a Stockholder so
electing being herein a "Participating Stockholder") in the selling
Stockholder's sale of Common Shares to the Purchaser and any non-selling
Stockholders who have exercised their Purchase Option and are purchasing Common
Shares, in accordance with this Section 4(g);
(ii) Each such non-selling Stockholder shall have the right
(the "Participation Right") to Transfer, to the Purchaser and any non-selling
Stockholders who have exercised their Purchase Option and are purchasing Common
Shares, a number of Common Shares equal to the product of the number of Common
Shares proposed to be so sold to the Purchaser and any non-selling Stockholders
who have exercised their Purchase Option and are purchasing Common Shares times
a fraction, the numerator of which is the number of Common Shares owned by such
non-selling Stockholder (including vested options to purchase shares of Common
Stock pursuant to the Corporation's 1995 Non-Qualified Stock Option Plan) with
respect to which such non-selling Stockholder has exercised Participation Rights
and the denominator of which is the sum of the number of Common Shares to be so
sold and the number of Common Shares (including vested options to purchase
shares of Common Stock pursuant to the Corporation's 1995 Non-Qualified Stock
Option Plan) owned by all Participating Stockholders and with respect to which
Participation Rights are exercised.
The number of Common Shares to be sold by the selling Stockholder to the
Purchaser and any non-selling Stockholders who have exercised the Purchase
Option and/or the Second Option shall be reduced by the number of Common Shares
to be sold to the Purchaser and any non-selling Stockholders who have exercised
their Purchase Option and are purchasing Common Shares by a Participating
Stockholder pursuant to the exercise of a Participation Right;
(iii) The Participation Right shall be exercised, if at all,
by the Participating Stockholder giving written notice of its exercise of its
Participation Right to the selling Stockholder and each of the other non-selling
Stockholders within thirty (30) days after the Disposition Notice is given
pursuant to Section 4(a).
(iv) If the selling Stockholder would retain ownership of any
Disposition Securities by reason of the exercise of Participation Rights (such
remaining shares being herein the "Excluded Securities"), the selling
Stockholder may either (A) rescind all exercises of Participation Rights, reject
the offer to the Purchaser and retain ownership of the Disposition Securities,
or (B) negotiate with the Purchaser to purchase the Excluded Securities on the
terms and conditions contained in the Disposition Notice or on terms and
conditions less advantageous to the selling Stockholder. Any such sale of the
Excluded Securities to the Purchaser shall again be subject to the provisions of
Sections 3 and 4 of this Agreement. A transfer of Common Shares pursuant to the
exercise of a Participation Right shall not be subject to the provisions of
Section 3 or Section 4 of this Agreement.
5. Volume Limitations; "Piggy-back" Registration Rights.
(a) Volume Limitations. Until the fifth anniversary of the date
hereof, Xxxxxx and the Xxxxxxx Group will only be permitted to sell their
respective Common Shares into the public market at the Rule 144 permitted volume
level (i.e., during any three month period, the amount of Common Shares sold
shall not exceed the greater of (i) one percent (1%) of the outstanding shares
of Common Stock as shown by the most recent report or statement published by the
Corporation or (ii) the average weekly reported volume of trading during the
four calendar weeks preceding the date of the proposed sale).
"Piggy-back" Registration Rights. (i) If the Corporation shall
determine to register any shares of Common Stock either for its own account or
the account of a security holder or holders, other than a registration relating
solely to employee benefit plans, or a registration relating solely to a Rule
145 (under the Securities Act) transaction, the Corporation shall (A) promptly
give to each Stockholder written notice thereof (which shall include a list of
the jurisdictions in which the Corporation intends to attempt to qualify such
securities under the applicable blue sky or other state securities laws) and (B)
include in such registration (and any related qualification under blue sky laws
or other compliance), and in any underwriting involved therein, all of the
Common Shares specified in a written request or requests made by any Stockholder
within thirty (30) days after receipt of the written notice from the Corporation
described in clause (A) above, except as set forth in clause (ii) below. Such
written requests may specify all or a part of a Stockholder's Common Shares.
(ii) Notwithstanding any other provision of this Section 5(b),
if the representative(s) of the underwriters advises the Corporation that
marketing factors require a limitation on the number of shares of Common Stock
to be underwritten or that the inclusion of other securities of the Corporation
or Common Shares may adversely affect the sales price (of the securities to be
registered) that may be obtained, then, Xxxxxx'x Common Shares to be included in
the Public Offering will be excluded from such registration on a pari passu
basis with the Common Shares owned by members of the Xxxxxxx Group and included
in the Public Offering.
6. Additional Common Stock Acquired by Stockholders. All of the provisions
of this Agreement shall apply to all shares of Common Stock now owned or which
may be issued or transferred to a Stockholder or to his, hers or its transferee
in consequence of any additional issuance, purchase, exchange or
reclassification of any Common Stock, corporate reorganization or any other form
of recapitalization, or stock split or stock dividend or which are acquired by a
Stockholder in any other manner.
7. Condition Precedent to Permitted Dispositions. In addition to any other
conditions imposed by his Agreement, as a condition precedent to any Transfer by
any Stockholder of any Common Shares permitted pursuant to this Agreement other
than pursuant to Section 3(b)(iii) hereof, each purchaser, transferee or donee
shall agree in writing to be bound by all of the provisions and conditions of
this Agreement and shall become a Stockholder hereunder and no such purchaser,
transferee or donee shall be permitted to effect any Transfer which any
Stockholder was not permitted to make under this Agreement.
8. Special Voting Requirements. Except as otherwise provided
herein, a majority vote of the entire Board of Directors shall be required
to approve the following actions:
(a) any merger or consolidation involving the Corporation or
any subsidiary of the Corporation;
(b) a Public Offering;
(c) any sale or disposition of a material portion of the assets of
the Corporation and/or its subsidiaries or the creation of consensual liens on a
material portion of the assets of the Corporation and/or its subsidiaries in any
single transaction or series of related transactions;
(d) any acquisition or investment by the Corporation and/or
its subsidiaries in any single transaction or series of related transactions
which would exceed in the aggregate, $250,000, other than in the ordinary course
of business;
(e) the entering into by the Corporation of any material
contract involving aggregate payments to or from the Corporation in excess of
$250,000, other than in the ordinary course of business;
(f) the incurrence of indebtedness in excess of $250,000,
other than in the ordinary course of business;
(g) the termination of the employment of any executive
officer of the Corporation (other than the termination of the employment of (i)
Xxxxxx, in which case Xxxxxx shall abstain from voting on such action and such
action shall require the approval of a majority of the remaining Directors and
at least one (1) of the Xxxxxx Directors or (ii) Xxxx Xxxxxxx, in which case
Xxxx Xxxxxxx shall abstain from voting on such action and such action shall
require the approval of a majority of the remaining Directors and at least one
(1) of the Xxxxxxx Group Directors;
(h) any issuance of additional equity securities of the
Corporation other than the issuance of shares upon the exercise of outstanding
options to purchase shares of Common Stock pursuant to the Corporation's 1995
Non-Qualified Stock Option Plan;
(i) the adoption of any plan of liquidation of the
Corporation or any of its subsidiaries;
(j) the dissolution of the Corporation or any of its
subsidiaries;
(k) any action by the Corporation or any of its subsidiaries
to commence any suit, case, proceeding or other action (A) under any existing or
future law of any jurisdiction relating to bankruptcy, insolvency,
reorganization or relief of debtors seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its assets, or making a general assignment
for the benefit of its creditors; or
(l) aggregate expenditures in excess of $250,000 in any
fiscal year, except for ordinary course (i) expenditures of office rent, (ii)
expenditures for selling, general and administrative expenses and (iii)
out-of-pocket development expenditures not in excess of $500,000 during each of
the first two fiscal years following the consummation of the transactions
contemplated by the Share Exchange Agreement.
In the event that the Board of Directors is deadlocked with respect
to any fundamental corporate decision where the failure to act upon such
fundamental corporate decision is likely to result in the bankruptcy,
liquidation or dissolution of the Corporation within the foreseeable future
(each, an "Emergency Corporate Decision"), the dispute with respect to such
Emergency Corporate Decision (as well as any dispute with respect to whether the
issue in dispute involves an Emergency Corporate Decision) shall be submitted to
arbitration before the American Arbitration Association in accordance with the
Rules of the American Arbitration Association then pending. The arbitration
shall take place in the County and State of New York and the substantive law
applicable to the arbitration shall be that of the State of New York. The
arbitration award shall be final and binding upon the parties. Such award may be
confirmed in any court having jurisdiction and reduced to final judgment. The
Board of Directors may elect to use a single arbitrator and, failing to agree on
such person, the dispute shall be determined by a panel of three (3) neutral
arbitrators selected under the Rules of the American Arbitration Association.
All such other actions upon which the Board of Directors cannot reach a decision
shall not be taken by the Corporation.
Anything contained in this Section 8 to the contrary
notwithstanding, Board approval shall not be required for expenditures or
commitments to production which are funded either by non-recourse debt, such as
negative pick-up borrowings, or by cash flow or other binding commitments of
distributors or responsible third parties to pay for such production commitments
or expenditures. In addition, such borrowings, on a negative pick-up basis,
shall also not require Board approval regardless of their amount.
Each of the Stockholders shall take all actions necessary as
stockholders and directors (to the extent applicable) of the Corporation to
fully effectuate the terms and provisions of this Agreement.
9. Stockholder Covenants. Unless the Board of Directors approves
otherwise, Xxxxxx shall until December 31, 1997 maintain a balance of cash or
cash equivalents for the Corporation of at least $500,000.00 and shall at all
times thereafter maintain a balance of cash or cash equivalents for the
Corporation of at least $300,000.00. The parties hereto hereby agree that as
soon as practicable following the date hereof, $500,000.00 in cash or cash
equivalents shall be placed in a separate account, and any withdrawal from such
account shall require the signatures of Xxxxxx and a representative of the
Xxxxxxx Group. The balance of such account shall be reduced to $300,000 on
December 31, 1997. The parties hereto hereby acknowledge and agree that for
purposes of the first three sentences of this Section 9, NPDC Shares (as defined
below) shall be considered cash equivalents and shall be valued as of the date
they were contributed to the capital of the Corporation. Subject to the
restrictions set forth in this Section 9, if Xxxxxx determines at any time that
any or all of the 90,556 shares of common stock of National Patent Development
Corporation (the "NPDC Shares") held by the Corporation in its capital account
should be sold by the Corporation, Xxxxxx shall give written notice to Xxxxxx
Xxxxxxx setting forth the number of NPDC Shares to be sold. During the 20
business day period after receipt of such notice, Xxxxxx Xxxxxxx shall have the
exclusive right to determine the terms and conditions of the sale of such NPDC
Shares. If all of the NPDC Shares to be sold are not sold in such 20 business
day period, Xxxxxx shall have the exclusive right, during the next succeeding 20
business day period, to determine the terms and conditions of the sale of any
remaining NPDC Shares to be sold. If all of the NPDC Shares to be sold are not
sold in such second 20 business day period, the exclusive right of Xxxxxx to
determine the terms and conditions of the sale of any remaining NPDC Shares to
be sold shall terminate and any sale of such NPDC Shares shall again be subject
to the provisions of this Section 9.
10. Books of Account. The Corporation hereby covenants and agrees
with the Stockholders that the Corporation shall accurately and fairly
maintain its books of account in accordance with generally accepted
accounting principles.
11. Legend. Each certificate representing Common Shares owned by the
Stockholders or by any persons subject to the provisions of this Agreement shall
(in addition to any other legend(s)) have stamped, printed or typed thereon the
following legends (or a legend substantially similar thereto:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED OR
OFFERED FOR SALE OR TRANSFER IN THE ABSENCE OF SUCH
REGISTRATION OR ANY EXCEPTION THEREFROM UNDER SUCH ACT."
(b) "THESE SECURITIES ARE SUBJECT TO THE TERMS AND CONDITIONS SET
FORTH IN THE STOCKHOLDERS AGREEMENT, DATED AS OF SEPTEMBER 30
, 1996, AMONG THE CORPORATION AND ITS STOCKHOLDERS, COPIES OF
WHICH ARE MAINTAINED AND ARE AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
12. Agreement by the Corporation. No transfer of Common Shares made
in contravention of this Agreement shall be recognized by the Corporation, and
the Corporation will not at any time permit any transfer to be made on its books
or records of the certificates representing any shares of Common Stock of the
Stockholders or any other person subject to the provisions of this Agreement,
unless such transfer is made pursuant to and in accordance with the terms and
conditions of this Agreement.
13. Specific Performance. The Stockholders agree that inasmuch as the
Common Stock is closely held and the market therefor is limited, irreparable
damage would result if this Agreement is not specifically enforced. Therefore,
each of the parties hereto hereby consents that the restrictions on the transfer
of the Common Stock and the obligations to offer for sale Common Stock contained
in this Agreement shall be enforceable in a court of equity by a decree of
specific performance, and that injunctive relief may be granted to any party
hereto in connection therewith. Such remedies shall be cumulative and not
exclusive and shall be in addition to any other rights or remedies which any
party may have under this Agreement or otherwise.
14. Benefits of Agreement: Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, legal representatives and heirs; this
Agreement does not create, and shall not be construed as creating, any rights
enforceable by any other Person. The rights of the Stockholders hereunder shall
not be assignable except to the extent permitted in conjunction with a sale of
stock permitted in accordance with Section 3(a) hereof. The obligations of the
Stockholders hereunder shall be assumed by any of their transferees who shall be
required to become parties hereto.
15. Complete Agreement. This Agreement constitutes the complete
understanding among the parties with respect to its subject matter and
supersedes all existing agreements and understandings, whether oral or written,
among them and no alteration or modification of any of its provisions shall be
valid unless made in writing and signed by all of the parties hereto.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
17. Notices. All notices, offers, acceptances and other communications
required or permitted to be given or to otherwise be made to any party to this
Agreement shall be deemed to be sufficient if contained in a written instrument
delivered by hand, first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, as follows:
(a) If to the Corporation:
c/o Avenue Pictures, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Mr. Xxxx Xxxxxx
with a copy to:
Pryor, Cashman, Xxxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
And a carbon copy to:
The CineMasters Group, Inc.
c/o National Patent Development Corporation
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
and
The CineMasters Group, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
(b) If to any Stockholder, to the address of such Stockholder
as set forth in the stock transfer books of the Corporation.
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and the next business day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery. Any party may change the address to which each
such notice or communication shall be sent by giving written notice to the other
parties of such new address in the manner provided herein for giving notice.
18. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
without giving affect to the provisions, policies or principles thereof
respecting conflict or choice of laws.
19. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original but all of which taken
together shall constitute one and the same agreement.
20. Severability. Any provision of this Agreement which is determined to
be illegal, prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such illegality, prohibition or
unenforceability without invalidating the remaining provisions hereof which
shall be severable and enforceable according to their terms and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first set forth above.
XXXX XXXXXX
NATIONAL PATENT
DEVELOPMENT CORPORATION
By:
Name:
Title:
XXXX XXXXXXX
XXXXXX XXXXXXX
XXXXXXX ST. XXXX XXXXXXX
XXXXXXX XXXXXXX
THE CINEMASTERS GROUP, INC.
By:
Name:
Title:
Schedule I
-------------------------------------------------------------------------------
Number of Shares Number of Vested Number of
of Common Stock Stock Options Unvested Stock
Stockholder Owned by Owned by Options Owned by
Stockholder Stockholder Stockholder
-----------------------------------------------------------------------------
Xxxx Xxxxxx ............... 1,425,000 60,000 240,000
National Patent
Development Corporation 1,060,500 0 0
Xxxx Xxxxxxx .............. 170,000 200,000 0
Xxxxxx Xxxxxxx ............ 82,049 5,000 20,000
Xxxxxxx St. Xxxx Xxxxxxx
17,500 10,000 40,000
Xxxxxxx Xxxxxxx ........... 15,400 30,000 120,000
TOTALS .................... 2,770,449 305,000 420,000
