EXHIBIT 10.9
CINEMARK, INC.
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "AGREEMENT") is made as of March 12,
2004, among Cinemark, Inc., a Delaware corporation (the "COMPANY"), Madison
Dearborn Capital Partners IV, L.P., a Delaware limited partnership ("MDCP"),
each of the investors listed on the Schedule of Xxxxxxxx Investors attached
hereto (collectively, the "XXXXXXXX INVESTORS") and each of the executives
listed on the Schedule of Executives attached hereto (collectively, the
"EXECUTIVES"). MDCP, the Xxxxxxxx Investors and the Executives are collectively
referred to herein as the "STOCKHOLDERS" and individually as a "STOCKHOLDER."
Unless otherwise specified herein, all of the capitalized terms used herein are
defined in paragraph 13 hereof.
WHEREAS, MDCP shall acquire shares of the Company's Class A Common
Stock pursuant to the Stock Purchase Agreement between MDCP and the Company
dated as of the date hereof (the "PURCHASE AGREEMENT"); and
WHEREAS, the Xxxxxxxx Investors and the Executives currently own shares
of the capital stock of the Company and, in some cases, options to acquire
shares of Class A Common Stock; and
WHEREAS, the Company is a party to the Merger Agreement with Popcorn
Merger Corp., pursuant to which Popcorn Merger Corp will merge with and into the
Company with the Company as the surviving corporation (the "MERGER"), and
immediately following the effectiveness of the Merger, the Executives and
certain of the Xxxxxxxx Investors will own shares of Class A Common Stock; and
WHEREAS, the Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's Board of Directors (the "BOARD"), (ii) assuring continuity in the
management and ownership of the Company, (iii) limiting the manner and terms by
which the Stockholder Shares may be transferred and (iv) providing covenants for
certain stockholders;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Board of Directors.
(a) From and after the Closing and until the provisions
of this paragraph 1 cease to be effective, each holder of Stockholder Shares
shall vote all of such holder's Stockholder Shares which are voting shares and
any other voting securities of the Company over which such holder has voting
control and shall take all other reasonably necessary or desirable actions
within such holder's control (whether in such holder's capacity as a
stockholder, director, member of a Board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all reasonably
necessary or desirable actions within its control (including, without
limitation, calling special Board and stockholder meetings), so that:
(i) the authorized number of directors on the
Board shall be twelve;
(ii) the following individuals shall be elected
to the Board:
(A) two representatives designated by
the Xxxxxxxx Investors (determined by a vote of the Xxxxxxxx
Investors owning a majority of the Stockholder Shares held by
all Xxxxxxxx Investors) (the "XXXXXXXX DIRECTORS"), who shall
be initially: Xxx Xxx Xxxxxxxx and one other individual to be
designated by Xxx Xxx Xxxxxxxx; and
(B) ten representatives designated by
MDCP, provided that MDCP shall have the right to assign to the
Co-Investors the right to designate one of the ten
representatives MDCP is entitled to designate hereunder and in
the event that MDCP effects such an assignment, one
representative designated by the Co-Investors (determined by a
vote of the Co-Investors holding a majority of the Stockholder
Shares held by all Co-Investors) shall be elected to the
Board;
(iii) the removal from the Board of any director
as a result of a breach of such director's fiduciary duties to the
Company and its stockholders under applicable law shall be only by a
vote of the holders of a majority of the Company's outstanding Class A
Common Stock;
(iv) the removal from the Board of any director
for any other reason shall be only upon the written request of the
Person or Persons originally entitled to designate such director
pursuant to this paragraph 1(a);
(v) in the event that any representative
designated hereunder by any Stockholder ceases to serve as a director
during his or her term in office, the resulting vacancy shall be filled
by the Person or Persons originally entitled to designate such director
pursuant to this paragraph 1(a);
(vi) Xxx Xxx Xxxxxxxx shall serve as the Chairman
of the Board; provided that, if so requested by a majority of the
members of the Board (excluding the Xxxxxxxx Directors), he shall
resign as Chairman at such time as: (A) the right of the Xxxxxxxx
Investors to designate any director terminates in accordance with
paragraph 1(c)(i) or 1(c)(ii); or (B) pursuant to the Employment
Agreement between Xxx Xxx Xxxxxxxx and the Company dated as of the date
hereof (the "EMPLOYMENT AGREEMENT"), his employment is terminated by
the Company for Cause (as defined in the Employment Agreement) or by
Xxx Xxx Xxxxxxxx in a Voluntary Termination (as defined in the
Employment Agreement), and in the event that Xxx Xxx Xxxxxxxx ceases to
serve as the Chairman of the Board, the Chairman shall be elected by a
majority of the members of the Board;
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(vii) if any party fails to designate a director
to fill a vacancy on the Board pursuant to the terms of this paragraph
1(a), such vacant Board position shall remain open and unfilled until
such time as the party with the right to designate a director for such
a vacancy exercises such party's right to fill such position; and
(viii) notwithstanding the foregoing, in the event
that a Person loses its rights to designate a director in accordance
with paragraph 1(c) below, the director designated by such Person shall
be removed at the request of a majority of the Board (excluding such
director or directors) upon the occurrence of such event and the total
authorized number of directors shall be reduced upon such action by a
majority of the Board (excluding such director or directors) by the
number of directors that such Person loses its rights to designate.
(b) The Company shall pay the reasonable out-of-pocket
expenses incurred by each director in connection with attending the meetings of
the Board and any committee thereof.
(c) Notwithstanding anything to the contrary contained
herein,
(i) the number of Xxxxxxxx Directors shall be
reduced by one upon the occurrence of each of the following events: (A)
such time as the Xxxxxxxx Investors and their Permitted Transferees
hold in the aggregate less than 10% of the outstanding shares of Class
A Common Stock and (B) such time as the Xxxxxxxx Investors and their
Permitted Transferees hold in the aggregate less than 5% of the
outstanding shares of Class A Common Stock; and the rights of the
Xxxxxxxx Investors under this paragraph 1 shall terminate automatically
and cease to have any further force or effect upon the occurrence of
the event described in clause (B) above;
(ii) the rights of the Xxxxxxxx Investors under
this paragraph 1 shall terminate automatically and cease to have any
further force or effect at such time as the Xxxxxxxx Investors and
their Permitted Transferees hold, directly or indirectly, more than a
5% interest of any business (other than the Company) that owns,
operates or manages theatres with more than 800 movie screens in the
aggregate in the Western Hemisphere;
(iii) the rights, if any, of the Co-Investors
under this paragraph 1 to designate a director shall terminate
automatically and cease to have any further force or effect at such
time as the Co-Investors and their Permitted Transferees hold in the
aggregate less than 5% of the outstanding shares of Class A Common
Stock, and the right to designate such director shall revert back to
MDCP under paragraph 1(a)(ii)(B); and
(iv) the rights of MDCP under this paragraph 1
shall terminate automatically and cease to have any further force or
effect at such time as MDCP and its Permitted Transferees hold in the
aggregate less than 5% of the outstanding shares of Class A Common
Stock; provided that MDCP may assign its right to designate (A) any
number of directors that MDCP is entitled to designate hereunder to any
Person or group of affiliated Persons who acquires more than 50% of the
shares of Class A Common Stock held by MDCP, after giving effect to the
last of the Transfers to the Co-Investors
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contemplated by paragraph 3(b)(i)(D) below, and (B) one of the
directors MDCP is entitled to designate hereunder to any Person or
group of affiliated Persons who acquires less than 50% of the shares of
Class A Common Stock held by MDCP, after giving effect to the last of
the Transfers to the Co-Investors contemplated by paragraph 3(b)(i)(D)
below and any assignment by MDCP to the Co-Investors of the right to
designate one of the directors MDCP is entitled to designate hereunder
pursuant to paragraph 1(a)(ii)(B) above.
(d) The provisions of this paragraph 1 shall
terminate automatically and cease to have any further force or effect
upon the consummation of a Sale of the Company.
2. Representations and Warranties; Voting Agreements.
(a) Each Stockholder represents and warrants that (i) as
of the Closing, such Stockholder will be the record owner of the number of
Stockholder Shares set forth opposite its name on the Schedules attached hereto,
free and clear of all liens and encumbrances, (ii) this Agreement has been duly
authorized, executed and delivered by such Stockholder and constitutes the valid
and binding obligation of such Stockholder, enforceable in accordance with its
terms, (iii) as of the Closing, such Stockholder has not granted and is not a
party to any proxy, voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement, (iv) as of the date
hereof, the number of shares of common stock of the Company which such
Stockholder owns of record and the number of shares of common stock of the
Company issuable upon exercise of options owned by such Stockholder are set
forth opposite such Stockholder's name on the schedules attached hereto, (v)
except as set forth on such schedules, such Stockholder does not own any shares
of capital stock issued by the Company or any of its Subsidiaries or any other
securities or rights to acquire securities of the Company or any of its
Subsidiaries, and (vi) such Stockholder is not entitled to receive any payments
or other compensation from the Company or any of its Subsidiaries or any other
party as a result of or in connection with the transactions contemplated by the
Merger Agreement, except (to the extent applicable) pursuant to such
Stockholder's Existing Employment Agreement and pursuant to the terms of the
Sale Bonus Agreement. In addition, Xxx Xxx Xxxxxxxx and The Xxxxxxxx Special
Trust represent and warrant that Xxx Xxx Xxxxxxxx is one of two trustees of such
trust, and such trust is solely for the benefit of members of Xxx Xxx Xxxxxxxx'x
Family Group.
(b) From and after the Closing, no Stockholder shall
grant any proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
3. Restrictions on Transfer of Stockholder Shares.
(a) Transfer of Stockholder Shares. No holder of
Stockholder Shares shall sell, transfer, assign or otherwise dispose of (whether
with or without consideration and whether voluntarily or involuntarily or by
operation of law, but excluding by way of merger or consolidation) any interest
in his Stockholder Shares (a "TRANSFER"), except pursuant to this Agreement. Any
Transfer or attempted Transfer of any Stockholder Shares in violation of any
provision of this Agreement shall be void, and the Company shall not record such
Transfer on its
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books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
(b) Exempt Transfers.
(i) Subject to the provisions in paragraph
3(b)(ii), the restrictions set forth in this paragraph 3 shall not apply to any
Transfer by a Stockholder with respect to any of the following Transfers (each
an "EXEMPT TRANSFER"):
(A) any Transfer of Stockholder Shares by a
Stockholder who is not a natural person to such Stockholder's
Affiliates, including, in the case of MDCP, any Transfer which
constitutes an in-kind distribution to its partners (and, in connection
with or following any such distribution, an in-kind distribution by the
general partner of MDCP to its partners);
(B) in the case of a Stockholder who is a
natural person, any Transfer by will or pursuant to the applicable laws
of descent and distribution or Transfers to or among such holder's
Affiliates, any members of such holder's Family Group or such Family
Group member's Affiliates;
(C) any Transfer of Stockholder Shares in
connection with an Approved Sale;
(D) any Transfer by MDCP of its Stockholder
Shares to one or more Co-Investors (other than to a Competitor or such
Competitor's Affiliates) during the first six months after the Closing,
so long as immediately following the last to occur of such Transfers,
MDCP and its Permitted Transferees hold in the aggregate shares of
Class A Common Stock with an aggregate original cost of not less than
$350 million; or
(E) any Transfer by the Executives of their
Stockholder Shares to the Company or any of its Subsidiaries.
(ii) A transferee of Stockholder Shares pursuant
to a Transfer described in paragraphs 3(b)(i)(A) and (B) above are referred to
herein as a "PERMITTED TRANSFEREE." The restrictions contained in paragraph 3(a)
shall continue to be applicable to the Stockholder Shares after any Transfer
pursuant to paragraphs 3(b)(i)(A), (B) and (D), and such transferees of such
Stockholder Shares shall agree in writing to be bound by the provisions of this
Agreement affecting the Stockholder Shares so transferred. Notwithstanding the
foregoing, no party hereto shall avoid the provisions of this Agreement by
making one or more Transfers to one or more Permitted Transferees and then
disposing of all or any portion of such party's interest in any such Permitted
Transferee. Notwithstanding anything herein to the contrary, in no event shall
any Stockholder Shares be pledged unless otherwise approved in writing by MDCP
and the Xxxxxxxx Investors.
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(c) First Refusal Rights upon Transfers by Stockholders
other than MDCP.
(i) If any holder of Stockholder Shares (other
than MDCP or any of its Permitted Transferees) proposes to Transfer Stockholder
Shares (other than pursuant to an Exempt Transfer), then not less than 20 days
prior to the date on which such Transfer will occur (such 20-day period, the
"ELECTION PERIOD"), the transferring holder (the "TRANSFERRING STOCKHOLDER")
shall deliver a written notice (an "OFFER NOTICE") to the Company and MDCP. The
Offer Notice shall disclose in reasonable detail the number of Stockholder
Shares to be Transferred, the material terms and conditions of the Transfer and
the identity, background and ownership (if applicable) of the prospective
transferee(s), and the Offer Notice shall constitute a binding offer to sell
such Stockholder Shares in accordance with the provisions of this paragraph
3(c), first to the Company and then to MDCP, on the terms and conditions
contained in the Offer Notice.
(ii) Upon receipt of the Offer Notice, the
Company may elect to purchase all (but not less than all) of the Stockholder
Shares specified in the Offer Notice at the price and on the terms specified
therein by delivering written notice (the "COMPANY ELECTION NOTICE") of such
election to the Transferring Stockholder and MDCP as soon as practical, but in
any event within ten days (the "COMPANY OFFER PERIOD") after the delivery of the
Offer Notice to the Company and MDCP.
(iii) If and only if the Company has not elected
to purchase all of the Stockholder Shares within the Company Offer Period, then
MDCP may elect to purchase all (but not less than all) of the Stockholder Shares
specified in the Offer Notice at the price and on the terms specified therein by
delivering written notice (the "MDCP ELECTION NOTICE") of such election to the
Transferring Stockholder within 20 days after delivery of the Offer Notice to
the Company and MDCP.
(iv) If the Company and/or MDCP has elected to
purchase Stockholder Shares from the Transferring Stockholder, the Transfer of
such shares shall be consummated as soon as practical after the delivery of the
Company Election Notice or the MDCP Election Notice, as applicable, to the
Transferring Stockholder, but in any event within 45 days after the expiration
of the Election Period.
(v) To the extent that the Company and MDCP have
not elected to purchase all of the Stockholder Shares being offered, the
Transferring Stockholder may, within 90 days after the expiration of the
Election Period and subject to the provisions of this Agreement, Transfer such
Stockholder Shares to the transferees identified in the Offer Notice at a price
no less than the price per share specified in the Offer Notice and on other
terms no more favorable to the transferees thereof than those offered to the
Company and MDCP in the Offer Notice. Any Stockholder Shares not transferred
within such 90-day period shall be reoffered to the Company and MDCP under this
paragraph 3(c) prior to any subsequent Transfer.
(d) First Refusal Rights upon Transfers by MDCP to a
Competitor.
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(i) If MDCP proposes to Transfer its Stockholder
Shares to a Competitor or such Competitor's Affiliates and such Transfer will
not be effected in connection with a Sale of the Company, then not less than 20
days prior to the date on which such Transfer will occur (such 20-day period,
the "COMPETITOR SALE ELECTION PERIOD"), such Person shall deliver a written
notice (a "COMPETITOR SALE OFFER NOTICE") to the Company and the Xxxxxxxx
Investors. The Competitor Sale Offer Notice shall disclose in reasonable detail
the number of Stockholder Shares to be Transferred, the material terms and
conditions of the Transfer and the identity, background and ownership (if
applicable) of the Competitor, and the Competitor Sale Offer Notice shall
constitute a binding offer to sell such Stockholder Shares in accordance with
the provisions of this paragraph 3(d), first to the Company and then to the
Xxxxxxxx Investors, on the terms and conditions contained in the Competitor Sale
Offer Notice.
(ii) Upon receipt of the Competitor Sale Offer
Notice, the Company may elect to purchase all (but not less than all) of the
Stockholder Shares specified in the Competitor Sale Offer Notice at the price
and on the terms specified therein by delivering written notice (the "COMPETITOR
SALE ELECTION NOTICE") of such election to MDCP and the Xxxxxxxx Investors as
soon as practical, but in any event within ten days (the "COMPETITOR SALE OFFER
PERIOD") after the delivery of the Competitor Sale Offer Notice to the Company
and MDCP.
(iii) If and only if the Company has not elected
to purchase all of the Stockholder Shares within the Competitor Sale Offer
Period, the Xxxxxxxx Investors may elect to purchase all (but not less than all)
of the Stockholder Shares specified in the Competitor Sale Offer Notice at the
price and on the terms specified therein by delivering written notice (the
"XXXXXXXX ELECTION NOTICE") of such election to MDCP within 20 days after
delivery of the Offer Notice to the Company and the Xxxxxxxx Investors.
(iv) If the Company and/or any of the Xxxxxxxx
Investors has elected to purchase Stockholder Shares from MDCP, the Transfer of
such shares shall be consummated as soon as practical after the delivery of the
Competitor Sale Election Notice or the Xxxxxxxx Election Notice, as applicable,
to MDCP, but in any event within 45 days after the expiration of the Competitor
Sale Election Period.
(v) To the extent that the Company and the
Xxxxxxxx Investors have not elected to purchase all of the Stockholder Shares
being offered, MDCP may, within 90 days after the expiration of the Competitor
Sale Election Period and subject to the provisions of this Agreement, Transfer
such Stockholder Shares to the Competitor (or such Competitor's Affiliates)
identified in the Competitor Sale Offer Notice at a price no less than the price
per share specified in the Competitor Sale Offer Notice and on other terms no
more favorable to the Competitor (or such Competitor's Affiliates) than those
offered to the Company and the Xxxxxxxx Investors in the Competitor Sale Offer
Notice. Any Stockholder Shares held by MDCP not transferred within such 90-day
period shall be reoffered to the Company and the Xxxxxxxx Investors under this
paragraph 3(d) prior to any subsequent Transfer to a Competitor.
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(e) Participation Rights.
(i) If MDCP proposes to Transfer any of its
Stockholder Shares (other than pursuant to an Exempt Transfer), then not less
than 20 days prior to any such Transfer of Stockholder Shares (such 20-day
period, the "MDCP SALE PERIOD"), MDCP shall deliver a written notice (the "MDCP
SALE NOTICE") to the Company and all holders of Stockholder Shares other than
MDCP (the "OTHER STOCKHOLDERS") specifying in reasonable detail the identity,
background and ownership (if any) of the prospective transferee(s), the number
of shares to be Transferred and the terms and conditions of the Transfer (which
notice may be the same notice and given at the same time as the Offer Notice
under paragraph 3(d)). Subject to paragraph 3(e)(iii), the Other Stockholders
may elect to participate in the contemplated Transfer at the same price per
share and on the same terms by delivering written notice (the "MDCP SALE
ELECTION Notice") to MDCP within the MDCP Sale Period. If any of the Other
Stockholders has elected to participate in such Transfer, then MDCP and such
Other Stockholder shall be entitled to sell in the contemplated Transfer, at the
same price and on the same terms, a number of Stockholder Shares equal to the
product of (A) the quotient determined by dividing (x) the percentage of
Stockholder Shares owned by such Person by (y) the aggregate percentage of
Stockholder Shares owned by MDCP and the Other Stockholders participating in
such sale, and (B) the number of Stockholder Shares to be sold in the
contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100
Stockholder Shares by MDCP, and if MDCP at such time owns 30%
of all Stockholder Shares and if the Xxxxxxxx Investors
owning 20% and Executives owning 10% of all Stockholder
Shares elect to participate, then MDCP would be entitled to
sell 50 shares (30% / 60% x 100 shares), the Xxxxxxxx
Investors would be entitled to sell 33 shares (20% / 60% x
100 shares) and the Executives would be entitled to sell 17
shares (10% / 60% x 100 shares).
(ii) Any of the Other Stockholders may elect to
sell in any Transfer contemplated under this paragraph 3(e) a number of
Stockholder Shares less than such Other Stockholders are entitled to sell
hereunder, in which case MDCP shall have the right to sell an additional number
of Stockholder Shares in such Transfer equal to the number that such Other
Stockholders are permitted to sell but have elected not to sell. MDCP shall use
reasonable efforts to obtain the agreement of the prospective transferee(s) to
the participation of the Other Stockholders in any contemplated Transfer, and
MDCP shall not Transfer any of its Stockholder Shares to any prospective
transferee if such prospective transferee declines to allow the participation of
the Other Stockholders. Each holder Transferring Stockholder Shares pursuant to
this paragraph 3(e) shall pay such holder's pro rata share (based on the number
of Stockholder Shares to be sold) of the expenses incurred by the holders in
connection with such Transfer and shall be obligated to join on a pro rata basis
(based on the number of Stockholder Shares to be sold) in any indemnification or
other obligations that MDCP agrees to provide in connection with such Transfer
(other than any such obligations that relate specifically to a particular holder
such as indemnification with respect to representations and warranties given by
a holder regarding such holder's title to and ownership of Stockholder Shares);
provided that no holder shall be obligated in connection with such Transfer to
agree to indemnify or hold harmless the transferees
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with respect to an amount in excess of the net consideration paid to such holder
in connection with such Transfer.
(iii) Notwithstanding the foregoing, no Executive
(or any of such Executive's Permitted Transferees) shall be entitled to
participate under this paragraph 3(e) in any Transfer made by MDCP or any of its
Permitted Transferees, unless such Transfer (together with any related
Transfers) constitutes a Sale of the Company.
(f) Transfers to Competitors. No holder of Stockholder
Shares (other than MDCP and its Permitted Transferees, subject to paragraph
3(d)) shall Transfer any Stockholder Shares to any Competitor, except pursuant
to paragraph 3(e) or paragraph 4 hereof.
(g) Termination of Restrictions. The restrictions on the
Transfer of Stockholder Shares set forth in this paragraph 3 shall continue with
respect to each Stockholder Share until the date on which such Stockholder Share
has been transferred in a Public Sale or in a Sale of the Company.
4. Sale of the Company.
(a) If the Board or MDCP approves a Sale of the Company
and delivers written notice to the holders of Stockholders Shares invoking the
provisions of this paragraph (any such sale, an "APPROVED SALE"), the holders of
Stockholders Shares shall consent to, vote in favor of and raise no objections
against the Approved Sale.
(b) If the Approved Sale is structured as (i) a merger or
consolidation, each holder of Stockholder Shares shall vote its Stockholder
Shares to approve such merger or consolidation, whether by written consent or at
a stockholders meeting (as requested by the Board or MDCP, as the case may be),
and waive all dissenter's rights, appraisal rights and similar rights in
connection with such merger or consolidation, (ii) a sale of stock, each holder
of Stockholder Shares shall agree to sell, and shall sell, all of its
Stockholder Shares and rights to acquire Stockholder Shares on the terms and
conditions so approved, or (iii) a sale of assets, each holder of Stockholder
Shares shall vote its Stockholder Shares to approve such sale and any subsequent
liquidation of the Company or other distribution of the proceeds therefrom,
whether by written consent or at a stockholders meeting (as requested by the
Board or MDCP, as the case may be).
(c) In furtherance of the foregoing, (i) each holder of
Stockholder Shares shall take, with respect to such holder's Stockholder Shares,
all necessary or desirable actions reasonably requested by the Board or MDCP, as
the case may be, in connection with the consummation of the Approved Sale,
including without limitation, voting to approve such transaction and executing
the applicable purchase agreement, and (ii) each holder of Stockholder Shares
shall make the same representations, warranties, indemnities and agreements as
each other holder of Stockholder Shares, provided that (A) each holder of
Stockholder Shares shall be obligated to make representations and warranties as
to such Stockholder's title to and ownership of Stockholder Shares,
authorization, execution and delivery of relevant documents by such Stockholder,
enforceability of relevant agreements against such Stockholder and other matters
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relating to such Stockholder, to enter into covenants in respect of a Transfer
of such Stockholder's Stockholder Shares in connection with such Approved Sale
and to enter into indemnification obligations with respect to the foregoing, in
each case to the extent that each other Stockholder is similarly obligated, but
no Stockholder shall be obligated to enter into indemnification obligations with
respect to any of the foregoing in respect of any other Stockholder or such
other Stockholder's Stockholder Shares and (B) in no event shall any Stockholder
be liable in respect of any indemnity obligations pursuant to any Approved Sale
in an aggregate amount in excess of the total consideration payable to such
Stockholder in such Approved Sale.
(d) The obligations of the holders of Stockholder Shares
with respect to an Approved Sale are subject to the satisfaction of the
following conditions: (i) except as provided in the provisos in paragraphs
8(d)(iii) and 8(d)(iv) of this Agreement, upon the consummation of the Approved
Sale, each holder of Stockholder Shares will receive the same form of
consideration and the same portion of the aggregate consideration that such
holder of Stockholder Shares would have received if such aggregate consideration
had been distributed by the Company in complete liquidation pursuant to the
rights and preferences set forth in the Company's Certificate of Incorporation
as in effect immediately prior to such Approved Sale; (ii) except as provided in
the provisos in paragraphs 8(d)(iii) and 8(d)(iv) of this Agreement, if any
holder of a class of Stockholder Shares is given an option as to the form and
amount of consideration to be received, each holder of such class of Stockholder
Shares will be given the same option; and (iii) each holder of then currently
exercisable rights to acquire shares of a class of Stockholder Shares will be
given an opportunity to exercise such rights prior to the consummation of the
Approved Sale and participate in such sale as holders of such class of
Stockholder Shares; provided that the condition that each holder of Stockholder
Shares receive, or is provided with the same option to receive, the same form of
consideration as set forth in clause (i) and clause (ii) above shall be deemed
satisfied even if certain holders of Stockholders Shares receive, to the
exclusion of others, securities of the entity acquiring the Company in an
Approved Sale, so long as each holder of Stockholder Shares receives the same
amount of value, whether in cash or such securities, as of the closing of such
Approved Sale with respect to such holder's Stockholder Shares.
(e) If 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) promulgated by the Securities Exchange Commission
may be available with respect to such negotiation or transaction (including a
merger, consolidation or other reorganization), the holders of Stockholder
Shares shall at the request of the Company, appoint a "purchaser representative"
(as such term is defined in Rule 501) reasonably acceptable to the Company. If
any holder of Stockholder Shares appoints a purchaser representative designated
by the Company, the Company shall pay the fees of such purchaser representative.
However, if any holder of Stockholder Shares declines to appoint the purchaser
representative designated by the Company, such holder shall appoint another
purchaser representative (reasonably acceptable to the Company), and such holder
shall be responsible for the fees of the purchaser representative so appointed.
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(f) Subject to paragraph 4(e), each holder of Stockholder
Shares shall, to the extent requested by the Company, pay such holder's pro rata
share of the expenses incurred by the holders in connection with an Approved
Sale.
5. Holdback Agreement. No Executive or any of his Permitted
Transferees shall effect any public sale or distribution of any Stockholder
Shares or of any other capital stock or equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such stock or
securities, during the seven days prior to and the 180 period beginning on the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration (as such terms are defined in the Registration Agreement
dated as of the date hereof among MDCP, the Xxxxxxxx Investors and the Company)
unless the underwriters managing the registration otherwise agree. The
restrictions on the transfer of Stockholder Shares set forth in this paragraph 5
shall continue with respect to each Stockholder Share until the date on which
such Stockholder Share has been transferred in a Public Sale.
6. Preemptive Rights.
(a) Except for issuances of equity securities or
securities or instruments containing equity-like features (i) in the form of
Class A Common Stock or options to acquire Class A Common Stock to employees,
directors or consultants of the Company or any of its Subsidiaries, (ii) upon
the conversion, recapitalization or reorganization of any securities of the
Company, (iii) as consideration for the acquisition of or investment in another
company or business (whether through a purchase of securities, a merger,
consolidation, purchase of assets or otherwise), including, without limitation,
joint ventures and strategic alliances, (iv) pursuant to a registered public
offering of Class A Common Stock under the Securities Act, (v) as additional
yield or return in respect of institutional indebtedness for borrowed money,
(vi) as a dividend or other distribution in respect of the Company's equity
securities or (vii) in connection with a stock split or similar event, if the
Company authorizes the issuance or sale of any shares of Class A Common Stock or
any other equity securities of the Company or any securities, options or other
rights to acquire any shares of Class A Common Stock or other equity securities
of the Company (any such securities or rights referred to herein as "ADDITIONAL
SECURITIES"), the Company shall first offer to sell to each holder of
Stockholder Shares (other than shares of Class A Common Stock issued or issuable
upon exercise of stock options (such shares referred to herein collectively as
"OPTION SHARES")) a portion of such Additional Securities equal to the quotient
determined by dividing (A) the number of shares of Class A Common Stock (other
than Option Shares) held by such holder by (B) the total number of shares of
Class A Common Stock outstanding on a fully-diluted basis (assuming exercise of
all outstanding rights to acquire shares of Class A Common Stock); provided that
such offer shall be made only to the holders of Stockholder Shares that are
"accredited investors" under Regulation D of the Securities Act, or the Company
otherwise consents to such holders' participation under this paragraph 6; and
provided further that, if such Additional Securities are being offered in
combination with other securities of the Company, the Persons exercising rights
pursuant to this paragraph 6 shall also be required to purchase the same strip
of securities on the same terms and conditions as being offered by the Company.
Holders of Stockholder Shares (other than Option Shares) shall be entitled to
purchase such Additional Securities at the same price and on the same terms as
such Additional Securities are to be offered to any other Persons. The purchase
price for all
11
Additional Securities so offered to the holders of Stockholder Shares hereunder
shall be payable in cash.
(b) In order to exercise their purchase rights hereunder,
each holder of Stockholder Shares (other than Option Shares) shall, within 10
days after receipt of written notice from the Company describing in reasonable
detail the stock or securities being offered, the purchase price thereof, the
payment terms and such holder's percentage allotment, deliver a written notice
to the Company describing such holder's election hereunder.
(c) Upon the expiration of the offering period described
above, the Company shall be entitled to sell such Additional Securities that the
holders of Stockholder Shares have not elected to purchase during the 90 days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to such holders. Any such Additional
Securities offered or sold by the Company after such 90-day period shall be
reoffered to the holders of Stockholder Shares (other than Option Shares)
pursuant to the terms of this paragraph 6.
7. Anti-Takeover Measures. Prior to the commencement of the
initial public offering of shares of the Company's Class A Common Stock
registered under the Securities Act, MDCP shall request that the Board adopt
reasonable and customary anti-takeover measures, except to the extent that (i)
the Board in the observance of its fiduciary duties determines that any such
measures are not in the best interests of the Company's stockholders or (ii) the
Company's underwriters managing the public offering advise the Company that any
such measures will adversely affect execution of such offering or the price to
be obtained in such offering.
8. Covenants.
(a) Financial Statements and Other Information. The
Company shall deliver to each Investor (so long as such Investor and its
Permitted Transferees in the aggregate hold at least 5% of the Company's
outstanding Class A Common Stock):
(i) within 30 days after the end of each monthly
accounting period in each fiscal year, a consolidated statement of income of the
Company and its Subsidiaries for such monthly period and for the period from the
beginning of the fiscal year to the end of such month;
(ii) within the earlier of 90 days after the end
of each fiscal year or upon filing an annual report on Form 10-K with the
Securities and Exchange Commission, annual consolidated statements of income and
cash flows of the Company and its Subsidiaries for such fiscal year, and a
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such fiscal year, setting forth in each case comparisons to the preceding fiscal
year, all prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by an audit opinion from an independent
accounting firm of recognized national standing;
12
(iii) within 30 days after the beginning of each
fiscal year, an annual budget prepared on a monthly basis for the Company and
its Subsidiaries for such fiscal year (displaying anticipated statements of
income and cash flows and balance sheets);
(iv) promptly after filing thereof, all regular
and special reports filed by the Company or any of its Subsidiaries with the
Securities and Exchange Commission or any exchange on which the Class A Common
Stock is listed; and
(v) promptly upon release thereof, all public
announcements made by the Company or any of its Subsidiaries.
(b) Inspection of Property. The Company shall permit any
representatives designated by any Investor, upon reasonable notice during normal
business hours and for a proper business purpose, to (i) visit and inspect any
of the properties of the Company and its Subsidiaries and examine the corporate
and financial records of the Company and its Subsidiaries, so long as such
Investor and its Permitted Transferees owns any Class A Common Stock, and (ii)
so long as such Investor and its Permitted Transferees in the aggregate own at
least 5% of the Company's outstanding Class A Common Stock, discuss the affairs,
finances and accounts of the Company with the officers of the Company.
(c) Current Public Information. At all times after the
Company has filed a registration statement with the Securities and Exchange
Commission pursuant to the requirements of either the Securities Act or the
Securities Exchange Act with respect to its Class A Common Stock, the Company
shall file all material reports required to be filed by it under the Securities
Act and the Securities Exchange Act and the rules and regulations adopted by the
Securities and Exchange Commission thereunder, all to the extent required to
enable the Investors to sell shares of Class A Common Stock pursuant to Rule 144
adopted by the Securities and Exchange Commission under the Securities Act (as
such rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission.
(d) Restrictions. So long as the Xxxxxxxx Investors and
their Permitted Transferees in the aggregate own at least 10% of the Company's
outstanding Class A Common Stock, the Company shall not, without the prior
written consent of the holders of a majority of the shares of Class A Common
Stock held by all of the Xxxxxxxx Investors (which consent shall not be
unreasonably withheld or delayed):
(i) declare or pay any dividends or make any
distributions upon any shares of its capital stock, except for dividends
declared and paid after the third anniversary of the date of this Agreement on a
pro rata basis on the outstanding shares of Class A Common Stock;
(ii) redeem, purchase or otherwise acquire any
shares of its capital stock, except for repurchases after the third anniversary
of the date of this Agreement of Class A Common Stock made pursuant to an offer
to all holders of Class A Common Stock on a pro rata basis and except for
repurchases of Class A Common Stock from employees, directors and
13
consultants and former employees, directors and consultants of the Company and
its Subsidiaries in connection with termination of employment pursuant to
arrangements approved by the Board;
(iii) merge or consolidate with any Person, unless
(a) immediately following the consummation of such transaction, the stockholders
of the Company immediately prior to the consummation of such transaction
continue to own in the aggregate the outstanding capital stock of the surviving
entity possessing the voting power to elect a majority of the surviving entity's
board of directors or other governing body or (b) the consideration received by
the holders of the Class A Common Stock as a result of such transaction consists
solely of cash, cash equivalents, shares of capital stock of the surviving
entity which have been registered under the Securities Act in connection with
such transaction and/or shares of capital stock of the surviving entity which
have not been registered under the Securities Act, but which are of a class of
securities registered under the Securities Exchange Act and are entitled to
demand, S-3 and piggyback registration rights substantially similar as those
contained in the Registration Agreement (provided that if the consideration
received by the Investors in such transaction consists of cash or cash
equivalents and shares of capital stock issued by any Person engaged in the
motion picture exhibition industry other than the Company, the Xxxxxxxx
Investors shall be entitled to receive (at their election) 120% of the cash and
cash equivalents such Investors would have otherwise been entitled to receive on
a pro rata basis and the amount of securities such Xxxxxxxx Investors would have
been entitled to receive on a pro rata basis shall be correspondingly reduced);
(iv) sell all or substantially all of its assets,
unless the consideration received by the holders of the Class A Common Stock as
a result of such transaction consists solely of cash, cash equivalents, shares
of capital stock which have been registered under the Securities Act in
connection with such transaction and/or shares of capital stock which have not
been registered under the Securities Act, but which are of a class of securities
registered under the Securities Exchange Act and are entitled to demand, S-3 and
piggyback registration rights substantially similar as those contained in the
Registration Agreement (provided that if the consideration received by the
Investors in such transaction consists of cash or cash equivalents and shares of
capital stock issued by any Person engaged in the motion picture exhibition
industry other than the Company, the Xxxxxxxx Investors shall be entitled to
receive (at their election) 120% of the cash and cash equivalents such Xxxxxxxx
Investors would have otherwise been entitled to receive on a pro rata basis and
the amount of securities such Xxxxxxxx Investors would have been entitled to
receive on a pro rata basis shall be correspondingly reduced);
(v) acquire (by merger, consolidation, or
otherwise) any company that is not primarily engaged in the motion picture
exhibition business or activities related to the current lines of businesses in
which the Company or any of its Subsidiaries is engaged at the time of the
consummation of the transactions contemplated by the Merger Agreement;
(vi) amend the Company's Certificate of
Incorporation or the Company's bylaws if such amendment would have an adverse
effect on the terms of the Class A Common Stock held by the Xxxxxxxx Investors
which is different from the adverse effect on the other holders of Class A
Common Stock;
14
(vii) issue or sell any shares of capital stock
which are senior to the Class A Common Stock with respect to dividends,
redemption or distributions in liquidation or which have voting rights different
from the Class A Common Stock, unless such securities are issued or sold at no
less than fair market value as determined by the Board in its reasonable
judgment and the Investors have the right to participate in such offering under
the provisions of paragraph 6 of this Agreement;
(viii) enter into, amend or modify any agreement,
transaction, commitment or arrangement with MDCP or any of its Affiliates,
except for the execution, delivery and performance of the Transaction Documents
and the other agreements and arrangements contemplated by this Agreement or the
Merger Agreement, except for any agreements, transactions, commitments and
arrangements approved by a majority of the disinterested directors on the Board
who are not affiliated with MDCP and except for the issuance of securities in
which the Investors have the right to participate under paragraph 6 of this
Agreement; or
(ix) incur, or permit any Subsidiary to incur,
any indebtedness for borrowed money (other than borrowings under, or
refinancings or replacements of, the loan facilities of the Company and its
Subsidiaries existing as of the effectiveness of the Merger under the Merger
Agreement) which would cause the Debt-to-EBITDA Ratio to exceed 5.25:1 prior to
the first anniversary of the Closing hereunder, 5.0:1 during the period between
the first and second anniversaries of such Closing hereunder and 4.75:1
thereafter, unless at the time of such incurrence the Company or any of its
Subsidiaries has defaulted under any of its agreements creating indebtedness for
borrowed money.
(e) Confidentiality. Each Investor shall not disclose to
any Person (other than such Investor's employees, agents and advisors who have a
need to know) and shall not use for any purpose other than monitoring such
Investor's investment in the Company, and shall cause its employees, agents and
advisors to maintain the confidentiality of, all of the information obtained
pursuant to paragraphs 3(a) and (b) of this Agreement, unless (a) such
information was or becomes publicly available through no fault of such Investor,
its Affiliates or Permitted Transferees or their employees, agents or advisors
or (b) the disclosure of such information is compelled by legal proceedings. In
the event that any Investor is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand or similar process) to disclose any such
information, such Investor will notify the Board promptly of the request or
requirement so that the Company may seek an appropriate protective order or
other appropriate relief or waive compliance with this provision. In the absence
of a protective order or the Investor's receiving such waiver from the Company,
the Investor will be permitted to disclose that portion (and only that portion)
of the information that the Investor is legally compelled by the tribunal to
disclose; provided, however, that the Investor shall use commercially reasonable
efforts to obtain an order or other assurance that confidential treatment will
be accorded to such portion of the information required to be disclosed as the
Company shall designate.
(f) Termination. All of the provisions of paragraph 8(d)
shall terminate and be of no further force or effect upon the effective date of
an Initial Public Offering of the
15
Company's Class A Common Stock registered under the Securities Act. The
provisions of paragraphs (a), (b) and (d) of this paragraph 8 are not
transferable or assignable by any Investor to any subsequent holder of any Class
A Common Stock purchased hereunder (except in the case of transfer to its
Permitted Transferees or another Investor or an Affiliate of any Investor), and
upon the transfer of any Investor's Class A Common Stock (except in the case of
a transfer to its Permitted Transferees or another Investor or any Affiliate of
an Investor), such provisions shall terminate with respect to such transferred
shares. If at any time the Xxxxxxxx Investors own, directly or indirectly, more
than a 5% interest in the aggregate of any business that owns, operates or
manages theatres with more than an aggregate of 800 screens in the Western
Hemisphere, the Xxxxxxxx Investors shall not be entitled to (i) receive any
information under paragraph 8(a), except that if the Company is not a reporting
company registered under the Securities Exchange Act, the Xxxxxxxx Investors
shall continue to receive the Company's annual consolidated financial statements
together with a letter from the Company's management describing material
developments at the Company, (ii) exercise any rights under paragraph 8(b),
except that the Xxxxxxxx Investors shall retain their statutory inspection
rights under Delaware law, or (iii) after the fifth anniversary of the Merger,
exercise any approval rights under paragraph 3(d)(x).
9. Reallocation of Sale Bonus Shares. For each Executive, a
portion of the total number of shares of Class A Common Stock owned by such
Executive immediately following the effectiveness of the Merger as specified
below shall constitute "SALE BONUS SHARES" hereunder (including therewith all
shares of capital stock of the Company issued or issuable with respect thereto
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization
affecting the Class A Common Stock):
Sale Bonus Shares
-----------------
Xxxxxxx Xxxxxxxx $855,708 / the Merger Consideration
Xxxxxx Xxxxxx $1,126,942 / the Merger Consideration
Xxxx Xxxxx $1,132,554 / the Merger Consideration
Xxxxxxx Xxxxxx $1,260,749 / the Merger Consideration
If prior to the third anniversary of the consummation of the Merger (the "THIRD
ANNIVERSARY") any Executive's employment with the Company terminates as a result
of Cause or Voluntary Termination (as such terms are defined in each such
Executive's New Employment Agreement), all of such Executive's Sale Bonus Shares
shall be automatically forfeited and the stock certificates representing such
shares shall be immediately surrendered by Executive to the Company endorsed in
blank or accompanied by an appropriate form of assignment. Upon receipt of such
certificate(s), the Company shall promptly reissue the Sale Bonus Shares
represented by such certificate(s) to the other Executives that at such time
continue to hold Sale Bonus Shares on a pro rata basis in accordance with the
number of Sale Bonus Shares owned by such Executives immediately prior to the
termination of such other Executive's employment. Prior to
16
the Third Anniversary, the Sale Bonus Shares may not be transferred by any
Executive (except to members of such Executive's Family Group), and during such
period, the certificates evidencing such shares shall be imprinted with the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE DESIGNATED
AS "SALE BONUS SHARES" UNDER, AND ARE SUBJECT TO THE TERMS OF,
THE STOCKHOLDERS AGREEMENT, DATED AS OF MARCH ____, 2004,
AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND
CERTAIN OF THE COMPANY'S STOCKHOLDERS, AS AMENDED FROM TIME TO
TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST. ANY PURPORTED TRANSFER OF THESE SECURITIES
NOT IN ACCORDANCE WITH SUCH STOCKHOLDERS AGREEMENT SHALL BE
INVALID AND THE COMPANY SHALL NOT RECORD SUCH TRANSFER ON ITS
BOOKS."
Within 30 days following the effectiveness of the Merger, each Executive shall
file a Section 83(b) election with the Internal Revenue Service with respect to
such Executive's Sale Bonus Shares.
10. Legend. Each certificate evidencing Stockholder Shares and
each certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE STOCKHOLDERS AGREEMENT DATED AS OF MARCH 12, 2004, AMONG
THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF
THE COMPANY'S STOCKHOLDERS, AS AMENDED AND MODIFIED FROM TIME
TO TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE
FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF
UPON WRITTEN REQUEST. ANY PURPORTED TRANSFER OF THESE
SECURITIES NOT IN ACCORDANCE WITH SUCH STOCKHOLDERS AGREEMENT
SHALL BE INVALID AND THE COMPANY SHALL NOT RECORD SUCH
TRANSFER ON ITS BOOKS."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date of the Closing, and the Stockholders shall
surrender their stock certificates to the Company for such purpose. The legend
set forth above shall be removed from
17
the certificates evidencing any shares which cease to be Stockholder Shares as
provided in the definition of such term in paragraph 13 hereof.
11. Transferees Bound. Prior to Transferring any Stockholder
Shares (other than in connection with a Public Sale or a Sale of the Company) to
any Person, the transferring holder of Stockholder Shares shall cause the
prospective transferee to be bound by this Agreement and to execute and deliver
to the Company and the other Stockholders a counterpart of this Agreement.
12. Effective Date; Assumption upon Merger. This Agreement shall
become effective automatically without any further action by any of the parties
hereto immediately upon the issuance of the shares of Class A Common Stock under
the Purchase Agreement. However, prior thereto, this Agreement shall terminate
and become null and void automatically without any further action by any of the
parties hereto immediately upon the termination of the Merger Agreement (as
defined below) pursuant to its terms.
13. Definitions.
"ADDITIONAL SECURITIES" has the meaning set forth in paragraph
6(a).
"AFFILIATE" of any Person is any other Person controlled by,
controlling or under common control with such Person and in the case of any
Stockholder that is a partnership or limited liability company, any partner or
member of such Stockholder (provided that the Company shall not be deemed to be
an affiliate of any Stockholder) or in the case of any Stockholder that is a
trust, any beneficiary, trust for the benefit of the beneficiary or successor
trust.
"BOARD" has the meaning set forth in the preamble.
"CAPITAL LEASE OBLIGATIONS" shall mean the obligations of the
Company or its Subsidiaries to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on the Company or its Subsidiaries' balance
sheet under GAAP; and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP provided that Capital Lease obligations shall
exclude the application of Emerging Issues Task Force Regulation 97-10 or
similar pronouncement.
"CLASS A COMMON STOCK" means, the Company's Class A Common
Stock, par value $0.001 per share.
"CLOSING" shall have the meaning assigned to such term in the
Purchase Agreement.
"CO-INVESTOR" means any investor introduced to the Company by
MDCP (other than any Affiliate of MDCP) and who acquires a portion of the Class
A Common Stock which MDCP has agreed to acquire pursuant to the Purchase
Agreement and who execute and deliver a joinder agreement in the form of Exhibit
A.
18
"COMPANY" has the meaning set forth in the preamble.
"COMPANY ELECTION NOTICE" has the meaning set forth in
paragraph 3(c)(ii).
"COMPANY OFFER PERIOD" has the meaning set forth in paragraph
3(c)(ii).
"COMPETITOR" means any Person that directly or indirectly
owns, operates or manages theatres with an aggregate of more than 50 movie
screens, each of which movie screens is used for the primary purpose of
exhibiting commercially distributed full-length motion pictures movie theatres
and any Affiliate of such Person.
"COMPETITOR SALE ELECTION NOTICE" has the meaning set forth in
paragraph 3(d)(ii).
"COMPETITOR SALE ELECTION PERIOD" has the meaning set forth in
paragraph 3(d)(i).
"COMPETITOR SALE OFFER PERIOD" has the meaning set forth in
paragraph 3(d)(ii).
"COMPETITOR SALE OFFER NOTICE" has the meaning set forth in
paragraph 3(d)(i).
"CONSOLIDATED EBITDA" shall mean for any period, without
duplication, Consolidated Net Income for such period plus, to the extent
reflected as a charge in the statement of such Consolidated Net Income for such
period, the sum of (a) income tax expense, (b) Consolidated Interest Expense,
amortization or write-off of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness,
(c) depreciation and amortization expense, (d) amortization of intangibles
(including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, net losses on sales of assets outside
of the ordinary course of business), (f) any minority interest deduction, and
(g) any other non-cash charges, and minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (a)
interest income (except to the extent deducted in determining Consolidated
Interest Expense), (b) any extraordinary, unusual or non-recurring income or
gains (including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, net gains on sales of
assets outside of the ordinary course of business), and (c) any other non-cash
income, all as determined on a consolidated basis; provided that for purposes of
calculating Consolidated EBITDA of the Company and its Subsidiaries for any
period:
(i) the Consolidated EBITDA of any Person
acquired by the Company or its Subsidiaries during such period shall be
included on a pro forma basis (including any items which are permitted
to be added back to Consolidated Net Income under Regulation SX and any
other identifiable cost savings resulting from any such acquisition as
well as the incremental EBITDA associated with the annualized run-rate
of theatres operated by the acquired Person for less than one year
prior to the date of acquisition, excluding any theatres opened for
less than six months) for such period (assuming the consummation of
such acquisition and the incurrence or assumption of any Indebtedness
19
in connection therewith had occurred on the first day of such period
and without giving effect to clause (a) of the proviso set forth in the
definition of Consolidated Net Income) if the consolidated balance
sheet of such acquired Person and its consolidated Subsidiaries as at
the end of the fiscal year preceding the acquisition of such Person and
the related consolidated statements of income and stockholders' equity
and of cash flows for the period in respect of which Consolidated
EBITDA is to be calculated have been reported on without a
qualification arising out of the scope of the audit by independent
certified public accountants of nationally recognized standing or have
been found reasonably acceptable by the Xxxxxxxx Investors; and
(ii) the Consolidated EBITDA of any Subsidiary
disposed of by the Company or its Subsidiaries during such period shall
be excluded for such period (assuming the consummation of such
disposition and the repayment of any Indebtedness in connection
therewith had occurred on the first day of such period).
"CONSOLIDATED INTEREST EXPENSE" shall mean for any period,
total cash interest expense (including that attributable to Capital Lease
Obligations) of the Company and its Subsidiaries for such period with respect to
all outstanding Indebtedness of the Company and its Subsidiaries (including,
without limitation, all commissions, discounts and other fees and charges owed
by the Company with respect to letters of credit and bankers' acceptance
financing and net costs of the Company under Hedge Agreements in respect of
interest rates to the extent such net costs are allocable to such period in
accordance with GAAP).
"CONSOLIDATED NET INCOME" shall mean for any period, the
consolidated net income (or loss) of the Company and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; provided,
that in calculating Consolidated Net Income of the Company and its Subsidiaries
for any period, there shall be excluded (a) the income (or deficit) of any
Person accrued prior to the date it becomes a Subsidiary of the Company or is
merged into or consolidated with the Company or any of its Subsidiaries, and (b)
the income (or deficit) of any Person (that is not a Subsidiary) in which the
Company or any of its Subsidiaries has an ownership interest, except to the
extent that any such income is actually received by the Company or such
Subsidiary in the form of dividends or similar distributions or payment of
principal or interest of inter-company Indebtedness.
"CONSOLIDATED TOTAL DEBT" shall mean at any date, the
aggregate amount of all Indebtedness of the Company and its Subsidiaries at such
date, determined on a consolidated basis in accordance with GAAP, excluding
inter-company Indebtedness.
"DEBT-TO-EBITDA RATIO" means as at the last day of any period
of four consecutive fiscal quarters of the Company, the ratio of (a)
Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period.
"ELECTION PERIOD" has the meaning set forth in the preamble.
"EXECUTIVES" has the meaning set forth in the preamble.
20
"EXEMPT TRANSFER" has the meaning set forth in paragraph 3(b).
"EXISTING EMPLOYMENT AGREEMENTS" means the Employment
Agreements between Cinemark, Inc. and each of Xxxx Xxxxx, Xxxxxxx Xxxxxx, Xxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxx, Xxx Xxx Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxxx and
Xxxxxx Xxxxxxx, each dated as of June 19, 2002, and as amended on December 24,
2003.
"FAMILY GROUP" with respect to any Stockholder, means, such
Stockholder's spouse and descendants (whether natural or adopted) and any trust
that is and remains solely for the benefit of such Stockholder and/or such
Stockholder's spouse and/or descendants.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time.
"HEDGE AGREEMENTS" shall mean all interest rate or currency
swaps, caps or collar agreements, foreign exchange agreements, commodity
contracts or similar arrangements entered into by the Company or its
Subsidiaries providing for protection against fluctuations in interest rates,
currency exchange rates, commodity prices or the exchange of nominal interest
obligations, either generally or under specific contingencies. For avoidance of
doubt, Hedge Agreements shall include any interest rate swap or similar
agreement that provides for the payment by the Company or any of its
Subsidiaries of amounts based upon a floating rate in exchange for receipt by
the Company or such Subsidiary of amounts based upon a fixed rate.
"INDEBTEDNESS" shall mean at any date, without duplication,
(a) all indebtedness of such Person for borrowed money, (b) all obligations of
the Company or its Subsidiaries for the deferred purchase price of Property or
services (other than trade payables incurred in the ordinary course of the
Company's or its Subsidiaries' business), (c) all obligations of the Company or
its Subsidiaries evidenced by notes, bonds, debentures or other similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to Property acquired by the
Company or its Subsidiaries (even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such Property, provided that, in such event, the amount
of such Indebtedness shall be deemed to be the value of the Property covered by
such agreement), and (e) all Capital Lease Obligations or Synthetic Lease
Obligations of the Company or its Subsidiaries. For purposes of clarification,
"Indebtedness" shall not include accounts payable or accrued operating expenses
of the Company or any of its Subsidiaries.
"INDEPENDENT THIRD PARTY" means any Person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Class A Common Stock on a fully-diluted basis (a "5% Owner)", who is
not controlling, controlled by or under common control with any such 5% Owner
and who is not the spouse or descendent (by birth or adoption) of any such 5%
Owner or a trust for the benefit of such 5% Owner and/or such other Persons.
21
"INITIAL PUBLIC OFFERING" means an underwritten initial public
offering of the Company's Class A Common Stock registered under the Securities
Act resulting in the sale to the public of shares with an aggregate selling
price of not less than $100 million.
"INVESTOR" means each of MDCP, the Co-Investors, the Xxxxxxxx
Investors and their respective Permitted Transferees.
"MDCP" has the meaning set forth in the preamble.
"MDCP ELECTION NOTICE" has the meaning set forth in paragraph
3(c)(iii).
"MDCP SALE ELECTION NOTICE" has the meaning set forth in the
paragraph 3(e).
"MDCP SALE NOTICE" has the meaning set forth in the paragraph
3(e).
"MDCP SALE PERIOD" has the meaning set forth in the paragraph
3(e).
"MERGER" has the meaning set forth in the preamble.
"MERGER AGREEMENT" means the Company is a party to the
Agreement and Plan of Merger, dated as of the date hereof, between the Company
and Popcorn Merger Corp. pursuant to which Popcorn Merger Corp. shall merge with
and into the Company, with the Company continuing as the surviving corporation.
"MERGER CONSIDERATION" has the meaning set forth in the Merger
Agreement.
"XXXXXXXX ELECTION NOTICE" has the meaning set forth in
paragraph 3(d)(iii).
"XXXXXXXX DIRECTORS" has the meaning set forth in paragraph
1(a)(ii)(A).
"XXXXXXXX INVESTORS" has the meaning set forth in the
preamble.
"MODIFICATION" has the meaning set forth in paragraph 15.
"NEW EMPLOYMENT AGREEMENTS" means the Employment Agreements,
dated as of the date hereof, between the Company and each of Xxxx Xxxxx, Xxxxxxx
Xxxxxx, Xxxxxx Xxxxxx and Xxxxxxx Xxxxxxxx.
"OFFER NOTICE" has the meaning set forth in paragraph 3(c).
"OPTION SHARES" has the meaning set forth in paragraph 6(a).
"OTHER STOCKHOLDERS" has the meaning set forth in paragraph
3(e)(i).
"PERMITTED TRANSFEREE" has the meaning set forth in paragraph
3(b).
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated
22
organization and a governmental entity or any department, agency or political
subdivision thereof.
"PROPERTY" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock.
"PUBLIC SALE" means any sale of Stockholder Shares to the
public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker on a securities exchange or in
the over-the-counter market pursuant to the provisions of Rule 144 adopted under
the Securities Act.
"PURCHASE AGREEMENT" has the meaning set forth in the
preamble.
"REGISTRATION AGREEMENT" means the Registration Agreement,
dated as of the date hereof, among the Company, MDCP and the Xxxxxxxx Investors.
"SALE BONUS AGREEMENT" means the Sale Bonus Agreement dated as
of the date hereof, among the Company, the Executives and certain other
shareholders of the Company.
"SALE OF THE COMPANY" means the sale of the Company to an
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i) capital stock of the Company or the surviving
entity possessing the voting power under normal circumstances to elect a
majority of the Company's or the surviving entity's board of directors or
entitling such Person to exercise more than fifty percent (50%) of the total
voting power of the shares of capital stock of the Company or the surviving
entity entitled to vote (whether by merger, consolidation or sale or transfer of
the Company's capital stock) or (ii) all or substantially all of the Company's
assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"STOCKHOLDER SHARES" means (i) any Class A Common Stock owned
by any Stockholder and (ii) any capital stock or other equity securities issued
or issuable directly or indirectly with respect to the Class A Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares constituting Stockholder
Shares, such shares shall cease to be Stockholder Shares when they have been (x)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (y) sold to the public through
a broker, dealer or market maker on a securities exchange or in the
over-the-counter market pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act.
"STOCKHOLDERS" has the meaning set forth in the preamble.
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, 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
23
contingency) to vote in the election of directors, managers or trustees 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 limited liability company, partnership, association or other
business entity, a majority of the limited liability company, partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more 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 limited liability company,
partnership, association or other business entity if such Person or Persons
shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control the
managing director or general partner of such limited liability company,
partnership, association or other business entity.
"SYNTHETIC LEASE OBLIGATIONS" shall mean all monetary
obligations of the Company or its Subsidiaries under (a) a so-called synthetic,
off-balance sheet or tax retention lease, or (b) an agreement for the use or
possession of property creating obligations which do not appear on the balance
sheet of the Company or its Subsidiaries but which, upon the insolvency or
bankruptcy of the Company or its Subsidiaries, would be characterized as the
Indebtedness of the Company or its Subsidiaries (without regard to accounting
treatment).
"TRANSFER" has the meaning set forth in paragraph 3(a).
"TRANSFERRING STOCKHOLDER" has the meaning set forth in
paragraph 3(c).
14. Additional Parties; Joinder. The Company may permit any Person
who acquires Class A Common Stock or rights to acquire Class A Common Stock
after the date hereof (the "ACQUIRED COMMON") to become a party to this
Agreement and to succeed to all of the rights and obligations of a "holder of
Stockholder Shares" under this Agreement by obtaining an executed joinder to
this Agreement from such Person in the form of Exhibit A attached hereto. Upon
the execution and delivery of the joinder by such Person, such Person's Acquired
Common shall be Stockholder Shares hereunder, and such Person shall be a "holder
of Stockholder Shares" under this Agreement with respect to the Acquired Common.
In particular, any Co-Investor purchasing Acquired Common shall execute and
deliver to the Company a joinder to this Agreement, and such Co-Investor's
Acquired Common shall be deemed Stockholder Shares hereunder.
15. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement (any such
modification, amendment or waiver, referred to herein as a "MODIFICATION") shall
be effective against the Company or any holder of Stockholder Shares unless such
Modification is approved in writing by the Company and the holder or holders of
a majority of the Stockholder Shares outstanding; provided that with respect to
any Modification that adversely affects the rights hereunder of a particular
group of holders of Stockholder Shares, each such group being the Xxxxxxxx
Investors, the Co-Investors, the Executives and MDCP (in each case together with
their respective Permitted Transferees), in any material respect different than
the other groups of holders of Stockholder Shares, such Modification shall be
effective against such particular group only if such Modification is approved in
writing by the holder or holders of a majority of all of the Stockholder Shares
held by such group. The failure of any party to enforce any of the provisions of
this Agreement shall
24
in no way be construed as a waiver of such provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
16. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
17. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
18. Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares; provided that the rights of
the Xxxxxxxx Investors under paragraph 1 hereof may not be assigned to Persons
other than Permitted Transferees without the prior written approval of MDCP.
19. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
20. Remedies. The Company, and the Stockholders shall be entitled
to enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that a breach of this Agreement would cause irreparable harm and money damages
would not be an adequate remedy for any such breach and that, in addition to
other rights and remedies hereunder, the Company, and the Stockholders shall be
entitled to specific performance and/or injunctive or other equitable relief
(without posting a bond or other security) from any court of law or equity of
competent jurisdiction in order to enforce or prevent any violation of the
provisions of this Agreement.
21. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid, return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the Company and MDCP at the addresses set
forth below and to any other recipient at the address indicated on the schedules
hereto and to any subsequent holder of Stockholder Shares subject to this
Agreement at such address as indicated by the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party.
25
Notices shall be deemed to have been given hereunder when delivered personally,
three days after deposit in the U.S. mail and one day after deposit with a
reputable overnight courier service.
The Company's address is: Cinemark, Inc.
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx
MDCP's address is: Madison Dearborn Capital Partners IV, L.P.
Three First National Plaza, Suite 3800
00 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxxxx
22. Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
23. Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company's chief-executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
24. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
25. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
26. Mutual Waiver of Jury Trial. The parties hereto hereby
irrevocably waive any and all rights to trial by jury in any legal proceeding
arising out of or related to this Agreement. Any action or proceeding whatsoever
between the parties hereto relating to this Agreement shall be tried in a court
of competent jurisdiction by a judge sitting without a jury.
[SIGNATURE PAGE FOLLOWS]
26
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
MADISON DEARBORN CAPITAL
CINEMARK, INC. PARTNERS IV, L.P.
By: Madison Dearborn Partners, LLC,
its General Partner
By: /s/ Xxx Xxx Xxxxxxxx By: Madison Dearborn Partners, Inc.,
------------------------
Its: CEO its General Partner
By: /s/ Xxxxxxxx X. Xxxxxxxxx
---------------------------------
Its: Managing Director
/s/ Xxx Xxx Xxxxxxxx THE XXXXXXXX TRUST
---------------------------------
Xxx Xxx Xxxxxxxx
/s/ Xxxx X. Stock By: /s/ Xxx Xxx Xxxxxxxx
--------------------------------- ---------------------------------
Xxxx Xxxxx Xxx Xxx Xxxxxxxx, Trustee
/s/ Xxxxxxx Xxxxxx By: /s/ Xxxx X. Xxxxxxxxxxx
--------------------------------- ---------------------------------
Xxxxxxx Xxxxxx Xxxx X. Xxxxxxxxxxx, Trustee
/s/ Xxxxxx Xxxxxx
---------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxxxx
---------------------------------
Xxxxxxx Xxxxxxxx
27
SCHEDULE OF XXXXXXXX INVESTORS
NAME AND ADDRESS NUMBER OF SHARES OF CINEMARK NUMBER OF STOCKHOLDER SHARES
---------------- CLASS B COMMON STOCK ----------------------------
-------------------------------
Xxx Xxx Xxxxxxxx 8,720,763 $51,000,000 / Merger Consideration
0000 Xxxxxx Xxxxxxx,
Xxxxx 000
Xxxxx, Xxxxx 00000
The Xxxxxxxx Special Trust 3,226,740 $49,000,000 / Merger Consideration
0000 Xxxxxx Xxxxxxx,
Xxxxx 000
Xxxxx, Xxxxx 00000
28
SCHEDULE OF EXECUTIVES
NUMBER OF NUMBER OF SHARES OF
SHARES OF CINEMARK CLASS A
CINEMARK CLASS COMMON STOCK SUBJECT
NAME AND ADDRESS A COMMON STOCK TO STOCK OPTIONS NUMBER OF STOCKHOLDER SHARES
---------------- -------------- ---------------- ----------------------------
Xxxx Xxxxx 94,050 66,000 $1,886,320 / Merger Consideration
0000 Xxxxxx Xxxxxxx,
Xxxxx 000
Xxxxx, Xxxxx 00000
Xxxxxxx Xxxxxx 132,000 66,000 $1,871,997 / Merger Consideration
0000 Xxxxxx Xxxxxxx,
Xxxxx 000
Xxxxx, Xxxxx 00000
Xxxxxx Xxxxxx 77,000 99,000 $1,677,337 / Merger Consideration
0000 Xxxxxx Xxxxxxx,
Xxxxx 000
Xxxxx, Xxxxx 00000
Xxxxxxx Xxxxxxxx 38,060 110,000 $1,319,333 / Merger Consideration
0000 Xxxxxx Xxxxxxx,
Xxxxx 000
Xxxxx, Xxxxx 00000
29
EXHIBIT A
----------
STOCKHOLDERS AGREEMENT
JOINDER
The undersigned is executing and delivering this Joinder pursuant to
the Stockholders Agreement dated as of March 12, 2004 (as the same may hereafter
be amended, the "STOCKHOLDERS AGREEMENT"), among Cinemark, Inc., a Delaware
corporation (the "COMPANY"), and the other person named as parties therein.
By executing and delivering this Joinder to the Company, the
undersigned hereby agrees to become a party to, to be bound by, and to comply
with the provisions of the Stockholders Agreement as a holder of Stockholder
Shares in the same manner as if the undersigned were an original signatory to
the Stockholders Agreement, and the undersigned's ____ shares of Class A Common
Stock shall be included as Stockholder Shares under the Stockholders Agreement.
[THE UNDERSIGNED SHALL BE DESIGNATED AS A CO-INVESTOR/PERMITTED TRANSFEREE UNDER
THE STOCKHOLDERS AGREEMENT.]
Accordingly, the undersigned has executed and delivered this Joinder as
of the ___ day of ____________, ______.
-----------------------------------------
Signature of Stockholder
-----------------------------------------
Print Name of Stockholder
Agreed and Accepted as
of __________________.
CINEMARK, INC.
By:
---------------------------------
Its:
---------------------------------
30
