STOCK CONTRIBUTION AND EXCHANGE AGREEMENT
EXHIBIT 10.2
EXECUTION
COPY
THIS STOCK CONTRIBUTION AND EXCHANGE AGREEMENT (this “Agreement”) is made as of August
7, 2006, by and between Cinemark Holdings, Inc., a Delaware corporation (the “Company”),
Cinemark, Inc., a Delaware corporation (“Cinemark”), Syufy Enterprises, LP, a California
limited partnership (“Contributor”) and Century Theatres Holdings, LLC, a California
limited liability company, a wholly owned Subsidiary of Contributor (“CTH”). Capitalized
terms used but not otherwise defined herein or in the Stockholders Agreement (as defined below)
shall have the meanings set forth in Section 9 hereof.
WHEREAS, the Company, Contributor and CTH are each a party to that certain Stock Purchase
Agreement (the “Purchase Agreement”), dated as of August 7, 2006, by and among the Company,
Contributor, CTH, Cinemark USA, Inc., a Delaware corporation (“Cinemark USA”), and Century
Theatres, Inc., a California corporation (“Century”), pursuant to which the Company and
Cinemark USA are acquiring all of the outstanding stock of Century other than the Rollover Shares;
WHEREAS, as of the date of this Agreement, CTH owns all of the issued and outstanding shares
of capital stock of Century (the “Century Shares”), and Contributor owns all of the
outstanding limited liability company interests of CTH;
WHEREAS, prior to the Closing, CTH will distribute all of the Century Shares to Contributor
and will then will be dissolved pursuant to the Xxxxxxx-Xxxxxx Limited Liability Company Act, as
amended, immediately after which Contributor will own all of the Century Shares;
WHEREAS, in connection with the transactions contemplated by the Purchase Agreement, pursuant
to this Agreement, Contributor will contribute 1,723,891 Century Shares (the “Rollover
Shares”) in exchange for 3,388,466 shares of Class A Common Stock of the Company (“Company
Shares”), and, pursuant to the Cinemark Contribution Agreement, the stockholders of Cinemark
will contribute all of their shares of capital stock of Cinemark to the Company in exchange for
shares of Class A Common Stock, par value $.001 per share of the Company (the “Class A Common
Stock”); and
WHEREAS, the parties hereto desire that the Contribution Transaction (as defined below)
qualify as a transaction under Section 351 of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants herein contained, the parties
hereto agree as follows:
Section 1. Issuance of Company Shares. Immediately prior to the consummation of the
Closing, the Company shall authorize the issuance to Contributor of 3,388,466 shares of the
Company’s Class A Common Stock, in exchange for all of Contributor’s right, title and interest in
the Rollover Shares.
Section 2. Subscription. Contributor hereby irrevocably subscribes for the Company
Shares upon the consummation of the Closing and accepts the Company Shares on the terms and
conditions set forth herein and in the Stockholders Agreement, dated as of the date hereof, by and
among the Company and the other persons listed therein (as the same may be amended, supplemented or
otherwise modified from time to time in accordance with its terms, the “Stockholders
Agreement”). Contributor agrees, as a condition to the effectiveness of this Agreement and the
issuance of the Company Shares hereunder, to deliver counterpart signature pages to, and to be
bound by the terms of, the
Stockholders Agreement. By execution hereof, Contributor acknowledges that the Company is
relying upon the accuracy and completeness of the representations of Contributor contained herein
in complying with its obligations under applicable securities laws.
Section 3. Contribution Transaction. Upon the consummation of the Closing, subject to
the terms and conditions set forth herein, Contributor shall contribute to the Company all of such
Contributor’s right, title and interest in the Rollover Shares and the Company shall issue the
Company Shares to Contributor in exchange (the “Contribution Transaction”). The
Contribution Transaction is intended to qualify as a transaction under Section 351 of the Internal
Revenue Code. Contributor shall deliver to the Company the certificate or certificates
representing the Rollover Shares held by Contributor, duly endorsed or accompanied by duly executed
assignment documents. The Company shall issue the certificates representing the Company Shares in
the name of Contributor.
Section 4. Conditions to Closing of Contribution Transaction.
(a) Conditions to Obligations of Each Party. The respective obligations of each party
to consummate the closing of the Contribution Transaction is conditioned upon the occurrence of the
Closing under the Purchase Agreement, and the Contribution Transaction shall occur simultaneously
with the Closing under the Purchase Agreement.
(b) Conditions to Obligations of Contributor. Contributor’s obligation to consummate
the Contribution Transaction is conditioned upon the representations and warranties of Cinemark and
the Company set forth in Section 7 that are qualified by materiality or Company Material Adverse
Effect being true and correct in all respects and the representations and warranties of Cinemark
and the Company set forth in Section 7 that are not qualified by materiality or Company Material
Adverse Effect being true and correct in all material respects, in each case as of the date hereof
(except for those representations and warranties made only as of a certain date, which shall remain
true and correct in all material respects as of such date) and as of the Closing as if the Closing
Date were substituted for the date of this Agreement throughout such representations and warranties
assuming that the transactions under this Agreement and the Purchase Agreement have not been
consummated, and the Company and Cinemark shall deliver a certificate to Contributor to such effect
at the Closing.
(c) Conditions to Obligations of the Company. The Company’s obligation to consummate
the Contribution Transaction is conditioned upon the representations and warranties of the
Contributor set forth in Section 8 being true and correct in all material respects, in each case as
of the date hereof and as of the Closing as if the Closing Date (except for those representations
and warranties made only as of a certain date, which shall remain true and correct in all material
respects as of such date) were substituted for the date of this Agreement throughout such
representations and warranties assuming that the transactions under this Agreement and the Purchase
Agreement have not been consummated and Contributor shall deliver a certificate to the Company to
such effect at the Closing.
Section 5. Restrictions on Transfers. The Company Shares (and any securities issued
with respect to the Company Shares by way of a split, dividend, recapitalization, merger,
consolidation, liquidation or other reorganization) shall be subject to the restrictions on
transfer set forth in the Stockholders Agreement.
Section 6. Pledge of Shares. Contributor’s indemnification obligations under Article
IX of the Purchase Agreement shall be secured by a pledge to the Company of 1,694,233 of the
Company Shares held by Contributor; and in connection therewith, Contributor shall enter into a
pledge agreement in the form of Exhibit A attached hereto at the closing of the
Contribution Transaction. The Company shall hold each certificate representing the pledged Company
Shares owned by Contributor
2
until such time as such shares represented by such certificates are released from the pledge
to the Company. The pledge of the Company Shares shall in no manner limit or restrict the
Company’s right to seek indemnification from Contributor directly, in addition to or in lieu of
exercising its rights in connection with the pledge of Company Shares.
Section 7. Representations and Warranties of Cinemark and the Company. As a material
inducement to Contributor to enter into this Agreement and acquire the Company Shares, Cinemark and
the Company hereby represent and warrant to Contributor that:
(a) Organization, Good Standing and Qualification. Each of the Company, Cinemark and
the Company’s Subsidiaries is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite legal capacity, power and authority,
including all corporate power and authority, to own, operate and lease its properties and assets,
to carry on its business as now conducted and, with respect to the Company and Cinemark, to enter
into and perform its obligations under this Agreement and to consummate the Contribution
Transaction. Each of the Company, Cinemark and Cinemark’s Subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the ownership or use of the
properties owned by it, or the nature of the activities conducted by it, requires such
qualification, except where the failure to so qualify has not had, and would not reasonably be
expected to have, a Company Material Adverse Effect. Each of the Company and Cinemark has
delivered to Contributor complete and correct copies of its respective Governing Documents of the
Company and Cinemark (as amended to date). Neither the Company nor Cinemark or any of its
Subsidiaries is in default under or in violation of its Governing Documents.
(b) Authorization; Enforceability. This Agreement and the consummation of the
Contribution Transaction have been duly authorized by all requisite corporate action by the Company
and Cinemark, and each of the Company and Cinemark has full corporate power and authority to
execute and deliver this Agreement and to perform its respective obligations hereunder. Except as
set forth on Schedule 7(b), no approval of the Company’s or Cinemark’s stockholders is
required in connection with the performance by the Company or Cinemark of its obligations under
this Agreement. This Agreement has been duly executed and delivered by the Company and Cinemark,
and assuming due authorization, execution and delivery by Contributor of this Agreement, this
Agreement constitutes the valid and legally binding obligation of the Company and Cinemark,
enforceable against the Company and Cinemark in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally and (b) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies.
(c) Non-Contravention. The execution, delivery and performance by the Company and
Cinemark of this Agreement and the consummation of the Contribution Transaction will not: (a)
violate, conflict with or result in the breach of any provision of the Governing Documents of the
Company, Cinemark or any of Cinemark’s Subsidiaries; (b) assuming all Governmental Authorizations
required under the HSR Act have been obtained, made or expired, conflict with or violate any Law,
Governmental Order or Governmental Authorization applicable to the Company, Cinemark or any of
Cinemark’s Subsidiaries or any of their respective assets or properties; or (c), except as set
forth on Schedule 7(c), violate, conflict with, result in a breach of any provision of,
constitute a default under, result in the termination, or in a right of termination or
cancellation, of, accelerate the performance required by, result in the triggering of any payment
or other material obligations pursuant to, result in the creation of any Lien on any of the
properties of the Company, Cinemark or Cinemark’s Subsidiaries under, or result in being declared
void, voidable, or without further binding effect, any of the terms, conditions or provisions of,
any material Contract to which the Company, Cinemark or Cinemark’s
3
Subsidiaries is a party, or by which the Company, Cinemark or Cinemark’s Subsidiaries, or any
of their respective properties, is bound or affected.
(d) Capitalization and Voting Rights. As of the Closing (after giving effect to the
Contribution Transaction), the entire authorized capital of the Company will consist of (i)
40,000,000 shares of the Class A Common Stock, of which 31,284,782 shares are issued and
outstanding (not including the Company Shares) and (ii) 5,000,000 shares of Preferred Stock, par
value $.001 per share (the “Preferred Stock”), none of which will be issued and
outstanding. As of the Closing, all of the issued and outstanding shares of Class A Common Stock
will be beneficially owned and held of record as set forth on Schedule 7(d) attached
hereto, free and clear of all Liens, restrictions on voting rights, purchase options, calls,
preemptive rights or similar third party rights on sale or restrictions on transfer (other than
restrictions imposed by applicable securities Laws). As of the Closing, the issued and outstanding
shares of Class A Common Stock will be duly authorized and validly issued, fully paid and
nonassessable, issued in accordance with the registration or qualification provisions of the
Securities Act and any relevant Laws, or pursuant to valid exemptions therefrom, and are not, and
were not at the date of issuance, subject to preemptive rights created by Law, Governing Documents
or any Contract. Except as set forth on Schedule 7(d), as of the Closing, there will not be
outstanding any options, warrants, rights (including conversion, subscription, purchase, exchange
or preemptive rights) or agreements or commitments for the purchase or acquisition from or issuance
by the Company of any shares of its capital stock or any securities or obligations convertible or
exchangeable into or exercisable for any securities of the Company, and no securities, Contracts or
instruments evidencing such rights are authorized, issued or outstanding. Except as set forth on
Schedule 7(d), as of the Closing, the Company is not and, to the Knowledge of the Company,
no stockholder of the Company is, a party or subject to any Contract, proxy or understanding, and
there will be no Contract, proxy or understanding which affects or relates to the voting or giving
of written consents with respect to any security of the Company. Except for the Registration
Agreement, as of the Closing, the Company will not be under any contractual or other obligation to
register any of its presently outstanding securities. Except as set forth on Schedule
7(d), as of the Closing, there will be no rights of first refusal, co-sale rights or
registration rights (including with respect to sales and resales thereof) granted by the Company
with respect to its capital stock. Except as set forth on Schedule 7(d), as of the
Closing, there will be no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company.
(e) Subsidiaries. Neither the Company nor Cinemark presently owns or controls,
directly or indirectly, any interest in any other corporation, joint venture, limited liability
company, partnership, association, or other business entity except for Cinemark’s Subsidiaries set
forth on Schedule 7(e), which sets forth each such Subsidiary, together with its respective
jurisdiction of organization, the authorized, issued and outstanding stock or equity interests of
each Subsidiary, the name of, and amounts held by, each holder thereof. All of the issued and
outstanding shares of stock or equity interests of each Subsidiary are duly authorized and validly
issued, fully paid and nonassessable and are owned by Cinemark or another Subsidiary. Except as
set forth on Schedule 7(e), neither the Company nor Cinemark or any of Cinemark’s
Subsidiaries owns or holds the right to acquire any shares of stock or any other interest in any
other Person or has any agreement or commitment to purchase such shares or interest. Except as set
forth on Schedule 7(e), there are no outstanding options, warrants, rights (including
conversion, subscription, purchase, exchange or preemptive rights) or agreements or commitments for
the purchase or acquisition from any Subsidiary of any shares of its capital stock or equity
interests or any securities or obligations convertible or exchangeable into or exercisable for any
securities of any Subsidiary (now, in the future or upon the occurrence of any contingency), and no
securities, Contracts or instruments evidencing such rights are authorized, issued or outstanding.
No Subsidiary is a party or subject to any Contract, proxy or understanding which affects or
relates to the voting or giving of written consents with respect to any security of such
Subsidiary. Except as set forth on Schedule 7(e), there are no rights of first refusal,
co-sale rights or registration rights (including with respect to sales and resales
4
thereof) granted by any of Cinemark’s Subsidiaries with respect to its capital stock or equity
interests. There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to any of the Cinemark’s Subsidiaries.
(f) Litigation. Except as disclosed on Schedule 7(f), there are no Actions
pending or, to the Knowledge of the Company, threatened, against the Company that could reasonably
be expected to involve payments or result in damages to the Company in excess of $100,000 and (x)
that are not fully insured or (y) for which the Company has not established reserves against its
full liability under its self insured retention program. To the Knowledge of the
Company, there are no material Actions pending or threatened against any Subsidiary. The Company
is not subject to any outstanding Governmental Order, other than the consent decree entered into in
2004 between Cinemark USA, Inc. and the Department of Justice relating to wheelchair locations
under the Americans with Disabilities Act.
(g) Financial Statements. Cinemark has made available to Contributor true and
complete copies of (a) its consolidated audited balance sheets, statements of income, statements of
shareholders’ equity and statements of cash flows at and for the fiscal years ended December 31,
2004 and December 31, 2005; and (b) an unaudited consolidated balance sheet of the Company and its
Subsidiaries as at June 30, 2006 (the “Interim Balance Sheet”) and the related statement of
income, at and for the period then ended (collectively, the “Financial Statements”). The
Financial Statements (i) fairly present, in all material respects, as applicable, the financial
condition and results of operations of Cinemark and its Subsidiaries on a consolidated basis as of
the dates, and for the periods, indicated therein, (ii) have been prepared consistent with the
books and records of Cinemark and its Subsidiaries and consistent with Cinemark’s accounting
policies and procedures, each in a manner consistent with prior financial statements of Cinemark
(except for adoption of accounting pronouncements and other changes in accounting policy, each as
disclosed in the SEC Reports), and (iii) have been prepared in all material respects in accordance
with GAAP consistently applied during the periods involved, except, in each case, as indicated in
such statements or in the notes thereto, except that (A) the Interim Balance Sheet and related
statement of income do not contain all footnotes required by GAAP and (B) the Interim Balance Sheet
and related statement of income are subject to normal year-end adjustments none of which
individually or in the aggregate are material.
(h) No Material Adverse Effect. Since December 31, 2005, (i) Cinemark’s Business has
been conducted in all material respects in the ordinary course consistent with past practice and
(ii) there has been no Material Adverse Effect.
(i) Reports with the Securities and Exchange Commission. Cinemark has made available
to Contributor complete and accurate copies of its annual report on Form 10-K for its three most
recent fiscal years, all other reports or documents required to be filed by Cinemark pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 since the filing of the most recent
annual report on Form 10-K and its most recent annual report to its stockholders (collectively, the
“SEC Reports”). Cinemark has made all filings with the Securities and Exchange Commission
which it is required to make, and Cinemark has not received any request from the Securities and
Exchange Commission to file any amendment or supplement to any of the reports described in this
paragraph. As of their respective dates, the SEC Reports (A) were prepared in all material
respects in accordance with the requirements of the Securities Exchange Act of 1934, as amended,
and the published rules and regulations of the SEC thereunder applicable thereto, and (B) did not
at the time such SEC Reports were filed contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
5
(j) No Undisclosed Liabilities. As of the date hereof, Cinemark and its Subsidiaries
have no material liabilities of a nature required by GAAP to be reflected on a consolidated balance
sheet or in the notes thereto, other than (a) as disclosed, reflected or reserved against in the
Financial Statements and (b) liabilities incurred in the ordinary course of business consistent
with past practice subsequent to the date of the Interim Balance Sheet, in each case which have not
had or would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(k) Conduct of Business; Liabilities. Prior to the Closing, the Company has not
conducted any business, incurred any expenses, obligations or liabilities or entered into any
contracts or agreements, except for this Agreement and the other agreements referred to herein, and
has not violated any Laws or Governmental Orders.
(l) Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE SCHEDULES AND
EXHIBITS HERETO AND IN ANY CERTIFICATE REQUIRED TO BE DELIVERED HEREUNDER, THE COMPANY MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE CLASS A COMMON STOCK, THE COMPANY,
CINEMARK, CINEMARK’S SUBSIDIARIES OR ANY OTHER MATTER, INCLUDING ANY REPRESENTATION OR WARRANTY AS
TO WORKMANSHIP, PROFITABILITY, FUTURE PERFORMANCE, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT OR ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR
COMPLETENESS OF ANY PROJECTION, FORECAST OR OTHER FORWARD-LOOKING INFORMATION AND ANY INFORMATION
CONTAINED IN ANY INFORMATION MEMORANDUM. ALL OF SUCH ADDITIONAL REPRESENTATIONS AND WARRANTIES ARE
HEREBY DISCLAIMED, AND THE COMPANY EXPRESSLY DISCLAIMS ANY AND ALL LIABILITY RELATING TO OR
RESULTING FROM THE USE OF ANY INFORMATION, DOCUMENTS OR MATERIAL DESCRIBED IN THE PREVIOUS
SENTENCE, INCLUDING ANY MARKET ANALYSIS AND FINANCIAL PROJECTIONS THAT MAY BE CONTAINED THEREIN, OR
FOR ANY ERRORS THEREIN OR OMISSIONS THEREFROM, EXCEPT FOR FRAUD.
Section 8. Contributor’s Representations and Warranties. For the purposes of this
Section 8, Company Shares include any securities issued with respect to the Company Shares
issued hereunder by way of a split, dividend, recapitalization, merger, consolidation, liquidation
or other reorganization.
(a) Contributor’s Investment Representations. Contributor hereby represents that it
is acquiring the Company Shares to be acquired by it hereunder for its own account with the present
intention of holding such securities for investment purposes and that it has no intention of
selling such securities in a public distribution in violation of the federal securities laws or any
applicable state securities laws. Contributor acknowledges that the Company Shares have not been
registered under the Securities Act or applicable state securities laws and that the Company Shares
will be issued to Contributor in reliance on exemptions from the registration requirements of the
Securities Act and applicable state statutes and in reliance on Contributor’s representations and
agreements contained herein.
(b) Other Representations and Warranties of Contributor. Contributor hereby further
represents and warrants to the Company that:
(i) Contributor has had an opportunity to ask questions and receive answers concerning the
terms and conditions of the Company Shares to be acquired by it hereunder and has had full access
to such other information concerning the Company (including access to the Stockholders
6
Agreement) as Contributor may have requested in making its decision to invest in the Company
Shares being issued hereunder;
(ii) Contributor is an “accredited investor” as defined in Rule 501(a) under the Securities
Act and has, by reason of its business and financial experience and the business and financial
experience of those retained by it, such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of holding the Company
Shares such that Contributor is sophisticated as contemplated by Rule 506(b)(2)(ii) under the
Securities Act;
(iii) Contributor is able to bear the economic risk and lack of liquidity of an investment in
the Company and is able to bear the risk of loss of its entire investment in the Company, and
Contributor fully understands and agrees that it may have to bear the economic risk of owning the
Company Shares for an indefinite period of time because, among other reasons, the Company Shares
have not been registered under the Securities Act or under the securities laws of any state and,
therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are
subsequently registered under the Securities Act and under the applicable securities laws of
certain states or unless an exemption from such registration is available;
(iv) Contributor acknowledges that the Company Shares are subject to the restrictions
contained in the Stockholders Agreement, and Contributor has received and reviewed a copy of the
Stockholders Agreement;
(v) Contributor will not sell or otherwise transfer the Company Shares without registration
under the Securities Act (and any applicable state securities laws) or an exemption therefrom, and
provided there exists such a registration or exemption, any transfer of Company Shares by
Contributor or subsequent holders of the Company Shares will be in compliance with the provisions
of the Stockholders Agreement;
(vi) If Contributor is acquiring the Company Shares subscribed for hereby in a representative
or fiduciary capacity, the representations and warranties contained herein (and in any other
written statement or document delivered to the Company in connection herewith) shall be deemed to
have been made on behalf of the person or persons for whom such Company Shares are being acquired;
(vii) Contributor acknowledges that any certificate representing interests issued hereunder
shall include the legend(s) set forth in the Stockholders Agreement;
(viii) Contributor has all requisite capacity and authority and all material authorizations
necessary to carry out the transactions contemplated by this Agreement; and the execution, delivery
and performance of this Agreement and all other agreements contemplated hereby to which Contributor
is a party and the acquisition of the Company Shares hereunder have been duly authorized by
Contributor;
(ix) Contributor is not relying on the Company with respect to the economic considerations of
Contributor relating to this investment. In regard to such considerations, Contributor has relied
on the advice of, or has consulted with, only its own advisors and the determination of Contributor
to acquire the Company Shares pursuant to this Agreement has been made by Contributor independent
of any statements or opinions as to the advisability of such acquisition or as to the properties,
business, prospects or condition (financial or otherwise) of the Company which may have been made
or given by any other stockholder of the Company or by any agent or employee of such stockholder
and independent of the fact that any other Person has decided to become an stockholder of the
Company;
7
(x) Contributor is not subscribing for the Company Shares as a result of or subsequent to any
advertisement, article, notice or other communication published in any newspaper, magazine,
internet publication or similar media or broadcast over television, radio or the internet or
presented at any seminar or meeting, or any solicitation of a subscription by a Person not
previously known to Contributor in connection with investments in securities generally;
(xi) Contributor is organized under the laws of California; and
(xii) CTH LLC beneficially owns and holds of record, and following the CTH LLC Transactions
and immediately prior to the Closing, Contributor will beneficially own and hold of record, the
Rollover Shares, free and clear of any Liens, purchase options, calls or similar third party rights
on sale or transfer (other than restrictions imposed by applicable securities Laws), preemptive
right, limitations on voting rights or options, and Contributor will have the authority to dispose
of such Rollover Shares pursuant to this Agreement. The contribution of the Rollover Shares by
Contributor to Holdings as contemplated by this Agreement, shall transfer good title to the
Rollover Shares, free and clear of all Liens, purchase options, calls, preemptive rights or similar
third party rights.
Section 9. Updates to Schedules. Upon obtaining knowledge thereof, the Company and
Cinemark shall give prompt notice to Contributor of the occurrence or non-occurrence of any event
after the date hereof, the occurrence or non-occurrence of which has caused any representation or
warranty contained in this Agreement to be untrue or inaccurate such that the conditions to closing
set forth in Section 4(b), shall not be met. Should any such occurrence or non-occurrence
referenced herein require any change in the Schedules, the Company and Cinemark shall deliver to
Contributor a supplement to the Schedules specifying such change; provided that the Company and
Cinemark shall only be entitled to update, amend or modify the Schedules after the date of this
Agreement until the Closing Date (the “Update Period”) to reflect factors, circumstances or
events first arising or, in the case of representations given to the Company’s Knowledge, becoming
known to the Company, during the Update Period. The information contained in such supplement will
be deemed to become part of the Schedules and will be deemed to qualify and constitute an exception
to the representations and warranties herein for purposes of Contributor’s right to indemnification
hereunder and shall also modify the Schedules hereto for purposes of determining whether the
conditions to closing have been satisfied unless Contributor delivers written notice of its
objection to the Company and Cinemark within ten (10) days after the date the supplement is
delivered. The delivery of any Schedule supplement pursuant to this Section 6.4 shall not be
deemed an admission or an acknowledgement (i) that the disclosures contained in such supplement are
material or would reasonably be expected to have a Material Adverse Effect or are outside of the
ordinary course of business or inconsistent with past practice, or (ii) that there has occurred an
actual or anticipatory breach of, or failure to comply with or satisfy, any representation,
warranty, covenant, condition or agreement.
Section 10. Definitions. For the purposes of this Agreement, the following terms have
the meanings set forth below:
“Action” means any litigation, suit or binding arbitration by or before any
Governmental Authority and any civil, criminal or administrative claim, demand, proceeding, binding
arbitration, hearing or to the Company’s or Cinemark’s knowledge, investigation.
“Affiliated Group” means an affiliated group as defined in the Internal Revenue Code
§1504 (or any analogous combined, consolidated or unitary group defined under state, local or
foreign income Tax law).
“Agreement” has the meaning set forth in the preamble.
8
“Cinemark’s Business” means the business conducted by Cinemark and its Subsidiaries,
taken as a whole.
“Closing” has the meaning set forth in the Purchase Agreement.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Shares” has the meaning set forth in Section 1.
“Contract” means any contract, lease, license or other agreement, whether written or
oral, that is or is intended to be legally binding and to which any of the Company, Cinemark or
Cinemark’s Subsidiaries is a party or by which any of them is bound.
“Contributor” has the meaning set forth in the preamble.
“Contemplated Transactions” means the transactions contemplated by the Purchase
Agreement and this Agreement, which includes the Contribution Transaction.
“Cinemark Contribution Agreement” means that certain Contribution and Exchange
Agreement, dated as of the date hereof, between Cinemark and the stockholders of Cinemark party
thereto.
“Governing Document” means any charter, articles, bylaws, certificate, operating
agreement, regulations or similar document adopted, filed or registered in connection with the
creation, formation, organization or governance of an entity.
“Governmental Authority” means any United States federal, state or local, or any
foreign governmental, regulatory, legislative, administrative, policing or taxing authority, agency
or commission or any court, tribunal, or judicial or arbitral body of any of the foregoing.
“Governmental Authorization” means any consent, license, permit, approval, or
registration issued or granted by any Governmental Authority or pursuant to any Law; provided that,
any consent that may be required by a Governmental Authority as a party to an agreement acting in
such Governmental Authority’s proprietary capacity rather than its regulatory capacity shall be
deemed not to be a Governmental Authorization.
“Governmental Order” means any order, writ, judgment, injunction, decree, filing,
notice, stipulation, determination or award of any kind or nature entered by or with any
Governmental Authority.
“HSR Act” means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended and the
regulations thereunder.
“Knowledge” means the actual knowledge (with no inquiry) of the executive officers of
the Company.
“Law” means any binding Federal, state, local, municipal or foreign constitution,
treaty, statute, law, ordinance, regulation, rule, code or order.
9
“Lien” means any pledges, liens, mortgages, security interests, licenses,
encumbrances, or any other restrictions or third party rights, including restrictions on use, and
the right to transfer, receive income or exercise any other attribute of ownership.
“Material Adverse Effect” means any change, effect, event, occurrence, state of facts
or development that is, or is reasonably expected to be, materially adverse to the business,
properties, assets, liabilities, condition (financial or otherwise) or results of operations of
Cinemark and its Subsidiaries, taken as a whole. Notwithstanding the foregoing, none of the
following changes, effects, events, occurrences, states of facts or developments shall be deemed
(either alone or in combination) to constitute, and none of the following shall be taken into
account in determining whether there has been, a Material Adverse Effect or whether a Material
Adverse Effect would reasonably be expected to occur: changes, effects, events, occurrences, states
of facts or developments (a) relating to or resulting from economic conditions in general in the
United States or the global economy or capital or financial markets generally, (b) relating to or
resulting from changes in any Law, (c) relating to any change in the accounting requirements
applicable to the Company or its Subsidiaries, (d) resulting from the execution of the Purchase
Agreement, or the announcement of the Contemplated Transactions, including any loss of employees,
(e) resulting from general increases in the costs of construction in any market or markets in which
Cinemark or any of its Subsidiaries conduct business, (f) relating to or resulting from changes
generally in the industry or markets in which Cinemark and its Subsidiaries operate unless such
changes disproportionately affect Cinemark and its Subsidiaries relative to other companies in
Cinemark’s and its Subsidiaries’ industry.
“Person” means an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
“Purchase Agreement” has the meaning set forth in the preamble.
“Registration Agreement” means that certain Registration Agreement, dated as of the
hereof, by and between the Company, Madison Dearborn Capital Partners IV, L.P. and the other
parties party thereto.
“Restricted Securities” means (i) the Company Shares issued hereunder and (ii) any
securities issued or exchanged with respect to the securities referred to in clause (i) above by
way of a stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance with the registration
statement covering them, (b) been distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 (or any similar rule or rules then in force) under the Securities Act or
become eligible for sale pursuant to Rule 144(k) (or any similar rule or rules then in force) under
the Securities Act or (c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in Section 12(a)(iv) have been delivered by the Company in
accordance with Section 12(a)(iv). Whenever any particular securities cease to be
Restricted Securities, the holder thereof shall be entitled to receive from the Company, without
expense, new securities of like tenor not bearing a Securities Act legend of the character set
forth in Section 12(a)(iv).
“Rollover Shares” has the meaning given to such term in the Purchase Agreement.
“Securities Act” means the Securities Act of 1933 and the rules and regulations
promulgated thereunder, in each case, as amended from time to time.
10
“Securities and Exchange Commission” includes any governmental body or agency
succeeding to the functions thereof.
“Stockholders Agreement” has the meaning set forth in Section 2.
“Subsidiary” means with respect to any Person, any other Person of which securities or
other ownership interests having ordinary voting power to elect at least 50% of the board of
directors or other persons performing similar functions are at the time directly or indirectly
owned by such Person.
Section 11. Indemnification.
(a) Survival of Representations and Warranties. All representations and warranties
contained herein or made in writing by any party in connection herewith shall survive the execution
and delivery of this Agreement and the consummation of the transactions contemplated hereby as
follows:
(i) the representations and warranties contained in Section 7(a) (Organization),
Section 7(b) (Authorization), Section 7(d) (Capitalization), Section 7(e)
(Subsidiaries) and Section 8 (Investment) shall not terminate until 60 days after the
expiration of the applicable statute of limitations with respect to the liabilities in question
(giving effect to any extensions or waivers thereof); and
(ii) all other representations and warranties contained in this Agreement, any schedules or
exhibits hereto or in any certificate delivered by the Company or Cinemark to Contributor, on the
one hand, or by Contributor to the Company, on the other hand, in connection with this Agreement,
shall terminate on the first anniversary of the closing of the Contribution Transaction (the
“Closing”).
(b) Indemnification.
(i) Subject to Section 11(c), after the Closing, Contributor, its affiliates and its
Subsidiaries and each of their respective officers, directors, employees, agents, representatives,
affiliates, successors and permitted assigns shall be indemnified and held harmless by the Company
for any and all liabilities, losses, damages, debts, obligations, claims, costs or expenses,
interest, awards, judgments, orders, fines and penalties (including reasonable attorneys’ fees and
expenses) actually suffered or incurred by them (hereinafter a “Loss”), to the extent such
Losses arise out of or result from the breach of any representation or warranty made by the Company
or Cinemark contained in this Agreement, any schedules or exhibits hereto or in any certificate
delivered by the Company or Cinemark to Contributor hereunder.
(ii) Subject to Section 11(c), after the Closing, the Company, its affiliates and its
Subsidiaries and each of their respective officers, directors, employees, agents, representatives,
affiliates, successors and permitted assigns shall be indemnified and held harmless by Contributor
for any and all Losses arising out of or resulting from the breach of any representation or
warranty made by Contributor contained in this Agreement (including the schedules and exhibits
thereto and any certificates required to be delivered by Contributor hereunder).
(iii) Any party seeking indemnification under this Section 11(b) (an “Indemnified
Party”) shall promptly give the party from whom indemnification is being sought (an
“Indemnifying Party”) notice of any matter which such Indemnified Party has determined has
given or could give rise to a right of indemnification under this Agreement stating the amount of
the Loss, if
11
known, and method of computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or arises.
(c) Limits on Indemnification.
(i) No amount shall be payable by any Indemnifying Party pursuant to Section 11(b)(i)
(other than with respect to the representations and warranties contained Section 7(a)
(Organization), Section 7(b) (Authorization), Section 7(d) (Capitalization) and
Section 7(e) (Subsidiaries) (collectively, the “Fully Indemnified
Representations”)) unless (i) the amount of Loss related to any individual item exceeds $50,000
(provided that such items shall be aggregated for the purposes of determining whether the
Deductible has been reached); and (ii) the aggregate amount of Losses indemnifiable by such
Indemnifying Party under Section 11(b)(i) exceeds $750,000 (the “Deductible”), and
then only to the extent of such excess.
(ii) Notwithstanding anything to the contrary contained in this Agreement, the maximum amount
of aggregate indemnifiable Losses which may be recovered from the Company under Section
11(b)(i) (other than with respect to the Fully Indemnified Representations) shall be
$7,500,000.
(iii) Notwithstanding anything to the contrary contained herein, for purposes of determining
whether there has been a breach of a representation or warranty and the amount of any Losses that
are the subject matter of a claim for indemnification hereunder (other than Section 7(k),
the Deductible amount shall be the materiality standard for all purposes hereunder and, therefore,
each representation, warranty and other provision contained in this Agreement and each certificate
delivered pursuant hereto shall be read without regard and without giving effect to any materiality
or Material Adverse Effect standard or qualification contained in such representation or warranty
(as if such standard or qualification were deleted from such representation and warranty).
(iv) Notwithstanding anything to the contrary contained in this Agreement, no Indemnified
Party shall be entitled to recover under any claim of indemnification pursuant to this Agreement to
the extent such Indemnified Party has previously been indemnified for such claim under the Purchase
Agreement.
(d) Indemnification as Exclusive Remedy. Subject to the limitations set forth in this
Section 11, (a) the indemnification provided in Section 11(b)(i) shall be
Contributor’s exclusive remedy for any breach by the Company of any representation or warranty
contained herein, and (b) the indemnification provided in Section 11(b)(ii) shall be the
Company’s exclusive remedy available for any breach by Contributor of any representation or
warranty contained herein, except in each case with regard to fraud.
Section 12. Miscellaneous.
(a) Transfer of Restricted Securities.
(i) Restricted Securities are transferable only pursuant to (a) public offerings registered
under the Securities Act, (b) Rule 144 or Rule 144A under the Securities Act (or any similar rule
or rules then in force) if such rule is available and (c) subject to the conditions specified in
Section 12(a)(ii) below, any other legally available means of transfer.
(ii) In connection with the transfer of any Restricted Securities (other than a transfer
described in clause (a) or (b) of subsection (i) above), the holder thereof shall deliver written
12
notice to the Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of counsel which (to the Company’s reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of Restricted Securities
may be effected without registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities delivers to the Company an opinion of counsel
that no subsequent transfer of such Restricted Securities shall require registration under the
Securities Act, the Company shall promptly upon such contemplated transfer deliver new certificates
for such Restricted Securities which do not bear the Securities Act legend set forth in Section
12(a)(iv) below. If the Company is not required to deliver new certificates for such Restricted
Securities not bearing such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to be bound by the
conditions contained in this Section 12(a)(ii) and Section 12(a)(iv).
(iii) If any Restricted Securities become eligible for sale pursuant to Rule 144(k) under the
Securities Act (or any similar rule or rules then in force), the Company shall, upon the request of
the holder of such Restricted Securities, remove the legend set forth in Section 12(a)(iv) from the
certificates representing such Restricted Securities.
(iv) Each certificate representing Restricted Securities shall be imprinted with a legend in
substantially the following form:
“The securities represented hereby have not been registered under
the Securities Act of 1933, as amended or any state securities or
blue sky laws and may not be transferred in the absence of
registration thereunder or an exemption therefrom.”
(b) Irrevocability: Binding Effect on Successors and Assigns. Contributor hereby
acknowledges and agrees that, except as provided under applicable federal and state securities
laws, the subscription hereunder is irrevocable, that Contributor is not entitled to cancel,
terminate or revoke this Agreement or any agreements of Contributor hereunder, and that this
Agreement any and such other agreements shall survive the death or disability of Contributor and
shall be binding upon and inure to the benefit of the parties and their respective heirs,
executors, administrators, successors, legal representatives and permitted assigns. If Contributor
is more than one person, the obligations of Contributor hereunder shall be joint and several and
the agreements, representations, warranties and acknowledgments herein contained shall be deemed to
be made by and be binding upon each such person and his, her or its heirs, executors,
administrators, successors, legal representatives, and assigns.
(c) 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.
(d) 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.
(e) Descriptive Headings; Interpretation. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this Agreement.
13
(f) 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.
(g) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement and the exhibits hereto shall be governed by the law of the
State of Delaware, without giving effect to any choice of law or conflict of law provisions or rule
(whether of the State of Delaware or any other jurisdiction) that would cause the laws of any
jurisdiction other than the State of Delaware to be applied.
(h) MUTUAL WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR EACH OF
THE PARTIES TO ENTER INTO THIS AGREEMENT (WITH EACH PARTY HAVING HAD OPPORTUNITY TO CONSULT
COUNSEL), EACH PARTY HERETO EXPRESSLY AND IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
LAWSUIT OR LEGAL PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREIN, AND ANY LAWSUIT OR LEGAL PROCEEDING RELATING TO OR ARISING IN ANY
WAY TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN SHALL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
(i) Notices. Any notice provided for in this Agreement must be in writing and must be
personally delivered, sent by telecopy with original to follow by overnight courier service, by
first class mail (postage prepaid and return receipt requested) or reputable overnight courier
service (charges prepaid) to the recipient at the addresses indicated below:
| Notices to the Company or Cinemark: | ||||
| Cinemark Holdings, Inc. | ||||
| Cinemark, Inc. | ||||
| 0000 Xxxxxx Xxxxxxx, Xxxxx 000 | ||||
| Xxxxx, XX 00000 | ||||
| Facsimile: (000) 000-0000 | ||||
| Attention: Xxxxxxx Xxxxxxxx | ||||
| with copies to (which shall not constitute notice): | ||||
| Madison Dearborn Capital Partners IV, L.P. | ||||
| Three First National Plaza, Suite 3800 | ||||
| 00 Xxxx Xxxxxxx Xxxxxx | ||||
| Xxxxxxx, XX 00000 | ||||
| Facsimile: (000) 000-0000 | ||||
| Attention: Xxxxxxxx X. Xxxxxxxxx | ||||
| Xxxxxxxx & Xxxxx LLP | ||||
| 000 Xxxx Xxxxxxxx Xxxxx | ||||
| Xxxxxxx, XX 00000 | ||||
| Facsimile: (000) 000-0000 | ||||
| Attention: Xxxxxx X. Xxxx, P.C. | ||||
Xxxxxxx X. Xxxxx |
||||
| Notices to Contributor: | ||||
14
| Syufy Enterprises, LP | ||||
| 000 Xxxxxxx Xxx | ||||
| Xxx Xxxxxx, XX 00000 | ||||
| Attention: Chief Financial Officer | ||||
| with copies to (which shall not constitute notice): | ||||
| Xxxxxxxx & Xxxxxxxx | ||||
| 000 Xxxxxx Xxxxxx | ||||
| Xxx Xxxxxxxxx, XX 00000 | ||||
| Facsimile: (000) 000-0000 | ||||
| Attention: Xxxx X. Xxxxxxxx | ||||
or to such other address or to the attention of such other Person as the recipient party has
specified by prior written notice to the sending party. Any notice under this Agreement shall be
deemed to have been given when so delivered or, if sent by telecopy the day of receipt, or if
mailed, three days after deposit in the U.S. mail (return receipt requested) and one day after
deposit with a reputable overnight courier service.
(j) Tax Treatment. The parties agree that Contributor’s transfer of the Rollover
Shares to the Company in exchange for the Company Shares together with the Cinemark shareholders’
contribution of their Cinemark shares to the Company in exchange for the Class A Common Stock is
intended to qualify under Section 351(a) of the Code, and the parties hereto agree to report such
transaction consistent with such qualification. In such case, the parties agree that they will take
all reasonable measures to defend the position that such transaction qualifies under Section 351(a)
of the Code in any audit, examination, litigation or other proceeding relating to taxes.
(k) THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE SALE OF SUCH
SECURITIES AND THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION
25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
(l) Closing. This Agreement will take effect as a binding agreement between
Contributor and the Company as of the date hereof on the terms and conditions set forth herein, and
Contributor acknowledges and agrees that this Agreement creates a binding commitment to consummate
the transactions set forth in Sections 2 and 3 above, and that the Company has
entered into the Purchase Agreement in reliance of such binding commitment. Notwithstanding the
foregoing, the provisions of this Agreement shall terminate and be of no further force and effect
in the event that the transactions contemplated in the Purchase Agreement are not consummated.
* * * * *
15
IN WITNESS WHEREOF, the parties hereto have executed this Stock Contribution and Exchange
Agreement on the date first written above.
| CINEMARK HOLDINGS, INC. |
||||
| By: | ||||
| Name: | ||||
| Its: | ||||
| CINEMARK, INC. |
||||
| By: | ||||
| Name: | ||||
| Its: | ||||
| SYUFY ENTERPRISES, LP |
||||
| By: | ||||
| Name: | ||||
| Its: | ||||
NUMBER OF SHARES OF CLASS A COMMON STOCK OF THE COMPANY
Number of Company Shares: 3,388,466
Number of Rollover Shares: 1,723,891
