STOCKHOLDERS AGREEMENT
EXHIBIT
10.19
This
STOCKHOLDERS AGREEMENT (the “Agreement”)
dated
as of July 21, 2006, is by and among WYNDCREST DD HOLDINGS, INC., a Delaware
corporation (the "Company"),
FALCON MEZZANINE PARTNERS II, LP, a Delaware limited partnership ("Falcon"),
and
WYNDCREST DD INVESTMENT HOLDINGS, LLC, XXXXXXX XXX, XXX XXXXXX, XXXX XXXXX,
XXXXXXXX XXXXXXX and XXXX X. XXXXXX (each, an "Investor",
and
together the "Investors").
Falcon, the Investors, and their respective Permitted Transferees (as defined
below) are each referred to herein as a "Stockholder"
and
together as the "Stockholders".
Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in Section 1 hereof.
WHEREAS,
Falcon has purchased (i) shares of the Convertible Preferred Stock and (ii)
Warrants, in each case, pursuant to a Purchase Agreement, dated as of the date
hereof, by and among the Company, Falcon, Digital Domain, Inc., a Delaware
corporation (“DDI”),
and
certain other parties (as amended, restated or modified from time to time,
the
"Falcon
Purchase Agreement");
WHEREAS,
the Investors have purchased shares of Common Stock prior to the date hereof;
and
WHEREAS,
the Company and the Stockholders desire to enter into this Agreement for the
purposes, among others, of (i) establishing the composi-tion of the board
of directors of the Company (the "Board"),
(ii)
assuring continuity in the management and ownership of the Company and
(iii) limiting the manner and terms by which the Stockholder Shares may be
transferred.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Definitions.
As used
herein, the following terms shall have the following respective
meanings:
"Affiliate"
means,
as to any Person, any other Person which directly or indirectly controls, or
is
under common control with, or is controlled by, such Person. As used in this
definition, "control" (including, with its correlative meanings, "controlled
by"
and "under common control with") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities, by contract or otherwise).
"Approved
Sale"
means a
Sale of the Company approved by a majority of the Board, and by the holders
of a
majority of the shares of Common Stock and Convertible Preferred Stock then
outstanding, voting together as a single class, pursuant to which all holders
of
Stockholder Shares are to receive with respect thereto (whether in such
transaction or, with respect to an asset sale, upon a subsequent liquidation)
the same form and amount of consideration per share of Common Stock or, if
any
holders are to be given an option as to the form and amount of consideration
to
be received, all holders are given the same option; provided that the purchase
price per share of Common Stock (or, with respect to an asset sale, the amount
received per share of Common Stock by such holders upon a subsequent
liquidation) in such transaction shall be not less than 1.25x the Conversion
Price (as defined in the Certificate of Designations) of the Convertible
Preferred Stock then in effect.
“Certificate
of Designations”
means
the Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of 8.0% Senior Cumulative
Convertible Preferred Stock, and Qualifications, Limitations and Restrictions
Thereof relating to the Convertible Preferred Stock, as in effect on the date
hereof.
“Closing
Date”
has
the
meaning ascribed thereto in the Falcon Purchase Agreement.
"Common
Stock"
means
(i) the Company's Common Stock, par value $.0001 per share, (ii) any other
class
of common stock of the Company, and (iii) any capital stock of the Company
issued or issuable with respect to the securities referred to in clauses (i)
and
(ii) above, whether by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Common
Stock Deemed Outstanding"
means,
as of any date of determination, the number of shares of Common Stock,
determined on a fully diluted basis after giving effect to all outstanding
securities convertible or exercisable into or exchangeable for Common Stock
(collectively, "Common
Stock Equivalents"),
and
any options, warrants, convertible securities, and other rights to acquire
Common Stock or Common Stock Equivalents, then outstanding.
"Convertible
Preferred Stock"
means
the Company's 8.0% Senior Cumulative Convertible Preferred Stock, par value
$.0001 per share, and any other securities issued in exchange, substitution
or
replacement therefor.
"Exchange
Act”
means
the Securities Exchange Act of 1934, as amended from time to time.
"Fair
Market Value"
means
fair market value, as determined by an independent appraiser, accountant or
investment bank knowledgeable in the Company’s field of business (the
"Appraiser")
acceptable to the Board (acting reasonably and without unreasonable delay).
The
Appraiser's determination of fair market value will be conclusive and binding
for purposes of Section 4(c) this Agreement. The Company will bear the costs
of
the Appraiser.
"Falcon
Securities"
means
the Stockholder Shares held by Falcon and its Permitted
Transferees.
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"Family
Group"
means,
with respect to any natural Person, (i) such Person’s spouse, former spouse
and descendants (whether natural or adopted), parents and their descendants,
descendants of such Person’s brothers and sisters and any spouse of the
foregoing individuals and (ii) any trust solely for the benefit of any of
the individuals listed in clause (i) above.
“GAAP”
means
United States generally accepted accounting principles.
"Independent
Third Party"
means
any Person who, immediately prior to the contemplated transaction, (A) does
not
own in excess of 5% of the Common Stock Deemed Outstanding, (B) is not an
Affiliate of any such 5% owner of the Common Stock Deemed Outstanding and (C)
is
not a member of the Family Group of any such 5% owner of the Common Stock Deemed
Outstanding..
"Interested
Party"
means
each Person who, as a result of an Involuntary Transfer, holds an interest
in
any Stockholder Shares previously owned by a Stockholder.
"Involuntary
Transfer"
means
(a) any Transfer of Stockholder Shares owned by a Stockholder that results
from
(i) the attachment, sequestration, garnishment, foreclosure or other similar
involuntary transfer resulting from a bankruptcy or similar proceeding affecting
such Stockholder, or (ii) the death or involuntary dissolution of such
Stockholder, or (b) a Marital Relationship Transfer, other than any Transfer
of
Stockholder Shares by an employee of the Company or any of its Subsidiaries
(or
such employee’s heirs, devisees, legatees, estate or representatives) to the
Company upon the death of such employee (an “Involuntary
Transfer to Company”).
"Marital
Relationship Transfer"
means
the transfer of any Stockholder Shares (or interest therein) pursuant to a
divorce, legal separation or similar proceeding to which the Stockholder owning
such Stockholder Shares is a party, or a failure of the Stockholder to succeed
to his or her deceased spouse's interest (if any) in any Stockholder
Shares.
"Other
Stockholders"
means,
with respect to a Stockholder, all Stockholders other than such
Stockholder.
"Permitted
Transferees"
has the
meaning set forth in Section 4(d).
"Person"
means
an individual, a partnership, a corpora-tion, a limited liability company,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Public
Sale"
means
any sale of Stockholder Shares to the public pursuant to an offering registered
under the Securities Act or to the public effected through a broker, dealer
or
market maker pursuant to the provisions of Rule 144 or Rule 144A (if such
rule is available) under the Securities Act (or any similar rule or rules then
in effect).
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"Qualified
Public Offering"
means
the first underwritten public offering by the Company of the Common Stock after
the date hereof pursuant to a registration statement filed with the Securities
and Exchange Commission in accordance with the Securities Act, which public
offering shall raise gross proceeds to the Company of at least
$25,000,000.
"Sale
of the Company"
means
the sale of the Company, including in one or more series of related
transactions, to an Independent Third Party or group of Independent Third
Parties pursuant to which such party or parties acquire (i) equity securities
of
the Company constituting a majority of the common equity of the Company (whether
by merger, consolida-tion, sale or transfer of any or all of the Company’s
outstanding capital stock) or (ii) all or substantially all of the Company’s
assets determined on a xxxxxxx-dated basis.
"Securities
Act"
means
the Securities Act of 1933, as amended from time to time.
“Shares”
means
shares of capital stock of any class of the Company, whether common or
preferred, voting or nonvoting, issued or unissued, or now authorized or
authorized in the future, whether or not issued or issuable upon the exercise
of
options, warrants or similar rights. For purposes of this Agreement, other
than
Section 4(a) hereof, options, warrants and other convertible securities will
be
considered to be of the same class as the underlying security into which such
option, warrant or convertible security may be exercised or converted.
“Significant
Subsidiary”
means
DDI and any Subsidiary of DDI, other than Senbazuru Productions for so long
as
it engages in no material activities and acquires no material assets except
as
in effect on the Closing Date, that shall at any time have assets with a fair
market value in excess of $50,000 or revenue in excess of $50,000 in any twelve
month period.
"Stockholder
Shares"
means
(i) any Common Stock or Common Stock Equivalents issued to or acquired by
the Stockholders, whether prior to, on or after the date hereof, and
(ii) any equity securi-ties issued or issuable directly or indirectly with
respect to the securities referred to in clause (i) above by way of stock
dividend or stock split or in connec-tion with a combination of shares,
recapitaliza-tion, merger, consolidation or other reorgan-ization. As to any
particular securities constituting Stock-holder Shares, such securities will
cease to be Stockholder Shares when they have been sold in a Public Sale.
"Subsidiary"
means,
with respect to any Person, any corporation, partnership, association or other
business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence
of
any contingency) to vote in the election of directors thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
of
the other Subsidiaries of that Person or a combination thereof, or (ii) if
a partnership, limited liability company, association or other business entity,
a majority of the partnership or other similar ownership interests thereof
is at
the time owned or controlled, directly or indirectly, by that Person or one
or
more of the other Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association
or
other business entity if such Person or Persons shall be allocated a majority
of
partnership, limited liability company, association or other business entity
gains or losses or shall be or control the managing member, managing director
or
general partner of such partnership, limited liability company, association
or
other business entity.
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"Transaction
Documents"
means
the following documents, both of which are dated as of the date hereof, as
amended from time to time: this Agreement and the Falcon Purchase
Agreement.
"Transfer"
means
any sale, transfer, assignment, pledge, hypothecation or other
disposition.
“Warrants”
means
the warrants to purchase shares of Common Stock issued to Falcon on the date
hereof pursuant to the Falcon Purchase Agreement.
2. Board
of Directors.
(a) Until
the
provisions of this Section 2 cease to be effective pursuant to Section
2(h), each Stockholder shall vote all voting securities of the Company over
which such Stockholder has voting control or which are beneficially owned by
such Stockholder, and shall take all other necessary or desirable actions within
such Stockholder's control (whether in such Stockholder's capacity as a
stock-holder, director, member of a Board committee or officer of the Company
or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary and desirable
actions within its control (including, without limitation, calling special
Board
and stockholder meetings), so that:
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(i)
|
the
Board shall be comprised of seven (7)
directors;
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(ii)
|
the
following persons will be elected to the
Board:
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(A)
|
the
holders of the majority of Stockholder Shares held by the Investors
will
designate six (6) directors, which designees shall initially be Xxxx
X.
Xxxxxx, Xxxxxxx Xxx, Xxxx Xxxxx, and three (3) persons to be designated
by
such holders after the date hereof;
and,
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(B)
|
the
holders of the majority of the Falcon Securities will designate one
(1)
director, which designee shall initially be Xxxxxx X. Xxxxx (the
“Falcon
Director”);
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(iii) any
director shall be removed from the Board (with or without cause) at the written
request of the Stockholder or Stockholders having the right to designate such
director hereunder, but only upon such written request and under no other
circumstances (in each case, determined on the basis of a vote or consent of
the
relevant Stock-holder(s)); provided,
that
the holders of a majority of the Stockholder Shares may remove any director
for
cause, but a replacement director may only be designated by the Stockholder(s)
having the right to designate such director hereunder; and
(iv) in
the
event that any representative member of the Board desig-nated hereunder for
any
reason ceases to serve as a member of the Board during such representative's
term of office, the resulting vacancy on the Board shall be filled by a
representative designated by the Stockholder(s) having the right to designate
the director who ceases to serve.
(b) Any
committee established by the Board shall consist of no more than four (4)
members, one of whom shall be the Falcon Director. All actions of each committee
of the Board shall require the affirmative vote of a majority of the members
of
such committee. The composition of the board of directors of each Significant
Subsidiary and each committee thereof shall, where the appropriate Persons
are
willing to serve, be identical to the composition of the Board and each
corresponding committee thereof; provided that no member of the Board shall
be
required to serve as a director or committee member of any such Significant
Subsidiary.
(c) The
Company agrees to, and shall cause each Significant Subsidiary to, obtain,
or be
an insured party pursuant to and beneficiary pursuant to, a general liability
insurance policy and a directors’ and officers’ liability insurance policy, in
each such case on terms and conditions that are mutually reasonably acceptable
to the members of the board of directors of such Person. The Company agrees
to,
and shall cause each Significant Subsidiary to, maintain such policies (or
policies containing similar terms and conditions) in full force and effect
at
all times. The Company’s and each such Significant Subsidiary’s certificate of
incorporation, bylaws and other organizational documents shall provide (i)
for
elimination of the liability of directors to the maximum extent permitted by
law
and (ii) for indemnification of directors for acts on behalf of, respectively,
the Company and each such Significant Subsidiary, to the maximum extent
permitted by law.
(d) The
Company shall, and shall cause each Significant Subsidiary to, pay the
reasonable out-of-pocket expenses incurred by each director in connection with
attend-ing the meetings of its respective board of directors or any committee
thereof of which he is a member.
(e) [reserved].
(f) If
any
party fails to designate a representative to fill a directorship pursuant to
the
terms of this Section 2, the election of a Person to such directorship shall
be
accomplished in accordance with the Company's or any Significant Subsidiary’s
(as applicable) certificate of incorporation and bylaws and applicable law
(provided that such party may subsequently remove and replace such Person in
accordance with the terms of this Section 2). In the event that any provision
of
the Company's or any Significant Subsidiary’s (as applicable) bylaws or
certificate of incorporation is inconsistent with any provision of this Section
2, the Stockholders shall take such action as may be necessary to amend any
such
provision in the Company's or such Significant Subsidiary’s (as applicable)
bylaws or certificate of incorporation to remedy such
inconsistency.
6
(g) Special
Voting Requirements.
Notwithstanding anything to the contrary in the Certificate of Incorporation
or
the By-laws of the Company or this Agreement, so long as Falcon and its
Permitted Transferees continue to own at least fifty percent (50%) of the number
of the Stockholder Shares Falcon owns on the date hereof (with such securities
deemed to be continued to be so owned when exercised or converted into, or
exchanged for, shares of Common Stock), the Company and the Stockholders agree
not to cause or permit the Company or any Subsidiary thereof to take any of
the
actions set forth below without the affirmative vote or written consent of
Stockholders holding at least a majority of the Falcon Securities held by Falcon
and its Permitted Transferees in the aggregate:
(i) except
to
the extent permitted by the Falcon Purchase Agreement, entering into any
transaction or amending in any material respect the terms of any existing
transaction with any (i) director, officer (other than as to reasonable
compensation arrangements), holder of 5% or more of any class of securities
of
the Company or any Affiliate thereof (other than a Subsidiary of the Company),
(ii) individual related by blood or marriage (a “Related
Person”)
to
such director, officer, or security holder, (iii) Affiliate (other than the
Company or any Subsidiary thereof) of such director, officer, security holder
or
Related Person or (iv) Person (other than the Company or any Subsidiary
thereof) in which such director, officer, security holder or Related Person
has
an interest of greater than 5% of the equity of such Person;
(ii) other
than an Approved Sale, the sale (whether by merger or otherwise) of all or
substantially all of the capital stock of the Company, or the sale (whether
by
merger or otherwise), lease or other disposition of all or substantially all
of
the assets of the Company and its Subsidiaries on a consolidated basis, in
any
transaction or series of related transactions;
(iii) the
dissolution and liquidation of the Company or any Significant Subsidiary;
(iv) the
issuance or sale by the Company, during the period after the Closing Date,
of
any of its equity interests, including Common Stock Equivalents, to current
or
future directors, officers, consultants, employees and strategic partners of
the
Company and any of its Subsidiaries, in an aggregate amount outstanding
(excluding any such equity interests issued or sold to such Persons by the
Company on or prior to the Closing Date, or after the Closing Date pursuant
to
the exercise, conversion or exchange of such equity interests as are outstanding
on the Closing Date) at any such time exceeding fifteen percent (15%) of all
such then outstanding equity interests of the Company on a fully diluted basis;
provided that such percentage shall be increased upon the repayment in full
(including upon a Legal Defeasance (as defined in the Falcon Purchase
Agreement)) of the Senior Secured Notes due 2011 of DDI to twenty percent (20%);
and
7
(v) the
making of any payments by Senbazuru Productions, a Subsidiary of the Company,
to
any Person (other than the Company or any Significant Subsidiary) for any
reason, except in connection with the development, production and exploitation
of the filmed entertainment project currently entitled, “A Thousand
Cranes.”
(h) The
provisions of this Sect-ion 2 shall terminate automatically and be of no
further force and effect upon the consummation of a Qualified Public
Offering
3. Representations
and Warranties.
Each
Stockholder represents and warrants that (a) this Agreement has been duly
authorized, executed and delivered by such Stockholder and constitutes the
valid
and binding obligation of such Stockholder, enforceable against such Stockholder
in accordance with its terms, and (b) such Stockholder has not granted and
is
not a party to any proxy, voting trust or other agreement which is inconsistent
with, conflicts with or violates any provision of this Agreement. No holder
of
Stockholder Shares shall grant any such proxy or become party to any such voting
trust or other agreement which is inconsistent with, conflicts with or violates
any provision of this Agreement. The Company represents and warrants that the
Capitalization Table of the Company attached hereto as Exhibit A correctly
sets
forth the ownership of the Common Stock and Common Stock Equivalents outstanding
as of the date hereof.
4. Restrictions
on Transfer by Stockholders/Other Rights.
(a) Tag-Along
Rights.
Subject
to Sections 4(b), 4(c), 4(d), 4(e) and 4(g) and other than in connection with
an
Approved Sale in accordance with Section 5, at least 15 days prior to any
contemplated Transfer (other than an Involuntary Transfer) by an Investor of
Stockholder Shares held by such Investor, which Stockholder Shares, together
with all Stockholder Shares previously transferred by such Investor, constitute
in aggregate more than 10 percent (10%) of the Stockholder Shares held by such
Investor on the date of this Agreement, such Investor shall deliver a written
notice (the "Sale
Notice")
to the
Company and the Other Stockholders, specifying in reasonable detail the identity
of the prospective transferee(s) and the terms and condi-tions of the Transfer.
The Other Stockholders may elect to participate in the contemplated Transfer
by
delivering written notice to the transferring Stockholder within 10 days after
delivery of the Sale Notice. If any Other Stockholders have elected timely
to
participate in such Transfer, each of the transferring Stockholder and such
Other Stockholders shall be entitled to sell in the contemplated Transfer,
at
the same price and on the same terms, a number of Stockholder Shares, of the
same class of Stockholder Shares proposed to be transferred by the Investor,
equal to the product of (i) the quotient determined by dividing the number
of Stock-holder Shares owned by such Stockholder by the aggregate number of
Stock-holder Shares owned by the transferring Stockholder and the Other
Stockholders participating in such Transfer, and (ii) the aggregate number
of Stockholder Shares to be sold in the proposed Transfer.
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(b) First
Offer Rights.
(i) Notice
of Transfer.
Subject
to Sections 4(c), 4(d), 4(e) and 4(g) and other than a Transfer by an Other
Stockholder pursuant to Section 4(a), and any Approved Sale in accordance with
Section 5, at least 30 days prior to any voluntary Transfer of Stockholder
Shares by any Stockholder, the Stockholder making such Transfer (the
"Transferring
Stockholder")
shall
deliver a written notice (the "Transfer
Notice")
to the
Company and the Other Stockholders stating that the Transferring Stockholder
intends to explore a potential Transfer of all or a specified portion of his
or
its Stockholder Shares (the “Offered
Shares”),
shall
reference this right of first offer and shall state that no such Transfer shall
be effected prior to the date that is 30 days following the date of the Transfer
Notice.
(ii) First
Option.
The
Company shall have the first right and option, exercisable within 20 days (the
“First
Option Period”)
after
the delivery of the Transfer Notice to make an offer (the “First
Offer”)
to the
Transferring Stockholder to purchase all (but not less than all) of the Offered
Shares, which First Offer shall be unconditional, shall provide for cash payment
for the Offered Shares within 10 days of acceptance of the First Offer, and
shall specify the purchase price to be paid for the Offered Shares. Any such
First Offer shall be delivered to the Transferring Stockholder by the Company,
with a copy provided to the Other Stockholders.
(iii) Second
Option.
If the
Company has not elected to purchase all of the Offered Shares prior to the
expiration of the first Offer Period, the Other Stockholders shall have the
right and option, exercisable within 20 days after the expiration of the First
Option Period (the “Second
Option Period”),
to
make an offer (the “Second
Offer”)
to the
Transferring Stockholder to purchase in aggregate all (but not less than all)
of
the Offered Shares (in such respective amounts as are equal to their respective
pro-rata portions of the Common Stock Deemed Outstanding owned by all such
Other
Stockholders, with the pro-rata over-allotment right to purchase such amounts
not purchased by any such Stockholder), which Second Offer shall be
unconditional, shall provide for cash payment for the Offered Shares within
10
days of acceptance of the Second Offer, and shall specify the purchase price
to
be paid for the Offered Shares (and the maximum percentage of the Offered Shares
that each Other Stockholder desiring to participate in the Second Offer is
willing to purchase pursuant to said over-allotment right). Any such Second
Offer shall be delivered to the Transferring Stockholder by each such Other
Stockholder wishing to participate in the Second Offer, and a copy provided
to
all of the Other Stockholders. In the event that different purchase prices
are
proposed severally by the Other Stockholders wishing to participate in the
Second Offer, the Second Offer purchase price shall be the lowest such proposed
price.
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(iv) Closing.
The
Transferring Stockholder shall have the absolute right to accept or reject
the
First Offer or Second Offer, as applicable, provided however that if either
such
offer is rejected, the Transferring Stockholder may only sell the Offered Shares
to one or more third parties at a purchase price greater than the price set
forth in the First Offer or Second Offer, as applicable, and to the extent
such
Offered Shares are not so transferred by the Transferring Stockholder within
90
days immediately following the date on which the Transfer Notice has been given
to the Company and the Other Stockholders the Transferring Stockholder shall
once again become subject to the provisions of this Section 4(b) with respect
to
any future Transfer of Stockholder Shares. If the Transferring Stockholder
shall
accept either the First Offer or the Second Offer, then the closing of the
purchase and sale will occur on the thirtieth (30th)
day
following the date of expiration of the First Option Period or the Second Option
Period, as applicable (or such earlier date as may be agreed upon among the
parties). If either the Company or the Other Stockholders default in their
obligation to purchase the Offered Shares, the Transferring Stockholder shall
be
free to transfer such shares without regard to any restriction on transfer
thereof set forth in this Section 4. The failure of the Company or any Other
Stockholder to advise the Transferring Stockholder of such Person’s decision to
purchase shares within the applicable period described above shall be deemed
to
constitute a notification to the Transferring Stockholder of a decision not
to
exercise the first right and option described in this Section 4(b).
(c) First
Offer Rights in Connection with Involuntary Transfers.
Upon
any Involuntary Transfer of Stockholder Shares, each Interested Party will
comply with, and the Involuntary Transfer will be subject to, the following
provisions, to the maximum extent permitted by applicable law:
(i) Notice
of Involuntary Transfer.
The
Interested Party will deliver a written notice (the "Notice
of Involuntary Transfer")
to
each Stockholder and the Company (and, in the case of a Marital Relationship
Transfer, to the former owner of the Stockholder Shares that are the subject
of
the Involuntary Transfer if the former owner is not a current Stockholder)
no
later than thirty (30) days after such Involuntary Transfer. The Company agrees
to promptly provide the Interested Party with a list of the names and addresses
of each Stockholder and, if applicable, the former owner, for such purpose
upon
request. The Notice of Involuntary Transfer will include (i) a description
of
the circumstances resulting in the Involuntary Transfer, (ii) the name and
address of each Interested Party and (iii) the type and number of Stockholder
Shares subject to such Involuntary Transfer (the "Subject
Securities").
Upon
the failure of the Interested Party to deliver a Notice of Involuntary Transfer
within thirty (30) days of an Involuntary Transfer, the Interested Party will
be
deemed to have provided such Notice of Involuntary Transfer to the Company
and
each Stockholder (and, if applicable, a former Stockholder in the case of a
Marital Relationship Transfer) and the terms of Sections 4(c)(ii) through (v)
will be applicable to any Involuntary Transfer.
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(ii) First
Option.
In the
case of a Marital Relationship Transfer, the Notice of Involuntary Transfer
will
constitute an irrevocable offer by the Interested Party to sell all (but not
less than all) of the Subject Securities at Fair Market Value to the former
owner from whom the Subject Securities were involuntarily transferred. The
former owner may elect to accept such offer by delivering to the Interested
Party (with a copy to the Company) written notice of his election to accept
such
offer, which election will be final and irrevocable, within thirty (30) days
after his receipt of the Notice of Involuntary Transfer. If the former owner
does not so elect to accept such offer within such thirty (30) day option period
with respect to the Subject Securities, then the Company, on behalf of the
former owner, will, immediately following the expiration of such thirty (30)
day
option period, inform the Interested Party in writing, with a copy to each
Stockholder, that the former owner did not elect to purchase the Subject
Securities, and the Company will then have the option pursuant to Section
4(c)(iii)
to
purchase all (but not less than all) of the Subject Securities.
(iii) Second
Option.
If
Section 4(c)(ii) is inapplicable, or if applicable, the former owner does not
elect to purchase all of the Subject Securities in accordance with Section
4(c)(ii), then the Notice of Involuntary Transfer will be deemed to constitute
an irrevocable offer by the Interested Party to sell to the Company, at Fair
Market Value, all (but not less than all) of the Subject Securities. The Company
may elect to accept such offer by delivering to the Interested Party written
notice of its election to accept such offer, which decision will be final and
irrevocable, within ten (10) days after the expiration of the option period
set
forth in Section 4(c)(ii) above.
(iv) Third
Option.
If the
Company does not elect to purchase the Subject Securities in accordance with
Section 4(c)(iii), then the Notice of Involuntary Transfer will be deemed
to constitute an irrevocable offer by the Interested Party to sell all (but
not
less than all) of the Subject Securities at Fair Market Value to the
Stockholders in such respective amounts as are equal to their respective
pro-rata portions of the Common Stock Deemed Outstanding owned by all such
Stockholders, with the pro-rata over-allotment right to purchase such amounts
not purchased by any such Stockholder. Each Stockholder may elect to accept
such
offer by delivering to the Interested Party (with a copy to the Company) written
notice of his or its election to accept such offer (including therein the
maximum percentage of the Subject Securities he or it is willing to purchase
subject to such over-allotment right), which election will be final and
irrevocable, within ten (10) days after the expiration of the ten (10) day
option period set forth in Section 4(c)(iii) above.
(v) Closing.
If any
Person validly elects to purchase Subject Securities pursuant to this
Section 4(c), then the closing of the purchase and sale will occur on the
sixtieth (60th) day following the date on which such Person was required to
elect to purchase such Subject Securities (or such earlier date as may be agreed
upon among the parties).
11
(d) Permitted
Transfers.
The
restrictions contained in this Section 4 shall not apply with respect to
any Involuntary Transfer to Company, or with respect to any other Transfer
(other than an Involuntary Transfer) of Stockholder Shares by any Stockholder
(i) in the case of an individual Stockholder, (A) to any Other
Stockholder(s) other than Wyndcrest DD Investment Holdings, LLC (“Investment
Holdings LLC”), or (B) only if approved in writing by a majority of the Board,
to any member of such Stockholder's Family Group, (ii) in the case of
Falcon or any of its Permitted Transferees, (A) to any Affiliate, managing
director, principal, limited or general partner, member, manager, employee
or
retired partner of Falcon or such transferee, (B) to any Other Stockholder(s),
(C) to any pledgee that is a commercial bank or other financial institution
providing financing to Falcon or such transferee, which pledgee is taking a
security interest in the Stockholder Shares in connection with such financing,
provided,
that
the pledgor shall at all times retain the right to vote its Stockholder Shares,
or (D) in connection with the transfer by Falcon of any of the Senior Secured
Notes due 2011 of DDI as permitted by the terms of the Falcon Purchase
Agreement, to any transferee of such Senior Secured Notes up to the
corresponding proportionate amount of each class of Stockholder Shares then
owned by Falcon, (iii) in the case of any Stockholder, of up to no more than
10%
of the aggregate Stockholder Shares owned by such Stockholder on the date of
this Agreement, to any Person(s) other than Investment Holdings LLC, and (iv)
in
the case of any Stockholder (other than Falcon and its Permitted Transferees)
that is not a natural Person, (A) to any Affiliate, managing director,
principal, limited or general partner, member, manager, employee, or retired
partner of such Person (other than Investment Holdings LLC), or (B) to any
Other
Stockholder(s) (other than Investment Holdings LLC). The restrictions contained
in this Section 4 shall continue to be applicable to such Stockholder
Shares after any such Transfer and the transferees of such Stockholder Shares
shall have agreed in writing to be bound by the provisions of this Agreement
which affect the Stockholder Shares so transferred by executing a joinder in
substantially the form attached hereto as Exhibit
C
(the
“Joinder
Agreement”).
All
transferees permitted under this Section 4(d) are collectively referred to
in
this Agreement as "Permitted
Transferees."
(e) Restriction
on Transfer of Warrants.
Notwithstanding anything to the contrary in this Agreement, neither Falcon
nor
any of its Permitted Transferees, nor any other Stockholder, shall be permitted,
prior to an Event of Default (as defined in the Falcon Purchase Agreement),
to
effect any voluntary Transfer of the Warrants owned by such Person, except
(i)
in an Approved Sale and (ii) in the case of Falcon and its Permitted
Transferees, to the transferees, and on the respective terms and conditions,
described in Section 4(d)(ii)(D) hereof.
(f) Prohibition
on Certain Transfers of Interests in Investment Holdings LLC.
Notwithstanding anything to the contrary in this Agreement, Investment Holdings
LLC agrees that, without the prior written consent of Stockholders holding
at
least a majority of the Falcon Securities then held by Falcon and its Permitted
Transferees in the aggregate, at any time that Wyndcrest Holdings, LLC ceases
to
be the sole manager of Investment Holdings LLC, it will not issue any membership
interest to, and will not cause or permit any of its members to directly or
indirectly transfer (except for bona fide
family/estate or tax planning purposes of the transferring member) any of his
or
its membership interests in Investment Holdings LLC to, in each case, any Person
other than Xx. Xxxx X. Xxxxxx, any members of Xx. Xxxx X. Xxxxxx’x Family Group,
and/or any Person of which 100% of the voting and economic interests are owned
by Xx. Xxxx X. Xxxxxx and/or one or more members of Xx. Xxxx X. Xxxxxx’x Family
Group.
12
(g) Termination
of Restrictions.
The
restrictions set forth in this Section 4 shall continue with respect to
each Stockholder Share until the earlier of (i) the Transfer of such
Stockholder Share in an Approved Sale in accordance with Section 5, or (ii)
immediately prior to the consummation of a Qualified Public
Offering.
5. Sale
of the Company.
(a) Upon
the
approval of a Sale of the Company qualifying as an Approved Sale by the
requisite majority of the Board and of the holders of the shares of Common
Stock
and Convertible Preferred Stock, each Stockholder will (i) consent to and
raise no objections against the Approved Sale or the process pursuant to which
the Approved Sale was arranged, (ii) waive any dissenter's rights and other
similar rights arising in connection therewith, and (iii) if the Approved
Sale is structured as a sale of stock, each Stockholder will agree to sell
its
Stockholder Shares on the terms and conditions of the Approved Sale. Each
Stockholder will take all necessary and desirable actions as directed by the
Board and the holders of a majority of the Common Stock and Convertible
Preferred Stock, voting together as a single class, in connection with the
consummation of any Approved Sale, including, without limitation, (A) executing
the applicable purchase agreement, (B) granting identical indemnification rights
(whether directly to the buyer of the Stockholder Shares or pursuant to the
provisions of a contribution agreement) on a several and pro
rata
basis up
to the net proceeds received by such Stockholder from such Approved Sale and
(C)
making only those representations and warranties relating to its ownership
of
the Stockholder Shares to be sold by him or it.
(b) If,
in
the context of an Approved Sale in which it is contemplated that the holders
of
the Company’s securities are to receive securities issued by any other Person,
the Company or the holders of the Company's securities enter into any
negotiation or transaction for which Rule 506 (or any similar rule then in
effect) under the Securities Act may be available with respect to such
negotiation or transaction (including a merger, consolidation or other
reorganization), the Stockholders (other than Falcon) will, at the request
of
the Company, appoint a purchaser representative (as such term is defined in
Rule
501 under the Securities Act) reasonably acceptable to the Company. If any
Stockholder appoints a purchaser representative designated by the Company,
the
Company will pay the fees of such purchaser representative, but if any
Stockholder declines to appoint the purchaser representative designated by
the
Company, such Stockholder will appoint another purchaser representative
(reasonably acceptable to the Company), and such Stockholder will be responsible
for the fees of the purchaser representative so appointed.
13
(c) This
Section 5 shall automatically terminate upon the consummation of a
Qualified Public Offering.
6. Preemptive
Rights.
(a) The
Company hereby grants to each Stockholder that is an “Accredited Investor”
within the meaning of Regulation D under the Securities Act, subject to the
terms and conditions specified in this Section 6, the right to purchase up
to
his or its pro
rata
share
(as defined below) of all New Securities (as defined in Section 6(b) hereof)
that the Company may, from time to time, propose to sell and issue. Each
Stockholder’s “pro
rata
share,”
for purposes of this preemptive right, is the ratio (i) the numerator of which
is the number of Stockholder Shares held by such Stockholder on the date of
the
Company’s written notice pursuant to Section 6(c) hereof, and (ii) the
denominator of which is the number of Stockholder Shares held by all
Stockholders eligible to participate in the preemptive rights offer in
accordance with the first sentence of this Section 6(a).
(b) “New
Securities”
means
any Shares, whether or not now authorized; provided that the term “New
Securities” does not include (i) Shares issued or sold to persons who are, or
who are to become, employees, officers, directors, strategic partners (which
may
include individuals) and/or consultants of the Company or any of its
Subsidiaries as bona fide compensation for services rendered or to be rendered;
provided, that such sales or issuances are approved in good faith by the Board;
(ii) securities issued to the seller as part of the financing of the acquisition
of another company by the Company pursuant to a plan, agreement or other
arrangement approved in good faith by the Board; (iii) securities issued
pursuant to any stock dividend, stock split, combination or other
reclassification by the Company of any Shares treating each class or series
of
Shares equally; (iv) securities issued pursuant to a bona fide arms’ length
transaction with debt financing sources, vendors or suppliers of the Company;
provided, that such issuances are approved in good faith by the Board; (v)
Shares issued upon the exercise of options, warrants or convertible securities
if the underlying instrument is outstanding on the date of this Agreement or
was
thereafter issued on the terms described in clause (i) or otherwise in
compliance with this Section 6, and (vi) Common Stock issued in a Qualified
Public Offering.
(c) In
the
event the Company proposes to undertake an issuance of New
Securities, it will give each Stockholder written notice (the “Preemptive
Notice”) of its intention, describing the class of New Securities, and the
price, amount and the general terms upon which the Company proposes to issue
the
same. Each eligible Stockholder will have twenty (20) days from the date of
any
such notice to agree to purchase up to his or its pro rata share of such New
Securities in accordance with Section 6(a), for the price and upon the general
terms specified in the Preemptive Notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased.
(d) In
the
event the Company delivers a Preemptive Notice, the Company will have ninety
(90) days from the date of the first closing specified in such written notice
to
sell all such New Securities (including the New Securities, if any, to be
purchased individually by any Stockholder pursuant to this Section 6) at a
price
and upon general terms no more favorable to the purchasers thereof than the
price and terms specified in the Company's original notice to the Stockholders,
and provided that such purchasers will agree in writing to be bound by the
terms
and conditions of this Agreement by executing the Joinder Agreement and any
other documents reasonably required by the Company. In the event the Company
has
not sold all such New Securities within said ninety (90) day period, the Company
will not thereafter issue or sell any New Securities without first offering
such
securities individually to the eligible Stockholders in the manner provided
by
this Section 6.
14
(e) In
the
event that a Stockholder that has the right under this Section 6 to purchase
any
New Securities declines to exercise his or its right in full to purchase the
New
Securities to be sold (each, a “Preemptive Declining Stockholder”), by failing
to give the written notice to the Company referenced in Section 6(c) within
the
twenty (20) day period specified therein, before the New Securities not
purchased by all Preemptive Declining Stockholders (the “Preemptive Unsubscribed
Portion”) are offered to any other Person, the Company shall deliver to each
Stockholder who is not a Preemptive Declining Stockholder a written notice
(the
“Second Preemptive Notice”) stating the number of such New Securities
constituting the Preemptive Unsubscribed Portion. Each Stockholder who has
timely elected to exercise in full his or its right to so purchase the New
Securities (collectively, the “Preemptive Participating Stockholders”) shall
have the right to purchase his or its pro rata share of the Preemptive
Unsubscribed Portion (excluding, for this purpose, the Stockholder Shares held
by the Preemptive Declining Stockholders) by providing written notice to the
Company of such Preemptive Participating Stockholder's election to purchase
his
or its pro rata share of the Preemptive Unsubscribed Portion within ten (10)
days of the date of delivery to him or it of the Second Preemptive
Notice.
(f) This
Section 6 shall automatically terminate upon consummation of a Qualified
Public Offering.
7. Financial
Reporting.
(a) The
Company shall cause to be prepared and delivered to Falcon, for so long as
Falcon continues to own at least fifty percent (50%) of the number of
Stockholder Shares owned by it on the date hereof (with such securities deemed
to be continued to be so owned when exercised or converted into, or exchanged
for, shares of Common Stock issued to Falcon), the following financial
statements:
(i) Within
thirty (30) days after the end of each calendar month (A) a consolidated balance
sheet as of the end of such month; and (B) the related consolidated statements
of income and cash flows for such month, each prepared in accordance with GAAP,
consistently applied (except as noted therein), with the exception that no
notes
need be attached to such statements, such statements may be condensed, and
year-end audit adjustments may not have been made;
15
(ii) Within
forty-five (45) days after the end of each calendar quarter ending on March
31,
June 30 and September 30 of each fiscal year, (A) a consolidated balance sheet
as of the end of such quarter; and (B) the related consolidated statements
of
income and cash flows for the quarter then ended, each prepared in accordance
with GAAP, consistently applied (except as noted therein), with the exception
that no notes need be attached to such statements, such statements may be
condensed, and year-end audit adjustments may not have been made;
and
(iii) Within
one hundred twenty (120) days of the end of each fiscal year, (A) a consolidated
balance sheet of the Company as of the end of such fiscal year, and (B) the
related consolidated statements of income and cash flows for such fiscal year,
prepared in accordance with GAAP, consistently applied (except as noted
therein), as audited and accompanied by a report and opinion thereon by
independent public accountants of national standing in the United States
selected by the Board.
(b) This
Section 7 shall automatically terminate upon the consummation of a
Qualified Public Offering.
8. Legend. In
addition to any legend required by any other document to which the parties
hereto are signatory, each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stock-holder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON [DATE
OF
ISSUANCE], HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFI-CATE ARE SUBJECT TO
THE
RESTRICTIONS CONTAINED IN A STOCKHOLDERS AGREE-MENT DATED AS OF JULY __, 2006
BY
AND AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE
COMPANY'S STOCKHOLDERS, AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME.
A
COPY OF SUCH STOCK-HOLDERS' AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
16
The
Company shall imprint such legend on any certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall
be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares.
9. Transfer
of Stockholder Shares.
(a) Any
Transfer or attempted Transfer of any Stockholder Shares in violation of any
provision of this Agreement shall be null and void ab initio,
and the
Company shall not record such Transfer on its books or treat any purported
transferee of such Stockholder Shares as the owner of such shares for any
purpose.
(b) Stockholder
Shares are transferable by any legally available means of Transfer; provided
that any
Transfer of Stockholder Shares must also comply with the terms of Section 4
and the other provisions of this Agreement.
(c) In
connection with any proposed Transfer of any Stockholder Shares other than
a
sale thereof pursuant to an offering registered under the Securities Act, the
holder thereof shall deliver written notice to the Company describing in
reasonable detail the proposed Transfer, together with an opinion of counsel
reasonably acceptable to the Company to the effect that such proposed Transfer
of Stockholder Shares may be effected without registration under the Securities
Act. In addition, if the holder of the Stockholder Shares delivers to the
Company an opinion of such counsel that no subsequent Transfer of such
Stockholder Shares shall require registration under the Securities Act, the
Company shall promptly upon such contemplated Transfer deliver new certificates
for such Stockholder Shares which do not bear the legend set forth in Section
8
above. If the Company is not required to deliver new certificates for such
Stockholder Shares not bearing such legend, the holder thereof shall not effect
the Transfer thereof until the prospective transferee has confirmed to the
Company in writing its agreement to be bound by the conditions contained herein,
as required by Section 4(d) above.
(d) In
the
event of a proposed Transfer of any Stockholder Shares pursuant to Rule 144A
(or
any similar rule or rules then in effect) under the Securities Act, upon the
request of the holder of Stockholder Shares proposing said Transfer, the Company
shall promptly supply to such holder or its prospective transferees all
information regarding the Company required to be delivered by the issuer in
connection with a Transfer pursuant to Rule 144A (or any similar rule or rules
then in effect) under the Securities Act.
(e) Upon
the
request of any holder of Stockholder Shares, the Company shall remove the legend
set forth in Section 8 above from the certificates for such holder's Stockholder
Shares; provided,
that
such Stockholder Shares are eligible for sale pursuant to Rule 144 (or any
similar rule or rules then in effect) under the Securities Act.
10. Registration
Rights.
The
Stockholders shall have registration rights with respect to the Common Stock
as
set forth in the Registration Rights Agreement attached hereto as Exhibit B
(the
"Registration
Rights Agreement"),
the
terms and conditions of which are hereby fully incorporated into this Agreement
by this reference. Each of the Stockholders agrees not to effect any public
sale
or distribution of any securities of the Company during the applicable periods
specified in the Registration Rights Agreement, except as permitted thereby,
and
each such Stockholder agrees to be bound by the rights of priority to
participate in offerings as set forth therein.
17
11. Corporate
Opportunity.
No
Stockholder (other than Falcon and its Affiliates) shall, directly or
indirectly, make any investment in any Corporate Opportunity unless all material
facts regarding such Corporate Opportunity have been presented to the Board
and
the disinterested members of the Board shall, by duly adopted resolution, elect
on behalf of the Company not to pursue such opportunity. For purposes of this
Agreement, “Corporate Opportunity” shall mean any business similar in nature to
the visual effects business then being conducted by the Company and its
Subsidiaries; provided, however, that this provision shall not prohibit any
Stockholder from any investment by such Stockholder in up to 4.9% of the voting
securities of any entity a class of whose shares are registered under Section
12(b) or 12(g) of the Exchange Act and approved for quotation on the Nasdaq
National Market or listed on a national securities exchange, so long as such
Stockholder is not part of any control group of such entity. The Company and
each of the Other Stockholders acknowledge that Falcon and its Affiliates and
each of their respective partners, members, stockholders, directors, officers,
controlling Persons, managers and employees have business interests and engage
in business activities or commercial transactions in addition to those relating
to the Company (including those which may compete with the Company). The Company
and each of the other Stockholders agree (and, to the fullest extent permitted
by applicable law, hereby waive and agree not to assert any claim to the
contrary) that neither Falcon nor any such Affiliate, partner, member,
stockholder, director, officer, controlling Person, manager or employee shall
be
obligated to present any particular investment or business opportunity to the
Company even if such opportunity is of such character that it could be
undertaken by the Company, and that Falcon and each such Affiliate, partner,
member, stockholder, director, officer, controlling Person, manager or employee
shall have the right to undertake any such opportunity for itself, for its
own
account, or on behalf of another or to recommend any such opportunity to any
other Person.
12. Spousal
Consent.
Each
Stockholder that holds Stockholder Shares in his individual name and is a
married natural Person will deliver to the other parties hereto,
contemporaneously with such Stockholder's executed counterpart signature page
hereto, a copy of the spousal consent that appears immediately following the
signature page hereto, duly executed by such Stockholder's spouse. Each such
spousal consent will be attached hereto and be a part hereof. Each married
natural Person who acquires Stockholder Shares in his individual name and
delivers the Joinder Agreement will deliver to the other parties hereto,
contemporaneously with such Person's executed Joinder Agreement, an executed
copy of the spousal consent that appears on the form of Joinder Agreement
attached hereto, duly executed by such Person's spouse.
13. Amendment
and Waiver.
No
modification, amendment or waiver of any provision of this Agreement shall
be
effective against the Company or the Stockholders unless such modifi-cation,
amendment or waiver is approved in writing by the Company, the holders of a
majority of the Falcon Securities and the holders of a majority of the
Stockholder Shares owned by the Investors; provided,
that
any such modification, amendment or waiver which adversely affects any
Stockholder and is prejudicial to such Stockholder relative to all of the Other
Stockholders cannot be effected without the consent of such Stockholder. The
failure of any party to enforce any of the provi-sions of this Agreement shall
in no way be construed as a waiver of such provisions and shall not affect
the
right of such party there-after to enforce each and every provision of this
Agreement in accordance with its terms.
18
14. Severability.
Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effec-tive and valid under applicable law, but if any provi-sion 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 any other provision or 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 con-tained herein.
15. Entire
Agreement.
Except
as otherwise expressly set forth herein, this document and the other Transaction
Document embody the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and thereof and supersede
and
preempt any prior understandings, agreements or representations by or among
the
parties, written or oral, which may have related to the subject matter hereof
or
thereof in any way.
16. 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 subse-quent holders of Stock-holder Shares and the
respec-tive successors and assigns of each of them, so long as they hold
Stockholder Shares or have received Stockholder Shares in accordance with the
terms hereof.
17. Counterparts.
This
Agreement may be executed in separate counterparts (including by means of
telecopied signature pages), all of which taken together shall constitute one
and the same agreement.
18. Remedies.
The
parties hereto shall be entitled to enforce their rights under this Agreement
specifically, and 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 money damages may not be an adequate
remedy for any breach of the provisions of this Agree-ment and that the Company
or any Stockholder may in his or its sole discretion apply to any court of
law
or equity of competent jurisdiction for specific performance and/or injunc-tive
relief (without posting a bond or other security) in order to enforce or prevent
any xxxxx-tion of the provisions of this Agree-ment.
19. Notices.
All
notices, demands or other communications to be given or delivered under or
by
reason of the provisions of this Agreement will be in writing and will only
be
deemed to have been given when delivered
personally, the next business day after being sent via a nationally recognized
overnight courier, or when sent via facsimile to the recipient (with mechanical
confirmation of transmission)
or via
e-mail (which shall be deemed to have been given upon the confirmed receipt
thereof by the recipient thereof). Such notices, demands and other
communications will be sent to the addresses indicated below:
19
To
the
Company:
Wyndcrest
DD Holdings, Inc.
000
X.X.
Xxxxxxx Xxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attention:
Xxxx X. Xxxxxx
Fax
No.:
(000) 000-0000
E-mail:
xxxxxxx@xxxxxxxxx.xxx
with
a
copy to:
Digital
Domain, Inc.
000
Xxxx
Xxxxxx
Xxxxxx,
Xxxxxxxxxx 00000
Attention:
General Counsel
Fax
No.:
(000) 000-0000
and
with
a copy to:
Xxxxxxxx
& Xxxxxx, LLP
0000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention:
D. Xxxxxx Xxxxxx
Fax
No.:
(000) 000-0000
E-mail:
xxxxxxx@xxxxxxxxxxxxxx.xxx
To
Falcon:
Falcon
Mezzanine Partners II, LP
00
Xxxxxx
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxxxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxxxx Xx.
Fax
No.:
(000) 000-0000
E-mail:
xxxxxxxx@xxxxxxxxxxxxxxxxx.xxx
With
a
copy to:
Xxxxxx
Xxxxxx & Xxxxxxx LLP
00
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxxxxxxxxx
Fax
No.:
(000) 000-0000
E-mail:
xxxxxxxxxxxxx@xxxxxx.xxx
20
To
any of
the Investors:
[Name
of
Investor]
c/o
Wyndcrest DD Holdings, Inc.
000
X.X.
Xxxxxxx Xxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attention:
Xxxx X. Xxxxxx
Fax
No.:
(000) 000-0000
E-mail:
xxxxxxx@xxxxxxxxx.xxx
with
a
copy to:
Xxxxxxxx
& Xxxxxx, LLP
0000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention:
D. Xxxxxx Xxxxxx
Fax
No.:
(000) 000-0000
E-mail:
xxxxxxx@xxxxxxxxxxxxxx.xxx
or
such
other address or to the attention of such other Person as the recipient party
shall have specified by prior written notice to the sending
party.
21
20. Governing
Law.
The
corporate law of the State of Delaware shall govern all issues concerning the
relative rights of the Company and its stockholders, to the extent not
permissibly addressed in this Agreement. This Agreement shall be governed by
and
construed in accordance with the internal laws of the State of Delaware, without
giving effect to principles of conflicts of laws or choice of law of the State
of Delaware or any other jurisdiction which would result in the application
of
the law of any jurisdiction other than the State of Delaware.
21. Descriptive
Headings.
The
descriptive headings of this Agreement are inserted for convenience of reference
only and do not constitute a part of this Agreement.
22. Time
of the Essence; Computation of Time.
Time is
of the essence for each and every provision of this Agreement. Whenever the
last
day for the exercise of any privilege or the discharge or any duty hereunder
shall fall upon a Saturday, Sunday, or any date on which banks in New York
City,
New York are authorized to be closed, the party having such privilege or duty
may exercise such privilege or discharge such duty on the next succeeding day
which is a regular business day.
23. Jurisdiction;
Venue; Consent to Service of Process.
(a) Each
party to this Agreement hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Superior Court
of the State of Delaware sitting in Wilmington County, of the Chancery Court
of
the State of Delaware and of the United States District Court of the District
of
Delaware, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment in any such action, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such Delaware
or, to the extent permitted by law, in such federal, court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall
be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or
in any other manner provided by law. Nothing in this Agreement shall affect
any
right any of the parties may otherwise have to bring any action or proceeding
relating to this Agreement against any other parties or their properties in
the
courts of any jurisdiction.
(b) Each
party to this Agreement hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it
may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in Section
23(a). Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(c) Each
party to this Agreement irrevocably consents to service of process in any action
or proceeding arising out of or relating to this Agreement, in the manner
provided for notices (other than telecopy and email) in Section 19. Nothing
in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by applicable law.
22
24. Waiver
of Jury Trial.
The
parties to this Agreement each hereby waives, to the fullest extent permitted
by
law, any right to trial by jury of any claim, demand, action, or cause of action
(i) arising under this Agreement or (ii) in any way connected with or related
or
incidental to the dealings of the parties hereto in respect of this Agreement
or
any of the transactions related hereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity, or otherwise. The
parties to this Agreement each hereby agrees and consents that any such claim,
demand, action, or cause of action shall be decided by bench trial without
a
jury and that the parties to this Agreement may file an original counterpart
of
a copy of this Agreement with any court as written evidence of the consent
of
the parties hereto to the waiver of their right to trial by jury.
* * * * *
(signature
page follows)
23
IN
WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement
as
of the date first above written.
WYNDCREST
DD HOLDINGS, INC.
By:
________________________________
Its:
________________________________
FALCON
MEZZANINE PARTNERS II, LP
By:
Falcon Mezzanine Investments II, LLC,
its
general partner
By:
________________________________
Its:
_______________________________
WYNDCREST
DD INVESTMENT
HOLDINGS,
LLC
By:
________________________________
Its:
________________________________
___________________________________
XXXXXXX
XXX
___________________________________
XXX
XXXXXX
___________________________________
XXXX
XXXXX
___________________________________
XXXXXXXX
XXXXXXX
___________________________________
XXXX
X.
XXXXXX
24
SPOUSAL
CONSENT
I
acknowledge that I have had the opportunity to seek and obtain independent
legal
counsel in connection with this consent, that I have read the foregoing
Stockholders Agreement ("Stockholders
Agreement")
of
Wyndcrest DD Holdings, Inc. (the "Company"),
that
I understand its provisions, that I consent thereto and that I agree to be
bound
by its terms. I am aware that by the terms of the Stockholders Agreement
transfer of the Stockholder Shares held by my spouse is restricted. I hereby
consent to such restrictions, approve of the provisions of the Stockholders
Agreement, and agree that if I pre-decease my spouse, the successors of my
community property or other interest (if any) in such shares will hold such
shares subject to the provisions of the Stockholders Agreement. I am also aware
of, and hereby consent to, the rights granted to my spouse and the other parties
to the Stockholders Agreement to purchase any Stockholder Shares that I may
acquire by virtue of an Involuntary Transfer (as defined in the Stockholders
Agreement), including without limitation any Stockholder Shares that may be
awarded or distributed to me in any dissolution, divorce, legal separation
or
other similar proceeding.
|
Dated: ___________ __,
2006
|
____________________________________
|
|
(Signature)
|
|
|
____________________________________
|
|
|
(Printed
Name)
|
EXHIBIT
A
CAPITALIZATION
TABLE
EXHIBIT
B
REGISTRATION
RIGHTS AGREEMENT
1. Definitions.
As used
herein, the following terms shall have the following meanings.
"Agreement"
means
the Stockholders Agreement to which this Registration Rights Agreement is an
Exhibit.
"Company
Registrable Securities"
has the
meaning set forth in Section 5(b).
"Exchange
Act"
means
the Securities Exchange Act of 1934, as amended.
"Falcon
Registrable Securities"
means
the shares of Common Stock owned by Falcon and its Permitted Transferees until
(x) a registration statement covering such shares of Common Stock has been
declared effective by the SEC and such securities have been disposed of pursuant
to such effective registration statement, (y) such securities have been sold
under circumstances in which all of the applicable conditions of Rule 144 (or
any similar provisions then in force) have been met, or such securities may
be
sold pursuant to Rule 144(k) or (z) such securities have been otherwise
transferred, the Company has delivered a new certificate or other evidence
of
ownership for such securities not bearing the legend set forth in Section 8
of
the Agreement (or other legend of similar import) and such securities may be
resold without subsequent registration under the Securities Act. For purposes
of
this Registration Rights Agreement, a Person will be deemed to be a holder
of
Falcon Registrable Securities whenever such Person has the right to acquire
directly or indirectly such Falcon Registrable Securities (upon conversion
or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected.
"Other
Registrable Securities"
means
any shares of Common Stock issued or issuable to or otherwise acquired by (i)
the Investors and (ii) by investors in the previously completed private
placement of shares of the Common Stock conducted by GunnAllen Financial, Inc.
as the Company’s placement agent (the “GA
Investors”)
until
(x) a registration statement covering such shares of Common Stock has been
declared effective by the SEC and such securities have been disposed of pursuant
to such effective registration statement, (y) such securities have been sold
under circumstances in which all of the applicable conditions of Rule 144 (or
any similar provisions then in force) have been met, or such securities may
be
sold pursuant to Rule 144(k) or (z) such securities have been otherwise
transferred, the Company has delivered a new certificate or other evidence
of
ownership for such securities not bearing the legend set forth in Section 8
of
the Agreement (or other legend of similar import) and such securities may be
resold without subsequent registration under the Securities Act. For purposes
of
this Registration Rights Agreement, a Person will be deemed to be a holder
of
Other Registrable Securities whenever such Person has the right to acquire
directly or indirectly such Other Registrable Securities (upon conversion or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected, but in the case
of
Other Registrable Securities subject to vesting, only to the extent that such
Person’s right to acquire such Other Registrable Securities has
vested.
27
"Person"
means
an individual, a partnership, a corporation, an association, a joint stock
company, a limited liability company, a trust, a joint venture, an
unincorporated organization or a governmental entity or any department, agency
or political subdivision thereof.
"Registrable
Securities"
means,
collectively, the Falcon Registrable Securities and the Other Registrable
Securities.
"Registration
Expenses"
means
all expenses incident to the Company’s performance of or compliance with this
Registration Rights Agreement, including, without limitation: (i) all
registration and filing fees, (ii) fees and expenses relating to compliance
with
securities or blue sky laws (including fees and expenses of counsel in
connection with blue sky qualifications of the securities registered), (iii)
printing, messenger and delivery expenses, (iv) internal expenses of the Company
(including all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) fees and expenses of counsel for the Company
and fees and expenses for independent certified public accountants retained
by
the Company (including the expenses of any comfort letters or costs associated
with the delivery by independent certified public accountants of a comfort
letter or comfort letters), (vi) fees and expenses of any special experts
retained by the Company in connection with such registration, (vii) reasonable
fees and expenses of a single counsel for the Stockholders participating in
the
offering selected by the holders of a majority of the Registrable Securities
offered, (viii) fees and expenses in connection with any review of underwriting
arrangements by the National Association of Securities Dealers, Inc. (the
"NASD") and (ix) fees and expenses of underwriters customarily paid by issuers
or sellers of securities (but not including any underwriting discounts or
commissions attributable to the sale of Registrable Securities).
"Rule
144"
means
Rule 144 under the Securities Act (or any similar rule then in
force).
"SEC"
means
the Securities and Exchange Commission.
"Securities
Act"
means
the Securities Act of 1933, as amended.
"Stockholder"
means
each Person (other than the Company) who is a party to the Agreement, whether
in
connection with the execution and delivery thereof as of the date thereof or
otherwise in accordance therewith, so long as such Person shall beneficially
own
any Registrable Securities or have the irrevocable right to acquire Registrable
Securities.
28
Unless
otherwise defined in this Registration Rights Agreement, all terms used in
this
Registration Rights Agreement shall have the meanings ascribed to them in the
Agreement.
2. Demand
Registrations.
(a) Request
for Registration.
Subject
to Section 2(b) and 2(c) below, at any time and from time to time following
the
earlier of (i) the fourth (4th)
anniversary of the date of this Agreement and (ii) the effective date of the
first registration statement filed by the Company for the offering of its
securities to the general public under the Securities Act, the holders of a
majority of the Falcon Registrable Securities may request registration, whether
underwritten or otherwise, under the Securities Act of all or part of their
Registrable Securities on Form S-1 or any similar long-form registration
("Long-Form
Registrations")
or on
Form S-3 or any similar short-form registration ("Short-Form
Registrations"),
if
available. Each request for a Long-Form Registration or Short-Form Registration
shall specify the approximate number of Registrable Securities requested to
be
registered and the anticipated per share price range for such offering. Within
ten (10) days after receipt of any such request for a Long-Form Registration
or
Short-Form Registration, the Company will give written notice of such requested
registration to all other holders of Registrable Securities and will include
(subject to the provisions of this Registration Rights Agreement) in such
registration, all Registrable Securities with respect to which the Company
has
received written requests for inclusion therein within twenty (20) days after
the receipt of the Company's notice. The Company shall, once during the 12
month
period commencing on the date on which a request for registration is made under
this Section 2(a), have the right to delay filing the registration statement
with respect thereto for a period of not more than 120 days; provided
the
Company shall have furnished to holders of the Falcon Registrable Securities
requesting such registration statement a certificate signed by the Chairman
of
the Board of the Company stating that in the good faith judgment of the Board
it
would be materially detrimental to the Company and its stockholders for such
registration statement to be filed, become effective or to remain effective
as
long as such registration statement would otherwise be required to remain
effective because such filing or effectiveness (x) would materially interfere
with a significant acquisition, corporate reorganization or other similar
transaction involving the Company, (y) would require premature disclosure of
material information that the Company has a bona fide business purpose for
preserving as confidential or (z) would render the Company unable to comply
with
requirements under the Securities Act or Exchange Act. All registrations
requested pursuant to this Section 2(a) are referred to herein as "Demand
Registrations".
(b) Long-Form
Registrations.
The
holders of a majority of the Falcon Registrable Securities will be entitled
to
request one (1) Long-Form Registration, in which the Company will pay all
Registration Expenses. A registration will not count as the permitted Long-Form
Registration until it has become effective and unless the holders of Falcon
Registrable Securities are able to register and sell at least 90% of the Falcon
Registrable Securities requested to be included in such
registration.
29
(c) Short-Form
Registrations.
In
addition to the Long-Form Registration provided pursuant to Section 2(b), the
holders of a majority of the Falcon Registrable Securities will be entitled
to
request up to a maximum of three (3) Short-Form Registrations, in which the
Company will pay all Registration Expenses. Demand Registrations will be
Short-Form Registrations whenever the Company is permitted to use any applicable
short form. After the Company has become subject to the reporting requirements
of the Exchange Act, the Company will use its commercially reasonable efforts
to
make Short-Form Registrations available for the sale of Registrable
Securities.
(d) Priority
on Demand Registrations.
The
Company will not include in any Long-Form Registration or Short-Form
Registration any securities (other than Company Registrable Securities) which
are not Registrable Securities without the prior written consent of the holders
of at least a majority of the Falcon Registrable Securities included in such
registration. If a Long-Form Registration or a Short-Form Registration is an
underwritten offering and the managing underwriters advise the Company in
writing that in their good faith opinion the inclusion of any Other Registrable
Securities in the offering would adversely affect the marketability of the
offering, then such Other Registrable Securities shall not be permitted to
be
included. Additionally, if in connection with such an offering, the managing
underwriters advise the Company in writing that in their opinion the number
of
Registrable Securities (and, if permitted hereunder, other securities requested
to be included in such offering) exceeds the number of Registrable Securities
and other securities, if any, which can be sold therein without adversely
affecting the marketability of the offering, the Company will include in such
registration (i) first, the Falcon Registrable Securities requested to be
included in such registration, (ii) second (x) if no Company Registrable
Securities are requested to be included in such registration, the Other
Registrable Securities requested to be included in such registration pro rata,
if necessary, among the holders of Other Registrable Securities based on the
number of shares of Other Registrable Securities owned by each such holder,
and
(y) if Company Registrable Securities are requested to be included in such
registration, the number of Other Registrable Securities and Company Registrable
Securities requested to be included in such registration pro rata, if necessary,
among Company Registrable Securities and the holders of Other Registrable
Securities based on the number of shares of Other Registrable Securities and
Company Registrable Securities requested to be included therein, and
(iii) third, any other securities of the Company requested to be included
in such registration pro rata, if necessary, on the basis of the number of
shares of such other securities owned by each holder thereof. Any Persons other
than holders of Registrable Securities who participate in Demand Registrations
must pay their share of the Registration Expenses incurred in connection
therewith.
(e) Selection
of Underwriters.
The
Company shall have the exclusive right to select the underwriter(s) and
manager(s) for any Demand Registration that is an underwritten offering;
provided, that the Company shall use its commercially reasonable efforts to
engage a qualified underwriter. The Company’s selection must be approved by the
holders of a majority of the Falcon Registrable Securities included in any
Demand Registration, such approval not to be unreasonably withheld, conditioned
or delayed. The Company in exercising such right in good faith shall be under
no
obligation to select any Person that is not a broker-dealer with nationally
recognized standing as a securities underwriter, and the holders of the Falcon
Registrable Securities hereby expressly acknowledge that no such Person may
be
willing to act as an underwriter or manager for any such Demand Registration
or,
if willing, may not be willing to do so on reasonable and/or standard terms
and
conditions applicable to such underwritings generally.
30
(f) Restrictions
on Demand Registrations.
The
Company will not be obligated to effect any Demand Registration within six
months after the effective date of a previous Demand Registration.
(g) Other
Registration Rights.
Except
as provided in this Registration Rights Agreement and except as granted to
the
GA Investors in connection with their acquisition of the Other Registrable
Securities owned by them, the Company will not grant to any Person rights to
request the Company to register any equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for such securities,
without the prior written consent of the holders of a majority of the Falcon
Registrable Securities, unless such rights granted are not more favorable to
the
grantee than those granted to Falcon herein.
3. Piggyback
Registrations.
(a) Right
to Piggyback.
Whenever the Company proposes to register any of its Common Stock under the
Securities Act (other than pursuant to a Demand Registration, and other than
pursuant to a registration statement on Form S-8 or S-4 or any similar form
or
in connection with a registration the primary purpose of which is to register
debt securities) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback
Registration"),
the
Company will give prompt written notice to all holders of Registrable Securities
of its intention to effect such a registration and will include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within twenty (20) days after
the receipt of the Company's notice; provided
that (y)
if such registration involves an underwritten public offering, all holders
of
Registrable Securities must sell their Registrable Securities included therein
to the underwriters on the same terms and conditions as applicable to the
Company and the other holders of Registrable Securities included therein and
(z)
if, at any time after giving written notice of its intention to register any
Common Stock pursuant to this Section 3(a) and prior to the effective date
of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Common Stock, the
Company shall give written notice thereof to all such holders of Registrable
Securities and, thereupon, shall be relieved of its obligation to register
any
Registrable Securities in connection with such registration. Notwithstanding
the
foregoing, in connection only with the initial registered public offering of
the
Company's securities, which offering is a primary offering, no Registrable
Securities shall be included in such registration without the prior written
consent of the holders of a majority of the Falcon Registrable
Securities.
(b) Piggyback
Expenses.
The
Registration Expenses of the holders of Registrable Securities will be paid
by
the Company in all Piggyback Registrations.
31
(c) Priority
on Underwritten Primary Registrations.
If a
Piggyback Registration is an underwritten primary registration on behalf of
the
Company, the Company will include in such registration all Registrable
Securities requested to be included in such registration; provided,
that if
the managing underwriters advise the Company in writing that in their good
faith
opinion the inclusion of any Registrable Securities in such offering would
adversely affect the marketability of the offering, then such Registrable
Securities shall not be permitted to be included; and provided further,
that if
in connection with such offering, the managing underwriters advise the Company
in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company will include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Registrable Securities requested to be
included in such registration pro rata among the holders of such Registrable
Securities on the basis of the number of shares of Registrable Securities owned
by each such holder, and (iii) third, at the Company’s discretion, other
securities, if any, requested to be included in such registration.
(d) Priority
on Underwritten Secondary Registrations.
If a
Piggyback Registration is an underwritten secondary registration on behalf
of
holders of the Company's securities (pursuant to registration rights the grant
of which was consented to by Falcon if required by Section 2(g) hereof), and
the
managing underwriters advise the Company in writing that in their good faith
opinion the inclusion of any Registrable Securities in the offering would
adversely affect the marketability of the offering, then such Registrable
Securities shall not be permitted to be included. Additionally, if in connection
with such an offering, the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in
such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company will include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration, (ii) second, the Registrable
Securities requested to be included in such registration pro rata among the
holders of such Registrable Securities on the basis of the number of shares
of
Registrable Securities owned by each such holder, and (iii) third, at the
Company’s discretion, other securities requested to be included in such
registration not covered by clause (i) above.
(e) Other
Registrations.
If the
Company has previously filed a registration statement with respect to
Registrable Securities pursuant to this Section 3, and if such previous
registration has not been withdrawn or abandoned, the Company will not file
or
cause to be effected any other registration of any of its equity securities
or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Forms S-4 or S-8 or any successor
forms), whether on its own behalf or at the request of any holder or holders
of
such securities, until a period of at least six months has elapsed from the
effective date of such previous registration.
4. Holdback
Agreements.
32
(a) Each
holder of Registrable Securities hereby agrees not to effect any public sale
or
distribution (including sales pursuant to Rule 144) of equity securities of
the
Company, or any securities convertible into or exchangeable or exercisable
for
such securities, during the ten days prior to and during the 180-day period
(in
the case of the Company’s initial public offering) or the 90-day period (in the
case of any other underwritten public offering by the Company) beginning on
the
effective date of any Demand Registration or Piggyback Registration that is
an
underwritten offering in which Registrable Securities are included (except
as
part of such underwritten registration); provided
that
each executive officer, director and Stockholder whose securities are included
therein and each other holder of at least 5% (on a fully diluted basis) of
Common Stock, or any securities convertible or exercisable into or exchangeable
for Common Stock, agree to similar restrictions. If the underwriters managing
the registered public offering waive any such restriction for the benefit of
any
Stockholder, they will also grant an equivalent waiver to each other
Stockholder, whether or not participating in such offering.
(b) The
Company agrees (i) not to effect any public sale or distribution of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, during the ten days prior to and during the 180-day period
beginning on the effective date of any underwritten Demand Registration or
Piggyback Registration (except as part of such underwritten registration or
pursuant to registrations on Form S-4 or S-8 or any successor forms), unless
the
underwriters managing the registered public offering otherwise agree, and (ii)
to cause each executive officer, director and holder of Registrable Securities
included therein and each other holder of at least 5% (on a fully diluted basis)
of Common Stock, or any securities convertible or exercisable into or
exchangeable for Common Stock, purchased from the Company at any time after
the
date of the Agreement (other than in a registered public offering) to agree
not
to effect any public sale or distribution (including sales pursuant to Rule
144)
of any such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
5. Registration
Procedures.
Whenever the holders of Registrable Securities have requested that any
Registrable Securities be registered pursuant to Section 2 or 3 hereof, the
Company will, subject to the provisions hereof, use its reasonable best efforts
to effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and pursuant thereto
the Company will as expeditiously as possible:
(a) prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use its reasonable best efforts to cause such registration
statement to become effective (provided
that
before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will furnish to the counsel selected by the
holders of a majority of the Registrable Securities covered by such registration
statement and, in the case of a Demand Registration, counsel selected by the
holders of a majority of the Falcon Registrable Securities included therein,
copies of all such documents proposed to be filed);
33
(b) if
requested by the holders of a majority of the Falcon Registrable Securities
in
connection with the first Demand Registration requested hereunder, use its
reasonable best efforts to cause to be included in such registration statement
newly issued shares of the Company's Common Stock having an aggregate value
(based on the midpoint of the proposed offering price range specified in the
registration statement used to offer such securities) of up to $25 million
("Company
Registrable Securities"),
to be
offered in a primary offering of the Company's securities contemporaneously
with
such offering of Registrable Securities;
(c) prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to
keep such registration statement effective for a period of not less than six
months and comply with the provisions of the Securities Act with respect to
the
disposition of all securities covered by such registration statement during
such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(d) furnish
to each seller of Registrable Securities such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
seller;
(e) use
its
reasonable best efforts to register or qualify such Registrable Securities
under
such other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided
that the
Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subsection, (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process (i.e., service of process which is not
limited solely to securities law violations) in any such
jurisdiction);
(f) notify
each seller of such Registrable Securities, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein, in the context in which
they
were made, not misleading, and, at the request of any such seller, the Company
will promptly prepare a supplement or amendment to such prospectus so that,
as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit
to
state any fact necessary to make the statements therein, in the context in
which
they were made, not misleading;
34
(g) cause
all
such Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed and, if not so listed,
to be listed, to the extent eligible therefor, on the Nasdaq National Market
System ("Nasdaq
Market")
and,
if listed on the Nasdaq Market, use its reasonable best efforts to secure
designation of all such Registrable Securities covered by such registration
statement, to the extent eligible therefor, as a Nasdaq "National Market System
Security" within the meaning of Rule 11Aa2-1 under the Exchange Act or, failing
that, to secure Nasdaq Market authorization for such Registrable Securities,
to
the extent eligible therefor, and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such with
respect to such Registrable Securities with the National Association of
Securities Dealers, Inc.;
(h) provide
a
transfer agent and registrar for all such Registrable Securities not later
than
the effective date of such registration statement;
(i) enter
into such customary agreements (including, in the case of underwritten
offerings, underwriting agreements in customary form with the managing
underwriter(s) selected by the Company) and take all such other actions as
the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the
disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares);
(j) make
available for inspection by any seller of Registrable Securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant
or
agent in connection with such registration statement;
(k) otherwise
use its reasonable best efforts to comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as soon
as
reasonably practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the Company's first full calendar
quarter after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 promulgated thereunder;
(l) permit
any holder of Registrable Securities which holder, in its sole and exclusive
judgment, might be deemed to be an underwriter or a controlling person of the
Company, to participate in the preparation of such registration statement and
to
require the insertion therein of material, furnished to the Company in writing,
which in the reasonable judgment of such holder and its counsel should be
included;
(m) in
the
event of the issuance of any stop order suspending the effectiveness of a
registration statement, or of any order suspending or preventing the use of
any
related prospectus or suspending the qualification of any common stock included
in such registration statement for sale in any jurisdiction, the Company will
use its reasonable best efforts promptly to obtain the withdrawal of such
order;
35
(n) use
its
reasonable best efforts to cause such Registrable Securities covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities;
and
(o) obtain
a
"cold comfort" letter from the Company's independent public accountants in
customary form and covering such matters of the type customarily covered by
"cold comfort" letters as the holders of a majority of the Registrable
Securities being sold reasonably request.
If
any
such registration statement refers to any holder by name or otherwise as the
holder of any securities of the Company and if, in its sole and exclusive
judgment, such holder is or might be deemed to be a controlling person of the
Company, such holder shall have the right to require (i) the insertion therein
of language, in form and substance satisfactory to such holder and presented
to
the Company in writing, to the effect that the holding by such holder of such
securities is not to be construed as a recommendation by such holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such holder by name or otherwise is not required by the Securities Act or
any
similar federal statute then in force, the deletion of the reference to such
holder; provided,
that
with respect to this clause (ii) such holder shall furnish to the Company an
opinion of counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to the Company.
6. Registration
Expenses.
Except
as otherwise expressly set forth herein, all Registration Expenses incident
to
the Company’s performance or compliance with this Registration Rights Agreement
shall be borne by the Company.
7. Indemnification.
(a) The
Company agrees to indemnify, to the extent permitted by law, each holder of
Registrable Securities, its officers and directors, and each Person who controls
such holder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses arising out of or based upon any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein,
in the context in which they were made, not misleading, and shall reimburse
such
holder, director, officer or controlling person for any legal or other expenses
reasonably incurred by such holder, director, officer or controlling person
in
connection with the investigation or defense of such loss, claim, damage,
liability or expense, except insofar as the same are caused by or contained
in
any information furnished in writing to the Company by such holder expressly
for
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendment or supplements thereto after the
Company has timely furnished such holder with a sufficient number of copies
of
the same (a “Delivery
Failure”).
In
connection with an underwritten offering, the Company will indemnify the
underwriters thereof, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
36
(b) In
connection with any registration statement in which a holder of Registrable
Securities is participating, each such holder will furnish to the Company in
writing such information and affidavits as the Company reasonably requests
for
use in connection with any such registration statement or prospectus and, to
the
extent permitted by law, will indemnify the Company, its directors and officers
and each Person who controls the Company (within the meaning of the Securities
Act) against any losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein,
in the context in which they were made, not misleading, but only to the extent
that such untrue statement or omission relates to such holder and is contained
in any information or affidavit so furnished in writing by such holder, or
from
such holder’s Delivery Failure; provided,
that
the obligation of each such holder to indemnify will be several and not joint
and will be limited to the net amount of proceeds received by such holder from
the sale of Registrable Securities pursuant to such registration
statement.
(c) Any
Person entitled to indemnification hereunder will (i) give prompt written notice
to the indemnifying party of any claim with respect to which it seeks
indemnification; provided,
that
the failure to notify the indemnifying party shall not relieve it from any
liability to the indemnified party hereunder except to the extent the
indemnifying party is actually prejudiced thereby, and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not
be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees
and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such
claim.
(d) The
indemnification provided hereunder will remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified party
or
any officer, director or controlling Person of such indemnified party and will
survive the transfer of securities. The Company also agrees to make such
provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event the Company's indemnification is
unavailable for any reason.
37
8. Participation
in Underwritten Registrations.
No
Person may participate in any registration hereunder which is underwritten
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all customary questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements; provided,
that no
holder of Registrable Securities included in any underwritten registration
shall
be required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such holder
and
such holder's intended method of distribution.
9. Rule
144 Reporting.
With a
view to making available to the holders of Registrable Securities the benefits
of certain rules and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to
use its reasonable best efforts to:
(a) make
and
keep current public information available, within the meaning of Rule 144 or
any
similar or analogous rule promulgated under the Securities Act, at all times
after it has become subject to the reporting requirements of the Exchange
Act;
(b) file
with
the SEC, in a timely manner, all reports and other documents required of the
Company under the Securities Act and Exchange Act (after it has become subject
to such reporting requirements); and
(c) so
long
as any party hereto owns any Registrable Securities, furnish to such Person
forthwith upon its request, a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time
commencing 90 days after the effective date of the first registration filed
by
the Company for an offering of its securities to the general public), the
Securities Act and the Exchange Act (at any time after it has become subject
to
such reporting requirements); a copy of the most recent annual or quarterly
report of the Company filed with the SEC; and such other reports and documents
as such Person may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration.
10. No
Third Party Beneficiaries.
No
Person, other than signatories to the Agreement and the Permitted Transferees
thereof, shall have any rights under this Registration Rights
Agreement.
38
EXHIBIT
C
JOINDER
TO
STOCKHOLDERS
AGREEMENT
THIS
JOINDER to the Stockholders Agreement, dated as of July [__],_2006
by
and among Wyndcrest DD Holdings, Inc., a Delaware corporation (the "Company"),
and
certain stockholders of the Company (the "Agreement"),
is
made and entered into as of _____________ (the “Joinder
Date”)
by and
between the Company and ______________ ("Holder").
Capitalized terms used but not otherwise defined herein shall have the
respective meanings set forth in the Agreement.
WHEREAS,
Holder has acquired certain shares of Common Stock, and the Agreement requires
Holder, as a holder of Common Stock, to become a party to the Agreement, and
Holder agrees to do so in accordance with the terms hereof.
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 Joinder hereby agree as follows:
1. Agreement
to be Bound.
Holder
hereby agrees that upon execution of this Joinder, he, she or it shall become
a
party to the Agreement and shall be fully bound by, and subject to, all of
the
covenants, terms and conditions of the Agreement as though an original party
thereto and shall be deemed a Stockholder for all purposes thereof. In addition,
Holder hereby agrees that all Common Stock held by Holder, whether on or after
the date hereof (“Holder
Common Stock”),
shall
be deemed Stockholder Shares for all purposes of the Agreement.
2. Successors
and Assigns.
Except
as otherwise provided herein or in the Agreement, this Joinder shall bind and
inure to the benefit of and be enforceable by the Company and its successors
and
assigns and Holder and any subsequent holders of Holder Common Stock and the
respective successors and assigns of each of them, so long as they hold any
shares of Holder Common Stock.
3. Counterparts.
This
Joinder may be executed in separate counterparts (including by means of
telecopied signature pages) all of which taken together shall constitute one
and
the same agreement.
4. Notices.
For
purposes of Section 19 of the Agreement, all notices, demands or other
communications to the Holder shall be directed to:
[Name]
[Address]
[Facsimile
Number]
[Email
address]
5. Governing
Law.
This
Joinder shall be governed by and construed in accordance with the internal
laws
of the State of New York, without giving effect to principles of conflicts
of
laws or choice of law of the State of New York or any other jurisdiction which
would result in the application of the law of any jurisdiction other than the
State of New York.
6. Descriptive
Headings.
The
descriptive headings of this Joinder are inserted for convenience of reference
only and do not constitute a part of this Joinder.
*
* * *
*
(signature
page follows)
40
IN
WITNESS WHEREOF, the parties hereto have executed this Joinder as of the Joinder
Date.
WYNDCREST
DD HOLDINGS, INC.
By:
_________________________________
Name:
Title:
Name:
Title:
[HOLDER]
By:
_________________________________
41
SPOUSAL
CONSENT
I
acknowledge that I have had the opportunity to seek and obtain independent
legal
counsel in connection with this consent, that I have read the Agreement and
foregoing Joinder Agreement, that I understand the provisions hereof and
thereof, that I consent hereto and thereto and that I agree to be bound by
the
terms hereof and thereof. I am aware that by the terms of the Agreement transfer
by my spouse of his or her Stockholder Shares is restricted. I hereby consent
to
such restrictions, approve of the provisions of the Agreement and the Joinder
Agreement, and agree that if I pre-decease my spouse, the successors of my
community property or other interest (if any) in such Stockholder Shares will
hold such Stockholder Shares subject to the provisions of the Agreement. I
am
also aware of, and hereby consent to, the rights granted to my spouse and the
other parties to the Agreement to purchase any Stockholder Shares that I may
acquire by virtue of an Involuntary Transfer, including without limitation
any
shares that may be awarded or distributed to me in any dissolution, divorce,
legal separation or other similar proceeding.
|
Dated: ___________ __,
200[_]
|
____________________________________
|
|
(Signature)
|
|
|
____________________________________
|
42
