<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 16, 1999
(Date of earliest event reported)
SILVER CINEMAS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 000- 72-2656147
(State or other jurisdiction of incorporation Commission File Number (I.R.S. Employer
or organization) identification No.)
</TABLE>
4004 BELTLINE ROAD, SUITE 205, ADDISON, TEXAS 75001-4363
(Address of principal executive offices, including zip code)
(972) 503-9851
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
On September 13, 1999, Silver Cinemas International, Inc. (the
"Registrant") disseminated a press release, a copy of which is filed herewith as
Exhibit 99.1. The press released discloses the fact Larry D. Hohl has been named
to the position of President and CEO of Silver Cinemas and all of its
subsidiaries, including Landmark Theatres. In addition to his operating duties,
Mr. Hohl was named to the Board of Directors of Silver Cinemas International,
Inc.
In connection with Mr. Hohl's appointment, the Registrant amended its
Restated Certificate of Incorporation to allow for the issuance of a new class
of preferred stock and entered into an employment agreement and stock purchase
agreement with Mr. Hohl, all of which are filed herewith as Exhibits 3.1, 10.1
and 10.2 respectively. The Registrant also amended its bylaws to increase the
number of directors to eight (8).
Steven Holmes will retain his position and responsibilities as Chief
Financial Officer of Silver Cinemas International, Inc.
* * * * *
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
EXHIBIT
NO.
- -------
99.1 Press Release dated September 13, 1999
3.1 Certificate of Amendment of Restated Certificate of Incorporation of
Silver Cinemas International, Inc.
10.1 Larry D. Hohl Employment Agreement dated September 7, 1999
10.2 Larry D. Hohl Stock Purchase Agreement dated September 7, 1999
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
Date: September 16, 1999 SILVER CINEMAS INTERNATIONAL, INC.
By /s/ STEVEN L. HOLMES
--------------------------------------
Steven L. Holmes
Chief Financial Officer
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --- -----------
<S> <C>
99.1 Press Release dated September 13, 1999
3.1 Certificate of Amendment of Restated Certificate of
Incorporation of Silver Cinemas International, Inc.
10.1 Larry D. Hohl Employment Agreement dated September 7, 1999
10.2 Larry D. Hohl Stock Purchase Agreement dated September 7, 1999
</TABLE>
<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: Jeanne R. Berney
Rogers & Cowan
(310) 201-8848
SILVER CINEMAS CASTS LARRY D. HOHL
AS PRESIDENT AND CEO
Hohl to run Dallas-based theater chain and all of its subsidiaries, including
-----------------------------------------------------------------------------
Landmark Theatres
-----------------
DALLAS, TX, September 13, 1999--Silver Cinemas International, Inc. has
named Larry D. Hohl to the position of President and CEO of Silver Cinemas and
all of its subsidiaries, including Landmark Theatres. The move was announced
today by Jack Sullivan, Chairman of the Board of Silver.
Hohl will assume many of the duties currently administered by Steve
Holmes, the company's Chief Financial Officer and co-founder, who has been
filling the position until a suitable leader could be found.
"As our business continues to expand we were eager to bring on board
someone with Larry's expertise," says Sullivan. "Steve Holmes, who will retain
his responsibilities as CFO, has done an outstanding job helping us grow, and
will continue to be very much involved with all of the company's operations."
Hohl comes to the company with a strong management and marketing
background, having served in senior management capacities with companies such as
Nike, Pepsico, Pizza Hut, and Storage, USA. At Nike, Hohl was Vice President and
General Manager of the worldwide retail business and was involved in the design,
construction, marketing, merchandising, and operation of Niketown and Nike
Factory Outlets.
Most recently, Hohl served as Executive Vice President and Senior
Operating Officer of Storage, USA, Inc., the second largest self-storage company
in the country. Hohl also served 11 years in various senior management positions
at Pepsico, Inc., finishing his run as Vice President and General Manager of
Pizza Hut, North Atlantic Division. Hohl, a Phoenix native, attended the United
States Air Force Academy, and graduated from Arizona State University's Business
College.
"I am enormously excited about getting involved with an industry that
continues to grow in consumer popularity," says Hohl. "I expect that my
experience with several multi-unit retail businesses will have considerable
application to the challenges we are facing and the new opportunities we are
creating at Silver Cinemas."
<PAGE> 2
Silver Cinemas International, Inc., a Dallas-based company operating
105 theaters with 530 screens, continues to grow through acquisition and new
theater construction, with a special emphasis on the burgeoning art house
market. Landmark Theatres, a wholly owned subsidiary of Silver, currently
operates 52 theaters representing 156 screens in 11 states, establishing the
chain as the only art house exhibitor with a national presence. Landmark is
building five new theaters across the country, including an eight-screen
specialized complex in Washington, DC, a six-screen theater in Dallas' West
Village, and artplexes in New York and Chicago.
###
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SILVER CINEMAS INTERNATIONAL, INC.
SILVER CINEMAS INTERNATIONAL, INC. a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by
unanimous written consent of its members dated August 25, 1999, adopted a
resolution setting forth a proposed amendment to the Restated Certificate of
Incorporation of the Corporation, declaring said amendment to be advisable and
directing its officers to submit said amendment to the stockholders of the
Corporation for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
NOW, THEREFORE, BE IT RESOLVED, that Article FOURTH
of the Corporation's Restated Certificate of Incorporation be
amended to read in its entirety as follows:
"FOURTH: The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
One Million (1,000,000), consisting of Five Hundred Thousand
(500,000) shares of Common Stock, par value $.01 per share,
and Five Hundred Thousand (500,000) shares of Preferred Stock,
par value $.01 per share.
The Preferred Stock may be divided into such number
of series as the Board of Directors may determine. Other than
with respect to the Series A Preferred Stock and the
Convertible Preferred Stock referenced below, the Board of
Directors is authorized to determine and alter the rights,
powers, preferences, privileges and restrictions (including
without limitation voting powers) granted to and imposed upon
the Preferred Stock or any series thereof with respect to any
wholly unissued series of Preferred Stock, and to fix the
number of shares of any series of Preferred Stock and the
designation of any such series of Preferred Stock. The Board
of Directors, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, may
increase or decrease (but not below the number of any series
then outstanding) the number of shares of any series
subsequent to the issue of shares of that series."
- --------------------------------------------------------------------------------
SERIES A PREFERRED STOCK
1. Designation. A series of the Preferred Stock of the
Corporation is hereby designated as "Series A Preferred Stock"
(hereinafter called the "Series A Preferred Stock") consisting
initially of four hundred thousand (400,000) shares. Shares of
the Series A Preferred Stock and Convertible Preferred Stock
shall rank prior to the Corporation's Common Stock with
respect to the payment of dividends and upon liquidation,
dissolution, winding-up or otherwise. Shares of Convertible
Preferred Stock shall rank prior to the Series A Preferred
Stock with respect to the payment of dividends and upon
liquidation, dissolution, winding-up or otherwise. Unless
specifically designated as junior to the Series A Preferred
Sock and Convertible Preferred Stock with respect to the
payment of dividends or upon liquidation, dissolution,
winding-up or otherwise, all other series of Preferred Stock
and other classes of preferred stock of the Corporation
<PAGE> 2
shall rank junior to the Convertible Preferred Stock and on
parity with the Series A Preferred Stock with respect thereto.
2. Dividends.
(a) (i) Each holder of shares of Series A Preferred
Stock shall be entitled to receive dividends on each such
share at the rate of six percent (6%) per annum (computed on
the basis of $100.00 per share), if, as and when declared by
the Board of Directors of the Corporation, out of funds
legally available for the payment of dividends, in respect of
the period from and including the date of the original
issuance of each such share of Series A Preferred Stock with
respect to each such share to and including June 30, 1996 (the
"Series A Initial Dividend Period"), and for each quarterly
dividend period thereafter (a "Quarterly Dividend Period"),
which Quarterly Dividend Periods shall commence on July 1,
October 1, January 1, and April 1 in each year and shall end
on and include the day immediately preceding the first day of
the next Quarterly Dividend Period. Dividends on the shares of
Series A Preferred Stock shall be payable on June 30,
September 30, December 31, and March 31 of each year (each, a
"Dividend Payment Date"), commencing June 30, 1996. Each such
dividend shall be paid to the holders of record of the Series
A Preferred Stock as they shall appear on the stock register
of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding such Dividend Payment Date, as
shall be fixed by the Board of Directors of the Corporation or
a duly authorized committee thereof.
If, on any Dividend Payment Date, the holders of the Series A
Preferred Stock shall not have received the full dividends
provided for in this Section 2 in cash, then such dividends
shall cumulate, whether or not earned or declared, with
additional dividends thereon, compounded quarterly, at the
dividend rate of six percent (6%) per annum, for each
succeeding full Quarterly Dividend Period during which such
dividends shall remain unpaid.
(b) The amount of any dividends accrued on any share
of the Series A Preferred Stock on any Dividend Payment Date
shall be deemed to be the amount of any unpaid dividends
accumulated thereon, to and including such Dividend Payment
Date, whether or not earned or declared. The amount of
dividends accrued on any share of the Series A Preferred Stock
on any date other than a Dividend Payment Date shall be deemed
to be the sum of (i) the amount of any unpaid dividends
accumulated thereon, to and including the last preceding
Dividend Payment Date, whether or not earned or declared, (ii)
an amount determined by multiplying (a) $100.00 by (b) the
result (the "Multiplier") of multiplying one and one-half
percent (1.5%) per annum by a fraction, the numerator of which
shall be the number of days from the last preceding Dividend
Payment Date, to and including the date on which such
calculation is made, and the denominator of which shall be the
full number of days in such Quarterly Dividend Period, and
(iii) an amount determined by multiplying the amount set forth
in clause (i) above by the Multiplier.
(c) Declaration Prior to Redemption or Liquidation.
Immediately prior to authorizing or making any distribution in
redemption or liquidation with respect to the Series A
Preferred Stock (other than a purchase or acquisition of
Series A Preferred Stock pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding
Series A Preferred Stock), the Board of Directors shall, to
the extent of any funds legally available therefor, declare a
dividend in cash on the Series A Preferred Stock payable on
the distribution date
<PAGE> 3
in the amount equal to any accrued and unpaid dividends on the
Series A Preferred Stock as of such date.
3. Redemption.
(a) Optional Redemption. The Series A Preferred Stock
may be redeemed, in whole or in part, at any time at the
election of the Corporation by resolution of its Board of
Directors, on notice as set forth in Section 3(c), below, at
the redemption price of $100.00 per share of Preferred Stock,
plus an amount equal to accrued and unpaid dividends to the
redemption date (the "Redemption Price").
In the event that at any time less than all of the Series A
Preferred Stock outstanding is to be redeemed, the shares to
be redeemed will be selected by lot or pro rata, except that
if the redemption is pro rata, the Corporation may redeem all
shares of Series A Preferred Stock held by all holders of 100
or fewer shares as may be specified by the Corporation.
Notwithstanding anything to the contrary, the Corporation may
not redeem less than all of the Series A Preferred Stock
outstanding unless all accrued and unpaid dividends have been
paid on all then outstanding shares of Series A Preferred
Stock.
(b) Notice of Redemption. Notice of any redemption
pursuant to this Section 3 shall be mailed, postage prepaid,
at least 15 days but not more than 60 days prior to said
redemption date to each holder or record of the Series A
Preferred Stock to be redeemed at its address as the same
shall appear on the stock register of the Corporation. Each
such notice shall state: (i) the date fixed for such
redemption, (ii) the place or places where certificates
representing such shares of Series A Preferred Stock are to
be surrendered for payment, (iii) the Redemption Price, and
(iv) that unless the Corporation defaults in making the
redemption payment, dividends on the shares of Series A
Preferred Stock called for redemption shall cease to accrue
on and after the date of redemption. If less than all the
shares of the Series A Preferred Stock owned by such holder
are then to be redeemed, such notice shall also specify the
number of shares thereof which are to be redeemed and the
numbers of the certificates representing such shares.
If such notice of redemption shall have been so mailed and if
prior to the date of redemption specified in such notice all
said funds necessary for such redemption shall have been
irrevocably deposited in trust, for the account of the holders
of the shares of the Series A Preferred Stock to be redeemed
(and so as to be and continue to be available therefor), with
a bank or trust company named in such notice and having
capital surplus and undivided profits of at least $50,000,000,
thereupon, and without awaiting the redemption date, all
shares of the Series A Preferred Stock with respect to which
such notice shall have been so mailed and such deposit shall
have been so made, shall, notwithstanding that any certificate
representing shares of Series A Preferred Stock shall not have
been surrendered for cancellation, be deemed to be no longer
outstanding and all rights with respect to such shares of the
Series A Preferred Stock shall forthwith upon such deposit in
trust cease and terminate, except for the right of the holders
thereof on or after the redemption date to receive from such
deposit the amount payable upon the redemption, but without
interest. In case the holders of shares of the Series A
Preferred Stock which shall have been called for redemption
shall not within two years (or any longer period if required
by law) after the redemption date claim any amount so
deposited in trust for the redemption of such shares, such
bank or trust company shall, if permitted by applicable law,
pay over to the Corporation any such unclaimed amount so
deposited with it, and shall
<PAGE> 4
thereupon be relieved of all responsibility in respect
thereof, and thereafter the holders of such shares shall,
subject to applicable escheat laws, look only to the
Corporation for payment of the redemption price thereof, but
without interest.
(c) Status of Shares. Shares of Series A Preferred
Stock redeemed, purchased or otherwise acquired for value by
the Corporation shall, after such acquisition, have the status
of authorized and unissued shares of Preferred Stock and may
be reissued by the Corporation at any time as shares of any
series of Preferred Stock, other than shares of Series A
Preferred Stock.
4. Priority.
(a) Priority as to Dividends. Subject to Section 4(b)
hereof, no dividends (other than dividends payable in Common
Stock or in another stock ranking, with respect to the payment
of dividends and upon liquidation, dissolution, winding-up or
otherwise, junior to, or on a parity with, the Series A
Preferred Stock) shall be declared or paid or set apart for
payment on the Preferred Stock of any series, or stock of any
other class which, in either case, ranks, as to dividends and
upon liquidation, dissolution, winding-up or otherwise, (x)
junior to the Series A Preferred Stock ("Series A Junior
Stock") or (y) on a parity with the Series A Preferred Stock
("Series A Parity Stock") for any period unless at the time of
such declaration or payment or setting apart for payment (i)
full cumulative dividends have been or contemporaneously are
declared and paid (or declared and a sum sufficient for the
payment thereof set apart for such payment) on the Series A
Preferred Stock for all Quarterly Dividend Periods terminating
on or prior to the date of payment of such dividends on Series
A Junior Stock or Series A Parity Stock, (ii) the Corporation
shall not be in default with respect to any obligation to
redeem shares of Series A Preferred Stock and (iii) an amount
equal to the dividends accrued on the Series A Preferred Stock
from the last Dividend Payment Date to the date of payment of
such dividends on Series A Junior Stock or Series A Parity
Stock has been declared and set apart in cash for payment on
the Series A Preferred Stock.
(b) Notwithstanding anything to the contrary in
Section 4(a) hereof, cumulative dividends on any Series A
Parity Stock may be paid if cumulative dividends shall be
declared upon shares of Series A Preferred Stock and such
Series A Parity Stock on a pro rata basis so that in all cases
the amount of dividends declared per share on the Series A
Preferred Stock and such Series A Parity Stock shall bear to
each other the same ratio that accrued dividends per share on
the shares of Series A Preferred Stock and on such Series A
Parity Stock bear to each other.
(c) Priority on Redemption. The Corporation shall
not, directly or indirectly, redeem or purchase or otherwise
acquire for value any Series A Junior Stock or Series A Parity
Stock unless, at the time of making such redemption, purchase
or other acquisition the Corporation shall have redeemed, or
shall contemporaneously redeem, all of the then outstanding
shares of Series A Preferred Stock at the applicable
redemption price (or shall have irrevocably committed to
redeem all of the then outstanding shares of Series A
Preferred Stock and have set aside a sum sufficient for the
payment thereof at the applicable Redemption Price on the date
of such subsequent redemption); provided that the foregoing
shall not apply to repurchases by the Corporation of shares at
a price not in excess of the original issuance price from
employees or consultants or directors whose employment,
consultancy or directorship has terminated.
<PAGE> 5
5. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding-up of the affairs of the Corporation, whether
voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation,
the holders of shares of the Series A Preferred Stock shall be
entitled to receive for each share of Series A Preferred Stock
then held, out of the assets of the Corporation, whether such
assets are capital or surplus and whether or not any dividends
as such are declared, the applicable Redemption Price on the
date fixed for distribution, and no more, before any
distribution shall be made to the holders of the Common Stock
or Series A Junior Stock with respect to the distribution of
assets.
If, upon any such liquidation, dissolution or other
winding-up of the affairs of the Corporation, the assets of
the Corporation distributable among the holders of all
outstanding shares of the Series A Preferred Stock and of any
Series A Parity Stock shall be insufficient to permit the
payment in full to such holders of the preferential amounts to
which they are entitled, then the entire assets of the
Corporation remaining after the payment or provision for
payment of the debts and other liabilities of the Corporation
shall be distributed among the holders of the Series A
Preferred Stock and of any Series A Parity Stock ratably in
proportion to the full amounts to which they would otherwise
be respectively entitled.
(b) Written notice of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the
Corporation, stating a payment date and the place where the
distributive amounts shall be payable, shall be given by mail,
postage prepaid, not less than 30 days prior to the payment
date stated therein, to the holders of record of the Series A
Preferred Stock at their respective addresses as the same
shall appear on the books of the Corporation.
(c) No payment on account of such liquidation,
dissolution or winding-up of the affairs of the Corporation
shall be made to the holders of any Series A Parity Stock,
unless there shall likewise be paid at the same time to the
holders of the Series A Preferred Stock like proportionate
distributive amounts ratably, in proportion to the full
distributive amounts to which they and the holders of such
Series A Parity Stock are respectively entitled with respect
to such preferential distribution.
5. Voting Rights. Except as otherwise required by law,
the holders of the Series A Preferred Stock shall be entitled
to vote along with the Common Stock (and not as a separate
class) on all matters and shall be entitled to one vote per
share of Series A Preferred Stock.
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK
1. Designation. A series of the Preferred Stock of the
Corporation is hereby designated as "Convertible Preferred
Stock" (hereinafter called the "Convertible Preferred Stock")
consisting initially of five thousand (5,000) shares. Shares
of the Series A Preferred Stock and Convertible Preferred
Stock shall rank prior to the Corporation's Common Stock with
respect to the payment of dividends and upon liquidation,
dissolution, winding-up or otherwise. Shares of Convertible
Preferred Stock shall rank prior to the Series A Preferred
Stock
<PAGE> 6
with respect to the payment of dividends and upon liquidation,
dissolution, winding-up or otherwise. All other series of
Preferred Stock and other classes of preferred stock of the
Corporation shall rank junior to the Series A Preferred Stock
with respect thereto.
2. Dividends.
(a) (i) Each holder of shares of Convertible
Preferred Stock shall be entitled to receive dividends on each
such share at the rate of eighty percent (80%) per annum
(computed on the basis of $100.00 per share), if, as and when
declared by the Board of Directors of the Corporation, out of
funds legally available for the payment of dividends, in
respect of the period from and including the date of the
original issuance of each such share of Convertible Preferred
Stock to and including September 30, 1999 (the "Convertible
Initial Dividend Period"), and for each quarterly dividend
period thereafter (a "Quarterly Dividend Period") through and
including the Quarterly Dividend Period ending on June 30,
2002. Thereafter, each holder of shares of Convertible
Preferred Stock shall be entitled to receive dividends on each
such share at the rate of six percent (6%) per annum (computed
on the basis of $100.00 per share), if, as and when declared
by the Board of Directors of the Corporation, out of funds
legally available for the payment of dividends, in respect of
each Quarter Dividend Period beginning with the Quarterly
Dividend Period which commences July 1, 2002. Notwithstanding
the foregoing, dividends shall cease accruing (and the
Convertible Preferred Stock shall thereafter not bear, accrue
or pay dividends) immediately upon the termination of
employment for any reason whatsoever (whether by the
Corporation or the holder) of the holder of the Convertible
Preferred Stock as Chief Executive Officer of the Corporation.
Quarterly Dividend Periods shall commence on October 1,
January 1, April 1 and July 1 in each year and shall end on
and include the day immediately preceding the first day of the
next Quarterly Dividend Period. Dividends on the shares of
Convertible Preferred Stock shall be payable on June 30,
September 30, December 31, and March 31 of each year (each, a
"Dividend Payment Date"), commencing September 30, 1999. Each
such dividend shall be paid to the holders of record of
Convertible Preferred Stock as they shall appear on the stock
register of the Corporation on such record date, not exceeding
45 days nor less than 10 days preceding such Dividend Payment
Date, as shall be fixed by the Board of Directors of the
Corporation or a duly authorized committee thereof.
If, on any Dividend Payment Date, the holders of the
Convertible Preferred Stock shall not have received the full
dividends provided for in this Section 2 in cash then such
dividends shall cumulate, whether or not earned or declared,
with additional dividends thereon, compounded quarterly, at
the then applicable dividend rate per annum on the Convertible
Preferred Stock, for each succeeding full Quarterly Dividend
Period during which such dividends shall remain unpaid.
(b) The amount of any dividends accrued on any share
of the Convertible Preferred Stock on any Dividend Payment
Date shall be deemed to be the amount of any unpaid dividends
accumulated thereon, to and including such Dividend Payment
Date, whether or not earned or declared. The amount of
dividends accrued on any share of the Convertible Preferred
Stock on any date other than a Dividend Payment Date shall be
deemed to be the sum of (i) the amount of any unpaid dividends
accumulated thereon, to and including the last preceding
Dividend Payment Date, whether or not earned or declared, (ii)
an amount determined by multiplying (a) $100.00 by (b) the
result (the
<PAGE> 7
"Multiplier") of multiplying one quarter of the then
applicable per annum dividend rate (i.e. 20% if dividends are
accruing at 80% per annum, or 1.5% if dividends are accruing
at 6% per annum) by a fraction, the numerator of which shall
be the number of days from the last preceding Dividend Payment
Date, to and including the date on which such calculation is
made, and the denominator of which shall be the full number of
days in such Quarterly Dividend Period, and (iii) an amount
determined by multiplying the amount set forth in clause (i)
above by the Multiplier.
3. Redemption. (a) The Convertible Preferred Stock may
be redeemed at the option of the Corporation for a total
purchase of One Dollar ($1.00) for all shares of Convertible
Preferred Stock if Larry Hohl's employment as Chief Executive
Officer of the Corporation is terminated (i) by the
Corporation with "cause" or (ii) by Larry Hohl without "good
reason" (as such terms are defined in the Employment Agreement
between the Corporation and Larry Hohl ("Employment
Agreement")). The Convertible Preferred Stock is not subject
to any mandatory redemption by the Corporation. Shares of
Convertible Preferred Stock acquired for value by the
Corporation shall, after any redemption or acquisition for
value, have the status of authorized and unissued shares of
Preferred Stock and may be reissued by the Corporation at any
time as shares of any series of Preferred Stock, other than
shares of Convertible Preferred Stock.
(b) Notice of Redemption. Notice of any redemption
pursuant to this Section 3 shall be mailed, postage prepaid,
to each holder or record of the Convertible Preferred Stock to
be redeemed at its address as the same shall appear on the
stock register of the Corporation. Each such notice shall
state: (i) the date fixed for such redemption, (ii) the place
or places where certificates representing such shares of
Convertible Preferred Stock are to be surrendered for payment,
and (iii) that unless the Corporation defaults in making the
redemption payment, dividends on the shares of Series A
Preferred Stock called for redemption shall cease to accrue on
and after the date of redemption.
If such notice of redemption shall have been so mailed and if
prior to the date of redemption specified in such notice all
said funds necessary for such redemption shall have been paid
to the holder of the shares of the Convertible Preferred Stock
to be redeemed, all shares of the Convertible Preferred Stock
shall, notwithstanding that any certificate for shares of
Convertible Preferred Stock shall not have been surrendered
for cancellation, be deemed to be no longer outstanding and
all rights with respect to such shares of the Convertible
Preferred Stock shall forthwith upon such deposit in trust
cease and terminate, except for the right of the holders
thereof on or after the redemption date to receive from such
deposit the amount payable upon the redemption, but without
interest.
4. Priority.
(a) Priority as to Dividends. Subject to Section
4(b) hereof, no dividends (other than dividends payable in
Common Stock or in another stock ranking, with respect to the
payment of dividends and upon liquidation, dissolution,
winding-up or otherwise, junior to the Convertible Preferred
Stock) shall be declared or paid or set apart for payment on
the Preferred Stock of any series, or stock of any other class
which, in either case, ranks, as to dividends and upon
liquidation, dissolution, winding-up or otherwise, junior to
the Convertible Preferred Stock ("Junior Stock") for any
period unless at the time of
<PAGE> 8
such declaration or payment or setting apart for payment (i)
full cumulative dividends have been or contemporaneously are
declared and paid (or declared and a sum sufficient for the
payment thereof set apart for such payment) on the Convertible
Preferred Stock for all Quarterly Dividend Periods terminating
on or prior to the date of payment of such dividends on Junior
Stock, and (ii) an amount equal to the dividends accrued on
the Convertible Preferred Stock from the last Dividend Payment
Date to the date of payment of such dividends on Junior Stock
has been declared and set apart in cash for payment on the
Convertible Preferred Stock.
5. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding-up of the affairs of the Corporation, whether
voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation,
the holders of shares of the Convertible Preferred Stock shall
be entitled to receive for each share of Convertible Preferred
Stock then held, out of the assets of the Corporation, whether
such assets are capital or surplus and whether or not any
dividends as such are declared, $100.00 per share of Preferred
Stock, plus accrued and unpaid dividends to the date of such
liquidation, dissolution or winding-up, and no more, before
any distribution shall be made to the holders of the Common
Stock or Junior Stock with respect to the distribution of
assets.
If, upon any such liquidation, dissolution or other
winding-up of the affairs of the Corporation, the assets of
the Corporation distributable among the holders of all
outstanding shares of the Convertible Preferred Stock shall be
insufficient to permit the payment in full to such holders of
the preferential amounts to which they are entitled, then the
entire assets of the Corporation remaining after the payment
or provision for payment of the debts and other liabilities of
the Corporation shall be distributed among the holders of the
Convertible Preferred Stock ratably in proportion to the full
amounts to which they would otherwise be respectively
entitled.
(b) Written notice of any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the
Corporation, stating a payment date and the place where the
distributive amounts shall be payable, shall be given by mail,
postage prepaid, not less than 30 days prior to the payment
date stated therein, to the holders of record of the
Convertible Preferred Stock at their respective addresses as
the same shall appear on the books of the Corporation.
5. Voting Rights. Except as otherwise required by
law, the holders of the Convertible Preferred Stock shall not
be entitled to vote on any matter.
6. Conversion.
Certain Definitions. Unless the context
otherwise requires, for the purposes of this Article, the term
"Liquidation Preference" shall mean one hundred dollars
($100.00) per share, plus an amount equal to any accrued but
unpaid dividends thereon.
(a) Upon the terms set forth in this Section 6, the
holder of the Convertible Preferred Stock shall have the
right, at such holder's option, upon a Liquidation Event (as
defined in the Employment Agreement), to convert all (but not
less than all) of the Convertible Preferred Stock into the
number of fully paid and nonassessable shares of Common Stock
determined pursuant to Exhibit
<PAGE> 9
A hereto The holder of the Convertible Preferred Stock may
exercise the conversion right pursuant to this Section 6 by
delivering to the Corporation the certificates representing
all shares of Convertible Preferred Stock, duly endorsed or
assigned in blank or to the Corporation (if required by it),
accompanied by written notice stating that the holder elects
to convert such shares and stating the name or names (with
address) in which the certificate or certificates representing
the shares of Common Stock are to be issued. Conversion shall
be deemed to have been effected on the date when such delivery
is, made or upon the consummation of a Public Offering as
provided below, if applicable (the "Conversion Date").
(b) Each share of Convertible Preferred Stock shall
automatically be converted into the number of fully paid and
nonassessable shares of Common Stock determined pursuant to
Section 6(a) above immediately upon the consummation of the
Corporation's first sale of its Common Stock in a firm
commitment underwritten public offering. For purposes of
determining Enterprise Value pursuant to Exhibit A, the
purchase price for the Common Stock shall be deemed to be the
price to public in such public offering, and the purchase
price for all securities convertible into, exercisable for or
exchangeable into Common Stock shall be deemed to be the price
to public of the aggregate number of shares of Common Stock
into which such securities could be converted, less the
aggregate exercise prices of such securities. Immediately
following any such conversion, the rights of the holders of
converted Convertible Preferred Stock shall cease, and the
persons entitled to receive the Common Stock upon the
conversion of Convertible Preferred Stock shall be treated for
all purposes as having become the owners of such Common Stock.
From and after mandatory conversion pursuant to this Section
5, the certificates representing the Convertible Preferred
Stock shall be deemed to represent only the shares of Common
Stock into which such shares of Convertible Preferred Stock
have been converted.
(c) As promptly as practicable after the conversion
of any shares of Convertible Preferred Stock into Common Stock
under Section 6, the Corporation shall issue and deliver to or
upon the written order of such holder, to the place designated
by such holder, a certificate or certificates representing the
number of full shares of Common Stock to which such holder is
entitled, rounded up to the nearest whole share. The person in
whose name the certificate or certificates representing Common
Stock are to be issued shall be deemed to have become a
stockholder of record on the Conversion Date.
(d) No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Convertible
Preferred Stock. The number of full shares of Common Stock
issuable upon conversion of Convertible Preferred Stock shall
be rounded up to the nearest whole share.
(e) In the event of any reclassification of the
stock of the Corporation (other than a change in par value or
from par value to no par value or from no par value to par
value or as a result of a stock dividend or subdivision,
split-up or combination of shares), or any consolidation or
merger of the Corporation, each share of Convertible Preferred
Stock shall after such reorganization, reclassification,
consolidation, or merger be convertible into the kind and
number of shares of stock or other securities or property of
the Corporation or of the corporation resulting from such
consolidation or survive such merger to which the holder of
the number of shares of Common Stock deliverable (immediately
prior to the time of such reorganization, reclassification,
consolidation or merger) upon conversion of such share of
<PAGE> 10
Convertible Preferred Stock would have been entitled upon such
reorganization, reclassification, consolidation or merger. The
provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.
(f) If the Corporation shall propose to take any
action of the types described in this Section 6(e), the
Corporation shall give notice to each holder of shares of
Convertible Preferred Stock, which notice shall specify the
record date, if any, with respect to any such action and the
date on which such action is to take place. Such notice shall
also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to
the extent such effect may be known at the date of such
notice) on the number, kind or class of shares or other
securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable
upon conversion of shares of Convertible Preferred
Stock.Failure to give such notice, or any defect therein,
shall not affect the legality or validity of any such action.
(g) The Corporation shall at all times keep
reserved, free from preemptive rights, out of its authorized
but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of Convertible Preferred Stock,
sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Convertible Preferred
Stock.
7. Exclusion of Other Rights. Except as may
otherwise be required by law, the shares of Convertible
Preferred Stock shall not have any voting powers, preferences
and relative, participating, optional or other special rights,
other than those specifically set forth in this Certificate of
Amendment to the Restated Certificate of Incorporation.
SECOND: That, thereafter, by written consent of the
holders of more than fifty percent (50%) of the outstanding
shares of common stock and Series A Preferred Stock of the
Corporation in accordance with Section 228 of the General
Corporation Law of the State of Delaware, the necessary number
of shares required by statute were voted in favor of the
amendment.
THIRD: That said amendment was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation of the State of Delaware.
<PAGE> 11
IN WITNESS WHEREOF, SILVER CINEMAS INTERNATIONAL, INC. has
caused this certificate to be signed by John M. Sullivan, its Chairman of the
Board, this 25th day of August, 1999.
SILVER CINEMAS INTERNATIONAL, INC.
By: /s/ JOHN M. SULLIVAN
---------------------------
Name: John M. Sullivan
Title: Chairman of the Board
<PAGE> 12
EXHIBIT A
The Convertible Preferred Stock is convertible in whole into the number of
shares of Common Stock representing the following percentages of the
fully-diluted Common Stock (on an as-converted basis assuming conversion of all
securities convertible into Common Stock and exercise of all options and
warrants to purchase Common Stock and conversion, exercise or exchange of any
other security convertible into, exercisable for or exchangeable into Common
Stock) set forth below in the event that the Equity Value (as defined below)
upon a Liquidation Event (as defined in the Employment Agreement) is less than
the Equity Value set forth below opposite the applicable percentage
"Equity Value" means the aggregate amount payable and/or distributable to the
stockholders of the Corporation (in their capacity as such) in respect of their
stock of the Corporation in connection with such Liquidation Event. For purposes
of this definition, amounts payable and/or distributable to holders of warrants,
rights, options or other securities convertible into, exchangeable for or
exercisable for any class of stock of the Corporation shall be included in the
calculation of Equity Value.
<TABLE>
<CAPTION>
But not equal
At Least to or more than
-------- ---------------
<S> <C> <C>
Equity Value ($mm) 40.0 42.5
Percentage of Common Stock 50.0% 50.0%
Equity Value ($mm) 42.5 45.0
Percentage of Common Stock 50.0% 50.0%
Equity Value ($mm) 45.0 47.5
Percentage of Common Stock 50.0% 50.0%
Equity Value ($mm) 47.5 50.0
Percentage of Common Stock 45.0% 45.0%
Equity Value ($mm) 50.0 52.5
Percentage of Common Stock 40.0% 40.0%
Equity Value ($mm) 52.5 55.0
Percentage of Common Stock 35% 35%
Equity Value ($mm) 55.0 57.5
Percentage of Common Stock 30.0% 30.0%
Equity Value ($mm) 57.5 60.0
Percentage of Common Stock 30.0% 30.0%
Equity Value ($mm) 60.0 65.0
Percentage of Common Stock 27.5% 27.5%
Equity Value ($mm) 65.0 70.0
Percentage of Common Stock 25.0% 25.0%
Equity Value ($mm) 70.0 75.0
Percentage of Common Stock 23.5% 23.5%
Equity Value ($mm) 75.0 80.0
Percentage of Common Stock 23.5% 23.5%
Equity Value ($mm) 80.0 85.0
Percentage of Common Stock 23.5% 23.5%
</TABLE>
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement is dated September 7, 1999, and is
entered into between Silver Cinemas International, Inc. (the "Company"), and
Larry Hohl ("Executive").
WHEREAS, the Company desires to employ Executive and
Executive desires to be employed by the Company, and Executive and the Company
desire to embody in this Agreement the terms and conditions under which
Executive shall be employed.
NOW, THEREFORE, the parties hereby agree:
I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
Section 1.01 Position. Executive shall serve as President and Chief
Executive Officer of the Company. Executive hereby accepts such employment.
Executive agrees to devote his full time and efforts to promote the interests
of the Company. It is intended that Executive shall also serve as a director of
the Company and, to such end, the Company shall include Executive on its slate
of nominees and recommend the election of Executive as a director to its
stockholders.
Section 1.02 Duties and Responsibilities. Executive shall have such
duties and responsibilities as are consistent with his position. Executive
shall report to the Chairman of the Board of Directors and the Board of
Directors of the Company.
Section 1.03 Location. Executive's principal location for the
performance of his duties and responsibilities under this Agreement shall be
the offices of the Company in Dallas, Texas; provided, however, that Executive
shall undertake reasonable business travel consistent with his position, and
Executive in his discretion, may move the offices of the Company to Los
Angeles, California.
II.
COMPENSATION AND EXPENSES
Section 2.01 Salary, Bonus and Benefits. As full compensation and
consideration for the performance by Executive of his obligations under this
Agreement, Executive shall be entitled to the following (subject, in each case,
to the provisions of Article IV hereof):
(a) Salary. The Company shall pay Executive a base salary
during the term of his employment, payable in accordance with the normal
payment procedures of the Company and subject to such withholding and other
normal employee deductions as may be required by law, at the rate of $350,000
per year. Executive's base salary shall be reviewed by
<PAGE> 2
the Board of Directors and subject to adjustment on an annual basis, provided,
however, that Executive's base salary shall not be reduced below $350,000.
(b) Performance Bonus. Commencing in 2000, Executive shall be
eligible for an annual performance bonus based upon the attainment of mutually
agreed upon performance goals established by the Executive and the Board of
Directors prior to the beginning of each calendar year. Executive's annual
target bonus amount shall be $175,000, subject to adjustment for performance
above and below the established performance goals.
(c) Management Preferred Stock. Executive shall be entitled
to receive 3,000 shares of Convertible Preferred Stock of the Company (the
"Management Preferred Stock") with the preferences and designations contained
in the Certificate of Amendment of Restated Certificate of Incorporation of
Silver Cinemas International, Inc. in the form attached hereto as Exhibit I
(the "Certificate"). The Management Preferred Stock shall be convertible into
common stock of the Company at the Executive's option upon a Liquidation Event
(as defined below) in accordance with the terms of the Certificate. A
"Liquidation Event" shall mean (i) the sale of all or substantially all of the
assets of the Company, (ii) the sale of the majority of the voting stock of the
Company for cash to a person other than the Investors or any of their
affiliates, (iii) a merger of the Company with or into another person which
results in the stockholders of the Company receiving cash consideration for
their shares of common stock or (iv) a liquidation of the Company for cash.
(d) Management Common Stock Option. Pursuant to the terms and
conditions and restrictions set forth in the Stock Purchase Agreement attached
hereto as Exhibit II (the "Stock Purchase Agreement"), Executive shall have the
right to purchase 10,000 shares of the Company's common stock at a price of
$1.00 per share.
(e) Special Bonus. In the event that (i) there is a
Liquidation Event prior to June 30, 2001 and (ii) the Enterprise Value of the
Company at the time of the Liquidation Event is greater than $90,000,000, but
less than the Liquidation Preference (as defined in the Certificate) of the
Management Preferred Stock as of the Liquidation Event plus the principal and
accrued interest on the outstanding long-term debt of the Company as of such
Liquidation Event , then Executive shall be entitled to a Special Bonus in the
amount set forth on Exhibit III. "Enterprise Value" means the total purchase
price, including assumed debt being paid by all buyers in the Liquidation
Event. The Company shall use its best efforts to satisfy its obligations and
commitments under this Paragraph in the event of a liquidation of the Company.
(f) Signing Bonus. Executive shall be entitled to a signing
bonus of $320,000 upon commencement of his employment with the Company.
(g) Benefits. Executive shall be eligible to participate in
such life insurance, health, disability and major medical insurance benefits,
and in such other employee benefit plans and programs generally available for
the benefit of the executive employees of the Company, as may be maintained
from time to time, in each case to the extent and in the manner generally
available to other such executives and subject to the terms and provisions of
such plan or program.
<PAGE> 3
(h) Vacation. Executive shall be entitled to 4 weeks paid
vacation annually, in accordance with Company policy.
(i) Expenses. The Company will reimburse Executive for
reasonable business-related expenses incurred by him in connection with the
performance of his duties hereunder upon presentation of written documentation,
subject, however, to the Company's reasonable policies relating to
business-related expenses as then in effect from time to time.
(j) Automobile Allowance. Executive shall be entitled to $500
per month for the costs associated with the lease or purchase of an automobile
and the insurance and maintenance related thereto.
(k) Accounting and Reimbursement. As soon as practicable
following completion of Executive's relocation to Dallas, Texas, Executive
shall provide Company with appropriate documentation of Executive's actual
expenses incurred in such relocation (the "Relocation Expenses"). The
Relocation Expenses may include but are not limited to reasonable household
moving expenses, housing closing costs, real estate commissions, temporary
living expenses, travel costs associated with house-hunting trips and any
appropriate tax gross-ups thereon. The amount of Executive's salary payable as
of the payroll next following the submission of the Relocation Expenses to the
Company, otherwise payable under Section 2.01(a) shall be reduced by the
difference, if any, between $200,000 and the sum of the Relocation Expenses.
III.
EXCLUSIVITY, ETC.
Section 3.01 Exclusivity; Non-Competition. Executive agrees to perform
his duties, responsibilities and obligations hereunder efficiently and to the
best of his ability. Executive agrees that he will devote his entire working
time, care and attention and best efforts to such duties, responsibilities and
obligations. Executive also agrees that during the term of his employment with
the Company he will not engage in any business activities that are competitive
with the business activities of the Company or any of its divisions,
subsidiaries or affiliates. Executive agrees that all of his activities as an
employee of the Company shall be in conformity with all present and future
policies, rules, regulations and directions of the Company not inconsistent
with this Agreement.
Section 3.02 Other Business Ventures. Executive agrees that during the
term of his employment with the Company, he will not own, directly or
indirectly, any controlling or substantial stock or other beneficial interest
in any business enterprise which is engaged in business activities that are
competitive with the business activities of the Company or any of its
divisions, subsidiaries or affiliates. Notwithstanding the foregoing, Executive
may own, directly or indirectly, up to 5% of the outstanding capital stock of
any business having a class of capital stock that is traded on any major stock
exchange or in the over-the-counter market.
Section 3.03 Properties; Business Secrets; and Non-Solicitation. All
right, title and interest of every kind and nature whatsoever, in and to
inventions, patents, trademarks, copyrights, films, scripts, ideas, literary
works, creations and properties furnished to the
<PAGE> 4
Company or any of its divisions, subsidiaries or affiliates, or used in or in
connection with any of the productions or other activities of any of such
companies with which Executive is in any way connected in the performance of
his duties and obligations hereunder, whether the same were invented, created,
written, developed, furnished, produced or disclosed by Executive or by any
other party since the inception of Executive's employment with the Company,
shall, as between the parties hereto, be, become and remain the sole exclusive
property of the Company or such division, subsidiary or affiliate (as the case
may be) for any and all purposes and uses whatsoever, and Executive shall have
no right, title or interest of any kind or nature therein. Executive hereby
fully releases and discharges the Company and all of its divisions,
subsidiaries, affiliates, successors, licensees and assigns (if any), and their
respective officers, directors and employees, from and against any and all
claims, demands, damages, liabilities, costs and expenses arising out of or
relating to any such inventions, patents, trademarks, copyrights, films,
scripts, ideas, literary works, creations and properties furnished to or used
by any of such companies with which Executive may be connected in the
performance of Executive's duties and obligations hereunder. This release and
discharge shall not apply to any obligations of the Company to indemnify the
Executive for claims arising out of Executive's conduct within the course and
scope of Executive's employment.
(b) Executive agrees that he will not, at any time, make use
of or divulge to any other person, firm or corporation any trade or business
secret, process, method or means, or any other confidential information
concerning the business or policies of the Company or any of its divisions,
subsidiaries or affiliates, which he may have learned in connection with his
employment by the Company. For purposes of this Agreement, a "trade or business
secret, process, method or means, or any other confidential information" shall
mean and include written information treated as confidential or as a trade
secret by the Company. Executive's obligation under this Section 3.03(b) shall
not apply to any information which (i) is known publicly; (ii) is in the public
domain or hereafter enters the public domain without the fault of Executive;
(iii) is known to Executive prior to his receipt of such information from the
Company, as evidenced by written records of Executive or (iv) is hereafter
disclosed to Executive by a third party not under an obligation of confidence
to the Company. Executive agrees not to remove from the premises of the
Company, except as an employee of the Company in pursuit of the business of the
Company or except as specifically permitted in writing by the Company, any
document or other object containing or reflecting any such confidential
information. Executive recognizes that all such documents and objects, whether
developed by him or by someone else, will be the sole exclusive property of the
Company. Upon termination of his employment hereunder, Executive shall
forthwith deliver to the Company all such confidential information, including
without limitation all lists of customers, correspondence, accounts, records
and any other documents or property made or held by him or under his control in
relation to the business or affairs of the Company or its subsidiaries or
affiliates, and no copy of any such confidential information shall be retained
by him.
(c) Executive shall not, for a period of two years after
termination of his employment with the Company, directly or indirectly, whether
as an employee, consultant, independent contractor, partner, joint venturer or
otherwise, on behalf of any person or entity engaged in business activities
competitive with the business activities of the Company or any of its
divisions, subsidiaries or affiliates, solicit or induce, or in any manner
attempt to solicit or induce, any person employed by, or as agent of, the
Company or any of its divisions, subsidiaries
<PAGE> 5
or affiliates to terminate such person's contract of employment or agency, as
the case may be, with the Company or with any such division, subsidiary or
affiliate.
(d) Executive agrees that, at any time and from time-to-time,
he will execute any and all documents that the Company may deem reasonably
necessary or appropriate to effectuate the provisions of this Section 3.03. It
is also agreed that the provisions of this Section 3.03 shall survive the
termination, for any reason, of this Agreement or Executive's employment,
except that the provisions of Section 3.03(c) shall survive such termination
only to the extent provided in that Section.
Section 3.04 Injunctive Relief. Executive acknowledges that (i) the
provisions of Section 3.01, 3.02 and 3.03 are reasonable and necessary to
protect the legitimate interests of the Company, and (b) any violation of
Section 3.01, 3.02 or 3.03 will result in irreparable injury to the Company,
the exact amount of which will be difficult to ascertain, and that the remedies
at law for any such violation would not be reasonable or adequate compensation
to the Company for such a violation. Accordingly, Executive agrees that if he
violates the provisions of Section 3.01, 3.02 or 3.03, in addition to any other
remedy which may be available at law or in equity, the Company shall be
entitled to specific performance and injunctive relief without the necessity of
proving actual damages.
IV.
TERMINATION
Section 4.01 Termination by the Company. The Company shall have the
right to terminate Executive's employment at any time with or without "Cause,"
subject to the provisions of Section 4.05. For purposes of this Agreement,
"Cause" shall mean (a) Executive's failure, neglect or refusal to fully perform
his material duties under this Agreement, (b) Executive's willful and continued
failure or refusal to follow material directions of the Chairman of the Board
or of the Board of Directors or any other act of insubordination on the part of
Executive, (c) the engaging by Executive in willful misconduct which is
injurious to the Company or any of its divisions, subsidiaries or affiliates,
monetarily or otherwise, (d) the commission by Executive of an act of fraud or
embezzlement against the Company or any of its divisions, subsidiaries or
affiliates, (e) the conviction of Executive of a felony, or (f) Executive's
material breach of the provisions of any of Section 3.01, 3.02 or any other
material provision of this Agreement; provided, however, that except in the
case of acts described in clauses (c), (d) and (e) of this sentence, Executive
shall have a period of 30 days to cure any acts which would otherwise give the
Company the right to terminate his employment for Cause. Such 30 day period
shall commence as of the date of receipt by Executive of written notice from
the Company of its intentions to terminate Executive's employment for Cause,
which notice shall state in reasonable detail the acts which the Company
considers to be grounds for such termination.
Section 4.02 Death. In the event of Executive's death, this Agreement
shall automatically terminate, such termination to be effective on the date of
Executive's death.
Section 4.03 Disability. In the event that Executive suffers a
disability which prevents him from substantially performing his duties under
this Agreement for a period of at
<PAGE> 6
least 60 consecutive days, or 90 non-consecutive days within any 365-day period
except as otherwise prohibited by law, the Company shall have the right to
terminate this Agreement, such termination to be effective upon the giving of
notice of Executive in accordance with Section 5.02 of this Agreement.
Section 4.04 Termination by Executive for Good Reason. Executive may
terminate his employment with the Company for "Good Reason" by giving 30 days
advance written notice to the Company of his intent to so terminate. For
purposes of this Agreement, the following circumstances shall constitute "Good
Reason":
(a) the assignment to Executive of any duties materially
inconsistent with his authority, duties or responsibilities, or any other
action by the Company which results in a material diminution or material
adverse change in such authority, duties or responsibilities, excluding for
this purpose an isolated action not taken in bad faith and which is remedied
prior to the expiration of the 30-day period after receipt of notice thereof
given by Executive; or
(b) any material breach of this Agreement by the Company,
other than an isolated failure not occurring in bad faith and which is remedied
prior to the expiration of the 30-day period after receipt of written notice
thereof given by Executive.
(c) any material reduction in Executive's bonus opportunities
which is not related to any failure by Executive to satisfy mutually agreed
upon performance goals; or
(d) without Executive's consent, relocation of the Company's
corporate offices to a location more than 20 miles from Dallas, Texas.
Section 4.05 Effect of Termination.
(a) For Cause; Without Good Reason; Death; Disability. In the
event of termination of this Agreement (i) by the Company for Cause, (ii) by
Executive without Good Reason, or (iii) by reason of Executive's death or
disability, the Company's sole obligation under this Agreement shall be to pay
to Executive (or his beneficiary in the event of his death) any base salary or
other compensation, or incentives earned and reimbursement of business expenses
incurred in accordance with Company policy, but not paid to Executive prior to
the effective date of such termination. In addition, Executive's rights and
vesting in the Management Common Stock will be determined under the Stock
Purchase Agreement.
(b) Without Cause within 2 Years or for Good Reason. In the
event of termination of this Agreement by the Company other than for Cause
prior to the second anniversary of the date hereof, or by Executive at any time
for Good Reason, and conditioned upon the Executive's execution of and the
effectiveness of a release of all claims, substantially in the form attached
hereto as Exhibit IV (the "Release"), Executive shall be eligible for the
following as severance: (i) payment of all base salary and other compensation
or incentive earned and reimbursement of business expenses incurred in
accordance with Company policy, but not paid to Executive prior to the
effective date of such termination, (ii) 18 months base salary taking into
account any scheduled salary increases, (iii) the product of Executive's target
performance bonus under Section 2.01(b) for the year in which such termination
occurs and 1.5; and (iv) Executive's rights and vesting in the Management
Common Stock will be determined
<PAGE> 7
under the Stock Purchase Agreement. In the event the Release is not effective
or Executive violates the provisions of Sections 3.01, 3.02 or 3.03, Executive
shall forfeit all rights to any severance otherwise payable under this Section
4.05(b).
(c) Without Cause after 2 Years. In the event of termination
of this Agreement by the Company other than for Cause after the second
anniversary of the date of this Agreement, and conditioned upon the Executive's
execution of the Release, Executive shall be eligible for the following as
severance: (i) payment of all base salary and other compensation or incentive
earned and reimbursement of business expenses incurred in accordance with
Company policy, but not paid to Executive prior to the effective date of such
termination, (ii) 12 months base salary taking into account any scheduled
salary increases, (iii) performance bonus under Section 2.01(b) for the year in
which such termination occurs based upon the annualized performance of the
Company through the date of termination; and (iv) Executive's rights and
vesting in the Management Common Stock will be determined under the Stock
Purchase Agreement. In the event the Release is not effective or Executive
violates the provisions of Sections 3.01, 3.02 or 3.03, Executive shall forfeit
all rights to any severance otherwise payable under this Section 4.05(c).
(d) Upon a Change in Control. Notwithstanding the provisions
of paragraph (c) in the event of termination of this Agreement by the Company
other than for Cause, or by Executive for Good Reason following a Change in
Control of the Company, and conditioned upon the Executive's execution of and
the effectiveness of the Release, Executive shall be eligible for the following
as severance: (i) payment of all base salary and other compensation or
incentive earned and reimbursement of business expenses incurred in accordance
with Company policy, but not paid to Executive prior to the effective date of
such termination, (ii) 18 months base salary taking into account any scheduled
salary increases, (iii) the product of Executive's target performance bonus
under Section 2.01(b) for the year in which such termination occurs and 1.5;
and (iv) Executive's rights and vesting in the Management Common Stock will be
determined under the Stock Purchase Agreement. In the event the Release is not
effective or Executive violates the provisions of Sections 3.01, 3.02 or 3.03,
Executive shall forfeit all rights to any severance otherwise payable under
this Section 4.05. For this purpose "Change in Control" shall mean (i) the sale
of all or substantially all of the assets of the Company, (ii) the sale of the
majority of the voting stock of the Company to a person other than the
stockholders of the Company on the date hereof or any of their affiliates,
(iii) a merger of the Company with or into another person which results in the
stockholders of the Company not being the majority of the stockholders of the
Company or any surviving entity or (iv) a liquidation of the Company; provided,
however, that in no event shall a Change in Control be deemed to have occurred
(i) due to an initial public offering of the Company's equity securities or
(ii) if the holders of the outstanding long-term debt of the Company acquire a
majority of the voting or equity securities of the Company and the majority of
the directors of the Company immediately prior to such event continue to
constitute a majority of the directors after such event.
V.
MISCELLANEOUS
Section 5.01 Benefit of Agreement; Assignment; Beneficiary. (a) This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and
<PAGE> 8
assigns, including, without limitation, any corporation or person which may
acquire all or substantially all of the Company's assets or business or with or
into which the Company may be consolidated or merged. This Agreement shall also
inure to the benefit of, and be enforceable by, Executive and his personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any amount
would still be payable to Executive hereunder if he had continued to live, all
such amounts shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary, devisee, legatee or other designee, or if there is no
such designee, to Executive's estate.
(b) The Company shall require any successor (whether direct
or indirect, by operation of law, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement and to the
extent provided therein, the related plans, in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
Section 5.02 Notices. Any notice required or permitted hereunder shall
be in writing and shall be sufficiently given if personally delivered or if
sent by telegram or telex or by registered or certified mail, postage prepaid,
with return receipt requested, addressed: (a) in the case of the Company, to
Silver Cinemas International, Inc., C/O Brentwood Associates, 11150 Santa
Monica Boulevard, Suite 1200, Los Angeles, California, 90025, Attention: David
Wong, or to such other addresses and/or to the attention of such other persons
as the Company shall designate by written notice to Executive; and (b) in the
case of Executive, to Larry Hohl, to such other address as Executive shall
designate by written notice to the Company. Any notice hereunder shall be
deemed to have been given at the time of receipt thereof by the person to whom
such notice is given.
Section 5.03 Entire Agreement; Amendment. This Agreement and any
agreements entered into with respect to the Management Preferred Stock, and
Management Common Stock, contain the entire agreement of the parties hereto
with respect to the terms and conditions of Executive's employment during the
term and supersedes any and all prior agreements and understandings, whether
written or oral, between the parties hereto with respect to compensation due
for services rendered hereunder. This Agreement may not be changed or modified
except by an instrument in writing signed by both of the parties hereto.
Section 5.04 Waiver. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a continuing
waiver or as a consent to or waiver of any subsequent breach hereof.
Section 5.05 Headings. The Article and Section headings herein are for
convenience of reference only do not constitute a part of this Agreement and
shall not be deemed to limit or affect any provision hereof.
Section 5.06 Attorneys Fees; Enforcement. The prevailing party will be
responsible for reasonable costs and expenses incurred in connection with any
dispute or legal proceeding between the parties arising out of the subject
matter of this Agreement, including any proceeding to enforce any right or
provision under this Agreement. Executive shall have no right
<PAGE> 9
to enforce any of his rights hereunder by seeking or obtaining injunctive or
other equitable relief and acknowledges that damages are an adequate remedy for
any breach by the Company of this Agreement.
Section 5.07 Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
Delaware without reference to the principles of conflict of laws.
Section 5.08 Agreement to Take Actions. Each party to this Agreement
shall executive and deliver such documents, certificates, agreements and other
instruments, and shall take such other actions, as may be reasonably necessary
or desirable in order to perform his or its obligations under this Agreement or
to effectuate the purposes hereof.
Section 5.09 Survivorship. The respective rights and obligations of
the parties under this Agreement shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.
Section 5.10 Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision or provisions of this Agreement, which
shall remain in full force and effect.
Section 5.11 Other Agreements. Executive represents and warrants to
the Company that to the best of his knowledge, neither the execution and
delivery of this Agreement nor the performance of his duties hereunder violates
or will violate the provisions of any other agreement to which he is a party or
by which he is bound.
Section 5.12 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
<PAGE> 10
IN WITNESS WHEREOF, the Company and Executive have duly
executed this Agreement as of the date first above written.
SILVER CINEMAS INTERNATIONAL, INC.
By: /s/ John M. Sullivan
--------------------------------
Name: John M. Sullivan
Title: Chairman of the Board
By: /s/ Larry D. Hohl
--------------------------------
Name: Larry D. Hohl
<PAGE> 11
EXHIBIT III
<TABLE>
<CAPTION>
Value
Created in Millions % to Executive $ to Executive
------------------- -------------- --------------
<S> <C> <C> <C>
Up to 10.0 12.5% 1.3
Less than 12.5 11.5% 1.4
Less than 15.0 10.5% 1.6
Less than 17.5 9.5% 1.7
Less than
</TABLE>
<PAGE> 12
EXHIBIT IV
RELEASE
For valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the undersigned ("Employee"), on behalf of himself and
his spouse, dependents, predecessors, successors, heirs, assigns,
representatives, and agents, and each of them, does hereby release and forever
discharge Silver Cinemas International, Inc. ("Employer") and its parents,
subsidiaries, and affiliates, past and present, and each of them, as well as
its and their directors, officers, associates, employees, servants, owners,
stockholders, partners, trustees, predecessors, successors, heirs, assigns,
representatives, agents, attorneys, and all persons acting by, through, under,
or in concert with them, past or present, and each of them, of and from any and
all manner of action or actions, cause or causes of action, in law or in
equity, suits, debts, liens, contracts, agreements, promises, liabilities,
claims, demands, damages, losses, costs, or expenses, of any nature whatsoever,
known or unknown, fixed or contingent (hereinafter called "Claims"), which
Employee now has or may hereafter have against them, or any of them, by reason
of any and all acts, omissions, events or facts occurring or existing prior to
the date hereof. The Claims released hereunder include, without limitation, any
Claims arising out of, based upon, or relating to the hire, employment, or
remuneration of Employee by Employer or arising out of, based upon, or relating
to Employee's termination of employment with Employer; any Claims arising out
of, based upon, or relating to any alleged breach of any employment agreement
between Employee and Employer; any Claims arising out of, based upon, or
relating to any alleged breach of any covenant of good faith and fair dealing,
express or implied; any Claims arising out of, based upon, or relating to any
alleged torts or other alleged legal restrictions on Employer's right to
terminate Employee's employment; and any Claims arising out of, based upon, or
relating to any alleged violation of any federal, state, or local statute or
ordinance pertaining to or governing Employee's employment with Employer or the
payment of wages, including, without limitation, Title VII of the Civil Rights
Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as
amended, the Americans with Disabilities Act, as amended, the Equal Pay Act, as
amended, the Fair Labor Standards Act, as amended, the Employee Retirement
income and Security Act of 1974, as amended.
IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT
OF 1990, EMPLOYEE IS HEREBY ADVISED AS FOLLOWS:
(A) EMPLOYEE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE
SIGNING THIS RELEASE;
(B) EMPLOYEE HAS TWENTY-ONE (21) DAYS FROM THE EXECUTION OF
THIS RELEASE TO CONSIDER THIS RELEASE BEFORE THIS RELEASE BECOMES EFFECTIVE;
AND
(C) EMPLOYEE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO
REVOKE IT; OTHERWISE, THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF
THAT REVOCATION PERIOD.
<PAGE> 13
Employee represents and warrants that there has been no
assignment or other transfer of any interest in any Claim that Employee may
have against Employer. Employee agrees to indemnify and hold Employer harmless
from any liability, claims, demands, damages, costs, expenses, and attorneys'
fees incurred as a result of any person asserting any such assignment or
transfer of any rights or Claims under any such assignment or transfer. It is
the intention of the Employee and Employer that this indemnity does not require
payment as a condition precedent to recovery by Employer from the Employee
under this indemnity.
Employee agrees that if he hereafter commences, joins in, or
in any manner seeks relief through any suit arising out of, based upon, or
relating to any of the Claims released hereunder or in any manner asserts
against Employer any of the Claims released hereunder, then Employee will pay
to Employer, in addition to any other damages caused thereby, all attorneys'
fees incurred by Employer in defending or otherwise responding to said suit or
Claim.
Employee and Employer further understand and agree that
neither the payment of money nor execution of this Release shall constitute or
be construed as an admission of any liability whatsoever by either Employer or
Employee.
Date: , 19
--------- ------ -------------------------
Larry D. Hohl
<PAGE> 1
EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is entered into this
7th day of September, 1999 by and between Silver Cinemas International, Inc., a
Delaware corporation (the "Company") and Larry Hohl ("Purchaser" or "you").
RECITALS
The Company desires to issue and sell to Purchaser, and Purchaser
desires to purchase from the Company, 10,000 shares (the "Common Shares") of
the Company's authorized but unissued Common Stock, par value $.01 per share
(the "Common Stock") subject to the vesting provisions and such other terms and
conditions contained herein.
The Company desires to grant to Purchaser in connection with the
performance of services and as an inducement to enter into an employment
agreement with the Company 3,000 shares (the "Preferred Shares") of the
Company's authorized but unissued Convertible Preferred Stock, par value $.01
per share (the "Preferred Stock"), upon the terms and conditions specified
herein. The Common Shares and Preferred Shares are hereinafter sometimes called
the "Shares."
The Company desires to have, and Purchaser is willing to grant to the
Company, the right and option to repurchase the Common Shares and Preferred
Shares upon the terms and conditions contained herein.
It is a condition precedent to the obligations of the Company under
this Agreement that Purchaser enter into that certain Stockholders' Agreement
of even date herewith (the "Stockholders' Agreement") among the Company,
Brentwood Associates Buyout Fund II, L.P. (the "Partnership") and the other
stockholders of the Company (the "Stockholders") (the Partnership, the
Stockholders and the Purchaser are collectively called the "Investors").
THEREFORE, in consideration of the premises and of the covenants and
conditions contained herein, the parties hereto agree as follows:
1. Purchase and Sale; Grant; Closing.
(a) Purchase and Sale. The Company hereby agrees to issue and sell to
Purchaser, and Purchaser hereby agrees to purchase from the Company on the
Closing Date, 10,000 shares of Common Stock for an aggregate purchase price of
Ten Thousand Dollars ($10,000). Of the Common Shares being purchased hereunder
by Purchaser, 5,000 are Eligible Time Accelerated Stock ("ETA Stock").
(b) Grant of Preferred Shares. The Company hereby agrees to issue to
Purchaser 3,000 shares of Preferred Stock in consideration for Purchaser's
execution of that certain Employment Agreement dated September 7, 1999 between
the Company and Purchaser and the performance of Purchaser's services
thereunder.
(c) The Closing. The consummation of the purchase and sale of the
Common Shares to be purchased hereunder and the grant of the Preferred Shares
hereunder (the "Closing")
<PAGE> 2
shall occur as of September 7, 1999, or at such other time as the parties may
agree (the "Closing Date"). At the Closing, the Company shall deliver to
Purchaser certificates evidencing the shares of Common Stock purchased
hereunder by Purchaser, against payment of the specified consideration
therefor. In addition, at the Closing the Company shall deliver to Purchaser
certificates evidencing the Preferred Shares granted hereunder ; provided,
however, that certificates evidencing the Common Shares purchased hereunder by
the Purchaser and the Preferred Shares granted hereunder shall be deposited
with the Escrow Agent pursuant to Section 5 hereof.
2. Vesting of the Common Stock.
(a) 33.33% of the Common Shares shall become vested on December 31,
1999 and 16.66% of the Common Shares shall become vested as of the last day of
each fiscal year of the Company (the "Fiscal Year End Date") commencing with
fiscal 2000, e.g. fiscal years 2000, 2001, 2002, and 2003, subject to the
earlier vesting of ETA Stock as described below.
All Common Shares (in excess of the 33.33% of the Common Shares
scheduled to vest in 1999 and the 16.66% scheduled to vest in any such other
year) which vest as ETA Stock under Section 2(b) will first reduce the Common
Shares then scheduled to vest as of the Fiscal Year End Date in 2000; then next
reduce the Common Shares then scheduled to vest as of the Fiscal Year End Date
in 2001; and, thereafter, will reduce in reverse chronological order the Common
Shares then scheduled to vest as of the Fiscal Year End Date in the years 2002
and 2003.
(b) Annex A, attached hereto and incorporated herein by reference,
includes vesting provisions, performance criteria (the "Performance Criteria")
for each of the periods set forth below for the ETA Stock and an example of
vesting which is applicable to ETA Stock which is eligible for accelerated
vesting. If the Company meets the Performance Criteria for fiscal 2000, 50% of
the ETA Stock shall become vested effective as of the Fiscal Year End Date in
2000; if the Company meets the Performance Criteria for fiscal 2001, an
additional 50% of the ETA Stock shall become vested effective as of the Fiscal
Year End Date in 2001. (Each of fiscal 2000 and 2001 is referred to herein as a
"Performance Year.")
Annex A also includes more detailed vesting provisions applicable to
the ETA Stock, including "Catch Up Vesting" provisions.
(c) The foregoing notwithstanding, with respect to Purchaser, no
Common Shares or shall become vested unless Purchaser has been continuously
employed by the Company, or any parent or subsidiary of the Company, from the
Closing Date until, each respective date on which the Common Shares are
eligible to vest; provided, however, that if there is a Termination of
Employment (as defined below):
(i) a pro rata portion of any Common Shares which are
scheduled to vest and are not ETA Stock shall become vested
immediately upon Termination of Employment (such pro rata portion
being equal to the ratio of the number of days of employment during
the fiscal year in question to 365); and
(ii) if the Termination of Employment occurs during a
Performance Year, and if, as of the date of Termination of Employment
(the
<PAGE> 3
"Termination Date"), the performance goals for the fiscal year to date
("Year to Date Performance") as of the last full month preceding the
Termination Date equaled or exceeded target performance goals (as set
forth on Annex A) for such period, then a pro rata portion (determined
as in Section 2(c)(i)) of the ETA Stock eligible to vest with respect
to such Performance Year shall become vested as of the Termination
Date. (It is understood that the determination of whether these shares
of ETA Stock will vest will not necessarily be able to be calculated
as of the Termination Date, but once the calculation is made, if any
such shares do in fact vest, they shall be deemed to have vested as of
the Termination Date).
(d) As used herein, "Termination of Employment" shall mean the time
when the employee-employer relationship between Purchaser and the Company is
terminated for any reason whatsoever, with or without cause. For purposes of
this Section 2(d), and elsewhere in this Agreement in the context of
employment, the term "Company" shall mean a subsidiary or parent of the Company
if Purchaser is then employed by such subsidiary or parent; provided, however,
that neither a transfer of Purchaser from the employ of the Company to the
employ of such subsidiary or parent nor the transfer of Purchaser from the
employ of such subsidiary or parent to the employ of the Company shall be
deemed a Termination of Employment.
(e) Anything in this Agreement to the contrary notwithstanding, if,
prior to an initial public offering of its equity securities, the Company is
acquired by a third party or parties through an asset purchase, merger or sale
of more than 50% (in value) of the outstanding equity securities of the Company
(an "Acquisition"), (i) all Common Shares scheduled to vest pursuant to Section
2(a) in the calendar year in which the Acquisition is closed (and not
previously repurchased by the Company pursuant to Section 3) shall vest
immediately prior to the Acquisition closing date and (ii) if the calendar year
in which the Acquisition is scheduled to close is a Performance Year, all ETA
Stock eligible to vest in such year shall vest immediately prior to the
Acquisition closing date; provided, however, that such ETA Stock shall only
vest if Year to Date Performance as of the Acquisition closing date (or a date
reasonably close and prior thereto) equaled or exceeded 90% of Plan performance
for such period.
Purchaser shall be entitled to "Catch Up Vesting" (as defined in Annex
A) with respect to a Performance Year prior to any Performance Year in which an
Acquisition is closed if ETA Stock vested for the year in which the Acquisition
is scheduled to close pursuant to Section 2(e). Shares of ETA Stock that are
eligible for Catch Up Vesting but that do not vest pursuant to the preceding
sentence shall be subject to the Company's Purchase Option provided in Section
3. In addition, the Company shall have the right to purchase pursuant to
Section 3 all shares of ETA Stock which were eligible for accelerated vesting
with respect to Performance Years prior to the calendar year in which the
Acquisition is closed which did not so accelerate pursuant to this Section 2(e)
or Section 2(b) and Annex A.
The proceeds of the Acquisition attributable to all of the Common
Shares outstanding on the closing date of the Acquisition (other than ETA Stock
repurchased pursuant to the preceding sentence) and not previously vested in
accordance with this Agreement, including the first sentence of this Section
2(e) (the "Escrowed Acquisition Proceeds"), shall be deposited with the Escrow
Agent and will be distributed to Purchaser one year after the Acquisition
closing date, if, but only if, Purchaser is then an employee of the Company or
the acquiring entity; provided, however, (i) if Purchaser is not offered the
opportunity to continue in the employ of the Company or to become an employee
of the acquiring entity (or a subsidiary or parent thereof) after the
Acquisition closing date (x) at the same or greater compensation as he
<PAGE> 4
was receiving from the Company, (y) with authority, duties and responsibilities
materially consistent with those he had with the Company prior to the
Acquisition, then the Escrowed Acquisition Proceeds shall be distributed to
Purchaser immediately following the Acquisition closing date or (ii) if
Purchaser is terminated by the Company or the acquiring entity (or a subsidiary
or parent thereof), as the case may be, then the Escrowed Acquisition Proceeds
shall then be distributed to Purchaser. Any Escrowed Acquisition Proceeds not
so distributed to Purchaser shall be paid to the other shareholders or former
shareholders of the Company in accordance with their interests.
3. Company Purchase Option.
(a) The Company shall have the unconditional right and option to
purchase any or all of the Common Shares that have not vested as provided in
Section 2 at a purchase price of $1.00 per share (the "Option Price") upon a
Termination of Employment on the terms and conditions hereinafter provided.
(b) In addition to the rights set forth in Section 3(a), prior to an
initial public offering of Common Stock, the Company shall have the
unconditional right and option to purchase any and or all of the Common Shares
that have vested, as provided in Section 2 at a per share purchase price equal
to the Fair Market Value thereof (the "Fair Market Value Price") upon a
Termination of Employment on the terms and conditions hereinafter provided. The
Company's right and option set forth in Sections 3(a) and 3(b) is referred to
herein as the "Purchase Option."
(c) The determination of whether ETA Stock has vested or has failed to
vest shall be made as of the date the Termination of Employment occurs with no
credit for the Company's performance in any subsequent Performance Years, and
there will be no "Catch Up Vesting." In the event of an Acquisition, the
Company shall be entitled to exercise the Purchase Option with respect to all
shares of ETA Stock eligible for accelerated vesting in any Performance Year
prior to the calendar year in which the Acquisition is closed, which did not
accelerate and vest pursuant to Section 2(b) above and do not accelerate and
vest as a result of the operation of the second paragraph of Section 2(e)
above.
The Purchase Option, if exercised, must be exercised no later than 60
days after a Termination of Employment. The Purchase Option may be exercised in
whole or in part. Any Common Stock which becomes subject to the Purchase Option
as provided herein but with respect to which the Purchase Option is not
exercised in accordance with the terms hereof shall become fully vested upon
expiration of the period during which the Purchase Option with respect thereto
is effective, and no such Common Stock shall at any time thereafter be subject
to the Purchase Option.
(d) The Purchase Option shall be exercised by written notice signed by
an officer of the Company and delivered or mailed to Purchaser as provided in
Section 15(c) of this Agreement and to the Escrow Agent (as defined in Section
5 hereof) as provided in the Joint Escrow Instructions (as defined in Section 5
hereof) and shall be effective immediately upon such delivery or mailing.
Amounts due to Purchaser from the Company as a result of exercise of the
Purchase Option shall be payable in cash promptly after exercise of the
Purchase Option or, in the case of ETA Stock and/or "Catch Up Vesting", as soon
as reasonably practical after determination of whether or not any applicable
Performance Criteria were met.
<PAGE> 5
(e) As used herein, "Fair Market Value" shall mean the fair market
value of a share of Common Stock, representing the price a willing buyer would
pay and at which at willing seller would sell, neither under any compulsion or
duress. Initially, the parties shall attempt to agree on Fair Market Value for
a period of thirty (30) days. If they are unable to reach agreement, each of
them shall within ten (10) days nominate an independent appraiser skilled in
valuing securities similar to the Common Stock, and the two appraisers so
nominated shall appoint a third appraiser within ten (10) days. The third
appraiser shall determine Fair Market Value, and such determination shall be
conclusive and binding on all parties. Each party shall bear the costs, if any,
of the appraiser it nominates, and the parties shall share equally the costs of
the third appraiser, which cost may be deducted by the Company from any amounts
payable to Purchaser if Purchaser has not otherwise paid his portion of the
third appraiser's costs.
4. No Employment Agreement. Nothing contained in this Agreement, or
except as provided in the Employment Agreement of even date herewith between
Purchaser and the Company, in any other agreement entered into by the Company
and Purchaser in connection with this Agreement, (i) obligates the Company, or
any subsidiary or parent of the Company, to continue employ Purchaser in any
capacity whatsoever, or (ii) prohibits or restricts the Company (or any such
subsidiary or parent) from terminating the employment of Purchaser at any time
or for any reason whatsoever, with or without cause, and Purchaser hereby
acknowledges and agrees that neither the Company nor any other person has made
any representations or promises whatsoever to Purchaser concerning Purchaser's
employment or continued employment by the Company. In the event of any
Termination of Employment, Purchaser shall have the rights set forth in the
Employment Agreement of even date herewith between Purchaser and the Company
and this Agreement and no more, and except as provided by law or in equity.
5. Escrow of Shares. As security for the faithful performance of the
terms of this Agreement and to ensure the availability for delivery of the
unvested Common Shares in case of an exercise of the Purchase Option, Purchaser
shall deliver to and deposit with the escrow agent (the "Escrow Agent") named
in the joint escrow instructions attached hereto as Annex B (the "Joint Escrow
Instructions"), stock assignments duly endorsed (with date and number of shares
blank) in the appropriate form attached hereto as Annex C, together with the
certificate or certificates evidencing the shares of Common Stock purchased
hereunder by Purchaser. Such documents are to be held by the Escrow Agent and
delivered by the Escrow Agent pursuant to the terms of the Joint Escrow
Instructions, which shall be executed by Purchaser and the Company and
delivered to the Escrow Agent concurrently with the execution of this
Agreement. As promptly as practicable after each vesting date under this
Agreement (but, with respect to ETA Stock, only after the Company is able to
determine whether or not the applicable Performance Criteria have been met),
the Company shall notify Purchaser and the Escrow Agent in writing of the
aggregate vesting and non-vesting to that date of Common Shares and ETA Stock,
and the Escrow Agent shall, within 30 days after receipt of such notice,
deliver to Purchaser certificates representing that number of Purchaser's
Common Shares that such notice states have become vested (less such shares, the
certificates for which have been previously delivered). From time to time, upon
written request of the Company, the Escrow Agent shall deliver to the Company
certificates representing that number of Common Shares which the Company shall
have purchased upon exercise of the Purchase Option, unless Purchaser objects
in the manner provided in the Joint Escrow Instructions.
In the case of any conflict or inconsistency between this Section 5
and the Joint Escrow Instructions, the Joint Escrow Instructions shall control.
<PAGE> 6
6. Change in Capitalization. If from time to time during the term of
this Agreement (i) there is any dividend of cash or property or rights to
acquire same, any liquidating dividend of cash and/or property, or any stock
dividend or stock split or other change in the character or amount of any of
the outstanding securities of the Company, or (ii) there is (a) any
consolidation, merger or sale of all, or substantially all, of the assets of
the Company or (b) a Drag-Along Sale pursuant to the Stockholders' Agreement,
then in such event any and all new, substituted or additional securities or
other property to which Purchaser may become entitled by reason of his
ownership of Common Shares shall immediately become subject to this Agreement
and shall assume the same status with respect to vesting as the Common Shares
upon which such dividend was paid or in substitution for which such additional
securities or property were distributed. Any cash or cash equivalents received
pursuant to this Section 6 shall be invested in conservative, short-term
interest bearing securities, and interest earned thereon shall likewise assume
the same status as to vesting. While the total Option Price for all Common
Shares subject to the Purchase Option shall remain the same after each such
event, the Option Price per Common Share upon exercise of the Purchase Option
shall be proportionately or otherwise appropriately adjusted as determined in
good faith by the Board of Directors of the Company.
7. Purchaser Representations and Agreements. Purchaser hereby
represents and warrants, and agrees with, the Company as set forth below.
(a) Purchaser has full power and authority to execute, deliver and
perform his obligations under this Agreement and this Agreement is a valid and
binding obligation of Purchaser, enforceable in accordance with its terms,
except that the enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and to general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law). Purchaser is not subject to any agreement not to compete or other
restriction on his ability to acquire the shares of Common Stock and Preferred
Stock being purchased or acquired pursuant to this Agreement or to become an
employee of the Company or any of its subsidiaries, and Purchaser will not
enter into any such agreement or restriction.
(b) Purchaser has received and reviewed this Agreement and all annexes
and schedules hereto, including the Stockholders' Agreement and all schedules
and exhibits attached hereto and thereto, and has received all such business,
financial and other information as he deems necessary and appropriate to enable
him to evaluate the financial risk inherent in making an investment in the
Shares and has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in
respect thereof.
(c) Purchaser is acquiring the Shares with his own funds or property
for investment, for his own account, and not as a nominee or agent for any
other person, firm or corporation, and not with a view to the sale or
distribution of all or any part thereof, and he has no present intention of
selling, granting participation in, or otherwise distributing any of the
Shares. Except as provided herein or pursuant to the Stockholders' Agreement,
Purchaser does not have any contract, undertaking, agreement or arrangement
with any person, firm or corporation to sell, transfer or grant participation
to such person, firm or corporation, with respect to any of the Shares.
(d) Purchaser understands and agrees that (i) the Shares will not be
registered under the Securities Act of 1933, as amended (the "Act"), in part
based upon an exemption from
<PAGE> 7
registration predicated on the accuracy and completeness of his representations
and warranties appearing herein and (ii) he will not be permitted to sell,
transfer or assign any of the Shares until they are registered under the Act or
an exemption from the registration and prospectus delivery requirements of the
Act is available, and (iii) there is no assurance that such an exemption from
registration will ever be available or that the Shares will ever be able to be
sold.
(e) Purchaser agrees that in no event will he make a disposition of
any Shares or any interest therein, unless such Shares are registered under the
Act or unless and until (i) he shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and (ii) he shall have
furnished the Company with an opinion of counsel reasonably satisfactory in
form and content to the Company to the effect that (A) such disposition will
not require registration of such Shares under the Act or applicable state
securities laws, or (B) that appropriate action necessary for compliance with
the Act and applicable state securities laws has been taken, or (iii) the
Company shall have waived, expressly and in writing, the provisions of clauses
(i) and (ii) of this subsection.
(f) Purchaser does not require the assistance of an investment advisor
or other purchaser representative to participate in the transactions
contemplated by this Agreement, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of his
investment in the Company, has the ability to bear the economic risks of its
investment for an indefinite period of time and has been furnished with and had
access to such information as is necessary to verify the accuracy of the
information supplied and to have all questions answered by the Company.
8. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser as set forth below.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to enter into this Agreement, to issue the Shares
and to perform its obligations hereunder.
(b) The execution and delivery of this Agreement have been duly and
validly authorized, and all necessary corporate action has been taken to make
this Agreement a valid and binding obligation of the Company, enforceable in
accordance with its terms, except that the enforcement thereof may be subject
to bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and to general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(c) When issued and paid for by Purchaser as provided for herein, the
Shares will be duly and validly issued, fully paid and non-assessable.
9. Conditions of Parties' Obligations.
The obligations of the Company to issue and sell, and of Purchaser to
purchase and pay for, the Common Shares are also subject to the fulfillment
prior to or concurrently with the Closing of the conditions set forth below.
<PAGE> 8
(a) The representations and warranties of the Purchaser and the
Company shall be true and correct on and as of the Closing Date.
(b) All permits, consents, approvals, orders and authorizations, if
any, which the Company is required to obtain from, and all registrations,
qualifications, designations, declarations and filings which the Company is
required to make with, any state or Federal governmental authority of the
United States in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly obtained or made and shall be effective on and as of the Closing
Date.
(c) Purchaser shall have received copies of such supporting documents
as Purchaser may reasonably request. The Company shall have received such
supporting documents as it may reasonably request to satisfy itself concerning
the representations of Purchaser.
(d) Purchaser shall have become a party to and agreed to be bound by
the Stockholders' Agreement, which Stockholders' Agreement is hereby
incorporated herein as if set forth in full in this Agreement.
10. Restriction on Sale or Transfer. Except as provided herein, none
of the Common Shares that have not vested pursuant hereto (or any beneficial
interest therein) shall be sold, transferred, assigned or pledged (including
transfer by operation of law) and any attempt to make any such sale, transfer,
assignment or pledge shall be null and void and of no effect.
11. Legends. In addition to any legends required by the Stockholders'
Agreement, the certificates representing the shares of Common Stock purchased
pursuant to this Agreement will bear a legend in substantially the following
form:
"The shares represented by this certificate are subject to repurchase
under certain circumstances by the issuer pursuant to a Stock Purchase
Agreement between the Issuer and the initial purchaser, to which reference is
made for a fuller description of such repurchase rights."
12. Enforcement.
The parties acknowledge that the remedy at law for any breach or
violation of the provisions of Section 10 hereof shall be inadequate and that,
in the event of any such breach or violation, the Company or Purchaser, as the
case may be, shall be entitled to injunctive relief in addition to any other
remedy, at law or in equity, to which he or it may be entitled.
13. Violation of Transfer Provisions. The Company shall not be
required (a) to transfer on its books any Common Shares which shall have been
sold, transferred, assigned or pledged in violation of any of the provisions of
this Agreement or (b) to treat as owner of such Common Shares or to accord the
right to vote or to pay dividends to any purported transferee of Common Shares
in violation of any of the provisions of this Agreement.
14. Covenant Regarding 83(b) Election. Purchaser hereby covenants and
agrees that he will make an election pursuant to Treasury Regulation 1.83-2
with respect to the Shares and will furnish the Company with a copy of the form
of election Purchaser has filed and evidence that such an election has been
filed in a timely manner.
15. General Provisions.
<PAGE> 9
(a) No Assignments. Except as specifically provided to the contrary in
this Agreement, neither party shall transfer, assign or encumber any of its or
his rights, privileges, duties or obligations under this Agreement without the
prior written consent of the other party, and any attempt to so transfer,
assign or encumber shall be void; provided, however, that the Company may
assign this Agreement and its rights hereunder in connection with a sale of all
of the stock of or all or substantially all of the assets of the Company.
(b) [intentionally left blank]
(c) Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given and made and served either by personal delivery to the person
for whom it is intended (including by reputable overnight delivery services
which shall be deemed to have effected personal delivery) or by telecopy,
receipt of which is acknowledged by the telecopy number set forth below for the
applicable addressee, or if deposited, postage prepaid, registered or certified
mail, return receipt requested, in the United States mail:
(i) if to Purchaser, addressed to Purchaser at his address
shown on the stock register maintained by the Company, or at such
other address as Purchaser may specify by written notice to the
Company, or
(ii) if to the Company, addressed to Silver Cinemas
International, Inc., c/o David H. Wong, Brentwood Associates, 11150
Santa Monica Boulevard, Suite 1200 Los Angeles, California 90025, or
at such other address as the Company may specify by written notice to
the Purchaser.
Each such notice, request, consent and other communication shall be
deemed to have been given upon receipt thereof as set forth above or, if
sooner, three days after deposit as described above. The addresses for the
purposes of this Section 15(c) may be changed by giving written notice of such
change in the manner provided herein for giving notice. Unless and until such
written notice is received, the addresses provided herein shall be deemed to
continue in effect for all purposes hereunder.
(d) Choice of Law. This Agreement shall be governed by and construed
in accordance with the internal laws, and not the laws of conflicts of laws, of
the State of Delaware.
(e) Severability. The parties hereto agree that the terms and
provisions in this Agreement are reasonable and shall be binding and
enforceable in accordance with the terms hereof and, in any event, that the
terms and provisions of this Agreement shall be enforced to the fullest extent
permissible under law. In the event that any term or provision of this
Agreement shall for any reason be adjudged to be unenforceable or invalid, then
such unenforceable or invalid term or provision shall not affect the
enforceability or validity of the remaining terms and provisions of this
Agreement, and the parties hereto hereby agree to replace such unenforceable or
invalid term or provision with an enforceable and valid arrangement which in
its economic effect shall be as close as possible to the unenforceable or
invalid term or provision.
(f) Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective permitted successors and assigns of the parties hereto.
<PAGE> 10
(g) Modification, Amendment and Waiver. No modification, amendment or
waiver of any provision of this Agreement shall be effective against the
Company or Purchaser unless approved in writing, and, in the case of the
Company, authorized by its Board of Directors. The failure at any time to
enforce any of the provisions of this Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of any of the
parties thereafter to enforce each and every provision hereof in accordance
with its terms. (h) Integration. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior negotiations, understandings and agreements, written or
oral.
(i) Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
(j) Counterparts. This Agreement may be executed in counterpart with
the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
COMPANY:
SILVER CINEMAS INTERNATIONAL, INC.
By: /s/ John M. Sullivan
---------------------------------
Name: John M. Sullivan
--------------------------------
Title: Chairman of the Board
-------------------------------
PURCHASER:
/s/ Larry D. Hohl
---------------------------------
Larry Hohl
<PAGE> 11
ANNEX A
SILVER CINEMAS INTERNATIONAL, INC.
PERFORMANCE CRITERIA
AND VESTING EXAMPLE
This Annex A sets forth the Performance Criteria, detailed vesting
provisions and vesting example with respect to the vesting of ETA Stock, which
is a part of the Common Shares to be acquired by Purchaser pursuant to the
Stock Purchase Agreement dated as of September 7, 1999 among the Company and
the Purchaser (the "Agreement"). Capitalized terms used herein and not defined
have the meanings ascribed to them in the Agreement.
As stated in Section 2(b) of the Agreement, 16.66% of the ETA Stock
shall become eligible for vesting as of the end of each of fiscal year from
fiscal 2000 through fiscal 2002 (each of such full fiscal years being defined
in the Agreement as a Performance Year). Each installment of ETA Stock when it
becomes eligible for vesting is hereinafter referred to as the "Eligible ETA
Stock."
For each Performance Year, the amount of Eligible ETA Stock that shall
become vested (effective as of the end of the fiscal year) will be determined
by comparing the Company's actual EBITDA as of the end of such fiscal year (as
determined from its audited financial statements) to Plan EBITDA (as described
below) for such fiscal year. The percentage of Eligible ETA Stock that shall
become vested at the end of each Performance Year shall be as set forth in the
following table:
<TABLE>
<CAPTION>
Actual Performance as a Percentage of Eligible ETA Stock
% of Plan EBITDA Stock that shall become vested
----------------------- --------------------------------
<S> <C>
less than 85.00% 0%
88.75% 30%
92.50% 60%
96.25% 80%
100% 100%
</TABLE>
Vesting between the percentages listed in the table above will be
linearly interpolated.
If the Company fails to achieve the dollar amount of Plan EBITDA
required to vest 100% of the Eligible ETA Stock in any one Performance Year,
but in the immediately following Performance Year the Company's actual EBITDA
exceeds Plan EBITDA, the Company shall add the dollar amount by which the
Company's EBITDA exceeds Plan EBITDA in such Performance Year to the Company's
EBITDA for the Performance Year immediately prior thereto and vest the
additional Eligible ETA Stock that would have vested in that Performance Year
with the addition of the dollar amount carried back; provided that there are
limitations in the Agreement in the case of termination of employment and
acquisitions of the
<PAGE> 12
Company. Such vesting for the earlier Performance Year is referred to herein as
"Catch Up Vesting."
In the event of an Acquisition, any Eligible ETA Stock which shall
have failed to vest as a result of the Company's failure to achieve the dollar
amount of Plan EBITDA required to vest 100% of the then Eligible ETA Stock
shall become subject to the Company's Purchase Option in Section 3 of the
Agreement.
"EBITDA" means, for any fiscal year, consolidated pre-tax income plus
interest expense (including non-cash interest, amortization of original issue
discount and the interest component of capital leases) on indebtedness,
depreciation and amortization of goodwill, covenants not to compete and similar
intangibles, all as determined in accordance with generally accepted accounting
principles and as reflected in the Company's audited consolidated financial
statements.
"Plan EBITDA" means, for each Performance Year, the dollar amount of
EBITDA set forth in the Operating Plan approved by the Board of Directors. Plan
EBITDA will be adjusted from time to time as may be mutually agreed upon to
reflect the expected contribution to EBITDA of acquisitions or major corporate
projects.
<PAGE> 13
ANNEX B
JOINT ESCROW INSTRUCTIONS
September 7, 1999
Mark Kimura
c/o Brentwood Associates
11150 Santa Monica Boulevard
Los Angeles, California 90025
Joint Escrow Instructions
Dear Sir or Madam:
As the person identified herein as Escrow Agent for Silver Cinemas
International, Inc. (the "Company"), a Delaware corporation, and the
undersigned holder of common stock, par value $.01 per share, of the Company
and Convertible Preferred Stock, par value $.01 per share, of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Stock Purchase Agreement
(the "Agreement") dated as of September 7, 1999, to which a copy of these Joint
Escrow Instructions is attached as Annex B, in accordance with the following
instructions:
1. In the event the Company, or any assignee of the Company (referred
to collectively herein as the "Company"), shall elect to exercise the Purchase
Option (as defined and described in the Agreement), the Company shall give to
the Purchaser and you a written notice specifying the number of shares of stock
to be purchased, the purchase price and the time for a closing hereunder at the
principal office of the Company, which time shall not be less than 20 days
after the date of such written notice. Unless you shall have received written
notice from Purchaser at least five days prior to the date specified for the
closing objecting to consummation of the transaction, Purchaser and the Company
hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice
including prompt delivery of the stock certificate(s) representing the shares
purchased. Any objecting notice from Purchaser shall set forth in reasonable
detail the basis for his objections, but his failure to do so shall not affect
your duties hereunder.
2. At the closing or upon redemption of the Convertible Preferred
Stock, you are directed to (i) date a stock certificate assignment form or
forms necessary for the transfer in question, (ii) fill in the number of shares
being transferred and (iii) deliver same together with the certificate or
certificates evidencing the shares to be transferred to the Company, against
the simultaneous delivery to you of the purchase price for the number of shares
of stock being purchased pursuant to the exercise of the Purchase Option.
Promptly after the closing, the Company shall deliver to you any certificate or
certificates representing shares which were not so purchased and remain subject
to these Joint Escrow Instructions.
3. Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all
<PAGE> 14
documents necessary or appropriate to make such securities negotiable and
complete any transaction herein contemplated, including but not limited to any
required filings with all other governmental or regulatory bodies.
4. This escrow shall terminate (i) with respect to the Common Shares,
upon termination of the Purchase Option with respect to all Common Shares under
the Agreement and (ii) with respect to Convertible Preferred Stock, upon its
redemption or conversion to Common Stock , in each case in accordance with the
Company's certificate of incorporation, as amended. Within ten days after each
date of vesting under Sections 2(a) and 2(b) of the Agreement, the Company
shall notify you and Purchaser in writing of the number of shares which have
vested on that date. Within 20 days after your receipt of such notice, you
shall deliver to Purchaser a certificate or certificates evidencing the shares,
which have so, vested. Promptly following any exercise of the Purchase Option,
you shall deliver to Purchaser a certificate or certificates representing the
number of shares of stock not theretofore repurchased by the Company pursuant
to such exercise of the Purchase Option which have vested (less such shares as
have been previously delivered).
5. If at the time of termination of this escrow you should have in
your possession any documents, securities or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged
from all further obligations hereunder. The Company hereby authorizes you at
any time and from time to time after the date hereof to comply with a written
request from Purchaser, a copy of which you shall deliver to the Company, and
unless the Company shall have given you written notice of its objection to such
request within 30 days following its receipt thereof, to deliver to Purchaser a
certificate for that many shares of stock as have become vested in accordance
with the terms of the Agreement (less such shares as have been previously
delivered).
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing by the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in acting
or refraining from acting in reliance upon any instrument reasonably believed
by you to be genuine and to have been signed or presented by the proper party
or parties. You shall not be personally liable for any act you may do or omit
to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith and in the exercise of your own good judgment, and any act
done or omitted by you pursuant to the advice of our own independent attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees or
any court. If you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such obedience or compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside vacated or found to have been entered without
jurisdiction. For purposes of this paragraph 8, an objection made pursuant to
paragraph 1 by the Purchaser shall not be deemed a warning.
<PAGE> 15
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder or thereunder.
10. You shall be entitled to employ such independent legal counsel and
other experts as you may deem necessary properly to advise in connection with
your obligations hereunder, may rely upon the advice of such counsel and may
pay such counsel reasonable compensation therefor.
11. Your responsibilities as Escrow Agent hereunder shall terminate on
the thirtieth day following receipt by the parties of your written notice of
resignation. In the event of any such termination, the Company shall appoint a
successor Escrow Agent.
12. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such dispute shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail, by registered or certified mail with postage
and fees prepaid, addressed to each of the other parties thereunto entitled at
the following addresses, or at such other addresses as a party may designate by
ten (10) days' advance written notice to each of the other parties hereto.
Company: c/o Brentwood Associates
11150 Santa Monica Boulevard
Suite 1200
Los Angeles, California 90025
Attention:
Notice to Purchaser shall be sent to the address set forth below Purchaser's
signature.
Escrow Agent:
Mark Kimura
c/o Brentwood Associates
11150 Santa Monica Boulevard
Suite 1200
Los Angeles, California 90025
15. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of these Joint Escrow Instructions; you do not
become a party to the Agreement.
<PAGE> 16
16. All liabilities, losses, costs, fees and disbursements incurred by
you in connection with the performance of your duties hereunder, including
without limitation the compensation paid pursuant to paragraph 10 hereof, shall
be borne by the Company, and the Company hereby agrees to indemnify and hold
you free and harmless in respect of all claims, actions, demands, liabilities,
losses, costs, fees and expenses incurred by you in the performance of your
duties hereunder; provided, however, that this indemnity shall not extend to
conduct which has been determined, by a final judgment of a court of competent
jurisdiction, to have been grossly negligent or to have constituted intentional
misconduct.
17. This instrument shall be governed by and construed in accordance
with the internal laws, and not the laws of conflict of law, of the State of
Delaware.
18. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
<PAGE> 17
19. This instrument may be executed in counterpart with the same
effect as if all parties had signed the same document. All such counterparts
shall be deemed an original, shall be construed together and shall constitute
one and the same instrument.
Very truly yours,
SILVER CINEMAS INTERNATIONAL, INC.
By:
------------------------------
Purchaser:
-----------------------------------
Name: Larry Hohl
Address:
---------------------------
ESCROW AGENT:
-----------------------------------
Name: Mark Kimura
<PAGE> 18
ANNEX C
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase
Agreement dated as of September 7, 1999 (the "Agreement"), the undersigned
hereby sells, assigns and transfers unto the person identified as Escrow Agent
in the Agreement all rights and interests in ___________________ shares of
____________ Stock of Silver Cinemas International, Inc. (the "Company"), a
Delaware corporation, represented by Stock Certificate No. _______________
herewith (the "Certificate"), which Certificate was deposited by the
undersigned with the Escrow Agent pursuant to the Joint Escrow Instructions (as
defined in the Agreement) among the undersigned, the Company and such Escrow
Agent, such Certificate standing in the undersigned's name on the books of the
Company.
The undersigned does hereby irrevocably constitute and appoint the
Escrow Agent attorney to transfer such Common Stock on the books of the
Company, with full power of substitution in the premises.
Dated: ______________, 199_ ----------------------------------
Name: Larry Hohl
