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National Cinemedia, - Form of Director Designation Agreement
Exhibit 10.5
DIRECTOR DESIGNATION AGREEMENT
THIS DIRECTOR DESIGNATION AGREEMENT dated as of , 2007 (this " Agreement" ), is among National CineMedia, Inc., a Delaware corporation (" NCM Inc." ), American Multi-Cinema, Inc., a Missouri corporation (" AMC" ), Cinemark Media, Inc., a Delaware corporation (" Cinemark Media" ), and Regal CineMedia Holdings, LLC, a Delaware limited liability company (" Regal ," and together with AMC and Cinemark Media, including any Affiliate or Permitted Transferee thereof, so long as any Permitted Transferee continues to qualify as a Permitted Transferee, the " Founding Members" ). Certain terms used in this Agreement are defined in Section 1.1.
RECITALS A. The Founding Members own all of the outstanding common membership units (the " Membership Units" ) of National CineMedia, LLC, a Delaware limited liability company (" NCM LLC" ).
B. NCM Inc. is contemplating an offer and sale of its Common Stock to the public in an underwritten initial public offering (the " IPO" ).
C. Pursuant to the terms of a Common Unit Subscription Agreement dated as of , 2007 (the " Subscription Agreement" ), between NCM LLC and NCM Inc., it is contemplated that NCM Inc. will use the proceeds of the IPO to purchase from NCM LLC a number of Membership Units equal to the number of shares of Common Stock sold in the IPO.
D. Upon consummation of the transactions contemplated by the Subscription Agreement, it is contemplated that NCM Inc. will be admitted as a member, and appointed as the manager, of NCM LLC. E. In order to induce the Founding Members to approve the sale and issuance of Membership Units by NCM LLC to NCM Inc. and the appointment of NCM Inc. as the manager of NCM LLC, NCM Inc. has agreed to permit each of the Founding Members to designate up to two persons for nomination for election to the board of directors of NCM Inc. (the " Board" ) on the terms and conditions set forth herein.
F. The Certificate of Incorporation of NCM Inc. (the " Charter" ) provides that NCM Inc. shall have a staggered Board that consists of three classes of directors and that the term of one class of directors will expire at each annual meeting of the stockholders of NCM Inc.
G. Under the terms of the NCM LLC Operating Agreement and the Charter, each Founding Member will have the right to cause NCM LLC to redeem the Membership Units held by such Founding Members in exchange for shares of Common Stock or cash.
AGREEMENT
In consideration of the covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NCM Inc. and the Founding Members agree as follows:
1. Definitions 1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1:
" Affiliate" has the meaning set forth in the NCM LLC Operating Agreement. " Change of Control" with respect to any Person that is not individual, means (i) any merger or consolidation with or into any other entity or any other similar transaction, whether in a single transaction or series of related transactions, where (A) the members or stockholders of such Person immediately prior to such transaction in the aggregate cease to own at least 50 percent of the general voting power of the entity surviving or resulting from such transaction (or its stockholders or the ultimate parent thereof) or (B) any Person or Group becomes the beneficial owner of more than 50 percent of the general voting power of the entity surviving or resulting from such transaction (or its stockholders or the ultimate parent thereof), (ii) any transaction or series of related transactions in which in excess of 50 percent of such Person' s general voting power is Transferred to any other Person or Group or (iii) the sale or Transfer by such Person of all or substantially all of its assets.
" Cinemark" means Cinemark Holdings, Inc. or its successor or any Person that wholly-owns Cinemark Holdings, Inc., directly or indirectly, in the future. " Common Stock" means the common stock, par value $0.01 per share, of NCM Inc. " Control" (including the terms " Controlled by" and " under common Control with" ), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.
" Director" means a member of the Board.
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" Group" has the meaning set forth in Section 13(d)(3) and Rule 13d-5 of the Securities Exchange Act of 1934, as amended.
" Independent Director" means any Director that if the Common Stock is traded on the NASDAQ Stock Market, satisfies the definition of an " independent director" set forth in the applicable rules in the Marketplace Rules of the NASDAQ Stock Market, Inc., as such rules may be amended from time to time, or, if the Common Stock is then traded on a different exchange, such term shall mean any director of NCM Inc. that satisfies the definition of independent director according to the rules of such exchange. " Marquee Holdings" means Marquee Holdings Inc. or its successor or any Person that wholly-owns Marquee Holdings Inc., directly or indirectly, in the future.
" NCM LLC Operating Agreement" means the Third Amended and Restated Limited Liability Company Operating Agreement of National CineMedia, LLC to be entered into among the Founding Members and NCM Inc.
" Nominating Committee" means the nominating/governance committee of the Board or any committee of the Board authorized to perform the function of nominating directors for the Board. " Permitted Transferee" means, in the case of any Founding Member and any Permitted Transferee of any Founding Member (i) an Affiliate of such Founding Member or Permitted Transferee, or (ii) a non-Affiliate of such Founding Member or Permitted Transferee that is owned more than 50 percent directly or indirectly through one or more entities that are the same entities that own or Control the Ultimate Parent of such Founding Member.
" Person" means any individual, corporation, limited liability company, partnership, trust, joint stock company, business trust, unincorporated association, joint venture, governmental authority or other entity or organization of any nature whatsoever or any Group of two or more of the foregoing.
" REG" means Regal Entertainment Group or its successor or any Person that wholly-owns Regal Entertainment Group, directly or indirectly, in the future.
" Retiring Director" means any Director whose term expires at the next annual meeting of stockholders of NCM Inc. pursuant to the terms of the Charter.
" Securities Laws" means the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder.
" Transfer" or " Transferred" means, directly or indirectly, to sell, transfer, give, exchange, bequest, assign, pledge, encumber, hypothecate or otherwise dispose of, either
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voluntarily or involuntarily, any of the rights granted under Section 2 (including through a Change of Control of a Person holding units directly or indirectly), provided, however , a Change of Control of an Ultimate Parent or its stockholders shall not be a Transfer.
" Ultimate Parent" means (i) Marquee Holdings in the case of AMC, (ii) Cinemark in the case of Cinemark Media, and (iii) REG in the case of Regal. 1.2 Additional Terms . In addition to defined terms identified in Section 1.1, the following terms have the meanings assigned in the Sections referred to in the table below:
Term Section
Term Section
AMC Preamble
IPO Recitals
Board Recitals
Manager Preamble
Cinemark Media Preamble
NCM Inc. Preamble
Designee a72.1
NCM LLC. Recitals
Founding Members Preamble
Subscription Agreement Recitals
Regal Preamble
2. Nominee Designation
2.1 Nomination Right . Subject to the conditions set forth in this Section 2, each Founding Member shall have the right to designate two persons to be appointed or nominated, as the case may be, for election to the Board as follows (each, a " Designee" ):
(a) each Founding Member may designate two persons for appointment or nomination to the Board, as the case may be, who initially shall be:
Founding Member
Designees
Director Class
AMC
Cinemark Media
Regal
(b) at every meeting of the Board, or a committee thereof, for which Directors are appointed or are nominated to stand for election by stockholders of NCM Inc., each Founding Member will have the right to designate those persons to be appointed or nominated for election to the Board for each Retiring Director
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that was a prior Designee of such Founding Member in accordance with this Section 2.1; (c) if a vacancy occurs because of the death, disability, disqualification, resignation or removal of a Designee, the Founding Member who designated such person shall be entitled to designate such person' s successors in accordance with this Agreement and the Board, subject to a determination of the Board in good faith, after consultation with outside legal counsel, that such action would not constitute a breach of its fiduciary duties or applicable law, shall fill the vacancy with such successor Designee; and
(d) if a Designee is not nominated or elected to the Board because of the Designee' s death, disability, disqualification, withdrawal as a nominee or for other reason is unavailable or unable to serve on the Board, the Founding Member who designated such person shall be entitled to designate promptly another Designee and the director position for which such Designee was nominated shall not be filled pending such designation. 2.2 Independent Directors . At least one of the Designees of each Founding Member must qualify as an Independent Director at the time of designation.
2.3 Effect of Reduction of Holdings . If at any time any Founding Member owns less than five percent of the then issued and outstanding Membership Units, including Membership Units acquired from another Founding Member or an Affiliate of another Founding Member (which, for purposes of this Section 2.3, shall be calculated to include (a) all shares of Common Stock beneficially owned by such Founding Member as of the date of determination as a result of the redemption of any Membership Units in accordance with Article 9 of the LLC Agreement, (b) any shares of Common Stock issued in connection with any dividend or distribution on the Common Stock so received as a result of the redemption of any Membership Units, and (c) any shares of Common Stock acquired from another Founding Member provided that such other Founding Member acquired such shares of Common Stock in a transaction described in clause (a) or (b) above, but excluding (x) any shares of Common Stock otherwise acquired by the Founding Members and (y) any Membership Units issued to NCM Inc. by NCM LLC in connection with redemption of Membership Units by a Founding Member (unless the Founding Member has disposed of any of the shares of Common Stock received in connection with such redemption of Membership Units (other than to another Founding Member in a transaction described in clause (c) above), in which case a number of Membership Units issued to the Corporation in connection with such redemption equal to the number of shares of Common Stock disposed of by such Founding Member shall be included in determining such Founding Member' s ownership interest)), then such Founding Member shall permanently cease to have any rights of desig...
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