Document:

EX-10.1

 Exhibit 10.1 

UNITED STATES OF AMERICA 

Before the 
 SECURITIES
AND EXCHANGE COMMISSION 
 SECURITIES EXCHANGE ACT OF 1934 

Release No. 74782 / April 22, 2015 

ADMINISTRATIVE PROCEEDING 
 File No. 3-16504

  

			
	 In the Matter of
  

W2007 Grace Acquisition I, Inc.,
  

Respondent.
		ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER

 I. 

The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-and-desist proceedings be, and hereby are,
instituted pursuant to Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”), against W2007 Grace Acquisition I, Inc. (“W2007 Grace” or “Respondent”). 

II. 
 In anticipation of
the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on
behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over Respondent and the subject matter of these proceedings, which are admitted,
Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order
(“Order”), as set forth below. 

 III. 

On the basis of this Order and Respondent’s Offer, the Commission finds that: 

Summary 
 1. These
proceedings arise out of violations of the issuer reporting requirements under the federal securities laws and the misapplication of the rules concerning the counting of holders of record promulgated thereunder. 

2. Pursuant to Section 15(d) of the Exchange Act and the rules promulgated thereunder, a company that files a registration statement
pursuant to the Securities Act of 1933 (the “Securities Act”) which becomes effective must file periodic and other reports. Rule 12h-3 of the Exchange Act permits an issuer to suspend its Section 15(d) reporting obligations by filing
a certification on Form 15 if the issuer has fewer than 300 holders of record of the class of securities offered under the Securities Act registration statement.1 But if that issuer has 300 or
more holders of record on the first day of any subsequent fiscal year, the suspension ends. Once the suspension ends, the reporting obligation returns without any action by the issuer and the issuer must resume periodic reporting, starting with the
filing of an annual report on Form 10-K for its preceding fiscal year within 120 days, pursuant to Rule 12h-3(e) of the Exchange Act. 
 3.
Section 15(d) was promulgated “to assure a stream of current information about an issuer for the benefit of purchasers in the registered offering, and for the public.” SEC Rel. No. 34-20263, 1983 SEC LEXIS 2765, at *4-5 (Oct. 5,
1983). But “Congress recognized, with respect to Section 15(d), that the benefits of periodic reporting by an issuer might not always be commensurate with the burdens imposed” and so provided that the duty to file reports under
Section 15(d) for any class of securities shall be automatically suspended for any fiscal year where that class of securities had fewer than 300 holders of record on the first day of the fiscal year. SEC Rel. No. 34-20263, 1983 SEC LEXIS 2765,
at *5 (Oct. 5, 1983). Section 15(d) further authorizes the Commission to “define by rules and regulations the term ‘held of record’ as it deems necessary or appropriate in the public interest or for the protection of investors in
order to prevent circumvention of the provision of this subsection.” 17 U.S.C. § 78o(d)(1). Pursuant to Section 15(d), the Commission promulgated Rule 12g5-1 setting out the definition of the term “held of record” and with
it, the methodology for counting holders of record. 
 4. On October 25, 2007, Equity Inns, Inc. (“Equity Inns”) merged with
and into W2007 Grace, a newly formed entity indirectly owned by one or more Whitehall Real Estate Funds, real estate private equity funds affiliated with The Goldman Sachs Group, Inc. (“Goldman Sachs”) (the “Merger”). Prior to
the Merger, Equity Inns was a reporting issuer under the Exchange Act and its 8.75% Series B Cumulative Preferred Stock (“Equity Inns Series B”) and 8.00% Series C Cumulative Preferred Stock (“Equity Inns Series C”)
(collectively, the “Equity Inns 
  

	1 	The rule may not be invoked, however, with regard to the year in which the registration statement became effective or was required to be updated under Section 10(a)(3) of the Securities Act. Preferred Stock”)
were each listed on the New York Stock Exchange (“NYSE”) and registered pursuant to Section 12(b) of the Exchange Act. 

  
 2 

 5. In connection with the Merger, (a) each share of common stock of Equity Inns outstanding
immediately prior to the effective time of the Merger was converted into the right to receive $23.00, without interest; (b) each share of Equity Inns Series B and Equity Inns Series C outstanding immediately prior to the effective time of the
Merger was converted into the right to receive one share of W2007 Grace 8.75% Series B Cumulative Preferred Stock (“Series B”) and W2007 Grace 8.00% Series C Cumulative Preferred Stock (“Series C”) (collectively, the
“Preferred Stock”), respectively. Pursuant to Rule 15d-5 of the Exchange Act, W2007 Grace succeeded to Equity Inns’ Section 15(d) Exchange Act reporting obligations with respect to the Preferred Stock. 

6. On November 6, 2007, Equity Inns filed with the Commission a notice of suspension of duty to file reports pursuant to
Section 15(d) of the Exchange Act on Form 15 certifying that its Preferred Stock had 66 and 36 holders of record, respectively.2 On the first day of each fiscal year thereafter through 2013,
there continued to be less than 300 holders of record of the Preferred Stock, not taking into account certain trusts created in 2012.3 

7. As set forth below, W2007 Grace undercounted its holders of record as of January 1, 2014, and thus, on January 1, 2014, had 300 or
more holders of record of the Preferred Stock. W2007 Grace, as successor registrant, therefore was required to file an annual report on Form 10-K for 2013 within 120 days and seven periodic and other reports afterwards, including reports on Form
10-Q and Form 8-K. W2007 Grace did not make these filings as required by Section 15(d) and Rules 15d-1, 15d-11, and 15d-13 thereunder. 

Respondent 
 8.
W2007 Grace is a Tennessee corporation with its principal place of business in Texas. W2007 Grace, a real estate investment firm, indirectly owned by one or more Whitehall Real Estate Funds, real estate private equity funds affiliated with Goldman
Sachs, acquired Equity Inns through the Merger. Prior to the Merger, Equity Inns was a reporting issuer with both common stock and preferred stock listed on the NYSE. In connection with the Merger, all of the stock was deregistered with the
Commission and delisted from the NYSE. The Common Stock converted into the right to receive cash merger consideration as part of the transaction, and the preferred stock of Equity Inns was converted into the Preferred Stock. On November 6,
2007, W2007 Grace filed with the Commission a notice of suspension of duty to file reports pursuant to Section 15(d) of the Exchange Act on Form 15. 

 

	2 	W2007 Grace has treated the Series B and Series C as having “substantially similar character and the holders of which enjoy substantially similar rights and privileges” and thus as a single “class”
for purposes of Section 15(d). 15 U.S.C. §78o(d)(1). 

	3 	In late 2012, a single shareholder, Joseph M. Sullivan, transferred some of his Preferred Shares to 300 separate trusts, each designated as a “JMS Trust” and each with Mr. Sullivan as the designated
trustee (the “JMS Trusts”). 

  
 3 

 Applicable Legal Framework 

9. Section 15(d) requires any issuer which has filed a registration statement pursuant to the Securities Act to file periodic and other
reports. Pursuant to Rule 12h-3(a) of the Exchange Act, such reporting obligation “shall be suspended for such class of securities immediately upon filing with the Commission a certification on Form 15” certifying that the issuer has fewer
than 300 holders of record of a class of securities. 17 CFR § 240.12h-3(a). Securities are treated as a single class where they have “substantially similar character and the holders of which enjoy substantially similar rights and
privileges.” 15 USC § 78l(g)(5). 
 10. As prescribed by Section 15(d), the Commission promulgated Rule 12g5-1 to define the
term “held of record” “for the protection of investors in order to prevent circumvention of” Section 15(d). When adopting Rule 12g5-1, the Commission explicitly determined not to equate “held of record” with the
beneficial holder of the security.4 Instead, the Commission wrote Rule 12g5-1 so as to “simplify[] the process by which customers determine whether or not they are covered by the new
provisions.”5 
 11. Under Rule 12g5-1’s process for counting holders of
record, securities are “deemed to be ‘held of record’ by each person who is identified as the owner of such securities on records of security holders maintained by or on behalf of the issuer,” with certain exceptions contained in
the rule. SEC Staff Report on Authority to Enforce Exchange Act Rule 12g5-1 and Subsection (b)(3), 2012 WL 814601, at *4 (Oct. 15, 2012). The rule allows certain entries on the issuer’s list of security holders – in this case, the transfer
agent list – to be aggregated. Specifically, paragraph (a)(6) of Rule 12g5-1 permits the issuer to aggregate “[s]ecurities registered in substantially similar names where the issuer has reason to believe because of the address or other
indications that such names represent the same person.” 
 12. By definition, every company is a separate “person.” 17 USC
§ 78c(a)(9). Paragraph (a)(2) of Rule 12g5-1 requires that “Securities identified as held of record by a corporation, a partnership, a trust whether or not the trustees are named, or other organization shall be included as so held by one
person.” Thus, each trust and/or corporation listed as a registered holder is a separate holder of record. 
 13. Further, paragraph
(a)(3) of Rule 12g5-1 requires that “Securities identified as held of record by one or more persons as trustees, executors, guardians, custodians or in other fiduciary capacities with respect to a single trust, estate or account shall be
included as held of record by one person.” Neither paragraph (a)(3) nor paragraph (a)(6) permit shares “held of record” by a person in an individual capacity and also separately, for one or more accounts, in a custodial capacity, to
be aggregated as a single holder of record, even though the same person would make investment decisions regarding all of the shares. 

 

	4 	Securities Exchange Act Release No. 34-7492 (Jan. 14, 1965) (“The Commission has determined not to adopt at this time the provision that securities registered in the name of a broker, dealer, or bank, or
nominee for any of them, and held in customers’ accounts, shall be counted as held of record by the number of separate accounts for which the securities are held”). 

	5 	Id. 

  
 4 

 W2007 Grace’s Misapplication of the Counting Rules 

14. On November 6, 2007, Equity Inns filed with the Commission a notice of suspension of duty to file reports pursuant to
Section 15(d) of the Exchange Act on Form 15 certifying that its Preferred Stock had 66 and 36 holders of record, respectively. On the first day of each fiscal year thereafter through 2013, Equity Inns continued to have fewer than 300 holders
of record, not taking into account the JMS Trusts. 
 15. As of January 1, 2014, however, and since that date, W2007 Grace has
continuously had 300 or more holders of record, not taking into account the JMS Trusts. Specifically, Respondents, incorrectly aggregated as one holder of record three separate custodial accounts. Respondents also incorrectly aggregated three
corporate entities under the theory that these entities were controlled by the same entity. But because each corporation and each separate custodial account are separate holders of record, these aggregations were a misapplication of Rule
12g5-1(a)(6). As a result, W2007 Grace undercounted its holders of record at January 1, 2014 and violated Section 15(d) by not resuming its Exchange Act reporting as required by Rule 12h-3(e). 

16. Thus, W2007 Grace, as successor registrant, was required to file an annual report on Form 10-K for 2013 within 120 days and seven periodic
and other reports afterwards, including reports on Form 10-Q and Form 8-K. W2007 Grace did not make these filings as required by Section 15(d) and Rules 15d-1, 15d-11, and 15d-13 thereunder. 

Respondent’s Remedial Efforts 

17. In determining to accept the Offer, the Commission considered certain remedial acts undertaken by Respondent and cooperation afforded to
Commission staff. 
 IV. 

In view of the foregoing, the Commission deems it appropriate, in the public interest, and for the protection of investors to impose the
sanctions agreed to in Respondent W2007 Grace’s Offer. 
 Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby
ORDERED that: 
 A. Respondent cease and desist from committing or causing any violations and any future violations of Section 15(d) of
the Exchange Act and Rules 15d-1, 15d-11, and 15d-13 thereunder. 
 B. Respondent shall resume periodic reporting pursuant to
Section 15(d) of the Exchange Act by filing an annual report on Form 10-K for fiscal year 2014 on or before May 15, 2015, and filing an annual report on Form 10-K for fiscal year 2013 and any periodic reports required to be filed on or
before July 1, 2015; and 

  
 5 

 C. Respondent shall, within 14 days of the entry of this Order, pay a civil money penalty in the
amount of $640,000 to the Securities and Exchange Commission for transfer to the general fund of United States Treasury in accordance with Exchange Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant
to 31 U.S.C. 3717. Payment must be made in one of the following ways: 
 (1) Respondent may transmit payment electronically to the
Commission, which will provide detailed ACH transfer/Fedwire instructions upon request; 
 (2) Respondent may make direct payment from a
bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 
 (3) Respondent may pay by certified
check, bank cashier’s check, or United States postal money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed to: 

Enterprise Services Center 

Accounts Receivable Branch 
 HQ
Bldg., Room 181, AMZ-341 
 6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

Payments by check or money order must be accompanied by a cover letter identifying W2007 Grace as a Respondent in these proceedings, and the
file number of these proceedings; a copy of the cover letter and check or money order must be sent to Timothy Casey, Assistant Regional Director, Division of Enforcement, Securities and Exchange Commission, 200 Vesey Street, New York, NY 10281. 

By the Commission. 

Brent J. Fields 

Secretary 

  
 6bsi-ex1001.htm

Exhibit 10.01

 

SETTLEMENT AGREEMENT

 

THIS SETTLEMENT AGREEMENT (the "Agreement") dated as of April 21, 2015 by and among Ballantyne Strong, Inc., a Delaware corporation (the "Company") and Fundamental Global Partners, LP, a Delaware limited partnership ("Partners"), Fundamental Global Partners Master Fund, LP, a Cayman Islands limited partnership ("Master Fund"), Fundamental Global Partners GP, LLC, a North Carolina limited liability company ("GP"), FG Partners GP, LLC, a Florida limited liability company ("FG GP"), and Fundamental Global Investors, LLC, a North Carolina limited liability company ("Investors LLC" and, together with Partners, Master Fund, GP and FG GP the "Investors" and each an "Investor").

 

RECITALS

 

A.           The Company has outstanding approximately 14,103,396 shares of Common Stock (as defined below) as of March 16, 2015.

 

B.           The Company and each Investor (each a "Party") desire to enter into this Agreement, which (i) grants to the Investors the right to have five of its designees nominated for election to the Company's Board of Directors (the "Board of Directors") at the Company’s Annual Meeting of Stockholders scheduled for May 13, 2015 ("2015 Annual Meeting"), (ii) restricts certain purchases of the Company's capital stock by the Investors and their respective Affiliates and Associates and (iii) provides for certain other obligations and limitations on the Investors and their respective Affiliates and Associates.

 

NOW, THEREFORE, in consideration of the premises, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Party, intending to be legally bound, hereby agrees as follows:

 

ARTICLE I

DEFINITIONS AND CONSTRUCTION

 

Section 1.1   Certain Definitions.  The capitalized terms used in the Agreement will have the meanings specified in Exhibit A hereto.

 

Section 1.2   Interpretation and Construction of this Agreement.  The definitions in Exhibit A hereto will apply equally to both the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun will include the corresponding masculine, feminine and neuter forms.  The words "include," "includes" and "including" will be deemed to be followed by the phrase "without limitation."  All references herein to Articles, Sections and Schedules will be deemed to be references to Articles and Sections of, and Schedules to, this Agreement unless the context will otherwise require.  The headings of the Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.  Unless the context will otherwise require or provide, any reference to any agreement or other instrument or statute or regulation is to such agreement, instrument, statute or regulation as amended and supplemented from time to time (and, in the case of a statute or regulation, to any successor provision).

 

 

 

  

  

  

 

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

Section 2.1   Representation and Warranties by the Investors.  Each of the Investors hereby represents and warrants to the Company as follows:

 

(a)   Such Investor has all requisite power and authority to execute, deliver and perform its respective obligations under this Agreement.  The execution, delivery and performance of this Agreement by such Investor and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action on the part of such Investor.

 

(b)  This Agreement has been duly executed and delivered by such Investor and constitutes a legal, valid and binding obligation of such Investor, enforceable against such Investor in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights generally or by general principles of equity.

 

(c)   No governmental consent, approval, authorization, license or clearance, or filing or registration with any governmental or regulatory authority, is required in order to permit such Investor to perform its respective obligations under this Agreement, except for such as have been obtained.

 

(d)  The shares of Common Stock set forth on Schedule 2.1(d) attached hereto represent all of the shares of capital stock of the Company, if any, which are Beneficially Owned by such Investor on the date hereof.  Such shares are owned free and clear of any charge, claim, equitable interest, lien, option, pledge, security interest, right of first refusal, encumbrance or similar restriction.

 

Section 2.2   Representations and Warranties by the Company.  The Company represents and warrants to the Investors as follows:

 

(a)   The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement.  The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Company.

 

(b)   This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally or by general principles of equity.

 

(c)   No governmental consent, approval, authorization, license or clearance, or filing or registration with any governmental or regulatory authority, is required in order to permit the Company to perform its obligations under this Agreement, except for such as have been obtained.

 

 

 

  

  

  

 

 

 

ARTICLE III

RESTRICTIONS ON ACQUISITION OF VOTING SECURITIES

BY EACH INVESTOR AND ITS AFFILIATES AND ASSOCIATES

 

Section 3.1   Acquisition Restrictions.  Subject to Section 3.2, each Investor agrees that it will not, and will cause each of its respective Affiliates and Associates not to, directly or indirectly, acquire, offer to acquire, or agree to acquire, by purchase or otherwise, Beneficial Ownership of any shares of Common Stock on and following the Effective Date, if as a result the shares of Common Stock Beneficially Owned in the aggregate by all of the Investors and their Affiliates and Associates would represent more than the twenty percent (20%) of the outstanding shares of Common Stock at such time (“Percentage Limitation”).

 

Section 3.2   Effect of Action by the Company.  The Investors will not be deemed in violation of this Article III if the Beneficial Ownership of shares of Common Stock by the Investors and their Affiliates and Associates exceeds the Percentage Limitation solely as a result of an acquisition of shares of Common Stock by the Company that, by reducing the number of outstanding shares of Common Stock, increases the proportionate number of shares of Common Stock Beneficially Owned by the Investors and their Affiliates and Associates.

 

Section 3.3   The Company's Rights Plan.  Promptly following the execution of this Agreement, the Company will take such action as may be necessary to amend the Rights Plan so that it will expire within five business days of the date hereof without any consideration being paid to the holders of the rights thereunder.

 

Section 3.4   Exceptions.  Section 3.1 shall not apply to any of the Excepted Parties.  Section 3.1 shall no longer apply in the event that (a) one or more Persons that do not currently have on file with the SEC a Schedule 13D or 13G reporting Beneficial Ownership of 5% or more of the Common Stock file one or more Schedules 13D and/or 13G with the SEC disclosing the Beneficial Ownership of Common Stock in the aggregate equal to 20% or more of the outstanding shares of Common Stock or (b) any Person that has previously reported Beneficial Ownership of 5% or more of the Common Stock files a Schedule 13D and/or 13G with the SEC disclosing the Beneficial Ownership of Common Stock along with its Affiliates, Associates and “group” members in the aggregate equal to 20% or more of the outstanding shares of Common Stock.  The Investors shall not be deemed to be Affiliates or Associates with CWA Asset Management Group, LLC (doing business as “Capital Wealth Advisors”), with respect to the Common Stock held in accounts of its customers, or with respect to any such customers with respect to the shares held in such accounts, and the Investors will not be deemed to Beneficially Own any such shares, for any purpose under this Agreement.

 

ARTICLE IV

OTHER LIMITATIONS; QUORUM; DIRECTORS

 

Section 4.1   Covenants.  Within two (2) Business Days of the date of this Agreement, the Investors will file, or cause to be filed on their behalf, with the SEC (i) an amendment to their Schedule 14A terminating the proxy contest by the Investors with the Company regarding the election of their nominees to the Board of Directors at the 2015 Annual Meeting, and (ii) an amendment to their Schedule 13D with respect to the Company disclosing the material contents of this Agreement.

 

 

 

  

  

  

 

 

In addition to the foregoing, and except as set forth in Section 4.2, the Investors agree that they will not, and they will cause each of their Affiliates and Associates not to, directly or indirectly, alone or in concert with others, unless specifically permitted by a Supermajority Board Vote, take any of the actions set forth below:

 

(a)   effect, seek, offer, propose (whether publicly  or otherwise) or cause or participate in, or assist, encourage or seek to persuade, any other Person to effect, seek, offer or propose (whether publicly or otherwise) or participate in:

 

(i)   any acquisition of Beneficial Ownership of Common Stock or other equity interests in the Company, provided that in the case of any of the Investors or their Affiliates and Associates, such acquisition may be made to the extent they would not result in a breach of Article III of this Agreement;

 

(ii)   any tender or exchange offer, merger, consolidation, share exchange or business combination involving the Company or any material portion of its business or any purchase of all or any substantial part of the assets of the Company;

 

(iii)   any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any material portion of its business or any substantial part of the assets of the Company; or

 

(iv)   other than solely in connection with the nomination or election at the 2015 Annual Meeting of no more than a total of five (5) Investor Directors to the Board of Directors, any "solicitation" of "proxies" (as such terms are used in the proxy rules of the SEC) with respect to the Company or any action resulting in such Person becoming a "participant" in any "election contest" (as such terms are used in the proxy rules of the SEC) with respect to the Company;

 

(b)   propose any matter for submission to a vote of shareholders of the Company; provided that nothing in this Section 4.1(b) will restrict the manner in which the Investor Directors may (i) vote on any matter submitted to the Board of Directors, or (ii) participate in deliberations or discussions of the Board of Directors (including making suggestions and raising issues to the Board of Directors) in such director's capacity as a member of the Board of Directors and in no other capacity;

 

(c)   grant any proxy with respect to any Voting Securities to any Person not designated by the Company;

 

(d)   deposit any Voting Securities in a voting trust or subject any Voting Securities to any arrangement, agreement or understanding with respect to the Voting of such Voting Securities or other agreement having similar effect;

 

 

 

  

  

  

 

 

 

(e)   execute any written shareholder consent with respect to the Company;

 

(f)   take any other action to seek to affect the control of the management or Board of Directors of the Company; provided that nothing in this Section 4.1(g) will restrict the manner in which the Investor Directors may (i) vote on any matter submitted to the Board of Directors, or (ii) participate in deliberations or discussions of the Board of Directors (including making suggestions and raising issues to the Board of Directors) in such director's capacity as a member of the Board of Directors and in no other capacity;

 

(g)   initiate any litigation against the Company or any of its directors, officers, employees or agents, except to enforce this Agreement;

 

(h)   call or seek to have called any special meeting of the shareholders of the Company other than through participation as a director of the Company and with prior approval by a Supermajority Board Vote or as required by Applicable Law;

 

(i)   request the Company or the Board of Directors, directly or indirectly, to amend, waive or terminate any provision of this Agreement; or

 

(j)   enter into any discussions, negotiations, arrangements or understandings with any Person other than the Company with respect to any of the foregoing, or advise, assist, encourage or seek to persuade others to take any action with respect to any of the foregoing.

 

Section 4.2  Exceptions to Covenants.  Notwithstanding any other provision of this Agreement to the contrary, including the foregoing Section 4.1:

 

(a)   if any Party other than the Company, an Investor or its Affiliates or Associates commences or otherwise undertakes any tender or exchange offer, an Investor may commence a competing tender or exchange offer having terms at least as favorable as those terms offered by such third party; and

 

(b)   if a Supermajority Board Vote approves a Control Transaction or directs the officers, advisors or agents of the Company to find or negotiate with a third party regarding a Control Transaction, then the provisions of this Agreement will not be applicable until such time as a Supermajority Board Vote approves the abandonment of such actions.

 

Section 4.3   Press Releases, Etc.

 

(a)   The Company and the Investors will promptly disclose the existence of this Agreement after its execution pursuant to a press release substantially in the form annexed hereto as Exhibit B; provided, however, that no Party will disclose the existence of this Agreement until the press release is issued.

 

(b)   Unless required by Applicable Law, no Investor or any of its Affiliates or Associates, may make any press release, public announcement or other communication with respect to any of the matters described in Section 4.1 without approval by a Supermajority Board Vote.  Nothing in this Section 4.3 will permit any Investor or its Affiliates or Associates to take any action which would otherwise violate any provision contained in Section 4.1.

 

 

 

  

  

  

 

 

Section 4.4   Voting of the Company’s Voting Securities.  Subject to Section 4.2 of this Agreement, each Investor and its Affiliates and Associates will vote its shares of Common Stock at the 2015 Annual Meeting (a) for the election of the directors set forth in Exhibits E and F hereto, and (b) against any item of business raised at a meeting of the shareholders of the Company that has not complied with the Company’s advance notice bylaw.

 

Section 4.5   Confidentiality.  In connection with discussions between the Investors and their representatives and the Company and its representatives regarding this Agreement, the Company or its representatives may disclose to any Investor or its representatives information which is confidential to the Company. Any such disclosure is subject to the confidentiality agreement entered into between the Company and the Investors attached hereto as Exhibit C, which continues in full force and effect.

 

Section 4.6   Quorum.  Each Investor will use reasonable efforts to ensure that it will be present, and will use reasonable efforts to cause its Affiliates and Associates owning Voting Securities to be present, in each case, in person or by proxy, at all meetings of shareholders of the Company so that all Voting Securities Beneficially Owned by each Investor and its Affiliates and Associates will be counted for purposes of determining the presence of a quorum at such meeting.

 

Section 4.7   Notice of Proposals Regarding Acquisition Transactions.  Each Investor agrees that it will notify the Company promptly if any inquiries or proposals which such Investor reasonably believes are of substance are received by, any information is exchanged with respect to, or any negotiations or substantive discussions are initiated or continued with, such Investor or, to such Investor's knowledge, with any of its Affiliates or Associates regarding any proposal involving (a) a sale of all or substantially all of the assets of the Company, (b) a third-party tender offer, exchange offer or other purchase offer for Voting Securities with a number of Votes in excess of five percent (5%) of the Voting Power of the Company, or (c) a merger, consolidation or other business combination involving the Company.

 

Section 4.8   Board Expansion, Election and Committees.

 

(a)   Pursuant to Article II, Section 1 of the Company's Bylaws, the Incumbent Directors have unanimously expanded the size of the whole Board to nine directors pursuant to the resolution attached hereto as Exhibit D.

 

(b)   The Incumbent Directors have unanimously nominated the election of the Investor Directors and the Remaining Incumbent Directors at the 2015 Annual Meeting.  The Incumbent Directors will not withdraw or rescind these nominations, or change the number of director nominations being made by the Company’s board, at any time prior to the 2015 Annual Meeting.  The Company will hold the 2015 Annual Meeting as scheduled on May 13, 2015 and will not adjourn or postpone the 2015 Annual Meeting.  The Company will not take any action to reopen the period of time during which director nominations or other business may be properly proposed by shareholders for the 2015 Annual Meeting under the advance notice provisions contained in the Company’s by-laws.

 

 

 

  

  

  

 

 

(c)   In the case of any vacancy occurring with respect to the Remaining Incumbent Directors serving on the Board of Directors, the vacancy will be filled by a Supermajority Board Vote.  In the case of any vacancy occurring with respect to the Investor Directors serving on the Board of Directors, the vacancy may be filled only by the Investors, and the Board of Directors of the Company will take all such action permitted by Applicable Law and applicable rules of the New York Stock Exchange that is necessary to cause any designee appointed by the Investors to fill such vacancy to be promptly appointed to the board.

 

(d)   The Investors will provide all information requested by the Company and reasonably necessary for the Company to prepare the proxy statement in accordance with the SEC's proxy rules in a timely and complete manner.

 

(e)   Following the 2015 Annual Meeting, at least two of the Remaining Incumbent Directors shall be a member of each Committee of the Board of Directors, unless any such director would not qualify under Applicable Law as a “disinterested director” with respect to the matters that have been delegated by the Board of Directors to the applicable Committee.

 

(f)   Between the date of this Agreement and through the date of the 2015 Annual Meeting, the Company’s board of directors will not take any actions outside of the normal course of business, including without limitation the declaration or payment of any dividend, the approval or execution of any employment agreement, compensation plan, severance arrangement, retention bonus arrangement, severance arrangement or change in control arrangement, or the approval or execution of any amendment to any equity plan or award or any employment agreement, plan or arrangement.

 

(g)   The Company shall not take any action to avoid or seek to avoid the observance or performance of any of the terms required to be observed or performed by the Company under this Agreement, but shall at all times in good faith take all actions that are necessary to carry out and perform all of the provisions of this Agreement.

 

ARTICLE V

TERM AND TERMINATION

 

Section 5.1   Termination.  The provisions of this Agreement will terminate upon the earlier of (i) final adjournment of the 2017 annual meeting of the Company's shareholders or, (ii) adoption of a resolution by a Supermajority Board Vote terminating this Agreement.  Any termination of this Agreement as provided herein will be without prejudice to the rights of any Party arising out of the breach by any other Party of any provision of this Agreement.

 

ARTICLE VI

MISCELLANEOUS

 

Section 6.1   Notices.  All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third (3rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 6.1):

 

 

 

  

  

  

 

 

	
The Company:

	
Ballantyne Strong, Inc.

13710 FNB Parkway, Ste. 400

Omaha, Nebraska  68154

Attn:  Dave Anderson

E-mail: Dave.Anderson@btn-inc.com

 

	
with a copy to:

	
Stinson Leonard Street, LLP

1201 Walnut, Suite 2900

Kansas City, Missouri  64106

Attn:  John A. Granda, Esq.

Facsimile.:  (816) 412-1159

E-mail: John.Granda@stinsonleonard.com

 

	
The Investor:

	
Fundamental Global Investors, LLC

4201 Congress Street, Suite 140

Charlotte, North Carolina  28209

Attn:  D. Kyle Cerminara

E-mail:  kyle@fundamentalglobal.com

 

	
with a copy to:

	
Thompson Hine LLP

390 Key Center

127 Public Square

Cleveland, Ohio 44114

Attn:  Derek D. Bork

Facsimile: 216-566-5800

E-mail:  derek.bork@thompsonhine.com

 

Section 6.2   Assignment.  No Party will assign this Agreement or any rights, interests or obligations hereunder, or delegate performance of any of its obligations hereunder, without the prior written consent of each of the other Parties, which in the case of the Company will require approval by a Supermajority Board Vote.

 

Section 6.3   Entire Agreement.  This Agreement, including the Exhibits and Schedule attached hereto, embodies the entire agreement and understanding of the Parties in respect of the subject matter contained herein.  This Agreement, including the Exhibits and Schedule attached hereto, supersedes all prior agreements and understandings between the Parties with respect to such subject matter.

 

Section 6.4   Waiver, Amendment, etc.  This Agreement may not be amended or supplemented, and no waivers of or consents to departures from the provisions hereof will be effective, unless set forth in a writing signed by, and delivered to, all the Parties, which in the case of the Company will require approval by a Supermajority Board Vote.  No failure or delay of any Party in exercising any power or right under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right or power, or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power.

 

 

 

  

  

  

 

 

Section 6.5   Binding Agreement; No Third Party Beneficiaries.  This Agreement will be binding upon and inure to the benefit of the Parties and their successors and permitted assigns.  Nothing expressed or implied herein is intended or will be construed to confer upon or to give to any third party any rights or remedies by virtue hereof.

 

Section 6.6   Governing Law; Exclusive Jurisdiction; Service of Process.  This Agreement will be governed by and construed in accordance with the internal laws of the state of Delaware, without regard to conflicts of laws principles.  Each of the parties hereto (a) submits to the exclusive jurisdiction of the federal and/or state courts sitting in Delaware for purposes of all legal proceedings with respect hereto, (b) irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, (c) irrevocably consents to service of process in such proceeding in the manner provided for notices in Section 6.1, and (d) agrees that nothing in this Agreement will affect the right of any Party to this Agreement to serve process in any such proceeding in any other manner permitted by law.

 

Section 6.7   Severability.  The invalidity or unenforceability of any provision hereof in any jurisdiction will not affect the validity or enforceability of the remainder hereof in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction.  To the extent permitted by Applicable Law, each Party waives any provision of Applicable Law that renders any provision hereof prohibited or unenforceable in any respect.  If any provision of this Agreement is held to be unenforceable for any reason, it will be adjusted rather than voided, if possible, in order to achieve the intent of the Parties to the extent possible.

 

Section 6.8   Counterparts.  This Agreement may be executed in one or more counterparts each of which when so executed and delivered will be deemed an original but all of which will constitute one and the same Agreement.

 

Section 6.9   Remedies.  Each of the Parties acknowledges and agrees that each Party would suffer irreparable damage in the event that any of the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached and that such damage may not be compensable in money damages.  It is accordingly agreed that, in the event of a breach, violation or threatened breach or violation of the terms this Agreement by any of the Parties, each of the other Parties will be entitled to specific enforcement of, and injunctive relief to prevent any breach, violation or further breach or violation of, the terms hereof, in addition to any other remedy or relief available at law or in equity.  In the event an action seeking injunctive relief hereunder, no Party will be required to post bond.

 

 

 

  

  

  

 

 

IN WITNESS WHEREOF, the Company and each Investor have caused their respective duly authorized officers to execute this Agreement as of the day and year first above written.

 

 

	  	
BALLANTYNE STRONG, INC.

	  	  	  
	  	  	  
	  	
By:

	
/s/ Gary L. Cavey

	  	  	
Name: Gary L. Cavey

	  	  	
Title: President and CEO

	  	  	  

	  	
FUNDAMENTAL GLOBAL PARTNERS, LP

	  	  	  
	  	  	  
	  	
By:

	
/s/ D. Kyle Cerminara

	  	  	
Name: D. Kyle Cerminara

	  	  	
Title: Partner and Manager

	  	  	  

	  	
FUNDAMENTAL GLOBAL PARTNERS MASTER FUND, LP

	  	  	  
	  	  	  
	  	
By:

	
/s/ D. Kyle Cerminara

	  	  	
Name: D. Kyle Cerminara

	  	  	
Title: Manager

	  	  	  

	  	
FUNDAMENTAL GLOBAL PARTNERS GP, LLC

	  	  	  
	  	  	  
	  	
By:

	
/s/ D. Kyle Cerminara

	  	  	
Name: D. Kyle Cerminara

	  	  	
Title: Partner and Manager

	  	  	  

	  	
FG PARTNERS GP, LLC

	  	  	  
	  	  	  
	  	
By:

	
/s/ D. Kyle Cerminara

	  	  	
Name: D. Kyle Cerminara

	  	  	
Title: Manager

	  	  	  

 

	  	
FUNDAMENTAL GLOBAL INVESTORS, LLC

	  	  	  
	  	  	  
	  	
By:

	
/s/ D. Kyle Cerminara

	  	  	
Name: D. Kyle Cerminara

	  	  	
Title: CEO, Partner and Manager

	  	  	  

 

 

 

 

  

  

  

 

 

 

SCHEDULE 2.1(d)

694,925 shares of Common Stock held by Fundamental Global Partners, LP

1,290,823 shares of Common Stock held by Fundamental Global Partners Master Fund, LP.

 

 

 

  

  

  

 

 

 

EXHIBIT A

 

DEFINITION OF TERMS

 

The following terms have the meanings specified below:

 

"Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

 

"Applicable Law" means all applicable provisions of all (a) constitutions, treaties, statutes, laws (including common law), rules, regulations, ordinances or codes of any Governmental Authority, and (b) orders, decisions, injunctions, judgments, awards and decrees of any Governmental Authority.

 

"Associate" has the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.

 

"Beneficial Owner".  A Person shall be deemed the "Beneficial Owner" of, and to have “beneficial ownership” of, and shall be deemed to “beneficially own," any securities as to which such Person or any of such Person’s Affiliates or Associates is or may be deemed to be the beneficial owner, directly or indirectly, pursuant to Rules 13d-3 of the General Rules and Regulations under the Exchange Act, as such Rules are in effect on the date of this Agreement.

 

"Business Day" means a day other than a Saturday, a Sunday, a day on which banking institutions in the States of New York or Missouri are authorized or obligated by law or required by executive order to be closed, or a day on which the New York Stock Exchange is closed.

 

"Common Stock" means the common stock of the Company.

 

"Control Transaction" means an agreement by the Company to be a party to (a) any consolidation or merger, other than a merger or consolidation in which the holders of the Company's Common Stock (exclusive of the Investors and their Affiliates and Associates) immediately prior to such merger or consolidation Beneficially Own a majority of the common stock of the surviving corporation immediately after such merger or consolidation or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company.

 

“Excepted Parties” means (a) CWA Asset Management Group, LLC (doing business as “Capital Wealth Advisors”), with respect to the Common Stock held in accounts of its customers, and any such customers with respect to the shares held in such accounts, (b) any investor in any of Fundamental Global Partners, LP or Fundamental Global Partners Master Fund, LP and such investor’s Affiliates, Associates and Beneficial Owners, and (c) any Person that has at any time served as a director or officer of the Company, with respect to equity awards granted to them by the Company and Common Stock acquired by them consistent with the Company’s Stock Ownership Guidelines for Directors and Officers.

 

"Effective Date" means the date on which the Rights Plan has been terminated.

 

 

 

  

  

  

 

 

"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

"Governmental Authority" means any federal, state, local or political subdivision, governmental or administrative body, instrumentality, department or agency or any court, administrative hearing body, arbitration tribunal, commission or other similar dispute resolution panel or body, and any other entity exercising executive, legislative, judicial, regulatory or administrative functions of a government.

 

"Group" means any group within the meaning of Section 13(d)(3) of the Exchange Act, and Rule 13d-5(b) thereunder, in each case as in effect on the date hereof.

 

"Incumbent Directors" means those individuals who, as of the date hereof, constitute the Board of Directors; provided, however, that any individual who becomes a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the Incumbent Directors then serving on the Board of Directors will be considered as though such individual were an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest  or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors.  For the avoidance of doubt, any Investor Director will not be an Incumbent Director.

 

"Investor Directors" means the directors listed on Exhibit E hereto, and any successors of such individual as set forth in Section 4.8(c).

 

"Percentage Limitation" has the meaning set forth in Section 3.1 of the Agreement.

 

"Person" means an individual, a partnership, an association, a joint venture, a corporation, a limited liability company, a business, a trust, any entity organized under Applicable Law, an unincorporated organization or any Governmental Authority.

 

"Rights Plan" means the Rights Agreement dated as of November 5, 2014 between the Company and Computershare, Inc., as rights agent.

 

“Remaining Incumbent Directors” means those Incumbent Directors listed on Exhibit F hereto that have been nominated by a majority of the Incumbent Directors for election to the Company’s Board of Directors at the 2015 Annual Meeting and their replacements appointed pursuant to Section 4.8(c).

 

"SEC" means the Securities and Exchange Commission.

 

"Supermajority Board Vote" means the affirmative vote of at least six of the nine members constituting the full Board of Directors, of which at least two of whom must be Remaining Incumbent Directors.

 

"Vote" means, as to any entity, the ability to cast a vote at a shareholders' or comparable meeting of such entity with respect to the election of directors or other members of such entity's governing body.

 

 

 

  

  

  

 

 

"Voting Power" means the aggregate number of Votes of the Company outstanding as at such date.

 

"Voting Securities" means the Common Stock and any other securities of the Company having the right to Vote.

 

 

 

  

  

  

 

 

 

EXHIBIT E

 

NAMES OF INVESTOR DIRECTORS

 

D. Kyle Cerminara

William J. Gerber

Charles T. Lanktree

Robert J. Marino

Robert J. Roschman

 

 

 

  

  

  

 

 

 

EXHIBIT F

 

NAMES OF REMAINING INCUMBENT DIRECTORS

 

Samuel C. Freitag

James C. Shay

Marc E. LeBaron

Gary L. Cavey

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