1
Exhibit 10.5
WARRANT PURCHASE AGREEMENT
This WARRANT AND COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of March 6, 1998 by and between VIDEO UPDATE, INC., a Delaware
corporation (the "Company"), and BANQUE PARIBAS, GRAND CAYMAN BRANCH (the
"Purchaser").
R E C I T A L S
WHEREAS, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, certain common stock purchase
warrants (the "New Warrants"), which New Warrants shall (i) be subject to a
warrant and shareholder agreement in the form of Exhibit A attached hereto (the
"Warrant Agreement") and a registration rights agreement in the form of Exhibit
C hereto (the "Registration Rights Agreement") and (ii) initially entitle the
holder to purchase 1,000,000 shares of Class A common stock, par value $.01, of
the Company (the "Common Stock") (subject to adjustment) as set forth in the New
Warrant Certificate (as defined below) and the Warrant Agreement;
WHEREAS, the Company desires to issue to the Purchaser certain common
stock purchase warrants (the "Exchange Warrants"), and the Purchaser desires to
surrender to the Company certain certain common stock purchase warrants issued
by Moovies, Inc. (the "Moovies Warrants"), which Exchange Warrants shall (i) be
subject to the Warrant Agreement and the Registration Rights Agreement and (ii)
initially entitle the holder to purchase 375,000 shares of Common Stock (subject
to adjustment) as set forth in the Exchange Warrant Certificate (as defined
below) and the Warrant Agreement; and
WHEREAS, the Company and the Purchaser desire to enter into this
Agreement, the New Warrant Certificate, the Exchange Warrant Certificate, the
Warrant Agreement and the Registration Rights Agreement (collectively, the
"Equity Documents");
NOW, THEREFORE, in consideration of the foregoing recitals and mutual
covenants contained herein, the parties agree as follows:
1. Sale and Purchase of New Warrants.
The Company hereby agrees to sell to the Purchaser and the Purchaser
hereby agrees to purchase from the Company, subject to the conditions and
restrictions contained in this Agreement and in reliance on the representations
and warranties of the Company and the Purchaser contained herein, the New
Warrants for good and valuable consideration, receipt of which is hereby
acknowledged. The Company shall issue and deliver certificates to the Purchaser
evidencing the New Warrants in the form of Exhibit B-1 attached hereto (the "New
Warrant Certificate") concurrently with the Purchaser's execution of this
Agreement and the other Equity Documents.
2
2. Issuance of Exchange Warrants.
The Company hereby agrees to issue to the Purchaser the Exchange
Warrants, and the Purchaser hereby agrees to surrender to the Company the
Moovies Warrants, in each case subject to the conditions and restrictions
contained in this Agreement and in reliance on the representations and
warranties of the Company and the Purchaser contained herein. The Company shall
issue and deliver certificates to the Purchaser evidencing the Exchange Warrants
in the form of Exhibit B-2 attached hereto (the "Exchange Warrant Certificate"
and, together with the New Warrant Certificate, collectively, the "Warrant
Certificates") concurrently with the Purchaser's execution of this Agreement and
the other Equity Documents.
3. Restrictions on Transfer of Warrants.
The transfer of the Warrants shall be limited as provided in the
Warrant Certificates and/or the Warrant Agreement.
4. Company Representations.
The Company represents and warrants to the Purchaser as follows:
(a) The Company (i) is a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the power and authority to own its property and assets
and to transact the business in which it is engaged and presently proposes to
engage and (iii) is duly qualified as a foreign corporation and is in good
standing in each jurisdiction where the ownership, leasing or operation of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not reasonably be expected to have a
material adverse effect on the business, operations, property, assets, condition
(financial or otherwise) or prospects of the Company and its subsidiaries taken
as a whole.
(b) The authorized capital stock of the Company consists of (i)
60,000,000 shares of Common Stock and (ii) 5,000,000 shares of preferred stock
(the "Preferred Stock"). After giving effect to the transactions on the date
hereof, there will be (i) [________] million shares of Common Stock issued and
outstanding and (ii) no shares of Preferred Stock issued and outstanding. On the
date hereof, all outstanding shares of capital stock of the Company have been
duly authorized and validly issued and fully paid and nonassessable.
(c) This Agreement and the other Equity Documents have been duly
authorized, executed and delivered by the Company and are the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance and transfer, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether the issue of enforceability is
considered in a proceeding in equity or at law).
2
3
(d) As of the date hereof, sufficient shares of the Company's Common
Stock have been authorized and duly reserved for issuance pursuant to the
Warrants. The shares of Common Stock issuable upon the exercise of the Warrants,
when issued in accordance with the terms thereof, will be validly issued, fully
paid and nonassessable.
(e) Neither the execution, delivery or performance by the Company of
this Agreement or any other Equity Document, nor compliance by it with the terms
and provisions thereof, (i) will contravene any provision of any law or statute
of the United States or any State or territory thereof or any rule or regulation
or any order, writ, injunction or decree of any court or governmental
instrumentality applicable to it, (ii) will conflict with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any lien upon any of the property or assets of
the Company or any of its subsidiaries pursuant to the terms of any indenture,
mortgage, deed of trust, credit agreement, loan agreement or any other
agreement, contract or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be subject (including, without limitation, the Credit
Agreement referred to below) or (iii) will violate any provision of the articles
of incorporation or by-laws (or analogous organizational documents) or any
amendments thereto of the Company or any of its subsidiaries.
(f) Other than such documentation as may be required to be filed with
the Secretary of State of Delaware to authorize the issuance of any Equivalent
Nonvoting Security (as defined in the Warrant Agreement), no authorizations,
consents or approvals of or filings with any governmental agencies or
authorities are required in connection with the execution, delivery and
performance of this Agreement or any other Equity Document by the Company.
(g) The representations and warranties of the Company contained in the
Credit Agreement, dated as of March 6, 1998, among the Company, various
financial institutions and Banque Paribas, as Agent, are hereby confirmed and
restated, each such representation and warranty, together with all related
definitions and ancillary provisions being incorporated into this Agreement by
reference as though specifically set forth in this Section.
5. Purchaser Representations.
The Purchaser represents and warrants to the Company as follows:
(a) The Purchaser is acquiring the Warrants for investment for its own
account and not with a view to, or for the resale in connection with, the
distribution or other disposition thereof.
(b) The Purchaser will not, during the term of the Warrants, directly
or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of the Warrants except in accordance with the terms of this Agreement,
the relevant Warrant Certificate and the other Equity Documents.
3
4
(c) The Purchaser understands that the offer and sale of the Warrants,
any Common Stock issuable thereunder have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and that the same
cannot be sold, pledged, assigned or otherwise disposed of unless the same is
subsequently registered under the Securities Act or an exemption from such
registration is available.
(d) The Purchaser is an "accredited investor" as defined in Regulation
D promulgated under the Securities Act of 1933, as amended. The Purchaser
acknowledges its receipt of a copy of the Registration Statement of the Company
dated January 27, 1998, which contains disclosures denoted as "Risk Factors" and
other statements made by the Company that are not historical facts but are
forward looking statements involving risks and uncertainties. The Purchaser has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of any investment in
the Company and is able financially to bear the risks thereof.
6. Miscellaneous.
(a) Further Assurances. Each party hereto agrees to perform any further
acts and execute and deliver any document which may be reasonably necessary to
carry out the intent of this Agreement.
(b) Binding Agreement. This Agreement shall bind and inure to the
benefit of the successors and assigns of the Company and the Purchaser.
(c) Amendments. This Agreement may be amended at any time by the
written agreement and consent of the parties hereto.
(d) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to such State's choice of law provisions.
(e) Entire Agreement. This Agreement, including the agreements referred
to herein, constitutes the entire agreement and understanding between the
parties pertaining to the subject matter hereof and supersedes any and all prior
agreements, whether written or oral, relating thereto.
(f) Headings. Introductory headings at the beginning of each section of
this Agreement are solely for the convenience of the parties and shall not be
deemed to be a limitation upon or description of the contents of any such
section.
(g) Conditions. This Agreement shall become effective when (i) each of
the Company and the Purchaser shall have duly executed and delivered the Warrant
Agreement and the Registration Rights Agreement, (ii) the Company shall have
duly executed and delivered to the Purchaser the Warrant Certificates, (iii) the
Purchaser shall have surrendered the Moovies Warrants to the Company for
cancellation and (iv) the Company shall have delivered to the
4
5
Purchaser an opinion of Xxxxxx & Hannah, LLP, dated the date hereof, in the form
set forth in Exhibit D attached hereto.
(h) Counterparts. This Agreement may be executed in two or more
counterparts, all of which, when taken together, shall constitute one and the
same instrument.
* * * *
5
6
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
VIDEO UPDATE, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Title:
BANQUE PARIBAS, GRAND CAYMAN BRANCH
By: /s/ X. Xxxxxx
-------------------------------
Title:
By:
-------------------------------
Title:
6
