EXHIBIT 99.9
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April 8, 1999, among the
investors listed on Schedule I hereto (collectively, the "Investor") and Four
Media Company, a Delaware corporation (the "Company").
R E C I T A L S
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WHEREAS, the Investor has, pursuant to the terms of a Preferred Stock
Conversion and Stockholders Agreement (the "Conversion Agreement"), converted
certain outstanding shares of Series A Convertible Preferred Stock of the
Company into 2,250,000 shares of common stock, par value $.01 per share ("Common
Stock") of the Company (the "Shares"); and
WHEREAS, in connection with the original purchase of the Preferred
Stock, the Investor and the Company entered into the Registration Rights
Agreement, dated as of February 27, 1998 (the "Registration Rights Agreement");
and
WHEREAS, the Company has agreed, as a condition precedent to the
Investor's obligations under the Conversion Agreement, to terminate the
Registration Rights Agreement and to grant the Investor certain registration
rights with respect to the Shares; and
WHEREAS, the Company and the Investor desire to define the
registration rights of the Investor with respect to the Shares on the terms and
subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the parties hereby agree as follows:
1. DEFINITIONS
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As used in this Agreement, the following terms have the respective
meanings set forth below:
Commission: shall mean the Securities and Exchange Commission or any
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other federal agency at the time administering the Securities Act;
Exchange Act: shall mean the Securities Exchange Act of 1934, as
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amended;
Holder: shall mean any holder of Registrable Securities;
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Initiating Holder: shall mean any Holder or Holders who in the
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aggregate are Holders of more than 50% of the then outstanding Registrable
Securities;
Person: shall mean an individual, partnership, limited liability
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company, joint-stock company, corporation, trust or unincorporated organization,
and a government or agency or political subdivision thereof;
register, registered and registration: shall mean a registration
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effected by preparing and filing a registration statement in compliance with the
Securities Act (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement;
Registrable Securities: shall mean (A) the Shares and (B) any stock
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of the Company issued as a dividend or other distribution with respect to, or in
exchange for or in replacement of, the Common Stock referred to in clause (A);
provided, however, that the Common Stock referred to in clauses (A) and (B)
shall no longer be deemed Registrable Securities upon the earliest of: (i) such
time as a registration statement with respect to such shares of Common Stock
shall have been declared effective by the Commission and all of the Registrable
Securities registered thereunder shall have been disposed of by the Holders in
accordance with the plan of distribution described in the prospectus forming a
part of such effective registration statement, (ii) the sale of all shares of
Registrable Securities by the Holders pursuant to Rule 144 under the Securities
Act and (iii) the transfer of all shares of Registrable Securities by the
Holders to a transferee or transferees who are not otherwise entitled to
registration rights with respect to such securities.
Registration Expenses: shall mean all expenses incurred by the
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Company in compliance with Sections 2(a) and (b) hereof, including, without
limitation, all registration and filing fees, listing fees, printing expenses,
fees and disbursements of counsel for the Company, fees and expenses of one
counsel for all the Holders in an amount not to exceed $15,000, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company);
Security, Securities: shall have the meaning set forth in Section
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2(1) of the Securities Act;
Securities Act: shall mean the Securities Act of 1933, as amended;
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and
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Selling Expenses: shall mean all underwriting discounts and selling
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commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for each of the Holders other than fees and expenses of
one counsel for all the Holders in an amount not to exceed $15,000 and all stock
transfer taxes related to the Registrable Securities.
Xxxxxxx Shares: shall mean (A) the 1,432,875 shares of Common Stock
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beneficially owned by Xxxxxx X. Xxxxxxx pursuant to an agreement with Technical
Services Partners, L.P. and (B) any stock of the Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement of, the
Common Stock referred to in clause (A); provided, however, that the Common Stock
referred to in clauses (A) and (B) shall no longer be deemed Registrable
Securities upon the earliest of: (i) such time as a registration statement with
respect to such Common Stock shall have been declared effective by the
Commission and all of the Registrable Securities registered thereunder shall
have been disposed of by the Holders in accordance with the plan of distribution
described in the prospectus forming a part of such effective registration
statement, (ii) the sale of all Registrable Securities by the Holders pursuant
to Rule 144 under the Securities Act and (iii) the transfer of all Registrable
Securities by the Holders to a transferee or transferees who are not otherwise
entitled to registration rights with respect to such securities.
Warburg Registration Rights Agreement: shall mean the Registration
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Rights Agreement, dated the date hereof, by and between the Company and the
Buyers (as defined in the Conversion Agreement).
Warburg Shares: shall mean the shares of Common Stock defined as
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Registrable Securities in the Warburg Registration Rights Agreement, held at any
time by the Buyers.
2. REGISTRATION RIGHTS
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(a) Requested Registration.
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(i) Request for Registration. If the Company shall receive from
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an Initiating Holder, at any time, a written request that the Company
effect a registration under the Securities Act with respect to all or a
part of the Registrable Securities, the Company will:
(A) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders and the
Other Stockholders (as hereinafter defined) in the event of an
underwritten offering, such notice to provide, in the case of an
underwritten offering, an opportunity for the holders of Warburg
Shares to jointly exercise their request for registration rights with
the Initiating Holder pursuant
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to Section 2(a)(i) of the Warburg Registration Rights Agreement; and
(B) as soon as practicable, use its reasonable best efforts
to effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations
issued under the Securities Act) as may be so requested and as is
reasonably necessary to permit or facilitate the sale and distribution
of all or such portion of such Registrable Securities as are specified
in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within 10
business days after written notice from the Company is given under
Section 2 (a)(i)(A) above; provided that the Company shall not be
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obligated to effect, or take any action to effect, any such
registration pursuant to this Section 2(a):
(x) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act or applicable rules
or regulations thereunder;
(y) After the Company has effected three (3) such
registrations pursuant to this Section 2(a) and such registrations
have been declared or ordered effective and have remained effective
for a period ending on the earlier of (i) one hundred twenty (120)
days after the date of such effectiveness and (2) the date on which
the sales of such Registrable Securities shall have (A) been made in
accordance with the plan of distribution described in the prospectus
forming a part of such effective registration statement and (B)
closed; provided, however, that in the event that sales of the
securities consistent with the plan of distribution described in the
prospectus forming a part of such effective registration statement
are not permitted by the Commission, or such sales would not be in
accordance with the applicable rules and regulations of the
Commission (as evidenced by written advice of counsel), at any time
during such 120-day period, such 120-day period will be extended by
such number of days during which such sales were not permitted or
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not in accordance with such applicable rules and regulations; or
(z) If the Registrable Securities requested by all
Holders to be registered pursuant to such request have an
anticipated aggregate public offering price (before any underwriting
discounts and commissions) of less than $9,000,000.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 2(a)(ii) below,
include other securities of the Company which are held by Persons who, by virtue
of agreements with the Company, are entitled to include their securities in any
such registration, including without limitation the Xxxxxxx Shares ("Other
Stockholders").
The registration rights set forth in this Section 2 may be assigned,
in whole or in part, to any transferee of Registrable Securities (who shall be
bound by all obligations of this Agreement).
The Initiating Holders may, at any time prior to the effective date of
the registration statement relating to any registration effected pursuant to
Section 2(a) of this Agreement, revoke such demand for registration by providing
written notice to the Company, in which event the Initiating Holders shall elect
either (i) that such request is deemed to be a request for registration under
this Section 2(a)(i) or (ii) that such request shall be deemed not to be a
request under this Section 2(a)(i) and, in the case of (ii) above, the
Initiating Holders, and not the Company, shall be responsible for any expenses
incurred by the Company in connection with such withdrawn registration
statement.
(ii) Underwriting. If the Initiating Holders intend to
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distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 2(a)(i)(A). If Other Stockholders request inclusion in such
underwritten offering, the Holders shall offer to include the securities of such
Other Stockholders in the underwriting on the same terms and conditions as the
Registrable Securities of the Holders (subject to the limitations on sale set
forth herein) and may condition such offer on their acceptance of the further
applicable provisions of this Section 2. The Holders whose shares are to be
included in such registration and the Company shall (together with all Other
Stockholders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by the
Initiating Holders and reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 2(a), if the representative advises the Holders
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in writing that marketing factors require a limitation on the number of shares
to be underwritten, the securities of the Company held by the Initiating Holder
and each Other Stockholder shall be excluded from such registration as follows:
first, securities held by each Other Stockholder (other than Warburg
Shares and shares subject to registration (the "Encore Shares") under that
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certain Registration Rights Agreement dated as of September 15, 1998 (the "Other
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Registration Rights Agreement") between the Investors (as defined in the Other
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Registration Rights Agreement and the Company) to the minimum extent so required
(which may be up to 100% of such securities) by such limitation, such exclusion
to be effected on a pro rata basis (based on the number of shares requested for
inclusion in such registration by such Other Stockholders); and, second, to the
extent that the Company is advised that additional shares must also be excluded
from such registration, securities held by the holders of Warburg Shares and
Encore Shares shall be excluded from such registration to the minimum extent so
required (which may be up to 100% of such securities) by such limitation, such
exclusion to be effected on a pro rata basis (based on the number of shares
requested for inclusion in such registration by the holders of the Warburg
Shares and the holders of the Encore Shares), provided that if the holders of
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Warburg Shares have elected to join in such request for registration by notice
to the Company and the Initiating Holders within ten (10) days of the notice
referred to in Section 2(a)(i) hereof, then the foregoing limitation shall be
inapplicable and, instead, securities held by the holders of Warburg Shares, the
Initiating Holders, the holders of the Encore Shares and each Other Stockholder
shall be excluded from such registration as follows: first, securities held by
Other Stockholders and the Encore Shares shall be excluded from such
registration, to the minimum extent so required by such limitation, such
exclusion to be effected on a pro rata basis (based on the number of shares
requested for inclusion in such registration by the holders of the Encore Shares
and all Other Stockholders); and second, securities held by the holders of the
Warburg Shares and the Initiating Holders shall be excluded from such
registration to the minimum extent so required by such limitation, such
exclusion to be effected on a pro rata basis (based on the number of shares
requested for inclusion in such registration by the Initiating Holders and the
holders of the Warburg Shares). No Registrable Securities or any other
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. If any Other
Stockholder who has requested inclusion in such registration as provided above
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Initiating
Holders. The securities so withdrawn shall also be withdrawn from registration.
If the underwriter has not limited the number of Registrable Securities or other
securities to be underwritten, the Company and officers and directors of the
Company may include its or their securities for its or their own account in such
registration if the representative so agrees and
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if the number of Registrable Securities and other securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
(iii) Right to Defer; General.
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Notwithstanding the foregoing, if the Company shall promptly (but in no event
later than five business days) upon receipt of a request for registration
pursuant to Section 2(a) furnish to the Initiating Holders a certificate signed
by the Secretary of the Company stating that, in the good faith judgment of the
Board of Directors of the Company (acting through its Independent Directors (as
defined in the Securities Purchase Agreement, dated January 18, 1999, between
the Company and the Buyers (as defined in the Conversion Agreement)) as set
forth in a duly adopted written resolution, it would materially interfere with a
business or financial transaction of substantial importance to the Company
(other than an underwritten public offering of its securities) for such
registration statement to be filed and it is therefore necessary to defer the
filing of such registration statement, the Company shall have the right to defer
such filing for a period of not more than one hundred thirty-five (135) days
after receipt of the request of the Initiating Holders; provided, however, that
the Company may not utilize this right more than once in any twelve month period
and in no event will the Company be permitted to defer such filing for more than
six (6) months in the aggregate pursuant to Sections 2(a)(iii) and (iv) hereof.
In the event of any deferral pursuant to this Section, the Initiating Holder
may, at its option, promptly upon receipt of notice of such deferral provide
notice to the Company of its intention to withdraw its demand for a registration
pursuant to Section 2(a); provided, however, that upon such withdrawal the
Initiation Holder's withdrawn demand for registration shall not be deemed to
have been a demand for purposes of Section 2(a)(i)(y) of this Agreement.
(iv) Right to Defer; Company Offering.
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Notwithstanding the foregoing, if the Company receives a request for
registration under Section 2(a) of this Agreement, then it may postpone such
request for registration for ninety (90) days in order to file a registration
statement for a primary offering of Common Stock; provided that, in such event,
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the Holders may elect by delivering written notice to the Company within ten
(10) days of receipt of notice of such deferral to either (A) postpone such
request for registration, in which event the number of registrations that such
holders may exercise under Section 2(a)(i) hereof shall remain unaffected, (B)
exercise the registration rights granted to them pursuant to Section 2(b)
hereof, in which event the number of registrations that such holders may
exercise under Section 2(a)(i) hereof shall remain unaffected, or (C) exercise a
request for registration under Section 2(a) hereof in which event such holders
shall, notwithstanding the provisions of Section 2(b)(ii) hereof, be treated
pari passu with the Company in all respects.
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(b) Company Registration.
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(i) If the Company shall determine to register any of its equity
securities either for its own account or for the account of Other
Stockholders, other than a registration relating solely to employee benefit
plans or employee stock plans or similar employee benefit plans, or a
registration relating solely to a Commission Rule 145 transaction or
similar transaction, including any registration on Form S-4 or S-8 or any
successor form to such form, or a registration on any registration form
which does not permit secondary sales or does not include substantially the
same information as would be required to be included in a registration
statement covering the sale of Registrable Securities, the Company will:
(A) promptly give to each of the Holders a written notice
thereof (which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws), such notice to
provide, in the case of an underwritten offering for the account of
holders of Warburg Shares, an opportunity for the Holders to jointly
exercise their rights with the holders of Warburg Shares to a request for
registration pursuant to Section 2(a)(i) hereof; and
(B) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made by the Holders within fifteen (15) days after
receipt of the written notice from the Company described in clause (A)
above, except as set forth in Section 2(b)(ii) below. Such written
request may specify all or a part of the Holders' Registrable Securities.
(ii) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 2(b)(i)(A). In such event, the right of each of
the Holders to registration pursuant to this Section 2(b) shall be
conditioned upon such Holders' participation in such underwriting and the
inclusion of such Holders' Registrable Securities in the underwriting to
the extent provided herein. The Holders whose shares are to be included in
such registration shall (together with the Company and the Other
Stockholders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the representative of
the underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other
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provision of this Section 2(b), if the representative determines that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the a llocation priority
set forth below) limit the number of Registrable Securities to be included
in the registration and underwriting. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and
underwriting shall be allocated in the following manner: the securities of
the Company held by the Initiating Holders and by each Other Stockholder
("Demanding Holders") shall be excluded from such registration and
underwriting as follows: first, securities held by each Other Stockholder
(other than Warburg Shares and Encore Shares) to the minimum extent
required (which may be up to 100% of such securities) by such limitation,
such exclusion to be effected on a pro rata basis (based on the number of
shares requested for inclusion in such registration by such Other
Stockholder; and, second, to the extent that the Company is advised that
additional shares must also be excluded from such registration, securities
held by the holders of Warburg Shares, Encore Shares and the Initiating
Holders shall be excluded from such registration to the minimum extent so
required (which may be up to 100% of such securities) by such limitation,
such exclusion to be effected on a pro rata basis (based on the number of
shares requested for inclusion in such registration by the Initiating
Holders and the holders of the Warburg Shares and the holders of the Encore
Shares), provided that if such registration is a request by the holders of
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Warburg Shares pursuant to Section 2(a)(i) of the Warburg Registration
Rights Agreement, then, unless the Initiating Holders have elected to join
in such request for registration by notice to the Company and the holders
of the Warburg Shares within ten (10) days of the notice referred to in
Section 2(b)(i)(A) hereof, such exclusion referred to in "second" above
shall apply only to the Initiating Holders and the holders of the Encore
Shares and not to the holders of Warburg Shares. If any of the Demanding
Holders disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter.
Any Registrable Securities or other securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration.
(c) Expenses of Registration. All Registration Expenses incurred in
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connection with any registration, qualification or compliance pursuant to this
Section 2 shall be borne by the Company, and all Selling Expenses shall be borne
by the Holders of the securities so registered pro rata on the basis of the
number of their shares so registered.
(d) Registration Procedures. In the case of each registration
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effected by the Company pursuant to this Section 2,
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the Company will keep the Holders, as applicable, advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will:
(i) prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use all reasonable commercial
efforts to cause such registration statement to become effective, and, upon
the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration effective for a period of one
hundred twenty (120) days or until the Holders, as applicable, have
completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement, and furnish such
copies thereof to the Holders and any underwriters as they may reasonably
request;
(iii) furnish such number of prospectuses and other documents incident
thereto as each of the Holders, as applicable, from time to time may
reasonably request in order to facilitate the disposition of the
Registrable Securities of such Holder;
(iv) notify each Holder of Registrable Securities covered by such
registration at any time when a prospectus relating thereto is required to
be delivered under the Securities Act when the Company becomes aware of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, whereupon, each
Holder shall immediately cease to use such registration statement or
prospectus for any purpose and, as promptly as practicable thereafter, the
Company shall prepare and file with the Commission, and furnish without
charge to the appropriate Holders and managing underwriters, if any, a
supplement or amendment to such registration statement or prospectus which
will correct such statement or omission or effect such compliance and in
such quantities thereof as the Holders and any underwriters may reasonably
request, after which time the Holders may continue to use such supplemented
or amended registration statement and prospectus as provided herein; and
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(v) furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to
such securities becomes effective, (1) an opinion, dated as of such date,
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders participating in such registration,
addressed to the underwriters, if any, and to the Holders participating in
such registration and (2) a letter, dated as of such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders
participating in such registration, addressed to the underwriters, if any,
and if permitted by applicable accounting standards, to the Holders
participating in such registration.
(e) Indemnification.
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(i) The Company will indemnify each of the Holders, as applicable,
each of its officers, directors and partners, and each person controlling
each of the Holders, with respect to each registration which has been
effected pursuant to this Section 2, and each underwriter, if any, and each
person who controls any underwriter, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including
any related registration statement, notification or the like) incident to
any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or the
Exchange Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse
each of the Holders, each of its officers, directors and partners, and each
person controlling each of the Holders, each such underwriter and each
person who controls any such underwriter, for any legal and any other
expenses reasonably incurred (by one law firm retained by them and
appropriate local counsel) in connection with investigating and defending
any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such
claim,
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loss, damage, liability or expense arises out of or is based on any untrue
statement or omiss ion based upon written information furnished to the
Company by the Holders (including their respective officers, directors,
partners and controlling persons) or underwriters (including their
controlling persons) and stated to be specifically for use therein.
(ii) Each of the Holders will, if Registrable Securities held by it
are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify the Company, each of its
directors and officers and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who
controls the Company or such underwriter, each Other Stockholder and each
of their officers, directors, and partners, and each person controlling
such Other Stockholder against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
such registration statement, prospectus, offering circular or other
document made by such Holder, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements by such Holder therein not misleading, and will
reimburse the Company and such Other Stockholders, directors, officers,
partners, persons, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case
to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of each of the Holders hereunder
shall be limited to an amount equal to the net proceeds to such Holder of
securities sold as contemplated herein.
(iii) Each party entitled to indemnification under this Section 2(e)
(the "Indemnified Party") shall give written notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party receives notice (whether oral or written) of any claim as
to which indemnity may be sought, and shall permit the Indemnifying Party
to assume the defense of any such claim or any litigation resulting
therefrom; provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting therefrom,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be
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withheld) and the Indemnified Party may participate in such defense at such
party's expense (unless the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnifying Party and
the Indemnified Party and the Indemnified Party shall have been advised by
counsel in a written opinion that representation of both parties by the
same counsel would be inappropriate due to actual or potential material
differing interests between them, in which case the fees and expenses of
counsel shall be at the expense of the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 2(e) unless the Indemnifying Party is materially
prejudiced thereby. No Indemnifying Party, in the defense of any such claim
or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
(iv) If the indemnification provided for in this Section 2(e) is held
by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party hereunder, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense,
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether any action in question,
including the untrue (or alleged untrue) statement of a material fact or
the omission (or alleged omission) to state a material fact, relates to
information supplied by the Indemnifying Party or by the Indemnified Party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission.
(v) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in
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connection with any underwritten public offering contemplated by this
Agreement are in conflict with the foregoing provi sions, the provisions in
such underwriting agreement shall be controlling.
(vi) The foregoing indemnity agreement of the Company and Holders is
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time
the registration statement in question becomes effective or the amended
prospectus filed with the Commission pursuant to Commission Rule 424(b)
(the "Final Prospectus"), such indemnity or contribution agreement shall
not inure to the benefit of any underwriter or Holder if a copy of the
Final Prospectus was furnished to the underwriter or Holder and was not
furnished to the person asserting the loss, liability, claim or damage at
or prior to the time such action is required by the Securities Act.
(vii) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 2(e) were determined by pro rata
allocation or by other method of allocation which does not take into
account the equitable considerations referred to in Section 2(e)(iv) above.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of fraudulent misrepresentation.
(f) Information by the Holders. Each of the Holders holding
--------------------------
securities included in any registration shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 2.
(g) Rule 144 Reporting.
------------------
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted securities
to the public without registration, the Company agrees to:
(i) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act ("Rule 144");
(ii) use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
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(iii) so long as the Holder owns any Registrable Securities, furnish
to the Holder upon request, a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so
filed as the Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing the Holder to sell any such
securities without registration.
(h) "Market Stand-Off" Agreement. Each Holder hereby agrees that
----------------------------
following the effective date of any registration effected pursuant to Sections
2(a) and (b) (provided the Holders are given written notice of the offering and
the right to participate therein as provided for in this Agreement), each Holder
shall not, for such reasonable period of time as the managing underwriters shall
require (but in no event longer than 135 days), unless otherwise agreed to by
the managing underwriter(s), directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except Registrable Securities included in such
registration (the "Lock-Up Shares"). In addition, each Holder agrees to
acknowledge the undertaking provided for in this Section 2(h) by entering into
customary written "lock-up" agreements with respect to the Lock-Up Shares with
the managing underwriter(s) of the relevant underwriting.
(i) Other Registration Rights. Except as provided in this Agreement
-------------------------
or the Warburg Registration Rights Agreement, or as otherwise consented to in
writing by the Holders, the Company will not grant to any Person the right to
request the Company to register any equity securities of the Company, or any
securities convertible, exchangeable or exercisable for or into such securities
("Other Securities"), other than (i) piggyback registration rights entitling the
----------------
holder thereof to participate in registrations initiated by the Company or by a
Demanding Holder with holders of Registrable Securities; provided, however, that
-------- -------
the Registrable Securities shall have priority over Other Securities in any such
registration other than the Encore Shares, (ii) registration rights granted in
connection with the Company's acquisition of a complementary business through a
pooling of interests transaction; provided, however, that (x) the Company is
-------- -------
required to grant such rights in order to account for any such acquisition as a
pooling of interests transaction, (y) such rights or the agreement or instrument
granting such rights will not restrict or otherwise adversely affect the ability
of the Company to perform its obligations under this Agreement and (z) the
Company shall use its reasonable best efforts to obtain agreements from any
holder
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or holders who receive such rights to the effect that such holders will
enter into lock-up agreements if requested to do so by any underwriter in any
registration effected pursuant to Section 2(a) (except that the Company shall
not be obligated to take such action if it would prevent the subject acquisition
from being accounted for as a pooling of interests) and (iii) registration
rights granted in connection with the Company's acquisition of a complementary
business through a purchase transaction (which could be in the form of demand
registration rights or the Company's agreement to file a registration statement
for securities delivered as consideration in such purchase transaction (a
"Purchase Registration")); provided, however, that (x) such rights or the
-------- -------
agreement or instrument granting such rights will not restrict or otherwise
adversely affect the ability of the Company to perform its obligations under
this Agreement and (y) the holders of the Registrable Securities shall have the
right to piggyback on any Purchase Registration and the priority of securities
to be included in any such registration shall be governed by Section 2(b)
hereof. In the case of clause (iii) above, the holders of the Registrable
Securities shall be entitled to the notice provided for in Section 2(a)(i)(a)
hereof.
3. MISCELLANEOUS
-------------
(a) Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(b) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed entirely within such State.
(c) Section Headings. The headings of the sections and subsections of
----------------
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
(d) Notices.
-------
(i) All communications under this Agreement shall be in writing
and shall be delivered by hand or facsimile or mailed by overnight courier
or by registered or certified mail, postage prepaid:
(A) if to the Company, to Four Media Company, 000 Xxxxxxx
Xxxxxx, Xxxxx Xxxxxx, XX 00000, Attention: Xxxxxxx X. Xxxxx, Esq.
(facsimile: (000)000-0000), or at such other address as it may have
furnished in writing to the Investor;
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(B) if to the Investor, at the address or facsimile number
listed on Schedule I hereto, or at such other address or facsimile
number as may have been furnished the Company in writing.
(iii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and
if mailed by registered or certified mail, on the third business day after
the date of such mailing.
(e) Reproduction of Documents. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, any consents, waivers and
modifications which may hereafter be executed may be reproduced by the Investor
by any photographic, photostatic, microfilm, microcard, miniature photographic
or other similar process and the Investor may destroy any original document so
reproduced. The parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investor in the regular course
of business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
(f) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties.
(g) Entire Agreement; Amendment and Waiver. This Agreement
--------------------------------------
constitutes the entire understanding of the parties hereto with respect to the
subject matter described herein and supersedes all prior understanding among
such parties with respect thereto, including without limitation the Registration
Rights Agreement. This Agreement may be amended, and the observance of any term
of this Agreement may be waived, with (and only with) the written consent of the
Company and the Investor.
(h) Severability. In the event that any part or parts of this
------------
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.
(i) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
FOUR MEDIA COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
INVESTORS:
XXXXXXX US DISCOVERY FUND III, L.P.
By: Xxxxxxx US Discovery Partners, L.P., its
general partner
By: Xxxxxxx US Discovery, LLC, its general
partner
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Xxxxxx X. Xxxx, member
XXXXXXX US DISCOVERY OFFSHORE
FUND III, L.P.
By: Xxxxxxx US Discovery Partners, L.P., its
general partner
By: Xxxxxxx US Discovery, LLC, its general
partner
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Xxxxxx X. Xxxx, member
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SCHEDULE I
Name and Address
of Investor:
------------
XXXXXXX US DISCOVERY FUND III, X.X.
XXXXXXX US DISCOVERY OFFSHORE FUND III, X.X.
Xxxxxxx Capital Management
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Facsimile: 000-000-0000
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