SECURITIES PURCHASE AGREEMENT
between
FIRST LOOK MEDIA, INC.
and
SEVEN HILLS PICTURES, LLC
Dated as of May 20, 2002
TABLE OF CONTENTS
SECTION 1. PURCHASE AND SALE OF THE SECURITIES.....................2
1.1 Purchase and Sale...........................................2
1.2 Purchase Prices.............................................2
1.3 Closing.....................................................2
SECTION 2. REPRESENTATIONS AND WARRANTIES..........................3
2.1 Representations, Warranties and Agreements of the Company...3
2.2 Representations and Warranties of the Purchaser............10
SECTION 3. OTHER AGREEMENTS.......................................12
3.1 Access.....................................................12
3.2 Transfer Restrictions......................................13
3.3 Stop Transfer Instruction..................................13
3.4 Furnishing of Information..................................13
3.5 Reservation of Warrant Shares and Conversion Shares........14
3.6 Notice of Breaches and Violations; Purchaser Default.......14
3.7 Form D.....................................................15
3.8 Future Financings..........................................15
3.9 Transactions with Affiliates...............................15
3.10 Best Efforts...............................................16
3.11 Corporate Existence........................................16
3.12 Publicity..................................................16
SECTION 4. CONDITIONS.............................................17
4.1 Conditions Precedent to the Company's Obligations..........17
4.2 Conditions Precedent to the Purchaser's Obligations........18
SECTION 5. INDEMNIFICATION........................................21
5.1 Indemnification............................................21
5.2 Survival...................................................22
5.3 Reduction of Certain Benefits..............................22
SECTION 6. TERMINATION............................................22
6.1 Termination................................................22
6.2 Notice.....................................................23
6.3 Effects of Termination.....................................23
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SECTION 7. MISCELLANEOUS..........................................23
7.1 Entire Agreement...........................................23
7.2 Notices....................................................23
7.3 Amendments; Waivers........................................24
7.4 Headings...................................................25
7.5 Successors and Assigns.....................................25
7.6 No Third-Party Beneficiaries...............................25
7.7 Governing Law..............................................25
7.8 Attorneys' Fees............................................25
7.9 Counterparts; Facsimile Signatures.........................25
7.10 Severability...............................................26
7.11 Remedies...................................................26
7.12 Nature of Purchaser's Obligations and Rights...............26
7.13 Further Assurances.........................................26
7.14 Fees and Expenses..........................................26
Exhibits
Exhibits A-1 and A-2 - Forms of Warrants
Exhibit B - Form of Secured Convertible Promissory Note
Exhibit C - Form of Security Agreement
Exhibit D - Form of Investor Rights Agreement
Exhibit E - Form of Limited Liability Company Agreement
Exhibit F - Form of Film Marketing and Distribution Agreement
Exhibit G - Form of Amended and Restated Voting Agreement
Exhibit H - Form of Signing Release
Exhibit I - Purchaser's Legal Opinion
Exhibit J - Company's Legal Opinion
Schedules
Schedule 2.1(a) Subsidiaries
Schedule 2.1(c) Capitalization
Schedule 2.1(f) Consents and Approvals
Schedule 2.1(k) SEC Documents
Schedule 2.1(q) Film Library
Schedule 2.1(u) Taxes
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SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into
as of May 20, 2002, between FIRST LOOK MEDIA, INC., a Delaware corporation (the
"Company"), and SEVEN HILLS PICTURES, LLC, a Connecticut limited liability
company, or its designee as permitted herein (the "Purchaser"), with reference
to the following facts:
RECITALS:
A. Subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, (i) 2,630,434 shares (the
"Shares") of common stock, par value $.001 per share, of the Company (the
"Common Stock"), (ii) warrants to purchase 881,137 shares and 291,285 shares,
respectively, of Common Stock at an exercise price of $3.40 per share in the
forms of Exhibits A-1 and A-2 annexed hereto (collectively, the "Warrants"), and
(iii) a Secured Convertible Promissory Note of the Company in the principal
amount of $2,000,000 in the form of Exhibit B annexed hereto (the "Note" and
together with the Shares and the Warrants, the "Securities").
B. In connection with the execution and delivery of this Agreement, the
Company proposes to execute and deliver a Security Agreement in favor of the
Purchaser in the form of Exhibit C annexed hereto (the "Security Agreement"),
pursuant to which the Company will afford the Purchaser certain collateral
security for the payment and performance of the Note and certain other
obligations described therein.
C. In connection with the execution and delivery of this Agreement, the
Company and the Purchaser desire to enter into an Investor Rights Agreement in
the form of Exhibit D annexed hereto (the "Investor Rights Agreement"), pursuant
to which the Company will agree to afford the Purchaser certain rights with
respect to the registration under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws of the Shares, the
shares of Common Stock issuable upon the exercise of the Warrants (the "Warrant
Shares") and the shares of common stock issuable upon the conversion of the Note
(the "Conversion Shares").
D. In connection with the execution and delivery of this Agreement, the
Company and the Purchaser also desire to enter into a Limited Liability Company
Agreement in the form of Exhibit E annexed hereto (the "LLC Agreement") for the
purpose of organizing a Delaware limited liability company to be known as "First
Look/Seven Hills LLC" (the "LLC") to provide certain funding for prints and
advertising relating to their respective businesses as contemplated by a Film
Marketing and Distribution Agreement to be entered into among the Company, the
Purchaser and the LLC in the form of Exhibit F annexed hereto (the "Marketing
and Distribution Agreement").
E. In connection with the execution and delivery of this Agreement, the
Company, the Purchaser and the stockholders of the Company named therein (the
"Principal Stockholders") also desire to enter into an Amended and Restated
Voting Agreement in the form annexed as Exhibit G hereto (the "Amended Voting
Agreement"), pursuant to which they will make certain provisions for the
composition of the Board of Directors of the Company and the voting of their
respective shares of Common Stock in the election of directors of the Company.
AGREEMENT:
NOW, THEREFORE, in consideration of the promises and mutual covenants
and agreements hereinafter contained, the Company and the Purchaser hereby agree
as follows:
SECTION 1. PURCHASE AND SALE OF THE SECURITIES
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, on the Closing Date (as defined below) the Company shall issue and sell
to the Purchaser, and the Purchaser shall purchase from the Company, the Shares,
the Warrants and the Note for the respective purchase prices set forth in
Section 1.2.
1.2 Purchase Prices. The purchase price for the Shares and the Warrants
shall be $6,050,000 in the aggregate. The purchase price for the Note shall be
$2,000,000.
1.3 Closing. The closing of the purchase and sale of the Securities
(the "Closing") shall take place at the offices of Xxxx & Xxxxx Professional
Corporation, 0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000,
or such different location as the parties shall agree, three business days
following the first date as of which all of the conditions set forth in Sections
4.1 and 4.2 have been satisfied or waived, or such later date (the "Closing
Date") as the parties shall agree. At the Closing:
(a) The Purchaser shall pay and deliver to the Company the purchase
price of the Shares and the Warrants in United States dollars in immediately
available funds to an account or accounts designated in writing by the Company
prior to the Closing Date;
(b) The Purchaser shall pay and deliver for the account and benefit of
the Company the purchase price of the Note in United States dollars in
immediately available funds to an account or accounts of the LLC to be
established by the Company and the Purchaser prior to the Closing Date;
(c) The Company shall deliver to the Purchaser one or more certificates
representing the Shares registered in the Purchaser's name and in such
denominations as the Purchaser shall designate in writing prior to the Closing;
(d) The Company shall execute and deliver to the Purchaser the
Warrants;
(e) The Company shall execute and deliver to the Purchaser the Note;
and
(f) The parties shall execute and deliver each of the other agreements,
documents and items specified in Section 4.
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SECTION 2. REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. As a
material inducement to the Purchaser to enter into this Agreement, the Security
Agreement, the Investor Rights Agreement, the LLC Agreement, the Marketing and
Distribution Agreement and the Amended Voting Agreement (together with the Note
and the Warrants, the "Transaction Documents"), and to carry out its obligations
hereunder and thereunder, the Company hereby represents and warrants to the
Purchaser as follows:
(a) Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Except as set forth on Schedule 2.1(a), the Company has no subsidiaries
(collectively, the "Subsidiaries"). Each of the Subsidiaries (which for purposes
of this Agreement means any entity in which the Company, directly or indirectly,
owns the majority of such entity's capital stock or holds an equivalent equity
or similar interest) is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, with the
full corporate power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction where such qualification is necessary, except
for those jurisdictions where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any of this
Agreement or the Transaction Documents (as defined in Section 2.1(b)) or any of
the transactions contemplated hereby or thereby, (ii) have or result in a
material adverse effect on the business, operations, properties, assets,
liabilities, results of operations or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole or (iii) materially impair the
Company's ability to perform fully on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), constituting a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no further action is
required by the Company, its Board of Directors or its stockholders in
connection with such authorization. This Agreement and each of the Transaction
Documents have been duly executed by the Company and, when delivered in
accordance with the terms hereof or thereof, will constitute the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application, and
except that rights to indemnification and contribution may be limited by federal
or state securities laws or public policy relating thereto.
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(c) Capitalization. As of the date hereof, the authorized capital stock
of the Company is as set forth in Schedule 2.1(c). All of such outstanding
shares of capital stock have been duly authorized and validly issued, are fully
paid and nonassessable and were issued in accordance with the registration or
qualification provisions of the Securities Act, or pursuant to valid exemptions
therefrom. Except as set forth in Schedule 2.1(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens, claims or encumbrances suffered or permitted by the
Company, nor is any holder of the Common Stock entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company by virtue
of any Transaction Document, (ii) there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable or
exercisable for, or giving any Person (as defined below) any right to subscribe
for or acquire, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable or exercisable for, any shares of capital stock of the Company or
any of its Subsidiaries, (iii) there are no outstanding debt securities of the
Company or any of its Subsidiaries, (iv) there are no contracts, commitments,
understandings, agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act (except the Investor Rights Agreement), (v) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings, agreements or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities, or upon the exercise of the Warrants or the conversion of the
Note, (vii) the Company does not have any stock appreciation rights or "phantom
stock" plans or agreements, or any similar plan or agreement and (viii) except
as specifically disclosed in the SEC Documents (as defined in Section 2.1(k)),
to the Company's knowledge, no Person or group of related Persons beneficially
owns (as determined pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), or has the right to
acquire by agreement with or by obligation binding upon the Company beneficial
ownership of in excess of 5% of the Common Stock. As used herein, "Person" means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
(d) Authorization, Validity and Issuance of Shares. The Shares, when
sold and delivered at the Closing, the Warrant Shares, when issued in accordance
with the terms of the Warrants, and the Conversion Shares, when issued in
accordance with the terms of the Note, will be validly issued, fully paid and
nonassessable, free and clear of all liens, claims and encumbrances other than
liens, claims and encumbrances created by the Purchaser (collectively, "Liens"),
and will not be subject to any preemptive or similar rights. The Shares will
constitute not less than 18% of the outstanding shares of Common Stock
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immediately following the Closing, and the Shares, the Warrant Shares and the
Conversion Shares, in the aggregate, will constitute not less than 22.9% of the
fully-diluted shares of Common Stock (after giving effect to the exercise and
conversion in full of all outstanding options, warrants and other rights to
purchase shares of Common Stock) immediately following the Closing.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of the Company's
Amended and Restated Certificate of Incorporation as in effect on the date
hereof (the "Certificate of Incorporation"), the Company's Bylaws, as in effect
on the date hereof (the "Bylaws"), or other organizational documents of the
Company or any of its Subsidiaries, (ii) subject to obtaining the consents
referred to in Section 2.1(f), conflict with, or constitute a breach or a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to other Persons any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, license or
instrument to which the Company or any of its Subsidiaries is a party or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or any of its Subsidiaries is subject (including
federal and state securities laws and regulations and the rules and regulations
of the National Association of Securities Dealers, Inc. ("NASD")
Over-The-Counter Bulletin Board ("OTC Bulletin Board") as in effect on the date
hereof, or by which any material property or asset of the Company or any of its
Subsidiaries is bound or affected, except for, in the case of clauses (ii) and
(iii), such matters that could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(f) Consents and Approvals. Except as set forth in Schedule 2.1(f),
neither the Company nor any of its Subsidiaries is required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self-regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or any of the Transaction Documents, other than (i) the Form D under
the Securities Act referred to in Section 3.7 and any filings, notices or
registrations under applicable state securities laws (together with the
consents, waivers, authorizations, orders, notices and filings referred to on
Schedule 2.1(f), the "Required Approvals") and (ii) other filings, notifications
and consents which, if not given or made, could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
(g) Litigation; Proceedings. There is no action, suit, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties or assets before or by any court,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) or any arbitrator, which (i) challenges the legality,
validity or enforceability of this Agreement or any of the Transaction Documents
or (ii) could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
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(h) No Default or Violation. Neither the Company nor any of its
Subsidiaries is (i) in violation of any of the provisions of its Certificate of
Incorporation, Bylaws or other charter documents, (ii) in default under or in
violation of any indenture, loan or other credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties or assets is bound, (iii) in violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court,
arbitrator or governmental authority applicable to it, (iv) in violation of any
law, statute, ordinance, rule or regulation of any governmental authority to
which it is subject, or (v) in default under or in violation of any of the
quotation requirements of the OTC Bulletin Board, and the Company is not aware
of any facts which would reasonably lead to discontinuance of quotations on the
OTC Bulletin Board for the Common Stock in the foreseeable future, except for,
in the case of clauses (ii) through (v), such defaults or violations that have
not had, and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted, and shall not be conducted, in violation of
any law, statute, ordinance, rule or regulation of any governmental authority,
except where such violations have not resulted or would not reasonably result,
individually or in the aggregate, in a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is in breach of any agreement where such
breach, individually or in the aggregate, would have a Material Adverse Effect.
(i) Disclosure; Absence of Certain Changes. Except as specifically
disclosed in the SEC Documents (as hereinafter defined) filed via XXXXX at least
five business days prior to the date hereof, since December 31, 2001, the
business of the Company and the Subsidiaries has been conducted in the ordinary
course consistent with past practice and, to the Company's knowledge, there has
been no event, occurrence, development or state of circumstances or facts that
has had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(j) Private Offering. Neither the Company nor any Person acting on its
behalf has taken, or will take, any action, including without limitation, any
offer or sale of any securities or solicitation of offers to buy any security
under circumstances that would require registration of the Securities, the
Warrant Shares, or the Conversion Shares under the Securities Act or the
integration of the offer, issuance and sale of the Securities, the Warrant
Shares or the Conversion Shares with any other offer, sale and issuance of the
Company's securities (past, current or future) under the Securities Act.
(k) SEC Documents; Financial Statements. The Common Stock is registered
pursuant to Section 12(g) of the Exchange Act. Except as set forth in Schedule
2.1(k), the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the United States Securities and
Exchange Commission (the "Commission") pursuant to the reporting requirements of
the Exchange Act, including pursuant to Section 13, 14 or 15(d) thereof (the
foregoing materials and all exhibits included therein and financial statements
and schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein being collectively referred to herein as the
"SEC Documents"), on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All agreements to
which the Company or any of its Subsidiaries is a party or to which the property
6
or assets of the Company or any of its Subsidiaries are subject and which are
required to be filed as exhibits to the SEC Documents have been filed as
exhibits to the SEC Documents as required, and neither the Company nor any of
its Subsidiaries nor, to the Company's knowledge, any other party is in breach
of any such agreement. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial year-end
audit adjustments.
(l) Books and Records. The books of account, minute books, stock record
books and other records of the Company are complete and correct in all material
respects and have been maintained in accordance with sound business practices.
(m) Liabilities. The Company does not have any material liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) which
were not adequately reflected or reserved against on the Company's most recent
balance sheet or in the notes to financial statements made part of the SEC
Documents, except for liabilities and obligations incurred since the date
thereof in the ordinary course of the Company's business and consistent with
past practice and which, in any event, in the aggregate, would not have a
Material Adverse Effect; and the reserves reflected therefor on the Company's
most recent balance sheet included in such financial statements are adequate,
appropriate and reasonable.
(n) Investment Company. The Company is not, and is not controlled by or
under common control with an Affiliate (as defined below) of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
As used herein, "Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control", when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated", "controlling" and "controlled" have meanings
correlative to the foregoing.
(o) Broker's Fees. No fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Company to any broker,
financial advisor, finder, investment banker or bank.
(p) OTC Bulletin Board Compliance. Quotations for Common Stock
currently are available on the OTC Bulletin Board. The Company is not aware of
any facts which would reasonably lead to the discontinuance or unavailability of
quotations for the Common Stock on the OTC Bulletin Board. The Company is, after
giving effect to the transactions contemplated by this Agreement and the
Transaction Documents, will be, in compliance with all OTC Bulletin Board
requirements.
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(q) Film Library.
(i) Schedule 2.1(q) is a complete and accurate description of
each film as to which the Company either (i) owns the copyright ("Owned
Pictures"), (ii) has been granted distribution rights by a third party
("Distribution Rights Pictures") or (iii) has been appointed as a sales agent
with respect to Distribution Rights Pictures ("Sales Agent Pictures," and
together with Owned Pictures and Distribution Rights Pictures, the "Pictures")
and each Picture is labeled as such on Schedule 2.1(q).
(ii) Copyright protection under laws of the United States is
and will remain in effect as to each of the Owned Pictures, for the lesser of
the following periods (A) the full term of copyright allowed under the Copyright
Act of the United States (assuming proper renewal, if required) or (B) any
lesser term set forth under the column headed "Length of Rights" in Schedule
2.1(q). Schedule 2.1(q) lists each of the aforementioned Owned Pictures, and
sets forth the copyright registration data with respect thereto.
(iii) The Company maintains on the date of the Agreement, and,
if generally available to distributors, will maintain at all times to and
including the Closing, a blanket policy insuring against Distributors Errors and
Omissions Liability covering all the Pictures in the amounts of at least
$1,000,000 per occurrence and $3,000,000 aggregate, with customary deductibles,
and coverage and other provisions.
(iv) Each Owned Picture has been duly registered for copyright
protection in the United States and, to the Company's knowledge, appropriate
copyright assignments or licenses as between Company and its grantors or
licensors have been executed and, except for distribution license agreements,
recorded pursuant to the Copyright Act and renewals of copyright, where
necessary to maintain copyright protection, have been effected to protect
adequately the rights of the Company for each Pictures, except where failure to
do so would not have, either singly or in the aggregate, a Material Adverse
Effect.
(v) Opposite the name of each Picture set forth on Schedule
2.1(q) is a description of the methods by which, and the territories in which,
the Company has the right to distribute or exhibit each such Picture set forth
on Schedule 2.1(q).
(vi) The Company has the right to use the present title of
each of the Pictures.
(vii) To the Company's knowledge, there are no claims, liens,
encumbrances or other rights or charges of any kind existing or threatened in,
to or on any Picture or any literary, musical or other material contained
therein, or any of the rights or any of the tangibles or physical or pre-print
materials relating to any Picture, which can or will materially impair, limit,
restrict or interfere with any of said rights or the exercise thereof.
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(viii) To the Company's knowledge, the Pictures and the
operations of the Company do not infringe upon any trademarks, trade names,
rights of privacy, copyrights or any other rights of any other person and the
Company has not been challenged by others alleging that any of its conduct or
properties infringes upon any trademarks, trade names, rights of privacy,
copyrights or any other rights of others. The Company and each of its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trademark applications, trade names and service marks, whether or not
registered, and all patents, patent applications, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and intellectual
property rights which are necessary for use in connection with their respective
businesses as now conducted and as described in the SEC Documents, and the
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of these rights.
(r) Employee Relations. No executive officer (as defined in Rule 501(f)
under the Securities Act) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer's employment with the
Company.
(s) Permits. The Company and each of its Subsidiaries possess all
certificates, authorizations, licenses, easements, consents, approvals, orders
and permits necessary to own, lease and operate their respective properties and
to conduct their respective businesses as currently conducted except where the
failure to possess such permits would not, individually or in the aggregate,
have a Material Adverse Effect ("Material Permits"), and there is no claim,
action or proceeding pending, or, to the knowledge of the Company or its
Subsidiaries, threatened, relating to the revocation, modification, suspension
or cancellation of any Material Permit. Neither the Company nor any of the
Subsidiaries is in conflict with, in default under or in violation of any
Material Permit.
(t) Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverages as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business, at a cost that would not materially and
adversely affect the business, operations, properties, assets, liabilities,
results of operations or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole.
(u) Tax Status; FIRPTA. Except as set forth on Schedule 2.1(u), the
Company and each of its Subsidiaries have made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith (which are set forth on
Schedule 2.1(u) hereof), and have set aside on their books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due from the Company or any of its
Subsidiaries by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim. The Company is not a "United
States real property holding corporation" within the meaning of Section
847(c)(2) of the Internal Revenue Code of 1986, as amended.
9
(v) Transactions With Affiliates. Except as disclosed in the SEC
Documents, none of the officers, directors or employees of the Company, or any
of their affiliates, is presently a party to any transaction with the Company or
any of its Subsidiaries.
(w) Solvency. The Company has, and after giving effect to the
transactions contemplated by this Agreement and the Transaction Documents, will
have, assets in excess of its liabilities, both as determined in accordance with
GAAP and in accordance with the fair market values of such assets and
liabilities, and the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time as such debts mature.
(x) Use of Proceeds. The Company will use the proceeds from the sale of
the Shares to repay indebtedness under its credit facility (the "Chase
Facility") with XX Xxxxxx Xxxxx Bank (formerly known as The Chase Manhattan
Bank). Subsequently, the Company intends to re-draw funds available under the
Chase Facility to, among other things, make further acquisitions of film rights
and to expand its operations, primarily related to domestic distribution,
including theatrical and video/DVD distribution in the United States; provided,
that the Company may need to reallocate the proceeds from the sale of the Shares
and/or drawings under the Chase Facility for other uses based on changes in
operations, evolving business plans and prevailing industry and general economic
conditions. The Company will use the proceeds from the sale of the Note solely
to fund its initial capital contribution to the LLC as provided in the LLC
Agreement.
2.2 Representations and Warranties of the Purchaser. As a material
inducement to the Company to enter into this Agreement and the Transaction
Documents, and to carry out its obligations hereunder and thereunder, the
Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a limited liability
company duly formed, validly existing and in good standing under the laws of
Connecticut, with the requisite company power and authority to enter into and to
consummate the transactions contemplated hereby and by the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. Xxxxxxx
Xxxxxxx is the sole member and manager of the Purchaser and owns, beneficially
and of record, all of the membership interests in the Purchaser. The execution
and delivery of this Agreement and each of the Transaction Documents by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by all necessary company action,
and no further action is required by the Purchaser, its member or manager in
connection with such authorization. This Agreement and the other Transaction
Documents have been duly executed and delivered by the Purchaser and constitute
the valid and legally binding obligations of the Purchaser, enforceable against
the Purchaser in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application, and except that rights to indemnification and contribution may be
limited by federal or state securities laws or public policy relating thereto.
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(b) No Conflicts. The execution, delivery and performance of this
Agreement and each of the Transaction Documents by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of the
Purchaser's Articles of Organization as in effect on the date hereof, the
Company's Operating Agreement, as in effect on the date hereof, or other
organizational documents of the Purchaser, (ii) conflict with, or constitute a
breach or a default (or an event which with notice or lapse of time or both
would become a default) under, or give to other Persons any rights of
termination, amendment, acceleration or cancellation of any material agreement,
indenture, patent, license or instrument to which the Purchaser is a party or by
which any property or asset of the Purchaser is bound or affected, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Purchaser is subject, or by which any material property or asset of the
Purchaser is bound or affected.
(c) Consents and Approvals. The Purchaser is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self-regulatory agency, or other Person in
connection with the execution, delivery and performance by the Purchaser of this
Agreement or any of the Transaction Documents.
(d) Broker's Fees. No fees or commissions or similar payments with
respect to the transactions contemplated by this Agreement or the Transaction
Documents have been paid or will be payable by the Purchaser to any broker,
financial advisor, finder, investment banker or bank.
(e) Private Placement.
(i) The Purchaser understands that the offering and sale of
the Securities is intended to be exempt from registration under the Securities
Act pursuant to Section 4(2) of the Securities Act and any applicable state
securities or blue sky laws.
(ii) The Securities to be acquired by the Purchaser pursuant
to this Agreement are being acquired for its own account and without a view to
the resale or distribution of such Securities or any interest therein other than
in a transaction exempt from registration under the Securities Act.
(iii) The Purchaser is an "accredited investor" as such term
is defined in Regulation D under the Securities Act.
(iv) The Purchaser has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Securities and the Purchaser is capable of
bearing the economic risks of such investment, including a complete loss of its
investment in the Securities. The Purchaser understands that Purchaser's
investment in the Securities involves a high degree of risk.
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(v) The Purchaser has been furnished with a copy of the SEC
Documents filed by the Company with the SEC since January 1, 2000, and has been
given the opportunity to ask questions of, and receive answers from, the Company
concerning the terms and conditions of the Securities and other related matters.
The Company has made available to the Purchaser or its agents all documents and
information relating to an investment in the Securities requested by or on
behalf of the Purchaser.
(vi) The Purchaser understands that the Securities have not
been registered under the Securities Act or any state securities laws, and may
not be offered, sold, pledged or otherwise transferred, except in compliance
with the terms of this Agreement and the Transaction Documents and applicable
federal and state securities laws.
(vii) The Purchaser understands that the Securities shall bear
a restrictive legend to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, OR
TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH.
(viii) The Purchaser's principal place of business is in the
State of California.
(ix) Immediately following the Closing, the Purchaser will not
beneficially own any voting securities of the Company other than the Securities.
(x) The Purchaser does not have any agreements, arrangements
or understandings with any other Person with regard to acquiring, holding,
voting or disposing of any securities of the Company other than as set forth or
referred to in this Agreement.
SECTION 3. OTHER AGREEMENTS
3.1 Access. Following the execution of this Agreement and until the
Closing Date, the Company shall (i) provide the Purchaser and its
representatives with such information as the Purchaser or its representatives
may from time to time reasonably request with respect to the financial
condition, business, management, operations, assets, liabilities and prospects
of the Company or the transactions contemplated by this Agreement; (ii) provide
the Purchaser and its representatives complete access to the books, records,
offices, personnel, counsel, accountants and representatives of the Company as
the Purchaser or its representatives may from time to time reasonably request;
and (iii) permit the Purchaser and its representatives to make such inspections
of the Company's business and assets as the Purchaser may reasonably request.
Any investigation pursuant to this Section 3.1 shall be conducted in a manner
that does not interfere unreasonably with the conduct of the business of the
Company or its Subsidiaries.
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3.2 Transfer Restrictions. The Purchaser shall not engage in any
transactions involving any securities of the Company prior to the Closing Date.
After the Closing Date, the Purchaser agrees that it will not offer, sell,
contract to sell, pledge, gift or otherwise dispose of, directly or indirectly,
the Securities to any Person except pursuant to an effective registration
statement under the Securities Act or an available exemption from the
registration requirements of the Securities Act, or in the case of the Shares,
the Warrant Shares or the Conversion Shares, Rule 144 promulgated under the
Securities Act ("Rule 144"), or to the Company. In connection with any transfer
or disposition of any of the Securities other than pursuant to an effective
registration statement, Rule 144 or to the Company, the Company may require the
Purchaser to provide to the Company a written opinion of counsel experienced in
the area of United States securities laws selected by the Purchaser, the form
and substance of which opinion shall be customary for opinions of counsel in
comparable transactions, to the effect that such transfer or disposition does
not require registration of such transferred securities under the Securities
Act. Notwithstanding the foregoing, the Purchaser shall be entitled to transfer
of any of the Securities, the Warrant Shares, or the Conversion Shares, or any
interest therein, to any member of the Purchaser or any Person which is wholly
owned by the Purchaser or Xxxxxxx Xxxxxxx, provided, that the transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act. Any such transferee shall also agree in writing
to be bound by the terms of this Agreement and shall have all the rights and
obligations of the Purchaser under this Agreement and the Transaction Documents
as they pertain to the Securities, the Warrant Shares or the Conversion Shares,
or interest therein, so transferred. If the Purchaser provides the Company with
an opinion of counsel, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions, to the effect that
a public sale, assignment or transfer of the Securities, the Warrant Shares or
the Conversion Shares may be made without registration under the Securities Act,
or the Purchaser provides the Company with reasonable assurances that the
Securities, the Warrant Shares or the Conversion Shares can be sold pursuant to
Rule 144(k) without any restriction as to the number of securities acquired as
of a particular date that can then be immediately sold, the Company shall permit
the transfer. Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities, the Warrant Shares and the Conversion Shares may
be pledged as collateral in connection with a bona fide margin account or other
lending arrangement.
3.3 Stop Transfer Instruction. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
expands the restrictions on transfer set forth in Section 3.1.
3.4 Furnishing of Information. As long as the Shares, together with any
of the Warrant Shares and the Conversion Shares then outstanding, held by the
Purchaser constitute, in the aggregate, more than 5% of the outstanding shares
of Common Stock, the Company will cause the Common Stock to continue at all
times to be registered under Section 12(g) or (b) of the Exchange Act, will
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to Sections 13, 14 or 15(d) of the Exchange Act and,
unless filed via XXXXX, will promptly furnish, but in no event later than two
business days after the filing thereof with the Commission, the Purchaser with
true and complete copies of all such filings, and will not take any action or
file any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing obligations, and
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will make and keep public information available, as those terms are defined in
Rule 144. As long as the Purchaser owns any of the Securities, the Warrant
Shares or the Conversion Shares, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Purchaser and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company also agrees to send the following to the Purchaser:
(i) on the same day as the release thereof, facsimile copies of all press
releases issued by the Company or any of its Subsidiaries; and (ii) copies of
any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders. The Company further covenants that it will take
such further action as any holder of the Securities, the Warrant Shares or the
Conversion Shares may reasonably request, all to the extent required from time
to time to enable such Person to sell the Securities, the Warrant Shares or the
Conversion Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act, including the legal opinion referenced above in Section 3.2.
Upon the request of any such Person, the Company shall deliver to such Person a
written certification of a duly authorized officer as to whether it has complied
with such requirements.
3.5 Reservation of Warrant Shares and Conversion Shares. For so long as
any of the Warrants or the Note is outstanding, the Company shall reserve a
sufficient number of shares of its authorized but unissued Common Stock to
provide for the full exercise of the Warrants and conversion of the Note. If at
any time the number of shares of Common Stock authorized and reserved for
issuance is insufficient to cover the number of Warrant Shares and Conversion
Shares issued and issuable upon the exercise of the Warrants (at the Exercise
Price (as defined in the Warrants) of the Warrants in effect from time to time)
and the conversion of the Note (based on the Conversion Price (as defined in the
Note) of the Note in effect from time to time) without regard to any limitation
on exercises or conversions, the Company will promptly take all corporate action
necessary to authorize and reserve such shares, including, without limitation,
calling a special meeting of stockholders to authorize additional shares to meet
the Company's obligations under this Section 3.5, in the case of an insufficient
number of authorized shares, and using its best efforts to obtain stockholder
approval of an increase in such authorized number of shares.
3.6 Notice of Breaches and Violations; Purchaser Default.
(a) Notice of Breach. After the date hereof and prior to the Closing
Date, the Company and the Purchaser shall give prompt written notice to each
other of any breach by it of any representation, warranty or other agreement
contained in this Agreement or in the Transaction Documents, as well as any
events or occurrences which would reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case may be,
contained herein or therein to be incorrect or breached as of the Closing Date.
However, no disclosure by any party pursuant to this Section 3.6 shall be deemed
to cure any breach of any representation, warranty or other agreement contained
herein or in the Transaction Documents.
14
(b) Notice of Violation. Notwithstanding the generality of Section
3.6(a), after the date hereof and prior to the Closing Date, the Company shall
promptly notify (provided such notification will not constitute material
non-public information) the Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any of its Subsidiaries to
the effect that the consummation of the transactions contemplated hereby and by
the Transaction Documents violates or would violate any written agreement or
understanding between such lender and the Company or any of its Subsidiaries,
and the Company shall promptly furnish by facsimile to the Purchaser a copy of
any written statement in support of or relating to such claim or notice.
3.7 Form D. The Company agrees to timely file a Form D with respect to
the Securities as required by Rule 506 under Regulation D and any forms required
to be filed under applicable securities or "blue sky" laws of any state, and to
provide a copy thereof to the Purchaser promptly after such filing.
3.8 Future Financings. Except for (a) the issuance of the Warrant
Shares and the Conversion Shares, (b) shares of Common Stock deemed to have been
issued by the Company in connection with any plan which has been approved by the
Board of Directors of the Company, pursuant to which the Company's securities
may be issued to any employee, officer, director or consultant of the Company,
(c) shares of Common Stock issuable upon the exercise of any options or warrants
outstanding on the date hereof and listed on Schedule 2.1(c) hereto, (d) shares
of Common Stock issued in connection with strategic transactions between the
Company and another Person, including without limitation, joint ventures,
marketing or distribution arrangements or technology transfer or development
arrangements, (e) shares of Common Stock or other securities convertible into or
exchangeable or exercisable for Common Stock issued in an offering registered
under the Securities Act and (f) shares of Common Stock issuable upon conversion
or exercise of any other security issued in an offering in which the Purchaser
previously had the right to participate under this Section 3.8, if the Company
agrees to issue for cash shares of Common Stock or other securities convertible
into or exchangeable or exercisable for Common Stock (the "New Security") while
the Note is outstanding (either of (i) or (ii), a "Future Financing"), the
Company shall provide to the Purchaser notice (the "Future Financing Notice") of
the Future Financing which describes in reasonable detail (i) the proposed terms
of the Future Financing, (ii) the amount of the proceeds that will be raised and
(iii) the Person with whom such Future Financing shall be effected. Upon
receiving the Future Financing Notice, the Purchaser shall have the right, by
notice to the Company within ten days of its receipt of the Future Financing
Notice, to purchase, on the same terms as the Future Financing, up to an amount
of New Securities which equals the proportion that the number of shares of
Common Stock owned beneficially by the Purchaser (assuming for this purpose the
exercise and conversion in full of all securities and instruments exercisable or
convertible into shares of Common Stock, including without limitation, the
Warrants (to the extent then exercisable) and the Note) immediately prior to
this completion of the Future Financing bears to the total number of shares of
Common Stock owned beneficially by all Persons (assuming for this purpose the
exercise and conversion in full of all securities and instruments exercisable
for or convertible into shares of Common Stock) immediately prior to completion
of the Future Financing.
15
3.9 Transactions with Affiliates. So long as the Shares, together with
any of the Warrant Shares and the Conversion Shares then outstanding, held by
the Purchaser constitute, in the aggregate, more than 5% of the outstanding
shares of Common Stock, the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any of
its Subsidiaries to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors or persons who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or Affiliates or any individual related by blood, marriage or
adoption to any such individual or with any Person in which any such Person owns
a 5% or more beneficial interest (each, a "Related Party"), except for (a)
customary employment arrangements and benefit programs on reasonable terms, (b)
any agreement, transaction, commitment or arrangement on an arm's length basis
on terms no less favorable than terms which would have been obtainable from a
Person other than such Related Party or (c) any agreement, transaction,
commitment or arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is also an
officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. For purposes of this Section only, "Affiliate" means,
with respect to any Person, another Person that, directly or indirectly, (i) has
a 5% or more equity interest in that Person, (ii) has 5% or more common
ownership with that Person, (iii) controls that Person or (iv) shares common
control with that Person. "Control" or "Controls" for purposes of this Section
only means that a Person has the power, direct or indirect, to conduct or govern
the policies of another Person, whether through the ownership of voting
securities, by contract or otherwise.
3.10 Best Efforts. Each of the parties hereto shall use its reasonable
best efforts to satisfy each of the conditions to be satisfied as provided in
Section 4.
3.11 Corporate Existence. Until such time as the Purchaser notifies the
Company that the Purchaser does not own beneficially (as determined in
accordance with Rule 13d-3 promulgated under the Exchange Act) any shares of
Common Stock, the Company shall maintain its corporate existence and shall not
merge or consolidate with or into another Person or Persons or sell all or
substantially all of the Company's assets, except in a merger or consolidation
or sale of all or substantially all of the Company's assets where the surviving
or successor Person in such transaction assumes the Company's obligations
hereunder and under the Transaction Documents and the agreements and instruments
entered into in connection herewith and therewith.
3.12 Publicity. In connection with the execution of this Agreement, the
Company shall issue a press release (a "Signing Release") and shall file with
the Commission a Report on Form 8-K with respect to the transactions
contemplated hereby (the "Signing 8-K" and together with the Signing Release,
the "Agreed Disclosure"). The Signing Release shall be in form and substance as
set forth on Exhibit H hereto. The Signing 8-K shall be provided to the
Purchaser prior to filing and the Purchaser shall be given a reasonable
opportunity to comment thereon. The Company shall accept all reasonable changes
suggested by the Purchaser. Neither the Company nor the Purchaser shall make any
statement or representation regarding the transactions contemplated hereby,
publicly or in a manner which could reasonably be expected to result in its
public dissemination, which is materially inconsistent with the Agreed
Disclosure. Nothing contained herein shall interfere with the Company's
disclosure obligations under the federal securities laws.
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SECTION 4. CONDITIONS
4.1 Conditions Precedent to the Company's Obligations. The obligations
of the Company under this Agreement are subject to the satisfaction or waiver by
the Company, at or before the Closing, of each of the following conditions:
(a) Accuracy of the Purchaser's Representations and Transaction
Documents and in each of the Warranties. The representations and warranties of
the Purchaser set forth in this Agreement and in each of the Transaction
Documents that are qualified as to materiality or Material Adverse Effect shall
be true and correct in all respects and the other representations and warranties
of the Purchaser set forth in this Agreement and each of the Transaction
Documents shall be true and correct in all material respects, in each case, as
of the date when made (except for representations and warranties that speak as
of a specific date) and as of the Closing Date;
(b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Transaction Documents to be
performed, satisfied or complied with by the Purchaser at or prior to the
Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated,
endorsed or threatened or shall be pending by or before any court or
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement or the
Transaction Documents;
(d) Required Approvals. All Required Approvals shall have been obtained
by the Company; and
(e) Documents and Certificates. At the Closing, the Purchaser shall
have delivered to the Company the following in form and substance satisfactory
to the Company:
(i) Opinion. An opinion of the Purchaser's legal counsel,
substantially in the form attached hereto as Exhibit I, dated as of the Closing
Date;
(ii) Investor Rights Agreement. The Investor Rights Agreement,
duly executed by the Purchaser;
(iii) Security Agreement. The Security Agreement, duly
executed by the Purchaser;
(iv) LLC Agreement. The LLC Agreement, duly executed by the
Purchaser, along with all documents and instruments to be delivered thereunder
by the Purchaser;
(v) Marketing and Distribution Agreement. The Marketing and
Distribution Agreement, duly executed by the Purchaser and the LLC;
17
(vi) Amended Voting Agreement. The Amended Voting Agreement,
duly executed by the Purchaser and the Principal Stockholders;
(vii) Manager's Certificate. A Certificate, dated the Closing
Date, and signed by the manager of the Purchaser (a) confirming the accuracy of
the Purchaser's representations, warranties and covenants as of the Closing Date
and the compliance by the Purchaser with the conditions precedent set forth in
this Section 4.1 as of the Closing Date and (b) certifying that attached thereto
is a true and complete copy of (A) the Articles of Organization of the
Purchaser, as in effect on the Closing Date, and as certified by the Secretary
of State of the State of Connecticut within ten days prior to the Closing Date
(B) the Operating Agreement of the Purchaser, as in effect on the Closing Date
and (C) resolutions duly adopted by the manager of the Purchaser authorizing the
execution, delivery and performance of this Agreement and the Transaction
Documents, and that such resolutions have not been modified, rescinded or
revoked;
(viii) Good Standing Certificate. A certificate confirming the
good standing of the Purchaser in Connecticut issued by the Secretary of State
of the State of Connecticut as of a date within ten days prior to the Closing
Date; and
(ix) Other Documents. Such other documents relating to the
transactions contemplated by the Transaction Documents as the Company or its
counsel may reasonably request.
4.2 Conditions Precedent to the Purchaser's Obligations. The
obligations of the Purchaser under this Agreement are subject to the
satisfaction or waiver by the Purchaser, at or before the Closing, of each of
the following conditions:
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement and in
each of the Transaction Documents that are qualified as to materiality or
Material Adverse Effect shall be true and correct in all respects and the other
representations and warranties of the Company set forth in this Agreement and
each of the Transaction Documents shall be true and correct in all material
respects, in each case, as of the date when made (except for representations and
warranties that speak as of a specific date) and as of the Closing Date;
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated,
endorsed or threatened or shall be pending by or before any court or
governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement or the
Transaction Documents;
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(d) Quotations for Common Stock. Quotations for the Common Stock shall
have been at all times since the date hereof, and on the Closing Date shall be,
available on the OTC Bulletin Board;
(e) Required Approvals. All Required Approvals shall have been obtained
by the Company and copies thereof delivered to the Purchaser;
(f) Change of Control. No "Change of Control" shall have occurred
between the date hereof and the Closing Date. As used herein, "Change of
Control" means the occurrence of any of (A) an acquisition after the date hereof
by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than by the Purchaser or any of their
Affiliates, of in excess of 33% of the voting securities of the Company, (B) a
replacement of more than one-half of the members of the Company's Board of
Directors which is not approved by those individuals who are members of the
Board of Directors on the date hereof in one or a series of related
transactions, (C) the merger of the Company with or into another Person or the
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (D) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in clause (A), (B) or (C);
(g) UCC Financing Statement. The Company shall have executed and
delivered to the Purchaser a UCC-1 financing statement, in form and content
satisfactory to the Purchaser, in respect of the security interest in the
Collateral (as defined in the Security Agreement) granted to the Purchaser and
all other documents required for filing in the appropriate jurisdictions to
perfect the security interest granted to the Purchaser as contemplated by this
Agreement, the Security Agreement and all other documents relating thereto.
(h) Copyright Filings. The Purchaser shall have received from the
Company such copyright filings and other filings as the Purchaser shall deem
necessary to afford the Purchaser a second priority security interest in the
Collateral (as defined in the Security Agreement) in a form satisfactory for
filing.
(i) Documents and Certificates. At the Closing, the Company
shall have delivered to the Purchaser the following in form and substance
satisfactory to the Purchaser:
(i) Opinion. An opinion of the Company's legal counsel,
substantially in the form attached hereto as Exhibit J, dated as of the Closing
Date;
(ii) Shares. The certificate or certificates representing the
Shares registered in the name of the Purchaser;
(iii) Warrants. The Warrants, duly executed by the Company;
(iv) Note. The Note, duly executed by the Company;
(v) Security Agreement. The Security Agreement, duly executed
by the Company, Form UCC-1 financing statement and all other documents required
for filing in the requisite jurisdictions and with the United States Copyright
Office so as to afford the Purchaser a second priority security interest in the
Collateral (as defined in the Security Agreement);
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(vi) Investor Rights Agreement. The Investor Rights Agreement,
duly executed by the Company;
(vii) LLC Agreement. The LLC Agreement, duly executed by the
Company, along with all documents and instruments to be delivered thereunder by
the Company;
(viii) Marketing and Distribution Agreement. The Marketing and
Distribution Agreement, duly executed by the Company and the LLC;
(ix) Amended Voting Agreement. The Amended Voting Agreement,
duly executed by the Company and the Principal Stockholders;
(x) Appointment of Directors. Xxxxxxx Xxxxxxx and the other
designee of the Purchaser shall have been duly appointed to the board of
directors of the Company, effective as of the Closing, as contemplated by the
Amended Voting Agreement;
(xi) Chase Documentation. All documentation, in form and
substance reasonably satisfactory to the Purchaser and its counsel, required
under the Credit, Security, Guaranty and Pledge Agreement, dated as of June 20,
2000, among the Company, the Guarantors named therein and the Lenders named
therein, with The Chase Manhattan Bank as Administrative Agent and as Issuing
Bank, as amended, to permit the Company to grant a second priority security
interest with respect to the Collateral (as defined in the Security Agreement).
(xii) Xxxxxxxx Street Certificate. A Certificate, dated the
Closing Date, and signed by the manager of Xxxxxxxx Street Productions, LLC,
certifying that (A) Xxxxxxxx Street Productions, LLC is owed no additional
securities from the Company pursuant to the provisions of Section 2.03 of the
Securities Purchase Agreement, dated May 3, 2000, between it and the Company and
(B) it has no known claim, and no present intention to assert a claim, against
the Company for indemnification pursuant to such Securities Purchase Agreement;
(xiii) Officer's Certificate. An Officer's Certificate, dated
the Closing Date, and signed by the chief executive officer of the Company,
confirming the accuracy of the Company's representations, warranties and
covenants as of the Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in this Section 4.2 as of the Closing
Date;
(xiv) Secretary's Certificate. A Secretary's Certificate,
dated the Closing Date, and signed by the Secretary or Assistant Secretary of
the Company, certifying that attached thereto is a true and complete copy of (A)
the Certificate of Incorporation of the Company, as in effect on the Closing
Date, and as certified by the Secretary of State of the State of Delaware within
ten days prior to the Closing Date, (B) the Bylaws of the Company, as in effect
on the Closing Date and (C) resolutions duly adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance of this
Agreement and the Transaction Documents, and that such resolutions have not been
modified, rescinded or revoked;
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(xv) Good Standing Certificate. A certificate confirming the
good standing of the Company in Delaware issued by the Secretary of State of the
State of Delaware as of a date within ten days prior to the Closing Date;
(xvi) Transfer Agent Letter. A letter from the Company's
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five days of the Closing Date; and
(xvii) Other Documents. Such other documents relating to the
transactions contemplated by the Transaction Documents as the Purchaser or its
counsel may reasonably request.
SECTION 5. INDEMNIFICATION
5.1 Indemnification.
(a) Subject to Sections 5.2 and 5.3, from and after the Closing Date,
the Company shall defend, protect, indemnify and hold harmless the Purchaser and
its Affiliates (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, proceedings, costs (as
incurred), penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including interest,
penalties and attorneys' fees and disbursements ("Damages"), incurred by any
Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or in any of the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby or (ii) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or any of the Transaction Documents, or any other certificate,
instrument or document contemplated hereby or thereby provided, that, (i) the
Company shall not be liable under this Section 5.1(a) unless the aggregate
amount of Damages with respect to all matters referred to in this Section 5.1(a)
exceeds $75,000 (the "Basket"); provided, that once such aggregate Damages for
which the Purchaser seeks indemnification exceed the Basket, the Company shall
be liable for the entire amount of such Damages, including the first $75,000 of
such Damages; and provided further, that the Basket shall not apply to Damages
incurred due to the dishonesty or fraud of the Company or any of its
Subsidiaries and (ii) the Company's maximum liability under this Section 6.1
shall not exceed $6,050,000. To the extent that the foregoing undertakings by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of all Damages which is
permissible under applicable law.
(b) Subject to Sections 5.2 and 5.3, from and after the Closing, the
Purchaser shall defend, protect, indemnify and hold harmless the Company and its
Affiliates from and against any and all Damages incurred by the Company or its
Affiliates as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Purchaser in this Agreement or in any of the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby or (ii) any
breach of any covenant, agreement or obligation of the Purchaser contained in
this Agreement or any of the Transaction Documents, or any other certificate,
instrument or document contemplated hereby or thereby; provided, that the
Purchaser shall not be liable under this Section 5.1(b) unless the aggregate
amount of Damages with respect to all matters referred to in this Section 5.1(b)
(determined without regard to any materiality qualification contained in any
representation, warranty or covenant giving rise to the claim for indemnity
hereunder) exceeds the Basket; provided, that once such aggregate Damages for
which the company seeks indemnification exceed the Basket, the Purchaser shall
be liable for the entire amount of such Damages, including the first $75,000 of
such Damages; and provided further, that the Basket shall not apply to Damages
incurred due to the dishonesty or fraud of the Purchaser and Purchaser's maximum
liability under this Section 6.1 shall not exceed $6,050,000.
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5.2 Survival. The representations and warranties contained in this
Agreement shall survive the Closing until 18 months after the Closing Date
(except for fraud as to which there shall be no termination date except for the
applicable statute of limitations), except that (i) the representations and
warranties contained in Sections 2.1(a), (b), (c), (d), (f) and 2.2(a), (b) and
(c) shall survive indefinitely and (ii) the representations and warranties
contained in Section 2.1(u) shall survive until expiration of the statute of
limitations applicable to the matters covered thereby (giving effect to any
waiver, mitigation or extension thereof, if applicable). Any claim for
indemnification with respect to a breach of representation or warranty must be
given to the indemnifying party in writing and in reasonable detail prior to the
termination date of such representation or warranty. The covenants and
agreements of the parties contained in this Agreement shall survive the Closing
in accordance with their terms or, if no term is specified, indefinitely.
5.3 Reduction of Certain Benefits. The amount of any indemnification
payment payable under Section 5.1(a) or (b) shall be calculated after giving
effect to (a) any proceeds received from insurance policies covering the damage,
loss, liability or expense that is the subject of the claim for indemnity and
(b) the actual net realized tax benefit to the indemnified party resulting from
the damage, loss, liability or expense that is the subject of the indemnity and
of the indemnity payment itself. It is acknowledged and understood that only tax
benefits which serve to reduce actual cash payments to be made by a party for
taxes, and not events which merely serve to increase net loss carry forwards,
shall serve to trigger reduction in the obligations of a party under clause (b)
of this Section 5.3. For purposes of this Section 5.3, an actual realized tax
benefit is an actual reduction in taxes payable or a refund of taxes previously
paid.
SECTION 6. TERMINATION
6.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by joint written agreement of the Company and the Purchaser;
(b) by the Company, if the Purchaser has breached any representation,
warranty, covenant or agreement contained in this Agreement to an extent as
would make the condition in Section 4.1(b) (with respect to covenants and
agreements to be performed by the Purchaser) or Section 4.1(a) unsatisfied and
has not cured such breach within ten business days after written notice to the
Purchaser (provided that the Company is not then in material breach of the terms
of this Agreement; and provided further that no cure period shall be required
for a breach which by its nature cannot be cured);
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(c) by the Purchaser, if the Company has breached any representation,
warranty, covenant or agreement contained in this Agreement to an extent as
would make the condition in Section 4.2(b) (with respect to covenants and
agreements to be performed by the Company) or Section 4.2(a) unsatisfied and has
not cured such breach within ten business days after written notice to the
Company (provided that the Purchaser is not then in material breach of the terms
of this Agreement; and provided further that no cure period shall be required
for a breach which by its nature cannot be cured);
(d) by any party, if the Closing has not occurred on or before June 30,
2002; provided, however, that a party may not terminate this Agreement pursuant
to this Section if the failure of such party to fulfill any of its obligations
hereunder shall have been the principal reason that the Closing shall not have
occurred on or before said date; and
(e) by any party if there shall be a change of law or regulation that
makes consummation of the transactions contemplated hereby illegal or otherwise
prohibited or if consummation of the transactions contemplated hereby would
violate any nonappealable, final order, decree or judgment of any court or
governmental body having competent jurisdiction.
6.2 Notice. The party desiring to terminate this Agreement pursuant to
Section 6.1 shall given notice of such termination to the other parties hereto.
6.3 Effects of Termination. If this Agreement is terminated as provided
in this Section 6, such termination shall be without liability of either party
to the other parties to this Agreement; provided, that this Section 6 shall
remain in effect; and provided, further, that if such termination shall result
from the (i) willful failure by any party to fulfill a condition to the
performance of the obligations of the other parties, (ii) failure by any party
to perform a covenant of this Agreement, or (iii) breach by any party hereto of
any representation, warranty, covenant or agreement contained herein, such party
shall be fully liable for any and all damages incurred or suffered by the other
parties as a result of such failure or breach.
SECTION 7. MISCELLANEOUS
7.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents, contains the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
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7.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally, (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by or before 5:30 P.M. Eastern
Time where such notice is received) or the first Business Day following such
delivery (if received after 5:30 P.M. Eastern Time where such notice is
received) or (iii) one Business Day after deposit with a nationally recognized
overnight courier, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
(i) If to the Company:
First Look Media, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx X
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(ii) If to the Purchaser, to:
Seven Hills Pictures, LLC
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx & Xxxxx, Professional Corporation
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Each party shall provide written notice to the other parties of any change in
address or facsimile number in accordance with the provisions hereof.
7.3 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchaser or, in the case of a waiver, by the party
against whom a waiver of any such provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
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7.4 Headings. The table of contents, titles and headings contained
herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
7.5 Successors and Assigns. No party may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
Party; provided, that this provision shall not limit Purchaser's right to
transfer the Securities, the Warrant Shares and the Conversion Shares in
accordance with all of the terms of this Agreement and the Transaction
Documents. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns.
7.6 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
7.7 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Delaware
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of Wilmington, Delaware, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.
7.8 Attorneys' Fees. If any action at law or equity, including an
action for declaratory relief, is brought to enforce or interpret any provision
of this Agreement or of the Transaction Documents, the prevailing party shall be
entitled to recover its reasonable attorneys' fees and expenses from the other
party, which fees and expenses shall be in addition to any other relief which
may be awarded.
7.9 Counterparts; Facsimile Signatures. This Agreement may be executed
in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other parties,
it being understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
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7.10 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
7.11 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. The Company and the
Purchaser agree that monetary damages would not be adequate compensation for any
loss incurred by reason of any breach of its obligations described in the
foregoing sentence and hereby agree to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
7.12 Nature of Purchaser's Obligations and Rights. Nothing contained
herein or in any other agreement or document delivered at the Closing other than
the LLC Agreement, and no action taken by the Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchaser as a partnership, an
association, a joint venture or any other kind of Person, or create a
presumption that the Purchaser is in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. The
Purchaser shall be entitled to protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the Transaction
Documents, and it shall not be necessary for any other Person to be joined as an
additional party in any proceeding for such purpose.
7.13 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other parties may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
7.14 Fees and Expenses. Except as set forth in Investor Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, that the Company shall reimburse the
Purchaser at the Closing for the fees and expenses of Xxxx & Xxxxx Professional
Corporation in connection with negotiating and preparing his Agreement and the
Transaction Documents and consummating the transactions contemplated hereby and
thereby, which amount shall not exceed $50,000.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
persons as of the date first indicated above.
FIRST LOOK MEDIA, INC.
By: /s/ Xxxxxxxxxxx Xxxxxx
Name: Xxxxxxxxxxx Xxxxxx
Title: Chief Executive Officer
SEVEN HILLS PICTURES, LLC
By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Manager
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