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Exhibit 10.6
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is dated as of March 6, 1998
and entered into by and between VIDEO UPDATE, INC., a Delaware corporation (the
"Company") and BANQUE PARIBAS, GRAND CAYMAN BRANCH (the "Purchaser").
WITNESSETH:
WHEREAS, the Company has agreed to issue and sell to the Purchaser
1,000,000 common stock purchase warrants, as hereinafter described (the "New
Warrants") to purchase, at the Purchaser's option, but subject to the terms of
Section 8 hereof, 1,000,000 shares of Class A common stock, par value $.01 per
share, of the Company (the "Common Stock") pursuant to that certain warrant
purchase agreement, dated as of March 6, 1998, by and between the Purchaser and
the Company (the "Warrant Purchase Agreement"); and
WHEREAS, the Company has agreed to issue to the Purchaser 500,000
common stock purchase warrants, as hereinafter described (the "Exchange
Warrants" and, together with the New Warrants, collectively, the "Warrants") to
purchase, at the Purchaser's option, but subject to the terms of Section 8
hereof, 375,000 shares of Common Stock pursuant to the Warrant Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1.
DEFINED TERMS
(a) The following terms when used in this Agreement, including its
preamble and recitals, shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Additional Shares" means any shares of Common Stock issued after the
date hereof except (i) Common Stock issued upon the exercise of any Warrant,
(ii) except as provided in clause (iii) below, Common Stock issued upon
conversion or exercise of any outstanding Options or Convertible Securities of
the Company or Moovies, Inc. (as such Options and Convertible Securities are in
effect on the date hereof); (iii) Common Stock issued upon conversion or
exercise of any Option or other rights granted under Approved Option Plans or
Approved Rights Plans; or (iv) Common Stock issued pursuant to or upon stock
splits, combinations or dividends
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or other transactions described in Sections 9(a) through (d) (after giving
effect to any adjustments required to be made by such Sections).
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agreement" shall have the meaning provided in the preamble of this
Agreement.
"Applicable Law" means all provisions of laws, statutes, ordinances,
rules, regulations, permits or certificates of any Governmental Authority
applicable to such Person or any of its assets or property, and all judgments,
injunctions, orders and decrees of all courts, arbitrators or Governmental
Authorities in proceedings or actions in which such Person is a party or by
which any of its assets or properties are bound.
"Approved Option Plans" shall mean option plans adopted by the Board of
Directors of the Company for the benefit of employees, independent contractors
and similar persons, the scope and terms of which are, in the good faith
determination of the Board of Directors of the Company, customary for similarly
situated businesses in the industry.
"Approved Rights Plan" shall mean stockholder rights plans adopted by
the Board of Directors of the Company in good faith.
"Business Day" shall mean any day except Saturday, Sunday and any day
which in New York shall be a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Closing Date" means the initial date of issuance of Warrants under
this Agreement.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the 1933 Act.
"Common Stock" shall have the meaning provided in the recitals of this
Agreement.
"Common Stock Per Share Market Value" means the price per share of
Common Stock obtained by dividing (A) the Market Value by (B) the number of
shares of Common Stock outstanding (on a Fully-Diluted Basis) at the time of
determination.
"Company" shall have the meaning provided in the preamble of this
Agreement.
"Convertible Securities" shall have the meaning provided in Section
9(c) of this Agreement.
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"Credit Agreement" shall mean the Credit Agreement, dated as of March
6, 1998, among the Company, various financial institutions and Banque Paribas,
as Agent, as the same may be amended, amended and restated, supplemented,
restructured or otherwise modified from time to time (in whole or in part and,
without limitation, as to terms, conditions or covenants and without regard to
the principal amount thereof) and in effect, including all related notes,
collateral documents, guaranties, instruments and agreements entered into in
connection therewith, and any successive restructurings, renewals, extensions or
refundings thereof.
"Distribution" shall have the meaning provided in Section 9(c) of this
Agreement.
"Equivalent Nonvoting Security" means, with respect to any security
issued or to be issued by any Person, a security of such Person that is
identical in rights and benefits to such security, except that (a) the
equivalent security shall not be entitled to vote on any matter on which holders
of voting securities of such Person are entitled to vote, other than as required
by Applicable Law or with respect to any amendment or repeal of any provision of
the Organizational Documents of such Person or any other agreement or instrument
pursuant to which the equivalent security was issued which provision
specifically affects such equivalent security, (b) subject to such reasonable
restrictions as any affected Regulated Holder may request (including any
restriction necessary to prevent the violation by such Regulated Holder of any
provision of Applicable Law with respect to its ownership of voting securities),
the equivalent security shall be convertible in a one-to-one ratio into the
first security and (c) the terms of the equivalent security shall include such
provisions requested by any affected Regulated Holder as are reasonable and
equitable to ensure that (i) the equivalent security is treated comparably to
the first security with respect to dividends, distributions, stock splits,
reclassifications, capital reorganizations, mergers, consolidations and other
similar events and transactions, (ii) the conversion right provided in clause
(b) above is equitably protected and (iii) the acquisition of the equivalent
security will not cause such Regulated Holder to violate Applicable Law.
"Exchange Warrant Certificates" shall have the meaning provided in
Section 2.
"Exchange Warrant Exercise Price" shall have the meaning provided in
Section 5.
"Exchange Warrant Expiration Date" shall have the meaning provided in
Section 5.
"Exchange Warrant Number" shall have the meaning provided in Section 9.
"Exchange Warrants" shall have the meaning provided in the recitals of
this Agreement.
"Expiration Date" shall mean the Exchange Warrant Expiration Date
and/or the New Warrant Expiration Date.
"Fully-Diluted Basis" means, as applied to the calculation of the total
number of shares of Common Stock outstanding at any time, after giving effect to
(a) all shares of Common Stock outstanding at the time of determination, and (b)
all shares of Common Stock issuable upon the exercise of any Convertible
Security (including the Warrants) or similar right to purchase Common Stock
outstanding at the time of determination and then so convertible or exchangeable
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at a conversion or exchange price equal to or less than the Market Price per
share of Common Stock at such time.
"Governmental Authority" means any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
or any court, in each case of the United States of America.
"Holder" or "Holders" means the Purchaser (so long as it holds any
Warrants or Warrant Shares) and any other holder of any of the Warrants or
Warrant Shares.
"Independent Financial Expert" means a nationally recognized investment
banking firm (a) that does not (and whose directors, officers, employees and
Affiliates do not) have a direct or indirect material financial interest in the
Company or any Holder, (b) that has not been, and, at the time it is called upon
to serve as an Independent Financial Expert under this Agreement is not (and
none of whose directors, officers, employees or Affiliates is) a promoter,
director or officer of the Company or any Holder, (c) that has not been retained
during the preceding two years by the Company or the Holder for any purpose, and
(d) that is otherwise qualified to serve as an independent financial advisor.
Any such Person may receive customary compensation and indemnification by the
Company for opinions or services it provides as an Independent Financial Expert.
"Market Price" means, with respect to a share of Common Stock on any
Business Day:
(a) if the Common Stock is Publicly Traded at the time of
determination, the average of the closing prices on such day of the
Common Stock on all domestic securities exchanges on which the Common
Stock is then listed, or, if there have been no sales on any such
exchange on such day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day or, if on any such
day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted on the NASDAQ System as of
4:00 P.M., New York time, on such day, or if on any day such security
is not quoted on the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a
period of 30 days consisting of the day as of which "Market Price" is
being determined and the twenty-nine consecutive Business Days prior to
such day (provided that, if Market Price is being determined as of the
date of a Qualified Public Offering, Market Price as of such date shall
be the offering price for the Common Stock subject to such Qualified
Public Offering); or
(b) if the Common Stock is not Publicly Traded at the time of
determination, the Common Stock Per Share Market Value.
"Market Value" means the highest price that would be paid for the
entire common equity of the Company on a going-concern basis in an arm's-length
transaction between a willing buyer and a willing seller (neither acting under
compulsion), using valuation techniques then prevailing in the securities
industry (but without giving effect to any discount in respect of a minority
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interest) and determined in accordance with the Valuation Procedure, and
assuming full disclosure and understanding of all relevant information and a
reasonable period of time for effectuating such sale. For the purposes of
determining the Market Value, (a) the exercise price of options or warrants to
acquire Common Stock which are deemed to have been exercised for the purpose of
determining the number of shares of Common Stock outstanding on a Fully-Diluted
Basis, shall be deemed to have been received by the Company, (b)(i) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are deemed exercised for or converted into Common Stock for the
purpose of determining the number of shares of Common Stock outstanding on a
Fully-Diluted Basis and (ii) any contractual limitation in respect of the shares
of Common Stock relating to voting rights, shall be deemed to have been
eliminated or cancelled and (c) full effect shall be given to any discount that
may arise as the result of the fact that the shares of Common Stock are not
Publicly Traded.
"NASDAQ" means the National Association of Securities Dealers, Inc.,
Automated Quotation System.
"New Warrant Certificates" shall have the meaning provided in Section
2.
"New Warrant Exercise Price" shall have the meaning provided in Section
5.
"New Warrant Expiration Date" shall have the meaning provided in
Section 5.
"New Warrant Number" shall have the meaning provided in Section 9.
"New Warrants" shall have the meaning provided in the recitals of this
Agreement.
"Options" shall have the meaning provided in Section 9(c) of this
Agreement.
"Organizational Documents" means, with respect to any Person, each
instrument or other document that (a) defines the existence of such Person,
including its articles or certificate of incorporation, as filed or recorded
with an applicable Governmental Authority or (b) governs the internal affairs of
such Person, including its by-laws, in each case as amended, supplemented or
restated.
"Person" or "Persons" means and includes natural persons, corporations,
limited partnerships, limited liability companies, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Publicly Traded" means, with respect to any security, that such
security is (a) listed on a domestic securities exchange, (b) quoted on NASDAQ
or (c) traded in the domestic over-the-counter market, which trades are reported
by the National Quotation Bureau, Incorporated.
"Purchaser" shall have the meaning provided in the preamble of this
Agreement.
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"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of March 6, 1998, between the Company and the Purchaser.
"Regulated Holder" shall have the meaning provided in Section 8.
"Regulation Y" shall have the meaning provided in Section 8.
"Requisite Holders" means Holders holding Warrants and Warrant Shares
representing at least a majority of all Warrant Shares issued and issuable upon
the exercise of the Warrants outstanding on the date of determination.
"Section 11(e) Transaction" shall have the meaning provided in Section
11(e).
"Valuation Procedure" means, with respect to the determination of any
amount or value required to be determined in accordance with such procedure, a
determination (which shall be final and binding on the Company and the Holders)
made (i) by agreement among the Company and the Requisite Holders within 20 days
following the event requiring such determination or (ii) in the absence of such
an agreement, by an Independent Financial Expert selected in accordance with the
further provisions of this definition. If required, an Independent Financial
Expert shall be selected within five days following the expiration of the 20-day
period referred to above, either by agreement among the Company and the
Requisite Holders or, in the absence of such agreement, by lot from a list of
four potential Independent Financial Experts remaining after the Company
nominates three, the Requisite Holders nominate three, and each side eliminates
one potential Independent Financial Expert. The Independent Financial Expert
shall be instructed by the Company and the Requisite Holders to make its
determination within 20 days of its selection. The fees and expenses of an
Independent Financial Expert selected hereunder shall be paid by the Company.
"Warrant Certificates" shall have the meaning provided in Section 2.
"Warrant Documents" means this Agreement, the Warrant Purchase
Agreement and the Warrant Certificates.
"Warrant Number" shall have the meaning provided in Section 9.
"Warrant Purchase Agreement" shall have the meaning provided in the
preamble of this Agreement.
"Warrant Shares" means (a) the shares of Common Stock issued or
issuable upon exercise of a Warrant in accordance with Section 5 or upon
exchange of a Warrant in accordance with Section 5, (b) all other securities or
other property issued or issuable upon any such exercise or exchange in
accordance with this Agreement and (c) any securities of the Company distributed
with respect to the securities referred to in the preceding clauses (a) and (b).
As used in this Agreement, the phrase "Warrant Shares then held" by any Holder
or Holders shall mean Warrant Shares held at the time of determination by such
Holder or Holders, and shall include
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Warrant Shares issuable upon exercise of the Warrants held at the time of
determination by such Holder or Holders.
"Warrants" shall have the meaning provided in the recitals of this
Agreement.
SECTION 2.
WARRANT CERTIFICATES/STOCK CERTIFICATES
The Company will issue and deliver (i) a certificate or certificates
evidencing the New Warrants (the "New Warrant Certificates") in accordance with
Section 1 of the Warrant Purchase Agreement and (ii) a certificate or
certificates evidencing the Exchange Warrants (the "Exchange Warrant
Certificates" and, together with the New Warrant Certificates, collectively, the
"Warrant Certificates") in accordance with Section 2 of the Warrant Purchase
Agreement. Warrant Certificates shall be dated the date of issuance by the
Company.
SECTION 3.
EXECUTION OF WARRANT CERTIFICATES;
MUTILATED OR MISSING WARRANT CERTIFICATES
Warrant Certificates shall be signed on behalf of the Company by its
Chief Executive Officer. Each Warrant Certificate shall also be manually signed
on behalf of the Company by its Secretary or an Assistant Secretary.
In case any of the Warrant Certificates shall be mutilated, lost,
stolen or destroyed, the Company shall, upon request of the Holder of any such
Warrant Certificate, issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and an
indemnity bond, if requested, also satisfactory to the Company. Applicants for
such substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe.
SECTION 4.
REGISTRATION/RESERVATION OF WARRANT SHARES
The Company shall number and register the Warrant Certificates in a
register as they are issued. The Company may deem and treat the registered
Holders of the Warrant Certificates as the absolute owners thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes and shall not be affected by any notice to the
contrary. The Warrants shall be registered initially in the name of the
Purchaser and thereafter in such name or names as the Purchaser shall designate
in writing to the Company upon compliance with Section 13 hereof.
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The Company shall at all times reserve and keep available, free from
preemptive rights (except as otherwise provided herein), out of the aggregate of
its authorized but unissued Common Stock, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding options, warrants (including the Warrants) or other
securities convertible into or exchangeable or exercisable for Common Stock.
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the applicable Exercise
Price therefor and issue thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights (except as may be granted by this
Agreement) and free from all taxes, liens, charges and security interests with
respect to the issue thereof arising from any action or inaction by the Company.
If and so long as the outstanding Common Stock may be listed on any
securities exchange in the United States, the Company shall use its reasonable
best efforts to cause all reserved Warrant Shares to be listed on each such
exchange upon official notice of issuance upon such exercise.
SECTION 5.
WARRANTS; EXERCISE OF WARRANTS
Subject to the terms of this Agreement, (i) each Holder of New Warrants
shall have the right, which may be exercised at any time or from time to time on
and after the date hereof and prior to 5:00 P.M., New York time, on March 6,
2003 (the "New Warrant Expiration Date"), to receive from the Company the number
of fully paid and nonassessable Warrant Shares which the Holder may at the time
be entitled to receive on exercise of such New Warrants and payment of the New
Warrant Exercise Price then in effect for such New Warrant Shares and (ii) each
Holder of Exchange Warrants shall have the right, which may be exercised at any
time or from time to time on and after the date hereof and prior to 5:00 P.M.,
New York time, on March 14, 2007 (the "Exchange Warrant Expiration Date"), to
receive from the Company the number of fully paid and nonassessable Warrant
Shares which the Holder may at the time be entitled to receive on exercise of
such Exchange Warrants and payment of the Exchange Warrant Exercise Price then
in effect for such Exchange Warrant Shares. Each Warrant not exercised prior to
5:00 P.M., New York time, on the applicable Expiration Date therefor shall
become void and all rights thereunder and all rights in respect thereof under
this Agreement shall cease as of such time; provided that the occurrence of any
Expiration Date shall not relieve the Company of any obligation to any Holder
which arose pursuant to the terms of this Agreement prior to such date.
The price at which each New Warrant shall be exercisable (as such price
may be adjusted from time to time, in accordance with the terms hereof, the "New
Warrant Exercise Price") shall initially be $2.68 per Warrant exercised. The
price at which each Exchange Warrant shall be exercisable (as such price may be
adjusted from time to time, in accordance with the terms hereof, the "Exchange
Warrant Exercise Price") shall initially be $6.35 per Warrant exercised. The
Common Stock shall have a par value of no greater than $.01.
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A Warrant may be exercised upon surrender to the Company at its address
set forth on the signature pages hereto of the applicable Warrant Certificate or
Warrant Certificates to be exercised with the form of election to purchase
attached thereto duly completed and signed, and upon payment to the Company of
the applicable Exercise Price for the number of Warrant Shares in respect of
which such Warrants are then exercised. Payment of the applicable aggregate
Exercise Price may be made, at the option of the applicable Holder, (i) by cash,
certified or bank cashier's check or wire transfer, (ii) by surrendering to the
Company the number of Warrants which, when exercised, would entitle the Holder
thereof to that number of Warrant Shares which is equal to (A) such applicable
aggregate Exercise Price divided by (B) the excess of (x) the product of (1) the
Warrant Number and (2) the Market Price per share of Common Stock over (y) the
applicable Exercise Price, (iii) by surrendering to the Company the number of
shares of Common Stock which is equal to (A) such applicable aggregate Exercise
Price divided by (B) the Market Price per share of Common Stock or (iv) any
combination of the foregoing.
Subject to the provisions of Section 6, upon such surrender of any
Warrants and payment of the applicable Exercise Price, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as such Holder may designate a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants (and such other consideration as may be
deliverable upon exercise of such Warrants) together with, at the sole option of
the Company, cash for fractional Warrant Shares as provided in Section 7. Such
certificate or certificates shall be deemed to have been issued and the Person
so named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the proper surrender of such Warrants and
payment in full of the applicable Exercise Price, irrespective of the date of
delivery of such certificate or certificates for Warrant Shares.
Each Warrant shall be exercisable, at the election of the Holder
thereof, either in full or from time to time in part and, in the event that a
Warrant Certificate is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
such Warrants, a new certificate evidencing the remaining such Warrant or
Warrants will be issued and delivered pursuant to the provisions of this Section
5 and of Section 2.
All Warrant Certificates surrendered upon exercise of Warrants shall be
cancelled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office.
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SECTION 6.
PAYMENT OF TAXES
The Company will pay all taxes and other governmental charges imposed
by the United States of America or any State or territory thereof (including all
documentary stamp taxes, but excluding all foreign, federal, state or local
income taxes and all property, withholding, value-added and similar taxes
payable by a Holder) in connection with the issuance or delivery of the Warrants
hereunder, including all such taxes attributable to the initial issuance or
delivery of Warrant Shares upon the exercise of any Warrants and the payment of
the applicable Exercise Price therefor. The Company shall not, however, be
required to pay any tax that may be payable in respect of any subsequent
transfer of the Warrants, any transfer involved in the issuance and delivery of
Warrant Shares in a name other than that in which the Warrants to which such
issuance relates were registered and, if any such tax would otherwise be payable
by the Company, no such issuance or delivery shall be made unless and until the
Person requesting such issuance has paid to the Company the amount of any such
tax, or it is established to the reasonable satisfaction of the Company that any
such tax has been paid.
SECTION 7.
FRACTIONAL INTERESTS
The Company shall not be required to issue fractional Warrant Shares on
the exercise of Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same Holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except for
the provisions of this Section 7, be issuable on the exercise of any Warrants
(or specified portion thereof), the Company shall, at its sole option, pay an
amount in cash equal to the Market Price of the Warrant Share so issuable
multiplied by such fraction.
SECTION 8.
LIMITATIONS ON CERTAIN HOLDERS
Notwithstanding anything in this Agreement or any Warrant Certificate
to the contrary, no (x) Holder which is (i) subject to the provisions of
Regulation Y promulgated by the Board of Governors of the Federal Reserve, or
any successor regulation thereto ("Regulation Y") or (ii) which is affiliated
with any entity subject to the provisions of Regulation Y (if such Affiliate
holds securities of the Company (any such Holder being referred to herein as a
"Regulated Holder")) or (y) transferee of such Regulated Holder, may exercise
the Warrants for a number of Warrant Shares which would cause such Regulated
Holder, together with its Affiliates and transferees, to own or control a number
of Shares greater than that permitted by Applicable Law, including without
limitation, Regulation Y.
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SECTION 9.
ADJUSTMENTS
The New Warrant Exercise Price is initially $2.68 per New Warrant, the
Exchange Warrant Exercise Price is initially $6.35 per Exchange Warrant and the
number of shares of Common Stock issuable upon the exercise of each New Warrant
is initially one (the "New Warrant Number") and upon the exercise of each
Exchange Warrant is initially .75 (the "Exchange Warrant Number and each of the
New Warrant Number and the Exchange Warrant Number shall constitute a "Warrant
Number"). Each Exercise Price and each Warrant Number are subject to adjustment
from time to time upon the occurrence of the events enumerated in, or as
otherwise provided in this Section 9. The Company shall give each Holder notice
of any event described below which requires an adjustment pursuant to this
Section 9 at the time of such event. At any time and from time to time, the
Company shall promptly, without any action required of the Holders, cause the
appropriate adjustment or adjustments (to the extent that more than one event
requiring an adjustment has occurred since the last adjustment made) to be made
pursuant to this Section 9 in respect of each Warrant outstanding.
(a) Stock Splits, Combinations, etc. In case the Company shall
hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether Additional Shares or capital stock of
another class), (B) subdivide its outstanding shares of Common Stock or (C)
combine its outstanding shares of Common Stock into a smaller number of shares,
each Warrant Number in effect immediately prior to such action shall be adjusted
so that the Holder of any Warrant thereafter exercised shall be entitled to
receive the number of shares of capital stock of the Company which such Holder
would have owned immediately following such action had such Warrant been
exercised immediately prior thereto. An adjustment made pursuant to this
paragraph shall become effective immediately after the record date in the case
of a dividend and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this paragraph, the Holder of any Warrant
thereafter exercised shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors of the Company
shall in good faith determine the allocation of each adjusted Exercise Price
between or among shares of such classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in Section 9(a) above and
other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of a subdivision or combination), or in
case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants (other than a change in par value, or from par value to
no par value, or from no par value to par value or as a result of a subdivision
or combination)) or in case of any sale or conveyance to another corporation of
all or substantially all of the assets of the Company, then, as a condition of
such reclassification, change, consolidation, merger, sale or conveyance, the
Company or such a successor or
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purchasing corporation, as the case may be, shall forthwith make lawful and
adequate provision whereby the Holder of such Warrant then outstanding shall
have the right thereafter to receive on exercise of such Warrant the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock issuable upon exercise of such Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and enter into a supplemental warrant agreement so providing. Such
provisions shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
9. If the issuer of securities deliverable upon exercise of Warrants under the
supplemental warrant agreement is an Affiliate of the formed, surviving or
transferee corporation, that issuer shall join in the supplemental warrant
agreement. The above provisions of this Section 9(b) shall similarly apply to
successive reclassification and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Agreement to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for, adjustments of shares of the Common Stock for
which any Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 9. For purposes of
this Section 9(b) "shares of stock and other securities" of a successor or
acquiring corporation shall include stock of such corporation of any class which
is not preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 9(b) shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations or disposition of
assets.
(c) Issuance of Options or Convertible Securities. Except in
connection with the conversion or exercise of any outstanding Options or
Convertible Securities of the Company or Moovies, Inc. (as such Options and
Convertibles Securities are in effect on the date hereof) or with respect to any
Option granted under an Approved Option Plan, in the event the Company shall, at
any time or from time to time after the date hereof, issue, sell, distribute or
otherwise grant in any manner (including by assumption) any rights to subscribe
for or to purchase, or any warrants or options for the purchase of, Common Stock
or any stock or securities convertible into or exchangeable for Common Stock
(any such rights, warrants or options being herein called "Options" and any such
convertible or exchangeable stock or securities being herein called "Convertible
Securities") or any Convertible Securities (other than upon exercise of any
Option), whether or not such Options or the rights to convert or exchange such
Convertible Securities are immediately exercisable, and the price per share at
which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the aggregate amount if any, received or receivable by the Company
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as consideration for the issuance, sale, distribution or granting of such
Options or any such Convertible Security, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
all such Options or upon conversion or exchange of all such Convertible
Securities, plus, in the case of Options to acquire Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
conversion or exchange of all such Convertible Securities, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of all such Convertible Securities or
upon the conversion or exchange of all Convertible Securities issuable upon the
exercise of all such Options) shall be less than the Market Price per share of
Common Stock on the record date for the issuance, sale, distribution or granting
of such Options (any such event being herein called a "Distribution") then,
effective upon such Distribution, each Exercise Price shall be reduced to the
price (calculated to the nearest 1/1,000 of one cent) determined by multiplying
such Exercise Price in effect immediately prior to such Distribution by a
fraction, the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding (exclusive of any treasury shares) immediately prior to
such Distribution multiplied by the Market Price per share of Common Stock on
the date of such Distribution plus (ii) the consideration, if any, received by
the Company upon such Distribution, and the denominator of which shall be the
product of (A) the total number of shares of Common Stock outstanding (exclusive
of any treasury shares) immediately after such Distribution multiplied by (B)
the Market Price per share of Common Stock on the record date for such
Distribution. For purposes of the foregoing, the total maximum number of shares
of Common Stock issuable upon exercise of all such Options or upon conversion or
exchange of all such Convertible Securities or upon the conversion or exchange
of the total maximum amount of the Convertible Securities issuable upon the
exercise of all such Options shall be deemed to have been issued as of the date
of such Distribution and thereafter shall be deemed to be outstanding and the
Company shall be deemed to have received as consideration therefor such price
per share, determined as provided above. Except as provided in Sections 9(i) and
9(j) below, no additional adjustment of an Exercise Price or Warrant Number
shall be made upon the actual exercise of such Options or upon conversion or
exchange of the Convertible Securities or upon the conversion or exchange of the
Convertible Securities issuable upon the exercise of such Options. In addition,
each Warrant Number after such issuance shall be determined by multiplying each
Warrant Number by a fraction, (i) the denominator of which shall be the number
of shares of Common Stock on a Fully Diluted Basis immediately prior to such
issuance plus the number of shares that the aggregate consideration to be
received by the Company for the total number of such Additional Shares issued or
to be issued in connection with the conversion or exercise of other Convertible
Securities (including the issue price of any such other Convertible Securities)
would purchase at the Market Price and (ii) the numerator of which shall be the
number of shares of Common Stock on a Fully Diluted Basis immediately after such
issuance.
(d) Dividends and Distributions. In the event the Company shall,
at any time or from time to time after the date hereof, distribute to all the
holders of Common Stock any dividend or other distribution of cash, evidences of
its indebtedness, other securities or other properties or assets (in each case
other than (i) dividends payable in additional shares of Common Stock, Options
or Convertible Securities and (ii) any cash dividend from current or retained
earnings), or any options, warrants or other rights to subscribe for or purchase
any of
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the foregoing, then (A) each Exercise Price shall be decreased to a price
determined by multiplying such Exercise Price then in effect by a fraction, the
numerator of which shall be the Market Price per share of Common Stock on the
record date for such distribution less the sum of (X) the cash portion, if any,
of such distribution per share of Common Stock outstanding (exclusive of any
treasury shares) on the record date for such distribution plus (Y) the then fair
market value (as determined in good faith by the Board of Directors of the
Company) per share of Common Stock outstanding (exclusive of any treasury
shares) on the record date for such distribution of that portion, if any, of
such distribution consisting of evidences of indebtedness, other securities,
properties, assets, options, warrants or subscription or purchase rights, and
the denominator of which shall be such Market Price per share of Common Stock
and (B) the Warrant Number shall be increased to a number determined by
multiplying the Warrant Number in effect immediately prior to the record date
for such distribution by a fraction, the numerator of which shall be the
applicable Exercise Price in effect immediately prior to the adjustment required
by clause (A) of this sentence and the denominator of which shall be the
applicable Exercise Price in effect immediately after such adjustment. The
adjustments required by this Section 9(d) shall be made whenever any such
distribution occurs retroactive to the record date for the determination of
stockholders entitled to receive such distribution. Notwithstanding anything to
the contrary contained herein, the Company shall not make any such distribution
or dividend which would entitle a holder of Common Stock to an amount equal to
or greater than the Market Price per share of Common Stock.
(e) Issuance of Additional Shares of Common Stock. If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares for consideration in an amount per Additional Share less than
the Market Price, then each Warrant Number shall be adjusted to equal the
product obtained by multiplying the Warrant Number immediately prior to such
issue or sale by a fraction (A) the numerator of which shall be the number of
shares of Common Stock outstanding immediately after such issue or sale (on a
Fully-Diluted Basis), and (B) the denominator of which shall be the sum of (1)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale (on a Fully-Diluted Basis), and (2) the aggregate consideration received
from the issuance or sale of the Additional Shares divided by the Market Price.
For the purposes of this Section 9(e), the date as of which the Market Price per
share of Common Stock shall be computed shall be the earlier of (a) the first
Business Day on which the Company shall be able to determine the Market Price
per share of Common Stock pursuant to the terms of a firm contract for the
issuance of such Additional Shares or (b) the date of actual issuance of such
Additional Shares.
(f) Certain Distributions. If the Company shall pay a dividend
or make any other distribution payable in Options or Convertible Securities,
then, for purposes of Section 9(e) above, such Options or Convertible Securities
shall be deemed to have been issued or sold without consideration.
(g) Consideration Received. If any shares of Common Stock,
Options or Convertible Securities shall be issued, sold or distributed for a
consideration other than cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed to be the then fair
market value of such consideration (as determined in good faith by the Board of
Directors of the Company). If any Options shall be issued in connection with the
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issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
without consideration; provided, however, that if such Options have an exercise
price equal to or greater than the Market Price of the Common Stock on the date
of issuance of such Options, then such Options shall be deemed to have been
issued for consideration equal to such exercise price.
(h) Deferral or Exclusion of Certain Adjustments. No adjustment
to any Exercise Price or Warrant Number shall be required hereunder unless such
adjustment together with other adjustments carried forward as provided below,
would result in an increase or decrease of at least one percent (1%) of the
applicable Exercise Price or Warrant Number; provided that any adjustments which
by reason of this Section 9(h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. No adjustment need
be made for a change in the par value of the Common Stock. All calculations
under this Section shall be made to the nearest 1/1,000 of one cent or to the
nearest 1/1000th of a share, as the case may be.
(i) Changes in Options and Convertible Securities. If the
exercise price provided for in any Options referred to in Section 9(c) above,
the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in Section 9(c) above, or the rate at
which any Convertible Securities referred to in Section 9(c) above are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 9), each Exercise Price then in effect and each Warrant Number shall
forthwith be readjusted (effective only with respect to any exercise of any
Warrant after such readjustment) to such Exercise Price and Warrant Number that
would then be in effect had the adjustment made upon the issuance, sale,
distribution or granting of such Options or Convertible Securities been made
based upon such changed purchase price, additional consideration or conversion
rate, as the case may be, but only with respect to such Options and Convertible
Securities as then remain outstanding.
(j) Expiration of Options and Convertible Securities. If, at any
time after any adjustment to each Warrant Number shall have been made pursuant
to Sections 9(c) or 9(i) above or this Section 9(j), any Options or Convertible
Securities shall have expired unexercised, the number of such shares so
purchasable shall, upon such expiration, be readjusted and shall thereafter be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
shares of Common Stock deemed to have been issued in connection with such
Options or Convertible Securities were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such Options or Convertible
Securities and (ii) such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale, distribution or granting of all such Options or Convertible
Securities, whether or not exercised; provided that no such readjustment shall
have the effect of decreasing the number of such shares so purchasable by an
amount (calculated by adjusting such decrease to account for all other
adjustments made pursuant to this Section 9 following the date of the original
adjustment referred to above) in
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excess of the amount of the adjustment initially made in respect of the
issuance, sale, distribution or granting of such Options or Convertible
Securities.
(k) Other Adjustments. In the event that at any time, as a
result of an adjustment made pursuant to this Section 9, the Holders shall
become entitled to receive any securities of the Company other than shares of
Common Stock, thereafter the number of such other securities so receivable upon
exercise of any Warrants and the relevant Exercise Price applicable to such
exercise shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
shares of Common Stock contained in this Section 9.
(l) Other Action Affecting Common Stock. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Section 9, then the number of
shares of Common Stock or other stock for which each Warrant is exercisable
shall be adjusted in such manner as may be equitable in the circumstances. If
the Company shall at any time and from time to time issue or sell (i) any shares
of any class of common stock other than Common Stock, (ii) any evidences of its
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for such shares of common stock, with or without the payment of
additional consideration in cash or property or (iii) any warrants or other
rights to subscribe for or purchase any such shares of common stock or any such
evidences, shares of stock or other securities, then in each such case such
issuance shall be deemed to be of, or in respect of, Common Stock for purposes
of this Section 9; provided, however, that, without limiting the generality of
the foregoing, if the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend payable in, or
other distribution of, common stock other than Common Stock, including shares of
non-voting common stock, then the number of shares of Common Stock for which
each Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the aggregate number of shares of such common stock
and of Common Stock which a record holder of the same number of shares of Common
Stock for which such Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event.
(m) Regulated Holders. If, in the written opinion of counsel to
any Regulated Holder (which may be internal counsel), the receipt by such
Regulated Holder of Warrant Shares (or any security included therein) upon any
exercise or exchange pursuant to this Section 9 would cause such Regulated
Holder to violate any provision of Applicable Law with respect to its ownership
of securities of the Company, then the Company will use its best efforts
(including using its best efforts to cause its Organizational Documents to be
amended) to create an Equivalent Nonvoting Security with respect to Warrant
Shares (or any such security included therein), and such Regulated Holder shall
be entitled to receive upon such exercise or exchange, in lieu of such number
(as it shall specify) of shares or other units of Warrant Shares (or any such
security included therein) otherwise receivable by such Regulated Holder, the
same number of shares or other units of such Equivalent Nonvoting Security, it
being understood and agreed that the Company shall not be required by virtue of
the provisions of this subsection 9(m) to take any action which would violate
any agreement with NASDAQ or any other exchange or any other agreement to which
the Company is a party.
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(n) Public Offering. No adjustment shall be made in connection
with the issuance of shares of Common Stock or other securities in a bona fide
public offering pursuant to a firm commitment underwriting by a firm which is a
member of the National Association of Securities Dealers, Inc.
SECTION 10.
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Holders that the
representations and warranties of the Company contained in the Credit Agreement
are hereby confirmed and restated, each such representation and warranty,
together with all related definitions and ancillary provisions, being hereby
incorporated into this Agreement by reference as though specifically set forth
in this Section.
SECTION 11.
COVENANTS
(a) Notices of Certain Actions. In the event that the Company:
(i) shall authorize the issuance to holders of Common Stock of
rights or warrants to subscribe for or purchase capital stock of the Company or
of any other subscription rights or warrants; or
(ii) shall authorize a dividend or other distribution to holders
of Common Stock of evidences of its indebtedness, cash or other property or
assets; or
(iii) proposes to become a party to any consolidation or merger
for which approval of any stockholders of the Company will be required, or to a
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any capital reorganization or reclassification or change
of the Common Stock; or
(iv) commences a voluntary or involuntary dissolution,
liquidation or winding up; or
(v) fails to comply with the provisions of this Agreement; or
(vi) proposes to take any other action which would require an
adjustment pursuant to Section 9;
then the Company shall provide a written notice to each Holder stating (i) the
date as of which the holders of record of Common Stock to be entitled to receive
any such rights, warrants or distribution are to be determined, (ii) the
material terms of any such consolidation or merger and the expected effective
date thereof, (iii) the material terms of any such conveyance or
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transfer, and the date on which any such conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, and
the date as of which it is expected that holders of record of Common Stock will
be entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, conveyance, transfer, dissolution,
liquidation or winding up, (iv) the nature of the lack of compliance, any
corrective action taken and any rights or remedies which such lack of compliance
has bestowed on the Holders or (v) a notice as is required by Section 9. Such
notice shall be given not later than 10 Business Days prior to the effective
date (or the applicable record date, if earlier) of such event. The failure to
give the notice required by this subsection 11(a) or any defect therein shall
not affect the legality or validity of any distribution, right, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up, or the vote upon any action. Notwithstanding anything to the contrary
contained above in this subsection 11(a), no notice to a Holder shall be
required to be given under this subsection 11(a) after the date upon which all
of the Warrants have been exercised by such Holder.
(b) Financial Statements and Reports. The Company shall furnish to each
Holder such information relating to the Company and its subsidiaries and their
operations and condition as any Holder shall reasonably request; provided that
(i) after the date upon which all of the Warrants of a Holder have been
exercised by such Holder, the Company shall only be required to furnish to such
Holder such information as it may be required to provide to a stockholder of the
Company under the Delaware General Corporate Law and applicable securities laws
and (ii) each Holder agrees to maintain the confidentiality of all non-public
information obtained from the Company as provided above. This subsection 11(b)
shall not apply to any transferee Holder.
(c) Information Rights and Access Rights. Each Holder shall have the
right, upon its reasonable request, whether or not such Holder has exercised or
exchanged any Warrants, to receive lists of stockholders or other information
respecting the Company and to inspect the books and records of the Company and
to visit the properties of the Company, in each case during ordinary business
hours; provided however, that (i) each Holder agrees in writing to maintain the
confidentiality of all non-public information obtained as provided above in this
subsection 11(c) and (ii) after the date upon which all of the Warrants of a
Holder have been exercised by such Holder, such Holder shall have no greater
information, inspection or visitation rights than those accorded a stockholder
of the Company under Delaware General Corporation Law and applicable securities
laws. Nothing contained in this Agreement shall be construed as conferring upon
any Holder, prior to its exercise of any Warrant, the right to vote or to
consent or to receive notice as stockholders in respect of meetings of
stockholders or the election of directors of the Company or any other matter, or
any rights whatsoever as stockholders of the Company, except as expressly
provided hereunder or under Applicable Law. This subsection 11(c) shall not
apply to any transferee Holder.
(d) Covenants Incorporated by Reference. The Company agrees with each
of the Holders that, until the performance of all of its obligations hereunder,
the Company will perform, comply with and be bound by all of the agreements,
covenants and obligations contained in Sections 8.01, 8.02 and 8.04 of the
Credit Agreement (it being understood and agreed that the reference to "the
Agent" contained in Section 8.02 of the Credit Agreement
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shall be a reference to a Holder for the purposes of this subsection 11(d)), as
in effect on the date hereof, each such agreement, covenant and obligation,
together with all related definitions and ancillary provisions, being hereby
incorporated into this Agreement by reference as though specifically set forth
in this subsection 11(d) and all of such agreements, covenants and obligations
shall survive the repayment of the loans and the termination of the Credit
Agreement for purposes hereof.
(e) Regulated Holders. (i) Notwithstanding any other provision of this
Agreement to the contrary, except as provided in this subsection 11(e), without
the prior written consent of any Regulated Holder, the Company shall not,
directly or indirectly, redeem, purchase or otherwise acquire, convert or take
any action (including any amendment to the Articles of Incorporation) with
respect to the voting rights of, or undertake any other action or transaction
(including any merger, consolidation or recapitalization) affecting, any shares
of its capital stock or other voting securities if the result of the foregoing
would be to cause the ownership of the capital stock of the Company by such
Regulated Holder, or the ownership of voting securities of the Company (or any
class thereof) by such Regulated Holder, to exceed the quantity of such capital
stock or voting securities (or any class thereof) that such Regulated Holder is
permitted under Applicable Law to own. Any action or transaction referred to in
the preceding sentence shall be referred to herein as a "Section 11(e)
Transaction". If the Company proposes to undertake any action or transaction
which could constitute a Section 11(e) Transaction, it shall provide the Holders
at least 15 days prior written notice thereof. If, in the written opinion of
counsel to any Regulated Holder (which may be internal counsel) delivered within
10 days following receipt of such notice, such action or transaction constitutes
a Section 11(e) Transaction with respect to such Regulated Holder, then the
Company shall delay undertaking such Section 11(e) Transaction for the purpose
of using its best efforts to agree on a manner in which to restructure such
action or transaction in a manner reasonably satisfactory to the Company and
such Regulated Holder so that it no longer would constitute a Section 11(e)
Transaction. If the Company and such Regulated Holder are unable to agree,
within 20 days of the delivery of such written opinion, upon a manner in which
to so restructure such Section 11(e) Transaction, and such Section 11(e)
Transaction is a bona fide action or transaction proposed by the Company in good
faith, then the Company shall be permitted to undertake such Section 11(e)
Transaction if prior to or concurrently with doing so it purchases from such
Regulated Holder, at a purchase price equal to the Common Stock Per Share Market
Value a number (specified by such Regulated Holder) of Warrants (based on the
number of Warrant Shares represented thereby) or Warrant Shares sufficient, in
the written opinion of counsel to such Regulated Holder (which may be internal
counsel), to prevent such Section 11(e) Transaction from causing the ownership
of the capital stock of the Company by such Regulated Holder to exceed the
quantity of such capital stock that such Regulated Holder is permitted under
Applicable Law to own. Notwithstanding anything to the contrary contained
herein, the Company shall be permitted to undertake any Section 11(e)
Transaction which would otherwise result in the ownership by any Regulated
Holder of voting securities (or any class thereof in excess of the quantity
permitted by Applicable Law) if, in a manner reasonably satisfactory to such
Regulated Holder, the Company shall provide or cause to be provided for such
Regulated Holder (i) to receive in connection with any such action or
transaction a number of shares or other units of Equivalent Nonvoting Securities
equal to such excess in lieu of the same number of shares or other units of the
voting securities it would
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otherwise have received or (ii) if it would not otherwise have received voting
securities in connection with such action or transaction, to exchange a number
of shares or other units of voting securities then held by such Regulated Holder
equal to such excess for the same number of shares or other units of Equivalent
Nonvoting Securities.
(ii) If it becomes unlawful for any Regulated Holder to continue
to hold some or all of the Warrants or Warrant Shares held by it, or
restrictions are imposed on any Regulated Holder by Applicable Law which, in the
reasonable judgment of such Regulated Holder, make it unduly burdensome to
continue to hold such Warrants or Warrant Shares, the Company shall (i)
cooperate with such Regulated Holder in any efforts by such Regulated Holder to
dispose of some or all of such Warrants or Warrant Shares in a prompt and
orderly manner, including providing (and authorizing such Regulated Holder to
provide) publicly available financial and other information (or such information
to which a Holder would be entitled under Delaware law) concerning the Company
to any prospective purchaser of such Warrants or Warrant Shares and (ii) at the
request of such Regulated Holder, take all steps (including using its best
efforts to cause its Articles of Incorporation to be amended) necessary to
create an Equivalent Nonvoting Security with respect to the Warrant Shares then
held by such Regulated Holder and permit such Regulated Holder to exchange
Warrant Shares for the same number of shares or other units of such Equivalent
Nonvoting Security; provided, that nothing in this subsection 11(e) shall
require the Company to register or qualify such Warrants or Warrant Shares under
any federal or state securities laws.
(f) Current Public Information. The Company will file all reports
required to be filed by it under the 1933 Act and the 1934 Act and the rules and
regulations adopted by the Commission thereunder, and will take such further
action as any Holder may reasonably request, all to the extent required to
enable such Holder to sell Warrant Shares pursuant to Rule 144 or Rule 144A
adopted by the Commission under the 1933 Act. Upon request, the Company will
deliver to any such Holder a written statement as to whether it has complied
with such requirements.
(g) Public Disclosures. The Company will not disclose any Holder's name
or identity as an investor in the Company in any press release or other public
announcement or in any written consent of such Holder, unless such disclosure is
required by applicable law or governmental regulations or by order of a court of
competent jurisdiction in which case prior to making such disclosure the Company
will give written notice to such Holder describing in reasonable detail the
proposed content of such disclosure and will permit the Holder to review and
comment upon the form and substance of such disclosure.
(h) Certain Restrictions. The Company will not without the consent of
the Requisite Holders permit any amendment to its Organizational Documents, if
such amendment would alter the powers, preferences or special rights of the
shares of any class of capital stock of the Company so as to affect the holders
of Common Stock adversely in any material respect.
(i) Specific Performance. Each Holder shall have the right to specific
performance by the Company of the provisions of this Agreement, in addition to
any other remedies it may have at law or in equity. The Company hereby
irrevocably waives, to the extent that it may do
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so under Applicable Law, any defense based on the adequacy of a remedy at law
which may be asserted as a bar to the remedy of specific performance in any
action brought against the Company for specific performance of this Agreement by
any Holder of the Warrants or Warrant Shares.
(j) Transactions with Affiliates. The Company will not, and will not
permit any of its subsidiaries to, enter into transactions with an Affiliate
(for purposes of this Section 11(j), as defined in the Credit Agreement) of the
Company other than transactions on terms and conditions substantially as
favorable to the Company as would be obtainable in a comparable arm's-length
transaction with a Person other than an Affiliate. Except for such transactions
that may be entered into between the Company and any subsidiary, neither the
Company nor any subsidiary shall engage in a merger, business combination or
sale of a material amount of its assets to an Affiliate. The Company will not
issue capital stock to an Affiliate for a price which is below its fair market
value and will not purchase capital stock from an Affiliate for a price which is
greater than its fair market value.
(k) Board Observation Rights. The Purchaser shall have the right to
have two representatives attend and observe all meetings of the Board of
Directors of the Company at the expense of the Company. The Company agrees to
give the Purchaser's representatives prior written notice of all Board meetings
promptly after the scheduling thereof and in any event no later than five
business days prior to such meeting, or if such meeting is scheduled less than
five business days in advance, on the date on which the date of the Board
meeting is set; provided, however, that (i) to the extent the Purchaser or any
Affiliate of the Purchaser is providing financing to the Company, the
Purchaser's representatives may be excluded from that portion of any Board or
committee meeting at which the financing provided by such Person is discussed
and (ii) Purchaser's representatives may be excluded from any portion of any
meeting of the Board of Directors at which counsel to the Company is giving
legal advice and such counsel reasonably determines the presence of Purchaser's
representatives would compromise attorney-client privilege. Purchaser, for its
part, agrees to maintain the confidentiality of the non-public content of all
meetings attended and observed by its representatives. This Section 11(k) shall
not apply to any transferee Holder.
SECTION 12.
AMENDMENTS AND WAIVERS
(a) Consent of Holders. No amendment, modification, termination or
waiver of any provision of this Agreement (including the terms of any agreement
incorporated by reference) and the Warrant Certificates or consent to any
departure by the Company therefrom, shall in any event be effective without the
written concurrence of the Requisite Holders; provided, however, that without
the consent of each Holder affected, no amendment, modification, termination or
waiver may:
(i) make any change to the definition of "Requisite Holders";
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(ii) make any change to the transfer provisions of Section 13
that adversely affects the ability of a Holder to make any transfer described
therein; or
(iii) make any change in the foregoing amendment and waiver
provisions.
After an amendment, modification, termination or waiver under this
Section 12 becomes effective, the Company shall mail to the Holders affected
thereby a notice briefly describing such amendment, modification, termination or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
amendment, modification, termination or waiver.
In connection with any amendment, modification, termination or waiver
under this Section 12, the Company may offer, but shall not be obligated to
offer, to any Holder who consents to such amendment, modification, termination
or waiver, consideration for such Holder's consent, so long as such
consideration is offered to all Holders.
(b) Solicitation of Holders. The Company will not effect any proposed
amendment, modification, termination or waiver of any of the provisions of this
Agreement or the Warrant Certificates unless each Holder affected thereby
(irrespective of the amount of Warrants or Warrant Shares then owned by it)
shall be informed thereof by the Company prior to the effectuation thereof (but
only to the extent the Company has been provided with addresses for the Holders)
and shall be afforded the opportunity of considering the same and shall be
supplied by the Company with sufficient information to enable it to make an
informed decision with respect thereto. Executed or true and correct copies of
any amendment, modification, termination or waiver effected pursuant to the
provisions of this Section 12 shall be delivered by the Company to each Holder
of outstanding Warrants or Warrant Shares forthwith following the date on which
the same shall have been executed and delivered by the Holder or Holders of the
requisite percentage of outstanding Warrant Shares (but only to the extent the
Company has been provided with the addresses for the Holders).
(c) Revocation and Effect of Consents. Until an amendment,
modification, termination or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Warrant or Warrant Shares, even if notation of the consent is not made on any
Warrant Certificate or stock certificate. However, any such Holder or subsequent
Holder may revoke any such consent by notice to the Company received before the
date on which the Requisite Holders have consented (and not theretofore revoked
such consent) to such amendment, modification, termination or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
modification, termination or waiver, which record date shall be at least 10 days
prior to the first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
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SECTION 13.
TRANSFERS
(a) Each Holder, subject to the provisions of subsection 13(b) below,
shall be permitted to transfer any Warrant or Warrant Share (and the rights
relating thereto under this Agreement and the other Warrant Documents) to any
Person; provided that
(i) such transfer is made pursuant to a registration statement
under the 1933 Act (it being acknowledged that the Company shall not be
obligated to assist in any manner in any such registration) or pursuant to an
exemption from the registration requirements of the 1933 Act and in compliance
with similar laws of any other sovereignty having jurisdiction over such Holder
and the proposed transfer;
(ii) if such transfer is being made pursuant to an exemption
from such registration requirements and if requested by the Company (except if
such transfer is being made to an affiliate), counsel for such Holder (which
counsel may be internal counsel) furnishes to the Company an opinion, acceptable
in form and substance to the Company, to the effect that such transfer is being
made pursuant such an exemption;
(iii) the applicable transferee (or, in the case of an account
manager, the managed account on behalf of which the account manager is acting)
is an "accredited investor" as defined in Regulation D promulgated under the
1933 Act;
(iv) the applicable transferee is not a direct competitor of the
Company (as determined in good faith by management of the Company);
(v) except if such transfer is being made to an affiliate (in
which case the representation described in this sentence shall be deemed made),
such transferee represents to the Company in writing that it is acquiring such
Warrant or Warrant Share solely for its own account (or in the case of account
managers, on behalf of managed accounts) and not as nominee or agent for any
other Person (other than for such managed accounts, if applicable) and not with
a view to, or for offer or sale in connection with, any distribution thereof
(within the meaning of the 0000 Xxx) that would be in violation of the
securities laws of the United States of America or any State thereof or any
government having jurisdiction over the proposed transfer, without prejudice,
however, to its right at all times to sell or otherwise dispose of all or any
part of said Warrant or Warrant Share pursuant to a registration statement under
the 1933 Act or pursuant to an exemption from the registration requirements of
the 1933 Act, and subject, nevertheless, to the disposition of its property
being at all times within its control; and
(vi) such transferee provides to the Company such information as
the Company may reasonably require in connection with a registration of any
proposed transfer (e.g., tax identification number and address).
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(b) Upon satisfaction of conditions set forth in Section 13(a), the
Company shall promptly register the transfer of any outstanding Warrants in the
Warrant register and any outstanding Warrant Shares in a Common Stock register
to be maintained by the Company upon surrender thereof, accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company, duly
executed by the registered Holder or Holders thereof or by the duly appointed
legal representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant or Warrant Share, as the case may be,
shall be issued and delivered with all reasonable dispatch to the transferee(s)
and such transferee(s) shall be deemed to have become the Holder(s) of record of
such Warrant or Warrant Share, as the case may be, and the surrendered Warrant
or Warrant Share, as the case may be, shall be canceled and disposed of by the
Company.
SECTION 14.
MISCELLANEOUS
(a) Notices. Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be in
writing and shall be made by personal service, telecopy, United States mail or
reputable courier service:
(i) if to the Purchaser or subsequent Holder, at the address or
facsimile number set forth on the signature pages to this Agreement, or such
other address as shall be designated in a written notice delivered to the
Company; and
(ii) if to the Company, at the address or facsimile number set
forth on the signature pages to this Agreement, or such other address as shall
be designated in a written notice delivered to the other parties hereto.
Unless otherwise specifically provided herein, any notice or other
communication shall be deemed to have been given when delivered in person or by
courier service, upon receipt of facsimile, or three Business Days after
depositing it in the United States mail with adequate postage prepaid and
properly addressed.
(b) Failure or Indulgence Not Waiver: Remedies Cumulative. No failure
or delay on the part of any Holder in the exercise of any power, right or
privilege hereunder or under any other Warrant Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other power,
right or privilege. All rights and remedies existing under this Agreement and
the other Warrant Documents are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
(c) Severability. In case any provision in or obligation under this
Agreement or the Warrant Certificates shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
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(d) Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
(e) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(f) Successors and Assigns. This Agreement shall be binding on the
parties hereto and their respective successors and assigns and shall insure to
the benefit of the parties hereto and the successors and assigns of the
Purchaser (including each Holder and its successors and assigns).
(g) Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
(h) Survival of Representation and Warranties, Entire Agreement. All
representations and warranties contained herein (including those contained in
the Credit Agreement and incorporated herein by reference) or made in writing or
on behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Warrant Shares and the transfer by the
Purchaser of any Warrant Shares or any portion thereof or interest therein, and
may be relied upon by the Purchaser regardless of any investigation made at any
time by or on behalf of the Purchaser. This Agreement, the Warrant Purchase
Agreement, the Warrant Certificates and the Registration Rights Agreement embody
the entire agreement and understanding between the parties hereto and supersede
all prior agreements and understandings, if any, relating to the subject matter
hereof.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
Notice Address:
3100 World Trade Center VIDEO UPDATE, INC.
00 Xxxx Xxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000 By: /s/ Xxxxxx X. Xxxxxx
Attention: Xxxxxx X. Xxxxxx, -------------------------------
Chairman and Chief Title:
Executive Officer
Notice Address:
000 Xxxxxxx Xxxxxx BANQUE PARIBAS, GRAND XXXXXX XXXXXX
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxx By: /s/ X. Xxxxxx
-------------------------------
Title:
By:
-------------------------------
Title:
