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Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of
March 6, 1998 (the "Effective Date") and entered into by and between VIDEO
UPDATE, INC., a Delaware corporation (the "Company"), and BANQUE PARIBAS, GRAND
CAYMAN BRANCH (the "Purchaser"). Unless otherwise provided in this Agreement,
capitalized terms used herein shall have the meanings set forth in the Warrant
Agreement.
WHEREAS, the Purchaser and the Company are parties to the Warrant
Purchase Agreement and the Warrant Agreement;
WHEREAS, in order to induce the Purchaser to enter into the Warrant
Purchase Agreement and the Warrant Agreement, the Company has agreed to provide
the registration rights set forth in this Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the purchase of the New Warrants and the issuance of the Exchange Warrants, in
each case 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. Registration on Request.
(a) Registration on Request. (i) At any time and from time to time
after the Effective Date upon the request of the Required Holders for a
registration of Registrable Securities the anticipated gross proceeds of which
equals or exceeds $1,000,000, the Company will promptly give written notice of
such requested registration to all registered holders of Registrable Securities,
and thereupon the Company, in accordance with the provisions of Section 4
hereof, will use its best efforts to effect the registration under the
Securities Act of:
(A) the Registrable Securities which the Company has
been so requested to register for disposition in accordance
with the intended method or methods of disposition stated in
such request, and
(B) all other Registrable Securities which the
Company has been requested to register by the holders thereof
by written request given to the Company within 20 days after
the giving of such written notice by the Company (which
request shall specify the intended method of disposition of
such Registrable Securities),
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. The Company shall not be required to effect more than four
registrations pursuant to this
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Section 1 (each, a "Demand Registration") and, in any event, not more than one
such Demand Registration within any six-month period.
(ii) Effective Registration Statement. A registration
requested pursuant to this Section 1 shall not be deemed to be effected
(A) if a registration statement with respect thereto shall not have
become effective, (B) if, after it has become effective, such
registration is interfered with for any reason by any stop order,
injunction or other order or requirement of the Commission or any other
governmental agency or any court, and the result of such interference
is to prevent the holders of Registrable Securities to be sold
thereunder from disposing thereof in accordance with the intended
methods of disposition, or (C) if the conditions to closing specified
in the purchase agreement or underwriting agreement entered into in
connection with any underwritten registration shall not be satisfied or
waived with the consent of the underwriters of such Registrable
Securities that were to have been sold thereunder, other than as a
result of any breach by any such holder of its obligations thereunder
or hereunder.
(iii) Registration Statement Form. Registrations
under this Section 1 shall be on such appropriate registration form of
the Commission as shall be selected by the Company and as shall permit
the disposition of the Registrable Securities so to be registered in
accordance with the intended method or methods of disposition specified
in the request of the holders of Registrable Securities being
registered for such registration. The Company agrees to include in any
such registration statement all information which the holders of
Registrable Securities being registered shall reasonably request.
(iv) Selection of Underwriters. If a requested
registration pursuant to this Section 1 involves an underwritten
offering, the managing underwriter or underwriters shall be selected by
a majority of the holders of Registrable Securities requested to be
included in such registration, such underwriter to be reasonably
satisfactory to the Company.
(v) Priority in Requested Registrations. If a
requested registration pursuant to this Section 1 involves an
underwritten offering, and the managing underwriter shall advise the
Company in writing (with a copy to each Person requesting registration
of Registrable Securities) that, in its opinion, the number of
securities requested to be included in such registration exceeds the
number which can be sold in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities
requested to be included therein, the Company will include in such
registration to the extent of the number which the Company is so
advised can be sold in such offering first all Priority Securities (as
hereinafter defined) requested to be included (to the extent described
in the last sentence of this clause (v)) and then pro rata among the
holders of Registrable Securities requesting inclusion therein in
accordance with the number of securities requested to be included in
such registration by each such holder; provided, that if, as a result
of the preceding clause or the last sentence of this clause (v), the
number of Registrable Securities registered and
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sold on behalf of holders of Registrable Securities in any registration
requested pursuant to this Section 1 is less than 80% of the
Registrable Securities as to which such holders requested registration
pursuant to this Section 1, then such registration shall be deemed to
be a registration under Section 2 hereof and not under Section 1
hereof. Except as required by any existing registration rights
agreement listed on Schedule I hereto, if this Section 1 is applicable
in connection with any such registration, without the written consent
of the holders of at least a majority of the Registrable Securities, no
securities other than Registrable Securities shall be covered by such
registration and the Company will not grant any registration rights
inconsistent with the provisions of this Section 1. To the extent that
any of the holders listed on Schedule A (collectively, "Priority
Holders") request registration of any of the shares of common stock
held by them on the date hereof and identified on Schedule A
(collectively, the "Priority Securities")), the Priority Securities
shall, but only to the extent the registration rights of such holders
as in effect the date hereof so require, be first included in the
proposed registration prior to the inclusion of any Registrable
Securities.
SECTION 2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its equity securities under the Securities Act (other than pursuant to a
transaction described in Rule 145 of the Securities Act or on Form S-8), whether
or not for sale for its own account, the Company will each time give prompt
written confidential notice of such proposed filing to all Holders (i) in all
cases at least 20 days before the anticipated filing date and (ii) in the case
of a proposed registration in connection with the exercise of any demand
registration rights (other than the demand registration rights under Section 1)
within five (5) Business Days after the Company receives notice of such demand.
Such notice shall offer such Holders the opportunity to register such amount of
Registrable Securities as they shall request (a "Piggyback Registration").
Subject to Sections 3(b) and 3(c) hereof, the Company shall include in each such
Piggyback Registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within 15 days after
such notice has been given by the Company to the Holders. If the Registration
Statement relating to the Piggyback Registration is to cover an underwritten
offering, such Registrable Securities shall be included in the underwriting on
the same terms and conditions as the securities otherwise being sold through the
underwriters. The Holders shall be permitted to withdraw all or part of the
Registrable Securities from a Piggyback Registration at any time prior to the
effective time of such Piggyback Registration.
(b) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company by or through one
or more underwriters of recognized standing and the managing underwriters
thereof advise the Company in writing that in their good faith judgment the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without materially and adversely
affecting the marketability of the offering,
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then the Company will include in the Registration Statement relating to such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities and the Priority Securities (but only to the
extent the registration rights of the holders of such securities as in effect on
the date hereof does not permit the Registrable Securities to be included first)
requested to be included in such registration by the holders thereof, reduced,
if necessary, on a pro rata basis, based on the number of shares owned by each
such Holder, and (iii) third, if no Registrable Securities had to be excluded
pursuant to this Section 2(b), securities other than Registrable Securities
requested to be included in such registration, reduced, if necessary, on a pro
rata basis, based on the amount of such other securities owned by such other
holders; provided, that if such registration contemplates an "over-allotment
option" on the part of underwriters, to the extent such over-allotment option is
exercised and Holders were excluded from registering any Registrable Securities
pursuant to the priority provisions of Section 2(b) or 2(c), then the
over-allotment option shall be exercised with respect to such Registrable
Securities to the extent of such exclusion, subject to the provisions of Section
2(b)(ii).
(c) Priority on Secondary Registrations. If a Piggyback Registration is
an underwritten secondary registration on behalf of any holders of the Company's
securities, by or through one or more underwriters of recognized standing and
the managing underwriters advise the Company in writing that in their good faith
judgment the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without materially and
adversely affecting the marketability of the offering, the Company will include
in such registration, (i) first, the Registrable Securities and the Priority
Securities (but only to the extent the registration rights of the holders of
such securities as in effect on the date hereof do not permit the Registrable
Securities to be included first) requested to be included in such registration
by the Holders thereof, reduced, if necessary, on a pro rata basis, based on the
number of shares owned by any other Holder and (ii) second, the securities owned
by such other holders.
SECTION 3. Holdback Agreements.
Restrictions on Public Sale by Holders of Registrable
Securities. Each Holder agrees, if so requested (pursuant to timely notice) by
the managing underwriter of an underwritten registration effected pursuant to
Section 1 or 2 hereof in which such Holder is selling Registrable Securities,
not to effect any public sale or distribution of any securities of the Company
of the same class as the securities included in such underwritten registration,
during the fourteen (14) days prior to the effective date of such registration
and until the earlier of (i) the end of the 90-day period beginning on the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration (except as part of such underwritten registration, unless
the underwriters managing the registered public offering otherwise agree) and
(ii) the abandonment of such offering. Notwithstanding the provisions of the
preceding sentence, a Holder may sell any or all of its Registrable Securities
in a private sale, provided that such sale is not to a direct competitor of the
Company (as determined in good faith by management of the Company).
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None of the foregoing provisions of this Section 3 shall apply
to any Holder if such Holder is prevented by applicable statute or regulation
from entering into any such agreement; provided, that any such Holder shall
undertake not to effect any public sale or distribution of the applicable class
of Registrable Securities unless it has provided 45 days' prior written notice
of such sale or distribution to the underwriter or underwriters.
SECTION 4. Registration Procedures. Whenever the Company is
required to register Registrable Securities pursuant to Section 1 or 2 hereof,
the Company will use its reasonable best efforts to effect the registration to
permit the sale of such Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Company will
as expeditiously as possible:
(a) prepare and file with the Commission as soon as practicable a
Registration Statement with respect to such Registrable Securities as prescribed
by Section 1 or 2 on a form available for the sale of the Registrable Securities
by the holders thereof in accordance with the intended method or methods of
distribution thereof and use its reasonable best efforts to cause each such
Registration Statement to become and remain effective for up to 180 days;
provided, however, that before filing a Registration Statement, the Company will
furnish to the Holders of the Registrable Securities covered by such
Registration Statement, the underwriters, if any, and any attorney, accountant
or other agent retained by any such Holder of Registrable Securities or
underwriters (i) copies of all such documents proposed to be filed, which
documents will be subject to the review and comment of such Holders, their
counsel and underwriters, if any, and (ii) if requested, financial and other
information required by the Commission to be included in such Registration
Statement and all financial and other records, pertinent corporate documents and
properties of the Company customarily reviewed in connection with an
underwritten registration; and shall cause the officers, directors and employees
of the Company, counsel to the Company and independent certified public
accountants of the Company, to respond to such inquiries and supply all
information, as shall be necessary, in the opinion of respective counsel to such
Holders and underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act, and will not file any Registration Statement to
which the holders of at least a majority of the Registrable Securities covered
by such Registration Statement or the underwriters, if any, shall reasonably
object;
(b) prepare and file with the Commission such amendments,
post-effective amendments and prospectus supplements to such Registration
Statement as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement until such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such Registration Statement; provided, that the Company shall be deemed not to
have used its best efforts to keep a Registration Statement effective during the
applicable period if it voluntarily takes any action that results in the
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selling Holders of the Registrable Securities covered thereby not being able to
sell such Registrable Securities during that period;
(c) furnish to each selling Holder of Registrable Securities covered by
a registration statement and to each underwriter, if any, such number of copies
of such registration statement, each amendment and post-effective amendment
thereto, the prospectus included in such registration statement (including each
preliminary prospectus and any supplement to such prospectus and any other
prospectus filed under Rule 424 of the Securities Act), in each case including
all exhibits, and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller or to be disposed of by such underwriter (the Company hereby consenting
to the use in accordance with all applicable law of each such registration
statement (or amendment or post-effective amendment thereto) and each such
prospectus (or preliminary prospectus or supplement thereto) by each such seller
and the underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such registration statement or prospectus);
(d) use its reasonable best efforts to register or qualify and, if
applicable, to cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, the securities to be included in a Registration Statement for
offer and sale under the securities or blue sky laws of such jurisdictions
within the United States of America as any selling Holder or managing
underwriters (if any) shall reasonably request, to keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the securities covered by the applicable Registration
Statement; provided, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph or (ii) consent to general service of
process in any such jurisdiction;
(e) cause all such Registrable Securities to be listed on each
securities exchange on which securities of the same class as the Registrable
Securities are then listed and, if not so listed, to be listed on the NASD
automated quotation system and, if listed on the NASD automated quotation
system, use its reasonable best efforts to secure designation of all such
Registrable Securities covered by such Registration Statement as a NASDAQ
Security within the meaning of Rule 11Aa3-l under the Exchange Act or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to use its reasonable best
efforts to arrange for at least two market makers to register as such with
respect to such Registrable Securities with the NASD;
(f) provide a transfer agent and registrar for all such Registrable
Securities and a CUSIP number for all such Registrable Securities not later than
the effective date of such Registration Statement;
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(g) comply with all applicable rules and regulations of the Commission,
and make available to its security holders an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (or in each case within such extended
period of time as may be permitted by the Commission for filing the applicable
report with the Commission) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment or
best efforts underwritten offering or (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which earnings
statement shall cover said 12-month periods;
(h) permit any Holder which, in its sole and exclusive judgment, might
be deemed to be an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such Holder and its counsel should
be included;
(i) use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or suspending the
qualification (or exemption from qualification) of any of the securities
included therein for sale in any jurisdiction within the United States of
America, and, in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending the
qualification of any securities included in such Registration Statement for sale
in any jurisdiction within the United States of America, the Company will use
its best efforts promptly to obtain the withdrawal of such order at the earliest
possible moment;
(j) if the piggyback or requested registration is an underwritten
registration, obtain "cold comfort" letters and updates thereof (which letters
and updates (in form, scope and substance) shall be reasonably satisfactory to
the managing underwriters, if any, and counsel to the selling Holders of
Registrable Securities) from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the underwriters,
if any, and each selling Holder of Registrable Securities, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings and such other
matters as the underwriters, if any, or the Holders of a majority of the
Registrable Securities being sold may reasonably request;
(k) obtain opinions of independent counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and not objected
to by the Holders of a majority of the Registrable Securities being sold),
addressed to each selling Holder and each of the underwriters, if any, covering
the matters customarily covered in
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opinions of issuer's counsel requested in underwritten offerings, such as the
effectiveness of the Registration Statement and such other matters as may be
requested by such counsel and underwriters, if any;
(l) promptly (but in any event, within two business days) notify the
selling Holders of Registrable Securities, their counsel and the managing
underwriters, if any, and confirm such notice in writing,
(i) when a prospectus or any supplement or post-effective
amendment to such prospectus has been filed, and, with respect to a
Registration Statement or any post-effective amendment thereto, when
the same has become effective,
(ii) of any request by the Commission or any other Federal or
state governmental authority for amendments or supplements to a
Registration Statement or related prospectus or for additional
information,
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any prospectus or the
initiation of any proceedings by any Person for that purpose,
(iv) if at any time the representations and warranties of the
Company contemplated by clause (i) of paragraph (q) below cease to be
true and correct in any respect,
(v) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Securities for offer or sale under the securities or blue sky laws of
any jurisdiction, or the contemplation, initiation or threatening, of
any proceeding for such purpose,
(vi) of the happening of any event that makes any statement
made in such Registration Statement untrue in any material respect or
that requires the making of any changes in such Registration Statement
so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made (in the case of any prospectus), not
misleading, and
(vii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate;
(m) if requested by the managing underwriters, if any, or a Holder of
Registrable Securities being sold, promptly incorporate in a prospectus,
supplement or post-effective amendment such information as the managing
underwriters, if any, and the Holders of a majority of the Registrable
Securities being sold reasonably request to
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be included therein relating to the sale of the Registrable Securities,
including, without limitation, information with respect to the number of shares
of Registrable Securities being sold to underwriters, the purchase price being
paid therefor by such underwriters and with respect to any other terms of the
underwritten offering of the Registrable Securities to be sold in such offering,
and make all required filings of such prospectus, supplement or post-effective
amendment promptly following notification of the matters to be incorporated in
such supplement or post-effective amendment;
(n) furnish to each selling Holder of Registrable Securities and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement;
(o) cooperate with the selling Holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Registrable Securities not bearing any
restrictive legends and in a form eligible for deposit with The Depository Trust
Company to be sold and cause such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters, if any,
or holder of Registrable Securities may request at least three business days
prior to any sale of Registrable Securities to the underwriters;
(p) as promptly as practicable upon the occurrence of any event
contemplated by clause (vi) of paragraph (l) above, prepare a supplement or
post-effective amendment to the Registration Statement, or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold hereunder, the prospectus will not contain an
untrue statement of a material fact or an omission to state a material fact
required to be stated in a Registration Statement or prospectus or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading;
(q) enter into such agreements (including underwriting agreements in
customary form, scope and substance) and take all such other actions in
connection therewith as the Holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to expedite
or facilitate the registration or the disposition of such Registrable
Securities, and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration:
(i) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, with respect
to the business of the Company and the Registration Statement, in form,
substance and scope as are customarily made by issuers to underwriters
in underwritten offerings and confirm the same, if and when requested;
(ii) if an underwriting agreement is entered into, cause the
same to include the indemnification and contribution provisions and
procedures substantially similar to (and no less favorable to the
selling holders of Registrable Securities and the underwriters than)
those contained in Section 6
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hereof with respect to all parties to be indemnified pursuant to said
Section (or, with respect to the indemnification of such underwriters,
such similar indemnification and contribution provisions as such
underwriters shall customarily require); and
(iii) deliver such documents and certificates as may be
requested by the Holders of a majority of the Registrable Securities
being sold and managing underwriters, if any, to evidence compliance
with clause (i) above and with any conditions contained in the
underwriting agreement or other similar agreement entered into by the
Company,
it being understood that the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent otherwise reasonably
requested by the holders of a majority of the Registrable Securities being sold.
(r) cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD; and
(s) use its reasonable best efforts to take all other steps necessary
to effect the registration of the Registrable Securities covered by the
Registration Statement contemplated hereby.
Each Holder agrees by acquisition of such Registrable
Securities that, upon receipt of written notice from the Company of the
happening of any event of the kind described in Xxxxxxx 0(x)(xx), 0(x)(xxx),
0(x)(x), 0(x)(xx) or 4(l)(vii), such Holder will forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Registration Statement contemplated by Section 4(p), or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such prospectus, and, if so directed by the Company, such Holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. If the Company shall give any such notice, the time periods mentioned in
Section 1 hereof shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement receives (x) the copies of the supplemented or amended prospectus
contemplated by Section 4(p) hereof or (y) the Advice, as the case may be.
SECTION 5. Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation (i) all registration, filing
fees and ex-
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penses (including fees with respect to filings made with NASD (including, if
applicable, the fees and expenses of any "qualified independent underwriter", as
may be required by the rules and regulations of the NASD), (ii) fees and
expenses of compliance with securities or blue sky laws (including fees and
disbursements of counsel for the underwriters or selling holders in connection
with blue sky qualifications of the Registrable Securities and determinations of
their eligibility for investment under the laws of such jurisdiction as the
managing underwriters or Holders of a majority of the Registrable Securities
being sold may designate), (iii) printing expenses (including printing
certificates for the Registrable Securities to be sold and the Registration
Statements), messenger and delivery expenses, duplication, word processing, and
telephone expenses, (iv) fees and disbursements of counsel for the Company, and
(v) fees and disbursements of all independent certified public accountants of
the Company incurred in connection with such registration (including the
expenses of any special audit and "cold comfort" letters incident to such
registration), underwriters (excluding discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities) and
other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne by the Company regardless of whether a
Registration Statement becomes effective; provided, that the Company will, in
any event, pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit or quarterly review, the
fees and expenses of any Person, including special experts, retained by the
Company, the expense of any liability insurance, up to $15,000 of the fees and
expenses of one counsel for selling holders of securities and the expenses and
fees for listing the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed or on the NASD
automated quotation system.
(b) To the extent any expenses of registration are not required to be
paid by the Company, each holder of securities included in any registration
hereunder will pay those expenses allocable to the registration of such holder's
securities so included (including fees and expenses of counsel in excess of
$15,000), and any expenses not so allocable will be borne by all sellers of
securities included in such registration in proportion to the aggregate selling
price of the securities to be so registered.
SECTION 6. Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify, to
the fullest extent permitted by law, each Holder, each affiliate of a Holder and
each officer, director, employee, counsel, agent or representative of such
Holder and its affiliates and each Person who controls any such Person (within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act) against, and hold it and them harmless from, all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees and disbursements) and expenses, including expenses of
investigation (collectively, "Losses") arising out of, caused by or based upon
any untrue or alleged untrue statement of material fact contained in any
Registration Statement, or any omission or alleged omission of a
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material fact required to be stated therein or necessary to make the statements
therein not misleading (a "Misstatement/Omission"), except that the Company
shall not be liable (i) insofar as such Misstatement/Omission is based upon and
in conformity with information furnished in writing to the Company by a Holder
expressly for use therein and (ii) to the extent that any such claim arises out
of or is based upon a Misstatement/Omission made in any preliminary prospectus,
(x) to the extent such Misstatement/Omission is corrected in the final
prospectus and (y) having previously been timely furnished by or on behalf of
the Company with sufficient copies of the final prospectus, such indemnified
Person thereafter fails to deliver such prospectus prior to or concurrently with
the sale to the Person who purchased a Registrable Security from such
indemnified Person and who is asserting such claim. In connection with an
underwritten offering, the Company will indemnify such underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers and directors and each Person
who controls (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) such underwriters to the same extent as provided
above with respect to the indemnification of the Holders. This indemnity shall
be in addition to any other indemnification arrangements to which the Company
may otherwise be party.
(b) Indemnification by Holders. In connection with any Registration
Statement in which a Holder is participating, each such Holder will furnish to
the Company in writing such powers of attorney, custody agreements and letters
of direction and other information and affidavits as the Company reasonably
requests for use in connection with any such Registration Statement, and each
such Holder agrees to indemnify, to the fullest extent permitted by law, the
Company, its directors and officers and each Person who controls the Company
(within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act) against, and hold it and them harmless from, any Losses
resulting from any Misstatement/Omission, but only to the extent that such
Misstatement/Omission is based upon and in conformity with information furnished
in writing by such Holder expressly for use in such Registration Statement;
provided, that the obligation to indemnify will be individual (several and not
joint) to each Holder and will be limited to the net amount of proceeds (net of
payment of all expenses) received by such holder from the sale of Registrable
Securities pursuant to such Registration Statement giving rise to such
indemnification obligation.
(c) In case any action, claim or proceeding shall be brought against
any Person entitled to indemnification hereunder, such indemnified party shall
promptly notify each indemnifying party in writing, and such indemnifying party
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses
incurred in connection with the defense thereof. The failure to so notify such
indemnifying party shall not affect any obligation it may have to any
indemnified party under this Agreement or otherwise except to the extent that
(as finally determined by a court of competent jurisdiction (which determination
is not subject to review or appeal)) such failure materially and adversely
prejudiced such indemnifying party. Each indemnified party shall have the right
to employ separate counsel in such action, claim or proceeding and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of
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each indemnified party unless: (i) such indemnifying party has agreed to pay
such expenses; (ii) such indemnifying party has failed promptly to assume the
defense and employ counsel reasonably satisfactory to such indemnified party; or
(iii) the named parties to any such action, claim or proceeding (including any
impleaded parties) include both such indemnified party and such indemnifying
party or an affiliate or controlling person of such indemnifying party, and such
indemnified party shall have been advised in writing by counsel that either (x)
there may be one or more legal defenses available to it which are different from
or in addition to those available to such indemnifying party or such affiliate
or controlling person or (y) a conflict of interest may exist if such counsel
represents such indemnified party and such indemnifying party or its affiliate
or controlling person; provided, however, that such indemnifying party shall
not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be responsible
hereunder for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel), which counsel shall be designated by such
indemnified party.
No indemnified party shall be liable for any settlement effected
without its written consent. Each indemnifying party agrees, jointly and
severally, that it will not, without the indemnified party's prior written
consent, consent to entry of any judgment or settle or compromise any pending or
threatened claim, action or proceeding in respect of which indemnification or
contribution may be sought hereunder unless the foregoing contains an
unconditional release, in form and substance reasonably satisfactory to the
indemnified parties, of the indemnified parties from all liability and
obligation arising therefrom.
(d) The indemnifying party's liability to any such indemnified party
hereunder shall not be extinguished solely because any other indemnified party
is not entitled to indemnity hereunder.
(e) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party, and will survive the transfer of securities.
(f) Contribution. If the indemnification provided for in this Section 6
is unavailable to, or insufficient to hold harmless, an indemnified party under
Section 6(a) or Section 6(b) above in respect of any Losses referred to in such
Sections, then each applicable indemnifying party shall have an obligation to
contribute to the amount paid or payable by such indemnified party as a result
of such Losses in such proportion as is appropriate to reflect the relative
fault of the Company, on the one hand, and of the Holder, on the other, in
connection with the Misstatement/Omission which resulted in such Losses, taking
into account any other relevant equitable considerations. The amount paid or
payable by a party as a result of the Losses referred to above shall be deemed
to include, subject to the limitations set forth in Section 6(c) above, any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation, lawsuit or legal or administrative action or proceeding.
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Page 14
The relative fault of the Company, on the one hand, and of the Holder,
on the other, shall be determined by reference to, among other things, whether
the relevant Misstatement/Omission relates to information supplied by the
Company or by the Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Misstatement/Omission.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 6(f) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 6(f), a Holder shall not be required to contribute
any amount in excess of the amount by which (i) the amount (net of payment of
all expenses) at which the securities that were sold by such Holder and
distributed to the public were offered to the public exceeds (ii) the amount of
any damages which such Holder has otherwise been required to pay by reason of
such Misstatement/Omission.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 6
are in addition to any liability that the indemnifying parties may have to the
indemnified parties.
SECTION 7. Rules 144 and 144A.
The Company shall timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including but not limited to the
reports under sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, it will, upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 and Rule
144A under the Securities Act, as such Rules may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the Commission. Upon
the request of any holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with the filing
requirements of this Section 6.
SECTION 8. (a) Limitation on Obligations to Register.
Anything in this to the contrary notwithstanding:
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Page 15
(i) The Company may defer the filing of any registration
statement one time if (i) the Company is engaged in active negotiations with
respect to the acquisition of a "significant subsidiary" as defined in
Regulation S-X of the Commission which would in the opinion of counsel for the
Company be required to be disclosed in the proposed filing; (ii) in the opinion
of counsel for the Company, the proposed filing would require the inclusion
therein of audited financial statements other than those in respect of the
Company's most recently ended full fiscal year and any preceding full fiscal
year, and the Company may then, at its option, delay the imposition of its
obligations pursuant to this Agreement hereof until the earlier of (A) the
conclusion or termination of such negotiations, or the date of availability of
such audited financial statements, whichever is applicable, or (B) 120 days from
the date of the registration request, or (iii) the proposed filing would be made
within 180 days from the date of effectiveness of any registration statement
that could have included the Registrable Securities.
(b) Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) timely completes and executes all
questionnaires, powers of attorney, customary indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements; provided, that no Holder included in any underwritten registration
shall be required to make any representations or warranties to the Company or
the underwriters other than representations and warranties regarding such Holder
and such Holder's intended method of distribution.
SECTION 9. Definitions.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" means the Company's Class A Common Stock, par value $.01
per share, or any other shares of capital stock or other securities of the
Company into which such shares of Common Stock shall be reclassified or changed,
including, by reason of a merger, consolidation, reorganization or
recapitalization. If the Common Stock has been so reclassified or changed, or if
the Company pays a dividend or makes a distribution on the Common Stock in
shares of capital stock, or subdivides (or combines) its outstanding shares of
Common Stock into a greater (or smaller) number of shares of Common Stock, a
share of Common Stock shall be deemed to be such number of shares of stock and
amount of other securities to which a holder of a share of Common Stock
outstanding immediately prior to such change, reclassification, exchange,
dividend, distribution, subdivision or combination would be entitled.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any similar Federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
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Page 16
"Exchange Warrants" shall mean the warrants to purchase 350,000 shares
of Common Stock issued to the Purchaser pursuant to the Warrant Purchase
Agreement in exchange for warrants issued to the Purchaser pursuant to the
Moovies Warrant Purchase Agreement.
"Moovies Warrant Purchase Agreement" shall mean the Warrant Purchase
Agreement, dated March 14, 1997, by and between Moovies, Inc. and the Purchaser.
"NASD" means the National Association of Securities Dealers, Inc.
"New Warrants" means the warrants to purchase 1,000,000 shares of
Common Stock issued to the Purchaser pursuant to the Warrant Purchase Agreement.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Registrable Securities" means (i) any of the shares of Common Stock
issuable upon the exercise of the Warrants and (ii) any securities issued or
issuable with respect to such Common Stock referred to in clause (i) above by
way of stock dividends or stock splits or in connection with a combination of
shares, recapitalization, merger, consolidation, or other reorganization or
otherwise. As to any particular Registrable Securities, such securities will
cease to be Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act or any successor rule. The foregoing notwithstanding, a
security will not cease to be a Registrable Security until all stop transfer
instructions or notations and restrictive legends with respect to such security
have been lifted or removed. For purposes of this Agreement, a Person will be
deemed to be a "Holder" whenever such Person (x) has acquired such Registrable
Securities or (y) has the right to acquire directly such Registrable Securities
upon conversion or exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise of
such right, whether or not such acquisition has actually been effected (any such
Person, a "Holder").
"Registration Statement" means any registration statement under the
Securities Act of the Company that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the related prospectus,
all amendments and supplements to such registration statement, including pre-
and post-effective amendments, all exhibits thereto and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Required Holders" means Holders of at least a majority of the
aggregate amount of all Registrable Securities.
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Page 17
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any similar Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at the
time.
"Warrant Purchase Agreement" shall mean the Warrant Purchase Agreement
of even date herewith, by and between the Company and the Purchaser.
"Warrant Agreement" means the Warrant Agreement of even date herewith,
by and between the Company and the Purchaser.
"Warrants" shall mean and include the New Warrants and the Exchange
Warrants.
Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the Warrant Agreement.
SECTION 10. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with,
adversely affects or violates the rights granted to the Holders in this
Agreement. The Company has not previously entered into any agreement with
respect to its securities granting any registration rights to any Person other
than as set forth in Schedule I attached hereto.
(b) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights provided in the Warrant Purchase Agreement, the
Warrant Agreement or granted by law, it being understood and agreed that the
Company shall not be liable for any decrease in value of Registrable Securities
arising from circumstances beyond its control. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance or injunctive relief that a remedy at law would
be adequate. Accordingly, any party may in its sole discretion apply to any
court of law or equity of competent jurisdiction (without posting any bond or
other security) for specific performance and for other injunctive relief in
order to enforce or prevent violation of the provisions of this Agreement.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement, including the provisions of this sentence, may be
amended, modified, supplemented or waived only upon the prior written consent of
the Company and the Required Holders.
(d) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions
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Page 18
of this Agreement which are for the benefit of the Purchaser or Holders are also
for the benefit of, and enforceable by, any subsequent Holder of Registrable
Securities (except in the event such subsequent Holder is a direct competitor of
the Company (as determined in good faith by management of the Company));
provided, however, in no event may any assignment hereunder result in more than
10 Holders (it being understood that Holders who are affiliates of each other
shall only count as one Holder). The Company may not assign its rights or
obligations hereunder without prior written consent of each Holder.
(e) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, any one of which need not contain the signatures of more than one
party, but each of which when so executed shall be deemed to be an original and
all such counterparts taken together shall constitute one and the same
Agreement.
(g) Descriptive Headings: Interpretation. The descriptive headings of
this Agreement are inserted for convenience of reference only and shall not
limit or otherwise affect the meaning hereof. The use of the word "including" in
this Agreement shall be by way of example rather than by limitation.
(h) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable air courier guaranteeing overnight
delivery (charges prepaid), mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid or sent by facsimile. Such
notices, demands and other communications shall be sent to the Purchaser at the
address indicated below the Purchaser's name on the signature pages hereto and
to the Company at the address indicated below:
Video Update
0000 Xxxxx Xxxxx Xxxxxx
00 Xxxx Xxxxxxx Xxxxxx
Xx. Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx,
Chairman and Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party. Any
notice, demand or other
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Page 19
communication given hereunder will be deemed to have been given as of the date
so delivered; as of the first business day after being delivered to an overnight
air courier guaranteeing overnight delivery; on the fifth business day after
being mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; as the case may be.
(i) Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York. Each of the Company and each Holder hereby irrevocably submits to the
jurisdiction of any New York State Court sitting in the Borough of Manhattan in
the City of New York or any Federal court sitting in the Borough of Manhattan in
the City of New York in respect of any suit, action or proceeding arising out of
or relating to this Agreement and the Registrable Securities, and irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, jurisdiction of the aforesaid courts. Each of the Company and
each Holder irrevocably waives, to the fullest extent it may effectively do so
under applicable law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any such
court and any claim that any such suit, action or proceeding has been brought in
an inconvenient forum. Nothing herein shall affect the right of any Holder to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other jurisdiction.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(k) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the court, shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
* * * *
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IN WITNESS WHEREOF the parties hereto have or have caused this
Registration Agreement to be duly executed as of the date first above written.
VIDEO UPDATE, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Title:
BANQUE PARIBAS, GRAND CAYMAN BRANCH
By: /s/ X. Xxxxxx
--------------------------------
Title:
By:
--------------------------------
Title:
Address for Notices:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
