REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April 8, 1999, among the
investors listed on Schedule I hereto (collectively, the "Investor") and Four
Media Company, a Delaware corporation (the "Company").
R E C I T A L S
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WHEREAS, the Investor has, pursuant to the terms of three separate
Stock Purchase Agreements, each dated as of January 18, 1999, by and between (i)
the Company and the Investor, (ii) Technical Services Partners, L.P. ("TSP") and
the Investor and (iii) certain of the Company's current stockholders and the
Investor (collectively, the "Purchase Agreements"), agreed to purchase a total
of 10,200,000 shares (the "Shares") of common stock, par value $0.01 per share,
of the Company (the "Common Stock") and a Warrant to purchase an additional
1,100,000 shares of Common Stock (the "Warrant Shares"); and
WHEREAS, the Investor has, pursuant to the terms of a Voting and Option
Agreement, dated as of January 18, 1999, by and among the Investor, TSP and the
Company (the "Option Agreement"), been granted an irrevocable option to purchase
1,432,875 shares of Common Stock (the "Option Shares"); and
WHEREAS, the Company has agreed, as a condition precedent to the
Investor's obligations under the Purchase Agreements, to grant the Investor
certain registration rights with respect to the Shares, the Warrant Shares and
the Option Shares; and
WHEREAS, the Company and the Investor desire to define the registration
rights of the Investor with respect to the Shares, the Warrant Shares and the
Option Shares on the terms and subject to the conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the parties hereby agree as follows:
1. DEFINITIONS
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As used in this Agreement, the following terms have the respective
meanings set forth below:
Commission: shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act;
Exchange Act: shall mean the Securities Exchange Act of 1934, as
amended;
Flemings Registration Rights Agreement: shall mean the Regis- tration
Rights Agreement, dated the date hereof, between the Company and Flemings (as
defined in the Purchase Agreements);
Flemings Shares: shall mean the shares of Common Stock defined as
Registrable Securities in the Flemings Registration Rights Agreement, held at
any time by Flemings;
Holder: shall mean any holder of Registrable Securities;
Initiating Holder: shall mean any Holder or Holders who in the
aggregate are Holders of more than 50% of the then outstanding Registrable
Securities;
Person: shall mean an individual, partnership, limited liability
company, joint-stock company, corporation, trust or unincorporated organization,
and a government or agency or political subdivision thereof;
register, registered and registration: shall mean a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement;
Registrable Securities: shall mean (A) the Shares, the Warrant Shares
and the Option Shares, (B) any additional shares of Common Stock acquired by the
Investor and (C) any stock of the Company issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Common Stock referred to in clause (A); provided, however, that the Common Stock
referred to in clauses (A) and (B) shall no longer be deemed Registrable
Securities upon the earliest of: (i) such time as a registration statement with
respect to such shares of Common Stock shall have been declared effective by the
Commission and all of the Registrable Securities registered thereunder shall
have been disposed of by the Holders in accordance with the plan of distribution
described in the prospectus forming a part of such effective registration
statement, (ii) the sale of all shares of Registrable Securities by the Holders
pursuant to Rule 144 under the Securities Act and (iii) the transfer of all
shares of Registrable Securities by the Holders to a transferee or transferees
who are not otherwise entitled to registration rights with respect to such
securities.
Registration Expenses: shall mean all expenses incurred by the Company
in compliance with Sections 2(a) and (b) hereof, including, without limitation,
all registration and filing fees, listing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and expenses of one counsel for
all the Holders in an amount not to exceed $15,000, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company);
Security, Securities: shall have the meaning set forth in Section 2(1)
of the Securities Act;
Securities Act: shall mean the Securities Act of 1933, as amended; and
Selling Expenses: shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for each of the Holders other than fees and expenses of
one counsel for all the Holders in an amount not to exceed $15,000 and all stock
transfer taxes related to the Registrable Securities.
▇▇▇▇▇▇▇ Shares: shall mean (A) the 1,432,875 shares of Common Stock
beneficially owned by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ pursuant to an agreement with Technical
Services Partners, L.P. and (B) any stock of the Company issued as a dividend or
other distribution with respect to, or in exchange for or in replacement of, the
Common Stock referred to in clause (A); provided, however, that the Common Stock
referred to in clauses (A) and (B) shall no longer be deemed Registrable
Securities upon the earliest of: (i) such time as a registration statement with
respect to such shares of Common Stock shall have been declared effective by the
Commission and all of the Registrable Securities registered thereunder shall
have been disposed of by the holder thereof in accordance with the plan of
distribution described in the prospectus forming a part of such effective
registration statement, (ii) the sale of all shares of Registrable Securities by
the holder thereof pursuant to Rule 144 under the Securities Act and (iii) the
transfer of all shares of Registrable Securities by the holder thereof to a
transferee or transferees who are not otherwise entitled to registration rights
with respect to such securities.
2. REGISTRATION RIGHTS
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(a) Requested Registration.
(i) Request for Registration. If the Company shall receive
from an Initiating Holder, at any time, a written request that the Company
effect a registration under the Securities Act with respect to all or a
part of the Registrable Securities, the Company will:
(A) promptly give written notice of the proposed
registration, qualification or compliance to
all other Holders and the Other Stockholders (as hereinafter defined) in
the event of an underwritten offering, such notice to provide, in the
case of an underwritten offering, an opportunity for the holders of
Flemings Shares to jointly exercise their request for registration
rights with the Initiating Holder pursuant to Section 2(a)(i) of the
Flemings Registration Rights Agreement; and
(B) as soon as practicable, use its reasonable best
efforts to effect such registration (including, without limitation,
the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations
issued under the Securities Act) as may be so requested and as is
reasonably necessary to permit or facilitate the sale and distribution
of all or such portion of such Registrable Securities as are specified
in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within 10
business days after written notice from the Company is given under
Section 2(a)(i)(A) above; provided that the Company shall not be
obligated to effect, or take any action to effect, any such registration
pursuant to this Section 2(a):
(x) In any particular jurisdiction in which
the Company would be required to execute a general consent to service
of process in effecting such registration, qualification or
compliance, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder;
(y) After the Company has effected three (3) such
registrations (or, if the Purchase Agreements have been terminated
for any reason but the Investor has elected to exercise its option to
purchase the Option Shares pursuant to the Option Agreement, after
the Company has effected two (2) such registrations) pursuant to this
Section 2(a) and such registrations have been declared or ordered
effective and have remained effective for a period ending on the
earlier of (i) one hundred twenty (120) days after the date of such
effectiveness and (2) the date on which the sales of such Registrable
Securities shall have closed; provided, however, that in the event
that sales of the securities consistent with the plan of distribution
described in the prospectus forming a part of such effective
registration statement are not been permitted by the Commission, or
such sales would not be in accordance with the applicable rules and
regulations of the Commission (as evidenced by written advice of
counsel), at any time during such 120-day period, such 120-day period
will be extended by such number of days during which such sales were
not permitted or not in accordance with such applicable rules and
regulations; or
(z) If the Registrable Securities requested by all
Holders to be registered pursuant to such request have an anticipated
aggregate public offering price (before any underwriting discounts
and commissions) of less than $15,000,000.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 2(a)(ii) below,
include other securities of the Company which are held by Persons who, by virtue
of agreements with the Company, are entitled to include their securities in any
such registration, including without limitation the ▇▇▇▇▇▇▇ Shares ("Other
Stockholders").
The registration rights set forth in this Section 2 may be assigned, in
whole or in part, to any transferee of Registrable Securities (who shall be
bound by all obligations of this Agreement).
The Initiating Holders may, at any time prior to the effective date of
the registration statement relating to any registration effected pursuant to
Section 2(a) of this Agreement, revoke such demand for registration by providing
written notice to the Company, in which event the Initiating Holders shall elect
either (i) that such request is deemed to be a request for registration under
this Section 2(a)(i) or (ii) that such request shall be deemed not to be a
request under this Section 2(a)(i) and, in the case of (ii) above, the
Initiating Holders, and not the Company, shall be responsible for any expenses
incurred by the Company in connection with such withdrawn registration
statement.
(ii) Underwriting. If the Initiating Holders intend to distri-
bute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request
made pursuant to Section 2(a)(i)(A). If Other Stockholders request
inclusion in such such underwritten offering, the Holders shall offer to
include the securities of such Other Stockholders in the underwriting on the
same terms and conditions as the Registrable Securities of the Holders
(subject to the limitations on sale set forth herein) and may condition
such offer on their acceptance of the further applicable provisions of this
Section 2. The Holders whose shares are to be included in such registration
and the Company
shall (together with all Other Stockholders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter or underwriters
selected for such underwriting by the Initiating Holders and reasonably
acceptable to the Company. Notwithstanding any other provision of this
Section 2(a), if the representative advises the Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the securities of the Company held by the Initiating Holder
and each Other Stockholder shall be excluded from such registration as
follows: first, securities held by each Other Stockholder (other than
Flemings Shares) to the minimum extent so required (which may be up to 100%
of such securities) by such limitation, such exclusion to be effected on a
pro rata basis (based on the number of shares requested for inclusion in
such registration by such Other Stockholders); and, second, to the extent
that the Company is advised that additional shares must also be excluded
from such registration, securities held by the holders of Flemings Shares
shall be excluded from such registration to the minimum extent so required
(which may be up to 100% of such securities) by such limitation, provided
that if the holders of Flemings Shares have elected to join in such request
for registration by notice to the Company and the Initiating Holders within
ten (10) days of the notice referred to in Section 2(a)(i) hereof, then the
foregoing limitation shall be inapplicable and, instead, securities held by
the holders of Flemings Shares and the Initiating Holders shall be excluded
from such registration to the minimum extent so required by such limitation,
such exclusion to be effected on a pro rata basis (based on the number of
shares requested for inclusion in such registration by the Initiating
Holders and the holders of the Flemings Shares). No Registrable Securities
or any other securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration.
If any Other Stockholder who has requested inclusion in such registration as
provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the under-
writer and the Initiating Holders. The securities so withdrawn shall also be
withdrawn from registration. If the underwriter has not limited the number
of Registrable Securities or other securities to be underwritten, the
Company and officers and directors of the Company may include its or their
securities for its or their own account in such registration if the
representative so agrees and if the number of Registrable Securities and
other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
(iii) Right to Defer; General. Notwithstanding the foregoing, if
the Company shall promptly (but in no event later than five business days)
upon receipt of a request for registration pursuant to Section 2(a) furnish
to the Initiating Holders a certificate signed by the Secretary of the
Company stating that, in the good faith judgment of the Board of
Directors of the Company (acting through its Independent Directors (as
defined in the Purchase Agreements) as set forth in a duly adopted written
resolution, it would materially interfere with a business or financial
transaction of substantial importance to the Company (other than an
underwritten public offering of its securities) for such registration
statement to be filed and it is therefore necessary to defer the filing of
such registration statement, the Company shall have the right to defer such
filing for a period of not more than one hundred thirty-five (135) days
after receipt of the request of the Initiating Holders; provided, however,
that the Company may not utilize this right more than once in any twelve
month period and in no event will the Company be permitted to defer such
filing for more than six (6) months in the aggregate pursuant to Sections
2(a)(iii) and (iv) hereof. In the event of any deferral pursuant to this
Section, the Initiating Holder may, at its option, promptly upon receipt of
notice of such deferral provide notice to the Company of its intention to
withdraw its demand for a registration pursuant to Section 2(a); provided,
however, that upon such withdrawal the Initiation Holder's withdrawn demand
for registration shall not be deemed to have been a demand for purposes of
Section 2(a)(i)(y) of this Agreement.
(iv) Right to Defer; Company Offering. Notwithstanding the
foregoing, if the Company receives a request for registration under Section
2(a) ofthis Agreement, then it may postpone such request for registration
for ninety (90) days in order to file a registration statement for a primary
offering of Common Stock; provided that, in such event, the Holders may
elect by delivering written notice to the Company within ten (10) days of
receipt of notice of such deferral to either (A) postpone such request for
registration, in which event the number of registrations that such holders
may exercise under Section 2(a)(i) hereof shall remain unaffected, (B)
exercise the registration rights granted to them pursuant to Section 2(b)
hereof, in which event the number of registrations that such holders may
exercise under Section 2(a)(i) hereof shall remain unaffected, or (C)
exercise a request for registration under Section 2(a) hereof in which
event such holders shall, notwithstanding the provisions of Section
2(b)(ii) hereof, be treated pari passu with the Company in all respects
(b) Company Registration.
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(i) If the Company shall determine to register any of its equity
securities either for its own account or for the account of Other
Stockholders, other than a registration relating solely to employee benefit
plans or employee stock plans or similar employee benefit plans, or a regis-
tration relating solely to a Commission Rule 145 transaction or similar
transaction, including any registration on Form S-4 or S-8 or any successor
form to such form, or a registration on any registration form which does not
permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the
Company will:
(A) promptly give to each of the Holders a written
notice thereof (which shall include a list of the jurisdictions in which
the Company intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws), such notice to
provide, in the case of an underwritten offering for the account of
holders of Flemings Shares, an opportunity for the Holders to jointly
exercise their rights with the holders of Flemings Shares to a request
for registration pursuant to Section 2(a)(i) hereof; and
(B) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified
in a written request or requests, made by the Holders within fifteen
(15) days after receipt of the written notice from the Company described
in clause (A) above, except as set forth in Section 2(b)(ii) below.
Such written request may specify all or a part of the Holders'
Registrable Securities.
(ii) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting,
the Company shall so advise each of the Holders as a part of the written
notice given pursuant to Section 2(b)(i)(A). In such event, the right of
each of the Holders to registration pursuant to this Section 2(b) shall be
conditioned upon such Holders' participation in such underwriting and the
inclusion of such Holders' Registrable Securities in the underwriting to the
extent provided herein. The Holders whose shares are to be included in such
registration shall (together with the Company and the Other Stockholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 2(b), if the
representative determines that marketing factors require a limitation
on the number of shares to be underwritten, the representative may
(subject to the allocation priority set forth below) limit the number
of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall
be allocated in the following manner: the securities of the Company held by
the Initiating Holders and by each Other Stockholder ("Demanding Holders")
shall be excluded from
such registration and underwriting as follows: first, securities held by
each Other Stockholder (other than Flemings Shares) to the minimum extent
required (which may be up to 100% of such securities) by such limitation,
such exclusion to be effected on a pro rata basis (based on the number of
shares requested for inclusion in such registration by such Other Stock-
holder; and, second, to the extent that the Company is advised that
additional shares must also be excluded from such registration, securities
held by the holders of Flemings Shares and the Initiating Holders shall be
excluded from such registration to the minimum extent so required (which may
be up to 100% of such securities) by such limitation, such exclusion to be
effected on a pro rata basis (based on the number of shares requested for
inclusion in such registration by the Initiating Holders and the holders of
the Flemings Shares), provided that if such registration is a request by the
holders of Flemings Shares pursuant to Section 2(a)(i) of the Flemings
Registration Rights Agreement, then, unless the Initiating Holders have
elected to join in such request for registration by notice to the Company
and the holders of the Flemings Shares within ten (10) days of the notice
referred to in Section 2(b)(i)(A) hereof, such exclusion referred to in
"second" above shall apply only to the Initiating Holders and not to the
holders of Flemings Shares. If any of the Demanding Holders disapproves of
the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
(c) Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
this Section 2 shall be borne by the Company, and all Selling Expenses shall be
borne by the Holders of the securities so registered pro rata on the basis of
the number of their shares so registered.
(d) Registration Procedures. In the case of each registration
effected by the Company pursuant to this Section 2, the Company will keep the
Holders, as applicable, advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company will:
(i) prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use all reasonable
commercial efforts to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such registration effective for a
period of one hundred twenty (120) days or until the Holders, as applicable,
have completed the distribution described in the registration statement
relating thereto, whichever first occurs;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement, and furnish such
copies thereof to the Holders and any underwriters as they may reasonably
request;
(iii) furnish such number of prospectuses and other documents
incident thereto as each of the Holders, as applicable, from time to time
may reasonably request in order to facilitate the disposition of the
Registrable Securities of such Holder;
(iv) notify each Holder of Registrable Securities covered by such
registration at any time when a prospectus relating thereto is required to
be delivered under the Securities Act when the Company becomes aware of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, whereupon, each
Holder shall immediately cease to use such registration statement or
prospectus for any purpose and, as promptly as practicable thereafter, the
Company shall prepare and file with the Commission, and furnish without
charge to the appropriate Holders and managing underwriters, if any, a
supplement or amendment to such registration statement or prospectus which
will correct such statement or omission or effect such compliance and in
such quantities thereof as the Holders and any underwriters may reasonably
request, after which time the Holders may continue to use such supplemented
or amended registration statement and prospectus as provided herein; and
(v) furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to
such securities becomes effective, (1) an opinion, dated as of such date,
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders participating in such registration,
addressed to the underwriters, if any, and to the Holders participating in
such registration and (2) a letter, dated as of such date, from the
independent certified public accountants of the Company, in form and
substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory
to a majority in interest of the Holders participating in such
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders participating in such
registration.
(e) Indemnification.
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(i) The Company will indemnify each of the Holders, as
applicable, each of its officers, directors and partners, and each
person controlling each of the Holders, with respect to each
registration which has been effected pursuant to this Section 2, and
each underwriter, if any, and each person who controls any underwriter,
against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or
the Exchange Act or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and
will reimburse each of the Holders, each of its officers, directors and
partners, and each person controlling each of the Holders, each such
underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred (by one law firm
retained by them and appropriate local counsel) in connection with
investigating and defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case
to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by the Holders
(including their respective officers, directors, partners and
controlling persons) or underwriters (including their controlling
persons) and stated to be specifically for use therein.
(ii) Each of the Holders will, if Registrable Securities held
by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company,
each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person
who controls the Company or such underwriter, each
Other Stockholder and each of their officers, directors, and partners, and
each person controlling such Other Stockholder against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document made by such Holder, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements by such Holder therein not misleading, and
will reimburse the Company and such Other Stockholders, directors, officers,
partners, persons, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of each of the Holders hereunder
shall be limited to an amount equal to the net proceeds to such Holder of
securities sold as contemplated herein.
(iii) Each party entitled to indemnification under this Section
2(e) (the "Indemnified Party") shall give written notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party receives notice (whether oral or written) of
any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or any litigation resulting there-
from, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the named parties to any such action
or proceeding (including any impleaded parties) include both the Indemnify-
ing Party and the Indemnified Party and the Indemnified Party shall have
been advised by counsel in a written opinion that representation of both
parties by the same counsel would be inappropriate due to actual or
potential material differing interests between them, in which case the fees
and expenses of counsel shall be at the expense of the Indemnifying Party),
and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 2(e) unless the Indemnifying Party is mater-
ially prejudiced thereby. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemni-
fying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation
resulting therefrom.
(iv) If the indemnification provided for in this Section 2(e) is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and of
the Indemnified Party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense,
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether any action in question,
including the untrue (or alleged untrue) statement of a material fact or
the omission (or alleged omission) to state a material fact, relates to
information supplied by the Indemnifying Party or by the Indemnified Party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission.
(v) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with any underwritten public offering
contemplated by this Agreement are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall be
controlling.
(vi) The foregoing indemnity agreement of the Company and Holders
is subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time
the registration statement in question becomes effective or the amended
prospectus filed with the Commission pursuant to Commission Rule 424(b) (the
"Final Prospectus"), such indemnity or contribution agreement shall not
inure to the benefit of any underwriter
or Holder if a copy of the Final Prospectus was furnished to the
underwriter or Holder and was not furnished to the person asserting the
loss, liability, claim or damage at or prior to the time such action is
required by the Securities Act.
(vii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 2(e) were determined by
pro rata allocation or by other method of allocation which does not take
into account the equitable considerations referred to in Section 2(e)(iv)
above. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of fraudulent misrepresentation.
(f) Information by the Holders. Each of the Holders holding
securities included in any registration shall furnish to the Company such infor-
mation regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Section 2.
(g) Rule 144 Reporting.
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With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted securities
to the public without registration, the Company agrees to:
(i) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act ("Rule 144");
(ii) use its reasonable best efforts to file with the Commission
in a timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(iii) so long as the Holder owns any Registrable Securities,
furnish to the Holder upon request, a written statement by the Company as to
its compliance with the reporting requirements of Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so
filed as the Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing the Holder to sell any such
securities without registration.
(h) "Market Stand-Off" Agreement. Each Holder hereby agrees that
following the effective date of any registration effected pursuant to Sections
2(a) and (b) (provided
the Holders are given written notice of the offering and the right to
participate therein as provided for in this Agreement), each Holder shall not,
for such reasonable period of time as the managing underwriters shall require
(but in no event longer than 135 days), unless otherwise agreed to by the
managing underwriter(s), directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Company held by it at any time during
such period except Registrable Securities included in such registration (the
"Lock-Up Shares"). In addition, each Holder agrees to acknowledge the
undertaking provided for in this Section 2(h) by entering into customary written
"lock-up" agreements with respect to the Lock-Up Shares with the managing
underwriter(s) of the relevant underwriting.
(i) Other Registration Rights. Except as provided in this
Agreement or the Flemings Registration Rights Agreement, or as otherwise
consented to in writing by the Holders, the Company will not grant to any Person
the right to request the Company to register any equity securities of the
Company, or any securities convertible, exchangeable or exercisable for or into
such securities ("Other Securities"), other than (i) piggyback registration
rights entitling the holder thereof to participate in registrations initiated by
the Company or by a Demanding Holder with holders of Registrable Securities;
provided, however, that the Registrable Securities shall have priority over
Other Securities in any such registration, (ii) registration rights granted in
connection with the Company's acquisition of a complementary business through a
pooling of interests transaction; provided, however, that (x) the Company is
required to grant such rights in order to account for any such acquisition as a
pooling of interests transaction, (y) such rights or the agreement or instrument
granting such rights will not restrict or otherwise adversely affect the ability
of the Company to perform its obligations under this Agreement and (z) the
Company shall use its reasonable best efforts to obtain agreements from any
holder or holders who receive such rights to the effect that such holders will
enter into lock-up agreements if requested to do so by any underwriter in any
registration effected pursuant to Section 2(a) (except that the Company shall
not be obligated to take such action if it would prevent the subject acquisition
from being accounted for as a pooling of interests) and (iii) registration
rights granted in connection with the Company's acquisition of a complementary
business through a purchase transaction (which could be in the form of demand
registration rights or the Company's agreement to file a registration statement
for securities delivered as consideration in such purchase transaction (a
"Purchase Registration")); provided, however, that (x) such rights or the
agreement or instrument granting such rights will not restrict or otherwise
adversely affect the ability of the Company to perform its obligations under
this Agreement and (y) the holders of
the Registrable Securities shall have the right to piggyback on any Purchase
Registration and the priority of securities to be included in any such
registration shall be governed by Section 2(b) hereof. In the case of clause
(iii) above, the holders of the Registrable Securities shall be entitled to the
notice provided for in Section 2(a)(i)(a) hereof.
3. MISCELLANEOUS
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(a) Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed entirely within such State.
(c) Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof.
(d) Notices.
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(i) All communications under this Agreement shall be in writing
and shall be delivered by hand or facsimile or mailed by overnight courier
or by registered or certified mail, postage prepaid:
(A) if to the Company, to Four Media Company, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esq. (facsimile: (▇▇▇) ▇▇▇-▇▇▇▇), or at such other address as it may
have furnished in writing to the Investor;
(B) if to the Investor, at the address or facsimile
number listed on Schedule I hereto, or at such other address or
facsimile number as may have been furnished the Company in writing.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if mailed by
courier, on the first business day following the date of such mailing; and
if mailed by registered or certified mail, on the third business day after
the date of such mailing.
(e) Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, any consents, waivers and
modifications which may hereafter be executed may be reproduced by the Investor
by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and the Investor may destroy any original document so
reproduced. The parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investor in the regular course
of business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties.
(g) Entire Agreement; Amendment and Waiver. This Agreement
constitutes the entire understanding of the parties hereto with respect to the
subject matter described herein and supersedes all prior understanding among
such parties with respect thereto. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the Investor.
(h) Severability. In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
FOUR MEDIA COMPANY
By:_________________________
Name:
Title:
INVESTORS:
WARBURG, ▇▇▇▇▇▇ EQUITY PARTNERS, L.P.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By:_________________________
Name:
Title:
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY
PARTNERS I, C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By:_________________________
Name:
Title:
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY
PARTNERS II, C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By:_________________________
Name:
Title:
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY
PARTNERS III, C.V.
By: Warburg, ▇▇▇▇▇▇ & Co.,
General Partner
By:_________________________
Name:
Title:
SCHEDULE I
Name and Address
of Investor:
------------
WARBURG, ▇▇▇▇▇▇ EQUITY PARTNERS, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS I, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS II, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS III, C.V.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇