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LOCK-UP AND REGISTRATION RIGHTS AGREEMENT
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October 31, 1996
TABLE OF CONTENTS
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Page
1. Definitions...................................................... 1
2. Lock-Up.......................................................... 2
3. Registration Rights.............................................. 4
3.1 Demands for Registration................................ 4
3.2 Company Registrations................................... 5
3.3 Obligations of the Company.............................. 6
3.4 Furnish Information..................................... 8
3.5 Expenses of Registrations............................... 8
3.6 Indemnification......................................... 8
3.7 Assignment of Registration Rights....................... 10
3.8 "Market Stand-Off" Agreement............................ 11
3.9 Underwriting Requirements............................... 12
3.10 Reports Under Securities Exchange Act of 1934........... 12
3.11 Limitations on Subsequent Registration Rights........... 13
3.12 Termination of Registration Rights...................... 13
4. Miscellaneous.................................................... 13
4.1 Restrictive Legend...................................... 13
4.2 Successors and Assigns.................................. 13
4.3 Governing Law........................................... 14
4.4 Counterparts............................................ 14
4.5 Titles and Subtitles.................................... 14
4.6 Notices................................................. 14
4.7 Expenses................................................ 14
4.8 Amendments and Waivers.................................. 14
4.9 Severability............................................ 15
4.10 Entire Agreement........................................ 15
4.11 Specific Performance.................................... 15
LOCK-UP AND REGISTRATION RIGHTS AGREEMENT
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THIS LOCK-UP AND REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
made as of the 31st day of October, 1996, by and between Overseas Filmgroup,
Inc., a Delaware corporation (the "Company"), and each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Little
("EDL"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("RBL") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("WFL") (each an
"Overseas Stockholder" and, collectively, the "Overseas Stockholders").
RECITALS
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WHEREAS, the Company and the Overseas Stockholders are among the
parties to an Agreement of Merger, as of dated July 2, 1996, as amended
pursuant to that certain Amendment to the Merger Agreement dated as of
September 20, 1996 (as so amended, the "Merger Agreement");
WHEREAS, as a material inducement to the Company's entering into the
Merger Agreement and as a material inducement to the Overseas Stockholders'
entering into the Merger Agreement, the Overseas Stockholders and the Company
hereby agree that this Agreement shall govern the right of the Company to
restrict the sale of the Merger Shares (as defined below) by the Overseas
Stockholders for certain periods of time and the rights of the Overseas
Stockholders to cause the Company to register the Merger Shares and certain
other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Definitions. For purposes of this Agreement:
(a) The term "Holder" means each of the Overseas Stockholders and any
permitted assignee under Section 3.7 of this Agreement.
(b) The term "Merger Agreement" shall have the meaning set forth in
the Preamble to this Agreement.
(c) The term "Merger Shares" means the 3,177,778 shares of Common
Stock to be received by the Overseas Stockholders pursuant to the Merger
Agreement;
(d) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder as such may be amended from
time to time (collectively, the "Act"),
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and the declaration or ordering of effectiveness of such registration statement
or document by the Securities and Exchange Commission;
(e) The term "Registrable Securities" means (1) the Merger Shares, and
(2) any Common Stock issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, pursuant to a stock split or in exchange for or
in replacement of, the Merger Shares, excluding in all cases, however, any
Registrable Securities which are sold, assigned or otherwise disposed of by a
Holder in a transaction in which such Holder's rights under this Agreement are
not assigned or assignable;
(f) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities; and
(g) Any capitalized terms used in this Agreement but not otherwise
defined shall have the meanings set forth in the Merger Agreement.
2. Lock-Up.
(a) Subject to Section 2(b) below, each of the Overseas Stockholders
covenants and agrees that such Overseas Stockholder will not, directly or
indirectly, sell, offer, contract to sell, pledge, grant any option to purchase
or otherwise dispose of any Merger Shares held by such Overseas Stockholder
(such restrictions are hereinafter referred to as the "Lock-Up") for a period
(the "Lock-Up Period") commencing on the date hereof and ending on the
following dates (rounded to the nearest whole number of shares): (a) as to
one-third of the Merger Shares held by such Overseas Stockholder, the Lock-Up
will terminate on February 16, 1998, (b) as to one-half of the remaining Merger
Shares held by such Overseas Stockholder, the Lock-Up will terminate on
February 16, 1999, and (c) as to the balance of the Merger Shares held by such
Overseas Stockholder, the Lock-Up will terminate on February 16, 2000.
(b) Notwithstanding Section 2(a):
(i) the Overseas Stockholders shall be entitled to transfer all or
any portion of the Merger Shares during the Lock-Up Period for bona fide estate
planning purposes, as charitable contributions and/or in connection with the
bona fide pledge of Merger Shares, and the Merger Shares subject to the Lock-Up
shall also be transferable by will and by the laws of intestacy; provided that
in each such case, the transferee of such Merger Shares shall agree in writing
to be bound by the terms of the Lock-Up with respect to such Merger Shares as a
condition to such transfer;
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(ii) the Lock-Up will terminate prior to the end of the Lock-Up
Period immediately upon the happening of any of the following events: (A) as to
the Merger Shares owned beneficially in whole or in part by any Overseas
Stockholder (or his or her permitted transferees pursuant to this Section 2) in
the event that such Overseas Stockholder's employment with the Company is
terminated Without Cause or is terminated by such Overseas Stockholder for Good
Reason (as such terms are defined in the respective employment agreement
between the Company and such Overseas Stockholder); and (B) as to ten percent
(10%) of the Merger Shares subject to the Lock-Up in the event that both of EDL
and RBL are deceased;
(iii) WFL shall be permitted to transfer Merger Shares held by him
to EDL and/or RBL or their designees pursuant to any right of first refusal or
repurchase agreement among such parties and EDL and RBL shall be permitted to
transfer Merger Shares held by them to each other; provided that in any such
case, the transferee or transferees shall agree in writing to be bound by the
terms of the Lock-Up with respect to such Merger Shares as a condition to such
transfer;
(iv) the Lock-Up shall terminate prior to the end of the Lock-Up
Period as to (A) any Merger Shares that are surrendered for cancellation
pursuant to Section 10.6 of the Merger Agreement, or (B) any Merger Shares
surrendered for cancellation in payment upon the exercise of outstanding stock
options held by EDL or RBL; and
(v) if any Event of Default occurs under the Security Agreement
with respect to any Note under which an Overseas Stockholder is a payee, the
Lock-Up shall immediately terminate as to a number of Merger Shares
beneficially owned by such Overseas Stockholder (or his or her permitted
transferee), either individually or jointly with another Overseas Stockholder
(or such stockholder's permitted transferee), equal to (A) the remaining amount
of principal and interest due to such Overseas Stockholder under such Note,
divided by (B) Current Market Price, which shall be the closing price of EMAC
Common Stock on the trading day immediately following the date of such Event of
Default. The closing price shall be the last reported sales price regular way
(or, in case no such reported sale takes place on such day, the last reported
sales price regular way for the next succeeding day for which such information
is available shall be used), in each case on the principal national securities
exchange or the Nasdaq National Market on which the shares of EMAC Common Stock
are listed or admitted to trading, or if not listed or admitted to trading
thereon, the average of the closing bid and asked prices of EMAC Common Stock
in the over-the-counter market as reported by Nasdaq or any comparable system,
or if EMAC Common Stock is not listed on Nasdaq or a comparable system, the
average of the closing bid and asked prices on such day in the domestic
over-the-counter market as reported on the NASD Electronic Bulletin Board, or,
if not reported on such Bulletin Board, in the "pink sheets" published by the
National Quotation Bureau, Incorporated. If at any time EMAC Common Stock is
not listed on any national securities exchange or quoted in the Nasdaq System
or the over-the-counter market or reported on the NASD Electronic Bulletin
Board or in the "pink sheets" published by the National Quotation Bureau,
Incorporated, the Current Market Price on such
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day shall be the fair market value thereof reasonably determined in good faith
by the members of the board of directors of EMAC, excluding the Overseas
Stockholders, and reasonably agreed to in good faith by the Overseas
Stockholders based upon such information and advice as they mutually consider
appropriate.
3. Registration Rights. The Company covenants and agrees
as follows:
3.1 Demands for Registration.
(a) If the Company shall receive, at any time on or after
February 16, 1998 or such earlier date on which the Lock-Up terminates under
Section 2, a written demand from the Holders of a majority of the Registrable
Securities then outstanding that the Company file a registration statement
under the Act covering the registration of at least 250,000 shares of the
Registrable Securities (such number to be appropriately adjusted for stock
splits, stock dividends, recapitalizations and similar events), then the
Company shall, subject to the limitations specified in this Agreement, use its
best efforts to effect within 90 days of the receipt of such request, the
registration under the Act of all Registrable Securities which such Holders
have demanded to have registered. The Company covenants and agrees to give
written notice of its receipt of any written demand by any Holder(s) to all
other Holders within ten days from the date of receipt of such notice.
(b) If the Holders initiating the registration demand (the
"Initiating Holders") hereunder intend to distribute the Registrable Securities
covered by their demand by means of an underwriting, such Initiating Holders
shall so advise the Company as a part of their demand made pursuant to this
Section 3.1. The underwriter will be selected by a majority in interest of the
Initiating Holders; provided that such underwriter shall be reasonably
acceptable to the Company. In such event, the right of any Holder to include
his or her Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute Registrable Securities through such
underwriting shall (together with the Company as provided in Section 3.3(e))
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting.
(c) The Company is obligated to effect only three (3) such
registrations pursuant to this Section 3.1. A demand to effect a registration
pursuant to this Section 3.1 may not be made if a demand pursuant to this
Section 3.1 was made within the preceding eighteen (18) months and the Company
complied with the requirements of this Agreement with respect to such demand.
Registration pursuant to this Section 3.1 shall not be deemed to have been
effected and a demand not made; (i) unless a registration statement with
respect thereto has become effective and the Company has complied with all
covenants and agreements required by this Agreement to be performed by it in
connection with such registration, (ii) if, after the registration statement
has become effective, the offering is prevented by any stop order, injunction
or other order or requirement of the Securities and
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Exchange Commission or other governmental agency or court for any reason other
than by reason of some wrongful act or omission of an Overseas Stockholder,
(iii) if the conditions to closing agreed to by the Company specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied by reason of breach by the Company of its
covenants contained therein, or (iv) if the number of Registrable Shares
included in such registration is less then 66 2/3% of the total number of shares
of Common Stock included in such registration.
(d) Notwithstanding the foregoing, if the Company shall
furnish to the Initiating Holders a certificate signed by the Chief Executive
Officer or President of the Company stating that, in the good faith judgment of
the Board of Directors of the Company, such filing could reasonably be expected
to have a material adverse effect on any plan or proposal by the Company with
respect to any material transaction which the Company is at that time actively
pursuing other than a registration of securities (except a registration
pursuant to Form S-4), and it is therefore essential to defer the filing of
such registration statement, the Company shall have the right to defer the
filing of such registration statement for a reasonable period not to exceed
sixty (60) days after receipt of the request of the Initiating Holders.
(e) The registration statement filed pursuant to the demand
of the Initiating Holders may include other securities of the Company (i) which
are held by persons who, by virtue of agreements with the Company, are entitled
to include their securities in any such registration, (ii) which are held by
officers and directors of the Company, or (iii) which are being offered for the
account of the Company; provided that the percentage of Registrable Securities
requested to be included in such registration by the Initiating Holders shall
not be reduced or limited, without such Initiating Holders' consent, as a
result of the inclusion of persons other than Initiating Holders, below 66 2/3%
of the total number of shares included in such registration; and provided,
further, that the plan of distribution proposed by such other persons shall not
be different from the plan of distribution proposed by the Initiating Holders.
3.2 Company Registrations. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
Common Stock or other securities under the Act (other than a registration on
Form S-8 or any successor form relating solely to the sale of securities to
participants in a Company stock plan, or a registration on Form S-4 in
connection with a merger transaction contemplated by Rule 145(a) or any
successor form), the Company shall, at such time, promptly give each Holder
written notice of such registration (but in no event shall such notice be
delivered less than twenty days prior to the proposed date of such filing).
Upon the written request of any Holder given within twenty (20) days after
delivery of such notice in accordance with Section 4.6, the Company shall,
subject to the provisions of Section 3.9, cause to be registered under the Act
all of the Registrable Securities that such Holder has requested to be
registered. The Company represents to each Holder that, as of the date of this
Agreement, except for the Unit Purchase Option, there are no agreements which
would prohibit the inclusion (subject to Underwriter
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cutbacks and resulting requirements of pro rata inclusion) of Registrable
Securities in any registration by the Company, and the Company covenants and
agrees not to enter into any such agreement so long as any of the Registrable
Securities are outstanding.
3.3 Obligations of the Company. Whenever required under this
Section 3 to effect the registration of any Registrable Securities, the Company
shall promptly and in accordance with any and all other time periods set forth
herein:
(a) Prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement with respect to such
Registrable Securities (including such audited financial statements as may be
required by the Act) and use its best efforts to cause such registration
statement to become effective, and, upon the demand of Initiating Holders, keep
such registration statement effective until the earlier of (i) the date which
is one hundred and eighty (180) days after such registration statement first
became effective or (ii) the date on which all of the Registrable Securities
included in such registration statement are sold. Each Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in Section 3.3(f), such Holder
shall forthwith discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.3(f), and, if so directed by the Company, such Holder
shall 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. The Company shall extend the period during which such registration
statement shall be maintained effective pursuant to this Agreement by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 3.3(f) to and including the date when each
seller of Registrable Securities covered by such registration statement shall
have received the copies of the supplemented or amended prospectus contemplated
by Section 3.3(f).
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to keep such
registration statement effective and to comply with the provisions of the Act
with respect to the disposition of all securities covered by such registration
statement.
(c) Furnish to the Holders whose Registrable Securities are
covered by the Registration Statement and each underwriter, if any, such
numbers of copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by the Holders.
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(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by any
Holder whose Registrable Securities are covered by the Registration Statement;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
proposing to distribute Registrable Securities through such underwritten public
offering shall also enter into and perform its obligations under such an
agreement.
(f) Promptly notify the Holders whose Registrable Securities
are covered by the registration statement at any time when a prospectus
relating thereto is required to be delivered under the Act of the occurrence 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 light of the circumstances under
which they were made and, at the request of the Holders, promptly prepare and
furnish to the Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
(g) Use its best efforts to furnish, at the request of the
Holders whose Registrable Securities are covered by the Registration Statement,
on the date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to this Section 3, 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, (i) an opinion, dated 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, addressed to the underwriters, if any, and to
the Holders whose Registrable Securities are covered by the Registration
Statement and (ii) a "comfort" letter dated 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, addressed to the underwriters, if any, and
to the Holders whose Registrable Securities are covered by the Registration
Statement.
(h) Cause all such Registrable Securities registered pursuant
to such registration statement to be listed on each securities exchange or
quotation system on which similar securities issued by the Company are then
listed.
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(i) Otherwise comply with all applicable rules and
regulations of the Securities and Exchange Commission and applicable blue sky
authorities.
3.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to effect a registration pursuant to this
Section 3 with respect to the Registrable Securities of a Holder whose
Registrable Securities are covered by the Registration Statement that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
3.5 Expenses of Registrations. All expenses other than the
underwriting discounts and commissions charged per share (for which each Holder
shall be responsible with respect to the Registrable Securities being sold by
such Holder) incurred in connection with registrations, filings or
qualifications pursuant to this Section 3, including (without limitation) all
registration, filing and qualification fees and expenses, printers' and
accounting fees (including the expenses of any audits or comfort letter
required by or incident thereto), fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel for the
Holders whose Registrable Securities are covered by the Registration Statement
(which counsel shall be chosen by the OverSeas Stockholders) shall be borne by
the Company. If the Initiating Holders elect to pay all the expenses in
connection with a registration request withdrawn by the Initiating Holders
other than by reason of the discovery or occurrence of material adverse
information regarding the Company's results of operations, financial condition,
business or properties or any material adverse event affecting the proposed
registration including, without limitation, the exercise by any holder of Unit
Purchase Options, as defined in the Merger Agreement, of any registration
rights pursuant thereto (in which each such case such payment will not be
required), then the Initiating Holders shall remain entitled to the number of
registrations which they were entitled to pursuant to Section 3.1 prior to
making such withdrawn registration request.
3.6 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder whose Registrable Securities are
covered by the Registration Statement, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), and each of their respective officers and
directors, against any losses, claims, damages, expenses, or liabilities (joint
or several) to which any of the foregoing may become subject under the Act or
the 1934 Act, or any rule or regulation promulgated under the Act or the 1934
Act, insofar as such losses, claims, damages, or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of
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a material fact contained in such registration statement, including any
preliminary prospectus, final prospectus or summary prospectus contained
therein or any document incorporated therein by reference or any amendments or
supplements thereto, (ii) the 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 (iii) any violation or alleged violation
by the Company of the Act, the 1934 Act, any State "blue sky" or securities law
or any rule or regulation promulgated under the Act, the 1934 Act or any State
"blue sky" or securities law; and the Company will also pay to such Holders,
and each such underwriter or controlling person and any other person entitled
to be indemnified pursuant to Section 3.6(a), any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; provided, however,
that the indemnity agreement contained in this Section 3.6 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, action or proceeding
to the extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with written information furnished
specifically for inclusion in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
thereto by such Holders, or any such underwriter or controlling person.
(b) To the extent permitted by law, each Holder whose
Registrable Securities are covered by the Registration Statement will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, and any controlling
person of any such underwriter, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject under the Act or the 1934 Act or any rule or regulation promulgated
under the Act or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder specifically for inclusion in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement thereto; and such Holder will pay any legal
or other expenses reasonably incurred by any person entitled to be indemnified
pursuant to this Section 3.6(b), in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity and contribution agreement contained in this Section 3.6(b) and
3.6(d) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of such Holder, which consent shall not be unreasonably withheld; provided
further, that in no event shall any indemnity or contribution under this
Section 3.6 exceed the proceeds (net of any underwriting discounts and
commissions) from the offering received by such Holder.
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(c) Promptly after receipt by an indemnified party under this
Section 3.6 of notice of the commencement of any action (including any
governmental action or proceeding), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
3.6, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the indemnified parties; provided, however,
that an indemnified party, (together with all other indemnified parties which
may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, and to participate in the defense of such action (subject
to the right of counsel to the indemnifying party to assume and control such
defense) if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action, if materially prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 3.6, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
3.6.
(d) If the indemnification provided for in this Section 3.6
is held by a court of competent jurisdiction to be unenforceable as to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, 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 that 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 the untrue or alleged untrue statement of a material fact or
the 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 statement or omission.
(e) The rights accorded to any indemnified party shall be in
addition to any rights that any indemnified party may have at law, by separate
agreement, or otherwise.
(f) The obligations of the Company and Holders under this
Section 3.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement.
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3.7 Assignment of Registration Rights. Any heir or the estate
of an Overseas Stockholder which acquires the Registrable Securities from such
Overseas Stockholder by will or intestate succession shall be entitled to cause
the Company to register Registrable Securities pursuant to this Section 3. Any
Overseas Stockholder may sell, assign or transfer Registrable Securities to his
or her spouse or children or to a trust established for the benefit of his or
her spouse, children or himself or herself, and such transferee shall be
entitled to cause the Company to register Registrable Securities pursuant to
this Section 3, if, and only if, such transferee agrees in writing to be bound
by the terms of this Agreement. In addition, the rights to cause the Company to
register Registrable Securities pursuant to this Agreement may be assigned by a
Holder to a transferee or assignee of such securities, provided that: (a) the
Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such specified registration rights are being
assigned; (b) such transferee or assignee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement; and (c) a minimum of
100,000 (such number to be appropriately adjusted for stock splits, stock
dividends, recapitalizations and similar events) of the Registrable Securities
held by a Holder are transferred or assigned; provided, however, that if a
transferee acquires Registrable Securities from a Holder in a transaction in
which such securities are not subject to restrictions on transfer under the Act
in the hands of the transferee, the registration rights set forth in Section 3
shall not be assignable to such transferee. In each such event and for purposes
of this Agreement, the term "Holder" as used herein shall include all such
heirs, such estate or such transferees.
3.8 "Market Stand-Off" Agreement. Each Overseas Stockholder
hereby agrees that: (i) for a period of 180 days following the effective date
of an underwritten registration statement of the Company filed under the Act,
if requested by the underwriter of such Registrable Securities, but only on one
occasion and not within six months of the expiration of a preceding "market
standoff" period, and (ii) with respect to any other underwritten registration
statement of the Company filed under the Act, for a period of 90 days following
the effective date of such registration statement, but not within six months of
the expiration of a preceding "market standoff" period, such Overseas
Stockholder shall not, to the extent requested by such underwriter, 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 Common
Stock, any securities of the Company that are of the class subject to such
registration statement, or any securities that are convertible into such class
of securities, held by it at any time during such period except (A) for any
Common Stock or other securities included in such registration, (B) under the
circumstances set forth in clauses (i) (other than pledges of Registrable
Securities), and (iii) of Section 2 of this Agreement (provided the transferee
agrees in writing to be subject to the provisions of this Section 3.8), (C) for
the exercise of stock options held by such Overseas Stockholder, and (D) for a
private placement of Registrable Securities pursuant to a written agreement
executed by such Overseas Stockholder prior to the request by the
underwriter(s) to such Overseas Stockholder for a market stand-off commitment;
and each Overseas Stockholder agrees to enter into an
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agreement to such effect with such underwriter; provided, however, that all
executive officers and directors of the Company enter into agreements that are
at least as restrictive as the terms hereof; and provided, further, that this
Section 3.8 shall not apply with respect to an underwritten registration
statement filed pursuant to the exercise of, or in which securities are
included pursuant to, the demand registration rights in the Unit Purchase
Options.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
the Overseas Stockholders (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
This Section 3.8 and the "market stand-off" agreement
contained herein shall terminate on the eighth anniversary of the date of this
Agreement; provided, however, that the 180-day market standoff shall not be
available to the Company if the Overseas Stockholders own less than fifteen
percent (15%) of the original number of Registrable Securities held by them.
3.9 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock,
the Company shall not be required under Section 3.2 to include any Holder's
securities in such underwriting unless such Holder complies with the last
sentence of Section 3.3(e) of this Agreement. If, in connection with a
registration pursuant to Section 3.2, the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities that, in the written opinion of the
managing underwriters for such offering, when added to the securities being
registered by the Company, will exceed the maximum amount of the Company's
securities which can be marketed (a) at a price reasonably related to their
then current market value, and (b) without materially and adversely affecting
the entire offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not materially
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders). If
the Holders have validly requested registration of more than 250,000
Registrable Securities and at least 250,000 Registrable Securities are not
included in such registration statement for sale (either upon effectiveness or
ninety (90) days thereafter), then such Holders shall receive one additional
demand registration for their Registrable Securities on the terms set forth in
Section 3.1 hereof which, without regard to the 18-month restriction in such
Section, may be exercised after ninety days after the effectiveness of the
registration statement from which their securities were excluded. For purposes
of the preceding parenthetical concerning apportionment, for any selling
stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall
be deemed to be a single "selling stockholder", and any
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pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.
3.10 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the Commission that may at
any time permit a Holder to sell securities of the Company to the public
without registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act, at all times;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company as to whether it has complied with the reporting requirements of Rule
144, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of any
rule or regulation of the Commission which permits the selling of any such
securities without registration.
3.11 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company that would allow such holder or prospective
holder (a) to include such securities in any registration statement filed by
the Company or (b) to make a demand registration unless such registration
rights are subordinate to the registration rights granted to the Holders
pursuant to this Agreement.
3.12 Termination of Registration Rights. The Holders shall
not be entitled to exercise any piggyback registration right provided for in
Section 3.2 after eight (8) years following the date of this Agreement. The
demand registration rights set forth in Section 3.1 shall terminate: (a) as to
one demand registration, after eight (8) years following the date of this
Agreement, (b) as to a second demand registration, after twelve (12) years
following the date of this Agreement, and (c) as to the third demand
registration after fifteen (15) years following the date of this Agreement.
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4. Miscellaneous.
4.1 Restrictive Legend. All certificates evidencing the
Merger Shares shall have affixed thereto a legend substantially in the
following form:
"The shares of stock represented by this certificate are
subject to certain restrictions on transfer as set forth
in a Lock-Up and Registration Rights Agreement by and
among the registered owner of this certificate, the
Company and another stockholder of the Company, a copy of
which is available for inspection at the offices of the
Secretary of the Company."
The Company will promptly remove the foregoing legend from any Merger Shares
upon termination of the Lock-Up related to such shares.
4.2 Successors and Assigns. Except as otherwise provided
herein, and provided that the transfer or assignment is in accordance with the
terms hereof, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including any permitted transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
4.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California without regard to
principles of conflicts or choice of laws. Each of the parties hereto consents
to the jurisdiction of, and confers exclusive jurisdiction on, any court or
tribunal located in Los Angeles County, California (in the case of state
courts) or the Central District of California (in the case of federal courts),
over any action, suit or proceeding arising out of or relating to this
Agreement. Each party hereby irrevocably waives, and agrees not to assert as a
defense in any such action, suit or proceeding, any objection which he, she or
it may now or hereafter have to venue of any such action, suit or proceeding
brought in any court or tribunal located in Los Angeles County, California or
the Central District of California and hereby irrevocably waives any claim that
any such action, suit or proceeding brought in any such court or tribunal has
been brought in an inconvenient forum.
4.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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4.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.6 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party in the Merger Agreement, or at such other address as
such party may designate by ten (10) days' advance written notice to the other
parties.
4.7 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which such party may be entitled.
4.8 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of (a) the Company (acting
through its Board of Directors, with a majority of the directors not designated
by the Overseas Stockholders approving such amendment or waiver) and (b)(i) in
the case of Section 2, Overseas Stockholders holding a majority of the Merger
Shares held by the Overseas Stockholders, (ii) in the case of Section 3, the
Holders of a majority of the Registrable Securities then outstanding, and (iii)
in the case of any material changes to the registration rights of the Overseas
Stockholders, each of the Overseas Stockholders. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each Holder of
any Registrable Securities then outstanding, each future Holder of all such
Registrable Securities, and the Company.
4.9 Severability. If any term, provision or covenant in this
Agreement is held to be invalid, void or unenforceable, (i) the remainder of
the terms, provisions and covenants in this Agreement shall remain in full
force and effect and shall in no way be affected, ignored or invalidated, and
(ii) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, all portions of any section of this Agreement
containing any such provision held to be invalid, void or unenforceable that
are not themselves invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, void or
unenforceable.
4.10 Entire Agreement. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
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4.11 Specific Performance. The parties hereto acknowledge
that there may be no adequate remedy at law if any party fails to perform any
of its obligations hereunder and that each party may be irreparably harmed by
any such failure, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Lock-Up
and Registration Rights Agreement as of the date first above written.
OVERSEAS FILMGROUP, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
OVERSEAS STOCKHOLDERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Little
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Little
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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