Redbox 2008 Annual Report Download - page 30

shares of Common Stock at the closing date, and then receiving deferred consideration in cash and/or shares of
Common Stock at such date(s) as GAM is paid Deferred Consideration. Any consideration to be paid in shares of
Common Stock to these interest holders will be valued in the same manner as any consideration to be paid in shares
of Common Stock to GAM and such shares will either be newly issued, unregistered shares of Common Stock with
similar registration rights to those of GAM or newly issued shares of Common Stock for which we already have an
existing effective registration statement. The total consideration to be paid in these transactions is expected to be
between $21.5 million and $24.9 million.
The private placement of the 1.5 million shares of Common Stock to be issued to GAM on the closing date, as
well as any additional shares of Common Stock to be issued to GAM as Deferred Consideration, if any, in
connection with the GAM Purchase Agreement will be made in reliance upon exemption from the registration
requirements of the Securities Act pursuant to Regulation D and/or Section 4(2) thereof. In addition, the private
placement of newly issued, unregistered shares of Common Stock to be issued to certain minority interest and non-
voting interest holders of Redbox will be made in reliance upon exemption from registration requirements of the
Securities Act pursuant to Regulation D and/or Section 4(2) thereof.
On the closing date of the GAM transaction pursuant to the terms of the GAM Purchase Agreement, we will
enter into a Registration Rights Agreement with GAM (the “Registration Rights Agreement”) whereby GAM
would be entitled to registration rights under the Securities Act of 1933, as amended (the “Securities Act”), with
respect to the shares of Common Stock acquired in connection with the GAM Purchase Agreement. Under the
Registration Rights Agreement, we are required to file on the closing date a registration statement on Form S-3 with
the SEC covering the 1.5 million shares of Common Stock making up a portion of the Initial Consideration. On any
date we make any payment of Deferred Consideration in the form of shares of Common Stock, we also would be
required to file a registration statement on Form S-3 covering such shares, provided that such date of payment
occurs prior to six months from closing date. Further, we will grant GAM demand and piggyback registration
statement rights relating to the shares of Common Stock acquired in connection with the GAM Purchase
Agreement. Pursuant to the Registration Rights Agreement, we must use our reasonable best efforts to cause
any such registration statement on Form S-3 to be declared effective as soon as practicable after filing and to keep
such registration statement continuously effective, in compliance with the Securities Act and usable for resale of the
Common Stock for so long as required under the Registration Rights Agreement. If we fail to meet certain
requirements of the Registration Rights Agreement, we may be required to pay specified cash damages to GAM. We
will pay all of our own costs and expenses, including all fees and expenses of any counsel, relating to our
performance under the Registration Rights Agreement. In addition to the consideration paid to all parties for the
remaining interests in Redbox, we will incur an estimated $2.5 to $3.0 million in transaction costs, including
consulting fees and amounts relating to legal and accounting charges.
In connection with the GAM Purchase Agreement, on February 12, 2009, we entered into an amendment to our
credit agreement, dated as of November 20, 2007, by and among us, the lenders party thereto and Bank of America,
N.A., as administrative agent to the Lenders (the “Credit Agreement”). The Credit Agreement, as amended, is
described below in “Liquidity and Capital Resources”.
Strategy
Our strategy, embodied in our 4th Wall concept, is based on cross-selling our full range of products and
services to our retailers. In addition, we believe that we will continue to increase operating efficiencies by
combining and concentrating our products and services in our retailers’ storefronts.
We expect to continue devoting significant resources to building our sales organization in connection with our
4th Wall cross-selling strategy, adding administrative personnel to support our growing organization and developing
the information technology systems and technology infrastructure necessary to support our products and services.
We expect to continue evaluating new marketing and promotional programs to increase use of our products and
services.
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