LOCK-UP AGREEMENT
This Lock-Up Agreement ("Agreement") is entered into as of January 8,
1997, by and between Xxxxxx X. Xxx ("Xxx"), an individual and a resident of
California, Xxxxx Xxxxxxx ("Xxxxxxx"), an individual and a resident of
California, and Xxxxxx Entertainment Inc., a Tennessee corporation ("Xxxxxx"),
with respect to the following facts:
RECITALS
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A. Unless otherwise defined, all capitalized terms used in this
Agreement shall have the meanings ascribed to them in that certain override
agreement (the "Override Agreement") dated as of November 19, 1996, by and among
Xxx Video City, Inc., a California corporation ("VCI"), Xxx on behalf of himself
and as trustee of the Xxxxxx X. Xxx Revocable Living Trust UDT 1/9/91 (the
"Trust"), Prism Entertainment Corporation, a Delaware corporation ("Prism"), and
Xxxxxx.
B. VCI and Prism have entered into that certain Agreement and Plan of
Reorganization and Merger dated as of October 25, 1996, as amended by that
certain Agreement and Plan of Reorganization and Merger, dated December 20,
1996, and that certain Second Amended Agreement and Plan of Reorganization and
Merger, dated December 24, 1996 (the "Merger Agreement"), with respect to the
merger (the "Merger") of VCI into Prism.
C. In connection with the Merger, VCI, Xxx, Prism and Xxxxxx have
entered into the Override Agreement which sets forth the terms and conditions
upon which such parties have agreed to, among other things, restructure the VCI
Debt.
D. This Agreement is being delivered pursuant to Article 9 of the
Override Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
and obligations set forth in the Override Agreement and in this Agreement, Xxx,
Xxxxxxx and Xxxxxx hereby agree as follows:
1. Lock-Up.
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1.1 Except as expressly provided for in this Agreement, Xxx
(including the Trust) and Xxxxxxx shall not, without the prior written consent
of Xxxxxx, directly or indirectly, issue, offer to sell, sell, grant an option
for the purchase of, assign, transfer, pledge, hypothecate or otherwise encumber
or dispose (pursuant to Rule 144 of the regulations under the Securities Act, or
otherwise) of any of their respective Lock-Up Shares, or dispose of any
beneficial interest therein.
1.2 This Agreement, and all of the restrictions relating to the
Lock-Up Shares contained herein, shall terminate on that date which is the
earlier of (i) ninety days after Xxx ceases to be an employee or consultant on a
substantially full time basis with the Company or (ii) that date upon which 80%
of the Remaining Debt has been paid to Xxxxxx. Immediately after any
termination of this Agreement pursuant to this Section, the legend imposed
pursuant to Section 1.3 below shall, upon request of Xxx or Xxxxxxx, as
applicable, be removed from any stock certificates representing the Lock-Up
Shares.
1.3 Xxx and Xxxxxxx understand and agree that the following
legend, or such other legend as shall be in a form and substance satisfactory to
Xxxxxx, shall be set forth on each certificate representing the respective Lock-
Up Shares registered in the name of, or beneficially owned by, as applicable,
Xxx or Xxxxxxx.
THE HOLDER OF THIS CERTIFICATE HAS AGREED, NOT TO DIRECTLY OR
INDIRECTLY OFFER TO SELL, GRANT AN OPTION FOR THE SALE OF, ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE ENCUMBER OR DISPOSE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE, OR TO DISPOSE OF ANY
BENEFICIAL INTEREST THEREIN, PURSUANT TO RULE 144 OF THE SECURITIES
ACT OF 1933, AS AMENDED, OR OTHERWISE, EXCEPT (A) WITH THE PRIOR
WRITTEN CONSENT OF XXXXXX ENTERTAINMENT INC. OR (B) AS PERMITTED BY
THAT CERTAIN LOCK-UP AGREEMENT DATED JANUARY 8, 1996, ENTERED INTO BY
THE HOLDER HEREOF AND XXXXXX ENTERTAINMENT INC.
2. Escrow Agent. At all times during the term of this Agreement, the
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Lock-Up Shares subject to this Agreement will be held by Loeb & Loeb LLP, a
California limited liability partnership, or such other escrow agent that is
mutually acceptable to Xxx, Xxxxxxx and Xxxxxx, pursuant to the terms and
conditions of an escrow agreement substantially in the form, and containing the
substance, of Exhibit A, which is attached hereto and incorporated herein by
this reference.
3. Miscellaneous.
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3.1 Notices. All notices, requests and other communications to
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any party hereunder shall be in writing and shall be given to such party at its
address or telecopier number set forth below, or such other address or
telecopier number as such party may hereinafter specify by notice to each other
party hereto:
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if to Xxx:
Xxxxxx Xxx
Xxx Video City, Inc.
0000 XxXxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
with a copy to:
Xxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
if to Xxxxxxx:
Xxxxx Xxxxxxx
Video City, Inc.
0000 XxXxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
if to Xxxxxx:
Xxxxxx Entertainment Inc.
Two Xxxxxx Xxxxxxxxx
Xx Xxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxxxx, Esq., General Counsel
Telecopy: (000) 000-0000
Each such notice, request or other communication shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the appropriate answerback is received or, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, properly addressed or, (iii) if given by any other means, when
delivered at the address specified herein.
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3.2 Amendments; No Waivers.
----------------------
(a) Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by each party hereto, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No failure or delay by any party hereto in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
3.3 Successors and Assigns. The provisions of this Agreement
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shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
3.4 Governing Law. This Agreement shall be construed in
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accordance with and governed by the laws of the State of California, without
giving effect to the conflict of laws principles thereof.
3.5 Counterparts; Effectiveness. This Agreement may be signed in
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any number of counterparts, each of which shall be an original and all of which
shall be deemed to be one and the same instrument, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
3.6 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement, including without limitation, the Letter of
Intent dated September 16, 1996, the Workout Agreement, the Stock Pledge
Agreement, the Note Pledge Agreement, the Prior Supply Agreement, the Old
Warrants and the Old Security Agreements. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been made
or relied upon by any party hereto.
3.7 Severability. If any one or more provisions of this
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Agreement shall, for any reasons, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
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3.8 Captions and Section References. The captions herein are
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included for convenience of reference only and shall be ignored in the
construction or interpretation hereof. All references to "Sections" without
further citation refer to sections of this Agreement.
3.9 Interpretation. Where the context or construction
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requires, all words applied in the plural shall be deemed to have been used in
the singular, and vice versa; the masculine shall include the feminine and
neuter, and vice versa; and the present tense shall include the past and future
tense, and vice versa.
3.10 Attorneys' Fees. In the event of any litigation or
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legal proceedings (including arbitration) between the parties hereto, the
nonprevailing party shall pay the expenses, including reasonable attorneys' fees
and court costs, of the prevailing party in connection therewith.
3.11 No Third-Party Rights. Nothing in this Agreement,
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whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any Persons other than the parties to it and
their respective successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
Persons to any party to this Agreement, nor shall any provision give any third
Persons any right of subrogation or action over against any party to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
/s/ Xxxxxx X. Xxx
--------------------------------
Xxxxxx X. Xxx
/s/ Xxxxx Xxxxxxx
--------------------------------
Xxxxx Xxxxxxx
Xxxxxx Entertainment Inc., a Tennessee
corporation
By: /s/ Xxxxxx X. Xxxx
----------------------------
Name: Xxxxxx X. Xxxx
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Title: Vice Chairman
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EXHIBIT A
ESCROW AGREEMENT
ESCROW AGREEMENT - LOCK-UP SHARES
This Escrow Agreement ("Escrow Agreement") is made and entered into as
of this 8th day of January 1997, by and among Loeb & Loeb LLP ("Escrow Agent"),
a California limited liability partnership, Xxxxxx X. Xxx ("Xxx"), an individual
and resident of California, Xxxxx Xxxxxxx ("Xxxxxxx"), an individual and a
resident of California, and Xxxxxx Entertainment Inc., a Tennessee corporation
("Xxxxxx") with respect to the following facts:
RECITALS
A. Unless otherwise defined, all capitalized terms used in this
Agreement shall have the meanings ascribed to them in that certain Override
Agreement (the "Override Agreement") dated as of November 19, 1996, by and among
Xxx Video City, Inc., a California corporation ("VCI"), Xxx on behalf of himself
and as trustee of the Xxxxxx X. Xxx Revocable Living Trust UDT 1/9/91, Prism
Entertainment Corporation, a Delaware corporation, and Xxxxxx.
B. Pursuant to the Override Agreement, Xxx, Xxxxxxx and Xxxxxx
have entered into that certain Lock-Up Agreement dated as of the date hereof
(the "Lock-Up Agreement") pursuant to which, among other things, Xxxxxxx and Xxx
have agreed to deposit with the Escrow Agent the Lock-Up Shares to be held
pursuant to the terms and conditions of this Agreement.
C. The Escrow Agent is willing to serve in the capacity as escrow
agent upon the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Act. The Escrow Agent agrees to act as escrow
----------------
agent pursuant to the terms of this Agreement.
2. Receipt of Lock-Up Shares. Upon issuance thereof, Xxxxxxx
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and Xxx agree to promptly deposit the Lock-Up Shares with the Escrow Agent to be
held by the Escrow Agent in accordance with the provisions of the Lock-Up
Agreement and this Agreement. Upon receipt of written notice from all parties
hereto of the termination of the Lock-Up Agreement pursuant to Section 1.2
thereof, the Escrow Agent shall return the Lock-Up Shares to Xxxxxxx and Xxx, as
the case may be, or their respective designees.
3. Provisions Regarding Escrow Agent. The following provisions
---------------------------------
shall control with respect to the rights, duties and liabilities of the Escrow
Agent:
a. No Responsibility For Validating or Sufficiency. The
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Escrow Agent shall have no duty to know or determine the performance or non-
performance of any provision of any agreement between the other parties hereto,
including, but not limited to, the Override Agreement and the Lock-Up Agreement,
and the original or a copy of any such agreement deposited with the Escrow Agent
shall not bind the Escrow Agent in any manner. The Escrow Agent assumes no
responsibility for the validity or sufficiency of any documents or papers or
payments deposited or called for hereunder except as may be expressly and
specifically set forth herein, and the duties and responsibilities of the Escrow
Agent hereunder are limited to those expressly stated herein.
b. Modification and Amendments. The provisions of this
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Agreement may be supplemented, altered, amended modified or revoked only by a
writing signed by Xxxxxxx, Xxx and Xxxxxx and approved in writing by the Escrow
Agent.
c. Exculpation of Escrow Agent. The Escrow Agent shall
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not be personally liable for any act it may do or omit to do hereunder as such
agent while acting in good faith and in the exercise of its own best judgment,
and any act done or omitted by it pursuant to the written advice of its own
attorneys shall be conclusive evidence of such good faith. The Escrow Agent
shall have the right at any time to consult with its counsel upon any question
arising hereunder and shall incur no liability for any delay reasonably required
to obtain the advice of counsel.
d. Conflicting Notices. Other than those which are
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specifically referred to in this Escrow Agreement, the Escrow Agent is hereby
authorized to disregard any and all notices or warnings given by Xxxxxxx, Xxx or
Xxxxxx, or by any other person, firm or corporation, except that the Escrow
Agent is hereby expressly authorized to comply with any and all final processes,
orders, judgments or decrees of any court. To the extent the Escrow Agent obeys
or complies with any process, order, judgment or decree of any court, it shall
not be liable to any other party hereto or to any other person, firm or
corporation by reason of such compliance.
e. Fees and Expenses of Escrow Agent. In consideration
---------------------------------
of the acceptance of this Escrow by the Escrow Agent (as evidenced by its
signature below), the Company shall, for itself and its successors and assigns,
pay Escrow Agent its reasonable charges, fees and expenses hereunder.
f. Authority of Signing Parties. The Escrow Agent shall
----------------------------
be under no duty or obligation to ascertain the identity, authority or right of
Xxxxxxx, Xxx or Xxxxxx, (or their agents) to execute or deliver this Agreement
or any documents, certificates, or payments deposited, delivered or given
hereunder.
g. No Liability for Lapse of Rights. The Escrow Agent
--------------------------------
shall not be liable for the lapse of any rights under any statute of limitations
or by
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reason of laches with respect to this Agreement or any funds, securities,
documents or papers deposited, delivered or given hereunder.
h. Duties in Event of Dispute. In the event of any
--------------------------
dispute among the parties hereto as to any fact or matter relating hereto or to
the transactions contemplated in the Override Agreement or the Lock-Up
Agreement, the Escrow Agent is instructed that it shall be under no obligation
to act except under process or order of court, or if there be no such process or
order, until it has filed or caused to be filed an appropriate action impleading
Xxxxxxx, Xxx and Xxxxxx. The Escrow Agent shall sustain no liability for its
failure to act pending such process of court, order or impleader action.
i. Resignation. The Escrow Agent, or any successor
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Escrow Agent, may at any time resign by giving notice in writing to Xxxxxxx, Xxx
and Xxxxxx, and shall be discharged from its duties under this Escrow Agreement
on the first to occur of the appointment of a successor Escrow Agent as provided
in this Section, or the expiration of thirty (30) calendar days after such
resignation notice is given. In the event of any such resignation, a successor
Escrow Agent shall be appointed within thirty (30) days by the agreement of
Xxxxxxx, Xxx and Xxxxxx. Any successor Escrow Agent shall deliver to Xxxxxxx,
Xxx and Xxxxxx a written instrument accepting appointment under this Agreement,
and thereupon it shall succeed to all the rights and duties of the Escrow Agent
hereunder and shall be entitled to receive any funds, securities, documents,
instruments, certificates, checks, or agreements held by the predecessor Escrow
Agent.
j. Replacement. At their option, Xxxxxxx, Xxx and Xxxxxx
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may terminate the appointment of Escrow Agent hereunder and appoint another
person as escrow agent in its place. Upon any such appointment, the escrow agent
so replaced shall deliver to the successor escrow agent all of the Lock-Up
Shares and such other documents, certificates and agreements held by it
hereunder and the successor escrow agent shall assume all rights and duties of
"Escrow Agent" hereunder.
k. Waiver of Right to Set-Off. Escrow Agent hereby
--------------------------
waives the benefit of, and any right to, any setoff or recoupment or any other
claim it may have now or hereafter have in or with respect to the Lock-Up
Shares.
l. Discharge. Escrow Agent, having delivered all of the
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funds, securities, documents, instruments, checks, certificates or agreements
pursuant to the terms of this Agreement, shall be discharged from any further
obligation hereunder.
m. Indemnity. In the event Escrow Agent becomes involved
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in litigation in connection with this Escrow Agreement, or any transaction
related in any way hereto, Xxxxxxx, Xxx and Xxxxxx, jointly and severally, shall
indemnify and
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save the Escrow Agent harmless from all loss, cost, damage, expense and
attorneys' fees suffered or incurred by the Escrow Agent as a result thereof,
except for any loss, cost, damage, or expense resulting from the Escrow Agent's
breach of this Agreement or its willful misconduct or gross negligence.
4. Notices. All communications hereunder shall be in writing and,
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if sent to Xxxxxx, shall be mailed by registered or certified mail or delivered
or telegraphed and confirmed in writing to Two Xxxxxx Boulevard, La Vergne,
Tennessee 37089, Attention: Chief Financial Officer; if sent to Xxx, shall be
mailed by registered or certified mail or delivered or telegraphed and confirmed
in writing to Xxxxxx X. Xxx, Video City, Inc., 0000 XxXxxxxx Xxxxx, Xxxxx X,
Xxxxxxxxxxx, Xxxxxxxxxx 00000; if sent to Xxxxxxx, shall be mailed by registered
or certified mail or delivered or telegraphed and confirmed in writing to Xxxxx
Xxxxxxx, Video City, Inc., 0000 XxXxxxxx Xxxxx, Xxxxx X, Xxxxxxxxxxx, Xxxxxxxxxx
00000; and if sent to the Escrow Agent, shall be mailed by registered or
certified mail or delivered or telegraphed and confirmed in writing to Loeb &
Loeb LLP, 0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxx X. Xxxxxxxx, Esq.
Loeb & Loeb LLP, a California limited liability
partnership
By: -----------------------------------------
Xxxxx X. Xxxxxxxx, a Partner of the Firm
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Xxxxxx X. Xxx
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Xxxxx Xxxxxxx
Xxxxxx Entertainment Inc., a Tennessee corporation
By: -----------------------------------------
Its: -----------------------------------------
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