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Exhibit 5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated January 8, 1997,
between Video City, Inc., a Delaware corporation (formerly known as Prism
Entertainment Corporation) (the "Company"), and Xxxxxx Entertainment Inc., a
Tennessee corporation ("Xxxxxx").
A. The Company, Xxxxxx, Xxx Video City, Inc., a California corporation
("VCI"); and Xxxxxx X. Xxx, an individual resident of California on behalf of
himself and as Trustee of the Xxxxxx X. Xxx Revocable Living Trust UDT 1/9/91
(the "Trust") have entered into an Override Agreement, dated as of November 19,
1996 (the "Override Agreement"), providing for the restructuring of indebtedness
of VCI to Xxxxxx. Capitalized terms used herein but not defined herein shall
have the meanings given to them in the Override Agreement.
B. As contemplated by the Override Agreement, VCI has merged into the
Company, with the Company being the survivor (the "Merger").
C. Concurrently with the effective time of the Merger, the Company issued
to Xxxxxx the Additional Warrants and 1,500,000 shares of its Common Stock, and
certain shareholders of the Company issued to Xxxxxx the New Warrants.
D. As an inducement to Xxxxxx to enter into the Override Agreement, the
Company has agreed to xxxxx Xxxxxx certain registration rights with respect to
the Shares (as defined below).
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.01 par value per share, of
the Company, as constituted as of the date of this Agreement.
"Company" shall have the meaning provided therefor in the first paragraph
of this Agreement.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Xxxxxx" shall have the meaning provided therefor in the first paragraph
of this Agreement.
"Registration Expenses" shall mean the expenses so described in
Section 6.
"Restricted Stock" shall mean the Shares, but excluding shares of Common
Stock (a) which have been registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of by Xxxxxx in
accordance with the registration statement covering them; or (b) which may be
publicly sold by Xxxxxx pursuant to Rule 144(k) under the Securities Act
(without regard to any volume limitation).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 6.
"Shares" shall mean the shares of Common Stock purchased or purchasable
pursuant to the exercise of the Additional Warrants and the New Warrants and the
1,500,000 shares of Common Stock issued by the Company to Xxxxxx at the Closing.
2. Restrictive Legend. Each certificate representing the Shares shall,
except in compliance with the following legend, be stamped or otherwise
imprinted with a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SHARES UNDER THAT ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, AN EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.
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3. Required Registration.
(a) Immediately upon the Company's qualification to use a Form S-3
Registration Statement to register the resale of shares of Restricted Stock by
Xxxxxx, Xxxxxx may request the Company to register under the Securities Act
shares of Restricted Stock held by Xxxxxx for sale in the manner specified in
such notice, provided that the reasonably anticipated aggregate price to the
public of such public offering would exceed One Million Five Hundred Thousand
Dollars ($1,500,000). The Company shall be obligated to use its best efforts to
cause the registration for resale of the shares of Restricted Stock pursuant to
this Section 3(a) as soon as practicable, but in no event more than 45 days
following the receipt of Xxxxxx'x notice, and on an unlimited number of
occasions, subject to applicable law. The Company shall notify Xxxxxx within
thirty (30) days after it has become eligible to use Form S-3.
(b) In the event that on or prior to December 31, 1997, the Company has
not become qualified to use a Form S-3 Registration Statement to register
shares of Restricted Stock by Xxxxxx, then at any time thereafter Xxxxxx may
request that the Company register pursuant to a Registration Statement on Form
S-1 or Form S-2, as applicable, the resale of no less than 500,000 shares of
Restricted Stock held by Xxxxxx for sale in the manner specified in such
notice. The Company shall be obligated to use its best efforts to cause the
registration for resale of the shares of Restricted Stock pursuant to this
Section 3(b) as soon as practicable, but in no event more than 45 days
following the receipt of Xxxxxx'x notice, and on one occasion only, provided,
however, that such obligation shall be deemed satisfied only when a
registration statement covering the Restricted Stock, for sale in accordance
with the method of disposition specified in the notice, shall have become
effective.
(c) Notwithstanding the foregoing and anything to the contrary contained
herein, (i) the only securities that the Company shall be required to register
for resale pursuant to this Section 3 shall be shares of Common Stock, (ii) no
request may be made under this Section 3 within 90 days after the effective date
of a registration statement filed by the Company covering a firm commitment
underwritten public offering of Common Stock by the Company under the Securities
Act and (iii) the Company may postpone for a reasonable period of time, not to
exceed thirty (30) days, the filing or the effectiveness of any registration
statement covering the shares of Restricted Stock requested to be registered by
Xxxxxx, if the Board of Directors of the Company in good faith determines that
such registration would have a material adverse effect on any plan or proposal
by the Company with respect to any financing, acquisition, recapitalization,
reorganization or other material transaction, or the Company is in possession of
material non-public information that, if publicly disclosed, would result in a
material disruption of a major corporate development or transaction then pending
or in progress or in other material adverse consequences to the Company.
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(d) The Company shall be entitled to include in any registration
statement referred to in this Section 3, for sale in accordance with the method
of disposition specified in the notice from Xxxxxx referred to above, shares of
Common Stock to be sold by the Company for its own account and or by other
holders of Common Stock, provided, however, that if the registration covers an
underwritten public offering, if the managing underwriter or underwriters, if
any, of such offering advise the Company that the number of shares requested to
be included in the registration should be reduced or eliminated, the shares so
excluded shall be excluded in the following order: (i) first to any director,
officer, or employee of the Company; (ii) any holder of Common Stock not having
contractual registration rights; (iii) any other holder have contractual
registration rights; (iv) the Company; and (v) Xxxxxx or any transferee or
assignee as to the Restricted Stock.
4. Registration Procedures. If and whenever the Company is required by the
provisions of Section 3 to use its best efforts to effect the registration of
any shares of Restricted Stock under the Securities Act, the Company will, as
expeditiously as reasonably possible but in no event more than 45 days following
the receipt of Xxxxxx'x notice:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for the
period specified in Section 4(a) above and comply with the provisions of the
Securities Act with respect to the disposition of all Restricted Stock covered
by such registration statement;
(c) furnish to Xxxxxx and to each underwriter such number of copies of
the registration statement and the prospectus included therein (including each
preliminary prospectus), as such persons reasonably may request in order to
facilitate the public sale or other disposition of the shares of Restricted
Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as Xxxxxx or, in the case of an underwritten public
offering, the managing underwriter reasonably shall request, provided, however,
that the Company shall not for any such purpose be required to qualify generally
to transact business as a
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foreign corporation in any jurisdiction where it is not so qualified, subject
itself to taxation in any jurisdiction wherein it is not so subject, or to
consent to general service of process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange or the NASDAQ National
Market System on which the Common Stock of the Company is then listed;
(f) promptly notify Xxxxxx and each underwriter under such registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event of which the
Company has knowledge as a result of which the prospectus contained 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 then existing. Xxxxxx agrees upon receipt of such notice forthwith
to cease making offers and sales of Restricted Stock pursuant to such
registration statement or deliveries of the prospectus contained therein for any
purpose until the Company has prepared and furnished such amendment or
supplement to the prospectus as may be necessary so that, as thereafter
delivered to purchasers of such Restricted Stock, 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 the light of the circumstances then existing.
For purposes of Section 4(a) and 4(b) and of Section 3(c), the period of
distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of the shares of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all the shares of Restricted Stock
covered thereby and 60 days after the effective date thereof.
In connection with any registration hereunder, Xxxxxx shall provide such
information and execute such documents as may reasonably be required in
connection with such registration.
5. Piggyback Registrations. Each time that the Company proposes to file a
registration statement under the Securities Act with respect to an offering (in
connection with either an offering of Common Stock by the Company or by its
shareholders) on a form that would also permit the registration of the
Restricted Stock, the Company will give written notice of such proposal to
Xxxxxx; provided, however, that, if there is an effective registration statement
covering the Restricted
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Stock, no such notice pursuant to this Section 5 shall be required. Xxxxxx may,
by written request given within ten business days after receipt of any such
notice, require the Company to use its best efforts to cause all or part of the
Restricted Stock to be included in such registration statement. Notwithstanding
the foregoing, if the managing underwriter or underwriters, if any, of such
offering advise the Company in writing that inclusion of the Restricted Stock
would (a) make it impracticable to conduct an underwritten offering of the
Common Stock being registered at the price at which such Common Stock could be
sold without such inclusion, or (b) materially and adversely interfere with the
offering, then the number of the shares requested to be included in the
registration by Xxxxxx may be reduced or eliminated; provided, that, the Company
shall exclude first from such registration, in the following order, shares of
Common Stock sought to be included therein by (i) any director, officer, or
employee of the Company, (ii) any holder of Common Stock not having contractual
registration rights, and (iii) any holder having contractual registration rights
that are subordinate to the holders of the Restricted Stock; provided, however,
that with regard to any holder of registration rights on a parity with Xxxxxx'x,
such holder's shares to be included in the registration statement shall be
reduced with Xxxxxx'x pro rata in accordance with the number of shares desired
to be included. In connection with any registration pursuant to this Section 5
covering an underwritten public offering, the Company and Xxxxxx agree to enter
into a written agreement with a managing underwriter containing such provisions
as are customary in the securities business for such an arrangement between such
underwriters and companies of the Company's size and investment stature. In
connection with any such registration, Xxxxxx shall (a) provide such information
and execute such documents as may be reasonably required in connection with such
registration, (b) agree to sell the shares of Restricted Stock on the basis
provided in any underwriting arrangements and (c) complete and execute all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements,
which arrangements shall not be inconsistent herewith.
6. Expenses. All expenses of registration and offerings in connection with
this Agreement including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with federal and state securities laws, fees of the
NASD and of transfer agents and registrar but excluding any Selling Expenses,
are called "Registration Expenses". All underwriting discounts and selling
commissions applicable to the sale of the shares of Restricted Stock are called
"Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed in accordance with this Agreement. All Selling
Expenses in
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connection with the sale of shares of Restricted Stock by Xxxxxx pursuant to
each registration statement filed in accordance with this Agreement shall be
borne by Xxxxxx.
7. Rule 144. During any period that the Company has any securities
registered under the Exchange Act, the Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder, and it will
take such further action as Xxxxxx may reasonably request, all to the extent
required from time to time to enable Xxxxxx to sell Common Stock without
registration under the Securities Act within the limitation of the exemption
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the Commission.
8. Indemnification and Contribution.
(a) In the event of a registration of any Restricted Stock under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless Xxxxxx, each underwriter of such Restricted Stock thereunder and each
other person, if any, who controls Xxxxxx or such underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which Xxxxxx, such underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement of any material fact contained in any registration
statement under which such Restricted Stock were registered under the Securities
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will pay the legal fees and
other expenses of Xxxxxx, each such underwriter and each such controlling person
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that the Company will not
be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in reliance
upon and in conformity with information furnished by Xxxxxx, any such
underwriter or any such controlling person in writing, and, provided further,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of or is based upon
an untrue or alleged untrue statement or omission or an alleged omission made in
any preliminary prospectus or final prospectus if (1) Xxxxxx failed to send or
deliver a copy of the final prospectus or prospectus supplement with or prior to
the delivery of written confirmation of the sale of Restricted Stock and (2) the
final
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prospectus or prospectus supplement would have corrected such untrue statement
or omission.
(b) In the event of a registration of any Restricted Stock
under the Securities Act pursuant to this Agreement, Xxxxxx will indemnify and
hold harmless the Company, each person, if any, who controls the Company within
the meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which Restricted Stock was
registered under the Securities Act pursuant to this Agreement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon 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, and will pay the legal fees and other
expenses of the Company and each such officer, director, underwriter and
controlling person incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that Xxxxxx will be liable hereunder in any such case if and only to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information furnished in writing to
the Company by Xxxxxx for use in such registration statement or prospectus.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the failure to so notify
the indemnifying party shall not relieve it from any liability that it may have
to such indemnified party other than under this Section 8 and shall only relieve
it from any liability that it may have to such indemnified party under this
Section 8 if and to the extent the indemnifying party is prejudiced thereby. In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 8 for any legal expenses subsequently incurred by such
indemnified
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party in connection with the defense thereof; provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
(based on the advice of counsel) that there may be reasonable defenses available
to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assert such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred, it being understood, however, that the indemnifying party shall not,
in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel as
required by the local rules of such jurisdiction) at any time for all such
indemnified parties.
(d) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
9. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including, without
limitation, transferees of any shares of Restricted Stock), whether so expressed
or not.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or sent by Federal Express or
other recognized overnight courier service, addressed as follows:
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if to the Company:
Video City, Inc.
0000 XxXxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
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
or, in any case, at such other address or addresses as shall have been furnished
in writing by one party to the other in accordance with the provisions of this
Section 9(b).
(c) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California without giving
effect to the conflict of laws provisions.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and Xxxxxx.
(e) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart executed by the party
against whom enforcement is sought.
(f) If requested in writing by the underwriters for an underwritten
public offering of securities of the Company, Xxxxxx shall agree not to sell
publicly any Restricted Stock or any other shares of Common Stock (other than
shares of Restricted Stock or other shares of Common Stock being registered in
such offering), without the consent of such underwriters, for a period, not to
exceed ninety days, following the effective date of the registration statement
relating to such offering to be reasonably determined by the underwriters,
except that Xxxxxx shall not be required to so agree more than once during any
twelve calendar months.
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(g) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(h) The Company shall not grant any registration rights to any person
that will adversely affect Xxxxxx'x rights under this Agreement, except for pro
rata reduction of Xxxxxx'x piggyback registration rights as provided in
Section 5.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date and year first above written.
VIDEO CITY, INC.
By:______________________________
Name:____________________________
Title:___________________________
XXXXXX ENTERTAINMENT INC.
By:______________________________
Name:____________________________
Title:___________________________
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