EXHIBIT E
[REGISTRATION RIGHTS AGREEMENT, DATED 3/25/98]
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated as of this
25th day of March, 1998, is entered into by and between VIDEO CITY, INC., a
Delaware corporation (the "Company"), and MORTCO, INC., an Oregon corporation
("Mortco") and wholly-owned subsidiary of Rentrak Corporation, an Oregon
corporation ("Rentrak").
RECITALS
WHEREAS, Mortco has acquired 675,012 shares of the Company's common stock
(collectively, the "Shares") pursuant to: (i) the terms and conditions of that
certain Restructured Debt Agreement, dated as of the date hereof (the
"Restructured Debt Agreement"), by and among the Company, Mortco, Rentrak,
▇▇▇▇▇▇▇▇ One, Inc., a California corporation, and Adventures in Video, Inc., a
Minnesota corporation; and (ii) the Company's acquisition of ▇▇▇▇▇▇▇▇ One, Inc.;
and
WHEREAS, to induce Rentrak and Mortco to enter into the Restructured Debt
Agreement and acquire the Shares, the Company has agreed to grant to Mortco the
registration rights described herein.
AGREEMENT
NOW THEREFORE, in consideration of the recitals, mutual promises and
covenants hereinafter set forth, the Company and Mortco agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
(b) "Common Stock" shall mean the Common Stock, $.01 par value per
share, of the Company, as constituted on the date of this Agreement.
(c) "Company" shall have the meaning set forth in the first paragraph
of this Agreement.
(d) "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.
(e) "▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇ Entertainment, Inc., a Tennessee
corporation.
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(f) "Person" shall mean any individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated association,
or other entity of any nature whatsoever.
(g) "Registration Expenses" shall mean the expenses described in
Section 15 of this Agreement.
(h) "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 Mortco in accordance with the registration statement
covering them; or (b) which may be publicly sold by Mortco pursuant to Rule
144(k) of the Securities Act (without regard to any volume limitation).
(i) "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.
(j) "Selling Expenses" shall mean the expenses described in Section 5.
(k) "Shares" shall mean all shares of Common Stock now or hereafter
held by Mortco, including without limitation, shares of Common Stock issued
upon the exercise of any warrants held by Mortco.
(l) The terms "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, and the declaration
or ordering of effectiveness of such registration statement or document.
2. REQUIRED REGISTRATIONS.
(a) At any time after the date hereof, provided that the Company is
eligible to use a Form S-3 registration statement, Mortco shall have the
right to demand, by written notice, that the Company cause a Form S-3
registration statement to be filed under the Securities Act registering all
or a portion of the Restricted Stock, provided that the closing sale price
(or if no sales have been reported for such date, the mean between the
closing bid and asked price) per share of Common Stock on the trading day
immediately preceding the date of such notice, multiplied by the number of
Shares as to which registration is requested, is at least $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 2(a) as soon as practicable, but in no event more than 45 days
following the receipt of Mortco's notice, and on an unlimited number of
occasions, subject to applicable law.
(b) If the Company is not qualified to use a Form S-3 Registration
Statement to register shares of Restricted Stock, then Mortco may at any
time demand, by written notice, that the Company register pursuant to a
Registration
PAGE 2
Statement on Form S-1 or Form S-2, as applicable, the resale of no less
than 325,000 shares of Restricted Stock 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 2(b) as soon as practicable, but in no event more
than sixty (60) days following the receipt of Mortco's 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 2 shall be shares
of Common Stock; (ii) no request may be made under this Section 2 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 effectiveness of any registration statement covering the
Restricted Stock that Mortco requests to be registered, 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 the 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 consequences
to the Company.
(d) The Company shall be entitled to include in any registration
statement referred to in this Section 2, for sale in accordance with the
method of disposition specified in Mortco's notice 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 order specified in Section 3(d) of that certain Registration Rights
Agreement, dated as of January 7, 1997, between the Company and ▇▇▇▇▇▇ (the
"▇▇▇▇▇▇ Registration Rights Agreement").
3. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Section 2 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 forty-five (45)
days following the receipt of Mortco's notice requesting such registration:
(a) Prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such
registration
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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 3(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 Mortco and to each underwriter such number of copies of
the registration statement and the prospectus included therein (including
each preliminary prospectus) as such persons may reasonably request in
order to facilitate the public sale or other disposition of the Restricted
Stock covered by such registration statement;
(d) Use its best efforts to register and qualify the Restricted Stock
covered by such registration statement under the securities or "Blue Sky"
laws of such jurisdictions as Mortco or, in the case of an underwritten
public offering, the managing underwriter shall reasonably request;
provided, however, that the Company shall not for any such purpose be
------------------
required to qualify generally to transact business as a 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 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 Company's Common Stock is then listed or quoted;
(f) Promptly notify Mortco 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 an
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 material fact or omits to state a material
fact required to be state therein or necessary to make the statements
therein not misleading in light of the circumstances then existing. Mortco
shall, upon the 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 state therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
PAGE 4
For purposes of Section 3(a) and 3(b) and of Section 2(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 Restricted Stock in any other registration shall be deemed to extend until
the earlier of the sale of all Restricted Stock covered thereby or sixty (60)
days after the effective date thereof.
In connection with any registration hereunder, Mortco shall provide such
information and execute such documents as may reasonably be requested in
connection with such registration.
4. 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 an offering of Common Stock either by the Company or by its
shareholders) on a form that would also permit the registration of the
Restricted Stock, the Company shall promptly give Mortco written notice of such
proposal; provided, however, that, if there is an effective registration
statement covering the Restricted Stock, no such notice pursuant to this Section
3 will be required. Mortco may, by written request within ten (10) business days
after the receipt of any such written 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 shares
that Mortco requests to be included in the registration 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; (iii) any
holder having contractual registration rights that are subordinate to Mortco's
or ▇▇▇▇▇▇'▇ registration rights. The Company and Mortco intend that the
registration rights granted under this Agreement be on a parity with those
previously granted to ▇▇▇▇▇▇ under the ▇▇▇▇▇▇ Registration Rights Agreement.
Accordingly, after excluding shares of Common Stock from such registration in
the order set forth above, the Company may exclude the Restricted Stock from
such registration only on a pro rata basis with shares of Common Stock held by
▇▇▇▇▇▇, based on the number of shares that Mortco and ▇▇▇▇▇▇ desire to include
in such registration statement. In connection with any registration pursuant to
this Section 4 covering an underwritten public offering, the Company and Mortco
shall 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, Mortco 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,
PAGE 5
indemnities, underwriting agreements, and other documents required under the
terms of such underwriting arrangements, which arrangements shall not be
inconsistent herewith.
5. 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 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. Mortco shall
pay all Selling Expenses in connection with the sale of Restricted Stock
pursuant to each registration statement filed in accordance with this Agreement.
6. 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 Mortco may reasonably request, all to the extent
required from time to time to enable Mortco to sell its 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.
7. 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 Mortco, each underwriter of such Restricted Stock thereunder
and each other person, if any, who controls Mortco or such underwriter
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which Mortco, 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 Mortco, 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 to Mortco in any such case if
and to the extent that any such loss, claim, damage or
PAGE 6
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 Mortco, 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) Mortco 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
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, Mortco 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 Mortco will be liable hereunder in any such
case if any 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
Mortco 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 7 and
shall only relieve it from any liability that it may have to such
indemnified party under this Section 7 if and to the extent the
indemnifying party is prejudiced thereby. In case any such action shall be
PAGE 7
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereto, 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 7 for any legal expenses subsequently incurred by
such indemnified 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 reasonable 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 ore
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.
8. 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:
PAGE 8
If to the Company:
Video City, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇
If to Mortco:
Mortco, Inc.
One Airport Center
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
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 8(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 Mortco
whose rights or obligations would be affected thereby.
(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, Mortco 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 Mortco shall not
be required to so agree more than once during any twelve calendar months.
(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.
PAGE 9
(h) The Company shall not grant any registration rights to any person
that will adversely affect Mortco's rights under this Agreement, except for
pro rata reduction of Mortco's piggyback registration rights as provided in
Section 4.
IN WITNESS WHEREOF, the Company and Mortco have entered into this Agreement
as of the day and year set forth above.:
VIDEO CITY, INC.
By: ________________________
▇▇▇▇▇▇ ▇. ▇▇▇, Chief
Executive Officer
MORTCO, INC.
By: ________________________
▇▇▇ ▇▇▇▇▇▇, President
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