AMENDMENT NO. 1 TO THE
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDMENT NO. 1 (this "AMENDMENT") to the AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION, dated as of July 30, 1998 (the "MERGER AGREEMENT,"
capitalized terms used but not otherwise defined herein are used herein as
therein defined), among HOLLYWOOD ENTERTAINMENT CORPORATION, a corporation
organized and existing under the laws of the State of Oregon ("PARENT"),
R ACQUISITION, INC., a corporation organized and existing under the laws of
the State of Delaware ("MERGER SUB") and a direct wholly owned subsidiary of
Parent, and XXXX.XXX, INC., a corporation organized and existing under the
laws of the State of Delaware (the "COMPANY"), is made this 3rd day of
September, 1998, by and among Parent, Merger Sub and the Company.
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub and the Company desire to amend the Merger
Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreement set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO MERGER AGREEMENT. The Merger
Agreement is hereby amended as follows:
(a) Sections 3.01(c)(i), and 3.02(e) of the Merger Agreement
are hereby amended by deleting the dollar amount "$30,000,000" and
inserting in lieu thereof the dollar amount "$29,849,500."
(b) Sections 3.01(c)(ii), 3.02(f), 3.06(a) and 3.06(b) of the
Merger Agreement are hereby amended by deleting the numeral ".5388"
and inserting in lieu thereof the numeral ".537608239."
(c) The last sentence of Section 3.02(b) of the Merger
Agreement is hereby amended and restated in its entirety to read as
follows:
"Any shareholder's election to receive the Cash Consideration
shall have been properly made only if Parent shall have received at
its designated office, by 10:00 a.m., San Francisco time, September
11, 1998 (the "Election Date") a Form of Election properly completed
and signed."
(d) Section 3.02(c) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
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"Any Form of Election may be revoked by the shareholder
submitting it to Parent only by written notice received by Parent
prior to 10:00 a.m., San Francisco time, on the Election Date."
(e) Section 3.02(g) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(g) The aggregation of the portion of Electing Shares that are
subject to proration under subsection (e) are referred to herein as
"Deemed Stock Electing Shares" and the aggregation of the portion of
non-Electing Shares that are subject to proration under subsection (f)
are referred to herein as "Deemed Cash Electing Shares."
(f) The third sentence of Section 3.03 of the Merger Agreement
is hereby amended and restated in its entirety to read as follows:
"Commencing immediately after the Effective Time, each holder of a
certificate or certificates theretofore representing shares of Company
Capital Stock (other than Dissenting Shares) may surrender the same to
Parent together with a letter of transmittal in the form provided to
such holder by Parent."
(g) Section 6.07 of the Merger Agreement is hereby amended and
restated in its entirety as follows:
"6.07 OPTION CASH-OUT. Immediately prior to the Effective
Time, the Company shall (or shall have) accelerated vesting of not
more than 25% of outstanding Company Stock Options and irrevocably
undertaken to cash-out such options and other previously vested
Company Stock Options (the "Previously Vested Options") for an
aggregate cash payment with respect to all such Company Stock Options
(the "Cash-Out Amount") of an amount not in excess of $7,000,000. With
respect to the accelerated options, one-half of such amount shall be
paid out immediately after the Effective Time, and the remainder of
such amount shall be deposited into an escrow account (with an escrow
agent to be identified by the Company) and paid out on the 120th day
following the Effective Time in accordance with the terms and subject
to the conditions specified by the Company under the escrow agreement
and in accordance with the Company Stock Option Plans. If, under the
terms of the escrow agreement, funds remain in the escrow account
after the 120th day following the Effective Time as a result of the
termination of an optionholder's employment under specified
circumstances, such remaining amount shall be promptly distributed to
the Persons that held Electing Shares, Deemed Cash Electing Shares and
Previously Vested Options immediately prior to the Effective Time
ratably on the basis of the aggregate number of (i) Electing Shares
held by such holder immediately prior to the Effective Time, (ii)
Deemed Cash Electing shares held by such holder immediately prior to
the Effective Time and (iii) shares of Company Capital Stock issuable
upon exercise of Previously Vested Options held by such holder
immediately prior to the Effective Time."
(h) Section 6.10 of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
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"6.10 CONTINUITY OF INTEREST. The parties hereto acknowledge
and agree that the relative amounts of Redeemable Preferred Stock and
Parent Common Stock included in the Stock Consideration issued under
this Agreement and issued under the Stock Purchase Agreement shall be
adjusted in accordance with the provisions of this Section 6.10 (and a
corresponding provision of the Stock Purchase Agreement) in order to
ensure satisfaction of the continuity of interest requirement for
status of the Merger as a "reorganization" under Section 368(a) of the
Code:
(a) If the closing price of the Parent Common Stock on the
NNM or the day preceding the Closing Date (the "Closing Date Stock
Value") is equal to or more than $13.50 per share, then (i) the number of
shares of Parent Common Stock issued under this Agreement will be
increased to 4,000,000, (ii) the number of shares of Parent Common
Stock to be issued under the Stock Purchase Agreement shall be reduced
by the amount of the increase under clause (i), (iii) the number of
shares of Redeemable Preferred Stock issued under this Agreement will
be reduced by the amount of the increase under clause (i), and (iv) a
number of shares of Redeemable Preferred Stock equal to the amount of
the increase under clause (i) shall be issued under the Stock Purchase
Agreement.
(b) If the Closing Date Stock Value is less than $13.50
per share, then the number of shares of Parent Common Stock issued
under this Agreement shall be further increased (with corresponding
adjustments in the manner provided under subsection (a) to the number
of shares of Parent Common Stock and Redeemable Preferred Stock issued
under this Agreement and the Stock Purchase Agreement) to the extent
necessary to cause, if possible, (i) the number of shares of Parent
Common Stock issued under this Agreement multiplied by the Closing
Date Stock Value to equal or exceed (ii) 50% of the value of the
aggregate consideration issued under this Agreement in exchange for
the Company Capital Stock (valuing any Redeemable Preferred Stock
issued under this Agreement at $16.20 per share solely for purposes of
this Section 6.10 and Section 8.01(g))."
(i) Article VI of the Merger Agreement is hereby amended by
adding the following Section 6.12 immediately following Section 6.11
thereof:
"6.12 STATUS OF MERGER AS REORGANIZATION. The parties intend
that the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code and have not taken, and following the
Effective Time will not take, any action that could reasonably be
expected to cause the Merger to fail to so qualify, PROVIDED that,
subject to the foregoing, no party makes any representation or
warranty that the requirements for treatment of the Merger as a
reorganization are satisfied."
(j) The first sentence of Section 7.02 is hereby amended and
restated in its entirety to read as follows:
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"The Company shall call and hold a special meeting of the
stockholders of the Company (or solicit the written consent of the
Company's stockholders in lieu of a meeting) no later than September
11, 1998.
(k) Article VIII of the Merger Agreement is hereby amended by
adding the following subsection (g) of Section 8.01 immediately
following subsection (f) thereof:
"(g) the product of the Closing Date Stock Value (as defined by
Section 6.10 of this Agreement) and the number of shares of Parent
Common Stock issued under this Agreement shall equal or exceed 50% of
the value of the aggregate consideration issued under this Agreement
in exchange for the Company Capital Stock (valuing any Redeemable
Preferred Stock issued under this Agreement at $16.20 for this
purpose) so as to ensure satisfaction of the continuity of interest
requirement for treatment of the Merger as a reorganization under
Section 368(a) of the Code."
(l) Section 10.02(a) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(a) Parent and its Affiliates, officers, directors, employees,
agents, successors and assigns (each an "Indemnified Party") shall be
indemnified and held harmless, jointly and severally, by each holder
(a "Holder") of Company Capital Stock receiving Consideration for any
and all Liabilities, losses, damages, claims, costs (including
business interruption costs) and expenses, interest, awards, judgments
and penalties (including, without limitation, attorneys' and
consultants' fees and expenses) actually suffered or incurred by them
(including, without limitation, any Action brought or otherwise
initiated by any of them) (hereinafter a "Loss"), arising out of or
resulting from (i) the breach of any representation or warranty made
by the Company contained in the Acquisition Documents and (ii) any
breach of any representation or warranty by the Company regarding
Taxes and any Taxes owed by the Company, any Predecessor Company or
equity holder therein related to periods or acts prior to the
Effective Time."
SECTION 2. Representations and Warranties.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Parent and Merger Sub that: (i) the Company
has all necessary corporate power and authority to execute and deliver this
Amendment, to perform its obligations under the Merger Agreement as amended
hereby and to consummate the transactions contemplated hereby; (ii) the
execution and delivery of this Amendment by the Company and the consummation by
the Company of the transactions contemplated by the Merger Agreement as amended
hereby have been duly and validly authorized by all necessary corporate action
(other than stockholder approval as described in the Merger Agreement);
(iii) this Amendment has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
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(b) REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that: (i) Parent and Merger Sub have all
necessary corporate power and authority to execute and deliver this
Amendment, to perform their respective obligations under the Merger
Agreement as amended hereby and to consummate the transactions
contemplated hereby; (ii) the execution and delivery of this Amendment
by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the transactions contemplated by the Merger Agreement as amended
hereby have been duly and validly authorized by all necessary
corporate action; (iii) this Amendment has been duly executed and
delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the
legal, valid and binding obligation of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms.
SECTION 3. EFFECT ON MERGER AGREEMENT. Except as otherwise
specifically provided herein, the Merger Agreement shall not be
amended but shall remain in full force and effect.
SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF DELAWARE (WITHOUT REFERENCE TO CONTRACT OF LAW PRINCIPLES
OTHER THAN THOSE DIRECTING DELAWARE LAW).
SECTION 5. COUNTERPARTS. This Amendment may be signed in
one or more counterparts, each of which shall be an original but all
of which, taken together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
HOLLYWOOD ENTERTAINMENT CORPORATION
By:
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President and
General Counsel
R ACQUISITION, INC.
By:
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Secretary
XXXX.XXX, INC.
By:
------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Chief Executive Officer
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