Exhibit 10.16
MERGER AND REGISTRATION RIGHTS AGREEMENT
MERGER AND REGISTRATION RIGHTS AGREEMENT made as of the 1st day of
November 1999, by and among (i) HISPANIC INTERNET HOLDINGS, INC., a Florida
corporation ("HIH"), (ii) the shareholders of HIH listed on SCHEDULE I to this
Agreement (the "Shareholders"), (iii) BIG CITY RADIO INC, a Delaware corporation
("BCR"), and (iv) HIH ACQUISITION, INC., a Delaware corporation and a wholly
owned subsidiary of BCR ("Newco"). Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed to such terms in Article VII
hereof.
WITNESSETH
WHEREAS, the Boards of Directors of HIH, BCR and Newco have each
approved the merger of Newco with and into HIH (the "Merger"), upon the terms
and subject to the conditions set forth herein;
WHEREAS, each Shareholder owns, and will own immediately prior to the
Closing, that number of shares (the "Shares") of common stock of HIH (the "HIH
Common Stock") set forth opposite his or her name on SCHEDULE I.
WHEREAS, pursuant to the Merger, the Shareholders will receive the
Merger Consideration specified herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements and covenants contained herein, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
MERGER
1.1 THE MERGER; SURVIVING CORPORATION. Upon the terms and subject to
the conditions set forth herein, and in accordance with the provisions of this
Agreement and the Florida Business Corporation Act (the "FBCA"), at the
Effective Time, Newco shall be merged with and into HIH, with Newco being the
surviving corporation (hereinafter sometimes called the "Surviving
Corporation").
1.2 ARTICLES OF INCORPORATION. The Articles of Incorporation of Newco,
as in effect at the Effective Time, shall be the Articles of Incorporation of
the Surviving Corporation until thereafter amended as provided by law.
1.3 BYLAWS. The Bylaws of Newco, as in effect at the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended as
provided by law.
1.4 DIRECTORS AND OFFICERS. The directors and officers of Newco
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation at the Effective Time until thereafter changed in
accordance with applicable law and appropriate corporate actions.
1.5 EFFECTIVE TIME. The Merger shall become effective in accordance
with the terms of articles of merger (the "Delaware Articles of Merger") in the
form attached hereto as EXHIBIT "A" to be filed with the Delaware Department of
State pursuant to Delaware law. The date and time when the Merger shall become
effective are herein referred to as the "Effective Time."
1.6 EFFECTUATION OF THE MERGER. The parties shall file the Delaware
Articles of Merger and take any and all other lawful actions and do any and all
other lawful things necessary to cause the Merger to become effective.
1.7 CONVERSION OF COMMON STOCK; MERGER CONSIDERATION. By virtue of the
Merger and without any action on the part of any holder of capital stock of
Newco or HIH:
(a) The Shares of HIH issued and outstanding immediately prior
to the Effective Time (except for Shares which are held by HIH in its treasury)
shall be converted at the Effective Time into and represent the right to receive
the Merger Consideration (as defined below) in accordance with the terms hereof.
(b) Each share of HIH common stock held in its treasury
immediately prior to the Effective Time shall be canceled or retired and cease
to exist at the Effective Time without any conversion thereof.
(c) The term "Merger Consideration" shall mean (i) an
aggregate amount of 400,000 shares of Common Stock (the "Closing Date Shares"),
$.01 par value (the "BCR Common Stock") of BCR, to be allocated among the
Shareholders in accordance with such Shareholder's Pro Rata Portion, and (ii)
the Earnout specified in Section 1.13 hereof (the "Earnout Shares" and
collectively with the Closing Date Shares, the "Merger Consideration Shares").
1.8 PAYMENT OF THE MERGER CONSIDERATION. BCR shall deliver, or cause to
be delivered, the Merger Consideration Shares to the Shareholders as follows:
(i) the Closing Date Shares shall be delivered to the Shareholders, in
accordance with their Pro Rata Portion, on the Closing Date, and (ii) the
Earnout Shares shall be delivered to the Shareholders, in accordance with their
Pro Rata Portion, within five business days of reaching the goals set forth in
Section 1.13 hereof.
1.9 NO OTHER RIGHTS. Upon consummation of the Merger, until surrendered
to the Surviving Corporation, each certificate for Shares which immediately
prior to the Effective Time represented outstanding Shares shall represent
solely the right to receive the Merger Consideration relating thereto at and
after the Effective Time.
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1.10 NEWCO COMMON STOCK. Each share of common stock, $.01 par value per
share, of Newco issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted at the Effective Time into one fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
1.11 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any further documents,
instruments or assurances in law or any other acts are necessary, desirable or
proper to carry out the intent and accomplish the purposes of this Agreement,
BCR agrees that the Surviving Corporation and its proper officers and directors
will execute and deliver all documents, instruments and assurances in law and do
all acts reasonably necessary, desirable or proper to carry out the intent and
accomplish the purposes of this Agreement, and that the proper officers and
directors of the Surviving Corporation are fully authorized in the name of the
Surviving Corporation or otherwise to take any and all such action.
1.12 THE CLOSING. The consummation of the transaction contemplated by
this Agreement (the "Closing") shall take place at a location and date to be
mutually agreed to by the parties ("Closing Date").
1.13 EARN OUT. The Shareholders shall be entitled to payment of
additional consideration (the "Earnout") as follows, based upon achievement of
the Earnout Milestones (as defined below):
(a) (i) an aggregate amount of 120,000 shares of BCR Common Stock
if Gross Revenues (as defined in (b) below) of HIH for the
2000 calendar year equal or exceed $1,800,000 (the "Y2000
Milestone"), (ii) an additional aggregate amount of 120,000
shares of BCR Common Stock if Gross Revenues of HIH for the
2001 calendar year equal or exceed $4,500,000 (the "Y2001
Milestone"), (iii) an additional aggregate amount of 120,000
shares of BCR Common Stock if Gross Revenues of HIH for the
2002 calendar year equal or exceed $8,500,000 (the "Y2002
Milestone"), (iv) an additional aggregate amount of 120,000
shares of BCR Common Stock if Gross Revenues of HIH for the
2003 calendar year equal or exceed $11,500,000 (the "Y2003
Milestone"), and (v) an additional aggregate amount of 120,000
shares of BCR Common Stock if Gross Revenues of BCR Common
Stock if Gross Revenues of HIH for the 2004 calendar year
equal or exceed $15,000,000 (the "Y2004 Milestone") (such
additional shares issued upon payment of the Earnout are
referred to as the "Earnout Shares" and the Y2000 Milestone,
the Y2001 Milestone, the Y2002 Milestone, the Y2003 Milestone
and the Y2004 Milestone shall be each be an "Earnout
Milestone" and shall be collectively referred to as the
"Earnout Milestones"). The Earnout Shares shall be issued to
the Shareholders in accordance with their Pro Rata Portion and
if the Earnout Milestone for a calendar year during the 2000
to 2004 calendar years is met during such calendar year. If in
any given calendar year, Gross Revenues are at least equal to
the Earnout Milestones for the first subsequent calendar year,
then the Earnout Milestones for the first such subsequent
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calendar year will be equal to the average of the original
Earnout Milestones for the first such subsequent calendar year
and the year immediately proceeding the first such subsequent
calendar year. If in any given calendar year, the Gross
Revenues are at least equal to the Earnout Milestones for the
second, third, fourth or fifth subsequent calendar year and if
in the first such subsequent year the Gross Revenues are at
least equal to the Earnout Milestones for the second, third,
fourth or fifth years, then the Earnout Shares associated with
the Earnout Milestone attained in these two consecutive years
shall be awarded at the close of such subsequent calendar
year. For example, if Gross Revenues for the 2000 calendar
year equal $6,000,000, the Shareholder shall be granted
120,000 shares. The additional 120,000 shares will be granted
if and only if the revenues at the end of calendar Y2001 are
at least equal to the average of Y2000's and Y2001's Earnout
Milestones. If, for example, Gross Revenues for calendar Y2000
equal $10,000,000, the Shareholder shall be granted 120,000
shares. At the end of the calendar year 2001, 120,000 shares
will be granted if the revenues at the end of calendar Y2001
are at least equal to the average of the Y2000's and Y2001's
Earnout Milestones and an additional 120,000 shares will be
granted if revenues at the end of calendar Y2001 are at least
equal to Y2002's Earnout Milestone.
(b) For purposes of this Agreement, "Gross Revenues of HIH" mean actual
cash revenues from whatever source derived, excluding any barter revenue.
(c) BCR shall make available to the Shareholders all such information
and copies of documents and records necessary for evaluating the achievement of
the Earnout Milestones. If any Shareholder disputes such determination, then
such Shareholder shall give written notification to BCR setting forth such
dispute. As promptly as reasonably possible after receipt of such notice,
representatives of BCR and such Shareholder(s) shall meet to attempt to
reconcile their differences. If the dispute has not been resolved within fifteen
(15) business days after notice of dispute has been given, then within five (5)
business days thereafter any party may give notice to the other of its desire to
arbitrate such disputed items and, at the request of the notifying party, such
disputed items shall be submitted for arbitration to an arbitrators mutually
acceptable to the parties. The costs of such arbitrators shall be borne by the
non-prevailing party. Any Earnout Shares not subject to dispute shall be paid in
accordance with this Section 1.13.
(d) If a Sale or Spin-off of the Surviving Corporation shall occur at
any time prior to the fifth anniversary date of this Agreement and the
Shareholders shall have (i) complied with the terms and conditions of this
Agreement and (ii) the Sale price or, in the case of a Spin-off, the Equity
Value, of the Surviving Corporation, shall be at least Ten Million Dollars
($10,000,000), the Earnout Milestones shall be deemed to have been achieved, as
of the date of such Sale, and the Shareholders shall be issued the Earnout
Shares in accordance with their Pro Rata Portion. For purposes of this
Agreement, "Sale" shall mean the acquisition by any person, group of affiliated
persons or entity, of (1) all of the stock of the Surviving Corporation, or BCR,
as the case may be or (2) all or substantially all of the assets of the
Surviving Corporation, or BCR, as the case may be. For purposes of this
Agreement, "Spin-off" shall mean (x) the distribution by BCR of 100% of its
ownership interests in the Surviving Corporation as a dividend to its existing
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shareholders or (y) an initial public offering of all or part of BCR's ownership
interests in the Surviving Corporation. If a Sale of BCR shall occur at any time
prior to the fifth anniversary of this Agreement and the Sale price shall be at
least $4.00 per share of Class A Common Stock, the Earnout Milestones shall be
deemed to have been achieved, as of the date of such Sale, and the Shareholders
shall be issued the Earnout Shares in accordance with their Pro Rata Portion.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BCR
In order to induce each Shareholder to enter into this Agreement, BCR
represents and warrants to each Shareholder the following as of the Closing
Date.
2.1 ORGANIZATION AND CORPORATE POWER. BCR is a corporation duly
organized and validly existing under the laws of the State of Delaware. Newco is
a corporation duly organized and validly existing under the laws of the State of
Delaware. Each of BCR and Newco has all required corporate power and authority
to own its property and to carry on its businesses as presently conducted. Each
of BCR and Newco has all required corporate power and authority to enter into
and perform this Agreement, and to carry out the transactions contemplated
hereby, including, without limitation, the issuance of the Merger Consideration
Shares.
2.2 AUTHORIZATION AND NON-CONTRAVENTION. This Agreement is a valid and
binding obligation of BCR and Newco, enforceable against BCR and Newco in
accordance with its terms, except as such enforceability may be limited by
bankruptcy laws and general principles of equity. The execution, delivery and
performance of this Agreement and the issuance of the Merger Consideration
Shares, have been duly authorized by all necessary corporate action of BCR and
Newco. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) violate or
conflict with BCR's or Newco's charter or bylaws, (ii) conflict with or
constitute a breach of any material agreement to which BCR or Newco or any of
its subsidiaries are a party, except where such breach would not have a Material
Adverse Effect, or (iii) violate any applicable law, rule, regulation, judgment,
order, writ or decree to which BCR or Newco is subject, except for such
violations that would not have a Material Adverse Effect.
2.3 CAPITALIZATION. As of the Closing, and prior to giving effect to
the transactions contemplated hereby, the authorized and issued capital stock of
BCR is as set forth in SCHEDULE 2.3 attached hereto.
2.4 REPORTS AND FINANCIAL STATEMENTS. The historical financial
statements included in the Incorporated Documents present fairly in all material
respects the financial position of BCR and its consolidated subsidiaries at the
dates indicated and the statement of operations, stockholders' equity and cash
flows of BCR and its consolidated subsidiaries for the periods specified were
prepared in conformity with GAAP applied on a consistent basis throughout the
periods presented except as disclosed therein. Since the date of the most recent
financial statements included in the Incorporated Documents, there has been no
Material Adverse Change.
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2.5 INCORPORATED DOCUMENTS. The Incorporated Documents comply in all
material respects with the requirements of the Exchange Act and as of their
respective dates, did 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, in the light of the circumstances under which they were
made, not misleading.
2.6 REGULATORY MATTERS. Except to the extent as would not have a
Material Adverse Effect, BCR is in compliance with (i) the Communications Act of
1934, as amended by the Telecommunications Act of 1996 (the "Communications
Act") and with all applicable rules, regulations and policies of the Federal
Communications Commission (the "FCC"), and (ii) all state and local laws
relating to telecommunications.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HIH
In order to induce BCR and Newco to enter into this Agreement, HIH
represents and warrants to BCR the following as of the Closing Date.
3.1 ORGANIZATION AND CORPORATE POWER. HIH is a corporation duly
organized and validly existing under the laws of the State of Florida. HIH has
all required corporate power and authority to own its property and to carry on
its businesses as presently conducted. HIH has all required corporate power and
authority to enter into and perform this Agreement, and to carry out the
transactions contemplated hereby.
3.2 AUTHORIZATION AND NON-CONTRAVENTION. This Agreement is a valid and
binding obligation of HIH, enforceable against HIH in accordance with its terms,
except as such enforceability may be limited by bankruptcy laws and general
principles of equity. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate action of HIH. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not (i) violate or conflict with HIH's
charter or bylaws, (ii) conflict with or constitute a breach of any material
agreement to which HIH or any of its subsidiaries are a party, except where such
breach would not have a Material Adverse Effect, or (iii) violate any applicable
law, rule, regulation, judgment, order, writ or decree to which HIH is subject,
except for such violations that would not have a Material Adverse Effect.
3.3 CAPITALIZATION. The Shareholders are the record owners of all of
the issued and outstanding shares of HIH Common Stock. All of such shares of HIH
Common Stock are duly authorized, validly issued, fully paid and nonassessable
and were not issued in violation of (i) any preemptive or other rights of any
person to acquire securities of HIH, or (ii) any applicable federal or state
securities laws, and the rules and regulations promulgated thereunder. There are
no outstanding subscriptions, options, convertible securities, rights
(preemptive or other), warrant, calls or agreements relating to any shares of
capital stock of HIH.
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3.4 OWNERSHIP OF WEBSITE. HIH owns and has the right to use the
website, "xxxxxxxxx.xxx" free and clear of all liens and encumbrances and has
filed an application for service xxxx registration in the United States Patent
and Trademark Office, copy of which is attached hereto as Exhibit "B".
3.5 OPTIONS OR OTHER RIGHTS. There is no outstanding right,
subscription, warrant, call, unsatisfied preemptive right, option or other
agreement of any kind to purchase or otherwise to receive from the Company, or
any Stockholder any of the outstanding, authorized by unissued, unauthorized or
treasury shares of the capital stock or any other security of the Company or,
and there is no outstanding security of any kind convertible into any such
capital stock.
3.6 CHARTER DOCUMENTS AND CORPORATE RECORDS. The Stockholders have
heretofore caused to be delivered to BCR true and complete copies of the
Articles of Incorporation and By-laws, or comparable instruments, of the Company
as in effect on the date hereof and has made available for inspection the true
and complete minute books of the Company.
3.7 COMPLIANCE WITH LAWS. The Company is not in violation of any
applicable order, judgment, injunction, award, decree or writ (collectively,
"Orders"), or any applicable law, statute, code, ordinance, regulation or other
requirement (collectively, "Laws"), of any government or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, any court or
arbitrator (collectively, "Governmental Bodies") the enforcement of which would
have a Material Adverse Effect on the condition of the Company as a whole, and
the Company has not received notice that any such violation is being or may be
alleged.
3.8 PERMITS. The Company has all licenses, permits, orders or approvals
of, and have made all required registrations with, any Governmental Body that
are material to the current conduct of the business of, or the current use of
any of the Properties of, the Company (collectively, "Permits"). All Permits are
listed on Schedule 3.4 and are in full force and effect; no material violations
are or have been recorded in respect of any Permit; and no proceeding is pending
or, to the Knowledge of the Company, threatened to revoke or limit any Permit.
No action by the Stockholders, the Company or BCR is required in order that all
Permits will remain in full force and effect following the consummation of the
transactions provided for herein.
3.9 NO BREACH. The execution, delivery and performance of this
Agreement by the Stockholders and the consummation of the transactions
contemplated hereby, including but not limited to, the merger (the "Contemplated
Transactions") will not (i) violate any provision of the Articles of
Incorporation or By-laws of the Company; (ii) require the Stockholders or the
Company or to obtain any consent, approval or action of, or make any filing with
or give any notice to, any Governmental Body or any other Person, (iii) violate,
conflict with or result in the breach of any of the terms of, result in a
material modification of the effect of, otherwise cause the termination of or
give any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any contract,
agreement, indenture, note, bond, loan, instrument, lease, conditional sale
contract, mortgage, license, franchise,
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commitment or other binding arrangement (collectively, the "Contracts") to which
the Company is a party or by or to which it or any of its Properties may be
bound or subject, or result in the creation of any Lien upon the Properties of
the Company pursuant to the terms of any such Contract; (iv) if the Required
Consents are obtained, violate any Order of any Governmental Body against, or
binding upon, the Company or upon its securities, Properties or business; (v) if
the Required Consents are obtained, violate any Law of any Governmental Body; or
(vi) if the Required Consents are obtained, violate or result in the revocation
or suspension of any Permit.
3.10 CLAIMS AND PROCEEDINGS. There are no outstanding Orders of any
Governmental Body against or involving the Company. There are no actions, suits,
claims or legal, administrative or arbitral proceedings or investigations
(collectively, "Claims") (whether or not the defense thereof or liabilities in
respect thereof are covered by insurance) pending, or to the Knowledge of the
Company, threatened, against or involving the Company or any of its Properties
and to the Knowledge of the Company, or any of the Stockholders, there is no
fact, event or circumstance that may give rise to any Claim.
3.11 CONTRACTS. (a) Schedule 3.11 sets forth all of the following
Contracts to which the Company is a party or by or to which it or its Properties
may be bound or subject: (i) Contracts with any current or former officer,
director, shareholder, employee, consultant, agent or other representative or
with an entity in which any of the foregoing is a controlling Person; (ii)
Contracts with any labor union or association representing any employee or
former employee; (iii) Contracts for the sale of any Properties other than in
the ordinary course of business or for the grant to any Person of any option or
preferential rights to purchase any Properties; (iv) partnership or, joint
venture agreements or Contracts; (v) Contracts under which the Company agrees to
indemnify any party or to share tax liability of any party; (vi) material
Contracts which cannot be cancelled without liability, premium or penalty only
on 90 days' or more notice; (vii) Contracts containing covenants of the Company
not to compete in any line of business or with any Person in any geographical
area or covenants of any other Person not to compete with the Company in any
line of business or in any geographical area; (viii) Contracts relating to the
acquisition by the Company of any operating business or the capital stock of any
other Person; (ix) Contracts relating to the borrowing of money; (x) Contracts
containing obligations or liabilities of any kind to holders of the capital
stock of the Company as such (including, without limitation, an obligation to
register any of such securities under any federal or state securities laws);
(xi) Contracts pursuant to which the Company may hold or use any interest owned
or claimed by the Company in or to any material Property; (xii) management
Contracts and other similar agreements with any Person; (xiii) any other
Contracts pursuant to the terms of which there is either a current or future
obligation or right of the Company to make payments in excess of $10,000 or
receive payments in excess of $25,000;
(b) There have been delivered to BCR true and complete copies of
all of the Contracts set forth on Schedule 3.11 or on any other Schedule. All of
the Contracts are valid and binding upon the Company in accordance with their
terms. The Company is not in default in any material respect under any of such
Contracts, nor does any condition exist that with notice or lapse of time or
both would constitute such a material default thereunder. To the Knowledge of
the Company, no other party to any such Contract is in default thereunder in any
material respect
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nor does any condition exist that with notice or lapse of time or both would
constitute such a material default thereunder.
3.12 INTELLECTUAL PROPERTY. Schedule 3.14 sets forth a list of the
Company's registered patents, registered trademarks, domain names, registered
service marks, registered trade names, registered copyrights and franchises, all
applications for any of the foregoing and all permits, grants and licenses or
other rights running to the Company relating to any of the foregoing that are
material to the business of the Company. The Company owns, or is licensed or
otherwise has the right, to use all registered patents, registered trademarks,
domain names, registered service marks, registered trade names, registered
copyrights and franchises set forth on Schedule 3.14, and (ii) the Company's
rights in the property set forth on such list are free and clear of any Lien or
other encumbrances and the Company has not received written notice of any
adversely-held patent, invention, trademark, service xxxx or trade name of any
other person, or notice of any charge or claim of any person relating to such
intellectual property or any process or confidential information of the Company
and to the Company's Knowledge there is no basis for any such charge or claim.
3.13 TITLE TO PROPERTIES. Except as set forth in the Schedules hereto,
the Company own outright and have good and marketable title to all of their
Properties, including, without limitation, all of the assets reflected on the
Balance Sheet or currently used in the operation of their businesses, in each
case free and clear of any Lien.
3.14 OFFICERS, DIRECTORS AND KEY EMPLOYEES. Schedule 3.16 sets forth (i)
the name and the 1999 total compensation of each officer and director of the
Company, (ii) the name and total compensation of each other employee,
consultant, agent or other representative of the Company (iii) any accrual for,
or any commitment or agreement by the Company to pay, such increases, bonuses or
pay.
3.15 POTENTIAL CONFLICTS OF INTEREST. No executive officer or director
of the Company, no Stockholder, no relative or spouse (or relative of such
spouse) of any such officer, director or a Stockholder and no entity controlled
by one or more of the foregoing:
(i) owns, directly or indirectly, any interest in
(excepting less than 1% stock holdings for investment purposes in securities of
publicly held and traded companies), or is an officer, director, employee or
consultant of, any Person which is, or is engaged in business as, a competitor
or customer of the Company;
(ii) owns, directly or indirectly, in whole or in
part, any Property that the Company uses in the conduct of its business; or
(iii) has any cause of action or other claim
whatsoever against, or owes any amount to, the Company, except for claims in the
ordinary course of business such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements existing on the
date hereof.
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3.16 PROJECTIONS. The projections relating to operations of the Company
through the fiscal year ending 2005 (the "Projections"), heretofore delivered by
the Company to BCR, have been prepared in good faith on a reasonable basis. The
assumptions on which the Projections are based are stated in Schedule 3.17 and
are consistent with past practices of the Company and with historical conditions
applicable to the business of the Company. Nothing has come to the attention of
the Company, or any of the Stockholders to indicate that the Projections or the
assumptions upon which they are based are not reasonable.
3.17 FULL DISCLOSURE. All documents, Contracts, instruments,
certificates, statements, schedules (including Schedules to this Agreement),
exhibits (including Exhibits to this Agreement), Projections through the year
ending 2004, and any other papers whatsoever (collectively, "Documents")
delivered by or on behalf of the Stockholders or the Company in connection with
this Agreement and the Contemplated Transactions are authentic if original or
true and correct copies of the originals. No representation or warranty of the
Stockholders contained in this Agreement, and no Document furnished by or on
behalf of the Stockholders or the Company to BCR pursuant to this Agreement or
in connection with the Contemplated Transactions, contains 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 made, in the context in which made,
not materially false or misleading. Except as otherwise set forth in this
Agreement, there is no material fact that the Stockholders have not disclosed to
BCR in writing that materially adversely affects or, so far as any of the
Stockholders can now foresee, will have a Material Adverse Effect on the Company
or the ability of the Stockholders to perform this Agreement.
ARTICLE IV
REGISTRATION RIGHTS AND LOCK-UP
4.1 SHELF REGISTRATION. Not later than twelve (12) months from the
Closing Date, BCR will file a registration statement (the "Shelf Registration
Statement") covering the number of shares representing the maximum amount of
Merger Consideration Shares and thereafter shall use its reasonable efforts to
(i) cause the Shelf Registration Statement to be declared effective as soon as
practicable following such filing, and (ii) maintain such effectiveness (the
"Registration Period") until the earlier of (x) the time at which each
Shareholder is no longer subject to the volume limitations under Rule 144 of the
Securities Act, or (y) such time as all of the Merger Consideration Shares have
been sold.
4.2 REGISTRATION PROCEDURES. BCR will, as expeditiously as possible:
(a) prepare and file with the Commission a Shelf Registration
Statement with respect to the Merger Consideration Shares and use its best
efforts to cause such Shelf Registration Statement to become and remain
effective for a period of time required for the disposition of Merger
Consideration Shares by each Shareholder;
(b) prepare and file with the Commission such amendments and
supplements to the Shelf Registration Statement and the prospectus used in
connection therewith as may be
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necessary to keep such Shelf Registration Statement effective and to comply with
the provisions of the Securities Act with respect to the sale or other
disposition of the Merger Consideration Shares covered by the Shelf Registration
Statement until such time as all of such securities have been disposed of by
each Shareholder;
(c) furnish each Shareholder such number of copies of a
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as each Shareholder may reasonably request;
(d) use its reasonable efforts to register or qualify the
Merger Consideration Shares covered by the Shelf Registration Statement under
such other securities or blue sky laws of such jurisdictions within the United
States and Puerto Rico as each Shareholder shall reasonably request (provided,
however, BCR shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then qualified or
to file any general consent to service or process),and do such other reasonable
acts and things as may be required of it to enable each Shareholder to
consummate the disposition in such jurisdiction of the securities covered by the
Shelf Registration Statement; and
(e) promptly notify in writing each Shareholder of the
happening of any event, during the period of distribution, as a result of which
the Shelf Registration Statement includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing.
4.3 EXPENSES. All expenses incurred in complying with this Article IV,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for BCR shall be paid by BCR.
4.4 LOCK-UP. Prior to the first anniversary of this Agreement, no
Shareholder shall sell, assign, transfer, pledge, or encumber or grant any
rights or interests or in respect of (any such transfer, disposition or
encumbrance being hereinafter referred to as "Transfer") any Merger
Consideration Shares. Any purported Transfer in violation of this Agreement
shall be null and void and of no force and effect. Upon a Sale of the Company,
the foregoing prohibition on the Transfer of Merger Consideration Shares shall
terminate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby represents to BCR on behalf of such Shareholder
that:
(a) Such Stockholder has the full legal right and power and all authority and
approvals required to execute and deliver this Agreement and to perform fully
such Stockholder's obligations hereunder. This Agreement has been duly executed
and delivered by such Stockholder and (assuming the due authorization, execution
and delivery hereof by BCR) is a valid and binding obligation of such
Stockholder enforceable in accordance with its terms. The
11
execution and delivery by such Stockholder of this Agreement, the consummation
of the Contemplated Transactions and the performance by such Stockholder of this
Agreement in accordance with its terms will not (i) require the approval or
consent of any Governmental Body or the approval or consent of any other Person;
(ii) conflict with or result in any breach or violation of any of the terms and
conditions of, or constitute (or with notice or lapse of time or both
constitute) a default under, any Law or Order of any Governmental Body
applicable to such Stockholder or to the Shares held by such Stockholder, or any
Contract to which such Stockholder is a party or by or to which such Stockholder
is or the Shares held by such Stockholder are bound or subject; or (iii) result
in the creation of any Lien on the Shares held by such Stockholder.
(b) Such Shareholder is acquiring the Merger Consideration
Shares for its own account, for investment, and not with a view to any
"distribution" thereof within the meaning of the Securities Act, and such
Shareholder has no present or presently contemplated agreement, undertaking,
arrangement, obligation, indebtedness or commitment providing for the
distribution thereof.
(c) Such Shareholder understands that because the Merger
Consideration Shares have not been registered under the Securities Act, it
cannot dispose of any or all of the Merger Consideration Shares unless the
relevant shares are subsequently registered under the Securities Act or
exemptions from such registration are available. Such Shareholder understands
that each certificate representing the Merger Consideration Shares will bear the
following legend or one substantially similar thereto:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"). These
securities have been acquired for investment and not with a
view to distribution or resale, and may not be sold,
mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such
securities under the Act or an opinion of counsel satisfactory
to Big City Radio Inc. is obtained to the effect that an
exemption from such registration requirements is available.
(d) Such Shareholder is sufficiently knowledgeable and
experienced in the making of investments so as to be able to evaluate the risks
and merits of its investment in BCR, and is able to bear the economic risk of
loss of its investment in BCR.
(e) Such Shareholder has been advised that the Merger
Consideration Shares have not been and are not being registered under the
Securities Act or under the "blue sky" laws of any jurisdiction and that BCR in
issuing the Merger Consideration Shares is relying upon, among other things, the
representations and warranties of such Shareholder contained in this Article V.
(f) Such Shareholder has been afforded the opportunity to ask
questions of, and receive answers from, BCR and all of its executed officers and
directors and to obtain any
12
additional information, to the extent that BCR possesses such information or
could have acquired it, necessary to verify the accuracy of the information
contained in any documents delivered to each Shareholder concerning BCR and has
in general had access to all information each Shareholder deemed material to an
investment decision with respect to the acquisition of the Securities.
(g) Such Shareholder is an "accredited investor" as defined in
Rule 501 of Regulation D promulgated under the Securities Act.
(h) Such Shareholder owns his or her shares of HIH Common
Stock free and clear of any and all liens, mortgages, adverse claims, charges,
security interests, encumbrances or other restrictions or limitations whatsoever
(except for limitations imposed under U.S. federal or applicable state
securities laws) and, upon delivery of and payment for such Shares as herein
provided, such Stockholder will convey to BCR good and valid title thereto, free
and clear of any Lien.
(k). The representations of the Company set forth in Section
3 are true, correct and complete in all material respects.
ARTICLE VI
INDEMNIFICATION.
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by each party in this Agreement shall survive the Closing Date
for a period of three (3) years from the Closing Date. The covenants of the
parties shall survive the Closing Date as provided herein.
6.2 INDEMNIFICATION BY BCR. BCR shall indemnify and defend and hold
harmless each Shareholder against and with respect to any and all damages,
claims, losses, penalties, liabilities, actions, fines, costs and expenses
(including, without limitation, reasonable attorney's fees and expenses) (all of
the foregoing hereinafter collectively referred to as a "Loss"), with respect to
the following items: (i) any misrepresentation or breach of warranty or covenant
by BCR under this Agreement; or (ii) any untrue statement of a material fact
contained in the registration statement referenced in Article II hereof, or the
omission therefrom of a material fact necessary to make statements therein, in
light of the circumstances under which they were made, not misleading (other
than statements provided by each Shareholder).1
6.3 INDEMNIFICATION BY SHAREHOLDER. Each Shareholder shall indemnify
and defend and hold harmless BCR against any Losses with respect to any
misrepresentation or breach of warranty or covenant by such Shareholder, or HIH
under this Agreement, but each case only to the extent such Losses do not exceed
such Shareholder's Pro Rata Portion of cash received by the Shareholder upon
sale of the Merger Consideration Shares, and subject to the next sentence, in no
event shall the Shareholder's Indemnification Obligation for Losses exceed the
greater of (a)
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the value of the Merger Consideration Shares as of the date hereof and (b) the
value of the Merger Consideration Shares as of the date the Indemnification
Obligation is to be paid. In the event that the stock or assets of Hispanic
Internet Holdings shall be determined by any court of competent jurisdiction to
not have been the property of HIH and to be the property of another person or
entity (other than the Shareholders), and as a result thereof, BCR shall be
required to forfeit the xxxxxxxxx.xxx site and/or related assets, or to incur
Losses to retain such site and/or assets, all of the Merger Consideration Shares
shall be promptly transferred to BCR by the Shareholders, without consideration,
the Shareholders shall indemnify and hold harmless BCR against any Losses with
respect to such determination.
ARTICLE VII
DEFINITIONS
As used herein, the following terms shall have the following respective
meanings:
CLOSING. "Closing" shall have the meaning ascribed to such term in
Section 1.12 hereof.
CLOSING DATE. "Closing Date" shall have the meaning ascribed to such
term in Section 1.12 hereof.
CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended.
COMMISSION. "Commission" means the Securities and Exchange Commission.
EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
GAAP. "GAAP" means generally accepted accounting principles.
INCORPORATED DOCUMENTS. "Incorporated Documents" shall mean BCR's most
recent Annual Report on Form 10-K filed with the Commission and each Form 10-Q
Quarterly Report and each Current Report on Form 8-K filed with the Commission
since the end of the fiscal year to which such Annual Report relates, including
any amendments thereto.
LOSS. "Loss" shall have the meaning ascribed to such term in Section
5.2 hereof.
MATERIAL ADVERSE CHANGE or MATERIAL ADVERSE EFFECT. "Material Adverse
Change" or "Material Adverse Effect" shall mean a material adverse effect on the
business or financial condition of BCR and its subsidiaries, taken as a whole,
or HIH taken as a whole, as the case may be.
PRO RATA PORTION. "Pro Rata Portion" shall mean the percentage set
forth opposite such Shareholder's name on SCHEDULE I.
REGISTRATION PERIOD. "Registration Period" shall have the meaning
ascribed to such term in Section 4.1 hereof.
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SECURITIES ACT. "Securities Act" means the Securities Act of 1933, as
amended.
SHELF REGISTRATION STATEMENT. "Shelf Registration Statement" shall have
the meaning ascribed to such term in Article IV hereof.
ARTICLE VIII
GENERAL
8.1 AMENDMENTS, WAIVERS AND CONSENTS. No failure or delay on the part
of any party hereto in exercising any right, power or remedy hereunder shall
operate as a waiver thereof. The remedies provided for herein are cumulative and
are not exclusive of any remedies that may be available to any party hereto at
law or in equity or otherwise. This Agreement may be amended only with the prior
written consent of BCR and each Shareholder.
8.2 GOVERNING LAW. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of New
York, without giving effect to conflicts of laws principles thereof.
8.3 SECTION HEADINGS. The descriptive headings in this Agreement have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provision thereof or hereof.
8.4 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.
8.5 NOTICES AND DEMANDS. Any notice or demand which is required or
provided to be given under this Agreement shall be deemed to have been
sufficiently given and received for all purposes when received and may be
delivered by hand, telecopy, telex or other method of facsimile, certified or
registered mail, postage and charges prepaid, return receipt requested, or by
overnight delivery, to the address set forth on the signature page hereto.
8.6 SEVERABILITY. Each provision of this Agreement shall be interpreted
in such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be deemed prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or the other provisions of this
Agreement.
8.7 INTEGRATION. This Agreement, including the exhibits, documents and
instruments referred to herein or therein, constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, including, without
limitation, the letter of intent between the parties hereto in respect of the
transactions contemplated herein.
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8.8 BROKERS. Each party represents that no broker, finder, agent or
similar intermediary has acted on behalf of BCR or such Shareholder in
connection with this Agreement or the transactions contemplated hereby.
8.9 PUBLICITY. BCR shall not issue any public release or announcement
concerning this Agreement or the transactions contemplated hereby that
identifies such Shareholder without the prior written consent of such
Shareholder, except as required by law (in which case, so far as possible, there
shall be consultation between the parties prior to such announcement).
8.10 EXPENSES. Each party shall bear its own expenses with respect to
the transactions contemplated hereby.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Investment
and Registration Rights Agreement on the date first written above.
HISPANIC INTERNET HOLDINGS, INC.
By:
--------------------------------
BIG CITY RADIO INC.
By:
--------------------------------
SHAREHOLDERS:
------------------------------------
Xxxxxxx X. Xxxxxxxxx
------------------------------------
Xxxxxxx Xxxxx, M.D.
------------------------------------
Xxxxx Xxxxxxxxx
------------------------------------
XXXXX XXXX
------------------------------------
Xxxxxx Xxxxxx
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SCHEDULE I
LIST OF SHAREHOLDERS
NAME NUMBER OF SHARES OF HIH PRO RATA PORTION
---- ----------------------- ----------------
Xxxxxxx X. Xxxxxxxxx 560,000 56%
Xxxxxxx Xxxxx, M.D. 175,000 17.5%
Xxxxx Xxxxxxxxx 140,000 14%
Xxxxx Xxxx 90,000 9%
Xxxxxx Xxxxxx 35,000 3.5%
--------- -----
TOTALS 1,000,000 100%
========= =====
