EXHIBIT 2
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 10, 1999
BY AND AMONG
THE TIMES MIRROR COMPANY,
HOLLYWOOD ONLINE INC.,
BIG ENTERTAINMENT, INC.
AND
BIG ACQUISITION CORP.
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TABLE OF CONTENTS
Page
----
RECITALS .............................................................................................1
ARTICLE 1 THE MERGER...................................................................................1
SECTION 1.1. The Merger..................................................................1
SECTION 1.2. Effective Time..............................................................2
SECTION 1.3. Closing of the Merger.......................................................2
SECTION 1.4. Effects of the Merger.......................................................2
SECTION 1.5. Articles of Incorporation and Bylaws........................................2
SECTION 1.6. Directors...................................................................2
SECTION 1.7. Officers....................................................................2
SECTION 1.8. Aggregate Consideration.....................................................3
(a) Merger Consideration........................................................3
(i) Conversion of Shares..................................................3
(ii) Parent Common Stock Price.............................................4
(b) Conversion of Stock of Sub..................................................5
(c) Cancellation of Treasury Shares.............................................5
SECTION 1.9. Exchange of Certificates....................................................5
(a) Delivery of Certificates Representing Merger Consideration..................5
(b) Delivery of Certificates Representing Shares................................5
(c) Fractional Shares...........................................................5
(d) Effect of Exchange..........................................................5
ARTICLE 2 CONDITIONS TO CONSUMMATION OF MERGER.........................................................6
SECTION 2.1. Conditions to All Parties' Obligations......................................6
(a) HSR Act; Other Governmental Approvals.......................................6
(b) No Order....................................................................6
(c) Shareholder Approval........................................................6
(d) Proxy Statement.............................................................6
SECTION 2.2. Conditions to Parent's and Sub's Obligations................................6
(a) Representations, Warranties and Covenants; Officer's Certificates...........6
(b) Certificates of Good Standing...............................................7
(c) Resolutions.................................................................7
(d) Third-Party Consents........................................................7
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(e) NATO Agreement.............................................................7
(f) Domain Names................................................................7
(g) Ancillary Agreements........................................................7
(h) Tax Certificate.............................................................8
SECTION 2.3. Limited Exception to Section 2.2(a) Condition to Parent's and
Sub's Obligations to Close..................................................8
SECTION 2.4. Conditions to Times Mirror and HOL's Obligations............................9
(a) Representations, Warranties and Covenants...................................9
(b) Certificates of Good Standing...............................................9
(c) Resolutions.................................................................9
(d) Third-Party Consents........................................................9
(e) Recommendation of Board of Directors of Parent..............................9
(f) Ancillary Agreements........................................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF HOL.......................................................10
SECTION 3.1. Organization and Good Standing of HOL......................................10
SECTION 3.2. Authority..................................................................10
SECTION 3.3. No Breach..................................................................10
SECTION 3.4. Consents and Approvals.....................................................11
SECTION 3.5. Capital Stock of HOL.......................................................11
SECTION 3.6. Equity Interests...........................................................11
SECTION 3.7. Intentionally Omitted......................................................11
SECTION 3.8. No Indebtedness............................................................11
SECTION 3.9. Assets Other Than Real Property............................................11
SECTION 3.10. Real Property..............................................................12
(a) Owned Property.............................................................12
(b) Leased Property............................................................12
(c) Title to Real Property.....................................................12
SECTION 3.11. Intellectual Property......................................................12
(a) Proprietary Rights.........................................................12
(b) Licenses...................................................................13
(c) Trade Secrets..............................................................13
(d) Photographs................................................................13
(e) Domain Names...............................................................13
(f) Claims.....................................................................13
SECTION 3.12. Contracts..................................................................14
(a) Employment, Independent Contractor and Consulting Agreements...............14
(b) Non-Competition Agreements.................................................14
(c) Leases of Real Property....................................................14
(d) Personal Property Leases...................................................14
(e) Supply and Service Agreements..............................................14
(f) Indebtedness...............................................................14
(g) Guarantees.................................................................15
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(h) Partnerships and Joint Ventures............................................15
(i) Online Service Agreements..................................................15
(j) Electronic Ticketing and Merchandising Agreements..........................15
(k) Other Agreements...........................................................15
SECTION 3.13. Litigation; Decrees........................................................15
SECTION 3.14. Employee Benefits and Related Matters......................................15
(a) Plans......................................................................15
(b) Compliance with ERISA and the Code.........................................16
(c) Multiemployer Plan Liabilities.............................................16
(d) Accumulated Funding Deficiencies; Liens....................................17
(e) Employee Welfare Benefit Plans.............................................17
SECTION 3.15. Absence of Changes or Events...............................................17
SECTION 3.16. Compliance with Applicable Laws............................................17
(a) General....................................................................17
SECTION 3.17. Environmental Matters......................................................17
(a) Compliance.................................................................17
(b) Hazardous Materials........................................................17
(c) Notices of Certain Environmental Matters...................................18
(d) Definitions................................................................18
(i) "Hazardous Material..................................................18
(ii) "Environmental Law...................................................18
SECTION 3.18. Taxes......................................................................18
(a) Definitions................................................................18
SECTION 3.19. Labor Matters..............................................................21
SECTION 3.20. Information Supplied.......................................................21
SECTION 3.21. Insurance..................................................................21
SECTION 3.22. Year 2000..................................................................22
SECTION 3.23. Investor Representations...................................................22
SECTION 3.24. Exemption from Registration, Restricted Securities.........................22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF TIMES MIRROR..............................................22
SECTION 4.1. Organization and Good Standing of Times Mirror.............................22
SECTION 4.2. Authority..................................................................22
SECTION 4.3. No Breach..................................................................23
SECTION 4.4. Consents and Approvals.....................................................23
SECTION 4.5. Title to and Transfer of the Shares........................................23
SECTION 4.6. Brokers....................................................................23
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............................................24
SECTION 5.1. Organization and Good Standing.............................................24
SECTION 5.2. Authority..................................................................24
SECTION 5.3. No Breach..................................................................24
SECTION 5.4. Consents and Approvals.....................................................24
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SECTION 5.5. Capital Stock of Parent....................................................25
SECTION 5.6. SEC Reports; Financial Statements..........................................26
SECTION 5.7. Information Supplied.......................................................26
SECTION 5.8. Vote Required..............................................................26
SECTION 5.9. Litigation; Decrees........................................................27
SECTION 5.10. Absence of Changes or Events...............................................27
SECTION 5.11. No Prior Activities........................................................27
SECTION 5.12. Brokers....................................................................27
SECTION 5.13. Taxes......................................................................27
(a) Tax Returns and Taxes......................................................27
(b) Tax Claims.................................................................27
(c) Tax Free Reorganization....................................................27
ARTICLE 6 COVENANTS OF HOL AND TIMES MIRROR...........................................................28
SECTION 6.1. Delivery of Year-End Audited Financial Statements..........................28
SECTION 6.2. Access.....................................................................29
SECTION 6.3. Ordinary Conduct...........................................................29
(a) Charter and Bylaws.........................................................30
(b) Dividends..................................................................30
(c) Capital Stock..............................................................30
(d) Employee Matters...........................................................30
(e) Compensation...............................................................30
(f) Indebtedness...............................................................30
(g) Encumbrances...............................................................30
(h) Related-Party Transactions.................................................30
(i) Accounting Policies and Tax Matters........................................30
(j) Acquisitions; Reorganizations..............................................30
(k) Capital Expenditures.......................................................31
(l) Asset Dispositions.........................................................31
(m) Other Actions..............................................................31
(n) Contracts..................................................................31
(o) Agreements.................................................................31
SECTION 6.4. Insurance..................................................................31
SECTION 6.5. No Sale or Pledge..........................................................31
SECTION 6.6. Notice of Breach by Times Mirror or HOL....................................31
SECTION 6.7. No Additional Representations..............................................32
ARTICLE 7 COVENANTS OF PARENT AND SUB.................................................................32
SECTION 7.1. Confidentiality............................................................32
SECTION 7.2. Conduct of Business of Parent..............................................32
(a) Parent Common Stock........................................................32
(b) Dividends..................................................................33
(c) Reorganizations............................................................33
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(d) Charter and Bylaws.........................................................33
(e) Indebtedness...............................................................33
(f) Employment Agreements......................................................33
(g) Other Actions..............................................................33
(h) Parent Rights Agreement....................................................33
(i) Agreements.................................................................33
SECTION 7.3. Meetings of Shareholders...................................................33
SECTION 7.4. Preparation of Proxy Statement.............................................34
SECTION 7.5. No Additional Representations..............................................34
SECTION 7.7. Notice of Breach by Parent or Sub..........................................34
ARTICLE 8 MUTUAL COVENANTS............................................................................34
SECTION 8.1. Cooperation................................................................34
SECTION 8.2. Publicity..................................................................34
SECTION 8.3. Records....................................................................35
SECTION 8.4. Antitrust Notification.....................................................35
SECTION 8.5. Reasonable Efforts; Additional Agreements..................................36
SECTION 8.6. Tax-Free Reorganization....................................................36
ARTICLE 9 TERMINATION; AMENDMENT; WAIVER..............................................................36
SECTION 9.1. Termination................................................................36
SECTION 9.2. Return of Confidential Information.........................................37
SECTION 9.3. Effects of Termination.....................................................37
ARTICLE 10 EMPLOYEE AND RELATED MATTERS................................................................38
SECTION 10.1. Offers of Employment.......................................................38
SECTION 10.2. Continuation of Plans......................................................38
SECTION 10.3. Mutual Cooperation.........................................................38
(a) General....................................................................38
(b) Performance Cycle Bonus Payments...........................................38
ARTICLE 11 INDEMNIFICATION.............................................................................39
SECTION 11.1. Indemnification by Times Mirror............................................39
SECTION 11.2. Indemnification by Parent..................................................39
SECTION 11.3. Adjustments to Losses......................................................40
SECTION 11.4. Termination of Indemnification.............................................40
SECTION 11.5. Procedures Relating to Indemnification for Third Party Claims..............40
SECTION 11.6. Tax Matters................................................................41
(a) Tax Indemnification........................................................41
(b) Preparation of Tax Returns; Payment of Taxes...............................41
(i) Times Mirror.........................................................41
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(ii) Parent...............................................................42
(iii) Closing Taxable Year; Allocation for Straddle Year...................43
(c) Refund Claims..............................................................44
(d) Carrybacks.................................................................44
(e) Cooperation with Respect to Taxes..........................................44
(f) Tax Proceedings............................................................44
(g) Claim Period...............................................................45
(h) Termination of Tax Sharing Arrangements....................................46
SECTION 11.7. Exclusive Remedy...........................................................46
ARTICLE 12 MISCELLANEOUS...............................................................................46
SECTION 12.1. Expenses...................................................................46
SECTION 12.2. HOL Acquisition Agreement..................................................46
SECTION 12.3. Assignment.................................................................46
SECTION 12.4. No Third-Party Beneficiaries...............................................46
SECTION 12.5. Notices....................................................................47
(a) if to Parent, Sub or the Surviving Corporation, HOL........................47
(b) if to Times Mirror.........................................................47
(c) if to HOL, prior to the Effective Time.....................................47
SECTION 12.6. Counterparts...............................................................47
SECTION 12.7. Entire Agreement...........................................................48
SECTION 12.8. Severability...............................................................48
SECTION 12.9. Amendment..................................................................48
SECTION 12.10. Extension; Waiver..........................................................48
SECTION 12.11. Dispute Resolution; Equitable Enforcement..................................48
(a) Accounting Disputes........................................................48
(b) Arbitration................................................................48
(c) Equitable Enforcement......................................................49
SECTION 12.12. Interpretation of this Agreement...........................................49
(a) Construction...............................................................49
(b) Knowledge..................................................................50
(c) Governing Law..............................................................50
(d) Headings, Exhibits and Schedules...........................................50
SECTION 12.13. Survival of Representations................................................50
SECTION 12.14. No Consequential or Punitive Damages.......................................50
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TABLE OF EXHIBITS
Exhibit A................................................Shareholder Agreement
Exhibit B........................................Registration Rights Agreement
Exhibit C............................................Non-Competition Agreement
Exhibit D.....................................................Voting Agreement
Exhibit E.............................Form of Times Mirror/HOL Tax Certificate
Exhibit F...............................Term Sheet of Series E Preferred Stock
Exhibit G..........................Form of Additional Financial Representation
TABLE OF SCHEDULES
2.4(d) Parent Consents
3.1 HOL Foreign Jurisdictions
3.3 HOL Conflicts
3.4 HOL Consents
3.6 Equity Interests
3.9 Certain Liens
3.10(b) Leased Property
3.11(a) Intellectual Property
3.11(b) Licenses
3.11(d) Domain Names
3.11(e) Claims
3.12(a) Employment Agreements
3.12(b) Non-Competition Agreements
3.12(c) Leases of Real Property
3.12(d) Personal Property Leases
3.12(e) Supply and Service Agreements
3.12(f) Indebtedness
3.12(g) Guarantees
3.12(h) Partnerships and Joint Ventures
3.12(i) On-line Service Agreements
3.12(j) Electronic Merchandising Agreements
3.12(k) Other Agreements
3.13 Litigation; Decrees
3.14(a) Plans
3.14(b) Compliance with ERISA and Code
3.14(e) Employee Welfare Benefit Plans
3.15 Changes or Events
3.18(b) Tax Claims
5.5(a) Parent Options and Rights
5.10 Parent Changes or Events
6.3 Conduct of Business of HOL
6.4 HOL Insurance Policies
7.2 Conduct of Business of Parent
10.3 Severance Benefits
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TABLE OF DEFINED TERMS
Cross Reference
Term in Agreement Page
---- ------------ ----
Accounting Firm............................................................Section 11.6(b)(i)(2).................39
Acquisition Proposal.......................................................Section 6.5...........................29
Affiliated Group...........................................................Section 3.18(a)(i)....................17
Agreement..................................................................Preamble...............................1
Ancillary Agreements.......................................................Section 2.4(f).........................6
Announcement Date..........................................................Section 1.8(a)(ii).....................4
Applicable Laws............................................................Section 3.16(a).......................16
Audited Financial Statements...............................................Section 6.1...........................26
Average Share Price........................................................Section 1.8(a)(ii).....................4
CA Agreement of Merger.....................................................Section 1.2............................2
Cash Merger Consideration..................................................Section 1.8(a)(i)......................3
CGCL.......................................................................Section 1.1............................1
Closing Date...............................................................Section 1.3............................2
Closing....................................................................Section 1.3............................2
Code.......................................................................Recitals...............................1
Common Stock Merger Consideration..........................................Section 1.8(a)(i)......................3
Confidentiality Agreement..................................................Section 6.2...........................27
Contracts..................................................................Section 3.12..........................12
DGCL.......................................................................Section 1.1............................1
DOJ........................................................................Section 8.4...........................32
Effective Time.............................................................Section 1.2............................2
Employment Agreements......................................................Section 10.3.(b)......................35
Enforceability Exceptions..................................................Section 3.2............................9
Environmental Law..........................................................Section 3.16(d)(ii)...................16
ERISA Affiliate............................................................Section 3.14(a).......................14
ERISA......................................................................Section 3.14(b).......................15
Excess Share Amount........................................................Section 1.8(a)(i)......................3
Exchange Act...............................................................Section 5.5(b)........................24
FTC........................................................................Section 8.4...........................32
Hazardous Material.........................................................Section 3.16(d)(i)....................16
HOL Material Adverse Effect................................................Section 3.1............................8
HOL Plan...................................................................Section 3.14(a).......................14
HOL........................................................................Preamble...............................1
HSR Act....................................................................Section 2.1(a).........................5
indemnified party..........................................................Section 11.5..........................36
Knowledge..................................................................Section 12.12(b)......................46
Leased Properties..........................................................Section 3.10(b).......................10
Losses.....................................................................Section 2.3............................7
Merger Certificate.........................................................Section 1.2............................2
Merger Consideration.......................................................Section 1.8(a)(i)......................3
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Merger.....................................................................Section 1.1............................1
NATO Agreement.............................................................Section 3.12(h).......................13
Parent Common Stock Price..................................................Section 1.8(a)(ii).....................4
Parent Common Stock........................................................Section 1.8(a)(i)......................3
Parent Material Adverse Effect.............................................Section 5.1...........................22
Parent Preferred Stock.....................................................Section 5.5(a)........................23
Parent Rights Agreement....................................................Section 5.5(a)........................23
Parent Rights..............................................................Section 5.5(a)........................23
Parent SEC Reports.........................................................Section 5.6(a)........................24
Parent Shareholders........................................................Recitals...............................1
Parent.....................................................................Preamble...............................1
Performance Cycle Amount...................................................Section 10.3.(b)......................35
Permitted Liens............................................................Section 3.9...........................10
Plans......................................................................Section 3.14(a).......................14
Preferred Stock Merger Consideration.......................................Section 1.8(a)(i)......................3
Proxy Statement............................................................Section 3.20..........................20
Records....................................................................Section 8.3...........................32
Reduced Common Stock Merger Consideration..................................Section 1.8(a)(i)......................3
Related Corporation........................................................Section 5.13(c)(i)....................25
SEC........................................................................Section 5.6(a)........................24
Securities Act.............................................................Section 5.6(a)........................24
Share......................................................................Section 1.8(a)(i)......................2
Sub........................................................................Preamble...............................1
Surviving Corporation......................................................Section 1.1............................1
Tax Proceeding.............................................................Section 11.6(f)(i)....................41
Tax Return.................................................................Section 3.18(a)(iii)..................17
Taxes......................................................................Section 3.18(a)(ii)...................17
Third-Party Claim..........................................................Section 11.5..........................37
Times Mirror Plan..........................................................Section 3.14(a).......................14
Times Mirror...............................................................Preamble...............................1
Year 2000 Compliant........................................................Section 3.22..........................20
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
January 10, 1999 is by and among THE TIMES MIRROR COMPANY, a Delaware
corporation, ("Times Mirror"), HOLLYWOOD ONLINE INC., a California corporation
and a wholly owned subsidiary of Times Mirror ("HOL"), BIG ENTERTAINMENT, INC.,
a Florida corporation ("Parent"), and BIG ACQUISITION CORP., a Delaware
corporation ("Sub").
RECITALS
WHEREAS the Boards of Directors of HOL, Parent and Sub have each (i)
determined that the Merger (as defined below) is fair and in the best interests
of their respective stockholders and (ii) approved the Merger and the issuance
by Parent of shares of Parent Common Stock and Series E Preferred Stock, if any
(each as defined below), to Times Mirror, upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, concurrently with the execution of this Agreement, each of
Xxxxxxxx Xxxxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxxx and Tekno Simon, LLC
(collectively, the "Parent Shareholders") has entered into a Voting Agreement
with Times Mirror, pursuant to which each Parent Shareholder has agreed to
approve the issuance by Parent of shares of Parent Common Stock and Series E
Preferred Stock, if any, to Times Mirror pursuant to the Merger as contemplated
by this Agreement, if approval of Parent's shareholders of such issuance is
required by NASDAQ rules or regulations;
WHEREAS for federal income tax purposes it is intended that the Merger
qualify as a reorganization under the provisions of Sections 368(a)(1)(A) and
(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, HOL, Parent and Sub desire that the Merger and the other
transactions contemplated herein be consummated upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and
intending to be legally bound hereby, Times Mirror, HOL, Parent and Sub hereby
agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. The Merger. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in accordance
with the California General Corporation Law (the "CGCL") and the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into HOL (the
"Merger"). Following the Merger, HOL shall continue as the surviving corporation
(the "Surviving Corporation") and the separate corporate existence of Sub shall
cease.
SECTION 1.2. Effective Time. Subject to the terms and conditions set
forth in this Agreement, (a) an agreement of merger and accompanying officers'
certificates (together, the "CA Agreement of Merger") shall be duly executed and
acknowledged by Parent, Sub and HOL and thereafter delivered to the Secretary of
State of the State of California for filing pursuant to the CGCL on the Closing
Date (as defined in Section 1.3), and (b) a Certificate of Merger (the "Merger
Certificate") shall be duly executed and acknowledged by HOL and thereafter
delivered to the Secretary of State of the State of Delaware for filing pursuant
to the DGCL on the Closing Date. The Merger shall become effective at such time
as a properly executed copy of the CA Agreement of Merger is duly filed with the
Secretary of State of the State of California in accordance with the CGCL, or
such later time as HOL and Sub may agree upon and set forth in the CA Agreement
of Merger (the time the Merger becomes effective being referred to herein as the
"Effective Time").
SECTION 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the first business day
following the satisfaction or waiver of the conditions set forth in Section 2.1
below, at such place as the parties shall mutually agree in writing, unless
another time or date is agreed to in writing by the parties hereto.
SECTION 1.4. Effects of the Merger. The Merger shall have the effects
set forth in the CGCL and the DGCL. Without limiting the generality of the
foregoing and subject thereto, at the Effective Time the Surviving Corporation
shall succeed to all the rights and property of Sub and HOL and shall be subject
to all the debts and liabilities of Sub and HOL.
SECTION 1.5. Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of HOL in effect at the Effective Time shall be the
Articles of Incorporation and Bylaws of the Surviving Corporation until amended
in accordance with applicable law.
SECTION 1.6. Directors. The directors of Sub at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and bylaws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
SECTION 1.7. Officers. The officers of Sub at the Effective Time shall
be the initial officers of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
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SECTION 1.8. Aggregate Consideration.
(a) Merger Consideration.
(i) Conversion of Shares. At the Effective Time, all
of the shares of common stock, no par value, of HOL (individually a
"Share" and collectively the "Shares") issued and outstanding
immediately prior to the Effective Time (other than Shares held in
HOL's treasury, which shall be canceled as provided in Section 1.8(c))
shall, by virtue of the Merger and without any action on the part of
Sub, HOL or the holder thereof, be converted into and shall become a
number of fully paid and nonassessable shares of common stock, $.01 par
value per share, of Parent ("Parent Common Stock") equal to the
quotient of (A) the aggregate amount of thirty-one million dollars
($31,000,000) divided by (B) the Parent Common Stock Price (as defined
below) (the "Common Stock Merger Consideration");
(1) provided, however, that in the event
that, pursuant to such calculation, the Shares would be converted into
and would become a number of shares of Parent Common Stock that would
be, for equity accounting purposes, in excess of 19.9% of the fully
diluted voting stock of Parent (which outstanding voting capital stock
shall include, for purposes of this calculation, such shares of Parent
Common Stock that would comprise the Common Stock Merger
Consideration), then the number of shares of Parent Common Stock that
would comprise the Common Stock Merger Consideration shall be reduced
by such excess number of shares (such excess number of shares, the
"Excess Share Amount") of Parent Common Stock (such remaining share
amount, the "Reduced Common Stock Merger Consideration"). In such
event, the Shares shall, by virtue of the Merger and without any action
on the part of Sub, HOL or the holder thereof, be converted into and
shall become a number of fully paid and nonassessable shares of Parent
Common Stock equal to the sum of the Reduced Common Stock Merger
Consideration plus a number of fully paid and nonassessable shares of
Series E Preferred Stock (as defined below) having an aggregate initial
liquidation preference equal to the product of (x) the Excess Share
Amount multiplied by (y) the Parent Common Stock Price (such number of
shares of Series E Preferred Stock, the "Preferred Stock Merger
Consideration");
(2) provided, further, however, that in no
event shall the Shares be converted into a number of shares of Series E
Preferred Stock that would have an aggregate initial liquidation
preference in excess of six million dollars ($6,000,000);
(3) provided, still further, however, that
in the event the number of shares of Series E Preferred Stock that
would comprise the Preferred Stock Merger Consideration would have an
aggregate initial liquidation preference of one million dollars
($1,000,000) or less (such dollar amount, the "Cash Merger
Consideration"), then, at the option of Parent, the Shares shall, by
virtue of the Merger and without any action on the part of Sub, HOL or
the holder thereof, be converted into and shall become the sum of a
3
number of fully paid and nonassessable shares of Parent Common Stock
equal to the Reduced Common Stock Merger Consideration plus the Cash
Merger Consideration (such numbers of shares of Parent Common Stock,
Series E Preferred Stock (if any) and Cash Merger Consideration (if
any) that the Shares are converted into and become, pursuant to this
Section 1.8(a)(i), the "Merger Consideration.")
(4) provided, still further, however, that
in the event that, pursuant to the calculation of the Common Stock
Merger Consideration pursuant to this Section 1.8(a)(i), the Shares
would be converted into and would become a number of shares of Parent
Common Stock that would be equal to or in excess of 20% of the issued
and outstanding common stock of Parent or the voting power of Parent
immediately prior to the Effective Time and the aggregate Parent Common
Stock Price of the excess shares would be equal to one million dollars
($1,000,000) or less, then, at the option of Parent, the Shares shall,
by virtue of the Merger and without any action on the part of Sub, HOL
or the holder thereof, be converted into and shall become the sum of a
number of fully paid and nonassessable shares of Parent Common Stock
equal to 19.9% of the issued and outstanding common stock of Parent or
the voting power of Parent immediately prior to the Effective Time plus
an amount in cash equal to the product of (x) the number of excess
shares multiplied by (y) the Parent Common Stock Price.
(5) For purposes of this Agreement, "Series
E Preferred Stock" means that series of preferred stock with such terms
as are set forth on Exhibit F hereto and such other terms as are
mutually acceptable to the parties hereto. Unless the context otherwise
requires, each reference in this Agreement to shares of Parent Common
Stock shall include the associated Parent Rights. Notwithstanding the
foregoing, if, between the date of this Agreement and the Effective
Time, the outstanding shares of Parent Common Stock or the Shares shall
have been changed into a different number of shares or a different
class of capital stock or other securities or property of Parent or any
other person by reason of any stock dividend, other distribution,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares of Parent Common Stock (whether by merger or
consolidation, sale of all or substantially all of Parent's assets,
spin-off or another business combination), then the Merger
Consideration contemplated by this Agreement shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(ii) Parent Common Stock Price. The "Parent Common Stock
Price" shall be equal to, with respect to one share of Parent Common Stock, the
average of the per share closing bid prices (the "Average Share Price") of
Parent Common Stock on the NASDAQ SmallCap Market for the fifteen (15) trading
days ending on the third trading day immediately preceding, and the fifteen (15)
trading days beginning on the third trading day immediately following, the date
(the "Announcement Date") on which Parent and Times Mirror publicly announce the
proposed Merger; provided, however, that, in no event may the Average Share
Price exceed $17.5289 or be less than $8.4499.
4
(b) Conversion of Stock of Sub. At the Effective Time, each
outstanding share of the common stock, par value $.01 per share, of Sub shall be
converted into one share of common stock, no par value, of the Surviving
Corporation.
(c) Cancellation of Treasury Shares. At the Effective Time,
each Share held in the treasury of HOL shall, by virtue of the Merger and
without any action on the part of Sub, HOL or the holder thereof, be canceled,
retired and cease to exist and no shares of Parent Common Stock or other
consideration shall be delivered with respect thereto.
SECTION 1.9. Exchange of Certificates.
(a) Delivery of Certificates Representing Merger
Consideration. At the Effective Time, Parent shall deliver to Times Mirror in
exchange for certificates representing the outstanding Shares (i) certificates
representing the number of shares of Parent Common Stock to be delivered
pursuant to Section 1.8(a) and (ii) cash to be paid in lieu of fractional shares
of Parent Common Stock as contemplated by Section 1.9(c).
(b) Delivery of Certificates Representing Shares. At the
Effective Time, Times Mirror shall deliver to Parent for cancellation in
accordance with this Article 1 certificates representing the outstanding Shares.
(c) Fractional Shares. No fractions of a share of Parent
Common Stock shall be issued in the Merger. In lieu thereof, in the event that
Times Mirror would otherwise be entitled to a fraction of a share of Parent
Common Stock, Times Mirror shall, upon surrender of its certificate or
certificates representing outstanding Shares, be entitled to receive an amount
of cash (without interest) determined by multiplying the Average Share Price by
the fractional share interest to which Times Mirror would otherwise be entitled.
The parties acknowledge that payment of the cash consideration in lieu of
issuing fractional shares was not separately bargained for consideration but
merely represents a mechanical rounding off for purposes of simplifying the
corporate and accounting complexities which would otherwise be caused by the
issuance of fractional shares.
(d) Effect of Exchange. All shares of Parent Common Stock
delivered upon the surrender of certificates representing Shares in accordance
with the terms hereof (including any cash paid pursuant to Section 1.9(c)) shall
be deemed, to the fullest extent permitted by Applicable Law, to have been
delivered in full satisfaction of all rights pertaining to such Shares, and
after the Effective Time there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time.
5
ARTICLE 2
CONDITIONS TO CONSUMMATION OF MERGER
SECTION 2.1. Conditions to All Parties' Obligations. The respective
obligations of the parties hereto to consummate the Merger shall be subject to
the satisfaction (or waiver by each party) as of the Effective Time of the
following conditions:
(a) HSR Act; Other Governmental Approvals. Any waiting period
applicable to the consummation of the Merger contemplated under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act") shall have expired or have been
terminated, and any other notices, registrations, consents, approvals or
authorizations to or of any federal, state or foreign governmental authority
with respect to the Merger shall have been either filed, in the case of notices
or registrations, or received, in the case of consents, approvals and
authorizations.
(b) No Order. No federal, state or foreign governmental
authority or other agency or commission or court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) which remains in effect, and which has the effect of making the
transactions contemplated hereby illegal or otherwise prohibiting consummation
of the transactions contemplated by this Agreement.
(c) Shareholder Approval. The issuance by Parent of the shares
of Parent Common Stock and Series E Preferred Stock to Times Mirror pursuant to
this Agreement shall have been approved by the requisite vote, if any, of the
shareholders of Parent in accordance with any Applicable Laws and/or NASDAQ
rules or regulations.
(d) Proxy Statement. In the event that NASDAQ rules or
regulations would require the approval by the shareholders of Parent with
respect to the issuance by Parent of shares of Parent Common Stock and Series E
Preferred Stock, the definitive Proxy Statement shall have been mailed to
shareholders of Parent in compliance with the Exchange Act.
SECTION 2.2. Conditions to Parent's and Sub's Obligations. The
obligations of Parent and Sub to consummate the Merger are subject to the
satisfaction (or waiver by each of Parent and Sub) as of the Effective Time of
the following conditions:
(a) Representations, Warranties and Covenants. Subject to
Section 2.3, the representations and warranties of each of HOL and Times Mirror
made in this Agreement, the Ancillary Agreements and any certificate or document
required to be delivered by Times Mirror or HOL pursuant to the terms of this
Agreement and not qualified as to materiality or HOL Material Adverse Effect
shall be true and correct in all material respects and those representations and
warranties of each of HOL and Times Mirror so qualified shall be true and
correct in all respects, in each case as of the date of this Agreement, and each
of HOL and Times Mirror shall have performed or complied with, or shall have
caused to be performed or complied with, in all material respects all
6
obligations and covenants required by this Agreement, the Ancillary Agreements
and any certificate or document required to be delivered by Times Mirror or HOL
pursuant to the terms of this Agreement to be performed or complied with by HOL
and Times Mirror by the Effective Time.
(b) Certificates of Good Standing. Parent and Sub shall have
received (i) from HOL and Times Mirror, certificates as to HOL and Times Mirror,
respectively, issued by the appropriate governmental authority of the state of
incorporation of each of HOL and Times Mirror, and (ii) from HOL, certificates
as to HOL issued by the appropriate governmental authority of each of the states
set forth on Schedule 3.1, evidencing its good standing in such jurisdiction or
state as of a date not more than ten days prior to the Effective Time (such good
standing to be reaffirmed by bring-down telegram or other official means on the
Closing Date).
(c) Resolutions. Parent and Sub shall have received (i) from
HOL certified copies of resolutions duly adopted by the Board of Directors of
HOL authorizing the execution, delivery and performance of this Agreement and
each of the Ancillary Agreements to which it is a party and the consummation of
the transactions contemplated hereby and thereby and (ii) from Times Mirror
certified copies of its general standing resolutions duly adopted by the Board
of Directors of Times Mirror authorizing the execution, delivery and performance
of this Agreement and each of the Ancillary Agreements to which it is a party
and the consummation of the transactions contemplated hereby and thereby and
(iii) from Times Mirror certified copies of resolutions acting in its capacity
as the sole shareholder of HOL approving this Agreement and each of the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby, and all such resolutions shall not
have been revoked and shall remain in full force and effect as of the Effective
Time.
(d) Third-Party Consents. HOL and Times Mirror shall have
obtained in writing any material third-party consents required under any of the
Contracts that are indicated with an asterisk on Schedule 3.4.
(e) NATO Agreement. The NATO Agreement shall be in full force
and effect in accordance with its terms as of the date hereof, HOL shall not be
in default thereunder, there shall not be any event or circumstance that would
have, or could be reasonably expected to have, a material adverse effect on
HOL's rights and obligations thereunder or give rise to any right of
termination, cancellation or non-renewal of any other party thereto and there
shall not otherwise have been any material adverse change to HOL's rights and
obligations thereunder.
(f) Domain Names. The domain name "xxxxxxxxx.xxx" as
registered with InterNIC/Network Solutions, Inc. shall be valid and in full
force and effect and no event or circumstance shall have occurred in respect of
such domain name which would have, or could reasonably be expected to have, a
material adverse effect on HOL's use and enjoyment thereof.
(g) Ancillary Agreements. Each of the Shareholder Agreement
and the Non-Competition Agreement shall have been executed and delivered by the
parties thereto, substantially in the forms of Exhibit A and Exhibit C,
respectively.
7
(h) Tax Certificate. Each of Times Mirror and HOL shall have
delivered a certificate in the form attached hereto as Exhibit E (i) at the time
of the filing of the definitive form of Proxy Statement and (ii) at the Closing.
SECTION 2.3. Limited Exception to Section 2.2(a) Condition to Parent's
and Sub's Obligations to Close. The language of Section 2.2(a) notwithstanding,
the condition to the obligations of Parent and Sub to consummate the Merger
contained in Section 2.2(a) shall be deemed to be satisfied notwithstanding any
inaccuracy or breach in the representations, warranties or covenants that
otherwise are required to be true and correct as provided in such Section 2.2(a)
if, 5 business days prior to the Effective Time, Times Mirror delivers to Parent
and Sub a certificate (which certificate shall be reaffirmed by a like
certificate delivered at the Effective Time) dated as of the Effective Time
signed by the chief financial officer of Times Mirror that sets forth (i) the
reasonable details of any such inaccuracy or breach; (ii) a firm undertaking by
Times Mirror to indemnify Parent and Sub for any and all damage, loss (including
any diminution in the value of HOL as of the date of this Agreement), liability,
claim, penalty, judgment, assessment, cost and expense of any kind (including
reasonable expenses of investigation and reasonable attorneys' fees and
expenses) (collectively, "Losses") that may arise from any such inaccuracy or
breach; and (iii) the amount of the Losses resulting from any such inaccuracy or
breach and the basis for the determination thereof, accompanied by a cash
payment (which shall be by wire transfer of immediately available funds) in the
amount of such Losses; provided, however, that (a) such condition shall not be
deemed to be satisfied by the delivery of such certificate if the aggregate
amount of such Losses is reasonably expected to be $3,100,000 or more; (b) Times
Mirror shall not have any liability for the amount of such Losses unless the
aggregate amount thereof exceeds, on a cumulative basis, an amount equal to
$1,000,000, in which case Times Mirror shall be responsible only for the amount
of such Losses in excess of $1,000,000; and (c) this Section 2.3 shall not apply
to (x) any Losses with respect to the matters for which Parent is entitled to
indemnification under Sections 11.1 and 11.6, (y) any breach by Times Mirror or
HOL of the covenants set forth in Sections 6.1, 6.3, 6.5, 6.6, 8.5(c), 8.6 and
11.6 and (z) any inaccuracy or breach of any representation and warranty or
covenant covered by this Section 2.3 that arises from fraud or willful
misconduct on the part of either Times Mirror, HOL or any of their respective
officers, directors, employees or agents. In the absence of such fraud or
willful misconduct, the remedy contained in this Section 2.3 shall constitute
the sole and exclusive remedy after the Closing of Parent and Sub with respect
to any inaccuracy in or breach of any representation and warranty or covenant of
Times Mirror or HOL specified in any certificate delivered by Times Mirror
pursuant to this Section 2.3 (unless excluded from the coverage of this Section
2.3). In addition, if the amount of any of the Losses specified in such
certificate is reasonably expected to be $3,100,000 or more, Parent may, in its
sole discretion, elect to deem such condition to be satisfied by the delivery of
such certificate and the accompanying payment referred to in the first sentence
of this Section 2.3.
Notwithstanding the foregoing, Parent shall have the right to object in
writing to Times Mirror's statement of the amount of any Losses set forth in any
certificate delivered pursuant to this Section 2.3 within five business days of
the Effective Time. If any such objection is not resolved by Times Mirror and
Parent within five days of the date of such written objection, such dispute
shall be resolved by submitting it to arbitration in accordance with Section
12.11(b).
8
SECTION 2.4. Conditions to Times Mirror's and HOL's Obligations. The
obligations of Times Mirror and HOL to consummate the Merger are subject to the
satisfaction (or waiver by each of Times Mirror and HOL) as of the Effective
Time of the following conditions:
(a) Representations, Warranties and Covenants; Officers'
Certificates. The representations and warranties of each of Parent and Sub made
in this Agreement and not qualified as to materiality or Parent Material Adverse
Effect shall be true and correct in all material respects, and those
representations and warranties of each of HOL and Times Mirror so qualified
shall be true and correct in all respects, in each case as of the date of this
Agreement, and each of Parent and Sub shall have performed or complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by Parent or Sub by the Effective Time.
(b) Certificates of Good Standing. HOL and Times Mirror shall
have received certificates as to Parent and Sub, respectively, issued by the
appropriate governmental authority of the jurisdiction of incorporation of each
of Parent and Sub evidencing its good standing in such jurisdiction as of a date
not more than ten days prior to the Effective Time (such good standing to be
reaffirmed by bring-down telegram or other official means on the Closing Date).
(c) Resolutions. HOL and Times Mirror shall have received from
(i) Parent certified copies of resolutions duly adopted by the Board of
Directors of Parent authorizing the execution, delivery and performance of this
Agreement and each of the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby, (ii) Sub
certified copies of resolutions duly adopted by the Board of Directors of Sub
authorizing the execution, delivery and performance of this Agreement and each
of the Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby and (iii) Parent certified copies
of resolutions acting in its capacity as the sole shareholder of Sub approving
this Agreement and each of the Ancillary Agreements to which it is a party and
the consummation of the transactions contemplated hereby and thereby, and all
such resolutions shall not have been revoked and shall remain in full force and
effect as of the Effective Time.
(d) Third-Party Consents. Parent shall have obtained in
writing any material third-party consents required under any of the contracts to
which Parent is a party that are indicated with an asterisk on Schedule 2.4(d).
(e) Recommendation of Board of Directors of Parent. If such
shareholder approval is required by NASDAQ rules and regulations, Parent,
through its Board of Directors, shall have recommended to its shareholders (via
the Proxy Statement) that such shareholders approve the issuance of shares of
Parent Common Stock to Times Mirror pursuant to this Agreement.
(f) Ancillary Agreements. Each of the Shareholders Agreement
and the Registration Rights Agreement shall have been executed and delivered by
the parties thereto, substantially in the forms of Exhibit A and Exhibit B,
respectively (such agreements, together with the Non-Competition Agreement and
the Voting Agreement in the form of Exhibit D, the "Ancillary Agreements").
9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF HOL
HOL hereby represents and warrants to each of Parent and Sub as
follows:
SECTION 3.1. Organization and Good Standing of HOL. HOL is a
corporation duly organized and validly existing under the laws of the State of
California. HOL has all requisite corporate power and authority and possesses
all governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to carry on its business as presently conducted, other
than such franchises, licenses, permits, authorizations and approvals the lack
of which would not have a material adverse effect on the business, assets,
properties, liabilities, financial or other condition or results of operations
of HOL (such effects, taken individually or in the aggregate, an "HOL Material
Adverse Effect"). HOL is duly qualified and in good standing to do business in
the jurisdictions set forth on Schedule 3.1, which jurisdictions constitute each
jurisdiction in which the nature of its business or the ownership, leasing or
holding of its properties makes such qualification necessary, except such
jurisdictions where the failure be so qualified or in good standing would not
have an HOL Material Adverse Effect.
SECTION 3.2. Authority. HOL has all requisite corporate power and
authority to execute and deliver this Agreement and each Ancillary Agreement to
which it is a party and to consummate the transactions contemplated hereby and
thereby. All necessary corporate action required to have been taken by or on
behalf of HOL by Applicable Law or its charter documents has been taken to
authorize (a) the approval, execution and delivery on behalf of HOL of this
Agreement and each Ancillary Agreement to which it is a party and (b) the
performance by HOL of its obligations under this Agreement and each Ancillary
Agreement to which it is a party and the consummation of the transactions
contemplated hereby and thereby. This Agreement and each Ancillary Agreement to
which it is a party constitutes a valid and binding agreement of HOL,
enforceable against it in accordance with its terms, except (i) as the same may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws of
general application relating to or affecting creditors' rights, including the
effect of statutory or other laws regarding fraudulent conveyances and
preferential transfers and (ii) for the limitations imposed by general
principles of equity (the foregoing exceptions set forth in clauses (i) and (ii)
being referred to as the "Enforceability Exceptions").
SECTION 3.3. No Breach. The execution and delivery by HOL of this
Agreement and each Ancillary Agreement to which it is a party do not, and the
consummation of the transactions to which HOL is a party contemplated hereby
will not, (a) violate or conflict with the Articles of Incorporation or bylaws
of HOL or (b) except as set forth on Schedule 3.3 hereto, constitute a material
breach or default under, or give rise to any, third-party right of termination,
cancellation, modification or acceleration under, or result in the creation of
any material lien under, any contract that HOL is a party to or any contract or
arrangement by which HOL or its assets are bound, or (ii) violate or conflict
with any Applicable Law, assuming that the consents contemplated by Section 3.4
are obtained and in effect.
10
SECTION 3.4. Consents and Approvals. Except for (a) the filing and
recordation of the Merger Certificate as required by the DGCL and of the CA
Agreement of Merger as required by the CGCL and (b) filings, permits,
notifications, registrations, authorizations, consents and approvals as may be
required under applicable requirements of the HSR Act and Applicable Law,
neither the execution and delivery by HOL of this Agreement or any Ancillary
Agreement to which it is a party nor the consummation of the transactions to
which HOL is a party contemplated hereby and thereby will require any consent,
approval, authorization or permit of, or filing with or notification to, or
registration with, any federal, state or foreign governmental or regulatory
authority, except where the failure to obtain such consent, approval,
authorization or permit, or to make such filing, registration or notification,
(A) would not materially impair HOL from performing its obligations under this
Agreement and (B) would not have an HOL Material Adverse Effect.
SECTION 3.5. Capital Stock of HOL. The authorized capital stock of HOL
consists of one thousand (1,000) shares of common stock, no par value, of which
one hundred thirty-three and three hundred thirty-four one thousandth (133.334)
shares, constituting the Shares, are duly authorized and validly issued and
outstanding, fully paid and nonassessable. Except for the Shares, there are no
shares of capital stock or other equity securities of HOL outstanding. The
Shares have not been issued in violation of, and none of the Shares is subject
to, any preemptive or subscription rights. Except as may exist under the
agreements listed on Schedule 3.12(a), there are no outstanding warrants,
options, "phantom" stock rights, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) pursuant to which
HOL is or may become obligated to issue, sell, purchase, return or redeem any
shares of capital stock or other securities of HOL, and no equity securities of
HOL are reserved for issuance for any purpose. Other than this Agreement, the
Shares are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, registration, dividend rights or disposition of the
Shares or any other securities exchangeable or exercisable for or convertible
into Shares or any other capital stock of HOL.
SECTION 3.6. Equity Interests. Except as set forth on Schedule 3.6, HOL
does not directly or indirectly own any capital stock of or other equity
interests in any corporation, partnership or other entity.
SECTION 3.7. Intentionally Omitted.
SECTION 3.8. No Indebtedness. As of the date hereof and as of the
Effective Time, HOL shall not have any indebtedness of any kind, other than
liabilities (but not indebtedness for borrowed money) under the NATO Agreement,
the Water Garden office lease, the Contracts as set forth in Schedules 3.12(a)
through 3.12(k) and in connection with any accrued vacation benefits or sick pay
with respect to any employee of HOL.
SECTION 3.9. Assets Other Than Real Property. HOL has good title to all
of its assets and properties, tangible or intangible, free and clear of all
mortgages, liens, security interests or other encumbrances of any nature
whatsoever, except (a) such as are disclosed on Schedule 3.9 and (b) Permitted
11
Liens. For purposes of this Agreement, "Permitted Liens" shall mean (i)
mechanics', carriers', workmen's, warehousemen's, repairmen's or other like
liens arising in the ordinary course of business, (ii) liens arising under the
original purchase price conditional sale contracts and equipment leases with
third parties entered into in the ordinary course, (iii) liens for Taxes and
other governmental obligations not yet due and payable or which thereafter may
be paid without penalty and (iv) other imperfections of title, restrictions or
encumbrances, if any, which liens, imperfections of title, restrictions or other
encumbrances do not materially impair the continued use in the business of the
respective owner thereof and operation of the specific assets to which they
relate.
This Section 3.9 does not relate to real property or interests in real
property, which are the subject of Section 3.10, or to intellectual property,
which is the subject of Section 3.11.
SECTION 3.10. Real Property.
(a) Owned Property. HOL does not own any real property.
(b) Leased Property. Schedule 3.10(b) sets forth a true and
complete list of all real property and interests in real property leased by HOL
("Leased Properties") and identifies any leases relating to the Leased
Properties, each as amended to date (true and complete copies of which leases,
as so amended, have heretofore been made available to Parent). HOL has not
received any written notices of any violations of Applicable Laws relating to
the Leased Properties. No work has been performed or is in progress at, and no
materials have been furnished with respect to, the Leased Properties or any
portion thereof which might give rise to mechanics', materialmens' or other
similar liens.
(c) Title to Real Property. HOL has good and marketable title
to the leasehold estates in all Leased Properties, free and clear of all
mortgages, liens, security interests, easements, covenants, rights-of-way and
other similar restrictions of any nature whatsoever, except (i) Permitted Liens,
(ii) easements, covenants, rights-of-way and other similar restrictions of
record and (iii) (A) zoning, building and other similar restrictions, (B)
mortgages, liens, security interests or encumbrances that have been placed by
any developer, landlord or other third party on property over which HOL has
easement rights or on any Leased Property and subordination or similar
agreements relating thereto and (C) unrecorded easements, covenants,
rights-of-way or other similar restrictions, none of which items set forth in
clauses (A), (B) and (C) above materially impairs the continued use in the
business of HOL and the operation of the property to which they relate.
SECTION 3.11. Intellectual Property.
(a) Proprietary Rights. Schedule 3.11(a) sets forth a
true and complete list of trademarks, trade names and service marks and
applications therefor and all patents (if any), copyrights and
applications therefor that are registered or filed in the name of HOL
or are otherwise material to HOL's business as presently conducted and
all other licenses or other like rights relating to intellectual
property of any kind that are material to the operation of HOL's
business (the "Intellectual Property"). Except as set forth on Schedule
3.11(a), as to Intellectual Property owned by HOL, HOL has valid title
12
and ownership, free and clear of any liens or claims of third parties
and, as to Intellectual Property licensed for use in HOL's business,
HOL has the valid right to use such Intellectual Property in accordance
with the terms of any such licenses.
(b) Licenses.
(i) Except for the licenses as disclosed in Schedule
3.11(b), or pursuant to a Contract identified on Schedule 3.12(k), if
any, HOL has not licensed to any third party the right to use or
exploit any of the Intellectual Property or any portion thereof in any
jurisdiction in a manner that is material, individually or in the
aggregate.
(ii) Any video, audio, text, still photograph, logo
or title or any other material or other Intellectual Property (other
than music, recording, mechanical or performance rights) owned by any
third party and used in the operation of the business of HOL prior to
the Effective Time was obtained by HOL under either a written or an
oral license to HOL from the owner or agent of any such material, which
licenses are, to HOL's Knowledge in the case of oral licenses only,
binding and enforceable and, the use of all such licenses prior to the
Effective Time by HOL has not violated the express or implied terms of
any such written or oral license in any material respect.
Notwithstanding anything to the contrary contained in this Section
3.11, HOL makes no warranty that it has any title to or ownership
rights in any studio-provided materials and the right to use such
materials after the conclusion of a film's theatrical release.
(c) Trade Secrets. HOL has at all times exercised reasonable
precautions to maintain the confidentiality of its information that derives
economic value, actual or potential, from not being generally known to other
persons who can obtain economic value from its disclosure or use.
(d) Photographs. HOL employs a staff photographer who takes
pictures for use on HOL's website, and HOL has full title and ownership of all
such photographs.
(e) Domain Names. HOL has registered each of the domain names
set forth on Schedule 3.11(d) with InterNIC/Network Solutions, Inc. and each of
such registrations is valid and in full force and effect.
(f) Claims.
(i) Except as set forth on Schedule 3.11(f), no
claims are pending or, to the Knowledge of HOL, threatened against HOL
by any person with respect to the ownership, validity, enforceability
or use of any Intellectual Property or otherwise challenging or
questioning the validity or effectiveness of any Intellectual Property,
except for any such claim that would not have an HOL Material Adverse
Effect. Except as set forth on Section 3.11(f), no claims are pending
or, to the Knowledge of HOL, threatened against HOL by any person in
13
which such person alleges that any activities or conduct of business of
HOL infringes upon the intellectual property rights, moral rights or
rights of publicity of any third party.
(ii) Except as set forth on Schedule 3.11(f), no past
or present officer, employee or consultant of HOL has a basis for
claiming an ownership interest (a material ownership interest as to any
consultant only) in any of the processes, software or products used in
the operation of the business of HOL as a result of having been
involved in the development of such process, software or product while
employed by or consulting to HOL.
SECTION 3.12. Contracts. Schedules 3.12(a) through 3.12(k) set forth a
true and complete list of all material contracts to which HOL is a party
(together with the leases related to the Leased Properties, "Contracts"),
including but not limited to the following (true and complete copies of which,
each as currently in effect, have been heretofore made available to Parent):
(a) Employment, Independent Contractor and Consulting
Agreements. (i) Any employment agreement, employment contract or any agreement
or contract providing for the payment of any "phantom" stock rights or severance
compensation or for the provision, vesting and/or acceleration of any employee
benefits following a change of ownership or control of HOL and (ii) any
independent contractor or consulting agreement that has an aggregate liability
after the Effective Time in excess of $25,000 and is not terminable by notice of
less than 60 calendar days;
(b) Non-Competition Agreements. Except as set forth on
Schedule 3.12(b), any covenant or agreement that restricts the ability of HOL to
compete in any line of business in any place in the world;
(c) Leases of Real Property. Any lease under which HOL is a
lessor or sublessor of, or makes available for use by any third party, any Real
Property;
(d) Personal Property Leases. Any lease under which (i) HOL is
lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible
personal property owned by a third party or (ii) HOL is a lessor or sublessor
of, or makes available for use by any third party, any tangible personal
property owned or leased by HOL, in any such case which has an aggregate
liability after the Effective Time in excess of $25,000 and is not terminable by
notice of less than 60 calendar days;
(e) Supply and Service Agreements. Any continuing agreement or
contract for the future purchase by HOL of materials, supplies or equipment
(other than purchase contracts and orders for inventory in the ordinary course
of business consistent with past practice) or any advertising agreement or
arrangement, in any such case which has an aggregate liability after the
Effective Time in excess of $25,000 and is not terminable by notice of less than
60 calendar days;
(f) Indebtedness. Any agreement or contract under which HOL
has borrowed or loaned any money or issued any note, bond, indenture or other
14
evidence of indebtedness or directly or indirectly guaranteed indebtedness,
liabilities or obligations of others (other than endorsements for the purpose of
collection in the ordinary course of business), or any other note, bond,
indenture or other evidence of indebtedness;
(g) Guarantees. Any agreement or contract under which Times
Mirror or any other person has directly or indirectly guaranteed indebtedness,
liabilities or obligations of HOL and any guarantees by HOL or similar contracts
obligating HOL for the indebtedness of any person;
(h) Partnerships and Joint Ventures. The First Amended and
Restated Master NATO Agreement dated as of April 15, 1996, by and between HOL,
Times Mirror and the National Association of Theatre Owners, Inc., a New York
not-for-profit corporation, and any Exhibitor Services Agreement entered into in
connection therewith (together, the "NATO Agreement"), and any other partnership
agreement or other joint venture agreement to which HOL is a party;
(i) Online Service Agreements. Any agreement or contract under
which any third party has agreed to provide HOL with online services;
(j) Electronic Ticketing and Merchandising Agreements. Any
agreement or contract under which HOL provides online ticketing and
merchandising services; and
(k) Other Agreements. Any other agreement, contract, lease,
license (including Intellectual Property licenses), commitment or instrument to
which HOL is a party or by or to which the assets or business of HOL is bound or
subject, which in any case has an aggregate liability after the Effective Time
in excess of $25,000, and is not terminable by notice of less than 60 calendar
days (other than purchase contracts and orders for inventory in the ordinary
course of business, consistent with past practice).
Except as disclosed on Schedules 3.12(a) through 3.12(k) or the other schedules
hereto, each of Times Mirror and HOL has performed in all material respects all
obligations required to be performed by it to date under the Contracts to which
it is a party and it is not in breach or default in any material respect
thereunder and, to the Knowledge of HOL, no other party to any of the Contracts
is in breach or default in any material respect thereunder.
SECTION 3.13. Litigation; Decrees. Schedule 3.13 sets forth a list, as
of the date of this Agreement, of all pending and, to the Knowledge of HOL,
threatened lawsuits or claims by or against HOL or otherwise involving HOL or
its properties, assets, operations or business. Except as disclosed on Schedule
3.13, HOL is not in default under any judgment, order or decree of any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, applicable to HOL or its properties,
assets, operations or business.
SECTION 3.14. Employee Benefits and Related Matters.
(a) Plans. Schedule 3.14(a) sets forth each employee pension,
retirement, profit sharing, stock bonus, stock option, stock purchase,
15
incentive, deferred compensation, medical, dental, vision, life insurance,
accidental death and dismemberment insurance, business travel insurance,
vacation pay, salary continuation, sick pay, disability, severance, golden
parachute or other plan, fund, program, policy, contract or arrangement
(including any contracts or agreements with certain employees of HOL that relate
to the transactions contemplated by this Agreement) providing employee benefits
that is maintained or contributed to by Times Mirror or HOL in which any HOL
personnel have participated or under which any HOL personnel have accrued and
remain entitled to any benefits (the "Plans"). Each Plan covering only HOL
personnel and which is sponsored by HOL (an "HOL Plan") is identified as such on
Schedule 3.14(a). Each Plan not so identified shall, for purposes of this
Agreement, be referred to as a "Times Mirror Plan." None of the HOL Plans are
subject to Title IV of ERISA. HOL has made available to Parent true, complete
and correct copies of (i) each Plan (or, in the case of any unwritten Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500 filed
with the IRS with respect to each Plan (if any such report was required), (iii)
the most recent summary plan description for each Plan for which such a summary
plan description is required and (iv) each trust agreement and group annuity
contract relating to any Plan. Neither HOL nor any corporation or trade or
business (whether or not incorporated) which would be treated as a member of the
controlled group including HOL under Sections 414(b), (c), (m) and (o) of the
Code or Section 4001(a)(14) of ERISA (as defined in Section 3.14(b)) (an "ERISA
Affiliate") would be liable for any amount pursuant to Section 4062, 4063 or
4064 of ERISA, if any Plan which is subject to Title IV of ERISA were to
terminate. Except as disclosed on Schedule 3.14(a), no HOL employee is entitled
to any benefit under any Plan by reason of the transactions contemplated hereby,
and no Plan includes any common stock or other security issued by Times Mirror
or any ERISA Affiliate among its assets.
(b) Compliance with ERISA and the Code. None of Times Mirror,
HOL or any of the Plans or any trust created thereunder, or any trustee or
administrator thereof, has engaged in a transaction in connection with which HOL
would be subject to either a material liability or civil penalty assessed
pursuant to Sections 409, 502(i) or 502(1) of ERISA or a material Tax imposed
pursuant to Section 4971, 4972, 4974, 4975, 4976 or 4980B of the Code. Except as
described on Schedule 3.14(b), each of the Plans has been operated and
administered in all material respects in accordance with Applicable Laws,
including the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code. Each Plan intended to be a qualified plan under Code
Section 401 has received a favorable determination letter to that effect (a copy
of which has been made available to Parent) and nothing has occurred since the
issuance of such letter that would adversely affect the Tax qualification of any
such Plan. There are no pending or, to the Knowledge of Times Mirror or HOL,
threatened claims by or on behalf of any of the Plans, by any employee or
beneficiary covered under any such Plan, or otherwise involving any such Plan
(other than ordinary course claims for benefits).
(c) Multiemployer Plan Liabilities. None of Times Mirror, HOL
or any ERISA Affiliate is, or has been within the last six years, obligated to
contribute, on behalf of any current or former employee of HOL, to a
multiemployer plan (as defined in Section 3(37) of ERISA) and no such ERISA
Affiliate is liable or reasonably expected to be liable for any withdrawal
liability under Section 4201 of ERISA. None of Parent, Sub or HOL will have any
16
liability with respect to any multiemployer plan as a result of the Merger or
the transactions contemplated by this Agreement.
(d) Accumulated Funding Deficiencies; Liens. None of the Plans
or any trust established thereunder has incurred any accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
of the Plans. No contribution failure has occurred with respect to any Plan
sufficient to give rise to a lien under Section 302(f) of ERISA. None of Parent,
Sub or HOL is liable or reasonably expected to be liable for any contributions
to any employee benefit plan subject to Title IV of ERISA sponsored by any ERISA
Affiliate.
(e) Employee Welfare Benefit Plans. With respect to any Plan
that is an employee welfare benefit plan, except as disclosed on Schedule
3.14(e), (i) no such Plan is funded through a welfare benefits fund, as such
term is defined in Section 419(e) of the Code and (ii) each such Plan that is a
group health plan, as such term is defined in Section 5000(b)(1) of the Code,
complies with the applicable requirements of Section 4980B(f) of the Code.
SECTION 3.15. Absence of Changes or Events. Since December 31, 1998,
there has not been any event or circumstance which has caused or is reasonably
likely to cause an HOL Material Adverse Effect, other than changes relating to
the economy in general or the internet content provider industry in general and
not specifically relating to HOL. Except as disclosed on Schedule 3.15 or as
contemplated by this Agreement, since September 30, 1998, the business of HOL
has been conducted only in the ordinary course and has not taken any of the
actions prohibited or restricted under Section 6.3.
SECTION 3.16. Compliance with Applicable Laws. Except as previously
disclosed by HOL to Parent in writing, to the Knowledge of HOL:
(a) General. HOL is in compliance with, and has not received
written notice of any alleged non-compliance with, all applicable statutes,
laws, ordinances, rules, orders and regulations of any governmental authority or
instrumentality, domestic or foreign ("Applicable Laws"), except for any such
incidents of noncompliance that would not have an HOL Material Adverse Effect.
This Section 3.16 does not relate to matters with respect to Taxes or
environmental matters.
SECTION 3.17. Environmental Matters. Except as previously disclosed by
HOL to Parent in writing:
(a) Compliance. To the Knowledge of HOL, HOL is in compliance
with all applicable Environmental Laws, except for any such incidents of
noncompliance that would not have an HOL Material Adverse Effect.
(b) Hazardous Materials. There has been no release of any
Hazardous Material to soil or water originating at, on, or from any of the Real
Properties during the period that HOL or any of its divisions has leased such
Real Property, except for any such releases that would not have an HOL Material
Adverse Effect.
17
(c) Notices of Certain Environmental Matters. HOL has not
received written notice of (i) any alleged violation of Environmental Law or
(ii) liability for any release of any Hazardous Material or violation of any
Environmental Laws in connection with the present or past business or properties
of HOL, and there exists no pending or, to the Knowledge of HOL, threatened
writ, injunction, decree, order or judgment outstanding, nor any pending or, to
the Knowledge of HOL, threatened lawsuit, proceeding, citation, claims, summons
or government agency investigation relating thereto, except for any such matters
that would not have an HOL Material Adverse Effect.
(d) Definitions. For purposes of Sections 3.16(b) and 3.16(c):
(i) "Hazardous Material" means any material,
chemical, substance or waste the presence of which requires investigation or
remediation under any federal, state or local statute, regulation, ordinance,
order, or common law; or which is characterized, classified or otherwise defined
as a hazardous toxic, pollutant or contaminant or words of similar meaning and
is regulated as such by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States or state or
any political subdivision thereof, including but not limited to, petroleum,
asbestos, polychlorinated biphenyls and radioactive materials.
(ii) "Environmental Law" means any applicable law
(including common law), statute, regulation, rule, ordinance, code, license,
order or other legal requirement, of any governmental agency, department,
commission, board, bureau or instrumentality of the United States, states and
political subdivisions thereof and all applicable judicial and administrative
and regulatory decrees, judgments and orders relating to the protection of human
health or the environment or natural resources, including the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation Recovery Act, the Clean Air Act, the Clean Water Act and the
Occupational Safety and Health Act or analogous state laws.
SECTION 3.18. Taxes Except as set forth on Schedule 3.18:
(a) Definitions: For purposes of this Agreement:
(i) "Affiliated Group" means any affiliated group
within the meaning of Section 1504 of the Code, or any combined,
unitary or similar group under a similar provision of state, local or
foreign law.
(ii) "Taxes" (each individually, a "Tax") means all
federal, state, local or foreign taxes, assessments, duties, levies or
similar charges of any kind including, without limitation, net income,
gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, withholding, payroll, employment,
excise, stamp, premium, property or other taxes of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, whether disputed or not, and
shall include any transferee or successor liability in respect of Taxes
(whether by contract or otherwise) and any liability in respect of Tax
18
as a result of being a member of any Affiliated Group, including any
consolidated, combined, unitary or similar group.
(iii) "Tax Return" means any return (including any
consolidated, combined or unitary return in which HOL is, or was,
included or includable), declaration, claim for refund, report,
statement or information statement required to be filed with respect to
Taxes or any amendment thereto, and including any schedule or
attachment thereto.
(b) All Tax Returns that are required to be filed by, or on
behalf of, HOL have been duly filed on a timely basis under the statutes, rules
and regulations of each jurisdiction in which such Tax Returns are required to
be filed. All such Tax Returns are true, complete and accurate in all material
respects. All Taxes due with respect to such Tax Returns have been timely paid.
(c) HOL has duly and timely withheld and paid over to the
appropriate taxing authorities all Taxes and other amounts required to be so
withheld and paid for all periods under all applicable laws in connection with
amounts paid or owing to any employee, independent contractor, subcontractor,
lender, stockholder or other third party or other personnel supplied by any
third party.
(d) No claim for assessment or collection of Taxes has been
asserted against or with respect to HOL.
(e) There is no pending claim by a taxing authority in a
jurisdiction with respect to which a Tax Return is not currently filed by or on
behalf of HOL that HOL is or may be subject to taxation by that jurisdiction,
nor is HOL or Times Mirror aware that any such assertion of jurisdiction is
threatened.
(f) None of the assets of HOL is (a) "tax-exempt use" property
within the meaning of Section 168(h) of the Code, (b) required to be treated as
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (c) "tax-exempt bond financed property"
within the meaning of Section 168(g) of the Code, or (d) "limited use property"
(as that term is used in Rev. Proc. 76-30).
(g) Neither HOL nor Times Mirror with respect to HOL has (A)
filed a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to the disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the HOL, (B) is
required to make any adjustments pursuant to Section 481(a) of the Code or any
other similar provision of state, local or foreign law by reason of a change in
accounting method initiated by HOL or has any Knowledge that the Internal
Revenue Service ("IRS") has proposed any such adjustment or change in accounting
method, or has any application pending with any taxing authority requesting
permission for any changes in accounting methods that relate to the business or
operations of HOL, other than as described on Schedule 3.18(g)(B), (C) executed
19
or entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law with respect to HOL, (D) executed a power of attorney with respect
to any Tax matter which is currently in force, other than with respect to
federal income Tax matters or (E) requested any extension of time within which
to file any Tax Return, which Tax Return has since not been filed, or (F)
executed or filed with the IRS or any other taxing authority any agreement,
waiver, or other document or arrangement extending or having the effect of
extending the period for assessment or collection of Taxes (including, but not
limited to, any applicable statute of limitations).
(h) HOL is not a party to any tax sharing, tax indemnification
or similar agreement or arrangement (whether or not written) with respect to
Taxes pursuant to which it will or may have any obligation to make any payments
after the Closing Date.
(i) For federal income tax purposes, HOL is a member of the
Affiliated Group of which Times Mirror is the common parent, and joins in the
filing of a consolidated federal income tax with Times Mirror. HOL is not now
and has never been a member of any Affiliated Group (other than the Affiliated
Group of which Times Mirror is the common parent).
(j) HOL is not party to any joint venture, partnership or
other arrangement or contract that constitutes a partnership for federal income
tax purposes.
(k) HOL has not constituted either a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(l) No gain or loss will be recognized by HOL, for federal
income tax purposes, upon the Merger by reason of the consolidated return
Treasury Regulations promulgated under Section 1502 of the Code.
(m) Schedule 3.17 lists all the material Tax elections made by
or with respect to HOL or as to which HOL would be bound with respect to taxable
periods ending after the Closing Date.
(n) HOL has received no prepaid subscription income which
would or may be includable in the gross income of HOL after the Closing Date
under Section 455 of the Code.
(o) Except for the payment of the Performance Cycle Amount,
there is no contract, agreement, plan or arrangement covering any Person that
could give rise to the payment of any amount that would not be deductible by HOL
by reason of Section 280G of the Code.
(p) Each of HOL and Times has no reason to believe that any
conditions exist that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(E) of the Code.
20
(q) At the Effective Time, HOL will hold at least 90% of the
fair market value of its net assets, and at least 70% of the fair market value
of its gross assets, held immediately prior to the Effective Time. For purposes
of this representation, any amounts paid by HOL to Times Mirror in connection
with or pursuant to the Merger, any amounts used by HOL to pay its transaction
expenses and those of Times Mirror, and all redemptions and distributions
(except for regular, normal dividends) made by HOL are treated as assets of HOL
immediately prior to the Effective Time.
SECTION 3.19. Labor Matters. There is no labor strike, dispute, or work
stoppage or lockout pending or, to the Knowledge of HOL, threatened against or
affecting HOL and there is no pending or, to the Knowledge of HOL, threatened
grievance asserting that HOL has committed an unfair labor practice. HOL is not
a party to or otherwise bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor organization, no
such contract or agreement is being negotiated, and there is not and has not
been, in the last five years, any application for certification or recognition
by any union or organization for any of HOL's employees. There are no
complaints, charges or claims against HOL or to HOL's Knowledge threatened
against HOL, with any public or governmental authority, arbitrator or court
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment of HOL, of any individual. To HOL's
Knowledge, HOL is in material compliance with all laws, regulations and orders
relating to the employment of labor, including all such laws, regulations and
orders relating to wages, hours, WARN, collective bargaining, discrimination,
civil rights, safety and health, workers' compensation and the collection and
payment of withholding and/or social security taxes and any similar tax except
for immaterial non-compliance.
SECTION 3.20. Information Supplied. None of the information supplied or
to be supplied by HOL for inclusion in or incorporation by reference to the
proxy statement, if any, relating to the meeting of Parent's shareholders to be
held in connection with the Merger (the "Proxy Statement") will, at the date
mailed to the shareholders of Parent and at the time of the meeting of the
shareholders of Parent to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading.
SECTION 3.21. Insurance. Set forth on Schedule 6.4 is a true and
complete list of all material fire and casualty, general liability, business
interruption and product liability insurance policies maintained with respect to
HOL's business as of the date of this Agreement. All such policies are with
reputable insurance carriers, provide (together with any self-insurance)
adequate coverage for all normal risks in accordance with customary practices
for comparable businesses, are in full force and effect, all premiums due and
payable thereon have been paid (other than retroactive or retrospective premium
adjustments that are not yet, but may be, required to be paid with respect to
any period ending prior to the Closing Date), and no notice of cancellation or
termination has been received with respect to any such policy which has not been
replaced on substantially similar terms. The activities and operations of HOL
have been conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies.
21
SECTION 3.22. Year 2000. To the Knowledge of HOL, each computer program
programmed and used by HOL in its business is Year 2000 compliant or will be
Year 2000 compliant in sufficient time to avoid any material disruption to HOL's
business. "Year 2000 Compliant" means that such program is capable of managing
and manipulating data involving dates after the year 1999 without any functional
or data abnormality and without inaccurate result related to such dates, to the
extent that other computer programs, used in combination with the computer
programs programmed and used by HOL, properly exchanges data involving dates
with it.
SECTION 3.23. Investor Representations. The shares of Parent Common
Stock and Series E Preferred Stock, if any, received by Times Mirror pursuant to
the Merger will be acquired for Times Mirror's own account and not with a view
to or in connection with the sale or distribution of any part thereof.
SECTION 3.24. Exemption from Registration; Restricted Securities. Times
Mirror understands that the shares of Parent Common Stock and Series E Preferred
Stock, if any, received by Times Mirror pursuant to the Merger will not be
registered under the Securities Act on the ground that such sale provided for in
this Agreement is exempt from registration under the Securities Act, and that
the reliance of Parent on such exemption is predicated in part on Times Mirror's
representations set forth in this Agreement and the certificates representing
the same will bear an appropriate legend reflecting such exempt issuance without
registration. Times Mirror understands that the shares of Parent Common Stock
and Series E Preferred Stock, if any, received by Times Mirror pursuant to the
Merger are restricted securities within the meaning of Rule 144 under the Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TIMES MIRROR
Times Mirror hereby represents and warrants to Parent and Sub as
follows:
SECTION 4.1. Organization and Good Standing of Times Mirror. Times
Mirror is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Times Mirror has all requisite
corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to carry
on its business as presently conducted, other than such franchises, licenses,
permits, authorizations and approvals the lack of which would not materially
impair Times Mirror from performing its obligations under this Agreement.
SECTION 4.2. Authority. Times Mirror has all requisite corporate power
and authority to execute and deliver this Agreement and each Ancillary Agreement
to which it is a party and to consummate the transactions to which Times Mirror
is a party contemplated hereby and thereby. All necessary corporate action
22
required to have been taken by or on behalf of Times Mirror by Applicable Law or
its charter documents has been taken to authorize (a) the approval, execution
and delivery on behalf of Times Mirror of this Agreement and each Ancillary
Agreement to which it is a party and (b) the performance by Times Mirror of its
obligations under this Agreement and each Ancillary Agreement to which it is a
party and the consummation of the transactions contemplated hereby and thereby.
This Agreement and each Ancillary Agreement to which it is a party constitutes a
valid and binding agreement of Times Mirror, enforceable against it in
accordance with its terms, except as the same may be limited by the
Enforceability Exceptions.
SECTION 4.3. No Breach. The execution and delivery by Times Mirror of
this Agreement and each Ancillary Agreement to which it is a party do not, and
the consummation of the transactions to which Times Mirror is a party
contemplated hereby and thereby will not, (a) violate or conflict with the
Certificate of Incorporation or bylaws of Times Mirror or (b) constitute a
material breach or default or give rise to any lien, third-party right of
termination, cancellation, material modification or acceleration under any
material agreement, understanding or undertaking to which Times Mirror is a
party or by which it is bound, or violate or conflict with any Applicable Law.
SECTION 4.4. Consents and Approvals. Except for (a) the filing and
recordation of the Merger Certificate as required by the DGCL and of the CA
Agreement of Merger as required by the CGCL and (b) filings, permits
notifications, registrations, authorizations, consents and approvals as may be
required under applicable requirements of the HSR Act and Applicable Law,
neither the execution and delivery by Times Mirror of this Agreement nor any
Ancillary Agreement to which it is a party nor the consummation of the
transactions to which Times Mirror is a party contemplated hereby and thereby
will require any consent, approval, authorization or permit of, or filing with
or notification to, or registration with, any federal, state or foreign
governmental or regulatory authority, except where the failure to obtain such
consent, approval, authorization or permit, or to make such filing, registration
or notification, (i) would not prevent HOL from performing its obligations under
this Agreement and (ii) would not have an HOL Material Adverse Effect.
SECTION 4.5. Title to and Transfer of the Shares. Times Mirror is the
record and sole beneficial owner of the Shares and has good and marketable title
thereto, free and clear of any liens, claims, encumbrances, security interests,
options, charges and other rights and restrictions of any kind and, at the
Effective Time, Parent will have good and marketable title to the Shares, free
and clear of any liens, claims, encumbrances, security interests, options,
charges and other rights and restrictions of any kind.
SECTION 4.6. Brokers. No broker, finder or investment banker is
entitled to any brokerage finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Times Mirror or HOL.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby represent and warrant to each of Times Mirror and
HOL as follows:
SECTION 5.1. Organization and Good Standing. Each of Parent and Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Parent has all requisite corporate power
and authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to carry on its business as
presently conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which would not have a material adverse
effect on the business, assets, properties, liabilities, financial or other
condition or results of operations of Parent or on the ability of Parent to
perform its obligations under this Agreement (such effects, taken individually
or in the aggregate, a "Parent Material Adverse Effect").
SECTION 5.2. Authority. Each of Parent and Sub has all requisite
corporate power and authority to execute and deliver this Agreement and each
Ancillary Agreement to which it is a party and to consummate the transactions to
which each of Parent and Sub is a party contemplated hereby and thereby. All
necessary corporate action required to have been taken by or on behalf of each
of Parent and Sub by Applicable Law or its charter documents has been taken to
authorize (a) the approval, execution and delivery on behalf of each of Parent
and Sub of this Agreement and each Ancillary Agreement to which it is a party
and (b) the performance by each of Parent and Sub of its obligations under this
Agreement and each Ancillary Agreement to which it is a party and the
consummation of the transactions contemplated hereby and thereby. This Agreement
and each Ancillary Agreement to which it is a party constitutes a valid and
binding agreement of each of Parent and Sub, enforceable against each of them in
accordance with its terms, except as the same may be limited by the
Enforceability Exceptions.
SECTION 5.3. No Breach. The execution and delivery by each of Parent
and Sub of this Agreement and each Ancillary Agreement to which it is a party do
not, and the consummation of the transactions to which each of Parent and Sub is
a party contemplated hereby and thereby will not, (a) violate or conflict with
the organizational documents of Parent or Sub or (b) constitute a material
breach or default or give rise to any lien or other encumbrance, third-party
right of termination, cancellation, material modification or acceleration under
any material agreement, understanding or undertaking to which Parent is a party
or by which it is bound, or violate or conflict with any Applicable Law
(assuming that the consents contemplated by Section 5.4 are obtained and in
effect).
SECTION 5.4. Consents and Approvals. Except for (a) the filing and
recordation of the Merger Certificate as required by the DGCL and of the CA
Agreement of Merger as required by the CGCL and (b) filings, permits,
notifications, registrations, authorizations, consents and approvals as may be
required under applicable requirements of the Securities Act, the Exchange Act,
state securities or blue sky laws, the HSR Act and Applicable Law, neither the
execution and delivery by Parent or Sub of this Agreement or any Ancillary
24
Agreement to which it is a party nor the consummation of the transactions to
which either Parent or Sub is a party contemplated hereby and thereby will
require any consent, approval, authorization or permit of, or filing with or
notification to, or registration with, any governmental or regulatory authority,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing, registration or notification (A) would not
materially impair Parent or Sub from performing is respective obligations under
this Agreement and (B) would not have a Parent Material Adverse Effect.
SECTION 5.5. Capital Stock of Parent.
(a) The authorized capital stock of Parent consists of (i)
25,000,000 shares of Parent Common Stock, of which, as of the date hereof,
8,161,954 shares of Parent Common Stock were issued and outstanding (each
together with a Parent Common Stock purchase right (the "Parent Rights") issued
pursuant to the Rights Agreement (the "Parent Rights Agreement"), dated as of
August 23, 1996 by and between Parent and American Stock Transfer & Trust
Company), and 394,466 shares of Parent Common Stock were issued and held as
collateral for lease obligations of the Parent; and (ii) one million shares of
Preferred Stock ("Parent Preferred Stock"), designated as follows: (A) 217,600
shares of Series A Variable Rate Convertible Preferred Stock, $6.25 stated value
per share, all of which shares, as of the date hereof, are issued and
outstanding, (b) 142,223 shares of Series B Variable Rate Convertible Preferred
Stock, $5.21 stated value per share, of which, as of the date hereof, 122,846
shares are issued and outstanding, (C) 100,000 shares of 4% $100 Series C
Convertible Preferred Stock, $100 stated value per share, of which, as of the
date hereof, 20,000 shares are issued and outstanding, (D) 1,000 shares of 7%
Series D Convertible Preferred Stock, $10,000 stated value per share, of which,
as of the date hereof, 250 shares are issued and outstanding and (E) 50 shares
of 7% Series D-2 Convertible Preferred Stock, $10,000 stated value per share,
all of which shares, as of the date hereof, are issued and outstanding. All of
the shares of Parent Common Stock are, and, upon the issuance by Parent of any
shares of Series E Preferred Stock, the Series E Preferred Stock will be, duly
authorized and validly issued and outstanding, fully paid and nonassessable.
Except for the outstanding shares of the Parent Common Stock and the Parent
Preferred Stock, as of the date hereof, there are no shares of capital stock or
other equity securities of Parent outstanding. The shares of Parent Common Stock
have not been, and the shares of Series E Preferred Stock will not be, issued in
violation of, and none of the shares of Parent Common Stock is, or Series E
Preferred Stock will be, subject to, any preemptive or subscription rights. As
of the date hereof, except as set forth on Schedule 5.5(a) and except for the
Parent Rights and the Parent Preferred Stock, there are no outstanding warrants,
options, "phantom" stock rights, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) pursuant to which
Parent is or may become obligated to issue, sell, purchase, return or redeem any
shares of capital stock or other securities of Parent, and no equity securities
of Parent are reserved for issuance for any purpose. Other than this Agreement
and except as set forth on Schedule 5.5(a), the shares of Parent Common Stock
are not, and the shares of Series E Preferred Stock will not be, subject to any
voting trust agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, registration,
25
dividend rights or disposition of the shares of Parent Common Stock or any other
securities exchangeable or exercisable for or convertible into Parent Common
Stock or any other capital stock of Parent.
(b) The Parent Common Stock constitutes the only class of
equity securities or Parent or its subsidiaries registered or required to be
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
SECTION 5.6. SEC Reports; Financial Statements.
(a) Parent has filed all required forms, reports and documents
required to be filed by it ("Parent SEC Reports") with the Securities and
Exchange Commission ("SEC"), each of which has complied as to form in all
material respects with all applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, each as in effect
on the dates such forms, reports and documents were filed. None of such Parent
SEC Reports, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained, as of their
respective dates (and, if amended or superseded by a filing prior to the date of
this Agreement or the Effective Time, then on the date of such filing), any
untrue statement of a material fact or omitted to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein in light of the circumstances under which they were made
not misleading. The audited consolidated financial statements of Parent included
in the Parent SEC Reports were prepared in accordance with GAAP and present
fairly the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended.
(b) Parent has heretofore made available or promptly will make
available to Times Mirror and HOL a complete and correct copy of any amendments
or modifications which are required to be filed with the SEC but have not yet
been filed with the SEC to any Parent SEC Reports.
SECTION 5.7. Information Supplied. None of the information supplied or
to be supplied by Parent or Sub for inclusion or incorporation by reference to
the Proxy Statement, if any, will, at the date mailed to the shareholders of
Parent and at the time of the meeting of the shareholders of Parent to be held
in connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
SECTION 5.8. Vote Required. The affirmative vote of the holders of a
majority of the shares of Parent Common Stock represented at a meeting where a
quorum is present is the only vote of the holders of any class or series of
Parent's capital stock necessary to approve the issuance by Parent of the shares
of Parent Common Stock to Times Mirror pursuant to this Agreement if shareholder
approval of such issuance of the shares of Parent Common Stock and Series E
Preferred Stock pursuant to the Merger as contemplated by this Agreement should
be required by NASDAQ rules or regulations.
26
SECTION 5.9. Litigation; Decrees. Except as publicly disclosed by
Parent in the Parent SEC Reports, neither Parent nor any of its subsidiaries is
in default under any judgment, order or decree of any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, applicable to Parent or any of its subsidiaries or any of
the properties, assets, operations or businesses of Parent or any of its
subsidiaries, except where such default would not have a Parent Material Adverse
Effect.
SECTION 5.10. Absence of Changes or Events. Except as publicly
disclosed by Parent in the Parent SEC Reports, since September 30, 1998, there
has not been any event or circumstance which has caused, or is reasonably likely
to cause, a Parent Material Adverse Effect, other than changes relating to the
economy in general or the entertainment, media or Internet industry in general
and not specifically relating to Parent. Except as disclosed on Schedule 5.10 or
in the Parent SEC Reports or as contemplated by this Agreement, since September
30, 1998, the business of Parent and its subsidiaries has been conducted only in
the ordinary course.
SECTION 5.11. No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby, Sub has
neither incurred any obligation or liability nor engaged in any business or
activity of any type or kind whatsoever or entered into any agreement or
arrangement with any person.
SECTION 5.12. Brokers. No broker, finder or investment banker is
entitled to any brokerage finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Sub.
SECTION 5.13. Taxes.
(a) Tax Returns and Taxes. Parent or Sub, as applicable, has
filed or caused to be filed in a timely manner (within any applicable extension
periods) with the appropriate Tax authorities all Tax Returns they are required
to have filed and have paid or provided for all Taxes they are required to have
paid, except where the failure to have filed such a Tax Return or paid or
provided for such Taxes would not have a Parent Material Adverse Effect. There
are no material Tax liens or assessments against Parent or any property or
assets of Parent, other than liens for Taxes that are not due and payable or
which may thereafter be paid without penalty.
(b) Tax Claims. Except as set forth on Schedule 5.13(b), no
material claim for assessment or collection of Taxes is presently being asserted
against Parent and Parent is not a party to any pending action, proceeding, or
investigation by any governmental taxing authority nor does Parent have
Knowledge of any such threatened action, proceeding or investigation.
(c) Tax Free Reorganization. Parent represents to Times Mirror
as follows, and acknowledges that Times Mirror is relying on the truth and
27
accuracy of the representations set forth in this Section 5.13(c) in treating
the Merger as a reorganization qualifying under the provisions of Section 368(a)
of the Code:
(i) Neither Parent nor any "Related Corporation" to
Parent has any plan or intention to redeem or otherwise acquire any Parent
Common Stock issued in the Merger other than redemptions or acquisitions
pursuant to (i) any right Parent or any Affiliate of Parent may have pursuant to
this Agreement or any Ancillary Agreements and (ii) open market transactions.
For purposes of this paragraph, a "Related Corporation" to Parent is a
corporation in which Parent owns, directly or indirectly, stock possessing at
least fifty percent of the total combined voting power of all classes of stock
entitled to vote, or at least fifty percent of the total value of shares of all
classes of stock (determined by taking into account the constructive ownership
of stock rules under Section 318(a) of the Code as modified by Section 304(c) of
the Code). For purposes of the foregoing, a Related Corporation will be
considered as acquiring shares of Parent Common Stock acquired by a partnership
in which it is a partner in accordance with its partner's equity interest in the
partnership`.
(ii) Parent has no plan or intention to liquidate
HOL, to cause HOL to merge with or into another corporation, to sell or
otherwise dispose of the Shares acquired in the Merger or to cause HOL to sell
or otherwise dispose of any of its assets or of any of the assets acquired from
Sub, except for dispositions made in the ordinary course of business, transfers
to corporations controlled, directly or indirectly, by Parent, or transfers to
partnerships in which such corporations (a) own more than a thirty-three and
one-third percent interest in the capital and profits or (b) own more than a
twenty percent interest in the capital and profits and perform active and
substantial management functions.
(iii) Following the Merger, Parent will cause HOL to
continue its historic business or use a significant portion of its historic
business assets in a business within the meaning of Treasury Regulations Section
1.368-1(d).
(iv) Parent has no plan or intention to cause HOL to
issue additional shares after the Merger, or take any other action, that would
result in Parent losing control of HOL.
ARTICLE 6
COVENANTS OF HOL AND TIMES MIRROR
SECTION 6.1. Delivery of Year-End Audited Financial Statements.
(a) As soon as practicable and in any event not later than
January 31, 1999, HOL shall, and Times Mirror shall cause HOL to, deliver to
Parent the audited balance sheets of HOL and the notes thereto at each of
December 31, 1996, December 31, 1997 and December 31, 1998, and the audited
statements of income, shareholders' equity and cash flows and the notes thereto
of HOL for the years then ended (collectively, the "Audited Financial
Statements"), which shall be prepared by Ernst & Young LLP in accordance with
GAAP, and, in the opinion of the management of HOL, will include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
28
of HOL's financial position and the results of its operations and cash flows as
of the date thereof and for the period covered thereby. The financial statements
delivered pursuant to this Section 6.1 shall be accompanied by a certificate of
the chief financial officer of HOL confirming that such financial statements
have been prepared as described above and containing the additional
representations and certifications set forth on Exhibit G.
(b) HOL shall cause to be made available to Parent and Sub,
simultaneously with the delivery of the Audited Financial Statements, the work
papers (the "Work Papers") of Ernst & Young LLP or any other accountants with
respect to the audits performed of the Audited Financial Statements and any
special memoranda or correspondence prepared in connection with the same in
order that Parent and Sub may make such reasonable review, examination and
investigation of the business of HOL as Parent may reasonably desire; provided,
however, all such information or documentation made available pursuant to this
sentence shall be subject to the terms of the Confidentiality Agreement.
(c) Parent shall have fifteen (15) days from the date the
Audited Financial Statements are delivered and the Work Papers are made
available to Parent to review the Audited Financial Statements. If the Audited
Financial Statements are not satisfactory to Parent in its discretion, Parent
shall provide written notice to Times Mirror to such effect and shall have the
right to terminate this Agreement; provided, however, that if Parent does not,
within such fifteen (15) day period, provide such written notice to Times
Mirror, the Audited Financial Statements shall be deemed to be acceptable to
Parent and Parent shall have no further rights to terminate the Agreement
pursuant to this Section 6.1.
SECTION 6.2. Access. Prior to the Effective Time, HOL and Times Mirror
and their officers, directors, employees, advisors, representatives and
authorized agents will provide Parent and Sub and their representatives,
employees, counsel and accountants, during scheduled appointments reasonably
requested by Parent and reasonably approved by HOL occurring during normal
business hours and in a manner not unreasonably disruptive to the conduct of the
business of HOL or any of HOL's officers, directors, employees, advisors,
representatives or authorized agents, access to the personnel, properties, books
and records of HOL and Times Mirror (to the extent related to HOL), including
access to HOL employees for the purpose of pre-enrolling such HOL employees in
any employee benefit or welfare plans of Parent; provided, however, that all
information and documentation made available pursuant to the terms of this
Section 6.2 shall be subject to the terms of the Confidentiality Agreement
between Parent and Times Mirror dated as of August 25, 1998 (the
"Confidentiality Agreement").
SECTION 6.3. Ordinary Conduct. Except as contemplated by this Agreement
or as set forth on Schedule 6.3, from the date of this Agreement to the
Effective Time, HOL will, and Times Mirror will cause HOL to, conduct HOL's
business in the ordinary course consistent with present practices and make all
reasonable efforts to preserve and maintain all its relationships with
customers, suppliers and others with whom HOL deals. Except as contemplated by
this Agreement, HOL will not, and Times Mirror will cause HOL not to, do any of
the following, without the prior written consent of Parent:
29
(a) Charter and Bylaws. Amend its Articles of Incorporation
or bylaws;
(b) Dividends. Declare, set aside or pay any dividend or make
any other distributions to Times Mirror whether or not upon or in respect of any
shares of its capital stock.
(c) Capital Stock. (i) Sell, pledge or otherwise dispose of
any of the Shares or (ii) issue, sell, make any changes in, redeem or otherwise
acquire any shares of its capital stock or issue any capital stock or any
option, warrant or right relating thereto or any securities convertible into or
exchangeable or exercisable for any shares of capital stock;
(d) Employee Matters. Adopt or amend any Plan or collective
bargaining agreement, except as required by Applicable Law;
(e) Compensation. (i) Grant to any executive officer or
employee any increase in compensation or benefits or any rights to receive
severance payments or other benefits upon a termination of employment or a
change of ownership or control of the employer, except (A) as may be required
under existing agreements set forth on Schedule 3.12(a), (B) general increases
to employees in the ordinary course of business consistent with past practice,
or (C) any increases, payments or benefits for which Times Mirror shall be
solely and unconditionally obligated, including any stay bonuses, or (ii)
terminate any executive officer or employee other than in the ordinary course of
business, consistent with past practice;
(f) Indebtedness. Incur or assume any liabilities, obligations
or indebtedness for borrowed money (except for any monetary amounts owed to
Times Mirror under any intercompany loans which shall be canceled without
consideration at the Closing) or guarantee any such liabilities, obligations or
indebtedness;
(g) Encumbrances. Permit, allow or suffer any of its assets to
be subjected to any mortgage, pledge, lien, encumbrance, restriction or charge
of any kind, other than those excepted from the representations set forth in
Sections 3.9 and 3.10;
(h) Related-Party Transactions. Except in the ordinary course
of business and consistent with past practice, pay, loan or advance any amount
to, or sell, transfer or lease any of its assets to, or enter into any agreement
or arrangement with Times Mirror or any affiliate of Times Mirror;
(i) Accounting Policies and Tax Matters. Make (i) any change
in any method of accounting or accounting practice or policy other than those
required by GAAP or (ii) any change in any Tax election or settle or compromise
any Tax liability;
(j) Acquisitions; Reorganizations. Acquire or agree to acquire
by merging or consolidating with, or by purchasing the stock of, or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets (other than
in the ordinary course of business, consistent with past practice), except as
maybe contemplated under the terms of this Agreement;
30
(k) Capital Expenditures. Make or incur any capital
expenditures other than those made or incurred substantially in accordance with
Times Mirror's fiscal year 1999 capital expenditure budget with respect to HOL
heretofore disclosed in writing to Parent;
(l) Asset Dispositions. Sell, lease or otherwise dispose of,
or agree to sell, lease or otherwise dispose of, any of its assets, except in
the ordinary course of business;
(m) Other Actions. Not knowingly take any action or omit to
take any action that would cause any of its representations and warranties to
become untrue in any material respect;
(n) Contracts. Modify, amend, grant any consent, waiver or
release under, assign, transfer or terminate any Contract or enter into any
agreement, contract or arrangement with any person which would constitute a
Contract, except for contracts entered into in the ordinary course of business,
consistent with past practice; or
(o) Agreements. Agree, whether in writing or otherwise, to do
any of the foregoing.
SECTION 6.4. Insurance. Times Mirror and HOL shall keep, or cause to be
kept, all insurance policies presently maintained relating to HOL and its
properties, or suitable replacements therefor, in full force and effect through
the close of business at the Effective Time. Schedule 6.4 sets forth a true and
complete list of all the insurance policies presently owned and maintained by or
for the benefit of HOL.
SECTION 6.5. No Sale or Pledge. From the date hereof until the earlier
of the Closing and the termination of this Agreement pursuant to Section 9.1,
HOL shall not, and Times Mirror shall not permit HOL to merge, consolidate or
enter into any share exchange, recapitalization, business combination or similar
transaction with any other person (any such transaction other than the
transactions contemplated by this Agreement, an "Acquisition Proposal"). In
addition, from the date hereof until the earlier of the Closing and the
termination of this Agreement pursuant to Section 9.1, HOL shall not, and Times
Mirror shall cause HOL not to, and each of Times Mirror and HOL shall not permit
or authorize any of its directors, officers, employees, agents or other
representatives (including legal and financial advisors) to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal or (ii) participate in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or take any other action
to facilitate, any Acquisition Proposal or any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal. Immediately after the execution and delivery of this
Agreement, each of Times Mirror and HOL shall, and shall cause their respective
officers, directors, employees, investment bankers, attorneys, accountants and
other agents of either of them to, cease and terminate any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any possible Acquisition Proposal.
SECTION 6.6. Notice of Breach by Times Mirror or HOL. Times Mirror
promptly shall notify Parent in writing of any inaccuracy in or any breach of
any representation and warranty of Times Mirror or HOL contained in this
31
Agreement or any certificate or document delivered pursuant to this Agreement
that it acquires Knowledge of subsequent to the date of this Agreement and
before the Closing and shall also notify Parent in writing of any event or
occurrence after the date hereof that it acquires Knowledge of subsequent to the
date of this Agreement and before the Closing which, if it had existed or
occurred on or prior to the date hereof and was not disclosed to Parent at such
time, would have caused the representation and warranty to which such event or
occurrence relates to be untrue.
SECTION 6.7. No Additional Representations. Each of Times Mirror and
HOL acknowledges that none of Parent, Sub or any other person has made any
representation or warranty, expressed or implied, as to the accuracy or
completeness of any information regarding Parent except as expressly set forth
in this Agreement, the Ancillary Agreements or the schedules hereto and thereto
and any certificate delivered pursuant hereto and thereto. Without limiting the
generality of the foregoing, none of Parent, Sub or any other person will have
or be subject to any liability or indemnification obligation to Times Mirror,
HOL or any other person resulting from the distribution to Times Mirror or HOL,
or Times Mirror or HOL's use of, any such information, and any information,
document, or material made available to Times Mirror or HOL in certain "data
rooms," management presentations or in any other form in anticipation of the
transactions contemplated by this Agreement.
ARTICLE 7
COVENANTS OF PARENT AND SUB
SECTION 7.1. Confidentiality. Each of Parent and Sub acknowledges that
the information being provided to each of them by or on behalf of HOL and Times
Mirror is subject to the terms of the Confidentiality Agreement, the terms of
which are incorporated herein by reference. Effective as of, and only as of, the
Effective Time, the Confidentiality Agreement will terminate only with respect
to information relating solely to HOL, and each of Parent and Sub acknowledges
that any and all other information provided to it by Times Mirror or Times
Mirror's representatives concerning any other subsidiary of Times Mirror or any
other operations of Times Mirror shall remain subject to the terms and
conditions of the Confidentiality Agreement after the Effective Time.
SECTION 7.2. Conduct of Business of Parent. Except as contemplated by
this Agreement or as set forth on Schedule 7.2, during the period from the date
of this Agreement to the Effective Time, Parent will, and will cause each of its
subsidiaries to, conduct their respective businesses in the ordinary course
consistent with present practices and will make all reasonable efforts to
preserve and maintain their respective relationships with customers, suppliers
and others with whom Parent and each of its subsidiaries deals. Except as
otherwise contemplated by this Agreement, prior to the Effective Time, neither
Parent nor any of its subsidiaries will, without the prior written consent of
Times Mirror and HOL:
(a) Parent Common Stock. Take any action that would result in
a failure to maintain the trading of the Parent Common Stock on the NASDAQ
SmallCap Market;
32
(b) Dividends. Declare, set aside or pay any dividend or other
distribution in respect of its capital stock except for dividends payable in
Parent Common Stock, dividends payable on the Parent Preferred Stock and
dividends by a subsidiary of Parent to Parent or another subsidiary of Parent;
(c) Reorganizations. Acquire or agree to acquire by merging or
consolidating with, by purchasing an equity interest in or the assets of, or by
any other manner, any business or any corporation, partnership or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets of any other entity (other than the purchase of assets from suppliers,
clients or vendors in the ordinary course of business and consistent with past
practice), if such transaction would prevent or materially delay the
consummation of the transactions contemplated by this Agreement;
(d) Charter and Bylaws. Adopt or propose to adopt any
amendments to its charter documents which would have a material adverse impact
on the consummation of the transactions contemplated by this Agreement;
(e) Indebtedness. Incur or assume any liabilities, obligations
or indebtedness for borrowed money or guarantee any such liabilities,
obligations or indebtedness in an aggregate principal amount exceeding
$1,000,000, other than indebtedness for borrowed money incurred in the ordinary
course of Parent's business or otherwise pursuant to existing credit facilities
of Parent or to refinance or refund any existing credit facilities of Parent;
(f) Employment Agreements. Enter into or change the terms of,
any employment or compensation agreements or arrangements with any employee of
HOL which would become effective prior to the Effective Time;
(g) Other Actions. Not knowingly take any action or omit to
take any action that would cause any of its representations and warranties to
become untrue in any material respect;
(h) Parent Rights Agreement. Amend the Parent Rights Agreement
in any manner that would permit any person to acquire more than 15% of the
shares of Parent Common Stock, or redeem the Parent Rights; or
(i) Agreements. Agree, whether in writing or otherwise, to do
any of the foregoing.
SECTION 7.3. Meeting of Shareholders. If shareholder approval for the
issuance of Parent Common Stock and the Series E Preferred Stock pursuant to the
Merger as contemplated by this Agreement is required by NASDAQ rules or
regulations, Parent shall take all action necessary in accordance with the
Florida Business Corporation Act and its Amended and Restated Articles of
Incorporation and Bylaws to duly call, give notice of, convene, and hold a
meeting of its shareholders as promptly as practicable to consider and vote upon
the approval of the issuance of the shares of Parent Common Stock to Times
Mirror pursuant to this Agreement and Parent's Amended and Restated Articles of
Incorporation. Parent will, through its Board of Directors (subject to their
fiduciary duties), recommend that its shareholders approve such matters.
33
SECTION 7.4. Preparation of Proxy Statement. If shareholder approval
for the issuance of Parent Common Stock and the Series E Preferred Stock
pursuant to the Merger as contemplated by this Agreement is required by NASDAQ
rules or regulations, Parent shall promptly prepare and file with the SEC the
Proxy Statement. Parent shall also take any action required to be taken under
any applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger, and HOL shall furnish all information concerning HOL
and Times Mirror as may be reasonably requested in connection with any such
action.
SECTION 7.5. No Additional Representations. Each of Parent and Sub
acknowledges that none of Times Mirror, HOL or any other person has made any
representation or warranty, expressed or implied, as to the accuracy or
completeness of any information regarding HOL except as expressly set forth in
this Agreement, the Ancillary Agreements or the schedules hereto and thereto and
any certificate delivered pursuant hereto and thereto. Without limiting the
generality of the foregoing, none of Times Mirror, HOL or any other person will
have or be subject to any liability or indemnification obligation to Parent, Sub
or any other person resulting from the distribution to Parent or Sub, or Parent
or Sub's use of, any such information, and any information, document, or
material made available to Parent or Sub in certain "data rooms," management
presentations or in any other form in anticipation of the transactions
contemplated by this Agreement.
SECTION 7.6. Notice of Breach by Parent or Sub. Parent shall promptly
notify Times Mirror in writing of any inaccuracy in or any breach of any
representation and warranty of Parent or Sub contained in this Agreement or any
certificate or document delivered pursuant to this Agreement that it acquires
Knowledge of subsequent to the date of this Agreement and before the Closing and
shall also notify Times Mirror in writing of any event or occurrence after the
date hereof that it acquires Knowledge of subsequent to the date of this
Agreement and before the Closing which, if it had existed or occurred on or
prior to the date hereof and was not disclosed to Times Mirror at such time,
would have caused the representation and warranty to which such event or
occurrence relates to be untrue.
ARTICLE 8
MUTUAL COVENANTS
SECTION 8.1. Cooperation. HOL, Times Mirror and Parent shall use all
reasonable commercial efforts to cooperate with each other and to cause their
respective officers, employees, affiliates, agents, auditors and representatives
to cooperate with each other after the Effective Time to ensure the orderly
transfer of HOL to Parent and to minimize any disruption to the respective
businesses of HOL or Parent that might result from the transactions contemplated
hereby.
SECTION 8.2. Publicity. Each of HOL, Times Mirror, Parent and Sub
agrees that, from the date of this Agreement through the Effective Time, no
34
public release or announcement concerning the transactions contemplated hereby
shall be issued by any party without the prior consent of each other party
(which consent shall not be unreasonably withheld), except as such release or
announcement may be required by Applicable Law or the rules or regulations of
any United States or foreign securities exchange, in which case the party
required to make the release or announcement shall allow each other party
reasonable time to comment on such release or announcement in advance of such
issuance.
SECTION 8.3. Records.
(a) At the Effective Time, Times Mirror shall deliver or cause
to be delivered to Parent true and complete copies of all original agreements,
documents, books, records and files, each as currently in effect (collectively,
"Records"), in the possession of Times Mirror related to the business and
operations of HOL to the extent not then in the possession of HOL, subject to
the following exceptions:
(i) Parent recognizes that certain Records may
contain incidental information relating to HOL or may relate primarily to
subsidiaries or divisions of Times Mirror other than HOL or businesses of HOL
previously sold, and that Times Mirror may retain such Records and shall provide
true and complete copies of the relevant portions thereof to Parent and HOL;
(ii) Times Mirror may retain all Records prepared in
connection with the sale of the Shares, including bids received from other
parties and analyses relating to HOL; and
(iii) Times Mirror may retain any Tax Returns or Tax
records, and Parent and HOL shall be provided with copies of such Tax Returns or
Tax records to the extent they relate to HOL.
(b) After the Effective Time, upon reasonable written notice,
Times Mirror and Parent agree to furnish or cause to be furnished to each other
and their representatives, employees, counsel and accountants access, during
normal business hours, to such information (including Records pertinent to HOL)
and assistance relating to HOL as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any Tax Returns
or the defense of any Tax Claim or assessment; provided, however, that such
access does not unreasonably disrupt the normal operations of Times Mirror,
Parent or HOL.
SECTION 8.4. Antitrust Notification. Each of Times Mirror and Parent
will as promptly as practicable, but in no event later than ten business days
following the execution and delivery of this Agreement, file with the United
States Federal Trade Commission (the "FTC") and the United States Department of
Justice (the "DOJ") the notification and report form, if any, required for the
transactions contemplated hereby and any supplemental information requested in
connection therewith pursuant to the HSR Act, and make similar filings within,
to the extent reasonably practicable, a similar time frame with any other
governmental entity for which such filing is required. Any such notification and
report form and supplemental information will be in compliance with the
requirements of the HSR Act or other applicable antitrust regulation. Each of
35
Times Mirror and Parent shall furnish to the other such necessary information
and reasonable assistance as the other may reasonably request in connection with
its preparation of any filing or submission which is necessary under the HSR Act
or other applicable antitrust regulation. Times Mirror and Parent shall: request
early termination of the waiting period under the HSR Act and any other
applicable antitrust regulation; shall respond with reasonable diligence and
dispatch to any request for additional information made in response to such
filings; and shall keep each other apprised of the status of any communications
with, and inquiries or requests for additional information from, the FTC and the
DOJ and shall comply promptly with any such inquiry or request. Each of Times
Mirror and Parent will use its reasonable commercial efforts to obtain any
clearance required under the HSR Act or other applicable antitrust regulation
for the consummation of the transactions contemplated hereby.
SECTION 8.5. Reasonable Efforts; Additional Agreements. Subject to the
terms and conditions provided herein, each of the parties hereto agrees to use
all reasonable commercial efforts to take or cause to be taken all actions and
to do or cause to be done all things reasonably necessary, proper or advisable
under Applicable Laws to consummate and make effective the transactions
contemplated by this Agreement and each of the Ancillary Agreements to which it
is a party, including, without limitation: (a) cooperating in the preparation
and filing of the Proxy Statement, if required, and any amendments thereto; (b)
executing any additional agreements, instruments or other documents or taking
any other actions necessary to consummate the transactions contemplated hereby;
and (c) not knowingly taking or agreeing to take any action that would cause any
of the representations and warranties contained in this Agreement or any
certificate or other document being delivered pursuant to the terms of this
Agreement to be untrue in any material respect.
SECTION 8.6. Tax-Free Reorganization. Each party hereto shall use all
reasonable efforts to cause the Merger to be treated as a reorganization
qualifying under the provisions of Section 368(a) of the Code and shall use all
reasonable efforts to prevent any affiliate of such party from taking any
actions which could prevent the Merger from being treated as a reorganization
qualifying under the provisions of Sections 368(a)(1)(A) and (a)(2)(E) of the
Code.
ARTICLE 9
TERMINATION; AMENDMENT; WAIVER
SECTION 9.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time:
(a) by mutual written consent of Times Mirror and Parent ;
(b) by Parent pursuant to its termination right under Section
6.1(c);
(c) by Times Mirror, HOL, Parent or Sub if (i) any federal,
state or foreign governmental authority or other agency or commission or court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any order, decree or ruling which remains in effect, and which has the
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effect of making the transactions contemplated hereby illegal or otherwise
prohibiting consummation of the transactions contemplated by this Agreement and
such order, decree, ruling or other action is or shall have become nonappealable
or (ii) the Merger has not been consummated by 150 days after the date hereof;
and
(d) Subject to Section 2.3, by Times Mirror or HOL if either
Parent or Sub, or by Parent or Sub if either Times Mirror or HOL, (i) shall have
materially breached any of its agreements and covenants under this Agreement or
any Ancillary Agreement or (ii) any representation or warranty of such party
contained in this Agreement or any certificate or other document being delivered
pursuant to this Agreement shall fail to be true and correct in all material
respects, and, in the cases of the foregoing clauses (i) and (ii), such breach
or failure shall continue for 30 days without cure after written notice thereof
or, in the case of the foregoing clause (ii) only, such breach or failure would
render the conditions set forth in Sections 2.2(e) or 2.4(f), as the case may
be, incapable of being satisfied by the 150th day after the date hereof.
Notwithstanding anything to the contrary contained in this
Agreement, the right of a party to terminate this Agreement under this Section
9.1 shall not be available to any party (i) which is in material breach of its
obligations hereunder or (ii) whose failure to fulfill its obligations hereunder
is the cause of, or results in, the failure to satisfy any of the conditions to
the consummation of the Merger set forth in Article 2.
SECTION 9.2. Return of Confidential Information. In the event of
termination by any party pursuant to Section 9.1, written notice thereof shall
forthwith be given to the other parties and the transactions contemplated by
this Agreement shall be terminated, without further action by any party. If the
transactions contemplated by this Agreement are terminated as provided herein:
(a) Parent and Sub shall return and cause to be returned all
documents and copies and other material received from or on behalf of Times
Mirror or HOL relating to the business of Times Mirror or HOL or to the
transactions contemplated hereby, whether obtained before or after the execution
hereof, to Times Mirror;
(b) Parent and Sub shall destroy all analyses, summaries and
other documents based upon such confidential materials, and shall deliver to HOL
and Times Mirror a certificate signed by an authorized officer of each of Parent
and Sub confirming the foregoing; and
(c) All confidential information received by Parent and Sub
with respect to the businesses of Times Mirror or HOL shall be treated in
accordance with the Confidentiality Agreement, which shall remain in full force
and effect notwithstanding the termination of this Agreement.
SECTION 9.3. Effects of Termination. If this Agreement is terminated
and the transactions contemplated hereby are abandoned pursuant to Section 9.1,
this Agreement shall become void and of no further force and effect, except for
the provisions of (a) Section 7.1 relating to the obligations of each of Parent
and Sub to keep confidential certain information and data obtained by it, (b)
Section 7.5 relating to the acknowledgment by each of Parent and Sub that no
37
additional representations were made by or on behalf of Times Mirror or HOL
other than those set forth in this Agreement, (c) Section 8.2 relating to
publicity, (d) Section 12.1 relating to expenses generally, (e) Section 12.5
relating to notices, (f) Section 12.11 relating to arbitration and consent to
jurisdiction, (g) Section 12.14 relating to the limitation on consequential and
punitive damages and (h) this Article 9. Nothing in this Article 9 shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement.
ARTICLE 10
EMPLOYEE AND RELATED MATTERS
SECTION 10.1. Offers of Employment. The Surviving Corporation shall
assume responsibility for all HOL employees on substantially the same terms and
conditions to which such employees were subject immediately prior to the
Effective Time, subject to the provisions of this Article 10. Any HOL employee
who is not actively employed at the Effective Time shall be offered active
employment with the Surviving Corporation following the expiration of such leave
of absence only to the extent that HOL would have been obligated to offer
employment to any such employee.
SECTION 10.2. Continuation of Plans. As of the Effective Time, HOL
personnel shall cease to participate in or be covered by all Times Mirror Plans,
and neither HOL nor any other affiliate of HOL after the Merger, including the
Parent and Sub shall have any responsibility for benefits under such Plans. As
of the Effective Time, Parent or HOL shall remain the sponsor of each HOL Plan,
and neither Times Mirror nor any other affiliate of Times Mirror shall have any
responsibility for benefits under any such Plan. Without limiting the foregoing,
Parent or HOL shall be solely responsible for providing and continuing benefits
under COBRA to HOL personnel and qualified beneficiaries with respect to
"qualifying events", as such term is used in Section 4980B of the Code, whether
such qualifying event occurs prior to, on, or following, the Effective Time.
SECTION 10.3. Mutual Cooperation.
(a) General. Each of Parent and HOL agrees to cooperate, and
agrees to use its best efforts to cause its affiliates to cooperate and in a
complete, diligent and timely manner to provide Times Mirror with such
compensation, service, payroll and other pertinent census data as may be
required by Times Mirror for purposes of calculating or affecting distribution
of benefits to which any HOL employee or former employee may be entitled under
any benefit plan established, maintained or contributed to by Times Mirror.
(b) Performance Cycle Bonus Payments. Parent acknowledges that
Times Mirror or HOL may have an obligation after the Effective Time to pay all
or a portion of the performance cycle bonuses owing to Xxxxx X. Xxxxxxx, Xxxxxxx
X. Xxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx pursuant to the employment
agreements set forth on Schedule 3.12(a) (the "Employment Agreements"). If any
of such persons elects not to accelerate the Determination Date (as defined in
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each Employment Agreement) of the Performance Cycle Amount (as defined below),
Times Mirror shall advance payment in cash (which shall be by wire transfer of
immediately available funds) to Parent for the payment by Parent of any
performance cycle bonuses immediately prior to the date of payment as determined
in accordance with Section 5.2 or like provision of each of the employment
agreements set forth on Schedule 3.12(a) (such amount, the "Performance Cycle
Amount"). If such persons collectively agree to accelerate the Determination
Date of the Performance Cycle Amount, Times Mirror shall pay the performance
cycle bonuses owing to such persons on or before the Closing Date.
ARTICLE 11
INDEMNIFICATION
SECTION 11.1. Indemnification by Times Mirror. Without duplication of
any amounts payable for indemnification under Section 11.6, Times Mirror shall
indemnify Parent, Sub, the Surviving Corporation, each of their affiliates (as
defined in Rule 405 under the Securities Act) and each of their respective
officers, directors, shareholders, partners, employees and agents against and
hold them harmless from any and all Losses suffered or incurred by any such
indemnified party to the extent arising from (a) any alleged liability of HOL
under ERISA arising from HOL having been a member of Times Mirror's "control
group" prior to the Effective Time and from HOL's participation in any Times
Mirror Plan; (b) Times Mirror's obligation to advance payment to Parent for the
payment by Parent of the Performance Cycle Amount as provided in Section
10.3(b); (c) any breach or inaccuracy in any representation or warranty
contained in Sections 3.2 (Authority of HOL), 3.5 (Capital Stock of HOL), 3.6
(Equity Interests of HOL), 3.8 (No Indebtedness of HOL), 3.19 (Information
Supplied), 4.2 (Authority of Times Mirror), 4.5 (Title to and Transfer of the
Shares), 4.6 (Brokers) and any of the representations and warranties of Times
Mirror and HOL contained in Exhibit F (Times Mirror/HOL Tax Certificate); and
(d) any breach by Times Mirror or HOL of the covenants contained in Sections
6.1, 6.3, 6.5, 6.6, 8.5(c), 8.6, 11.1 and 11.6.
SECTION 11.2. Indemnification by Parent. Parent shall indemnify Times
Mirror and its affiliates, officers, directors, shareholders, partners,
employees and agents against and hold them harmless from any Losses suffered or
incurred by any such indemnified party to the extent arising from (a) the
obligations of Times Mirror under (i) the Guaranty of Lease dated November 6,
1998, by and between Times Mirror and Water Garden Company L.L.C. with respect
to the obligations of HOL under that certain office lease dated November 6,
1998, by and between HOL and Water Garden Company L.L.C., pertaining to the
property and building located at 0000 00xx Xxxxxx, Xxxxxx 360 and 000, Xxxxx
Xxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx 00000 (which shall be net of any unpaid or
unperformed obligations of Times Mirror or HOL under same attributable to any
period prior to the Closing), and (ii) the NATO Agreement (which shall be net of
any unpaid or unperformed obligations of Times Mirror or HOL under same
attributable to any period prior to the Closing); (b) any breach or inaccuracy
in any representation or warranty contained in Section 5.2 (Authority of Parent
and Sub), 5.5 (Capital Stock of Parent), 5.6 (SEC Reports; Financial
Statements), 5.7 (Information Supplied), 5.12 (Brokers) and 5.13 (Taxes); and
(c) any breach by Parent or Sub of the covenants contained in Sections 7.2, 7.6,
8.5(c), 8.6 and 11.2.
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SECTION 11.3. Adjustments to Losses. The amount of any Losses for which
indemnification is provided under this Article 11 (including the obligation of
Times Mirror to advance payment to Parent for the payment of the Performance
Cycle Amount pursuant to Section 10.3(b)) shall be reduced by any amounts
recovered or recoverable by the indemnified party under insurance policies with
respect to such Losses. Furthermore, the amount of any Losses and the obligation
of Times Mirror to advance payment to Parent for the payment of the Performance
Cycle Amount pursuant to Section 10.3(b) shall be (a) increased to take account
of any Tax cost incurred by the indemnified party by reason of the receipt of
the indemnity payment (grossed-up for such increase) and (b) reduced to take
account of any Tax benefit actually realized by the indemnified party in respect
of the taxable year in which the Loss is incurred or paid and, with respect to a
Tax benefit arising in a year subsequent to the year in which the Loss is paid
or incurred, the indemnified party shall pay to the indemnifying party the
amount of such Tax benefit when such Tax Benefit is actually realized. In
computing the amount of any such Tax cost or Tax benefit, the indemnified party
shall be deemed to recognize all other items of income, gain, loss, deduction or
credit before recognizing any item arising from the receipt of any indemnity
payment hereunder or the incurrence or payment of any indemnified loss,
liability, claim, damage or expense.
SECTION 11.4. Termination of Indemnification. The obligations to
indemnify and hold harmless a party hereto, (a) pursuant to Section 5.13, shall
terminate at the time the applicable statutes of limitations with respect to the
Tax liabilities in question expire (giving effect to any extension thereof by
waiver or otherwise), (b) pursuant to Sections 11.1 and 11.2, shall terminate
when the applicable representation or warranty terminates pursuant to Section
12.13.
SECTION 11.5. Procedures Relating to Indemnification for Third Party
Claims. In order for a party (the "indemnified party") to be entitled to any
indemnification provided for under Sections 11.1 and 11.2 of this Agreement in
respect of, arising out of or involving a claim or demand made by any person,
firm, governmental authority or corporation against the indemnified party (a
"Third-Party Claim"), such indemnified party must notify the indemnifying party
in writing, and in reasonable detail, of the Third-Party Claim within 15 days
after receipt by such indemnified party of written notice of the Third-Party
Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually and materially prejudiced as a
result of such failure. Thereafter, the indemnified party shall deliver to the
indemnifying party, within 5 business days after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third-Party Claim.
If a Third-Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party. Should
the indemnifying party so elect to assume the defense of a Third-Party Claim,
the indemnifying party will not be liable to the indemnified party for legal
fees and expenses subsequently incurred by the indemnified party in connection
with the defense thereof. If the indemnifying party assumes such defense, the
indemnified party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by the
40
indemnifying party, it being understood that the indemnifying party shall
control such defense; provided, however, that such indemnified party shall pay
the fees and expenses of such counsel unless the named parties to any such claim
or proceeding include both such indemnified party and the indemnifying party and
such indemnified party has been advised by legal counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case, if such indemnified
party informs the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim or proceeding
on behalf of such indemnified party), it being understood that the indemnifying
party shall not, in connection with any one claim or proceeding, be liable for
the fees and expenses of more than one separate firm of attorneys at any time
for such indemnified party. The indemnifying party shall be liable for the fees
and expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend or prosecute any Third-Party Claim, all the
parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information
which are reasonably relevant to such Third-Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party shall have assumed the defense of a Third-Party Claim, the indemnified
party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third-Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably withheld).
SECTION 11.6. Tax Matters
(a) Tax Indemnification. Times Mirror agrees to be responsible
for, and to indemnify and hold the indemnified parties listed in Section 11.1
harmless from and against, any and all Losses relating to, resulting from or
based upon:
(i) any and all Taxes with respect to any taxable
periods (or portions thereof) of HOL (or any predecessor) ending on or
prior to the Closing Date;
(ii) any and all Taxes of HOL for the period
allocated to Times Mirror pursuant to Section 11.6(b)(iii); and
(iii) any liability under Treasury Regulation Section
1.1502-6(a) or any analogous or similar state, local or foreign law or
regulation as a result of HOL (or any predecessor) being a member of
any Affiliated Group at any time on or prior to the Closing Date.
(b) Preparation of Tax Returns; Payment of Taxes.
(i) Times Mirror.
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(1) Times Mirror (A) shall include, or cause
to be included, HOL in, and shall file, (I) the United States
consolidated federal income Tax Return of Times Mirror for its
taxable year ended December 31, 1998 and for all subsequent
taxable periods of HOL ending on or prior to the Closing Date
and (II) all other consolidated, combined or unitary Tax
Returns of Times Mirror or its subsidiaries in which HOL has
been, or is required to be, includable for the taxable periods
of HOL ending on or prior to the Closing Date and (B) also
shall file, or shall cause HOL to file, all other Tax Returns
of, or which include, HOL required to be filed (taking into
account any extensions) on or prior to the Closing Date. Such
Tax Returns shall be prepared in a manner consistent with
prior practice with respect to HOL. Times Mirror shall prepare
and deliver any such Tax Returns (or the relevant portions
thereof), to Parent at least 10 business days prior to their
due date and Parent shall have the right to review and, other
than with respect to federal income tax returns, approve
(which approval shall not be unreasonably withheld) such Tax
Returns (or the relevant portions thereof).
(2) Following the Closing, Times Mirror
shall be responsible for preparing or causing to be prepared
all foreign, state and local Tax Returns required to be filed
by HOL on a separate return basis after the Closing Date with
respect to taxable periods that end on or prior to the Closing
Date. Such Tax Returns shall be prepared in a manner
consistent with prior practice. Times Mirror shall prepare and
deliver such Tax Returns, along with the amount of any Taxes
shown due thereon, to Parent for filing at least 10 business
days prior to their due date and Parent shall have the right
to review and approve such Tax Returns (which approval shall
not be unreasonably withheld).
(3) Notwithstanding the foregoing, following
the Closing Date, neither Times Mirror nor any subsidiary
shall amend any Tax Return without the prior written consent
of Parent (which consent shall not be unreasonably withheld)
if any adjustment provided in such Tax Return would adversely
affect the Taxes payable by HOL for taxable periods ending
after the Closing Date. Similarly, neither Parent nor HOL
shall amend any Tax Return with respect to Tax years ending on
or before the Closing Date or straddle years without the prior
written consent of Times Mirror (which consent shall not be
unreasonably withheld) if any adjustment provided in such Tax
Return would adversely affect the Taxes or indemnification
payments payable by Times Mirror for taxable periods ending on
or before the Closing Date.
(ii) Parent.
(1) Parent shall cause to be filed all Tax
Returns required to be filed by HOL after the Closing Date,
and shall, subject to receiving the payments from Times Mirror
referred to in Section 11.6(b)(ii)(2), pay the Taxes shown due
thereon. Nothing contained in the foregoing shall in any
manner terminate, limit or adversely affect any right of any
42
party to receive indemnification pursuant to any provision in
this Agreement.
(2) With respect to any Tax Returns which
Parent shall cause to be filed pursuant to Section
11.6(b)(ii)(1) hereof, Times Mirror shall pay to Parent an
amount equal to that portion of the Taxes shown on such Tax
Return for which Times Mirror has an obligation to indemnify
any party pursuant to the provisions of Section 11.6(a).
Parent shall provide Times Mirror with a schedule showing the
computation of such amount at least 35 days prior to the due
date (including extensions, if any) for filing the Tax Returns
which reflects Taxes for which Times Mirror has an obligation
to indemnify any party pursuant to the provisions of Section
11.6(a) along with a copy of such Tax Return (or the relevant
portions thereof). Times Mirror shall have the right to review
any such Tax Return (or the relevant portion thereof) and
schedule, and Parent and Times Mirror shall attempt in good
faith mutually to resolve any disagreements regarding the
determination of such amount within ten (10) days of the Times
Mirror's receipt thereof. Any disagreement regarding such
determination shall be resolved by an independent nationally
recognized accounting firm (the "Accounting Firm"). The
parties will instruct the Accounting Firm to reach its
conclusion regarding any such dispute within fifteen (15) days
after its appointment. The report of the Accounting Firm shall
be final, binding and conclusive on Times Mirror and Parent.
The fees and expenses of the Accounting Firm shall be borne
equally by Times Mirror and Parent. Any amount owing under
this Section 11.6(b)(ii)(2) shall be paid no later than five
(5) days before the due date for payment of Taxes with respect
to any such Tax Return.
(iii) Closing Taxable Year; Allocation for Straddle
Year. For federal income tax purposes, the taxable year of HOL shall
end as of the close of the Closing Date and, with respect to all other
Taxes, Times Mirror and Parent will, unless prohibited by applicable
law, close the taxable period of HOL as of the close of the Closing
Date. Except as otherwise required by applicable law, neither Times
Mirror nor Parent shall take any position inconsistent with the
preceding sentence on any Tax Return. In any case where applicable law
does not permit HOL to close its taxable year on the Closing Date or in
any case in which a Tax is assessed with respect to a taxable period
which includes the Closing Date (but does not begin or end on that
day), then Taxes, if any, attributable to the taxable period of HOL
beginning before and ending after the Closing Date shall be allocated
(A) to Times Mirror for the period up to and including the Closing
Date, and (B) to Parent for the period subsequent to the Closing Date.
Any allocation of income, deductions, credits or other items required
to determine any Taxes attributable to any period beginning before and
ending after the Closing Date shall be prepared by Parent and shall be
made by means of a closing of the books and records of HOL as of the
close of the Closing Date, provided that exemptions, allowances,
deductions or other items that are calculated on an annual basis
(including, but not limited to, depreciation and amortization
deductions) shall be allocated between the period ending on the Closing
Date and the period after the Closing Date in proportion to the number
of days in each such period.
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(c) Refund Claims. Any refund of Taxes received (or utilized
as a credit against Taxes due by Parent or any member of its Affiliated Group
for taxable periods beginning on or after the Closing Date) by HOL after the
Closing Date shall be retained by the HOL, provided, however, that in the event
HOL shall receive a refund of Taxes after the Closing Date (or utilize such
refund as a credit against Taxes due for taxable periods beginning on or after
the Closing Date) with respect to a Tax Return of HOL relating to taxable
periods ending on or prior to the Closing Date (other than a refund or credit
arising by reason of a carryback of any item incurred after the Closing Date),
then the amount of such refund or credit and any interest thereon, net of any
Taxes payable on receipt thereof, shall be reimbursed by HOL to Times Mirror
within 10 business days after such Tax benefit is realized by HOL as a refund or
credit, provided that Times Mirror shall return to HOL the amount, if any, by
which the amount of such Tax benefit is thereafter reduced pursuant to a final
determination.
(d) Carrybacks. Times Mirror shall in good faith consider
requests by HOL for filing carryback refund claims for the carryback of any
losses recognized by HOL in post-Closing Date years that may be carried back to
pre-Closing Date periods (the refunds from which would belong to Parent).
However, Times Mirror has no obligation to comply with such requests.
(e) Cooperation with Respect to Taxes. Parent and Times Mirror
agree to furnish or cause to be furnished to each other, and each at their own
expense, as promptly as practicable, such information (including access to books
and records) and assistance, including making employees available on a mutually
convenient basis to provide additional information and explanations of any
material provided, relating to HOL as is reasonably necessary for the
determination of any Taxes, for the filing of any Tax Return (including any
amended Tax Return or claim for refund), for the preparation for any audit, and
for the prosecution or defense of any claim, suit or proceeding relating to any
adjustment or proposed adjustment with respect to Taxes. Each of Parent and
Times Mirror agree (A) to retain all books and records with respect to Tax
matters pertinent to HOL relating to any taxable period beginning before the
Closing Date until the expiration of the relevant statute of limitations (and
such longer period as reasonably requested in writing), and (B) to give the
other party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, in such event, if the other party so
requests, to allow the other party to take possession of such books and records.
(f) Tax Proceedings.
(i) In the event that any audit or examination shall
be instituted, or any deficiency asserted or assessment made, or any
administrative or court proceeding commenced by the IRS or any other
taxing authority (a "Tax Proceeding") with respect to any taxable
period ending prior to or on the Closing Date of which Parent has
notice, Parent shall promptly cause written notice of the Tax
Proceeding to be forwarded to Times Mirror. Similarly, Times Mirror
shall promptly cause written notice of any Tax Proceeding of which
44
Times Mirror has notice relating to any indemnifiable Taxes to be
forwarded to Parent.
(ii) Times Mirror shall have the right to elect, at
its sole option and expense, and subject to the provisions of this
Section 11.6(f), to represent the interests of HOL in the Tax
Proceeding and collect, settle or pay any amount due or owed by HOL
with respect to any taxable period ending prior to or on the Closing
Date, with counsel of its choice reasonably satisfactory to Parent. In
the event Times Mirror elects to represent HOL in the Tax Proceeding,
Times Mirror shall within five (5) days (or sooner, if the nature of
the Tax Proceeding so requires) notify Parent of its intent to do so
and Parent shall cause HOL to appoint Times Mirror as attorney in fact
with the exclusive authority to represent HOL in the Tax Proceeding.
Parent shall have (x) the right to participate fully in the Tax
Proceeding, including through separate counsel of its own choosing at
its sole cost and expense, (y) the right to receive reasonable advance
notice from Times Mirror of any meetings, hearings or proceedings, and
(z) the right, if possible, to review in advance and comment on any
pleadings, briefs, or other documents to be filed. Times Mirror shall
not enter into any settlement, closing or other agreement with respect
to any Tax Proceeding without the prior written consent of Parent (not
to be unreasonably withheld, conditioned or delayed) if such
settlement, closing agreement or other agreement will adversely affect
Taxes payable by HOL for taxable periods (or portions thereof)
beginning after the Closing Date. If Times Mirror elects not to
represent HOL in the Tax Proceeding, or fails to timely notify Parent
of its election herein provided or contests its obligation to
indemnify, then Parent may represent the interests of HOL in any Tax
Proceeding in any manner that it reasonably may deem appropriate.
(iii) Parent and Times Mirror jointly shall represent
the interests of HOL in any Tax Proceeding relating to any taxable
period of HOL which includes (but does not begin or end on) the Closing
Date. Any disputes regarding the conduct or resolution of any such Tax
Proceeding shall be resolved by the Accounting Firm. The parties will
instruct the Accounting Firm to reach its conclusion regarding any such
dispute within 20 days after its appointment. The report of the
Accounting Firm shall be final, binding and conclusive on Times Mirror
and Parent. All costs, fees and expenses paid to third parties in the
course of such Tax Proceeding (including the fees of the Accounting
Firm) shall be borne by Parent and Times Mirror in the same ratio as
the ratio in which, pursuant to the terms of this Agreement (including
Section 11.6(b) hereof), Parent and Times Mirror would share the
responsibility for payment of the Taxes asserted by the taxing
authority in such Tax Proceeding if such Tax Proceeding were sustained
in its entirety.
(g) Claim Period. Any claim for indemnity under this Section
11.6 may be made at any time prior to 90 days after the expiration of the
applicable Tax statute of limitations with respect to the relevant taxable
period of HOL or of such indemnified party (including all periods of extension,
whether automatic or permissive).
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(h) Termination of Tax Sharing Arrangements. Any tax sharing,
tax indemnification or similar agreement or arrangement with respect to Taxes
(other than the provisions of this Agreement) between or among HOL, Times Mirror
and any subsidiary of Times Mirror shall be terminated as to HOL as of the
Closing Date and HOL shall have no liability from and after the Closing Date
under any such agreements or arrangements.
SECTION 11.7. Exclusive Remedy. In the absence of fraud or willful
misconduct on the part of the indemnifying party or any of its officers,
directors, employees or agents, the remedy contained in Sections 2.3, 11.1 and
11.2 shall constitute the sole and exclusive remedy after the Closing of the
indemnified party (and its respective officers, directors, employees and agents)
against the indemnifying party for Losses suffered or incurred in connection
with this Agreement and the transactions contemplated hereby.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. Expenses. Whether or not the transactions contemplated
hereby are consummated, and except as otherwise provided in this Agreement, all
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs or expenses. Without limiting the generality of the immediately preceding
sentence, the fees, costs and expenses incurred by HOL in connection with this
Agreement and the transactions contemplated hereby shall be borne by Times
Mirror and none of such fees, costs or expenses shall be paid by HOL.
SECTION 12.2. HOL Acquisition Agreement. At the Closing, Times Mirror
shall assign and transfer all of its rights to Parent under that certain Stock
Purchase Agreement dated as of January 16, 1996 by and among Times Mirror and
the other parties on the signature pages thereto.
SECTION 12.3. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by Parent, Sub, Times Mirror
or HOL (including by operation of Applicable Law in connection with a merger, or
sale of substantially all the assets, of Parent, Times Mirror or HOL) without
the prior written consent of the other parties hereto (except that nothing
herein shall be construed (a) as obligating (i) Times Mirror to obtain the
consent of HOL or (ii) HOL to obtain the consent of Times Mirror to any of the
transactions described in the immediately prior parenthetical or (b) as
obligating (i) Parent to obtain the consent of Sub or (ii) Sub to obtain the
consent of Parent to any of the transactions described in the immediately prior
parenthetical); provided, however, that no assignment shall limit or affect the
assignor's obligations hereunder.
SECTION 12.4. No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any person or
entity, other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
46
SECTION 12.5. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telecopy, or sent, postage prepaid, by registered,
certified or express mail, or reputable overnight courier service and shall be
deemed given when so delivered by hand or telecopied, or if mailed, three days
after mailing (one Business Day in the case of express mail or overnight courier
service), as follows:
(a) if to Parent, Sub or the Surviving Corporation:
Big Entertainment, Inc.
0000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 0xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx
Telecopier No.: (000) 000-0000
(b) if to Times Mirror:
The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
(c) if to HOL, prior to the Effective Time:
0000 00xx Xxxxxx, Xxxxx 000, Xxxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
SECTION 12.6. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other party.
47
SECTION 12.7. Entire Agreement. This Agreement, the Ancillary
Agreements and the Confidentiality Agreement and the Schedules attached hereto
and thereto and any certificates delivered pursuant hereto or thereto contain
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter.
SECTION 12.8. Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
SECTION 12.9. Amendment. This Agreement may be amended by action taken
by HOL, Times Mirror, Parent and Sub at any time only by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 12.10. Extension; Waiver. At any time prior to the Effective
Time, any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of any other party, (b) waive any inaccuracies in the
representations and warranties of any other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance by any other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
SECTION 12.11. Dispute Resolution; Equitable Enforcement.
(a) Accounting Disputes. Notwithstanding anything to the
contrary contained in this Section 12.11, any controversy, dispute or claim
arising under this Agreement related to or arising out of accounting matters
relating to this Agreement shall be resolved by means of discussions between the
regularly retained independent certified public accountants of Parent and Times
Mirror. In the event that the independent certified public accountants of each
of Parent and Times Mirror are unable to resolve the dispute within 60 days
after the dispute is first submitted to them, then a third independent certified
public accountant of recognized national standing shall be selected by the
independent certified public accountants of each of Parent and Times Mirror and
the determination of such third independent certified public accountant, with
respect to the matter in dispute, shall be rendered within 45 days after the
dispute has been submitted to it and such determination shall be final and
binding on all of the parties hereto.
(b) Arbitration. Except as otherwise provided in Section
12.11(a) or (c), any controversy, dispute or claim arising under this Agreement
which cannot be settled by mutual agreement shall be finally settled by
arbitration as follows: any party who is aggrieved shall deliver a notice to
other party setting forth the specific points in dispute. Any points remaining
in dispute twenty (20) days after the giving of such notice shall be submitted
to arbitration in New York, New York to Endispute, before a single arbitrator
appointed in accordance with Endispute's Arbitration Rules, modified only as
herein expressly provided. The arbitrator may enter a default decision against
any party who fails to participate in the arbitration proceedings. The decision
48
of the arbitrator on the points in dispute will be final, unappealable and
binding and judgment on the award may be entered in any court having
jurisdiction thereof. The parties agree that this clause has been included to
rapidly and inexpensively resolve any disputes between them with respect to this
Agreement, and that this clause shall be grounds for dismissal of any court
action commenced by either party with respect to this Agreement, other than
post-arbitration actions seeking to enforce an arbitration award. The parties
shall keep confidential, and shall not disclose to any person, except as may be
required by law, the existence of any controversy hereunder, the referral of any
such controversy to arbitration or the status or resolution thereof.
(c) Equitable Enforcement. Notwithstanding anything to the
contrary contained in this Section 12.11, any claim by either party for
injunctive or other equitable relief, including specific performance (including
specific performance of the agreement to resolve disputes related to or arising
out of accounting matters contained in Section 12.11(a) and the agreement to
arbitrate contained in Section 12.11(b)), may be brought in any state or federal
court located in the Southern District of New York in the State of New York,
before or as a result of arbitration, and any judgment, order or decree relating
thereto shall have precedence over any arbitral award or proceeding. Each of
Parent, Sub, Times Mirror and HOL irrevocably submits to the exclusive
jurisdiction of the state or federal courts situated in the Southern District in
the State of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
Parent, Sub, Times Mirror and HOL agrees to commence any action, suit or
proceeding relating hereto in any of such courts only. Each of Parent, Sub,
Times Mirror and HOL further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party's respective address set forth
in Section 12.5 above shall be effective service of process for any action, suit
or proceeding in New York with respect to any matters to which it has submitted
to jurisdiction as set forth above in the immediately preceding sentence. Each
of Parent, Sub, Times Mirror and HOL irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in any of such courts
only and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 12.12. Interpretation of this Agreement.
(a) Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, "including" is not limiting
and "or" has the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder" and similar terms in this Agreement
refer to this Agreement as a whole (including the Preamble, the Recitals, the
Schedules and the Exhibits) and not to any particular provision of this
Agreement. Article, section, exhibit, schedule, recital and preamble references
in this Agreement are to those portions of this Agreement unless otherwise
specified.
49
(b) Knowledge. Whenever any representation or warranty of any
party contained in this Agreement or in any certificate or other document
delivered in connection with this Agreement is qualified to the "Knowledge" of
such party, such qualification shall mean the actual knowledge, after due
inquiry, of (i) in the case of Times Mirror, Xxxxx Xxxxxxxx, Xxxx X. Xxxxxx and
Xxxxxx Xxxxxxxx; (ii) in the case of HOL, Xxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx
and Xxxxxxx X. Xxxxxxx; (iii) in the case of Parent, Xxxxxxxx Xxxxxxxxxx and
Xxxxxx X. Xxxxxxx.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
applicable to agreements made and to be performed entirely within such State.
(d) Headings, Exhibits and Schedules. The headings contained
in this Agreement, in any Exhibit or Schedule hereto and in the Table of
Contents to this Agreement, are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Any capitalized
terms used in any Exhibit or Schedule but not otherwise defined therein shall
have the meaning as defined in this Agreement. Any matter disclosed in one
Schedule hereto shall be deemed incorporated by reference into each other
Schedule hereto and disclosed in each such Schedule to the extent that the
relevancy of such matter to each such other Schedule is apparent from the
disclosure included on the Schedule.
SECTION 12.13. Survival of Representations. The representations and
warranties described in Sections 11.1 and 11.2 (other than representations and
warranties contained in Section 5.13 which shall survive for the periods set
forth below in this Section 12.13) shall survive after the Effective Time
indefinitely for purposes of the indemnification set forth in Sections 11.1 and
11.2. The representations and warranties contained in Section 5.13 relating to
Taxes shall survive until 90 days after the expiration of the applicable statute
of limitations with respect to such Taxes.
SECTION 12.14. No Consequential or Punitive Damages. NOTWITHSTANDING
ANYTHING TO THE CONTRARY ELSEWHERE IN THIS AGREEMENT, NO PARTY (OR ITS
AFFILIATES) SHALL, IN ANY EVENT, BE LIABLE TO ANY OTHER PARTY (OR ITS
AFFILIATES) FOR ANY CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS
OF REVENUE OR INCOME, OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY, OR ANY
PUNITIVE DAMAGES RELATING TO THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT.
50
IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Merger to be duly executed as of the date first written above.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
HOLLYWOOD ONLINE INC.,
a California corporation
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Chief Executive Officer
BIG ENTERTAINMENT, INC.,
a Florida corporation
By: /s/ Xxxxxxxx Xxxxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
BIG ACQUISITION CORP.,
a Delaware corporation
By: /s/ Xxxxxxxx Xxxxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: President
51
Exhibit A
BIG ENTERTAINMENT, INC.
--------------------------------------------------------------------------------
SHAREHOLDER AGREEMENT
January 10, 1999
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
SECTION 1 CERTAIN DEFINITIONS.................................1
SECTION 2 SHAREHOLDER ACTIVITIES..............................3
2.1 Certain Agreements..................................3
SECTION 3 RESTRICTIONS ON TRANSFER............................4
3.1 Transfer Restrictions...............................4
3.2 Market Standoff.....................................5
3.3 Stop Transfer Order.................................5
3.4 Legend..............................................5
3.5 Permitted Transferees; Other Transferees............6
SECTION 4 RIGHT OF FIRST REFUSAL..............................6
4.1 Right of First Refusal..............................6
4.2 Assignment of Right of First Refusal................7
SECTION 5 RIGHT OF FIRST OFFER................................7
5.1 Shareholder Offers..................................7
5.2 Acceptance of Offer.................................7
5.3 Closing.............................................8
5.4 Limitation of Rights................................8
5.5 Assignment of Right of First Offer..................8
SECTION 6 VOTING PROVISIONS...................................8
6.1 Voting by Shareholder...............................8
6.2 Presence for Quorum.................................9
SECTION 7 BOARD REPRESENTATION................................9
7.1 Director Nominees...................................9
7.2 Solicitation of Proxies; No Transfer................9
SECTION 8 EQUITY ACCOUNTING..................................10
SECTION 9 MISCELLANEOUS......................................10
9.1 Termination........................................10
9.2 Specific Enforcement...............................10
9.3 Governing Law......................................10
9.4 Successors and Assigns.............................11
9.5 Entire Agreement; Amendment........................11
9.6 Publicity..........................................11
9.7 Confidentiality....................................11
9.8 Notices, etc.......................................11
9.9 Severability.......................................12
9.10 Titles and Subtitles...............................12
9.11 Facsimile Signatures...............................12
9.12 Counterparts.......................................12
SHAREHOLDER AGREEMENT
This Shareholder Agreement (this "Agreement") is entered into
effective as of January 10, 1999 by and between BIG ENTERTAINMENT, INC., a
Florida corporation (the "Company"), and THE TIMES MIRROR COMPANY, a Delaware
corporation (the "Shareholder").
RECITALS
WHEREAS, the Company and Shareholder are parties to that
certain Agreement and Plan of Merger dated as of January 10, 1999 (the "Merger
Agreement") providing for the acquisition by the Company of Hollywood Online
Inc., a California corporation ("Hollywood") from the Shareholder pursuant to a
merger of Big Acquisition Corp., a Delaware corporation a wholly owned
subsidiary of the Company, with and into Hollywood (the "Merger");
WHEREAS, as consideration for the Merger, the Shareholder (i)
is receiving shares of the Company's Common Stock, par value $.01 per share (the
"Company Common Stock") and (ii) may receive shares of the Company's
newly-designated Series E Convertible Preferred Stock, par value $0.01 per share
(the "Series E Preferred Stock");
WHEREAS, the Company and Shareholder wish to provide for and
acknowledge certain arrangements and understandings following the Merger; and
WHEREAS, the consummation of the Merger is conditioned upon
the execution of this Agreement.
NOW THEREFORE, in consideration of the foregoing, the parties
agree as follows:
SECTION 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth in this Section 1:
"Affiliate" means, with respect to any entity, an affiliate of
that entity as defined in Rule 12b-2 under the Exchange Act.
"Beneficial owner" or "beneficially owned" or "beneficial
ownership" shall have the meaning assigned to such term in Rule 13d-3 under the
Exchange Act.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Florida or California are authorized or
required by law to close.
"Change of Control" means such time as any Person or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) of Persons (other
than Xxxxxxxx Xxxxxxxxxx and Xxxxxx Xxxxxxx) owns more than 50% of the Company
Common Stock.
"Dilutive Transaction" means any proposed transaction or
securities offering involving the issuance by the Company of Company Common
Stock at a price less than 20% of the Parent Common Stock Price (as defined in
the Merger Agreement) that would result in the reduction of the number of shares
of Company Common Stock held by the Shareholder as of the date of the proposed
transaction or offering by more than 50%.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Independent Director" means a member of the Board of
Directors of the Company other than any director nominated by the Shareholder or
any director having an interest in the matter to be voted upon.
"Market Price" means (i) in the event the Company Common Stock
is listed or traded on any national securities exchange, the average of the
daily closing prices per share of the Company Common Stock for the 10
consecutive trading days immediately prior to the date on which the Offer (as
defined in Section 5.1) is delivered to the Company; (ii) if the Company Common
Stock is not listed or traded on any national securities exchange, the average
of the daily high bid and low asked prices per share of the Company Common Stock
on the NASDAQ National Market or the NASDAQ SmallCap Market, as applicable, or,
if not so listed, in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, for the 10 consecutive trading days immediately prior to the
date on which the Offer is delivered to the Company; or (iii) if the Company
Common Stock is not so listed or traded, such price as shall be determined in
good faith in the reasonable judgment of the Board of Directors of the Company.
"Permitted Transferee" means (i) any direct or indirect
Subsidiary of the Shareholder, provided that the Shareholder shall own, directly
or indirectly, all securities of such Subsidiary (a "Wholly Owned Subsidiary"),
and (ii) each of The Times Mirror Foundation, the L.A. Times Fund and such other
accounts established by the Shareholder and affiliated with the Fidelity
charitable gift fund.
"Person" means any individual, business, trust, unincorporated
association, corporation, partnership, joint venture, limited liability company
or other entity of any kind.
"Private Sale" means any sale other than pursuant to an
underwritten public offering or pursuant to Rule 144 under the Securities Act.
2
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any entity, any other
entity of which securities or other ownership interest having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are owned directly or indirectly by such entity.
"Total Voting Power" means the maximum number of votes that
the holders of the Company's capital stock are entitled (determined without
regard to the voting provisions of this Agreement) to vote generally in the
election of directors (except to the extent such voting rights are contingent
upon dividend arrearages or similar circumstances).
"Transfer" has the meaning specified in Section 3.1(i).
"Voting Securities" means all classes of the Company's capital
stock that are entitled by their terms (and determined without regard to the
voting provisions of this Agreement) to vote generally in the election of
directors and all options, rights, warrants and other securities convertible
into, or exercisable or exchangeable for, any shares of such capital stock.
SECTION 2
SHAREHOLDER ACTIVITIES
2.1 CERTAIN AGREEMENTS. The Shareholder agrees that, except as specifically
permitted or contemplated by this Agreement or unless previously approved in
writing by the Company upon the approval of a majority of the Independent
Directors, the Shareholder and each of its Affiliates will not in any manner,
directly or indirectly acting alone or in concert with others:
(i) acquire, or offer or agree, attempt, seek or propose to acquire,
directly or indirectly, any equity securities or property of the
Company or any of its successors or subsidiaries (or any direct or
indirect beneficial ownership, rights, options or interests therein),
except that Permitted Transferees may acquire shares of Company Common
Stock from the Shareholder in accordance with the terms of this
Agreement;
(ii) solicit proxies or consents or become a "participant" in a
"solicitation" (as such terms are defined or used in Regulation 14A
under the Exchange Act), of proxies or consents with respect to
securities of the Company or any of its successors or subsidiaries or
initiate any shareholder proposal or "election contest" (as such term
is defined or used in Rule 14a-11 of the Exchange Act) with respect to
the Company or any of its successors or subsidiaries or, directly or
indirectly, act to encourage, or induce others to take any such action;
3
(iii) take any public action for the purpose of convening a shareholders
meeting of the Company or any of its successors or subsidiaries or,
directly or indirectly, act to encourage, or induce others to take such
action;
(iv) except as may be required by applicable laws, rules or regulations,
make any public announcement or disclosure relating to the acquisition
of Voting Securities or a merger, business combination, sale of assets,
liquidation, restructuring, recapitalization or other extraordinary
corporate transaction relating to the Company or any of its successors
or subsidiaries;
(v) deposit Voting Securities into a voting trust or subject Voting
Securities to voting agreements, except as provided in Section 6.1
hereof, or grant any proxy with respect to any Voting Securities to any
person not designated by the Company who is not an officer, director or
employee of Shareholder;
(vi) form, join or in any way participate in a "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) for the purpose of acquiring,
holding, voting or disposing of securities of the Company or any of its
successors or subsidiaries or otherwise with respect to the Company or
taking any other actions restricted or prohibited under any clause of
this Section 2.1;
(vii) disclose publicly any intention, plan or arrangement inconsistent with
the foregoing or the other provisions of this Agreement relating to any
Voting Securities; or
(viii) enter into any discussions, negotiations, arrangements or
understandings with any third party with a view to, or advising,
aiding, abetting, soliciting, inducing or encouraging, any action
prohibited by any of the foregoing.
SECTION 3
RESTRICTIONS ON TRANSFER
3.1 TRANSFER RESTRICTIONS. The Shareholder will not, at any time:
(i) Directly or indirectly, sell, transfer any beneficial interest in,
pledge, hypothecate or otherwise dispose, or offer to sell, transfer
any beneficial interest in, pledge, hypothecate or otherwise dispose
(collectively, "Transfer"), any shares of Company Common Stock within
90 days after the date of this Agreement except to any Permitted
Transferee;
(ii) Transfer any Company Common Stock to any transferee (other than
Permitted Transferees) unless prior thereto, at least a majority of the
Independent Directors shall have specifically expressed in a resolution
that such transferee is not a competitor of the Company, which
resolution shall be voted upon by the Independent Directors at least
ten (10) Business Days after receiving a written request from the
Shareholder therefor;
4
(iii) Transfer in the aggregate, in one or more transactions, Company Common
Stock representing more than 2.5% of the Total Voting Power to any
single transferee or group of related transferees (other than Permitted
Transferees);
(iv) Transfer Company Common Stock to any transferee or group of related
Transferees (other than Permitted Transferees) that, following such
Transfer, would own more than 2.5% of the Total Voting Power; or
(v) Transfer Series E Preferred Stock or any other capital stock of the
Company (other than Company Common Stock in accordance with this
Section 3.1) to any Person (other than Permitted Transferees).
3.2 MARKET STANDOFF. The Shareholder shall not, to the extent requested by the
Company and any underwriter of Company Common Stock or other securities of the
Company, directly or indirectly, sell, offer to sell, contract to sell, grant
any option to purchase or otherwise transfer or dispose of any securities of the
Company held by it for a period of up to 90 days following the commencement date
of a public offering of such Company Common Stock or other securities of the
Company.
3.3 STOP TRANSFER ORDER. The Company shall not be required (i) to transfer on
its books any Company Common Stock or other capital stock of the Company that
shall have been sold or transferred in violation of any of the provisions set
forth in this Agreement or (ii) to treat as owner of such Company Common Stock
or accord the right to vote as such owner or pay dividends to any transferee to
whom such Company Common Stock or other capital stock of the Company shall have
been so transferred in violation of any the provisions set forth in this
Agreement. Any purported transfer of Company Common Stock or other capital stock
of the Company by any holder that is not in compliance with the terms and
conditions of this Agreement shall be void, and the transferee under any such
purported transfer shall acquire no title or ownership thereby. The Shareholder
hereby agrees to the entry of a stop transfer order with the transfer agent or
agents of the Company against the transfer of Company Common Stock and other
capital stock of the Company except in compliance with the requirements of this
Agreement.
3.4 LEGEND. To assist in effectuating the provisions of this Agreement, the
Shareholder hereby consents to the placement of the following legend on all
certificates representing the capital stock of the Company beneficially owned by
it until termination of this Agreement:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF AN AGREEMENT BETWEEN THE SHAREHOLDER AND THE COMPANY AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS
ON FILE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.
5
3.5 PERMITTED TRANSFEREES; OTHER TRANSFEREES. No Person shall be a Permitted
Transferee hereunder unless (i) such Person shall agree in writing to be bound
by the terms of this Agreement and (ii) if such person is a Wholly Owned
Subsidiary, such Person shall agree in writing for the benefit of the Company
that at any time such Person ceases to be a Wholly Owned Subsidiary, such Person
shall transfer back to the Shareholder any Company Common Stock acquired from
the Shareholder. Other than Permitted Transferees, no transferee of Company
Common Stock from the Shareholder pursuant to the terms of this Agreement shall
be bound by this Agreement.
SECTION 4
RIGHT OF FIRST REFUSAL
4.1 RIGHT OF FIRST REFUSAL. Prior to making any sale, transfer or other
disposition of Company Common Stock in a Private Sale to any Person (other than
Permitted Transferees), and subject to the provisions of Section 3, the
Shareholder shall give the Company the opportunity to purchase such securities
in the following manner:
(i) The Shareholder shall give notice (the "Transfer Notice") to the
Company in writing of such intention specifying the number of shares of
Company Common Stock proposed to be sold or transferred to one or more
bona fide third party transferees, the proposed aggregate price of the
Company Common Stock to be transferred, which shall be in cash only and
not subject to a financing condition (the "Transfer Consideration"),
the identity of the transferee and the other material terms upon which
such transfer is proposed to be made.
(ii) The Company shall have the right, exercisable by written notice given
by the Company to the Shareholder within three (3) Business Days
(except as such date may be extended as provided below) after receipt
of the Transfer Notice, to purchase (or to cause a Person designated by
the Company to purchase) all of the shares of Company Common Stock
specified in such Transfer Notice for cash in an amount equivalent to
the Transfer Consideration and otherwise upon substantially the same
terms and conditions set forth in the Transfer Notice.
(iii) If the Company or its assigns exercises the right of first refusal
hereunder, the closing of the purchase of the Company Common Stock with
respect to which such right has been exercised shall take place on such
date as the Company and the Shareholder shall agree, which (A) if the
Transfer Consideration is equal to or greater than $3.0 million, shall
be within 20 days after the Company or its assigns gives notice of such
exercise and (B) if the Transfer Consideration is less than $3.0
million, shall be within 10 days after the Company or its assigns gives
notice of such exercise, which period of time shall, in each case, be
extended, as necessary, in order to comply with applicable securities
6
and other applicable laws and regulations. Upon exercise of its right
of first refusal, the Company or its assigns and the Shareholder shall
be legally obligated to consummate the purchase contemplated thereby
and shall use their reasonable best efforts to secure any approvals
required in connection therewith.
(iv) If neither the Company nor its assigns exercise the right of first
refusal under this Section 4 with respect to proposed transfers of
Company Common Stock within the three (3) Business Day time period
specified for such exercise, the Shareholder shall be free (without
regard to the provisions of Section 5), during the period of 45 days
following the expiration of such time for exercise, to sell the Company
Common Stock on terms no less favorable to the Shareholder than those
presented to the Company in the Transfer Notice at a price not less
than the Transfer Consideration. If the Shareholder does not consummate
such a sale within such 45-day period, it shall be required to comply
with this Section 4 or, if applicable, Section 5 prior to making, or
offering to make, any sale, transfer or other disposition of Company
Common Stock.
4.2 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company may assign its rights
under Section 4.1 hereof to other persons who shall then be entitled to purchase
such securities.
SECTION 5
RIGHT OF FIRST OFFER
5.1 SHAREHOLDER OFFERS. Prior to making any offer to sell, transfer or otherwise
dispose of any shares of Company Common Stock to any Person (other than any
Permitted Transferee) pursuant to an underwritten public offering or pursuant to
Rule 144 under the Securities Act, the Shareholder shall give the Company three
(3) Business Days prior written notice (the "Offer"), of the Shareholder's
desire to sell shares of Company Common Stock (the "Offered Securities"),
stating the number of shares of Company Common Stock to be offered and the other
material terms of such proposed sale. Such notice shall include a representation
to the Company that the Shareholder has a good faith intention to sell such
shares of Company Common Stock on the terms specified therein. The Offer shall
constitute an offer by the Shareholder, irrevocable for three (3) Business Days,
to the Company for all of the Offered Securities at a price per share equal to
the Market Price and otherwise on the terms specified in the Offer.
5.2 ACCEPTANCE OF OFFER. Within three (3) Business Days after receipt of an
Offer, the Company may elect to provide written notice to the Shareholder (an
"Acceptance Notice") that the Company has elected to purchase all of the Offered
Securities. If the Company fails to provide an Acceptance Notice to the
Shareholder by the end of such three (3) Business Day period, the Company shall
be deemed to have elected not to purchase the Offered Securities.
7
5.3 CLOSING. The closing of any sale of Offered Securities shall take place on
such date as the Company and the Shareholder shall agree, which (i) if the
aggregate Market Price of the Offered Securities is equal to or greater than
$3.0 million, shall be within 20 days after the date of the Acceptance Notice
and (ii) if the aggregate Market Price of the Offered Securities is less than
$3.0 million, shall be within 10 days after the date of the Acceptance Notice
(subject in each case to extension to comply with applicable securities and
other applicable laws and regulations related to the transfer of the Offered
Securities to the Company).
5.4 LIMITATION OF RIGHTS. If the Company does not elect to purchase the Offered
Securities within the three (3) Business Day period specified in Section 5.2
hereof, then the Shareholder must sell all (without regard to the provisions of
Section 4), but not less than all, of the Offered Securities at not less than
the applicable Market Price and otherwise on terms no less favorable to the
Shareholder than those presented to the Company in the Offer on or before the
90th day following the expiration of the three (3) Business Day period in
Section 5.2 hereof (subject to extension to comply with applicable securities
and other applicable laws and regulations related to the transfer of the Offered
Securities from the Shareholder to the purchasers). If the Offered Securities
have not been sold within such 90-day period (as extended, if necessary,
pursuant to the preceding sentence), then the Shareholder may not sell any
Offered Securities unless it provides the Company with a new Offer pursuant to
Section 5.1 hereof.
5.5 ASSIGNMENT OF RIGHT OF FIRST OFFER. The Company may assign its rights under
this Section 5 to other persons who shall then be entitled to accept the Offer
and purchase such securities.
SECTION 6
VOTING PROVISIONS
6.1 VOTING BY SHAREHOLDER. With respect to the election of directors of the
Company, for a period of three (3) years after the date of this Agreement, the
Shareholder shall vote and cause to be voted all shares of Company Common Stock
directly or indirectly owned by the Shareholder in the manner recommended to
shareholders by the Company's Board of Directors (so long as (i) such Board of
Directors includes at least one member designated by the Shareholder or (ii) at
the time of such vote, the Shareholder beneficially owns at least 5% of the
Total Voting Power). With respect to all other matters submitted to the vote of
the shareholders of the Company, for a period of three (3) years after the date
of this Agreement (except with respect to (i) a proposed business combination or
other transaction that would result in a Change of Control or (ii) if, at the
time of such vote the Shareholder beneficially owns at least 10% of the Total
Voting Power, a proposed Dilutive Transaction; provided, however, that if one or
more of the Shareholder's designees to the Company's Board of Directors votes in
favor of any such proposed Dilutive Transaction or Change of Control, the
Shareholder shall vote in favor of such transaction) the Shareholder shall vote
8
all shares of Company Common Stock owned by it in the same proportion as all
other shareholders of the Company vote on any such matter.
6.2 PRESENCE FOR QUORUM. The Shareholder and its Affiliates, as holders of
Company Common Stock, shall be present, in person or by proxy, at all meetings
of shareholders of the Company with respect to which Shareholder receives notice
so that all shares of Company Common Stock directly or indirectly owned by it
and its Affiliates may be counted for the purpose of determining the presence of
a quorum at such meetings.
SECTION 7
BOARD REPRESENTATION
7.1 DIRECTOR NOMINEES. Until such time as the Shareholder beneficially owns less
than 5% of the Total Voting Power, the Shareholder will be entitled to designate
one person (who shall be Xxxxxx Xxxxxxxx or any other officer of the Shareholder
reasonably satisfactory to the Independent Directors) as a nominee for election
to the Company's Board of Directors. If at any time when the Shareholder
beneficially owns at least 5% of the Total Voting Power, the total number of
members of the Company's Board of Directors is increased to ten (10), the
Shareholder shall be entitled to designate an additional person (who shall be
any officer of the Shareholder reasonably satisfactory to the Independent
Directors) as a nominee for election to the Company's Board of Directors. If at
any time when the Shareholder beneficially owns at least 5% of the Total Voting
Power, the total number of members of the Company's Board of Directors is
increased to a number greater than ten (10), the number of persons that the
Shareholder shall be entitled to designate as nominees for election to the
Company's Board of Directors shall be increased (provided that each such
designee shall be an officer of the Shareholder reasonably satisfactory to the
Independent Directors) so that the proportion of Shareholder designees to total
members of the Company's Board of Directors shall approximate (as closely as
possible) the proportion of shares of Company Common Stock beneficially owned by
the Shareholder to the total outstanding shares of Company Common Stock. If
Shareholder sells, transfers or otherwise disposes of any Company Common Stock,
the number of persons that the Shareholder shall be entitled to designate as
nominees for election to the Company's Board of Directors shall be decreased so
that the proportion of Shareholder designees to total members of the Company's
Board of Directors shall approximate (as closely as possible) the proportion of
shares of Company Common Stock beneficially owned by the Shareholder to the
total outstanding shares of Company Common Stock; provided that Shareholder
shall continue to have the right to designate at least one nominee until such
time as Shareholder beneficially owns less than 5% of the Total Voting Power.
7.2 SOLICITATION OF PROXIES; NO TRANSFER. The Company agrees to solicit proxies
for, and recommend that its shareholders vote in favor of, each of the designees
nominated for election to the Company's Board of Directors by the Shareholder.
If a designee shall cease to be a director of the Company for any reason other
than expiration of his or her term and the Shareholder shall at such time
9
beneficially own at least 5% of the Total Voting Power, the Company shall
promptly, upon the request of the Shareholder, use its reasonable best efforts
to cause the election or appointment of a person selected by the Shareholder
(who shall be any officer or director of the Shareholder reasonably satisfactory
to the Independent Directors) to replace such designee. The right to designate
directors of the Company pursuant to this Section 7 is personal to the
Shareholder and may not be transferred in any manner without the consent of the
Independent Directors.
SECTION 8
EQUITY ACCOUNTING
If the Shareholder elects to account for its investment in the
Company pursuant to the equity method, if requested by the Shareholder, the
Company will furnish to the Shareholder information that is required by
generally accepted accounting principles to enable the Shareholder to account
for its investment in the Company pursuant to the equity method, to the extent
reasonably available to the Company.
SECTION 9
MISCELLANEOUS
9.1 TERMINATION. This Agreement shall terminate upon the earliest to occur of
the following: (i) the fifth anniversary of the date of this Agreement; (ii) the
date on which the Shareholder, together with the Times Mirror Foundation and the
L.A. Times Fund, beneficially owns less than 5% of the Total Voting Power; and
(iii) a Change of Control; provided, however, that the provisions of Sections 1,
2 and 9 shall not terminate upon the occurrence of the date in clause (ii) above
and shall terminate upon the earlier to occur of the date set forth in clause
(i) or clause (iii).
9.2 SPECIFIC ENFORCEMENT. The Company and the Shareholder acknowledge and agree
that if any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached, irreparable damage would
occur and it would be extremely impracticable and difficult to measure damages.
Accordingly, in addition to any other rights and remedies to which the parties
may be entitled by law or equity, the parties shall be entitled to an injunction
or injunctions to prevent or cure breaches of the provision of this agreement
and to enforce specifically the term and provisions hereof, and the parties
expressly waive (a) the defense that a remedy in damages will be adequate and
(b) any requirement, in an action for specific performance, for the posting of a
bond.
9.3 GOVERNING LAW. This Agreement shall be governed and construed in all
respects in accordance with the laws of the State of Florida. The Company and
the Shareholder each hereby consents to personal jurisdiction in any action
brought with respect to this Agreement and the transactions contemplated hereby
in the United States District Court for the Southern District of Florida. The
10
Company and the Shareholder each also agrees that service of process may be
accomplished pursuant to the provisions of Section 9.8 hereof.
9.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the provisions
hereof shall inure to the benefit of and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
9.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the Merger
Agreement and the Ancillary Agreements (as defined in the Merger Agreement)
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof, and no party shall be liable or
bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
9.6 PUBLICITY. Neither the Company nor the Shareholder shall issue any press
release or otherwise make an public statement with respect to the transactions
contemplated by this Agreement without consulting the other party, except as may
be required by applicable law or regulation.
9.7 CONFIDENTIALITY. The Shareholder acknowledges and agrees that any
information or data it has acquired from the Company, not otherwise properly in
the public domain, was received in confidence. The Shareholder agrees not to
divulge, communicate or disclose, except as may be required by law or for the
performance of this Agreement, or use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any such
confidential information of the Company.
9.8 NOTICES, ETC. Unless otherwise provided, any notice, request, demand or
other communication required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery to the
party to be notified, or when sent by telex or telecopier (with receipt
confirmed), or one Business Day following deposit with overnight courier or
three Business Days following deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed as follows (or at
such other address as a party may designate by notice to the other):
If to the Company:
Big Entertainment, Inc.
0000 Xxxxxx Xxxx, #000X
Xxxx Xxxxx, Xxxxxxx 00000-0000
Attention: President
Facsimile: (000) 000-0000
11
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Shareholder:
The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
9.9 SEVERABILITY. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, invalid,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision. In such event, the parties shall negotiate, in good
faith, a legal, valid and enforceable substitute provision which most nearly
effects the intent of the parties in entering into this Agreement.
9.10 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
9.11 FACSIMILE SIGNATURES. Any signature page delivered by a fax machine or
telecopy machine shall be binding to the same extent as an original signature
page, with regard to any agreement subject to the terms hereof or any amendment
thereto. Any party who delivers such a signature page agrees to later deliver an
original counterpart to any party which requests it.
9.12 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
12
The foregoing agreement is hereby executed as of the date
first above written.
BIG ENTERTAINMENT, INC.
By: /s/ Xxxxxxxx Xxxxxxxxxx
-------------------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
THE TIMES MIRROR COMPANY
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Executive Vice President &
Chief Financial Officer
13
Exhibit B
FORM OF
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement")is entered into
effective as of _____________, 1999 by and between BIG ENTERTAINMENT, INC., a
Florida corporation ("Big"), and THE TIMES MIRROR COMPANY, a Delaware
corporation (the "Shareholder").
WHEREAS, Big and the Shareholder are parties to that certain
Agreement and Plan of Merger dated as of January 10, 1999 (the "Merger
Agreement") providing for the acquisition by Big of HOLLYWOOD ONLINE INC., a
California corporation ("Hollywood") from the Shareholder pursuant to a merger
of BIG ACQUISITION CORP., a Delaware corporation and wholly owned subsidiary of
Big, with and into Hollywood (the "Merger");
WHEREAS, as consideration for the Merger, the Shareholder will
receive (i) __________ shares of Big's Common Stock, par value $.01 per share
(the "Big Common Stock")and (ii) if issued pursuant to the Merger Agreement,
__________ shares of Big's Series E Preferred Stock, par value $.01 per share
(the "Big Preferred Stock";
WHEREAS, Big and the Shareholder wish to provide for and
acknowledge certain arrangements and understandings following the Merger; and
WHEREAS, the consummation of the Merger is conditioned upon the
execution of this Agreement.
NOW THEREFORE, in consideration of the foregoing, the parties agree
as follows:
1. DEFINITIONS. Capitalized terms used but not defined in this Agreement shall
have the meaning ascribed to such terms in the Merger Agreement.
NYFS05...:\41\26141\0006\1916\AGR1069P.48G
2. REGISTRATION RIGHTS.
(a) Registration Upon Request. (i) At any time, and from time
to time, commencing on the Effective Date, upon the written request (the
"Notice") of any Qualified Holder(s) (as hereinafter defined) requesting that
Big effect the registration under the Securities Act of 1933, as amended (the
"Securities Act") of Registrable Securities (as hereinafter defined) to be sold
in a firm commitment underwritten public offering for cash, which, in the
aggregate, constitute at least 20% of the shares of Registrable Securities
issued to the Shareholder pursuant to the Merger for each registration
hereunder, Big shall (within forty-five (45) days of the receipt of such Notice)
file with the Commission a registration statement to register under the
Securities Act (a "Demand Registration") the Registrable Securities which Big
has been requested to register and use its best efforts to, as expeditiously as
may be practicable, have such registration statement declared effective by the
Commission, provided that no Qualified Holder(s) shall be permitted to request a
Demand Registration within three (3) months of the effective date of any
registration statement for equity securities of Big (other than on Form S-4 or
Form S-8 or any successor or similar form). A request for a Demand Registration
will not count as the use of such right unless the registration statement to
which it relates is declared effective under the Securities Act and remains
effective for a period (not less than three (3) months sufficient to allow for
the orderly sale of the Registrable Securities covered thereby, except that such
exercise shall count if such registration statement is withdrawn because the
Qualified Holders, for any reason whatsoever, determine not to proceed with such
registration; provided, however, if any Qualified Holder should elect to
withdraw its Registrable Securities from the registration as a result of the
proration provisions of Section 3(a) or 3(b) in which such Qualified Holder is
not permitted to register at least fifty percent (50%) of the number of shares
requested by such Qualified Holder to be registered in such registration (a "50%
Withdrawal"), then such request for registration shall not be considered a
Demand Registration for purposes of Section 2(a)(iii)(B).
(ii) Within ten (10) Business Days of receipt of the Notice by
Big, Big shall provide notice (the "Holder Notice") to all Qualified Holders of
such demand. The Holder Notice shall set forth, at a minimum, the number and
class of Registrable Securities to be registered, the proposed date of filing of
the related registration statement, and the proposed means of distribution of
such Registrable Securities, and the proposed managing underwriter or
underwriters of such Registrable Securities. Upon the written request of any
Qualified Holder delivered to Big within five (5) days after its receipt of such
Holder Notice (which request shall
2
specify the number of Registrable Securities intended to be disposed of by such
Qualified Holder and the intended method of disposition thereof), such
Registrable Securities of such Qualified Holder shall be included in such
registration statement as if such Qualified Holder had joined in such demand.
(iii) It is hereby agreed that (A) if Big shall have
previously effected a Demand Registration pursuant to this Section 2(a), it
shall not be required to effect a subsequent Demand Registration until a period
of at least one hundred twenty (120) days shall have elapsed from the effective
date of the registration statement used in connection with such previous Demand
Registration and (B) Big shall not be required to effect more than four (4)
Demand Registrations pursuant to this Section 2(a).
(iv) If any Demand Registration pursuant to this Section 2(a)
is proposed to be effected by means of the use of Form S-3 (or any similar
short-form registration statement which is a successor to Form S-3) and the
managing underwriter shall advise Big in writing that in its opinion the use of
another permitted form is of material importance to the success of the offering,
then such registration shall be effected by the use of such other permitted
form.
(v) As used in this Agreement, the term "Registrable
Securities" means any and all (A) shares of Big Common Stock received by the
Qualified Holders in the Merger or upon conversion of the Big Preferred Stock
received, if any, by the Qualified Holders in the Merger in exchange for the
shares of common stock of Hollywood beneficially owned by them on the date
hereof, and (B) any other of Big Common Stock issued or issuable with respect to
any shares of Big Common Stock or Preferred Stock described in clause (A) above
by way of a stock dividend or stock split or in connection with a combination,
exchange, reorganization, recapitalization or reclassification of Big
securities, or pursuant to a merger, consolidation or other similar business
combination transaction involving Big. Reference in this Section 2(a) to
specified numbers of shares shall be equitably adjusted to reflect any such
occurrences referred to in the preceding sentence.
(vi) As to any particular Registrable Securities, such
securities shall cease to constitute Registrable Securities when (A) a
registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with the methods contemplated by the registration
statement, (B) such securities shall have been sold in satisfaction of all
applicable conditions to the resale provisions of Rule
3
144 under the Securities Act (or any successor provision thereto), (C) such
securities shall have been transferred, new certificates evidencing such
securities without legends restricting further transfer shall have been
delivered by Big, and subsequent public distribution of such securities shall
neither require registration under the Securities Act nor qualification (or any
similar filing) under any state securities or "blue sky" law then in effect, or
(D) such securities shall have ceased to be issued and outstanding.
(vii) The term "Qualified Holder(s)" means the Shareholder and
any Permitted Transferee as such term is defined in that certain Shareholder
Agreement, by and between Big and the Shareholder dated as of a date equal
herewith. The term "Majority Qualified Holders" means a majority in interest of
the Qualified Holders participating in a registration of Registrable Securities
pursuant hereto.
(viii) It is hereby further agreed that with respect to any
Demand Registration requested pursuant to Section 2(a), Big may defer the filing
or effectiveness of any registration statement related thereto for a reasonable
period of time not, to exceed ninety (90) days after a request by any of the
Qualified Holders if (A) Big is, at such time, in the process of preparing,
filing or going effective on an underwritten public offering of Big Common Stock
("Big Common Stock Offering") and is advised in writing by its managing
underwriter(s) that such offering would in its or their opinion be materially
and adversely affected by such filing or (B) the Board of Directors of Big
reasonably determines, in its good faith judgment, that any such filing or the
offering of any Registrable Securities would materially impede, delay or
interfere with any material proposed financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction involving
Big; provided that, with respect to clause (B), Big gives the Qualified Holders
written notice of such determination and a copy of the resolution of the Big
Board of Directors with regard thereto; and provided further, however, with
respect to both clauses (A) and (B), Big shall not be entitled to postpone such
filing or effectiveness if, within the preceding twelve (12) months, it had
effected one (1) postponement pursuant to this paragraph (viii) and, following
such postponements, the Registrable Securities to be sold pursuant to the
postponed registration statements were not sold (for any reason); provided
further, however, that, during the period commencing ninety (90) days after the
Effective Date and ending one hundred and twenty (120) days thereafter, Big
shall not so postpone the filing or effectiveness of the first Demand
Registration requested pursuant to this Section 2(a) for more than thirty (30)
days.
4
(b) Piggyback Registration. If at any time Big proposes to register
shares of Big Common Stock under the Securities Act; whether proposed to be
offered for sale by Big or any other person (other than a registration on Form
S-4 or Form S-8, or any successor or similar forms), in a manner that would
permit registration of Registrable Securities for sale to the public under the
Securities Act, it will each such time promptly give written notice to all
Qualified Holders of its intention to do so, of the registration form of the
Commission that has been selected by Big, the number and class of securities so
proposed to be registered, the proposed date of filing of such registration
statement, any proposed means of distribution of such securities, any proposed
managing underwriter or underwriters of such securities and, if applicable, a
good faith estimate by Big of the proposed maximum offering price thereof, as
such price is proposed to appear on the facing page of such registration
statement (the "Section 2(b) Notice"). Big will use its best efforts to include
in the proposed registration all Registrable Securities that Big is requested in
writing, within fifteen (15) days after the Section 2(b) Notice is given, to
register by the Qualified Holders thereof; provided, however, that (A) if, at
any time after giving written notice of its intention to register shares of Big
Common Stock and prior to the effective date of the registration statement filed
in connection with such registration, Big shall determine for any reason not to
register such equity securities, Big may, at its election, give written notice
of such determination to all Qualified Holders and, thereupon, shall be relieved
of its obligation to register any Registrable Securities in connection with such
abandoned registration (but not from its obligation to pay any Registration
Expenses to the extent incurred in connection therewith), without prejudice,
however, to the rights of Qualified Holders under Section 2(a) hereof and (B) in
case of such a determination by Big to delay registration of Big Common Stock
pursuant to clause (A) of this Section 2(b), Big shall be permitted to delay the
registration of such Registrable Securities for the same period as the delay in
registering such Big Common Stock. No registration effected under this Section
2(b) shall relieve Big of its obligations to effect Demand Registrations under
Section 2(a) and, notwithstanding anything to the contrary in Section 2(a), no
Qualified Holder shall have the right to require Big to register any Registrable
Securities pursuant to Section 2(a) until the later of (A) the completion of the
distribution of the securities offered and registered pursuant to the Section
2(b) Notice and (B) ninety (90) days after the date a registration statement
effected under this Section 2(b) is declared effective.
5
(c) Registration and Qualification.
In connection with Big's registration obligations under Sections
2(a) and 2(b) hereof, Big shall effect such registrations on the appropriate
form available for the sale of the Registrable Securities to permit the sale of
Registrable Securities in accordance with the method or methods of disposition
thereof specified by the Qualified Holders of such Registrable Securities, and
pursuant thereto Big shall:
(i) No fewer than ten (10) Business Days prior to the initial
filing of a registration statement or prospectus and no fewer than four (4)
Business Days prior to the filing of any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), furnish to the Qualified Holders of Registrable
Securities, their counsel and the managing underwriters, if any, copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Qualified Holders, their counsel and such underwriters, if any,
and cause the officers and directors of Big, counsel to Big and independent
certified public accountants to Big to respond to such inquiries as shall be
necessary, in the opinion of respective counsel to such Qualified Holders and
such underwriters, to conduct a reasonable investigation within the meaning of
the Securities Act with respect thereto. Big shall not file any such
registration statement or prospectus or any amendments or supplements thereto to
which the Qualified Holders of a majority of outstanding Registrable Securities,
their counsel, or the managing underwriters, if any, shall reasonably object on
a timely basis (within five (5) and three (3) Business Days of receipt thereof,
in the case of the filing and amendment or supplement, respectively);
(ii) Prepare and file with the Commission such amendments,
including post-effective amendments, to each registration statement as may be
necessary to keep such registration statement continuously effective for the
applicable time period; cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement as
so amended or in such prospectus as so supplemented;
6
(iii) Notify the Qualified Holders of Registrable Securities
to be sold, their counsel and the managing underwriters, if any, promptly, (and,
in the case of clause (A) (1) below, in no event less than five (5) Business
Days prior to such filing) and (if requested by any such Person), confirm such
notice in writing, (A) (1) when a prospectus or any prospectus supplement or
post-effective amendment is being filed, and, (2) with respect to a registration
statement or any post-effective amendment, when the same has become effective,
(B) of any request by the Commission or any other federal or state governmental
authority for amendments or supplements to a registration statement or related
prospectus or for additional information, (C) of the issuance by the Commission,
any state securities commission, any other governmental agency or any court of
any stop order, order or injunction suspending or enjoining the use or the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (D) if at any time any of the representations and warranties
of Big contained in any agreement (including any underwriting agreement)
contemplated hereby cease to be true and correct in all material respects, (E)
of the receipt by Big of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (F) of the happening of any event that makes
any statement made in such registration statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in such
registration statement, prospectus or documents so that, in the case of the
registration statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, not misleading, and so that, in the
case of the prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(iv) Use its reasonable best efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of any order enjoining or suspending the
use or effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any United States jurisdiction, at the
earliest practicable moment;
(v) If requested by the managing underwriters, if any, or the
Qualified Holders of a majority of outstanding Registrable Securities being sold
in connection with such offering, (i) promptly incorporate in a prospectus
supplement or
7
post-effective amendment such information as the managing underwriters, if any,
and a majority of the Qualified Holders agree and reasonably propose should be
included therein, and (ii) make all required filings of such prospectus
supplement or such post- effective amendment as soon as practicable after Big
has received notification of the matters reasonably proposed to be incorporated
in such prospectus supplement or post-effective amendment; provided, however,
that Big shall not be required to take any action pursuant to this Section 2(d)
that would, in the opinion of outside counsel for Big, violate applicable law;
(vi) Furnish to each Qualified Holder, their counsel and each
managing underwriter, if any, without charge, at least one conformed copy of
each registration statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
any such Person (including those previously furnished or incorporated by
reference) as soon as practicable after the filing of such documents with the
Commission;
(vii) Deliver to each Qualified Holder, their counsel, and the
underwriters, if any, without charge, as many copies of the prospectus or
prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons reasonably request; and Big hereby consent to
the use of such prospectus and each amendment or supplement thereto by each of
the selling Qualified Holders of Registrable Securities and the underwriters, if
any, in connection with the offering and sale of the Registrable Securities
covered by such prospectus and any amendment or supplement thereto, as
contemplated thereby;
(viii) Prior to any public offering of Registrable Securities,
use its reasonable best efforts: (i) to register or qualify or cooperate with
the Qualified Holders of Registrable Securities to be sold, the underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue sky laws
of such jurisdictions within the United States as any Qualified Holder or
underwriter reasonably requests in writing; and (ii) to keep each such
registration or qualification (or exemption therefrom) effective during the
period such registration statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by such registration
statement; provided, however, that Big shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would
8
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject Big to any tax in any such jurisdiction where it
is not then so subject;
(ix) Use its reasonable best efforts to cause the Registrable
Securities covered by the registration statement, and the offering thereof, to
be registered with or approved by such other governmental agencies or
authorities within the United States, except as may be required solely as a
consequence of the nature of such selling Qualified Holder's business, in which
case Big will cooperate in all reasonable respects with the filing of such
registration statement and the granting of such approvals as may be necessary to
enable the seller or sellers thereof or the underwriters, if any, to consummate
the disposition of such Registrable Securities; provided, however, that Big
shall not be required to register the Registrable Securities in any jurisdiction
that would subject it to general service of process in any such jurisdiction
where it is not then so subject or subject Big to any tax in any such
jurisdiction where it is not then so subject or to require Big to qualify to do
business in any jurisdiction where it is not then so qualified;
(x) Upon the occurrence of any event contemplated by Section
2(c)(iii)(D), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to each registration statement or a
supplement to the related prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, such prospectus will not contain 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 light of the
circumstances under which they were made, not misleading;
(xi) To the extent not previously so listed, use its
reasonable best efforts to list prior to the effective date of such registration
statement, subject to notice of issuance, the Registrable Securities covered by
such registration statement on any securities exchange on which securities of
the same class are then listed or, if such class is not then so listed, to have
the Registrable Securities accepted for quotation for trading on the NASDAQ
National Market System (or a comparable interdealer quotation system then in
effect);
(xii) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten offerings
containing indemnification provisions and procedures no less favorable to the
selling
9
Qualified Holders and the underwriters, if any, than those set forth in Section
2(e) hereof (or such other provisions and procedures acceptable to Qualified
Holders of a majority of outstanding Registrable Securities covered by such
registration statement and the managing underwriters) and take all such other
reasonable actions in connection therewith (including those reasonably requested
by the managing underwriters, if any, or the Qualified Holders of a majority of
outstanding Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration: (A) make such
representations and warranties to the Qualified Holders of such Registrable
Securities and the underwriters, if any, with respect to the business of Big and
its subsidiaries, and the registration statement, prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (B) obtain opinions of counsel to Big and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and counsel to the Qualified
Holders of the Registrable Securities being sold), addressed to each selling
Qualified Holder of Registrable Securities and each of the underwriters, if any,
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such counsel
and underwriters; (C) unless not permitted to be issued under an applicable
Statement of Accounting Standards, obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of Big (and, if
necessary, any other independent certified public accountants of any subsidiary
of Big or of any business acquired by Big for which financial statements and
financial data is, or is required to be, included in the registration
statement), addressed to each selling Qualified Holder of Registrable Securities
and each of the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; and (D) deliver such documents and
certificates as may be reasonably requested by the Qualified Holders of a
majority of outstanding Registrable Securities being sold, their counsel or the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to Section 2(c)(xii)(A) above and
to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by Big;
(xiii) Make available for inspection by a representative of
the Qualified Holders of a majority of outstanding Registrable Securities being
sold, any
10
underwriter participating in any such disposition of Registrable Securities, if
any, and any attorney, consultant or accountant retained by such selling
Qualified Holders or underwriter, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of Big and its subsidiaries, and cause the officers,
directors, agents and employees of Big and its subsidiaries to supply all
information in each case reasonably requested by any such representative,
underwriter, attorney, consultant or accountant in connection with a
registration; provided, that any records, documents and other information
designated by Big as confidential shall be kept confidential by such Persons
unless disclosure of any such record, document or other information is required
by law or by a court or administrative order, in which case such record,
document or information shall be disclosed only to the extent required to comply
with such law or order;
(xiv) Use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its securityholders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act), no later than forty-five (45) days after
the end of any 12-month period (or ninety (90) days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to underwriters in a
firm commitment or reasonable efforts underwritten offering and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the first
fiscal quarter of Big after the effective date of a registration statement,
which statement shall cover said period, consistent with the requirements of
Rule 158; and
(xv) If so requested by the Majority Qualified Holders of the
Securities being sold in connection with such offering, promptly amend the
relevant registration statement, by post-effective amendment or otherwise, to
reflect any change in the plan or method of distribution of the Registrable
Securities being sold in connection with such registration.
Big may require any Qualified Holder to furnish Big such information
regarding such Qualified Holder and the distribution of Registrable Securities
by such Qualified Holder as Big may from time to time reasonably request in
writing and as shall be required by law or by the Commission in connection with
any registration.
If any such registration statement refers to any Qualified Holder by name
or otherwise as the Qualified Holder of any securities of Big, then such
Qualified Holder
11
shall have the right to require (A) the insertion therein of language, in form
and substance reasonably satisfactory to such Qualified Holder, to the effect
that the holding by such Qualified Holder of such securities is not to be
construed as a recommendation by such Qualified Holder of the investment quality
of Big's securities covered thereby and that such holding does not imply that
such Qualified Holder will assist in meeting any future financial requirements
of Big, or (B) in the event that such reference to such Qualified Holder by name
or otherwise is not required by the Securities Act or any similar federal
statute then in force, the deletion of the reference to such Qualified Holder in
any amendment or supplement to the registration statement filed or prepared
subsequent to the time that such reference ceases to be required.
(d) Registration Expenses. Whether or not any registration statement
prepared and filed pursuant to this Section 2 is declared effective by the
Commission (except where a Demand Registration is terminated, withdrawn or
abandoned at the written request (other than pursuant to a 50% Withdrawal) of
the Majority Qualified Holders), Big shall pay all expenses incident to Big's
performance of or compliance with the registration requirements of this
Agreement, including, without limitation, the following: (A) all Commission and
any NASDAQ registration and filing fees and expenses; (B) any and all expenses
incident to its performance of, or compliance with, this Agreement, including,
without limitation, any allocation of salaries and expenses of Big personnel or
other general overhead expenses of Big, or other expenses for the preparation of
historical and pro forma financial statements or other data normally prepared by
Big in the ordinary course of its business; (C) all listing, transfer and/or
exchange agent and registrar fees; (D) fees and expenses in connection with the
qualification of the Registrable Securities under securities or "blue sky" laws
including reasonable fees and disbursements of counsel for the underwriters in
connection therewith; (E) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or by the Qualified Holders of a majority of outstanding
Registrable Securities included in any registration statement) (F) messenger,
telephone and delivery expenses; and (G) fees and out-of-pocket expenses of
counsel for Big and its independent certified public accountants (including the
expenses of any audit, review and/or "cold comfort" letters) and other persons,
including special experts, retained by Big (collectively, clause (A) through
(G), "Registration Expenses"); provided, however, that Big shall not be required
to pay, and the Qualified Holders shall pay, all fees and out-of-pocket expenses
of more than one counsel selected by the Qualified Holders or any
12
discounts, commissions or fees of underwriters, selling brokers and dealers
relating to the distribution of the Registrable Securities.
(e) Indemnification; Contribution.
(i) Big shall, notwithstanding termination of this Agreement
and without limitation as to time, indemnify and hold harmless, each Qualified
Holder of Registrable Securities, the officers, directors, partners, agents,
investment advisors and employees of each of them, each Person who controls any
such Qualified Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, partners, agents
and employees of each such controlling Person, to the fullest extent lawful,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, legal or other expenses reasonably incurred in
connection with investigating or preparing to defend or defending against or
appearing as a third party witness in connection therewith) and expenses,
including expenses of investigation (collectively, "Losses"), as incurred,
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus or form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of any prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent that (a) the untrue statement or omission
in the form of a preliminary prospectus was corrected in the final prospectus or
(b) such are based upon information regarding such Qualified Holder furnished in
writing to Big by or on behalf of such Qualified Holder expressly for use
therein to the extent that such information was reasonably relied on by Big in
the preparation thereof. The obligations of Big to each Indemnified Party shall
be separate obligations, and the liability of Big to any Indemnified Party
hereunder shall not be extinguished solely because any other Indemnified Party
is not entitled to indemnity hereunder.
(ii) In connection with any registration statement in which a
Qualified Holder of Registrable Securities is participating, such Qualified
Holder of Registrable Securities shall furnish to Big in writing such
information as Big reasonably requests for use in connection with any
registration statement or prospectus and each Qualified Holder agrees, severally
and not jointly, to indemnify and hold harmless Big, its directors, officers,
agents and employees, each Person who controls Big (within the meaning of
Section 15 of the Securities Act or Section 20 of the
13
Exchange Act), and the directors, officers, agents or employees of each such
controlling Person, to the fullest extent lawful, from and against all Losses
(as determined by a court of competent jurisdiction in a final judgment not
subject to appeal or review) arising out of or based upon any untrue statement
of a material fact contained in any registration statement, prospectus, or form
of prospectus, or arising out of or based upon any omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by such
Qualified Holder to Big expressly for use in such registration statement or
prospectus and that such information was reasonably relied upon by Big in
preparation of such registration statement, prospectus or form of prospectus. In
no event shall the liability of any selling Qualified Holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such Qualified Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(iii) If any Proceeding shall be brought or asserted against
any Person entitled to indemnity hereunder (an "Indemnified Party"), such
Indemnified Party promptly shall so notify the Person from whom indemnity is
sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses
incurred in connection therewith; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations pursuant to this Section 2(e), except to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to review or appeal) that such failure shall have materially
prejudiced the Indemnifying Party, and provided further, that such failure to
give notice shall not relieve the Indemnifying Party from any liability which it
may have otherwise than under this Section 2(e).
Any such Indemnified Party shall have the right to employ
separate counsel in any such action, claim or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party
has agreed to pay such fees and expenses; or (ii) the Indemnifying Parties shall
have failed promptly to assume the defense of such action, claim or proceeding
and to employ counsel reasonably satisfactory to such Indemnified Party or
Parties in any such action, claim or proceeding; or (iii) the named parties to
any such action, claim or proceeding (including any impleaded parties) include
both such Indemnified Party or Parties and
14
one or more of the Indemnifying Parties, and such Indemnified Parties shall have
been advised in writing by counsel to the Indemnifying Party or Parties that a
conflict of interest may exist if such counsel represents such Indemnified Party
or Parties and one or more of the Indemnifying Parties (in which case, if any
such Indemnified Party notifies the Indemnifying Parties in writing that it
elects to employ separate counsel at the expense of the Indemnifying Parties,
the Indemnifying Parties shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Parties), it being
understood, however, that, the Indemnifying Parties shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings 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 (in addition to any local counsel) at
any time for all such Indemnified Parties, which firm shall be designated in
writing by the Indemnified Parties. No Indemnifying Party shall be liable for
any settlement of any such Proceeding made without its written consent. No
Indemnifying Party shall, without the prior written consent of each Indemnified
Party, effect any settlement of any proceeding unless such settlement includes
an unconditional release of such Indemnified Party from all liability on claims
that are or may be the subject matter of such proceeding.
All fees and expenses of each Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such action or proceeding in a manner not
inconsistent with this Section 2(e) shall be paid to such Indemnified Party, as
incurred, upon written notice thereof to the Indemnifying Parties (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder).
(iv) If a claim by an Indemnified Party for indemnification
under Section 2(e)(i) or 2(e)(ii) hereof is found unenforceable in a final
judgment by a court of competent jurisdiction (not subject to further appeal or
review) even though the express provisions hereof provide for indemnification in
such case, then each applicable Indemnifying Party, in lieu of this Section 2(e)
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses in such proportion
as is appropriate to reflect the relative fault of each Indemnifying Party and
the Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of each such Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a
15
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 2(e)(iii)
hereof, any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or Proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 2(e)(iv) were determined by
pro rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 2(e)(iv), an
Indemnifying Party that is a Qualified Holder of Registrable Securities shall
not be required to contribute any amount in excess of the amount by which the
total price at which the securities sold by such Indemnifying Party and
distributed to the public were offered to the public exceeds the amount of any
damages that such Indemnifying Party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 10(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(f) Selection of Underwriters. If any of the Registrable Securities
covered by any registration statement filed pursuant to Sections 2(a) or 2(b),
are to be sold pursuant to an underwritten offering, the managing underwriter or
underwriters thereof shall be selected by (i) in the case of any registration
statement filed pursuant to Section 2(a) hereof, the Qualified Holders of a
majority of outstanding Registrable Securities included in such offering,
subject to the consent of Big (which shall not be unreasonably withheld or
delayed) and (ii) in the case of any registration statement pursuant to Section
2(b) hereof, by Big or in such other manner as Big may agree. No Person may
participate in any underwritten registration hereunder unless such Person (i)
agrees to sell such Person's Registrable Securities on the basis reasonably
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
16
3. CERTAIN REQUIREMENTS IN CONNECTION WITH REGISTRATION RIGHTS.
(a) If the managing underwriter for a registration pursuant to
Section 2(a) that involves an underwritten offering shall advise Big in writing
that, in its opinion, the inclusion of some or all of the Registrable Securities
to be sold for the account of Qualified Holders would adversely affect the price
per unit to be derived from the offering or otherwise materially and adversely
affect the success of the offering, then the number of Registrable Securities to
be sold for the account of such Qualified Holders shall be reduced (and may be
reduced to zero) in accordance with the managing underwriter's written opinion
to the minimum extent necessary to eliminate any such adverse effects. If the
number of securities to be included in any registration is reduced (but not to
zero), the number of such securities (including the Registrable Securities)
excluded from such registration shall be allocated, first, on a pro rata basis
to the securities requested to be registered for the account of any Person (as
defined in Section 2 of the Securities Act) (including Big), other than the
Person who made the original demand request pursuant to Section 2(a)(i) and
other than the holders of Priority Registrable Securities (as hereinafter
defined), on the basis of the relative number of shares of such securities such
person has requested to be included in such registration, second, to the Person
who made the original demand request pursuant to Section 2(a)(i), other than the
holders of Priority Registrable Securities and, last, on a pro rata basis among
all other holders of Big securities who may hold senior registration rights
("Other Qualified Holders") with respect to shares of Big Common Stock
("Priority Registrable Securities"), on the basis of the relative number of
shares of such Priority Registrable Securities such Other Qualified Holder has
requested to be included in such registration, if any. If, as a result of the
proration provisions of this Section 3(a), any Qualified Holder shall not be
entitled to include all Registrable Securities in a registration pursuant to
Section 2(a) that such Qualified Holder has requested be included, such
Qualified Holder may elect to withdraw its Registrable Securities from the
registration; provided, however, that such withdrawal election shall be
irrevocable and, after making a withdrawal election, a Qualified Holder shall no
longer have any right to include Registrable Securities in the registration as
to which such withdrawal election was made.
(b) If the managing underwriter for a registration pursuant to
Section 2(b) that involves an underwritten offering shall advise Big in writing
that, in its opinion, the inclusion of some or all of the Registrable Securities
to be sold for the account of Qualified Holders would adversely affect the price
per unit Big or the holders of Big's securities who initiated such offering, if
any, will derive from the
17
offering or otherwise materially and adversely affect the success of the
offering, then the number of Registrable Securities to be sold for the account
of such Qualified Holders shall be reduced (and may be reduced to zero) in
accordance with the managing underwriter's written opinion to the minimum extent
necessary to eliminate any such adverse effects. If the number of securities to
be included in any registration is reduced (but not to zero), the number of such
securities (including the Registrable Securities) excluded from such
registration shall be allocated, first, on a pro rata basis to the securities
requested to be registered for the account of any Person (including Big), other
than the holders of Priority Registrable Securities, on the basis of the
relative number of shares of such securities such person has requested to be
included in such registration and second, on a pro rata basis among all Other
Qualified Holders with respect to Priority Registrable Securities, on the basis
of the relative number of shares of such Priority Registrable Securities such
Other Qualified Holder has requested to be included in such registration. If, as
a result of the proration provisions of this Section 3(b), any Qualified Holder
shall not be entitled to include all Registrable Securities in a registration
pursuant to Section 2(b) that such Qualified Holder has requested be included,
such Qualified Holder may elect to withdraw its Registrable Securities from the
registration; provided, however, that such withdrawal election shall be
irrevocable and, after making a withdrawal election, a Qualified Holder shall no
longer have any right to include Registrable Securities in the registration as
to which such withdrawal election was made.
(c) Notwithstanding anything in Section 2(b) to the contrary,
Qualified Holders shall not have any right to include their Registrable
Securities in any distribution or registration of Big Common Stock by Big, which
is a result of a merger, consolidation, acquisition, exchange offer (or other
offering of securities solely to Big's existing stockholders), recapitalization,
other reorganization, dividend reinvestment plan, stock option plan or other
employee benefit plan, or any similar transaction having the same effect.
(d) So long as the Shareholder maintains registration rights
pursuant to this Agreement, subject to existing registration rights granted by
Big prior to the date hereof, without the written consent of the Qualified
Holders of a majority of outstanding Registrable Securities, Big shall not grant
to any Person the right to request Big to register any equity securities of Big
under the Securities Act unless the rights so granted are subject in all
respects to the prior rights of the Qualified Holders of Registrable Securities
set forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement.
18
(e) Subject to the existing registration rights granted by Big prior
to the date hereof, unless the Qualified Holders of a majority of the
Registrable Securities otherwise consent, neither Big nor any of its
securityholders (other than the Qualified Holders of Registrable Securities in
such capacity) shall have the right to include any securities of Big in any
registration effected under Section 2(a) hereof other than Registrable
Securities.
(f) So long as the Shareholder maintains any registration rights
pursuant to this Agreement, Big will not hereafter enter into any agreement or
arrangement with respect to its securities which is inconsistent in any material
respect with the rights granted to the holders of Registrable Securities in this
Agreement.
(g) Big shall use its best efforts to file the reports required to
be filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at any time Big is not required to file such reports, it will, upon the
request of any Qualified Holder of Registrable Securities, make publicly
available other information so long as necessary to permit sales of their
securities pursuant to Rule 144. Big further covenants that it will take such
further action as any Qualified Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Qualified
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144. Upon the
request of any Qualified Holder of Registrable Securities, Big shall deliver to
such Qualified Holder a written statement as to whether it has complied with
such requirements.
4. NOTICES.
Except as otherwise provided below, whenever it is provided in this
Agreement that any notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon any of the parties
hereto, or whenever any of the parties hereto, desires to provide to or serve
upon any person any other communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or sent by registered or certified mail (return receipt
requested, postage prepaid), or by overnight mail, courier, or delivery service
or by telecopy and confirmed by telecopy addressed as follows:
19
(a) If to Big, to:
Big Entertainment, Inc.
0000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxxx Xxxxxxxxxx
Facsimile: (000) 000-0000
- With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Shareholder, to:
The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
- With a copy to:
The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
or at such other address as may be substituted by notice delivered as provided
herein. The furnishing of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly furnished or served on (i) the date on which personally
delivered, with receipt acknowledged, (ii) the date on which telecopied and
confirmed by telecopy
20
answerback, (iii) the next business day if delivered by overnight or express
mail, courier or delivery service, or (iv) three (3) business days after the
same shall have been deposited in the United States mail, as the case may be.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
5. ENTIRE AGREEMENT.
This Agreement and the other agreements entered into in connection
with the Merger Agreement (including, but not limited to, the Shareholder
Agreement) represent the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersede any and all prior
oral and written agreements, arrangements and understandings among the parties
hereto with respect to such subject matter; and can be amended, supplemented or
changed, and any provision hereof can be waived, only by a written instrument
making specific reference to this Agreement signed by Big on the one hand, and
the holders of a majority of the Registrable Securities on the other hand.
6. SUCCESSORS.
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors.
7. PARAGRAPH HEADINGS.
The paragraph headings contained in this Agreement are for general
reference purposes only and shall not affect in any manner the meaning,
interpretation or construction of the terms or other provisions of this
Agreement.
8. APPLICABLE LAW.
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of New York, applicable to contracts to be
made, executed, delivered and performed wholly within such state and, in any
case, without regard to the conflicts of law principles of such state.
21
9. SEVERABILITY.
If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal,
void or unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this Agreement.
10. SPECIFIC PERFORMANCE.
Big acknowledges that it would be impossible to determine the amount
of damages that would result from any breach by it of any of the provisions of
this Agreement and that the remedy at law for any breach, or threatened breach,
of any of such provisions would likely be inadequate and, accordingly, agrees
that each of the Shareholders shall, in addition to any other rights or remedies
which it may have, be entitled to seek such equitable and injunctive relief as
may be available from any court of competent jurisdiction to compel specific
performance of, or restrain Big from violating any of, such provisions. In
connection with any action or proceeding for injunctive relief, Big hereby
waives the claim or defense that a remedy at law alone is adequate and agrees,
to the maximum extent permitted by law, to have such provision of this Agreement
specifically enforced against it, without the necessity of posting bond or other
security against it, and consents to the entry of injunctive relief against it
enjoining or restraining any breach or threatened breach of this Agreement.
11. ARBITRATION.
[Insert Copy of Final Arbitration Provision From Merger Agreement]
12. NO WAIVER.
The failure of any party at any time or times to require performance
of any provision hereof shall not affect the right at a later time to enforce
the same. No waiver by any party of any condition, and no breach of any
provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
22
13. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, any of
which may be by facsimile, each of which shall be deemed an original, but all of
which together shall constitute but one and the same original instrument.
23
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
BIG ENTERTAINMENT, INC.
By:
-----------------------------------
Name:
Title:
THE TIMES MIRROR COMPANY
By:
-----------------------------------
Name:
Title:
24
Exhibit C
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is entered into as of
_________ __, 1999 by and between BIG ENTERTAINMENT, INC., a Florida corporation
(the "Company"), and THE TIMES MIRROR COMPANY, a Delaware corporation ("Times
Mirror").
RECITALS
WHEREAS, the Company and Times Mirror, among others, are parties to
that certain Agreement and Plan of Merger dated as of January __, 1999 (the
"Merger Agreement") providing for the acquisition by the Company of Hollywood
Online Inc. ("HOL") from Times Mirror pursuant to a merger of Big Acquisition
Corp., a wholly owned subsidiary of the Company, with and into HOL (the
"Merger");
WHEREAS, the Company and Times Mirror wish to provide for and
acknowledge certain arrangements and understandings following the Merger; and
WHEREAS, the consummation of the Merger is conditioned upon the
execution of this Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth in this Section 1:
"Affiliate" means any majority-owned subsidiaries of Times Mirror.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in Florida or California are authorized or required by
law to close.
"Competing Business" means MovieFone, MovieLink, Mr. Showbiz, Xxxx.xxx,
Xxxx.xxx, DVD Express, Rough Cut, XXxX.xxx and any similar business, enterprise
or venture that operates as its primary focus a national- or
international-targeted web site dedicated to providing movie-going consumers
with movie-related information or offering for sale movie-themed merchandise or
tickets for movies.
"Person" means any individual, business, trust, unincorporated
association, corporation, partnership, joint venture, limited liability company
or other entity of any kind.
SECTION 2
NON-COMPETITION
2.1 COVENANT NOT TO COMPETE. For a period of three (3) years after the
date of this Agreement, Times Mirror shall not, and shall cause its Affiliates
not to, directly or indirectly, engage or participate in any Competing Business,
nor, directly or indirectly, own, manage, operate, promote (except through paid
print and/or traditional paid banner online advertising), control, be connected
with as a stockholder (other than on a passive basis with less than 5% of the
equity of a publicly-traded company and on a passive basis with less than 10% of
the equity of a privately-owned company), joint venturer or partner, in any
Competing Business.
2.2 PERMITTED BUSINESSES. Notwithstanding the provisions of Section
2.1, the following business ventures and other activities shall not be
considered a Competing Business: (i) the operation of the current web sites
operated by the Los Angeles Times and other newspapers owned by Times Mirror to
the extent such web sites provide primarily local and regional movie information
and movie-themed merchandise; provided, however, that if any such web site
offers national consumer commerce movie information, ticketing or reservations
services or movie-themed merchandise for sale it shall be considered a Competing
Business (except as arises out of the national edition of the Los Angeles
Times), (ii) the licensing and syndication of movie information by the L.A.
Times Syndicate to third parties, which information is posted to such third
parties' web sites; (iii) the operation of business-to-business (information
for, film professionals, e.g., casting, credits, location, etc.) web sites by
Times Mirror or any Affiliates; (iv) the operation by Times Mirror or any
Affiliates of a promotional events website such as movie fairs and movie events;
and (v) the operation of web sites promoting the syndicate offerings of the Los
Angeles Times Syndicate and other syndicating operations owned by Times Mirror.
SECTION 3
NON-SOLICITATION AND
NON-INTERFERENCE
For a period of three (3) years after the date of this Agreement, Times
Mirror shall not, directly or indirectly, (a) induce or attempt to induce any
employee of HOL to leave the employ of HOL or in any way interfere adversely
with the relationship between any such employee and HOL, except for a hiring
that results from an unsolicited (direct or indirect) response to a wide-spread
solicitation, (b) induce or attempt to induce any employee of HOL to work for,
render services or (c) induce or attempt to induce any customer, supplier,
licensee, licensor or other business relation of HOL with a willful intent to
cause such person to cease doing business with HOL or with a willful intent to
interfere with the relationship between any such customer, supplier, licensee,
licensor or other business relation and HOL.
SECTION 4
MISCELLANEOUS
4.1 SPECIFIC ENFORCEMENT. The Company and Times Mirror acknowledge and
agree that if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached, irreparable
2
damage would occur and it would be extremely impracticable and difficult to
measure damages. Accordingly, in addition to any other rights and remedies to
which the parties may be entitled by law or equity, the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this agreement and to enforce specifically the term and provisions
hereof, and the parties expressly waive (a) the defense that a remedy in damages
will be adequate and (b) any requirement, in an action for specific performance,
for the posting of a bond.
4.2 GOVERNING LAW. This Agreement shall be governed and construed in
all respects in accordance with the laws of the State of New York. The Company
and Times Mirror each hereby consents to personal jurisdiction in any action
brought with respect to this Agreement and the transactions contemplated hereby
in the United States District Court for the Southern District of New York or, if
subject matter jurisdiction is unable to be obtained in such court, in any state
court in the City of New York in the State of New York. The Company and Times
Mirror each also agrees that service of process may be accomplished pursuant to
the provisions of Section 4.6 hereof.
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof, and no party shall be liable or bound to any other party in any
manner with respect to such subjects by any warranties, representations or
covenants except as specifically set forth herein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
4.5 NOTICES, ETC. Unless otherwise provided, any notice, request,
demand or other communication required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified, or when sent by telex or telecopier (with receipt
confirmed), or one Business Day following deposit with overnight courier or
three Business Days following deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed as follows (or at
such other address as a party may designate by notice to the other):
If to the Company:
Big Entertainment, Inc.
0000 Xxxxxx Xxxx, #000X
Xxxx Xxxxx, Xxxxxxx 00000-0000
Attention: President
Facsimile: (000) 000-0000
3
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx
Facsimile: (000) 000-0000
If to Times Mirror:
The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
4.6 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
invalid, unenforceable or void, this Agreement shall continue in full force and
effect without said provision. In such event, the parties shall negotiate, in
good faith, a legal, valid and enforceable substitute provision which most
nearly effects the intent of the parties in entering into this Agreement.
4.7 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.8 FACSIMILE SIGNATURES. Any signature page delivered by a fax machine
or telecopy machine shall be binding to the same extent as an original signature
page, with regard to any agreement subject to the terms hereof or any amendment
thereto. Any party who delivers such a signature page agrees to later deliver an
original counterpart to any party which requests it.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
4
The foregoing agreement is hereby executed as of the date first above
written.
BIG ENTERTAINMENT, INC.
By:
-----------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: President
THE TIMES MIRROR COMPANY
By:
-----------------------------------
Name:
Title:
5
Exhibit D
VOTING AGREEMENT
AGREEMENT, dated as of January 10, 1999 (this "Agreement"), by and
among THE TIMES MIRROR COMPANY, a Delaware corporation ("TM"), and each of the
other parties signatory hereto (each, a "Stockholder" and, collectively, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, concurrently herewith, TM, HOLLYWOOD ONLINE, INC., a
California corporation ("Hollywood") and a direct wholly-owned subsidiary of TM,
and BIG ENTERTAINMENT, INC., a Florida corporation ("Big"), are entering into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement;" capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement)
pursuant to which BIG ACQUISITION CORP., a Delaware corporation ("Merger Sub")
and a wholly-owned subsidiary of Big will be merged with and into Hollywood (the
"Merger");
WHEREAS, each of the Stockholders Beneficially Owns (as defined
herein) the number of shares, par value $.01 per share, of common stock of Big
(the "Shares" or "Company Common Stock") set forth opposite such Stockholder's
name on Schedule I hereto;
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, TM has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. Provisions Concerning Company Common Stock. Each Stockholder
hereby agrees that during the period (the "Agreement Period") commencing on the
date hereof and continuing until the first to occur of the Merger and
termination of the Merger Agreement in accordance with its terms, at any meeting
of the holders of Company Common Stock, however called, or in connection with
any written consent of the holders of Company Common Stock, such Stockholder
shall vote (or cause to be voted) the Shares held of record or Beneficially
Owned by
NYFS05...:\41\26141\0006\1916\AGRD318N.40B
such Stockholder, whether heretofore owned or hereafter acquired, in favor of
approval of the issuance of Company Common Stock to TM (if required pursuant to
the rules and regulations of the NASDAQ or any other applicable law) in
connection with the Merger. Such Stockholder shall not enter into any agreement
or understanding with any Person (as defined below), the effect of which would
be inconsistent or violative of the provisions and agreements contained herein.
For purposes of this Agreement, "Beneficially Own" or "Beneficial Ownership"
with respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" as within the
meanings of Section 13(d)(3) of the Exchange Act. For purposes of this
Agreement, "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2. Restrictions on Voting. During the Agreement Period, each
Stockholder hereby agrees that it will not vote any such Stockholder's Shares in
favor of the approval of any other merger, consolidation, sale of assets,
reorganization, recapitalization, liquidation or winding up of Big or any other
extraordinary transaction involving Big or any matters related to or in
connection therewith, or any corporate action relating to the consummation of
which would frustrate the purposes of, or prevent or delay the consummation of,
the transactions contemplated by the Merger Agreement.
3. Representations and Warranties. Each Stockholder represents and
warrants to Parent and Sub that as of the date hereof:
(a) such Stockholder (i) owns beneficially all of the Shares set
forth opposite such Stockholder's name in Schedule I hereto, (ii) has the full
and unrestricted legal power, authority and right to enter into, execute and
deliver this Agreement without the consent or approval of any other person and
(iii) has not entered into any voting agreement with or granted any person any
proxy (revocable or irrevocable) with respect to such Shares (other than this
Agreement);
(b) this Agreement is the valid and binding agreement of such
Stockholder; and
2
(c) no investment banker, broker or finder is entitled to a
commission or fee from such Stockholder or Big in respect of this Agreement
based upon any arrangement made by or on behalf of such Stockholder.
4. Termination. Except as otherwise provided herein, the covenants
and agreements contained herein with respect to the Shares shall terminate upon
the termination of the Agreement Period.
5. Stockholder Capacity. No person executing this Agreement who is
or becomes during the term hereof a director of Big makes any agreement or
understanding herein in his or her capacity as such director. Each Stockholder
signs solely in his or her capacity as the record and/or beneficial owner of
such Stockholder's Shares.
6. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to any Stockholder: At the addresses set forth
on Schedule I hereto
3
If to Big
or Merger Sub: Big Entertainment, Inc.
000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxxxxx
with a copy to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
If to TM: The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to: The Times Mirror Company
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
If to HOL, prior to
Effective Time: Hollywood Online, Inc.
0000 00xx Xxxxxx, Xxxxx 000, Xxxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
4
(c) Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(e) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed in counterparts,
any one of which may be by facsimile, each of which shall be deemed to be an
original, but all of which, taken together, shall constitute one and the same
Agreement.
(g) Failure to Perform. The parties hereto agree that if for any
reason any party hereto shall have failed to perform its obligations under this
Agreement, then the party seeking to enforce this Agreement against such
non-performing party shall be entitled to specific performance and injunctive
and other equitable relief, and the parties hereto further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such-injunctive or other equitable relief. This provision is
without prejudice to any other rights or remedies, whether at law or in equity,
that any party hereto may have against any other party hereto for any failure to
perform its obligations under this Agreement.
(h) Transfers. Each Stockholder agrees that if it sells, transfers,
assigns, encumbers or otherwise disposes (each a "Transfer") of any Shares it
Beneficially Owns (whether to an affiliate or otherwise), it shall require the
transferee of such Shares to execute and deliver to Times Mirror and Big, an
agreement identical in form to this Agreement except for the identity of such
Stockholder prior
5
to or concurrent with the consummation of such Transfer. Each of Times Mirror,
Merger Sub and Big understand and acknowledge that, subject to the preceding
sentence, the Stockholder is free to Transfer any Shares it Beneficially Owns at
such times and in such manner as it deems appropriate.
[Remainder of page intentionally left blank]
6
IN WITNESS WHEREOF, TM and each Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.
THE TIMES MIRROR COMPANY
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
XXXXXXXX XXXXXXXXXX
/s/ Xxxxxxxx Xxxxxxxxxx
----------------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxx
----------------------------------------
XXXXXX X. XXXXXXXXX
/s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
TEKNO SIMON, LLC
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title:
7
Schedule I to
Stockholders Agreement
Number of Shares
Stockholder Name and Address Beneficially Owned
---------------------------- ------------------
Xxxxxxxx Xxxxxxxxxx and Xxxxxx X. Silver, 1,820,493
as tenants by the entirety
c/o Big Entertainment, Inc.
0000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, XX 00000-0000
Mr. and Xxx. Xxxxxx X. Xxxxxxxxx 286,076
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
Tekno Simon, LLC 563,852
Xxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Mr. Xxxxx Xxxxx
8
EXHIBIT E
OFFICERS' CERTIFICATE
THE TIMES MIRROR COMPANY
HOLLYWOOD ONLINE INC.
In connection with the merger (the "Merger") of Big Acquisition Corp.
("Sub"), a direct newly-formed, wholly-owned subsidiary of Big Entertainment,
Inc. ("Parent"), with and into Hollywood Online Inc. ("HOL"), pursuant to the
Agreement and Plan of Merger, dated as of January 10, 1999 (the "Merger
Agreement"), the undersigned hereby represents:
A. The fair market value of the common stock of Parent and the
Parent Rights (as defined in the Merger Agreement)
(collectively, the "Parent Common Stock"), and the preferred
stock of Parent (the "Parent Preferred Stock") and any cash in
lieu of fractional shares to be received by each shareholder
of HOL in the Merger will be approximately equal to the fair
market value of the stock of HOL ("HOL Stock") surrendered in
the exchange.
2. Prior to and in connection with the Merger, none of the HOL
Stock will be (i) redeemed by HOL, (ii) acquired by any person
related to HOL (as defined in Treas. Reg. ss. 1.368-1(E)(3)
without regard to ss. 1.368-1(e)(3)(i)(A)) for consideration
other than Parent Common Stock and Parent Preferred Stock (and
any cash in lieu of fractional shares), or (iii) the subject
of any extraordinary distributions by HOL.
3. On the date of the Merger, HOL will not have outstanding any
warrants, options, convertible securities, or any other type
of right pursuant to which any person could acquire stock in
HOL that, if exercised or converted, would affect Parent's
acquisition or retention of control of HOL within the meaning
of Section 368(c) of the Internal Revenue Code of 1986, as
amended (the "Code").
4. In the Merger, shares of HOL Stock representing control of HOL
(within the meaning of Section 368(c) of the Code) will be
exchanged solely for Parent Common Stock. For purposes of this
representation, any shares of HOL Stock exchanged for cash or
other property originating with Parent or a direct or indirect
subsidiary of Parent will be treated as outstanding HOL Stock
on the date of the Merger.
5. In connection with or in anticipation of the Merger, HOL has
not sold, transferred or otherwise disposed of any of its
assets as would prevent Parent or members of its qualified
group (within the meaning of Treas. Reg. ss.
1.368-1(d)(4)(ii)) from causing HOL after the Merger to
continue the historic business of HOL or use a significant
portion of HOL's historic assets in a business.
6. On the date of the Merger, the fair market value of the assets
of HOL will exceed the sum of its liabilities, plus the amount
of liabilities, if any, to which the assets are subject.
7. Immediately following the Merger, HOL will hold at least 90%
of the fair market value of its net assets and at least 70%
of the fair market value of its gross assets held
immediately prior to the Merger and at least 90% of the fair
market value of the net assets and at least 70% of the fair
market value of the gross assets of Sub held immediately
prior to the Merger. For purposes of this representation,
amounts paid by HOL to dissenters, amounts paid by HOL to
its shareholders who receive cash or other property in
connection with or pursuant to the Merger, amounts used by
HOL to pay its reorganization expenses and those of its
shareholders, and all redemptions and distributions (except
for regular, normal dividends) made by HOL will be included
in the assets of HOL immediately prior to the Merger.
8. HOL and its shareholders will pay their respective expenses,
if any, incurred in connection with the Merger.
9. HOL is not an investment company as defined in Section 368(a)
(2)(F)(iii) and (iv) of the Code.
10. HOL is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the
Code.
11. There is no intercorporate indebtedness existing between
Parent and HOL or between Sub and HOL that was issued,
acquired or will be settled at a discount.
12. None of the Parent Common Stock to be received in the Merger
by any shareholder of HOL will be separate consideration for,
or allocable to, past or future services. None of the
compensation to be received by any shareholder of HOL who is
(or was) a service provider to HOL is separate consideration
for, or allocable to, such shareholder's shares of HOL Stock
to be surrendered in the Merger, and the compensation to be
paid to any such persons will be for services actually
rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services.
13. The Merger is being effected for bona fide business reasons,
as described in the Proxy Statement.
14. The Merger Agreement represents the full and complete
agreement among Parent, Sub, HOL and Times Mirror regarding
the Merger and there are no other written or oral agreements
regarding the Merger.
15. Neither HOL nor any of its subsidiaries has constituted either
a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (i) in the two years prior to the date
of the Merger Agreement or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
this __ day of __________, 1999.
HOLLYWOOD ONLINE INC.
By:
-----------------------------------
Name:
Title:
THE TIMES MIRROR COMPANY
By:
-----------------------------------
Name:
Title:
EXHIBIT F
6% SERIES E CONVERTIBLE PREFERRED STOCK TERM SHEET
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to them in the Agreement and Plan of Merger to which this Term
Sheet is attached.
AGGREGATE INITIAL
LIQUIDATION PREFERENCE: An amount equal to the product of (x) the
Excess Share Amount multiplied by (y) the
Parent Common Stock Price.
DIVIDENDS: The dividend rate payable on the 6% Series E Convertible
Preferred Stock (the "Preferred Stock") will be six
percent (6%) per annum, which will be calculated based
on the then current liquidation preference and will
accrue from the date of issuance. Dividends for the
Preferred Stock will be payable quarterly, in cash or in
kind as provided below, when, as and if declared by the
Board of Directors of Parent; provided that dividends
shall accrue quarterly regardless of whether declared.
Dividends may be payable-in-kind for the first two years
after the Closing Date, provided that such dividends
have identical terms and are subject to the same
provisions as the Preferred Stock and provided, further,
that if at any time after the second anniversary of the
Closing Date, a third-party lender prohibits Parent from
paying cash dividends pursuant to covenants imposed on
Parent by such lender, dividends shall be
payable-in-kind. In the event that Parent makes a
dividend or other distribution to the holders of Parent
Common Stock that is payable in securities other than
Parent Common Stock, the holders of the Preferred Stock
shall receive (upon conversion thereof), in addition to
shares of Parent Common Stock, the number of such
securities that they would have received had they held
Parent Common Stock on the date of the distribution.
RANKING: With regard to the rights to receive dividends and
distributions upon dissolution, liquidation or winding
up of Parent, the Preferred Stock will rank prior to the
Parent Common Stock and will rank junior to all existing
authorized shares of preferred stock of Parent.
LIQUIDATION RIGHTS: Upon the dissolution, liquidation or winding up of
Parent, whether voluntary or involuntary, the holders of
the Preferred Stock will be entitled to receive out of
the assets of Parent available for distribution to
shareholders an amount in cash equal to the then current
liquidation preference per share of the Preferred Stock
plus accrued and unpaid dividends thereon before any
payment or distribution shall be made on the Parent
Common Stock.
PARTICIPATION RIGHTS: The Preferred Stock shall participate in any dividends
and other payments or distributions (including
liquidation payments) made on the Common Stock.
CONVERSION PRICE: All or any portion of the Preferred Stock will be
convertible into shares of Parent Common Stock at any
time at the option of Times Mirror. Any such conversion
will be based on the then current liquidation preference
of the Preferred Stock, plus accrued and unpaid
dividends thereon through the conversion date. The
conversion price for the Preferred Stock (the
"Conversion Price") will be equal to 105% of the Parent
Common Stock Price.
At any time when Times Mirror's percentage ownership,
for equity accounting purposes, of the fully diluted
voting capital stock of Parent is less than 19.5%, as a
result of a sale or transfer of shares or otherwise,
Times Mirror shall convert such number of shares of
Preferred Stock to cause Times Mirror to hold 19.9% of
the outstanding shares of Common Stock.
The Conversion Price will be subject to adjustment in
accordance with customary "anti-dilution" provisions
including, without limitation:
(i) the issuance of Parent Common Stock or
rights, options, warrants or other
securities convertible into or exchangeable
for shares of Parent Common Stock at a price
per share below the then prevailing market
price of the Parent Common Stock; or
(ii) any subdivision, stock split, stock
dividend or similar event.
If at any time the outstanding shares of Parent Common
Stock shall have been changed into a different number of
shares or a different class of capital stock or other
securities of Parent or any other person by reason of
any capital reorganization, merger or consolidation,
exchange of shares of Parent Common Stock, sale of all
or substantially all of Parent's assets, spinoff or any
other business combination or reorganization (a
"Reorganization"), the holders of the Preferred Stock
(upon conversion) shall be entitled to receive the same
number of shares of capital stock or other securities or
property that they would have been entitled to receive
2
had they converted their shares of Preferred Stock into
shares of Parent Common Stock immediately prior to the
Reorganization and received in exchange for such shares
of Parent Common Stock such different number or
different class of capital or other securities of Parent
or such other person that the holders of Parent Common
Stock would be entitled to receive in the
Reorganization.
Notwithstanding the above, the Conversion Price will not
be subject to adjustment for the issuance of Parent
Common Stock upon the grant of or exercise of options
under Parent's existing or any future stock option
plans; provided, however, that the Conversion Price
shall be adjusted with respect to grants of stock
options under any future stock option plans in excess of
50% of the number of options authorized on the Closing
Date.
Parent and Times Mirror will each pay 50% of any and all
documentary stamp or similar issue or transfer taxes
payable in connection with the issue and delivery of the
Parent Common Stock on conversion of the Preferred
Stock.
OPTIONAL REDEMPTION
BY PARENT: All or any portion of the outstanding shares of
Preferred Stock may be called for redemption at the
option of Parent at any time after the second
anniversary of the Closing Date. Such redemption must be
on at least twenty (20) business day's prior written
notice to Times Mirror. The redemption price will be
equal to the greater of (i) the Market Price (as defined
in the Shareholder Agreement) or (ii) the then current
liquidation preference per share for each share of
Preferred Stock being called for redemption, plus
accrued and unpaid dividends thereon through the
redemption date. If the redemption price is not paid
within 30 days after it is due, interest shall accrue
thereon at the rate of 18% per annum.
VOTING RIGHTS: Except for customary voting rights with respect to
adverse changes to the powers, preferences or rights of
the Preferred Stock and related matters, the Preferred
Stock will have no voting rights.
3
EXHIBIT G
1. No Undisclosed Liabilities. As of the date such certificate is
delivered, except for liabilities set forth on HOL's balance sheet at December
31, 1998 (or reflected in the notes thereto) and except for normal or recurring
liabilities incurred since such date in the ordinary course of business, HOL
does not have any liabilities of any kind whatsoever, either accrued, contingent
or otherwise and whether due or to become due (whether or not required to be
reflected in financial statements pursuant to generally accepted accounting
principles).
