Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as
of May 22, 2002, by and among Hollywood Media Corp., a Florida corporation, with
headquarters located at 2255 Glades Road, Suite 237W, Boca Raton, Florida 33431
(the "Company"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act").
B. The Company has authorized the issuance of up to $5.7
million principal amount of its 6% Senior Convertible Debentures due May 22,
2005 (collectively, the "Debentures"), which shall be convertible into shares of
the Company's common stock, par value $0.01 per share (the "Common Stock") (as
converted, the "Initial Conversion Shares"), in accordance with the terms of the
Debentures.
C. The Buyers severally wish to purchase, upon the terms
and conditions stated in this Agreement, initially (i) an aggregate of up to
$5.7 million principal amount of Debentures on the Initial Closing Date (as
defined below), such Debentures to be in the form attached hereto as Exhibit A
(the "Initial Debentures") in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers and (ii) warrants (the "Warrants") to
purchase shares of Common Stock (as exercised collectively, the "Warrant
Shares"), such Warrants to be substantially in the form attached hereto as
Exhibit B.
D. The Buyers will have the option, subject to the terms
and conditions stated in this Agreement, to purchase in the aggregate up to an
additional $1 million principal amount of Debentures on the Additional Closing
Date(s) (as defined below), such Debentures to be in the form attached hereto as
Exhibit K (the "Additional Debentures") (pro-rata based on the principal amount
of Initial Debentures that each Buyer purchased in relation to the total
principal amount of Initial Debentures issued), which shall be convertible into
shares of Common Stock (as converted, the "Additional Conversion Shares" and,
together with the Initial Conversion Shares, the "Conversion Shares"). The
Initial Debentures and the Additional Debentures collectively are referred to in
this Agreement as the "Debentures."
E. Contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit C (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide the Buyers with the benefit of certain registration rights under the
1933 Act and the rules and regulations promulgated thereunder, and applicable
state securities laws, on the terms and subject to the conditions set forth
therein.
F. The location of defined terms in this Agreement is set
forth on the Index of Terms attached hereto.
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NOW THEREFORE, the Company and the Buyers hereby agree as
follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
a. Purchase of Debentures and Warrants. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a)
below, the Company shall issue and sell to each Buyer, and each Buyer severally
agrees to purchase from the Company, the respective principal amount of Initial
Debentures, together with the related Warrants, set forth opposite such Buyer's
name on the Schedule of Buyers (the "Initial Closing"). Subject to the terms
stated herein, and the satisfaction (or waiver) of the conditions set forth in
Sections 6(b) and 7(b) below, within twelve (12) months following the Initial
Closing Date (as defined below), each Buyer in its sole discretion may notify
the Company (the "Additional Debentures Exercise Notice") that it wishes to
purchase up to its pro rata share of the principal amount of the Additional
Debentures (the maximum pro rata share amount is listed opposite each Buyer's
name on the Schedule of Buyers) and the Company shall issue and sell to such
Buyer such principal amount of Additional Debentures (each, an "Additional
Closing"). The Initial Closing and each Additional Closing are each sometimes
referred to herein as a "Closing." Notwithstanding the foregoing, in the event
that at any time following the effective date of the registration statement
filed pursuant to Section 2(a) of the Registration Rights Agreement (the
"Initial Debentures Registration Statement"), the Conditions to Cancellation of
Right to Purchase Additional Debentures (as defined below) are satisfied, then
the Company shall have the right to send a written notice to all, but not less
than all of the Buyers on the Business Day (as defined below) immediately
following the Measuring Period (as defined below) indicating that the right of
the Buyers to further exercise their option to purchase any Additional
Debentures will terminate on the twentieth (20th) trading day (the "Additional
Debentures Purchase Cancellation Date") following receipt of such written notice
as to the Additional Debentures for which the Buyer has not delivered an
Additional Debentures Exercise Notice as of such termination date. "Conditions
to Cancellation of Right to Purchase Additional Debentures" means the following
conditions: (i) on each day during the period beginning on the first day of the
Measuring Period and ending on the Additional Debentures Purchase Cancellation
Date, the Initial Debentures Registration Statement shall be effective and
available for the sale of at least all of the Registrable Securities (as defined
in the Registration Rights Agreement) required to be included in such Initial
Debentures Registration Statement and there shall not have been any Grace
Periods (as such term is defined in the Registration Rights Agreement); (ii) on
each day during the period beginning on the first day of the Measuring Period
and ending on the Additional Debentures Purchase Cancellation Date, there shall
not have occurred (A) an event constituting an Event of Default (as defined in
the Debentures), (B) an event that with the passage of time and without being
cured would constitute an Event of Default, or (C) the public announcement of a
pending, proposed or intended Change of Control (as defined in the Debentures),
unless such pending, proposed or intended Change of Control has been terminated,
abandoned or consummated and the Company has publicly announced such
termination, abandonment or consummation of such Change of Control and (iii) at
any time following the effective date of the Initial Debentures Registration
Statement, the Closing Sale Price (as defined in the Debentures) is equal to or
greater than 150% of the Conversion Price under the Initial Debenture (subject
to adjustment for stock splits, stock dividends, recapitalizations,
combinations, reverse stock splits or other similar events) during each of the
following two periods: (A) each trading day of any twenty (20) consecutive
trading days following the effectiveness of the Initial Debentures Registration
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Statement (the "Measuring Period") and (B) each trading day during the period
commencing on the Business Day immediately following the Measuring Period and
ending on and including the Additional Debenture Purchase Cancellation Date.
Notwithstanding anything herein to the contrary, in no event shall the issuance
of any Additional Debentures pursuant to Section 4(l) hereof reduce the
$1,000,000 in aggregate principal amount of Additional Debentures that may be
purchased by the Buyers pursuant to this Section 1(a).
b. The Closings. The date and time of the Initial Closing
(the "Initial Closing Date") shall be 10:00 a.m., New York City time, on May 22,
2002, and the date and time of each Additional Closing shall be on the third
(3rd) Business Day following receipt by the Company of the applicable Additional
Debentures Exercise Notice (or such later date as is mutually agreed to by the
Company and the applicable Buyer or Buyers) (each, an "Additional Closing
Date"), in each case subject to the satisfaction (or waiver) of the conditions
set forth in Sections 6(a) and 7(a), or 6(b) and 7(b), as applicable. The
Initial Closing Date and each Additional Closing Date each shall be referred to
as a "Closing Date." Each Closing shall occur on the applicable Closing Date at
the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York
10022. "Business Day" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.
c. Form of Payment. On each Closing Date, (A) each Buyer
shall pay the Company for the Debentures and, in the case of the Initial
Closing, the related Warrants to be issued and sold to such Buyer on such
Closing Date, by wire transfer of immediately available funds in accordance with
the Company's written wire instructions, less any amount withheld at the Initial
Closing for expenses pursuant to Section 4(k), and (B) the Company shall deliver
to each Buyer Debentures (in the denominations as such Buyer shall reasonably
request) representing the principal amount of Debentures which such Buyer is
then purchasing hereunder, along, in the case of the Initial Closing, with
warrants representing the related Warrants, duly executed on behalf of the
Company and registered in the name of such Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only
itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Debentures and the Warrants, (ii) upon conversion of the Debentures owned by it,
will acquire the Conversion Shares then issuable and the Interest Shares, if any
(as defined in the Debentures), and (iii) upon exercise of the Warrants held by
it, will acquire the Warrant Shares issuable upon exercise thereof (the
Debentures, the Conversion Shares, the Interest Shares, the Warrants and the
Warrant Shares collectively are referred to herein as the "Securities") for its
own account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time, provided further, however, that such
disposition shall be in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act.
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b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D under the
1933 Act and was not organized for the specific purpose of acquiring the
Securities.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein and in the
applicable Debenture or Warrant in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.
d. Information. Such Buyer (i) has been furnished with or
has had full access to all of the information that it considers necessary or
appropriate to make an informed investment decision with respect to the
Debentures, the Warrants, the Conversion Shares and the Warrant Shares and that
it has requested from the Company, (ii) has had an opportunity to discuss with
management of the Company the business and financial affairs of the Company and
to obtain information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to it or to which it had access, (iii) can bear the
economic risk of a total loss of its investment in the Debentures and the
Warrants and (iv) has such knowledge and experience in business and financial
matters so as to enable it to understand the risks of and form an investment
decision with respect to its investment in the Debentures, the Warrants, the
Conversion Shares and the Warrant Shares and to protect its interest in
connection with such investment. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in this Agreement.
e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except
as provided in the Registration Rights Agreement: (i) the Securities have not
been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, or (B) such Buyer shall have delivered to
the Company an opinion of counsel in a form reasonably satisfactory to the
Company, to the effect that such Securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such
registration, (ii) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule 144") may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
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obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder. The
Securities and the right to purchase Additional Debentures pursuant to Section
1(a) may be pledged in connection with a bona fide margin account or other loan
secured by the Securities and/or the right to purchase Additional Debentures
pursuant to Section 1(a) and such pledge of Securities and/or the right to
purchase Additional Debentures pursuant to Section 1(a) shall not be deemed to
be a transfer, sale or assignment of the Securities and the right to purchase
Additional Debentures pursuant to Section 1(a) hereunder, and no Investor
effecting a pledge of Securities and the right to purchase Additional Debentures
pursuant to Section 1(a) shall be required to provide the Company with any
notice thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document, including, without limitation, this
Section 2(f); provided that in order to make any sale, transfer or assignment of
Securities and/or the right to purchase Additional Debentures pursuant to
Section 1(a), such Investor and its pledgee makes such disposition in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act.
The right to purchase Additional Debentures pursuant to Section 1(a) shall be
subject to the same restrictions on transfer as the Securities hereunder.
g. Legends. Such Buyer understands that the Debentures and
Warrants, except as set forth below, shall bear a restrictive legend and that
the Initial Debentures shall bear a tax legend in substantially the following
forms (and a stop-transfer order may be placed against transfer of such
Debentures and Warrants):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT
("OID") RULES TO THIS DEBENTURE. THIS DEBENTURE HAS AN ISSUE
PRICE OF $_________, AN AGGREGATE AMOUNT OF OID OF
$__________, AN ISSUE DATE OF MAY 22, 2002, AND A YIELD TO
MATURITY OF 7.689%.
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Such Buyer further understands that until such time as the
Conversion Shares, the Interest Shares and the Warrant Shares have been sold
pursuant to the registration statement contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares, the
Interest Shares and the Warrant Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY
MAY NOT BE OFFERED OR TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE
OR OTHERWISE UNLESS (I) A REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE ACT IS IN EFFECT OR (II) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, WHICH IS SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
The legends set forth above, other than the tax legend, shall be removed and the
Company shall issue the relevant securities without such legend to the holder of
the Securities upon which it is stamped, if, (i) such Securities are registered
for resale under the 1933 Act and are transferred or sold pursuant to such
registration or (ii) in connection with a sale transaction, such holder provides
the Company with an opinion of counsel, reasonably satisfactory to the Company,
to the effect that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act.
h. Authorization; Enforcement; Validity. This Agreement and
the Registration Rights Agreement have been duly and validly authorized,
executed and delivered on behalf of such Buyer and are valid and binding
agreements of such Buyer enforceable against such Buyer in accordance with their
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country or
state specified in its address on the Schedule of Buyers.
j. No Conflicts. The execution and performance of this
Agreement and the Registration Rights Agreement do not conflict with any
agreement to which such Buyer is a party or is bound thereby, any court order or
judgment addressed to such Buyer, or the constituent documents of such Buyer.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that as of the date hereof:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns 30% or more of the capital stock or
other equity or similar interests or owns capital stock or holds an equity or
similar interest which ownership entitles the Company to elect 30% or more of
the board of directors or similar governing body of such entity) are
corporations, partnerships or limited liability companies duly organized and
validly existing in good standing (to the extent such concepts are applicable)
under the laws of the jurisdiction in which they are incorporated or organized,
and have the requisite corporate, limited liability company or partnership power
and authorization to own their properties and to carry on their business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation, partnership or limited liability company to do business and
is in good standing (to the extent such concepts are applicable) in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any
material adverse effect on the business, properties, assets, operations, results
of operations, prospects or condition (financial or otherwise) of the Company
and its Subsidiaries, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). A complete list
of Subsidiaries is set forth on Schedule 3(a).
b. Authorization; Enforcement; Validity. The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Debentures, the Warrants, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
Section 5) and each of the other agreements entered into by the parties hereto
in connection with the transactions contemplated by this Agreement
(collectively, the "Transaction Documents"), and to issue the Securities in
accordance with the terms hereof and thereof. The execution and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Debentures, the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion thereof, the reservation for issuance
and the issuance of Interest Shares in accordance with the terms of the
Debentures, the issuance of the Warrants and the reservation for issuance and
the issuance of the Warrant Shares issuable upon exercise of the Warrants, have
been duly authorized by the Company's Board of Directors and no further consent
or authorization is required of the Company's Board of Directors or stockholders
(except to the extent that stockholder approval may be required pursuant to the
rules of the NASD for the issuance of a number of Conversion Shares, Interest
Shares and Warrant Shares greater in the aggregate than 19.99% of the number of
shares of Common Stock outstanding immediately prior to the Initial Closing Date
(the "19.99% Rule")). The Transaction Documents have been duly executed and
delivered by the Company. The Transaction Documents constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
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with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
c. Capitalization. As of May 20, 2002, the authorized
capital stock of the Company consists of 100,000,000 shares of Common Stock, of
which as of such date, 28,856,041 shares are issued and outstanding and
7,708,945 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans (including pursuant to options outstanding as of such
date as well as options granted thereafter). All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (A) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights (arising under Florida law, the Company's Articles of Incorporation or
By-laws or any agreement or instrument to which the Company is a party) or any
liens or encumbrances granted or created by the Company; (B) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries (other than
any such options, warrants, scrip, rights, calls, commitments, securities,
understandings and arrangement outstanding under plans disclosed in the SEC
Documents); (C) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound; (D) there are no
amounts outstanding under, and there will be no amounts due upon termination of,
any credit agreement or credit facility; (E) there are no financing statements
securing obligations in any amounts greater than $100,000, singly, or $250,000
in the aggregate, filed in connection with the Company or any of its
Subsidiaries, excluding financing statements filed to secure an interest in the
accounts receivable of the Company or its Subsidiaries with an aggregate value
of $433,838 as of May 6, 2002 pursuant to the Accounts Receivable Purchase
Agreement, dated as of October 15, 2001 between the Company and Bridgeport
Capital Services, Inc. (the "Accounts Receivable Agreement"); (F) there are no
agreements or arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (G) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (H) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; (I) the Company does not have any
stock appreciation rights or "phantom" stock plans or agreements or any similar
plan or agreement; (J) to the Company's knowledge, (i) no current or former
officer or director who individually owns 1% or more of the Company's
outstanding capital stock or (ii) other beneficial owner of 5% or more of the
Company's outstanding capital stock, has pledged shares of the Company's capital
stock in connection with a margin account or other loan secured by such capital
stock; and (K) the Company and its Subsidiaries have no liabilities or
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obligations required to be disclosed in the SEC Documents (as defined herein)
but not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company's or its Subsidiaries' respective businesses and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole. The Company
has made available to each Buyer that has requested it true and correct copies
of the Company's Articles of Incorporation, as amended and as in effect on the
date hereof (the "Certificate of Incorporation"), and the Company's By-laws, as
amended and as in effect on the date hereof (the "By-laws"), and the terms of
all securities convertible into or exercisable or exchangeable for Common Stock
and the material rights of the holders thereof in respect thereto except for
stock options granted under any benefit plan or stock option plan of the Company
approved by the Board of Directors of the Company. The Company has delivered to
each Buyer a true and correct copy of the Accounts Receivable Agreement as
amended and in effect on the date hereof.
d. Issuance of Securities. The Securities are duly
authorized and, upon issuance in accordance with the terms of the applicable
Transaction Documents, shall be (i) validly issued, fully paid and
non-assessable and (ii) free from all taxes, liens and charges with respect to
the issuance thereof (other than any such taxes, liens and charges created by
any Buyer or assignee or transferee), and, except as set forth in Schedule 3(c),
shall not be subject to pre-emptive rights or other similar rights of
shareholders of the Company. As of the Initial Closing, at least 3,024,626
shares of Common Stock (subject to adjustment pursuant to the Company's covenant
set forth in Section 4(f) below) will have been duly authorized and reserved for
issuance upon conversion of the Initial Debentures, exercise of the Warrants and
the issuance of the Interest Shares issuable over the full term of the Initial
Debentures (assuming the Company paid the maximum amount of interest permitted
to be paid in Interest Shares over the full term of the Initial Debentures). As
of each Additional Closing, at least 120% of the shares of Common Stock (subject
to adjustment pursuant to the Company's covenant set forth in Section 4(f)
below) will have been duly authorized and reserved for issuance upon conversion
of the Additional Debentures being sold at such Additional Closing and the
Interest Shares issuable over the full term of the Additional Debentures being
purchased at such Additional Closing (assuming the Company paid the maximum
amount of interest permitted to be paid in Interest Shares over the full term of
such Additional Debentures). Upon conversion or issuance in accordance with the
Debentures or the Warrants, as applicable, the Conversion Shares, the Interest
Shares and the Warrant Shares, as the case may be, will be validly issued, fully
paid and non-assessable and free from all taxes, liens and charges with respect
to the issue thereof (other than any such taxes, liens and charges created by
any Buyer or any assignee or transferee), with the holders being entitled to all
rights accorded to a holder of Common Stock. Based, in part, on reliance on the
representations and warranties of each of the Buyers in the Transaction
Documents, the issuance by the Company of the Securities is exempt from
registration under the 1933 Act.
e. No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares, the Interest
Shares and the Warrant Shares) will not (i) result in a violation of the
Articles of Incorporation or the By-laws; (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its Subsidiaries is a party (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
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violations as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect); or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market (as defined below)) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of or in default under its Articles of Incorporation,
By-laws or their organizational charter or by-laws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any term of or in default
under any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except where such violations and defaults would not
result, either individually or in the aggregate, in a Material Adverse Effect.
The business of the Company and its Subsidiaries is not being conducted in
violation of any law, ordinance or regulation of any governmental entity, except
where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect. Except as specifically contemplated by this
Agreement, as required under the 1933 Act, as required by Blue Sky filings or as
required by the 19.99% Rule, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its Subsidiaries are currently
unaware of any facts or circumstances which might give rise to any of the
foregoing events set forth in this paragraph. The Company is not in violation of
the listing requirements of the Principal Market, and has no actual knowledge of
any facts which would reasonably lead to delisting or suspension of the Common
Stock by the Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since January 1,
2001, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to or on the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). As of the date of filing of such SEC Documents, each such SEC
Document, as it may have been subsequently amended by filings made by the
Company with the SEC prior to the date hereof, complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Document. None of the SEC
Documents, as of the date filed and as they may have been subsequently amended
by filings made by the Company with the SEC prior to the date hereof, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and published rules and
regulations of the SEC with respect thereto. Such financial statements have been
10
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). To the best of the Company's knowledge, no other written
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d), contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are or were made,
not misleading. Neither the Company nor any of its Subsidiaries nor any of their
officers, directors, employees or agents have provided the Buyers with any
material, nonpublic information. As of the date hereof, the Company meets the
requirements for use of Form S-3 for registration of the resale of Registrable
Securities (as defined in the Registration Rights Agreement) and does not have
any knowledge or reason to believe that it does not meet such requirements or
any actual knowledge of any fact which would reasonably result in its not
meeting such requirements. The Company is not required to file and will not be
required to file any agreement, note, lease, mortgage, deed or other instrument
entered into prior to the date hereof and to which the Company is a party or by
which the Company is bound which has not been previously filed as an exhibit to
its reports filed with the SEC under the 1934 Act. Except for the issuance of
the Debentures and the Warrants contemplated by this Agreement, no event,
liability, development or circumstance has occurred or exists, or is currently
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws and
which has not been publicly disclosed.
g. Absence of Certain Changes. Except as disclosed in the
SEC Documents available on the EDGAR system, since December 31, 2000, there has
been no change or development that has had or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. Except as
disclosed in the SEC Documents available on the EDGAR system, since December 31,
2000, (i) the Company has not declared or paid any dividends, and (ii) as of the
date hereof, has not sold any assets, individually or in the aggregate, in
excess of $100,000 outside of the ordinary course of business or had capital
expenditures, individually or in the aggregate, in excess of $200,000.
h. Absence of Litigation. Except as disclosed in the
section titled "Legal Proceedings" in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened in writing against the Company or
any of the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, that would
11
reasonably be expected to result in judgments against the Company or any of its
Subsidiaries in an amount, individually or in the aggregate, in excess of
$250,000.
i. No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated, nor will the Company or any of its Subsidiaries take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings.
j. Employment Matters; ERISA Matters. (i) Neither the
Company nor any of its Subsidiaries is involved in any material union labor
dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any
such dispute threatened. None of the Company's or its Subsidiaries' U.S.
employees is a member of a union which relates to such employee's relationship
with the Company. Neither the Company nor any of its Subsidiaries is a party to
a collective bargaining agreement. No executive officer (as defined in Rule
501(f) of the 1933 Act) has notified the Company in writing that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company.
(ii) The Company and its Subsidiaries are in compliance
with all federal, state, local and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
k. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use (i) all
trademarks, trade names, trade dress, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, technology
licenses, approvals, governmental authorizations, trade secrets, and other
intellectual property rights (collectively, "Intellectual Property") necessary
to conduct their respective businesses as now conducted and as currently
contemplated to be conducted other than businesses that the Company has not as
of the date hereof launched, except where the failure to own, possess or protect
such rights would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect. None of the Company's or its
Subsidiaries' Intellectual Property rights have expired or terminated, or are
expected to expire or terminate within two years from the date of this
Agreement, except where such expiration or termination would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. Except as would not reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of Intellectual
Property rights of others, or of any development of similar or identical trade
secrets or technical information by others and except as would not reasonably be
expected to result in a Material Adverse Effect, there is no claim, action or
proceeding being made by or brought against, or to the knowledge of the Company,
currently threatened in writing by or against, the Company or its Subsidiaries
12
regarding the Intellectual Property rights of or the use of any Intellectual
Property by the Company or its Subsidiaries or any third party.
l. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries taken as a whole, in each case free and
clear of all liens, encumbrances and defects except such as (i) constitute
purchase money security interests, (ii) are described in Schedule 3(l) or (iii)
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and any of its Subsidiaries. Any real property and facilities
held under lease by the Company and any of its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and facilities by the Company and its Subsidiaries.
m. Environmental Laws. The Company and its Subsidiaries (A)
are in compliance with any and all Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (C) are in
compliance with all terms and conditions of any such permit, license or
approval, except in each case where the failure of the Company and its
Subsidiaries would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect. The term "Environmental Laws"
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes into the environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
n. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
o. Regulatory Permits. Except for Permits (as defined
below) the absence of which would not, either individually or in the aggregate,
result in a Material Adverse Effect, the Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as currently conducted (the "Permits"), and neither the Company nor
13
any such Subsidiary has received any written notice of proceedings relating to
the revocation or modification of any such Permit.
p. No Materially Adverse Contracts, Etc. Neither the
Company nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is currently expected in
the future to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company's officers has or is currently expected to have a Material Adverse
Effect.
q. Tax Status. Except as could not reasonably be expected
to have a Material Adverse Effect, the Company and each of its Subsidiaries (i)
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges due with
respect to the periods covered by such returns, reports and declarations, except
those being contested in good faith and for which the Company has made
appropriate reserves on its books, and (iii) has paid or set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
(referred to in clause (i) above) apply. There are no unpaid taxes that are
individually or in the aggregate material in amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
r. Transactions With Affiliates. Except as set forth on
Schedule 3(r) and in the SEC Documents, and other than the grant of stock
options described on Schedule 3(c), none of the officers, directors, employees
of the Company is presently a party to any transaction with the Company or any
of its Subsidiaries (other than in connection with the provision of services as
employees, officers and directors, payment of ordinary course business expenses
for employees, and other expenditures on behalf of employees in an aggregate
amount for all employees not in excess of $500,000), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
s. Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation, the laws of the
state of its incorporation or the laws of any other state which is or could
become applicable to the Buyers as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyers' ownership of the Securities.
t. Foreign Corrupt Practices. Neither the Company nor any
of its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company or any Subsidiary used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
14
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
u. MovieTickets.com. The Company is the record and
beneficial owner of 2,500 shares of common stock of MovieTickets.com, Inc.
("MovieTickets"), representing ownership of approximately 26% of the economic
and voting interest in MovieTickets, free and clear of any preemptive right,
restriction on voting or transfer or any pledge, lien (statutory or otherwise),
claim, preference, priority charge, encumbrance or security interest of any kind
except as set forth on Schedule 3(u) hereof.
4. COVENANTS.
a. Best Efforts. Each party shall use its reasonable best
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Buyers at each of the Closings pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyers on or prior to
each of the Closing Dates (to the extent such action is required by applicable
law). The Company shall make all filings and reports relating to the offer and
sale of the Securities required under applicable securities or "Blue Sky" laws
of the states of the United States following each Closing Date.
c. Reporting Status. Other than pursuant to a Change of
Control (as defined in the Debentures), until the earlier of (i) the date which
is one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares, the
Interest Shares and the Warrant Shares without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto) and (ii) the date
on which (A) the Investors shall have sold all the Conversion Shares, the
Interest Shares and the Warrant Shares and (B) none of the Debentures or
Warrants is outstanding (the "Reporting Period"), the Company shall timely file
all reports required to be filed with the SEC pursuant to the 1934 Act and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from
the sale of the Debentures and the Warrants to fund working capital and for
general corporate purposes.
15
e. Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period: (i) within ten (10) days
after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
any registration statements (other than on Form S-8) or amendments thereto filed
pursuant to the 1933 Act, provided that if any such report is filed with the SEC
through EDGAR and is available to the Buyers via EDGAR then no such deliveries
shall be required; (ii) using its reasonable efforts, on the same day as the
release thereof, facsimile copies of all press releases issued by the Company
relating to the Company's quarterly operating results and (iii) copies of any
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than (i) prior to the issuance of any Additional Debentures,
120% of the number of shares of Common Stock (the "Initial Reservation Amount")
needed to provide for the issuance of the Initial Conversion Shares upon
conversion of all of the Initial Debentures, the Warrant Shares upon exercise of
all of the Warrants (without regard to any limitations on conversions or
exercise) and the maximum number of Interest Shares issuable over the full term
of the Initial Debentures (assuming the Company paid the maximum amount of
interest permitted to be paid in Interest Shares over the full term of the
Initial Debentures) and (ii) from and after the first issuance of any Additional
Debentures, 120% of the number of shares of Common Stock (the "Additional
Reservation Amount") needed to provide for the issuance of the Additional
Conversion Shares upon conversion of all of the Additional Debentures and the
maximum number of Interest Shares issuable over the full term of the Additional
Debentures (assuming the Company paid the maximum amount of interest permitted
to be paid in Interest Shares over the full term of the Additional Debentures).
g. Listing. The Company shall promptly secure the listing
of all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and, shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. So long as
any Securities are outstanding, the Company shall maintain the Common Stock's
authorization for quotation on listing on The New York Stock Exchange, Inc. (the
"NYSE"), the American Stock Exchange, Inc. ("AMEX") or The Nasdaq Stock Market,
Inc. ("NASDAQ") (as applicable, the "Principal Market"). The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(g).
h. Filing of Form 8-K. At or before 8:30 a.m., New York
City time, on the Business Day following the Initial Closing Date, the Company
shall file a Current Report on Form 8-K with the SEC describing the terms of the
transactions contemplated by the Transaction Documents and including as exhibits
to such Current Report on Form 8-K this Agreement, the form of Initial
Debenture, the form of Additional Debenture, the form of Warrants and the
Registration Rights Agreement in the form required by the 1934 Act. At or before
8:30 a.m., New York City time, on the Business Day following each Additional
16
Closing Date, if any, the Company shall file a Current Report on Form 8-K with
the SEC describing the transaction consummated on such Additional Closing Date.
i. Proxy Statement. If the Company, at any time determines
that in connection with the issuance of the Securities, Stockholder Approval is
required by the Principal Market in connection with the 19.99% Rule, the Company
shall provide each stockholder entitled to vote at the next meeting of
stockholders of the Company, which meeting shall occur on or before ninety days
from the date of such determination (the "Stockholder Meeting Deadline"), a
proxy statement, which has been previously reviewed by the Buyers and a counsel
of their choice, soliciting each such stockholder's affirmative vote at such
stockholder meeting for approval of the Company's issuance of all of the
Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the Principal Market (such
affirmative approval being referred to herein as the "Stockholder Approval"),
and the Company shall use its reasonable best efforts to solicit its
stockholders' approval of such issuance of the Securities and to cause the Board
of Directors of the Company to recommend to the stockholders that they approve
such proposal.
j. Pledge of Securities. The Company acknowledges and
agrees that the Securities may be pledged in compliance with applicable
securities laws by an Investor in connection with a bona fide margin agreement
or other loan secured by the Securities. The pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Investor effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document, including, without
limitation, Section 2(f) of this Agreement; provided that in order to make any
sale, transfer or assignment of Securities, such Investor and its pledgee makes
such disposition in accordance with or pursuant to a registration statement or
an exemption under the 1933 Act. The Company hereby agrees to execute and
deliver such reasonable documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.
k. Expenses. Subject to Section 9(l) below, at the Initial
Closing, the Company shall reimburse the Buyers for the Buyers' reasonable,
documented fees and expenses of Schulte Roth & Zabel LLP incurred in connection
with the consummation of the transactions contemplated by this Agreement, up to
a maximum of $40,000, which reasonable, documented amount shall be withheld by
the Buyers from its Purchase Price to be paid at the Initial Closing.
l. Additional Debentures. For so long as any Buyer
beneficially owns any Securities, the Company will not issue any Debentures
other than to the Buyers as contemplated hereby and the Company shall not issue
any other securities that would cause a breach or default under the Debentures;
provided, however, that the Company may issue to Viacom Inc., Societe Generale
and Velocity Investment Partners Ltd. an additional principal amount of
additional Initial Debentures not to exceed in the aggregate the amount set
forth on Schedule 4(l)(i) and additional Additional Debentures not to exceed in
the aggregate the amount set forth on Schedule 4(l)(ii), each as required by the
contractual participation rights held on the Initial Closing Date by each such
party, within fifteen (15) Business Days after the Additional Closing Date on
terms and conditions which are no more favorable, either individually or in the
aggregate, than the terms and conditions set forth in the Transaction Documents.
On or before 8:30 a.m. on the Business Day following the consummation of the
17
sale of any Debentures contemplated by this Section 4(l) the Company shall file
a Current Report on Form 8-K with the SEC describing the transaction
consummated.
m. Tax Matters.
(i) For United States Federal income tax purposes, the Company and each
Buyer agree (A) to treat the Debentures as indebtedness, (B) that
$253,699.60 of the aggregate purchase price for the securities issued
by the Company to the Buyers hereunder is attributable to the purchase
of the Warrants, and (C) to treat the Initial Debentures as having been
issued for an aggregate purchase price of $5,446,300.40.
(ii) The Company shall be permitted to withhold from any amounts
payable to a Buyer, a Debenture holder, a Warrant holder or a holder of
Common Stock any taxes required by law to be withheld from such amount.
If the Company shall be required to withhold or deduct any tax, levy or
other governmental charge, excluding (A) net income taxes, franchise
taxes, or taxes imposed on or measured by net income (or overall gross
receipts, to the extent such tax is imposed in lieu of a tax on net
income by a jurisdiction that does not impose any tax based on or
measured by net income) on any Buyer or Debenture holder by the
jurisdiction in which such Buyer or Debenture holder is organized or
any other jurisdiction in which such Buyer or Debenture holder would be
subject to tax without regard to the transactions contemplated hereby,
and (B) U.S. Federal withholding taxes (unless such U.S. Federal
withholding taxes would not be imposed but for a change in or amendment
to the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Regulations or any other administrative authority thereunder
or any tax treaty or the release or promulgation of any judicial
decision relating thereto, in each case, on or after the later of (x)
the date of this Agreement or (y) the date such Debenture holder
becomes a party hereto (each, a "Change in Law")) (all such
non-excluded taxes, levies or other governmental charges, "Taxes") from
any payment of interest, or any accrual of original issue discount, for
U.S. Federal income tax purposes made hereunder or under any Debenture
to or for the benefit of any Buyer or any Debenture holder, then (A)
the amount payable shall be increased by the amount necessary so that
after making all required deductions and withholdings (including
deductions and withholdings with respect to additional amounts payable
under this Section 4(m)) such Buyer or such Debenture holder shall
receive an amount equal to the amount it would have received if no such
deduction or withholding of Taxes had been required, (B) the Company
shall make such deduction or withholding and (C) the Company shall pay
the full amount deducted to the appropriate governmental authority in
accordance with applicable law. If any Buyer or any Debenture holder is
organized under the laws of a jurisdiction other than the United
States, any State thereof or the District of Columbia (each a "Non-U.S.
Debenture Holder"), it shall deliver to the Company two copies of
either (A) U.S. Internal Revenue Service Form W-8BEN (claiming complete
exemption from U.S. Federal withholding tax under an income tax
treaty), or any successor form; (B) U.S. Internal Revenue Service Form
W-8ECI (claiming complete exemption from U.S. Federal withholding tax
because the income is effectively connected with a U.S. trade or
business), or any successor form; (C) in the case of a Non-U.S.
18
Debenture Holder claiming exemption from U.S. Federal withholding tax
under Section 871(h) or 881(c) of the Code, with respect to payments of
"portfolio interest," U.S. Internal Revenue Service Form W-8BEN
(certifying as to beneficial ownership), or any successor form, and a
certificate in form and substance reasonably acceptable to the Company
representing that such Non-U.S. Debenture Holder is not a "bank" for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of the Company
and is not a "controlled foreign corporation" related to the Company
(within the meaning of Section 864(d)(4) of the Code); or (D) other
applicable form, certificate or document prescribed by the U.S.
Internal Revenue Service certifying as to such Non-U.S. Debenture
Holder's entitlement to a complete exemption from U.S. Federal
withholding tax, as applicable, in all cases such forms and other
documents being properly completed and duly executed by such Non-U.S.
Debenture Holder claiming complete exemption from U.S. Federal
withholding tax on payments of interest (or of original issue discount)
for U.S. Federal income tax purposes by the Company under the
Debentures. Each Buyer, each Warrant holder and each holder of common
stock that is organized under the laws of a jurisdiction other than the
United States, any State thereof or the District of Columbia (each a
"Non-U.S. Equity Holder") also shall deliver to the Company, to the
extent legally able to do so, with respect to payments of dividends for
U.S. Federal income tax purposes by the Company, if applicable, two
copies of either (A) U.S. Internal Revenue Service Form W-8BEN
(claiming a reduction of U.S. Federal withholding tax under an
applicable income tax treaty, if any), or any successor form, (B) U.S.
Internal Revenue Service Form W-8ECI (claiming complete exemption from
U.S. Federal withholding tax because the income is effectively
connected with a U.S. trade or business), or any successor form, or (C)
other applicable form, certificate or document prescribed by the U.S.
Internal Revenue Service certifying as to such Non-U.S. Equity Holder's
entitlement to an exemption from, or a reduction of, U.S. Federal
withholding tax on payments of dividends for U.S. Federal income tax
purposes by the Company, as applicable, in all cases such forms and
other documents being properly completed and duly executed by such
Non-U.S. Equity Holder. In addition, each Buyer, each Debenture holder,
each Warrant holder, and each holder of Common Stock that is not
otherwise exempt from "back-up withholding" shall deliver to the
Company two properly completed and duly executed copies of either (A)
U.S. Internal Revenue Service Form W-8BEN, or any successor form, (B)
U.S. Internal Revenue Service Form W-8ECI, or any successor form, (C)
U.S. Internal Revenue Service Form W-9, or any successor form, or (D)
other applicable form, certificate or document prescribed by the U.S.
Internal Revenue Service, as applicable, in each case indicating that
such Buyer, Debenture holder, Warrant holder, or holder of Common Stock
is not subject to "back-up withholding" for U.S. Federal income tax
purposes. The forms and other documents required to be delivered
pursuant to this Section 4(m)(ii) shall be delivered (A) on or prior to
the Initial Closing Date and (B) from time to time thereafter if within
ten (10) Business Days after receipt of a written request therefor by
the Company. In addition, each Buyer, each Debenture holder, each
Warrant holder and each holder of Common Stock shall promptly notify
the Company at any time it determines that it is no longer in a
position to provide any previously delivered (or requested) form,
document or certificate to the Company, including as a result in whole
or in part from a Change in Law; provided, however, that the failure to
19
provide such notice shall not affect any Buyer's or Debenture holder's
right to any additional amounts hereunder.
(iii) Notwithstanding anything to the contrary in Section 4(m)(ii)
above, the Company shall not be required to pay any additional amount
to any Buyer or any Debenture holder pursuant to the preceding
paragraph to the extent the Tax in respect of which such additional
amount would otherwise be payable would not have been imposed but for
the failure of such Buyer or Debenture holder to comply with its
obligations under such paragraph; provided, however, that the failure
to provide the applicable form, document or certificate pursuant to the
preceding paragraph as provided in the notice required by the preceding
paragraph resulting in whole or in part from a Change in Law shall not
affect such Buyer's or Debenture holder's right to any additional
amounts hereunder.
n. The business of the Company and its Subsidiaries shall
not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
o. So long as least $1,000,000 in principal amount of the
Debentures is outstanding, the Company will not, directly or indirectly, pledge,
hypothecate, encumber, allow to exist any lien on or otherwise grant a security
interest in its equity interest in MovieTickets.com, Inc., including any
dividends, distributions or other securities issued in respect of or exchange
for such securities, whether by MovieTickets.com, Inc. or any successor thereto.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agents, and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at DTC, registered in the name
of each Buyer or its respective nominee(s), for the Conversion Shares and
Warrant Shares in such amounts as specified from time to time by each Buyer to
the Company upon conversion of the Debentures or exercise of the Warrants, as
applicable and in accordance with their respective terms (the "Irrevocable
Transfer Agent Instructions"), a form of which is attached as Exhibit D hereto.
Prior to transfer or sale pursuant to a registration statement or Rule 144 under
the 1933 Act of the Conversion Shares and the Warrant Shares, all such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction inconsistent with the
Irrevocable Transfer Agent Instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares and the Warrant Shares, prior to registration of the
Conversion Shares and the Warrant Shares under the 1933 Act) will be given by
the Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Debentures, the Warrants and the Registration
Rights Agreement. If a Buyer provides the Company with an opinion of counsel, in
generally acceptable form, to the effect that a public sale, assignment or
transfer of Securities may be made without registration under the 1933 Act or
that the Securities can be sold pursuant to Rule 144 without any restriction as
20
to the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of the
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates, or credit shares to one or more balance
accounts at DTC, in such name and in such denominations as specified by such
Buyer and without any restrictive legend. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyers by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyers shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. The obligation of the Company to issue and sell the
Debentures and the Warrants to each Buyer at the Initial Closing is subject to
the satisfaction, at or before the Initial Closing Date, of each of the
following conditions, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the purchase price
(less any amounts withheld pursuant to Section 4(k)) for the Initial
Debentures and the Warrants being purchased by such Buyer at the
Initial Closing, by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall be true
and correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to
materiality in Section 2 above, in which case such representations and
warranties shall be true and correct without further qualification) as
of the date when made and as of the Initial Closing Date as though made
at that time (except for representations and warranties that speak as
of a specific date (which shall be true and correct as of such date)),
and such Buyer shall have performed, satisfied and complied with in all
material respects the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with
by such Buyer at or prior to the Initial Closing Date.
b. The obligation of the Company to issue and sell the
Additional Debentures to each Buyer at an Additional Closing is subject to the
satisfaction, at or before the applicable Additional Closing Date, of each of
the following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole discretion
by providing each Buyer with prior written notice thereof:
21
(i) Such Buyer shall have delivered to the Company the purchase price
for the Additional Debentures being purchased by such Buyer at such
Additional Closing, by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(ii) The representations and warranties of such Buyer shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality
in Section 2 above, in which case such representations and warranties
shall be true and correct without further qualification) as of the date
when made and as of such Additional Closing Date as though made at that
time (except for representations and warranties that speak as of a
specific date (which shall be true and correct as of such date)), and
such Buyer shall have performed, satisfied and complied with in all
material respects the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with
by such Buyer at or prior to such Additional Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. The obligation of each Buyer hereunder to purchase the
Initial Debentures and the Warrants from the Company at the Initial Closing is
subject to the satisfaction, at or before the Initial Closing Date, of each of
the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with prior written notice thereof:
(i) The Company shall have executed each of the Transaction Documents
and delivered the same to such Buyer.
(ii) The Common Stock (x) shall be designated for quotation or listed
on the Principal Market and (y) shall not have been suspended by the
SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been
threatened either (A) in writing by the SEC or the Principal Market or
(B) by falling below the minimum listing maintenance requirements of
the Principal Market; and the Initial Conversion Shares issuable upon
conversion of the Initial Debentures (without regard to any limitations
on conversions), the Warrant Shares issuable upon exercise of the
Warrants (without regard to any limitations on exercises) shall be
listed (subject to official notice of issuance) on the Principal Market
and the maximum number of Interest Shares issuable over the full term
of the Initial Debentures (assuming the Company paid the maximum amount
of interest permitted to be paid in Interest Shares over the full term
of the Initial Debentures) shall be approved for listing on the
Principal Market.
(iii) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to
materiality in Section 3 above, in which case such representations and
warranties shall be true and correct without further qualification) as
22
of the date when made and as of the Initial Closing Date as though made
at that time (except for representations and warranties that speak as
of a specific date (which shall be true and correct as of such date))
and the Company shall have performed, satisfied and complied with in
all material respects the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Initial Closing Date.
(iv) The Company shall have delivered to such Buyer the opinion of
Weil, Gotshal & Manges LLP, counsel to the Company, dated as of the
Initial Closing Date, in the form of Exhibit E attached hereto and the
opinion of Broad & Cassel, special securities counsel to the Company,
dated as of the Initial Closing Date, in the form of Exhibit I attached
hereto.
(v) The Company shall have executed and delivered to such Buyer the
Initial Debentures and the Warrants (in such denominations as such
Buyer shall reasonably request) for the Initial Debentures and the
Warrants being purchased by such Buyer at the Initial Closing.
(vi) As of the Initial Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Initial Debentures, the exercise of
the Warrants and the payment of interest in the form of Interest Shares
(assuming the Company paid the maximum amount of interest permitted to
be paid in Interest Shares over the full term of the Initial
Debentures) 3,024,626 shares of its Common Stock.
(vii) The Company shall have delivered the Irrevocable Transfer Agent
Instructions, in the form of Exhibit D attached hereto, to the
Company's transfer agent.
(viii) The Company shall have delivered to such Buyer a secretary's
certificate, dated as of the Initial Closing Date, certifying as to (A)
adoption of the form of resolutions of the Board of Directors of the
Company consistent with Section 3(b) above (the "Resolutions"), (B) the
Certificate of Incorporation and (C) the By-laws, each as in effect at
the Initial Closing.
(ix) The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance
of the Securities pursuant to this Agreement in compliance with such
laws.
(x) The Chief Executive Officer, Mitchell M. Rubenstein, and the
President, Laurie S. Silvers, of the Company shall have executed and
delivered to each Buyer an agreement to extend their line of credit in
favor of the Company, in the form attached hereto as Exhibit F (the
"Line of Credit Agreement").
b. The obligation of each Buyer hereunder to purchase
Additional Debentures from the Company at any Additional Closing is subject to
the satisfaction, at or before such Additional Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
23
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:
(i) The Common Stock (x) shall be designated for quotation or listed on
the Principal Market and (y) shall not have been suspended by the SEC
or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened
either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum listing maintenance requirements of the
Principal Market; and the Additional Conversion Shares issuable upon
conversion of the Additional Debentures (without regard to any
limitations on conversions) and the maximum number of Interest Shares
issuable over the full term of the Additional Debentures (assuming the
Company paid the maximum amount of interest permitted to be paid in
Interest Shares over the full term of the Additional Debentures) shall
be approved for listing on the Principal Market.
(ii) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to
materiality in Section 3 above, in which case such representations and
warranties shall be true and correct without further qualification) as
of the date when made and as of such Additional Closing Date as though
made at that time (except for representations and warranties that speak
as of a specific date (which shall be true and correct as of such
date)) and the Company shall have performed, satisfied and complied
with in all material respects the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to such Additional Closing
Date.
(iii) The Company shall have executed and delivered to such Buyer the
Additional Debentures (in such denominations as such Buyer shall
reasonably request) for the Additional Debentures being purchased by
such Buyer at such Additional Closing.
(iv) As of each Additional Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Additional Debentures
and the payment of interest in the form of Interest Shares on all
Additional Debentures issued on such Additional Closing Date, 120% of
the number of shares of Common Stock issuable upon conversion of such
Additional Debentures and the number of Interest Shares issuable under
such Additional Debentures (assuming the Company paid the maximum
amount of interest permitted to be paid in Interest Shares over the
full term of such Additional Debentures).
(v) The Board of Directors of the Company shall have adopted, and shall
not have amended, rescinded or repealed, the Resolutions.
(vi) The Irrevocable Transfer Agent Instructions shall remain in effect
as of such Additional Closing Date and the Company shall cause its
Transfer Agent to deliver a letter to the Buyers to that effect.
24
(vii) The Company shall have delivered to such Buyer a secretary's
certificate, dated as of the Additional Closing Date, certifying as to
(A) adoption of the Resolutions, (B) the Certificate of Incorporation
and (C) the By-laws, each as in effect at such Additional Closing.
(viii) The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance
of the Securities pursuant to this Agreement in compliance with such
laws.
(ix) The Company shall have delivered to such Buyer the opinion of
Weil, Gotshal & Manges LLP, counsel to the Company, dated as of each
Additional Closing Date, in the form of Exhibit H attached hereto and
the opinion of Broad & Cassel, special securities counsel to the
Company, dated as of each Additional Closing Date, in the form of
Exhibit J attached hereto.
8. INDEMNIFICATION. In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer, each holder of Debentures and Warrants and each affiliate
of any Buyer holding Securities and all of their stockholders, partners,
members, officers, directors, employees and direct or indirect investors and any
of the foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements, but excluding amounts covered by Section 4(m)(ii) hereof (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of or arising
out of, or relating to (a) any misrepresentation or breach of any representation
or warranty made by the Company in the Transaction Documents or (b) any breach
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or (c) any cause of action, suit or claim brought or made
against such Indemnitee (other than a cause of action, suit or claim which is
(x) brought or made by the Company and (y) is not a shareholder derivative suit)
and arising out of or resulting from (i) the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities or (iii) the status of such Buyer, such holder of
Debentures and Warrants and any such affiliate of any Buyer holding Securities
as an investor in the Company. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 8 shall be the same as those set forth in
Sections 6(a) and (d) of the Registration Rights Agreement, including, without
limitation, those procedures with respect to the settlement of claims and the
Company's rights to assume the defense of claims.
25
9. MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between each Buyer, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended or waived other than by an instrument in writing signed
by the Company and the holders of at least 60% of the outstanding principal
26
amount of the Debentures or Conversion Shares, as applicable (but excluding from
such calculation Debentures issued or issuable pursuant to Section 4(l) or
Conversion Shares issued or issuable upon conversion of such Debentures). No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Debentures then outstanding. No consideration shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents or holders of
the Conversion Shares, as the case may be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one (1) Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Hollywood Media Corp.
2255 Glades Road, Suite 237W
Boca Raton, Florida 33431
Telephone:(561) 998-8000
Facsimile:(561) 998-2974
Attention:Chief Executive Officer
With copies to:
Hollywood Media Corp.
2255 Glades Road, Suite 237W
Boca Raton, Florida 33431
Telephone:(561) 998-8000
Facsimile:(561) 998-2974
Attention:General Counsel
and
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone:(713) 546-5275
Facsimile: (713) 224-9511
Attention:W. Robert Shearer, Esq.
27
If to the Transfer Agent:
American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level
New York, NY 10038
Facsimile:(718) 921-8323
If to a Buyer, to it at the address and facsimile number
set forth on the Schedule of Buyers, with copies to such Buyer's representatives
as set forth on the Schedule of Buyers, or at such other address and/or
facsimile number and/or to the attention of such other person as the recipient
party has specified by written notice given to each other party five (5) days
prior to the effectiveness of such change. Written confirmation of receipt (A)
given by the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttal evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Securities; provided, however, that
such successor or assignee shall deliver the forms specified in Section 4(m)(ii)
as if it were a "Buyer." The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the holders
of at least 60% of the outstanding principal amount of the Debentures (but
excluding from such calculation Debentures issued or issuable pursuant to
Section 4(l)). A Buyer may assign some or all of its rights and obligations
hereunder without the consent of the Company; provided, however, that the
transferee has agreed in writing to be bound by the applicable provisions of
this Agreement and provided, further, that such assignment shall be in
connection with a transfer of all or a portion of the Debentures and Warrants
held by such Buyer and subject to the terms and conditions of the Warrants and
Debentures, as applicable. Any such assignment shall only be effective upon the
Company's receipt of written notice thereof. Any Buyer shall be entitled to
pledge the Securities in connection with a bona fide margin account or other
loan secured by the Securities and the pledge of Securities shall not be deemed
to be a transfer, sale or assignment of the Securities hereunder, and no
Investor effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document, including, without
limitation, Section 2(f) of this Agreement; provided that in order to make any
sale, transfer or assignment of Securities, such Investor and its pledgee makes
such disposition in accordance with or pursuant to a registration statement or
an exemption under the 1933 Act.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
28
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive until such time as no Debentures remain outstanding. Each Buyer
shall be responsible only for its own representations, warranties, agreements
and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to (i) file a Current Report on Form 8-K, substantially in the form
attached hereto as Exhibit G, after the Initial Closing, (ii) make any press
release or other public disclosure of information that previously has been
publicly disclosed (other than pursuant to a breach of this paragraph), and
(iii) make any press release or other public disclosure with respect to such
transactions in the form as is required by applicable law and regulations.
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Initial Closing shall
not have occurred with respect to a Buyer on or before five (5) Business Days
from the date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6(a) and 7(a) above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party.
m. Placement Agent. The Company acknowledges that it has
engaged one or more placement agents in connection with the sale of the
Debentures and the Warrants and that the total amount of compensation of each
such agent has been disclosed in writing to each Buyer. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or brokers' commissions (other than for persons engaged by any Buyer or
its investment advisor) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
attorney's fees and out-of-pocket expenses) arising in connection with any such
claim.
n. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
o. Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any person having any rights under any provision of this
29
Agreement shall be entitled to enforce such rights to recover damages by reason
of any breach of any provision of this Agreement and to exercise all other
rights granted by law. Furthermore, the Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations
under this Agreement, any remedy at law may prove to be inadequate relief to the
Buyers. The Company therefore agrees that the Buyers shall be entitled to seek
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages and without posting a bond or other security.
p. Payment Set Aside. To the extent that the Company makes
a payment or payments to any Buyer hereunder or pursuant to any of the other
Transaction Documents, or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
[signature page follows]
30
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the date first
written above.
COMPANY:
HOLLYWOOD MEDIA CORP.
By: /s/ Nicholas G. Hall
---------------------------------------
Name: Nicholas G. Hall
Title: Senior Vice President and
Chief Operating Officer
31
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
BUYERS:
PORTSIDE GROWTH & OPPORTUNITY FUND LTD.
By: /s/ Jeffrey M. Solomon
---------------------------------------
Name: Jeffrey M. Solomon
Title: Authorized Person
LEONARDO, L.P.
By:
---------------------------------------
Name:
Title:
CARPE DIEM LONG SHORT FUND, LLC
(a Delaware limited liability company)
By: CD Capital Management, LLC
Its: Investment Manager
By: /s/ John Ziegelman
---------------------------------------
Name: John Ziegelman
Title: President
MITCHELL RUBENSTEIN
By: /s/ Mitchell Rubenstein
---------------------------------------
32
[additional buyers signature page]
FEDERATED KAUFMANN FUND
By: Federated Investment Management Company
Its: Attorney -In-Fact
By:
---------------------------------------
Name:
Title:
33
SCHEDULE OF BUYERS
Maximum Principal
Investor's Name, Representative, Principal Amount Amount
Address for Notices of Initial of Additional
and Facsimile Number Debentures Debentures Number of Warrants
-------------------- ---------- ---------- ------------------
Portside Growth & Opportunity Fund Ltd. $1,000,000 $175,438.60 101,156
c/o Ramius Capital Group, LLC
666 Third Avenue, 26th Floor
New York, NY 10017
Attention: Jeffrey M. Solomon
Andrew Strober
Telephone: (212) 845-7917
Facsimile: (212) 845-7999
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Attn: Eleazer Klein
Facsimile: (212) 593-5955
Telephone: (212) 756-2000
Leonardo, L.P. $3,000,000 $526,315.79 294,118
c/o Angelo Gordon, LP
245 Park Avenue
New York, NY 10167
Attention: Fred Berger
Gary Wolf
(212) 867-6449
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Attn: Eleazer Klein
Facsimile: (212) 593-5955
Telephone: (212) 756-2000
Federated Kaufmann Fund
140 East 45th Street, 43rd Floor $1,000,000 $175,438.60 101,156
New York, New York 10017
Attention: Judith Reardon
with a copy to:
Federated Investors, Inc.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Attention: G. Andrew Bonnewell, Esq.
Carpe Diem Long Short Fund, LLC
(a Delaware Limited liability company) $200,000 $35,087.72 20,231
c/o CD Capital Managment, LLC
Attention John Ziegelman, President
Principal Address: 2 North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Ph: 312.466.3226
Fx: 312.559.1288
Mitchell Rubenstein $500,000 $87,719.29 50,578