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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 30, 1999
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BIG ENTERTAINMENT, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 0-22908 65-0385686
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(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
2255 GLADES ROAD, SUITE 237 WEST, BOCA RATON, FLORIDA 33431
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 998-8000
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26141.0006
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
GENERAL
On September 1, 1999, the Company announced that it has entered into a Stock
Purchase Agreement, dated August 26, 1999 (the "Stock Purchase Agreement"),
between the Company and CBS Corporation ("CBS") providing for the issuance by
the Company to CBS of 6,672,031 shares of the Company's common stock for an
aggregate purchase price of $105,303,030. $100,000,000 of the purchase price is
payable by CBS in advertising, promotion and content over a seven-year term
pursuant to an Advertising and Promotion Agreement (the "Promotion Agreement")
and a Content License Agreement (the "Content Agreement"). The Promotion
Agreement and the Content Agreement will be entered into by CBS and
hollywood.com, Inc., the Company's wholly owned subsidiary that operates the
Hollywood.com website, upon the closing of the transaction. The balance of the
purchase price is payable in cash by CBS to the Company upon the closing of the
transaction. The Company will also issue to CBS upon the closing of the
transaction a Warrant (the "Warrant") to purchase an additional 1,178,892 shares
of common stock for an aggregate exercise price of $10,937,002. Half of the
warrant exercise price is payable in cash and half is payable in additional
advertising and promotion under the Promotion Agreement during the 24-month
period immediately following the exercise of the Warrant by CBS. Pursuant to the
Stock Purchase Agreement, the Company and CBS will, upon the closing of the
transaction, enter into an Investor's Rights Agreement, a Registration Rights
Agreement and a Voting Agreement.
STOCK PURCHASE AGREEMENT
The Stock Purchase Agreement contains customary representations and warranties,
covenants, closing conditions and indemnification provisions for a transaction
of this nature. The Company agrees in the Stock Purchase Agreement to use its
best efforts to conduct its business and operations in the ordinary course
consistent with past practice until the closing of the CBS transaction. The
Company specifically agrees, among other things, that until such closing it will
not, without the consent of CBS (1) incur any indebtedness for borrowed money;
(2) sell, license or dispose of any of its material properties or assets except
in the ordinary course of business; (3) acquire or agree to acquire any business
or company (other than up to two acquisitions for an aggregate purchase price of
$10 million); or (4) consummate any registered public offering of common stock
to be sold for the account of the Company. During the period between the signing
of the Stock Purchase Agreement and the closing of the transaction, CBS has a
preemptive right to purchase a pro rata portion of shares of common stock or
securities convertible into common stock issued by the Company. If CBS elects to
exercise this right, it will purchase the shares for cash upon the closing of
the transaction between CBS and the Company and otherwise on the same terms as
the Company has agreed to issue the shares. This preemptive right does not apply
to certain issuances of shares by the Company, including issuances to directors,
officers,
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employees, contractors, advisors or consultants of the Company or its
subsidiaries in the ordinary course of business.
WARRANT
Upon the closing of the transactions under the Stock Purchase Agreement, the
Company will issue to CBS a Warrant to purchase 1,178,892 shares of common stock
for an aggregate exercise price of $10,937,002. Half of the warrant exercise
price is payable in cash at the closing and half is payable in additional
advertising and promotion under the Promotion Agreement. The additional
advertising and promotion will be furnished to the Company during the 24-month
period immediately following the exercise of the Warrant by CBS. The Warrant may
be exercised at any time prior to the earlier of (1) the second anniversary of
the date of its issuance and (2) the consummation by the Company of its first
underwritten, registered public offering of common stock following the date of
issuance of the Warrant.
ADVERTISING AND PROMOTION AGREEMENT
Pursuant to the Promotion Agreement, CBS will provide to the Company an
aggregate of $70 million in advertising and promotion of the Hollywood.com
website over a seven-year term ($10 million per year). In addition, the Company
has the right to allocate up to $30 million in value deliverable by CBS under
the Content Agreement to additional advertising and promotion under the
Promotion Agreement. CBS will conduct the advertising and promotion across its
full range of media properties, including the CBS television network, CBS owned
and operated television stations, CBS cable networks, Infinity Broadcasting
Corporation's radio stations and outdoor billboards, CBS Internet sites and CBS
syndicated television programs. CBS will deliver the advertising and promotion
pursuant to a media plan jointly developed by CBS and the Company, which will
provide broad-based exposure for the Hollywood.com website, including prominent
placements in conjunction with appropriate entertainment-related events and
programming. The value of all advertising and promotion furnished by CBS to the
Company will be based on the average unit price paid to CBS by third parties for
the particular media on which the advertising and promotion occurs. CBS has the
right to terminate its obligation to deliver advertising and promotion under the
Promotion Agreement upon the occurrence of specified defaults by the Company
that are not cured within the time periods specified in the Promotion Agreement.
CONTENT LICENSE AGREEMENT
Pursuant to the Content Agreement, CBS will provide to the Company an aggregate
of $30 million in value over a seven-year term to be allocated in the Company's
discretion to the license of content, advertising sales or advertising and
promotion. The Company will receive $4.3 in value during each of the first six
years of the term and $4.2 in value during the last year of the term.
License of Content. CBS grants to the Company a non-exclusive license to use,
distribute and otherwise make available on the Hollywood.com website certain
text, graphics, photographs,
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video, audio and other information owned by CBS and related to the movie
business or any particular motion picture. In addition, subject to compliance by
the Company with certain obligations, it has the right to archive the CBS
content on the Hollywood.com website after expiration of the term of the Content
Agreement.
Advertising Sales. The Company has the right to require CBS to sell
advertisements on the Hollywood.com website totaling gross advertising revenues
of up to $1.5 million per year. In connection therewith, CBS agrees to include
the Hollywood.com website in all advertising sales programs and presentations
that are appropriate for the sale of advertising on the website. The Company
will pay to CBS a commission of 8% of gross advertising revenues generated by
advertising sold by CBS on the Hollywood.com website in excess of the portion of
the $1.5 million guaranteed amount selected by the Company each year.
Advertising and Promotion. The Company has the right to allocate all or any
portion of the $30 million in value to additional advertising and promotion of
the Hollywood.com website to be furnished by CBS under the Promotion Agreement.
CBS has the right to terminate its obligations under the Content Agreement upon
the occurrence of specified defaults by the Company that are not cured within
the time periods specified in the Content Agreement.
INVESTOR'S RIGHTS AGREEMENT
The Investor's Rights Agreement to be entered into by the Company and CBS at the
closing sets forth various rights and obligations of the Company and CBS related
to CBS's ownership of the Company's common stock, including CBS's registration
rights with respect to the common stock, the Company's right of first refusal
with respect to transfers by CBS of the common stock, standstill provisions to
which CBS is bound, and preemptive rights of CBS with respect to certain
issuances of common stock and other securities by the Company.
Registration Rights. CBS has the right to initiate up to four registrations
under the Securities Act of 1933 of the common stock that it is acquiring from
the Company. The Investor's Rights Agreement contains various restrictions on
the timing of such registrations. In addition, CBS has "piggyback" registration
rights allowing it to include the shares of common stock that it acquires from
the Company in registrations of the Company's common stock initiated by the
Company or other shareholders. The Company will pay all expenses associated with
any such registrations other than underwriters' fees or commissions relating to
the sale of the common stock.
Transfer Restrictions; Right of First Refusal. CBS is not permitted to transfer
any shares of the Company's common stock for a period of one year after the
closing, except to certain affiliates of CBS. If CBS proposes to transfer any
shares of common stock during the six year period following the first year,
other than to certain affiliates or in a bona fide public distribution pursuant
to an effective registration statement, the Company has the right to purchase
the shares on the same terms on which CBS proposes to transfer them to a third
party. The Company's right
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of first refusal will terminate (a) at such time as Mitchell Rubenstein, the
Company's Chairman of the Board and Chief Executive Officer, and Laurie S.
Silvers, the Company's Vice Chairman of the Board and President, have sold more
than 60% of the common stock owned by them as of the closing or (b) at any time
after the second anniversary of the closing if CBS owns less than 15% of the
Company's outstanding common stock (other than as a result of transfers by CBS
of at least half of the common stock acquired by it from the Company).
Standstill Provisions. For a period of seven years after the closing, CBS agrees
that, except as contemplated by the Investor's Rights Agreement or the Stock
Purchase Agreement, it will not, directly or indirectly, do any of the
following:
(1) acquire or propose to acquire any securities of the Company if,
after giving effect thereto, CBS and its affiliates beneficially
own in excess of 34.8% of the Company's outstanding common stock;
(2) solicit proxies or become a participant in a solicitation of
proxies or consents with respect to any securities of the Company
or initiate or encourage the submission of any stockholder
proposal or election content with respect to the Company;
(3) take any action for the purpose of convening a meeting of the
shareholders of the Company or initiate any process to solicit or
obtain consents of shareholders in lieu of a meeting;
(4) except as may be required by applicable law, make any public
announcement or disclosure in respect in respect of any plan,
contract or arrangement relating to the acquisition of capital
stock of the Company or a merger, sale of assets or other
extraordinary corporate transaction relating to the Company;
(5) deposit capital stock of the Company into a voting trust or
subject capital stock of the Company to voting agreements, or
grant a proxy or power-of-attorney with respect to any capital
stock of the Company to any person not designated by the Company
who is not an officer, director or employee of CBS or its
affiliates;
(6) form or in any participate in a group for the purpose of
acquiring, holding, voting or disposing of securities of the
Company; or
(7) disclose publicly any intention or arrangement inconsistent with
the foregoing or enter into any discussions or understandings
with any third party with a view to encouraging any action
prohibited with the foregoing.
If the Company's board of directors approves or recommends to its shareholders
for approval any transaction in which a party (other than Company's existing
large shareholders) would acquire at least 50% of the Company's outstanding
common stock, then the restrictions described above would not apply during the
pendency of the transaction and would cease upon the consummation of the
transaction.
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VOTING AGREEMENT
The Voting Agreement to be entered into by the Company, CBS and certain
shareholders of the Company at the closing contains agreements by such parties
with respect to nominating individuals to serve on the Company's Board of
Directors and the voting of the common stock owned by such parties in favor of
such nominees. CBS has the right to nominate for election to the Company's Board
of Directors a number of individuals equal to the product of CBS's percentage
ownership of the Company's common stock and the total number of members of the
Board of Directors (rounded down to the nearest whole number). In addition, as
long as the Promotion Agreement and the Content Agreement remain in effect, CBS
shall have the right to designate at least one nominee to the Board. In all
elections for members of the Board, each of the shareholders that is a party to
the Voting Agreement agrees to vote all shares beneficially owned by them in
favor of the CBS designees. Each of The Times Mirror Company, Mitchell
Rubenstein, Laurie S. Silvers, Martin H. Greenberg and Rosalind Greenberg have
agreed to enter into the Voting Agreement.
In all elections for members of the Board, CBS agrees to vote all shares of
common stock owned by it, or over which it has voting control, in favor of (1)
each individual nominated for election to the Board by the Company, and (2) each
individual nominated for election to the Board by The Times Mirror Company
pursuant to the Shareholder Agreement between the Company and The Times Mirror
Company.
CBS's right to nominate directors for election to the Board will terminate upon
the acquisition by CBS of an equity interest in excess of 15% in any entity who
owns, operates or controls a website that is a competitor (as defined) of the
Hollywood.com website.
The purchase price for the common stock being acquired by CBS was determined by
arms-length negotiations between the Company and CBS.
Prior to entering into the Stock Purchase Agreement, there were no material
relationships between the Company or any of its affiliates, directors or
officers, or any associates of such directors and officers on one hand, and CBS,
on the other hand.
The descriptions of the Stock Purchase Agreement, the Warrant, the Promotion
Agreement, the Content Agreement, the Investor's Rights Agreement and the Voting
Agreement contained herein are qualified in their entirety by reference to the
applicable agreements, which are attached as Exhibits 10.1, 10.2, 10.3, 10.4,
10.5 and 10.6, respectively.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Businesses Acquired.
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Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
1. Stock Purchase Agreement, dated as of August 26, 1999,
between the Company and CBS
2. Form of Advertising and Promotion Agreement between
hollywood.com, Inc. and CBS
3. Form of Content License Agreement between hollywood.com,
Inc. and CBS
4. Form of Warrant to be issued by the Company to CBS
5. Form of Investor's Rights Agreement between the Company
and CBS
6. Form of Voting Agreement between the Company, CBS and each
of the other shareholders signatory thereto
7. Form of Waiver Letter
8. Press Release dated September 1, 1999
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EXHIBIT INDEX
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Exhibit Number Description
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10.1 Stock Purchase Agreement, dated as of August 26, 1999,
between the Company and CBS
10.2 Form of Advertising and Promotion Agreement between
hollywood.com, Inc. and CBS
10.3 Form of Content License Agreement between hollywood.com,
Inc. and CBS
10.4 Form of Warrant to be issued by the Company to CBS
10.5 Form of Investor's Rights Agreement between the Company
and CBS
10.6 Form of Voting Agreement between the Company, CBS and each
of the other shareholders signatory thereto
10.7 Form of Waiver Letter
99.1 Press Release dated September 1, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BIG ENTERTAINMENT, INC.
By: /s/ W. Robert Shearer
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W. Robert Shearer
Senior Vice President
And General Counsel
Date: September 28, 1999
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