Asset Purchase Agreement - Big Entertainment Inc., CinemaSource Inc., Brett West and Pamela West
ASSET PURCHASE AGREEMENT
BY AND AMONG
BIG ENTERTAINMENT, INC.,
CINEMASOURCE, INC.,
BRETT WEST
AND
PAMELA WEST
Dated as of March 29, 1999
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TABLE OF CONTENTS
Page
ARTICLE I ACQUISITION AND TRANSFER OF ASSETS................................................1
Section 1.1. Assets to be Acquired........................................................1
Section 1.2. Excluded Assets..............................................................2
Section 1.3. Assumed and Excluded Liabilities.............................................3
Section 1.4. Accounts Receivable and Accounts Payable.....................................3
ARTICLE II CONSIDERATION.....................................................................4
Section 2.1. Amount and Form of Consideration.............................................4
Section 2.2. Allocation of Purchase Price.................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..........................................5
Section 3.1. Organization.................................................................5
Section 3.2. Authorization of Agreement...................................................5
Section 3.3. Consents and Approvals; No Violation.........................................6
Section 3.4. Title to Assets..............................................................6
Section 3.5. No Indebtedness..............................................................7
Section 3.6. Results of Operations........................................................7
Section 3.7. Litigation, etc..............................................................7
Section 3.8. Compliance with Law..........................................................7
Section 3.9. Employee Benefits and Related Matters........................................7
Section 3.10. Certain Agreements...........................................................8
Section 3.11. Real Property................................................................9
Section 3.12. Intangible Property..........................................................9
Section 3.13. Taxes.......................................................................10
Section 3.14. Permits.....................................................................12
Section 3.15. Related Parties; Related Party Transactions.................................12
Section 3.16. Options.....................................................................13
Section 3.17. Year 2000...................................................................13
Section 3.18. Absence of Changes or Events................................................13
Section 3.19. Investor Representations....................................................13
Section 3.20. Exemption from Registration; Restricted Securities..........................13
Section 3.21. Brokers.....................................................................13
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ARTICLE III-A REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES....................................14
Section 3A.1. Authorization of Agreement..................................................14
Section 3A.2. Consents and Approvals; No Violation........................................15
Section 3A.3 Investor Representations....................................................15
Section 3A.4 Exemption from Registration; Restricted Securities..........................15
Section 3A.5 Brokers.....................................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..........................................16
Section 4.1. Organization................................................................16
Section 4.2. Authorization of Agreement..................................................16
Section 4.3. Consents and Approvals; No Violations.......................................16
Section 4.4. Litigation..................................................................17
Section 4.5. Capital Stock of Buyer......................................................17
Section 4.6. SEC Reports; Financial Statements...........................................18
Section 4.7. Absence of Changes or Events................................................18
Section 4.8. Brokers.....................................................................19
ARTICLE V COVENANTS OF SELLER AND SHAREHOLDER..............................................19
Section 5.1. Delivery of Year-End Audited Financial Statements...........................19
Section 5.2. Access to Information.......................................................20
Section 5.3. Exclusivity.................................................................20
Section 5.4. Conduct of Business.........................................................21
Section 5.5. Public Announcements; Confidential Information..............................23
Section 5.6. No Breach of Representations and Warranties.................................23
Section 5.7. Updating Information........................................................23
Section 5.8. Restrictions on Transfer of Stock Consideration.............................23
Section 5.9. Employment Agreement........................................................24
Section 5.10. Bulk Sales Law Compliance...................................................24
Section 5.11. Indemnification Pledge Agreement, Escrow Agreement..........................24
Section 5.12. Consents....................................................................25
Section 5.13. Further Actions.............................................................25
ARTICLE VI COVENANTS OF BUYER...............................................................25
Section 6.1. No Breach of Representations and Warranties.................................25
Section 6.2. Confidentiality.............................................................25
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Section 6.3. Non-Competition Agreement; Indemnification Pledge
Agreement; Escrow Agreement.................................................26
Section 6.4. Employment Agreement........................................................26
Section 6.5. Tax Loan....................................................................26
Section 6.6. Employee Matters............................................................26
Section 6.7. Public Announcement.........................................................26
Section 6.8. Consents and Conditions.....................................................26
Section 6.9. Further Actions.............................................................27
ARTICLE VII CONDITIONS PRECEDENT TO buyer's OBLIGATIONS......................................27
Section 7.1. Conditions..................................................................27
ARTICLE VIII CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.....................................29
Section 8.1. Conditions..................................................................29
ARTICLE IX THE CLOSING......................................................................30
Section 9.1. Closing Date................................................................30
Section 9.2. Proceedings at the Closing..................................................30
Section 9.3. Deliveries by Seller to Buyer...............................................31
Section 9.4. Deliveries by Buyer to Seller...............................................31
ARTICLE X ADDITIONAL POST-CLOSING COVENANTS................................................32
Section 10.1. Further Assurances..........................................................32
Section 10.2. Seller to Change Name.......................................................32
Section 10.3. Preservation of Corporate Records...........................................33
Section 10.4. Confidentiality.............................................................33
ARTICLE XI INDEMNIFICATION..................................................................33
Section 11.1. Indemnification.............................................................33
Section 11.2. Procedures for Indemnification..............................................35
Section 11.3. Determination of Damages and Related Matters................................37
Section 11.4. Payments to Indemnified Party...............................................38
Section 11.5. Exclusive Remedy............................................................38
ARTICLE XII TERMINATION......................................................................39
Section 12.1. Termination.................................................................39
Section 12.2. Liabilities After Termination...............................................39
ARTICLE XIII MISCELLANEOUS....................................................................39
Section 13.1. Survival of Representations and Warranties..................................39
Section 13.2. Entire Agreement............................................................40
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Section 13.3. Governing Law; Construction.................................................40
Section 13.4. Transfer Taxes..............................................................40
Section 13.5. Expenses....................................................................40
Section 13.6. Notices.....................................................................41
Section 13.7. Severability................................................................41
Section 13.8. Binding Effect; No Assignment...............................................42
Section 13.9. Amendments..................................................................42
Section 13.10. Counterparts................................................................42
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SCHEDULES
1.1(a) Assigned Contracts
1.2 Certain Excluded Assets
2.2 Allocation of Purchase Price
3.3(a) Consents and Approvals
3.3(b) Violations
3.4 Title to Assets
3.5 Liabilities
3.7 Litigation, etc.
3.8 Compliance with Law
3.9(a) Employment and Other Agreements
3.9(b) Employee Benefits
3.10 Certain Agreements
3.11(b) Real Property
3.12 Intangible Property
3.13 Taxes
3.14 Permits
3.18 Absence of Changes of Events Related to Seller
4.4 Litigation
4.7 Absence of Changes or Events Related to Buyer
4.5(a) Capital Stock
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EXHIBITS
Exhibit A Form of Additional Financial Representations
Exhibit B Form of Non-Competition Agreement
Exhibit C Form of Indemnification Pledge Agreement
Exhibit D Terms of Employment Agreement
Exhibit E Form of Note
Exhibit F Form of Tax Loan Pledge Agreement
Exhibit G Form of Opinion of Seller's Counsel
Exhibit H-1 Form of Opinion of Buyer's Counsel
Exhibit H-2 Form of Opinion of Buyer's Special Counsel
Exhibit I Form of Bill of Sale and Assignment and Assumption
Agreement
Exhibit J Form of Assignment Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of March 29, 1999, by and among BIG
ENTERTAINMENT, INC., a Florida corporation ("BUYER"), CINEMASOURCE, INC., a
Connecticut corporation ("SELLER"), and, with respect to certain provisions
hereof, Brett West (the "SHAREHOLDER") and Pamela West (together with the
Shareholder, the "SELLER PARTIES").
W I T N E S S E T H :
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, Seller desires to sell, assign and transfer to Buyer, and Buyer desires
to purchase and acquire from Seller, all of Seller's right, title and interest
in the Assets (as defined herein);
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE I
ACQUISITION AND TRANSFER OF ASSETS
Section 1.1. ASSETS TO BE ACQUIRED.
(a) Upon the terms and subject to the conditions hereinafter set forth,
Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Seller (the "ACQUISITION"), free and
clear of all Liens (as defined in Section 1.1(b) below), all right, title and
interest of Seller in, to and under all of the assets, properties, rights,
contracts, claims, operations and business of Seller (collectively, the
"ASSETS") (but excluding the Excluded Assets, as defined in Section 1.2 below),
whether or not appearing on the books of Seller, including, without limitation,
the following:
(i) all of Seller's (A) contracts or license agreements with
licensees of movie showtimes data (the "LICENSE AGREEMENTS"), (B)
contracts or license agreements related to obtaining movie showtimes
data (the "PROCUREMENT AGREEMENTS"), (C) leases, rental agreements and
other contracts and agreements, all of which contracts, leases and
other agreements referred to in this clause (i) (collectively, the
"ASSIGNED CONTRACTS") are listed on SCHEDULE 1.1(A) hereto;
(ii) all of the furniture, supplies, computers, office
equipment, fixtures and other fixed assets owned by Seller (the "FIXED
ASSETS");
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(iii) each trademark, trade name, logo, service mark, brand
mark, brand name, computer program, domain name, database, patent,
industrial design and copyright owned or used by Seller, a list of all
registrations thereof and pending applications therefor, inventions,
drawings, customer lists, proprietary know-how or information owned or
used by Seller and each contract, license or other agreement relating
thereto (including, without limitation, the name "CinemaSource" and all
rights relating to the use of such name and any logos or characters
developed by or on behalf of Seller for use in connection with Seller's
business) (collectively, the "INTANGIBLE PROPERTY");
(iv) all trade accounts receivable of Seller;
(v) all papers, databases, computer programs, disks, software,
and other books, records, documents and materials owned by Seller (the
"BOOKS AND RECORDS");
(vi) all assets of Seller (other than Excluded Assets) as to
which Buyer assumes any liability;
(vii) all rights of Seller under or pursuant to all
warranties, representations and guarantees made by suppliers,
manufacturers and contractors in connection with any of the foregoing
Assets; and
(viii) all goodwill relating to the foregoing Assets.
(b) For the purposes of this Agreement, "LIEN" shall mean any lien,
pledge, mortgage, deed of trust, security interest, claim, lease, charge,
option, right of first refusal, easement or other real estate declaration,
covenant, condition, restriction or servitude, transfer restriction under any
shareholder or similar agreement, or encumbrance.
Section 1.2. EXCLUDED ASSETS. Notwithstanding anything in Section 1.1 to
the contrary, the parties hereto expressly agree that Seller is not hereunder
selling, assigning, transferring, conveying or delivering to Buyer, and Buyer is
not purchasing, acquiring or accepting, the following assets, rights and
properties (collectively, the "EXCLUDED ASSETS"):
(i) any cash, bank deposits or similar cash items of Seller;
(ii) any insurance policies, bonds, letters of credit or other
similar items, or any cash surrender value in regard thereto;
(iii) any claim, right or interest in or to any refund for
federal, state or local franchise, income or other taxes or fees of any
nature whatsoever for periods on or prior to the Closing Date (as
defined in Section 9.1 below) and any interest (or similar amount)
thereon;
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(iv) any of Seller's corporate books and records of internal
proceedings or tax records, and any books and records that Seller is
required by law to retain (the "CORPORATE RECORDS"), but Buyer shall
have access to the same to the extent permitted by Section 10.3 below;
(v) any employment, consulting or similar agreement except for
any agreements that constitute Assigned Contracts; and
(vi) any assets described on SCHEDULE 1.2 hereto.
Section 1.3. ASSUMED AND EXCLUDED LIABILITIES.
(a) Buyer shall not assume or be bound by any obligations, liabilities
(including without limitation, liabilities in respect of Taxes (as defined in
Section 3.13(a) below) and "employee benefit plans" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended) or any other
pension plans or employee benefit arrangements) or commitments of Seller or any
of its affiliates of any kind, character or description, whether absolute,
accrued, known, unknown, asserted, unasserted, due or to become due, contingent
or otherwise ("LIABILITIES"), in connection with the Assets or otherwise, other
than the following:
(i) obligations and liabilities arising after the Closing Date
under the Assigned Contracts in respect of the period following such
Closing Date; and
(ii) all trade accounts payable arising in the ordinary course
of business of Seller (which shall not include any expenses incurred by
Seller in connection with this Agreement or any of the transactions
contemplated hereby) (the liabilities described in paragraphs (i) and
(ii) being referred to collectively as the "ASSUMED LIABILITIES").
With respect to any nonincome Tax imposed on a periodic basis that relates to a
period straddling the Closing Date, such Tax shall be prorated to the Closing
Date, and the portion allocable to the period prior to the Closing Date shall be
promptly paid or reimbursed by Seller, and the portion allocable to the period
after the Closing Date shall be promptly paid or reimbursed by Buyer. All other
Liabilities of Seller shall remain the sole responsibility of Seller.
Section 1.4. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.
(a) Within 45 days after the Closing, Buyer shall cause to be prepared
and delivered to Seller and Shareholder a written accounting of the dollar
amount of all trade accounts receivable and trade accounts payable included
within the Assets and Liabilities acquired or assumed by Buyer in the
Acquisition. Seller shall notify Buyer within fifteen (15) days after receipt of
such accounting if it objects to any of the information contained thereon. If
Seller shall not have objected to the accounting within
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such fifteen-day period, the information contained thereon shall be deemed to be
accurate and the accounting delivered to Seller and Shareholder by Buyer shall
be deemed to be final. Buyer and Seller agree to negotiate in good faith to
resolve any disagreement with respect to the accounting.
(b) To the extent the final accounting indicates that the dollar amount
of the trade accounts receivable acquired by Buyer exceeded the dollar amount of
the trade accounts payable assumed by Buyer, Buyer shall be entitled to keep 50%
of such excess and shall pay the remaining 50% of such excess to Seller in cash
within five (5) days after the accounting is deemed final or Buyer and Seller
agree that it is final. To the extent the final accounting indicates that the
dollar amount of the trade accounts payable assumed by Buyer exceeded the dollar
amount of the trade accounts receivable acquired by Buyer, Seller shall, and
Shareholder shall cause Seller to, pay the amount of such excess to Buyer in
cash within five (5) days after the accounting is deemed final or Buyer and
Seller agree that it is final.
ARTICLE II
CONSIDERATION
Section 2.1. AMOUNT AND FORM OF CONSIDERATION.
(a) The aggregate consideration (the "CONSIDERATION") to be paid on the
Closing Date by Buyer to Seller for the Assets shall consist of the following:
(i) at the election of Buyer, either:
(A) (x) $6,500,000 in cash, plus (y) 436,191 fully
paid and nonassessable shares of the common stock, $.01 par
value per share (the "COMMON STOCK"), of Buyer (the "STOCK
CONSIDERATION"); or
(B) (x) $6,500,000 in cash, plus (y) the product of
436,191 and the greater of (1) $12.50 and (2) the average of
(a) $12.50 and (b) the average closing sale price of the
Common Stock for the ten trading days ending on the second
trading day preceding the Closing Date as reported by the
Nasdaq Stock Market, Inc. (the amount of cash paid by Buyer
pursuant to clause (A) or (B) is referred to herein as the
"CASH CONSIDERATION"); plus
(ii) the assumption by Buyer of the Assumed Liabilities.
Section 2.2. ALLOCATION OF PURCHASE PRICE. The Consideration and other
relevant items shall be allocated among the Assets acquired hereunder by Buyer
in accordance with the requirements of Section 1060 of the Internal Revenue Code
of 1986, as amended (the "CODE"). Buyer shall provide Seller with a draft of
such allocation within 90 days after the Closing Date. Seller shall notify Buyer
within thirty (30) days of
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receipt of such draft allocation of any objection Seller may have thereto.
Seller and Buyer agree to resolve any disagreement with respect to such
allocation in good faith consistent herewith. Seller and Buyer each agree to
report and file all Tax Returns (as defined in Section 3.13(a)) (including
amended Tax Returns and claims for refund) consistent with such allocation, and
shall take no position contrary thereto or inconsistent therewith (including,
without limitation, in any audits or examinations by any taxing authority or any
other proceedings). Seller and Buyer shall cooperate in the filing of any forms
(including Form 8594) with respect to such allocation, including any amendments
to such forms required with respect to any adjustment to the Consideration,
pursuant to this Agreement. Notwithstanding any other provisions of this
Agreement, the foregoing agreement shall survive the Closing Date without
limitation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 3.1. ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
All of the outstanding capital stock of Seller is owned beneficially and of
record by the Shareholder.
Section 3.2. AUTHORIZATION OF AGREEMENT. Seller has full corporate
power and authority to execute and deliver this Agreement and each other
agreement, document, instrument or certificate contemplated by this Agreement or
to be executed by Seller in connection with the consummation of the transactions
contemplated by this Agreement (all such other agreements, documents,
instruments and certificates are hereafter collectively referred to as the
"SELLER DOCUMENTS") and to perform fully its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and each
of the Seller Documents have been duly and validly authorized and approved by
the Board of Directors and shareholders of Seller and by all other necessary
corporate action on behalf of Seller. This Agreement has been, and on or prior
to the Closing each of the Seller Documents will be, duly and validly executed
and delivered by Seller and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement constitutes,
and each of the Seller Documents when so executed and delivered will constitute,
the legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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Section 3.3. CONSENTS AND APPROVALS; NO VIOLATION. (a) Except as set
forth on SCHEDULE 3.3(A) hereto, no filing with, notification to or consent,
authorization, waiver, approval, order, license, certificate or Permit of, any
Government Body (as defined in Section 3.17 below) is necessary for Seller's
execution, delivery or performance of this Agreement or any of the Seller
Documents or the consummation by Seller of the transactions contemplated by this
Agreement and the Seller Documents. For purposes of determining whether a filing
is required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, 15 U.S.C. ss. 18a, and the Rules promulgated thereunder, 16 C.F.R. ss.ss.
801.1 Et seq., and based on the definitions set forth therein, the Acquired
Person within which Seller is included does not have total assets or annual net
sales of $10,000,000 or more.
(b) Except as set forth on SCHEDULE 3.3(B) hereto, none of the
execution and delivery by Seller of this Agreement and the Seller Documents, the
consummation of the transactions contemplated hereby or thereby or compliance by
Seller with any of the provisions hereof or thereof will (i) conflict with or
result in any breach of any provision of the Certificate of Incorporation or
By-laws of Seller, (ii) violate any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award (each, an "ORDER") or statute, rule or
regulation of any Government Body by which Seller or any of its properties or
assets is bound, (iii) conflict with, violate, result in the breach or
termination of, or (with or without due notice or the lapse of time or both)
constitute a default or give rise to any "takeback" right or right of
termination or acceleration or right to increase the obligations under or
otherwise modify any of the terms, conditions or provisions of any Assigned
Contract or other contract, agreement instrument or obligation listed on
SCHEDULE 3.10 hereto or which would be required to be listed on SCHEDULE 3.10
hereto to make the representations and warranties in Section 3.10(a) accurate,
or (iv) result in the creation of any Lien upon any of the Assets other than (i)
Liens for Taxes that are not yet due and payable, (ii) mechanics, materialmen's
or other like liens arising in the ordinary course of business and (iii)
purchase money liens and liens securing rental payments under capital leases
(collectively, "PERMITTED LIENS").
Section 3.4. TITLE TO ASSETS. (a) Except as set forth on SCHEDULE 3.4
hereto, Seller has good and marketable title to all of the Assets, free and
clear of all Liens (except for Permitted Liens). Upon the sale, assignment,
transfer and conveyance of the Assets to Buyer hereunder, there will be vested
in Buyer good and marketable title to such Assets, free and clear of all Liens
(except for Permitted Liens) other than those placed thereon by Buyer.
(b) Other than the Assets and the Excluded Assets, there are no other
tangible or intangible assets, rights, properties or agreements that are used in
the ownership or operation of the Assets or the business of CinemaSource or that
are material to the ownership or operation of the Assets or the business of
CinemaSource.
Section 3.5. NO INDEBTEDNESS. Seller has no indebtedness for borrowed
money.
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Section 3.6. RESULTS OF OPERATIONS. Seller's annual running revenue and
annual running operating cash flow, based on actual figures for the month of
January 1999 determined in accordance with generally accepted accounting
principles (i.e., multiplying January's amounts by twelve), were no less than
$1.7 million and $700,000, respectively. Such amounts are before giving effect
to distributions to the Shareholders, but after giving effect to reimbursements
to the Shareholders of operating expenses of Seller funded by the Shareholders.
The foregoing revenue and operating cash flow amounts for the month of January
do not include any extraordinary or non-recurring sources of revenue (it being
understood that Seller makes no representation that such revenue sources will
continue after the date hereof) or any revenues resulting from contracts that
were not negotiated and entered into by Seller on an arm's length basis.
Section 3.7. LITIGATION, ETC. There is no judicial, administrative or
arbitral action, suit, proceeding (public or private), claim or governmental
proceeding (each, a "LEGAL PROCEEDING") pending or, to the knowledge of Seller,
threatened that questions the validity of this Agreement, the Seller Documents
or any action taken or to be taken by Seller or the Shareholders in connection
with the consummation of the transactions contemplated hereby or thereby. Except
as set forth on SCHEDULE 3.7 hereto, (i) no investigation or review by any
Government Body with respect to Seller is pending or, to the knowledge of
Seller, threatened, nor has any Government Body indicated to Seller an intention
to conduct the same, (ii) there is no Legal Proceeding pending or, to the
knowledge of Seller, threatened against or affecting Seller or its assets at law
or in equity, or before any Government Body (and, to the knowledge of Seller,
there is no basis for any such Legal Proceeding not so set forth which, if
adversely determined, could adversely affect Seller or Buyer) and (iii) there is
no outstanding or, to the knowledge of Seller, threatened Order of any
Government Body against, affecting or naming Seller or affecting any of the
Assets. Except as set forth on SCHEDULE 3.7 hereto, during the three years
preceding the date of this Agreement, no Legal Proceeding has been commenced or,
to the knowledge of Seller, threatened in writing against or affecting Seller or
its assets at law or in equity, or before any Government Body. On and after the
date hereof until the Closing, Seller will notify Buyer of the existence or
threat of any investigation, review, Legal Proceeding or Order which would be
required to be disclosed on SCHEDULE 3.7.
Section 3.8. COMPLIANCE WITH LAW. Except as set forth on SCHEDULE 3.8
hereto, Seller has not violated or failed to comply in any material respect with
any statute, law, ordinance, regulation, rule or Order of any Government Body.
Section 3.9. EMPLOYEE BENEFITS AND RELATED MATTERS.
(a) Except as set forth on SCHEDULE 3.9(A) hereto, Seller is not a
party to any employment, compensation, consulting, severance or indemnification
agreement with any party or any other agreement with a present or former
employee of Seller that provides for severance payments or stay bonuses
contingent upon a change in control of Seller or a sale of its business or
assets. Seller is in compliance in all material respects with all laws relating
to the employment of labor, including all laws relating to wages,
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hours, the Workers' Adjustment Retraining Notification Act and any similar state
or local "mass layoff" or "plant closing" law, collective bargaining,
discrimination, civil rights, safety and health and workers' compensation.
(b) SCHEDULE 3.9(B) sets forth each employee pension, retirement,
profit sharing, stock bonus, stock option, stock purchase, incentive, deferred
compensation, medical, dental, vision, life insurance, accidental death and
dismemberment insurance, business travel insurance, vacation pay, salary
continuation, sick pay, disability, severance, golden parachute or other plan,
fund, program, policy, contract or arrangement providing employee benefits that
is maintained or contributed to by Seller (the "PLANS"). Seller has delivered to
Buyer true, correct and complete copies of each Plan (or, in the case of any
unwritten Plans, descriptions thereof). There are no pending, or to the
knowledge of Seller, threatened suits, actions, proceedings, or claims (except
claims for benefits payable in the normal operation of the Plans) against any
Plan by any employee or other beneficiary covered under any such Plan or
otherwise involving any Plan.
Section 3.10. CERTAIN AGREEMENTS.
(a) Except as set forth on SCHEDULE 1.1(A) hereto or SCHEDULE 3.10
hereto, neither Seller nor any of its properties or assets is a party to or
bound by any (i) License Agreement, (ii) Procurement Agreement, (iii) lease or
rental agreement, (iv) contract granting a right of first refusal or for the
acquisition, sale or lease of any assets of Seller, (v) mortgage, pledge,
conditional sales contract, security agreement or other similar contract with
respect to any property of Seller, (vi) loan agreement, credit agreement,
promissory note, guarantee, subordination agreement, letter of credit or other
similar type of contract, (vii) collective bargaining agreement or other
contract or agreement with any labor union or (viii) any other material
contract. Except as set forth on SCHEDULE 3.10 hereto, Seller has delivered to
Buyer true, correct and complete copies of the Assigned Contracts, including all
amendments, modifications, supplements, side letters or consents affecting the
obligations of any party thereunder. Neither Seller nor any of its properties or
assets is a party to or bound by any agreement or contract relating to online
movie ticketing.
(b) Except as set forth on SCHEDULE 3.10 hereto, to Seller's knowledge,
each Assigned Contract is valid and enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). Seller is not in material breach of or in material default under any
Assigned Contract and, to Seller's knowledge, there has not occurred any event
which, after the giving of notice or lapse of time or both, would constitute a
default under or result in a breach of an Assigned Contract by any party subject
thereto. Except as set forth in SCHEDULE 3.10, no previous or current party to
any Assigned Contract (i) has given notice of or made a claim with respect to
any breach or default under any Assigned Contract or (ii) has given notice of
termination or non-
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renewal of any Assigned Contract. Except as set forth in SCHEDULE 3.10 hereto,
each of the Assigned Contracts is freely transferable by Seller to Buyer and no
third party consents are required for such transfer.
(c) The License Agreements represent at least 100 separate revenue
sources, including different geographic markets and end users as separate
revenue sources. A list of Seller's revenue sources is attached as SCHEDULE
3.10(C) hereto.
Section 3.11. REAL PROPERTY.
(a) Seller does not now own and has not ever owned any real property.
(b) Other than the indenture of lease, dated November 18, 1996 (the
"LEASE"), between Seller, as lessee, and Stonehouse Commons Investment Group,
L.L.C. (as successor to Canaan Woodland I Limited Partnership), as lessor
("LESSOR"), and except as set forth on SCHEDULE 3.11(B) hereto, Seller is not
now and has never been a party to any lease, sublease, license, sublicense or
other agreement or arrangement with respect to any real property, and has not
used or occupied, does not use or occupy, and does not have any right to use or
occupy, now or in the future, any real property.
(c) The office space that is the subject of the Lease is not subject to
any lease, sublease, license or other agreement granting to any other
corporation, partnership, limited liability company, person or other entity or
group (a "PERSON") any right to the use, occupancy or enjoyment of such property
or any part thereof.
(d) The Lease covers the entire estate it purports to cover and, upon
the consummation of the transactions contemplated hereby and assuming the
consent of Lessor to the assignment of the Lease to Buyer is obtained, will
entitle Buyer to the use, occupancy and possession of the real property
specified in the Lease and for the purposes such property is now being used. No
previous or current party to the Lease has given notice of or made a claim with
respect to any breach or default thereunder.
Section 3.12. INTANGIBLE PROPERTY. (a) SCHEDULE 3.12 hereto sets forth
a list of each material item of Intangible Property, including a list of all
customers of Seller, and indicates, with respect to each item of Intangible
Property, the owner thereof and, if applicable, the name of the licensor and
licensee thereof. Except as set forth on SCHEDULE 3.12, each of the foregoing
assets listed on such Schedule as being owned by Seller is owned by Seller free
and clear of any and all Liens and is in good standing and no other person or
entity has any claim of ownership or right of use with respect thereto. To
Seller's knowledge, except as set forth on SCHEDULE 3.12 hereto, the use,
modification, compilation, reproduction, public display or performance, or
distribution of the foregoing by Seller does not, and the use, modification,
compilation, reproduction, public display or performance, or distribution
thereof by Buyer immediately after the Closing will not, conflict with, infringe
upon, violate or interfere with or constitute an appropriation of any right,
title, interest or goodwill, including, without limitation, any intellectual
property right, trademark, trade name, service mark, brand mark, brand name,
computer program,
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domain name, database, patent, industrial design, copyright or any pending
application therefor of any other person or entity and except as set forth on
SCHEDULE 3.12 hereto, there have been no claims made and Seller has not received
any notice or otherwise acquired any knowledge that any of the foregoing is
invalid or conflicts with the asserted rights of any other person or has not
been used or enforced or has been failed to be used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of any of the
Intangible Property. Except as set forth on SCHEDULE 3.12, no past or present
officer, employee or consultant of Seller has any claim of ownership or right of
use with respect to any item of Intangible Property.
(b) Notwithstanding anything in Section 3.12(a) to the contrary, on and
after the closing, except with respect to the representation and warranty set
forth in Section 3.12(d), Seller disclaims and Buyer assumes, all risks with
respect to Buyer's use, reuse, modification, compilation, collection,
reproduction, public display or performance, or distribution of the movie
showtime data, radio programming data or musical event data, including any
claims that the use, modification, compilation, collection, reproduction, public
display or performance, or distribution of the showtime data, radio programming
data and musical event data conflict with, infringe upon, violate or interfere
with or constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark, trade
name, service mark, brand mark, brand name, computer program, domain name,
database, patent, industrial design, copyright, or any pending application
thereof of any other person or entity. Any claims arising out of the foregoing
and brought against Buyer shall not give rise to a claim by Buyer against Seller
for indemnity, breach of warranty, or otherwise.
(c) Except as set forth on SCHEDULE 3.12 hereto, Seller is not a party
to or bound by any contract, license or other agreements relating to the
Intangible Property.
(d) The software applications (including those referred to by Seller as
"web crawlers") used by or on behalf of Seller for the collection, compilation
or reproduction of data published on the World Wide Web do not by themselves or
together with other software applications, collect, compile or reproduce any
data or information other than movie showtimes and related factual information
that is in the public domain (such as the type of sound delivery technology
available for a particular movie).
Section 3.13. TAXES. (a) For purposes of this Agreement:
(i) "TAX" or "TAXES" shall mean all taxes, charges, fees,
imposts, levies or other assessments by any taxing authority, including
all net income, gross receipts, capital, sales, use, ad valorem, value
added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes,
customs duties, fees, assessments and charges of any kind whatsoever,
and all interest, penalties, fines or additions to tax imposed by any
taxing authority which relate in any way to the assessment of
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collection of any taxes or the filing of any Tax Return, and shall
include any transferee or successor liability in respect of Taxes
(whether by contract or otherwise).
(ii) "TAX RETURN" means any return (including any
consolidated, combined or unitary return in which Seller is, or was,
included or includible), declaration, report, claim for refund,
separate election or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
(b) Except as set forth on SCHEDULE 3.13(B) hereto, Seller has (w)
filed when due or will file when due (taking into account extensions) with the
appropriate federal, state, local, foreign and other taxing authorities, all Tax
Returns required to be filed by it or on its behalf, all of which Tax Returns
were true or will be true, complete and correct as of the time of filing, (x)
paid when due and payable (and, until the Closing Date, will timely pay) all
required Taxes (except for Taxes which are being contested in good faith, as set
forth on SCHEDULE 3.13(B), and for which adequate reserves have been established
in accordance with GAAP, and (y) established (and through and including the
Closing Date will establish) reserves that are adequate for the payment of all
Taxes not yet due and payable with respect to the results of operations through
the Closing Date.
(c) To the knowledge of Seller, there are no Taxes assessed or asserted
or claimed in writing to be due by any taxing authority or otherwise in respect
of any Tax Returns filed by Seller or on Seller's behalf, and no issues have
been raised (and are currently pending) by any taxing authority in connection
with any such Tax returns.
(d) Seller has duly and timely withheld and paid over to the
appropriate taxing authorities all Taxes and other amounts required to be so
withheld and paid over for all periods under all applicable laws in connection
with amounts paid or owing to any employee, independent contractor,
subcontractor, lender, stockholder or other third party or other personnel
supplied by any third party.
(e) To the knowledge of Seller, there is no audit, examination,
deficiency, or refund proceeding pending with respect to any Taxes or Tax
Returns of Seller, and no taxing authority has given written notice of the
commencement of any audit, examination or deficiency proceeding with respect to
any Taxes or Tax Returns of Seller.
(f) Set forth on SCHEDULE 3.13(F) is a complete list of all federal,
state, local, and foreign Tax Returns filed by, or on behalf of, Seller for
taxable periods commencing on or after January 1, 1995, and all jurisdictions in
which Seller is currently subject to tax.
(g) Set forth on SCHEDULE 3.13(G) is a complete list of all bulk sales
or similar notices required to be filed (whether by Buyer or Seller), in
connection with the transactions contemplated herein, with any taxing authority
with respect to the Assets.
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(h) Except as set forth in SCHEDULE 3.13(H), none of the Assigned
Contracts contain any Tax sharing, Tax indemnification or similar agreements.
(i) Except as set forth in SCHEDULE 3.13(I), none of the Assets are (i)
property required to be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986;
(ii) "tax-exempt use property" within the meaning of Section 168(h)(l) of the
Code; (iii) tax exempt bond financed property within the meaning of Section
168(g) of the Code, or (iv) property used "predominantly outside of the United
States" within the meaning of Section 168(g)(4).
(j) Seller (and any predecessor of Seller) has since its inception been
and will be, up to and including the Closing Date, an S Corporation within the
meaning of Section 1361 of the Code and under all corresponding provisions of
applicable state and local Tax laws to the extent they recognize S corporation
status.
(k) Seller is not a "foreign person" within the meaning of Section 1445
of the Code.
Section 3.14. PERMITS. SCHEDULE 3.14 hereto sets forth a list of all
material approvals, authorizations, consents, franchises, licenses, permits or
certificates (collectively, "PERMITS") granted by any government or governmental
or regulatory body thereof or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private) (each, a "GOVERNMENT BODY") and applications,
if any, for any of the foregoing, held by Seller. Seller is the holder of all
Permits necessary or appropriate to enable it to continue to conduct its
business in all material respects as presently conducted. Each of the Permits is
in full force and effect.
Section 3.15. RELATED PARTIES; RELATED PARTY TRANSACTIONS. Except for
the transactions contemplated hereby, neither Seller nor any shareholder of
Seller owns any direct or indirect interest of any kind in, or controls or is a
director, officer, employee or partner of, or consultant to, or lender to or
borrower from or has the right to participate in the profits of, any Person
which is (A) a competitor, supplier, customer, landlord, tenant, creditor or
debtor of Seller, (B) engaged in a business related to the business of Seller,
(C) participating in any transaction to which Seller is a party, or (D) a party
to any contract, agreement, indenture, note, bond, loan, instrument, lease,
conditional sale contract, mortgage, license, franchise, insurance policy,
commitment or other arrangement or agreement with Seller.
Section 3.16. OPTIONS. There are no outstanding securities of Seller
convertible into or evidencing the right to purchase or subscribe for any shares
of capital stock of Seller and there are no outstanding or authorized options,
warrants, calls, subscriptions, rights, commitments or any other agreements of
any character obligating
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Seller to issue any shares of its capital stock or any securities convertible
into or evidencing the right to purchase or subscribe for any shares of such
stock.
Section 3.17. YEAR 2000. Each computer program used by Seller in its
business is Year 2000 Compliant or will be Year 2000 Compliant in sufficient
time to avoid any material disruption to Seller's business. "YEAR 2000
COMPLIANT" means that such program is capable of managing and manipulating data
involving dates after the year 1999 without any functional or data abnormality
and without inaccurate results related to such dates.
Section 3.18. ABSENCE OF CHANGES OR EVENTS. Except as set forth on
SCHEDULE 3.18, since December 31, 1998, no event or circumstance has occurred
that has had, or is reasonably likely to have, a material adverse effect on the
business, assets, properties, liabilities, financial condition or results of
operations of Seller, other than events or circumstances relating to the economy
in general or the media industry in general and not specifically relating to
Seller. Except as set forth on SCHEDULE 3.18 hereto, since December 31, 1998,
Seller has conducted its business only in the ordinary course.
Section 3.19. INVESTOR REPRESENTATIONS. The shares of Common Stock
received by Seller pursuant to this Agreement will be acquired for Seller's own
account and not with a view to or in connection with the sale or distribution of
any part thereof except for distributions to the Shareholder.
Section 3.20. EXEMPTION FROM REGISTRATION; RESTRICTED SECURITIES.
Seller understands that the shares of Common Stock received by Seller pursuant
to this Agreement will not be registered under the Securities Act on the ground
that the sale provided for in this Agreement is exempt from registration under
the Securities Act, and that the reliance of Buyer on such exemption is
predicated in part on Seller's representations set forth in this Agreement. The
certificates representing the shares of Common Stock issued to Seller pursuant
to this Agreement will bear an appropriate legend reflecting such exempt
issuance without registration. Seller understands that the shares of Common
Stock received by Seller pursuant to this Agreement are restricted securities
within the meaning of Rule 144 under the Securities Act.
Section 3.21. BROKERS. No broker, finder or investment banker is
entitled to any brokerage fee, finder's fee or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Seller.
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ARTICLE III-A
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller Parties hereby, jointly and severally, represent and warrant
to Buyer as follows:
Section 3A.1. AUTHORIZATION OF AGREEMENT. This Agreement has been, and
on or prior to the Closing each other agreement, document, instrument or
certificate contemplated by this Agreement to be executed by either of the
Seller Parties on or prior to the Closing Date (all such other agreements,
documents, instruments and certificates are hereafter collectively referred to
as the "SHAREHOLDER DOCUMENTS") in connection with the transactions contemplated
by this Agreement will be, duly and validly executed and delivered by the Seller
Parties and (assuming the due authorization, execution and delivery by the other
parties hereto and thereto) this Agreement constitutes, and each of the
Shareholder Documents when so executed and delivered will constitute, the legal,
valid and binding obligation of the respective Seller Parties executing such
agreements, enforceable against the Seller Parties in accordance with its
respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 3A.2. CONSENTS AND APPROVALS; NO VIOLATION. (a) No filing with,
notification to or consent, authorization, waiver, approval, order, license,
certificate or Permit of, any Government Body is necessary for the Seller
Parties' execution, delivery or performance of this Agreement or any of the
Shareholder Documents or the consummation by the Seller Parties of the
transactions contemplated by this Agreement and the Shareholder Documents.
(b) None of the execution and delivery by the Seller Parties of this
Agreement and the Shareholder Documents, the consummation of the transactions
contemplated hereby or thereby or compliance by the Seller Parties with any of
the provisions hereof or thereof will (i) violate any Order or statute, rule or
regulation of any Government Body by which either of the Seller Parties or any
of their properties or assets is bound, (ii) conflict with, violate, result in
the breach or termination of, or (with or without due notice or the lapse of
time or both) constitute a default or give rise to any "takeback" right or right
of termination or acceleration or right to increase the obligations under or
otherwise modify any of the terms, conditions or provisions of any note, bond,
mortgage, license, franchise, Permit, indenture, contract, agreement or other
instrument or obligation to which either of the Seller Parties is a party, or by
which either of the Seller Parties or any of their properties or assets is or
may be bound, or (iii) result in the creation of any Lien upon any of the
Assets.
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Section 3A.3 INVESTOR REPRESENTATIONS. The shares of Common Stock
received by Seller pursuant to this Agreement and distributed to the Shareholder
will be acquired for the Shareholder's own account and not with a view to or in
connection with the sale or distribution of any part thereof.
Section 3A.4 EXEMPTION FROM REGISTRATION; RESTRICTED SECURITIES. The
Shareholder understands that the shares of Common Stock received by Seller
pursuant to this Agreement and distributed to the Shareholder will not be
registered under the Securities Act on the ground that the sale provided for in
this Agreement is exempt from registration under the Securities Act, and that
the reliance of Buyer on such exemption is predicated in part on the
Shareholder's representations set forth in this Agreement. The certificates
representing the shares of Common Stock issued to Seller pursuant to this
Agreement will bear an appropriate legend reflecting such exempt issuance
without registration. The Shareholder understands that the shares of Common
Stock received by Seller pursuant to this Agreement and distributed to the
Shareholder are restricted securities within the meaning of Rule 144 under the
Securities Act.
Section 3A.5 BROKERS. No broker, finder or investment banker is
entitled to any brokerage fee, finder's fee or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Seller Parties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 4.1. ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
Section 4.2. AUTHORIZATION OF AGREEMENT. Buyer has full corporate power
and authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by Buyer in connection with the consummation of the transactions
contemplated hereby and thereby (all of such agreements, documents, instruments
and certificates required to be executed by Buyer being hereinafter referred to,
collectively, as the "BUYER DOCUMENTS"), and to perform fully its obligations
hereunder and thereunder. The execution, delivery and performance by Buyer of
this Agreement and each Buyer Document have been duly authorized by the Board of
Directors of Buyer and by all other necessary corporate action on the part of
Buyer. This Agreement has been, and at or prior to the Closing, each of the
Buyer Documents will be, duly and validly executed and delivered by Buyer and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the Buyer Documents
when so executed
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and delivered will constitute, the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 4.3. CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Assuming the accuracy of Seller's representation and warranty set
forth in the last sentence of Section 3.3(a) hereof, except for filings,
notifications, authorizations, consents and approvals as may be required under
federal and state securities or blue sky laws, no filing with, notification to
or consent, authorization, waiver, approval, order, license, certificate or
Permit of, any Government Body is necessary for Buyer's execution, delivery or
performance of this Agreement or any of the Buyer Documents or the consummation
by Buyer of the transactions contemplated by this Agreement and the Buyer
Documents.
(b) None of the execution and delivery by Buyer of this Agreement or
the Buyer Documents, the consummation of the transactions contemplated hereby or
thereby or compliance by Buyer with any of the provisions hereof or thereof will
(i) conflict with or result in any breach of any provision of the Articles of
Incorporation or By-laws of Buyer, (ii) violate any Order or statute, rule or
regulation of any Government Body by which Buyer or any of its properties or
assets is bound, or (iii) conflict with, violate, result in the breach or
termination of, or (with or without due notice or the lapse of time or both)
constitute a default or give rise to any "takeback" right or right of
termination or acceleration or right to increase the obligations under or modify
any of the terms, conditions or provisions of any note, bond, mortgage, license,
franchise, Permit, indenture, agreement or other instrument or obligation to
which Buyer is a party, or by which Buyer or any of its properties or assets is
or may be bound.
Section 4.4. LITIGATION. There are no Legal Proceedings pending or, to
the knowledge of Buyer, threatened that question the validity of this Agreement,
the Buyer Documents or any action taken or to be taken by Buyer in connection
with the consummation of the transactions contemplated hereby or thereby. On and
after the date hereof until the Closing, Buyer will notify Seller of the
existence or threat of any such Legal Proceeding. Except as set forth on
SCHEDULE 4.4 hereto or as disclosed in the Buyer SEC Reports (as defined in
Section 4.6), there are no Legal Proceedings pending against or affecting Buyer
or its assets at law or in equity, which, if adversely determined, could
adversely affect Buyer.
Section 4.5. CAPITAL STOCK OF BUYER.
(a) The authorized capital stock of Buyer consists of (i) 25,000,000
shares of Common Stock, of which, as of the date hereof, 8,929,281 shares of
Common
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Stock were issued and outstanding (each together with a Common Stock purchase
right (the "BUYER RIGHTS") issued pursuant to the Rights Agreement, dated as of
August 23, 1996 by and between Buyer and American Stock Transfer & Trust
Company), and 394,466 shares of Common Stock were issued and held as collateral
for lease obligations of Buyer; and (ii) one million shares of Preferred Stock
("BUYER PREFERRED STOCK"), designated as follows: (A) 217,600 shares of Series A
Variable Rate Convertible Preferred Stock, $6.25 stated value per share, all of
which shares, as of the date hereof, are issued and outstanding, (B) 142,223
shares of Series B Variable Rate Convertible Preferred Stock, $5.21 stated value
per share, of which, as of the date hereof, 122,846 shares are issued and
outstanding, (C) 100,000 shares of 4% $100 Series C Convertible Preferred Stock,
$100 stated value per share, of which, as of the date hereof, no shares are
issued and outstanding, (D) 1,000 shares of 7% Series D Convertible Preferred
Stock, $10,000 stated value per share, of which, as of the date hereof, 250
shares are issued and outstanding and (E) 50 shares of 7% Series D-2 Convertible
Preferred Stock, $10,000 stated value per share, all of which shares, as of the
date hereof, are issued and outstanding. All of the outstanding shares of Common
Stock are, duly authorized and validly issued and outstanding, fully paid and
nonassessable. Except for the outstanding shares of the Common Stock and the
Buyer Preferred Stock, as of the date hereof, there are no shares of capital
stock or other equity securities of Buyer outstanding. The shares of Common
Stock have not been issued in violation of, and none of the shares of Common
Stock is subject to any preemptive or subscription rights. As of the date
hereof, except as set forth on SCHEDULE 4.5(A) and except for the Buyer Rights
and the Buyer Preferred Stock, there are no outstanding warrants, options,
"phantom" stock rights, agreements, convertible or exchangeable securities or
other commitments (other than this Agreement) pursuant to which Buyer is or may
become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of Buyer, and no equity securities of Buyer
are reserved for issuance for any purpose. Other than this Agreement and except
as set forth on SCHEDULE 4.5(A), the shares of Common Stock are not subject to
any voting trust agreement or other contract, agreement, arrangement, commitment
or understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, registration,
dividend rights or disposition of the shares of Common Stock or any other
securities exchangeable or exercisable for or convertible into Common Stock or
any other capital stock of Buyer.
(b) The Common Stock constitutes the only class of equity securities or
Buyer or its subsidiaries registered or required to be registered under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT").
Section 4.6. SEC REPORTS; FINANCIAL STATEMENTS.
(a) Buyer has filed all required forms, reports and documents required
to be filed by it ("BUYER SEC REPORTS") with the Securities and Exchange
Commission ("SEC"), each of which has complied as to form in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and the Exchange Act, each as in effect on the
dates such forms, reports and documents
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were filed. None of the Buyer SEC Reports contained, as of their respective
dates (or, if amended or superseded by a filing prior to the date of this
Agreement or the Closing Date, as of the date of such filing), any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements of Buyer included
in the Buyer SEC Reports were prepared in accordance with generally accepted
accounting principles ("GAAP") and present fairly the consolidated financial
position of Buyer and its consolidated subsidiaries as of the dates thereof and
their consolidated results of operations and changes in financial position for
the periods then ended.
(b) Buyer has heretofore made available or promptly will make available
to Seller a complete and correct copy of any amendments or modifications to any
Buyer SEC Reports that are required to be filed with the SEC but have not yet
been filed with SEC.
Section 4.7. ABSENCE OF CHANGES OR EVENTS. Except as disclosed in the
Buyer SEC Reports or on SCHEDULE 4.7 hereto, since December 31, 1998, no event
or circumstance has occurred that has had, or is reasonably likely to have, a
material adverse effect on the business, assets, properties, liabilities,
financial condition or results of operations of Buyer and its subsidiaries taken
as a whole, other than events or circumstances relating to the economy in
general or the entertainment, media or Internet industry in general and not
specifically relating to Buyer. The parties hereto acknowledge and agree that if
the condition to Buyer's obligation to consummate the Acquisition set forth in
Section 7.1(vi) has not been satisfied as of the Closing Date and Buyer elects
to waive such condition and consummate the Acquisition, the failure of such
condition to be satisfied shall in no event be deemed to have, or be reasonably
likely to have, a material adverse effect on the business, assets, properties,
liabilities, financial condition or results of operations of Buyer and its
subsidiaries taken as a whole.
Section 4.8. BROKERS. No broker, finder or investment banker is
entitled to any brokerage fee, finder's fee or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Buyer.
ARTICLE V
COVENANTS OF SELLER AND SHAREHOLDER
Section 5.1. DELIVERY OF YEAR-END AUDITED FINANCIAL STATEMENTS.
(a) As soon as practicable and in any event not later than April 30,
1999, Seller shall deliver to Buyer (i) the audited balance sheets of Seller and
the notes thereto at each of December 31, 1997 and December 31, 1998, and the
audited statements of income, shareholders' equity and cash flows and the notes
thereto of Seller for the
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years ended December 31, 1997 and December 31, 1998 (collectively, the "AUDITED
FINANCIAL STATEMENTS"), which shall be prepared by Reynolds & Rowella in
accordance with GAAP and (ii) the unaudited balance sheets of Seller and the
notes thereto at December 31, 1996, and the unaudited statements of income,
shareholders' equity and cash flows and the notes thereto of Seller for the year
ended December 31, 1996 (collectively, the "UNAUDITED FINANCIAL STATEMENTS" and,
together with the Audited Financial Statements, the "FINANCIAL STATEMENTS"),
which shall be prepared by Seller in accordance with GAAP. The Financial
Statements shall, in the opinion of the management of Seller, include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of Seller's financial position and the results of its operations
and cash flows as of the dates thereof and for the periods covered thereby. The
financial statements delivered pursuant to this Section 5.1 shall be accompanied
by (i) a certificate of the president and the chief financial officer of Seller
confirming that such financial statements have been prepared as described above
and containing the additional representations and certifications set forth on
EXHIBIT A and (ii) a written statement of Reynolds & Rowella consenting to the
inclusion by Buyer of the Audited Financial Statements in any report or other
document filed by Buyer with the SEC.
(b) Seller shall cause to be made available to Buyer, simultaneously
with the delivery of the Audited Financial Statements, the work papers (the
"WORK PAPERS") of Reynolds & Rowella or any other accountants with respect to
the audits performed of the Audited Financial Statements and any special
memoranda or correspondence prepared in connection with the same in order that
Buyer may make such reasonable review, examination and investigation of the
business of Seller as Buyer may reasonable desire.
(c) Buyer shall have ten (10) days from the date the Financial
Statements are delivered and the Work Papers are made available to Buyer to
review the Financial Statements. If the Financial Statements are not
satisfactory to Buyer in its discretion, Buyer shall provide written notice to
Seller to such effect and shall have the right to terminate this Agreement;
PROVIDED, HOWEVER, that if Buyer does not, within such ten (10) day period,
provide such written notice to Seller, the Financial Statements shall be deemed
to be acceptable to Buyer and Buyer shall have no further rights to terminate
the Agreement pursuant to this Section 5.1(c).
Section 5.2. ACCESS TO INFORMATION. From the date of this Agreement
until the Closing Date, Seller shall permit Buyer and its representatives,
including, without limitation, its legal counsel and accountants, to conduct an
appropriate due diligence examination and investigation with respect to Seller.
Seller will reasonably cooperate with Buyer's diligence, and such cooperation
will include, without limitation, the following:
(i) providing Buyer and its representatives with reasonable
access to all data, records and other information that they may request
in connection with their evaluation of the transactions contemplated by
this
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Agreement (including, without limitation, lists of contact persons,
marketing information, and records of negotiations with existing and
prospective customers);
(ii) allowing Buyer and its representatives to conduct a
complete business, financial and legal review of all aspects of Seller;
(iii) affording Buyer and its representatives the opportunity
to discuss the affairs, finances, operations and accounts of Seller
with Seller's officers, directors, agents and other appropriate
personnel;
(iv) facilitating conversations between Buyer and its
representatives and representatives of the other parties to the
Assigned Contracts; and
(v) delivering to Buyer a true, correct and complete copy of
each Assigned Contract not delivered to Buyer prior to the date of this
Agreement, including all amendments, modifications, supplements, side
letters or consents affecting the obligations of any party thereunder.
Section 5.3. EXCLUSIVITY. From the date of this Agreement until the
termination of this Agreement in accordance with its terms, neither Seller nor
the Shareholder shall, nor shall Seller permit its officers, directors,
employees, affiliates, representatives or agents to (including, without
limitation, investment bankers, financial advisors, attorneys, brokers and other
advisors) (collectively, the "REPRESENTATIVES"), directly or indirectly do any
of the following:
(i) discuss, negotiate, undertake, authorize, recommend,
propose or enter into, either as the proposed surviving, merged,
acquiring or acquired corporation, any transaction (an "ACQUISITION
TRANSACTION") involving any disposition or other change of ownership or
control of a substantial portion of Seller's stock or assets or any
assumption by Seller of substantial liabilities, including, without
limitation, any joint venture or partnership involving any of the
foregoing (other than the transaction contemplated in this Agreement);
(ii) facilitate, encourage, solicit or initiate or in any way
engage in discussions, negotiations or submissions of proposals or
offers in respect of an Acquisition Transaction (other than the
transaction contemplated in this Agreement);
(iii) furnish or cause to be furnished to any Person (other
than Buyer or its representatives) any information concerning the
business, operations, properties or assets of Seller in connection with
an Acquisition Transaction; or
(iv) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any
other Person to do or seek any of the foregoing.
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Seller shall inform Buyer by telephone, within 24 hours, of Seller's receipt of
any proposal or bid (including the terms thereof and the Person making such
proposal or bid) in respect of any Acquisition Transaction other than the
transaction described in this Agreement. Seller shall, immediately upon
execution of this Agreement, instruct its Representatives to cease all further
activities with respect to the sale of Seller or Seller's assets, including,
without limitation, the dissemination of information.
Section 5.4. CONDUCT OF BUSINESS. (a) From the date of this Agreement
until the earlier of the Closing Date or the Termination Date (as defined in
Section 12.1 below) Seller:
(i) shall not modify or amend any Assigned Contract in any
material respect or assign, transfer or terminate any Assigned
Contract;
(ii) shall not enter into any agreement, contract or
arrangement with any person of the type included in the Assigned
Contracts, except for agreements, contracts or arrangements entered
into in the ordinary course of business, consistent with past practice,
and, in any event, shall not enter into any agreement, contract or
arrangement relating to online movie ticketing;
(iii) shall use its reasonable best efforts to preserve its
present relationships with Persons having business dealings with
Seller;
(iv) shall (A) maintain the books, accounts and records of
Seller in the ordinary course of business consistent with past
practices, (B) collect all trade accounts receivable and shall pay all
trade accounts payable in the ordinary course of business consistent
with past practices, and (C) comply in all material respects with all
contractual and other obligations applicable to the operations of
Seller;
(v) shall not subject any of the properties or assets (whether
tangible or intangible) of Seller to any Lien other than liens arising
by operation of law in the ordinary course of business and liens
arising under equipment leases entered into in the ordinary course of
business;
(vi) shall not incur any indebtedness for borrowed money;
(vii) shall not sell, assign, transfer, convey, lease or
otherwise dispose of any of the properties or assets of Seller except
for distributions of cash to the Shareholder;
(viii) shall not acquire any properties or assets except in
the ordinary course of business, consistent with past practice;
(ix) shall not cancel or compromise any debt or claim or waive
or release any right of Seller;
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(x) shall not grant any officer or employee of Seller any
increase in compensation or benefits or any rights to receive severance
payments or other benefits upon a termination of employment;
(xi) shall not terminate any officer or employee of Seller,
induce or attempt to induce any officer or employee of Seller to leave
the employ of Seller or in any way interfere adversely with the
relationship between any such employee and Seller;
(xii) shall not introduce any change with respect to the
operation of Seller; and
(xiii) shall operate only in the ordinary course of business.
The foregoing shall not restrict Seller from canceling any agreement not
included in the Assets.
(b) Each of the Seller Parties agrees that it shall not take any
action, and shall not permit any event to occur, that would cause Seller to
violate any of the covenants set forth in Section 5.4(a).
Section 5.5. PUBLIC ANNOUNCEMENTS; CONFIDENTIAL INFORMATION. Seller
agrees that it shall not issue any press release or make any public statement,
announcement or filing concerning this Agreement or any aspect of the
transactions contemplated hereby or otherwise furnish or make available to any
person any of the terms and conditions of this Agreement or any of the
transactions contemplated hereby or any information disclosed by Buyer in
connection herewith, except as may be required by applicable law or with the
prior written consent of Buyer. Seller agrees that it shall not issue any such
release or make any such statement, announcement or filing required by
applicable law except after prior consultation with Buyer.
Section 5.6. NO BREACH OF REPRESENTATIONS AND WARRANTIES. Seller agrees
that it shall not take any action, and shall use its reasonable commercial
efforts not to permit any event to occur, which would result in any of the
representations and warranties of Seller contained in this Agreement (including
EXHIBIT A hereto) not being true and correct in any material respect on and as
of the Closing Date with the same force and effect as if such representations
and warranties had been made on and as of the Closing Date.
Section 5.7. UPDATING INFORMATION. Seller shall promptly deliver to
Buyer any information concerning events subsequent to the date of this Agreement
which is necessary to supplement the representations and warranties contained
herein (including in EXHIBIT A hereto), including the Schedules hereto, or the
information delivered by Seller pursuant to any of the covenants contained
herein, in order that such representations and warranties (including such
Schedules) or the information so delivered be complete and accurate in all
material respects, it being understood and agreed that the delivery of such
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information shall not in any manner constitute a waiver by Buyer of any of the
conditions precedent to the Closing hereunder, including, without limitation,
the conditions contained in Section 7.1. To the extent that, notwithstanding the
delivery of such information, Buyer decides to waive any part of the condition
set forth in 7.1(i) and close the Acquisition, the written information provided
pursuant to this Section 5.7 will be deemed to have amended the Schedules
hereto, to have qualified the representations and warranties contained in
Articles III and III-A above, and to have cured any misrepresentation or breach
of warranty that otherwise might have existed hereunder by reason of the
delivery of such information except, in each case, to the extent Seller or
either of the Seller Parties had actual knowledge of such information on the
date of this Agreement.
Section 5.8. RESTRICTIONS ON TRANSFER OF STOCK CONSIDERATION. (a)
Seller and the Shareholder shall not, directly or indirectly, sell, transfer any
beneficial interest in, pledge, hypothecate or otherwise dispose, or offer to
sell, transfer any beneficial interest in, pledge, hypothecate or otherwise
dispose (collectively, "TRANSFER"), any shares of Common Stock constituting the
Stock Consideration during the 12-month period following the Closing Date.
Seller and the Shareholder shall not, individually or in the aggregate, Transfer
more than 10% of the shares of Common Stock issued as part of the Stock
Consideration on the Closing Date during any calendar quarter following the
one-year anniversary of the Closing Date; PROVIDED that if less than 10% of the
shares of Common Stock issued as part of the Stock Consideration are Transferred
during any such calendar quarter, the number of shares that were eligible for
Transfer but were not Transferred may be sold in any subsequent quarter so long
as Seller and the Shareholder do not, in the aggregate, sell more than 20% of
the shares of Common Stock constituting the Stock Consideration during any
calendar quarter. Notwithstanding the foregoing, (i) Seller may distribute the
Stock Consideration to the Shareholder at any time, (ii) the Shareholder may
pledge the Stock Consideration to the Buyer pursuant to the Tax Loan Pledge
Agreement (as defined in Section 6.5) and the Indemnification Pledge Agreement
(as defined in Section 6.3) and (iii) at any time after December 31, 2000,
Shareholder may give any portion of the Stock Consideration that is not then
pledged under either the Tax Loan Pledge Agreement or the Indemnification Pledge
Agreement to any member of his immediate family; PROVIDED that thereafter the
restriction on Transfer of more than 10% of the shares of Common Stock during
any calendar quarter described above shall apply to Transfers by the Shareholder
and by such family member on an aggregate basis, and, prior to receiving any
shares of Common Stock from Shareholder, such family member shall agree in
writing, for the benefit of Buyer and in form and substance reasonably
satisfactory to Buyer, to be bound by such transfer restrictions.
(b) Notwithstanding anything to the contrary in this Section 5.8, this
Section 5.8 shall not restrict any Transfer in connection with a merger, stock
purchase, reorganization or other transaction pursuant to which shareholders of
Buyer generally have the opportunity to sell or exchange all or a portion of
their Common Stock. The restrictions on Transfer in this Section 5.8 shall in
any event expire on the fourth anniversary of the Closing Date.
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Section 5.9. EMPLOYMENT AGREEMENT. At the Closing, Shareholder shall
enter into an employment agreement with Buyer on the terms set forth in EXHIBIT
D hereto and otherwise reasonably satisfactory to Shareholder and Buyer.
Section 5.10. BULK SALES LAW COMPLIANCE. Following the execution of
this Agreement, Seller and Buyer shall cooperate to take all action necessary to
permit Buyer to comply with all applicable bulk sales or bulk transfer or
similar laws, including under applicable Tax laws (collectively "BULK SALES
LAWS"). Seller shall promptly provide Buyer with copies of any and all notices
or other documents or correspondence that it receives from any Government Body
or other Person relating to the bulk sales process. In the event of any
objection or dispute by any creditor or taxing authority relating to any such
bulk sales notice, Seller shall take all action reasonably necessary to
eliminate such objection or dispute (PROVIDED, HOWEVER, that the foregoing shall
not be deemed to prevent Seller from contesting any such dispute in good faith).
Section 5.11. INDEMNIFICATION PLEDGE AGREEMENT, ESCROW AGREEMENT. At
the Closing, (i) to the extent any of the Consideration consists of Stock
Consideration, Shareholder shall enter into an indemnification pledge agreement,
substantially in the form of EXHIBIT C hereto (the "INDEMNIFICATION PLEDGE
AGREEMENT") with Buyer or (ii) to the extent all of the Consideration consists
of Cash Consideration, Seller and Shareholder shall enter into an escrow
agreement with Buyer providing for the deposit into escrow of $1,000,000 of the
Consideration on the Closing Date, which escrow agreement shall contain terms
comparable to those in the Indemnification Pledge Agreement and shall otherwise
be reasonably satisfactory to Buyer, Seller and Shareholder (the "ESCROW
AGREEMENT").
Section 5.12. CONSENTS. Seller shall use its diligent, good faith
efforts to obtain, at the earliest practicable date, all consents and approvals
required to consummate the transactions contemplated by this Agreement.
Section 5.13. FURTHER ACTIONS. Seller agrees to execute and deliver
such instruments and promptly take such other actions as may reasonably be
required to consummate the transactions contemplated hereby in accordance with
the terms hereof.
ARTICLE VI
COVENANTS OF BUYER
Section 6.1. NO BREACH OF REPRESENTATIONS AND WARRANTIES. Buyer agrees
that it shall not take any action, and shall use its reasonable commercial
efforts not to permit any event to occur, which would result in any of the
representations and warranties of Buyer contained in this Agreement not being
true and correct in any material respect on and as of the Closing Date with the
same force and effect as if such representations and warranties had been made on
and as of the Closing Date.
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Section 6.2. CONFIDENTIALITY. Buyer agrees that until the Closing Date,
it shall not disclose or use, and it shall cause its Representatives not to
disclose or use, any Confidential Information (as defined below) with respect to
Seller furnished, or to be furnished, by Seller or its Representatives to Buyer
or its Representatives in connection with the transactions contemplated hereby
and the due diligence investigation performed by Buyer and its Representatives
other than in connection with its evaluation and consummation of the
transactions contemplated hereby; PROVIDED, HOWEVER, that disclosure of such
information may be made (i) to Representatives of Buyer, (ii) to the extent the
same shall be or shall have otherwise become publicly available other than as a
result of a disclosure by Buyer or its Representatives, (iii) to the extent
required to be disclosed by law or during the course of or in connection with
any litigation or other proceeding, (iv) to the extent it is obtained by Buyer
from a source other than Seller or its Representatives, provided that such
source was not then bound by a duty of confidentiality to Seller or another
party with respect to the information, (v) to the extent required to be
disclosed by Buyer in filings with the Securities and Exchange Commission or
(vi) with the written consent of Seller. As used herein, "CONFIDENTIAL
INFORMATION" means any information relating to Seller provided to Buyer or its
Representatives by Seller or its Representatives. If this Agreement is
terminated pursuant to Section 12.1 hereto, Buyer shall promptly return to
Seller all Confidential Information in its possession.
Section 6.3. NON-COMPETITION AGREEMENT; INDEMNIFICATION PLEDGE
AGREEMENT; ESCROW AGREEMENT. At the Closing, Buyer shall enter into (i) a
non-competition agreement, substantially in the form of EXHIBIT B hereto (the
"NON-COMPETITION AGREEMENT"), with Seller and the Seller Parties, (ii) to the
extent any of the Consideration consists of Stock Consideration, the
Indemnification Pledge Agreement with the Shareholder and (iii) to the extent
all of the Consideration consists of Cash Consideration, the Escrow Agreement
with Seller and the Shareholder.
Section 6.4. EMPLOYMENT AGREEMENT. At the Closing, Buyer shall enter
into an employment agreement with Shareholder containing the terms set forth in
EXHIBIT D hereto and otherwise reasonably satisfactory to Shareholder and Buyer.
Section 6.5. TAX LOAN. Within 30 business days prior to the due date
thereof, Shareholder shall reasonably determine the amount of federal, state and
local income taxes payable by him in respect of the Stock Consideration, if any,
received by the Seller at the Closing (the "LOAN AMOUNT"), and shall provide
Buyer with written notice of the Loan Amount, accompanied by a computation of
such amount in reasonable detail. So long as no amount is due and owing by
Seller or the Seller Parties to Buyer under Article XI hereof, upon delivery by
the Shareholder of a promissory note, in the form attached hereto as EXHIBIT E
(the "NOTE"), in favor of Buyer for an amount equal to the Loan Amount, and a
pledge agreement, in the form attached hereto as EXHIBIT F (the "TAX LOAN PLEDGE
AGREEMENT"), Buyer shall, no later than one business day prior to the due date
of such taxes, loan an amount equal to the Loan Amount to the Shareholder on the
terms set forth in the Note and the Tax Loan Pledge Agreement. The Loan Amount
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shall in no event exceed the product of (i) 0.24 and (ii) the closing sale price
of the Common Stock on the Closing Date as reported by the Nasdaq Stock Market,
Inc.
Section 6.6. EMPLOYEE MATTERS. Buyer shall, on or promptly after the
Closing Date, make an offer of employment to each of the employees of Seller
actively working for Seller at the time of the Closing (including those
employees on vacation at such time). Buyer shall offer such employees (i) a
salary equal to the salary paid to them by Seller immediately prior to the
Closing Date and (ii) employee benefits comparable to benefits offered to
similarly situated employees of Buyer.
Section 6.7. PUBLIC ANNOUNCEMENT. Prior to issuing any press release or
making any public statement, announcement or filing concerning this Agreement or
any aspect of the transactions contemplated hereby, Buyer shall furnish Seller
with a copy thereof and allow Seller a reasonable opportunity to consult with
Buyer with respect thereto.
Section 6.8. CONSENTS AND CONDITIONS. Buyer shall use its reasonable
efforts to assist Seller in causing each of the conditions precedent to the
obligations of Seller to be satisfied.
Section 6.9. FURTHER ACTIONS. Buyer agrees to execute and deliver such
instruments and take such other actions as may reasonably be required to
consummate the transactions contemplated hereby in accordance with the terms
hereof.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Section 7.1. CONDITIONS. The obligation of Buyer to consummate the
Acquisition on the Closing Date is subject to the satisfaction of the following
conditions (any or all of which may be waived by Buyer, in its sole discretion,
in whole or in part, to the extent permitted by applicable law):
(i) each of the representations and warranties of Seller and
the Seller Parties contained herein that are not qualified as to
materiality shall be true and correct in all material respects and each
of the representations and warranties of Seller and the Seller Partner
that are so qualified shall be true and correct in all respects, in
each case, on and as of the Closing Date with the same force and effect
as though the same had been made on and as of the Closing Date;
(ii) Seller shall have performed and complied, in all material
respects, with the covenants and provisions of this Agreement required
to be performed or complied with by it between the date hereof and the
Closing Date;
(iii) since the date of this Agreement, no event or
circumstance shall have occurred that has had, or is reasonably likely
to have, a material
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adverse effect on the business, assets, properties, liabilities,
financial condition or results of operations of Seller taken as a whole
(a "MATERIAL ADVERSE EFFECT");
(iv) (A) no Legal Proceeding shall have been instituted or
threatened or claim or demand made against Seller or Buyer seeking to
restrain or prohibit or to obtain damages with respect to the
consummation of the transactions contemplated by this Agreement, or
which might, in the reasonable opinion of Buyer, result in a Material
Adverse Effect and (B) there shall not be in effect any Order of a
Government Body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
by this Agreement;
(v) Buyer or Seller shall have received all third-party
consents and approvals referred to in SCHEDULE 3.10 and, except to the
extent the failure to obtain the same would not have a Material Adverse
Effect, all necessary governmental and regulatory approvals and all
other consents that Buyer may reasonably require with respect to its
assumption of any contracts, licenses, agreements, understandings and
other arrangements and instruments to which Seller is a party;
(vi) the closing shall have occurred under the Agreement and
Plan of Merger, dated as of January 10, 1999, by and among, Big
Entertainment, Inc., Hollywood Online Inc., The Times Mirror Company
and Big Acquisition Corp.;
(vii) Buyer shall not have obtained or discovered, in the
course of its due diligence review referred to in Section 5.2 above,
information concerning Seller or the Assets which, in the sole judgment
of Buyer, could materially adversely affect the business, assets,
financial condition or results of operations of Seller or Buyer
(provided that the condition set forth in this clause (vii) will lapse
on April 9, 1999);
(viii) Buyer shall have received an opinion of counsel for
Seller, dated the Closing Date, substantially in the form of EXHIBIT G
hereto;
(ix) Buyer shall have received a certificate to the effect set
forth in clauses (i) and (ii) above, dated the Closing Date and signed
by a duly authorized officer of Seller;
(x) Buyer shall have received a certificate of the Secretary
of Seller, dated the Closing Date, setting forth resolutions of the
Board of Directors and of the shareholders of Seller authorizing the
execution and delivery of this Agreement and each document and
instrument required to be executed and delivered by Seller hereunder
and the consummation of the transactions contemplated hereby and
thereby, and certifying that such resolutions were duly adopted and
have not been rescinded or amended as of the Closing Date;
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(xi) Seller and the Shareholder shall, to the extent required
by Section 5.10 hereto, have executed and delivered to Buyer the
Indemnification Pledge Agreement or the Escrow Agreement and Seller and
the Seller Parties shall have executed and delivered to Buyer the
Non-Competition Agreement;
(xii) Shareholder shall have entered into an employment
agreement with Buyer in accordance with Section 5.9 hereto;
(xiii) each of Seller, EDKS Associates, David Stonehill and
Elizabeth Stonehill shall have executed and delivered an Assignment
Agreement relating to the assignment to Seller by such other parties of
all rights that such parties may have in certain software used by
Seller, which Assignment Agreement shall be substantially in the form
of EXHIBIT J hereto.
(xiv) Buyer shall have received from Seller all information
reasonably requested by Buyer to enable Buyer to comply with all
applicable Bulk Sales Laws, and applicable notice periods specified in
any such Bulk Sales Laws shall have expired; and
(xv) Seller shall have executed and delivered to Buyer (A) all
documents to be delivered at the Closing in accordance with the terms
of this Agreement and (B) such other documents and instruments as Buyer
may reasonably request and which Seller can obtain with reasonable
commercial efforts in order to consummate the transactions contemplated
by this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Section 8.1. CONDITIONS. The obligation of Seller to consummate the
Acquisition on the Closing Date is subject to the satisfaction of the following
conditions (any or all of which may be waived by Seller, at the sole option of
Seller, in whole or in part to the extent permitted by applicable law):
(i) each of the representations and warranties of Buyer
contained herein shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though the
same had been made on and as of the Closing Date;
(ii) Buyer shall have performed and complied, in all material
respects, with the covenants and provisions of this Agreement required
to be performed or complied with by it between the date hereof and the
Closing Date;
(iii) Seller shall have received the opinions of counsel for
Buyer, dated the Closing Date, substantially in the forms of EXHIBITS
H-1 AND H-2 hereto;
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(iv) Seller shall have received a certificate to the effect
set forth in clauses (i) and (ii) above, dated the Closing Date and
signed by a duly authorized officer of Buyer;
(v) Seller shall have received a certificate of the Secretary
of Buyer, dated the Closing Date, setting forth resolutions of the
Board of Directors of Buyer authorizing the execution and delivery of
this Agreement and each document and instrument required to be executed
and delivered by Buyer hereunder and the consummation of the
transactions contemplated hereby and thereby, and certifying that such
resolutions were duly adopted and have not been rescinded or amended as
of the Closing Date;
(vi) (A) no Legal Proceeding shall have been instituted
against Seller seeking to restrain or prohibit or to obtain damages
with respect to the consummation of the transactions contemplated by
this Agreement and (B) there shall not be in effect any Order of a
Government Body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
by this Agreement;
(vii) Buyer shall have entered into an employment agreement
with Shareholder in accordance with Section 6.4;
(viii) since the date of this Agreement, no event or
circumstance shall have occurred that has had, or is reasonably likely
to have, a material adverse effect on the business, assets, properties,
liabilities, financial condition or results of operations of Buyer and
its subsidiaries taken as a whole (the parties hereto acknowledge and
agree that if the condition to Buyer's obligation to consummate the
Acquisition set forth in Section 7.1(vi) has not been satisfied as of
the Closing Date and Buyer elects to waive such condition and
consummate the Acquisition, the failure of such condition to be
satisfied shall in no event be deemed to have, or be reasonably likely
to have, a material adverse effect on the business, assets, properties,
liabilities, financial condition or results of operations of Buyer and
its subsidiaries taken as a whole); and
(ix) Buyer shall have executed and delivered to Seller (A) all
documents to be delivered at the Closing in accordance with the terms
of this Agreement and (B) such other documents and instruments as
Seller may reasonably request and which Buyer can obtain with
reasonable commercial efforts in order to consummate the transactions
contemplated by this Agreement.
ARTICLE IX
THE CLOSING
Section 9.1. CLOSING DATE. Except as hereinafter provided, the closing
of the transactions contemplated by this Agreement (the "CLOSING") shall take
place at the
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offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York at
10:00 a.m. on the third business day following the date on which each of the
conditions specified in Section 7.1 and Section 8.1 (other than those as to
which the parties agree will be satisfied at the Closing) of this Agreement has
been fulfilled (or waived by the party entitled to waive that condition) or at
such other time and place as Seller and Buyer may mutually agree in writing. The
date on which the Closing of the Acquisition occurs is referred to herein as the
"CLOSING DATE."
Section 9.2. PROCEEDINGS AT THE CLOSING. All proceedings to be taken
and all documents to be executed and delivered by Seller in connection with the
Closing shall be reasonably satisfactory in form and substance to Buyer and its
counsel. All proceedings to be taken and all documents to be executed and
delivered by Buyer in connection with the Closing shall be reasonably
satisfactory in form and substance to Seller and its counsel. All proceedings to
be taken and all documents to be executed and delivered by both parties at the
Closing shall be deemed to have been taken and executed simultaneously, and no
proceedings shall be deemed taken nor any documents executed or delivered until
all have been taken and delivered.
Section 9.3. DELIVERIES BY SELLER TO BUYER. At the Closing, Seller
shall deliver, or shall cause to be delivered, to Buyer the following:
(i) a bill of sale and assignment and assumption agreement in
the form of EXHIBIT I hereto (the "BILL OF SALE AND ASSIGNMENT AND
ASSUMPTION AGREEMENT"), duly executed by Seller;
(ii) all other assignments and other instruments or documents
as shall be reasonably necessary in the judgment of Buyer to evidence
the sale, assignment, transfer and conveyance by Seller to Buyer of the
Assets in accordance with the terms hereof, free and clear of all Liens
other than Permitted Liens;
(iii) copies of all approvals and consents referred to in
clause (v) of Section 7.1 above;
(iv) the opinion of counsel for Seller referred to in clause
(viii) of Section 7.1 above;
(v) the certificate, signed by a duly authorized officer of
Seller, referred to in clause (ix) of Section 7.1 above;
(vi) the certified resolutions of the Board of Directors and
shareholders of Seller referred to in clause (x) of Section 7.1 above;
(vii) the employment agreement referred to in clause (xii) of
Section 7.1 above;
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(viii) the Non-Competition Agreement duly executed by Seller
and the Seller Parties and, as applicable, the Indemnification Pledge
Agreement duly executed by the Shareholder or the Escrow Agreement duly
executed by the Seller and the Seller Parties;
(ix) an affidavit of Seller, in a form reasonably satisfactory
to Buyer, stating, under penalties of perjury, Seller's United States
taxpayer identification number and that Seller is not a foreign person
within the meaning of Section 1445(b)(2) of the Code; and
(x) a certificate of the Secretary of Seller attesting to the
incumbency and signature of each officer of Seller who shall execute
this Agreement or any other Seller Document.
Section 9.4. DELIVERIES BY BUYER TO SELLER. At the Closing, Buyer shall
deliver to Seller the following:
(i) the opinions of counsel for Buyer referred to in clause
(iii) of Section 8.1 above;
(ii) the certificate, signed by a duly authorized officer of
Buyer, referred to in clause (iv) of Section 8.1 above;
(iii) the employment agreement referred to in clause (vii) of
Section 8.1 above duly executed by Buyer;
(iv) the Non-Competition Agreement and, as applicable, the
Indemnification Pledge Agreement or the Escrow Agreement, each duly
executed by Buyer;
(v) the certified resolutions of the Board of Directors of
Buyer referred to in clause (v) of Section 8.1 above; and
(vi) a certificate of a duly authorized officer of Buyer
attesting to the incumbency and signature of each officer of Buyer who
shall execute this Agreement or any other Buyer Document.
ARTICLE X
ADDITIONAL POST-CLOSING COVENANTS
Section 10.1. FURTHER ASSURANCES.
(a) From time to time after the Closing Date, each of the parties
hereto will, at the request of any other party, execute and deliver such other
and further instruments of sale, assignment, assumption, transfer and conveyance
and take such other and further actions as such party may reasonably request in
order to make all the benefits
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of the Assigned Contracts and rights of Seller included in the Assets available
to Buyer, to provide for the assumption of the Assigned Contracts by Buyer, to
vest in Buyer and put Buyer in possession of the Assets, to transfer to Buyer
any contracts and rights of Seller relating to the Assets and to assure to Buyer
the benefits thereof and effectuate fully the purposes of this Agreement.
(b) With respect to any Assigned Contract which is not assumed by Buyer
at the Closing because a consent to assignment is required but not obtained
prior to the Closing, if Seller or Buyer shall thereafter obtain such consent to
assignment, then Seller and Buyer shall each execute and deliver such
instruments of assignment and assumption as may reasonably be required for
Seller to assign and Buyer to assume such Assigned Contract, subject to all the
terms and conditions of this Agreement as if such Assigned Contract had been
included in the Assets at the Closing.
Section 10.2. SELLER TO CHANGE NAME. On the Closing Date or as soon
thereafter as practicable (but in no event more than 5 business days
thereafter), Seller shall adopt (and shall make all appropriate filings so as to
adopt), and shall thereafter do business under, a new name which does not
contain the words "CinemaSource" or any variation thereof.
Section 10.3. PRESERVATION OF CORPORATE RECORDS. Seller shall preserve
and keep the Corporate Records for a period of seven years from the Closing Date
and shall make such Corporate Records and personnel, if any, of Seller available
to Buyer as Buyer may reasonably require (i) in connection with, among other
things, any insurance claims by, Legal Proceedings against or governmental
investigations of Buyer or (ii) in order to enable Buyer to comply with its
obligations under the Code, any other applicable statute with respect to
taxation, this Agreement and each other agreement, document or instrument
contemplated hereby. If Seller wishes to destroy such Corporate Records after
such seven year period, then Seller shall first give 90 days prior written
notice to Buyer and Buyer shall have the right at its option and expense, upon
prior written notice given to Seller within that 90 day period, to take
possession of the Corporate Records within 180 days after the date of such
notice.
Section 10.4. CONFIDENTIALITY. From and after the Closing Date, none of
Seller, any of its employees or the Seller Parties shall divulge, furnish or
make available to any person any knowledge or information with respect to the
Assets or Buyer (other than in the regular course and in furtherance of the
Buyer's business) which is, or which Seller or either of the Seller Parties is
advised or has reason to believe is, confidential (including, but not limited
to, information relating to any marketing, financial or personnel matters in
connection with the Assets).
ARTICLE XI
INDEMNIFICATION
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Section 11.1. INDEMNIFICATION.
(a) Each of Seller and the Seller Parties jointly and severally agrees
to indemnify and hold Buyer harmless from and against any and all losses,
liabilities, obligations, judgments, damages, deficiencies, costs, penalties and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) (collectively, "LOSSES") based upon, attributable to or resulting
from:
(i) (A) any misrepresentation or breach of warranty on the
part of Seller or either of the Seller Parties under this Agreement,
any of the Seller Documents or any of the Shareholder Documents (other
than any employment or stock option agreement entered into by Buyer and
Shareholder) or (B) any breach of covenant or other agreement on the
part of Seller or either of the Seller Parties under this Agreement,
any of the Seller Documents or any of the Shareholder Documents (other
than any employment or stock option agreement entered into by Buyer and
Shareholder);
(ii) any Liabilities of Seller not expressly assumed by Buyer
under the terms of this Agreement, including, without limitation:
(A) any liabilities and obligations arising out of or
based upon the conduct of the business of Seller prior to the
Closing Date (other than obligations or liabilities that are
expressly assumed by Buyer under the terms of this Agreement);
(B) any claims for any injury to person or property
attributable to any services rendered by Seller prior to the
Closing Date, regardless of whether such claims are asserted
prior to or after the Closing;
(C) any claims by any employee or former employee of
Seller arising out of the employment or termination of
employment of the employee or former employee on or prior to
the Closing Date or as a result of the transactions
contemplated by this Agreement; and
(D) any third party claims with respect to
occurrences or events that occurred on or prior to the Closing
Date and relate to Seller, its employees or the Assets;
(iii) any liabilities and obligations, based in any way on
agreements, arrangements or understandings made by or on behalf of
Seller or the Seller Parties, for any brokerage fees, finder's fees,
commissions or like payments in respect of the transactions
contemplated by this Agreement;
(iv) any costs incurred by Buyer in connection with any claims
or disputes arising from the requirements of any applicable Bulk Sales
Laws, other than, with respect to any claim or dispute arising under
any commercial
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Bulk Sales Laws (but not any tax Bulk Sales Laws), any such claim or
dispute which arises or results solely as a result of Buyer's failure
to timely file any notice required thereunder (provided that Seller
shall have provided Buyer with the necessary information with respect
to such notice); and
(v) all actions, suits, proceedings, demands, assessments,
judgments, costs, penalties and expenses, including reasonable
attorneys' fees, incident to the foregoing.
(b) Buyer agrees to indemnify and hold Seller and the Seller Parties
harmless from and against any and all Losses attributable to or resulting from:
(i) (A) any misrepresentation or breach of warranty on the
part of Buyer under this Agreement or any of the Buyer Documents (other
than any employment or stock option agreement entered into by Buyer and
Shareholder) or (B) any breach of covenant or other agreement on the
part of Buyer under this Agreement or any of the Buyer Documents (other
than any employment or stock option agreement entered into by Buyer and
Shareholder);
(ii) any Assumed Liabilities;
(iii) to the extent Buyer is not indemnified with respect
thereto under Section 11.1(a), any claims that arise from Buyer's
ownership or operation of the Assets subsequent to the Closing Date,
including, without limitation, any claims by any employee or former
employee of Buyer arising out of the employment or termination of
employment of the employee or former employee subsequent to the Closing
Date or as a result of the transactions contemplated by this Agreement;
(iv) any liabilities and obligations, based in any way on
agreements, arrangements or understandings made by or on behalf of
Buyer, for any brokerage fees, finder's fees, commissions or like
payments in respect of the transactions contemplated by this Agreement;
and
(v) all actions, suits, proceedings, demands, assessments,
judgments, costs, penalties and expenses, including reasonable
attorneys' fees, incident to the foregoing.
Section 11.2. PROCEDURES FOR INDEMNIFICATION. (a) Whenever a claim
shall arise for indemnification under Section 11.1 above, with the exception of
claims for litigation expenses in respect of a litigation as to which a notice
of claim, as provided below in this Section 11.2, has previously been given,
which expenses shall be funded on an ongoing basis, the party entitled to
indemnification (the "INDEMNIFIED PARTY") shall promptly notify the party from
whom indemnification is sought (the "INDEMNIFYING PARTY") of such claim and,
when known, the facts constituting the basis for such claim; PROVIDED, HOWEVER,
that in the event of any claim for indemnification hereunder resulting
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from or in connection with any claim or Legal Proceeding by a third
party, the Indemnified Party shall give such notice thereof to the
Indemnifying Party not later than 10 business days prior to the time
any response to the asserted claim is required, if possible, and in any
event within 5 business days following receipt of notice thereof.
Notwithstanding anything in the preceding sentence to the contrary, the
failure of any Indemnified Party to so notify the Indemnifying Party
shall not relieve the Indemnifying Party from any liability for
indemnification it may have if and to the extent that the Indemnifying
Party shall not have been prejudiced by such omission. In the event of
any such claim for indemnification resulting from or in connection with
a claim or Legal Proceeding by a third party, the Indemnifying Party
may, at its sole cost and expense, assume the defense thereof with
counsel selected by the Indemnifying Party and reasonably satisfactory
to the Indemnified Party; PROVIDED, HOWEVER, that Seller shall not be
entitled to assume the defense of any claim or Legal Proceeding against
Buyer for Taxes with respect to a period ending after the Closing Date.
If an Indemnifying Party assumes the defense of any such claim or Legal
Proceeding, the Indemnifying Party shall be entitled to select counsel
and take all steps necessary in the defense thereof; PROVIDED, HOWEVER,
that no settlement shall be made without the prior written consent of
the Indemnified Party, which consent shall not be unreasonably withheld
(and if the Indemnified Party shall withhold its consent to any
monetary settlement proposed by the Indemnifying Party and which the
other party to the action has indicated it is prepared to accept, the
Indemnified Party shall in no event be deemed for purposes of this
Agreement, to have suffered Losses in connection with such claim or
proceeding in excess of the proposed amount of such settlement);
PROVIDED, FURTHER, that the Indemnified Party may, at its own expense,
participate in any such proceeding with the counsel of its choice
without any right of control thereof. So long as the Indemnifying Party
is in good faith defending such claim or Legal Proceeding, the
Indemnified Party shall not compromise or settle such claim without the
prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld. If the Indemnifying Party does not assume
the defense of any such claim or Legal Proceeding in accordance with
the terms hereof, the Indemnified Party may defend (and, in the case of
any claim or Legal Proceeding against Buyer for Taxes with respect to a
period ending after the Closing Date, shall defend) against such claim
or Legal Proceeding in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation (after
giving prior written notice of the same to the Indemnifying Party and
obtaining the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld) on such terms as the
Indemnified Party may deem appropriate, and the Indemnifying Party will
promptly indemnify the Indemnified Party in accordance with the
provisions of this Section 11.2; PROVIDED, HOWEVER, that if the
Indemnified Party does not obtain the prior written consent of the
Indemnifying Party to any such settlement, and such written consent is
not unreasonably withheld by the Indemnifying Party, the Indemnified
Party shall not be entitled to indemnification hereunder from such
Indemnifying Party with respect to the claim settled. The Indemnifying
Party shall be liable for the fees and expenses of counsel employed by
the Indemnified Party for any period during which the Indemnifying
Party has not assumed the defense thereof. Notwithstanding anything in
this Section 11.2 to the contrary, if, in any claim or Legal
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Proceeding with respect to which the Indemnified Party has given the
notice required under this Section 11.2, such Indemnified Party shall
have reasonably concluded, based upon the opinion of its outside legal
counsel, that there may be one or more legal defenses available to it
that are different from or additional to those available to the
Indemnifying Party, then (x) the Indemnified Party may participate in
any such proceeding with the counsel of its choice, the expense for
which shall be borne by the Indemnifying Party (but in no event shall
the Indemnifying Party be required to pay the fees and expenses of more
than one counsel employed by the Indemnified Party with respect to such
claim or proceeding) and (y) the Indemnifying Party shall not have the
right to direct the defense of any such action on behalf of the
Indemnified Party.
(b) Notwithstanding anything to the contrary set forth in this Article
XI, except with respect to any misrepresentation or breach of warranty set forth
in Section 3.12(d), Seller shall have no responsibility or obligation to
indemnify Buyer or defend, or hold Buyer harmless against any Losses, claims or
Legal Proceedings arising out of Seller's or Buyer's use, reuse, modification,
compilation, collection, reproduction, public display or performance, or
distribution of showtime data, radio programming data or musical event data.
Should Seller choose to litigate or otherwise defend against a claim or Legal
Proceeding relating to the foregoing in which Buyer is not a named party, in
accordance with the provisions set forth in this Article XI, Seller shall notify
Buyer and Buyer may, at its sole expense and cost, participate in the defense of
any such Legal Proceeding with the counsel of its choice. Should Buyer elect not
to participate in any such Legal Proceeding, Seller shall have no responsibility
to defend such issues and may compromise any such claims on terms favorable to
Seller, in Seller's sole discretion, without regard to the outcome of such
issues.
Section 11.3. DETERMINATION OF DAMAGES AND RELATED MATTERS. (a) For
purposes of indemnification under Section 11.1(a)(i)(A) and Section
11.1(b)(i)(A), any breach of any representation or warranty shall be deemed to
constitute a breach of such representation or warranty notwithstanding any
limitation or qualification as to materiality (or, in the case of the
representation and warranty set forth in Section 3.5, as to dollar amounts) set
forth in such representation or warranty on the scope, accuracy or completeness
thereto, it being the intention of the parties hereto that, except as provided
in Sections 11.3(b) and (c), each Indemnified Party shall be indemnified and
held harmless from and against any and all Losses arising out of or based upon
or with respect to the failure of any such representation or warranty to be
true, correct and complete in any respect.
(b) An Indemnifying Party shall not have any liability under Sections
11.1(a)(i)(A) and 11.1(b)(i)(A) unless the aggregate amount of Losses to the
Indemnified Party finally determined to arise thereunder exceeds $100,000, and
then only to the extent of such excess.
(c) In the absence of fraud or willful misconduct on the part of the
Indemnifying Party or any of its employees or agents, an Indemnifying Party
shall not have liability for Losses indemnifiable under Section 11.1(a) or
Section 11.1(b) in excess
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of $6,000,000 in the aggregate; PROVIDED, HOWEVER, that the foregoing cap shall
not apply to any Losses in respect of Taxes for which Seller and the Seller
Parties have indemnified Buyer under Section 11.1(a).
(d) Notwithstanding anything to the contrary set forth in this Article
XI, in the absence of fraud or willful misconduct, Pamela West's liability under
Section 11.1(a) shall in no event exceed the greater of (i) $1,000,000 and (ii)
the market value of any assets directly or indirectly transferred to Pamela West
by Brett West on or after the date hereof.
(e) The amount of any Losses for which indemnification is provided
under this Article XI shall be reduced by any amounts recovered or recoverable
by the Indemnified Party under any insurance policy with respect to such Losses.
(f) To the extent any payment under this Article XI is not treated as
an adjustment to the Consideration for Tax purposes, then an additional amount
shall be paid to the Indemnified Party to take into account any additional Tax
cost by reason of the receipt of any indemnity payment (including any payment
pursuant to this paragraph). Any payment to an Indemnified Party pursuant to
this Article XI shall be reduced to take account of any net Tax benefit actually
realized by the Indemnified Party in respect of the taxable year in which such
Loss is incurred or paid and, with respect to a Tax benefit arising in a year
subsequent to the year in which the Loss is paid or incurred, the Indemnified
Party shall pay to the Indemnifying Party the amount of such Tax benefit
(including, as relevant, any member of its affiliated group as determined for
Tax purposes) when such Tax benefit is actually realized. In computing the
amount of any such Tax cost or Tax benefit, the Indemnified Party shall be
deemed to recognize all other items of income, gain, loss, deduction or credit
before recognizing any item arising from the receipt of any indemnity payment
hereunder or the incurrence or payment of any indemnified loss, liability,
claim, damage or expense.
(g) Until it is no longer possible in law or fact for the Indemnified
Party to sustain Losses by reason of any breach hereof or to assert a claim with
respect to any such breach or Losses, except as otherwise provided herein, the
indemnification provisions of this Article XI shall survive.
Section 11.4. PAYMENTS TO INDEMNIFIED PARTY. All payments by the
Indemnifying Party pursuant to this Article XI shall be paid in full in cash in
immediately available funds; PROVIDED, HOWEVER, that to the extent that any of
the Consideration consists of Stock Consideration, Seller and the Seller Parties
may elect to pay any amount payable by them as an Indemnifying Party
fifty-percent (50%) in cash in immediately available funds and fifty-percent
(50%) in Common Stock of Buyer. For purposes of the preceding sentence, the
Common Stock shall be valued at $10.50 per share (as adjusted to reflect any
subdivision, stock split, stock dividend or similar event after the date hereof
with respect to the Common Stock). Notwithstanding the foregoing, Seller and the
Seller Parties shall not, without the written consent of Buyer, be permitted to
make payments to Buyer pursuant to this Article XI to the extent such cash
payments would cause the net
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Stock Consideration (taking into account all payments by Seller or the Seller
Parties pursuant to this Article XI) paid by Buyer hereunder to equal or exceed
70% of the net Consideration (taking into account all payments by Seller or the
Seller Parties pursuant to this Article XI) paid by Buyer hereunder. For
purposes of the preceding sentence only, the Stock Consideration shall be valued
based upon the closing sale price of the Common Stock on the Closing Date as
reported by the Nasdaq Stock Market, Inc. Seller and the Seller Parties shall,
in lieu of making cash payments that would violate the above provisions (it
being understood that if Buyer consents to such cash payments, the above
provisions will not be violated), make such payments by delivery of a number of
shares of Common Stock of Buyer equal to the quotient of (i) the cash amount
otherwise payable by Seller and the Seller Parties and (ii) the closing sale
price of the Common Stock on the trading day immediately before such payments
are made as reported by the Nasdaq Stock Market, Inc.
Section 11.5. EXCLUSIVE REMEDY. The remedies set forth in this Article
XI shall be the exclusive remedies for Buyer, Seller and the Seller Parties with
respect to any Loss for which indemnification is provided to such party
hereunder but shall not preclude any assertion by Buyer, Seller or the Seller
Parties, as the case may be, of any causes of action for (i) fraud or willful
misconduct or (ii) specific performance in situations in which only equitable
relief would be suitable to address the injury or potential injury. Nothing in
this Article XI shall limit the remedies available to an Indemnified Party to
enforce its right to indemnification.
ARTICLE XII
TERMINATION
Section 12.1. TERMINATION. This Agreement may be terminated (i) by the
written agreement of Seller and Buyer, (ii) by either Seller or Buyer by written
notice to the other given after the date that is 180 days after the date of this
Agreement if the Closing shall not have occurred on or before such date;
PROVIDED, that no party shall have the right to terminate this Agreement
pursuant to this clause (ii) to the extent such party's failure to fulfill its
obligations under this Agreement is the cause of, or results in, the failure to
satisfy any of the conditions to the consummation of the Acquisition set forth
in Article VII or VIII, (iii) by Buyer in accordance with the provisions of
Section 5.1, (iv) by Buyer upon written notice given to Seller on or before
April 9, 1999 if, in the course of the due diligence review referred to in
Section 5.2, Buyer obtains or discovers information concerning Seller or the
Assets, which, in the sole judgment of Buyer, could materially adversely affect
the business, assets, financial condition or results of operations of Seller or
Buyer (unless, within 10 days after delivery by Buyer of such notice, Seller is
able to satisfy Buyer (which shall act reasonably and in good faith) that the
event, occurrence, fact or situation discovered or obtained by Buyer has been
cured and could not materially adversely affect the business, assets, financial
condition or results of operations of Seller or Buyer), and (v) by Buyer upon
written notice to Seller that the condition set forth in Section 7.1(vi) is not
reasonably likely to be satisfied;
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PROVIDED, HOWEVER, that, in each case, such termination shall have no effect
upon the agreements and obligations set forth in Section 13.5 and Sections 5.5
and 6.2 above. The date of any such termination is referred to herein as the
"TERMINATION DATE."
Section 12.2. LIABILITIES AFTER TERMINATION. Upon any termination of
this Agreement pursuant to Section 12.1 above, no party hereto shall thereafter
have any further liability or obligation hereunder; PROVIDED, HOWEVER, that no
such termination shall relieve any party hereto of any liability for any breach
of this Agreement prior to the date of such termination and PROVIDED, FURTHER,
that Seller shall remain bound by Section 5.5 above, Buyer shall remain bound by
Section 6.2 above, and each of Seller and Buyer shall remain bound by Section
13.5 below.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. (a) Seller,
the Seller Parties and Buyer hereby agree that the representations and
warranties contained in this Agreement, as supplemented or modified by any
amendments to the Schedules hereto made on or prior to the Closing Date, shall
survive the execution and delivery of this Agreement and shall further survive
the Closing hereunder until the close of business on December 31, 2000,
regardless of any investigation made by the parties hereto; PROVIDED, HOWEVER,
that the representations and warranties contained in Sections 3.2, 3A.1 and 4.2
shall survive indefinitely and the representations and warranties contained in
Section 3.13 shall survive for the applicable statute of limitations plus 90
days. Notwithstanding the foregoing, the obligations of the parties to indemnify
and hold harmless any other party pursuant to Article XI for any
misrepresentation or breach of warranty shall not terminate with respect to any
item as to which the party to be indemnified shall have, before the expiration
of the applicable representation and warranty, previously made a claim by
delivering a notice pursuant to Section 11.2 (stating in reasonable detail the
basis of the claim) to the party to be providing the indemnification.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, if Buyer elects to deliver all of the Consideration in the form of
Cash Consideration, then immediately prior to the Closing Date, the
representations and warranties contained in Sections 4.5, 4.6 and 4.7 shall
terminate and shall be deemed not to have been made by Buyer for any and all
purposes of this Agreement and the transactions contemplated hereby.
Section 13.2. ENTIRE AGREEMENT. This Agreement (with its Schedules and
Exhibits) contains, and is intended as, a complete statement of, all of the
terms and the arrangements between the parties hereto with respect to the
matters provided for herein, and supersedes any previous agreements and
understandings among the parties hereto with respect to those matters.
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Section 13.3. GOVERNING LAW; CONSTRUCTION. This Agreement and all
agreements related thereto shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts to be made, executed,
delivered and performed wholly in such state, but without regard to conflicts of
law principles of such state. The table of contents, captions and headings in
this Agreement are for reference purposes only and shall be given no effect in
the construction and interpretation of this Agreement. No provision of this
Agreement shall be construed against either party because such party drafted or
caused to be drafted such provision. Each provision of this Agreement shall be
construed as if such provision were proposed by both Buyer and Seller.
Section 13.4. TRANSFER TAXES. Seller shall pay when due (i) all
transfer and documentary taxes and fees imposed with respect to instruments of
conveyance in the transactions contemplated hereby and (ii) all sales, use and
other transfer or similar taxes on the transfer of the Assets contemplated
hereby. Buyer shall execute and deliver to Seller at the Closing any
certificates or other documents as Seller may reasonably request to perfect any
exemption from any such transfer, documentary, sales or use tax.
Section 13.5. EXPENSES. Each of Buyer, Seller and the Seller Parties
shall bear its own expenses (including, without limitation, all fees and
expenses of financial institutions, accountants, legal counsel, brokers,
investment bankers and other advisors), incurred in connection with the
negotiation, preparation, execution, review, delivery and performance of this
Agreement, each of the other documents and instruments executed in connection
with or contemplated by this Agreement or related hereto, and the consummation
of the transactions contemplated hereby and thereby.
Section 13.6. NOTICES. Any notice, request, instruction or other
communication to be given under this Agreement or otherwise in connection with
the Acquisition shall be in writing and shall be delivered by hand or prepaid
telecopy, or sent, postage prepaid, by registered, certified or express mail, or
reputable overnight courier service and shall be deemed given when so delivered
by hand or telecopied, or if mailed, three days after mailing (one business day
in the case of express mail or overnight courier service) to a party at the
following address (or at such other address as such party may have specified by
notice given to the other party pursuant to this provision):
if to Seller or the Seller Parties at: Prior to the Closing Date:
CinemaSource, Inc.
641 Danbury Road
Ridgefield, CT 06877
Attention: Brett West and Pamela West
Telecopier No.: (203) 438-0043
After the Closing Date:
2 Lookout Point Drive
Ridgefield, CT 06877
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with a copy to: LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Thomas Fairfield, Esq.
Telecopier No.: (860) 293-3555
and if to Buyer at: Big Entertainment, Inc.
2255 Glades Road
Suite 237W
Boca Raton, Florida 33431
Attention: Mitchell Rubenstein
Telecopier No.: (561) 998-2974
with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Howard Chatzinoff, Esq.
Telecopier No.: (212) 310-8007
Section 13.7. SEVERABILITY. If any provision of this Agreement, or the
application of such provision to Buyer, Seller, or any Person or circumstance,
shall be held invalid, then the remainder of this Agreement, or the application
of such provision to persons, entities or circumstances other than those as to
which it is held invalid, shall not be affected thereby.
Section 13.8. BINDING EFFECT; NO ASSIGNMENT.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns. Nothing in
this Agreement shall create or be deemed to create any third party beneficiary
rights in any Person not party to this Agreement. Except as expressly permitted
below, no assignment of this Agreement or of any rights or obligations hereunder
may be made by either party (by operation of law or otherwise) without the prior
written consent of the other party hereto and any attempted assignment without
such required consent shall be void.
(b) Prior to the Closing, Buyer may assign any and all of its rights
and obligations under this Agreement to any party, if Buyer directly and
unconditionally guarantees the obligations of such assignee under this
Agreement. After the Closing, Buyer may assign any or all of its rights and
obligations with respect to the Assets without the consent of Seller, provided
that Buyer shall cause its obligations to Seller under this Agreement in respect
of the Acquisition to be binding upon any successor to Buyer and Buyer shall
directly and unconditionally guarantee the obligations of such successor.
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Section 13.9. AMENDMENTS. This Agreement may be amended, supplemented
or modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
Section 13.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this instrument as
of the date and year first above written.
CINEMASOURCE, INC.
By:
------------------------------------------
Brett West
President
BIG ENTERTAINMENT, INC.
By:
------------------------------------------
Mitchell Rubenstein
Chairman of the Board and Chief
Executive Officer
The undersigned hereby acknowledges and agrees to be bound by the
provisions of Sections 1.4, 5.3, 5.4, 5.8, 5.9, 5.11, 6.5, 10.1(a) and 10.4 and
Articles III, III-A and XI of this Agreement, and, to the extent applicable,
Articles XII and XIII of this Agreement. The undersigned hereby acknowledges and
agrees to the terms set forth in EXHIBIT B and EXHIBIT C to this Agreement and
agrees to execute and deliver to Buyer at the Closing agreements in the forms of
such Exhibits.
---------------------------
Brett West
The undersigned hereby acknowledges and agrees to be bound by the
provisions of Sections 5.4, 10.1(a) and 10.4 and Articles III, III-A and XI of
this Agreement, and, to the extent applicable, Articles XII and XIII of this
Agreement. The undersigned hereby acknowledges and agrees to the terms set forth
in EXHIBIT B to this Agreement and agrees to execute and deliver to Buyer at the
Closing an agreement in the form of such Exhibit.
---------------------------
Pamela West
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EXHIBIT A
1. NO UNDISCLOSED LIABILITIES. As of the date such certificate is
delivered, except for liabilities set forth on Seller's balance sheet at
December 31, 1998 (or reflected in the notes thereto) and except for normal or
recurring liabilities incurred since such date in the ordinary course of
business and the contingent liabilities described in SCHEDULE 3.7 to the Asset
Purchase Agreement, Seller does not have any liabilities of any kind whatsoever,
either accrued, contingent or otherwise and whether due or to become due
(whether or not required to be reflected in financial statements pursuant to
generally accepted accounting principles).
<PAGE>
EXHIBIT B
FORM
OF
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is entered into as of
_________ __, 1999 by and among Big Entertainment, Inc., a Florida corporation
(the "Company"), CinemaSource, Inc., a Connecticut corporation ("CinemaSource")
and each of Brett West and Pamela West (together, the "Executives").
RECITALS
WHEREAS, the Company, CinemaSource and the Executives are parties to
that certain Asset Purchase Agreement, dated as of March __, 1999 (the "Purchase
Agreement"), providing for the purchase by the Company of substantially all of
the assets of CinemaSource;
WHEREAS, Brett West is the President and sole shareholder of
CinemaSource and serves as a director of CinemaSource, and Pamela West is the
Treasurer and the Secretary of CinemaSource and serves as a director of
CinemaSource;
WHEREAS, the Company and the Executives wish to provide for and
acknowledge certain arrangements and understandings following the closing of the
transactions contemplated by the Purchase Agreement; and
WHEREAS, the closing of the transactions contemplated by the Purchase
Agreement is conditioned upon the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used but not otherwise defined
herein shall have the meanings assigned thereto in the Purchase Agreement. As
used in this Agreement, the following terms shall have the respective meanings
set forth in this Section 1:
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Competing Business" means (i) Premier Datavision, Inc.,
____________________, (ii) any other business, enterprise or venture that
competed with CinemaSource on the date of the Purchase Agreement or the Closing
Date or that is engaged in any business, enterprise or venture conducted by the
business that constitutes the Assets, (iii) any other business, enterprise or
venture that is engaged anywhere in North America in the compilation,
reproduction or distribution of movie showtimes , movie dates, movie
descriptions or synopses, movie photos, movie trailers or any other movie or
theatre related information, or (iv) any other business, enterprise or venture
that is engaged anywhere in North America in the compilation, reproduction or
distribution of information related to radio programming or concerts or other
musical events.
<PAGE>
"Person" means any individual, business, trust, unincorporated
association, corporation, partnership, joint venture, limited liability company
or other entity of any kind.
"Proprietary Information" means all intellectual property rights, trade
secrets and other proprietary or confidential information related to the
business and operations of CinemaSource or the Assets (as defined in the
Purchase Agreement). The term "Proprietary Information" includes, by way of
example, matters of a technical nature, "know-how," computer programs (including
documentation of such programs), research projects, and matters of a business
nature, such as proprietary information about costs, profits, markets, sales,
lists of customers, and other information of a similar nature to the extent not
available to the public, and such materials constituting plans for future
development.
2. NON-SOLICITATION AND NON-INTERFERENCE. For a period of five (5)
years after the date of this Agreement, neither CinemaSource nor the Executives
shall (a) induce or attempt to induce any employee of the Company to leave the
employ of the Company or in any way interfere adversely with the relationship
between any such employee and the Company, (b) induce or attempt to induce any
employee of the Company to work for, render services or provide advice to or
supply Proprietary Information to any Person or (c) induce or attempt to induce
any customer, supplier, licensee, licensor, consultant or other business
relation of the Company to cease doing business with the Company or in any way
interfere with the relationship between any such customer, supplier, licensee,
licensor, consultant or other business relation and the Company.
3. INDIRECT SOLICITATION. For a period of five (5) years after the date
of this Agreement, neither CinemaSource nor the Executives shall, directly or
indirectly, induce, assist or encourage any Person in carrying out, directly or
indirectly, any activity that would be prohibited by the provisions of Section 2
if such activity were carried out by CinemaSource or either of the Executives,
either directly or indirectly; and, by way of example but not limitation,
neither CinemaSource nor the Executives shall, directly or indirectly, induce,
assist or encourage any employee of the Company to carry out, directly or
indirectly, any such activity.
4. COVENANT NOT TO COMPETE. For a period of five (5) years after the
date of this Agreement, neither CinemaSource nor the Executives shall, directly
or indirectly, have any interest in, own, manage, operate, control, be connected
with as a stockholder (other than as a stockholder of less than two percent (2%)
of the issued and outstanding stock of a company whose stock is listed on a
national securities exchange or quoted on The Nasdaq Stock Market), joint
venturer, officer, director, partner, employee or consultant, or otherwise
engage, be interested in, or invest or participate in any Competing Business.
5. PROPRIETARY INFORMATION. From and after the date of this Agreement,
neither CinemaSource nor the Executives shall (for the benefit of CinemaSource
or either of the Executives or for the benefit of any other Person) use or
disclose any Proprietary Information known to, or in the possession of, any of
them.
6. REPRESENTATIONS. Each Executive represents and warrants to the
Company that he or she is an officer and a director of CinemaSource, is actively
involved in the business of
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CinemaSource and will receive, directly or indirectly, substantial benefits from
the transactions contemplated by the Purchase Agreement.
7. SPECIFIC ENFORCEMENT. The parties hereto acknowledge and agree that
if any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur
and it would be extremely impracticable and difficult to measure damages.
Accordingly, in addition to any other rights and remedies to which the parties
may be entitled by law or equity, the parties shall be entitled to an injunction
or injunctions to prevent or cure breaches of the provisions of this agreement
and to enforce specifically the term and provisions hereof, and the parties
expressly waive (a) the defense that a remedy in damages will be adequate and
(b) any requirement, in an action for specific performance, for the posting of a
bond.
8. GOVERNING LAW. This Agreement shall be governed and construed in all
respects in accordance with the laws of the State of New York. The Company,
CinemaSource and the Executives each hereby consents to personal jurisdiction in
any action brought with respect to this Agreement and the transactions
contemplated hereby in the United States District Court for the Southern
District of New York or, if subject matter jurisdiction is unable to be obtained
in such court, in any state court in the City of New York in the State of New
York. The Company, CinemaSource and the Executives each also agrees that service
of process may be accomplished pursuant to the provisions of Section 11 hereof.
9. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
10. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof, and no party shall be liable or bound to any other party in any
manner with respect to such subjects by any warranties, representations or
covenants except as specifically set forth herein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
11. NOTICES, ETC. Unless otherwise provided, any notice, request,
demand or other communication required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified, or when sent by telex or telecopier (with receipt
confirmed), or one Business Day following deposit with overnight courier or
three Business Days following deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed as follows (or at
such other address as a party may designate by notice to the other):
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<PAGE>
If to the Company:
Big Entertainment, Inc.
2255 Glades Road, #237W
Boca Raton, Florida 33431-7383
Attention: Chief Executive Officer
Facsimile: (561) 998-2970
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Howard Chatzinoff, Esq.
Facsimile: (212) 735-4989
If to CinemaSource or the Executives:
2 Lookout Point Dr.
Ridgefield, Connecticut 06877
Attention: Brett West and Pamela West
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Goodwin Square
225 Asylum Street
Hartford, CT 06103
Attention: Thomas Fairfield, Esq.
Facsimile: (860) 293-3555
SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, invalid, unenforceable or void, this Agreement shall continue in full
force and effect without said provision. It is the desire and intent of the
parties hereto that the restrictions set forth in Sections 2 through 5 of this
Agreement shall be enforced and adhered to in every particular, and in the event
that any provision, clause or phrase shall be declared by a court of competent
jurisdiction to be judicially unenforceable either in whole or in part whether
the fault be in duration, geographic coverage or scope of activities precluded -
the parties agree that they will mutually petition the court to sever or limit
the unenforceable provision so as to retain and effectuate to the greatest
extent legally permissible the intent of the parties as expressed in Sections 2
through 5 of this Agreement.
12. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
13. FACSIMILE SIGNATURES. Any signature page delivered by a fax machine
or telecopy machine shall be binding to the same extent as an original signature
page, with regard to any
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agreement subject to the terms hereof or any amendment thereto. Any party who
delivers such a signature page agrees to later deliver an original counterpart
to any party which requests it.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
The foregoing agreement is hereby executed as of the date first above
written.
BIG ENTERTAINMENT, INC.
By
------------------------------------------
Name: Mitchell Rubenstein
Title: Chairman of the Board and Chief
Executive Officer
CINEMASOURCE, INC.
By
------------------------------------------
Name: Brett West
Title: President
By:
------------------------------------------
Brett West
By:
------------------------------------------
Pamela West
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<PAGE>
FORM
OF
INDEMNIFICATION PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of __________, 1999 (the
"Agreement"), made by Brett West (the "Pledgor") in favor of Big Entertainment,
Inc., a Florida corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company, CinemaSource, Inc. ("CinemaSource"),
Pledgor and Pamela West have entered into an Asset Purchase Agreement, dated as
of March __, 1999 (the "Purchase Agreement"), whereby the Company has agreed to
purchase, and CinemaSource has agreed to sell, substantially all of the assets
of CinemaSource;
WHEREAS, pursuant to the Purchase Agreement, the Company,
Pledgor and Pamela West have jointly and severally agreed to indemnify and hold
the Company harmless from certain losses, liabilities and obligations that may
arise in connection with the transactions contemplated by the Purchase
Agreement;
WHEREAS, Pledgor is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by the Company; and
WHEREAS, it is a condition precedent to the obligation of the
Company to close the transactions contemplated by the Purchase Agreement that
Pledgor shall have executed and delivered this Pledge Agreement to the Company.
NOW, THEREFORE, in consideration of the premises and to induce
the Company to close the transactions contemplated by the Purchase Agreement,
Pledgor hereby agrees with the Company, as follows:
1. DEFINED TERMS. (a) The following terms shall have the
following meanings:
"AGREEMENT": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"BUSINESS DAY": any day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or required
by law to close.
"CODE": the Uniform Commercial Code from time to time in
effect in the State of New York.
"COLLATERAL": the Pledged Stock and all Proceeds.
<PAGE>
"COMMON STOCK": the common stock, $0.01 par value per share,
of the Company.
"EVENT OF DEFAULT": Pledgor's failure to pay any amount to the
Company in respect of the Obligations within ten (10) Business Days after
written notice is given to Pledgor by the Company specifying that, in the
reasonable judgment of the Company, such amount is due and owing by Pledgor to
the Company, provided, that the Company shall have provided notice to the extent
required by Article XI of the Purchase Agreement, and PROVIDED FURTHER, that if
Pledgor shall have contested any claim by the Company under Article XI of the
Purchase Agreement, no such claim shall constitute an Obligation hereunder
unless and until the Company shall have obtained a final judgment (not subject
to further appeal) from a court of competent jurisdiction and, in such event, an
Obligation shall be deemed to arise only to the extent provided in such
judgment.
"INDEMNITORS": each of CinemaSource, the Pledgor and Pamela
West.
"OBLIGATIONS": all obligations of the Indemnitors under
Article XI of the Purchase Agreement and all reasonable costs and expenses of
every kind incurred by the Company in respect of the enforcement of its rights
under the Purchase Agreement and this Agreement, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to the Company.
"PERSON": any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PLEDGED STOCK": the shares of Common Stock listed on Schedule
1 hereto, together with all stock certificates that may be issued or granted by
the Company to Pledgor as a dividend, distribution, option or right paid or
issued on the Common Stock without payment of any consideration by Pledgor while
this Agreement is in effect.
"PROCEEDS": all "proceeds" as such term is defined in Section
9-306(l) of the Code on the date hereof and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. PLEDGE; GRANT OF SECURITY INTEREST. Pledgor hereby delivers
to the Company all the Pledged Stock and hereby grants to the Company a first
security interest in the Collateral, as collateral security for the prompt and
complete payment and performance when due of the Obligations.
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<PAGE>
3. STOCK POWERS. Concurrently with the delivery to the Company
of each certificate representing one or more shares of Pledged Stock to the
Company, Pledgor shall deliver an undated stock power, in the form of Exhibit A
hereto, covering such certificate, duly executed in blank by Pledgor with, if
the Company so requests, signature guaranteed.
4. COVENANTS. Pledgor covenants and agrees with the Company
that, from and after the date of this Agreement until this Agreement is
terminated and the security interests created hereby are released:
(a) If Pledgor shall, solely as a result of its ownership of
the Pledged Stock and without payment of any consideration other than delivery
or exchange of certificates representing the Pledged Stock, become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights, whether in
addition to, in substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock, or otherwise in respect thereof, Pledgor shall
accept the same as the agent of the Company, hold the same in trust for the
Company, and deliver the same forthwith to the Company in the exact form
received, duly endorsed by Pledgor to the Company, if required, together with an
undated stock power, in the form of Exhibit A hereto, covering such certificate
duly executed in blank by Pledgor and with, if the Company so requests,
signature guaranteed, to be held by the Company, subject to the terms hereof, as
additional collateral security for the Obligations. Any such stock certificate
shall constitute Pledged Stock under this Agreement.
(b) Pledgor is subject to the restrictions on the transfer of
the Pledged Stock set forth in Section 5.8 of the Purchase Agreement. In
addition, without the prior written consent of the Company, Pledgor will not (1)
sell, assign, transfer, exchange or otherwise dispose of, or grant any option
with respect to, the Collateral, (2) create, incur or permit to exist any lien
or option in favor of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the security interests created
by this Agreement or (3) enter into any agreement or undertaking restricting the
right or ability of Pledgor or the Company to sell, assign or transfer any of
the Collateral.
(c) Pledgor shall maintain the security interest created by
this Agreement as a first, perfected security interest and shall defend such
security interest against claims and demands of all Persons whomsoever. At any
time and from time to time, upon the written request of the Company, and at the
sole expense of Pledgor, Pledgor will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the Company
may reasonably request for the purposes of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the Company,
duly endorsed in a manner satisfactory to the Company, to be held as Collateral
pursuant to this Agreement.
3
<PAGE>
(d) Pledgor shall pay, and save the Company harmless from, any
and all liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be payable or determined
to be payable with respect to any of the Collateral or in connection with any of
the transactions contemplated by this Agreement.
5. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default
shall have occurred and be continuing, Pledgor shall be permitted to receive all
cash dividends paid in respect of the Pledged Stock and to exercise all voting
and corporate rights with respect to the Pledged Stock.
6. REMEDIES. (a) The Company and Pledgor hereby agree that the
Pledged Stock shall be deemed to have a value of $10.50 per share (the "Stated
Value") for purposes of this Agreement regardless of the market value of the
Pledged Stock from time to time. The Stated Value of the Pledged Stock shall be
adjusted from time to time to reflect any subdivision, stock split, stock
dividend or similar event after the date hereof with respect to the Common
Stock.
(b) Subject to Pledgor's rights to sell the Pledged Stock
under Section 8(b) hereof, if an Event of Default shall have occurred and be
continuing, the Company may at any time, without further demand of performance
or other demand, presentment, protest, advertisement or notice of any kind to or
upon Pledgor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived) transfer and assign to and upon
itself a number of shares of the Pledged Stock (rounded to the nearest whole
number) equal to the quotient of (i) the amount determined in the reasonable
judgment of the Company to be due and owing by Pledgor to the Company in respect
of the Obligations and (ii) the Stated Value. Such transfer and assignment shall
be deemed to be a payment of the Obligations in an amount equal to the product
of (i) the number of shares of Pledged Stock transferred and assigned and (ii)
the Stated Value. If such payment is not sufficient to pay the Obligations in
full, the Pledgor and the other Indemnitors shall remain liable for any
deficiency. The Company shall not be required to account for any surplus to the
Pledgor in the event that the market value of shares of the Pledged Stock
exceeds the Stated Value at any time. To the extent permitted by applicable law,
Pledgor waives all claims, damages and demands it may acquire against the
Company arising out of the exercise by the Company of any rights hereunder.
7. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section
9-402 of the Code, Pledgor authorizes the Company to file financing statements
with respect to the Collateral without the signature of Pledgor in such form and
in such filing offices as the Company reasonably determines appropriate to
perfect the security interests of the Company under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
8. RELEASE AND TERMINATION.
(a) In the event that Pledgor elects to sell any shares of
Pledged Stock as permitted by the Purchase Agreement and so long as no claim has
been made by the
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<PAGE>
Company under Article XI of the Purchase Agreement that remains outstanding and
unpaid (an "Outstanding Claim"), the number of shares of Common Stock (not to
exceed in any quarter the aggregate number of shares that may be sold pursuant
to Section 5.8 of the Purchase Agreement) designated by Pledgor shall be
released from this Agreement and delivered to Pledgor on the first day of each
calendar quarter beginning on the first anniversary of the Closing Date.
(b) Upon the written request of Pledgor to the Company
following the occurrence of an Event of Default, the Company shall release a
number of shares of Pledged Stock to be sold, subject to applicable securities
laws, by on or behalf of Pledgor such that the net proceeds resulting therefrom
shall be sufficient to pay in full all Obligations of Pledgor. The net proceeds
of any such sale shall be paid directly to the Company in satisfaction of the
Obligations.
(c) This Agreement shall terminate and the Pledged Stock shall
be released and delivered to Pledgor on December 31, 2000 unless there exists an
Outstanding Claim. If there are one or more Outstanding Claims on December 31,
2000, then this Agreement shall remain in effect and a number of shares of
Pledged Stock having an aggregate value (based on a value of $10.50 per share)
equal to the aggregate amount of all Outstanding Claims shall remain subject to
this Agreement until all such Outstanding Claims are satisfied or terminated,
and all other shares of Pledged Stock shall be released to Pledgor.
9. NOTICES. All notices, requests and demands to or upon the
Company or Pledgor to be effective shall be in writing (or by telex, facsimile
or similar electronic transfer confirmed in writing) and shall be deemed to have
been duly given or made (1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt requested, or (3) if by
telex, facsimile or similar electronic transfer, when sent and receipt has been
confirmed, addressed to the Company or Pledgor at its address or transmission
number for notices provided on the signature page hereto. The Company and
Pledgor may change their addresses and transmission numbers for notices by
notice in the manner provided in this Section 9.
10. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
Pledgor and the Company, provided that any provision of this Agreement may be
waived by the Company in a letter or agreement executed by the Company or by
telex or facsimile transmission from the Company.
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<PAGE>
(b) The Company shall not by any act (except by a written
instrument pursuant to paragraph 11(a) hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Company, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise have
on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
12. SECTION HEADINGS. The section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of Pledgor and shall inure to the benefit of the
Company and its successors and assigns.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed and delivered as of the date first above written.
By:
------------------------
Brett West
Address for Notices:
2 Lookout Point Dr.
Ridgefield, Connecticut 06877
Fax: (____) ____-______
Accepted this ____ day of ________, 1999
BIG ENTERTAINMENT, INC.
By:
---------------------------------------
Mitchell Rubenstein
Chairman of the Board and Chief Executive Officer
Address for Notices:
Big Entertainment, Inc.
2255 Glades Road, #237W
Boca Raton, Florida 33431-7383
Fax: (561) 998-2970
7
<PAGE>
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
1. Stock Certificate No. _____, representing ________ shares
of Common Stock, par value $.01 per share, of Big Entertainment, Inc.
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EXHIBIT A
STOCK POWER
For value received, Brett West hereby sells, assigns and
transfers unto __________________________, ________ shares of Common Stock of
Big Entertainment, Inc. standing in the name on the books of said Big
Entertainment, Inc. represented by Certificate No. ____ herewith and does hereby
irrevocably constitute and appoint ________________ as attorney to transfer said
shares on the books of Big Entertainment, Inc. with full power of substitution
in the premises.
Dated: Signature
------------------------ -------------------------
Brett West
9
<PAGE>
EXHIBIT E
FORM
OF
LIMITED RECOURSE
PROMISSORY NOTE
$_______________ _________________, 2000
FOR VALUE RECEIVED, the undersigned Brett West (the
"Borrower"), hereby, promises to pay to the order of Big Entertainment, Inc., a
Florida corporation (the "Company") at its offices, in lawful money of the
United States of America, the principal amount of _____________ ($________). The
principal amount shall be paid on the earlier to occur of (i) the disposition of
any shares of Pledged Stock (as such term is defined in the Pledge Agreement
referred to below) by the Borrower, provided, that the Borrower shall be
required only to pay that amount of the principal amount which is equal to the
proceeds received from any such disposition (with any outstanding unpaid
principal remaining subject to this sentence) and (ii) [one year after the date
of issuance of this Note] (the "Maturity Date").
The Borrower further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time outstanding
at a variable interest rate equal to the Prime Rate (as defined below) plus 1%
per annum on (x) the Maturity Date and (y) with respect to the amount of any
payment upon the disposition of shares of Pledged Stock or any optional
repayment, on the date of such payment. Interest shall accrue hereunder on the
unpaid principal amount hereof on each day during the period from and including
the date of this Note to but excluding the date this Note is paid in full.
"Prime Rate" shall mean the prime commercial lending rate of Citibank, N.A., New
York, New York as quoted on the first business day of each calendar month.
This Note is subject to optional prepayment in whole or in
part at any time without premium or penalty.
Reference is hereby made to the Pledge Agreement of even date
herewith made by the Borrower in favor of the Company (the "Pledge Agreement").
The obligation of Borrower to pay the principal amount of, and accrued interest
on, this Note is recourse only to the Pledged Stock and other Collateral (as
defined in the Pledge Agreement) pledged to the Company under the Pledge
Agreement.
The following shall constitute "Events of Default" under the
terms of this Note:
(i) default in payment when due and payable,
upon acceleration or otherwise, of principal of, or interest
on, this Note; and
<PAGE>
(ii) default by the Borrower in any of its
obligations under the Pledge Agreement
Upon the occurrence of any one or more of the Events of
Default, all amounts then remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable by the Company.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
--------------------------
BRETT WEST
<PAGE>
EXHIBIT F
FORM
OF
TAX LOAN PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of __________, 2000, made by Brett
West (the "Pledgor") in favor of Big Entertainment, Inc., a Florida corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, the Company has agreed to make a loan (the "Loan") to
Pledgor to be used to pay certain state and federal income taxes payable by
Pledgor in respect of the shares of Common Stock of the Company received by
Pledgor in connection with the Asset Purchase Agreement, dated as of March __,
1999, (the "Purchase Agreement") by and among the Company, Cinema Source, Inc.
and Pledgor;
WHEREAS, the Loan will be evidenced by a promissory note of
even date herewith in favor of the Company (the "Note");
WHEREAS, Pledgor is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) issued by the Company; and
WHEREAS, it is a condition precedent to the obligation of the
Company to make the Loan to Pledgor that Pledgor shall have executed and
delivered this Pledge Agreement to the Company.
NOW, THEREFORE, in consideration of the premises and to induce
the Company to make the Loan, Pledgor hereby agrees with the Company, as
follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, terms
defined in the Note and used herein shall have the meanings assigned to them in
the Note.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"BUSINESS DAY": any day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or required
by law to close.
"CODE": the Uniform Commercial Code from time to time in
effect in the State of New York.
"COLLATERAL": the Pledged Stock and all Proceeds.
<PAGE>
"DEFAULT": any event that is or with the passage of time or
the giving of notice or both would be an Event of Default under the Note.
"OBLIGATIONS": the collective reference to the unpaid
principal of and interest on the Note and all other obligations and liabilities
of Pledgor to the Company (including, without limitation, interest accruing at
the then applicable rate provided in the Note after the maturity of the Loan and
interest accruing at the then applicable rate provided in the Note after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to Pledgor, whether or not a claim
for post-filing or postpetition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with the Note and this Agreement or any other document made, delivered or given
in connection therewith, in each case whether on account of principal, interest,
costs, expenses or otherwise.
"PERSON": any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PLEDGED STOCK": the shares of capital stock listed on
Schedule 1 hereto, together with all stock certificates that may be issued or
granted by the Company to Pledgor as a dividend, distribution, option or right
paid or issued on the Pledged Stock, without payment of any consideration by
Pledgor, while this Agreement is in effect.
"PROCEEDS": all "proceeds" as such term is defined in Section
9-306(l) of the Code on the date hereof and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. PLEDGE; GRANT OF SECURITY INTEREST. Pledgor hereby delivers
to the Company all the Pledged Stock and hereby grants to the Company a first
security interest in the Collateral, as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
3. STOCK POWERS. Concurrently with the delivery to the Company
of each certificate representing one or more shares of Pledged Stock to the
Company, Pledgor shall deliver an undated stock power, in the form of Exhibit A
hereto, covering such certificate, duly executed in blank by Pledgor with, if
the Company so requests, signature guaranteed.
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<PAGE>
4. COVENANTS. Pledgor covenants and agrees with the Company
that, from and after the date of this Agreement until this Agreement is
terminated and the security interests created hereby are released:
(a) If Pledgor shall, solely as a result of its ownership of
the Pledged Stock and without payment of any consideration other than delivery
or exchange of certificates representing the Pledged Stock, become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights, whether in
addition to, in substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock, or otherwise in respect thereof, Pledgor shall
accept the same as the agent of the Company, hold the same in trust for the
Company, and deliver the same forthwith to the Company in the exact form
received, duly endorsed by Pledgor to the Company, if required, together with an
undated stock power, in the form of Exhibit A hereto, covering such certificate
duly executed in blank by Pledgor and with, if the Company so requests,
signature guaranteed, to be held by the Company, subject to the terms hereof, as
additional collateral security for the Obligations. Any such stock certificate
shall constitute Pledged Stock under this Agreement.
(b) Pledgor is subject to the restrictions on the transfer of
the Pledged Stock set forth in Section 5.8 of the Purchase Agreement. In
addition, without the prior written consent of the Company, Pledgor will not (1)
sell, assign, transfer, exchange or otherwise dispose of, or grant any option
with respect to, the Collateral, (2) create, incur or permit to exist any lien
or option in favor of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the security interests created
by this Agreement or (3) enter into any agreement or undertaking restricting the
right or ability of Pledgor or the Company to sell, assign or transfer any of
the Collateral.
(c) Pledgor shall maintain the security interest created by
this Agreement as a first, perfected security interest and shall defend such
security interest against claims and demands of all Persons whomsoever. At any
time and from time to time, upon the written request of the Company, and at the
sole expense of Pledgor, Pledgor will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the Company
may reasonably request for the purposes of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the Company,
duly endorsed in a manner satisfactory to the Company, to be held as Collateral
pursuant to this Agreement.
(d) Pledgor shall pay, and save the Company harmless from, any
and all liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be payable or determined
to be payable with respect to any of the Collateral or in connection with any of
the transactions contemplated by this Agreement.
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<PAGE>
5. COMPANY'S RIGHT TO REQUIRE SALE OF PLEDGED SHARES. In the
event that the Obligations have not been paid in full prior to [THE ONE-YEAR
ANNIVERSARY OF THE CLOSING DATE UNDER THE PURCHASE AGREEMENT] (the "Anniversary
Date"), the Company shall have the right to require Pledgor to sell up to 10% of
the original number of shares of Pledged Stock (as adjusted to reflect any
subdivision, stock split, stock dividend or similar event) during the first four
weeks of each calendar quarter ending after the Anniversary Date until the
Obligations are paid in full. All of the proceeds of any such sales shall be
paid to the Company in respect of the Obligations. The Company shall exercise
its rights under this paragraph by delivery of a notice to Pledgor no later than
5 Business Days before the commencement of any such calendar quarter, which
notice shall indicate the number of shares of Pledged Stock required to be sold
by Pledgor in accordance with this paragraph. Pledgor shall make all
arrangements for any such sale and shall notify the Company as to where it
should deliver the certificates representing the Pledged Stock to be sold. The
Company shall release the lien and security interest on any Pledged Stock to be
sold in accordance with this paragraph.
6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default
shall have occurred and be continuing and the Company shall have given notice to
Pledgor of the Company's intent to exercise its corresponding rights pursuant to
Section 8 below, Pledgor shall be permitted to receive all cash dividends paid
in respect of the Pledged Stock and to exercise all voting and corporate rights
with respect to the Pledged Stock.
7. RIGHTS OF THE COMPANY. If an Event of Default shall occur
and be continuing and the Company shall give notice to Pledgor of the Company's
intent to exercise its corresponding rights pursuant to Section 8 below, the
Company shall have the right to receive any and all cash dividends paid in
respect of the Pledged Stock and make application thereof to the Obligations in
such order as the Company may determine.
8. REMEDIES. If an Event of Default shall have occurred and be
continuing, the Company may exercise, in addition to all other rights and
remedies granted in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the obligations, all rights and remedies of
a secured party under the Code. Without limiting the generality of the
foregoing, the Company, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon Pledgor or any other Person (all
and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give option or options to purchase or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, in the over-the-counter
market, at any exchange, broker's board or office of Company or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Company shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in Pledgor, which right or equity is hereby waived or
released. The Company
4
<PAGE>
shall apply any Proceeds from time to time held by it and the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Company
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel to the Company, to the payment in whole or in part of
the Obligations, in such order as the Company may elect, and only after such
application and after the payment by the Company of any other amount required by
any provision of law, including, without limitation, Section 9-504(l)(c) of the
Code, need the Company account for the surplus, if any, to Pledgor. To the
extent permitted by applicable law, Pledgor waives all claims, damages and
demands it may acquire against the Company arising out of the exercise by the
Company of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.
9. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section
9-402 of the Code, Pledgor authorizes the Company to file financing statements
with respect to the Collateral without the signature of Pledgor in such form and
in such filing offices as the Company reasonably determines appropriate to
perfect the security interests of the Company under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
10. NOTICES. All notices, requests and demands to or upon the
Company or Pledgor to be effective shall be in writing (or by telex, facsimile
or similar electronic transfer confirmed in writing) and shall be deemed to have
been duly given or made (1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt requested, or (3) if by
telex, facsimile or similar electronic transfer, when sent and receipt has been
confirmed, addressed to the Company or Pledgor at its address or transmission
number for notices provided on the signature page hereto. The Company and
Pledgor may change their addresses and transmission numbers for notices by
notice in the manner provided in this Section 10.
11. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a)
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
Pledgor and the Company, provided that any provision of this Agreement may be
waived by the Company in a letter or agreement executed by the Company or by
telex or facsimile transmission from the Company.
5
<PAGE>
(b) The Company shall not by any act (except by a written
instrument pursuant to paragraph 12(a) hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Company, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise have
on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
13. SECTION HEADINGS. The section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of Pledgor and shall inure to the benefit of the
Company and their successors and assigns.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date first above written.
By:
--------------------------------
Brett West
Address for Notices:
2 Lookout Point Dr.
Ridgefield, Connecticut 06877
Fax: (____) ____-______
Accepted this ____ day of ________, 2000
BIG ENTERTAINMENT, INC.
By:
---------------------------------------
Mitchell Rubenstein
Chairman of the Board and Chief Executive Officer
Address for Notices:
Big Entertainment, Inc.
2255 Glades Road, #237W
Boca Raton, Florida 33431-7383
Fax: (561) 998-2970
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<PAGE>
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
1. Stock Certificate No. _____, representing ________ shares
of Common Stock, par value $.01 per share, of Big Entertainment, Inc.
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<PAGE>
EXHIBIT A
STOCK POWER
For value received, Brett West hereby sells, assigns and
transfers unto __________________________, ________ shares of Common Stock of
Big Entertainment, Inc. standing in the name on the books of said Big
Entertainment, Inc. represented by Certificate No. ____ herewith and do hereby
irrevocably constitute and appoint ________________ as attorney to transfer said
shares on the books of Big Entertainment, Inc. with full power of substitution
in the premises.
Dated: Signature
------------------------- ------------------
Brett West
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<PAGE>
EXHIBIT I
BILL OF SALE AND ASSIGNMENT
AND ASSUMPTION AGREEMENT
BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT (the
"Agreement"), dated as of __________ ____, 1999, by and between Big
Entertainment, Inc., a Florida corporation ("Buyer"), and CinemaSource, Inc., a
Connecticut corporation ("Seller"). Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms in the Asset
Purchase Agreement (as defined below).
WHEREAS, Buyer and Seller have entered into that certain Asset
Purchase Agreement (the "Asset Purchase Agreement"), dated as of March __, 1999,
pursuant to which Seller has agreed to sell, assign and transfer to Buyer, and
Buyer has agreed to purchase and acquire from Seller, all right, title and
interest of Seller in and to all assets, properties, rights, contracts, claims,
operations, and business of Seller (but excluding the Excluded Assets), free and
clear of all Liens;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. Seller does hereby sell, assign, transfer, convey and
deliver to Buyer all of the right, title and interest of Seller in, to and under
the Assets, including each of the Assigned Contracts listed on Schedule 1.1(a)
hereto.
2. Buyer hereby assumes the Assumed Liabilities. Buyer does
not assume and shall not be bound by any other Liabilities of Seller, all of
which shall remain the sole responsibility of Seller.
3. This Agreement is in accordance with, and is subject to all
of the representations, warranties, covenants and exclusions set forth in, the
Asset Purchase Agreement.
4. Seller will, at the request of Buyer, execute and deliver
such other and further instruments of sale, assignment, transfer and conveyance
and take such other and further actions as Buyer may reasonably request, with
respect to the Assets, in order to make all the benefits of the Assigned
Contracts and rights of Seller in the Assets available to Buyer, to vest in
Buyer and put Buyer in possession of the Assets and to transfer to Buyer any
contracts and rights of Seller relating to the Assets and to assure to Buyer the
benefits thereof and effectuate fully the purposes of this Agreement.
5. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns
under the Asset Purchase Agreement. Except as expressly permitted under the
Asset Purchase Agreement, no assignment of this Agreement or of any rights or
obligations hereunder may be made by either party (by operation of law or
otherwise) without the prior written consent of the
<PAGE>
other party hereto and any attempted assignment without such required consent
shall be void.
6. Nothing in this Agreement, express or implied, is intended
or shall be construed to confer upon, or give to, any person, firm or
corporation other than Buyer and Seller and their respective successors and
permitted assigns, any remedy or claim under or by reason of this instrument or
any term, covenant or condition hereof, and all the terms, covenants and
conditions, promises and agreements in this instrument contained shall be for
the sole and exclusive benefit of Buyer and Seller and their respective
successors and permitted assigns.
7. This Agreement may be amended, supplemented or modified,
and any provision hereof may be waived, only pursuant to a written instrument
making specific reference to this Agreement signed by each of the parties
hereto.
8. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts to be
made, executed, delivered and performed wholly in such state, but without regard
to conflicts of law principles of such state. No provision of this Agreement
shall be construed against either party because such party drafted or caused to
be drafted such provision. Each provision of this Agreement shall be construed
as if such provision were proposed by both Buyer and Seller.
To have and to hold the Assets unto Buyer, its successors and
assigns forever.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
instrument as of the date and year first above written.
BIG ENTERTAINMENT, INC.
By:
----------------------------------
Mitchell Rubenstein
Chairman of the Board and Chief
Executive Officer
CINEMASOURCE, INC.
By:
---------------------------------
Brett West
President