-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hg9qKTPXoDLaWZeTYz4NUuircU70HdCLDUqnbcmmzSrzL0wrm4wL8rCxCJnCvc80 guPEMr0GdQLIWiqUsw90tA== /in/edgar/work/20000829/0000909518-00-000546/0000909518-00-000546.txt : 20000922 0000909518-00-000546.hdr.sgml : 20000922 ACCESSION NUMBER: 0000909518-00-000546 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000822 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000829 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLYWOOD COM INC CENTRAL INDEX KEY: 0000912544 STANDARD INDUSTRIAL CLASSIFICATION: [5990 ] IRS NUMBER: 650385686 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-14332 FILM NUMBER: 712749 BUSINESS ADDRESS: STREET 1: 2255 GLADES RD STREET 2: STE 237 W CITY: BOCA RATON STATE: FL ZIP: 33431 BUSINESS PHONE: 5619988000 MAIL ADDRESS: STREET 1: 2255 GLADES RD STREET 2: STE 237 W CITY: BOCA RATON STATE: FL ZIP: 33431 FORMER COMPANY: FORMER CONFORMED NAME: BIG ENTERTAINMENT INC DATE OF NAME CHANGE: 19930924 8-K 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 22, 2000 ------------------------ HOLLYWOOD.COM, INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) FLORIDA 0-22908 65-0385686 - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER OF INCORPORATION) IDENTIFICATION NO.) 2255 GLADES ROAD, SUITE 237 WEST, BOCA RATON, FLORIDA 33431 - -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 998-8000 ----------------------- 26141.0003 INFORMATION TO BE INCLUDED IN THE REPORT ITEM 5. OTHER EVENTS. On August 22, 2000, the Company issued an aggregate of 358,423 shares of the Company's common stock, $0.01 par value, to two investors at $8.37 per share for a total purchase price of $3,000,000 in cash. The investors also received warrants to acquire an aggregate of 60,000 shares of common stock at a price of $10.00 per share. If the investors hold at least seventy-five percent of the shares of common stock issued to them in the transaction on the six-month anniversary of the effective date of a registration statement in respect of the shares, the exercise price of the warrants will be decreased to $8.84. The Company may issue additional shares of common stock to the investors from time to time on the terms set forth in the Warrants attached hereto as Exhibits 10.3 and 10.4. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Businesses Acquired. Not applicable. (b) Pro Forma Financial Information. Not applicable. (c) Exhibits. 10.1 Common Stock Investment Agreement dated as of August 22, 2000 among the Company, Elliott Associates, L.P. and Westgate International, L.P. 10.2 Registration Rights Agreement dated August 22, 2000 among the Company, Elliott Associates, L.P. and Westgate International, L.P. 10.3 Common Stock Adjustment Warrant dated August 22, 2000 between the Company and Elliott Associates, L.P. 10.4 Common Stock Adjustment Warrant dated August 22, 2000 between the Company and Westgate International, L.P. 10.5 Common Stock Purchase Warrant dated August 22, 2000 between the Company and Elliott Associates, L.P. 10.6 Common Stock Purchase Warrant dated August 22, 2000 between the Company and Westgate International, L.P. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HOLLYWOOD.COM, INC. By: /s/ W. Robert Shearer -------------------------------- W. Robert Shearer Senior Vice President And General Counsel Date: August 29, 2000 3 EXHIBIT INDEX Exhibit Number Description 10.1 Common Stock Investment Agreement dated as of August 22, 2000 among the Company, Elliott Associates, L.P. and Westgate International, L.P. 10.2 Registration Rights Agreement dated August 22, 2000 among the Company, Elliott Associates, L.P. and Westgate International, L.P. 10.3 Common Stock Adjustment Warrant dated August 22, 2000 between the Company and Elliott Associates, L.P. 10.4 Common Stock Adjustment Warrant dated August 22, 2000 between the Company and Westgate International, L.P. 10.5 Common Stock Purchase Warrant dated August 22, 2000 between the Company and Elliott Associates, L.P. 10.6 Common Stock Purchase Warrant dated August 22, 2000 between the Company and Westgate International, L.P. 4 EX-10 2 0002.txt 10-1 EXHIBIT 10.1 ------------ EXECUTION COPY COMMON STOCK INVESTMENT AGREEMENT COMMON STOCK INVESTMENT AGREEMENT ("AGREEMENT") dated as of August 22, 2000 among HOLLYWOOD.COM, INC., a Florida corporation (the "COMPANY"), ELLIOTT ASSOCIATES, L.P., a Delaware limited partnership ("ELLIOTT"), and WESTGATE INTERNNATIONAL, L.P., a Cayman Islands limited partnership ("WESTGATE", together with Elliott, the "INVESTORS"). W I T N E S S E T H: -------------------- WHEREAS, the Company desires to sell and issue to the Investors, and the Investors wish to purchase from the Company, an aggregate of 358,423 shares of the Company's Common Stock, $.01 par value ("COMMON STOCK") (all of such shares of Common Stock being the "INITIAL SHARES"), three (3) year warrant, in the form attached hereto as Annex A, to purchase 60,000 shares of Common Stock at an initial exercise price of $10.00 per share (the "INITIAL WARRANTS"), and a warrant, in the form attached hereto as Annex B, to purchase a number of shares of Common Stock calculated pursuant to a formula set forth therein (the "ADJUSTMENT WARRANTS"; together with the Initial Warrants, the "WARRANTS"), all on the terms and conditions described below; and WHEREAS, the Initial Shares, the shares of Common Stock underlying the Initial Warrants (the "WARRANT SHARES") and the shares of Common Stock underlying the Adjustment Warrants (the "Adjustment Shares"; the Initial Shares, the Warrant Shares and the Adjustment Shares collectively being the "REGISTRABLE SHARES") will carry registration rights, pursuant to the terms of that certain Registration Rights Agreement to be entered into between the Company and the Investors substantially in the form annexed hereto (the "REGISTRATION RIGHTS Agreement"). NOW, THEREFORE, in consideration of the foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF SHARES AND WARRANTS ---------------------------------------- Section 1.1 Issuance of Initial Shares and Warrants. Upon the following terms and conditions, the Company shall issue and sell to the Investors, and the Investors shall purchase from the Company, the number of Initial Shares and Warrants indicated next to the Investors' names on Schedule I attached hereto. (a) Purchase Price. The aggregate purchase price for the Initial Shares and Warrants to be acquired by each Investor (the "AGGREGATE PURCHASE PRICE") shall be the Aggregate Purchase Price set forth next to each such Investor's name on Schedule I. The purchase price per share of Common Stock (the "SHARE PURCHASE PRICE") shall equal 105% of the average of the two (2) lowest VWAP's (as defined below) during the five (5) consecutive trading days ending on and including August 21, 2000, or $8.37. (b) The Closing. (i) The closing of the purchase and sale of the Initial Shares and Warrants (the "CLOSING") shall take place at the offices of Kleinberg, Kaplan, Wolff & Cohen, P.C. ("KKWC"), on the date hereof (the "CLOSING DATE"). (ii) On the Closing Date, the Company shall deliver to the Investors stock certificates (with the number of and denomination of such certificates requested by each Investor) representing the Initial Shares and the Warrants purchased hereunder, each registered in the name of each such Investor or its nominee. The delivery of payment by wire transfer, to an account designated in writing by the Company, by each Investor of the Purchase Price applicable to it as set forth in Section 1.1 and Schedule I shall constitute a payment delivered to the Company in full satisfaction of the Investor's obligation to pay the Aggregate Purchase Price hereunder. In addition, each party shall deliver all documents, instruments and writings required to be delivered by such party pursuant to this Agreement at or prior to the Closing. ARTICLE II REPRESENTATIONS AND WARRANTIES ------------------------------ Section 2.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Investors as of the date hereof, on the Closing Date and on the date of any Fill-up Closing: (a) Organization and Qualification; Material Adverse Effect. The Company is a corporation duly incorporated and existing in good standing under the laws of the State of Florida and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company does not have any subsidiaries other than the subsidiaries listed on Schedule 2.1(a) attached hereto ("SUBSIDIARIES"). Except where specifically -2- indicated to the contrary, all references in this Agreement to Subsidiaries shall be deemed to refer to all direct and indirect subsidiaries of the Company. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any adverse effect(s) on the business, operations, properties, prospects or financial condition of the Company and its Subsidiaries, if any, and which is material to the Company and its Subsidiaries, if any, taken as a whole. (b) Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Warrants and the Registration Rights Agreement ("TRANSACTION DOCUMENTS") and to issue the Initial Shares, Adjustment Shares, Warrants and Warrant Shares (collectively, the "SECURITIES") in accordance with the terms hereof, (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors (or any committee or subcommittee thereof) or stockholders is required, (iii) the Transaction Documents have been duly executed and delivered by the Company, (iv) the Transaction Documents constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of creditors' rights and remedies or by other equitable principles of general application, and (v) the Securities have been duly authorized and, upon issuance thereof and payment therefor in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, free and clear of any and all liens, claims and encumbrances. (c) Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 100,000,000 shares of Common Stock, of which as of the date hereof, 23,505,441 shares are issued and outstanding, 3,100,000 shares are issuable and reserved for issuance pursuant to the Company's stock option and purchase plans and no more than 4,207,010 shares are issuable and reserved for issuance pursuant to securities exercisable or exchangeable for, or convertible into, shares of Common Stock, and (ii) 1,000,000 shares of preferred stock, of which as of the date hereof, no shares were issued and outstanding. All of such outstanding shares have been, or upon issuance will be, validly issued, fully paid and nonassessable. As of the date hereof, except as contemplated by this Agreement or as disclosed in Schedule 2.1(c), (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which -3- the Company or any of its Subsidiaries is or may become bound to issue Adjustment Shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iv) there are no agreements or arrangements (except the Registration Rights Agreement) under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act of 1933, as amended ("SECURITIES ACT" or "1933 ACT"), (v) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of Common Stock as required by this Agreement and (vii) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. The Company has furnished to the Investors true and correct copies of the Company's Articles of Incorporation, as amended and as in effect on the date hereof (the "ARTICLES OF INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"). The Company and its Subsidiaries have no securities convertible into or exercisable for Common Stock at a floating price or resettable price. (d) No Conflicts. Except as disclosed in Schedule 2.1(d), the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Article of Incorporation or the By-laws; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both reasonably could be expected to become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of the Principal Market) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Except as disclosed in Schedule 2.1(d), neither the Company nor its Subsidiaries is in violation of any term of, or in default under, (x) its Article of Incorporation or By-laws or their organizational charter or by-laws, respectively, (y) any material contract, agreement, mortgage, indebtedness, indenture, instrument, or (z) any judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries. Except as specifically contemplated by this Agreement and as required under the 1933 Act, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Transaction Documents in accordance with the terms hereof or thereof. Except as disclosed in Schedule 2.1(d), all consents, authorizations, orders, filings -4- and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company complies with and is not in violation of the listing requirements of the Principal Market, and no notice of any non-compliance or violation has been received in the previous 12 months. (e) Principal Market The Principal Market for the Common Stock is, and for the forseeable future is anticipated to be, the Nasdaq National Market System. (f) SEC Documents; Financial Statements. Since December 31, 1997, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and financial statements and schedules thereto being hereinafter referred to as the "SEC DOCUMENTS"). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Investor with any material, nonpublic information which was not publicly disclosed prior to the date provided. (g) Absence of Certain Changes. Except as disclosed in Schedule 2.1(g) or the SEC Documents filed at least five (5) days prior to the date hereof, since December 31, 1997, no event, liability, development or circumstances has occurred and there has been no adverse change or adverse development in the business, properties, assets, operations, financial condition, liabilities or results of operations of the Company or its Subsidiaries which either has had or, to the knowledge of the Company or its Subsidiaries, is reasonably likely to have a Material Adverse Effect or which would be required to be disclosed in an SEC registration statement for the Common Stock. The Company has not taken any steps, and does not currently expect -5- to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings. (h) Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, (i) except as set forth in Schedule 2.1(h) or the SEC documents filed at least five (5) days prior to the date hereof, and (ii) except which individually and in the aggregate, respectively, would be reasonably likely to result in liability to the Company of less than $50,000 and $100,000, respectively. (i) Acknowledgment Regarding Investors' Purchase of Shares. The Company acknowledges and agrees that the Investors are acting solely in the capacity of arm's length purchasers with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investors are not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives. (j) No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause any offering of Securities to the Investors to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of the Principal Market, nor will the Company or any of its Subsidiaries take any action or steps in the future that would cause any offering of the Securities to be integrated with other offerings. (k) Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement. The Company is not the subject of any union organizing campaign and, to its knowledge, no such campaign is threatened. No executive officer (as defined in Rule 501(f) of the 1933 Act) whose departure would be adverse to the Company has notified the Company that such officer intends to leave the Company or otherwise terminate such officer's employment with the Company. -6- (l) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others. Except as set forth on Schedule 2.1(l), there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademarks, trade name rights, patents, patent rights, inventions, copyrights, licenses, service names, service marks, service mark registrations, trade secrets or other infringement. The Company and its Subsidiaries believes they have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties. (m) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all material terms and conditions of any such permits, licenses or approvals. (n) Title. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 2.1(n). Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. (o) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. (p) Regulatory Permits. The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities, necessary to conduct their respective businesses, and neither the Company nor any such -7- Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. (q) Internal Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (r) Foreign Corrupt Practices Act. Neither the Company, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of acting for, or on behalf of, the Company, directly or indirectly used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; directly or indirectly made any direct or indirect unlawful payment to any foreign or domestic government or party official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of the United States; or directly or indirectly made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government or party official or employee. (s) Tax Status. The Company and each of its Subsidiaries has made or filed all United States federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the Company is not aware of any basis for any such claim. (t) Certain Transactions. Except as set forth on Schedule 2.1(t) and in the SEC Documents filed at least five (5) trading days prior to the date hereof, and other than the grant of stock options disclosed on Schedule 2.1(c), none of the officers, directors or employees of the Company is presently a party to any material transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any material contract, material agreement or other material arrangement providing for the furnishing of services to or by, providing for rental of real or -8- personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director or any such employee has a substantial interest or is an officer, director, trustee or partner. (u) Dilutive Effect. The Company understands and acknowledges that the number of Shares of Common Stock issuable pursuant to this Agreement will increase in certain circumstances. The Company further acknowledges that, subject to such limitations as are expressly set forth in the Transaction Documents, its obligation to issue Warrant Shares and Adjustment Shares and perform its other obligations pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that any such issuance may have on the ownership interests of other shareholders of the Company. (v) Application of Takeover Protections. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable anti-takeover provision contained in the Company's Article of Incorporation or By-Laws or Florida law which is or could become applicable to the Investors as a result of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Common Stock and the Investors' ownership of Common Stock. (w) Rights Plan. Other than the Rights Agreement dated as of August 23, 1996 and most recently amended as of October 1, 1999 (the "PLAN"), neither the Company nor any of its Subsidiaries has adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company. The Company confirms that no provision of the Plan will, under any present or future circumstances, delay, prevent or interfere with the performance of any of the Company's obligations under the Transaction Documents and the Plan will not be "triggered" by such performance. (x) Form S-3. The Company is eligible to file the Registration Statement (as defined in the Registration Rights Agreement) for secondary offerings on Form S-3 (as in effect on the date of this Agreement) under the 1933 Act and rules promulgated thereunder. (y) Brokers. Except for its obligations to Trinity Capital, the Company has taken no action which would give rise to any claim by any person for brokerage commissions, finder's fees or similar payments by the Company or the Investor relating to this Agreement or the transactions contemplated hereby. All obligations to Trinity Capital are the exclusive responsibility of the Company. Section 2.2 Representations and Warranties of the Investors. Each Investor hereby makes the following representations and warranties to the Company as of the date hereof as to itself, on the Closing Date and on the date of any Fill-up Closing required by such Investor: -9- (a) Accredited Investor Status; Sophisticated Investor. The Investor is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D under the 1933 Act. The Investor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in the Common Stock. (b) Information. The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company which have been requested and materials relating to the offer and sale of the Initial Shares and Warrants (and the other shares of Common Stock issuable hereunder) which have been requested by the Investor. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by the Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor's right to rely on the Company's representations and warranties contained in Section 2.1 above. The Investor understands that its investment in the Common Stock and the Warrants involves a high degree of risk. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition thereof. (c) No Governmental Review. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Common Stock or the fairness or suitability of the investment in Common Stock nor have such authorities passed upon or endorsed the merits of the offering of the Common Stock or Warrants hereunder. (d) Authorization; Enforcement. This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of the Investor and each is a valid and binding agreement of the Investor enforceable against the Investor in accordance with their terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. The Investor has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and each other agreement entered into by the parties hereto in connection with the transactions contemplated by this Agreement. (e) Residency. Each Investor is a resident of the jurisdiction indicated on Schedule 1. (f) No Conflicts. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Investor and the -10- consummation by the Investor of the transactions contemplated hereby and thereby will not result in a violation of the partnership agreement or other documents of organization of the Investor. (g) Regulatory Status. The Investor is not itself a registered broker-dealer. (h) Investment Representation. The Investor is purchasing the Initial Shares and the Warrants for its own account and not with a view to distribution in violation of any securities laws. The Investor has been advised and understands that none of the Initial Shares or the Warrants or other Securities have been registered under the 1933 Act or under the "blue sky" laws of any jurisdiction and may be resold only if registered pursuant to the provisions of the 1933 Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law. The Investor has been advised and understands that the Company is issuing the Initial Shares, Warrants and, to the extent issued, other Securities in reliance upon, among other things, the representations and warranties of the Investor contained in this Section 2.2 in concluding that such issuance is a "private offering" and is exempt from the registration provisions of the 1933 Act. (i) Brokers. The Investor has taken no action which would give rise to any claim by any person for brokerage commissions, finder's fees or similar payments by the Company or the Investor relating to this Agreement or the transactions contemplated hereby. ARTICLE III COVENANTS --------- Section 3.1 Registration and Listing; Effective Registration. Until the earliest of (1) such time as no Securities are outstanding or (2) the date that is two years after the Closing Date, the Company will cause the Common Stock to continue at all times to be registered under Sections 12(b) or (g) of the Exchange Act, will comply in all material respects with its reporting and filing obligations under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and will not take any action or file any document (whether or not permitted by the Exchange Act or the rules thereunder) to terminate or suspend such reporting and filing obligations. Until such time as no Securities are outstanding, the Company shall use its best efforts to continue the listing or trading of the Common Stock on the Nasdaq National Market, Nasdaq SmallCap Market, New York Stock Exchange or American Stock Exchange (each, an "APPROVED MARKET") and shall comply in all material respects with the Company's reporting, filing and other obligations under the bylaws or rules of the Approved Market on which the Common Stock is listed. Section 3.2 Replacement Certificates. The certificate(s) representing the Securities held by any Investor (or then holder) may be exchanged by the Investor (or such holder) at any time and from time to time for certificates with different denominations representing an equal aggregate number of Securities as requested by the Investor (or such holder) upon surrendering the same. The Company will deliver such substitute certificates within three trading days. No service charge will be made for such registration or transfer or exchange. -11- Section 3.3 Securities Compliance. The Company shall notify the SEC and the Principal Market, in accordance with their requirements, of the transactions contemplated by this Agreement, the Warrants and the Registration Rights Agreement, and shall take all other necessary action and proceedings as may be required by applicable law, rule and regulation, for the legal and valid issuance of the Securities. Section 3.4 Use of Proceeds. The Company agrees that the net proceeds received by the Company from the sale of the Securities hereunder shall be used for legally permitted purposes. Section 3.5 Reservation of Common Stock. --------------------------- (a) The Company shall reserve all authorized but unissued Securities for issuance to the Investor pursuant to the terms of this Agreement. (b) For the purpose of effecting the issuance of Adjustment Shares and the exercise of Warrants, the Company initially shall reserve and keep available 1,950,000 shares of Common Stock, and thereafter shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock the number of its shares of Common Stock (but never reduce below 1,950,000) as shall from time to time be sufficient to effect any such issuances and exercises, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient, the Company will take such corporate action as may, in the reasonable opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including without limitation engaging in best efforts to obtain the requisite shareholder approval. If at any time the number of authorized but unissued Adjustment Shares is not sufficient to effect such exercises and sales in full, the Investors shall be entitled to, inter alia, the redemption rights provided in the Registration Rights Agreement. Section 3.6 Form D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities, as required under Regulation D and to provide a copy thereof to the Investors promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall have reasonably determined is necessary to qualify the Securities for sale to the Investors under applicable securities or "blue sky" laws of the states of the United States (or to obtain an exemption from such qualification), and shall -12- provide evidence of any such action so taken to the Investors on or prior to the Closing Date; provided, however, that the Company shall not be required in connection therewith to register or qualify as a foreign corporation in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits or taxation, in each case, in any jurisdiction where it is not now so subject. Section 3.7 Publicity. The Company shall, within 5 business days after the Closing, file a Form 8-K or issue a press release with respect to this Agreement, in a form which has been reviewed by and is reasonably acceptable to the Investors and which specifically discloses the existence and nature of the Adjustment Warrants. Section 3.8 No Inside Information. The Company shall not, and shall cause its agents not to, provide an Investor with any material non-public information. Any information received by an Investor may be publicly disclosed by such Investor without liability. Section 3.9 Financial Information. The Company agrees to send the following to the Investors for 12 months after the Closing Date: (i) promptly upon the release thereof, facsimile or e-mail copies of all press releases issued by the Company or any of its Subsidiaries; and (ii) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders. Section 3.10 Prospectus Delivery Requirements. Each Investor will comply with the prospectus delivery requirements imposed by applicable securities laws when selling its Registrable Shares. Section 3.11 Overall Limit on Common Stock Issuable. Notwithstanding anything contained herein to the contrary, the number of shares of Common Stock issuable by the Company and acquirable by the Investors hereunder and under the Warrants shall not exceed 4,635,000 shares of Common Stock, subject to appropriate adjustment for stock splits, stock dividends, or other similar recapitalizations affecting the Common Stock (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the issuance of shares hereunder in excess of the Maximum Common Stock Issuance shall first be approved by the Company's shareholders in accordance with applicable law and the By-laws and Articles of Incorporation of the Company. If such shareholders' approval becomes required but is diligently sought and duly obtained within ninety (90) days, the inability of the Company to reserve or issue shares of Common Stock to the Investors as a result of this Section 3.11 shall not be deemed an "Exercise Deficiency" under the Registration Rights Agreement. The parties understand and agree that the Company's failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of this Agreement and issuance and sale of Securities hereunder, and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section. The -13- parties further agree that if an event constituting a Maximum Common Stock Issuance occurs during an Adjustment Period, the Investors shall have the right but not the obligation to treat such Adjustment Period as "tolled" under Section 1.2(c)(ii)(x). Section 3.12 Certain Sales. ------------- (a) The Investors shall not enter into a short position for more than 358,423 shares of Common Stock, which number will be subject to adjustment for stock splits, reverse stock splits, stock dividends, recapitalizations and the like. During the first forty-five (45) calendar days following the Closing, the Investors shall not enter into a short position for any shares of Common Stock. Between the forty-sixth (46th) calendar day after Closing and the earlier of (x) the 100th calendar day after Closing or (y) the Effective Date (as defined below), the Investors shall not enter into a short position on any single trading day in respect of more than fifty percent (50%) of the shares of Common Stock permitted to be sold pursuant to Section 3.13 on such trading day. After the date which is the earlier of (x) or (y) above, the Investors shall not enter into a short position (calculated on a daily basis) in respect of more than 100% of the shares of Common Stock permitted to be sold pursuant to Section 3.13. Notwithstanding the foregoing, at no time will there be any limits upon the number of shares of Common Stock in respect of which the Investors may enter into short positions at a price of $18 or above (as such price may be adjusted for stock splits, reverse stock splits, recapitalizations, etc.) (the "THRESHOLD PRICE"). Short sales entered into at or above the Threshold Price will not count against any restrictions or limits under this Section 3.12. (b) Each Investor agrees it shall not engage in any short sales of the Common Stock with the intention of reducing the price of the Common Stock on the Principal Market. Notwithstanding the foregoing, the Company acknowledges that there is no presumption, nor will there be deemed to be a presumption, that any sales by an Investor (including short sales) are made with the intent of reducing the price of the Common Stock on the Principal Market, even if the price of the Common Stock on the Principal Market falls during the period in which such sales are occurring. Nothing in this Section 3.12 shall prohibit an Investor from at any time entering into, inter alia, option or derivative contracts with respect to the Securities, including puts and calls in which shares of Common Stock are delivered or deliverable in satisfaction of any exercised options. (c) This Section 3.12 shall automatically terminate and the Investors shall have no obligations hereunder if the Company shall have materially breached the Transaction Documents and not cured such material breach with seven (7) trading days of an Investor delivering written notice thereof, if there shall occur any Interfering Event (as defined in the Registration Rights Agreement), or if the Company delivers a Share Redemption Notice or a Warrant Redemption Notice (each as defined below). -14- Section 3.13 Resale Limitations. On any single trading day, no Investor shall sell (including by way of a short sale) on the Principal Market a number of shares of Common Stock equal to or greater than the greater of (a) 20% of the average daily volume of the Common Stock on the Principal Market during the prior 30 trading days or (b) 20% of the trading volume on such single trading day. This Section 3.13 automatically shall terminate and the Investors shall have no obligations hereunder (i) if the Company shall have materially breached the Transaction Documents and not cured such material breach with seven (7) trading days of an Investor delivering written notice thereof, or (ii) if the Company delivers a Share Redemption Notice (as defined below) or Warrant Redemption Notice (as defined in the Initial Warrant). Notwithstanding the foregoing, no Investor shall be restricted from selling (including by way of short sales) shares of Common Stock at or above the Threshold Price. Nothing in this Section 3.13 shall prohibit an Investor from at any time entering into, inter alia, option or derivative contracts with respect to the Securities, including puts and calls in which shares of Common Stock are delivered or deliverable in satisfaction of any exercised options. Section 3.14 Reporting Lack of Effective Registration. The Company shall promptly notify each Investor in writing if there shall ever be a lack of Effective Registration, as well as when Effective Registration is re-established. Section 3.15 Optional Redemption of Initial Shares. ------------------------------------- (a) At any time after the date on which Initial Shares are first declared effective by the SEC (the "EFFECTIVE DATE"), the Company may elect, upon forty-one (41) trading days' prior written notice to all but not fewer than all the Investors (such notice, in respect of redemptions after the Effective Date pursuant to this subsection (a), or before the Effective Date pursuant to subsection (b) below, shall be the "SHARE REDEMPTION NOTICE"), to redeem all but not less than all the Initial Shares still held of record as of the Share Redemption Date by such Investors at the price specified in the next sentence; provided that the Investors shall have no obligation to resell their remaining Initial Shares to the Company on the forty-first (41st) trading day following the date they receive the Share Redemption Notice (the "SHARE REDEMPTION DATE"; for purposes of subsection (b) below, the Share Redemption Date shall be the sixteenth (16th) trading day following the date the Investors receive the Share Redemption Notice) unless on each of the forty (40) trading days prior to the Share Redemption Date there shall have been Effective Registration. The redemption price for each remaining Initial Share shall be 120%, 130% or 140%, of the Share Purchase Price, as applicable, for Share Redemption Notices received by the Investors during the first three (3) month period, second three (3) month period, and all subsequent periods, respectively, following the Effective Date. (b) At any time prior to the Effective Date, the Company may elect, by delivery of a Share Redemption Notice, to redeem all but not less than -15- all the Initial Shares still held as of the applicable Share Redemption Date by such Investors at a price per share equal to the greater of: (i) 115% of the Share Purchase Price, or (ii) the highest single traded price for a share of Common Stock on the Principal Market during the period starting on the fifteenth (15th) trading day prior to and ending on the fifteenth (15th) trading day following the date the Investors receive the applicable Share Redemption Notice. ; provided, the Company's rights under this subsection (b) shall terminate and be of no effect if the Company fails to comply with its registration obligations under the Registration Rights Agreement. (c) All such amounts shall be paid in immediately available funds from the Company to the Investors on the applicable Shares Redemption Date. Nothing shall prohibit the Investors from selling Initial Shares after receiving the Shares Redemption Notice but before the Share Redemption Date. The Share Redemption Notice shall be irrevocable, and if the Company does not redeem the Investors' Initial Shares as and when provided by this Section 3.15, its rights under Section 3.15 automatically and permanently shall expire and terminate. Section 3.16 Reports Under The 1934 Act. -------------------------- With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration ("Rule 144"), the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and (c) furnish to each Investor so long as such Investor owns Registrable Shares, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the -16- Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration. ARTICLE IV TRANSFER AGENT INSTRUCTIONS. ---------------------------- The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of the Investors or their respective nominee(s), for Common Stock in such amounts as specified from time to time by the Investor to the Company (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants that no instruction relating to the Common Stock other than the Irrevocable Transfer Agent Instructions referred to in this Article IV will be given by the Company to its transfer agent and that the Common Stock issued to the Investors shall be freely transferable on the books and records of the Company as contemplated by Article VI below when the legend referred to therein may be removed. The Company shall instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by the Investors and, upon transfer as contemplated by Article VI, without any restrictive legends. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investors by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section will be inadequate and agrees, in the event of a breach by the Company of the provisions of this Section, that each affected Investor shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate issuance and transfer without any bond or other security being required. ARTICLE V CONDITIONS TO CLOSINGS ---------------------- Section 5.1 Conditions Precedent to the Obligation of the Company to Sell. The obligation hereunder of the Company to issue and/or sell the Initial Shares and Warrants to the Investors at the Closing is subject to the satisfaction, at or before the Closing, as the case may be, of each of the applicable conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. (a) Accuracy of the Investors' Representations and Warranties. The representations and warranties of the Investors will be true and correct in all material respects as of the date when made and as of the Closing Date. -17- (b) Performance by the Investors. The Investors shall have performed all agreements and satisfied all conditions required to be performed or satisfied by the Investors at or prior to the Closing, including payment of the applicable purchase price. (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by the Transaction Documents. Section 5.2 Conditions Precedent to the Obligation of the Investors to Purchase. The obligation hereunder of the Investors to acquire and pay for the Initial Shares and Warrants at the Closing, is subject to the satisfaction, at or before the Closing, of each of the applicable conditions set forth below. These conditions are for the Investors' benefit and may be waived by the Investors at any time in their sole discretion. (a) Accuracy of the Company's Representations and Warranties. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the applicable closing date as though made at that time (except for representations and warranties expressly as of an earlier date, which shall be true and correct in all material respects as of such date). (b) Performance by the Company. The Company shall have performed all agreements and satisfied all conditions required to be performed or satisfied by the Company at or prior to the applicable closing, including, without limitation, delivery of certificates representing the Securities and the Warrants, as applicable. (c) Nasdaq Trading. Trading in the Company's Common Stock shall not have been suspended by the SEC and trading in securities generally as reported by the Principal Market (or other Approved Market) shall not have been suspended or limited, and the Common Stock shall be listed on an Approved Market. (d) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by Transaction Documents. The NASD shall not have objected or indicated that it may object to the consummation of any of the transactions contemplated by this Agreement. (e) Opinion of Counsel. The Investors shall have received an opinion of counsel to the Company in the applicable form attached hereto as Exhibit 5.2(e). -18- (f) Registration Rights Agreement. The Company and the Investors shall have executed and delivered the Registration Rights Agreement in the form and substance of Exhibit 5.2(f) attached hereto. (g) Officer's Certificate. The Company shall have delivered to the Investors a certificate in form and substance satisfactory to the Investors and the Investors' counsel, executed by an officer of the Company, certifying as to satisfaction of applicable closing conditions, incumbency of signing officers, and the true, correct and complete nature of the Article of Incorporation, By-laws, good standing and authorizing resolutions of the Company. (h) Miscellaneous. The Company shall have delivered to the Investors such other documents relating to the transactions contemplated by this Agreement as the Investors or their counsel may reasonably request. Section 5.3 Closing Date Deliveries. ----------------------- (a) On the Closing Date, the Company shall deliver to the Investor: (i) Certificates representing the Initial Shares; (ii) Warrants in the form attached as Annex A; (iii) The certificate referred to in Section 5.2(g) above; (iv) The evidence of any necessary blue sky filing required by Section 3.6; (v) The executed Registration Rights Agreement; and (vi) The opinion of counsel referred to in Section 5.2(e) above. (b) On the Closing Date, the Investors shall deliver to the Company: (i) The Purchase Price set forth on Schedule I hereto; and (ii) The executed Registration Rights Agreement. Section 5.4 Company Deliveries at Fill-up Closing. On the date of each Fill-up Closing, the Company shall deliver to the Investor: -19- (i) Certificates representing the applicable Adjustment Shares issuable to the Investors; (ii) The certificate referred to in Section 5.2(g) above; (iii) A current, deliverable prospectus that may be used to resell the Adjustment Shares; and (iv) Evidence of any necessary blue sky filings required by Section 3.6. ARTICLE VI LEGEND AND STOCK ---------------- Each certificate representing the Common Stock issued hereunder shall be stamped or otherwise imprinted with a legend substantially in the following form: These Securities Have Not Been Registered For Offer or Sale Under The Securities Act Of 1933 Or Any State securities laws. They May Not Be Sold Or Offered For Sale Except Pursuant To An Effective Registration Statement Under Said Act And Any Applicable State Securities Law Or An Applicable Exemption From Such Registration Requirements. The Company agrees to reissue within 3 trading days certificates for Common Stock without the legend set forth above at such time as such Common Stock (i) is sold to a purchaser or purchasers who (in the opinion of counsel to the seller or such purchaser(s), in form and substance reasonably satisfactory to the Company and its counsel) are able to dispose of such shares publicly without registration under the Act, (ii) are registered pursuant to an effective registration statement, or (iii) may be sold pursuant to Rule 144(k). Any Common Stock issued pursuant to exercise of Warrants shall bear a legend in the same form as the legend indicated above; provided that such legend shall be removed from the Common Stock and the Company shall issue new certificates without such legend if such Common Stock is registered for resale under the 1933 Act, or (iii) such Common Stock is sold to a purchaser or purchasers who (in the opinion of counsel to the seller or such purchaser(s), in form and substance reasonably satisfactory to the Company and it counsel) are able to dispose of such shares publicly without registration under the 1933 Act. Upon the applicable trade date of each such sale, the Company agrees to issue within 3 trading days new certificates representing such Common Stock without such legend. The Investor agrees to sell the Common Stock represented by the new -20- certificates in accordance with the applicable prospectus delivery requirements (if copies of a current prospectus are provided to the Investors by the Company) or in accordance with an exemption from the registration requirements of the 1933 Act. Nothing herein shall limit the right of any holder to pledge these securities pursuant to a bona fide margin account or lending arrangement entered into in compliance with law, including applicable securities laws. ARTICLE VII INDEMNIFICATION --------------- In consideration of the Investors' execution and delivery of this Agreement, the Warrants and the Registration Rights Agreement and in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Investors and all of their partners, officers, directors, employees, members and direct or indirect investors and any of the foregoing persons' agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "INDEMNITEES") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate or document contemplated hereby or thereby, (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from (i) the execution, delivery, performance, breach by the Company or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities or (iii) the status of the Investor or holder of the Securities or Warrants as investors in the Company, and (d) the enforcement of this Article VII. Notwithstanding the foregoing, Indemnified Liabilities shall not include any liability of any Indemnitee to the extent arising out of such Indemnitee's willful misconduct or fraudulent action(s). To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Article VIII shall be the same as those set forth in Section 6 (other than Section 6(b)) of the Registration Rights Agreement, -21- including, without limitation, those procedures with respect to the settlement of claims and Company's right to assume the defense of claims. ARTICLE VIII 9.99% LIMITATION. ----------------- Section 8.1 Limitation ---------- (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Investor upon the exercise or issuance of Securities shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such holder (other than by virtue of the ownership of securities or rights to acquire securities that have limitations on the Investor's right to convert, exercise or purchase similar to the limitation set forth herein (the "EXCLUDED SHARES")), together with all shares of Common Stock deemed beneficially owned (not counting such affiliate's Excluded Shares) by the Investor's "AFFILIATES" (as defined in Rule 144 of the Act) ("AGGREGATION PARTIES") that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934 as amended, exists, would exceed 9.99% of the total issued and outstanding shares of the Common Stock (the "RESTRICTED OWNERSHIP PERCENTAGE"). Each Investor shall have the right (w) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (x) (subject to waiver) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the announcement of event of: (i) any consolidation or merger of the Company with or into any other corporation or other entity or person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in excess of 50% of the Company's voting power is transferred through a merger, consolidation, tender offer or similar transaction, (ii) any person (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), together with its affiliates and associates (as such terms are defined in Rule 405 under the 1933 Act), beneficially owns or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act without regard to the 60-day exercise period) in excess of 50% of the Company's voting power, (iii) there is a replacement of more than one-half of the members of the Company's Board of Directors which is -22- not approved by those individuals who are members of the Company's Board of Directors on the date thereof, in one or a series of related transactions or (iv) a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis (each, a "MAJOR TRANSACTION"). (b) The Investor covenants at all times on each day (each such day being referred to as a "Covenant Day") as follows: During the balance of such Covenant Day and the succeeding sixty-one (61) days (the balance of such Covenant Day and the succeeding 61 days being referred to as the "Covenant Period") such Investor will not acquire shares of Common Stock pursuant to any right existing at the commencement of the Covenant Period to the extent the number of shares so acquired by such Investor and its Aggregation Parties (ignoring all dispositions) would exceed: (x) the Restricted Ownership Percentage of the total number of shares of Common Stock outstanding at the commencement of the Covenant Period, minus ----- (y) the number of shares of Common Stock owned by such Investor and its Aggregation Parties at the commencement of the Covenant Period. A new and independent covenant will be deemed to be given by the Investor as of each moment of each Covenant Day. No covenant will terminate, diminish or modify any other covenant. The holder agrees to comply with each such covenant. This Section 8 controls in the case of any conflict with any other provision of the Transaction Documents. (i) The Company's obligation to issue Common Shares which would exceed such limits referred to in this Section 5(i) shall be suspended to the extent necessary until such time, if any, as shares of Common Stock may be issued in compliance with such restrictions. ARTICLE IX GOVERNING LAW; MISCELLANEOUS. ----------------------------- Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE -23- TO CONTRACTS TO BE EXECUTED AND PERFORMED EXCLUSIVELY IN NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. IF ANY PROVISION OF THIS AGREEMENT SHALL BE INVALID OR UNENFORCEABLE IN ANY JURISDICTION, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINDER OF THIS AGREEMENT IN THAT JURISDICTION OR THE VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT IN ANY OTHER JURISDICTION. Section 9.2 Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature. Section 9.3 Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Section 9.4 Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. Section 9.5 Entire Agreement; Amendments; Waivers. ------------------------------------- -24- (a) This Agreement supersedes all other prior oral or written agreements between the Investors, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein (including the other Transaction Documents) contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investors make any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. (b) The Investors may at any time elect, by notice to the Company, to waive (whether permanently or temporarily, and subject to such conditions, if any, as the Investors may specify in such notice) any of their respective rights (but not obligations) under any of the Transaction Documents to acquire shares of Common Stock from the Company, in which event such waiver shall be binding against the Investors in accordance with its terms. Section 9.6 Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing, must be delivered by (i) courier, mail or hand delivery or (ii) facsimile, and will be deemed to have been delivered upon receipt. The addresses and facsimile numbers for such communications shall be: If to the Company: Hollywood.com, Inc. 2255 Glades Road Boca, Raton, Florida 33431 Telephone: (561) 998-8000, ext. 250 Facsimile: (561) 998-2974 Attention: General Counsel If to the Transfer Agent: American Stock Transfer and Trust Company 40 Wall Street New York, NY 10005 Telephone: (718) 921-8256 Facsimile: (718) 921-8327 Attention: Mr. Joe Comito -25- If to the Investors: Elliott Associates, L.P. 712 Fifth Avenue, 36th Floor New York, New York 10019 Telephone: (212) 974-6000 Facsimile: (212) 586-9457 Attention: Mr. Brett Cohen and --- Westgate International, L.P. 712 Fifth Avenue, 36th Floor New York, New York 10019 Telephone: (212) 506-2999 Facsimile: (212) 586-9467 Attention: Mr. Brett Cohen With a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C. 551 Fifth Avenue, 18th Floor New York, New York 10176 Telephone: 212-986-6000 Facsimile: 212-986-8866 Attention: Christopher P. Davis, Esq. Each party shall provide five (5) days prior written notice to the other party of any change in address, telephone number or facsimile number. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. Section 9.7 Successors and Assigns. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any Permitted Assignee (as defined below). The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor. The Investors may assign some or all of their rights hereunder to the other Investor, to an affiliate of either Investor or to an entity or fund which has the same principal investment adviser as either Investor, without the consent of the Company, and to others, with the written consent of the Company (in each case, a "PERMITTED ASSIGNEE"); provided, however, that any such -26- assignment shall not release the Investors from their obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption. Notwithstanding anything to the contrary contained in the Transaction Documents, the Investor shall be entitled to pledge the Securities or Warrants in connection with a bona fide margin account. In the event of any Major Transaction in which the Company does not remain an independent company with publicly registered shares, the surviving or acquiring entity in any Major Transaction (as a precondition of consummating such Major Transaction) will pay the Investors an amount in cash or freely tradeable publicly registered shares of the acquiror (at the option of such acquiror) with a value per Initial Share (excluding Initial Shares in respect of which an Adjustment Period (as defined in the Adjustment Warrant) has been completed if the Adjustment Shares issuable in connection therewith, if any, have been delivered to the Investors) equal to the amount by which 115% of the Share Purchase Price (as such amount would be adjusted by the mechanisms set forth in the Initial Warrants) exceeds the per share consideration paid in such Major Transaction. Section 9.8 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. Section 9.9 Survival. The representations, warranties and agreements of the Company and the Investors contained in the Agreement shall survive each of the Closing and to the extent applicable, each Fill-up Closing and each Closing, in each case for a period which expires on the second anniversary of the Closing Date. Section 9.10 Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. Section 9.11 Remedies. Each Investor and each Permitted Assignee shall have all rights and remedies set forth in this Agreement, the Warrants and the Registration Rights Agreement and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Each Investor and each Permitted Assignee without prejudice may withdraw, revoke or suspend its pursuit of any remedy at any time prior to its complete recovery as a result of such remedy. -27- Section 9.12 Days. Unless the context refers to "business days" or "trading days," all references herein to "days" shall mean calendar days. Section 9.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, wherever the Investors exercise a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Investors may rescind or withdraw, in their sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights. Section 9.14 Obligations Absolute. The Company's obligations under the Transaction Documents are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction. * * * * * [Signature Page Follows] -28- IN WITNESS WHEREOF, the parties hereto have caused this Common Stock Investment Agreement to be duly executed as of the date and year first above written. HOLLYWOOD.COM, INC. By: /s/ Mitchell Rubenstein --------------------------- Name: Mitchell Rubenstein Title: Chairman and CEO INVESTORS: ELLIOTT ASSOCIATES, L.P. By: /s/ Paul E. Singer ---------------------- Name: Paul E. Singer Title: General Partner WESTGATE INTERNATIONAL, L.P. By: ELLIOTT INTERNATIONAL CAPITAL ADVISORS INC. Attorney-in-Fact By: /s/ Paul E. Singer ---------------------- Name: Paul E. Singer Title: President Signature page to Common Stock Investment Agreement -29- LIST OF SCHEDULES - ----------------- Schedule 1 Investments Schedule 2.1(a) Organization and Qualification Schedule 2.1(c) Capitalization Schedule 2.1(d) No Conflicts Schedule 2.1(g) Absence of Certain Changes Schedule 2.1(h) Absence of Litigation Schedule 2.1(l) Intellectual Property Rights Schedule 2.1(n) Title Schedule 2.1(t) Certain Transactions LIST OF EXHIBITS - ---------------- Exhibit 5.2(e) Opinion of Counsel Exhibit 5.2(f) Registration Rights Agreement Exhibit 5.2(g) Officers' Certificate ANNEXES - ------- Annex A Initial Warrant Annex B Adjustment Warrant -30- SCHEDULE 1 ----------
NUMBER OF NUMBER OF INVESTOR RESIDENCE INITIAL SHARES INITIAL WARRANTS PURCHASE PRICE -------- --------- -------------- ---------------- -------------- Elliott Associates, L.P. New York 179,212 30,000 $1,500,000 Westgate International, L.P. Cayman Islands 179,211 30,000 $1,500,000
EX-10 3 0003.txt EXHIBIT 10.2 EXHIBIT 10.2 ------------ EXECUTION COPY REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement ("AGREEMENT") is entered into as of August 22, 2000, between HOLLYWOOD.COM, INC., a Florida corporation with offices at 2255 Glades Road, Suite 237W, Boca Raton, FL 33431 (the "COMPANY"), ELLIOTT ASSOCIATES, L.P., a Delaware limited partnership ("ELLIOTT"), and WESTGATE INTERNATIONAL, L.P., a Cayman Islands limited partnership ("WESTGATE"). Each of Elliott and Westgate are referred to hereinafter individually as an "INVESTOR" and collectively as the "INVESTORS". W I T N E S S E T H: -------------------- WHEREAS, pursuant to that certain Common Stock Investment Agreement, dated the date hereof, among the Company and the Investors (the "INVESTMENT AGREEMENT"), the Company has agreed to sell and issue to the Investors, and the Investors have agreed to purchase from the Company, inter alia, an aggregate of 358,423 shares (the "INITIAL SHARES") of the Company's common stock, $.01 par value ("COMMON STOCK"), and certain warrants, all as more fully specified and subject to the terms and conditions set forth in the Investment Agreement. NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in the Investment Agreement and this Agreement, the Company and the Investors agree as follows: 1. Certain Definitions. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Investment Agreement. As used in this Agreement, the following terms shall have the following respective meanings: "CLOSING" and "CLOSING DATE" shall have the meanings ascribed to such terms in the Investment Agreement. "COMMISSION" or "SEC" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "FAIR MARKET VALUE" shall equal the 10 Trading Day average closing trading price of the Common Stock on the principal market for the 10 Trading Days preceding the date of determination or, if the Common Stock is not listed or admitted to trading on any principal market, the average of the closing bid and asked prices on the over-the-counter market as furnished by any New York Stock Exchange member firm reasonably selected from time to time by the Company for that purpose and reasonably acceptable to the Holder, or, if the Common Stock is not listed or admitted to trading on the Principal Market or traded over-the-counter and the average price cannot be determined as contemplated above, the Fair Market Value of the Common Stock shall be as reasonably determined in good faith by the Company's Board of Directors with the concurrence of the Holder. "HOLDER" and "HOLDERS" shall include the Investors and any transferee or transferees of the Purchased Shares or Registrable Securities which have not been sold to the public to whom the registration rights conferred by this Agreement have been transferred in compliance with this Agreement and the Investment Agreement. "MANDATORY REDEMPTION PRICE" shall mean an amount in immediately available funds, on a per share basis, equal to: (a) as to the Purchased Shares, the greater of (i) 120% of the Share Purchase Price and (ii) the highest Common Stock closing price on the Principal Market between and including date of the event triggering the right of redemption and the trading day immediately prior to the actual redemption of the Purchased Shares; (b) as to the Warrants, the price calculated pursuant to (a) above as applied to the number of Warrant Shares into which the Warrant could be converted as calculated hereunder ("DELIVERABLE SHARES"). For purposes hereof, the number of Deliverable Shares shall equal the product of (x) the number of Warrant Shares with respect to which the Warrant is being surrendered for Deliverable Shares, multiplied by (y) the quotient of (i) the Fair Market Value of Common Stock less the Exercise Price (as such term is defined in the Common Stock Purchase Warrant entered into simultaneously herewith) divided by (ii) by Fair Market Value of Common Stock. The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement. "PURCHASED SHARES" means the Initial Shares, Warrant Shares and the Adjustment Shares issued or issuable for the current or previous Adjustment Periods. "REGISTRABLE SECURITIES" shall mean: (i) the Initial Shares; (ii) the Warrant Shares; (iii) the Adjustment Shares; (iv) securities issued or issuable upon any stock split, stock dividend, recapitalization or similar event with respect to the foregoing; and (v) any other security issued as a dividend or other distribution with respect to, in exchange for or in replacement of the securities referred to in the preceding clauses; provided such securities will cease to be Registrable Securities for purposes of this Agreement if and to the extent they become freely saleable by the Holders pursuant to Rule 144. "REGISTRATION EXPENSES" shall mean all expenses to be incurred by the Company in connection with each Holder's registration rights under this Agreement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, reasonable fees and disbursements of counsel to Holders (using a single counsel selected by a majority in interest of the Holders) for a "due diligence" examination of the Company and review of the Registration Statement and related documents, and the expense of any special audits incident 2 to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company). "REGISTRATION STATEMENT" shall have the meaning set forth in Section 2(a)(i) herein. "REGULATION D" shall mean Regulation D as promulgated pursuant to the Securities Act, and as subsequently amended. "SECURITIES ACT" or "ACT" shall mean the Securities Act of 1933, as amended. "SELLING EXPENSES" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all fees and disbursements of counsel for Holders not included within "Registration Expenses". "TRADING DAY" shall mean (x) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, a day on which there is trading on such stock exchange, or (y) if the Common Stock is not listed on either of such stock exchanges but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (z) if the foregoing provisions are inapplicable, a day on which quotations are reported by National Quotation Bureau Incorporated. 2. Registration Requirements. The Company shall use its best efforts to effect the registration of the Registrable Securities (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as would permit or facilitate the sale or distribution of all the Registrable Securities in the manner (including manner of sale) and in all states reasonably requested by any Holder. Such best efforts by the Company shall include, without limitation, the following: (a) The Company shall as expeditiously as possible after the Closing Date (except in the case of (i) below): (i) Within seventy-five (75) calendar days after the Closing, prepare and file a registration statement with the Commission pursuant to Rule 415 under the Securities Act on Form S-3 under the Securities Act (or in the event that the Company is ineligible to use such form, such other form as the Company is eligible to use under the Securities Act) covering resales by the Holders of the Registrable Securities ("REGISTRATION STATEMENT"). Thereafter the Company shall use its best efforts to cause such Registration Statement and other filings to be declared effective as soon as possible, and in any event prior to 100 days following the Closing Date; 3 provided that if the SEC reviews and gives comments on the Registration Statement requiring changes and amendments thereto before it will declare the Registration Statement effective, then the Company shall use its best efforts to have the Registration Statement and other filings declared effective no later than 130 days following the Closing Date. Without limiting the foregoing, the Company will promptly respond to all SEC comments, inquiries and requests, and shall request acceleration of effectiveness at the earliest possible date. (ii) Prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement and promptly notify the Holders of the filing and effectiveness of such Registration Statement and any amendments or supplements. (iii) Furnish to each Holder such numbers of copies of a current prospectus conforming with the requirements of the Act, copies of the Registration Statement, any amendment or supplement thereto and any documents incorporated by reference therein and such other documents as such Holder may reasonably require in order to facilitate the disposition of Registrable Securities owned by such Holder. (iv) Register and qualify the securities covered by such Registration Statement under the securities or "Blue Sky" laws of all domestic jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to register or qualify as a foreign corporation in any jurisdiction where it is not now so qualified or take any action that would subject it to service of process in suits or taxation, in each case, in any jurisdiction where it is not now so subject. (v) Notify each Holder immediately of the happening of any event (but not the substance or details of any such events unless specifically requested by a Holder) as a result of which the prospectus (including any supplements thereto or thereof) included in such Registration Statement, as then in effect, includes an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and use its best efforts to promptly update and/or correct such prospectus. 4 (vi) Notify each Holder immediately of the issuance by the Commission or any state securities commission or agency of any stop order suspending the effectiveness of the Registration Statement or the threat or initiation of any proceedings for that purpose. The Company shall use its best efforts to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible time. (vii) Permit counsel to the Holders to review and comment upon the Registration Statement and all amendments and supplements thereto within a reasonable period of time (but not less than five (5) full trading days) prior to each filing, and shall not file any document in a form to which such counsel reasonably objects and will not request acceleration of the Registration Statement without prior notice to such counsel. (viii) List the Registrable Securities covered by such Registration Statement with all securities exchange(s) and/or markets on which the Common Stock is then listed and prepare and file any required filings with the Nasdaq National Market System or any exchange or market where the Common Stock is traded. (ix) Take all steps necessary to enable Holders to avail themselves of the prospectus delivery mechanism set forth in Rule 153 (or successor thereto) under the Act. (b) Set forth below in this Section 2(b) are (I) events that may arise that the parties consider will interfere with the full enjoyment by the Investors of their rights under this Agreement and the Investment Agreement (the "INTERFERING EVENTS"), and (II) certain remedies applicable in each of these events. Paragraphs (i) through (iv) of this Section 2(b) describe the Interfering Events, provide a remedy to the Investors if an Interfering Event occurs and provide that the Investors may require that the Company repurchase outstanding Purchased Shares at a specified price if certain Interfering Events are not timely cured. Paragraph (v) provides, inter alia, that if default adjustments required as the remedy in the case of certain of the Interfering Events are not provided when due, the Company may be required by the Investors to redeem outstanding Purchased Shares at a specified price. Paragraph (vi) provides, inter alia, that the Investors have the right to specific performance. 5 The preceding paragraphs in this Section 2(b) are meant to serve only as an introduction to this Section 2(b), are for convenience only, and are not to be considered in applying, construing or interpreting this Section 2(b). (i) Delay in Effectiveness of Registration Statement. (A) In the event that such Registration Statement has not been declared effective within the periods specified in Section 2(a)(i), then the Company shall pay each Holder a Monthly Delay Payment (as defined below) for each 30 day period (or portion thereof) that effectiveness of the Registration Statement is delayed. In addition to the foregoing, if for any reason the Registration Statement has not been declared effective within 210 days after the Closing Date, then each Holder shall have the right but not the obligation to sell to the Company, and the Company shall have the obligation to purchase for immediately available funds, at any time after the 210th day after the Closing Date, any or all of its Purchased Shares or Warrants for a per share consideration equal to the applicable Mandatory Redemption Price. (B) As used in this Agreement, a "MONTHLY DELAY PAYMENT" shall be a payment in immediately available funds equal to 1% of the Aggregate Share Purchase Price of the Purchased Shares held by a Holder for the initial 30 day period (or portion thereof) that the specified condition in this Section 2(b) has not been fulfilled or the specified deficiency has not been remedied, and 2% of the Share Purchase Price of the Purchased Shares held by a Holder for each subsequent such 30 day period (or portion thereof) that the specified condition in this Section 2(B) has not been fulfilled or the specified deficiency has not been remedied (prorated in each case as appropriate). Payment of the Monthly Delay Payments and Mandatory Redemption Price shall be due and payable from the Company to such Holder within five (5) business days of demand therefor. Without limiting the foregoing, if payment in immediately available funds of the Mandatory Redemption Price is not made within such 5 business day period, the Holder may revoke and withdraw in whole or in part its election to cause the Company to make such mandatory purchase at any time prior to its receipt of such cash, without prejudice to its ability to elect to receive that particular or other Mandatory Redemption Price payments in the future. An Investor may only exercise its right to cause the Company to repurchase at the Mandatory Redemption Price as a result of a particular event or circumstance for a period of 150 days following the later of (i) its receipt of a written notice from the Company informing that Investor of such event or circumstance or (ii) the date on which the Mandatory Redemption Price put right first becomes available to such Investor in 6 respect of such event or circumstance. A failure of an Investor to cause a Mandatory Redemption Price repurchase within such 150 day period shall not limit that Investor's right to cause Mandatory Redemption Price repurchases with respect to any other triggering event or circumstance. (C) Notwithstanding the foregoing, for purposes of determining the Monthly Delay Payment there shall be excluded from the calculation of the number of days that the Registration Statement has not been declared effective, the number of delayed days which are solely attributable to delays due to the Investor not providing the Company with information required for the Registration Statement and requested by the Company, assuming the Company has complied with the timing requirements contained in this Agreement. (ii) No Listing; Premium Price Redemption for ---------------------------------------- Delisting of Class of Shares. ----------------------------- (A) In the event that the Company fails, refuses or for any other reason is unable to cause the Registrable Securities covered by the Registration Statement to be listed with Nasdaq National Market System or another Approved Market at all times during the period ("LISTING PERIOD") from the 130th day following the Closing Date until such time as the registration period in Section 5 herein terminates and so long as any share of Common Stock is outstanding, then each Holder shall have the right but not the obligation from time to time to sell to the Company, and the Company shall have the obligation to purchase for immediately available funds, any or all of its Purchased Shares or Warrants at the Mandatory Redemption Price. In the event that the Company is statutorily prohibited from purchasing all Purchased Shares or Warrants submitted for repurchase, the Company shall only be required (as long as such prohibition remains) to purchase a pro rata amount from each Holder based on the number of Purchased Shares or Warrants submitted for repurchase by all Holders. In any case where the Company fails to repurchase any Purchased Shares or Warrant as required, in addition to any other remedies available to the Holders, the Company shall provide to each Holder a Monthly Delay Payment in respect of each Purchased Share or Warrant not so repurchased, for each 30-day period or portion thereof during which such listing is not in effect. The provisions of Section 2(b)(i)(B) shall apply to this Section 2(b)(ii)(A). (B) In the event the shares of Common Stock are delisted or otherwise suspended from the Approved Market at any time following the Closing Date and remain delisted or suspended for five (5) consecutive Trading Days, then at the option of each Holder and to the extent such Holder so elects, each Holder shall have the right to sell to the Company the Purchased Shares and Warrants held by such Holder, in whole 7 or in part, for the Mandatory Redemption Price on the terms set forth in Section 2(b)(i)(B) above. (iii) Blackout Periods. In the event any Holder's ability to sell Registrable Securities under the Registration Statement is suspended for more than (i) five (5) consecutive Trading Days or (ii) an aggregate of twenty (20) Trading Days in any twelve (12) month period ("SUSPENSION GRACE PERIOD"), including without limitation by reason of any suspension or stop order with respect to the Registration Statement or the fact that an event has occurred as a result of which the prospectus (including any supplements thereto) included in such Registration Statement then in effect includes an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing (a "BLACKOUT"), then the Company shall provide to each Holder a Monthly Delay Payment for each 30 day period or portion thereof (appropriately prorated) from and after the expiration of the Suspension Grace Period, on the terms set forth in Section 2(b)(i)(B) above. In addition, if at any time following the expiration of the Suspension Grace Period, the Blackout continues for more than five (5) additional consecutive Trading Days, a Holder shall have the right to sell to the Company its Purchased Shares and Warrants, in whole or in part, for the applicable Mandatory Redemption Price on the terms set forth in Section 2(b)(i)(B) above. (iv) Redemption for Exercise Deficiency. In the event that the Company does not have a sufficient number of shares of Common Stock available to satisfy the Company's obligations to any Holder upon receipt of a notice of exercise of a Warrant from an Investor, or is otherwise unable or unwilling for any reason to issue Common Stock as required by, and in accordance with the provisions of, the Warrants or the Investment Agreement (each, an "EXERCISE DEFICIENCY"), then: (A) The Company shall provide to each Holder a Monthly Delay Payment for each 30 day period or portion thereof (appropriately prorated) following the Exercise Deficiency, on the terms set forth in Section 2(b)(i)(B) above. (B) At any time five (5) days after the commencement of the running of the first 30-day period described above in clause (A) of this paragraph (iv), at the request of any Holder, the Company promptly shall purchase from such Holder, and on the terms set forth in Section 2(b)(i)(B) above, the outstanding Warrants to the extent required to be 8 issued but not issuable, in each case as a result of the Exercise Deficiency at the Mandatory Redemption Price, on the terms set forth in Section 2(b)(i)(B) above. (C) The Holder shall have the right to withdraw any request for redemption hereunder at any time prior to its receipt of the Mandatory Redemption Price. (v) Mandatory Redemption Price for Defaults. ---------------------------------------- (A) The Company acknowledges that any failure, refusal or inability by the Company to perform the obligations described in the foregoing paragraphs (i) through (iv) will cause the Holders to suffer damages in an amount that will be difficult to ascertain, including without limitation damages resulting from the loss of liquidity in the Registrable Securities and the additional investment risk in holding the Registrable Securities. Accordingly, the parties agree, after consulting with counsel, that it is appropriate to include in this Agreement the foregoing provisions for Monthly Delay Payments and mandatory redemptions in order to compensate the Holders for such damages. The parties acknowledge and agree that the Monthly Delay Payments and mandatory redemptions set forth above represent the parties' good faith effort to quantify such damages and, as such, agree that the form and amount of such payments and mandatory redemptions are reasonable and will not constitute a penalty. (B) In the event that the Company fails to pay any Monthly Delay Payment within 5 business days of demand therefor, each Holder shall have the right to sell to the Company any or all of its Purchased Shares and Warrants at the Mandatory Redemption Price on the terms set forth in Section 2(b)(i)(B) above. (C) The Holder shall have the right to withdraw any request for redemption hereunder at any time prior to its receipt of the Mandatory Redemption Price. (vi) Cumulative Remedies. The Monthly Delay Payments and mandatory redemptions provided for above are in addition to and not in lieu or limitation of any other rights the Holders may have at law, in equity or under the terms of the Investment Agreement, the Warrants and this Agreement, including without limitation the right to monetary contract damages and specific performance. Each Holder shall be entitled to specific performance of any and all obligations of the Company in connection with the registration rights of the 9 Holders hereunder without the necessity of posting a bond or surety. (c) If the Holder(s) intend to distribute the Registrable Securities by means of an underwriting, the Holder(s) shall so advise the Company. Any such underwriting may only be administered by nationally or regionally recognized investment bankers reasonably satisfactory to the Company. (d) The Company shall enter into such customary agreements for secondary offerings (including a customary underwriting agreement with the underwriter or underwriters, if any) and take all such other reasonable actions reasonably requested by the Holders in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, whether or not an underwriting agreement is entered into and whether or not the Registrable Securities are to be sold in an underwritten offering: (i) make such representations and warranties to the Holders and the underwriter or underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in secondary offerings; (ii) cause to be delivered to the sellers of Registrable Securities and the underwriter or underwriters, if any, opinions of independent outside counsel to the Company, on and dated as of the effective day (or in the case of an underwritten offering, dated the date of delivery of any Registrable Securities sold pursuant thereto) of the Registration Statement, and within ninety (90) days following the end of each fiscal year thereafter, which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Holders and the underwriter(s), if any, and their counsel and covering, without limitation, such matters as the due authorization and issuance of the securities being registered and compliance with securities laws by the Company in connection with the authorization, issuance and registration thereof and other matters that are customarily given to underwriters in underwritten offerings, addressed to the Holders and each underwriter, if any; (iii) cause to be delivered, immediately prior to the effectiveness of the Registration Statement (and, in the case of an underwritten offering, at the time of delivery of any Registrable Securities sold pursuant thereto), and at the beginning of each fiscal year following a year during which the Company's independent certified public accountants shall have reviewed any of the Company's books or records, a "comfort" letter from the Company's independent certified public accountants addressed to the Holders and each underwriter, if any, stating that such accountants are 10 independent public accountants within the meaning of the Securities Act and the applicable published rules and regulations thereunder, and otherwise in customary form and covering such financial and accounting matters as are customarily covered by letters of the independent certified public accountants delivered in connection with secondary offerings; such accountants shall have undertaken in each such letter to update the same during each such fiscal year in which such books or records are being reviewed so that each such letter shall remain current, correct and complete throughout such fiscal year; and each such letter and update thereof, if any, shall be reasonably satisfactory to the Holders; (iv) if an underwriting agreement is entered into, the same shall include customary indemnification and contribution provisions to and from the underwriters and procedures for secondary underwritten offerings; and (v) deliver such documents and certificates as may be reasonably requested by the Holders of the Registrable Securities being sold or by the managing underwriter or underwriters, if any, to evidence compliance with clause (i) above and with any customary conditions contained in the underwriting agreement, if any. (e) The Company shall make available for inspection by the Holders, representative(s) of all the Holders together, any underwriter participating in any disposition pursuant to a Registration Statement, and any attorney or accountant retained by any Holder or underwriter, all financial and other records customary for purposes of the Holders' due diligence examination of the Company and review of any Registration Statement, all SEC Documents (as defined in the Investment Agreement) filed subsequent to the Closing, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with such Registration Statement, provided that such parties agree to keep such information confidential. (f) Subject to Section 2(b) above, the Company may suspend the use of any prospectus used in connection with the Registration Statement only in the event, and for such period of time as, such a suspension is required by the rules and regulations of the Commission. The Company will use its best efforts to cause such suspension to terminate at the earliest possible date. (g) The Company shall file a Registration Statement with respect to any newly authorized and/or reserved Registrable Securities within five (5) business days of any stockholders or directors meeting formally authorizing same and shall use its best efforts to cause such Registration 11 Statement to become effective within thirty (30) days of such stockholders meeting. If the Holders receive any Registrable Securities that were not already included in a Registration Statement, subsequent to the date such Registration Statement is declared effective, and the Company is unable under the securities laws to add such securities to the then effective Registration Statement, the Company shall promptly file, in accordance with the procedures set forth herein, an additional Registration Statement with respect to such newly Registrable Securities. The Company shall use its best efforts to (i) cause any such additional Registration Statement, when filed, to become effective under the Securities Act, and (ii) keep such additional Registration Statement effective during the period described in Section 5 below and cause such Registration Statement to become effective within 30 days of that date that the need to file the Registration Statement arose. All of the registration rights and remedies under this Agreement shall apply to the registration of such newly reserved shares and such new Registrable Securities, including without limitation the provisions providing for default payments and mandatory redemptions contained herein. 3. Expenses of Registration. All Registration Expenses in connection with any registration, qualification or compliance with registration pursuant to this Agreement shall be borne by the Company, and all Selling Expenses of a Holder shall be borne by such Holder. 4. Registration on Form S-3. The Company shall use its best efforts to remain qualified for registration on Form S-3 or any comparable or successor form or forms, or in the event that the Company is ineligible to use such form, such form as the Company is eligible to use under the Securities Act. 5. Registration Period. In the case of the registration effected by the Company pursuant to this Agreement, the Company will use its best efforts to keep such registration effective until the earliest of (a) the second (2nd) anniversary of the Closing Date or (b) the date upon which such Registrable Securities may be sold freely and without limitation by the Holders under Rule 144(k) (provided that the Company's transfer agent has accepted an irrevocable instruction from the Company to such effect, a copy of which shall have been given and be reasonably acceptable to the Holders and their counsel) or (c) the date on which all the Holders have completed the sales described in the Registration Statement relating thereto. As long as an Investor holds any Registrable Securities, the Company shall do all things necessary to make Rule 144 available to the Holders. 6. Indemnification. ---------------- (a) Company Indemnity. The Company will indemnify each Holder, each of its officers, directors, agents and partners, and each person controlling each of the foregoing, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls, within the meaning of Section 15 of the Securities Act and the rules and regulations 12 thereunder, any underwriter, against all claims, losses, damages, expenses (including the costs of enforcing this provision) and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, or any violation by the Company of the Securities Act or any state securities law or in either case, any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each Holder, each of its officers, directors, agents and partners, and each person controlling each of the foregoing, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action; provided that the Company will not be liable in any such case to a Holder to the extent that any such claim, loss, damage, liability or expense arises out of or is based on (1) any untrue statement or omission based upon written information furnished to the Company by such Holder or the underwriter (if any) therefor and stated to be specifically for use therein or (2) any untrue statement or omission contained in any prospectus, offering circular or other document if the Company shall have delivered to the Holder a revised prospectus, offering circular or other document in which the Company shall have corrected such untrue statement or omission and the Holder shall have failed to deliver such revised prospectus, offering circular or other document to any purchaser. The indemnity agreement contained in this Section 6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld). (b) Holder Indemnity. Each Holder will, severally and not jointly, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors, officers, agents and partners, and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, each other Holder (if any), and each of their officers, directors and partners, and each person controlling such other Holder(s) against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading in light of the circumstances under which they were made, and will reimburse the Company and such other Holder(s) and their directors, officers and partners, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged 13 untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein, and provided that the maximum amount for which such Holder shall be liable under this indemnity shall not exceed the net proceeds received by such Holder from the sale of the Registrable Securities pursuant to the registration statement in question. The indemnity agreement contained in this Section 6(b) shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld). (c) Procedure. Each party entitled to indemnification under this Section 6 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim in any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at its own expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 6 except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such non-privileged information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. 7. Contribution. If the indemnification provided for in Section 6 herein is unavailable to the Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein (other than by reason of the exceptions provided therein), then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities as between the Company on the one hand and any Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of such Holder in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of any Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by such Holder. 14 In no event shall the obligation of any Indemnifying Party to contribute under this Section 7 exceed the amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 6(a) or 6(b) hereof had been available under the circumstances. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Holders or the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraphs. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this section, no Holder or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any Holder, the net proceeds received by such Holder from the sale of Registrable Securities pursuant to the registration statement in question or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such Holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8. Survival. The indemnity and contribution agreements contained in Sections 6 and 7 and the representations and warranties of the Company referred to in Section 2(d)(i) shall remain operative and in full force and effect regardless of (i) any termination of this Agreement or the Investment Agreement or any underwriting agreement, (ii) any investigation made by or on behalf of any Indemnified Party or by or on behalf of the Company, and (iii) the consummation of the sale or successive resales of the Registrable Securities. 9. Information by Holders. Each Holder shall furnish to the Company such information regarding such Holder and the distribution and/or sale proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. The intended method or methods of disposition and/or sale (Plan of Distribution) of such securities as so provided by such Investor shall be included without alteration in the Registration Statement covering the Registrable Securities and shall not be changed without written consent of such Holder. 10. Replacement Certificates. The certificate(s) representing the shares of Common Stock held by any Investor (or then Holder) may be exchanged by such Investor (or such Holder) at any time and from time to time for certificates with different denominations representing an equal aggregate 15 number of shares of Common Stock, as reasonably requested by such Investor (or such Holder) upon surrendering the same. No service charge will be made for such registration or transfer or exchange. Upon receipt by the Corporation of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any certificate representing the Registrable Securities, and in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Corporation, or upon surrender and cancellation of such certificate if mutilated, the Corporation will make and deliver, or cause to be made and delivered, a new certificate of like tenor. 11. Transfer or Assignment. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The rights granted to the Investors by the Company under this Agreement to cause the Company to register Registrable Securities may be transferred or assigned (in whole or in part) to a permitted transferee or assignee of Registrable Securities or Warrants, and all other rights granted to the Investors by the Company hereunder may be transferred or assigned to any such transferee or assignee; provided in each case that the Company must be given written notice by the such Investor at the time of or within a reasonable time after said transfer or assignment, stating the name and address of said transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned; and provided further that the transferee or assignee of such rights agrees in writing to be bound by the registration provisions of this Agreement and such transfer is in compliance with applicable federal and state securities laws. 12. Miscellaneous. -------------- (a) Remedies. The Company and the Investors acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that 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 terms and provisions hereof without the necessity of posting a bond or surety, this being in addition to any other remedy to which any of them may be entitled by law or equity. (b) Jurisdiction. EACH OF THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND THE INVESTORS CONSENT TO 16 PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. (c) Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing by facsimile, mail or personal delivery and shall be effective upon actual receipt of such notice. The addresses for such communications shall be: to the Company: Hollywood.com, Inc. 2255 Glades Road Boca Raton, Florida 33431 Telephone: (561) 998-8000, ext. 250 Facsimile: (561) 998-2974 Attention: General Counsel to the Investors: Elliott Associates L.P. 712 Fifth Avenue, 36th Floor New York, New York 10019 Telephone: (212) 974-6000 Facsimile: (212) 586-9457 Attention: Mr. Brett Cohen Westgate International, L.P. 712 Fifth Avenue, 36th Floor New York, New York 10019 Telephone: (212) 506-2999 Facsimile: (212) 586-9467 Attention: Mr. Brett Cohen with copies to: Kleinberg, Kaplan, Wolff & Cohen, P.C. 551 Fifth Avenue New York, New York 10176 Telephone: (212)986-6000 Facsimile: (212) 986-8866 Attention: Christopher P. Davis, Esq. 17 Any party hereto may from time to time change its address for notices by giving at least five days' written notice of such changed address to the other parties hereto. (d) Indemnity. Each party shall indemnify each other party against any loss, cost or damages (including reasonable attorney's fees) incurred as a result of such parties' breach of any representation, warranty, covenant or agreement in this Agreement, including, without limitation, any enforcement of this indemnity. (e) Waivers. No waiver by any party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. The representations and warranties and the agreements and covenants of the Company and each Investor contained herein shall survive the Closing. (f) Execution in Counterpart. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, it being understood that all parties need not sign the same counterpart. Facsimile signatures shall be valid and binding on each party submitting the same. (g) Publicity. The Company agrees that it will not disclose, and will not include in any public announcement, the name of the Investors without their consent, unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. The Company agrees to submit for reasonable review and comment a copy of any public announcement regarding the matters covered by this Agreement or any agreement or document executed herewith to the Investors and any public announcement including the name of the Investors to the Investors, prior to the publication of such announcements. (h) Entire Agreement; Amendment. This Agreement, together with the Investment Agreement, the Warrants and the agreements and documents contemplated hereby and thereby, contains the entire understanding and agreement of the parties, and may not be amended, modified or terminated except by a written agreement signed by the Company plus the Holders of two-thirds (2/3) of the Registrable Securities (as if all Warrants were exercised). (i) Governing Law. THIS AGREEMENT AND THE VALIDITY AND PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT TO THE EXTENT THAT THE LAW OF THE STATE OF DELAWARE REGULATES THE COMPANY'S ISSUANCE OF SECURITIES. 18 (j) Titles. The titles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. [Signature Page Follows] 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. HOLLYWOOD.COM, INC. By: /s/ Mitchell Rubenstein --------------------------- Name: Mitchell Rubenstein Title: Chairman and CEO INVESTORS: ELLIOTT ASSOCIATES, L.P. By: /s/ Paul E. Singer ---------------------- Name: Paul E. Singer Title: General Partner WESTGATE INTERNATIONAL, L.P. By: ELLIOTT INTERNATIONAL CAPITAL ADVISORS INC. Attorney-in-Fact By: /s/ Paul Singer ------------------- Name: Paul Singer Title: President SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT 20 EX-10 4 0004.txt EXHIBIT 10.3 EXHIBIT 10.3 ------------ EXECUTION COPY THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR OTHERWISE. THIS ADJUSTMENT WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. COMMON STOCK ADJUSTMENT WARRANT No. A1 To Receive Shares of $.01 Par Value Common Stock of HOLLYWOOD.COM, INC. THIS CERTIFIES that, for value received, ELLIOTT ASSOCIATES, L.P. (the "INVESTOR") is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date hereof and on or prior to 5:00 p.m. New York City time on August 22, 2002 (the "TERMINATION DATE"), but not thereafter, to subscribe for from time to time from HOLLYWOOD.COM, INC., a Florida corporation (the "COMPANY"), a number of shares of Common Stock of the Company determined in accordance with Section 3 hereof (the "ADJUSTMENT SHARES"). The "EXERCISE PRICE" is $0. The number of shares for which the Adjustment Warrant is exercisable shall be subject to adjustment as provided herein. This Adjustment Warrant is being issued in connection with the Common Stock Investment Agreement dated as of August 22, 2000 (the "AGREEMENT") entered into between the Company and the Investor. 1. Title of Adjustment Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Adjustment Warrant and all rights hereunder are transferable, in whole or in respect of the right to receive any part of the Adjustment Shares, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Adjustment Warrant together with (a) the Assignment Form annexed hereto properly endorsed, and (b) any other documentation reasonably necessary to satisfy the Company that such transfer is in compliance with all applicable securities laws. 2. Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Adjustment Warrant will, upon exercise of the rights represented by this Adjustment Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue or otherwise specified herein). 3. Exercise of Adjustment Warrant for Adjustment Shares. ----------------------------------------------------- (a) Definitions.. ----------- "ADJUSTMENT NUMBER" means 17,921 shares of Common Stock in each of the Adjustment Periods. Subject to Section 3(c), "ADJUSTMENT PERIOD" initially means the period starting two trading days after the day on which a registration statement covering any Registrable Securities (as defined in the Registration Rights Agreement of even date herewith) is first declared effective by the SEC and ending on and including the 30th calendar day thereafter; and subsequently shall mean each of the nine (9) succeeding 30 day periods. "EFFECTIVE REGISTRATION" shall mean that a Registration Statement (as defined in the Registration Rights Agreement) shall have been declared effective, such registration is not subject to any suspension or stop order, the prospectus for the Initial Shares, the Warrant Shares issuable upon any exercise of the Initial Warrant and for all Adjustment Shares issued or issuable for the current or previous Adjustment Periods is current and deliverable, and none of the Company or any Subsidiary is subject to any bankruptcy, insolvency or similar proceeding, and no Interfering Event (as defined in the Registration Rights Agreement) exists. "SET PRICE" means, for a particular Adjustment Period, the average of the five (5) lowest VWAPs occurring during the fifteen (15) final trading days of such Adjustment Period. "VWAP" means the volume weighted average price of the Common Stock on the Principal Market as quoted by Bloomberg for a particular trading day. (b) Adjustment Share Calculations. Subject to Sections 3(c),(d) and (e), the number of Adjustment Shares (if any) issuable in respect of a particular Adjustment Period shall be calculated immediately following the close of the Principal Market on the final trading day of such Adjustment Period, using the following formula: # of Adjustment Shares = Adjustment Number x (115% of the Share Purchase Price) - Set Price ---------------------------------------------- Set Price
Promptly after performing such calculation for the Investor on the final trading day of such Adjustment Period, the Company shall deliver its written calculations to the Investor by facsimile. (c) Exercise of Adjustment Warrant. Exercise of the rights represented by this Adjustment Warrant may be made at any time or times, in whole or in part, after the termination of the applicable Adjustment Period and prior to 5:00 p.m. New York City time on the Termination Date, or such 2 earlier date on which this Adjustment Warrant may terminate as provided herein, by the surrender on any business day of this Adjustment Warrant and a Notice of Exercise in the form annexed hereto duly completed and executed, at the principal office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company); whereupon the holder of this Adjustment Warrant shall be entitled to receive a certificate for the number of Adjustment Shares for which this Adjustment Warrant has been so exercised. Certificates for Adjustment Shares shall be delivered to the holder hereof within three (3) Trading Days after the date on which this Adjustment Warrant shall have been exercised as aforesaid (each such event being a "FILL-UP CLOSING"). An exercise of this Adjustment Warrant shall be deemed for all purposes a "cashless" exercise. Notwithstanding the immediately preceding paragraph, if during an Adjustment Period, the Company delivers a Share Redemption Notice to the Investor pursuant to the Agreement, the number of Adjustment Shares due to the Investor with respect to the applicable Fill-Up Closing shall equal the number of Adjustment Shares calculated pursuant to the formula stated in Subsection (b) above multiplied by a fraction, the numerator of which is equal to the number of days elapsed from the commencement of the applicable Adjustment Period to the day on which such Share Redemption Notice is received by the Investor (including such day of receipt), and the denominator of which is equal to 30. (d) Effective Registration During Adjustment Period. ----------------------------------------------- (i) If at any time during an Adjustment Period there shall be a lack of Effective Registration or the Company has failed to deliver Adjustment Shares for any previous Adjustment Period in accordance with this Adjustment Warrant, the Investor may at its option either (x) waive the lack of Effective Registration or non-delivery of Adjustment Shares, in which case the Adjustment Period will continue uninterrupted with respect to the Investor in accordance with the other provisions of this Section 3, or (y) by written notice to the Company (delivered no later than 24 hours after actually receiving written notification from the Company of such lack of Effective Registration) elect to suspend such Adjustment Period with respect to itself (a "SUSPENSION NOTICE"). (ii) If the Investor elects pursuant to subsection (i) above to suspend a particular Adjustment Period and Effective Registration is subsequently re-established or such Adjustment Shares are delivered, either before or after the scheduled end of such Adjustment Period, then the Investor may, at its option, elect either (x) to treat such Adjustment Period as tolled for the duration (however long) of the lack of Effective Registration, such that the first full day of Effective Registration following delivery of the Suspension Notice shall be treated as and deemed to be the next day of that tolled Adjustment Period, or (y) to treat such Adjustment Period as having never commenced, such that the first full day of Effective Registration following delivery of the Suspension Notice shall be treated as and deemed to be the first day of the Adjustment Period interrupted by the 3 lack of Effective Registration. The Investor shall have two (2) trading days after receiving written notice from the Company of the re-establishment of Effective Registration to make such election. (iii) Nothing in this Section 3(d) shall limit the Investor's right to be eligible to receive Adjustment Shares or immediately available funds in respect of ten (10) separate Adjustment Periods. There cannot be more than one Adjustment Period at one time. (e) Inapplicability of Adjustment Period. (i) There shall be no Adjustment Shares payable in respect of, and consequently no Fill-Up Closing related to, an Adjustment Period in which, for each trading day in any single 10 consecutive trading day period in such Adjustment Period, both (A) the VWAP is greater than 120% of the Share Purchase Price and (B) the average daily trading volume of the Common Stock on the Principal Market is greater than 40,000; provided that this Section 3(e) shall only be applicable if there is Effective Registration for each day during such Adjustment Period. The existence of such circumstances during any given Adjustment Period will in no way affect the Company's obligation to deliver Adjustment Shares or, if required, immediately available funds to the Investor in subsequent Adjustment Periods. (ii) There shall be no future Adjustment Shares payable (1) after the consummation of any redemption at the Mandatory Redemption Price (as defined in the Registration Rights Agreement) or (2) if at any time after the Registration Statement is declared effective, the closing price for the Common Stock on the Principal Market equals or exceeds the Threshold Price (as defined in the Agreement) for fifteen (15) consecutive trading days. (f) Effective Registration as of Fill-up Closing. If there is Effective Registration on the date of a Fill-Up Closing, then the Company must pay (subject to Section 3(c)) the Investor in Adjustment Shares. If there is not Effective Registration on the date of a Fill-Up Closing, then the Investor shall have the option but not the obligation to receive from the Company, in lieu of the Adjustment Shares otherwise deliverable, an amount in immediately available funds equal to the product of (i) the average closing price of the Common Stock on the Principal Market from the final trading day of the applicable Adjustment Period through and including the trading day immediately prior to the date of the Fill-Up Closing and (ii) the number of Adjustment Shares the Company otherwise would be obligated to deliver to the Investor at such Fill-up Closing. (g) Remedies. If the Company fails to deliver the specified number of Adjustment Shares or amount of immediately available funds, as applicable, to the Investor within 3 trading days of the time and at the place specified in this Section 3, then the Investor may, without reducing its other rights at law or in equity, compel the Company to repurchase all or a part of its Securities (including the number of Adjustment Shares which, without regard to Effective Registration, should have been delivered by the Company) at the applicable Mandatory 4 Redemption Price (as defined in, and as specified, in the Registration Rights Agreement). (h) Adjustments. The number of Adjustment Shares shall be appropriately adjusted to reflect any stock split, stock dividend, recapitalization or similar event so that the Investor receives the same economically equivalent value of Adjustment Shares as it would in the absence of such event. (i) Miscellaneous. The Adjustment Shares shall upon delivery to the Investor be fully-paid, nonassessable, shares of Common Stock, free and clear of all liens and encumbrances and duly eligible for trading on the Nasdaq National Market System or if the Common Stock is not quoted thereon, on such exchange or market (which for purposes of this Agreement shall mean the New York Stock Exchange, the American Stock Exchange or the Nasdaq Small Cap Market) upon which the Common Stock is principally traded or quoted (in either case, the "PRINCIPAL MARKET"). 4. Non-Certificated Shares, In lieu of delivering physical certificates representing the Adjustment Shares, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Adjustment Warrant holder, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Adjustment Shares to the Adjustment Warrant holder by crediting the account of Adjustment Warrant holder's prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein. The term "TRADING DAY" means (x) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, a day on which there is trading on such stock exchange, or (y) if the Common Stock is not listed on either of such stock exchanges but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (z) if the foregoing provisions are inapplicable, a day on which quotations are reported by National Quotation Bureau Incorporated. 5. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the issuance of the Adjustment Shares 6. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Adjustment Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Adjustment Warrant or in such name or names as may be directed by the holder of this Adjustment Warrant; provided, however, that in the event certificates for shares of Common Stock are to be 5 issued in a name other than the name of the holder of this Adjustment Warrant, this Adjustment Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance of any Adjustment Warrant certificates or any certificates for the Adjustment Shares other than the issuance of a Adjustment Warrant Certificate to the Investor in connection with the Investor's surrender of a Adjustment Warrant Certificate upon the exercise of less than all of the Adjustment Warrants evidenced thereby, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 7. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Adjustment Warrant. 8. No Rights as Shareholder until Exercise. Subject to Section 13 of this Adjustment Warrant and the provisions of any other written agreement between the Company and the Investor, the Investor shall not be entitled to vote or receive dividends or be deemed the holder of Adjustment Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Investor, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Adjustment Warrant shall have been exercised as provided herein. However, at the time of the exercise of this Adjustment Warrant pursuant to Section 3 hereof, the Adjustment Shares so purchased hereunder shall be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Adjustment Warrant shall have been exercised. 9. Assignment and Transfer of Adjustment Warrant. This Adjustment Warrant may be assigned in whole or in part by the surrender of this Adjustment Warrant and the Assignment Form annexed hereto duly executed at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company); provided, however, that this Adjustment Warrant may not be resold or otherwise transferred except (i) in a transaction registered under the Securities Act of 1933, as amended (the "ACT"), or (ii) in a transaction pursuant to an exemption, if available, from registration under the Act and whereby, if requested by the Company, an opinion of counsel reasonably satisfactory to the Company is obtained by the holder of this Adjustment Warrant to the effect that the transaction is so exempt. 6 10. Loss, Theft, Destruction or Mutilation of Adjustment Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Adjustment Warrant or stock certificate representing the Adjustment Shares, and in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto. Upon surrender and cancellation of such Adjustment Warrant or stock certificate, if mutilated, the Company will make and deliver a new Adjustment Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Adjustment Warrant or stock certificate. 11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday. 12. Effect of Certain Events. If at any time while this Adjustment Warrant or any portion thereof is outstanding and unexpired there shall be (i) a sale or conveyance of all or substantially all of the Company's assets or (ii) a transaction (by merger or otherwise) in which more than 50% of the voting power of the Company is disposed of (collectively, a "SALE OR MERGER TRANSACTION"), the holder of this Adjustment Warrant shall have the right thereafter to purchase, by exercise of this Adjustment Warrant, the kind and amount of cash, shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Adjustment Warrant been exercised immediately prior thereto, subject to further adjustment as provided in Section 13. Notwithstanding the above, a Sale or Merger Transaction shall not be deemed to occur in the event the Company is the acquiring entity in connection with an acquisition by the Company. Nothing in this Section 12 will impair Section 9.7 of the Agreement. 13. Adjustment of Number of Adjustment Warrant Shares. -------------------------------------------------- The number of and kind of securities purchasable upon exercise of this Adjustment Warrant shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and other Issuances. If the Company shall at any time after the date hereof but prior to the expiration of this Adjustment Warrant subdivide its outstanding securities as to which purchase rights under this Adjustment Warrant exist, by split-up, spin-off, or otherwise, or combine its outstanding securities as to which purchase rights under this Adjustment Warrant exist, the number of Adjustment Shares as to which this Adjustment Warrant is exercisable as of the date of such subdivision, split-up, spin-off or combination shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. (b) Stock Dividend. If at any time after the date hereof the Company declares a dividend or other distribution on Common Stock payable in Common Stock or other securities or rights convertible into Common 7 Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration by holders of Common Stock for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon exercise or conversion thereof), then the number of shares of Common Stock for which this Adjustment Warrant may be exercised shall be increased as of the record date (or the date of such dividend distribution if no record date is set) for determining which holders of Common Stock shall be entitled to receive such dividends, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable upon conversion of all such securities convertible into Common Stock) of Common Stock as a result of such dividend. (c) Other Distributions. If at any time after the date hereof the Company distributes to holders of its Common Stock, other than as part of its dissolution, liquidation or the winding up of its affairs, any shares of its capital stock, any evidence of indebtedness or any of its assets (other than Common Stock), then the number of Adjustment Shares for which this Adjustment Warrant is exercisable shall be increased to equal: (i) the number of Adjustment Shares for which this Adjustment Warrant is exercisable immediately prior to such event, (ii) multiplied by a fraction, (A) the numerator of which shall be the Fair Market Value (as defined below) per share of Common Stock on the record date for the dividend or distribution, and (B) the denominator of which shall be the Fair Market Value price per share of Common Stock on the record date for the dividend or distribution minus the amount allocable to one share of Common Stock of the value (as jointly determined in good faith by the Board of Directors of the Company and the Adjustment Warrant holder) of any and all such evidences of indebtedness, shares of capital stock, other securities or property, so distributed. For purposes of this Adjustment Warrant, "FAIR MARKET VALUE" shall equal the 10 Trading Day average closing trading price of the Common Stock on the Principal Market for the 10 Trading Days preceding the date of determination or, if the Common Stock is not listed or admitted to trading on any Principal Market, the average of the closing bid and asked prices on the over-the-counter market as furnished by any New York Stock Exchange member firm reasonably selected from time to time by the Company for that purpose and reasonably acceptable to the Holder, or, if the Common Stock is not listed or admitted to trading on the Principal Market or traded over-the-counter and the average price cannot be determined as contemplated above, the Fair Market Value of the Common Stock shall be as reasonably determined in good faith by the Company's Board of Directors with the concurrence of the Holder. (d) Merger, etc. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into or a transfer of all or substantially all of the assets of the Company to another entity, then the Adjustment Warrant Holder shall be entitled to receive upon or after such transfer, merger or consolidation becoming effective, the number of shares or other securities or property of the Company or of the successor corporation resulting from such merger or consolidation, which would have been received by Adjustment Warrant Holder for the shares of stock subject to this Adjustment Warrant had this Adjustment Warrant been exercised just prior to such transfer, 8 merger or consolidation becoming effective or to the applicable record date thereof, as the case may be; the terms of the Adjustment Warrant automatically shall be applicable to the securities or property receivable upon the exercise of the Adjustment Warrant after consummation of such merger or consolidation. Nothing in this Section 13(d) will impair Section 9.7 of the Agreement. (e) Reclassification, etc. If at any time after the date hereof there shall be a reorganization or reclassification of the securities as to which purchase rights under this Adjustment Warrant exist into the same or a different number of securities of any other class or classes, then the Adjustment Warrant Holder shall thereafter be entitled to receive upon exercise of this Adjustment Warrant, during the period specified herein, the number of shares or other securities or property resulting from such reorganization or reclassification, which would have been received by the Adjustment Warrant Holder for the shares of stock subject to this Adjustment Warrant had this Adjustment Warrant at such time been exercised. 14. 9.99% Limitation. ----------------- (1) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Investor upon exercise pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such holder (other than by virtue of the ownership of securities or rights to acquire securities (including the Warrants) that have limitations on the Investor's right to convert, exercise or purchase similar to the limitation set forth herein (the "EXCLUDED Shares")), together with all shares of Common Stock deemed beneficially owned (not counting such affiliate's Excluded Shares) by the holder's "affiliates" (as defined Rule 144 of the Act) ("AGGREGATION PARTIES") that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934, as amended, exists, would exceed 9.99% of the total issued and outstanding shares of the Company's Common Stock (the "RESTRICTED OWNERSHIP PERCENTAGE"). Each Holder shall have the right (w) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (x) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the event of the announcement as pending or planned of a Major Transaction (as such term is defined in the Investment Agreement). (2) The Investor covenants at all times on each day (each such day being referred to as a "COVENANT DAY") as follows: During the balance of such Covenant Day and the succeeding sixty-one (61) days (the balance of such Covenant Day and the succeeding 61 days being referred to as the "COVENANT PERIOD") such Investor will not acquire shares of Common Stock pursuant to any right (including the exercise of the Adjustment Warrant) existing at the commencement of the Covenant Period to the extent the number of shares so acquired by such holder and its Aggregation Parties (ignoring all dispositions) would exceed: (x) the Restricted Ownership Percentage of the total number of shares of Common Stock outstanding at the commencement of the Covenant Period, 9 minus ----- (y) the number of shares of Common Stock owned by such holder and its Aggregation Parties at the commencement of the Covenant Period. A new and independent covenant will be deemed to be given by the holder as of each moment of each Covenant Day. No covenant will terminate, diminish or modify any other covenant. The holder agrees to comply with each such covenant. This Section 17 controls in the case of any conflict with any other provision of the Transaction Documents. The Company's obligation to issue Adjustment Shares which would exceed such limits referred to in this Section 17 shall be suspended to the extent necessary until such time, if any, as Adjustment Shares may be issued in compliance with such restrictions. 15. Compliance with Securities Laws. (a) The holder hereof acknowledges that the Adjustment Shares acquired upon the exercise of this Adjustment Warrant, if not registered (or if no exemption from registration exists), will have restrictions upon resale imposed by state and federal securities laws. Each certificate representing the Adjustment Shares issued to the Holder upon exercise (if not registered or if no exemption from registration exists) will bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, BASED ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. (b) Without limiting the Investor's right to transfer, assign or otherwise convey the Adjustment Warrant or Adjustment Shares in compliance with all applicable securities laws, the Investor of this Adjustment Warrant, by acceptance hereof, acknowledges that this Adjustment Warrant and the Adjustment Shares to be issued upon exercise hereof are being acquired solely for the Investor's own account and not as a nominee for any other party, and that the Investor will not offer, sell or otherwise dispose of this Adjustment Warrant or any Adjustment Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of applicable federal and state securities laws. Upon exercise of this Adjustment Warrant, the Investor 10 or holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Adjustment Warrant Shares of Common Stock so purchased are being acquired solely for the Investor's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) Neither this Adjustment Warrant nor any Share of Common Stock issued upon exercise of this Adjustment Warrant may be offered for sale or sold, or otherwise transferred or sold in any transaction which would constitute a sale thereof within the meaning of the Act, unless (i) such security has been registered for sale under the Act and registered or qualified under applicable state securities laws relating to the offer an sale of securities, or (ii) exemptions from the registration requirements of the Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the Act, such counsel and such opinion to be satisfactory to the Company. (d) Investor recognizes that investing in the Adjustment Warrant and the Adjustment Shares involves a high degree of risk, and Investor is in a financial position to hold the Adjustment Warrant and the Adjustment Shares indefinitely and is able to bear the economic risk and withstand a complete loss of its investment in the Adjustment Warrant and the Adjustment Warrant Shares. The Investor is a sophisticated investor and is capable of evaluating the merits and risks of investing in the Company. The Investor has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management, has been given full and complete access to information concerning the Company, and has utilized such access to its satisfaction for the purpose of obtaining information or verifying information and have had the opportunity to inspect the Company's operation. Investor has had the opportunity to ask questions of, and receive answers from, the management of the Company (and any person acting on its behalf) concerning the Adjustment Warrant and the Adjustment Shares and the agreements and transactions contemplated hereby, and to obtain any additional information as Investor may have requested in making its investment decision. The initial Investor in this Adjustment Warrant is an "accredited investor", as defined by Regulation D promulgated under the Act. 16. Miscellaneous. -------------- (a) Issue Date; Choice Of Law; Venue; Jurisdiction. The provisions of this Adjustment Warrant shall be construed and shall be given effect in all respects as if it had been issued and delivered by the Company on the date hereof. This Adjustment Warrant shall be binding upon any successors or assigns of the Company. This Adjustment Warrant will be construed and enforced in accordance with and governed by the laws of the State of New York, except for matters arising under the Act, 11 without reference to principles of conflicts of law. Each of the parties consents to the exclusive jurisdiction of the U.S. District Court sitting in the State of City of New York in the State of New York in connection with any dispute arising under this Adjustment Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdiction. Each party hereby agrees that if the other party to this Adjustment Warrant obtains a judgment against it in such a proceeding, the party which obtained such judgment may enforce same by summary judgment in the courts of any country having jurisdiction over the party against whom such judgment was obtained, and each party hereby waives any defenses available to it under local law and agrees to the enforcement of such a judgment. Each party to this Adjustment Warrant irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address in accordance with Section 18(c). Nothing herein shall affect the right of any party to serve process in any other manner permitted by law. Each party waives its right to a trial by jury. (b) Modification and Waiver. This Adjustment Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. Any amendment effected in accordance with this paragraph shall be binding upon the Investor, each future holder of this Adjustment Warrant and the Company. No waivers of, or exceptions to, any term, condition or provision of this Adjustment Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. (c) Notices. Any notice, request or other document required or permitted to be given or delivered to the Investor or future holders hereof or the Company shall be personally delivered or shall be sent by certified or registered mail, postage prepaid, to the Investor or each such holder at its address as shown on the books of the Company or to the Company at the address set forth in the Agreement. All notices under this Adjustment Warrant shall be deemed to have been given when received. A party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance with the provisions of this Section 18(c). (d) Severability. Whenever possible, each provision of this Adjustment Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Adjustment 12 Warrant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Adjustment Warrant in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Adjustment Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (e) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Adjustment Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Adjustment Warrant Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Adjustment Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Adjustment Warrant Shares on the exercise of this Adjustment Warrant. IN WITNESS WHEREOF, the Company has caused this Adjustment Warrant to be executed by its officers thereunto duly authorized. Dated: August 22, 2000 HOLLYWOOD.COM, INC. By: /s/ Mitchell Rubenstein --------------------------- Name: Mitchell Rubenstein Title: Chairman and CEO Agreed and Accepted this 22nd day of August, 2000 ELLIOTT ASSOCIATES, L.P. By: Elliott Capital Advisors, L.P., as General Partner By: Braxton Associates, Inc., as General Partner By: /s/ Paul E. Singer ----------------------------- Name: Paul E. Singer Title: General Partner 13 NOTICE OF EXERCISE ------------------ To: HOLLYWOOD.COM, INC. (1) The undersigned hereby elects to receive ________ shares of Common Stock of HOLLYWOOD.COM, INC. pursuant to the terms of the attached Adjustment Warrant in a "cashless" exercise. (2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: ------------------------------- (Name) ------------------------------- (Address) ------------------------------- (3) Please issue a new Adjustment Warrant for the unexercised portion of the attached Adjustment Warrant in the name of the undersigned or in such other name as is specified below: Other Name: ____________________ ----------------------------------- (Name) - -------------------- ----------------------------------- (Date) (Signature) ----------------------------------- (Address) 14 ASSIGNMENT FORM (To assign the foregoing Adjustment Warrant, execute this form and supply required information. Do not use this form to exercise the Adjustment Warrant.) FOR VALUE RECEIVED, the foregoing Adjustment Warrant of Hollywood.com, Inc. and all rights evidenced thereby are hereby assigned to whose address is - ----------------------------------------------- - ---------------------------------------------------------------. - --------------------------------------------------------------- Dated: ______________, Holder's Signature:_____________________________ Holder's Address:_______________________________ _______________________________ Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Adjustment Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Adjustment Warrant. 15 EX-10 5 0005.txt EXHIBIT 10.4 EXHIBIT 10.4 ------------ EXECUTION COPY THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR OTHERWISE. THIS ADJUSTMENT WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. COMMON STOCK ADJUSTMENT WARRANT No. A2 To Receive Shares of $.01 Par Value Common Stock of HOLLYWOOD.COM, INC. THIS CERTIFIES that, for value received, WESTGATE INTERNATIONAL, L.P. (the "INVESTOR") is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date hereof and on or prior to 5:00 p.m. New York City time on August 22, 2002 (the "TERMINATION DATE"), but not thereafter, to subscribe for from time to time from HOLLYWOOD.COM, INC., a Florida corporation (the "COMPANY"), a number of shares of Common Stock of the Company determined in accordance with Section 3 hereof (the "ADJUSTMENT SHARES"). The "EXERCISE PRICE" is $0. The number of shares for which the Adjustment Warrant is exercisable shall be subject to adjustment as provided herein. This Adjustment Warrant is being issued in connection with the Common Stock Investment Agreement dated as of August 22, 2000 (the "AGREEMENT") entered into between the Company and the Investor. 1. Title of Adjustment Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Adjustment Warrant and all rights hereunder are transferable, in whole or in respect of the right to receive any part of the Adjustment Shares, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Adjustment Warrant together with (a) the Assignment Form annexed hereto properly endorsed, and (b) any other documentation reasonably necessary to satisfy the Company that such transfer is in compliance with all applicable securities laws. 2. Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Adjustment Warrant will, upon exercise of the rights represented by this Adjustment Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue or otherwise specified herein). 3. Exercise of Adjustment Warrant for Adjustment Shares. (a) Definitions.. "ADJUSTMENT NUMBER" means 17,921 shares of Common Stock in each of the Adjustment Periods. Subject to Section 3(c), "ADJUSTMENT PERIOD" initially means the period starting two trading days after the day on which a registration statement covering any Registrable Securities (as defined in the Registration Rights Agreement of even date herewith) is first declared effective by the SEC and ending on and including the 30th calendar day thereafter; and subsequently shall mean each of the nine (9) succeeding 30 day periods. "EFFECTIVE REGISTRATION" shall mean that a Registration Statement (as defined in the Registration Rights Agreement) shall have been declared effective, such registration is not subject to any suspension or stop order, the prospectus for the Initial Shares, the Warrant Shares issuable upon any exercise of the Initial Warrant and for all Adjustment Shares issued or issuable for the current or previous Adjustment Periods is current and deliverable, and none of the Company or any Subsidiary is subject to any bankruptcy, insolvency or similar proceeding, and no Interfering Event (as defined in the Registration Rights Agreement) exists. "SET PRICE" means, for a particular Adjustment Period, the average of the five (5) lowest VWAPs occurring during the fifteen (15) final trading days of such Adjustment Period. "VWAP" means the volume weighted average price of the Common Stock on the Principal Market as quoted by Bloomberg for a particular trading day. (b) Adjustment Share Calculations. Subject to Sections 3(c),(d) and (e), the number of Adjustment Shares (if any) issuable in respect of a particular Adjustment Period shall be calculated immediately following the close of the Principal Market on the final trading day of such Adjustment Period, using the following formula: # of Adjustment Shares = Adjustment Number x (115% of the Share Purchase Price) - Set Price ---------------------------------------------- Set Price Promptly after performing such calculation for the Investor on the final trading day of such Adjustment Period, the Company shall deliver its written calculations to the Investor by facsimile. (c) Exercise of Adjustment Warrant. Exercise of the rights represented by this Adjustment Warrant may be made at any time or times, in whole or in part, after the termination of the applicable Adjustment Period and prior to 5:00 p.m. New York City time on the Termination Date, or such 2 earlier date on which this Adjustment Warrant may terminate as provided herein, by the surrender on any business day of this Adjustment Warrant and a Notice of Exercise in the form annexed hereto duly completed and executed, at the principal office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company); whereupon the holder of this Adjustment Warrant shall be entitled to receive a certificate for the number of Adjustment Shares for which this Adjustment Warrant has been so exercised. Certificates for Adjustment Shares shall be delivered to the holder hereof within three (3) Trading Days after the date on which this Adjustment Warrant shall have been exercised as aforesaid (each such event being a "FILL-UP CLOSING"). An exercise of this Adjustment Warrant shall be deemed for all purposes a "cashless" exercise. Notwithstanding the immediately preceding paragraph, if during an Adjustment Period, the Company delivers a Share Redemption Notice to the Investor pursuant to the Agreement, the number of Adjustment Shares due to the Investor with respect to the applicable Fill-Up Closing shall equal the number of Adjustment Shares calculated pursuant to the formula stated in Subsection (b) above multiplied by a fraction, the numerator of which is equal to the number of days elapsed from the commencement of the applicable Adjustment Period to the day on which such Share Redemption Notice is received by the Investor (including such day of receipt), and the denominator of which is equal to 30. (d) Effective Registration During Adjustment Period. (i) If at any time during an Adjustment Period there shall be a lack of Effective Registration or the Company has failed to deliver Adjustment Shares for any previous Adjustment Period in accordance with this Adjustment Warrant, the Investor may at its option either (x) waive the lack of Effective Registration or non-delivery of Adjustment Shares, in which case the Adjustment Period will continue uninterrupted with respect to the Investor in accordance with the other provisions of this Section 3, or (y) by written notice to the Company (delivered no later than 24 hours after actually receiving written notification from the Company of such lack of Effective Registration) elect to suspend such Adjustment Period with respect to itself (a "SUSPENSION NOTICE"). (ii) If the Investor elects pursuant to subsection (i) above to suspend a particular Adjustment Period and Effective Registration is subsequently re-established or such Adjustment Shares are delivered, either before or after the scheduled end of such Adjustment Period, then the Investor may, at its option, elect either (x) to treat such Adjustment Period as tolled for the duration (however long) of the lack of Effective Registration, such that the first full day of Effective Registration following delivery of the Suspension Notice shall be treated as and deemed to be the next day of that tolled Adjustment Period, or (y) to treat such Adjustment Period as having never commenced, such that the first full day of Effective Registration following delivery of the Suspension Notice shall be treated as and deemed to be the first day of the Adjustment Period interrupted by the 3 lack of Effective Registration. The Investor shall have two (2) trading days after receiving written notice from the Company of the re-establishment of Effective Registration to make such election. (iii) Nothing in this Section 3(d) shall limit the Investor's right to be eligible to receive Adjustment Shares or immediately available funds in respect of ten (10) separate Adjustment Periods. There cannot be more than one Adjustment Period at one time. (e) Inapplicability of Adjustment Period. (i) There shall be no Adjustment Shares payable in respect of, and consequently no Fill-Up Closing related to, an Adjustment Period in which, for each trading day in any single 10 consecutive trading day period in such Adjustment Period, both (A) the VWAP is greater than 120% of the Share Purchase Price and (B) the average daily trading volume of the Common Stock on the Principal Market is greater than 40,000; provided that this Section 3(e) shall only be applicable if there is Effective Registration for each day during such Adjustment Period. The existence of such circumstances during any given Adjustment Period will in no way affect the Company's obligation to deliver Adjustment Shares or, if required, immediately available funds to the Investor in subsequent Adjustment Periods. (ii) There shall be no future Adjustment Shares payable (1) after the consummation of any redemption at the Mandatory Redemption Price (as defined in the Registration Rights Agreement) or (2) if at any time after the Registration Statement is declared effective, the closing price for the Common Stock on the Principal Market equals or exceeds the Threshold Price (as defined in the Agreement) for fifteen (15) consecutive trading days. (f) Effective Registration as of Fill-up Closing. If there is Effective Registration on the date of a Fill-Up Closing, then the Company must pay (subject to Section 3(c)) the Investor in Adjustment Shares. If there is not Effective Registration on the date of a Fill-Up Closing, then the Investor shall have the option but not the obligation to receive from the Company, in lieu of the Adjustment Shares otherwise deliverable, an amount in immediately available funds equal to the product of (i) the average closing price of the Common Stock on the Principal Market from the final trading day of the applicable Adjustment Period through and including the trading day immediately prior to the date of the Fill-Up Closing and (ii) the number of Adjustment Shares the Company otherwise would be obligated to deliver to the Investor at such Fill-up Closing. (g) Remedies. If the Company fails to deliver the specified number of Adjustment Shares or amount of immediately available funds, as applicable, to the Investor within 3 trading days of the time and at the place specified in this Section 3, then the Investor may, without reducing its other rights at law or in equity, compel the Company to repurchase all or a part of its Securities (including the number of Adjustment Shares which, without regard to Effective Registration, should have been delivered by the Company) at the applicable Mandatory 4 Redemption Price (as defined in, and as specified, in the Registration Rights Agreement). (h) Adjustments. The number of Adjustment Shares shall be appropriately adjusted to reflect any stock split, stock dividend, recapitalization or similar event so that the Investor receives the same economically equivalent value of Adjustment Shares as it would in the absence of such event. (i) Miscellaneous. The Adjustment Shares shall upon delivery to the Investor be fully-paid, nonassessable, shares of Common Stock, free and clear of all liens and encumbrances and duly eligible for trading on the Nasdaq National Market System or if the Common Stock is not quoted thereon, on such exchange or market (which for purposes of this Agreement shall mean the New York Stock Exchange, the American Stock Exchange or the Nasdaq Small Cap Market) upon which the Common Stock is principally traded or quoted (in either case, the "PRINCIPAL MARKET"). 4. Non-Certificated Shares, In lieu of delivering physical certificates representing the Adjustment Shares, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Adjustment Warrant holder, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Adjustment Shares to the Adjustment Warrant holder by crediting the account of Adjustment Warrant holder's prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein. The term "TRADING DAY" means (x) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, a day on which there is trading on such stock exchange, or (y) if the Common Stock is not listed on either of such stock exchanges but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (z) if the foregoing provisions are inapplicable, a day on which quotations are reported by National Quotation Bureau Incorporated. 5. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the issuance of the Adjustment Shares 6. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Adjustment Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Adjustment Warrant or in such name or names as may be directed by the holder of this Adjustment Warrant; provided, however, that in the event certificates for shares of Common Stock are to be 5 issued in a name other than the name of the holder of this Adjustment Warrant, this Adjustment Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance of any Adjustment Warrant certificates or any certificates for the Adjustment Shares other than the issuance of a Adjustment Warrant Certificate to the Investor in connection with the Investor's surrender of a Adjustment Warrant Certificate upon the exercise of less than all of the Adjustment Warrants evidenced thereby, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 7. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Adjustment Warrant. 8. No Rights as Shareholder until Exercise. Subject to Section 13 of this Adjustment Warrant and the provisions of any other written agreement between the Company and the Investor, the Investor shall not be entitled to vote or receive dividends or be deemed the holder of Adjustment Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Investor, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Adjustment Warrant shall have been exercised as provided herein. However, at the time of the exercise of this Adjustment Warrant pursuant to Section 3 hereof, the Adjustment Shares so purchased hereunder shall be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Adjustment Warrant shall have been exercised. 9. Assignment and Transfer of Adjustment Warrant. This Adjustment Warrant may be assigned in whole or in part by the surrender of this Adjustment Warrant and the Assignment Form annexed hereto duly executed at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company); provided, however, that this Adjustment Warrant may not be resold or otherwise transferred except (i) in a transaction registered under the Securities Act of 1933, as amended (the "ACT"), or (ii) in a transaction pursuant to an exemption, if available, from registration under the Act and whereby, if requested by the Company, an opinion of counsel reasonably satisfactory to the Company is obtained by the holder of this Adjustment Warrant to the effect that the transaction is so exempt. 6 10. Loss, Theft, Destruction or Mutilation of Adjustment Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Adjustment Warrant or stock certificate representing the Adjustment Shares, and in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto. Upon surrender and cancellation of such Adjustment Warrant or stock certificate, if mutilated, the Company will make and deliver a new Adjustment Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Adjustment Warrant or stock certificate. 11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday. 12. Effect of Certain Events. If at any time while this Adjustment Warrant or any portion thereof is outstanding and unexpired there shall be (i) a sale or conveyance of all or substantially all of the Company's assets or (ii) a transaction (by merger or otherwise) in which more than 50% of the voting power of the Company is disposed of (collectively, a "SALE OR MERGER TRANSACTION"), the holder of this Adjustment Warrant shall have the right thereafter to purchase, by exercise of this Adjustment Warrant, the kind and amount of cash, shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Adjustment Warrant been exercised immediately prior thereto, subject to further adjustment as provided in Section 13. Notwithstanding the above, a Sale or Merger Transaction shall not be deemed to occur in the event the Company is the acquiring entity in connection with an acquisition by the Company. Nothing in this Section 12 will impair Section 9.7 of the Agreement. 13. Adjustment of Number of Adjustment Warrant Shares. The number of and kind of securities purchasable upon exercise of this Adjustment Warrant shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and other Issuances. If the Company shall at any time after the date hereof but prior to the expiration of this Adjustment Warrant subdivide its outstanding securities as to which purchase rights under this Adjustment Warrant exist, by split-up, spin-off, or otherwise, or combine its outstanding securities as to which purchase rights under this Adjustment Warrant exist, the number of Adjustment Shares as to which this Adjustment Warrant is exercisable as of the date of such subdivision, split-up, spin-off or combination shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. (b) Stock Dividend. If at any time after the date hereof the Company declares a dividend or other distribution on Common Stock payable in Common Stock or other securities or rights convertible into Common 7 Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration by holders of Common Stock for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon exercise or conversion thereof), then the number of shares of Common Stock for which this Adjustment Warrant may be exercised shall be increased as of the record date (or the date of such dividend distribution if no record date is set) for determining which holders of Common Stock shall be entitled to receive such dividends, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable upon conversion of all such securities convertible into Common Stock) of Common Stock as a result of such dividend. (c) Other Distributions. If at any time after the date hereof the Company distributes to holders of its Common Stock, other than as part of its dissolution, liquidation or the winding up of its affairs, any shares of its capital stock, any evidence of indebtedness or any of its assets (other than Common Stock), then the number of Adjustment Shares for which this Adjustment Warrant is exercisable shall be increased to equal: (i) the number of Adjustment Shares for which this Adjustment Warrant is exercisable immediately prior to such event, (ii) multiplied by a fraction, (A) the numerator of which shall be the Fair Market Value (as defined below) per share of Common Stock on the record date for the dividend or distribution, and (B) the denominator of which shall be the Fair Market Value price per share of Common Stock on the record date for the dividend or distribution minus the amount allocable to one share of Common Stock of the value (as jointly determined in good faith by the Board of Directors of the Company and the Adjustment Warrant holder) of any and all such evidences of indebtedness, shares of capital stock, other securities or property, so distributed. For purposes of this Adjustment Warrant, "FAIR MARKET VALUE" shall equal the 10 Trading Day average closing trading price of the Common Stock on the Principal Market for the 10 Trading Days preceding the date of determination or, if the Common Stock is not listed or admitted to trading on any Principal Market, the average of the closing bid and asked prices on the over-the-counter market as furnished by any New York Stock Exchange member firm reasonably selected from time to time by the Company for that purpose and reasonably acceptable to the Holder, or, if the Common Stock is not listed or admitted to trading on the Principal Market or traded over-the-counter and the average price cannot be determined as contemplated above, the Fair Market Value of the Common Stock shall be as reasonably determined in good faith by the Company's Board of Directors with the concurrence of the Holder. (d) Merger, etc. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into or a transfer of all or substantially all of the assets of the Company to another entity, then the Adjustment Warrant Holder shall be entitled to receive upon or after such transfer, merger or consolidation becoming effective, the number of shares or other securities or property of the Company or of the successor corporation resulting from such merger or consolidation, which would have been received by Adjustment Warrant Holder for the shares of stock subject to this Adjustment Warrant had 8 this Adjustment Warrant been exercised just prior to such transfer, merger or consolidation becoming effective or to the applicable record date thereof, as the case may be; the terms of the Adjustment Warrant automatically shall be applicable to the securities or property receivable upon the exercise of the Adjustment Warrant after consummation of such merger or consolidation. Nothing in this Section 13(d) will impair Section 9.7 of the Agreement. (e) Reclassification, etc. If at any time after the date hereof there shall be a reorganization or reclassification of the securities as to which purchase rights under this Adjustment Warrant exist into the same or a different number of securities of any other class or classes, then the Adjustment Warrant Holder shall thereafter be entitled to receive upon exercise of this Adjustment Warrant, during the period specified herein, the number of shares or other securities or property resulting from such reorganization or reclassification, which would have been received by the Adjustment Warrant Holder for the shares of stock subject to this Adjustment Warrant had this Adjustment Warrant at such time been exercised. 14. 9.99% Limitation. (1) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Investor upon exercise pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such holder (other than by virtue of the ownership of securities or rights to acquire securities (including the Warrants) that have limitations on the Investor's right to convert, exercise or purchase similar to the limitation set forth herein (the "EXCLUDED Shares")), together with all shares of Common Stock deemed beneficially owned (not counting such affiliate's Excluded Shares) by the holder's "affiliates" (as defined Rule 144 of the Act) ("AGGREGATION PARTIES") that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934, as amended, exists, would exceed 9.99% of the total issued and outstanding shares of the Company's Common Stock (the "RESTRICTED OWNERSHIP PERCENTAGE"). Each Holder shall have the right (w) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (x) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the event of the announcement as pending or planned of a Major Transaction (as such term is defined in the Investment Agreement). (2) The Investor covenants at all times on each day (each such day being referred to as a "COVENANT DAY") as follows: During the balance of such Covenant Day and the succeeding sixty-one (61) days (the balance of such Covenant Day and the succeeding 61 days being referred to as the "COVENANT PERIOD") such Investor will not acquire shares of Common Stock pursuant to any right (including the exercise of the Adjustment Warrant) existing at the commencement of the Covenant Period to the extent the number of shares so acquired by such holder and its Aggregation Parties (ignoring all dispositions) would exceed: (x) the Restricted Ownership Percentage of the total number of shares of Common Stock outstanding at the commencement of the Covenant Period, 9 minus (y) the number of shares of Common Stock owned by such holder and its Aggregation Parties at the commencement of the Covenant Period. A new and independent covenant will be deemed to be given by the holder as of each moment of each Covenant Day. No covenant will terminate, diminish or modify any other covenant. The holder agrees to comply with each such covenant. This Section 17 controls in the case of any conflict with any other provision of the Transaction Documents. The Company's obligation to issue Adjustment Shares which would exceed such limits referred to in this Section 17 shall be suspended to the extent necessary until such time, if any, as Adjustment Shares may be issued in compliance with such restrictions. 15. Compliance with Securities Laws. (a) The holder hereof acknowledges that the Adjustment Shares acquired upon the exercise of this Adjustment Warrant, if not registered (or if no exemption from registration exists), will have restrictions upon resale imposed by state and federal securities laws. Each certificate representing the Adjustment Shares issued to the Holder upon exercise (if not registered or if no exemption from registration exists) will bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, BASED ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. (b) Without limiting the Investor's right to transfer, assign or otherwise convey the Adjustment Warrant or Adjustment Shares in compliance with all applicable securities laws, the Investor of this Adjustment Warrant, by acceptance hereof, acknowledges that this Adjustment Warrant and the Adjustment Shares to be issued upon exercise hereof are being acquired solely for the Investor's own account and not as a nominee for any other party, and that the Investor will not offer, sell or otherwise dispose of this Adjustment Warrant or any Adjustment Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of applicable federal and state securities laws. Upon exercise of 10 this Adjustment Warrant, the Investor or holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Adjustment Warrant Shares of Common Stock so purchased are being acquired solely for the Investor's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (c) Neither this Adjustment Warrant nor any Share of Common Stock issued upon exercise of this Adjustment Warrant may be offered for sale or sold, or otherwise transferred or sold in any transaction which would constitute a sale thereof within the meaning of the Act, unless (i) such security has been registered for sale under the Act and registered or qualified under applicable state securities laws relating to the offer an sale of securities, or (ii) exemptions from the registration requirements of the Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the Act, such counsel and such opinion to be satisfactory to the Company. (d) Investor recognizes that investing in the Adjustment Warrant and the Adjustment Shares involves a high degree of risk, and Investor is in a financial position to hold the Adjustment Warrant and the Adjustment Shares indefinitely and is able to bear the economic risk and withstand a complete loss of its investment in the Adjustment Warrant and the Adjustment Warrant Shares. The Investor is a sophisticated investor and is capable of evaluating the merits and risks of investing in the Company. The Investor has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management, has been given full and complete access to information concerning the Company, and has utilized such access to its satisfaction for the purpose of obtaining information or verifying information and have had the opportunity to inspect the Company's operation. Investor has had the opportunity to ask questions of, and receive answers from, the management of the Company (and any person acting on its behalf) concerning the Adjustment Warrant and the Adjustment Shares and the agreements and transactions contemplated hereby, and to obtain any additional information as Investor may have requested in making its investment decision. The initial Investor in this Adjustment Warrant is an "accredited investor", as defined by Regulation D promulgated under the Act. 16. Miscellaneous. (a) Issue Date; Choice Of Law; Venue; Jurisdiction. THE PROVISIONS OF THIS ADJUSTMENT WARRANT SHALL BE CONSTRUED AND SHALL BE GIVEN EFFECT IN ALL RESPECTS AS IF IT HAD BEEN ISSUED AND DELIVERED BY THE COMPANY ON THE DATE HEREOF. THIS ADJUSTMENT WARRANT SHALL BE BINDING UPON ANY SUCCESSORS OR ASSIGNS OF THE COMPANY. THIS ADJUSTMENT WARRANT WILL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT FOR MATTERS ARISING UNDER THE ACT, 11 WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE U.S. DISTRICT COURT SITTING IN THE STATE OF CITY OF NEW YORK IN THE STATE OF NEW YORK IN CONNECTION WITH ANY DISPUTE ARISING UNDER THIS ADJUSTMENT WARRANT AND HEREBY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION BASED ON FORUM NON CONVENIENS, TO THE BRINGING OF ANY SUCH PROCEEDING IN SUCH JURISDICTION. EACH PARTY HEREBY AGREES THAT IF THE OTHER PARTY TO THIS ADJUSTMENT WARRANT OBTAINS A JUDGMENT AGAINST IT IN SUCH A PROCEEDING, THE PARTY WHICH OBTAINED SUCH JUDGMENT MAY ENFORCE SAME BY SUMMARY JUDGMENT IN THE COURTS OF ANY COUNTRY HAVING JURISDICTION OVER THE PARTY AGAINST WHOM SUCH JUDGMENT WAS OBTAINED, AND EACH PARTY HEREBY WAIVES ANY DEFENSES AVAILABLE TO IT UNDER LOCAL LAW AND AGREES TO THE ENFORCEMENT OF SUCH A JUDGMENT. EACH PARTY TO THIS ADJUSTMENT WARRANT IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS IN ACCORDANCE WITH SECTION 18(C). NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY WAIVES ITS RIGHT TO A TRIAL BY JURY. (b) Modification and Waiver. This Adjustment Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. Any amendment effected in accordance with this paragraph shall be binding upon the Investor, each future holder of this Adjustment Warrant and the Company. No waivers of, or exceptions to, any term, condition or provision of this Adjustment Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. (c) Notices. Any notice, request or other document required or permitted to be given or delivered to the Investor or future holders hereof or the Company shall be personally delivered or shall be sent by certified or registered mail, postage prepaid, to the Investor or each such holder at its address as shown on the books of the Company or to the Company at the address set forth in the Agreement. All notices under this Adjustment Warrant shall be deemed to have been given when received. A party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance with the provisions of this Section 18(c). (d) Severability. Whenever possible, each provision of this Adjustment Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Adjustment Warrant is held to be invalid, illegal or unenforceable in any respect 12 under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Adjustment Warrant in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Adjustment Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (e) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Adjustment Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Adjustment Warrant Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Adjustment Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Adjustment Warrant Shares on the exercise of this Adjustment Warrant. IN WITNESS WHEREOF, the Company has caused this Adjustment Warrant to be executed by its officers thereunto duly authorized. Dated: August 22, 2000 HOLLYWOOD.COM, INC. By: /s/ Mitchell Rubenstein --------------------------------- Name: Mitchell Rubenstein Title: Chairman and CEO Agreed and Accepted this 22nd day of August, 2000 WESTGATE INTERNATIONAL, L.P. By: Elliott International Advisors, Inc., as Attorney-in-Fact By: Paul E. Singer ------------------------------ Name: Paul E. Singer Title: President 13 NOTICE OF EXERCISE To: HOLLYWOOD.COM, INC. (1) The undersigned hereby elects to receive ________ shares of Common Stock of HOLLYWOOD.COM, INC. pursuant to the terms of the attached Adjustment Warrant in a "cashless" exercise. (2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: ------------------------------- (Name) ------------------------------- (Address) ------------------------------- (3) Please issue a new Adjustment Warrant for the unexercised portion of the attached Adjustment Warrant in the name of the undersigned or in such other name as is specified below: Other Name: ____________________ ----------------------------------- (Name) - -------------------- ----------------------------------- (Date) (Signature) ----------------------------------- (Address) ASSIGNMENT FORM (To assign the foregoing Adjustment Warrant, execute this form and supply required information. Do not use this form to exercise the Adjustment Warrant.) FOR VALUE RECEIVED, the foregoing Adjustment Warrant of Hollywood.com, Inc. and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is - ---------------------------------------------------------------. - --------------------------------------------------------------- Dated: ______________, Holder's Signature: _____________________________ Holder's Address: _____________________________ ----------------------------- Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Adjustment Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Adjustment Warrant. EX-10 6 0006.txt EXHIBIT 10.5 EXHIBIT 10.5 ------------ EXECUTION COPY THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR OTHERWISE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. COMMON STOCK PURCHASE WARRANT No. W1 To Purchase Shares of $.01 Par Value Common Stock of HOLLYWOOD.COM, INC. THIS CERTIFIES that, for value received, ELLIOTT ASSOCIATES, L.P. (the "INVESTOR") is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date hereof and on or prior to 5:00 p.m. New York City Time on August 22, 2003 (the "TERMINATION DATE"), but not thereafter, to subscribe for and purchase from HOLLYWOOD.COM, INC., a Florida corporation (the "COMPANY"), 30,000 shares of Common Stock of the Company (the "WARRANT SHARES"). The "EXERCISE PRICE" is $10.00. The Exercise Price and the number of shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. This Warrant is being issued in connection with the Common Stock Investment Agreement (the "INVESTMENT AGREEMENT") and the Registration Rights Agreement, each dated August 22, 2000 and entered into between the Company and the Investor. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Investment Agreement. 1. Title of Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable, in whole or in respect of the right to purchase any part of the 30,000 Warrant Shares, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant together with (a) the Assignment Form annexed hereto properly endorsed, and (b) any other documentation reasonably necessary to satisfy the Company that such transfer is in compliance with all applicable securities laws. 2. Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant and payment of the Exercise Price as set forth herein will be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue or otherwise specified herein). 3. Exercise of Warrant. (a) Exercise of the purchase rights represented by this Warrant may be made at any time or times, in whole or in part before the close of business on the Termination Date, or such earlier date on which this Warrant may terminate as provided in paragraph 11 below, by the surrender on any business day of this Warrant and the Notice of Exercise annexed hereto duly completed and executed, at the principal office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company), together with delivery to the Company by such holder of all certifications or documentation reasonably necessary to establish, to the satisfaction of the Company, that any such exercise has been undertaken in compliance with all applicable federal and state securities laws, and upon payment of the full Exercise Price of the shares thereby purchased; whereupon the holder of this Warrant shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. Certificates for shares purchased hereunder shall be delivered to the holder hereof within three (3) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. Payment of the Exercise Price of the shares shall be by certified check or cashier's check or by wire transfer (of same day funds) to an account designated by the Company in an amount equal to the Exercise Price multiplied by the number of shares being purchased. (b) In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised and/or surrendered, and the Company, at its expense, shall within three (3) Trading Days issue and deliver to or upon the order of the Warrant holder a new Warrant of like tenor in the name of Warrant holder or as Warrant holder (upon payment by Warrant holder of any applicable transfer taxes) may request, reflecting such adjusted Warrant Shares. All exercises will be deemed to occur as of the date of the Notice of Exercise, and certificates for shares of Common Stock purchased hereunder to the holder hereof within three (3) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. The Warrant holder may withdraw its Notice of Exercise under Section 3(a) or 3(b) at any time thereafter if the Company fails to timely deliver the applicable certificates to the Warrant holder as provided in this Agreement. (c) In lieu of delivering physical certificates representing the Common Stock issuable upon exercise, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Warrant Holder, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon exercise to the Warrant Holder by crediting the account of Warrant Holder's prime broker with DTC through its Deposit Withdrawal Agent 2 Commission ("DWAC") system. The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein. The term "TRADING DAY" means (x) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, a day on which there is trading on such stock exchange, or (y) if the Common Stock is not listed on either of such stock exchanges but sale prices of the Common Stock are reported on Nasdaq National Market or another automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (z) if the foregoing provisions are inapplicable, a day on which quotations are reported by National Quotation Bureau Incorporated. (d) If, on the six (6) month anniversary of the date a registration statement covering the Warrant Shares was declared effective by the Securities and Exchange Commission, the Investors continue to beneficially own at least 75% of the aggregate number of "Initial Shares" and Adjustment Shares purchased under the Investment Agreement, net of any short position by the Investors with respect to the Common Stock, then the Exercise Price automatically and permanently shall be reduced to $8.84, subject to continuing adjustment as provided in this Warrant. To cause the Exercise Price to be reduced in accordance with the previous sentence, the Investors shall send the Company written notice within 10 Trading Days after such 6 month anniversary, certifying that the condition in the previous sentence has been satisfied. 4. Optional Redemption of Warrants. At any time after the Effective Date, if the closing bid price for the Common Stock on the Principal Market exceeds 200% of the Exercise Price for a period of ten (10) consecutive Trading Days, the Company may elect, upon forty (40) trading days' prior written notice to all but not fewer than all the Warrant Holders (the "WARRANT REDEMPTION NOTICE"), to force the redemption of all but not less than all the Warrants at the redemption price of $.01 per underlying Warrant Share; provided there shall be no such redemption on the fortieth (40th) trading day after the Warrant Holders receive the Warrant Redemption Notice (the "WARRANT REDEMPTION DATE") unless on each of the forty (40) trading days prior to the Warrant Redemption Date there shall have been Effective Registration. Nothing shall prohibit the Warrant holders from exercising the Warrants after receiving the Warrant Redemption Notice but before the Warrant Redemption Date. 5. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. 6. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this 3 Warrant; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance of any Warrant certificates or any certificates for the Warrant Shares other than the issuance of a Warrant Certificate to the Investor in connection with the Investor's surrender of a Warrant Certificate upon the exercise of less than all of the Warrants evidenced thereby, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 7. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. 8. No Rights as Shareholder until Exercise. Subject to Section 13 of this Warrant and the provisions of any other written agreement between the Company and the Investor, the Investor shall not be entitled to vote or receive dividends or be deemed the holder of Warrant Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Investor, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised as provided herein. However, at the time of the exercise of this Warrant pursuant to Section 3 hereof, the Warrant Shares so purchased hereunder shall be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been exercised. 9. Assignment and Transfer of Warrant. This Warrant may be assigned in whole or in part by the surrender of this Warrant and the Assignment Form annexed hereto duly executed at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company); provided, however, that this Warrant may not be resold or otherwise transferred except (i) in a transaction registered under the Securities Act of 1933, as amended (the "ACT"), or (ii) in a transaction pursuant to an exemption, if available, from registration under the Act and whereby, if requested by the Company, an opinion of counsel reasonably satisfactory to the Company is obtained by the holder of this Warrant to the effect that the transaction is so exempt. 4 10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock certificate representing the Warrant Shares, and in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate. 11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday. 12. Effect of Certain Events. If at any time while this Warrant or any portion thereof is outstanding and unexpired there shall be (i) a sale or conveyance of all or substantially all of the Company's assets or (ii) a transaction (by merger or otherwise) in which more than 50% of the voting power of the Company is disposed of (collectively, a "SALE OR MERGER TRANSACTION"), in which the consideration to be received by the Company or its shareholders consists solely of cash, and in case the Company shall at any time effect a Sale or Merger Transaction in which the consideration to be received by the Company or its shareholders consists in part of consideration other than cash, the holder of this Warrant shall have the right thereafter to purchase, by exercise of this Warrant and payment of the aggregate Exercise Price in effect immediately prior to such action, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Warrant been exercised immediately prior thereto, subject to further adjustment as provided in Section 13. Notwithstanding the above, a Sale or Merger Transaction shall not be deemed to occur in the event the Company is the acquiring entity in connection with an acquisition by the Company. 13. Adjustments of Exercise Price and Number of Warrant Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and other Issuances. If the Company shall at any time after the date hereof but prior to the expiration of this Warrant subdivide its outstanding securities as to which purchase rights under this Warrant exist, by split-up, spin-off, or otherwise, or combine its outstanding securities as to which purchase rights under this Warrant exist, the number of Warrant Shares as to which this Warrant is exercisable as of the date of such subdivision, split-up, spin-off or combination shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. Appropriate proportional adjustments (decrease in the case of subdivision, increase in the case of combination) shall also be made to the Exercise Price payable per share, so that the aggregate 5 Exercise Price payable for the total number of Warrant Shares purchasable under this Warrant as of such date shall remain the same as it would have been before such subdivision or combination. (b) Stock Dividend. If at any time after the date hereof the Company declares a dividend or other distribution on Common Stock payable in Common Stock or other securities or rights convertible into Common Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration by holders of Common Stock for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon exercise or conversion thereof), then the number of shares of Common Stock for which this Warrant may be exercised shall be increased as of the record date (or the date of such dividend distribution if no record date is set) for determining which holders of Common Stock shall be entitled to receive such dividends, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable upon conversion of all such securities convertible into Common Stock) of Common Stock as a result of such dividend, and the Exercise Price shall be proportionately reduced so that the aggregate Exercise Price for all the Warrant Shares issuable hereunder immediately after the record date (or on the date of such distribution, if applicable), for such dividend shall equal the aggregate Exercise Price so payable immediately before such record date (or on the date of such distribution, if applicable). (c) Other Distributions. If at any time after the date hereof the Company distributes to holders of its Common Stock, other than as part of its dissolution, liquidation or the winding up of its affairs, any shares of its capital stock, any evidence of indebtedness or any of its assets (other than Common Stock), then the number of Warrant Shares for which this Warrant is exercisable shall be increased to equal: (i) the number of Warrant Shares for which this Warrant is exercisable immediately prior to such event, (ii) multiplied by a fraction, (A) the numerator of which shall be the Fair Market Value (as defined below) per share of Common Stock on the record date for the dividend or distribution, and (B) the denominator of which shall be the Fair Market Value per share of Common Stock on the record date for the dividend or distribution minus the amount allocable to one share of Common Stock of the value (as jointly determined in good faith by the Board of Directors of the Company and the Warrant Holder) of any and all such evidences of indebtedness, shares of capital stock, other securities or property, so distributed. For purposes of this Warrant, "FAIR MARKET VALUE" shall equal the 10 Trading Day average closing trading price of the Common Stock on the Principal Market for the 10 Trading Days preceding the date of determination or, if the Common Stock is not listed or admitted to trading on any Principal Market, the average of the closing bid and asked prices on the over-the-counter market as furnished by any New York Stock Exchange member firm reasonably selected from time to time by the Company for that purpose and reasonably acceptable to the Holder, or, if the Common Stock is not listed or admitted to trading on the Principal Market or traded over-the-counter and the average price cannot be determined as contemplated above, the Fair Market Value of the Common Stock shall be as reasonably determined in good faith by the Company's Board of Directors with the concurrence of the Holder. The 6 Exercise Price shall be reduced to equal: (i) the Exercise Price in effect immediately before the occurrence of any event (ii) multiplied by a fraction, (A) the numerator of which is the number of Warrant Shares for which this Warrant is exercisable immediately before the adjustment, and (B) the denominator of which is the number of Warrant Shares for which this Warrant is exercisable immediately after the adjustment. (d) Merger, etc. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into or a transfer of all or substantially all of the assets of the Company to another entity, then the Warrant Holder shall be entitled to receive upon or after such transfer, merger or consolidation becoming effective, and upon payment of the Exercise Price then in effect, the number of shares or other securities or property of the Company or of the successor corporation resulting from such merger or consolidation, which would have been received by Warrant Holder for the shares of stock subject to this Warrant had this Warrant been exercised just prior to such transfer, merger or consolidation becoming effective or to the applicable record date thereof, as the case may be; the terms of this Warrant automatically shall be applicable to the securities or property receivable upon the exercise of this Warrant after consummation of such merger or consolidation. (e) Reclassification, etc. If at any time after the date hereof there shall be a reorganization or reclassification of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, then the Warrant Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares or other securities or property resulting from such reorganization or reclassification, which would have been received by the Warrant Holder for the shares of stock subject to this Warrant had this Warrant at such time been exercised. 14. Voluntary Adjustment by the Company. The Company may at its option, at any time during the term of this Warrant, reduce but not increase the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 15. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, the Company shall promptly mail to the holder of this Warrant a notice setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares after such adjustment and setting forth a brief statement of the facts requiring such adjustment. 16. Authorized Shares. The Company covenants that during the period the Warrant is outstanding and exercisable, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates 7 to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Nasdaq National Market or any domestic securities exchange upon which the Common Stock may be listed. 17. 9.99% Limitation. (1) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Investor upon exercise pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such holder (other than by virtue of the ownership of securities or rights to acquire securities (including the Warrant) that have limitations on the Investor's right to convert, exercise or purchase similar to the limitation set forth herein (the "EXCLUDED Shares")), together with all shares of Common Stock deemed beneficially owned (not counting such affiliate's Excluded Shares) by the holder's "affiliates" (as defined Rule 144 of the Act) ("AGGREGATION PARTIES") that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934, as amended, exists, would exceed 9.99% of the total issued and outstanding shares of the Company's Common Stock (the "RESTRICTED OWNERSHIP PERCENTAGE"). Each Holder shall have the right (w) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (x) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the event of the announcement as pending or planned of a Major Transaction (as such term is defined in the Investment Agreement). (2) The Investor covenants at all times on each day (each such day being referred to as a "COVENANT DAY") as follows: During the balance of such Covenant Day and the succeeding sixty-one (61) days (the balance of such Covenant Day and the succeeding 61 days being referred to as the "COVENANT PERIOD") such Investor will not acquire shares of Common Stock pursuant to any right (including the exercise of the Warrant) existing at the commencement of the Covenant Period to the extent the number of shares so acquired by such holder and its Aggregation Parties (ignoring all dispositions) would exceed: (x) the Restricted Ownership Percentage of the total number of shares of Common Stock outstanding at the commencement of the Covenant Period, minus (y) the number of shares of Common Stock owned by such holder and its Aggregation Parties at the commencement of the Covenant Period. A new and independent covenant will be deemed to be given by the holder as of each moment of each Covenant Day. No covenant will terminate, diminish or modify any other 8 covenant. The holder agrees to comply with each such covenant. This Section 17 controls in the case of any conflict with any other provision of the Transaction Documents. The Company's obligation to issue Warrant Shares which would exceed such limits referred to in this Section 17 shall be suspended to the extent necessary until such time, if any, as Warrant Shares may be issued in compliance with such restrictions. 18. Compliance with Securities Laws. (a) The holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered (or if no exemption from registration exists), will have restrictions upon resale imposed by state and federal securities laws. Each certificate representing the Warrant Shares issued to the Holder upon exercise (if not registered or if no exemption from registration exists) will bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, BASED ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. (b) Without limiting the Investor's right to transfer, assign or otherwise convey the Warrant or Warrant Shares in compliance with all applicable securities laws, the Investor of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are being acquired solely for the Investor's own account and not as a nominee for any other party, and that the Investor will not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of applicable federal and state securities laws. Upon exercise of this Warrant, the Investor shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, appropriate investment representations and warranties as those delineated in this Section 18, including without limitation, that the Warrant Shares of Common Stock so purchased are being acquired solely for the Investor's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. 9 (c) Neither this Warrant nor any Share of Common Stock issued upon exercise of this Warrant may be offered for sale or sold, or otherwise transferred or sold in any transaction which would constitute a sale thereof within the meaning of the Act, unless (i) such security has been registered for sale under the Act and registered or qualified under applicable state securities laws relating to the offer an sale of securities, or (ii) exemptions from the registration requirements of the Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the Act, such counsel and such opinion to be satisfactory to the Company. (d) Investor recognizes that investing in the Warrant and the Warrant Shares involves a high degree of risk, and Investor is in a financial position to hold the Warrant and the Warrant Shares indefinitely and is able to bear the economic risk and withstand a complete loss of its investment in the Warrant and the Warrant Shares. The Investor is a sophisticated investor and is capable of evaluating the merits and risks of investing in the Company. The Investor has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management, has been given full and complete access to information concerning the Company, and has utilized such access to its satisfaction for the purpose of obtaining information or verifying information and have had the opportunity to inspect the Company's operation. Investor has had the opportunity to ask questions of, and receive answers from, the management of the Company (and any person acting on its behalf) concerning the Warrant and the Warrant Shares and the agreements and transactions contemplated hereby, and to obtain any additional information as Investor may have requested in making its investment decision. The initial Investor in this Warrant is an "accredited investor", as defined by Regulation D promulgated under the Act. 19. Miscellaneous. (a) Issue Date; Choice Of Law; Venue; Jurisdiction. THE PROVISIONS OF THIS WARRANT SHALL BE CONSTRUED AND SHALL BE GIVEN EFFECT IN ALL RESPECTS AS IF IT HAD BEEN ISSUED AND DELIVERED BY THE COMPANY ON THE DATE HEREOF. THIS WARRANT SHALL BE BINDING UPON ANY SUCCESSORS OR ASSIGNS OF THE COMPANY. THIS WARRANT WILL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT FOR MATTERS ARISING UNDER THE ACT, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE U.S. DISTRICT COURT SITTING IN THE STATE OF CITY OF NEW YORK IN THE STATE OF NEW YORK IN CONNECTION WITH ANY DISPUTE ARISING UNDER THIS WARRANT AND HEREBY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION BASED ON FORUM NON CONVENIENS, TO THE BRINGING OF ANY SUCH PROCEEDING IN SUCH JURISDICTION. EACH PARTY 10 HEREBY AGREES THAT IF THE OTHER PARTY TO THIS WARRANT OBTAINS A JUDGMENT AGAINST IT IN SUCH A PROCEEDING, THE PARTY WHICH OBTAINED SUCH JUDGMENT MAY ENFORCE SAME BY SUMMARY JUDGMENT IN THE COURTS OF ANY COUNTRY HAVING JURISDICTION OVER THE PARTY AGAINST WHOM SUCH JUDGMENT WAS OBTAINED, AND EACH PARTY HEREBY WAIVES ANY DEFENSES AVAILABLE TO IT UNDER LOCAL LAW AND AGREES TO THE ENFORCEMENT OF SUCH A JUDGMENT. EACH PARTY TO THIS WARRANT IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS IN ACCORDANCE WITH THIS SECTION 19(C). NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY WAIVES ITS RIGHT TO A TRIAL BY JURY. (b) Modification and Waiver. This Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. Any amendment effected in accordance with this paragraph shall be binding upon the Investor, each future holder of this Warrant and the Company. No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. (c) Notices. Any notice, request or other document required or permitted to be given or delivered to the Investor or future holders hereof or the Company shall be personally delivered or shall be sent by certified or registered mail, postage prepaid, to the Investor or each such holder at its address as shown on the books of the Company or to the Company at the address set forth in the Investment Agreement. All notices under this Warrant shall be deemed to have been given when received. A party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance with the provisions of this Section 19(c). (d) Severability. Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Warrant in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 11 (e) No Impairment. The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant. 12 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: August 22, 2000 HOLLYWOOD.COM, INC. By: /s/ Mitchell Rubenstein --------------------------------- Name: Mitchell Rubenstein Title: Chairman and CEO Agreed and Accepted this 22nd day of August, 2000 ELLIOTT ASSOCIATES, L.P. By: Elliott Capital Advisors, L.P., as General Partner By: Braxton Associates, Inc., as General Partner By: /s/ Paul E. Singer -------------------------------- Name: Paul E. Singer Title: General Partner 13 NOTICE OF EXERCISE To: HOLLYWOOD.COM, INC. (1) The undersigned hereby elects to purchase ________ shares of Common Stock of HOLLYWOOD.COM, INC. pursuant to the terms of the attached Warrant, and tenders herewith payment of the Exercise Price in full, together with all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: ------------------------------- (Name) ------------------------------- (Address) ------------------------------- (3) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below: Other Name: ____________________ ----------------------------------- (Name) - -------------------- ----------------------------------- (Date) (Signature) ----------------------------------- (Address) ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to exercise the warrant.) FOR VALUE RECEIVED, the foregoing Warrant of Hollywood.com, Inc. and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is - ---------------------------------------------------------------. - --------------------------------------------------------------- Dated: ______________, Holder's Signature: _____________________________ Holder's Address: _____________________________ ----------------------------- Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-10 7 0007.txt EXHIBIT 10.6 EXHIBIT 10.6 ------------ EXECUTION COPY THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR OTHERWISE. THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. COMMON STOCK PURCHASE WARRANT No. W2 To Purchase Shares of $.01 Par Value Common Stock of HOLLYWOOD.COM, INC. THIS CERTIFIES that, for value received, WESTGATE INTERNATIONAL, L.P. (the "INVESTOR") is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after the date hereof and on or prior to 5:00 p.m. New York City Time on August 22, 2003 (the "TERMINATION DATE"), but not thereafter, to subscribe for and purchase from HOLLYWOOD.COM, INC., a Florida corporation (the "COMPANY"), 30,000 shares of Common Stock of the Company (the "WARRANT SHARES"). The "EXERCISE PRICE" is $10.00. The Exercise Price and the number of shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. This Warrant is being issued in connection with the Common Stock Investment Agreement (the "INVESTMENT AGREEMENT") and the Registration Rights Agreement, each dated August 22, 2000 and entered into between the Company and the Investor. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Investment Agreement. 1. Title of Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable, in whole or in respect of the right to purchase any part of the 30,000 Warrant Shares, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant together with (a) the Assignment Form annexed hereto properly endorsed, and (b) any other documentation reasonably necessary to satisfy the Company that such transfer is in compliance with all applicable securities laws. 2. Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant and payment of the Exercise Price as set forth herein will be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue or otherwise specified herein). 3. Exercise of Warrant. (a) Exercise of the purchase rights represented by this Warrant may be made at any time or times, in whole or in part before the close of business on the Termination Date, or such earlier date on which this Warrant may terminate as provided in paragraph 11 below, by the surrender on any business day of this Warrant and the Notice of Exercise annexed hereto duly completed and executed, at the principal office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company), together with delivery to the Company by such holder of all certifications or documentation reasonably necessary to establish, to the satisfaction of the Company, that any such exercise has been undertaken in compliance with all applicable federal and state securities laws, and upon payment of the full Exercise Price of the shares thereby purchased; whereupon the holder of this Warrant shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. Certificates for shares purchased hereunder shall be delivered to the holder hereof within three (3) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. Payment of the Exercise Price of the shares shall be by certified check or cashier's check or by wire transfer (of same day funds) to an account designated by the Company in an amount equal to the Exercise Price multiplied by the number of shares being purchased. (b) In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised and/or surrendered, and the Company, at its expense, shall within three (3) Trading Days issue and deliver to or upon the order of the Warrant holder a new Warrant of like tenor in the name of Warrant holder or as Warrant holder (upon payment by Warrant holder of any applicable transfer taxes) may request, reflecting such adjusted Warrant Shares. All exercises will be deemed to occur as of the date of the Notice of Exercise, and certificates for shares of Common Stock purchased hereunder to the holder hereof within three (3) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. The Warrant holder may withdraw its Notice of Exercise under Section 3(a) or 3(b) at any time thereafter if the Company fails to timely deliver the applicable certificates to the Warrant holder as provided in this Agreement. (c) In lieu of delivering physical certificates representing the Common Stock issuable upon exercise, provided the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Warrant Holder, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon exercise to the Warrant Holder by crediting the account of Warrant Holder's prime broker with DTC through its Deposit Withdrawal Agent 2 Commission ("DWAC") system. The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein. The term "TRADING DAY" means (x) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, a day on which there is trading on such stock exchange, or (y) if the Common Stock is not listed on either of such stock exchanges but sale prices of the Common Stock are reported on Nasdaq National Market or another automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (z) if the foregoing provisions are inapplicable, a day on which quotations are reported by National Quotation Bureau Incorporated. (d) If, on the six (6) month anniversary of the date a registration statement covering the Warrant Shares was declared effective by the Securities and Exchange Commission, the Investors continue to beneficially own at least 75% of the aggregate number of "Initial Shares" and Adjustment Shares purchased under the Investment Agreement, net of any short position by the Investors with respect to the Common Stock, then the Exercise Price automatically and permanently shall be reduced to $8.84, subject to continuing adjustment as provided in this Warrant. To cause the Exercise Price to be reduced in accordance with the previous sentence, the Investors shall send the Company written notice within 10 Trading Days after such 6 month anniversary, certifying that the condition in the previous sentence has been satisfied. 4. Optional Redemption of Warrants. At any time after the Effective Date, if the closing bid price for the Common Stock on the Principal Market exceeds 200% of the Exercise Price for a period of ten (10) consecutive Trading Days, the Company may elect, upon forty (40) trading days' prior written notice to all but not fewer than all the Warrant Holders (the "WARRANT REDEMPTION NOTICE"), to force the redemption of all but not less than all the Warrants at the redemption price of $.01 per underlying Warrant Share; provided there shall be no such redemption on the fortieth (40th) trading day after the Warrant Holders receive the Warrant Redemption Notice (the "WARRANT REDEMPTION DATE") unless on each of the forty (40) trading days prior to the Warrant Redemption Date there shall have been Effective Registration. Nothing shall prohibit the Warrant holders from exercising the Warrants after receiving the Warrant Redemption Notice but before the Warrant Redemption Date. 5. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. 6. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant 3 or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance of any Warrant certificates or any certificates for the Warrant Shares other than the issuance of a Warrant Certificate to the Investor in connection with the Investor's surrender of a Warrant Certificate upon the exercise of less than all of the Warrants evidenced thereby, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 7. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. 8. No Rights as Shareholder until Exercise. Subject to Section 13 of this Warrant and the provisions of any other written agreement between the Company and the Investor, the Investor shall not be entitled to vote or receive dividends or be deemed the holder of Warrant Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Investor, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised as provided herein. However, at the time of the exercise of this Warrant pursuant to Section 3 hereof, the Warrant Shares so purchased hereunder shall be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been exercised. 9. Assignment and Transfer of Warrant. This Warrant may be assigned in whole or in part by the surrender of this Warrant and the Assignment Form annexed hereto duly executed at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company); provided, however, that this Warrant may not be resold or otherwise transferred except (i) in a transaction registered under the Securities Act of 1933, as amended (the "ACT"), or (ii) in a transaction pursuant to an exemption, if available, from registration under the Act and whereby, if requested by the Company, an opinion of counsel reasonably satisfactory to the Company is obtained by the holder of this Warrant to the effect that the transaction is so exempt. 4 10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock certificate representing the Warrant Shares, and in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate. 11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday. 12. Effect of Certain Events. If at any time while this Warrant or any portion thereof is outstanding and unexpired there shall be (i) a sale or conveyance of all or substantially all of the Company's assets or (ii) a transaction (by merger or otherwise) in which more than 50% of the voting power of the Company is disposed of (collectively, a "SALE OR MERGER TRANSACTION"), in which the consideration to be received by the Company or its shareholders consists solely of cash, and in case the Company shall at any time effect a Sale or Merger Transaction in which the consideration to be received by the Company or its shareholders consists in part of consideration other than cash, the holder of this Warrant shall have the right thereafter to purchase, by exercise of this Warrant and payment of the aggregate Exercise Price in effect immediately prior to such action, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Warrant been exercised immediately prior thereto, subject to further adjustment as provided in Section 13. Notwithstanding the above, a Sale or Merger Transaction shall not be deemed to occur in the event the Company is the acquiring entity in connection with an acquisition by the Company. 13. Adjustments of Exercise Price and Number of Warrant Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and other Issuances. If the Company shall at any time after the date hereof but prior to the expiration of this Warrant subdivide its outstanding securities as to which purchase rights under this Warrant exist, by split-up, spin-off, or otherwise, or combine its outstanding securities as to which purchase rights under this Warrant exist, the number of Warrant Shares as to which this Warrant is exercisable as of the date of such subdivision, split-up, spin-off or combination shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. Appropriate proportional adjustments (decrease in the case of subdivision, increase in the case of combination) shall also be made to the Exercise Price payable per share, so that the aggregate 5 Exercise Price payable for the total number of Warrant Shares purchasable under this Warrant as of such date shall remain the same as it would have been before such subdivision or combination. (b) Stock Dividend. If at any time after the date hereof the Company declares a dividend or other distribution on Common Stock payable in Common Stock or other securities or rights convertible into Common Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration by holders of Common Stock for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon exercise or conversion thereof), then the number of shares of Common Stock for which this Warrant may be exercised shall be increased as of the record date (or the date of such dividend distribution if no record date is set) for determining which holders of Common Stock shall be entitled to receive such dividends, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable upon conversion of all such securities convertible into Common Stock) of Common Stock as a result of such dividend, and the Exercise Price shall be proportionately reduced so that the aggregate Exercise Price for all the Warrant Shares issuable hereunder immediately after the record date (or on the date of such distribution, if applicable), for such dividend shall equal the aggregate Exercise Price so payable immediately before such record date (or on the date of such distribution, if applicable). (c) Other Distributions. If at any time after the date hereof the Company distributes to holders of its Common Stock, other than as part of its dissolution, liquidation or the winding up of its affairs, any shares of its capital stock, any evidence of indebtedness or any of its assets (other than Common Stock), then the number of Warrant Shares for which this Warrant is exercisable shall be increased to equal: (i) the number of Warrant Shares for which this Warrant is exercisable immediately prior to such event, (ii) multiplied by a fraction, (A) the numerator of which shall be the Fair Market Value (as defined below) per share of Common Stock on the record date for the dividend or distribution, and (B) the denominator of which shall be the Fair Market Value per share of Common Stock on the record date for the dividend or distribution minus the amount allocable to one share of Common Stock of the value (as jointly determined in good faith by the Board of Directors of the Company and the Warrant Holder) of any and all such evidences of indebtedness, shares of capital stock, other securities or property, so distributed. For purposes of this Warrant, "FAIR MARKET VALUE" shall equal the 10 Trading Day average closing trading price of the Common Stock on the Principal Market for the 10 Trading Days preceding the date of determination or, if the Common Stock is not listed or admitted to trading on any Principal Market, the average of the closing bid and asked prices on the over-the-counter market as furnished by any New York Stock Exchange member firm reasonably selected from time to time by the Company for that purpose and reasonably acceptable to the Holder, or, if the Common Stock is not listed or admitted to trading on the Principal Market or traded over-the-counter and the average price cannot be determined as contemplated above, the Fair Market Value of the Common Stock shall be as reasonably determined in good faith by the Company's Board of Directors with the concurrence of the Holder. The 6 Exercise Price shall be reduced to equal: (i) the Exercise Price in effect immediately before the occurrence of any event (ii) multiplied by a fraction, (A) the numerator of which is the number of Warrant Shares for which this Warrant is exercisable immediately before the adjustment, and (B) the denominator of which is the number of Warrant Shares for which this Warrant is exercisable immediately after the adjustment. (d) Merger, etc. If at any time after the date hereof there shall be a merger or consolidation of the Company with or into or a transfer of all or substantially all of the assets of the Company to another entity, then the Warrant Holder shall be entitled to receive upon or after such transfer, merger or consolidation becoming effective, and upon payment of the Exercise Price then in effect, the number of shares or other securities or property of the Company or of the successor corporation resulting from such merger or consolidation, which would have been received by Warrant Holder for the shares of stock subject to this Warrant had this Warrant been exercised just prior to such transfer, merger or consolidation becoming effective or to the applicable record date thereof, as the case may be; the terms of this Warrant automatically shall be applicable to the securities or property receivable upon the exercise of this Warrant after consummation of such merger or consolidation. (e) Reclassification, etc. If at any time after the date hereof there shall be a reorganization or reclassification of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, then the Warrant Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares or other securities or property resulting from such reorganization or reclassification, which would have been received by the Warrant Holder for the shares of stock subject to this Warrant had this Warrant at such time been exercised. 14. Voluntary Adjustment by the Company. The Company may at its option, at any time during the term of this Warrant, reduce but not increase the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 15. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, the Company shall promptly mail to the holder of this Warrant a notice setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares after such adjustment and setting forth a brief statement of the facts requiring such adjustment. 16. Authorized Shares. The Company covenants that during the period the Warrant is outstanding and exercisable, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates 7 to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Nasdaq National Market or any domestic securities exchange upon which the Common Stock may be listed. 17. 9.99% Limitation. (1) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Investor upon exercise pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such holder (other than by virtue of the ownership of securities or rights to acquire securities (including the Warrant) that have limitations on the Investor's right to convert, exercise or purchase similar to the limitation set forth herein (the "EXCLUDED Shares")), together with all shares of Common Stock deemed beneficially owned (not counting such affiliate's Excluded Shares) by the holder's "affiliates" (as defined Rule 144 of the Act) ("AGGREGATION PARTIES") that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934, as amended, exists, would exceed 9.99% of the total issued and outstanding shares of the Company's Common Stock (the "RESTRICTED OWNERSHIP PERCENTAGE"). Each Holder shall have the right (w) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (x) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the event of the announcement as pending or planned of a Major Transaction (as such term is defined in the Investment Agreement). (2) The Investor covenants at all times on each day (each such day being referred to as a "COVENANT DAY") as follows: During the balance of such Covenant Day and the succeeding sixty-one (61) days (the balance of such Covenant Day and the succeeding 61 days being referred to as the "COVENANT PERIOD") such Investor will not acquire shares of Common Stock pursuant to any right (including the exercise of the Warrant) existing at the commencement of the Covenant Period to the extent the number of shares so acquired by such holder and its Aggregation Parties (ignoring all dispositions) would exceed: (x) the Restricted Ownership Percentage of the total number of shares of Common Stock outstanding at the commencement of the Covenant Period, minus (y) the number of shares of Common Stock owned by such holder and its Aggregation Parties at the commencement of the Covenant Period. A new and independent covenant will be deemed to be given by the holder as of each moment of each Covenant Day. No covenant will terminate, diminish or modify any other covenant. The holder agrees to comply with each such covenant. 8 This Section 17 controls in the case of any conflict with any other provision of the Transaction Documents. The Company's obligation to issue Warrant Shares which would exceed such limits referred to in this Section 17 shall be suspended to the extent necessary until such time, if any, as Warrant Shares may be issued in compliance with such restrictions. 18. Compliance with Securities Laws. (a) The holder hereof acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered (or if no exemption from registration exists), will have restrictions upon resale imposed by state and federal securities laws. Each certificate representing the Warrant Shares issued to the Holder upon exercise (if not registered or if no exemption from registration exists) will bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, BASED ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. (b) Without limiting the Investor's right to transfer, assign or otherwise convey the Warrant or Warrant Shares in compliance with all applicable securities laws, the Investor of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are being acquired solely for the Investor's own account and not as a nominee for any other party, and that the Investor will not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of applicable federal and state securities laws. Upon exercise of this Warrant, the Investor shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, appropriate investment representations and warranties as those delineated in this Section 18, including without limitation, that the Warrant Shares of Common Stock so purchased are being acquired solely for the Investor's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. 9 (c) Neither this Warrant nor any Share of Common Stock issued upon exercise of this Warrant may be offered for sale or sold, or otherwise transferred or sold in any transaction which would constitute a sale thereof within the meaning of the Act, unless (i) such security has been registered for sale under the Act and registered or qualified under applicable state securities laws relating to the offer an sale of securities, or (ii) exemptions from the registration requirements of the Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the Act, such counsel and such opinion to be satisfactory to the Company. (d) Investor recognizes that investing in the Warrant and the Warrant Shares involves a high degree of risk, and Investor is in a financial position to hold the Warrant and the Warrant Shares indefinitely and is able to bear the economic risk and withstand a complete loss of its investment in the Warrant and the Warrant Shares. The Investor is a sophisticated investor and is capable of evaluating the merits and risks of investing in the Company. The Investor has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management, has been given full and complete access to information concerning the Company, and has utilized such access to its satisfaction for the purpose of obtaining information or verifying information and have had the opportunity to inspect the Company's operation. Investor has had the opportunity to ask questions of, and receive answers from, the management of the Company (and any person acting on its behalf) concerning the Warrant and the Warrant Shares and the agreements and transactions contemplated hereby, and to obtain any additional information as Investor may have requested in making its investment decision. The initial Investor in this Warrant is an "accredited investor", as defined by Regulation D promulgated under the Act. 19. Miscellaneous. (a) Issue Date; Choice Of Law; Venue; Jurisdiction. THE PROVISIONS OF THIS WARRANT SHALL BE CONSTRUED AND SHALL BE GIVEN EFFECT IN ALL RESPECTS AS IF IT HAD BEEN ISSUED AND DELIVERED BY THE COMPANY ON THE DATE HEREOF. THIS WARRANT SHALL BE BINDING UPON ANY SUCCESSORS OR ASSIGNS OF THE COMPANY. THIS WARRANT WILL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT FOR MATTERS ARISING UNDER THE ACT, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE U.S. DISTRICT COURT SITTING IN THE STATE OF CITY OF NEW YORK IN THE STATE OF NEW YORK IN CONNECTION WITH ANY DISPUTE ARISING UNDER THIS WARRANT AND HEREBY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION BASED ON FORUM NON CONVENIENS, TO THE BRINGING OF ANY SUCH PROCEEDING IN SUCH JURISDICTION. EACH PARTY HEREBY AGREES THAT IF THE OTHER PARTY TO THIS WARRANT OBTAINS A 10 JUDGMENT AGAINST IT IN SUCH A PROCEEDING, THE PARTY WHICH OBTAINED SUCH JUDGMENT MAY ENFORCE SAME BY SUMMARY JUDGMENT IN THE COURTS OF ANY COUNTRY HAVING JURISDICTION OVER THE PARTY AGAINST WHOM SUCH JUDGMENT WAS OBTAINED, AND EACH PARTY HEREBY WAIVES ANY DEFENSES AVAILABLE TO IT UNDER LOCAL LAW AND AGREES TO THE ENFORCEMENT OF SUCH A JUDGMENT. EACH PARTY TO THIS WARRANT IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS IN ACCORDANCE WITH THIS SECTION 19(C). NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY WAIVES ITS RIGHT TO A TRIAL BY JURY. (b) Modification and Waiver. This Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. Any amendment effected in accordance with this paragraph shall be binding upon the Investor, each future holder of this Warrant and the Company. No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. (c) Notices. Any notice, request or other document required or permitted to be given or delivered to the Investor or future holders hereof or the Company shall be personally delivered or shall be sent by certified or registered mail, postage prepaid, to the Investor or each such holder at its address as shown on the books of the Company or to the Company at the address set forth in the Investment Agreement. All notices under this Warrant shall be deemed to have been given when received. A party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in accordance with the provisions of this Section 19(c). (d) Severability. Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Warrant in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Warrant shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 11 (e) No Impairment. The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant. 12 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: August 22, 2000 HOLLYWOOD.COM, INC. By: /s/ Mitchell Rubenstein ------------------------------------ Name: Mitchell Rubenstein Title: Chairman and CEO Agreed and Accepted this 22nd day of August, 2000 WESTGATE INTERNATIONAL, L.P. By: Elliott International Advisors, Inc., as Attorney-in-Fact By: /s/ Paul E. Singer -------------------------------- Name: Paul E. Singer Title: President 13 NOTICE OF EXERCISE To: HOLLYWOOD.COM, INC. (1) The undersigned hereby elects to purchase ________ shares of Common Stock of HOLLYWOOD.COM, INC. pursuant to the terms of the attached Warrant, and tenders herewith payment of the Exercise Price in full, together with all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: ------------------------------- (Name) ------------------------------- (Address) ------------------------------- (3) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below: Other Name: ____________________ ----------------------------------- (Name) - -------------------- ----------------------------------- (Date) (Signature) ----------------------------------- (Address) ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to exercise the warrant.) FOR VALUE RECEIVED, the foregoing Warrant of Hollywood.com, Inc. and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is - ---------------------------------------------------------------. - --------------------------------------------------------------- Dated: ______________, Holder's Signature: _____________________________ Holder's Address: _____________________________ ----------------------------- Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. -----END PRIVACY-ENHANCED MESSAGE-----