-----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, Vw44vl7lsA4mQLKXKUCG4JdNx1J4JrLkxTdLQT3vQVIgKSmtlWuTp+OIYgUaK1ba q1FIcJaDLd6CylbmD4LMaQ== 0001042910-00-000887.txt : 20000516 0001042910-00-000887.hdr.sgml : 20000516 ACCESSION NUMBER: 0001042910-00-000887 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLYWOOD COM INC CENTRAL INDEX KEY: 0000912544 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 650385686 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14332 FILM NUMBER: 635619 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 10-Q 1 QUARTERLY REPORT OF FORM 10-Q U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission File No. 0-22908 HOLLYWOOD.COM, INC. (Exact name of registrant as specified in its charter) Florida 65-0385686 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2255 Glades Road, Suite 237 West Boca Raton, Florida 33431 (Address of principal executive offices) (zip code) (561) 998-8000 (Registrant's telephone number) Big Entertainment, Inc. ----------------------- (Former Name) Indicated by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- ------- As of May 12, 2000, the number of shares outstanding of the issuer's common stock, $.01 par value, was 23,277,385. HOLLYWOOD.COM, INC. Table of Contents Page(s) ------ PART I FINANCIAL INFORMATION --------------------- ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999......................... 3 Consolidated Statements of Operations for the Three Months ended March 31, 2000 and 1999 (unaudited) ......... 4 Consolidated Statement of Shareholders' Equity for the Three Months ended March 31, 2000 (unaudited)............. 5 Consolidated Statements of Cash Flows for the Three Months ended March 31, 2000 and 1999 (unaudited).......... 6 Notes to Consolidated Financial Statements (unaudited).... 7-15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................................... 16-25 PART II OTHER INFORMATION ----------------- ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.................... 26 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 27 Signature .............................................................. 29 -2- HOLLYWOOD.COM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2000 1999 --------------- -------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,429,994 $ 2,475,345 Receivables, net 1,985,066 1,155,999 Merchandise inventories 1,145,194 1,246,733 Prepaid expenses 1,760,316 1,687,347 Other receivables 26,998 18,037 Other current assets 93,948 67,541 Deferred advertising - CBS 24,313,695 - ------------ ------------ Total current assets 35,755,211 6,651,002 PROPERTY AND EQUIPMENT, net 2,052,576 1,877,959 INVESTMENT IN NETCO PARTNERS 1,121,868 549,975 INVESTMENT IN MOVIETICKETS.COM 1,066,667 - NONCURRENT DEFERRED ADVERTISING - CBS 106,602,016 - INTANGIBLE ASSETS, net 4,946,967 3,770,590 GOODWILL, net 45,261,305 46,483,647 OTHER ASSETS 2,468,662 3,149,652 ------------ ------------ TOTAL ASSETS $199,275,272 $ 62,482,825 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 867,670 $ 2,181,089 Accrued professional fees 184,029 199,514 Other accrued expenses 1,833,241 1,579,682 Deferred advertising - CBS - 2,344,950 Accrued reserve for closed stores 716,432 2,366,432 Deferred revenue 238,331 308,061 Note payable 1,928,138 1,928,138 Current portion of capital lease obligations 559,160 561,015 ------------ ------------ Total current liabilities 6,327,001 11,468,881 ------------ ------------ CAPITAL LEASE OBLIGATIONS, less current portion 872,778 995,213 ------------ ------------ DEFERRED REVENUE 249,117 249,117 ------------ ------------ MINORITY INTEREST 139,697 270,828 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Note 9) SHAREHOLDERS' EQUITY: Preferred Stock, $.01 par value, 539,127 shares authorized; none outstanding - - Common stock, $.01 par value, 100,000,000 shares authorized; 23,209,546 and 15,143,216 shares issued and outstanding at March 31,2000 and 232,096 151,432 December 31,1999, respectively. Warrants outstanding 6,096,704 5,096,704 Deferred compensation (255,167) (306,200) Additional paid-in capital 255,730,878 105,500,656 Accumulated deficit (70,117,832) (60,943,806) ------------ ------------ Total shareholders' equity 191,686,679 49,498,786 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $199,275,272 $ 62,482,825 ============ ============ The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets.
-3- HOLLYWOOD.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ----------------------------------- 2000 1999 ---------- ----------- NET REVENUES $ 4,077,696 $ 1,315,774 COST OF REVENUES 949,971 660,272 ------------ ----------- Gross margin 3,127,725 655,502 ------------ ----------- OPERATING EXPENSES: General and administrative 2,410,965 899,158 Selling and marketing 2,418,731 364,195 Salaries and benefits 2,432,915 698,808 Amortization of CBS advertising 4,124,197 - Amortization of goodwill and intangibles 1,651,934 7,857 Depreciation 249,995 280,825 ------------ ----------- Total operating expenses 13,288,737 2,250,843 ------------ ----------- Operating loss (10,161,012) (1,595,341) EQUITY IN EARNINGS OF NETCO PARTNERS 1,105,337 1,094,190 OTHER (EXPENSE): Interest, net (59,200) (190,776) Other, net - (129,903) ------------ ----------- Loss before minority interest (9,114,875) (821,830) MINORITY INTEREST (59,151) (152,808) ------------ ----------- Net loss $ (9,174,026) $ (974,638) ============ =========== Basic and diluted loss per common share $ (0.42) $ (0.12) ============ =========== Weighted average common and common equivalent shares outstanding - basic and diluted 21,830,827 8,565,528 ============ =========== The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets.
-4- HOLLYWOOD.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2000 (Unaudited)
Additional Common Paid-in Warrants Deferred Accumulated Stock Capital Outstanding Compensation Deficit Total -------- ------------- ----------- ------------ ------------- ------------ Balance - December 31,1999 $151,432 $ 105,500,656 $ 5,096,704 $ (306,200) $(60,943,806) $ 49,498,786 Issuance of common stock and common stock warrants pursuant to CBS agreement 66,720 119,100,882 18,051,784 - - 137,219,386 Stock options and warrants exercised 13,071 29,627,260 (18,051,784) - - 11,588,547 Common stock warrants issued in conection with investment in Movietickets.com - - 1,000,000 - - 1,000,000 Issuance of stock options and warrants for services rendered - 51,028 - - - 51,028 Non-cash issuance of common stock - franchise agreement 1,000 1,649,000 - - - 1,650,000 Amortization of employee stock bonuses - 51,033 51,033 Shares repurchased (127) (197,948) - - - (198,075) Net loss - - - - (9,174,026) (9,174,026) -------- ------------- ----------- ---------- ------------- ------------- Balance - March 31,2000 $232,096 $ 255,730,878 $ 6,096,704 $ (255,167) $ (70,117,832) $ 191,686,679 ======== ============= =========== ========== ============= ============= The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.
-5- HOLLYWOOD.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ---------------------------------- 2000 1999 ------------ ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (9,174,026) $ (974,638) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,901,929 288,683 Equity in earnings, net of return of invested capital (638,560) (1,076,140) Issuance of compensatory stock options and warrants 51,028 35,798 Amortization of deferred compensation costs 51,033 51,033 Recognition of deferred gain - (10,097) Provision for bad debts 25,514 - Provision for inventory 13,444 - Amortization of deferred financing costs 2,145 103,922 Amortization of deferred advertising - CBS 4,124,197 - Amortization of service contract 67,460 - Minority interest 59,151 152,808 Changes in assets and liabilities: Receivables (863,542) (64,380) Prepaid expenses (72,969) (79,614) Merchandise inventories 88,095 300,603 Other current assets (28,552) (173,056) Other assets 7,561 108,435 Accounts payable (1,313,419) (712,869) Accrued professional fees (15,485) (17,357) Deferred revenue (69,730) 14,021 Other accrued expenses 253,558 (87,439) ------------ ----------- Net cash used in operating activities (5,531,168) (2,140,287) ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in trademarks (1,000,000) - Capital expenditures, net (424,612) (83,675) Return of capital from Tekno Books to minority partner (190,282) (136,970) ------------ ----------- Net cash used in investing activities (1,614,894) (220,645) ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net repayments from revolving line of credit - (556,206) Proceeds from shareholder/officer loan - 571,000 Repayments of shareholder/officer loan - (671,000) Net proceeds from issuance of common stock 5,303,030 2,468,659 Proceeds from exercise of stock options and warrants 6,120,046 318,818 Dividends on preferred stock - - Payments to repurchase common stock (198,075) - Repayments under capital lease obligations (124,290) (167,495) ------------ ----------- Net cash provided by financing activities 11,100,711 1,963,776 ------------ ----------- Net increase (decrease) in cash and cash equivalents 3,954,649 (397,156) CASH AND CASH EQUIVALENTS, beginning of period 2,475,345 729,334 ------------ ----------- CASH AND CASH EQUIVALENTS, end of period $ 6,429,994 $ 332,178 ------------ ----------- SUPPLEMENTAL SCHEDULE OF CASH RELATED ACTIVITIES: Interest paid $ 94,065 $ 91,685 ============ =========== The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.
-6- HOLLYWOOD.COM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION: In the opinion of management, the accompanying consolidated financial statements have been prepared by Hollywood.com, Inc. (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. However, the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. The financial statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly the Company's financial position and results of operations. The results of operations and cash flows for the three months ended March 31, 2000 are not necessarily indicative of the results of operations or cash flows which may be recorded for the remainder of 2000. The accompanying consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. (2) ACQUISITIONS: (a) CinemaSource, Inc.: On May 18, 1999, the Company acquired substantially all of the assets of CinemaSource, Inc. ("CinemaSource"), a privately held company, pursuant to the terms of the Asset Purchase Agreement dated March 29, 1999 for $6.5 million in cash and 436,191 shares of the Company's common stock valued at $12.50 per share. At the closing of the acquisition, the Company directed CinemaSource to transfer the assets sold, on the Company's behalf, to its wholly owned subsidiary, Showtimes.com, Inc. ("Showtimes.com"). The shares of the Company's common stock issued at the time of acquisition are restricted from resale for the first 12 months following the closing of the transaction and are subject to volume limitations regarding resale thereafter. CinemaSource gathers movie data, including showtimes, synopses, photos and trailers, and then licenses this data, in a compiled manner, to internet companies. CinemaSource licenses this information to more than 200 different outlets, including customers such as Yahoo!, Excite, Go Network, Ticketmaster/CitySearch, Zip2, The New York Times web site, usatoday.com, latimes.com, iWon.com, The Washington Post web site, the Boston Globe web site, the Newsday web site, and all of the web sites of Knight Ridder and Advance/Newhouse. -7- (b) hollywood.com, Inc.: On May 20, 1999, the Company acquired all of the capital stock of hollywood.com, Inc. ("hollywood.com"), formerly called Hollywood Online Inc., from The Times Mirror Company ("Times Mirror"). The aggregate consideration paid to Times Mirror by the Company consisted of a one-year unsecured promissory note for $1,928,138 and 2,300,075 shares of common stock, which was valued as of the date of the transaction at $12.64 per share. As part of the transaction costs the Company issued 53,452 shares of common stock for services rendered in connection with the acquisition. Hollywood.com owns and operates the Hollywood.com web site offering viewers movie information, movie trailers, box office charts, movie soundtracks, photos and exclusive interactive games, celebrity interviews, local movie showtimes, and coverage of movie premieres, film festivals and movie-related events. Hollywood.com has an exclusive contract with the National Association of Theatre Owners ("NATO"). Through this contract, Hollywood.com promotes its web site to movie audiences by airing trailers featuring Hollywood.com before the feature films that play in most NATO-member theatres. In exchange, Hollywood.com provides web sites for the exhibiting NATO members. The value of this contract was recorded as an intangible asset of $4.6 million and is being amortized over the remaining life of the contract, approximately three years. (c) Baseline II, Inc.: On August 31, 1999, the Company purchased substantially all of the motion picture-related data assets of Paul Kagan Associates, Inc., including the PKBaseline.com web site, several publications, including the Motion Picture Investor newsletter, and a consumer oriented movie web site. PK Baseline is a subscription pay per use web site for movie professionals. The aggregate purchase price paid for the Baseline assets consisted of 492,611 shares of common stock valued at $17.81 per share and warrants to purchase an aggregate of 54,735 shares of common stock at an exercise price of $18.27 per share valued at $543,588. The shares of common stock issued in the transaction can not be transferred by the holders for a period of 24 months following the closing of the transaction. The Company plans to integrate part of the content into the Hollywood.com website and continue to operate PK Baseline.com as a service geared to movie professionals. The acquisitions of CinemaSource, hollywood.com and Baseline II were accounted for under the purchase method of accounting and, accordingly, the operating results of CinemaSource, hollywood.com and Baseline have been included in the Company's consolidated financial statements since the date of acquisition. The excess of the aggregate purchase prices over the fair value of net assets acquired of $48.9 million is being amortized over 10 years. The purchase price of CinemaSource, hollywood.com and Baseline II was allocated to assets and liabilities acquired as follows: Tangible assets $ 2,729,844 Intangible assets 4,567,513 Goodwill 48,932,777 Liabilities assumed (586,877) ------------ Total purchase price 55,643,257 Less value of common stock and warrants issued (46,290,190) -8- Less value of note issued (1,928,138) ------------ Subtotal 7,424,929 ------------ Paid in cash - purchase price 6,534,190 Paid in cash - acquisition costs 890,739 ------------ Total cash paid $ 7,424,929 ============ The following are unaudited pro forma combined results of operations of the Company, hollywood.com, CinemaSource and Baseline for the three months ended March 31, 1999, as if the acquisitions of hollywood.com, CinemaSource and Baseline II had occurred on January 1, 1999: Net Revenues $ 2,589,659 ----------- Net Loss $(6,047,256) ----------- Pro Forma Diluted Loss Per Share $ (.51) ----------- Weighted Average Shares Outstanding 11,794,405 =========== These unaudited pro forma combined results have been prepared for comparative purposes only and include certain adjustments, such as additional amortization expense as a result of goodwill and certain contractual adjustments to salaries. They do not purport to be indicative of the results of operations which actually would have resulted had the acquired companies been under common control prior to the date of the acquisition or which may result in the future. (d) Broadway.com The Company launched the Broadway.com web site on May 1, 2000. The Broadway.com web site offers the webs most comprehensive database of professional theater showtimes listings in the US with listings of more than over 1900 events as well as show synopsis, cast and crew crew credits and biographies, digitized show previews and show tunes, community chat area, the ability to purchase Broadway and Off-Broadway theater tickets online, and interviews. The Company has owned the web addresses Theater.com and Theaters.com which is being utilized to redirect traffic to Broadway.com. On January 6, 2000 the Company acquired the web address Broadway.com. The purchase price consisted of $1.0 million in cash and 35,294 in common stock valued at $17 per share. The common stock was issued and recorded in December 1999, prior to closing, and delivered in anticipation of the closing. The total purchase price of $1.6 million was recorded as an intangible asset in the accompanying balance sheet and is being amortized over a life of ten years. -9- (3) DEBT: On May 20, 1999, the Company delivered a $1,928,138 one-year unsecured promissory note of the Company payable to Times Mirror as partial consideration for the acquisition of hollywood.com, Inc. The promissory note has a maturity date of May 20, 2000 (at which time the aggregate principal balance thereof must be repaid in full with cash or Company stock at the Company's option) and bears interest at the prime rate in effect from time to time of Citibank, N.A. plus 1% (10% at May 12, 2000). Interest is due quarterly in arrears beginning June 30, 1999 with the final payment due at maturity. The promissory note may be prepaid in whole or in part at any time without payment of any premiums or penalty. (4) COMMON STOCK: On January 3, 2000, the Company issued 6,672,031 shares of common stock valued at $19.50 per share and a warrant, to purchase 1,178,892 shares of common stock, with an exercise price of $10,937,002 and valued at $18,051,784 as consideration for $100,000,000 of CBS advertising, promotion and content over a seven year period and $5,303,030 in cash. In March 2000 CBS exercised a warrant to acquire an additional approximate 5% equity interest in the Company. The value of the common stock and warrants issued to CBS has been recorded in the balance sheet as deferred advertising and is being amortized over each related contract year. On February 8, 2000 the Company issued 100,000 shares of common stock valued at $1,650,000 in order to reacquire territorial rights as per a franchise agreement. The company closed its retail operations in December 1999 and $1,650,000 was accrued for the accompanying December 31, 1999 consolidated balance sheet as accrued reserve for closed stores. In 1998, the Company's Board of Directors approved a plan for the repurchase of up to $1.0 million of the Company's common stock. Pursuant to the plan, during 2000 the Company repurchased 12,700 shares of its common stock for an aggregate consideration of $198,075, or an average purchase price of $15.60. During the three months ended March 31, 2000, the Company issued 1,306,999 shares of common stock upon the exercise of outstanding stock options and warrants, for which the Company received $6,120,046 in cash exercise proceeds and $5,468,501 in additional promotional advertising from CBS. (5) INVESTMENTS (a) NETCO PARTNERS: The Company owns a 50% interest in a joint venture called NetCo Partners. The Company records its investment under the equity method of accounting, recognizing 50% of NetCo Partners' income or loss as Equity in Earnings of NetCo Partners. NetCo Partners is engaged in the publishing and licensing of entertainment properties. NetCo Partners has entered into numerous licensing agreements, including book publishing agreements with The Berkley Publishing Group, Books on Tape, Inc. and various foreign publishers, and ABC television mini-series agreement. NetCo Partners recognizes revenues pursuant to these contracts when the earnings process has been completed based on the terms of the various contracts and at the point where ultimate collection of such revenue is no longer subject to significant contingencies such that collection is substantially assured. The revenues, gross profit and net income of NetCo Partners for the three months ended March 31, 2000 and 1999 are presented below: -10- Three Months Ended March 31, ----------------------------------- 2000 1999 ----------- ------------- Revenues $ 2,617,126 $ 2,688,972 Gross Profit 2,202,349 2,182,063 Net Income 2,210,674 2,188,380 The revenues, gross profit and net income of NetCo Partners for the three months ended March 31, 2000 is principally attributable to delivery of the manuscript for the fourth book in the Tom Clancy's NetForce adult series of books to the publisher during the quarter. This milestone triggers the recognition of certain revenues and corresponding expenses for the book under the various domestic and foreign licensing agreements. As of March 31, 2000, NetCo Partners has $2,518,650 in accounts receivable. Management of NetCo Partners believes that these receivables will be collected in full and no reserves have been established. NetCo Partners' deferred revenues, consisting of cash advances received but not yet recognized as income, amounted to $953,727 as of March 31, 2000. As of March 31, 2000, the Company has received cumulative profit distributions from NetCo Partners since its formation totaling $4,023,239, in addition to reimbursement of substantially all amounts advanced by the Company to fund the operations of NetCo Partners. (b) MOVIETICKETS.com The Company entered into a joint venture agreement with AMC Entertainment Inc. ("AMC") and National Amusements, Inc. Each partner owns one-third of the joint venture at March 31, 2000. Movietickets.com web site will allow users to purchase movie tickets online and either print the tickets on a personal computer or retrieve them at "will call" windows or ATM machines at the theaters. The web site is expected to launch in late May 2000. At March 31, 2000 the Company contributed $66,667 in cash to movietickets.com plus $1,000,000 of warrants. (6) LOSS PER COMMON SHARE: Basic loss per common share is computed by dividing net loss, after deducting dividends applicable to preferred stock, by the weighted average number of common shares outstanding. The following table sets forth the computation of basic and diluted loss per share for the three months ended March 31, 2000 and 1999: Three Months Ended March 31, --------------------------------- 2000 1999 ------------ ------------ Net Loss $ (9,174,026) $ (974,638) Preferred Stock Dividends - (91,459) ------------ ------------ Net Loss Available to Common Shareholders $ (9,174,026) $ (1,066,097) Weighted Average Shares Outstanding 21,830,827 8,565,528 ------------ ------------ Basic and Diluted Loss per Share $ (0.42) $ (0.12) ============ ============ -11- Inclusion of convertible preferred shares as dilutive securities would have an antidilutive effect on the loss per share calculation. Accordingly, these shares have been excluded from the calculation for the three months ended March 31, 2000 and 1999. Options and warrants to purchase 4,098,510 shares of common stock at exercise prices ranging from $0.01 to $23.00 per share were also not included in the computation of loss per share for the three months ended March 31, 2000 because the result would be antidilutive. (7) SEGMENT REPORTING: The Company has five reportable segments: Internet ad sales, business to business, e-commerce, retail, and intellectual properties. The Internet ad sales segment sells advertising on its web site, Hollywood.com and will also include Broadway.com and the Hollywood.com international sites advertising in subsequent quarters. The business to business segment licenses entertainment content and includes the division CinemaSource (which licenses movie showtimes and content), EventSource (which licenses event related information) and TheaterSource (which licenses live theater showtimes and content) to internet Companies. E-commerce sells entertainment related merchandise over the Internet. The retail segment operated retail studio stores that sold entertainment-related merchandise. The intellectual properties segment owns or controls the exclusive rights to certain intellectural properties created by best-selling authors and media celebrities, which it licenses across all media, including books, film and television, multimedia software, toys and other products. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on a comparison of actual profit or loss from operations before income taxes, depreciation, interest, and nonrecurring gains and losses to budgeted amounts. The following table illustrates the financial information regarding the Company's reportable segments. Three Months ended March 31, --------------------------------------- 2000 1999 ------------- ---------- REVENUES: Internet Ad Sales $ 2,310,355 $ - Business to Business 1,002,508 - E-Commerce 301,734 77,908 Retail - 696,900 Intellectual Properties 463,099 540,966 Other - - ------------- ---------- $ 4,077,696 $1,315,774 ============= ========== GROSS PROFIT: Internet Ad Sales $ 2,052,280 $ - Business to Business 942,444 - E-Commerce 52,382 30,040 Retail - 229,652 Intellectual Properties 80,619 395,810 Other - - - - ------------- ---------- $ 3,127,725 $ 655,502 ============= ========== -12- Three Months ended March 31, --------------------------------------- 2000 1999 ------------- ---------- OPERATING LOSS: Internet Ad Sales $ (7,136,865) $ - Business to Business 54,288 - E-Commerce (641,036) (208,871) Retail (28,405) (793,099) Intellectual Properties 118,789 311,764 Other (2,527,783) (905,135) ------------ ------------ $(10,161,012) $ (1,595,341) ============ ============ CAPITAL EXPENDITURES: Internet Ad Sales $ 277,626 $ - Business to Business 71,983 - E-Commerce - 65,058 Retail - - Intellectual Properties 5,188 - Other 69,815 18,617 ------------ ------------ $ 424,612 $ 83,675 ============ ============ DEPRECIATION EXPENSE: Internet Ad Sales $ 157,581 $ - Business to Business 24,820 - E-Commerce 3,606 2,342 Retail - 81,059 Intellectual Properties 2,073 1,226 Other 61,915 196,198 ------------ ------------ $ 249,995 $ 280,825 ============ ============ INTEREST, NET: Internet Ad Sales $ 685 $ - Business to Business 536 - E-Commerce - - Retail 39,180 176,622 Intellectual Properties (1,947) (1,084) Other 20,746 15,238 ------------ ------------ $ 59,200 $ 190,776 ============ ============ -13- (8) USE OF ESTIMATES: The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include management's estimate that accounts receivable of NetCo Partners as of March 31, 2000 will be collected in full, and that no reserve for uncollectible accounts is necessary (see Note 5). (9) COMMITMENTS AND CONTINGENCIES: Tax Loan - As part of the Asset Purchase Agreement between the Company and CinemaSource, the Company has agreed to make a loan to the shareholder of CinemaSource to pay the taxes due on the portion of the purchase price paid in the form of common stock (not to exceed 24% of the tax gain at the time of closing). On April 14, 2000, a loan in the amount of $1,737,513 was granted. The loan has a term of one year, bears interest and is secured by the holders stock in the Company. Litigation - The Company is a party to various legal proceedings arising in the ordinary course of business, none of which are expected to have a material adverse impact on the Company's financial condition or results of operations. -14- (10) RECLASSIFICATION: Certain amounts in the 1999 financial statements have been classified to conform with the 2000 classification. (11) SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES For the Three Months Ended March 31, 1999: The Company recorded the conversion of $2,000,000 of Series C Preferred Stock into 500,000 shares of common stock. The Company recorded non-cash dividends on its Series A,B,C,D and D-2 convertible Preferred Stock in the amount of $91,459, of which $41,589 was paid through the issuance of 3,506 shares of common stock. The Company entered into capital lease transactions totalling $56,068. For the Three Months ended March 31, 2000: The Company issued 100,000 shares of common stock, valued at $1,650,000. This amount was accrued for at December 31, 1999. The Company issued warrants valued at $1.0 million in connection with it's investment in Movietickets.com. The Company recorded $5,468,501 in deferred advertising in connection with the exercise of warrants by CBS. (12) SUBSEQUENT EVENT: On May 1, 2000, the Company purchased the assets of Broadwaytheater.com, Inc. for $135,000 in cash and 66,572 shares of common stock. Broadwaytheater.com sells Broadway and Off Broadway theater tickets online. This business has been incorporated into the Company's Broadway.com web site which launched on May 1, 2000. -15- ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains, in addition to historical information, "forward-looking statements" with respect to Hollywood.com, Inc. (the "Company") which represent the Company's expectations or beliefs, including, but not limited to, statements concerning industry performance, the Company's operations, performance, financial condition, growth, acquisition, and divestiture strategies, margins, and growth in sales of the Company's products. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company's control, and actual results may differ materially depending on a variety of important factors. Factors that may affect the Company's results include, but are not limited to, our continuing operating losses and accumulated deficit, our limited operating history, the need for additional capital to finance our operations, the need to manage our growth and integrate new businesses into the Company, our ability to develop strategic relationships, our ability to compete with other Internet companies, technology risks and the general risk of doing business over the Internet, future government regulation, dependence on our founders, the interests of our largest shareholder, Viacom Inc. (formerly CBS Corporation), and accounting considerations related to our strategic alliance with CBS. The Company is also subject to other risks detailed herein or detailed from time to time in the Company's filings with the Securities and Exchange Commission. Introduction We are an entertainment-focused Internet company that offers widely recognized brands and one of the broadest and deepest collections of entertainment content and related information in the industry. We also continue to operate the intellectual property business from which our company has expanded and evolved. Our Internet business generates revenues through the sale of advertising on Hollywood.com and Broadway.com, the business-to-business syndication of our content, to other internet companies including such companies as Yahoo!, Go Network, AOL DigitalCities, Excite, Ticketmaster/CitySearch and Zip2 and the sale of merchandise throughout our family of entertainment-related web sites. Our existing businesses, Hollywood.com, Broadway.com, CinemaSource, EventSource, TheaterSource and Baseline provide in-depth entertainment information, including movie and theater descriptions and reviews, showtime listings, entertainment news and an extensive multimedia library. In January 2000 we entered into a seven-year agreement with CBS Corporation providing for $100 million of advertising and promotion of the Hollywood.com web site and $5.3 million in cash in exchange for an approximate 30% equity interest in the Company. In March 2000 CBS Corporation exercised a warrant to acquire an additional approximate 5% equity interest in the Company. CBS Corporation merged with and into Viacom Inc. in May 2000. Internet Businesses Hollywood.com. Hollywood.com is a premier entertainment related web site featuring over one million pages of in-depth movie, television and music content, including movie descriptions and reviews, digitized movie trailers and photos, movie showtime listings, entertainment news, box office results, interactive games, movie soundtracks, television listings, concert information, celebrity profiles and biographies, comprehensive coverage of -16- entertainment awards shows and film festivals and exclusive video coverage of movie premieres. Hollywood.com is established on the Internet as a leading entertainment web site with approximately 67 million page impressions and approximately 3.1 million unique visitors recorded during March 2000. We sell banner advertising and sponsorships on Hollywood.com through an internal advertising sales force and through relationships with outside advertising firms. Some of our recent advertisers include Microsoft, Toyota, Universal Studios, eBay, P&G, iVillage, Visa, M&Ms, Destination Films, New Line Cinema, JC Penny, US Army, Nissan and Women.com. We promote the Hollywood.com web site through our strategic relationships with CBS and the National Association of Theatre Owners. Through exclusive contracts with the NATO and over 85 of its member theater exhibitors, we promote the Hollywood.com web site to movie audiences by airing trailers about Hollywood.com before feature films that play in participating theaters and by displaying posters and other promotional materials in those theaters. In exchange, we develop and maintain web sites for many of the theater exhibitors that feature their movie showtimes. In January 2000 we entered into a strategic, seven-year relationship with CBS that provides for extensive promotion of the Hollywood.com web site. CBS has agreed to provide Hollywood.com with $100,000,000 of promotion across its full range of media properties, including the CBS television network, CBS owned and operated television stations, CBS cable networks, Infinity Broadcasting Corporation's radio stations and outdoor billboards, CBS Internet sites and CBS syndicated television and radio programs. To supplement our internal sales efforts, we also have the right to reallocate a portion of each year's promotional budget and require CBS to sell up to $1.5 million of advertising on the Hollywood.com and Broadway.com web site. CBS has agreed to include the Hollywood.com web site in all advertising sale programs and presentations that are appropriate for the sale of advertising on the web site. We will pay an 8% commission on any additional advertising revenues generated by CBS for us in excess of the $1.5 million guaranteed amount selected by us each year. Through our MusicSite.com web site, which serves as the music area on Hollywood.com, we feature a comprehensive collection of information related to music, musicians and the music industry, including music news and information, musician profiles, reviews of current and upcoming releases, artist discographies and coverage of awards ceremonies. MusicSite.com also features extensive listings of concerts and music-related events around the country from the largest to the smallest of venues, which listings are provided by our EventSource division. Broadway.com. We launched the Broadway.com web site on May 1, 2000. Broadway.com features theater showtimes for virtually all professional live theater venues in the U.S. as well as London's West End; the ability to purchase Broadway and Off Broadway theater tickets online; the latest theater news; interviews with stage actors and playwrights; opening-night coverage; original theater reviews; and video excerpts from selected shows. The Broadway.com web site also offer current box office results, show synopses, cast and crew credits and biographies, digitized show previews, digitized showtunes and an in-depth Tony Awards(R) area. Broadway.com also offers a community chat area for users to chat with fellow users, stage actors, playwrights and reviewers about Broadway and live theater from around the country and worldwide. Broadway.com expects to generate revenue from advertising sales, syndication of content to other internet companies, and ticket sales. -17- Hollywood.com International. We have entered into and are pursuing several strategic relationships geared toward leveraging the Hollywood.com brand internationally. We entered into an agreement with AOL Latin America (a venture between AOL and Cisneros)in late 1999 pursuant to which we agreed to launch Portuguese and Spanish versions of the Hollywood.com web site to be promoted on AOL in countries throughout Latin America. We launched the br.hollywood.com Portuguese-language web site in Brazil in November 1999 and the mx.hollywood.com Spanish-language web site in Mexico in May 2000. These web sites are tailored to the local movie-going audience and feature much of the same content that is on Hollywood.com, including daily entertainment news, movie descriptions and reviews, movie previews, movie soundtracks, celebrity profiles and biographies and interactive games. We plan to launch ar.hollywood.com in Argentina in May 2000. Our br.hollywood.com web site is featured and promoted on the entertainment channels of both AOL Latin America and El Sitio.com, a Latin American-based Internet portal, and our other Latin American web sites will also be featured on these portals. The Company has entered into an agreement in principle to form a strategic partnership to distribute Hollywood.com content, in the Chinese language, throughout China on all Legend new PC's along with Legend's new Chinese-language portal FM365.com. Legend's market share of PC sales in China has climbed steadily to over 27%. The Company has also entered into an agreement in principle to form a strategic partnership to distribute Hollywod.com content across British Telecom's multiple Internet platforms, including narrowband ISP, broadband DSL access and wireless WAP technologies, throughout the United Kingdom. CinemaSource. CinemaSource is the largest supplier of movie showtimes to the Internet and compiles movie showtimes for every movie theater in the United States and Canada, representing approximately 36,000 movie screens. Since its start in 1995, CinemaSource has substantially increased its operations and currently provides movie showtime listings to more than 200 different Internet sites and media outlets, including Yahoo!, Excite, Go Network, Ticketmaster/CitySearch, Zip 2, NBCi, The New York Times web site, usatoday.com, latimes.com, iWon.com, The Washington Post web site, the Boston Globe web site, the Newsday web site, and all of the web sites of Knight Ridder and Advance/Newhouse. In addition, CinemaSource recently expanded its syndication business to include entertainment news, movie reviews, and celebrity biographies. In addition to charging guaranteed amounts for the data that it provides to its customers, CinemaSource often shares in the advertising revenue generated by its customers in connection with the data. We acquired CinemaSource in mid-1999. EventSource. We launched the EventSource business in mid-1999 as an expansion of the operations of CinemaSource. EventSource compiles and syndicates detailed information on community events in cities around the country, including concerts and live music, sporting events, festivals, fairs and live theater. EventSource entered into an agreement with AOL's Digital Cities in April 2000 to provide event listings for up to 200 cities nationwide. In addition to Digital Cities, other EventSource customers include the web sites of The New York Times and Knight Ridder. Baseline. We own and operate the PKBaseline.com web site, a pay-per-use web site geared to movie professionals, which we acquired from media analyst Paul Kagan. The Baseline business maintains one of the most comprehensive movie and television-related databases and has been in operation for over 15 years. The PKBaseline.com web site is a comprehensive database of information on over 67,000 films and television programs, as well as biographies on over one million entertainment industry professionals. This rich, interactive database is accessible online to our subscribers and includes credits, synopses, reviews and box office statistics. Baseline continuously tracks production, distribution, and exhibition of feature films worldwide, including box office projections, budgets, and trends. Baseline customers include major movie studios, investment banks, news agencies, consulting firms and other professionals in the entertainment industry. -18- Hollywood.com Studio Store. Our online studio store located at shopping.hollywood.com is one of the world's largest online movie studio stores. The studio store features a product line of branded licensed merchandise including toys, apparel, video games, art, collectibles, movie posters, housewares, accessories, costumes, games, high tech merchandise and media items. We currently offer approximately 2,500 different products for sale in the studio store and our strategy is to make the web site a one-stop shopping experience for anyone seeking entertainment merchandise. We cross-promote the Hollywood.com studio store to movie and entertainment enthusiasts through banners and links on our other web sites and the web site is promoted on over 12,000 affiliate web sites, including latimes.com, usatoday.com, Yahoo!, Excite, nj.com and others. We also offer for sale a comprehensive collection of merchandise related to current and classic Broadway shows through the Broadway.com web site. New Internet Properties. We plan to leverage our established entertainment Internet platform to launch additional entertainment-related Internet businesses, which we expect to significantly increase our ability to generate revenues from advertising, syndication and e-commerce. Recent examples of this strategy include the launch of Broadway.com, MusicSite.com and Mx.hollywood.com, and the upcoming launch of MovieTickets.com MovieTickets.com. In May 2000 we plan to launch MovieTickets.com, a joint venture among Hollywood.com, AMC Entertainment Inc., and National Amusements, Inc. Each of Hollywood.com, AMC Entertainment Inc. and National Amusements, Inc. owns one-third of the equity of MovieTickets.com, Inc. and the joint venture has entered into an agreement in principle for CBS Corporation to acquire a five percent interest. MovieTickets.com will be promoted through on-screen advertising in each participating exhibitor's movie screens and through $25 million of CBS advertising and promotion over the next five years. MovieTickets.com's current exhibitors include AMC Entertainment Inc., National Amusements, Inc. and Famous Players Inc. These exhibitors operate theaters located in all of the top ten markets and approximately 70% of the top 50 markets in the United States. AMC Entertainment Inc. is the largest movie theater in the United States based on box office sales and Famous Players generates approximately half of all box office sales in Canada. The MovieTickets.com web site will allow users to purchase movie tickets online and either print the tickets on a personal computer or retrieve them at "will call" windows at theaters. The web site will also feature movie content from Hollywood.com for all current and future release movies, movie reviews and synopses, digitized movie trailers and photos, and box office results. We expect the web site to generate a significant majority of its revenues from the sale of advertising, and may generate additional revenues from service fees charged to users for the purchase of tickets. Hollywood.com has the right to sell up to half of the available advertising inventory on the MovieTickets.com web site and we will receive a commission equal to 33% of all of the advertising revenue of MovieTickets.com generated by the Hollywood.com ad sales force. -19- Intellectual Properties Business Intellectual Properties. Our intellectual properties division owns the exclusive rights to intellectual properties, which are complete stories and ideas for stories, created by best-selling authors and media celebrities. Some examples of our intellectual properties are Leonard Nimoy's Primortals, Mickey Spillane's Mike Danger and Anne McCaffrey's Acorna the Unicorn Girl. We license rights to our intellectual properties to companies such as book publishers, film and television studios, multi-media software companies and producers of other products. These licensees develop books, television series and other products based on the intellectual properties licensed from us. We generally obtain the exclusive rights to the intellectual properties and the right to use the creator's name in the titles of the intellectual properties (e.g., Mickey Spillane's Mike Danger and Leonard Nimoy's Primortals). NetCo Partners. In June 1995, the Company and C.P. Group Inc. ("C.P. Group"), entered into an agreement to form NetCo Partners (the "NetCo Joint Venture Agreement"). NetCo Partners is engaged in the publishing and licensing of entertainment properties, including Tom Clancy's NetForce, and has entered into various licensing agreements described above. The Company and C.P. Group are each 50% partners in NetCo Partners. Tom Clancy owns 50% of C.P. Group. C.P. Group contributed to NetCo Partners all rights to Tom Clancy's NetForce, and the Company contributed to NetCo Partners all rights to Tad Williams' MirrorWorld, Arthur C. Clarke's Worlds of Alexander (formerly called Criosphinx), Neil Gaiman's Lifers, and Anne McCaffrey's Saraband. Pursuant to the terms of the NetCo Partners Joint Venture Agreement, the Company is responsible for developing, producing, manufacturing, advertising, promoting, marketing and distributing NetCo Partners' illustrated novels and related products and for advancing all costs incurred in connection therewith. All amounts advanced by the Company to fund NetCo Partners' operations are treated as capital contributions of the Company and the Company is entitled to a return of such capital contributions before distributions of cash flow are split equally between the Company and C.P. Group. Book Development and Book Licensing. Our intellectual properties division also includes a book development and book licensing operation through our 51% owned subsidiary, Tekno Books, that develops and executes book projects, typically with best-selling authors. Tekno Books has worked with approximately 50 New York Times best-selling authors, including Tom Clancy, Jonathan Kellerman, Dean Koontz, Tony Hillerman, Robert Ludlum and Scott Turow, and numerous media celebrities, including David Copperfield, Louis Rukeyser and Willard Scott. Our intellectual properties division has licensed books for publication with more than 60 book publishers, including HarperCollins, Bantam Doubleday Dell, Random House, Simon & Schuster, Penguin Putnum and Warner Books. The book development and book licensing division has a library of more than 1,100 books. The Chief Executive Officer of Tekno Books, Dr. Martin H. Greenberg, is also a director of the Company and owner of the remaining 49% interest in Tekno Books. Tekno Books also owns a 50% interest in Mystery Scene Magazine, a trade journal of the mystery genre of which Dr. Greenberg is co-publisher. During 1995, the Company directly acquired an additional 25% interest in the magazine. As an example of one of the many synergistic opportunities between the Company's Internet and publishing businesses, the -20- Company is currently working to develop an area on the Hollywood.com web site initially dedicated to mysteries, and later to include science fiction and romance. Results of Operations The following table summarizes the Company's revenues, cost of sales and gross profit by division for the three months ended March 31, 2000 and 1999, respectively:
Internet Business to Intellectual Ad Sales Business E-Commerce Properties Retail Total ------------- ------------ ------------ ------------- -------- ---------- March 31, 2000 - -------------- Net Revenues $2,310,355 $ 1,002,508 $ 301,734 $ 463,099 $ - $4,077,696 Cost of Sales 258,075 60,064 249,352 382,480 - 949,971 ---------- ----------- --------- --------- -------- ---------- Gross Profit $2,052,280 $ 942,444 $ 52,382 $ 80,619 $ - $3,127,725 ========== =========== ========= ========= ======== ========== March 31, 1999 - -------------- Net Revenues $ - $ - $ 77,908 $ 540,966 $ 696,900 $1,315,774 Cost of Sales - - 47,868 145,156 467,248 660,272 ---------- ---------- --------- --------- --------- ---------- Gross Profit $ - $ - $ 30,040 $ 395,810 $ 229,652 $ 655,502 ========== ========== ========= ========= ========= ==========
NET REVENUES Total net revenues for the three months ended March 31, 2000 and 1999 were $4,077,696 and $1,315,774, respectively. The increase in revenue was primarily due to increased revenues from the Company's internet divisions (internet ad sales, business to business and e-commerce). The Company acquired three internet businesses in May and August of 1999; therefore there were no revenues for these business divisions for the three months ended March 31, 1999. Internet sales revenue for the three months ended March 31, 2000 was $2,310,355. Revenue is derived from sale of banner advertisements and sponsorships on the Hollywood.com web site. Hollywood.com was acquired by the Company on May 20, 1999. Business to business revenue for the three months ended March 31, 2000 was $1,002,508. Revenue is generated by the licensing of movie showtimes and other content information to other Internet companies including YAHOO!, Excite, Zip2, NBCi, Go Network, usatoday.com, which is conducted through CinemaSource and Baseline. We acquired CinemaSource on May 18, 1999 and Baseline on August 31, 1999. -21- E-commerce revenue for the three months ended March 31, 2000 increased 287% to $301,734 from $77,908 for three months ended March 31, 1999. The principal contributing factors to increased e-commerce revenue were increased product assortment and better product promotion through the Company's relationship with CBS. Revenues from the Company's intellectual properties division decreased by $77,867 or 14% from $540,966 to $463,099 for the three months ended March 31, 2000. The decrease in revenues is attributable to a lesser number of manuscripts being delivered for the three months ended March 31, 2000 as compared to March 31, 1999. The intellectual properties division generates revenues from several different activities including book development and licensing, intellectual property licensing, and publishing Mystery Scene magazine. Revenues vary quarter to quarter dependent on the various stages of the book projects. Revenues are recognized when the earnings process has been completed based on the terms of the various agreements and when ultimate collection of such revenues is no longer subject to contingencies. The Company closed all its brick and mortar retail locations in December 1999, therefore there were no revenues for the three months ended March 31, 2000. Barter transactions that generate advertising revenue, (included in Internet ad sales) in which the Company received advertising or other services in exchange for content or advertising on its web sites accounted for approximately 6% of total net revenue for the three months ended March 31, 2000. In future periods, management intends to maximize cash advertising revenue, although the Company will continue to enter into barter relationships when deemed appropriate. The Company records barter income earned under a contract with NATO, which the Company acquired through its acquisition of Hollywood.com. Through the NATO Contract, the Company promotes its website to movie audiences by airing movie trailers about Hollywood.com, 40 out of 52 weeks per year, before the feature films that play in most NATO-member theaters. In exchange, the Company provides websites for the exhibiting NATO members, promotional materials and movie information, advertising and editorial content. For the three months ended March 31, 2000 the Company recorded $745,438 in promotional revenue and expense under the NATO Contract. COST OF REVENUE Cost of revenue for the three months ended March 31, 2000 and 1999 was $949,971 and $660,272, respectively. The increase in the cost of sales was primarily the result of decreased retail revenues which generate lower gross margins offset by increase in Hollywood.com ad sales and business to business revenues which generate much higher gross margins. As a percentage of net revenue, cost of sales was 23% and 50% for the three months ended March 31, 2000 and 1999, respectively. The company's e-commerce division generally produces a lower gross margin than other revenue categories. EQUITY IN EARNINGS OF NETCO PARTNERS The Company's 50% share in the earnings of Netco Partners increased by 1% or $11,147 to $1,105,337 for the three months ended March 31, 2000 from $1,094,190 for the three months ended March 31, 1999. On book projects, revenues are typically recognized upon delivery of the -22- manuscripts to the publishers. In both quarters NetCo Partners delivered one adult novel to the publisher. OPERATING EXPENSES General and administrative expenses. General and administrative expenses increased $1,511,807 or 168% to $2,410,965 for the three months ended March 31, 2000 from $899,158 for the three months ended March 31, 1999. This increase is primarily attributable to the addition of three internet businesses which were acquired in May and August of 1999. Selling and marketing expenses. Selling and marketing expenses increased $2,054,536 to $2,418,731 for the three months ended March 31, 2000 from $364,195 for the three months ended March 31, 1999. Included in selling and marketing are non-cash barter transactions of $995,268 and $220,000 for the three months ended March 31, 2000 and 1999, respectively. Barter transactions accounted for approximately 41% and 60% of selling and marketing expense for the three months ended March 31, 2000 and 1999. respectively. The increase in selling and marketing expense was primarily the result of increased advertising on the radio, television and outdoor. In addition, these expenses are related to the Company's internet divisions which were acquired in May and August 1999. Salaries and benefits. Salaries and benefits increased $1,734,107 to $2,432,915 for the three months ended March 31, 2000 from $698,808 for the three months ended March 31, 1999. This increase is attributable to the addition of three internet businesses and an increase in the infrastructure to support the growth of the Company.. Amortization. Amortization of goodwill and intangibles was $1,651,934 and $7,857 for the three months ended March 31, 2000 and 1999, respectively. The increase of $1,644,077 is attributable to goodwill and intangibles recorded with the three internet businesses acquired in May and August of 1999. In addition, the Company acquired the Broadway.com URL in January 2000 and the amortization of the purchase price is included above for the three months ended March 31, 2000. Amortization of CBS advertising relating to the Company's agreement with CBS was $4,124,197 for the three months ended March 31, 2000. Under the Company's agreement with CBS, the Company issued shares of common stock and warrants to purchase common stock in consideration of CBS's advertising and promotional efforts over seven years across its full range of media properties. The value of the Common Stock and warrants issued to CBS has been recorded in the balance sheet as deferred advertising and is being amortized over each related contract year. Depreciation. Depreciation was $249,995 and $280,825 for the three months ended March 31, 2000 and 1999, respectively. The decrease of $30,830 in depreciation expense is attributable to the closure of the Company's brick and mortar retail division in December of 1999. All depreciable assets relating to the retail operations were fully written off. The decrease in depreciation expense is offset by depreciation of assets relating to the three internet businesses acquired in May and August of 1999. Interest Expense, net. Interest expense, net for the three months ended March 31, 2000 was $59,200 compared to $190,776 for the three months ended March 31, 1999. The decrease is -23- attributable to an increase in interest income earned on a higher average balance of cash and a decrease in interest paid on the Company's capital lease obligation and inventory line of credit. OTHER INCOME (EXPENSE) Other expense for the three months ended March 31, 1999 included an accrual of $140,000 for a potential payment that may be due in conjunction with registration of shares underlying the Company's convertible preferred stock. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, the Company had cash and cash equivalents of $6,429,994 and working capital of $29,428,210 compared to cash and cash equivalents of $2,475,345 and a working capital deficit of $4,817,879 at December 31, 1999. Net cash used in operating activities during the first quarter of 2000 was $5,531,168, primarily representing cash used to fund the Company's net loss and a decrease in accounts payable. Net cash used in investing activities was $1,614,894, while $11,100,711 in cash was provided by financing activities. As a result of all of the above, cash and cash equivalents increased by $3,954,649 for the three months ended March 31, 2000. During the three months ended March 31, 1999, net cash used in operating activities was $2,140,287, net cash used in investing activities was $220,645, and $1,963,776 in cash was provided by financing activities. On January 3, 2000, the Company issued 6,672,031 shares of common stock valued at $19.50 per share and a warrant with an exercise price of $10,937,002 and valued at $18,051,784 as consideration for $100,000,000 of CBS advertising, promotion and content over a seven year period and $5,303,030 in cash. On February 8, 2000 the Company issued 100,000 shares of common stock valued at $1,650,000 in order to reacquire territorial rights as per a franchise agreement. The company closed its retail operations in December 1999 and $1,650,000 was accrued for the accompanying December 31, 1999 consolidated balance sheet as accrued reserve for closed stores. In 1998, the Company's Board of Directors approved a plan for the repurchase of up to $1.0 million of the Company's common stock. Pursuant to the plan, during 2000 the Company repurchased 12,700 shares of its common stock for an aggregate consideration of $198,075, or an average purchase price of $15.60. During the three months ended March 31, 2000, the Company issued 1,306,999 shares of common stock upon the exercise of outstanding stock options and warrants, for which the Company received $6,120,046 in cash exercise proceeds and $5,468,501 in additional promotional advertising from CBS. The growth of our Internet operations has required substantial financing and we expect to continue to require additional financing to fund our growth plan and for working capital. Our operating plans and assumptions indicate that anticipated cash flows when combined with other potential sources of capital, will be enough to meet our working capital requirements for the year 2000. If plans change or our assumptions prove to be inaccurate, we may need to seek further financing or curtail our operations. Our long-term financial success depends on our ability to generate enough revenue to offset operating expenses. To the extent we do not generate -24- sufficient revenues to offset expenses we will require further financing to fund our ongoing operations. YEAR 2000 ISSUES The Company believes that due to the newness of the Company's Internet operations, all Internet systems are currently year 2000 compliant and any new systems acquired or developed to support expansion of the Company's Internet operations are year 2000 compliant. Significant vendors were contacted to ensure that their year 2000 issues will be resolved in a timely manner and will not be disruptive to the Company's operations. Year 2000 had no adverse effects on the Company's current business operation or financial conditions nor does the Company expect an adverse effect on future operations. INFLATION AND SEASONALITY Although the Company cannot accurately determine the precise effects of inflation, it does not believe inflation has a material effect on the Company's sales or results of operations. The Company does, however, consider its business to be somewhat seasonal and expects net revenues to be generally higher during the second and fourth quarters of each fiscal year for its Tekno Books book development and licensing operation as a result of the general publishing industry practice of paying royalties semi-annually. The Company's entertainment retail business is also seasonal with the holiday season accounting for the largest percentage of annual net sales. In addition, although not seasonal, the Company's intellectual properties division and NetCo Partners both experience significant fluctuations in their respective revenue streams, earnings and cash flow as a result of the significant amount of time that is expended in the creation and development of the intellectual properties and their respective licensing agreements. While certain of the development costs are incurred as normal recurring operating expenses, the recognition of licensing revenue is typically triggered by specific contractual events which occur at different points in time rather than on an evenly recurring basis. -25- PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS During the quarter ended March 31, 2000, the Company issued a total of 1,306,999 shares of its common stock upon the exercise of outstanding warrants and options with exercise prices ranging from $5.00 to $9.28 per share. The Company received gross proceeds of $11,588,547 for issuance of this common stock and paid no fees or commissions related thereto. These amounts include issuance of 1,178,892 shares of Common Stock to CBS Corporation upon exercise of a warrant with a total exercise price of $10.9 million consisting of $5.47 million in cash and $5.47 million in the form of a commitment to provide advertising and promotion of the Company's web sites across the full range of CBS media properties. In February 2000 the Company issued an aggregate of 100,000 shares of Common Stock to a third party to reacquire franchise rights purchased by this individual during 1997. During the quarter ended March 31, 2000, the Company issued stock options and warrants to purchase an aggregate of 1,457,955 shares of the Company's common stock, including 185,527 stock options granted to employees at exercise prices ranging from $14.875 to $19.00 and warrants to purchase a total of 1,272,428 (including a warrant issued to CBS Corporation for 1,178,892 shares) shares at exercise prices ranging from $9.28 to $17.875 per share. Options granted to employees are subject to vesting periods ranging from six months to four years and generally expire five years from the date of issuance. The Company did not pay any placement fees or commissions in connection with the issuance of the securities. The common stock issued by the Company upon exercise of options granted under the Company's 1993 Stock Option Plan were registered under the Securities Act of 1933 pursuant to a registration Statement on Form S-8 filed by the Company with the Securities and Exchange Commission on October 23, 1996. The other securities described above were issued without registration under the Securities Act of 1933 by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, as transactions by an issuer not involving a public offering, each recipient of securities having delivered appropriate investment representations to the Company with respect thereto and having consented to the imposition of restrictive legends upon the certificates evidencing such securities. -26- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit Incorporated by No. Description Reference From --- ----------- -------------- 3.1 Amended and Restated Articles of Incorporation (1) 3.2 Bylaws (2) 4.1 Form of Common Stock Certificate (2) 4.2 Rights Agreement dated as of August 23, 1996 between the (3) Company and American Stock Transfer & Trust Company, as Rights Agent 10.1 Advertising and Promotion Agreement dated January 3, 2000 * between hollywood.com, Inc, and CBS Corporation 10.2 Content License Agreement dated January 3, 2000 between * hollywood.com, Inc. and CBS Corporation 10.3 Warrant dated January 3, 2000 issued in the name of CBS * Corporation for 1,178,892 shares of Common Stock 10.4 Investor's Rights Agreement dated January 3, 2000 between the Company and CBS Corporation * 10.5 Voting Agreement dated January 3, 2000 among the Company, CBS Corporation and the other parties signatory thereto * 27.1 Financial Data Schedule *
-27- - ------------------ * Filed as an exhibit to this Form 10-Q (1) Incorporated by reference from the exhibit filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (2) Incorporated by reference from the exhibit filed with the Company's Registration Statement on Form SB-2 (No. 33-69294). (3) Incorporated by reference from Exhibit 1 to the Company's Current Report on Form 8-K filed on October 20, 1999. (b) Reports on Form 8-K The Company did not file any Current Report on Form 8-K during the quarter ended March 31, 2000. -28- SIGNATURE 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 thereunto duly authorized. HOLLYWOOD, INC. Date: May 12, 1999 By: /s/ Mitchell Rubenstein ---------------------------------------------------- Mitchell Rubenstein, Chairman of the Board and Chief Executive Officer (Principal executive officer) Date: May 12, 1999 By: /s/ Margaret H. Fenton ------------------------------------------------------ Margaret H. Fenton, Vice President of Finance (Principal financial and accounting officer) -29- EXHIBIT INDEX
Exhibit Incorporated by No. Description Reference From --- ----------- -------------- 3.1 Amended and Restated Articles of Incorporation (1) 3.2 Bylaws (2) 4.1 Form of Common Stock Certificate (2) 4.2 Rights Agreement dated as of August 23, 1996 between the (3) Company and American Stock Transfer & Trust Company, as Rights Agent 10.1 Advertising and Promotion Agreement dated January 3, 2000 * between hollyywood.com, Inc. and CBS Corporation 10.2 Content License Agreement dated January 3, 2000 between * hollywood.com, Inc.and CBS Corporation 10.3 Warrant dated January 3,000 issued in the name of CBS * Corporation for 1,178,892 10.4 Investor's Rights Agreement dated January 3, 2000 between * the Company and CBS Corporation 10.5 Voting Agreement dated January 3, 2000 among the Company, * CBS Corporation and the other parties signatory thereto 27.1 Financial Data Schedule *
-30- EX-10.1 2 ADVERTISING AND PROMOTION AGREEMENT EXHIBIT A ADVERTISING AND PROMOTION AGREEMENT AGREEMENT made as of the 3rd day of January, 1999, by and between CBS Corporation, a Pennsylvania corporation with offices at 51 West 52nd Street, New York, New York 10019 ("CBS") and hollywood.com, Inc., a California corporation with offices at 2255 Glades Road, Suite 237 W, Boca Raton, Florida, 33431-7383 ("Hollywood" or the "Company"). 1. GENERAL DEFINITIONS 1.1 "Affiliate" - means any Person that directly or indirectly (through one or more intermediaries) controls, is controlled by, or is under common control with such Person concerned. 1.2 "Annual Ad Sales Commitment" - shall have the meaning set forth in paragraph 2.2 hereof. 1.3 "Annual Additional Promo Commitment" - shall have the meaning set forth in subparagraph 2.3(a) hereof. 1.4 "Arbitration Proceeding" - means a proceeding conducted in accordance with the following rules: (a) such proceeding is commenced by the party concerned, within five (5) days after notice to the other party of its intent to elect arbitration (under paragraph 1.6 below), and requesting the New York office of the American Arbitration Association to designate one arbitrator (who is a retired federal or state judge or a member of the CPC Panel of Distinguished Neutrals of the CPR Institute for Dispute Resolution and who is not and has not been an affiliate, employee, consultant, officer, director or stockholder of CBS or Big Entertainment, Inc. ("BEI") to conduct the proceeding; (b) within seven (7) days after the designation of the arbitrator, the arbitrator and the parties shall meet, at which time each party shall be required to set forth in writing all disputed issues, together with its proposed resolution of the matter, all in reasonable detail and containing such supporting materials it may choose to submit; (c) the arbitrator shall set a date for a hearing, which shall be no later than ten (10) days after the submission of written proposals pursuant to subparagraph 1.4(b) above, to discuss each of the issues identified by the parties. Each party shall have the right to be represented by counsel. The arbitration shall be governed by the Commercial Arbitration Rules of the American Arbitration Association; provided, however, that the Federal Rules of Evidence shall apply with regard to the admissibility of evidence; (d) the arbitrator shall rule on the matter at issue within seven (7) days after the completion of the hearing described in subparagraph 1.4(c) above. All rulings of the 1 arbitrator shall be in writing, shall be delivered to the parties and shall be final and conclusive as to any such matter; and (e) the arbitration shall be conducted in New York City. 1.5 "Capital Stock" - means any common stock or preferred stock of BEI and any options, warrants, rights, or other securities that are convertible, exercisable, or exchangeable into common stock or preferred stock of BEI. 1.6 "CBS Competitor" - means any Person, other than CBS or any Affiliate of CBS, who is primarily engaged in North America directly, or indirectly through an Affiliate, in radio or television programming or radio or television program distribution (including, without limitation, free over-the-air, telephone, Internet or microwave). A CBS Competitor shall not include any of the following: (a) any Person engaged in television programming or television program distribution, provided such Person's aggregate revenues generated from television programming and television program distribution are less than five percent (5%) of the aggregate revenues of the television broadcast market. (b) any Person engaged in free over-the-air radio programming or radio program distribution, provided such Person is not one of the top two (excluding CBS) nationally ranked radio broadcast networks, based on overall radio audience ratings. (c) any Person engaged in television programming or television program distribution over the Internet ("Television Internet Concern"), provided either of the following conditions are met: (i) the aggregate revenue of the Internet video streaming market/industry ("Internet Video Streaming Market") is less than 10% of the aggregate revenue for the network television broadcast market; or (ii) if the aggregate revenue of the Internet Video Streaming Market is equal to or more than 10% of the aggregate revenue for the network television broadcast market, then the Television Internet Concern shall not be a CBS Competitor if the aggregate revenue of such Television Internet Concern generated by television programming or television program distribution over the Internet is less than 10% of the aggregate revenue of the Internet Video Streaming Market. The foregoing markets and revenues shall be identified/delineated by Veronis, Suhler & Associates, provided, however, that if Veronis, Suhler is not a nationally reputable media/ communications forecasting service or does not (as a matter of course) provide the relevant data, the parties shall mutually agree upon a nationally reputable media/communications forecasting service (the "Forecasting Service"). In the event that the parties are unable to reach agreement upon the Forecasting Service within ten (10) 2 business days of commencement of discussion on the issue, then either party hereto shall have the right to elect to commence an Arbitration Proceeding to determine the Forecasting Service. (d) any Person engaged in radio programming or radio program distribution over the Internet ("Radio Internet Concern"), provided either of the following conditions are met: (i) the aggregate revenue of the Internet radio streaming market/industry ("Internet Radio Streaming Market") is less than 10% of the aggregate revenue for the radio broadcast market; or (ii) if the aggregate revenue of the Internet Radio Streaming Market is equal to or more than 10% of the aggregate revenue for the radio broadcast market, then the Radio Internet Concern shall not be a CBS Competitor if the aggregate revenue of such Radio Internet Concern generated by radio programming or radio program distribution over the Internet is less than 10% of the aggregate revenue of the Internet Radio Streaming Market. The foregoing markets and revenues shall be identified/delineated by Veronis, Suhler & Associates, provided, however, that if Veronis, Suhler is not a nationally reputable media/ communications forecasting service or does not (as a matter of course) provide the relevant data, the parties shall mutually agree upon a nationally reputable media/communications forecasting service (the "Forecasting Service"). In the event that the parties are unable to reach agreement upon the Forecasting Service within ten (10) business days of commencement of discussion on the issue, then either party hereto shall have the right to elect to commence an Arbitration Proceeding to determine the Forecasting Service. (e) any Person who owns or operates a multichannel video program distribution service, a cable system, a wireless cable system or a direct broadcast satellite system, so long as such Person does not otherwise engage (either directly or indirectly through an Affiliate) in television or radio programming or program distribution. (f) any Person engaged in the production of television programs or other audio visual materials, so long as such Person does not otherwise engage (either directly or indirectly through an Affiliate) in television or radio programming or program distribution. (g) AT&T Corporation, Comcast Corporation, Gannett Co, Inc. or The Times Mirror Company, as constituted on the date of this Agreement. (h) any Person engaged in television programming or television program distribution, so long as neither CBS nor any Affiliate of CBS owns a majority interest in the CBS Television Network. 3 (i) any Person engaged in radio programming or radio program distribution, so long as neither CBS nor any Affiliate of CBS owns a majority interest in Infinity Broadcasting Corporation. The revenue calculations in the preceding sentences shall be based on the last full fiscal year of the Person (including, without limitation, Television Internet Concern or Radio Internet Concern) concerned and the last full calendar year of the applicable market/industry. 1.7 "CBS Content" - means any Television Content, including archival Content, related to the movie business or any particular motion picture and contained in CBS's regularly scheduled hard news broadcasts, scheduled special events coverage and unscheduled live breaking news coverage, which CBS has the right to license for use on the Internet. Notwithstanding anything contained herein to the contrary, nothing herein shall be construed to grant Hollywood any rights to CBS Radio Content. 1.8 "CBS PLUS" - means a corporation-wide cross media sales unit that designs customized consumer-driven media and marketing programs for advertisers. CBS PLUS media and marketing programs are executed in cooperation with the sales organizations of the entire CBS organization, including: CBS Television Network, the CBS Television Stations Group, CBS/Infinity Radio Stations, CBS Cable and TDI, Infinity Broadcasting Corporation's outdoor advertising business. 1.9 "CBS Media Properties" - means the CBS Television Network, CBS Owned and Operated Television and Radio Stations (including those owned and operated by CBS Affiliates, including Infinity Broadcasting Corporation), CBS Cable, TDI, and CBS wholly-owned Internet websites. 1.10 "Co-Branded Site" - means an Internet Site: (a) that contains/displays a majority of the Content displayed on the Hollywood Site, and displays such Content in the same form and format as featured on the Hollywood Site; (b) is branded with the Hollywood name (or trademark) and the name/trademark of the third-party Web Site and (c) is accessed from the third party Web Site. 1.11 "Collaboration Agreement" - means any one of the following agreements between or among CBS, Hollywood and BEI: (a) this Agreement; (b) the Content Agreement dated as of even date (the "Content License") (c) the Stock Purchase Agreement dated as of even date; (d) the Investor's Rights Agreement dated as of even date and (e) the Voting Agreement dated as of even date. 1.12 "Content" - means text, graphics, photographs, video, audio and/or other data or information, including, without limitation, Television Content, relating to any subject, and/or advertisements. 1.13 "Contract Year" - means the annual period beginning on the date of commencement of the term of this Agreement, and each subsequent annual period during the term 4 beginning on the anniversary of that commencement date (as such Year may be suspended or extended, and those dates postponed, as provided herein). 1.14 "Gross Ad Revenues" - means Gross cash revenues accrued from the sale of advertising on the Hollywood Site (as defined below), provided that such revenues or other consideration shall not be reduced for royalties, commissions, fees or other expenses incurred in generating such revenues and without reduction for taxes. 1.15 "Hollywood Site" - means: (a) the Internet Web Site owned or controlled by Hollywood (and is accessed via the URL www.hollywood.com) that features or will feature movie, music and television-related news, data and merchandise offers and related Content and merchandise offers; (b) any Co-Branded Site and (c) any Mirror Site. 1.16 "Internet" - means a global network of interconnected computer networks, each using the Transmission Control Protocol/Internet Protocol and/or such other standard network interconnection protocols as may be adopted from time to time, which is used to transmit content that is directly or indirectly delivered to a computer or other digital electronic device for display to an end-user, whether such content is delivered through on-line browsers, off-line browsers, or through "push" technology, electronic mail, broadband distribution, satellite, wireless or otherwise. 1.17 "Internet Site" or "Web Site" - means any site or service delivering content on or through the Internet, including, without limitation, any on-line service such as America Online, CompuServe, Prodigy and the Microsoft Network. 1.18 "Person" - means any individual, partnership, corporation or organized group of persons, including agencies and other instrumentalities of governments and states. 1.19 "Term" - shall have the meaning set forth in paragraph 3.1 below. 1.20 "Television Content" - means Content broadcast on television. 1.21 "URL Scroll" - means the exhibition of a written representation of a URL in or during (i.e., at any time from the opening frame through the end of the closing credits) a television program or in/on an Internet Web Site page. 5 2. SCOPE 2.1 (a) During the Term, CBS shall arrange for the placement of advertising and promotion of the Hollywood Site in the media category or type set forth on Exhibit A attached hereto, at the rate of Ten Million Dollars ($10,000,000) per Contract Year (based upon the value ascribed for such advertising in subparagraph 2.1(b) below). A portion of the foregoing $10,000,000 amount may, at the option of Hollywood, be allocated to production costs for such advertising and promotion incurred by CBS or its Affiliates, at Hollywood's request. CBS and Hollywood shall meet periodically to jointly develop a media plan to formulate the Contract Yearly allocation of Ten Million Dollars of advertising and promotion, using the media categories or types set forth in Exhibit A. The media plan shall provide broad-based exposure for the Hollywood Site, including prominent placements in conjunction with appropriate entertainment-related events and programming. The media plan shall provide for the distribution of television and radio ads over various time periods. CBS will endeavor to implement the advertising and promotional goals set forth in the media plan. All advertising and promotional materials shall be subject to the applicable CBS Television Network Advertising Guidelines and CBS's standard preemption policies. CBS shall not have to make any ad placements if the exigencies of time or current or future contractual obligations entered into prior to the time the Company requests such advertising, prevent or restrict CBS from doing so. (b) The rate card value of all broadcast advertising and promotion provided hereunder shall be based upon the average paid unit price, excluding barter, for spots (excluding political spots) purchased during the specific CBS Television Network, CBS television station, CBS/Infinity owned and operated radio station or CBS Cable broadcast in which the advertising or promotion occurs. The value of the banner advertising on CBS Internet Sites shall have a rate card price equal to the average price paid or payable (excluding barter) by third parties for banner advertising during the month in which such advertising is delivered. The price of the billboard ad concerned shall be based on the average price paid or payable (excluding barter) by any third party during the same time period for any similar (in terms of, among other things, location, size, and type of billboard) billboard ad(s) during the month prior to the month in which such billboard ad is delivered. (c) CBS will provide to Hollywood calendar monthly statements, calendar quarterly statements (i.e., March 31, June 30, September 30, December 31) and calendar yearly statements, within twenty (20) days following expiration of the time period concerned (i.e. calendar month, quarter and year) showing the (i) value attributable to each of the media categories and types with respect to the advertising and promotions purchased by Hollywood during the statement period and (ii) the calculation of the aggregate value of advertising purchased. 2.2 (a) CBS will maintain accurate books and records which report the expenditure of the advertising and promotional value by Hollywood and information from which the calculation can be derived. Hollywood may, at its own expense, examine those books and records, as provided in this Section 2.2. Hollywood may make such an examination for a particular statement provided pursuant to subparagraph 2.1(c) only once and such examination must occur within three (3) years after the date such statement is sent by CBS to Hollywood. 6 (CBS will be deemed conclusively to have sent Hollywood the statement concerned at the time prescribed in Section 2.1(c), unless Hollywood notifies CBS otherwise with respect to any statement within sixty (60) days after that designated time.) Hollywood may make those examinations only during CBS's usual business hours, and at the address set forth herein for the provision of notices to CBS, unless otherwise notified. Hollywood will be required to notify CBS at least ten (10) days before the date of planned examination. If Hollywood's examination has not been completed within two (2) months from the time Hollywood begins it, CBS may require Hollywood to terminate it on seven (7) days notice to Hollywood at any time. (b) If any examination of CBS's books and records discloses that: (i) CBS has failed to properly account for advertising and promotions purchased by Hollywood hereunder, then CBS will make appropriate adjustment(s) to the cumulative total purchased by Hollywood. (ii) CBS has overstated the value of advertising purchased by more than 7.5%, then CBS shall reimburse Hollywood for its direct out-of-pocket expenses incurred in identifying such material overstatement. 2.3 (a) During each Contract Year, upon Hollywood's notice to CBS, Hollywood shall have the option to require CBS to sell advertisements/advertising space on the Hollywood Site totaling Gross Ad Revenues up to $1.5 million per Contract Year (the "Annual Ad Sales Option"), provided however, that Hollywood shall reduce the amount of Annual Additional Promo Commitment available to Hollywood, pursuant to paragraph 2.4 below (i.e., $4,300,000 per Contract Year) by the Annual Ad Sales Option or any portion thereof elected/sought by Hollywood. (b) (i) (A) CBS shall include the Hollywood Site in all of its CBS PLUS advertising sales programs and presentations to the extent that such programs/presentations are appropriate in respect of the sale of advertising on Hollywood Site, and (B) CBS shall invite Hollywood ad sales staff members to attend all CBS PLUS sales meetings specifically related to the sale of advertisements/advertising space on the Hollywood Site; and (ii) CBS will have the right to bundle inventory relating to the Hollywood Site with television, radio, cable, Internet and billboard inventory, although Hollywood shall only be credited with the pro-rated value of the advertising which appears on the Hollywood Site. (c) Hollywood shall pay CBS a commission of eight per cent (8%) of Gross Ad Revenues (the "CBS Commission") with respect to advertising sold on the Hollywood Site, in excess of the Annual Ad Sales Option concerned, if any. The CBS Commission shall be payable upon Hollywood's receipt of payment from the advertiser. CBS shall coordinate all such sales of advertisements/advertising space with Hollywood's ad sales staff or as otherwise agreed to by the parties. All sales of advertisements/advertising space by CBS shall be consistent with CPM rates and other pricing then being charged on the Hollywood Site. All sales in excess of the Annual Ad Sales Option shall be subject to the availability of advertising inventory on the Hollywood Site. 7 2.4 (a) (i) In addition to the advertising and promotion described in paragraph 2.1 above, Hollywood shall have the right to require CBS to arrange for placement of advertising and promotion of the Hollywood Site (in the media category or type set forth in Exhibit A, and subject to the terms of this Agreement) at a Market Value of no more than Four Million Three Hundred Thousand Dollars ($4,300,000) during each of the first six Contract Years and Four Million Two Hundred Thousand Dollars ($4,200,000) during the seventh Contract Year (the "Annual Additional Promo Commitment"), subject to the reductions prescribed in section 2.4(a)(ii) below. (ii) The Annual Additional Promo Commitment shall be reduced by: (A) the Annual Ad Sales Option, as prescribed in paragraph 2.3 above; and (B) the Market Value of any Content provided by CBS (during the Contract Year concerned), pursuant to section 2.4(a)(i) of the Content License. (b) (i) Upon commencement of the Contract Year and/or each calendar quarter of the Contract Year concerned, Hollywood shall use reasonable efforts to notify CBS of its election to license CBS Content, exercise the Annual Ad Sales Option or utilize the Annual Additional Promo Commitment, and the respective Market Values thereof. (ii) If, upon expiration of the Contract Year concerned, Hollywood has failed to notify CBS of its election, as set forth in section 2.4(b)(i) above, then the Annual Additional Promo Commitment (or any portion thereof for which Hollywood has failed to notify CBS of its election) will be deemed forfeited. (iii) Except as set forth in section 2.4(b)(ii) above, if upon expiration of the Contract Year concerned, the Annual Additional Promo Commitment has not been exhausted, then the amount of the unused portion of the Annual Additional Promo Commitment may be carried over to the immediately subsequent Contract Year (the "Annual Promo Carryover"), it being understood, however, that (A) in the immediately subsequent Contract Year the Annual Promo Carryover shall be exhausted (first) before the Annual Additional Promo Commitment for such subsequent Contract Year is utilized (B) Hollywood shall identify the intended use for (i.e., allocate) the Annual Promo Carryover during the first thirty (30) days of such subsequent Contract Year, and CBS shall use reasonable efforts to satisfy the allocation request depending upon the availability of the inventory/item sought. In the event that the inventory is not available, then Hollywood shall make a substitute allocation within thirty (30) days following CBS's advising Hollywood that the inventory/item sought is unavailable, (C) any portion of the Annual Promo Carryover unused as of the expiration date of the Contract Year concerned (i.e., such subsequent Contract Year) shall be deemed forfeited, except to the extent Hollywood complied with the notice requirements prescribed herein and CBS did not deliver such portion of the Annual Promo Carryover and (D) any portion of Annual Additional Promo Commitment (including any Annual Promo Carryover) unused as of the expiration date of the Term shall be deemed forfeited, except to the extent Hollywood complied with the notice requirements prescribed herein and CBS did not deliver such 8 portion of the Annual Additional Promo Commitment or Annual Promo Carryover, as applicable. (c) "Market Value", as used in this paragraph 2.3, shall mean: (i) with respect to CBS Content, the average price paid by a third party for the license of such Content on the Internet (provided that CBS has an established market for licenses on the Internet) or, if no such rate (or CBS market) exists, then the average price for worldwide over-the-air free television use (including in all instances, without limitation, any costs related to the retrieval, preparation (e.g., tape transfer and/or duplication) or delivery of CBS Content). (ii) with respect to advertising sales on the Hollywood Site, the proportionate dollar amount (of the Gross Ad Revenues) of the Ad Sales Option . (iii) with respect to CBS advertising and promotion, the unit price for the advertising medium concerned, as described in subparagraph 2.1(b) of this Agreement. 3. TERM 3.1 The term of this Agreement ("Term") shall begin as of the date hereof and shall continue in full force and effect for a period of seven (7) consecutive years, through and including __________, 2006, unless it is terminated earlier in accordance with the terms and conditions stated herein. 4. WARRANTIES, REPRESENTATIONS; INDEMNITEES 4.1 (a) CBS represents and warrants that: (i) it has full power and authority to enter into and fully perform this Agreement; (ii) this Agreement has been duly authorized and is enforceable in accordance with its terms; and (iii) at all times, it will comply with all applicable federal, state, local and foreign laws and regulations. (b) The Company represents, warrants and covenants that: (i) it has full power and authority to enter into and fully perform this Agreement; (ii) this Agreement has been duly authorized and is enforceable in accordance with its terms; 9 (iii) the Hollywood Site will be produced, advertised and transmitted in accordance with all applicable federal, state, local and foreign laws and regulations; and (iv) at all times, it will maintain the Hollywood Site in a professional manner consistent with applicable industry standards. In connection therewith, the Company shall satisfy the following minimum performance standards: (A) use its best efforts to maintain continuous accessibility to the public on the Internet; (B) capability of sustaining traffic of no less than 22 million page views per month, including, without limitation, the existence of a viable technological response, in the event that the foregoing traffic number is exceeded, that is designed to handle at least 44 million page views per month; (C) functionality as outlined/delineated in the most recent business plan for Hollywood; (D) monitoring of the Hollywood Site's traffic flows on a regular basis and (in addition to and above and beyond clause (B) above) implementation of plans to meet expected traffic flows and (E) maintenance of standards of quality and ease of use no less than the quality and ease of use of the Hollywood Site as of this date. (v) advertising and promotion material and any portion thereof created by or on behalf of Hollywood or furnished by Hollywood to CBS and the use thereof shall not violate any law or violate the rights of any Person. 4.2 (a) Each party to this Agreement (the "Indemnifying Party") shall at all times indemnify, hold harmless and defend the other party (collectively, the "Indemnified Party") from and against any loss, cost, liability or expense (including court costs and reasonable attorneys' fees) arising out of or resulting from any breach by the Indemnifying Party of any representation, warranty or covenant contained herein. In the event of any claim, the Indemnified Party shall: (i) promptly notify the Indemnifying Party of the claim; (ii) allow the Indemnifying Party to direct the defense and settlement of third party claim with counsel of the Indemnifying Party's choosing; and (iii) provide the Indemnifying Party, at the Indemnifying Party's expense, with information and assistance that is reasonably necessary for the defense and settlement of the third party claim. The Indemnified Party reserves the right to retain counsel, at the Indemnified Party's sole expense, to participate in the defense of any such claim. The Indemnifying Party shall not settle any such claim or alleged claim without first obtaining the Indemnified Party's prior written consent, which consent shall not be unreasonably withheld, if the terms of such settlement would adversely affect the Indemnified Party's rights under this Agreement or otherwise. If the Indemnifying Party assumes the defense and settlement of the claim as set forth above, then the Indemnifying Party's only obligation is to satisfy the claim, judgment or approved settlement. (b) Any sums payable by Hollywood under this paragraph 4.2 may be offset by Hollywood against the Market Value of any advertising, Content or Ad Sales Option deliverable by CBS (the "CBS Deliverable(s)") pursuant to this Agreement or the Content License (the "Indemnity Offset"). The amount or Market Value of the CBS Deliverable concerned will be reduced by the proportion thereof used for or contributed to the Indemnity Offset. For purposes of the Indemnity Offset, Hollywood shall be obligated to exhaust the CBS Deliverables as follows: 10 (i) The Market Value of any advertising or promotion, deliverable pursuant to paragraph 2.1 of this Agreement, shall be fully exhausted before any other CBS Deliverable is used for/contributed to the Indemnity Offset. (ii) Provided the Deliverable described in section 4.2(b)(i) above has been fully exhausted, the Market Value of any Annual Additional Promo Commitment (deliverable pursuant to paragraph 2.4 above) or Annual Ceiling (as such term is defined in the Content License and deliverable pursuant to subparagraph 2.3(c) of the Content License), shall be fully exhausted before any other CBS Deliverable is used for/contributed to the Indemnity Offset. (iii) The Market Value of any Ad Sales Option, deliverable pursuant to paragraph 2.2 of this Agreement, may be used for/contributed to the Indemnity Offset only if and when the Deliverables described in sections 4.2(b)(i) and (ii) above have been fully exhausted. For avoidance of doubt, CBS's obligation to deliver any CBS Deliverable, pursuant to this Agreement or the Content License, shall be extinguished (or reduced, as applicable) to the extent that such CBS Deliverable is used for/contributed to any Indemnity Offset. 5. REMEDIES 5.1 (a) CBS shall have the right to suspend and/or withdraw placement of all advertising and promotion and Hollywood Site ad sales: (i) during such time as the Company is enjoined from using the tradename, trademark or term(s) "HOLLYWOOD.com" on or in connection with the Hollywood Site and has not renamed the Website. The Company shall rename the Hollywood Site within twenty (20) days following the issuance of any injunction or the resolution of any claim which requires the Company to cease using the tradename, trademark or term(s) "HOLLYWOOD.com" on or in connection with its Website. (ii) In the event that the Hollywood Site is not operational for a period of seventy-two (72) consecutive hours until it becomes operational in a manner consistent with the standards in the industry. (b) CBS may exercise its right to suspend and/or withdraw placement of all advertising and promotion and all advertising sales pursuant to this paragraph 5.1 by sending the appropriate notice to Hollywood. No exercise by CBS of its rights under this Article 5 will limit CBS's remedies by reason of Hollywood's or BEI's default, CBS's rights to exercise any other rights under this Article 5, or any of CBS's other rights. 5.2 CBS shall have the right to terminate this Agreement if any of the following occurs: (a) The Hollywood Site contains Content which, in CBS's reasonable business judgment, violates Article I or Article III of the CBS License Guidelines (as set forth in 11 the Content License) and Hollywood fails to remove such Content from the Hollywood Site within ten (10) days after written notice of CBS's objection thereto demanding the removal of such Content. (b) Except as otherwise set forth in subparagraph 5.2(a) above, either Hollywood or BEI (if applicable) breaches any material term or condition of this Agreement, or any Collaboration Agreement and fails to: (i) cure such breach within thirty (30) days after CBS's notice of such breach, or (ii) complete curing such breach within sixty (60) days following CBS's notice of such breach; provided however that this clause (ii) shall only apply to a default that is incapable of being cured in thirty (30) days. The foregoing cure period will not apply: (i) solely with respect to this Agreement, to a term or condition (in this Agreement) for which a specific cure period is provided; or (ii) to a breach incapable of being cured. (c) BEI or Hollywood: (i) becomes insolvent or unable to pay its debts as they mature or makes an assignment for the benefit of its creditors; (ii) is the subject of a voluntary petition in bankruptcy or any voluntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors, if such petition or proceeding is not dismissed within sixty (60) days of filing; (iii) becomes the subject of any involuntary petition in bankruptcy or any involuntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors, if such petition or proceeding is not dismissed within sixty (60) days of filing; or (iv) is liquidated or dissolved. (d) BEI issues to a Person any voting securities of BEI and: (i) at the time of such issuance such Person is a CBS Competitor and (ii) as a result of such issuance such Person beneficially owns or controls, directly or indirectly, more than fifteen (15%) percent of the total voting power of BEI, in the aggregate. For the purposes of this subparagraphs 5.2(d), 5.2(e) and 5.2(f): (x) the term "beneficial ownership" shall have the meaning set forth in Section 13(d) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; (y) the term "total voting power" shall mean at any time, the total number of votes that may be cast in the election of directors of BEI at any meeting of the holders of voting securities at such time for such purpose; and (z) the term "voting securities" shall mean the Capital Stock and any other securities issued by BEI having the power to vote in the election of directors of BEI including, without limitation, any securities having such power only upon the occurrence of a default or any other extraordinary contingency. (e) BEI issues to a Person any voting securities of BEI and: (i) at the time of such issuance such Person is a CBS Competitor that beneficially owns or controls, directly or indirectly, more than fifteen (15%) percent of the total voting power of BEI and (ii) as a result of such issuance the voting power of such Person is increased by any amount. (f) BEI's board of directors consents to the acquisition of voting securities by a CBS Competitor such that as a result of such consent, the CBS Competitor beneficially owns or controls, directly or indirectly, more than 15% of the total voting power of BEI and at the time of such consent the Rights Agreement by and between BEI and American Stock Transfer & Trust Company dated August 23, 1996, as amended, is in full force and effect. 12 (g) Hollywood discontinues using the "Hollywood.com" mark (or any substitute mark approved by CBS) and does not establish use of a substitute mark reasonably acceptable to CBS within thirty (30) days. (h) The Hollywood Site ceases to operate due to any circumstance(s) (other than circumstances beyond Hollywood's reasonable control, which circumstances simultaneously affect a substantial number of web sites on the Internet) for: (i) a period of thirty (30) consecutive days; or (ii) a period of one week at least two times in any six (6) month period. CBS may exercise its right to terminate pursuant to this paragraph 5.2 by sending Hollywood appropriate written notice. No exercise by CBS of any of its rights under this Article 5 will limit CBS's remedies by reason of Hollywood's or BEI's default, CBS's rights to exercise any other rights under this Article 5, or any of CBS's other rights. 6. GENERAL 6.1 Neither party may assign this Agreement, or their respective rights and obligations hereunder, in whole or in part without the other party's prior written consent. Any attempt to assign this Agreement without such consent shall be void and of no effect ab initio. Notwithstanding the foregoing, CBS may assign this Agreement or any of its rights and obligations hereunder to an affiliate or to any entity controlling, controlled by or under common control with, CBS, or to any entity that acquires CBS by purchase of stock or by merger or otherwise, or by obtaining substantially all of CBS's assets (a "CBS Assignee"), provided that any such CBS Assignee, or any division thereof, thereafter succeeds to all of the rights and is subject to all of the obligations of CBS under this Agreement. 6.2 Each party hereto irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County; and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby or thereby. Each the parties hereto agrees to commence any such action, suite or proceeding either in the United States District Count for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the parties hereto further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth below shall be effective service of process for any action, suite or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this paragraph 6.2. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suite or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County; or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in any inconvenient forum. 13 6.3 If any provision of this Agreement (or any portion there) or the application of any such provision (or any portion thereof) to any Person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other Persons or circumstances. 6.4 All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and shall be deemed given when so delivered by hand, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows:
(a) if to Hollywood, hollywood.com, Inc. 2255 Glades Road, Suite 237W Boca Raton, Florida 33431 Attention: Mitchell Rubenstein, Chief Executive Officer with a copy to: hollywood.com, Inc. 2255 Glades Road, Suite 237W Boca Raton, Florida 33431 Attention: W. Robert Shearer, General Counsel and a copy to: hollywood.com, Inc. 1620 26th Street, Suite 370 South Santa Monica, CA 90404 Attention: Scott Shrock, Vice President of Operations and a copy to: Greenberg Traurig 200 Park Avenue New York, New York 10166 Attention: Clifford E. Neimeth, Esq. (b) if to CBS: CBS Corporation 51 West 52nd Street New York, New York 10019 14 Attention: Chief Financial Officer with a copy to: CBS Corporation 51 West 52nd Street New York, New York 10019 Attention: General Counsel
6.5 The parties to this Agreement are independent contractors. There is no relationship of partnership, joint venture, employment, franchise, or agency between the parties. Neither party shall have the power to bind the other or incur obligations on the other's behalf without the other's prior written consent. 6.6 No failure of either party to exercise or enforce any of its rights under this Agreement shall act as a waiver of such right. 6.7 This Agreement, along with any Exhibits hereto, contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. Neither party shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein. 6.8 This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to each of the other parties. 6.9 This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 6.10 This Agreement shall be governed by and construed in accordance with the internal laws of the state of New York applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 6.11 This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any Person, other than the parties hereto and such assigns, any legal or equitable rights hereunder. 6.12 The headings contained in this Agreement or in any Exhibit or Schedule hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning 15 as defined in this Agreement. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. HOLLYWOOD.COM, INC. CBS CORPORATION By: /s/ W. Robert Shearer By: /s/ Fredric G., Reynolds ---------------------------- ------------------------ Name: W. Robert Shearer Name: Fredric G. Reynolds ---------------------------- ------------------- Title: Senior Vice President Title: Executive Vice President and General Counsel and Chief Financial Officer 16 EXHIBIT A --------- Attached to and forming a part of the Agreement made as of January 3, 1999 between CBS Corporation, Big Entertainment, Inc. and hollywood.com, Inc.. - -------------------------------------------------------------------------------- Placement Possibilities 1. CBS Television Network programming 2. CBS Owned and Operated Television Stations' and Infinity owned and operated Radio Stations' programming 3. Infinity outdoor billboards and all other outdoor media owned by CBS 4. CBS Internet Sites 5. CBS Cable 6. CBS Syndicated Programs Placement types o 30 second units where available o 15 second units where available o 10 second units where available o URL Scrolls (5 seconds) o On-air mentions (30 seconds) o Banner ads, buttons and sponsorships o Credit rolls/sign-offs (5 seconds) 17 EX-10.2 3 CONTENT LICENSE AGREEMENT EXHIBIT A CONTENT LICENSE AGREEMENT AGREEMENT made as of the 3rd day of January, 1999, by and between CBS Corporation, a Pennsylvania corporation with offices at 51 West 52nd Street, New York, New York 10019 ( "CBS"), and hollywood.com, Inc., a California corporation with offices at 2255 Glades Road, Suite 237W, Boca Raton, Florida 33431 ("Hollywood"). 1. DEFINITIONS 1.1 "Affiliate" of the Person concerned, means a Person that directly or indirectly (through one or more intermediaries) controls, is controlled by or is under common control with such Person. 1.2 "Annual Ceiling" shall have the meaning set forth in section 2.3(c)(i) hereof. 1.3 "Arbitration Proceeding" means a proceeding conducted in accordance with the following rules: (a) such proceeding is commenced by the party concerned, within five (5) days after notice to the other party of its intent to elect arbitration (under paragraph 1.6 below), and requesting the New York office of the American Arbitration Association to designate one arbitrator (who is a retired federal or state judge or a member of the CPC Panel of Distinguished Neutrals of the CPR Institute for Dispute Resolution and who is not and has not been an affiliate, employee, consultant, officer, director or stockholder of CBS or Big Entertainment, Inc. ("BEI")) to conduct the proceeding; (b) within seven (7) days after the designation of the arbitrator, the arbitrator and the parties shall meet, at which time each party shall be required to set forth in writing all disputed issues, together with its proposed resolution of the matter, all in reasonable detail and containing such supporting materials it may choose to submit; (c) the arbitrator shall set a date for a hearing, which shall be no later than ten (10) days after the submission of written proposals pursuant to subparagraph 1.3(b) above, to discuss each of the issues identified by the parties. Each party shall have the right to be represented by counsel. The arbitration shall be governed by the Commercial Arbitration Rules of the American Arbitration Association; provided, however, that the Federal Rules of Evidence shall apply with regard to the admissibility of evidence; (d) the arbitrator shall rule on the matter at issue within seven (7) days after the completion of the hearing described in subparagraph 1.3(c) above. All rulings of the arbitrator 1 shall be in writing, shall be delivered to the parties and shall be final and conclusive as to any such matter; and (e) the arbitration shall be conducted in New York City. 1.4 "Capital Stock" means any common stock or preferred stock of BEI and any options, warrants, rights, or other securities that are convertible, exercisable, or exchangeable into common stock or preferred stock of BEI. 1.5 "CBS License Guidelines" means the clearance, form, format and use restrictions and procedures set forth in Exhibit A attached hereto. 1.6 "CBS Competitor" means any Person, other than CBS or any Affiliate of CBS, who is primarily engaged in North America directly, or indirectly through an Affiliate, in radio or television programming or radio or television program distribution (including, without limitation, free over-the-air, telephone, Internet or microwave). A CBS Competitor shall not include any of the following: (a) any Person engaged in television programming or television program distribution, provided such Person's aggregate revenues generated from television programming and television program distribution are less than five percent (5%) of the aggregate revenues of the television broadcast market. (b) any Person engaged in free over-the-air radio programming or radio program distribution provided such Person is not one of the top two (excluding CBS) nationally ranked radio broadcast networks, based on overall radio audience ratings. (c) any Person engaged in television programming or television program distribution over the Internet ("Television Internet Concern"), provided either of the following conditions are met: (i) the aggregate revenue of the Internet video streaming market/industry ("Internet Video Streaming Market") is less than 10% of the aggregate revenue for the network television broadcast market; or (ii) if the aggregate revenue of the Internet Video Streaming Market is equal to or more than 10% of the aggregate revenue for the network television broadcast market, then the Television Internet Concern shall not be a CBS Competitor if the aggregate revenue of such Television Internet Concern generated by television programming or television program distribution over the Internet is less than 10% of the aggregate revenue of the Internet Video Streaming Market. The foregoing markets and revenues shall be identified/delineated by Veronis, Suhler & Associates, provided, however, that if Veronis, Suhler is not a nationally reputable media/ communications forecasting service or does not (as a matter of course) provide the relevant data, 2 the parties shall mutually agree upon a nationally reputable media/communications forecasting service (the "Forecasting Service"). In the event that the parties are unable to reach agreement upon the Forecasting Service within ten (10) business days of commencement of discussion on the issue, then either party hereto shall have the right to elect to commence an Arbitration Proceeding to determine the Forecasting Service. (d) any Person engaged in radio programming or radio program distribution over the Internet ("Radio Internet Concern"), provided either of the following conditions are met: (i) the aggregate revenue of the Internet radio streaming market/industry ("Internet Radio Streaming Market") is less than 10% of the aggregate revenue for the radio broadcast market; or (ii) if the aggregate revenue of the Internet Radio Streaming Market is equal to or more than 10% of the aggregate revenue for the radio broadcast market, then the Radio Internet Concern shall not be a CBS Competitor if the aggregate revenue of such Radio Internet Concern generated by radio programming or radio program distribution over the Internet is less than 10% of the aggregate revenue of the Internet Radio Streaming Market. The foregoing markets and revenues shall be identified/delineated by Veronis, Suhler & Associates, provided, however, that if Veronis, Suhler is not a nationally reputable media/ communications forecasting service or does not (as a matter of course) provide the relevant data, the parties shall mutually agree upon a nationally reputable media/communications forecasting service (the "Forecasting Service"). In the event that the parties are unable to reach agreement upon the Forecasting Service within ten (10) business days of commencement of discussion on the issue, then either party hereto shall have the right to elect to commence an Arbitration Proceeding to determine the Forecasting Service. (e) any Person who owns or operates a multichannel video program distribution service, a cable system, a wireless cable system or a direct broadcast satellite system, so long as such Person does not otherwise engage (either directly or indirectly through an Affiliate) in television or radio programming or program distribution. (f) any Person engaged in the production of television programs or other audio visual materials, so long as such Person does not otherwise engage (either directly or indirectly through an Affiliate) in television or radio programming or program distribution. (g) AT&T Corporation, Comcast Corporation, Gannett Co, Inc. or The Times Mirror Company, as constituted on the date of this Agreement. (h) any Person engaged in television programming or television program distribution, so long as neither CBS nor any Affiliate of CBS owns a majority interest in the CBS Television Network 3 (i) any Person engaged in radio programming or radio program distribution, so long as neither CBS nor any Affiliate of CBS owns a majority interest in Infinity Broadcasting Corporation. The revenue calculations in the preceding sentences shall be based on the last full fiscal year of the Person (including, without limitation, Television Internet Concern or Radio Internet Concern) concerned and the last full calendar year of the applicable market/industry. 1.6 "CBS Content" means any Television Content, including archival Content, related to the movie business or any particular motion picture and contained in CBS's regularly scheduled hard news broadcasts, scheduled special events coverage and unscheduled live breaking news coverage, which CBS has the right to license for use on the Internet. Notwithstanding anything contained herein to the contrary, nothing herein shall be construed to grant Hollywood any rights to CBS Radio Content. 1.7 "CBS Content Pages" means pages of the Hollywood Site that include any CBS Content. 1.8 "Ceiling Amount" shall have the meaning ascribed to it in section 2.4(a)(i). 1.9 "Co-Branded Site" means an Internet Site: (a) that contains/displays a majority of the Content displayed on the Hollywood Site, and displays such Content in the same form and format as featured on the Hollywood Site; (b) is branded with the Hollywood name (or trademark) and the name/trademark of the third-party Web Site and (c) is accessed from the third party Web Site. 1.10 "Collaboration Agreement" means any one of the following agreements between or among CBS, Hollywood and BEI: (a) this Agreement; (b) the Advertising and Promotion Agreement dated as of even date (the "Ad Agreement") (c) the Stock Purchase Agreement dated as of even date; (d) the Investor's Rights Agreement dated as of even date and (e) the Voting Agreement dated as of even date. 1.11 "Content" means text, graphics, photographs, video, audio and/or other data or information, including, without limitation, Television Content, relating to any subject, and/or advertisements. 1.12 "Contract Year" means the annual period beginning on the date of commencement of the term of this Agreement, and each subsequent annual period during the term beginning on the anniversary of that commencement date (as such Year may be suspended or extended, and those dates postponed, as provided herein). 1.13 "Hollywood Content" means any Content owned or controlled by Hollywood other than CBS Property (as defined in subparagraph 4.1(a)). 4 1.14 "Hollywood Site" means: (a) the Internet Web Site owned or controlled by Hollywood (and is accessed via the URL www.hollywood.com) that features or will feature movie, music and television-related news, data and merchandise offers and related Content and merchandise offers; (b) any Co-Branded Site and (c) any Mirror Site. 1.15 "Intellectual Property Rights" means all inventions, discoveries, trademarks, patents, trade names, copyrights, jingles, know-how, intellectual property, software, shop rights, licenses, developments, research data, designs, technology, trade secrets, test procedures, processes, route lists, computer programs, computer discs, computer tapes, literature, reports and other confidential information, intellectual and similar intangible property rights, whether or not patentable or copyrightable (or otherwise subject to legally enforceable restrictions or protections against unauthorized third party usage), and any and all applications for, registrations of and extensions, divisions, renewals and reissuance of, any of the foregoing, and rights therein, including without limitation (a) rights under any royalty or licensing agreements, and (b) programming and programming rights, whether on film, tape or any other medium. 1.16 "Internet" means a global network of interconnected computer networks, each using the Transmission Control Protocol/Internet Protocol and/or such other standard network interconnection protocols as may be adopted from time to time, which is used to transmit Content that is directly or indirectly delivered to a computer or other digital electronic device for display to an end-user, whether such Content is delivered through on-line browsers, off-line browsers, or through "push" technology, electronic mail, broadband distribution, satellite, wireless or otherwise. 1.17 "Internet Site" or "Web Site" means any site or service delivering Content on or through the Internet, including, without limitation, any on-line service such as America Online, Compuserve, Prodigy and the Microsoft Network. 1.18 "Market Value" shall have the meaning ascribed to it in section 2.4(a)(iii). 1.19 "Mirror Site" means an Internet Site that contains the same Content as the Hollywood Site and is displayed in the same form/format as the Hollywood Site, and which (a) is located at a geographic location distinct from the Hollywood Site and (b) is created for the sole purpose of improving the performance of and accessibility to the Hollywood Site. 1.20 "Person" means any natural person, legal entity, or other organized group of persons or entities. (All pronouns whether personal or impersonal, which refer to Persons include natural persons and other Persons.) 1.21 "Television Content" consists of Content broadcast on television. 1.22 "Term" means the term specified in paragraph 3.1 below. 5 2. LICENSE 2.1 (a) Subject to the terms and conditions contained herein, CBS grants to Hollywood the non-exclusive right and license to: (i) use, copy, publicly display, publicly perform, distribute, or otherwise make the CBS Content available on the Hollywood Site during the Term, and (ii) Archive the CBS Content after expiration of the Term, to the extent CBS has the right to so license such Content to Hollywood. (b) CBS agrees that users of the Hollywood Site may view, access, retrieve, copy and print only for noncommercial private use (which use shall exclude any not-for-profit private use) any CBS Content distributed hereunder on the Hollywood Site. Nothing in this Agreement grants Hollywood ownership or other rights in or to the CBS Content, except in accordance and to the extent of this license. (c) "Archive", as used in this paragraph 2.1 (and with respect to CBS Content), shall mean the retention of CBS Content in the form, format and context originally displayed on the Hollywood Site during the Term (without, for avoidance of doubt, any editing or derivative use thereof), and use thereof in accordance with the terms of this Agreement applicable during the Term (including, without limitation, the CBS License Guidelines). 2.2 Hollywood's exercise of the rights granted herein shall conform to the restrictions or requirements set forth in the CBS License Guidelines, as the CBS License Guidelines may be amended or revised from time to time by CBS, to reflect any changes in the business, practice, procedures or policies of CBS. CBS will notify Hollywood of such amendments/revisions. 2.3 Hollywood shall have reasonable access to, and, subject to the conditions stated in the next sentence, CBS shall deliver CBS Content to Hollywood in a mutually agreed-upon form and format, provided Hollywood's request for CBS Content is reasonable. Notwithstanding anything to the contrary contained in this paragraph, CBS shall have the right to refuse to deliver to Hollywood any CBS Content if, in CBS's reasonable judgment: (i) any Content on the Hollywood Site (the "Hollywood Content") or (ii) the use contemplated for the CBS Content, conflicts with, interferes with or is detrimental to CBS's interests, reputation or business or might subject CBS to unfavorable regulatory action, violate any law, infringe the rights of any Person, or subject CBS to liability for any reason. 2.4 (a) (i) The CBS Content licensed hereunder shall not exceed a total Market Value of Thirty Million Dollars ($30,000,000) during the Term (the "Aggregate Ceiling") or a Market Value of Four Million Three Hundred Thousand Dollars ($4,300,000) during each of the first six Contract Years and Four Million Two Hundred Thousand Dollars ($4,200,000) during the seventh Contract Year (the "Annual Ceiling"), subject to the 6 reduction(s) prescribed in section 2.4(a)(ii) below. The Aggregate Ceiling and the Annual Ceiling are sometimes hereinafter individually or collectively referred to as the "Ceiling Amount". (ii) The Annual Ceiling shall be reduced by: (A) the (Market Value of the) Annual Ad Sales Option, as prescribed in paragraph 2.3 of the Ad Agreement; and (B) the Market Value of any advertising or promotion provided by CBS (during the Contract Year concerned), pursuant to paragraph 2.4 of the Ad Agreement. (iii) "Market Value", as used in this subparagraph 2.4(a), shall mean: (A) with respect to CBS Content, the average price paid by a third party for the license of such Content on the Internet (provided that CBS has an established market for licenses on the Internet) or, if no such rate (or CBS market) exists, then the average price for worldwide over-the-air free television use (including in all instances, without limitation, any costs related to the retrieval, preparation (e.g., tape transfer and/or duplication) or delivery of CBS Content). (B) with respect to advertising sales on the Hollywood Site, the proportionate dollar amount (of the Gross Ad Revenues, as such term is defined in the Ad Agreement) of the Ad Sales Option (as defined in paragraph 2.3 of the Ad Agreement). (C) with respect to CBS advertising and promotion, the unit price for the advertising medium concerned, as described in subparagraph 2.1(b) of the Ad Agreement. (b) (i) Upon commencement of the Contract Year concerned and/or each calendar quarter of the Contract Year concerned, Hollywood shall use reasonable efforts to notify CBS of its election to license Content, exercise its Annual Ad Sales Option (as defined in paragraph 2.3 of the Ad Agreement) or utilize the Annual Additional Promo Commitment (as prescribed in paragraph 2.4 of the Ad Agreement), and the respective Market Values thereof. (ii) If, upon expiration of the Contract Year concerned, Hollywood has failed to notify CBS of its election, as set forth in section 2.4(b)(i) above, then the Annual Ceiling (or any portion thereof for which Hollywood has failed to notify CBS of its election) will be deemed forfeited. (iii) Except as set forth in section 2.4(b)(ii) above, if upon expiration of the Contract Year concerned, the Annual Ceiling has not been exhausted, then the amount of the unused portion of the Annual Ceiling for such Contract Year may be 7 carried over to the immediately subsequent Contract Year (the "Annual Ceiling Carryover"), it being understood, however, that (A) in the immediately subsequent Contract Year the Annual Ceiling Carryover shall be exhausted (first) before the Annual Ceiling for such subsequent Contract Year is utilized, (B) Hollywood shall identify the intended use for (i.e., allocate) the Annual Ceiling Carryover during the first thirty (30) days of the subsequent Contract Year, and CBS shall use reasonable efforts to satisfy the allocation request depending upon the availability of the inventory/item sought. In the event that the inventory is not available, then Hollywood shall make a substitute allocation within thirty (30) days following CBS's advising Hollywood that the inventory/item sought is unavailable, (C) any portion of the Annual Ceiling Carryover unused as of the expiration date of the Contract Year concerned (i.e., such subsequent Contract Year) shall be deemed forfeited, except to the extent Hollywood complied with the notice requirements prescribed herein and CBS did not deliver such portion of the Annual Ceiling Carryover and (D) any portion of the Ceiling Amount (including the Annual Ceiling Carryover) unused as of the expiration date of the Term shall be deemed forfeited, except to the extent Hollywood complied with the notice requirements prescribed herein and CBS did not deliver such portion of the Ceiling Amount or Annual Ceiling Carryover, as applicable. 2.5 During the Term, the Hollywood Site shall consist of (i) movie-related entertainment news, data and merchandise offers (including movie celebrity interviews, movie reviews, movie trailers, movie soundtracks, movie-theater listings and movie ticketing), (ii) music-related news, data and merchandise offers, (iii) television-related news, data and merchandise offers and (iv) other entertainment-related Content and merchandise offers, in each case as determined by Hollywood from time to time in its sole discretion. All Content displayed on the Hollywood Site shall be subject to any restrictions or requirements set forth in the CBS License Guidelines. CBS shall have the right to demand the removal from the Hollywood Site of any Content which in CBS's reasonable business judgment conflicts with, interferes with or is detrimental to CBS's interests, reputation or business or which might subject CBS to unfavorable regulatory action, violate any law, infringe the rights of any Person, or subject CBS to liability for any reason. Hollywood shall thereafter remove the objected-to Content as soon as technically feasible, but in no event later than ten (10) days (or less than said ten days if CBS is or would be subject to potential liability, it being understood that: (i) in each instance, CBS shall notify Hollywood of the potential liability concerned; and (ii) Hollywood shall use its best efforts to remove the Content concerned as soon as possible, but in any event within three (3) business days) after written notice from CBS demanding the removal of such Content, subject to the next sentence. CBS shall have no right to demand the removal of any Content which is a hard news item of a nature normally reported by other news organizations of a character and stature equal to Hollywood or an editorial item clearly marked as such, provided, however, that such Content does not/will not subject CBS to unfavorable regulatory action, violate any law, infringe the rights of any Person, or subject CBS to liability for any reason. For purposes of this paragraph 2.5 (and in addition to the terms and conditions set forth in paragraph 7.4 below) notice shall be deemed given when sent by facsimile transmission to the fax number concerned in paragraph 7.4 below. 8 2.6 (a) During the Term, Hollywood shall periodically consult with CBS regarding the presentation of the CBS Content on the Hollywood Site. In no event shall Hollywood distort or misrepresent any material contained in the CBS Content. No CBS Content shall be used/displayed out of context. Hollywood shall have the right to edit and revise the CBS Content solely to meet spatial requirements provided that any such edits or revisions shall not distort or misrepresent any events, opinions or statements contained in the CBS Content. (b) Subject to any restrictions or requirements in the CBS License Guidelines, Hollywood shall have the right, but not the obligation, to correct any errors, omissions and/or inaccuracies in the transmission or transcription of the CBS Content identified by Hollywood or reported to Hollywood by Hollywood Site users. 2.7 Except as otherwise specified in this Agreement, during the Term, Hollywood shall not, without CBS's prior written approval, display, perform, distribute, transmit or otherwise make available in any media now known or hereafter developed, other than through the Hollywood Site, any CBS Content, or any portion thereof. 2.8 In the event that Hollywood desires to use any music contained in any CBS Content on the Hollywood Site, prior to such use, Hollywood shall: (i) report to the applicable music rights society on behalf of CBS, all titles and publishers of all such music; (ii) secure, at its sole cost and expense, and pay for all performing, duplication and/or recording rights licenses, if any, required by the applicable rights holder(s) for the use of musical compositions and sound recordings on the Internet and (iii) assume any and all liability in connection with its use of the music. CBS shall endeavor to deliver to Hollywood accurate music cue sheets for all music contained in the CBS Content. 2.9 Hollywood's right to Archive CBS Content shall cease if any of the following occurs: (i) CBS terminates this Agreement pursuant to paragraph 6.1; or (ii) Hollywood breaches any term of the CBS License Guidelines. 2.10 Upon termination of this Agreement pursuant to paragraph 6.1 or the Archive rights, Hollywood shall cease using any CBS Content or Content derived therefrom. In that connection, Hollywood shall immediately remove or erase the CBS Content from the Hollywood Site as soon as technically practicable, but in no event shall any such material remain on the Hollywood Site more than ten (10) days (or less than said ten days, if CBS is or would be subject to potential liability) after CBS's notice of termination, and at CBS's request, Hollywood shall furnish CBS with certified evidence of such removal or erasure satisfactory to CBS. 3. TERM 3.1 The term of this Agreement ("Term") shall begin on January 3, 1999 and shall continue in full force and effect for a period of seven (7) years, through and including January 3, 2006, unless earlier terminated in accordance with the terms and conditions contained herein. 9 4. RIGHTS 4.1 (a) As between CBS and Hollywood, CBS is or shall be the exclusive owner of and shall retain all right, title and interest to the CBS Content or any Content derived therefrom, including all Intellectual Property Rights therein (the "CBS Property"). (b) Hollywood shall place a notice of copyright on each CBS Content Page in accordance with the CBS License Guidelines. No CBS Content Page shall contain any other copyright notice whatsoever except as provided in the CBS License Guidelines. Hollywood shall cooperate fully with CBS in connection with CBS's obtaining appropriate copyright protection in the name of CBS for any CBS Content Page. (c) With respect to all Content on the Hollywood Site other than the CBS Property (i.e., CBS Content or any Content derived therefrom), as between CBS and Hollywood, Hollywood is or shall be the exclusive owner of and shall retain all right, title and interest to such Content or any Content derived therefrom, including all Intellectual Property Rights therein, and that Content shall be deemed "Hollywood Content." 4.2 Hollywood agrees to take all action and cooperate as is reasonably necessary, at CBS's request, to protect the CBS's rights, titles, and interests specified in this Article 4, and further agrees to execute any documents that might be necessary to perfect CBS's ownership of such rights, titles and interests. 5. WARRANTIES; REPRESENTATIONS; INDEMNITIES 5.1 (a) CBS represents and warrants that: (i) it has full power and authority to enter into and fully perform this Agreement; and (ii) it has sufficient right and authority to grant to Hollywood all licenses and rights granted by CBS hereunder. (b) Hollywood represents and warrants that: (i) it owns or controls all right, title, and interest in and to the Hollywood Content and the Hollywood Site, and all Intellectual Property Rights therein, necessary to carry out its obligations hereunder; (ii) it is has the full power and authority to enter into and fully perform this Agreement; 10 (iii) the Hollywood Site (including any and all Intellectual Property Rights therein or connected thereto) and the Hollywood Content and the use thereof shall not violate any applicable law or infringe upon or violate any rights of any Person; and (iv) the Hollywood Site will be produced, advertised and transmitted in accordance with all applicable federal, state, local and foreign laws and regulations. 5.2 (a) Each party (the "Indemnifying Party") shall at all times indemnify, hold harmless and defend the other party (the "Indemnified Party") from and against any loss, cost, liability or expense (including court costs and reasonable attorneys' fees) arising out of or resulting from any breach by the Indemnifying Party of any representation, warranty, covenant or agreement contained herein. In the event of any such claim, the Indemnified Party shall: (i) promptly notify the Indemnifying Party of the claim; (ii) allow the Indemnifying Party to direct the defense and settlement of any third party claim with counsel of the Indemnifying Party's choosing; and (iii) provide the Indemnifying Party, at the Indemnifying Party's expense, with information and assistance that is reasonably necessary for the defense and settlement of the third party claim. The Indemnified Party reserves the right to retain counsel, at the Indemnified Party's sole expense, to participate in the defense of any such claim. The Indemnifying Party shall not settle any such claim or alleged claim without first obtaining the Indemnified Party's prior written consent, which consent shall not be unreasonably withheld, if the terms of such settlement would adversely affect the Indemnified Party's rights under this Agreement or otherwise. If the Indemnifying Party assumes the defense and settlement of the claim as set forth above, then the Indemnifying Party's only obligation is to satisfy the claim, judgment or approved settlement. (b) Any sums payable by Hollywood under this paragraph 5.2 may be offset by Hollywood against the Market Value of any advertising, Content or Ad Sales Commitment deliverable by CBS (the "CBS Deliverable(s)") pursuant to this Agreement or the Ad Agreement (the "Indemnity Offset"). The amount or Market Value of the CBS Deliverable concerned will be reduced by the proportion thereof used for or contributed to the Indemnity Offset. For purposes of the Indemnity Offset, Hollywood shall be obligated to exhaust the CBS Deliverables as follows: (i) The Market Value of any advertising or promotion, deliverable pursuant to paragraph 2.1 of the Ad Agreement, shall be fully exhausted before any other CBS Deliverable is used for/contributed to the Indemnity Offset. (ii) Provided the CBS Deliverable described in section 5.2(b) above has been fully exhausted, the Market Value of any Ceiling Amount, deliverable pursuant to subparagraph 2.4(a) of this Agreement (or the Additional Promo Commitment, deliverable pursuant to paragraph 2.4 of the Ad Agreement), shall be fully exhausted before any other CBS Deliverable is used for/contributed to the Indemnity Offset. (iii) The Market Value of any Ad Sales Option deliverable pursuant to paragraph 2.3 of the Ad Agreement, may be used for/contributed to the Indemnity Offset only if and when the Deliverables described in sections 5.2(b)(i) and (ii) above have been fully exhausted. 11 For avoidance of doubt, CBS's obligation to deliver any CBS Deliverable, pursuant to this Agreement or the Ad Agreement, shall be extinguished (or reduced, as applicable) to the extent that such CBS Deliverable is used for/contributed to any Indemnity Offset. 6. REMEDIES 6.1 CBS shall have the right to terminate this Agreement if any of the following occurs: (a) The Hollywood Site contains Content which, in CBS's reasonable business judgment, violates Article I or Article III of the CBS License Guidelines and Hollywood fails to remove such Content from the Hollywood Site within ten (10) days after written notice of CBS's objection thereto demanding the removal of such Content. (b) Except as otherwise set forth in subparagraph 6.1(a) above, either Hollywood or BEI (if applicable) breaches any material term or condition of this Agreement, or any Collaboration Agreement and fails to: (i) cure such breach within thirty (30) days after CBS's written notice of such breach, or (ii) complete curing such breach within sixty (60) days following CBS's notice of such breach; provided however that this clause (ii) shall only apply to a default that is incapable of being cured in thirty (30) days. The foregoing cure period will not apply: (x) solely with respect to this Agreement, to a term or condition (in this Agreement) for which a specific cure period is provided; or (y) to a breach incapable of being cured. (c) BEI or Hollywood: (i) becomes insolvent or unable to pay its debts as they mature or makes an assignment for the benefit of its creditors; (ii) is the subject of a voluntary petition in bankruptcy or any voluntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors, if such petition or proceeding is not dismissed within sixty (60) days of filing; (iii) becomes the subject of any involuntary petition in bankruptcy or any involuntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors, if such petition or proceeding is not dismissed within sixty (60) days of filing; or (iv) is liquidated or dissolved. (d) BEI issues to a Person any voting securities of BEI and: (i) at the time of such issuance such Person is a CBS Competitor and (ii) as a result of such issuance such Person beneficially owns or controls, directly or indirectly, more than fifteen (15%) percent of the total voting power of BEI, in the aggregate. For the purposes of this subparagraphs 6.1(d), 6.1(e) and 6.1(f): (x) the term "beneficial ownership" shall have the meaning set forth in Section 13(d) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; (y) the term "total voting power" shall mean at any time, the total number of votes that may be cast in the election of directors of BEI at any meeting of the holders of voting securities at such time for such purpose; and (z) the term "voting securities" shall mean the Capital Stock and any other securities issued by BEI having the power to vote in the election of directors of BEI including, without limitation, any securities having such power only upon the occurrence of a default or any other extraordinary contingency. 12 (e) BEI issues to a Person any voting securities of BEI and: (i) at the time of such issuance such Person is a CBS Competitor that beneficially owns or controls, directly or indirectly, more than fifteen (15%) percent of the total voting power of BEI and (ii) as a result of such issuance the voting power of such Person is increased by any amount. (f) BEI's board of directors consents to the acquisition of voting securities by a CBS Competitor such that as a result of such consent, the CBS Competitor beneficially owns or controls, directly or indirectly, more than 15% of the total voting power of BEI and at the time of such consent the Rights Agreement by and between BEI and American Stock Transfer & Trust Company dated August 23, 1996, as amended, is in full force and effect. (g) Hollywood discontinues using the "Hollywood.com" mark (or any substitute mark approved by CBS) and does not establish use of a substitute mark reasonably acceptable to CBS within thirty (30) days after such discontinuation. (h) The Hollywood Site ceases to operate due to any circumstance(s) (other than circumstances beyond Hollywood's reasonable control, which circumstances simultaneously affect a substantial number of Web Sites on the Internet) for: (i) a period of thirty (30) consecutive days; or (ii) a period of one week at least two times in any six (6) month period. CBS may exercise its right to terminate pursuant to this paragraph 6.1 by sending Hollywood appropriate written notice. No exercise by CBS of any of its rights under this Article 6 will limit CBS's remedies by reason of Hollywood's or BEI's default, CBS's rights to exercise any other rights under this paragraph 6.1, or any of CBS's other rights. 7. GENERAL 7.1 Neither party may assign this Agreement, or their respective rights and obligations hereunder, in whole or in part without the other party's prior written consent. Any attempt to assign this Agreement without such consent shall be void and of no effect ab initio. Notwithstanding the foregoing, CBS may assign this Agreement or any of its rights and obligations hereunder to an affiliate or to any entity controlling, controlled by or under common control with, CBS, or to any entity that acquires CBS by purchase of stock or by merger or otherwise, or by obtaining substantially all of CBS's assets (a "CBS Assignee"), provided that any such CBS Assignee, or any division thereof, thereafter succeeds to all of the rights and is subject to all of the obligations of CBS under this Agreement. 7.2 Each party hereto irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby or thereby. Each of CBS and Hollywood agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the 13 State of New York, New York County. Each of CBS and Hollywood further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this paragraph 7.2. Each of CBS and Hollywood irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby and thereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 7.3 If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any Person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other Persons or circumstances. 7.4 All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and shall be deemed given when so delivered by hand, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows:
(a) if to Hollywood, hollywood.com, Inc. 2255 Glades Road, Suite 237W Boca Raton, Florida 33431 Attention: Mitchell Rubenstein, Chief Executive Officer Fax: (561) 998-2974 with a copy to: hollywood.com, Inc. 2255 Glades Road, Suite 237W Boca Raton, Florida 33431 Attention: W. Robert Shearer, General Counsel Fax: (561) 998-2974 14 and a copy to: hollywood.com, Inc. 1620 26th Street, Suite 370 South Santa Monica, CA 90404 Attention: Scott Shrock, Vice President of Operations Fax: (310) 447-2887 and a copy to: Greenberg Traurig 200 Park Avenue New York, New York 10166 Attention: Clifford E. Neimeth, Esq. Fax: (212) 801-6400 (b) if to CBS: CBS Corporation 51 West 52nd Street New York, New York 10019 Attention: Chief Financial Officer with a copy to: CBS Corporation 51 West 52nd Street New York, New York 10019 Attention: General Counsel
7.5 The parties to this Agreement are independent contractors. There is no relationship of partnership, joint venture, employment, franchise, or agency between the parties. Neither party shall have the power to bind the other or incur obligations on the other's behalf without the other's prior written consent. 7.6 No failure of either party to exercise or enforce any of its rights under this Agreement shall act as a waiver of such right. 7.7 This Agreement, along with any Exhibits hereto, contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. Neither party shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein. 15 7.8 This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to each of the other parties. 7.9 This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 7.10 This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 7.11 This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any Person, other than the parties hereto and such assigns, any legal or equitable rights hereunder. 7.12 The headings contained in this Agreement or in any Exhibit or Schedule hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning as defined in this Agreement. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. HOLLYWOOD.COM, INC. CBS CORPORATION /s/ W. Robert Shearer /s/ Fredric G. Reynolds - --------------------- ----------------------- W. Robert Shearer Fredric G. Reynolds Senior Vice President Executive Vice President and and General Counsel Chief Financial Officer 16 EXHIBIT A (Attached to and forming a part of the Agreement, made as of January 3, 1999 between CBS Corporation and hollywood.com, Inc.) - ------------------------------------------------------------------------------- CBS LICENSE GUIDELINES AND RESTRICTIONS --------------------------------------- I. GENERAL (a) The Hollywood Site shall not include the following Content (or other materials regarding or containing the following): (i) cigarettes, (ii) hard liquor, (iii) massage parlors, (iv) abortion clinics, (v) firearms and ammunition, (vi) head shops, (vii) illegal (under federal, state, local or foreign laws) lotteries, (viii) gambling (other than legal lotteries under federal, state or local, local laws applicable to the venue concerned), (ix) sexually explicit content, or (x) Content that denigrates a particular group based on gender, race, creed, religion, sexual preference or handicap ("Proscribed Content"). The standard for Content deemed "sexually explicit" shall be subject to the standards and practices applicable to the CBS Television Network. (b) The CBS License Guidelines may be amended or revised from time to time by CBS, to reflect any changes in CBS's business, practice, procedures or policies. CBS will notify Hollywood of such amendments/revisions. II. CONTENT (a) (i) Each party shall notify the other of all errors, omissions, and/or inaccuracies in transmission or transcription of the CBS Content within twenty-four (24) hours after it becomes aware thereof. (ii) If Hollywood provides such notice, it shall specify to CBS what action, if any, it has taken to correct the error, omission and/or inaccuracy. (iii) If CBS provides such a notice, or receives such notice, it may specify the action to be taken by Hollywood to correct the error, omission and/or inaccuracy or resubmit such Content. (b) All CBS Content on the Hollywood Site shall be subject to restrictions and instructions disclosed by CBS at any time. (c) CBS shall have the right to demand the removal from the Hollywood Site of any Content which in CBS's reasonable business judgment conflicts with, interferes with or is detrimental to CBS's interests, reputation or business or which might subject CBS to unfavorable regulatory action, violate any law, infringe the rights of any Person, or subject CBS to liability for any reason. Hollywood shall thereafter remove the objected to Content as soon as technically feasible, but in no event later than ten (10) days (or less than said ten days, if CBS is or would be 17 subject to potential liability , it being understood that: (i) in each instance, CBS shall notify Hollywood of the potential liability concerned; and (ii) Hollywood shall use its best efforts to remove the Content concerned as soon as possible, but in any event within three (3) business days) after written notice from CBS demanding the removal of such Content, subject to the next sentence. CBS shall have no right to demand the removal of any Content which is a hard news item of a nature normally reported by other news organizations of a character and stature equal to Hollywood or an editorial item clearly marked as such, provided, however, that such Content does not/will not subject CBS to unfavorable regulatory action, violate any law, infringe the rights of any Person, or subject CBS to liability for any reason. For purposes of this subparagraph II.(c) (and in addition to the terms and conditions set forth in paragraph 7.4) notice shall be deemed given when sent by facsimile transmission to the fax number concerned in paragraph 7.4. (d) Hollywood shall abide by responsible journalistic standards. No CBS Content shall be used and/or displayed out of context. Hollywood shall not distort or misrepresent any events, opinions or statements contained in the CBS Content received by Hollywood. III. CROSS-LINKS (a) Hollywood shall not establish any links from the Hollywood Site to any Internet Site containing Proscribed Content. Notwithstanding anything contained herein to the contrary, Hollywood shall not be deemed in breach of this Agreement if Hollywood links to an Internet web site, which Internet web site, in turn, includes advertising for, or links to, an independent web site (the "Indirectly Linked Site") displaying the above Proscribed Content, provided that Hollywood derives no revenues or other financial benefit from such Indirectly Linked Site or Proscribed Content. For avoidance of doubt, "financial benefit" includes the realization or accrual of any revenue from page views or reach of such Indirectly Linked, Site, or advertisements displayed on web site pages of such Indirectly Linked Site. (b) Hollywood shall not conduct any cross promotions between the Hollywood Site and any Internet Site which exhibits Proscribed Content. IV. OWNERSHIP (a) Hollywood shall place an appropriate copyright notice to be furnished by CBS on all CBS Content Pages of the Hollywood Site. (b) Hollywood and CBS shall mutually develop the procedures for placing any third party copyright notice on any CBS Content Page. 18 EX-10.3 4 WARRANT TO PURCHASE SHARES OF COMMON STOCK THIS WARRANT AND THE WARRANT SHARES ISSUABLE UPON THE EXERCISE HEREOF (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 UNDER THE ACT. THE WARRANT SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED, EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) IN COMPLIANCE WITH THE RESALE LIMITATIONS OF RULE 144 UNDER THE ACT, OR (iii) PURSUANT TO AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUBJECT TO AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, STATING THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR TRANSFER. THE WARRANT SHARES ARE SUBJECT TO AN AGREEMENT BETWEEN THE COMPANY AND THE HOLDER DATED JANUARY 3, 2000, REGARDING THE SALE, ASSIGNMENT AND TRANSFER OF THE WARRANT SHARES. A COPY OF SUCH AGREEMENT IS AVAILABLE, WITHOUT CHARGE, FROM THE SECRETARY OF THE COMPANY. January 3, 2000 Number of Shares: 1,178,892 HOLLYWOOD.COM, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK ------------------------------------------ FOR VALUE RECEIVED, HOLLYWOOD.COM, INC., a Florida corporation (the "Company"), hereby certifies that CBS CORPORATION, a Pennsylvania corporation ("CBS") is entitled, upon the terms and subject to the conditions contained herein, to purchase from the Company One million, one hundred seventy-eight thousand eight hundred and ninety-two (1,178,892) duly issued, fully paid and non-assessable shares of Common Stock (as defined below) of the Company, subject to adjustment, as provided herein, at the exercise price (the "Exercise Price") set forth in Section 1.1 of that certain Stock Purchase Agreement dated August 26, 1999, between CBS and the Company (the "Stock Purchase Agreement"). The term "Common Stock" means the Common Stock, par value $.01 per share, of the Company as constituted on the date hereof. The number of shares of Common Stock to be received upon the exercise of this Warrant shall be subject to adjustment from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter referred to as "Warrant Shares." 1. Exercise of Warrant. This Warrant may be exercised, in whole or in part, at any time prior to the earlier of (i) the second anniversary of the date hereof and (ii) the consummation by the Company of its first underwritten, registered public offering of Common Stock next following the date hereof. This Warrant will terminate and be of no further force and effect upon the earlier of the dates set forth in clause (i) and (ii) above. This Warrant shall be deemed duly and properly exercised only upon presentation and surrender by the holder hereof to the Company at its principal offices (which offices on the date hereof are situated at 2255 Glades Road, Suite 237W, Boca Raton, Florida 33431), or at the office of the Company's transfer agent for the Common Stock (which transfer agent on the date hereof is the American Stock Transfer and Trust Company and whose principal offices are situated at 40 Wall Street, New York, NY 10005), with the Warrant Exercise Form attached hereto properly completed signed and dated, and together with payment in full of the Exercise Price specified in Section 1.1 of the Stock Purchase Agreement. Upon presentation and surrender of the Warrant together with payment in full of the Exercise Price as aforesaid, CBS shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise, notwithstanding that the transfer books of the Company may then be closed or that certificates representing such Warrant Shares may not then be actually delivered to CBS. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issuance or delivery of Warrant Shares upon exercise of this Warrant. Certificates for the Warrant Shares purchased upon exercise of this Warrant shall be delivered to CBS or its permitted assignee (pursuant to Section 12) within a reasonable time, not exceeding 10 days after said exercise. 2. Reservation of Shares. The Company will at all times reserve for issuance and delivery upon exercise of this Warrant, all Warrant Shares and other shares of capital stock of the Company from time to time issuable upon exercise of this Warrant. All such shares shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and non-assessable and free and clear of all preemptive rights, taxes, liens and other charges. The Company will take all actions as may be necessary to assure that the Warrant Shares issuable upon exercise hereof may be issued without violation of any applicable law or regulation, or of any requirement of any domestic securities exchange upon which any capital stock of the Company may then be listed or admitted to unlisted trading privileges (including, without limitation, obtaining any requisite approval of the Company's stockholders). 3. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issuable upon the exercise of this Warrant, but the Company shall pay CBS an amount equal to the fair market value of such fractional share in lieu of each fraction of a share otherwise so issuable as determined by the Board of Directors in good faith. 4. Exchange of Warrants. This Warrant is exchangeable, without expense, at the option of CBS, upon presentation and surrender hereof to the Company or the transfer agent for the Common Stock for Warrants of smaller denominations, entitling CBS to purchase in the aggregate the same number of Warrant Shares purchasable upon the exercise of this Warrant. 5. Intentionally omitted. 6. Anti-Dilution Provisions 6.1 Adjustment for Recapitalization. If the Company shall at any time subdivide its outstanding shares of Common Stock by recapitalization, reclassification or split-up thereof, or if the Company shall declare a stock dividend or distribute shares of Common Stock to its shareholders, the number of shares of Common Stock subject to this Warrant immediately prior to such subdivision shall be proportionately increased. If the Company shall at any time combine the outstanding shares of Common Stock by recapitalization, reclassification or other combination thereof, the number of shares of Common Stock subject to this Warrant immediately prior to such combination shall be proportionately decreased. Any such adjustments pursuant to this Section 6.1 shall be effective at the close of business on the effective date of such subdivision or combination or, if any adjustment is the result of a stock dividend or distribution, then the effective date for such adjustment shall be the record date established by the Company therefor. 2 6.2 Adjustment for Reorganization, Consolidation, Merger, Etc. (a) In case of any capital reorganization of the Company (or any other corporation, the securities of which are at the time receivable upon the exercise of this Warrant) after the date hereof or in case after the date hereof the Company (or any such other corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then, in each such case, CBS thereafter shall be entitled to receive upon the exercise of this Warrant the kind and amount of securities, cash or other property which it would have owned or been entitled to receive immediately after consummation of such capital reorganization, consolidation, merger or conveyance had this Warrant been exercised immediately prior to the effective time of such capital reorganization, consolidation, merger or conveyance, and, in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions of this Section 6.2 with respect to the relative rights and interests thereafter of CBS to the end that such provisions thereafter shall correspondingly be made applicable, as nearly as reasonably may be practicable, in relation to any shares of capital stock or other securities or property thereafter deliverable upon the exercise of this Warrant. (b) If the Company shall consolidate with or merge into another corporation, and shall not be the surviving corporation, or shall convey all or substantially all of its assets to another corporation, then, and in each such case, the Company, as a condition of the closing of such transaction, shall require that the surviving corporation or the corporation that shall have received substantially all of the Company's assets, expressly assume the obligations of the Company under this Warrant in a form reasonably satisfactory to CBS. 6.3 No Impairment. The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, issuance or sale of securities, sale of assets or any other voluntary action, willfully 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 CBS against impairment. Without limiting the generality of the foregoing, while this Warrant is outstanding, the Company will not permit the par value, if any, of the Warrant Shares to be greater than the amount payable therefor upon such exercise. 6.4 Certificate as to Adjustments. In each case of an adjustment in the number of Warrant Shares receivable upon the exercise of this Warrant, the Company, at its expense, will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate executed by the chief financial officer of the Company setting forth such adjustment and showing in reasonable detail the facts upon which such adjustment is based. The Company will forthwith mail a copy of each such certificate to CBS at the address set forth in Section 11 hereof. The failure of CBS to object in writing to such certificate of adjustment within 10 days after receipt thereof shall constitute approval thereof by CBS. 6.5 Certain Other Distributions. If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (a) cash (other than a cash distribution or dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Company); 3 (b) any evidences of its indebtedness, any shares of the Company's capital stock or any other property of any nature whatsoever; or (c) any warrants or other rights to subscribe for or purchase any evidences of the Company's indebtedness, any shares of its capital stock or any other securities or property of any nature whatsoever, then, and in each such case, if this Warrant remains outstanding, the Company shall mail or cause to be mailed to CBS a notice specifying the date on which a record is to be taken for the purpose of such dividend or distribution, and stating the amount and character of such dividend, distribution or right. Such notice shall be mailed at least 15 days prior to the date therein specified and the Warrant may be exercised prior to said date during the term of the Warrant. 7. Restrictions on Warrant Shares. The Warrant Shares may not be offered, sold, transferred or otherwise disposed of unless such transactions are registered under the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities laws, or unless such transactions are effected pursuant to available exemptions from such registration, provided that CBS delivers to the Company an opinion of counsel satisfactory to the Company confirming the availability of such exemption. 8. Legend. 8.1 Unless the Warrant Shares have been registered under the Securities Act, upon exercise of this Warrant and the issuance of any of the Warrant Shares, all certificates representing such securities shall bear on the face thereof substantially the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 UNDER THE ACT. THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED, EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) IN COMPLIANCE WITH THE RESALE LIMITATIONS OF RULE 144 UNDER THE ACT, OR (iii) PURSUANT TO AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUBJECT TO AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, STATING THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR TRANSFER. 4 8.2 As may be required by that certain Investors' Rights Agreement of even date herewith by and between CBS and the Company, all certificates representing the Warrant Shares shall bear on the face thereof substantially the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AGREEMENT BETWEEN THE COMPANY AND CBS DATED AS OF AUGUST 26, 1999, REGARDING THE SALE, ASSIGNMENT AND TRANSFER OF THESE SECURITIES. COPIES OF SUCH AGREEMENT ARE AVAILABLE, WITHOUT CHARGE, FROM THE SECRETARY OF THE COMPANY. 9. No Rights or Liabilities as Stockholder. This Warrant does not by itself entitle CBS to any voting rights or other rights as a stockholder of the Company. In the absence of affirmative action by CBS to purchase Warrant Shares upon exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of CBS shall, by itself, cause CBS to be a stockholder of the Company for any purpose. 10. Amendment; Waiver. Any term of this Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and CBS. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon CBS and the Company. 11. Notices. All notices required hereunder shall be in writing and shall be deemed given when telegraphed, delivered personally or within two days after mailing when mailed by certified or registered mail, return receipt requested, as follows:
if to the Company, to: Hollywood.com, Inc. 2255 Glades Road, Suite 237 W Boca Raton, FL 33431-7383 Attention: Mitchell Rubenstein, Chief Executive Officer with a copy to: Hollywood.com, Inc. 2255 Glades Road, Suite 237 W Boca Raton, FL 33431-7383 Attention: W. Robert Shearer, General Counsel 5 with a copy (which shall not constitute notice pursuant to this Section 11) to: Greenberg Traurig The MetLife Building 200 Park Avenue New York, NY 10166 Attention: Clifford E. Neimeth, Esq. if to CBS, to: CBS Corporation 51 West 52nd Street New York, NY 10019 Attention: Fredric G. Reynolds, Executive Vice President and Chief Financial Officer with a copy to: CBS Corporation 51 West 52nd Street New York, NY 10019 Attention: Louis J. Briskman, Executive Vice President and General Counsel
12. Assignment. This Warrant, and the rights of CBS hereunder, are not assignable by CBS except to a subsidiary of CBS; provided that such subsidiary is an affiliate of CBS (within the meaning of Rule 12b-2 under the Exchange Act) that owns interests in multiple Internet businesses. Any attempted assignment in violation of this Section 12 shall be null and void. 13. Lost or Destroyed Certificate. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification or the posting of bond, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date. 14. Applicable Law. This Warrant shall be governed in all respects by the laws of the State of New York as such laws are applied to agreements between New York residents entered into and to be performed entirely in New York. 6 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf, in its corporate name, by its duly authorized officer, all as of the day and year first above written. Hollywood.com, Inc. By: /s/ W. Robert Shearer --------------------- W. Robert Shearer Senior Vice President and General Counsel 7 WARRANT EXERCISE FORM The undersigned hereby irrevocably elects to exercise its right under the attached Warrant to purchase ____________ shares of Common Stock of Hollywood.com, Inc., a Florida corporation, and hereby tenders ________________________ constituting full payment of the Exercise Price of the attached Warrant. ------------------------------------ Signature ------------------------------------ Date INSTRUCTIONS FOR ISSUANCE OF STOCK ---------------------------------- Name_________________________________________________________ (Please typewrite or print in block letters) Address_______________________________________________________ ______________________________________________________________ Taxpayer Identification Number_____________________ EX-10.4 5 INVESTOR'S RIGHTS AGREEMENT ================================================================================ INVESTOR'S RIGHTS AGREEMENT between CBS CORPORATION, and HOLLYWOOD.COM, INC. Dated January 3, 2000 ================================================================================ INVESTOR'S RIGHTS AGREEMENT This INVESTOR'S RIGHTS AGREEMENT ("Agreement") is entered into on this 3rd day of January 2000 by and between CBS Corporation, a Pennsylvania corporation ("CBS") and Hollywood.com, Inc., a Florida corporation (the "Company"). WITNESSETH: WHEREAS, the Company and CBS have entered into a Stock Purchase Agreement dated August 26, 1999 (the "Stock Purchase Agreement"), pursuant to which CBS has agreed to purchase shares of Common Stock (as hereinafter defined); and WHEREAS, by this Agreement, the Company and CBS each desire to set forth certain rights of the parties with respect to the shares of Common Stock as set forth below. NOW, THEREFORE, in consideration of the foregoing and of the mutual premises and the agreements and covenants contained herein, the parties, intending to be legally bound, hereby agree as follows: Defined Terms. As used in this Agreement, the following terms shall have the following respective meanings: (a) The term "Approved Transferees" means each of The Times Mirror Company, Gannett Co., Inc., Mitchell Rubenstein and Laurie S. Silvers. (b) "Beneficial owner", "beneficially owned" or "beneficial ownership" have the respective meanings assigned to such terms in Rule 13d-3 under the Exchange Act. (c) The term "CBS Percentage" means on the date of determination for purposes of Section 2.4 of this Agreement, the percentage determined by dividing (i) the number of shares of Common Stock then held by CBS and its Permitted Transferees by (ii) the aggregate shares of Common Stock outstanding immediately prior to the event giving rise to the determination of the CBS Percentage in this Agreement; provided, however, that if the CBS Percentage has been reduced as a result of (i) an issuance of securities by the Company after the date hereof pursuant to clause (v) of the definition of New Securities for which CBS was not offered an opportunity to maintain its ownership percentage at the level existing before such issuance by the purchase of additional securities or (ii) an issuance of securities by the Company in an underwritten offering after the date hereof for which CBS was not permitted to maintain its ownership percentage at the level existing before such issuance by the purchase of additional securities as a result of the provisions of Section 2.4(d) hereof, then the CBS Percentage shall be what it otherwise would have been but for any such issuance. The CBS Percentage shall in no event exceed 29.8% prior to the exercise of the Warrant or 34.8% after the exercise of the Warrant in full. 2 (d) "Change-of-Control Transaction" means any transaction, upon the consummation of which, any Person or "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), of Persons (other than CBS, Mitchell Rubenstein, Laurie S. Silvers, The Times Mirror Company, Gannett Co., Inc. or any of their respective affiliates) would own in excess of 50% of the outstanding Common Stock. (e) The term "Closing Date" has the meaning specified in the Stock Purchase Agreement. (f) The term "Common Stock" means the common stock, $0.01 par value per share, of the Company. (g) The term "Derivative Securities" means any options, warrants, rights, preferred stock or other securities that are convertible, exercisable or exchangeable into Common Stock or other capital stock of the Company that is entitled by its terms to vote generally in the election of directors of the Company. (h) The terms "Holder" or "Holders" means CBS and any of its Permitted Transferees. (i) The term "Initiating Holder" means any Holder or Holders of 25% or more of the aggregate Registrable Securities then outstanding. (j) The term "New Securities" means any Common Stock or Derivative Securities issued by the Company in either a private placement or a registered public offering, but excluding (i) any shares of Common Stock issuable upon the conversion, exercise or exchange of Derivative Securities of the Company issued and in effect as of the date of this Agreement; (ii) the issuance or sale by the Company of Common Stock or Derivative Securities to any directors, officers, employees, contractors, advisors or consultants of the Company or any of its subsidiaries provided such issuance or sale is pursuant to agreements or employee plans in the ordinary course of business of the Company consistent with past practice; (iii) shares of Common Stock issued in connection with any stock split, stock dividend, recombination or other recapitalization transaction in respect of the Common Stock; (iv) shares of Common Stock or Derivative Securities issued as collateral in connection with any equipment lease, real property lease, loan, credit line, guarantees of indebtedness or similar financing; (v) Common Stock or Derivative Securities issued in connection with or pursuant to any merger, acquisition, consolidation, amalgamation, business combination, reorganization, or reincorporation by or involving the Company or any of its subsidiaries; or (vi) Common Stock or Derivative Securities issued by the Company in any arms'-length transaction whose primary purpose is to provide carriage to the web sites operated by the Company in an amount not to exceed, in the aggregate, 4.99% of the aggregate shares of Common Stock outstanding. (k) The terms "register," "registered" and "registration" refer to a registration effected by the preparation and filing of a registration statement in compliance with the Securities Act of 1933, as amended (the "Securities Act"), and the declaration or ordering of the effectiveness of such registration statement by the SEC. 3 (l) The term "Registrable Securities" means (i) any and all shares of Common Stock issued to CBS pursuant to the Stock Purchase Agreement; (ii) any and all shares of Common Stock issued to CBS or any "Permitted Transferee" (as defined in Section 2.3 hereof) pursuant to the Warrant; and (iii) any and all shares of Common Stock issued in respect of the securities referred to in (i) and (ii) as a result of a stock split, dividend, recapitalization or the like, which has not been sold to the public. As to any particular Registrable Securities, such securities shall cease to be such when (i) a registration statement registering such securities under the Securities Act has been declared or ordered effective by the SEC and such securities have been sold or otherwise transferred by the holder thereof pursuant to and in accordance with the plan of distribution with respect to such securities disclosed in the prospectus (compliant with Rule 424(b) under the Securities Act) forming part of such registration statement; (ii) such securities have been sold in accordance with the resale requirements of Rule 144 (or any successor rule or provision) adopted by the SEC under the Securities Act; (iii) such securities shall have been transferred, new certificates evidencing such securities without legends restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall neither require registration under the Securities Act nor qualification (or any similar filing) under any state securities or "blue sky" law then in effect; or (iv) such securities no longer shall be issued and outstanding. (m) The term "Registration Expenses" means all expenses incurred by the Company in complying with Sections 1.2 and 1.3 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, reasonable fees and disbursements of one counsel (or firm of counsel) for CBS, "blue sky" qualification fees and expenses, and the expenses of any special audits incident 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.) (n) The term "SEC" means the Securities and Exchange Commission. (o) The term "Warrant" means that certain warrant of even date herewith for the purchase of shares of Common Stock of the Company issued to and in the name of CBS. 1. Registration Rights. 1.1. Intentionally Omitted. 1.2. Demand Registration. (a) Request for Registration. If the Company shall receive from any Initiating Holder a written request that the Company effect any registration, qualification or compliance with respect to Registrable Securities (a "Demand"), the Company will: (i) promptly give written notice ("Company Notice") of the proposed registration, qualification or compliance to all other Holders; and 4 (ii) as soon as practicable, use its best efforts to effect all such registrations, qualifications and compliances (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualifications under applicable "blue sky" or other state securities laws and appropriate compliance with exemptive regulations promulgated under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the public sale and distribution of all or such portion of such Initiating Holder's or Initiating Holders' Registrable Securities as are specified in such Demand, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such Demand as are specified in a written request given within 20 days after receipt of the Company Notice; provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 1.2: (A) at any time prior to (i) the effective date of the registration statement in respect of the first underwritten registered public offering by the Company next following the date of this Agreement or (ii) one year after the date of this Agreement, whichever first occurs; (B) during the period commencing on the 10th day next preceding the effective date of a registration statement filed with SEC pursuant to this Section 1.2 and ending on the 180th day next following such effective date; (C) during the period commencing on the 60th day next preceding the Company's good faith estimate of the date of filing of, and ending on the 60th day next following the effective date of, a Company registration pursuant to Section 1.3 hereof, provided the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; (D) in any particular jurisdiction in which the Company would be required to qualify to do business or become subject to taxation or general service of process, unless the Company already is so subject to service in such jurisdiction; or (E) after the Company has effected four (4) such registrations pursuant to this Section 1.2(a) and such registrations have been declared or ordered effective by the SEC. Subject to the foregoing clauses (A) through (E), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable, but in no event later than 60 days after receipt of the request(s) of the Initiating Holder(s) therefor; provided, however, that if the Company shall furnish to such holders a certificate signed by its Chief Executive Officer or President stating that in the good faith judgment of the Board of Directors it would be detrimental to the Company and its stockholders for such registration statement to be filed at or about the date requested by the Initiating Holders and it is therefore necessary or commercially desirable to defer the filing of such registration statement, the Company shall have an additional period of not more than 120 days after the 5 expiration of the initial 60-day period within which to file such registration statement; provided, however, that the Company shall not be entitled to utilize this right more than once in any 12-month period. (b) Underwriting. If the Holders intend to distribute the Registrable Securities covered by their request by means of an underwritten offering, they shall so advise the Company as part of their request made pursuant to this Section 1.2 and the Company shall include such information in the Company Notice. In such case, the underwriter shall be selected by the Company and shall be reasonably acceptable to a majority-in-interest of the Initiating Holders. The right of any Holder to registration pursuant to this Section 1.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. The Company shall (together with all Holders proposing to distribute their securities by means of such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters. Notwithstanding any other provision of this Section 1.2, if the "Managing Underwriter" (as such term is used in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be offered or sold, the Initiating Holders shall so advise all Holders, and the number of shares of Registrable Securities that may be included in the underwritten registration shall be allocated among all Holders thereof in the proportion, as nearly as practicable, that the respective amounts of Registrable Securities held by each such Holder bears to the aggregate amount of Registrable Securities held by all such Holders. If any Holder of Registrable Securities disapproves of the terms of the underwriting, such Holder may elect to withdraw its Registrable Securities therefrom by written notice to the Company, the underwriter and the Initiating Holders. Any Registrable Securities which are excluded from the underwriting by reason of the Managing Underwriter's marketing limitation or withdrawn from such underwriting forthwith shall be withdrawn from such registration. (c) Company Shares. If the Managing Underwriter has not limited the number of Registrable Securities to be underwritten, the Company may include therein securities for its own account or for the account of others if the Managing Underwriter so agrees and if the number of Registrable Securities which would otherwise have been included in such registration and underwriting will not thereby be limited. 1.3. "Piggyback" Registration. (a) Registration. If at any time or from time to time, the Company shall determine to register shares of Common Stock for its own account or the account of any of its stockholders, other than a registration on Form S-1 or S-8 relating solely to employee stock option or purchase plans, or a registration on Form S-4, or a registration on any other form (other than Form S-1, S-2, S-3, SB-1 or SB-2, or their successor forms) or any successor to such forms, which does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities, the Company will: (i) promptly give to each Holder written notice thereof; and 6 (ii) include in such registration, and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within 20 days after receipt of such written notice from the Company, by any Holder, except as set forth in Section 1.3(b) below. (b) Underwriting. If the registration as to which the Company gives notice is in respect of a registered underwritten public offering the Company shall so advise the Holders as a part of the written notice given pursuant to Section 1.3(a)(i). In such event the right of any Holder to registration pursuant to this Section 1.3 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other stockholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. If the Managing Underwriter of an offering of securities effected pursuant to this Section 1.3 reasonably shall determine and advise the Company in writing that in its opinion the aggregate number of Registrable Securities requested to be included in the Company's registration statement creates a substantial risk that the proceeds or the price per share that the Company (or in the case of a registration which does not include any securities being offered or sold for the Company's own account, the person(s) for whose account the registration statement is filed) would receive pursuant to the offering would be materially reduced or that the success of the offering otherwise would be materially adversely affected, then the number of Registrable Securities to be included in the Company's registration statement for the account of the Holders thereof shall be reduced pro rata among such Holders to the aggregate amount deemed appropriate by such Managing Underwriter; provided, however, if securities are being offered for the account of other persons or entities as well as the Company, then with respect to the Registrable Securities intended to be included for the account of the Holder thereof, the proportion by which the number of Registrable Securities intended to be included by such Holders is reduced shall not exceed the proportion by which the number of securities intended to be registered by such other persons or entities is reduced. If any Holder disapproves of the terms of the underwriting, he may elect to withdraw therefrom by written notice to the Company and the Managing Underwriter. Any Registrable Securities excluded or withdrawn from such underwriting forthwith shall be withdrawn from such registration. No Holder shall have any right to participate in, and Section 1.3(a) shall not apply to, the first registered public offering involving an underwriting consummated by the Company after the date of this Agreement (the "Follow-on Offering"); provided that each such Holder shall have a right to participate in the Follow-on Offering, irrespective of the date of consummation thereof, if the Follow-on Offering is not consummated within one year from the date hereof, subject, however, in any case to approval of such participation by the Managing Underwriter therefor. For any selling Holder which is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single selling Holder such that any pro rata reduction with respect to such selling Holder shall be based upon the aggregate amount of Registrable Securities owned by all entities and individuals included in such selling Holder. 7 (c) Company shall have the right to withdraw any "piggyback" registration for any reason upon reasonable notice to each Holder. 1.4. Expenses of Registration. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to this Section 1, Registration Rights shall be borne by the Company, except as follows: (a) The Company shall not be required to pay for expenses of any registration pursuant to Section 1.2 , the request for which has been subsequently withdrawn by the Initiating Holders, in which case such expenses shall be borne by the Holders requesting such withdrawal unless, at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business or prospects of the Company from that known by the Initiating Holders at the time of their request. (b) The Company shall not be required to pay underwriters' fees, discounts or commissions relating to Registrable Securities or any broker or dealer concessions or allowances relating to the distribution thereof. 1.5. Registration Procedures. In the case of each registration, qualification or compliance effected by the Company pursuant to this Agreement, the Company will keep each Holder participating therein advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. Except as otherwise provided in Section 1.4, at its expense the Company will: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to 180 days. (b) 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 Securities Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or "blue sky" laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or, except as required under the Securities Act, to file a general consent to service of process in any such states or jurisdictions. 8 (e) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or U.S. automated inter-dealer quotation system of a registered national securities association on which similar securities issued by the Company are then listed. 1.6. Indemnification. (a) The Company will indemnify and hold harmless each Holder of Registrable Securities and each of its officers, directors and partners, and each person controlling such Holder, with respect to which such registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter of the Registrable Securities held by or issuable to such Holder, against all claims, losses, expenses, damages and liabilities (or actions in respect thereto) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus or registration statement (including any supplement or amendment thereto), 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 (in the case of any prospectus, in light of the circumstances under which they were made) not misleading, or any violation or alleged violation by the Company of the Securities Act, the Exchange Act and any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law and relating to action or inaction legally required of the Company in connection with any such registration, qualification or compliance, and will reimburse each such Holder, each of its officers, directors and partners, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, within a reasonable amount of time after incurred (not to exceed 45 days) for any reasonable legal and any other expenses incurred by them in connection with investigating, defending or settling any such claim, loss, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 1.6(a) shall not apply to amounts paid in settlement of any such claim, loss, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld); and provided further, that the Company will not be liable in any such case to the extent that any such claim, loss, damage or liability arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by an instrument duly executed by such Holder, controlling person or underwriter specifically for use therein or upon such Holders failure to deliver a copy of a current prospectus (compliant with Section 10 of the Securities Act) or any amendment or supplement thereto (which does not contain any aforesaid misrepresentation or omissions) if the Company theretofore has furnished such Holder with a sufficient number of the copies of the same for delivery by the Holder in connection with the offer and sale of Registrable Securities. (b) Each Holder will, if Registrable Securities held by or issuable to such Holder are included in the securities as to which such registration, qualification or compliance is being effected pursuant to this Agreement, indemnify and hold harmless the Company, each of its directors and officers, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company within the meaning of the Securities Act, and each other such Holder, each of its officers, directors and 9 partners and each person controlling such Holder, against all claims, losses, expenses, 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 or prospectus (including any supplement or amendment thereto) or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein (in case of any prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse the Company, such Holders, such directors, officers, partners, persons or underwriters for any reasonable legal or any other expenses incurred in connection with investigating, defending or settling 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 untrue statement) or omission (or alleged omission) is made in such registration statement or prospectus (including any supplement or amendment thereto) in reliance upon and in conformity with written information furnished to the Company by the Holder in an instrument duly executed by such Holder specifically for use therein; provided, however, that the indemnity agreement contained in this Section 1.6(b) shall not apply to amounts paid in settlement of any such claim, loss, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld); and provided further, that the total amount for which any Holder shall be liable under this Section 1.6(b) shall not in any event exceed the aggregate proceeds received by such Holder from the sale of Registrable Securities held by such Holder in connection with the offering that gave rise to this indemnification obligation. (c) Each party entitled to indemnification under this Section 1.6 (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 or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party's 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 hereunder, unless such failure resulted in material prejudice to the Indemnifying Party; and provided further, that an Indemnified Party (together with all other Indemnified Parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel (or firm of counsel), with the fees and expenses to be paid by the Indemnifying Party, if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such proceeding. 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. (d) If recovery is not available under the foregoing indemnification provisions for any reason or reasons other than as specified therein, any person who otherwise 10 would be entitled to indemnification by the terms thereof nevertheless shall be entitled to contribution with respect to any losses with respect to which such person would be entitled to such indemnification but for such reason or reasons. In determining the amount of contribution to which the respective persons are entitled, there shall be considered the persons' relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission, and other equitable considerations appropriate under the circumstances. It is hereby agreed that it would not necessarily be equitable if the amount of such contribution were determined by pro rata or per capita allocation. 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 found guilty of such fraudulent misrepresentation. Notwithstanding the foregoing, no Holder of Registrable Securities shall be required to make a contribution in excess of the aggregate proceeds received by such Holder from the sale of Registrable Securities held by such Holder in connection with the offering that gave rise to the contribution obligation. (e) The obligations of the Company and Holders under this Section 1.6 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.7. Information by Holder. Any Holder or Holders of Registrable Securities included in any registration shall promptly furnish to the Company such information regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to herein. 1.8. Rule 144 Reporting. From and after such time as the Holders are eligible under Rule 144 to effect resales of Registrable Securities held by them, the Company hereby agrees to file with the SEC all periodic and other reports required to be so filed by it under the Securities Act and the Exchange Act and the rules and regulations thereunder (or, if the Company is not then required to file such reports, it shall, as promptly as reasonably practicable after the written request of any Holder of Registrable Securities therefore, make publicly available the requisite "Rule 15c2-11 information" in respect of the Company so long as and solely to the extent necessary to permit resales of Registrable Securities pursuant to Rule 144), and it shall take such further reasonable action, to the extent required from time to time, to enable such Holder to resell Registrable Securities without registration under the Securities Act. Upon the reasonable request of any Holder of Registrable Securities, the Company shall as promptly as reasonably practicable deliver to such Holder a written statement as to whether it has complied with the foregoing information and filing requirements. 1.9. "Market Stand-Off" Agreement. Each Holder hereby agrees that, during the period (not to exceed 180 days with respect to the Follow-on Offering, provided the Follow-on Offering is consummated within one year from the date hereof, and 90 days with respect to every other registration) specified by the Company and an underwriter of Common Stock or other securities of the Company following the effective date of a registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without 11 limitation, any short sale), grant any option to purchase, pledge or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except securities included in such registration; provided, however, that such agreement shall not be required unless all officers and key employees of the Company enter into similar agreements. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to any securities of the Company held by any Holder (and the shares of securities of every other person subject to the foregoing restriction) until the end of such period. 2. Right of First Refusal. 2.1. Restrictions on Transfer. No Holder may effect any sale, exchange, transfer, assignment, gift, pledge, encumbrance, hypothecation or alienation of any shares of any series or class of capital stock of the Company (the "Stock") or any direct or indirect interest in or right to such shares, now held by or hereafter acquired by such stockholder, whether voluntarily or involuntarily or by operation of law (hereinafter collectively referred to as a "Transfer"), for a period of one year after the date hereof, except to a Permitted Transferee. 2.2. Right of First Refusal. Until the seventh anniversary of the date hereof, if a Holder of Stock (an "Offering Stockholder") desires to Transfer any or all of the shares of Stock then owned by such Offering Stockholder (the "Transfer Stock") to any person other than a Permitted Transferee of such Holder or in any manner other than in a bona fide public distribution pursuant to an effective registration statement under the Securities Act, such Offering Stockholder shall give written notice (the "Offer Notice") to the Company of the terms and conditions of the proposed sale, and the Company shall have the right and option (but not the obligation) to purchase the Transfer Stock at the price and upon the other terms and conditions set forth in the Offer Notice. The right of first refusal provided for herein shall be exercisable by the Company upon delivery of written notice (the "Purchase Notice") to the Offering Stockholder not more than 10 business days after receipt by the Company of the Offer Notice (the "Exercise Period"). If the Company exercises its right of first refusal hereunder, consummation of the purchase of the Transfer Stock pursuant thereto shall occur on such date as the Company and the Offering Stockholder mutually shall agree, but in no event later than 10 business days next following the date on which the Company shall have delivered the Purchase Notice to the Offering Stockholder; subject to extension of such 10-day period as necessary to comply with applicable securities and other laws and regulations. Upon exercise of the foregoing right of first refusal, the Company and the Offering Stockholder shall be contractually obligated to consummate the purchase contemplated thereby and shall use their reasonable best efforts to obtain all requisite consents and approvals in connection therewith. If the Company declines to purchase the Transfer Stock as provided in this Section 2.2, the Offering Stockholder thereafter shall have the right for a period of 120 days next following the expiration of the Exercise Period (the "Open Sale Period") to transfer all or any portion of the Transfer Stock subject to the Transfer Offer, free and clear of the restrictions and limitations of this Section 2.2, in one or a series of bona fide transactions; provided, however, that such transfer may only be effected pursuant to general terms and conditions (including price) not more beneficial to the Offering 12 Stockholder than those contained in the Offer Notice. If any Transfer Stock is not sold or transferred pursuant to the provisions of this Section 2.2 prior to the expiration of the Open Sale Period, such Transfer Stock again shall become subject to the provisions and restrictions hereof. The Company may assign its rights under this Section 2.2 to Approved Transferees who shall be entitled to deliver the Purchase Notice and purchase the Transfer Stock in accordance with the identical terms of this Section 2.2. Notwithstanding any of the foregoing, the provisions of this Section 2.2 no longer shall be of any force or effect (a) at such time as Mitchell Rubenstein and Laurie S. Silvers shall have sold 60% or more of the Common Stock beneficially owned by them on the date hereof; provided, however, that Transfers of Common Stock by them to family members, to charitable organizations or to trusts for estate planning purposes shall not constitute Transfers for purposes of this paragraph; or (b) if at any time after the second anniversary of this agreement, 15% or less of the Common Stock is beneficially owned by CBS and its Permitted Transferees. The terms of clause (b) in the preceding sentence shall not be applicable if CBS and its Permitted Transferees beneficially own 15% or less of the Common Stock as a result of Transfers by CBS or its Permitted Transferees of at least 50% of the Common Stock acquired by CBS or its assignees pursuant to the Stock Purchase Agreement and the Warrant. 2.3. Permitted Transferees. "Permitted Transferee" shall mean any subsidiary of CBS that owns interests in multiple Internet businesses and which agrees to be bound by the terms and subject to the conditions of this Agreement. All Stock transferred to a Permitted Transferee shall continue to constitute and remain "Stock" hereunder and each such transferee shall be treated as a Holder for all purposes of this Agreement. The prohibitions and restrictions contained in Section 2.1 and 2.2 hereof shall not apply to transfer to any Permitted Transferees. Notwithstanding the foregoing, any attempt by CBS to transfer Stock in violation of this Section 2, whether voluntary or involuntary, shall be null and void, and the Company neither shall effect such a transfer nor treat any purported transferee as a Holder in respect of any shares intended to be transferred. 2.4. Preemptive Rights. (a) Until the seventh anniversary of the date hereof and subject to the terms and conditions specified in this Section 2.4, CBS shall have the right to purchase the CBS Percentage of all (or any portion of) New Securities that the Company may from time to time issue. (b) If the Company proposes to issue New Securities, it shall give CBS written notice of its intention to do so (the "Notice"), describing the type of New Securities and the price and the terms upon which the Company proposes to issue such New Securities. CBS shall have five business days from the date of delivery of any such Notice to agree in writing to purchase for cash up to the CBS Percentage of such New Securities for the price and upon the terms specified in the Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to exceed the CBS Percentage). 13 (c) If CBS fails to exercise such right to purchase within such five business day period, then the Company shall have 120 days thereafter to sell the New Securities specified in the Notice, at a price and upon general terms not more favorable to the purchaser thereof than specified in the Notice. (d) Notwithstanding any other provision of this Section 2.4, if an issuance of New Securities by the Company is by means of an underwritten offering, and the managing underwriter advises the Company in writing that marketing or other factors require a limitation on the number of shares to be acquired by CBS in such offering, then the Company shall so advise CBS, and CBS's right to acquire New Securities in such offering shall be so limited. 2.5. Assignment of TMC's Rights of First Refusal. Until the seventh anniversary of the date hereof and with respect to the right of first refusal in favor of the Company heretofore granted by The Times Mirror Company ("TMC") to the Company as set forth in Section 4 of that certain Shareholder Agreement (the "TMC Shareholder Agreement") dated as of January 10, 1999 (the "TMC Right of First Refusal"), in the case of any proposed sale or transfer by TMC of shares of Common Stock, the Company shall in a timely fashion (and consistent with the TMC Right of First Refusal) determine whether to exercise such right. If the Company either declines to exercise such right or elects to exercise such right for less than all of TMC's shares of Common Stock, the Company promptly shall so notify CBS and thereupon assign to CBS the TMC Right of First Refusal and provide to CBS all such information reasonably requested by CBS in connection therewith. Thereafter (but nevertheless in a timely fashion in accordance with all notice and time periods required by the TMC Right of First Refusal), CBS may elect (subject to the restrictions in Section 3.1(i) hereof) to purchase all or any portion of TMC's shares of Common Stock upon the identical terms and conditions as specified in the TMC Shareholder Agreement. 2.6. Legends. Each certificate representing shares of Common Stock will be endorsed with the following legends: (a) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED, EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) IN COMPLIANCE WITH THE RESALE LIMITATIONS OF RULE 144 UNDER THE ACT, OR (iii) PURSUANT TO AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUBJECT TO AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR TRANSFER. THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO AN AGREEMENT BETWEEN THE COMPANY AND THE HOLDER DATED AS OF AUGUST 26, 1999, THAT RESTRICTS THE SALE, ASSIGNMENT AND TRANSFER OF THE 14 SECURITIES REPRESENTED HEREBY. A COPY OF SUCH AGREEMENT IS AVAILABLE, WITHOUT CHARGE, FROM THE SECRETARY OF THE COMPANY. (b) Other Legends. Any other legends required by applicable state securities or "blue-sky" laws. (c) The Company need not register a transfer of legended shares of Common Stock and may also instruct its transfer agent not to register the transfer of the shares of Common Stock, unless the conditions specified in each of the foregoing legends are satisfied. 2.7. Removal of Legend and Transfer Restrictions. Any legend endorsed on a certificate pursuant to subsection 2.7(a) and/or 2.7(b) and the "stop transfer" instructions with respect to such legended securities shall be removed, and the Company shall issue a certificate without such legend to the holder of such securities if (a) such securities are registered and sold pursuant to an effective registration statement under the Securities Act and a prospectus meeting the requirements of Section 10 of the Securities Act is available and delivered in connection with such sale or (b) if the Holder satisfies the requirements of Rule 144(k) and, where reasonably deemed necessary by the Company, if the Company is provided with an opinion of counsel (reasonably satisfactory to the Company), to the effect that the Holder meets the requirements of Rule 144(k) and a public sale, transfer or assignment of such Securities may be made without registration under the Securities Act. 3. Other Covenants. 3.1. Standstill. Until the seventh anniversary of the date hereof, CBS agrees (and shall cause its Permitted Transferees to agree) that except as specifically permitted or contemplated by this Agreement or the Stock Purchase Agreement, CBS and its Permitted Transferees and each of their respective Affiliates shall not, directly or indirectly, in one or in a series of related transactions (and whether acting alone or together in concert with others): (i) acquire, or offer or agree, attempt, seek or propose to acquire, directly or indirectly, any equity securities, voting debt securities or property of the Company or any of its successors or subsidiaries (or any direct or indirect beneficial ownership rights, options or interests therein), if, after giving effect thereto, CBS and its affiliates beneficially own (as defined in Rule 13d-3 under the Exchange Act) in excess of 34.8% of the outstanding Common Stock; (ii) solicit proxies or consents or become a "participant" in a "solicitation" (as such terms are defined or used in Regulation 14A under the Exchange Act), of proxies or consents with respect to any securities of the Company (or any of its successors or subsidiaries) or initiate, encourage, entice or induce the submission of any stockholder proposal or "election contest" (as such term is defined or used in Rule 14a-11 under the Exchange Act) with respect to the Company (or any of its successors or subsidiaries) or, directly or indirectly, act to facilitate, encourage, or induce others to take any such action; 15 (iii) take any action for the purpose of convening a meeting of the stockholders the Company (or any of its successors or subsidiaries) or initiate any process to solicit or obtain consents of stockholders in lieu of a meeting or, directly or indirectly, act to facilitate, encourage, or induce others to take such action; (iv) except as may be required by applicable laws, rules or regulations, make any public announcement or disclosure in respect of any plan, commitment, contract, arrangement or understanding relating to any acquisition of capital stock of the Company or a merger, business combination, sale of assets, liquidation, restructuring, recapitalization or other extraordinary corporate transaction relating to the Company or any of its successors or subsidiaries; (v) deposit capital stock of the Company into a voting trust or subject capital stock of the Company to voting agreements, or grant to or constitute any Persons(s) with any proxy or power-of-attorney with respect to any capital stock of the Company to any person not designated by the Company who is not an officer, director or employee of CBS or a Permitted Transferee; (vi) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) for the purpose of acquiring, holding, voting or disposing of securities of the Company or any of its successors or subsidiaries or otherwise with respect to the Company or taking any other actions restricted or prohibited under any clause of this Section 3.1; (vii) disclose publicly any intention, plan or arrangement inconsistent with the foregoing or the other provisions of this Agreement relating to any capital stock of the Company; or (viii) enter into any discussions, negotiations, arrangements or understandings with any third party with a view to, or advising, aiding, abetting, soliciting, inducing or encouraging, any action prohibited by any of the foregoing. Notwithstanding the foregoing, if the Company's Board of Directors approves and/or recommends to its stockholders for approval any Change-in-Control Transaction, then the restrictions contained in this Section 3.1 shall not apply to CBS during the pendency of any such approved or recommended Change-in-Control Transaction and said restrictions shall cease to be of any further force or effect upon the consummation of any such approved or recommended Change-in-Control Transaction. 3.2. Voting by CBS and its Affiliates. (a) Until the seventh anniversary of the date hereof, notwithstanding the number of shares of Common Stock owned by CBS and its Affiliates, CBS shall only have the discretionary right to vote up to 34.8% of the outstanding shares of the Common Stock at any meeting of the shareholders of the Company or otherwise at any time that a vote of the shareholders of the Company is taken (by written consent or otherwise). CBS and its Affiliates 16 shall vote all shares of Common Stock beneficially owned by them in excess of 34.8% of the outstanding shares of the Common Stock in the same proportion as all other shareholders (other than CBS and its Affiliates) of the Company vote on any matter. (b) Until the seventh anniversary of the date hereof, CBS and its Affiliates, as holders of Common Stock, shall be present, in person or by proxy, at all meetings of shareholders of the Company so that all shares of Common Stock directly or indirectly owned by them may be counted for the purpose of determining the presence of a quorum at any such meeting. 3.3. Financial Information. Until such time as the CBS Percentage is equal to or less than 10%, beginning with the first full monthly period after the date hereof, the Company shall provide CBS with unaudited monthly, quarterly, and annual financial information, as appropriate, consisting of summarized financial information as described in SEC Regulation S-X, each prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") within 30 days following each period end. The Company will promptly notify CBS of any adjustment made to this financial information. In addition, the Company shall provide CBS with annual audited financial statements prepared in accordance with GAAP, together with an audit opinion from a "Big 5" public accounting firm no later than 90 days following period end. Until such time as the CBS Percentage is equal to or less than 10%, if CBS or any of its Affiliates notifies the Company that it is required to include summarized Company financial information in its consolidated financial statements, then the Company shall provide CBS or the affiliate with (a) audited annual financial statements of the Company prepared in accordance with GAAP and applicable SEC regulations within 75 days following period end; and (b) reviewed (by a "Big 5" public accounting firm) quarterly financial statements within 40 days following period end. Until such time as the CBS Percentage is equal to or less than 10%, if CBS or any of its Affiliates notifies the Company that it has determined that the Company constitutes an unconsolidated subsidiary qualifying as a "significant subsidiary" (as defined by SEC Regulation S-X) at the 20% level, then the Company shall provide to CBS or the Affiliate (w) draft audited annual financial statements within 50 days following period end, (x) audited annual financial statements within 75 days following period end; (y) reviewed (by a "Big 5" public accounting firm) quarterly financial statements within 35 days following period end; and (z) final quarterly financial statements within 40 days following period end in accordance with the requirements of Form 10-QSB promulgated by the SEC. 4. General. 4.1. Amendments. Any amendment or modification to this Agreement or the rights of either party must be by the written agreement of the parties hereto. 17 4.2. Governing Law. This Agreement shall be governed in all respects by the laws of the State of New York as such laws are applied to agreements between New York residents entered into and to be performed entirely within New York. 4.3. Successors and Assigns. Nothing in this Agreement, express or implied, is intended to confer on any party other than the signatories hereto any rights, remedies, obligations or liabilities under of by reason of this Agreement. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 4.4. Entire Agreement. This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and this Agreement shall supersede and cancel all prior agreements between the parties hereto with regard to the subject matter hereof. 4.5. Severability. If any provision of this Agreement, or the application thereof, is for any reason and to any extent determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances will be interpreted so as best to reasonably effect the intent of the parties hereto. The parties agree to use their best efforts to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision which will achieve, to the extent greatest possible, the economic, business and other purposes of the void or unenforceable provision. 4.6. Notices, etc. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and shall be deemed given when so delivered by hand, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows:
if to CBS, to: CBS Corporation 51 West 52nd Street New York, NY 10019 Attention: Fredric G. Reynolds, Executive Vice President and Chief Financial Officer with a copy to: CBS Corporation 51 West 52nd Street New York, NY 10019 Attention: Louis J. Briskman, Executive Vice President and General Counsel 18 if to the Company, to: Hollywood.com, Inc. 2255 Glades Road, Suite 237 W Boca Raton, FL 33431-7383 Attention: Mitchell Rubenstein, Chief Executive Officer with a copy to: Hollywood.com, Inc. 2255 Glades Road, Suite 237 W Boca Raton, FL 33431-7383 Attention: W. Robert Shearer, General Counsel with a copy (which shall not constitute notice pursuant to this Section 4.6) to: Greenberg Traurig MetLife Building, 15th Floor 200 Park Avenue New York, NY 10166 Attention: Clifford E. Neimeth, Esq.
4.7. Titles and Subtitles The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 4.8. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 19 IN WITNESS WHEREOF, the parties hereby have executed this Agreement on the date first above written. CBS CORPORATION By: /s/ Fredric G. Reynolds --------------------------- Fredric G. Reynolds Executive Vice President and Chief Financial Officer HOLLYWOOD.COM, INC. By: /s/ W. Robert Shearer ------------------------- W. Robert Shearer Senior Vice President and General Counsel 20 EX-10.5 6 VOTING AGREEMENT ================================================================================ VOTING AGREEMENT among CBS CORPORATION, HOLLYWOOD.COM, INC., AND EACH OF THE OTHER PARTIES SIGNATORY HERETO Dated January 3, 2000 ================================================================================ VOTING AGREEMENT This VOTING AGREEMENT ("Agreement") is entered into on this 3rd day of January 2000, by and among CBS Corporation, a Pennsylvania corporation ("CBS"), Hollywood.com, Inc., a Florida corporation with principal offices located at 2255 Glades Road, Suite 237 W, Boca Raton, Florida 33431-7383 (the "Company"), and each of the other parties signatory hereto (each a "Stockholder" and collectively, the "Stockholders"). WITNESSETH: WHEREAS, CBS has entered into a Stock Purchase Agreement with the Company dated August 26, 1999 (the "Stock Purchase Agreement") pursuant to which CBS has agreed to purchase shares of common stock, $.01 par value, (the "Common Stock") of the Company; and WHEREAS, each of the Stockholders own shares of Common Stock ("Shares") of the Company; and WHEREAS, as an inducement and condition for CBS and the Company to enter into the Stock Purchase Agreement, each of CBS, the Company and the Stockholders have agreed to enter into a voting agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing premises and of the mutual agreements and covenants contained herein, the parties, intending to be legally bound, hereby agree as follows: 1.1 Voting Covenants by the Company. As of the date of this Agreement, the Company's Board of Directors ("Board") comprises nine directors. CBS shall have the right from time to time to nominate for election to the Board a number of individuals (the "CBS Designees") equal to the product of the CBS Percentage (as defined below) and the total number of members of the Board (rounded down to the nearest whole number); provided that so long as the Advertising and Promotion Agreement between CBS and Hollywood.com, Inc. or the Content License Agreement between CBS and Hollywood.com, Inc., each of even date herewith, have not terminated or expired, CBS shall have the right to nominate at least one CBS Designee. CBS shall designate the CBS Designees each year sufficiently in advance of the Company's distribution of its annual proxy statement. The Company shall use its reasonable best efforts to cause the nomination and election from time to time of the CBS Designees. In connection therewith, the Company agrees to solicit proxies for, and recommend that its stockholders vote in favor of, each of the CBS Designees. If a CBS Designee shall cease to be a member of the Board for any reason other than expiration of his or her term, the Company shall promptly, upon the request of CBS, use its reasonable best efforts to cause the election or appointment of a person selected by CBS to replace such designee. For purposes of this Section 1.1, the "CBS 1 Percentage" shall mean, on any date of determination, that percentage determined by dividing (a) the number of outstanding shares of Common Stock CBS (or a CBS affiliate) then holds, by (b) the total number of shares of Common Stock of the Company then outstanding. 1.2 Voting Covenants by Stockholders. In any and all elections for members of the Board (whether at a meeting or by written consent in lieu of a meeting), each of the Stockholders shall vote or cause to be voted all shares of the Common Stock now or hereinafter directly or indirectly owned (of record or beneficially) by it, or over which it has voting control, and otherwise shall use its best efforts so as to elect to the Company's Board the CBS Designees. 1.3 Voting Covenants by CBS. In any and all elections for members of the Board (whether at a meeting or by written consent in lieu of a meeting), CBS shall vote or cause to be voted all shares of the Common Stock owned by it (or its affiliates), or over which it has voting control, and otherwise shall use its best efforts so as to elect to the Company's Board (a) each individual nominated for election to the Board by the Company and (b) each individual nominated for election to the Board by The Times Mirror Company, pursuant to the terms and conditions of Section 7.1 of that certain Shareholder Agreement, dated January 10, 1999, between the Company and The Times Mirror Company, and a renewal or extension of the term of Section 7.1 of such Shareholder Agreement (without otherwise modifying or amending any other term or condition of Section 7.1), which renewal or extension period shall not extend beyond the term of this Agreement. 2. Stockholder Capacity. No person executing this Agreement who is or becomes during the term hereof a member of the Board makes any agreement or understanding herein in his or her capacity as such member of the Board. Each Stockholder who signs this Agreement signs solely in his or her capacity as the record and/or beneficial owner of shares of Common Stock of the Company. 3. General. 3.1. Waivers and Amendments. Any amendment or modification to this Agreement or the rights of any party hereto must be by the written agreement of the parties hereto. 3.2. Governing Law. This Agreement shall be governed in all respects by the laws of the State of New York as such laws are applied to agreements between New York residents entered into and to be performed entirely within New York. 3.3. Successors and Assigns. Except as specifically set forth in this Agreement, nothing in this Agreement, express or implied, is intended to confer on any party other than the signatories hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement. 3.4. Entire Agreement. Except as set forth below, this Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and this Agreement 2 shall supersede and cancel all prior agreements between the parties hereto with regard to the subject matter hereof. 3.5. Severability. If any provision of this Agreement, or the application thereof, is for any reason and to any extent determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances will be interpreted so as best to reasonably effect the intent of the parties hereto. The parties agree to use their best efforts to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision which will achieve, to the extent greatest possible, the economic, business and other purposes of the void or unenforceable provision. 3.6. Notices, etc. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and shall be deemed given when so delivered by hand, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows:
if to CBS, to: CBS Corporation 51 West 52nd Street New York, NY 10019 Attention: Fredric G. Reynolds, Executive Vice President and Chief Financial Officer with a copy to: CBS Corporation 51 West 52nd Street New York, NY 10019 Attention: Louis J. Briskman, Executive Vice President and General Counsel if to the Company, to: Hollywood.com, Inc. 2255 Glades Road, Suite 237 W Boca Raton, FL 33431-7383 Attention: Mitchell Rubenstein, Chief Executive Officer 3 with a copy to: Hollywood.com, Inc. 2255 Glades Road, Suite 237 W Boca Raton, FL 33431-7383 Attention: W. Robert Shearer, General Counsel with a copy (which shall not constitute notice pursuant to this Section 3.6) to: Greenberg Traurig MetLife Building, 15th Floor 200 Park Avenue New York, NY 10166 Attention: Clifford E. Neimeth, Esq. if to any of the Stockholders, at the address set forth on Schedule I hereto.
3.7. Titles and Subtitles The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 3.8. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 3.9. Termination of Board Rights. Notwithstanding anything to the contrary set forth herein, the Company's obligations under Section 1.1 and the Stockholders' obligations under Section 1.2 shall terminate and be of no further force and effect upon the acquisition ("Competitor Acquisition") by CBS (or any of its affiliates or its assignees hereunder), directly or indirectly, of an equity interest in excess of 15% in any entity who, directly or indirectly, owns, operates or controls a Competitive Site. CBS shall remain subject to its obligations under Section 1.3 of this Agreement following any Competitor Acquisition, provided that CBS's voting obligations shall be limited to the number of individuals that would have been nominated for election to the Board by the Company and The Times Mirror Company if CBS's rights under Section 1.1 remained in effect at the time of any such nominations. As used herein, a "Competitive Site" means a website that has as its primary function and its principal theme the delivery of news or information related to movies, movie celebrities or the motion picture industry or the sale of movie- or television-related merchandise. The definition of "Competitive Site" shall not include a website that has as its primary function and its principal theme the sale of music to consumers in CD, cassette or music video format or in or through any and all other 4 formats, media, methods, processes or technologies (including, but not limited to, Internet streaming), whether now known or hereafter invented. 3.10. Term. This Agreement, and all rights and obligations hereunder shall become effective on the date first set forth above, and shall terminate on the earlier of: (a) seven years thereafter; (b) the termination or expiration of the Advertising and Promotion Agreement between CBS and hollywood.com, Inc. and the Content License Agreement between CBS and hollywood.com, Inc., each of even date herewith, whichever later occurs; and (c) the date on which the CBS Percentage is less than 10% as a result of CBS's sale of its Common Stock (and excluding, for avoidance of doubt, any other diminution or dilution of the CBS Percentage or any transfer of Common Stock to an affiliate of CBS), at which time this Agreement, and all rights and obligations hereunder, shall cease to be of further force or effect. 5 IN WITNESS WHEREOF, the parties hereby have executed this Agreement on the date first above written. CBS CORPORATION By: /s/ Fredric G. Reynolds --------------------------- Name: Fredric G. Reynolds Executive Vice President and Chief Financial Officer HOLLYWOOD.COM, INC. By:/s/ Mitchell Rubenstein -------------------------- Name: Mitchell Rubenstein Chief Executive Officer THE TIMES MIRROR COMPANY By:/s/ Edward L. Blood ------------------- Edward L. Blood Vice President 6 Schedule I to Voting Agreement ------------------------------ Number of Shares of Stockholder Name and Address Common Stock Beneficially Owned - ---------------------------- ------------------------------- Mitchell Rubenstein c/o Hollywood.com, Inc. 2255 Glades Road Suite 237 West Boca Raton, FL 33431-7383 1,469,199* Laurie S. Silvers c/o Hollywood.com, Inc. 2255 Glades Road Suite 237 West Boca Raton, FL 33431-7383 1,469,199* Mr. and Mrs. Martin H. Greenberg 1524 University Avenue, Suite 305 Green Bay, WI 54302 296,624 The Times Mirror Company 220 West First Street Los Angeles, California 90012 Attention: Thomas Unterman 2,300,075 * Except for 100,000 shares owned individually by each of Mr. Rubenstein and Ms. Silvers, all of the shares are held jointly as tenants by their entities. I-1 EX-27.1 7 FDS--5
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 6,429,994 0 2,108,148 123,082 1,145,194 35,755,211 3,102,389 (1,049,813) 199,275,272 6,327,001 0 0 0 232,096 182,845,949 199,275,272 4,077,696 4,077,696 949,971 13,288,737 0 0 59,200 (9,174,026) 0 (9,174,026) 0 0 0 (9,174,026) (0.42) (0.42)
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