<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) OCTOBER 1, 1998
------------------------------
HOLLYWOOD ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
OREGON 0-21824 93-0981138
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
9275 SW PEYTON LANE, WILSONVILLE, OREGON 97070
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(Address of principal executive offices) (Zip Code)
(503) 570-1600
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(Registrant's telephone number, including area code
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 1, 1998 and pursuant to the Agreement and Plan of Merger
and Reorganization (the "Merger Agreement"), dated as of July 30, 1998, as
amended, among Hollywood Entertainment Corporation (the "Registrant" or
"Hollywood"), R Acquisition, Inc., a Delaware corporation and wholly owned
subsidiary of Hollywood, and Reel.com, Inc., a Delaware corporation
("Reel.com"), Hollywood acquired all of the outstanding shares of Reel.com
capital stock in exchange (at the election of the Reel.com stockholders) for
$29,805,125 in cash, 4,000,000 shares of Hollywood Common Stock and 1,000,000
shares of Hollywood Series A Redeemable Preferred Stock (collectively, the
"Merger Consideration"). The merger of Reel.com into Hollywood was
consummated pursuant to Section 252 of the Delaware General Corporation Law and
Section 60.501 of the Oregon Business Corporation Act by the execution and
filing of certificates of merger with the Secretaries of State of the States
of Delaware and Oregon on October 1, 1998 (the "Merger"). Pursuant to the
Merger, all shares of Reel.com were canceled and converted into the right to
receive the Merger Consideration. Subject to the Merger Agreement, the former
stockholders of Reel.com will indemnify Hollywood for damages incurred by
reason of certain breaches of the Merger Agreement by Reel.com. The cash
portion of the Merger Consideration was funded with proceeds from the sale of
1,982,537 shares of Hollywood Common Stock and 1,380,263 shares of Hollywood
Series A Redeemable Preferred Stock at a purchase price of $13.50 per share
on October 2, 1998 pursuant to the Stock Purchase Agreement (the "Stock
Purchase Agreement"), dated as of July 30, 1998, as amended, among Hollywood
and certain stockholders and affiliates of stockholders of Reel.com.
Reel.com is an electronic commerce company currently offering over
85,000 VHS and 1,200 DVD titles for sale and over 35,000 VHS titles for
rental through an Internet-based movie store. Reel.com also provides
proprietary editorial content on its Internet site to assist its customers in
the selection of movies. Additionally, Reel.com operates a physical video
rental store located in Berkeley, California offering a selection of over
35,000 titles.
The Merger was structured to constitute a reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended, and will be
treated by the Registrant as a "purchase" for accounting purposes.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, AS AMENDED BY AMENDMENT NO. 1,
AMENDMENT NO. 2 AND AMENDMENT NO. 3, AND THE STOCK PURCHASE AGREEMENT, AS
AMENDED BY AMENDMENT NO. 1 AND AMENDMENT NO. 2, COPIES OF WHICH ARE INCLUDED
AS EXHIBITS 2.1, 2.2, 2.3, 2.4, 10.9, 10.10, AND 10.11 TO THIS CURRENT REPORT
ON FORM 8-K AND ARE INCORPORATED BY REFERENCE HEREIN.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMAL FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF REEL.COM
The financial statements required by Item 7(a) of Form 8-K will be
filed by amendment of this Form 8-K not later than 60 days after the date
hereof.
(b) PRO FORMA FINANCIAL INFORMATION
The pro forma financial statements required by Item 7(b) of Form
8-K will be filed by amendment of this Form 8-K not later than 60 days after
the date hereof.
(c) (c) EXHIBITS
<TABLE>
<CAPTION>
Number Description
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<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as
of July 30, 1998, among Hollywood Entertainment
Corporation, R Acquisition, Inc. and Reel.com, Inc.
(incorporated by reference to Exhibit 2.1 to the
Registrant's Form 10-Q for the quarter ended June 30,
1998)
2.2 Amendment No. 1 to Agreement and Plan of Merger and
Reorganization, dated as of September 3, 1998, among
Hollywood Entertainment Corporation, R Acquisition, Inc.
and Reel.com, Inc.
2.3 Amendment No. 2 to Agreement and Plan of Merger and
Reorganization, dated as of September 14, 1998, among
Hollywood Entertainment Corporation, R Acquisition, Inc.
and Reel.com, Inc.
2.4 Amendment No. 3 to Agreement and Plan of Merger and
Reorganization, dated as of September 30, 1998, among
Hollywood Entertainment Corporation, R Acquisition, Inc.
and Reel.com, Inc.
10.9 Stock Purchase Agreement, dated as of July 30, 1998, among
Hollywood Entertainment Corporation and the purchasers
listed therein (incorporated by reference to Exhibit 10.1
to the Registrant's Form 10-Q for the quarter ended June
30, 1998)
10.10 Amendment No. 1 to Stock Purchase Agreement, dated as of
September 14, 1998, among Hollywood Entertainment
Corporation and the purchasers listed therein
10.11 Amendment No. 2 to Stock Purchase Agreement, dated as of
September 30, 1998, among Hollywood Entertainment
Corporation and the purchasers listed therein
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOLLYWOOD ENTERTAINMENT CORPORATION
Date: October 16, 1998 By: /s/ Jeff Jordan
-----------------------------------------
Jeff Jordan
Chief Financial Officer
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AMENDMENT NO. 1 TO THE
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDMENT NO. 1 (this "AMENDMENT") to the AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION, dated as of July 30, 1998 (the "MERGER AGREEMENT,"
capitalized terms used but not otherwise defined herein are used herein as
therein defined), among HOLLYWOOD ENTERTAINMENT CORPORATION, a corporation
organized and existing under the laws of the State of Oregon ("PARENT"),
R ACQUISITION, INC., a corporation organized and existing under the laws of
the State of Delaware ("MERGER SUB") and a direct wholly owned subsidiary of
Parent, and REEL.COM, INC., a corporation organized and existing under the
laws of the State of Delaware (the "COMPANY"), is made this 3rd day of
September, 1998, by and among Parent, Merger Sub and the Company.
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub and the Company desire to amend the Merger
Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreement set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO MERGER AGREEMENT. The Merger
Agreement is hereby amended as follows:
(a) Sections 3.01(c)(i), and 3.02(e) of the Merger Agreement
are hereby amended by deleting the dollar amount "$30,000,000" and
inserting in lieu thereof the dollar amount "$29,849,500."
(b) Sections 3.01(c)(ii), 3.02(f), 3.06(a) and 3.06(b) of the
Merger Agreement are hereby amended by deleting the numeral ".5388"
and inserting in lieu thereof the numeral ".537608239."
(c) The last sentence of Section 3.02(b) of the Merger
Agreement is hereby amended and restated in its entirety to read as
follows:
"Any shareholder's election to receive the Cash Consideration
shall have been properly made only if Parent shall have received at
its designated office, by 10:00 a.m., San Francisco time, September
11, 1998 (the "Election Date") a Form of Election properly completed
and signed."
(d) Section 3.02(c) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
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"Any Form of Election may be revoked by the shareholder
submitting it to Parent only by written notice received by Parent
prior to 10:00 a.m., San Francisco time, on the Election Date."
(e) Section 3.02(g) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(g) The aggregation of the portion of Electing Shares that are
subject to proration under subsection (e) are referred to herein as
"Deemed Stock Electing Shares" and the aggregation of the portion of
non-Electing Shares that are subject to proration under subsection (f)
are referred to herein as "Deemed Cash Electing Shares."
(f) The third sentence of Section 3.03 of the Merger Agreement
is hereby amended and restated in its entirety to read as follows:
"Commencing immediately after the Effective Time, each holder of a
certificate or certificates theretofore representing shares of Company
Capital Stock (other than Dissenting Shares) may surrender the same to
Parent together with a letter of transmittal in the form provided to
such holder by Parent."
(g) Section 6.07 of the Merger Agreement is hereby amended and
restated in its entirety as follows:
"6.07 OPTION CASH-OUT. Immediately prior to the Effective
Time, the Company shall (or shall have) accelerated vesting of not
more than 25% of outstanding Company Stock Options and irrevocably
undertaken to cash-out such options and other previously vested
Company Stock Options (the "Previously Vested Options") for an
aggregate cash payment with respect to all such Company Stock Options
(the "Cash-Out Amount") of an amount not in excess of $7,000,000. With
respect to the accelerated options, one-half of such amount shall be
paid out immediately after the Effective Time, and the remainder of
such amount shall be deposited into an escrow account (with an escrow
agent to be identified by the Company) and paid out on the 120th day
following the Effective Time in accordance with the terms and subject
to the conditions specified by the Company under the escrow agreement
and in accordance with the Company Stock Option Plans. If, under the
terms of the escrow agreement, funds remain in the escrow account
after the 120th day following the Effective Time as a result of the
termination of an optionholder's employment under specified
circumstances, such remaining amount shall be promptly distributed to
the Persons that held Electing Shares, Deemed Cash Electing Shares and
Previously Vested Options immediately prior to the Effective Time
ratably on the basis of the aggregate number of (i) Electing Shares
held by such holder immediately prior to the Effective Time, (ii)
Deemed Cash Electing shares held by such holder immediately prior to
the Effective Time and (iii) shares of Company Capital Stock issuable
upon exercise of Previously Vested Options held by such holder
immediately prior to the Effective Time."
(h) Section 6.10 of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
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"6.10 CONTINUITY OF INTEREST. The parties hereto acknowledge
and agree that the relative amounts of Redeemable Preferred Stock and
Parent Common Stock included in the Stock Consideration issued under
this Agreement and issued under the Stock Purchase Agreement shall be
adjusted in accordance with the provisions of this Section 6.10 (and a
corresponding provision of the Stock Purchase Agreement) in order to
ensure satisfaction of the continuity of interest requirement for
status of the Merger as a "reorganization" under Section 368(a) of the
Code:
(a) If the closing price of the Parent Common Stock on the
NNM or the day preceding the Closing Date (the "Closing Date Stock
Value") is equal to or more than $13.50 per share, then (i) the number of
shares of Parent Common Stock issued under this Agreement will be
increased to 4,000,000, (ii) the number of shares of Parent Common
Stock to be issued under the Stock Purchase Agreement shall be reduced
by the amount of the increase under clause (i), (iii) the number of
shares of Redeemable Preferred Stock issued under this Agreement will
be reduced by the amount of the increase under clause (i), and (iv) a
number of shares of Redeemable Preferred Stock equal to the amount of
the increase under clause (i) shall be issued under the Stock Purchase
Agreement.
(b) If the Closing Date Stock Value is less than $13.50
per share, then the number of shares of Parent Common Stock issued
under this Agreement shall be further increased (with corresponding
adjustments in the manner provided under subsection (a) to the number
of shares of Parent Common Stock and Redeemable Preferred Stock issued
under this Agreement and the Stock Purchase Agreement) to the extent
necessary to cause, if possible, (i) the number of shares of Parent
Common Stock issued under this Agreement multiplied by the Closing
Date Stock Value to equal or exceed (ii) 50% of the value of the
aggregate consideration issued under this Agreement in exchange for
the Company Capital Stock (valuing any Redeemable Preferred Stock
issued under this Agreement at $16.20 per share solely for purposes of
this Section 6.10 and Section 8.01(g))."
(i) Article VI of the Merger Agreement is hereby amended by
adding the following Section 6.12 immediately following Section 6.11
thereof:
"6.12 STATUS OF MERGER AS REORGANIZATION. The parties intend
that the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code and have not taken, and following the
Effective Time will not take, any action that could reasonably be
expected to cause the Merger to fail to so qualify, PROVIDED that,
subject to the foregoing, no party makes any representation or
warranty that the requirements for treatment of the Merger as a
reorganization are satisfied."
(j) The first sentence of Section 7.02 is hereby amended and
restated in its entirety to read as follows:
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"The Company shall call and hold a special meeting of the
stockholders of the Company (or solicit the written consent of the
Company's stockholders in lieu of a meeting) no later than September
11, 1998.
(k) Article VIII of the Merger Agreement is hereby amended by
adding the following subsection (g) of Section 8.01 immediately
following subsection (f) thereof:
"(g) the product of the Closing Date Stock Value (as defined by
Section 6.10 of this Agreement) and the number of shares of Parent
Common Stock issued under this Agreement shall equal or exceed 50% of
the value of the aggregate consideration issued under this Agreement
in exchange for the Company Capital Stock (valuing any Redeemable
Preferred Stock issued under this Agreement at $16.20 for this
purpose) so as to ensure satisfaction of the continuity of interest
requirement for treatment of the Merger as a reorganization under
Section 368(a) of the Code."
(l) Section 10.02(a) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"(a) Parent and its Affiliates, officers, directors, employees,
agents, successors and assigns (each an "Indemnified Party") shall be
indemnified and held harmless, jointly and severally, by each holder
(a "Holder") of Company Capital Stock receiving Consideration for any
and all Liabilities, losses, damages, claims, costs (including
business interruption costs) and expenses, interest, awards, judgments
and penalties (including, without limitation, attorneys' and
consultants' fees and expenses) actually suffered or incurred by them
(including, without limitation, any Action brought or otherwise
initiated by any of them) (hereinafter a "Loss"), arising out of or
resulting from (i) the breach of any representation or warranty made
by the Company contained in the Acquisition Documents and (ii) any
breach of any representation or warranty by the Company regarding
Taxes and any Taxes owed by the Company, any Predecessor Company or
equity holder therein related to periods or acts prior to the
Effective Time."
SECTION 2. Representations and Warranties.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Parent and Merger Sub that: (i) the Company
has all necessary corporate power and authority to execute and deliver this
Amendment, to perform its obligations under the Merger Agreement as amended
hereby and to consummate the transactions contemplated hereby; (ii) the
execution and delivery of this Amendment by the Company and the consummation by
the Company of the transactions contemplated by the Merger Agreement as amended
hereby have been duly and validly authorized by all necessary corporate action
(other than stockholder approval as described in the Merger Agreement);
(iii) this Amendment has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
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(b) REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that: (i) Parent and Merger Sub have all
necessary corporate power and authority to execute and deliver this
Amendment, to perform their respective obligations under the Merger
Agreement as amended hereby and to consummate the transactions
contemplated hereby; (ii) the execution and delivery of this Amendment
by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the transactions contemplated by the Merger Agreement as amended
hereby have been duly and validly authorized by all necessary
corporate action; (iii) this Amendment has been duly executed and
delivered by Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the
legal, valid and binding obligation of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms.
SECTION 3. EFFECT ON MERGER AGREEMENT. Except as otherwise
specifically provided herein, the Merger Agreement shall not be
amended but shall remain in full force and effect.
SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF DELAWARE (WITHOUT REFERENCE TO CONTRACT OF LAW PRINCIPLES
OTHER THAN THOSE DIRECTING DELAWARE LAW).
SECTION 5. COUNTERPARTS. This Amendment may be signed in
one or more counterparts, each of which shall be an original but all
of which, taken together, shall constitute one and the same instrument.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
HOLLYWOOD ENTERTAINMENT CORPORATION
By:
------------------------------------
Name: Donald J. Ekman
Title: Senior Vice President and
General Counsel
R ACQUISITION, INC.
By:
------------------------------------
Name: Donald J. Ekman
Title: Secretary
REEL.COM, INC.
By:
------------------------------------
Name: Julie Wainwright
Title: Chief Executive Officer
6
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AMENDMENT NO. 2 TO THE
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDMENT NO. 2 (this "AMENDMENT") to the AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION, dated as of July 30, 1998, among HOLLYWOOD
ENTERTAINMENT CORPORATION, a corporation organized and existing under the
laws of the State of Oregon ("PARENT"), R ACQUISITION, INC., a corporation
organized and existing under the laws of the State of Delaware and a direct
wholly owned subsidiary of Parent ("MERGER SUB"), and REEL.COM, INC., a
corporation organized and existing under the laws of the State of Delaware
(the "COMPANY"), as amended September 3, 1998 (the "MERGER AGREEMENT,"
capitalized terms used but not otherwise defined herein are used herein as
therein defined), is made as of this 14th day of September, 1998 , by and
among Parent, Merger Sub and the Company.
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub and the Company desire to amend the Merger
Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreement set forth herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
SECTION 1. AMENDMENTS TO MERGER AGREEMENT. The Merger Agreement is
hereby amended as follows:
(a) Section 1.01 of the Merger Agreement is hereby amended by
inserting the following sentence in Section 1.01 after the sentence
beginning with "`NNM'" and before the sentence beginning with "`OTHER
TRANSACTION'":
""OREGON CORPORATION ACT" shall mean the Business Corporation Act
of the State of Oregon."
(b) Section 2.01 of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"SECTION 2.01 THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
Business Corporation Act and the Oregon Corporation Act, at the
Effective Time, the Company shall be merged with and into Parent. As
a result of the Merger, the separate corporate existence of the
Company shall cease and Parent shall continue as the surviving
corporation of the Merger (the "Surviving Corporation")."
(c) Section 2.03 of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
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"SECTION 2.03 EFFECTIVE TIME. At the time of the Closing, the
parties shall cause the Merger to be consummated by filing (i) a
certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware in such form as required by, and
executed in accordance with, the relevant provisions of, the Business
Corporation Act and (ii) an articles of merger (the "Articles of
Merger") with the Secretary of State of Oregon in such form as
required by, and executed in accordance with, relevant provisions of
the Oregon Corporation Act (the date and time of the later of such
filings, or such later time as may be agreed to by the parties hereto
and specified in the Certificates of Merger and the Articles of
Merger, being the "Effective Time")."
(d) Section 2.04 of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"SECTION 2.04 EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions
of the Business Corporation Act and the Oregon Corporation Act.
Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of the Company and
Parent shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Parent shall become the
debts, liabilities and duties of the Surviving Corporation."
(e) Section 2.05 of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"SECTION 2.05 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS
AND OFFICERS OF SURVIVING CORPORATION. Unless otherwise agreed by the
Company and Parent prior to the Effective Time, at the Effective Time:
(a) the articles of incorporation and bylaws of Parent, as
in effect immediately prior to the Effective Time, shall be the
articles of incorporation and bylaws of the Surviving Corporation
until thereafter amended as provided by Law and such articles of
incorporation or bylaws;
(b) the officers of Parent immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation until their successors are elected or appointed and
qualified or until their resignation or removal; and
(c) the directors of Parent immediately prior to the
Effective Time shall be the initial directors of the Surviving
Corporation until their successors are elected or appointed and
qualified or until their resignation or removal; provided that
Parent shall comply with Section 7.07."
(f) Section 3.01(a) is hereby amended and restated in its
entirety as follows:
"(a) CAPITAL STOCK OF PARENT. Each issued and outstanding
share of Parent Common Stock shall remain issued and outstanding and
each shares of Parent Common Stock held in treasury of Parent shall
remain in treasury.
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(g) Sections 3.01(c)(i), and 3.02(e) of the Merger Agreement
are hereby amended by deleting the dollar amount "$29,849,500" and
inserting in lieu thereof the dollar amount "$29,805,125."
(h) Sections 3.01(c)(ii), 3.02(f), 3.06(a) and 3.06(b) of
the Merger Agreement are hereby amended by deleting the numeral
".537608239" and inserting in lieu thereof the numeral "0.536704588."
(i) Article VI of the Merger Agreement is hereby amended by
adding the following Section 6.13 immediately following Section 6.12
thereof:
"SECTION 6.13 ACCOUNTING OF MERGER. The parties stipulate that
the value of goodwill and going concern value is not less than 50% of
the total value of the Company's assets. The parties further
stipulate that the value of inventory, copyrights, and other property
the sale of which would produce ordinary income to the Company or its
founder is not more than 15% of the net worth of the Company (as
defined in Section 341(e)(7) of the Code). The parties agree that
they will report the Merger for financial accounting purposes
consistent with such valuations."
(j) Section 7.03 of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"SECTION 7.03 DIRECTORS' AND OFFICERS' INDEMNIFICATION. From
and after the Effective Time, Parent shall indemnify and hold harmless
each present and former director and officer of the Company (the
"Surviving Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out
of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that the Company would have been
permitted under Delaware law and its charter documents (each as in
effect on the date hereof) to indemnify such Surviving Indemnified
Parties."
SECTION 2. Representations and Warranties.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Parent and Merger Sub that: (i) the
Company has all necessary corporate power and authority to execute and
deliver this Amendment, to perform its obligations under the Merger
Agreement as amended hereby and to consummate the transactions contemplated
hereby; (ii) the execution and delivery of this Amendment by the Company and
the consummation by the Company of the transactions contemplated by the
Merger Agreement as amended hereby have been duly and validly authorized by
all necessary corporate action; (iii) this Amendment has been duly executed
and delivered by the Company and, assuming the due authorization, execution
and delivery by Parent and Merger Sub, constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms.
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(b) REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company that: (i) Parent and Merger Sub have all necessary corporate
power and authority to execute and deliver this Amendment, to perform their
respective obligations under the Merger Agreement as amended hereby and to
consummate the transactions contemplated hereby; (ii) the execution and
delivery of this Amendment by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated by the Merger
Agreement as amended hereby have been duly and validly authorized by all
necessary corporate action; (iii) this Amendment has been duly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms.
SECTION 3. EFFECT ON MERGER AGREEMENT. Except as otherwise
specifically provided herein, the Merger Agreement shall not be amended but
shall remain in full force and effect.
SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
(WITHOUT REFERENCE TO CONTRACT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
DELAWARE LAW).
SECTION 5. COUNTERPARTS. This Amendment may be signed in one or more
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
HOLLYWOOD ENTERTAINMENT CORPORATION
By:
------------------------------------
Name: Donald J. Ekman
Title: Senior Vice President and
General Counsel
R ACQUISITION, INC.
By:
------------------------------------
Name: Donald J. Ekman
Title: Secretary
REEL.COM, INC.
By:
------------------------------------
Name: Julie Wainwright
Title: Chief Executive Officer
5
<PAGE>
AMENDMENT NO. 3 TO THE
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDMENT NO. 3 (this "AMENDMENT") to the AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION, dated as of July 30, 1998, among HOLLYWOOD
ENTERTAINMENT CORPORATION, a corporation organized and existing under the
laws of the State of Oregon ("PARENT"), R ACQUISITION, INC., a corporation
organized and existing under the laws of the State of Delaware and a direct
wholly owned subsidiary of Parent ("MERGER SUB"), and REEL.COM, INC., a
corporation organized and existing under the laws of the State of Delaware
(the "COMPANY"), as amended September 3, 1998 and September 14, 1998 (the
"MERGER AGREEMENT," capitalized terms used but not otherwise defined herein
are used herein as therein defined), is made as of this 30th day of
September, 1998, by and among Parent, Merger Sub and the Company.
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub and the Company desire to amend the Merger
Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreement set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO MERGER AGREEMENT. The Merger Agreement is
hereby amended as follows:
(a) The initial clause of Section 3.06(a) is hereby amended and
restated in its entirety to read as follows:
"At the Effective Time, each option granted by the Company to
purchase shares of Company Common Stock (each, a "Company Stock
Option") and Series C Warrant which is outstanding and unexercised,
and unvested as of September 15, 1998 in the case of Company Stock
Options, immediately prior to the Effective Time shall be assumed
by Parent and converted into an option or warrant to purchase
shares of Parent Common Stock in such number and at such exercise
price as provided below and otherwise having the same terms and
conditions as in effect immediately prior to the Effective Time
(except to the extent that such terms, conditions and restrictions
may be altered in accordance with their terms as a result of the
Merger):"
(b) The first sentence of Section 7.06 (a) is hereby amended and
restated in its entirety to read as follows:
1.
<PAGE>
"At the Effective Time, Parent shall assume, by virtue of this
Agreement and without any further action on the part of the
Company, all of the Company's obligations with respect to each
outstanding Company Stock Option which was unvested as of September
15, 1998."
(c) Section 9.01(b) is hereby amended and restated in its entirety as
follows:
"(b) by either Parent or the Company, if the Effective Time
shall not have occurred on or before October 1, 1998; provided,
however, that the right to terminate this Agreement under this
Section 9.01(b) shall not be available to any party whose failure
to fulfill an obligation under this Agreement has been the cause of
the failure of the Merger to occur on or before such date;"
(d) Section 10.02(a) of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"SECTION 10.02. INDEMNIFICATION BY THE HOLDERS.
(a) Parent and its Affiliates, officers, directors,
employees, agents, successors and assigns (each an "Indemnified
Party") shall be indemnified and held harmless, jointly and
severally, by each holder (a "Holder") of Company Capital Stock
receiving Merger Consideration for any and all Liabilities, losses,
damages, claims, costs (including business interruption costs) and
expenses, interest, awards, judgments and penalties (including,
without limitation, attorneys' and consultants' fees and expenses)
actually suffered or incurred by them (including, without
limitation, any Action brought or otherwise initiated by any of
them) (hereinafter a "Loss"), (y) arising out of or resulting from
(i) the breach of any representation or warranty made by the
Company contained in the Acquisition Documents and (ii) any breach
of any representation or warranty by the Company regarding Taxes
and any Taxes owed by the Company, any Predecessor Company or
equity holder therein related to periods or acts prior to the
Effective Time and (z) resulting from either a settlement approved
in accordance with Section 10.02(b) or a non-appealable finding by
a court of law of a violation of Law by the Company arising from
the alleged actions in the lawsuit MTS, Incorporated v. Fry's
Electronics, Inc. and Reel.com, Inc., case No. 98AS04414, Superior
Court of the State of California in the County of Sacramento (the
"MTS Matter").
(e) Section 10.02(b) of the Merger Agreement is hereby amended by
adding the following sentence immediately following the last sentence
of Section 10.02(b):
"If the MTS Matter is settled by Parent, the obligations and
Liabilities of the Holders to indemnify an Indemnified Party for a
Loss resulting from the MTS Matter as provided in Section
10.02(a)(z) are subject to the written consent of the Holders'
Representative to such a settlement, which consent shall not be
unreasonably withheld, provided, however, that the Holders'
Representative will
2
<PAGE>
not be required to consent to any portion of a settlement which
admits a violation of Law except as it may determine in its sole
discretion."
SECTION 2. Representations and Warranties.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Parent and Merger Sub that: (i) the
Company has all necessary corporate power and authority to execute and
deliver this Amendment, to perform its obligations under the Merger
Agreement as amended hereby and to consummate the transactions contemplated
hereby; (ii) the execution and delivery of this Amendment by the Company
and the consummation by the Company of the transactions contemplated by the
Merger Agreement as amended hereby have been duly and validly authorized by
all necessary corporate action; (iii) this Amendment has been duly executed
and delivered by the Company and, assuming the due authorization, execution
and delivery by Parent and Merger Sub, constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms.
(b) REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent
and Merger Sub hereby jointly and severally represent and warrant to the
Company that: (i) Parent and Merger Sub have all necessary corporate power
and authority to execute and deliver this Amendment, to perform their
respective obligations under the Merger Agreement as amended hereby and to
consummate the transactions contemplated hereby; (ii) the execution and
delivery of this Amendment by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated by the Merger
Agreement as amended hereby have been duly and validly authorized by all
necessary corporate action; (iii) this Amendment has been duly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms.
SECTION 3. EFFECT ON MERGER AGREEMENT. Except as otherwise
specifically provided herein, the Merger Agreement shall not be amended but
shall remain in full force and effect.
SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
(WITHOUT REFERENCE TO CONTRACT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING
DELAWARE LAW).
SECTION 5. COUNTERPARTS. This Amendment may be signed in one or more
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
[remainder of page intentionally blank]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
HOLLYWOOD ENTERTAINMENT CORPORATION
By:
-----------------------------------------
Name: Donald J. Ekman
Title: Senior Vice President and
General Counsel
R ACQUISITION, INC.
By:
-----------------------------------------
Name: Donald J. Ekman
Title: Secretary
REEL.COM, INC.
By:
-----------------------------------------
Name: Julie Wainwright
Title: Chief Executive Officer
4
<PAGE>
AMENDMENT NO. 1 TO THE
HOLLYWOOD ENTERTAINMENT CORPORATION
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (the "AMENDMENT") to the HOLLYWOOD ENTERTAINMENT
CORPORATION STOCK PURCHASE AGREEMENT dated as of July 30, 1998 (the "PURCHASE
AGREEMENT"), by and among Hollywood Entertainment Corporation, an Oregon
corporation (the "COMPANY"), and the parties set forth on Exhibit A thereto,
is made as of September 3, 1998. A copy of the Purchase Agreement is
attached hereto as ATTACHMENT 1.
RECITALS
WHEREAS, the Company and the undersigned parties hereto desire to amend
the Purchase Agreement as provided herein;
NOW, THEREFORE, IT IS AGREED THAT:
1. All capitalized terms used herein without definition shall have
the meanings ascribed to them in the Purchase Agreement, other than as set
forth in Section 4 below.
2. Section 1.1 of the Purchase Agreement shall be amended and
restated in its entirety as follows:
"Section 1.1 SALE OF THE STOCK. Subject to the terms and
conditions hereof, at the Closing (as defined below), the Company will issue
and sell to each Purchaser, and each Purchaser will purchase, in the
respective amounts set forth on Exhibit A, an aggregate of 5,000,000 shares
of Common Stock ("Common Stock") and Series A Redeemable Preferred Stock (as
described in Exhibit A to that certain Agreement and Plan of Merger and
Reorganization among the Company, R Acquisition, Inc. and Reel.com, Inc.
dated as of July 30, 1998, as amended (the "Merger Agreement")) ("Redeemable
Preferred") from the Company (the Common Stock and Redeemable Preferred shall
be referred to, collectively, as the "Stock"), at a purchase price per share
of $13.50 under this Agreement for an aggregate purchase price of
$67,500,000.00."
3. Section 3.2 of the Purchase Agreement shall be amended and
restated in its entirety as follows:
"Section 3.2 VALID ISSUANCE OF STOCK; COMPLIANCE WITH SECURITIES
LAWS. The Stock, when issued and paid for in accordance with this Agreement
will be duly authorized, validly issued, fully paid and non-assessable and
issued in compliance with all applicable federal and state securities laws.
As of the Closing, the Common Stock issuable upon conversion of the
Redeemable Preferred has been duly and validly reserved for issuance and,
upon issuance in accordance with the rights, preferences and privileges
attached to the Redeemable Preferred, will be validly issued, fully paid and
nonassessable."
<PAGE>
4. The following shall be added as Section 6.15 of the Purchase
Agreement and all capitalized terms used in this Section 6.15 and not
otherwise defined in this Amendment shall have the meanings ascribed to them
in the Merger Agreement:
"6.15 CONTINUITY OF INTEREST. The parties hereto acknowledge
and agree that the relative amounts of Redeemable Preferred and Common Stock
included as Stock to be purchased hereunder and issued as Merger Consideration
under the Merger Agreement shall be adjusted in accordance with the provisions
of this Section 6.15 (and Section 6.10 of the Merger Agreement) in order to
ensure satisfaction of the continuity of interest requirement for status of
the Merger as a "reorganization" under Section 368(a) of the Code:
(a) If the closing price of the Common Stock on the NNM for
the day preceding the Closing Date under the Merger Agreement (the "Closing
Date Stock Value") is equal to or more than $13.50 per share, then (i) the
number of shares of Common Stock issued under the Merger Agreement will be
increased to 4,000,000, (ii) the number of shares of Common Stock issued
under this Agreement shall be reduced by the amount of the increase under
clause (i), (iii) the number of shares of Redeemable Preferred issued under
the Merger Agreement will be reduced by the amount of the increase under
clause (i) and (iv) a number of shares of Redeemable Preferred equal to the
amount of the increase under clause (i) shall be issued under this Agreement,
on a pro rata basis among the Purchasers.
(b) If the Closing Date Stock Value is less than $13.50 per
share, then the number of shares of Common Stock issued under the Merger
Agreement shall be further increased (with corresponding adjustments in the
manner provided under subsection (a) to the number of shares of Common Stock
and Redeemable Preferred issued under the Merger Agreement and this
Agreement) to the extent necessary to cause, if possible, the number of
shares of Common Stock issued under the Merger Agreement multiplied by the
Closing Date Stock Value to equal or exceed 50% of the value of the aggregate
consideration issued under the Merger Agreement (valuing any Redeemable
Preferred issued thereunder at $16.20 per share solely for purposes of this
Section 6.15)."
5. DEFINITION OF STOCK IN SECTION 4.5 OF PURCHASE AGREEMENT. The
term "Stock" as used in Section 4.5 of the Purchase Agreement shall be deemed
to include any Common Stock issuable upon conversion of the Redeemable
Preferred.
6. REMOVAL OF PARTY. CMG@Ventures II, LLC shall be removed from
Exhibit A of the Purchase Agreement and shall have no rights, and shall have
no obligations, under the Purchase Agreement
7. ADDITION OF PARTIES. The parties hereto acknowledge and agree
that, upon execution of a signature page hereto, each of CMG Information
Services, Inc. and Saad Nadhir shall be added to Exhibit A to the Purchase
Agreement as a Purchaser thereunder and shall have all rights of, and be
subject to all conditions and obligations of, a Purchaser under the Purchase
Agreement, as amended by this Amendment, with respect to the shares of stock
set forth opposite their names on Exhibit A to this Amendment. Without
limiting the foregoing, each of CMG Information Services, Inc. and Saad
Nadhir represent and warrant that, at and as of the date of
-2-
<PAGE>
this Amendment, the representations and warranties set forth in Article IV of
the Purchase Agreement are true and correct with respect to it.
8. EXHIBIT A. Exhibit A of the Purchase Agreement shall be amended
and restated in its entirety as set forth in Exhibit A to this Amendment.
9. EFFECT OF AMENDMENT. Except as amended as set forth above, the
Purchase Agreement shall continue in full force and effect.
10. COUNTERPARTS. This Amendment may be signed in one or more
counterparts, each of which shall be deemed an original and all of which,
taken together, shall be deemed one and the same document.
[Signature Page Follows]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
HOLLYWOOD ENTERTAINMENT CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
PURCHASER
----------------------------------
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
No. of Shares
Name and Address of Stock to be Price Per Aggregate Purchase Price
of Purchaser Purchased Share
<S> <C> <C> <C>
Scott Beck 31,794 $13.50 $ 429,219.00
835 11th Street
Boulder, CO 80302
Bowana Foundation 262,534 13.50 3,544,209.00
Attn: Scott Beck
835 11th Street
Boulder, CO 80302
Pearl Street Trust 852,833 13.50 11,513,245.50
Attn: Scott Beck
835 11th Street
Boulder, CO 80302
Saad Nadhir 131,267 13.50 1,772,104.50
1973 Keats Court
Highland Park, IL 60035
CMG Information Services, Inc. 2,909,918 13.50 39,283,893.00
Attn: Andrew J. Hajducky III
100 Brickstone Square, 1st Floor
Andover, MA 01810
Intel Corporation 262,535 13.50 3,544,222.50
Attn: Terri Remillard
2625 Walsh Avenue, Building 4
Santa Clara, CA 95052
Vulcan Ventures Incorporated 525,069 13.50 7,088,431.50
Attn: Eric Robison
110 - 110th Avenue NE
Suite 500
Bellevue, WA 98004
<PAGE>
Toby Coppel 1,850 13.50 24,975.00
Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
John H. Josephson 7,400 13.50 99,900.00
Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
Eran Ashany 7,400 13.50 99,900.00
Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
Nancy Peretsman 7,400 13.50 99,900.00
Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
TOTALS 5,000,000 $67,500,000.00
</TABLE>
<PAGE>
AMENDMENT NO. 2 TO THE
HOLLYWOOD ENTERTAINMENT CORPORATION
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 (the "AMENDMENT") to the HOLLYWOOD ENTERTAINMENT
CORPORATION STOCK PURCHASE AGREEMENT, dated as of July 30, 1998, by and among
Hollywood Entertainment Corporation, an Oregon corporation (the "COMPANY"),
and the parties set forth on Exhibit A thereto, as amended September 14, 1998
(the "PURCHASE AGREEMENT"), is made as of October 1, 1998.
RECITALS
WHEREAS, the Company and the undersigned parties hereto desire to amend
the Purchase Agreement as provided herein;
NOW, THEREFORE, IT IS AGREED THAT:
1. All capitalized terms used herein without definition shall have
the meanings ascribed to them in the Purchase Agreement.
2. Section 1.1 of the Purchase Agreement shall be amended and
restated in its entirety as follows:
"Section 1.1 SALE OF THE STOCK. Subject to the terms and
conditions hereof, at the Closing (as defined below), the Company will issue
and sell to each Purchaser, and each Purchaser will purchase, in the
respective amounts set forth on Exhibit A, an aggregate of 3,362,800 shares
of Common Stock ("Common Stock") and Series A Redeemable Preferred Stock (as
described in Exhibit A to that certain Agreement and Plan of Merger and
Reorganization among the Company, R Acquisition, Inc. and Reel.com, Inc.,
dated as of July 30, 1998, as amended (the "Merger Agreement")) ("Redeemable
Preferred") from the Company (the Common Stock and Redeemable Preferred shall
be referred to, collectively, as the "Stock"), at a purchase price per share
of $13.50 under this Agreement for an aggregate purchase price of
$45,397,800.00."
3. Section 5.1(f) of the Purchase Agreement shall be amended and
restated in its entirety as follows:
"(f) MINIMUM CLOSING. The Purchasers shall have purchased a
minimum of 3,362,800 shares of Stock at the Closing."
4. REMOVAL OF PARTY. Saad Nadhir shall be removed from Exhibit A of
the Purchase Agreement and shall have no rights, and shall have no
obligations, under the Purchase Agreement.
<PAGE>
5. ADDITION OF PARTIES. The parties hereto acknowledge and agree
that, upon execution of a signature page hereto, Lillian Nadhir shall be
added to Exhibit A to the Purchase Agreement as a Purchaser thereunder and
shall have all rights of, and be subject to all conditions and obligations
of, a Purchaser under the Purchase Agreement, as amended by this Amendment,
with respect to the shares of stock set forth opposite her name on Exhibit A
to this Amendment. Without limiting the foregoing, Lillian Nadhir represents
and warrants that, at and as of the date of this Amendment, the
representations and warranties set forth in Article IV of the Purchase
Agreement are true and correct with respect to her.
6. EXHIBIT A. Exhibit A of the Purchase Agreement shall be amended
and restated in its entirety as set forth in Exhibit A to this Amendment.
7. EFFECT OF AMENDMENT. Except as amended as set forth above, the
Purchase Agreement shall continue in full force and effect.
8. COUNTERPARTS. This Amendment may be signed in one or more
counterparts, each of which shall be deemed an original and all of which,
taken together, shall be deemed one and the same document.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
HOLLYWOOD ENTERTAINMENT CORPORATION
By:
------------------------------------
Name:
Title:
PURCHASER:
---------------------------------------
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
No. of Shares of
Name and Address Stock Price Per
of Purchaser to be Purchased Share Aggregate Purchase Price
<S> <C> <C> <C>
Scott Beck 0 $13.50 $0
835 11th Street
Boulder, CO 80302
Bowana Foundation 210,027 13.50 2,835,364.50
Attn: Scott Beck
835 11th Street
Boulder, CO 80302
Pearl Street Trust 561,509 13.50 7,580,371.50
Attn: Scott Beck
835 11th Street
Boulder, CO 80302
Lillian Nadhir 88,284 13.50 1,191,834.00
1973 Keats Court
Highland Park, IL 60035
CMG Information Services, Inc. 1,957,094 13.50 26,420,769
Attn: Andrew J. Hajducky
100 Brickstone Square, 1st Floor
Andover, MA 01810
Intel Corporation 176,571 13.50 2,383,708.50
Attn: Terri Remillard
2625 Walsh Avenue, Building 4
Santa Clara, CA 95052
Vulcan Ventures Incorporated 353,140 13.50 4,767,390.00
Attn: Eric Robison
110 - 110th Avenue NE, Suite 500
Bellevue, WA 98004
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of Shares of
Name and Address Stock Price Per
of Purchaser to be Purchased Share Aggregate Purchase Price
<S> <C> <C> <C>
Toby Coppel 1,244 13.50 16,794.00
Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
John H. Josephson 4,977 13.50 67,189.50
Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
Eran Ashany 4,977 13.50 67,189.50
Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
Nancy Peretsman 4,977 13.50 67,189.50
Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
TOTALS 3,362,800 $45,397,800
</TABLE>
