STOCK PURCHASE AND REDEMPTION AGREEMENT
STOCK PURCHASE AND REDEMPTION AGREEMENT dated as of May 1,
1998 among EVENT MERCHANDISING, INC., a California corporation (the "Company"),
the persons listed as Sellers on the signature pages of this Agreement (the
"Sellers"), as the holders of all the shares of capital stock of the Company,
and EMI ACQUISITION SUB, INC., a Delaware corporation (the "Buyer").
WHEREAS, the Sellers desire to sell to the Buyer certain of
the shares of common stock, without par value, of the Company, and the Buyer
desires to purchase such shares from the Sellers, on the terms set forth in
this Agreement;
WHEREAS, the Sellers desire to sell to the Company certain of
the shares of common stock, without par value, of the Company, and the Company
desires to purchase and redeem such shares from the Sellers, on the terms set
forth in this Agreement; and
WHEREAS, in order to fund its purchase and redemption of
shares of common stock from the Sellers, the Company desires to issue and sell
to the Buyer certain shares of its Series A Preferred Stock, without par value,
and the Buyer desires to purchase such shares from the Company, on the terms
set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein set forth, the parties agree as follows:
1. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Action": any charge, claim, lawsuit, complaint, request for
investigation, report of alleged violation of Law or regulation, or
legal proceeding of any nature filed with or made to any court,
Governmental Authority or organization having jurisdiction or
authority over the Company, its assets, the Business, its property or
the operations occurring thereon.
"Affiliate": with respect to any Person means (i) any
Person directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person;
or (ii) any officer, director, partner or direct or indirect
beneficial or legal owner of any 10% or greater equity or
voting interest of such Person.
"Agent": ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, in his capacity as agent for the
Sellers.
this "Agreement": this Stock Purchase Agreement and all
Schedules and Exhibits hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"Business": the businesses now carried on by the Company,
consisting of providing merchandising operations for live
entertainment venues throughout the United States.
"Closing": the closing of the transactions contemplated by
this Agreement.
"Closing Date": the date of the Closing.
"Code": the Internal Revenue Code of 1986, as amended.
"Consent": any consent, waiver, approval or authorization
of, notice to, or designation, registration, declaration or filing
with, any Person.
"Contract": any written or oral contract, agreement,
understanding, lease, license, note, plan, instrument, commitment,
restriction, arrangement, obligation or undertaking of any kind or
character or other document to which a Person is a party, or that is
binding on such Person or its securities, assets or business.
"Default": (i) a breach of or default under or with respect
to any Contract, (ii) the occurrence of an event that with the passage
of time or the giving of notice or both would constitute a breach of
or default under or with respect to any Contract, or (iii) the
occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right to terminate,
change the terms of or renegotiate any Contract or to accelerate,
increase, or impose any material Liability under any Contract.
"ERISA": the Employee Retirement Income Security Act of 1974
(and any sections of the Code amended by it) and all regulations
promulgated thereunder, as amended.
2
"Financial Statements": the unaudited financial statements of
the Company for the fiscal years ended December 31, 1996 and December
31, 1997, the unaudited interim financial statements of the Company
for the three month period ended March 31, 1998, and the unaudited
interim financial statements of the Company for the three - month
period ended March 31, 1997, copies of which are attached hereto as a
part of Schedule 4.4.
"GAAP": generally accepted accounting principles.
"Governmental Authority" means any federal, state, county,
local, foreign or other governmental or public agency,
instrumentality, commission, authority, board or body.
"Hazardous Substance": (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as
those terms are defined by any applicable Environmental Laws) and
(ii) any chemicals, pollutants, contaminants, petroleum, petroleum
products, or oil.
"Improvements": all buildings, structures, fixtures and other
improvements located on or included in any real property.
"Intellectual Property": The Company's (i) Patents and
Trademarks, (ii) trade secrets, know-how, inventions, formulas and
processes, whether trade secrets or not, (iii) copyrights and any
registrations and applications therefor, (iv) technology rights and
licenses, and (v) computer software and other intellectual property,
to the extent proprietary in nature and not in the public domain.
"knowledge" or "known": with respect to the Sellers means
the current actual knowledge of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, without having made
any investigation for purposes of this Agreement.
"Laws": (i) all Federal, state, local or foreign laws, rules
and regulations; (ii) all Orders; (iii) all Permits; and (iv) all
agreements with Federal, state, local or foreign regulatory
authorities.
"Leased Real Property": the real property identified on
Schedule 4.9.
"Liability": any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, expense (including,
without limitation, costs of investigation, collection and defense),
claim, deficiency, guaranty or endorsement of or by any Person (other
than endorsements of notes, bills and
3
checks presented to banks for collection or deposit in the ordinary
course of business) of any type, whether known, unknown, accrued,
absolute, contingent, liquidated, unliquidated, matured, unmatured
or otherwise.
"Lien": any mortgage, pledge, deed of trust, transfer
restriction, option, escrow, hypothecation, lien, security interest,
financing statement, lease, charge, encumbrance, easement, conditional
sale or other title retention or security agreement or any other
similar restriction, claim or right of others whether arising by
Contract, operation of Law or otherwise.
"Litigation Expense": any reasonable expense incurred in
connection with investigating, defending or asserting any Action
incident to any matter indemnified against hereunder (including
without limitation rights to indemnification hereunder), including,
without limitation, court filing fees, court costs, arbitration fees
or costs, witness fees, and reasonable fees and disbursements of legal
counsel, investigators, expert witnesses, accountants and other
professionals.
"Litigation": any action, administrative or other proceeding,
arbitration, cause of action, claim, complaint, criminal prosecution,
hearing, governmental or regulatory investigation, governmental or
regulatory charge or litigation, by any Person alleging potential
Liability relating to or affecting the Company, its assets (including,
without limitation, Contracts relating to the Company, the Business or
the transactions contemplated by this Agreement.
"Loss": any and all direct or indirect demands, claims,
payments, obligations, recoveries, deficiencies, fines, penalties,
interest, assessments, actions, causes of action, suits, losses, and
Liabilities, and interest on any amount payable to a Third Party as a
result of the foregoing, other than Litigation Expense.
"Material Adverse Effect": as to any Person, any material
adverse change in or effect on (i) the business, operations, assets,
Liabilities, condition (financial or otherwise), results of operations
or prospects of such Person, (ii) the ability of such Person to
consummate the transactions contemplated by this Agreement or any of
the other Transaction Documents to which it is or will be a party, or
(iii) the ability of such Person to perform any of its obligations
under this Agreement or any of the other Transaction Documents to
which it is or will be a party.
"Order": any decree, injunction, judgment, order, ruling,
writ, quasi-judicial decision or award or administrative decision or
award of any federal,
4
state, local, foreign or other court, arbitrator, tribunal,
administrative agency or Governmental Authority to which any Person
is a party or that is or may be binding on any Person or its
securities, assets or business.
"Patents and Trademarks": the Company's U.S. and foreign (i)
patents and pending patent applications together with any and all
continuations, continuations in part, divisions, reissues,
reexaminations, extensions and renewals thereof, and (ii) trade names,
trademarks, service marks, logos, assumed names, brand names and all
registrations and applications therefor together with the goodwill of
the Business symbolized thereby.
"Permits": all Federal, state, local or foreign permits,
licenses, approvals, franchises, notices, authorizations,
registrations, certifications and similar filings.
"Permitted Liens": (i) carriers', warehousemen's, workers',
materialmen's, brokers' or customs' or other like Liens arising in
the ordinary course of business with respect to obligations which
are not due; and (ii) liens and other title exceptions set forth on
Schedule 4.8.
"Person": a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a business
association, corporation, general partnership, joint venture,
limited partnership, limited liability company, trust,
or any person acting in a representative capacity.
"Related Person": with regard to any natural Person, his or
her spouse, parent, sibling, child, aunt, uncle, niece, nephew,
in-law, grandparent and grandchild (including by adoption) and any
trustees or other fiduciaries for the benefit of such relatives.
"SFX": SFX Entertainment, Inc., a Delaware corporation.
"Shares": shares of the Company's common stock, without par
value.
"Subsidiary": with respect to any Person, (i) any corporation
of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors of such corporation is at the time, directly or indirectly
owned by such Person, or (ii) any partnership, limited liability
company or joint venture or other entity of which more than fifty
percent (50%) of the outstanding equity interests are at the time,
directly or indirectly, owned by such Person.
5
"Taxes": all taxes, charges, duties, fees, levies, penalties
or other assessments imposed by any taxing authority, including, but
not limited to, income, withholding, payroll, franchise, excise,
property, sales or transfer taxes, and including any interest,
penalties or additions attributable thereto.
"Tax Returns": all returns, reports, filings, declarations
and statements relating to Taxes that are required to be filed,
recorded, or deposited with any Governmental Authority, including any
attachment thereto or amendment thereof.
"Third Party": any Person that is not the Buyer, the Company
or a Seller or an Affiliate of the Buyer, the Company or a Seller.
"Transaction Documents": this Agreement, the Non-Competition
and Confidentiality Agreement referred to in Section 10.2(h), the
Management Services Agreement referred to in Section 10.2(i), the
Shareholders Agreement referred to in Section 10.2(j), and the Tax
Sharing Agreement referred to in Section 10.2(k) .
2. Purchase and Redemption of Sellers' Common Stock.
2.1 Purchase by the Buyer. At the Closing, each Seller shall
sell, transfer, assign, convey and deliver to the Buyer the number of Shares
owned by such Seller indicated below, and the Buyer will purchase, accept and
acquire such Shares from such Seller:
Seller Number of Shares
------ ----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 600
▇▇▇▇▇▇ ▇▇▇▇ 300
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 300
▇▇▇▇▇ ▇▇▇▇▇▇▇ 133-1/3
The purchase price payable by the Buyer to the Sellers for the Shares shall be
an aggregate of $4,250,000 (the "Base Purchase Price"). The Base Purchase Price
shall be allocated pro rata among the Shares being purchased and sold.
2.2 Redemption by the Company. At the Closing, each Seller
shall sell, transfer, assign, convey and deliver to the Company the number of
Shares owned by such Seller indicated below, and the Company will purchase,
accept and acquire such Shares from such Seller:
6
Seller Number of Shares
------ ----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 747
▇▇▇▇▇▇ ▇▇▇▇ 373-1/2
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 373-1/2
▇▇▇▇▇ ▇▇▇▇▇▇▇ 166
The purchase price payable by the Company to the Sellers for the Shares (the
"Redemption Price") shall be an aggregate of $4,250,000. The Redemption Price
shall be allocated pro rata among the Shares being purchased and redeemed.
2.3 Issuance and Sale of Preferred Stock. At the Closing, the
Company shall issue and sell to the Buyer, and the Buyer shall purchase from
the Company, at a price of $100 per share, 42,500 shares of the Company's
Preferred Stock, without par value per share (the "Preferred Stock"). The
Preferred Stock shall be issued pursuant to a certificate of designations or
restated certificate of incorporation duly authorized and filed by the Company
with the Secretary of State of the State of California, which shall be in
effect on the Closing Date, containing terms substantially as set forth in
Exhibit A attached hereto and otherwise satisfactory to the Buyer in all
respects.
2.4 Closing Date. Subject to Section 11 hereof, the Closing
shall occur on June 30, 1998. The Closing will take place at the offices of
Winston & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ The time and place
of the Closing may be changed as the parties shall mutually agree in writing.
2.5 Deliveries at Closing. At the Closing:
(a) Each Seller shall cause the Shares held by such Seller
that are being sold to the Buyer to be transferred to the Buyer, or its
assignee, by delivering to the Buyer certificates representing such Shares,
duly endorsed for transfer or accompanied by duly executed forms of assignment.
(b) Each Seller shall cause the Shares held by such Seller
that are being sold to the Company to be transferred to the Company by
delivering to the Company certificates representing such Shares, duly endorsed
for transfer or accompanied by duly executed forms of assignment.
(c) The Company shall deliver to the Buyer certificates
representing the shares of Preferred Stock being issued and sold pursuant to
Section 2.3.
7
(d) The Buyer shall pay to the Sellers the Base Purchase
Price, by wire transfer of immediately available funds in accordance with the
written instructions of the Agent.
(e) The Buyer shall pay to the Company the purchase price
for the Preferred Stock being issued and sold pursuant to Section 2.3, by
wire transfer of immediately available funds in accordance with the written
instructions of the Company.
(f) The Company shall pay to the Sellers the Redemption
Price, by wire transfer of immediately available funds in accordance with the
written instructions of the Agent.
2.6 Section 338(h)(10) Election. If the Buyer determines to
make such election, the Buyer will prepare and the Sellers shall join in the
timely filing of a Section 338(h)(10) election, providing for a deemed sale of
Company's assets, to be made under the Code in connection with the transactions
contemplated by this Agreement, and any comparable election required or
permitted under state or local Law. The Company will not be liable for any Tax
under Code ss.1374 in connection with such deemed sale of Company's assets
(including the assets of any qualified subchapter S subsidiary) caused by such
Section 338(h)(10) election. Subject to Sections 2.7 and 2.8 below, all such
Tax shall be paid by the Sellers. The allocation of the Base Purchase Price and
the Redemption Price to be used by the Company in its federal income tax return
for the period ending on the Closing Date shall be determined by the Buyer.
2.7 Tax Loan. The Buyer shall make loans to the Sellers,
bearing annual interest at 10%, to cover twenty percent (20%) of the federal,
state and local income taxes payable by the Sellers, calculated at lowest
applicable capital gains rates, on income resulting from any Section 338(h)(10)
election. Each such loan shall be repayable upon any disposition of the
remaining Common Stock of the Company held by the Sellers, and then only to the
extent of any taxes saved as a result of the increase in the tax basis of such
Common Stock resulting from the income recognized by the Sellers as a result of
the Section 338(h)(10) election.
2.8 Tax Indemnification.
(a) Corporate Taxes. The Buyer shall indemnify the Company
and contribute to the Company cash, as paid in capital and not as a loan, for
any corporate Taxes that result from a Section 338(h)(10) election (and any
corresponding state or local elections), including without limitation the 1.5%
corporate tax imposed by California Revenue and Taxation Sections 23151, 23501,
and 23802.
8
(b) Sellers' Taxes. The Buyer shall indemnify each Seller for
certain Transaction Taxes (as hereinafter defined) paid or payable by each
Seller. The Buyer agrees to pay such amounts including a tax gross-up
calculated to put the Sellers in the same position on an after-tax basis as
they would have been in had they sold stock and no Section 338(h)(10) election
were made, taking into account any taxes payable by the Sellers attributable
to payments made pursuant to this Section 2.8
(c) Definition. "Transaction Taxes" as used herein shall mean
all federal, state, and local income taxes, including related interest and
penalties, payable by the Sellers, irrespective of when assessed and payable,
as a result of the Sellers' disposition of 80% of their common stock in the
event of any elections under Section 338(h)(10) (and corresponding state tax
law provisions) contemplated herein, to the extent such Taxes exceed the sum
of:
(i) the portion of the Sellers' Taxes above that are
advanced to the Sellers pursuant to the loan provisions of Section 2.7, and
(ii) the amount of federal, state and local income taxes that
would have been payable by the Sellers on the disposition of 80% of their
shares had the Section 338(h)(10) election not been made.
(d) Computation and Payment. The Sellers shall submit to the
Buyer a calculation of any amounts due for Transaction Taxes, including the tax
gross-up referred to above. Unless the Buyer objects to such calculation, the
Buyer shall pay such amounts to the Sellers on or before the date such Taxes
become due and payable. Where practicable, the Sellers shall provide the Buyer
with ten business days to review such calculations. In the event the Buyer
disputes the Sellers' calculation, the undisputed portion shall be timely paid
and the disputed portion shall be submitted to a mutually acceptable "Big Six"
firm of certified public accountants for binding resolution. The cost of such
services shall be borne by the party whose determination of the amount in
question was further from the result determined by the accounting firm
selected. Any additional amount determined to be due to the Sellers shall
include interest at an annually compounded rate of 10% from the date such taxes
were due and payable.
3. Representations and Warranties of the Sellers to the
Buyer and the Company. Each of the Sellers, severally, represents and
warrants to the Buyer and to the Company as follows:
3.1 Authorization; Validity. Such Seller has the full power
and capacity necessary to enter into and perform his obligations under this
Agreement and
9
the other Transactions Documents to which he is a party and to consummate the
transactions contemplated hereby and thereby. This Agreement has been and the
other Transaction Documents to which the Seller is a party will be
when executed and delivered, duly executed and delivered by the Sellers and
each such agreement constitutes, or will constitute when executed and
delivered, a legal, valid and binding obligation of the Seller, except as
enforceability thereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws of general application affecting the enforceability of
creditors' rights generally or by general principles of equity.
3.2 Title to Shares; Other Rights. Such Seller is the owner
of all right, title and interest (record and beneficial) in and to the numbers
of shares of Common Stock set forth next to his name in Sections 2.1 and 2.2,
free and clear of all Liens, except as disclosed on Schedule 3.2. Except for
the agreements described in Schedule 3.2 which are to be terminated at or
before Closing, no Person has any Contract or any right or privilege (whether
preemptive or contractual) capable of becoming a Contract for the purchase from
such Seller of any Shares. Except for agreements effectively terminated at or
before Closing, the Seller is not a party to, or bound by, any other agreement,
instrument or understanding restricting the transfer of his Shares.
3.3 No Conflict. Subject to obtaining the Consents and
Permits listed on Schedule 3.3, neither the execution nor the delivery of the
Transaction Documents by the Seller nor the consummation of the transactions
contemplated hereby will (a) conflict with or result in any violation of or
constitute a breach of or default under any terms, conditions or provisions of
(i) the organizational documents or by-laws of the Company, or (ii) any
applicable Laws, or (iii) any Contract listed on Schedule 4.15, or (b) result
in the creation of any Lien on any of the Shares or any of the assets of the
Company.
4. Representations and Warranties of the Sellers to the
Buyer. The Sellers represent and warrant to the Buyer as follows:
4.1 Organization; Good Standing. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
corporate power and authority to own, operate and lease its properties, and to
carry on its business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified or licensed to transact business as a foreign
corporation in good standing in the jurisdictions listed on Schedule 4.1.
4.2 Capitalization; Subsidiaries. All of the authorized,
issued and
10
outstanding shares of capital stock of the Company, and the record
and beneficial holders thereof, are as set forth in Schedule 4.2 attached
hereto. All of the Shares are duly authorized, validly issued, fully paid and
non-assessable, and were issued pursuant to a valid exemption from registration
under the Securities Act of 1933, as amended (the "Securities Act"), and all
applicable state securities laws. Except as set forth in Schedule 4.2, there
are no outstanding rights of subscription, pre-emptive rights, warrants, calls,
options, conversion or exchange rights or other Contracts with respect to any
securities of the Company or any of its Subsidiaries or pursuant to which
any Person has an interest in its capital or profits, and there are no
Contracts as to the voting of the Company's or any Subsidiary's securities.
Except as set forth in Schedule 4.2, there are no outstanding rights to either
demand registration of any Shares under the Securities Act or to sell any
Shares in connection with such registration of shares. Except as set forth in
Schedule 4.2, (i) the Company does not own, beneficially or of record, any
capital stock or other equity securities of any corporation or other entity or
have any direct or indirect equity, ownership or voting interest in any other
Person, and (ii) the Company has no Subsidiaries. References to Subsidiaries in
this Agreement shall be deemed to mean any Subsidiaries that exist, and shall
not be deemed to imply that any exist if in fact there are none.
4.3 Due Authorization and Execution, etc. (a) The Company has
the full corporate power and authority necessary to enter into and perform its
obligations under this Agreement and the other Transactions Documents to which
it is a party and to consummate the transactions contemplated hereby and
thereby.
(b) The execution, delivery and performance of this Agreement
and the Transactions Documents by the Company have been approved by all
necessary action of the Board of Directors and stockholders of the Company.
(c) This Agreement has been and the other Transaction
Documents to which the Company is a party when executed and delivered will be,
duly executed and delivered by the Company and each such agreement constitutes,
or will constitute when executed and delivered, a legal, valid and binding
obligation of the Company, except as enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws of general application
affecting the enforceability of creditors' rights generally or by general
principles of equity.
(d) Subject to obtaining the Consents and Permits listed on
Schedule 3.3, neither the execution nor the delivery of the Transaction
Documents by the Company nor the consummation of the transactions contemplated
hereby will (i) conflict with or result in any violation of or constitute a
breach of or default under any terms, conditions or provisions of (i) the
organizational documents or by-laws of the Company, or (ii) any applicable
Laws, subject only to compliance with Section 500 of
11
the California General Corporation Law, or (iii) any Contract listed on
Schedule 4.15, or (b) result in the creation of any Lien on any of the Shares
or any of the assets of the Company.
4.4 Financial Statements; Receivables and Inventory.
(a) The Financial Statements are attached to Schedule 4.4. All of the
Financial Statements were prepared from the books and records of the Company
and its Subsidiaries, which are correct and complete in all material respects
and have been maintained in accordance with good business practices. Except as
disclosed on Schedule 4.4, the Financial Statements have been prepared in
accordance with standard accounting principles consistently applied during
each period and from period to period covered by the Financial Statements,
and fairly present the consolidated financial position and results of
operations of the Company and its Subsidiaries as of the dates thereof and for
the periods then ended, subject, in the case of any interim financial
statements, to normal year-end adjustments which will not, individually or
collectively, be material in amount.
(b) The accounts receivable reflected on the December 31,
1997 balance sheet included in the Financial Statements, or thereafter acquired
by the Company and its Subsidiaries through the date hereof and reflected on
the Closing Balance Sheet, are or will be valid, arose or will arise from sales
of products or services in the ordinary course of the Company's or its
Subsidiaries' business, and have been collected, or are collectible, at the
aggregate gross recorded amounts thereof less the allowances for doubtful
accounts reflected therein.
(c) As of the close of business on December 31, 1997, the
Company had positive Net Working Capital. As used in this Agreement, "Net
Working Capital" of the Company means the current assets of the Company less
the current liabilities of the Company, determined in accordance with GAAP
consistently applied.
4.5 Absence of Undisclosed Liabilities. The Company and its
Subsidiaries have no Liabilities or obligations, that would be material in the
aggregate, of a kind that in accordance with GAAP would be required to be
included on the consolidated balance sheet of the Company or disclosed in the
footnotes thereto, whether accrued, absolute or contingent, and whether due or
to become due, except (i) Liabilities reflected or reserved against on the
December 31, 1997 balance sheet included in the Financial Statements, (ii)
Liabilities arising in the ordinary course of business since the date of such
balance sheet, and (iii) any other Liabilities and obligations disclosed on
Schedule 4.5.
4.6 No Material Adverse Change. Since December 31, 1997,
there has not been (i) any change which has had or can reasonably be expected
to have a
12
Material Adverse Effect on the financial condition, operations, business,
prospects, properties, assets or Liabilities of the Company or any Subsidiary,
or (ii) any damage, destruction or loss to any of the properties or
assets of the Company or any Subsidiary, whether or not covered by insurance,
which has had or can reasonably be expected to have a Material Adverse Effect
on the Company or any Subsidiary or its ability to conduct the Business, or (v)
except as otherwise expressly permitted by this Agreement, any declaration or
payment of any dividends, repurchase of any of the Company's capital stock, or
any distribution to its stockholders.
4.7 Taxes. Except as provided in Schedule 4.7:
(a) The Company has been an S Corporation, as defined in the
Code, for its tax years ending in 1990 through 1998. There has been no action
or omission on the part of the Company or any of the Sellers that would cause
the termination of its status as an S Corporation for any of such years. Each
of the Company and its Subsidiaries has timely filed or caused to be filed all
Tax Returns required to be filed by it. All such Tax Returns are true, complete
and correct in all material respects, and all Taxes shown thereon and all
deficiencies or other assessments of tax, interest or penalties and all
estimated taxes due by the Company or with respect to its Business have been
paid. The charges, accruals and reserves, if any, in respect of Taxes
(including import duties) set forth in the Financial Statements are adequate.
Except with respect to returns for the 1997 tax year, no extensions of time
with respect to any date on which any Tax Return was or is to be filed by the
Company are in force.
(b) The Company's Tax Returns have never been audited by the
IRS or any other Governmental Authority and the Company has not waived any
statute of limitations in respect of Taxes nor agreed to a Tax assessment or
deficiency. The Company has not filed any consent under Section 341(f) of the
Code relating to collapsible corporations. No Tax is required to be withheld
pursuant to Section l445 of the Code as a result of any of the transfers
contemplated by this Agreement and the Company will provide any certificate
requested by Buyer at Closing with respect thereto.
(c) Neither the Company nor any qualified subchapter S
subsidiary of the Company has, in the past 10 years, (i) acquired assets from
another corporation in a transaction in which the Company's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (ii) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.
4.8 Good Title; No Liens. Except as set forth on Schedule
4.8, each of the Company and its Subsidiaries has good and marketable title to
all the properties
13
and assets, real and personal, tangible and intangible, purported to be owned
by it (including all property and assets reflected in the Financial
Statements, except as disposed of after the date thereof in the ordinary
course of business), subject to no Liens other than Permitted Liens. Except
as set forth on Schedule 4.8, no material item of the property used in
the Company's or any Subsidiary's operations or in the Business is owned by an
Affiliate of the Company.
4.9 Leases and Comparable Arrangements. Schedule 4.9 sets
forth a list of all leases of (or other arrangements for the use of) real
property or any material item of personal property, to which the Company or
any Subsidiary is a party, either as lessor or lessee or otherwise. Except as
indicated on Schedule 4.9, neither the Company nor any of its Subsidiaries
is in breach, violation or default of any lease or other agreement with
respect to or as a result of which the other party thereto has the right to
terminate the same, and neither the Company nor any Subsidiary has received
any notice of any claim that it is in breach, violation or default with
respect to any such lease or other agreement.
4.10 Insurance. All of the assets and the operations of the
Company and its Subsidiaries of an insurable nature are insured by the Company
in such amounts and against such losses, casualties or risks as is (i) required
by any Law applicable to the Company, any Subsidiary or the Business, or (ii)
required by any Contract. Schedule 4.10 contains a complete and accurate list
of all insurance policies held or owned by the Company and its Subsidiaries and
now in force and such Schedule indicates the name of the insurer, the type of
policy, the risks covered thereby, the amount of the premiums, the term of each
policy, the policy number and the amounts of coverage and deductible in each
case and all outstanding claims thereunder. Correct and complete copies of all
such policies have been delivered to Buyer by the Company on or before the date
of this Agreement. All such policies are in full force and effect. Neither the
Company nor any Subsidiary is in Default regarding the provisions of any such
policy, including, without limitation, failure to make timely payment of all
premiums due thereon, and neither has failed to give any notice or present any
claim thereunder in due and timely fashion. The Company has not been refused or
denied renewal of any insurance coverage.
4.11 Patents, Trademarks, etc. (a) Schedule 4.11 sets forth a
list of all Patents and Trademarks owned, licensed or used by the Company or
any Subsidiary during the past five (5) years and any applications or
registrations therefor which are currently either pending or issued and not
expired.
(b) Except as set forth on Schedule 4.11,
(i) the Company and its Subsidiaries own the entire
unencumbered right,
14
title and interest in and to all such Patents and Trademarks free of all
Liens other than Permitted Liens, and no rights or licenses to or from others
have been granted with respect to such Patents and Trademarks;
(ii) the Company and its Subsidiaries have taken all action
reasonably necessary to protect their rights with respect to the Patents and
Trademarks;
(iii) all of the Patents and registrations of Trademarks
are valid, subsisting and in full force and effect;
(iv) the Company and each of its Subsidiaries owns or
possesses the right to use all the Intellectual Property necessary for the
conduct of its business as now conducted, without any known infringement on,
violation of or conflict with the rights of others;
(v) to the Sellers' knowledge, no Third Party is using any of
the Intellectual Property or engaging in any activity that infringes on,
violates or conflicts with the rights of any of the Company or any Subsidiary
with respect to the Intellectual Property; and
(vi) no Affiliate of the Company or any Subsidiary owns or
possesses any rights in or to any Intellectual Property used by the Company or
any Subsidiary or in the Business.
4.12 Litigation, etc.
(a) Except as set forth on Schedule 4.12, there is no pending
or, to the Sellers' knowledge, threatened Action or governmental investigation
or inquiry against or involving the Company or any of its Subsidiaries or their
assets or operations, and to the Sellers' knowledge no event has occurred which
could reasonably be expected to result in an Action or governmental
investigation or inquiry against or involving the Shares, the Company, any of
its Subsidiaries or their assets or operations, and (ii) there are no
outstanding Orders binding upon the Shares, the Company, any of its
Subsidiaries, any of their assets, or the Business.
(b) Except as disclosed on Schedule 4.12, neither the Company
nor any of its Subsidiaries has been advised by any attorney representing it
that there are any "loss contingencies" (as defined in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board
in March 1975 ("FASB No. 5")), which would be required by FASB No. 5 to be
disclosed or accrued in consolidated financial statements of the Company, were
such financial statements prepared as of the date hereof.
15
4.13 Permits. Each of the Company and its Subsidiaries has
all Permits necessary for the conduct of the Business as presently conducted,
except to the extent the failure to have any Permit could not reasonably be
expected to have a Material Adverse Effect, and all such Permits are listed on
Schedule 4.13.
4.14 Compliance with Laws. Except as set forth on Schedule
4.14, neither the Company nor any of its Subsidiaries has received any notice
that it or the plants or properties where the Business is conducted are in
violation of, or have any material liability under, any Laws, Orders or
Permits. Except as set forth on Schedule 4.14, the Company and its Subsidiaries
are in compliance with all Laws, Orders and Permits, except for non-compliance
which could not reasonably be expected to have a Material Adverse Effect.
4.15 Contracts, etc. Set forth on Schedule 4.15 are
complete and accurate lists of the following:
(a) all bonus, incentive compensation, profit-sharing,
retirement, group insurance, death benefit or other fringe benefit plans,
deferred compensation and post-termination obligations or trust agreements of
the Company or any of its Subsidiaries in effect or under which any amounts
remain unpaid on the date hereof or which are to become effective after the
date hereof;
(b) each Contract defining the terms on which indebtedness
for borrowed money, or other indebtedness evidenced by bonds, notes or similar
instruments, of the Company or any of its Subsidiaries or guarantees thereof
have been or may be issued;
(c) all Contracts, oral or written, to which the Company or
any of its Subsidiaries is a party and in which any Affiliate of the Company
has any interest, direct or indirect;
(d) all bank accounts, safe deposit boxes, money market
funds, certificates of deposit, stocks, bonds, notes and other securities in
the name of or owned or controlled by the Company or any of its Subsidiaries,
and the names of the persons having access thereto;
(e) all powers of attorney granted by the Company or any
of its Subsidiaries to others;
(f) all other Contracts to which the Company or any of its
Subsidiaries is a party, except ones that are terminable on less than 60 days'
notice, or do not involve aggregate remaining payments or unpaid obligations of
$25,000 or more, and except
16
purchase orders for inventory and sales orders for products and services of
the Company or any of its Subsidiaries entered into in the ordinary course
of business.
Except as set forth on Schedule 4.15, none of the Company's or any of its
Subsidiaries' rights under any Contract listed on Schedule 4.15 will be
affected by the transactions contemplated hereby in any way that will have a
Material Adverse Effect. Except as set forth on Schedule 4.15, neither the
Company nor any of its Subsidiaries has given or received notice of and there
is no default or claimed or purported or alleged default on the part of the
Company or any of its Subsidiaries or, to the Sellers' knowledge, any other
party in the performance or payment of any obligation to be performed or paid
under any Contract listed on Schedule 4.15.
4.16 Governmental and other Consents, etc. No Consent or
Permit of any Person is required to be obtained by the Company or any of its
Subsidiaries or the Sellers in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby, or
to carry on the Company's or any of its Subsidiaries' business as now being
conducted, other than (a) under Contracts being terminated at or before Closing
which are identified on Schedule 4.16, and (b) the Consents and Permits
specified in Schedule 4.16.
4.17 Employee Benefits; ERISA. (a) The Company has no
Employee Benefit Plans.
(b) As used in this Agreement, "Employee Benefit Plan" means
any "employee benefit plan," as that term is defined in Section 3(3) of ERISA,
currently or previously adopted, maintained by, sponsored in whole or in part
by, or contributed to by the Company or any of its Subsidiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors or
other beneficiaries are eligible to participate.
4.18 Labor and Employment Matters.
(a) Schedule 4.18 contains a correct and complete list of (i)
all employees whose direct annual compensation exceeds $50,000 and (ii) a list
of all other employees in each job classification employed by the Company or
any of its Subsidiaries in the Business. Except as disclosed in Schedule 4.18,
the employment of all employees is terminable at will by the Company or a
Subsidiary without any penalty or severance obligation of any kind on the part
of the Company or such Subsidiary.
(b) Except as set forth in Schedule 4.18, neither the Company
nor any of its Subsidiaries has encountered any labor union organizing activity
with respect to non-union workers, or had any actual or, to the knowledge of
the Sellers, threatened employee strikes, work stoppages, slowdown or lock-outs
related to any labor union
17
organizing activity.
(c) Except as set forth in Schedule 4.18, the Company has not
received any notice prior to the date of this Agreement that any of the
officers or other senior level personnel of the Company or any of its
Subsidiaries will terminate or contemplates terminating his or her employment
currently or at any time before or within 60 days after the Closing Date or
will otherwise not be available to the Buyer, or not agree to employment by the
Buyer, on the same terms and conditions as his or her current employment on the
date hereof.
(d) Within the twelve (12) months prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries has with respect to
the Business effectuated (i) a "plant closing," as defined in the Worker
Adjustment and Retraining Notification Act (the "WARN Act"); or (ii) a "mass
layoff" (as defined in the WARN Act); and neither the Company nor any of its
Subsidiaries has engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local Law.
4.19 Environmental Matters. Except as set forth in Schedule
4.19, to the best of the Sellers' knowledge, neither the Company nor its
predecessors nor its former Subsidiaries is in violation of or has any
Liability under any Environmental Laws. As used in this Agreement,
"Environmental Laws" means all Laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), including,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and
other Laws relating to emissions, discharges, releases or threatened releases
of any Hazardous Substance, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any Hazardous Substance.
4.20 Prospective Changes. Except as described in Schedule
4.20, there has been no present or proposed change, or other event or
occurrence relating to the Company or any of its Subsidiaries, the Business,
relations with employees, relations with suppliers or lessors, governmental
actions or Laws applicable to the Business, which can reasonably be expected to
have a Material Adverse Effect.
4.21 Interested Transactions. Except as set forth in Schedule
4.21, neither the Company nor any of its Subsidiaries is a party to any
Contract or other transaction with any Affiliate of the Company, or any Related
Person of any Affiliate of the Company (other than as a shareholder or employee
of the Company). Except as
18
described in Schedule 4.21, none of the Persons described in the first
sentence of this Section 4.21 owns, or during the last three years has owned,
directly or indirectly, beneficially or legally, (individually or in the
aggregate) five percent (5%) or more of the equity or voting interests of
any Person that competes with the Company or the Business.
4.22 Absence of Certain Developments. (a) Except as set
forth on Schedule 4.22 or as contemplated by this Agreement, since
December 31, 1997 neither the Company nor any of its Subsidiaries has
conducted the Business other than in the ordinary course, or has:
(i) made or committed to make any capital expenditures or
capital additions or betterments in excess of an aggregate of $25,000;
(ii) instituted any litigation, action or proceeding before
any court, governmental body or arbitration tribunal relating to it or
its property, except for litigation, actions or proceedings instituted
in the ordinary course of business and consistent with prior practice;
(iii) acquired, or agreed to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof;
(iv) increased, or agreed or promised to increase, the
compensation of any officer, employee or agent of the Company or any
Subsidiary, directly or indirectly, including by means of any bonus,
pension plan, profit sharing, deferred compensation, savings,
insurance, retirement, or any other employee benefit plan, except in
the ordinary courses of business and consistent with prior practice;
(v) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
Liabilities or obligations incurred in the ordinary course of business
and consistent with prior practice;
(vi) declared or paid any dividends or made any other
distributions to its stockholders as such; or made any redemption or
repurchase of the Company's capital stock;
(vii) paid, discharged or settled any Liabilities of the
Company or any of its Subsidiaries for Taxes, other than payments
required for the current year that are not in dispute;
19
(viii) prepaid any principal of its long-term debt;
(ix) amended its Articles or Certificate of Incorporation
or by-laws;
(x) canceled or compromised any debt or claim or waived or
released any right, except for adjustments or settlements made in the
ordinary course of business consistent with past practice; or
(xi) made a loan to any person other than with respect to
accounts receivable created by unaffiliated third parties in the
ordinary course of business.
4.23 Condition of Property. Except as set forth on Schedule
4.23, all plants, structures and equipment owned or leased by the Company or
any of its Subsidiaries, and all utilities, heating, ventilating, air
conditioning, electrical and plumbing systems used in the operation of the
Company's or any of its Subsidiaries' business, are in good operating condition
and repair (except for routine immaterial maintenance to be done in the
ordinary course of business) and are sufficient to meet the operational needs
of such business, and to the knowledge of the Sellers, all improvements
(including, without limitation, the roofs and basements thereof) are free from
leakage and seepage. None of the property used in any of the Company's or any
of its Subsidiaries' operations or business is owned by an Affiliate.
4.24 Absence of Questionable Payments. Neither the Company
nor any of its Subsidiaries nor any predecessor thereof, nor any director,
officer, agent, employee or other Person acting on behalf of the Company or any
of its Subsidiaries or any predecessor thereof, has used, or authorized the use
of, any corporate or other funds for unlawful contributions, payments, gifts,
or entertainment, or made any unlawful expenditures relating to political
activity to government officials or others or established or maintained any
unlawful or unrecorded funds in violation of any applicable laws, rules or
regulations relating to foreign trade practices. Neither the Company nor any of
its Subsidiaries or to the knowledge of the Sellers any predecessor or former
Subsidiary, or any current director, officer, agent, employee or other Person
acting on behalf of any of such Persons, has accepted or received any unlawful
contributions, payments, gifts or expenditures.
4.25 Disclosure. The Company has made available or caused to
be made available to Buyer complete and correct copies of all agreements,
instruments and documents set forth in the Schedules hereto or underlying a
disclosure set forth in the Schedules hereto.
20
5. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers and to the Company as follows:
5.1 Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power to own, operate and lease its properties
and assets, to carry on its Business as now being conducted and to enter into
this Agreement and perform its obligations hereunder.
5.2 Authorization. The execution, delivery and performance of
this Agreement and the other Transaction Documents by the Buyer have been duly
authorized by all requisite corporate action and no other corporate proceedings
on the part of the Buyer are necessary to approve the consummation of the
transactions contemplated hereby. This Agreement has been and the other
Transaction Documents when executed and delivered will be duly executed and
delivered by the Buyer. This Agreement constitutes and the other Transaction
Documents when executed and delivered will constitute the valid and binding
obligations of the Buyer, enforceable in accordance with the terms hereof and
thereof, except as enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws of general application affecting
the enforceability of creditors' rights generally or by general principles
of equity.
5.3 No Conflict. Neither the execution nor the delivery of
this Agreement and the other Transaction Documents by the Buyer nor the
consummation of the transactions contemplated hereby and thereby will conflict
with or result in any violation of or constitute a breach of or default under
any terms, conditions or provisions of its organizational documents or by-laws
or any Law or Contract by which it is bound or to which it or its assets are
subject.
5.4 Investment Intent. The Buyer is aware that the Shares of
Common Stock it is purchasing from the Sellers and the shares of Preferred
Stock it is purchasing from the Company hereunder are not registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities Law. The Buyer is acquiring all such securities for investment
purposes only, for its own account not with a view to, or in connection with,
the public distribution thereof in violation of the Securities Act.
5.5 Governmental and other Consents, etc. No Consent or
Permit of any Person is required to be obtained by the Buyer in connection with
the execution and delivery of this Agreement or the other Transaction Documents
or the consummation of the transactions contemplated hereby or thereby.
21
5.6 Litigation, etc. There is no pending or, to the Buyer's
knowledge, threatened Action or governmental investigation against or involving
the Buyer that would, if adversely determined, have a Material Adverse Effect.
6. Covenants
6.1 Covenants of the Buyer. The Buyer hereby covenants and
agrees with the Sellers that:
(a) Cooperation. Prior to the Closing or the earlier
termination of this Agreement, the Buyer shall use its best efforts to cause
the sale contemplated by this Agreement to be consummated and, without limiting
the generality of the foregoing, to obtain all Consents and Permits which may
be necessary or reasonably required for the Buyer to effect the transactions
contemplated hereby.
(b) SFX to be Primary Obligor. SFX Entertainment, Inc. shall
become a primary obligor with respect to the obligations of the Buyer under this
Agreement, pursuant to a Joinder Agreement being executed and delivered to the
Sellers simultaneously with the execution and delivery of this Agreement.
6.2 Covenants of the Sellers. The Sellers hereby severally
covenant and agree with the Buyer that:
(a) Cooperation. The Sellers shall use their best efforts to
cause the sale contemplated by this Agreement to be consummated and, without
limiting the generality of the foregoing, to obtain all Consents and Permits
which may be necessary or reasonably required in order to effect the
transactions contemplated hereby.
(b) Maintenance of Business and Assets. From the date hereof
through the Closing Date, the Sellers shall cause the Company and its
Subsidiaries:
(i) Conduct of Business. To conduct the Business of the
Company and its Subsidiaries only in the ordinary course of business.
(ii) Preserve Organization. To preserve intact the current
business organization of the Company and each of its Subsidiaries,
keep available the services of the current officers, employees and
agents of the Company and each of its Subsidiaries and maintain the
relations and good will with suppliers, customers, landlords,
creditors, employees, agents and others having business relationships
with the Company and each of its Subsidiaries.
22
(iii) Reporting. To report periodically to the Buyer
concerning the status of the Business, operations and finances of the
Company.
(iv) Maintenance of Properties, etc. To maintain all of its
assets and properties in customary repair, order and condition (taking
into consideration the age and condition thereof), reasonable wear and
tear excepted, and maintain insurance covering such assets and
properties in such amounts and of such kinds comparable to that in
effect on the date of this Agreement.
(v) Compliance with Laws. To comply with all Laws applicable
to it and to the conduct of the Business (subject to exceptions in the
ordinary course of business described in Schedule 4.14).
(vi) Access to Properties, etc. To provide the Buyer and
its counsel, accountants, investment advisors, lenders, and their
respective other representatives full and free access during normal
business hours (upon reasonable prior notice) to all of its
properties (including subsurface testing), Organizational Documents,
books, tax returns, other financial data, Contracts, Permits, and
records, and to furnish to the Buyer all such documents and
information with respect to the affairs of the Company as the Buyer
may from time to time reasonably request.
(vii) Notification of Material Adverse Change. To notify the
Buyer promptly of any change having a Material Adverse Effect on the
financial condition of the Company and each of its Subsidiaries or in
the operations, business, prospects, properties, assets or Liabilities
of the Company on a consolidated basis from that of the Company set
forth in the Financial Statements dated December 31, 1997.
(viii) Administration of Working Capital. To administer its
cash, accounts receivable, inventory and accounts payable in the
ordinary course in accordance with past practices.
(c) Certain Prohibited Transactions. From the date hereof
through the Closing Date, except with the prior written consent of the Buyer or
as otherwise expressly contemplated by this Agreement, the Sellers will not
cause or permit the Company or any of its Subsidiaries to:
(i) enter into any transaction or make any payments out of
the ordinary course of business;
23
(ii) purchase or lease any real property, or sell, transfer
or otherwise dispose of any of its properties or assets other than
inventory in the ordinary course of business;
(iii) create or permit to exist any new Lien on the assets
of the Company or any of its Subsidiaries or any part thereof;
(iv) violate any Law;
(v) declare or pay any dividends, repurchase any of its
capital stock, or make any distributions to its shareholders as such,
other than dividends to fund federal, state and local income taxes
payable by the shareholders with respect to the Company's income for
1998 up to the Closing Date; or pay any management or consulting fees
or other compensation for services to any of the Sellers; or
(iv) amend its Articles or Certificate of Incorporation or
by-laws.
(d) Further Assurances. Following the Closing, at the request
of the Buyer, each Seller shall execute and deliver such further documents, and
take such other action, as may be necessary or appropriate to give full effect
to the transactions contemplated by this Agreement, including without
limitation to confirm the sale, transfer, assignment and conveyance of the
Securities to be sold by such Seller hereunder and to vest in the Buyer all
such Seller's right, title and interest in and to such Securities.
(e) Corporate Records. At the Closing, all originals of the
minute books and stock transfer registers of the Company and each of its
Subsidiaries shall be delivered to the Buyer and all records not already
situated at the Company's principal place of business, including without
limitation those in possession of any counsel of the Company and the
Accountants, shall be placed in the Buyer's control at such principal place of
business.
7. Indemnification.
7.1 Obligation of the Sellers. Subject to the limitations set
forth in Section 7.3, the Sellers shall indemnify and save harmless the Buyer
and its successors and assigns from, against, for and in respect of:
(a) any Loss incurred or required to be paid which arises out
of or relates to (i) a state of facts as a result of which any representation
or warranty made
24
by the Sellers to the Buyer or the Company in this Agreement is untrue,
inaccurate or misleading in any respect, or (ii) the breach of any covenant
or agreement made by the Sellers in this Agreement;
(b) any Loss incurred or required to be paid which arises out
of or relates to any deficiency in Taxes, and penalties and interest relating
thereto, owing by the Company or any of its Subsidiaries with respect to any
period prior to the Closing, except to the extent the responsibility therefor
is the Buyer's under other provisions of this Agreement; and
(c) any Litigation Expense incurred or required to be paid in
connection with any Action incident to any matter indemnified against in
paragraph (a) or (b).
7.2 Obligation of the Buyer. Subject to the limitations set
forth in Section 7.3, the Buyer shall indemnify and save harmless the Sellers
from, against, for and in respect of:
(a) any Loss incurred or required to be paid which arises out
of or relates to (i) a state of facts as a result of which any representation
or warranty made by the Buyer in this Agreement is untrue, inaccurate or
misleading in any respect, provided that the Sellers did not know that such
representation or warranty was untrue, inaccurate or misleading in any respect
on the Closing Date, or (ii) the breach of any covenant or agreement made by
the Buyer in this Agreement or in any Transaction Document; and
(b) any Litigation Expense incurred or required to be paid in
connection with any Action incident to any matter indemnified against in
Section 7.2 (a) above.
7.3 Limitation on Indemnity. The indemnification
obligations of the parties under Sections 7.1 and 7.2 shall be subject to the
following:
(a) Time Bar.
(i) The Buyer shall not be entitled to make any claim against
the Sellers for any Loss or Litigation Expense unless a notice of such claim
shall have been given to the Agent in accordance with Section 13.1 hereof
(A) on or before the first (1st) anniversary of the Closing
Date, in the case of any claim for Loss arising under Section
7.1(a)(i) hereof (and any Litigation Expense under Section 7.1(c)
hereof related to such Loss), other than a claim relating to the
untruth, inaccuracy or misleading nature of a representation or the
breach of a warranty, covenant or agreement made by the
25
Sellers with respect to the matters set forth in Sections 3.1, 3.2,
4.7, 4.17, 4.18 or 4.19 of this Agreement; and
(B) on or before the expiration of the applicable statute of
limitations, in the case of (1) any claim for Loss arising under
Section 7.1(a)(i) hereof (and any Litigation Expense under Section
7.1(c) hereof related to such Loss) because of the untruth, inaccuracy
or misleading nature of a representation or the breach of a warranty,
covenant or agreement made by any Seller in Sections 3.1, 3.2, 4.7,
4.17, 4.18 or 4.19 of this Agreement, and (2) any claim for Loss
arising under Section 7.1(a)(ii) or 7.1(b) hereof (and any Litigation
Expense under Section 7.1(c) hereof related to such Loss).
(ii) The Sellers shall not be entitled to make a claim
against the Buyer for any Loss or Litigation Expense relating thereto unless a
notice of such claim shall have been given to the Buyer in accordance with
Section 13.1 hereof
(A) on or before the first (1st) anniversary of the Closing
Date, in the case of any claim for Loss arising under Section
7.2(a)(i) hereof (and any Litigation Expense under Section 7.2(b)
hereof related to such Loss), or
(B) prior to the expiration of the applicable statute of
limitations, in the case of any claim for Loss arising under Section
7.2(a)(ii) hereof (and any Litigation Expense under Section 7.2(b)
hereof related to such Loss).
(b) Deductible. The Buyer shall be entitled to indemnity for
Losses with respect to any claim arising under Section 7.1(a)(i) or Section
7.1(b) and Litigation Expenses under Section 7.1(c) related to such Losses only
if the aggregate amount of its Losses and Litigation Expenses with respect to
all claims arising under such Sections (in excess of the threshold provided in
(i) preceding) exceeds $100,000 (and if such condition is met indemnity shall
be required for all Losses and Litigation Expenses), provided that the
limitations of this Section 7.3(b) shall not apply to indemnity with respect to
Losses arising out of or relating to a state of facts as a result of which a
representation or warranty set forth in Sections 3.1 or 3.2 is untrue or
inaccurate.
(c) Several Liability of the Sellers. Notwithstanding
anything to the contrary herein, the representations and warranties made in
Section 3.1, 3.2 and 3.3 of this Agreement shall be deemed made by each Seller
severally, not jointly, and no Seller shall have any liability under this
Section 7 with respect to any inaccuracy in such representations or breach of
such warranties that relates to the title, ownership, capacity, rights,
obligations or any action or inaction of any other Seller. Nothing herein shall
require the Buyer to proceed against all of the Sellers or any of them in
26
connection with any claim for indemnification; all such claims may be asserted
independently, subject to the limitations on any Seller's liability set forth
herein.
(d) Maximum Liability. The aggregate liability of the Sellers
in connection with all claims for Losses arising under Section 7.1(a)(i)
hereof, (and any Litigation Expense under Section 7.1(c) hereof related to such
Loss), to the extent in excess of the deductible provided for in Section
7.3(b), shall not exceed $4,250,000. The aggregate liability of each Seller in
connection with all claims for Losses arising under Section 7.1(a)(i) hereof
(and any Litigation Expense under Section 7.1(c) hereof related to such Loss),
to the extent in excess of the deductible provided for in Section 7.3(b), shall
not exceed such Seller's share of the Base Purchase Price. The aggregate
liability of the Sellers in connection with all claims for Losses arising
Section 7.1(a)(i) hereof and under Section 7.1(b) hereof (and any Litigation
Expense under Section 7.1(c) hereof related to such Loss), to the extent in
excess of the deductible provided for in Section 7.3(b), cumulatively, shall
not exceed $8,500,000.
(e) Insurance Proceeds. An indemnified party's indemnifiable
Loss hereunder shall be deemed reduced by the amount of any insurance proceeds
or indemnities recoverable by such indemnified party with respect to such Loss.
(f) Exclusivity. The sole and exclusive remedy of the parties
hereto for any claim resulting from a breach by any of the parties hereto of
its respective representations or warranties made herein shall be a claim under
this Section 7. The parties hereby waive any provision of law to the extent
that it would limit or restrict the agreement contained in this Section 7.3(f).
7.4 Set-Offs. The Buyer, its successors, assigns and
designees shall have the right to set off any amounts owed by the Sellers under
this Section 7 against any amounts owed by the Buyer to the Sellers under this
Agreement. This set-off right is not exclusive, and shall not be deemed to
restrict in any way the exercise of any other right or remedy the Buyer may
have under this Agreement, under applicable Law or otherwise to enforce a claim
for indemnification.
7.5 Notice and Defense of Claims. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by another party or third parties
shall be subject to the following terms and conditions:
(a) Notice. The indemnified party shall give prompt written
notice to the indemnifying party of any claim or event known to it which does
or may give rise to a claim by the indemnified party against the indemnifying
party based on this Agreement, stating the nature and basis of said claims or
events and the amounts thereof, to the extent known, and in the case of any
Action brought by any third party,
27
a copy of any documentation with respect thereto promptly after any such
documentation is received by the indemnified party. The claims notice may be
amended on one or more occasions with respect to the amount or description of
the asserted liability or the Loss at any time prior to final resolution of the
obligation to indemnify relating to the asserted liability or the Loss. If a
claims notice is not provided promptly as required by this Section 7.5(a), the
indemnified party nonetheless shall be entitled to indemnification by the
indemnifying party to the extent that the indemnifying party has not
established that it has been prejudiced by such late receipt of the claims
notice.
(b) Third Party Claims or Actions.
(i) In the event any Action is brought by any third party
against an indemnified party, with respect to which an indemnifying party may
have liability under this Agreement, the indemnifying party shall be entitled
to participate in, and, to the extent that it shall wish, to assume the defense
thereof, with independent counsel reasonably satisfactory to such indemnified
party, provided that in assuming the defense of any such third party Action,
the indemnifying party acknowledges in writing to the indemnified party that
the indemnifying party shall thereafter be liable, to the extent herein
provided, for any Loss and any Litigation Expense with respect to
such Action.
(ii) If the indemnifying parties elect to assume the defense
of any such third-party Action, the indemnifying parties shall have the right
to contest, pay, settle or compromise any such Action on such terms and
conditions as the indemnifying parties may determine; provided, however, that
(A) the indemnifying parties shall not settle or compromise any Action or
consent to the entry of any judgment that does not include an unconditional
term releasing the indemnified party from all liability in respect of such
asserted liability, and (B) no settlement that imposes any liability or
obligation on the indemnified party (other than the payment of money damages
that will be paid entirely by the indemnifying party), shall be made without
the indemnified party's written consent (which shall not be unreasonably
withheld). After notice from the indemnifying parties to such indemnified party
of the indemnifying parties' election so to assume the defense thereof, the
indemnifying parties shall not be liable to such indemnified party for any
Litigation Expense or other expenses incurred after the date of receipt of such
notice by the indemnified party. The indemnified party shall have the right to
employ its own counsel and such counsel may participate in such Action, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party, when and as incurred.
(iii) If the indemnifying parties do not elect to assume the
defense of any such Action, the indemnified party may engage counsel selected
by the indemnified
28
party to assume the defense and may contest and pay or may settle or compromise
any such claim. The fees and disbursements of such counsel shall constitute
Litigation Expense hereunder. Notwithstanding the foregoing, (A) if the
indemnifying parties acknowledge in writing to the indemnified party that the
indemnifying parties shall thereafter be liable, to the extent herein provided,
for any Loss and any Litigation Expense with respect to such Action, then the
selection of such counsel shall require the prior written consent of the
indemnifying parties (such consent not to be unreasonably withheld), and (B)
any settlement or compromise of such Action shall require the prior written
consent of the indemnifying parties (such consent not to be unreasonably
withheld).
(iv) The indemnified party and the indemnifying parties, as
the case may be, shall be kept fully informed of such Action at all stages
thereof whether or not such party is represented by its own counsel.
7.6 Cooperation. The parties hereto agree to render to each
other such assistance as they may reasonably require of each other and to
cooperate in good faith with each other in order to ensure the proper and
adequate defense of any Action brought by any third party.
7.7 Confidentiality. The parties agree to make
reasonable efforts to preserve in full the confidentiality of all proprietary
or confidential business records and the attorney-client and work product
privileges. In connection therewith, each party agrees that: (a) it will make
reasonable efforts, in any Action in which it has assumed or participated in
the defense, to avoid production of confidential business records; and (b) all
communications between any party hereto and counsel responsible for or
participating in the defense of any Action shall, to the extent possible, be
made so as to preserve any applicable attorney-client or work-product
privilege.
7.8 Survival of Representations and Warranties. All
covenants, representations and warranties and agreements made in this Agreement
or in any Exhibit, Schedule, certificate or document delivered herewith or at
the Closing shall survive the execution and delivery thereof and the Closing
hereunder; provided, however, that any claim for the breach of any such
covenant, representation, warranty or agreement shall be subject to the
applicable limitations set forth in this Section 7.
8. Other Agreements of the Parties.
8.1 Brokers. Each party represents and warrants that all
actions by it relative to this Agreement and the transactions contemplated
hereby were carried out in such manner as not to give rise to any valid claim
for finders fees, brokerage
29
commissions or similar payments.
8.2 Post-Closing Cooperation. After the Closing Date, the
Sellers and the Buyer shall provide each other timely access to information and
reasonable assistance and cooperation, during normal business hours, necessary
for the preparation of any tax returns or other filings or conducting or
responding to tax audit or other proceedings. All pertinent books of account,
papers, and records shall be retained by the parties until either the statute
of limitations to which they relate has expired, by lapse of time or by the
terms of any agreement for extension of the period of limitations.
8.3 Tax Returns. The Buyer will cause the Company and each of
its Subsidiaries to prepare and file appropriate federal and state income tax
returns for the Company and each of its Subsidiaries including the period from
January 1, 1998 through the Closing Date. Any Taxes payable pursuant to such
returns shall, however, be the responsibility of the Sellers. The Agent shall
have the right to consult with the Buyer on the preparation of such returns.
The Buyer will submit a draft return to the Agent for his review and comment at
least 10 business days prior to filing.
8.4 Other Tax Matters. (a) The parties agree to elect the
Section 1362(e)(3) closing of the books method, and not the pro-rata method,
for the computation of the Company's S Corporation taxable income for the
1998 termination year.
(b) The Agent shall have the right, including the right to
appoint a representative, to participate in any inquiry or exam by federal,
state or local taxing authorities that pertains to any tax period of the
Company up through the date of closing.
8.5 Guaranty by Company. The Company, as a Subsidiary of SFX
, shall provide guaranties of SFX's indebtedness comparable to those required
of other Subsidiaries of SFX. If the market capitalization of SFX's common
stock falls below $100 million, then SFX will take all steps necessary to have
all such guaranties terminated. If the market capitalization of SFX's common
stock falls below $125 million, then SFX will make reasonable efforts to have
all such guaranties terminated.
8.6 Shareholder Loans. At the Closing, the Company will
repay the outstanding loans from its shareholders (currently in the aggregate
amount of approximately $950,000), plus accrued unpaid interest thereon.
9. Exclusivity; No Solicitation. From and after the date
hereof and until the Closing, the Sellers shall not, and shall not permit the
Company to, solicit, discuss, negotiate, accept, approve, provide any Third
Party information in connection
30
with, or enter into any agreement with a Third Party relating to any offer or
proposal from anyone other than the Buyer relating to the acquisition of the
assets or Business of the Company, the acquisition of any of its capital stock
or other securities, or any merger, consolidation or other business combination
relating to the Company, and will promptly notify the Buyer of any offer or
proposal received by them or by the Company with respect to any such proposed
transaction.
10. Conditions Precedent.
10.1 Conditions to Obligations of the Sellers. All
obligations of the Sellers under this Agreement are subject to the fulfillment,
unless waived in writing at the sole option of the Sellers, at or prior to the
Closing Date, of each of the following conditions precedent:
(a) Buyer's Representations and Warranties. The
representations and warranties of the Buyer herein contained shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of said date, except as affected by the
transactions contemplated or permitted by this Agreement
(b) Buyer's Covenants. The Buyer shall in all material
respects have performed all its obligations and agreements and complied with
all its covenants contained in this Agreement to be performed and complied
with by the Buyer at or prior to the Closing Date.
(c) Buyer's Closing Certificate. The Sellers shall have
received a certificate of the Buyer, executed on behalf of the Buyer by any
duly authorized representative of the Buyer, dated the Closing Date, in form
and substance reasonably satisfactory to the Agent, certifying as to the
fulfillment of the matters mentioned in paragraphs (a) and (b) of this Section
10.1.
(d) Buyer's Counsel's Opinion. Messrs. Winston & ▇▇▇▇▇▇,
counsel to the Buyer, shall have delivered to the Sellers an opinion, dated the
Closing Date, in form and substance reasonably satisfactory to the Sellers. In
giving such opinion such counsel may rely, as to matters of fact, upon
certificates of duly authorized representatives of the Buyer and, as to matters
of Law, upon the opinions of other counsel reasonably satisfactory to the
Sellers; provided that copies thereof are delivered to the Sellers at or prior
to the Closing.
(e) Consents and Approvals. The Sellers and the Company shall
have received all approvals, consents, authorizations and waivers listed on
Schedule 4.16, including without limitation consents required from Subsidiaries
or Affiliates of SFX
31
under Contracts with the Company.
(f) Other Documents. The Sellers shall have received all
certificates, corporate documents, evidence of authorization, and other
agreements, instruments and documents in respect of any aspect or consequence
of the transactions contemplated by this Agreement as the Agent may reasonably
request, all of which shall be in form and substance reasonably satisfactory to
the Agent.
(g) No Litigation. No Action before any court or any
governmental or regulatory authority shall have been commenced and still be
pending, no investigation by any governmental or regulatory authority shall
have been commenced and still be pending, and no Action by any governmental or
regulatory authority shall have been threatened against the Sellers or the
Buyer seeking to restrain, prevent or change the transactions contemplated
hereby or questioning the validity or legality of any of such transactions.
(h) Management Services Agreement. The Company shall have
entered into a five-year Management Services Agreement with a corporation or
other entity controlled by the Sellers, automatically renewable for successive
five-year periods unless the Sellers' remaining common stock of the Company has
been redeemed or sold, in which event it shall be terminable by the Company,
and otherwise in form and substance reasonably satisfactory to the Sellers.
(i) Shareholders Agreement. The Company, the Buyer and the
Sellers shall have entered into a Shareholders Agreement, in form and substance
reasonably satisfactory to the Sellers.
(j) Tax Sharing Agreement. The Company shall have entered
into a Tax Sharing Agreement with SFX, in form and substance reasonably
satisfactory to the Sellers. The Tax Sharing Agreement shall provide that while
the Management Services Agreement is in effect SFX will bear the economic
burden of Taxes imposed on EMI's net income after the fees or other
compensation (to the extent deductible for income Tax purposes) payable under
the Management Service Agreement.
32
10.2 Conditions to the Obligations of the Buyer. All
obligations of the Buyer under this Agreement are subject to the fulfillment,
unless waived in writing at the sole option of the Buyer, at or prior to the
Closing Date, of each of the following conditions precedent:
(a) Sellers' Representations and Warranties. The
representations and warranties of the Sellers herein contained shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of said date, except as affected by
transactions contemplated or permitted by this Agreement.
(b) Sellers' Covenants. The Sellers shall in all material
respects have performed all of the obligations and agreements and complied with
all of the covenants contained in this Agreement to be performed and complied
with by the Sellers on or prior to the Closing Date.
(c) Sellers' Closing Certificate. The Buyer shall have
received one or more certificates of the Sellers, dated the Closing Date, in
form and substance reasonably satisfactory to the Buyer, certifying as to the
fulfillment of the matters mentioned in paragraphs (a) and (b) of this Section
10.2.
(d) Consents. The Buyer shall have received evidence,
satisfactory to the Buyer and its counsel, that all of the Consents required to
be obtained by the Buyer or the Seller in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby have been duly obtained, including without limitation the Consents
listed on Schedule 4.16, and the Consents required under Contracts listed on
Schedule 4.15.
(e) Sellers' Counsel's Opinion. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.,
counsel for the Sellers, shall have delivered to the Buyer opinions, dated the
Closing Date, in form and substance reasonably satisfactory to the Buyer.
In giving such opinions such counsel may rely, as to matters of fact, upon
certificates of the Sellers, and, as to matters of Law, upon the opinion of
other counsel reasonably satisfactory to the Buyer, provided that copies
thereof are delivered to the Buyer prior to the Closing.
(f) Other Documents. The Buyer shall have received all
certificates, corporate documents, evidence of authorization, and other
agreements, instruments and documents in respect of any aspect or consequence
of the transactions contemplated by this Agreement as the Buyer may reasonably
request, all of which shall be in form and substance reasonably satisfactory to
the Buyer.
(g) No Litigation. No Action before any court or any
governmental or regulatory authority shall have been commenced and still be
pending, no investigation
33
by any governmental or regulatory authority shall have been commenced and
still be pending, and no Action by any governmental or regulatory authority
shall have been threatened against the Sellers or the Buyer seeking to
restrain, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any of such transactions.
(h) Non-Competition and Confidentiality. The Sellers, other
than ▇▇▇▇▇ ▇▇▇▇▇▇▇, shall have executed and delivered a five-year
Non-Competition and Confidentiality Agreement in favor of the Buyer and the
Company, restricting competition with the Buyer and the Company, and requiring
confidentiality of non-public business information, in form and substance
reasonably satisfactory to the Buyer.
(i) Management Services Agreement. The Company shall have
entered into a five-year Management Services Agreement with a corporation or
other entity controlled by the Sellers, automatically renewable for successive
five-year periods unless the Sellers' remaining common stock of the Company has
been redeemed or sold, in which event it shall be terminable by the Company,
and otherwise in form and substance reasonably satisfactory to the Buyer.
(j) Shareholders Agreement. The Company, the Buyer and the
Sellers shall have entered into a Shareholders Agreement, in the form and
substance reasonably satisfactory to the Buyer.
(k) Tax Sharing Agreement. The Company shall have entered
into a Tax Sharing Agreement with SFX, in form and substance reasonably
satisfactory to SFX. The Tax Sharing Agreement shall provide that while the
Management Services Agreement is in effect SFX will bear the economic burden of
Taxes imposed on EMI's net income after the fees or other compensation (to the
extent deductible for income Tax purposes) payable under the Management Service
Agreement.
(l) Government Consents and Approval. All governmental
consents, authorizations, filings or registrations in connection with the
investment by the Buyer in the Company shall have been obtained, including,
without limitation, any required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
(m) Releases. The Sellers shall execute and deliver to the
Buyer general releases of claims against the Company and each of its
Subsidiaries, in form and substance reasonably satisfactory to the Buyer.
(n) Resignations. The Buyer shall have received the
resignations of all of the officers and directors of the Company.
34
(o) Satisfactory Completion of Buyer's Due Diligence. The
Buyer shall have completed its due diligence investigation of the business,
affairs, assets, Liabilities, historical financial results, operations and
prospects of the Company and each of its Subsidiaries, and the Buyer shall not
have learned any information as a result of such investigation which in the
reasonable opinion of the Buyer is likely to have a Material Adverse Effect.
This condition shall be deemed satisfied unless the Buyer delivers written
notice to the Agent of the receipt of such material adverse information in
reasonable detail. In the event that the Buyer delivers such notice, this
condition shall be deemed satisfied if, within ten (10) days of receiving such
notice, the Sellers or the Agent shall have cured or prevented, to the
reasonable satisfaction of the Buyer, any such Material Adverse Effect or the
underlying causes likely to have such effect.
11. Termination.
11.1 Termination.
(a) This Agreement may be terminated prior to the Closing
and the transactions contemplated hereby may be abandoned:
(i) by the Sellers, upon written notice from the Agent to the
Buyer, if the Closing has not taken place on or before June 30, 1998,
other than by reason of a default hereunder of the Sellers;
(ii) by the Buyer, upon written notice to the Agent, if the
Closing has not taken place on or before June 30, 1998, other than by
reason of a breach or default hereunder of the Buyer; or
(iii) by either the Buyer or the Sellers, upon written notice
to the other(s), if there shall be in effect a non-appealable order of
a court of competent jurisdiction permanently prohibiting the
consummation of the transactions contemplated hereby; or
(iv) by the Buyer if any condemnation, destruction or loss
due to fire or other casualty from the date hereof until the Closing
Date is such that the Business is materially interrupted or curtailed
or the assets of the Company or any of its Subsidiaries are materially
affected; provided that if the Buyer nonetheless elects to close, the
Sellers shall remit or assign the Sellers' rights or the Company's or
such Subsidiary's rights to all net condemnation proceeds or third
party insurance proceeds to the Buyer, and the Sellers shall have no
35
further liability or obligations with respect to such condemnation,
destruction or loss.
11.2 Status of Agreement after Termination. Upon any
termination of this Agreement pursuant to Section 11.1, this Agreement shall
become void and shall have no effect, except that such termination shall not
affect (a) the rights and obligations of the parties under the Confidentiality
Agreement dated January 27, 1998 between SFX and the Company, or (b) any other
liability any party may have for any loss, damage, liability, cost or expense
alleged to have been incurred by another as a consequence of such party's
default under this Agreement.
12. Arbitration.
(a) Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of Commercial Arbitration of the American Arbitration
Association (the "Rules"), and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(b) The arbitration tribunal shall consist of three
arbitrators, of whom one shall be nominated by Buyer, one shall be nominated by
the Seller, and the third, who shall serve as Chairman, shall be chosen by the
two party-nominated arbitrators or, in the event the party-nominated
arbitrators are unable to designate the third arbitrator, by the American
Arbitration Association.
(c) Any party to this Agreement is authorized to initiate
arbitration by providing written notice of arbitration, in accordance with the
Rules, to the Administrator of the American Arbitration Association and to the
party or parties against whom a claim is being made.
(d) The place of the arbitration shall be Los Angeles,
California.
(e) The award of the arbitrators shall be final and binding.
The parties waive any right to appeal the award, to the extent a right to
appeal may be lawfully waived. Each party retains the right to seek judicial
assistance: (i) to compel arbitration; (ii) to obtain interim measures of
protection pending arbitration; and (iii) to enforce any decision of the
arbitrators, including the final award.
13. General Provisions.
13.1 Notices. All waivers, notices, consents, demands,
requests,
36
approvals and other communications which are required or may be given
hereunder shall be in writing and shall be deemed to have been duly given when
hand-delivered, sent by telecopier, delivered by national overnight courier
service, or 72 hours after mailed by certified first class mail, return receipt
requested, postage prepaid, as follows:
if to the Buyer:
EMI Acquisition Sub, Inc.
c/o SFX Entertainment, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇, Esq.
fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Winston & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Sellers or the Agent:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as Agent
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Law Offices of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or addresses as may be designated by a party by
written notice to the other parties hereto.
13.2 Costs; Expenses. Whether or not the transactions are
37
consummated, the Buyer will bear its own costs and expenses incurred in
negotiating this Agreement and consummating the transactions contemplated
hereby, and the Sellers will bear the Company's and their own costs and
expenses incurred in negotiating this Agreement and consummating the
transactions contemplated hereby.
13.3 Binding Effect, Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns; provided, however, that nothing in this Agreement shall
be construed to confer any rights, remedies, obligations or liabilities on any
person other than the parties hereto or their respective successors and
assigns.
13.4 Public Announcements. The parties hereto shall advise
and consult with each other prior to the making of any public announcement with
respect to the transactions contemplated hereby. In any event, none of the
parties shall issue any press release or make any public announcement or
statement without the prior written consent of the other parties, except for
filings, registrations or public statements that are required by Law.
13.5 Entire Agreement; Amendment. (a) This Agreement,
together with its Schedules and Exhibits, embodies the entire agreement and
understanding of the parties hereto and supersedes any prior agreement or
understanding between the parties with respect to the subject matter of this
Agreement. The Confidentiality Agreement dated January 27, 1998 shall be deemed
to continue in full force and effect until the Closing; provided that, upon the
Closing, such agreement shall be deemed terminated and shall have no further
force or effect.
(b) This Agreement cannot be amended or terminated orally,
but only by a writing duly making specific reference to this Agreement executed
by the parties.
13.6 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document. Facsimile signatures will
be deemed acceptable and binding.
13.7 Headings. Headings of the Sections and paragraphs
in this Agreement are for reference purposes only and shall not be deemed to
have any substantive effect.
13.8 Assignment. This Agreement may not be assigned by either
party without the prior written consent of the other. Notwithstanding the
foregoing, the Buyer may, without the consent of the other parties hereto,
assign and delegate its obligations and rights hereunder or any part thereof to
(i) any wholly-owned Subsidiary
38
of SFX, and (ii) any lender providing financing to the Buyer, as collateral,
but no such assignment shall relieve the Buyer of its obligations to the
Sellers hereunder.
13.9 Applicable Law. This Agreement shall be governed and
construed and interpreted in accordance with the laws of the State of New York,
without regard to choice of laws principles, and the federal laws of the United
States of America.
13.10 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validly or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
13.11 Agent. The Sellers hereby appoint the Agent to act as
their agent with respect to this Agreement, including without limitation with
respect to all aspects of indemnity claims under Section 7 of this Agreement.
The Buyer shall be entitled to rely on and act in accordance with any notice,
consent, authorization, approval or instruction received in writing from the
Agent with the same effect as though it were received from all of the Sellers.
13.12 Waivers. Except as otherwise provided herein, no delay
on the part of a Seller or the Buyer in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of a Seller or the Buyer of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
13.13 Miscellaneous. The rights and remedies of the Buyer and
the Sellers hereunder are cumulative and not exclusive of any rights or
remedies they would otherwise have.
39
IN WITNESS WHEREOF, the parties have executed or caused to be
executed this Stock Purchase Agreement as of the date first set forth above.
BUYER:
EMI ACQUISITION SUB, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________
Vice President
THE COMPANY:
EVENT MERCHANDISING, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
______________________
Vice President
SELLERS:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually and as Agent
/s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
40