PARTNERSHIP AGREEMENT
FOR
WESTERN AMPHITHEATER PARTNERS
This Partnership Agreement ("Agreement") is made and entered into
effective as of this 4th day of April, 1997 by and between PAVILION PARTNERS, a
Delaware general partnership, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AMPHITHEATER, a California
general partnership. For and in consideration of the mutual covenants herein
contained, the parties to this Agreement hereby form and create a general
partnership, under and pursuant to the Partnership Act for the purposes and upon
the terms, provisions, and conditions as hereinafter set forth:
ARTICLE I
Definitions
Capitalized terms used in this Agreement shall have the respective
meanings indicated in the glossary of terms attached hereto as Exhibit "A".
ARTICLE II
Name of Business; Offices
2.01 Partnership Name. The name of the Partnership shall be Western
Amphitheater Partners. In addition to the foregoing name, the activities and
business of the Partnership may be conducted under such other name or names as
may be designated from time to time by the Executive Committee. The Partners
shall execute and file such certificates, if any, as are required by the
provisions of any assumed name law or statute in any jurisdiction in which the
Partnership conducts business, as may be required to reflect the Partnership's
operation under such names.
2.02 Partnership Offices. The principal places of business of the
Partnership shall be at ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and
at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Partnership
shall also maintain an office at each of the Subject Amphitheaters.
ARTICLE III
Purpose and Power of the Partnership
3.01 Purposes. As the owners of the Subject Amphitheaters, each of the
Partners agrees that the integration of the resources and management of the
Subject Amphitheaters will result in
substantial and significant operating efficiencies by, among other things,
eliminating unnecessary duplication of efforts in the area of marketing,
sponsorship sales, management oversight, facility maintenance and other
essential operations necessary for the proper use, operation and maintenance of
the Subject Amphitheaters. Accordingly, the character and purposes of the
specific business to be conducted by the Partnership are (i) to operate, use and
exploit each of the Subject Amphitheaters and (ii) to perform and fulfill all
obligations and duties imposed upon the Partnership pursuant to the terms and
provisions contained in each of the Amphitheater Contribution Agreements and
(iii) to take any and all other actions which may be incidental to or otherwise
reasonably related to the foregoing business and purposes. Notwithstanding
anything to the contrary contained herein, reference is made to the fact that
the Underlying Owner of each of the Subject Amphitheater has retained the right
to make the following major decisions with respect to such Subject Amphitheater:
(a) selling, transferring, conveying or otherwise disposing of such
Subject Amphitheater (subject to the provisions of Section 14.01 hereof);
(b) creating a mortgage, lien or other encumbrance upon the
Underlying Owner's interest in such Subject Amphitheater (subject to the
provisions of the Amphitheater Contribution Agreement which make the
Underlying Owner solely and exclusively obligated to discharge all
indebtedness and obligations secured by any such mortgage, lien or other
encumbrance); and
(c) making capital improvements at the Subject Amphitheaters
(subject to the provisions of the Amphitheater Contribution Agreement
which requires the Underlying Owner to be solely and exclusively obligated
to pay the costs of any such capital improvements).
Accordingly, the Partnership shall not have the authority to effect any of the
foregoing major decisions.
3.02 Powers. The Partnership shall have the power, in fulfilling the
purposes set forth in Section 3.01, to conduct any business or take any action
which is lawful and which is not prohibited by the Partnership Act.
ARTICLE IV
Term of Partnership
The term of the Partnership shall begin on the date first set forth above
and shall continue until November 30, 2016, unless sooner dissolved pursuant to
Section 17.01 or by operation of law.
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ARTICLE V
Contributions to Partnership
5.01 Pavilion's Initial Contribution.
(a) Pavilion shall hereafter contribute to the capital of the
Partnership on the Closing Date certain rights, licenses, assets and other
benefits relating to ▇▇▇▇ ▇▇▇▇▇ Amphitheater on, subject to and pursuant
to the terms and provisions contained in the Amphitheater Contribution
Agreement for ▇▇▇▇ ▇▇▇▇▇ Amphitheater.
(b) The Partners hereby agree that the combined fair market value of
the rights, licenses, assets and other benefits to be hereafter
contributed by Pavilion to the capital of the Partnership (net of
liabilities assumed by the Partnership or to which such rights, licenses,
assets and other benefits are subject) pursuant to the Amphitheater
Contribution Agreement for ▇▇▇▇ ▇▇▇▇▇ Amphitheater is $5,000,000 ("Initial
Contribution Amount") and that the initial balance of Pavilion's Capital
Account shall therefore equal the Initial Contribution Amount.
5.02 IMA's Initial Contribution.
(a) IMA shall hereafter contribute to the capital of the Partnership
on the Closing Date certain rights, licenses, assets and other benefits
relating to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater on, subject to and pursuant to the
terms and provisions contained in the Amphitheater Contribution Agreement
for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater.
(b) The Partners hereby agree that the combined fair market value of
the rights, licenses, assets and other benefits to be hereafter
contributed by IMA to the capital of the Partnership (net of liabilities
assumed by the Partnership or to which such rights, licenses, assets and
other benefits are subject) pursuant to the Amphitheater Contribution
Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater is equal to the Initial
Contribution Amount and that the initial balance of IMA's Capital Account
shall therefore equal the Initial Contribution Amount.
5.03 Operational Shortfalls. If an Operational Shortfall occurs at any
time and a Deficit Loan is not made by one or both of the Partners pursuant to
the provisions of Article VI hereof in an amount sufficient to cover such
Operational Shortfall, then each Partner shall be obligated to contribute to the
capital of the Partnership its Percentage Interest of the amount of funds needed
to cover such Operational Shortfall.
5.04 No Other Capital Contribution Obligations. Except for the specific
obligations to make contributions to the capital of the Partnership as expressly
set forth in this Article V and in Section 17.03 hereof, neither Partner shall
have any other obligation to make contributions to capital of the Partnership.
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ARTICLE VI
Deficit Loans
If an Operational Shortfall occurs at any time, then any Partner shall
have the right, but not the obligation, to extend a loan ("Deficit Loan") to the
Partnership in the amount of such Operational Shortfall. If both Partners elect
to extend a Deficit Loan to the Partnership upon the occurrence of an
Operational Shortfall, then each shall fund its Percentage Interest of the
amount of such Operational Shortfall. If one of the Partners elects to refrain
from extending a Deficit Loan with respect to any Operational Shortfall, then
the other Partner shall have the right to extend a Deficit Loan up to the full
amount thereof. Each Deficit Loan shall bear interest at a variable rate of
interest per annum equal to the Permitted Rate and shall be repayable as soon as
the Partnership has funds available therefor. No distributions shall be made to
the Partners pursuant to Article IX hereof at any time during which any Deficit
Loan remains outstanding.
ARTICLE VII
Tax Matters and
Maintenance of Capital Accounts
7.01 Generally. For each taxable year of the Partnership, the income,
gains, losses, credits and deductions of the Partnership shall be allocated
between the Partners in accordance with each Partner's Percentage Interest.
7.02 Section 704(c). Income, gain, loss and deduction with respect to any
item of property contributed to the Partnership shall, solely for federal income
tax purposes, be allocated between the Partners so as to take into account any
difference between the Gross Asset Value of such item of property and its
adjusted basis for federal income tax purposes on the date of such contribution,
in accordance with the requirements of Section 704(c) of the Code. All
allocations under this Section 7.02 shall be made in such a manner as the
Executive Committee shall determine reasonably reflects the requirements of
Section 704(c) of the Code. No allocations pursuant to this Section 7.02 shall
be reflected as an adjustment to any Partner's Capital Account.
7.03 Maintenance of Capital Accounts. A Capital Account shall be
established and maintained for each Partner in accordance with the following
provisions:
(a) Increases in Capital Accounts. Each Partner's Capital Account
shall be increased by (i) the amount of cash and the fair market value of
all property contributed by such Partner to the Partnership (net of
liabilities assumed by the Partnership or to which the contributed
property is subject) and (ii) that Partner's allocable share of income and
gain for federal income tax purposes (excluding any allocations made
pursuant to Section 7.02 hereof).
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(b) Decreases in Capital Accounts. Each Partner's Capital Account
shall be decreased by (i) the amount of cash and the fair market value of
all property distributed to such Partner (net of liabilities assumed by
the Partner or to which the property is subject) and (ii) that Partner's
allocable share of losses and other items of deduction for federal income
tax purposes (excluding any allocations made pursuant to Section 7.02
hereof).
(c) Use of Gross Asset Value. For purposes of computing the amount
of any item of income, gain, loss, or deduction to be reflected in the
Partners' Capital Accounts, the determination, recognition and
classification of such items shall be the same as their determination,
recognition and classification for federal income tax purposes, except
that (i) gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed with reference to the Gross Asset
Value of the property disposed of, rather than its adjusted basis, and
(ii) depreciation, amortization, or other cost recovery deductions with
respect to an item of Partnership property shall be computed with
reference to the Gross Asset Value of such property rather than its
adjusted basis.
(d) Compliance with Treasury Regulations. The foregoing provisions
and the other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with the Treasury Regulations
issued pursuant to Section 704(b) of the Code, and shall be interpreted
and applied in a manner consistent with such regulations. If the Partners
shall determine that it is prudent to modify the manner in which the
Capital Accounts are computed or maintained in order to comply with such
regulations, the Partners may make such modification.
7.04 Taxes Attributable to Post-1996 Receipts.
(a) All Post-1996 Receipts received prior to the Closing Date shall
be, for purposes of federal, state and local income tax, the income of the
recipient thereof. Accordingly, the recipient of all Post-1996 Receipts
received prior to the Closing Date shall be responsible for payment of,
and shall indemnify the Partnership with respect to, all federal, state
and local taxes payable on account of such Post-1996 Receipts.
(b) All Post-1996 Receipts received after the Closing Date shall be,
for purposes of federal, state and local income tax, the income of the
Partnership and allocated to the Partners pursuant to the provisions of
Section 7.01 hereof.
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ARTICLE VIII
Fees
8.01 Generally. Except as specifically provided in Section 8.02 hereof,
neither Partner shall be entitled to receive any fees from the Partnership
without the express prior written approval of both Partners.
8.02 Pavilion's Fee for Sponsorship Services. In consideration for the
services to be rendered by Pavilion in respect of the solicitation and
procurement of sponsors for the Subject Amphitheaters (as described in Section
12.09(a)(i) hereof), the Partnership shall pay a fee to Pavilion, within 30 days
following the completion of each Amphitheater Fiscal Year, in an amount equal to
20% of the amount (if any) by which (i) the Net Sponsorship Revenue for such
Amphitheater Fiscal Year exceeds (ii) the Net Sponsorship Revenue for the
Amphitheater Fiscal Year which ended on December 31, 1996. If the Executive
Committee should, at any time hereafter, elect to remove Pavilion as the party
primarily responsible for directing the efforts of soliciting, procuring and
obtaining sponsors for each of the Subject Amphitheaters pursuant to the
provisions of Section 12.09(c) hereof, then the fee provided for in this Section
8.02 shall not be payable to Pavilion for any Amphitheater Fiscal Year
thereafter.
ARTICLE IX
Rent Obligations and Cash Distributions
9.01 Advance of Rental Payments. Reference is made to the fact that
pursuant to the provisions of each of the Amphitheater Contribution Agreements,
(i) Pavilion is responsible for payment of all lease payments and rental
obligations due under arid pursuant to its Lease Agreement with the County of
San Bernardino at the ▇▇▇▇ ▇▇▇▇▇ Amphitheater and (ii) IMA is responsible for
the payment of all lease payments and rental obligations due under and pursuant
to its Lease Agreement with The Irvine Company at the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Amphitheater. To the extent that the Executive Committee determines that the
Partnership has cash available which is not required for a reasonable working
capital reserve for the obligations or business needs of the Partnership, the
Partnership shall fund the lease payments and rental obligations due in respect
of the Lease Agreements at each of the Subject Amphitheaters as and when due and
payable. All amounts so advanced by the Partnership shall be deemed to be a loan
made by the Partnership to (x) Pavilion with respect to all amounts so funded in
respect of the ▇▇▇▇ ▇▇▇▇▇ Amphitheater and (y) IMA with respect to all amounts
so funded in respect of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater (such loans being herein
collectively called the "Rental Loans").
9.02 Annual Distribution of Available Cash. All Available Cash of the
Partnership, as of December 31 of each calendar year, shall be distributed by
the Partnership to the Partners on or before January 31 of the next succeeding
calendar year in the amounts determined in accordance with the following
provisions:
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(a) Subject to the other provisions of this Section 9.02, the
Partnership shall distribute to each Partner an amount equal to its
Percentage Interest of the amount of Available Cash being distributed.
(b) Prior to making the distribution of the amount specified in
clause (a) of this Section 9.02, the Partnership shall reduce, deduct and
offset against such distribution to each Partner the then amount (if any)
of the Rental Loan owed by such Partner to the Partnership.
(c) All amounts withheld by the Partnership pursuant to clause (b)
of this Section 9.02 in repayment of the then outstanding Rental Loans
shall then be distributed to each of the Partners in proportion to their
respective Percentage Interests.
If a Partner's distributable share of Available Cash determined pursuant to
Section 9.02(a) hereof is less than the then amount of the Rental Loan owed by
such Partner, then such Partner shall immediately be obligated to pay to the
Partnership a cash sum to be applied against such Partner's Rental Loan in the
amount by which the then balance of such Rental Loan exceeds such Partner's
distributable share of Available Cash. All amounts received by the Partnership
pursuant to the immediately preceding sentence shall immediately thereafter be
distributed to the Partners in proportion to their respective Percentage
Interests.
ARTICLE X
Ownership of Partnership Property
All real or personal property acquired by the Partnership shall be owned
by the Partnership, such ownership being subject to the other terms and
provisions of this Agreement. Each Partner hereby expressly waives the right to
require partition of any Partnership property or any part thereof.
ARTICLE XI
Fiscal Matters
11.01 Fiscal Year. The fiscal year of the Partnership for tax purposes
shall end at such time as is required pursuant to the application of the
provisions of the Code or the U.S. Treasury Regulations promulgated thereunder.
The fiscal year of the Partnership for accounting purposes shall end on December
31; provided, however, the Partnership's Accounting Staff shall provide to
Pavilion such data and information as may be reasonably necessary to permit
Pavilion to incorporate the operating results of the Partnership into Pavilion's
financial reports and statements as of the end of each of Pavilion's fiscal
years (which currently ends on September 30 of each year).
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11.02 Books and Records.
(a) Proper books and records shall be kept by the staff at each of
the Subject Amphitheaters reflecting all financial transactions, receipts
and expenditures relating to the operation, use, maintenance and
exploitation of such Subject Amphitheater. The Executive Committee shall
establish certain financial reporting requirements from time to time that
shall apply equally to each of the Subject Amphitheaters. The staff at
each Subject Amphitheater, under the direction of the general manager of
such Subject Amphitheater, shall be responsible for complying with such
financial reporting requirements, and all reports so generated will be
provided simultaneously to both of the Partners.
(b) Pursuant to the provisions of Section 12.05 hereof, certain
accounting personnel employed by an Affiliate of a partner of IMA will be
loaned to the Partnership ("Partnership's Accounting Staff"), upon terms
consistent with the Operating Budget or otherwise approved by the
Executive Committee, who will be responsible for consolidating the books
and records of the Partnership, and each Partner shall at all reasonable
times during business hours have access to those consolidated books and
records. The Partnership's Accounting Staff shall prepare (in a form and
manner promulgated by Pavilion) and distribute to each of the Partners (i)
monthly financial statements within 20 days after the end of each calendar
month and (ii) annual financial statements within 45 days after the end of
each fiscal year of the Partnership. All financial reports prepared by the
Partnership's Accounting Staff (and the underlying accounting data) shall
be made available to the Partners, upon the request of either Partner, in
a manner enabling such Partner to load the information on a computer.
(c) All items of income and deductions recognized during a fiscal
year shall be allocated as of the end of each fiscal year, based on the
facts and circumstances existing as of the end of that year. Interim
monthly reports may be based on the facts and circumstances existing at
the time of those reports subject to year-end adjustments.
11.03 Partnership Bank Accounts. All funds of the Partnership shall be
deposited in its name in an account or accounts maintained at a national or
state bank selected by the Executive Committee. Checks shall be drawn upon the
Partnership and may be signed by such persons as may be designated from time to
time by the Executive Committee.
11.04 Tax Matters and Reports. Any provision hereof to the contrary
notwithstanding, solely for income tax purposes, each of the Partners hereby
recognizes that the Partnership will be subject to all provisions of Subchapter
K of Chapter 1 of Subtitle A of the Code; provided, however, the filing of U.S.
Partnership Returns of Income shall not be construed to extend the purposes of
the Partnership or expand the obligations or liabilities of the Partners.
Pavilion shall be the "Tax Matters Partner" for all purposes related to federal,
state and local income tax laws.
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11.05 Tax Returns. The Partnership's Accounting Staff shall prepare, or
cause to be prepared, all tax returns and statements, if any, which must be
filed on behalf of the Partnership with any taxing authority, and shall submit
copies of all such returns and statements to the Partners. To the extent
provided for in the then effective Operating Budget or otherwise approved by the
Executive Committee, the fees, charges and other expenses payable to third party
professionals such as attorneys or accountants relating to the preparation and
filing of tax returns and statements or otherwise reporting of financial results
of the Partnership, shall be properly chargeable as expenses of the Partnership.
11.06 Section 754 Election. In the case of distribution of Partnership
property within the provisions of Section 734 of the Code or in the case of a
transfer of a Partnership interest permitted by this Agreement made within the
provisions of Section 743 of the Code, the Partnership shall file an election
under Section 754 of the Code in accordance with the procedures set forth in the
applicable Treasury Regulations upon the request of any Partner if such
requesting Partner agrees to pay all costs incurred by the Partnership in
connection with the making of such election.
11.07 No Interest. No Partner shall be entitled to be paid interest on
either the balance of its Capital Account or any contributions made by it to the
Partnership.
11.08 Operational Audits. Each Partner shall have the right, at any time
and from time to time, without prior notice to the other Partner, to cause one
or more employees or other representatives of the auditing Partner, at the sole
cost and expense of the auditing Partner, to enter into and go upon the premises
of one or both of the Subject Amphitheaters to conduct audits of the operational
procedures and practices of the Subject Amphitheaters. Each Partner hereby
covenants and agrees with the Partnership and with the other Partner, that no
such audit of the operational procedures and practices of either of the Subject
Amphitheaters shall be conducted in a manner which is disruptive to the business
of the Partnership or either of the Subject Amphitheaters.
11.09 Complimentary Tickets. Each Partner shall have the right to receive
up to 48 complimentary tickets, subject to availability, for each Event
presented at the Subject Amphitheaters. If either Partner (or any of such
Partner's constituent partners or any Affiliate of any of such Partner's
constituent partners) should sell, or knowingly permit to be sold, any such
complimentary tickets (unless the sales price does not exceed the face value of
equivalent non-complimentary tickets and the proceeds are immediately remitted
to the Partnership), then such Partner shall be obligated and required to pay to
the Partnership, as liquidated damages and not as a penalty, the sum of (i) 125%
of all proceeds of such sales and (ii) interest on the amounts so owed from the
date of such sales until payment at a daily compounded rate of interest equal to
4% over the national prime rate.
11.10 Prohibition Against Scalping. If either Partner (or any of such
Partner's constituent partners or any Affiliate of any of such Partner's
constituent partners) should sell, or knowingly permit to be sold, without
Executive Committee approval, any ticket to an Event being
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presented at either of the Subject Amphitheaters for an amount that exceeds the
face value thereof and any applicable service charge, then such Partner shall be
obligated and required to pay to the Partnership, as liquidated damages and not
as a penalty, the sum of (i) 125% of all proceeds of such sales in excess of the
face value thereof and (ii) interest on the amounts so owed from the date of
such sales until payment at a daily compounded rate of interest equal to 4% over
the national prime rate.
11.11 Formation Costs. The Partners agree that the legal fees incurred by
each of the Partners in connection with the negotiation, preparation and
execution of this Agreement, the Amphitheater Contribution Agreements, the
Promotion Agreement and the T.B.A. Marketing Agreement are reasonable and
necessary costs related to the formation of the Partnership and shall be
reimbursed by the Partnership to each of the Partners.
ARTICLE XII
Management of Partnership Affairs
12.01 Management. The management and control of the Partnership's business
shall be vested in the Partners, who shall exercise such management and control
exclusively through and by virtue of their respective selection of the
Representatives to serve on the Executive Committee in accordance with the
provisions of this Article XII.
12.02 Executive Committee.
(a) Executive Committee's Authority. The Executive Committee shall
have (i) full, exclusive and complete authority and discretion to manage
and control, and shall make all decisions affecting, the Partnership's
business; (ii) full authority to effectuate the purposes of the
Partnership and to take any action required, permitted or authorized
pursuant to the terms of this Agreement; and (iii) full power to exercise
all rights and powers generally inferred or conferred by law in connection
therewith. Notwithstanding the foregoing, the Executive Committee shall
not have the right to make the major decisions referenced in Section 3.01
hereof, it being agreed that the authority to make such major decisions
with respect to each of the Subject Amphitheaters has been retained by the
Underlying Owner of such Subject Amphitheater.
(b) Unanimous Approval Required. Actions and decisions to be taken
by the Executive Committee shall require the unanimous approval of the
Representatives of the Executive Committee attending a duly called and
held meeting of the Executive Committee at which a quorum of the
Representatives are in attendance.
(c) Selection of Representatives on Executive Committee. The
Executive Committee shall be comprised of six (6) individual
Representatives. Pavilion shall have the right, at any time, and from time
to time, to designate and select three (3) out of the
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six (6) Representatives who shall serve on the Executive Committee. IMA
shall have the right, at any time, and from time to time, to designate and
select three (3) out of the six (6) Representatives who shall serve on the
Executive Committee. Each Partner's Representatives on the Executive
Committee may be removed or replaced at any time, for any reason,
temporarily or permanently, by such Partner upon notice thereof to the
other Partner.
(d) Meetings of the Executive Committee.
(1) Meetings of the Executive Committee may be held at such
regular times as may be specified by the Executive Committee and, in
addition, may be called by any Representative by giving at least ten
(10) days prior notice thereof to each of the Representatives.
Notice of each meeting shall be in writing and shall state the date,
time, and place at which such meeting is to be held (which must be a
place in either Houston, Texas or Los Angeles, California) and the
purposes for which such meeting is called. The attendance of a
Representative at a meeting shall constitute a waiver of notice of
such meeting.
(2) An annual meeting of the Executive Committee shall be held
on the last Monday of March in each year (unless such date is a
holiday, in which event such meeting shall be held on the next
business day thereafter) or at such other time and place as the
Executive Committee may designate.
(3) Any action required or permitted to be taken at a meeting
of the Executive Committee may be taken (i) by means of a telephone
conference in which all Representatives participating in the meeting
and constituting a quorum can hear and speak to each other or (ii)
by means of unanimous written consent executed by all of the
Representatives. All action taken pursuant to the immediately
preceding sentence shall be deemed for all purposes to have been
taken at a meeting of the Executive Committee.
(4) The presence at a meeting of at least four (4) of the
Representatives shall constitute a quorum for the transaction of all
business of the Executive Committee. Any meeting of the Executive
Committee which is properly called and at which a quorum is present
may be adjourned to a date which is no later than twenty-one (21)
days from the date upon which the initial meeting was called.
12.03 Annual Operating Budgets. Attached hereto as Exhibit "B" is the
Operating Budget for the Amphitheater Fiscal Year ending on December 31, 1997.
On or before November 30 of each calendar year, commencing on November 30, 1997,
the Partnership's Accounting Staff shall prepare and provide to the
Representatives (i) a proposed Operating Budget for the forthcoming Amphitheater
Fiscal Year setting forth in reasonable detail the various categories of
Budgeted Operating Expenses and the amounts for each such category to be
incurred
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by the Partnership during the forthcoming Amphitheater Fiscal Year and (ii) such
information and materials related to the proposed Operating Budget as may be
requested by any of the Representatives so long as such information and
materials can be generated in the ordinary course of business. To be adopted, a
proposed Operating Budget must be approved by the Executive Committee; however,
if no Operating Budget is approved by the Executive Committee for any
Amphitheater Fiscal Year prior to the commencement of such Amphitheater Fiscal
Year, then the Operating Budget for such Amphitheater Fiscal Year shall be
deemed to be, until a different Operating Budget is approved by the Executive
Committee, the Operating Budget for the prior Amphitheater Fiscal Year with each
line item increased by the greater of (i) 5% or (ii) the percentage increase in
the CPI Index during the immediately preceding Amphitheater Fiscal Year.
12.04 Transactions with Partners and Affiliates of Partners. Each Partner
hereby agrees that, with respect to any and all contracts and agreements entered
into by and between the Partnership (on the one hand) and any Partner, the
constituent partner of any Partner or any Affiliate of a constituent partner of
any Partner (on the other hand), (i) the existence of such affiliation shall be
disclosed to the other Partner prior to such agreement or contract being made
and entered into, (ii) copies thereof shall be made available to such other
Partner upon its request along with any details and other information related
thereto and (iii) the execution of each such contract and agreement shall
require the prior written consent of the other Partner (which consent shall not
be unreasonably withheld or delayed).
12.05 Partnership Staffing. Subject to the provisions hereof relating to
the Partnership's Operating Budget and the approval of the Executive Committee,
the staffing needs of the Partnership shall be filled by having employees of the
Partners, the constituent partners of the Partners, and Affiliates of the
constituent partners of the Partners, loaned to the Partnership on a full or
part-time basis. Each such employee who is so loaned to the Partnership shall
have all or such appropriate portion of his or her salary and benefit costs
reimbursed by the Partnership to the actual employer of such employee. If the
Executive Committee is unable to reach agreement concerning the staffing needs
of the Partnership at any time, then (i) Pavilion's designated Representatives
shall have the right to select and appoint the employees who provide services in
respect of the operation, maintenance and use of the ▇▇▇▇ ▇▇▇▇▇ Amphitheater,
subject to the limitations of the Partnership's Operating Budget, and (ii) IMA's
designated Representatives shall have the right to select and appoint the
employees who provide services in respect of the operation, maintenance and use
of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, subject to the limitations of the
Partnership's Operating Budget.
12.06 Special Right to Enforce Rights under Amphitheater Contribution
Agreements. Notwithstanding anything to the contrary contained in this Article
XII, (A) Pavilion shall have the exclusive right, power and authority, for and
on behalf of the Partnership, to (i) enforce all of the Partnership's rights,
benefits and privileges created under, by or pursuant to the Amphitheater
Contribution Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, including, without
limitation, the right to make elections thereunder on behalf of the Partnership
and to enforce any remedies available to the Partnership thereunder and (ii)
conduct and direct the defense of any
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claims made by IMA against the Partnership for any alleged breach by the
Partnership of the provisions thereof and (B) IMA shall have the exclusive
right, power and authority, for and on behalf of the Partnership, to (i) enforce
all of the Partnership's rights, benefits and privileges created under, by or
pursuant to the Amphitheater Contribution Agreement for ▇▇▇▇ ▇▇▇▇▇ Amphitheater,
including, without limitation, the right to make elections thereunder on behalf
of the Partnership and to enforce any remedies available to the Partnership
thereunder and (ii) conduct and direct the defense of any claims made by
Pavilion against the Partnership for any alleged breach by the Partnership of
the provisions thereof.
12.07 Promotion Agreement. Notwithstanding anything to the contrary
contained in this Article XII:
(a) The Partnership shall delegate the booking and logistical
production of all Events to be presented at the Subject Amphitheaters to
the Promoter on, subject to and in accordance with the terms, provisions
and conditions contained in the Promotion Agreement.
(b) Either Partner (acting alone or together with the other Partner)
shall have the right, power and authority, for and on behalf of the
Partnership, to (i) enforce all of the Partnership's rights, benefits and
privileges created under, by or pursuant to the Promotion Agreement
including, without limitation, the right to make elections thereunder on
behalf of the Partnership and to enforce any remedies available to the
Partnership thereunder and (ii) conduct and direct the defense of any
claims made by the Promoter against the Partnership for any alleged breach
by the Partnership of the provisions thereof. Without limiting the
generality of the foregoing, it is specifically recognized, agreed and
acknowledged that either Partner (acting alone or together with the other
Partner) shall have the right and authority, for and on behalf of the
Partnership, to (A) exercise the right, if available, to terminate the
Promotion Agreement pursuant to the provisions of Section 4(b), (c) or (d)
thereof and (B) elect to exercise the right, if available, to send a
Probationary Notice (as defined in the Promotion Agreement) pursuant to
the provisions of Section 4(c) thereof.
(c) Notwithstanding the provisions of clause (b) of this Section
12.07, only the Executive Committee, acting unanimously, shall have the
right and authority, for and on behalf of the Partnership, to (i) accept
any offer made by the Promoter pursuant to the provisions of Section 5(a)
of the Promotion Agreement and (ii) exercise the right created pursuant to
the provisions of Section 6(a) of the Promotion Agreement to approve of
booking offers proposed to be made by the Promoter after a Probationary
Notice has been provided pursuant to the provisions of Section 4(c) of the
Promotion Agreement; provided, however, that all Promoter-Related
Representatives shall be excluded from voting on any matter brought before
the Executive Committee which is described in this Section 12.07(c).
13
(d) If the Promotion Agreement should be terminated at any time
during the Term, then the selection of a new "booking agent" for the
Partnership shall be made by Pavilion, subject to IMA's consent (which
consent shall not be unreasonably withheld or delayed).
(e) If (i) the Promotion Agreement should be terminated at any time
during the Term pursuant to the provisions of section 4(b), (c) or (d) of
the Promotion Agreement by the unilateral action of Pavilion without the
written approval of Azoff Inc. and (ii) as a result of such termination,
Geddes Inc. exercises the IMA Put Option, then the following provisions
shall thereafter apply and become effective:
(1) IMA shall (i) deliver, or cause to be delivered, to
Pavilion, within three business days following receipt, a copy of
the notice of the exercise of the IMA Put Option and (ii) obtain, or
cause to be obtained, the consent of Pavilion (such consent not to
be unreasonably withheld or delayed) as to decisions related to the
selection and designation of appraisers in connection with the IMA
Put Option.
(2) At any time within thirty (30) days following receipt by
Azoff Inc. of the "Accountant's Notice" of the "Purchase Price" (as
such terms are defined in Section 3.03 of the Partnership Agreement
of IMA), Azoff Inc. may provide written notice (the "No-Interest
Notice") to Pavilion that Azoff Inc. does not wish to purchase all
or its "Percentage Interest" (as determined under Section 3.03 of
the Partnership Agreement of IMA) of the interest of Geddes Inc. in
IMA pursuant to the IMA Put Option. A No-Interest Notice given by
Azoff Inc. to Pavilion pursuant to the foregoing provisions shall
not be considered to have been received by Pavilion for purposes
hereof until Pavilion has received a copy of the Accountant's Notice
of the Purchase Price.
(3) At any time within ten (10) days after ▇▇▇▇ Inc.'s receipt
of a No-Interest Notice from Azoff Inc., but in no event later than
forty (40) days after Azoff Inc.'s receipt of the Accountant's
Notice of the Purchase Price, ▇▇▇▇ Inc. may provide written notice
(also a "No-Interest Notice") to Pavilion that ▇▇▇▇ Inc. does not
wish to purchase the interest of Geddes Inc. in IMA pursuant to the
IMA Put Option.
(4) If Pavilion should receive (A) a No-Interest Notice from
Azoff Inc. within 30 days following receipt by Azoff Inc. of the
Accountant's Notice of the Purchase Price and (B) a No Interest
Notice from ▇▇▇▇ Inc. by the earlier of (i) 10 days after ▇▇▇▇
Inc.'s receipt of the No-Interest Notice from Azoff Inc. or (ii) 40
days following receipt by Azoff Inc. of the Accountant's Notice of
the Purchase Price, then Pavilion shall provide a written notice to
IMA that Pavilion has elected to do one of the following:
14
(A) purchase all of the interest of Geddes Inc. in IMA
in accordance with the terms and provisions of the IMA Put
Option; or
(B) terminate the Partnership effective as of the last
day of the Amphitheater Fiscal Year in which such notice is
provided.
If Pavilion fails to fulfill its obligation to provide such notice
to IMA within thirty (30) days after the later of (i) receipt of the
No-Interest Notice from Azoff Inc. or (ii) receipt of the
No-Interest Notice from ▇▇▇▇ Inc., then Pavilion shall be deemed to
have elected to terminate the Partnership pursuant to clause (B)
above.
If Azoff Inc. should, at any time hereafter, agree to amend, without the
express prior consent of Pavilion, any of the terms, provisions or
conditions contained in the IMA Put Option which relate to the methodology
of calculating the purchase price, the timing of the payment of the
purchase price, the deadlines for exercising the put option or any other
similar provision in a manner which makes such terms less favorable to
Pavilion, then the foregoing provisions of this Section 12.07(e) shall be
of no further force or effect.
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14-A
12.08 Marketing Agreement. Notwithstanding anything to the contrary
contained in this Article XII:
(a) The Partnership shall delegate the responsibility of marketing
and advertising all Events to be presented at the Subject Amphitheaters to
T.B.A. on, subject to and in accordance with the terms, provisions and
conditions contained in the T.B.A. Marketing Agreement.
(b) Either Partner (acting alone or together with the other Partner)
shall have the right, power and authority, for and on behalf of the
Partnership, to (i) enforce all of the Partnership's rights, benefits and
privileges created under, by or pursuant to the T.B.A. Marketing Agreement
including, without limitation, the right to make elections thereunder on
behalf of the Partnership and to enforce any remedies available to the
Partnership thereunder and (ii) conduct and direct the defense of any
claims made by T.B.A. against the Partnership for any alleged breach by
the Partnership of the provisions thereof. If the T.B.A. Marketing
Agreement should be terminated at any time during the Term, then the
selection of a new "marketing agent" for the Partnership shall be made by
the Executive Committee.
12.09 Sponsorship Services.
(a) Notwithstanding the other provisions contained in this Article
XII, it is hereby agreed that (i) Pavilion shall be primarily responsible
for overseeing and directing, for and on behalf of the Partnership, the
solicitation, procurement and obtaining of sponsors for each of the
Subject Amphitheaters, (ii) a mutually approved employee of Pavilion (or
an Affiliate of a partner of Pavilion) shall be loaned on a part-time or
full-time basis to the Partnership pursuant to Section 12.05 hereof, upon
terms consistent with the Operating Budget or otherwise approved by the
Executive Committee, to assist in the procurement and implementation of
sponsorship arrangements applicable to the ▇▇▇▇ ▇▇▇▇▇ Amphitheater and
(iii) a mutually approved employee of IMA, a constituent partner of IMA or
an Affiliate of a constituent partner of IMA will be loaned on a part-time
basis to the Partnership, upon terms approved by the Executive Committee,
to assist in the procurement and implementation of sponsorship
arrangements applicable to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater. Except for the
employee referenced in clause (ii) of the immediately preceding sentence,
Pavilion shall not be reimbursed for the cost of any other employees of
Pavilion providing the services referenced in clause (i) of the
immediately preceding sentence, it being agreed that the sole and
exclusive compensation to Pavilion for the fulfillment of such services
referenced in clause (i) of the immediately preceding sentence shall be
the fee set forth in Section 8.02 of this Agreement.
(b) Notwithstanding the provisions of clause (a) of this Section
12.09, no sponsorship arrangement may be accepted on behalf of the
Partnership except in accordance with the following provisions:
15
(1) If such sponsorship arrangement is for three or fewer
Events, then such sponsorship arrangement may be approved by the
general manager of the Subject Amphitheater to which such
sponsorship arrangement relates.
(2) For all other sponsorship arrangements not described in
clause (1), the Executive Committee must unanimously approve the
acceptance of such sponsorship arrangement before it is executed and
entered into for and on behalf of the Partnership.
(c) If Pavilion's performance of the services referenced in Section
12.09(a)(i) hereof during any Amphitheater Fiscal Year results in
sponsorship revenues at the Subject Amphitheaters during such Amphitheater
Fiscal Year which (i) are materially less than the amount of sponsorship
revenues generated at similar outdoor entertainment facilities or (ii)
fails to meet an objective standard hereafter adopted by the Executive
Committee, then IMA shall have the right, power and authority, for and on
behalf of the Partnership, to remove Pavilion as the party primarily
responsible for overseeing and directing the solicitation, procurement and
obtaining of sponsors for each of the Subject Amphitheaters in which case
a successor "sponsorship person" shall be selected for the Partnership by
the Executive Committee.
(d) Reference is made to the fact that certain existing sponsorship
arrangements applicable to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater which will be
contributed to the capital of the Partnership by IMA on the Closing Date
are burdened by certain commission obligations referenced in Exhibit "C"
attached hereto. The Partnership hereby acknowledges such commission
obligations and agrees to honor such commission obligations to the extent
identified on Exhibit "C" attached hereto, as and when the applicable
sponsorship revenues are received by the Partnership. The foregoing
provisions shall not apply to any renewals or replacements of the existing
contractual sponsorship arrangements identified on Exhibit "C" attached
hereto.
12.10 Legal Review of Form of Contracts. Pavilion's legal staff and IMA's
legal staff shall each have the right to review and provide input on the form of
contracts to be used for various types of standard arrangements in connection
with the operation, use, management and exploitation of the Subject
Amphitheaters.
12.11 Liability Insurance. Selection and purchase of the Partnership's
liability insurance covering the operations and activities at each of the
Subject Amphitheaters shall be an Executive Committee decision taking into
account the best interest of the Partnership's economic and financial
considerations. If the Executive Committee should so approve, the Partnership's
liability insurance may be separately placed at each of the Subject
Amphitheaters.
16
ARTICLE XIII
Other Activities
13.01 Restrictions on Concert Promotion. During the Term, neither Partner
shall Promote an Amphitheater Event in the Restricted Area, or permit any of
such Partner's Related Parties to Promote an Amphitheater Event in the
Restricted Area, unless and except such Partner ("Promoting Partner") has first
offered, or caused to be offered, to the Partnership an option and right to
co-Promote such Amphitheater Event on an equal economic basis with the Promoting
Partner or its Related Party, as applicable. Any offer which a Promoting Partner
is required to make, or cause to be made, pursuant to the provisions of the
immediately preceding sentence with respect to any Amphitheater Event to be
presented in the Restricted Area must (i) be made in writing to the other
Partner ("Non-Promoting Partner"), (ii) include such information concerning the
economic terms and conditions of such Amphitheater Event as the Non-Promoting
Partner may reasonably request and (iii) be open for acceptance for no less than
five (5) business days. The decision on behalf of the Partnership to accept or
reject any offer made pursuant to the foregoing provisions shall be made,
notwithstanding anything to the contrary contained herein, by the Non-Promoting
Partner. If the economic terms and conditions upon which an Amphitheater Event
in the Restricted Area is to be Promoted should change in any respect after the
Non-Promoting Partner has declined on behalf of the Partnership the offer made
by the Promoting Partner pursuant to the foregoing provisions but prior to the
"on-sale" date for such Amphitheater Event, then another offer ("New Offer")
describing the changed terms and conditions must be made, or caused to be made,
by the Promoting Partner to the Partnership in accordance with the foregoing
provisions; provided, however, if the change in economic terms and conditions is
not material, then the New Offer may, by its terms, be open for acceptance for
less than five (5) business days but no less than forty-eight (48) hours.
13.02 Restrictions on Sell-Offs. If, during the Term, either Partner
("Sell Off Partner"), or any of its Related Parties, proposes to sell the right
to Promote an Amphitheater Event to a third party ("Unrelated Promoter") for
presentation in the Restricted Area, then the following provisions shall apply:
(a) Completion of the sale of the right to Promote such Amphitheater
Event in the Restricted Area may not be completed earlier than five (5)
business days following delivery of a notice to the other Partner
("Non-Sell Off Partner") setting forth the specific terms of such proposed
sale to the Unrelated Promoter and such other reasonable information
related thereto as may be requested by the Non-Sell Off Partner.
(b) The Non-Sell Off Partner shall have the right and authority,
notwithstanding anything to the contrary contained herein, to require that
the Partnership make a competing offer to the Sell-Off Partner
("Partnership's Competing Offer") for the purchase from the Sell-Off
Partner of the right to Promote such Amphitheater Event at one of the
Subject Amphitheaters for an amount up to, but not in excess of, the
amount being offered by the Unrelated Promoter.
17
(c) If the Non-Sell Off Partner exercises the right to issue a
Partnership's Competing Offer pursuant to the provisions of clause (b)
that matches the economics of the offer made by the Unrelated Promoter,
then the Sell-Off Partner shall exercise its reasonable efforts to cause
the Partnership's Competing Offer to be accepted with the express
understanding that the final decision as to which offer will be accepted
may not belong to the Sell-Off Partner.
Section 13.03 No Other Restrictions. Except as expressly provided in
Sections 13.01 and 13.02 above, this Agreement shall not preclude or limit in
any respect the right of any Partner to engage or invest in any business
activity of any nature or description, including those which may be similar to
the business of the Partnership. Neither the Partnership nor any Partner shall
have any right by virtue of this Agreement or any relationships created hereby
in or to such other ventures or activities or to the income or proceeds derived
therefrom. Notwithstanding the foregoing provisions or anything else to the
contrary contained herein or implied hereby, (i) the restrictions, limitations
and prohibitions set forth in the Promotion Agreement shall not be affected,
limited, lessened or otherwise altered in any respect by the provisions of this
Article XIII and all such matters contained in the Promotion Agreement shall
apply independently of, and cumulatively with, the provisions hereof and (ii)
the provisions of this Article XIII shall not limit, restrict or affect the
right of ▇▇▇▇▇▇ ▇▇▇▇▇ to serve as an artist manager and to perform the functions
and services customarily performed by him in that capacity.
Section 13.04 Certain Defined Terms. As used in this Article XIII, the
following terms shall have the respective meanings indicated below:
(a) "Amphitheater Event" shall mean any Event which is part of a
tour in which seventy percent (70%) or more of the total number of dates
included in such tour are being played in outdoor entertainment facilities
with a seating capacity of more than 7500 and less than 30,000.
(b) "Restricted Area" shall mean the geographical area encompassed
by the counties of San Bernardino, California and Orange County,
California.
(c) "Related Parties" shall mean, with respect to either Partner,
the constituent partners of such Partner and the Affiliates of each
constituent partner of such Partner.
(d) "Promote" shall mean, respect to any Amphitheater Event, the
business activity of (i) acquiring from the artist appearing in such
Amphitheater Event (or his agent or other representative) the right to
present such Amphitheater Event at a specific venue on a specific date in
exchange for an appearance fee and (ii) taking the risk that gross
revenues from the presentation of such Amphitheater Event will exceed the
sum of the appearance fee and other costs of presenting such Amphitheater
Event.
17-A
ARTICLE XIV
Rights of Refusal
14.01 Subject Amphitheaters. Except as expressly permitted by the
provisions of this Section 14.01, neither Partner shall sell, transfer or convey
the Subject Amphitheater owned by it. If one Partner ("Selling Partner")
receives after December 31, 1999, but not before, a written offer from a third
party ("Proposed Purchaser") to purchase the Subject Amphitheater owned by the
Selling Partner which the Selling Partner desires to accept, then the Selling
Partner shall have the right, to sell all, but not less than all, of its
interest in its Subject Amphitheater if, but only if, the Selling Partner
complies with all of the following provisions:
(a) The Selling Partner shall provide prompt written notice to the
other Partner ("Non-Selling Partner") upon the commencement of negotiation
concerning any proposed sale of the Selling Partner's Subject Amphitheater
to the Proposed Purchaser.
(b) Upon request of the Non-Selling Partner at any time following
the notice given pursuant to clause (a), the Selling Partner shall provide
an oral report as to the status of the negotiations for the proposed sale
of the Selling Partner's Subject Amphitheater to the Proposed Purchaser.
(c) The Selling Partner shall provide to the Non-Selling Partner,
from time to time after receipt, copies of all written drafts, letters or
other documentation pertaining to such proposed sale of the Selling
Partner's Subject Amphitheater to the Proposed Purchaser.
(d) Within five (5) days following the execution of a binding letter
of intent or other binding agreement ("Purchase Agreement") pursuant to
which the Selling Partner agrees to sell its Subject Amphitheater to the
Proposed Purchaser, the performance of each party thereto being
conditioned expressly upon the provisions of this Section 14.01, the
Selling Partner shall provide a true, correct, complete and accurate copy
thereof to the Non-Selling Partner.
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17-B
(e) Following receipt of a Purchase Agreement, the Non-Selling
Partner shall have the right and option ("Purchase Option"), exercisable
in its sole discretion, to purchase the Selling Partner's Subject
Amphitheater upon the same terms, provisions and conditions contained in
such Purchase Agreement.
(f) The Purchase Option may be exercised by the Non-Selling Partner
at any time within fifteen (15) days after receipt of a Purchase Agreement
by providing written notice thereof to the Selling Partner. If the
Non-Selling Partner should exercise the Purchase Option in a timely
manner, then (A) the closing of the sale of the Selling Partner's Subject
Amphitheater to the Non-Selling Partner shall occur on or before the later
of (i) sixty (60) days following the exercise of the Purchase Option or
(ii) the outside date for closing the transaction contemplated by the
Purchase Agreement which was the subject of the Purchase Option and (B)
the Selling Partner shall, simultaneously with the closing of the sale of
the Subject Amphitheater to the Non-Selling Partner, sell, transfer,
assign and convey its interest in the Partnership to the Non-Selling
Partner for no additional consideration.
(g) If, at any time after delivery of a Purchase Agreement to the
Non-Selling Partner, whether before or after the deadline for the
Non-Selling Partner's decision to exercise the Purchase Option, any of the
terms or provisions contained in such Purchase Agreement should be amended
by agreement between the Selling Partner and the Proposed Purchaser in a
manner which is favorable to the Proposed Purchaser to any material
extent, then the Selling Partner shall provide prompt written notice of
such modification to the Non-Selling Partner, and the Purchase Option
shall be extended until the date which is fifteen (15) days after the
provision of such notice of such amendment.
(h) If the Non-Selling Partner does not exercise the Purchase Option
within fifteen (15) days after receipt of a Purchase Agreement (or, if
applicable, after receipt of notification pursuant to clause (g) of an
amendment to a Purchase Agreement which is favorable to the Proposed
Purchaser to any material extent), then the Selling Partner may thereafter
complete the proposed sale of its Subject Amphitheater to the Proposed
Purchaser upon the same terms, conditions and provisions contained in the
Purchase Agreement previously provided to the Non-Selling Partner in
accordance with the provisions thereof, provided that the following
provisions are complied with at the closing of the sale:
(1) The Proposed Purchaser must execute such reasonable
documentation as may be requested or required by the Non-Selling
Partner to indicate the Proposed Purchaser's agreement that it is
acquiring title to the Subject Amphitheater subject to and burdened
by the provisions of the Amphitheater Contribution Agreement for
such Subject Amphitheater through and until the end of the
Amphitheater Fiscal Year in which such sale occurs.
18
(2) The Selling Partner must pay to the Non-Selling Partner,
as a break-up fee, a lump sum amount equal to the Non-Selling
Partner's Percentage Interest of two times the Average Cash Flow
Amount for the most recently completed Amphitheater Fiscal Year;
provided, however, such break-up fee shall not be payable to the
Non-Selling Partner if the Proposed Purchaser simultaneously
acquires and purchases the Partnership Interest of the Selling
Partner and the Non-Selling Partner consents and agrees, in its sole
discretion, to the admission of the Proposed Purchaser as a
substitute general partner in the Partnership.
If any such sale of the Selling Partner's Subject Amphitheater is
completed to a Proposed Purchaser in accordance with the foregoing
provisions, then, unless the Non-Selling Partner consents and agrees (in
its sole discretion) to the admission of the Proposed Purchaser as a
substitute general partner in the Partnership, the Partnership shall be
dissolved effective as of the last day of the Amphitheater Fiscal Year in
which such sale occurs.
14.02 IMA Partnership Interests. By executing this Agreement on behalf of
IMA, each of the partners of IMA hereby agree, in their respective individual
capacities, that Pavilion shall have a subordinate right and option ("Secondary
Refusal Option") to purchase any partnership interest in IMA which any such
partner proposes to sell, transfer, convey or assign. The Secondary Refusal
Option shall be upon the same terms, conditions and provisions as the right and
option that each partner in IMA has to purchase the partnership interests of the
other partners in IMA ("First Refusal Option") but shall only apply to the
extent that any partnership interest proposed to be sold, transferred, conveyed
or assigned by a partner in IMA is not acquired by the other partners in IMA
pursuant to the First Refusal Option. Copies of all notices given pursuant to
the First Refusal Option shall be provided to Pavilion. If Pavilion wishes to
exercise the Secondary Refusal Option, then Pavilion must conditionally exercise
the Secondary Refusal Option within the time periods granted pursuant to the
First Refusal Option; however, any such exercise shall only be effective to the
extent that the partnership interest in IMA that is then subject to the
Secondary Refusal Option is not acquired by the other partners in IMA pursuant
to the First Refusal Option.
14.03 Specific Performance. It is expressly agreed that the remedy at law
for breach of the obligations created in this Article XIV is inadequate in view
of (i) the complexities and uncertainties in measuring the actual damages that
would be sustained by reason of such breach and (ii) the uniqueness of the
Partnership business, the Partnership relationship and the Subject
Amphitheaters. Accordingly, it is agreed that the obligations created by this
Article XIV shall be enforceable by an equitable order of specific performance.
19
ARTICLE XV
Defaults and Remedies
15.01 Default by Partner. If any Partner ("Defaulting Partner") fails to
timely perform any of its obligations contained in this Agreement, or materially
violates the terms of this Agreement, then the other Partner ("Non-Defaulting
Partner") shall have the right to give the Defaulting Partner a notice ("Default
Notice") specifically setting forth the nature of such failure or violation and
stating that the Defaulting Partner shall have a period of ten (10) days to pay
any sums of money specified therein as due and owing to the Partnership or to
any Partner or, if the failure or violation is a non-monetary default and is
capable of being cured, thirty (30) days to cure such default specified therein.
If the monies specified in the Default Notice are not paid within such ten (10)
day period, or if such non-monetary failures or violations are not capable of
being cured or, if capable of being cured, such Defaulting Partner has not cured
such non-monetary failures or violations within such thirty (30) day period,
then a "Partner Default" shall be deemed to have occurred with respect to such
Defaulting Partner. If a Defaulting Partner cures in all material respects all
of its failures or violations which are capable of being cured within the
aforesaid notice and cure periods, then such defaults shall be deemed no longer
to exist and such Partner shall be deemed no longer to constitute a Defaulting
Partner.
15.02 Rights and Remedies. Upon the occurrence of a Partner Default, the
Non-Defaulting Partner and the Partnership shall each have the following rights,
options and remedies which shall be cumulative and may be exercised concurrently
or independently in the sole and absolute discretion of the Non-Defaulting
Partner:
(a) The right to bring an action at law by or on behalf of the
Partnership or the Non-Defaulting Partner in order to recover the amounts
owed, if any, and any damages arising from such default (including,
without limitation, reasonable attorneys' fees and disbursements incurred
or paid by the Partnership or the Non-Defaulting Partner, as the case may
be, in prosecuting any such action).
(b) The right to bring any proceeding in the nature of injunction,
specific performance or other equitable remedy, it being acknowledged by
each of the Partners that damages at law may be an inadequate remedy for
such default.
(c) If a sum of money is owed to the Partnership, the Non-Defaulting
Partner may advance the sum of money owed to the Partnership by the
Defaulting Partner with the following results:
(i) The sum thus advanced shall be deemed to be a loan from
the Non-Defaulting Partner to the Defaulting Partner;
20
(ii) The principal balance of such deemed loan shall be due
and payable in whole upon written demand from the Non-Defaulting
Partner to the Defaulting Partner;
(iii) The principal balance of such deemed loan shall bear
interest at the Permitted Rate compounded monthly; and
(iv) All distributions from the Partnership that would
otherwise be made to the Defaulting Partner (whether before or after
dissolution of the Partnership) shall, instead, be paid to the
Non-Defaulting Partner until such loan and all interest accrued
thereon has been repaid in full.
(d) If a sum of money is owed by the Defaulting Partner to the
Non-Defaulting Partner pursuant to the provisions of this Agreement, then
the Non-Defaulting Partner may require that all distributions that would
otherwise be made to the Defaulting Partner (whether before or after
dissolution of the Partnership) shall, instead, be paid to the
Non-Defaulting Partner until all such amounts owed have been repaid in
full.
(e) For purposes of voting or giving any consents or approvals under
any provisions of this Agreement, the right to deny the Defaulting Partner
any of its voting, consent or approval rights under this Agreement.
ARTICLE XVI
Voluntary Withdrawal
No Partner shall have the right to, and each Partner agrees that it will
not, withdraw voluntarily from the Partnership. In the event any Partner
withdraws from the Partnership in contravention of this Agreement, such
withdrawing Partner shall remain liable for its Percentage Interest of the
Partnership liabilities in existence at the time of its withdrawal and shall, in
addition, be liable for all damages attributable to its breach of this
Agreement. The withdrawal of a Partner in contravention of this Article XVI
shall not cause the Partnership to be dissolved, and such withdrawing Partner
shall be deemed to be an assignee of a Partner's Partnership Interest and shall
have only the rights provided a Partner's assignee under the provisions of the
Partnership Act.
21
ARTICLE XVII
Dissolution and Termination
17.01 Dissolution. The Partnership shall be dissolved upon the occurrence
of any of the following:
(a) the unanimous agreement of the Partners;
(b) expiration of the Term;
(c) a valid termination of the Partnership's exclusive license for
the use, possession and enjoyment of either of the Subject Amphitheaters
created pursuant to the Amphitheater Contribution Agreement for such
Subject Amphitheater;
(d) the election of either Partner by providing a notice of
dissolution to the other Partner within 60 days following the completion
of any Amphitheater Fiscal Year for which one of the following conditions
exist:
(1) the Partnership's Cash Flow for such Amphitheater Fiscal
Year is less than $0.00; or
(2) the Promotion Agreement was terminated at least three
years prior to the end of such Amphitheater Fiscal Year and the
Average Cash Flow Amount for such Amphitheater Fiscal Year is less
than the Cash Flow Target Amount for such Amphitheater Fiscal Year;
(e) the election of Pavilion by providing a notice of dissolution to
IMA within 60 days following the completion of any Amphitheater Fiscal
Year for which one of the following conditions exist:
(1) the paid attendance at the Events presented at ▇▇▇▇ ▇▇▇▇▇
Amphitheater during such Amphitheater Fiscal Year is less than 35%
of the total paid attendance at all of the Events presented at both
of the Subject Amphitheaters during such Amphitheater Fiscal Year;
or
(2) the total paid attendance at all of the Events presented
at ▇▇▇▇ ▇▇▇▇▇ Amphitheater during such Amphitheater Fiscal Year and
each of the 2 immediately preceding Amphitheater Fiscal Years is
less than 38% of the total paid attendance at all of the Events
presented at both of the Subject Amphitheaters during such
Amphitheater Fiscal Year and each of the 2 immediately preceding
Amphitheater Fiscal Years;
22
(f) the election of IMA by providing a notice of dissolution to
Pavilion within sixty (60) days following the completion of any
Amphitheater Fiscal Year for which both of the following conditions exist:
(1) the Promotion Agreement was terminated prior to the
commencement of such Amphitheater Fiscal Year; and
(2) the paid attendance at the Events presented at ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Amphitheater during such Amphitheater Fiscal Year is less
than 42.5% of the total paid attendance at all of the Events
presented at both of the Subject Amphitheaters during such
Amphitheater Fiscal Year;
(g) the election of Pavilion by providing a notice of dissolution to
IMA at any time following the occurrence of a Use Termination Event with
respect to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater;
(h) the election of IMA by providing a notice of dissolution to
Pavilion at any time following the occurrence of an Use Termination Event
with respect to the ▇▇▇▇ ▇▇▇▇▇ Amphitheater;
(i) the last day of any Amphitheater Fiscal Year during which one of
the Subject Amphitheaters is sold to a third party purchaser in accordance
with, and as permitted by, the provisions of Section 14.01 hereof unless
the Non-Selling Partner consents and agrees, in its sole discretion, to
the admission of the Proposed Purchaser as a substitute general partner in
the Partnership;
(j) the election or deemed election of Pavilion to terminate the
Partnership pursuant to the provisions of Section l2.07(e)(2) hereof
following receipt of a No-Interest Notice given by Azoff Inc. pursuant to
Section 12.07(e)(1) hereof; and
(k) any event or circumstance which requires a dissolution of the
Partnership pursuant to the provisions of the Partnership Act.
The dissolution shall be effective on the day on which the event occurs causing
dissolution ("Effective Date of Dissolution"), but the Partnership shall not
terminate until the assets have been distributed in accordance with the
provisions of this Agreement.
17.02 Distributions Upon Dissolution. On dissolution of the Partnership,
the Partners shall proceed diligently to wind up the affairs of the Partnership
and distribute its assets as soon as reasonably practicable without causing any
interference with the operation of the Subject Amphitheaters. The assets of the
Partnership are to be distributed in kind, unless expressly approved otherwise
by the Executive Committee. The Partnership's assets shall be applied or
distributed (after all adjustments to the Capital Accounts of the Partners which
are required (i)
23
following any sale of Partnership property or (ii) by the Treasury Regulations
upon a distribution of an item of Partnership property in kind) in the following
order of priority:
(a) In payment of all liabilities of the Partnership to creditors
other than Partners. If any liability is contingent or uncertain in
amount, a reserve equal to the maximum amount for which the Partnership
could be reasonably held liable shall be established. Upon the
satisfaction or other discharge of that contingency, the amount of the
reserve not required, if any, will be treated as income to the extent
previously treated as a deduction.
(b) In payment of any loans owed by the Partnership to any Partner.
(c) (i) A cash sum equal to the amount of Post-Dissolution Receipts
for ▇▇▇▇ ▇▇▇▇▇ Amphitheater received prior to the making of this
distribution and all of the then existing Operating Assets of ▇▇▇▇ ▇▇▇▇▇
Amphitheater shall be distributed to Pavilion (subject to the ordinary
course payables, obligations and liabilities related to, or associated
with, the use, operation or maintenance of ▇▇▇▇ ▇▇▇▇▇ Amphitheater, to the
extent not then past due) and (ii) a cash sum equal to the amount of
Post-Dissolution Receipts for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater received prior,
to the making of this distribution and all of the then existing Operating
Assets of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater shall be distributed to IMA (subject
to the ordinary course payables, obligations and liabilities related to,
or associated with, the use, operation or maintenance of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Amphitheater, to the extent not then past due).
(d) To the Partners in proportion to and to the extent of the
balance in their respective Capital Accounts (after adjustments to the
Capital Account balances for the distributions made pursuant to clause (c)
of this Section 17.02).
(e) To the Partners in proportion to their respective Percentage
Interests.
17.03 Capital Account Make-Up. If a Partner's Capital Account has a
deficit balance following completion of the liquidating distribution required to
be made by the provisions of Section 17.02(c) hereof (after taking into account
all Capital Account adjustments for the taxable year of the Partnership in which
liquidation occurs), the Partner shall, immediately following the receipt of
such distribution, contribute to the Partnership a cash sum in an amount
necessary to increase the balance in its Capital Account to zero. Any amount so
contributed shall be distributed as provided in Section 17.02(d) hereof or, if
applicable, Section 17.02(e) hereof.
ARTICLE XVIII
Transfer Restrictions
24
Neither Partner shall have the right to sell, assign, convey, transfer,
pledge or hypothecate, by operation of law or otherwise, all or any portion of
its Partnership Interest without the prior consent of the other Partner, it
being agreed and acknowledged that such consent may be withheld in such other
Partner's sole discretion for any reason whatsoever. Any purported sale,
assignment, conveyance, transfer, pledge or hypothecation of any Partner's
Partnership Interest in violation of the provisions of this Article XVIII shall
be voidable at the option of the other Partner. Notwithstanding the foregoing,
either Partner may pledge its Partnership Interest as security for borrowed
money.
ARTICLE XIX
Dispute Resolution
19.01 Generally. In the event of (i) any dispute between the Partners or
assignees of the Partners or the Partnership or (ii) any Major Operational
Deadlock (any such dispute or Major Operational Deadlock being herein
collectively called a "Dispute"), which cannot be otherwise informally resolved
by the Partners, the Partners will utilize the procedures specified in this
Article XIX (the "Procedure") to resolve the Dispute. The Partner seeking to
initiate the Procedure (the "Initiating Party") shall give written notice to the
other Partner and the Partnership, describing in general terms the nature of the
Dispute, the Initiating Party's claim for relief and identifying one or more
individuals with authority to settle the Dispute on such Partner's behalf. The
Partner receiving such notice (the "Responding Party") shall have ten (10)
business days within which to designate by written notice to the Initiating
Party, one or more individuals with authority to settle the Dispute on such
Party's behalf. The individuals so designated shall be known as the "Authorized
Individuals."
19.02 Negotiations. The Authorized Individuals shall be entitled to make
such investigation of the Dispute as they deem appropriate, but agree to
promptly, and in no event later than thirty (30) days from the date of the
Initiating Party's written notice, meet to discuss resolution of the Dispute.
The Authorized Individuals shall meet at such times and places and with such
frequency as they may agree. The Partners agree to participate in good faith in
the direct negotiations to resolve the Dispute. If the Dispute has not been
resolved within thirty (30) days from the date of their initial meeting, the
Partners shall cease direct negotiations and shall submit the Dispute to
arbitration in accordance with the following procedure.
19.03 Arbitration. All Disputes will be settled by arbitration by an
arbitrator mutually acceptable to the Partners in an arbitration proceeding
conducted in (i) Houston, Texas (if IMA is the Initiating Party) or (ii) in Los
Angeles, California (if Pavilion is the Initiating Party), in accordance with
the rules as then in effect of the American Arbitration Association. If the
Partners hereto cannot agree on an arbitrator within ten (10) business days of
the initiation of the arbitration proceeding, an arbitrator with experience in
the live entertainment industry shall be selected for the Partners by the
American Arbitration Association. The decision of such arbitrator shall be final
(except that errors of law shall be subject to appeal), and judgment upon the
award rendered by the arbitration may be entered in any court having
jurisdiction thereof. The costs
25
(including, without limitation, reasonable fees and expenses of counsel and
experts for the Partners) of such arbitration (including the costs to enforce or
preserve the rights awarded in the arbitration) shall be borne by the Partners
in the amounts and proportions specified by the arbitrator in his final
decision.
19.05 Press Releases. All press releases which are issued by the
Partnership or any Partner (or any constituent partner of a Partner or any
Affiliate of a Partner or a constituent partner of a Partner) concerning the
subject matter of this Agreement shall first be approved by the Executive
Committee before the release thereof.
ARTICLE XX
Miscellaneous Provisions
20.01 Notices. All notices, offers, approvals, elections, consents,
acceptances, waivers, reports, requests and other communications required or
permitted to be given hereunder (all of the foregoing hereinafter collectively
referred to as "Communications") shall be in writing and shall be deemed to have
been duly given if delivered personally with receipt acknowledged or sent by
registered or certified mail or equivalent, if available, return receipt
requested, or by facsimile, telex or cablegram (which shall be confirmed by a
writing sent by registered or certified mail or equivalent on the same day that
such facsimile, telex or cablegram is sent), or by recognized overnight courier
for next day delivery, addressed or sent to the parties at the following
addresses and facsimile numbers or to such other additional address or facsimile
number as any party shall hereafter specify by Communication to the other
parties:
Pavilion: c/o SM/PACE, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with copies to: c/o SM/PACE, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and
Sony Music Entertainment Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Esq.
and
26
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
IMA: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copies to: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
20.02 California Law to Apply. This Agreement shall be construed under and
in accordance with laws of the State of California without giving any effect to
the choice of law principles in the State of California.
20.03 Other Instruments. The parties hereto covenant and agree that they
will execute such other and further instruments and documents as are or may
become necessary or convenient to effectuate and carry out the Partnership
created by this Agreement.
20.04 Amendment. This Agreement may be amended or modified by the Partners
from time to time but only upon approval by all of the Partners contained in a
written instrument.
20.05 Headings. The headings used in this Agreement are used for
administrative purposes only and do not constitute substantive matter to be
considered in construing the terms of this Agreement.
27
20.06 Parties Bound. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Agreement.
20.07 Legal Construction. In case any one or more of the provisions
contained in this Partnership Agreement shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision hereof and this
Partnership Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
20.08 Counterparts. This Partnership Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original.
20.09 Gender. Wherever the context shall so require, all words herein in
the male gender shall be deemed to include the female or neuter gender, all
singular words shall include the plural, and all plural words shall include the
singular.
20.10 Prior Agreements Superseded. This Agreement supersedes any prior
understandings or written or oral agreements between the parties respecting the
within subject matter.
20.11 Attorneys Fees. The prevailing party in any dispute, litigation or
other proceeding between the parties hereto involving the subject matter of this
Agreement shall be entitled to be reimbursed by the other party for all of its
reasonable attorneys' fees incurred in connection with the pursuit of such
dispute, litigation or other proceeding.
ARTICLE XXI
Use Impairments and Use Termination Events
21.01 Use Impairments. If a Use Impairment occurs at either of the Subject
Amphitheaters, then the following provisions shall apply:
(a) The Underlying Owner of such Subject Amphitheater (and not the
Partnership) shall be entitled to receive and retain any property
insurance proceeds or condemnation award payable on account of the
occurrence of such Use Impairment.
(b) The Partnership (and not the Underlying Owner of such Subject
Amphitheater) shall be entitled to receive and retain any business
interruption insurance proceeds payable on account of the occurrence of
such Use Impairment.
(c) The Underlying Owner of such Subject Amphitheater shall have the
option of either (i) agreeing to correct, cure or repair the event,
circumstance or condition giving
28
rise to such Use Impairment ("Cure Option") or (ii) refusing to correct,
cure or repair the condition giving rise to such Use Impairment ("Non-Cure
Option"). If the Underlying Owner of such Subject Amphitheater has not
exercised the option referred to in the immediately preceding sentence by
providing notice thereof to the other Partner within sixty (60) days
following written notice from the other Partner that such Use Impairment
is in existence, then the Underlying Owner of such Subject Amphitheater
shall be deemed to have exercised the Non-Cure Option for all purposes
hereof. If the Underlying Owner of such Subject Amphitheater elects the
Cure Option, then such Underlying Owner shall be obligated pursuant to
this Agreement to (x) thereafter diligently pursue the correction, cure
and repair of the event, circumstance or condition giving rise to such Use
Impairment and (y) in any event to complete such correction, cure and
repair within one (1) year following the electing of the Cure Option.
(d) If the Underlying Owner of such Subject Amphitheater elects, or
is deemed to elect, the Non-Cure Option following the occurrence of a Use
Impairment, then a "Use Termination Event" shall be deemed to have
occurred with respect to such Subject Amphitheater.
21.02 Continuing Covenants Following Termination of Partnership as a
Result of a Use Termination Event. If the Partnership should be dissolved
pursuant to the provisions of clauses (g) or (h) of Section 17.01 hereof
following the occurrence of a Use Termination Event with respect to a Subject
Amphitheater, then the Underlying Owner of such Subject Amphitheater shall not
place such Subject Amphitheater back into operation as a venue for the
performance of live entertainment events at any time during the next 10 years
without first offering to the other Partner the right and option of re-forming
the Partnership upon the terms and conditions contained in this Agreement. The
right and option referenced in the immediately preceding sentence shall be
available for exercise for a period of sixty (60) days after receipt of written
notice of the offering of such right and option. The covenants and agreements
contained in this Section 21.02 shall survive the dissolution and termination of
the Partnership.
EXECUTED as of the day and year first written above.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, a California partnership
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Investment Corp., a
California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
29
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc., a California
corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
By: ▇▇▇▇▇▇ & ▇▇▇▇, Inc., a California
corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
By: Peach Street Partners, L.P., a California
limited partnership
By: Imua, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
"IMA"
PAVILION PARTNERS, a
Delaware general partnership
By: SM/PACE, Inc., a Texas corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: VP
"PAVILION"
30
Exhibit "A"
GLOSSARY OF TERMS
Affiliate: With respect to any Person, any other Person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Person specified. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and under "common control with") when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
Amphitheater Contribution Agreement: With respect to either of the Subject
Amphitheaters, the Amphitheater Contribution and License Agreement executed and
entered of even date herewith by and between the Partner who owns title to such
Subject Amphitheater and the Partnership.
Amphitheater Fiscal Year: Each twelve month period commencing on January 1
of a calendar year and ending on December 31 of such calendar year.
Available Cash: After repayment of all outstanding Deficit Loans, cash
held by the Partnership on each December 31st during the Term which, in the
judgment of the Executive Committee, is not required for a reasonable working
capital reserve for the obligations or business needs of the Partnership through
the next revenue generating period.
Avalon: New Avalon, Inc., a California corporation and an Affiliate of one
of the partners of IMA.
Average Cash Flow Amount: (i) With respect to the Amphitheater Fiscal Year
ending on December 31, 1999, the average of the Partnership's Cash Flow for the
Amphitheater Fiscal Years ending on December 31, 1998 and 1999 and (ii) with
respect to the Amphitheater Fiscal Year ending on December 31, 2000 and each
Amphitheater Fiscal Year thereafter, the average of the Partnership's Cash Flow
for such Amphitheater Fiscal Year and the two immediately preceding Amphitheater
Fiscal Years.
Azoff Inc.: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc., a California corporation wholly-owned by
▇▇▇▇▇▇ ▇▇▇▇▇ and one of the constituent partners of IMA.
Budgeted Operating Expenses: The overhead and operating expenses of the
Partnership which relate to the day-to-day operation and maintenance of the
Subject Amphitheaters such as salaries for employees and staff for the Subject
Amphitheaters, utility costs for the Subject Amphitheaters, insurance costs
relating to the maintenance of casualty and liability insurance for the Subject
Amphitheaters, costs relating to maintenance, repair and upkeep of the Subject
Amphitheaters and the personal property and equipment used in connection with
the operation
1
of the Subject Amphitheaters and costs for the purchase of office supplies and
equipment. Notwithstanding anything to the contrary implied by the immediately
preceding sentence, Show Expenses shall not be "Budgeted Operating Expenses" for
purposes of this Agreement.
Capital Account: The tax capital account maintained by the Partnership for
each Partner in accordance with, and as required by, the provisions of Section
7.03 of this Agreement.
Cash Flow: For any Amphitheater Fiscal Year, the amount (if any) by which
(A) the sum of (i) the cash receipts received by the Partnership which are
properly attributable to the use, operation and exploitation of the Subject
Amphitheaters during such Amphitheater Fiscal Year and (ii) the net profit (or
net loss) of the Partnership attributable to the co-promotion of Events during
such Amphitheater Fiscal Year which were offered to it by the Promoter pursuant
to Section 5(a)(ii) of the Promotion Agreement exceeds (B) the cash expenditures
paid or payable by the Partnership which are properly attributable to the
operation, use, maintenance and exploitation of the Subject Amphitheaters during
such Amphitheater Fiscal Year (excluding Rental Loans made to the Partners
pursuant to the provisions of Section 9.01 hereof and expenditures attributable
to capital asset additions or improvements).
Cash Flow Target Amount: With respect to the Amphitheater Fiscal Year
ending oh December 31, 1999, a monetary amount equal to $2,000,000. For each
subsequent Amphitheater Fiscal Year, the Cash Flow Target Amount shall be equal
to the Cash Flow Target Amount for the immediately preceding Amphitheater Fiscal
Year increased in the same percentage amount by which the CPI Index increased
during the twelve (12) calendar months since the beginning of the immediately
preceding Amphitheater Fiscal Year.
Closing Date: The date upon which the capital contributions required to be
made pursuant to the terms of the Amphitheater Contribution Agreements are made.
In accordance with the terms of the Amphitheater Contribution Agreements, the
Closing Date shall be March 3, 1997.
Code: The Internal Revenue Code of 1986, as amended.
CPI Index: Consumer Price Index for All Urban Consumers (all U.S. cities),
1982 - 84 equals 100 Base, published monthly by the U.S. Department of Labor's
Bureau of Labor Statistics, or any successor publication.
Default Notice: Shall have the meaning assigned to it pursuant to Section
15.01 hereof.
Defaulting Partner: Shall have the meaning assigned to it pursuant to
Section 15.01 hereof.
Deficit Loan: A loan extended by a Partner to the Partnership pursuant to
the provisions of Article VI hereof.
Exhibit "A"
Page 2 of 7
Effective Date of Dissolution: Shall have the meaning assigned to it
pursuant to Section 17.01 hereof.
Event: Any live public performance or concert featuring professional
musicians, performers or artists, including "free" performances or concerts for
which no patron or spectator is required to pay an admission price.
Executive Committee: The committee of individuals selected, from time to
time, by the Partners pursuant to the provisions of Section 12.02(c) of this
Agreement, to whom the responsibility of managing and controlling the operations
of the Partnership is delegated.
Geddes Inc.: ▇▇▇▇▇▇ & ▇▇▇▇, Inc., a California corporation wholly-owned by
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and one of the constituent partners of IMA.
▇▇▇▇ ▇▇▇▇▇ Amphitheater: ▇▇▇▇ ▇▇▇▇▇ Blockbuster Pavilion, an outdoor
entertainment facility located in San Bernardino, California.
Gross Asset Value: Subject to the adjustments described in the next
succeeding sentence, the fair market value of each item of Partnership property
at the time of contribution to the capital of the partnership. The Gross Asset
Value of each item of Partnership property shall be adjusted by depreciation,
amortization or other cost recovery deductions determined pursuant to Section
7.03(c)(ii) of this Agreement.
IMA: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, a California general partnership.
IMA Put Option: The currently existing provisions contained in Section
3.03 of the Partnership Agreement of IMA whereby Geddes Inc. is given the right
to require Azoff Inc. or ▇▇▇▇ Inc. to purchase the partnership interest of
Geddes Inc. in IMA upon the occurrence of certain events specified therein, a
true, correct and complete copy of such provisions being attached to this
Agreement as Exhibit "D".
Initial Contribution Amount: Shall have the meaning assigned to it
pursuant to Section 5.01(b) hereof.
Initial Promoter: Azoff Inc. and Geddes Inc., jointly and severally.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, an outdoor
entertainment facility located in Orange County, California.
▇▇▇▇ Inc.: IMA Investment Corp., a California corporation wholly-owned by
▇▇▇▇▇▇ ▇. ▇▇▇▇ and one of the constituent partners of IMA.
Major Operational Deadlock: The circumstance of the Executive Committee or
the Partners being unable to reach agreement with respect to an operational
decision (i) which must be made in order to permit the Subject Amphitheaters to
be used and operated consistent with their intended purpose and (ii) for which
another procedure of resolution is not provided for
Exhibit "A"
Page 3 of 7
elsewhere in this Agreement. An example of a "Major Operational Deadlock" would
be failure of the Partners to reach agreement pursuant to Section 12.07(d)
hereof on the selection of a "booking agent" to be engaged by the Partnership
following a termination of the Promotion Agreement.
Net Sponsorship Revenue: With respect to any Amphitheater Fiscal Year, the
excess of (A) all of the sponsorship revenues properly attributable to the
operation of the subject Amphitheaters during such Amphitheater Fiscal Year over
(B) all of the expenses, costs and other charges (i) incurred in connection with
the solicitation, acquisition or implementation of any sponsorship arrangement
at the Subject Amphitheaters (including the costs of any benefits conferred upon
or granted to sponsors and the costs of the Partnership for the employees
referenced in Section 12.09(a)(ii) and (iii) hereof) and (ii) properly
attributable to the operation of the Subject Amphitheaters during such
Amphitheater Fiscal Year.
Non-Defaulting Partner: Shall have the meaning assigned to it pursuant to
Section 15.01 hereof.
Operating Assets: With respect to either of the Subject Amphitheaters, as
of any time, all concession contracts, sponsorship agreements, service
contracts, maintenance agreements, utility agreements, accounts receivable,
trademarks, trade names, customer lists, price lists, vehicles, sound equipment,
copy machines, phone equipment, computers, facsimile machines, office supplies,
furniture, fixtures, equipment and other intangible assets or personal property
then owned by, or leased or licensed to, the Partnership and used in connection
with, or having been acquired on account of, the use, operation, maintenance or
management of such Subject Amphitheater.
Operating Budget: The budget of Budgeted Operating Expenses of the
Partnership to be prepared for each Amphitheater Fiscal Year in accordance with
and pursuant to the provisions of Section 12.03 hereof.
Operational Shortfall: The occurrence or happening, at any time, of the
circumstance of the Partnership having an insufficient amount of cash to pay or
cover any of its debts, liabilities or obligations as they become due.
Partners: Pavilion and IMA. The term "Partners" shall not include any
assignee of a Partner's Partnership Interest, unless the other Partner agrees to
admit such assignee to the Partnership.
Partnership: The Partnership created by this Agreement.
Partnership Act: The Uniform Partnership Act as set forth in Title 2,
Chapter 1 of the California Corporations Code.
Exhibit "A"
Page 4 of 7
Partnership Interest: All of the interest of any Partner in the
Partnership, including his (i) right to a distributive share of the profits and
losses of the Partnership, (ii) right to a distributive share of the assets of
the Partnership, and (iii) right to participate in the management of the affairs
of the Partnership.
Partnership Purposes: The purposes for which the Partnership is formed as
set forth in Article III of this Agreement.
Partnership's Accounting Staff: Shall have the meaning assigned thereto
pursuant to the provisions of Section 11.02(b) hereof.
Pavilion: Pavilion Partners, a Delaware general partnership.
Percentage Interest: The respective Partnership Interest of each Partner
in the Partnership expressed as a percentage of the Partnership Interests owned
by all Partners. The Percentage Interest of Pavilion is fifty percent (50%) and
the Percentage Interest of IMA is fifty (50%).
Permitted Rate: The lesser of (a) two percent (2%) per annum over the
Prime Rate or (b) the maximum non-usurious interest rate permitted by applicable
law from time to time in effect.
Person: Any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof, or any other form of entity.
Post-1996 Receipts: Revenues which are properly attributable to the
operation, use or exploitation of either of the Subject Amphitheaters after the
Closing Date, whether received before or after the Closing Date.
Post-Dissolution Receipts: Revenues which are properly attributable to the
operation, use or exploitation of either of the Subject Amphitheaters after the
Effective Date of Dissolution, whether received before or after the Effective
Date of Dissolution.
Prime Rate: The prime rate of interest per annum announced, from time to
time, by major U.S. money center banks as published daily in the "Money Rates"
column of The Wall Street Journal; provided, however, that if The Wall Street
Journal should ever cease, for any reason, to publish such rate on a daily
basis, then the Prime Rate shall be the rate of interest designated, and in
effect from time to time, by Citibank, N.A., in New York, New York as its prime
rate or base rate charged on commercial loans.
Promoter: As of any time, the person or entity then responsible for
performing the booking and promotion services under the Promotion Agreement. As
of the date hereof, the Promoter is Avalon.
Exhibit "A"
Page 5 of 7
Promoter-Related Representative: Any Representative on the Executive
Committee who is either (i) selected and designated as a Representative by an
officer, director, constituent partner or shareholder of the Promoter or by an
Affiliate of an officer, director, constituent partner or shareholder of the
Promoter or (ii) an officer, director, constituent partner or shareholder of the
Promoter.
Promotion Agreement: That certain Promotion Agreement being executed of
even date herewith by and between the Partnership and the Initial Promoter
whereby the Partnership has engaged and retained the services of the Initial
Promoter to provide booking and promotion services in respect of all Events to
be presented at the Subject Amphitheaters. Upon execution of the Promotion
Agreement, the Initial Promoter is subcontracting and delegating its
responsibilities thereunder to Avalon.
Representatives: The individuals who serve on the Executive Committee.
Show Expenses: Costs attributable to the production, promotion or
presentation of Events at the Subject Amphitheaters including, without
limitation, (i) fees payable to the performers appearing at such Event, (ii)
advertising costs directly associated with the promotion of such Event, (iii)
marginal costs of staffing which are directly attributable to such Event for
ushers, ticket takers, security personnel, parking attendants and similar
temporary employees and (iv) marginal costs for utilities and insurance which
are directly attributable to such Event.
Subject Amphitheaters: ▇▇▇▇ ▇▇▇▇▇ Amphitheater and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Amphitheater.
T.B.A.: T.B.A. Media, Inc., a corporation and an Affiliate of one of the
partners of IMA.
T.B.A. Marketing Agreement: That certain Marketing Agreement to be
hereafter executed and entered into by and between the Partnership and T.B.A.
whereby the Partnership shall engage and retain the services of T.B.A. to
provide marketing and advertising services with respect to all Events to be
presented at the Subject Amphitheaters upon terms and provisions to be hereafter
approved and adopted by the Executive Committee.
Term: The term of the Partnership as specified in Article IV hereof.
Treasury Regulations: The Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
Underlying Owner: With respect to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, IMA and
with respect to ▇▇▇▇ ▇▇▇▇▇ Amphitheater, Pavilion Partners.
Use Impairment: With respect to either of the Subject Amphitheaters, the
occurrence of any event, circumstance or condition which results in the
Partnership suffering a material
Exhibit "A"
Page 6 of 7
impairment (or termination) of its right or ability to book, produce, present
and promote Events at such Subject Amphitheater consistent with past practices
and with a maximum capacity of at least 90% of current maximum capacities. The
following are examples (which are intended to be illustrative and not exclusive)
of events or circumstances which would constitute a "Use Impairment" with
respect to one of the Subject Amphitheaters for purposes of this Agreement:
(a) Loss by the Underlying Owner of such Subject Amphitheater of its
possessory right to such Subject Amphitheater as a result of a failure of
title, a default under the applicable Lease Agreement or any other reason.
(b) A determination that such Subject Amphitheater is an unsafe
locale for the presentation of public events because of the presence of
toxic or hazardous waste on the site at which such Subject Amphitheater is
located.
(c) A fire, earthquake, flood or other casualty which results in
such Subject Amphitheater no longer being able to be used for its intended
purposes at 90% or more of its current maximum capacity.
(d) Condemnation of all or any portion of such Subject Amphitheater
through the exercise of any governmental authority's power of eminent
domain which results in such Subject Amphitheater no longer being able to
be used for its intended purposes at 90% or more of its current maximum
capacity.
(e) The discovery of any defects in the buildings, structures or
other improvements constituting a part of such Subject Amphitheater which
would materially and adversely interfere with the use of such Subject
Amphitheater as presently operated.
(f) The occurrence of any event or circumstance resulting in a loss
or restriction of access to public roads necessary to satisfy the current
and reasonably anticipated normal transportation requirements of such
Subject Amphitheater's business as presently operated.
(g) The occurrence of any event or circumstance resulting in such
Subject Amphitheater no longer having parking availability sufficient to
satisfy the parking requirements for an Event at which the Subject
Amphitheater is sold-out at its current maximum capacity.
(h) Loss of the use of necessary utilities (including water,
electricity, natural gas, sewer and telephone) in such quantity and
quality as are necessary to satisfy the current business activities of
such Subject Amphitheater as currently operated.
Use Termination Event: Shall have the meaning assigned thereto pursuant to
the provisions of Section 21.01(d) hereof.
Exhibit "A"
Page 7 of 7
Exhibit "B"
--------------------------------------------------------------------------------
WESTERN AMPHITHEATRE PARTNERS
--------------------------------------------------------------------------------
OPERATING BUDGET 1997
--------------------------------------------------------------------------------
IMA BBP WAP
--------------------------------------------------------------------------------
OVERHEAD EXPENSES
--------------------------------------------------------------------------------
SALARIES - ADMINISTRATIVE $399,400 $275,039 $674,439
--------------------------------------------------------------------------------
SALARIES - TEMPORARY HELP 1,800 0 1,800
--------------------------------------------------------------------------------
SALARIES - BOX OFFICE/STAGE 0 0 0
--------------------------------------------------------------------------------
PAYROLL TAXES 53,919 30,231 84,150
--------------------------------------------------------------------------------
EMPLOYEE BENEFITS 13,200 23,261 36,461
--------------------------------------------------------------------------------
WORKERS COMP 5,000 0 5,000
--------------------------------------------------------------------------------
RENT - OFFICE 52,200 0 52,200
--------------------------------------------------------------------------------
EQUIPMENT RENTAL 6,000 0 6,000
--------------------------------------------------------------------------------
ALLOCATED G & A - BOOKING DEPARTMENT 0 0 0
--------------------------------------------------------------------------------
ADVERTISING 24,000 7,374 31,374
--------------------------------------------------------------------------------
ADVERTISING - SPONSORSHIP 6,000 13,000 19,000
--------------------------------------------------------------------------------
BANK CHARGES 200 250 450
--------------------------------------------------------------------------------
BUSINESS ENTERTAINMENT 10,000 6,000 16,000
--------------------------------------------------------------------------------
CONTRIBUTIONS 1,200 4,400 5,600
--------------------------------------------------------------------------------
CONSULTING FEES 15,000 0 15,000
--------------------------------------------------------------------------------
CUSTODIAL SERVICES 6,000 74,999 80,999
--------------------------------------------------------------------------------
DUES & SUBSCRIPTIONS 2,400 2,502 4,902
--------------------------------------------------------------------------------
EQUIPMENT 2,400 4,847 7,247
--------------------------------------------------------------------------------
INSURANCE EXPENSE 26,016 37,199 63,215
--------------------------------------------------------------------------------
LEGAL & PROFESSIONAL 40,000 31,170 71,170
--------------------------------------------------------------------------------
MESSENGER SERVICE 180 0 180
--------------------------------------------------------------------------------
OFFICE EXPENSES 18,000 15,198 33,198
--------------------------------------------------------------------------------
PRINTING 2,000 0 2,000
--------------------------------------------------------------------------------
POSTAGE 6,600 8,748 15,348
--------------------------------------------------------------------------------
FEDERAL EXPRESS 3,000 0 3,000
--------------------------------------------------------------------------------
PROMOTION 10,000 3,000 13,000
--------------------------------------------------------------------------------
REPAIRS & MAINTENANCE - STAGE 20,000 10,000 30,000
--------------------------------------------------------------------------------
REPAIRS & MAINTENANCE - HOUSE 72,000 10,000 82,000
--------------------------------------------------------------------------------
REPAIRS & MAINTENANCE - GENERAL 113,500 49,002 162,502
--------------------------------------------------------------------------------
SECURITY 12,000 2,000 14,000
--------------------------------------------------------------------------------
SERVICE BUREAU 10,800 0 10,800
--------------------------------------------------------------------------------
SMALL TOOLS & EQUIPMENT 2,800 9,999 12,799
--------------------------------------------------------------------------------
TELEPHONE 50,000 24,000 74,000
--------------------------------------------------------------------------------
TRAVEL - OTHER 24,000 17,594 41,594
--------------------------------------------------------------------------------
UTILITIES 124,000 74,881 198,881
--------------------------------------------------------------------------------
TAXES & LICENSES 2,400 6,000 8,400
--------------------------------------------------------------------------------
MISCELLANEOUS 6,000 500 6,500
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL OVERHEAD EXPENSES $1,142,015 $741,194 $1,883,209
--------------------------------------------------------------------------------
Page 1
Exhibit "C"
List of Existing Sponsorship Commission Obligations at ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
15% commission due to ▇▇▇▇/▇▇▇▇▇▇▇▇ Marketing on each of the following:
Sponsor Sponsorship Revenue
------- -------------------
Mission Viejo Imports $ 40,000
Coors Brewing Company $200,000 (+$25,000 bonus)
▇▇▇▇▇▇ ▇▇▇▇ $ 2,300
Domino's Pizza $ 11,000
Round Hill Wineries $ 2,500
Specialty Coffee Company $ 9,200
Del Taco $ 12,500
Ruby's Diner $ 12,500
Evian $ 7,077
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 12,000
Better Beverage $ 3,500
EXHIBIT "D"
Paragraph 3.03 Appraised Buy-Out of the Partnership Interest of A&J, is
hereby amended and restated in it's entirety to read as follows:
5
EXHIBIT "D"
3.03 If, and only if SMI and A&J are terminated as the booking agents for
WAP pursuant to the terms of the Promotion Agreement with WAP, as it now exists
or as it may be modified in the future, then for a period of thirty (30) days
following such termination, A&J shall have the right, but not the obligation, by
delivering written notice ("Election Notice") to IMA Corp. and SMI, to cause
the purchase of the entire Partnership Interest of A&J in accordance with the
provisions of this Section 3.03. In the event A&J timely and validly makes such
an election, then except as hereinafter otherwise provided SMI shall be required
to purchase the entire Partnership Interest of A&J in accordance with the
provisions of this Section 3.03; provided, however, for a period of thirty (30)
days following the effective date of the "Accountant's Notice" of the "Purchase
Price" (as such terms are hereinafter defined), SMI shall have the right, but
not the obligation, to elect either (A) by delivering written notice (the "Pro
Rata Notice") to IMA Corp., to cause IMA Corp. and SMI to each purchase the
portion of the Partnership Interest of A&J that corresponds, in the case of SMI,
to the fraction obtained by dividing (i) the Percentage Interest (as of the
effective date of the Accountant's Notice) of SMI by (ii) the aggregate
Percentage Interests (as of the effective date of the Accountant's Notice) of
SMI and the ▇▇▇▇ Partners, and, in the case of IMA Corp., to the fraction found
by dividing (i) the aggregate Percentage Interests (as of the effective date of
the Accountant's Notice) of the ▇▇▇▇ Partners by (ii) the aggregate Percentage
Interests (as of the effective date of the Accountant's Notice) of SMI and the
▇▇▇▇ Partners; or (B) by written notice (the "No-Interest Notice") to IMA Corp.,
A&J and Pavilion Partners, to decline to purchase any portion of the Partnership
Interest of A&J. If SMI fails to timely make either such election, then SMI
shall be required to purchase the entire Partnership Interest of A&J in
accordance with the provisions of this Section 3.03. If SMI timely gives the
No-Interest Notice, then IMA Corp. may, at any time within ten (10) days after
its receipt of SMI's No-Interest Notice, provide written notice (also a
"No-Interest Notice") to Pavilion Partners, SMI and A&J that IMA Corp. does not
wish to purchase the Partnership Interest of A&J. If IMA Corp. fails to timely
give the No-Interest Notice, then IMA Corp. shall be required to purchase the
entire Partnership Interest of A&J in accordance with the provisions of this
Section 3.03. Any such purchase and sale of the Partnership Interest of A&J by
SMI alone or by SMI and IMA Corp., or by IMA Corp. alone (the "Purchasing
Partner(s)"), as the case may be, shall be made in accordance with the following
terms and conditions:
6
EXHIBIT "D"
(a) The Election Notice shall include the name of an appraiser with
at least five (5) years experience appraising businesses similar in nature
to the Project. Within forty (40) days after the effective date of the
Election Notice, the Purchasing Partner(s) shall either agree to such
appraiser or select a second appraiser (with similar appraisal experience)
and notify A&J of such second appraiser. If two (2) appraisers are
selected, then they shall appoint a third appraiser (with similar
appraisal experience) within five (5) days of the selection of the second
appraiser. In the event A&J, on the one hand, or the Purchasing
Partner(s), on the other hand, fail to appoint an appraiser within the
time period specified, and after the expiration of five (5) days following
the effective date of written demand that an appraiser be appointed, then
the appraiser duly appointed by the party making such demand and
appointing such appraiser shall proceed to make the appraisal as herein
set forth and the determination of such appraiser shall be conclusive.
Upon the failure of the two (2) appointed appraisers to timely appoint a
third appraiser within the time period specified therefor, either A&J, on
the one hand, or the Purchasing Partner(s), on the other hand, may
petition a court of competent jurisdiction to appoint a third appraiser,
in the same manner as provided for the appointment of an arbitrator
pursuant to Code of Civil Procedure Section 1281.6.
(b) The appraiser or three (3) appraisers, as the case may be, shall
promptly fix a time for the completion of the appraisal, which shall not
be later than thirty (30) days from the date of appointment of the last
appraiser. Each appraiser shall determine the fair market value of the
combined business and assets of the Partnership which shall be the fairest
price estimated in terms of money which the Partnership could obtain if
such business and assets were sold in the open market as a going concern,
allowing a reasonable time to find a purchaser who purchases with
knowledge of the uses which such business and assets in their then
condition are adapted and for which such business and assets are capable
of being used as of the effective date of the Election Notice.
(c) Upon the submission of the appraisal setting forth the opinions
as to the fair market value of the combined business and assets of the
Partnership (determined by each appraiser in accordance with Section
3.03(b)), the two (2) such appraisals which are nearest
7
EXHIBIT "D"
in amount shall be retained, and the third appraisal shall be discarded.
The average of the two (2) retained appraisals shall constitute the
"Appraised Value"; provided, however, that if one of the appraisals is the
mean of the other two (2), then that appraisal shall constitute the
"Appraised Value".
(d) Within fifteen (15) days after the determination of the
Appraised Value, the certified public accountants regularly employed by
the Partnership shall determine the purchase price ("Purchase Price") for
the Partnership Interest of A&J. The Purchase Price shall be equal to the
greater of (i) the sum of the balances standing in the Unrecovered
Contribution Account and Unrecovered Additional Contribution Account of
A&J, determined as of the effective date of the Election Notice, or (ii)
one hundred percent (100%) of the aggregate amount of cash that would be
distributed to A&J pursuant to Section 8.02(c) if (A) the combined
business and assets of the Partnership were sold for the Appraised Value
thereof as of the effective date of the Election Notice; (B) the
liabilities of the Partnership were liquidated pursuant to Section
8.02(a); (C) a reserve were established for any contingent or unforeseen
liabilities of the Partnership pursuant to Section 8.02(b); and (D) the
Partnership made its required distributions to the Partners pursuant to
Section 8.02(c). Upon the determination by the accountants of the Purchase
Price, such accountants shall give A&J, SMI and IMA Corp. written notice
("Accountant's Notice") of the Purchase Price. The determination by such
accountants of the Purchase Price, and any and all components thereof
(including, without limitation, the amount of any reserve) shall be deemed
conclusive.
(e) The closing of a purchase and sale pursuant to this Section 3.03
shall be held at the principal place of business of the Partnership on
such date as is designated by the Purchasing Partner(s), but in no event
later than the one hundred twentieth (120th) day following the effective
date of the Accountant's Notice. A&J shall transfer to the Purchasing
Partner(s) the entire Partnership Interest of A&J free and clear of all
liens, security interests, and competing claims (other than security
interests granted in favor of the Purchasing Partner(s) and shall deliver
to the Purchasing Partner(s) such instruments of transfer, and such
evidence of due authorization, execution, and delivery, and of the absence
of any such liens, security interests, or
8
EXHIBIT "D"
competing claims, as the Purchasing Partner(s) shall reasonably request.
The Purchasing Partner(s) shall pay the Purchase Price to A&J at the
closing by delivering to A&J cash, a certified or bank cashier's check or
a confirmed wire transfer of funds payable to the order of A&J.
(f) The portion of the Purchase Price for the Partnership Interest
of A&J to be paid by any Purchasing Partner shall be offset by the unpaid
balance of any and all Partner Loan(s) (together with all accrued interest
thereon) made by such Purchasing Partner to A&J. Such Partner Loan(s)
(together with all accrued interest thereon) shall be deemed paid to the
extent of such offset, with such deemed payment to be applied first to the
accrued interest thereon and thereafter to the payment of the outstanding
principal amount thereof. If the Purchase Price for the Partnership
Interest of A&J is insufficient to fully offset the outstanding, unpaid
balances (including all principal amounts thereof and all accrued interest
thereon) made by any and all of the Purchasing Partners to A&J, then such
loans shall be offset in proportion to their respective outstanding
balances (including all principal amounts thereof and all accrued, unpaid
interest thereon). In addition, the outstanding, unpaid balances
(including all principal amounts thereof and all accrued interest thereon)
made by any one or more non-purchasing Partners to A&J shall be due and
payable at the closing of the transfer of the Partnership Interest of A&J
pursuant to this Section 3.03 and shall be repaid, in proportion to such
respective outstanding balances, out of any and all of the proceeds of the
Purchase Price (after reduction of such price otherwise payable to A&J
pursuant to this Section 3.03 pursuant to the offset described above in
this Section 3.03(f)), prior to any payment of such proceeds to A&J
pursuant to this Section 3.03. To the extent any portion of any Partner
Loan made by a Partner to A&J is not satisfied pursuant to the foregoing
provisions of this Section 3.03(f), then A&J shall pay the remaining
outstanding balance (including all principal amounts thereof and all
accrued, unpaid interest thereon) at the closing. Also, notwithstanding
any provision of this Agreement to the contrary, the outstanding unpaid
balance of any and all Partner Loan(s) (including all principal amounts
thereof and all accrued, unpaid interest thereon) made by A&J to any
Partner shall be due and payable in full to A&J at the closing of the
purchase of the Partnership Interest of A&J pursuant to Section 3.03(e).
9
EXHIBIT "D"
(g) All costs (including, without limitation, the costs of the
appraisers and the accountants referenced in Sections 3.03(a) and/or
3.03(d) of the purchase and sale of the Partnership Interest of A&J
pursuant to this Section 3.03 shall be paid one-half (1/2) by A&J and
one-half (1/2) by the Purchasing Partner(s) (with such costs being divided
between such Purchasing Partners based upon the relative portion of the
Partnership Interest of A&J purchased by each such Purchasing Partner).
(h) On or before the closing of a purchase and sale transaction held
pursuant to this Section 3.03, the Purchasing Partner(s) shall use such
Partner's(s') reasonable, diligent, and good faith efforts to obtain
written releases of A&J and/or any Affiliates of A&J from all guarantees
of liabilities of the Partnership previously executed by A&J and/or such
Affiliates. To the extent such releases cannot be obtained by the
Purchasing Partner(s), the Purchasing Partner(s) shall severally in
proportion to their respective Percentage Interests as of the effective
date of the Election Notice) indemnify, defend, and hold free and harmless
A&J from and against any and all claims, liabilities, causes of action,
liens, charges, and all other matters arising out of or in connection with
the business and affairs of the Partnership, whether arising prior to or
subsequent to the effective date of such closing, except for unknown
liabilities arising prior to the effective date of such closing and not
taken into account in calculating the Purchase Price for the Partnership
Interest of A&J.
Provided, however, that if IMA Corp. and SMI both timely give their respective
No-Interest Notice, then, pursuant to the terms of the WAP Agreement, Pavilion
Partners shall be obligated either to purchase the entire Partnership Interest
of A&J or to terminate the WAP Agreement. In any event or circumstance where IMA
Corp. and SMI, elect after Determination of the Purchase Price not to effect the
purchase, thereby giving rise to an obligation to Pavilion Partners to effect
such purchase, and in the circumstance where Pavilion Partners, for any reason
fails or refuses to effect such purchase, then the Partnership shall immediately
proceed to dissolve the WAP Partnership, thereby causing, concurrent with such
dissolution, the reinstatement of the Agreement from the date of dissolution
forward, without
10
EXHIBIT "D"
regard to, the terms or the effects of this First Amendment which shall, from
the date of dissolution forward be null, void, and without further effect.
Moreover, in the event of any such failure or refusal by Pavilion Partners, A&J
acknowledges and agrees that the obligations of IMA Corp. and/or SMI to effect
any purchase of A&J's interest, pursuant to this paragraph 3.03, shall be null,
void, and without effect, and further that A&J agrees to indemnify and hold IMA
Corp., SMI, and their respective shareholders, officers and agents free and
harmless from and against any such obligation to effect any such purchase.
11