EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
AND ASSET PURCHASE AGREEMENT
by and among
SFX ENTERTAINMENT, INC.,
CONTEMPORARY INVESTMENTS CORPORATION,
CONTEMPORARY INVESTMENTS OF KANSAS, INC.,
CONTINENTAL ENTERTAINMENT ASSOCIATES, INC.,
`
CAPITAL TICKETS, LP,
DIALTIX, INC.,
CONTEMPORARY INTERNATIONAL PRODUCTIONS CORPORATION,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ LIVING TRUST, DATED 10/22/82,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ LIVING TRUST, DATED 11/24/81,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Dated as of December 10, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS..................................................................................................... 2
Section 1.01. Defined Terms........................................................................... 2
Section 1.02. Interpretation.............................................................. 2
ARTICLE II
THE CLOSING; ESCROW DEPOSIT..................................................................................... 2
Section 2.01. Closing................................................................................. 2
Section 2.02. Effective Date of Closing............................................................... 2
Section 2.03. Escrow Deposit.............................................................. 3
Section 2.04. Closing Adjustment.......................................................... 3
ARTICLE III
THE MERGER...................................................................................................... 3
Section 3.01. The Merger.............................................................................. 3
Section 3.02. Effective Time.......................................................................... 3
Section 3.03. Corporate Organization.................................................................. 4
Section 3.04. Conversion of Shares.................................................................... 4
Section 3.05. Stock Certificates; Surrender........................................................... 5
Section 3.06. No Further Transfers.................................................................... 6
Section 3.07. Certain Effects of the Merger........................................................... 6
Section 3.08. Transfer of Assets...................................................................... 6
Section 3.09. Tax Consequences........................................................................ 6
ARTICLE IV
THE ASSET ACQUISITION........................................................................................... 6
Section 4.01. Transfer of Assets...................................................................... 6
Section 4.02. Excluded Assets......................................................................... 9
Section 4.03. Assumption of Liabilities............................................................... 10
Section 4.04. Exclusion of Liabilities................................................................ 11
Section 4.05. Transfer of Assets...................................................................... 12
Section 4.06. Conveyance and Transfer; Assumption..................................................... 13
Section 4.07. Purchase Price.......................................................................... 13
Section 4.08. Allocation of Purchase Price............................................................ 13
Section 4.09. Adjustment of Asset Purchase Price...................................................... 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER ENTITIES........................................................... 14
(i)
Section 5.01. Organization, Good Standing and
Qualification............................................................... 14
Section 5.02. Authority............................................................................... 14
Section 5.03. Capitalization.......................................................................... 15
Section 5.04. Subsidiaries of the Sellers............................................................. 16
Section 5.05. No Default; Non-Contravention........................................................... 16
Section 5.06. Consents and Approvals.................................................................. 17
Section 5.07. Personal Property....................................................................... 17
Section 5.08. Real Property........................................................................... 18
Section 5.09. Litigation.............................................................................. 20
Section 5.10. Intellectual Property................................................................... 21
Section 5.11. Contracts............................................................................... 22
Section 5.12. Financial Statements.................................................................... 24
Section 5.13. Absence of Liabilities.................................................................. 24
Section 5.14. Absence of Certain Changes.............................................................. 25
Section 5.15. Taxes................................................................................... 27
Section 5.16. Compliance with Laws.................................................................... 29
Section 5.17. Employee Matters........................................................................ 29
Section 5.18. Employees and Related Agreements; ERISA................................................. 30
Section 5.19. Environmental Compliance................................................................ 34
Section 5.20. Insurance............................................................................... 36
Section 5.21. Accounts Receivable..................................................................... 36
Section 5.22. Transactions with Affiliates............................................................ 36
Section 5.23. Finder's Fees........................................................................... 36
Section 5.24. Absence of Certain Business Practices................................................... 36
Section 5.25. Certain Payments........................................................................ 37
Section 5.26. [RESERVED].............................................................................. 37
Section 5.27. Disclosure.............................................................................. 37
Section 5.28. Affiliated Party Transactions............................................... 37
Section 5.29. Accredited Investors........................................................ 38
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SFX........................................................................... 39
Section 6.01. Organization, Good Standing and
Qualification............................................................... 39
Section 6.02. Authority............................................................................... 39
Section 6.03. No Default; Non-Contravention........................................................... 39
Section 6.04. Consents and Approvals.................................................................. 40
Section 6.05. Capitalization.......................................................................... 40
Section 6.06. Litigation.............................................................................. 41
Section 6.07. Compliance with Laws.................................................................... 41
Section 6.08. Reports; Examinations................................................................... 41
Section 6.09. Financial Statements.................................................................... 41
(ii)
Section 6.10. No Material Adverse Change.............................................................. 42
Section 6.11. Acquisition Corp............................................................ 42
ARTICLE VII
PRE-CLOSING COVENANTS OF THE SELLER ENTITIES.................................................................... 43
Section 7.01. Conduct of Business..................................................................... 43
Section 7.02. Extraordinary Acts...................................................................... 44
Section 7.03. No Breach of Representations and
Warranties.................................................................. 46
Section 7.04. Access by SFX........................................................................... 46
Section 7.05. No Solicitation......................................................................... 47
Section 7.06. HSR Act................................................................................. 48
Section 7.07. Consents; Notices; Termination.......................................................... 48
Section 7.08. Certain Payments;Assumption of Certain
Liabilities................................................................. 48
Section 7.09. Best Efforts............................................................................ 49
Section 7.10. WARN Act.................................................................... 49
Section 7.11. S-Election.................................................................. 49
Section 7.12. ERISA....................................................................... 49
ARTICLE VIII
PRE-CLOSING COVENANTS OF SFX.................................................................................... 49
Section 8.01. No Breach of Representations and
Warranties.................................................................. 49
Section 8.02. HSR Act................................................................................. 50
Section 8.03. Consents and Approvals; Notices......................................................... 50
Section 8.04. Governing Documents..................................................................... 50
Section 8.05. Best Efforts............................................................................ 50
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SFX............................................................................ 50
Section 9.01. Representations and Warranties.......................................................... 50
Section 9.02. Covenants............................................................................... 51
Section 9.03. Officer's Certificate................................................................... 51
Section 9.04. Opinion of Counsel...................................................................... 51
Section 9.05. Governmental Consents................................................................... 51
Section 9.06. HSR Act................................................................................. 51
Section 9.07. Legality................................................................................ 51
Section 9.08. Injunctions............................................................................. 51
Section 9.09. Contract Consents....................................................................... 52
Section 9.10. Institution of Proceedings.............................................................. 52
Section 9.11. Title Insurance......................................................................... 52
Section 9.12. Employment Agreements................................................................... 52
(iii)
Section 9.13. FIRPTA Certificates..................................................................... 52
Section 9.14. Merger.................................................................................. 52
Section 9.15. Leases.................................................................................. 53
ARTICLE X
CONDITIONS TO THE OBLIGATIONS
OF THE SELLER ENTITIES.......................................................................................... 53
Section 10.01. Representations and Warranties......................................................... 53
Section 10.02. Covenants.............................................................................. 53
Section 10.03. Officer's Certificate.................................................................. 53
Section 10.04. Opinion of Counsel..................................................................... 53
Section 10.05. Governmental Consents.................................................................. 53
Section 10.06. HSR Act................................................................................ 54
Section 10.07. Legality............................................................................... 54
Section 10.08. Injunctions............................................................................ 54
Section 10.09. Merger................................................................................. 54
Section 10.10. Contract Consents...................................................................... 54
Section 10.11. Institution of Proceedings............................................................. 54
Section 10.12. Delivery of Consideration.............................................................. 54
Section 10.13. Delivery of Guarantee.................................................................. 55
ARTICLE XI
ADDITIONAL AGREEMENTS OF THE PARTIES............................................................................ 55
Section 11.01. Tax Matters............................................................................ 55
Section 11.02. Audits................................................................................. 57
Section 11.03. Employee Matters....................................................................... 57
Section 11.04. Merger Consideration................................................................... 58
Section 11.05. Adjustment of Class A Shares........................................................... 59
Section 11.06. Use of Name............................................................................ 60
Section 11.07. Access by Either Party................................................................. 60
Section 11.08. Registration of Class A Stock.......................................................... 60
Section 11.09. Restrictive Legend..................................................................... 63
ARTICLE XII
TERMINATION..................................................................................................... 64
Section 12.01. Termination............................................................................ 64
Section 12.02. Effect of Termination.................................................................. 66
ARTICLE XIII
INDEMNIFICATION................................................................................................. 68
Section 13.01. Survival of Representations and
Warranties................................................................. 68
Section 13.02. By the Seller Entities................................................................. 69
(iv)
Section 13.03. By the Purchaser Entities.............................................................. 69
Section 13.04. Limitations on Indemnification......................................................... 70
Section 13.05. Indemnification Procedure for Third
Party Claims............................................................... 71
ARTICLE XIV
MISCELLANEOUS................................................................................................... 72
Section 14.01. Further Assurances..................................................................... 72
Section 14.02. Entire Agreement....................................................................... 73
Section 14.03. Notices................................................................................ 73
Section 14.04. Binding Effect; Successors and Assigns................................................. 74
Section 14.05. Governing Law.......................................................................... 74
Section 14.06. Captions............................................................................... 75
Section 14.07. Confidentiality of Disclosures......................................................... 75
Section 14.08. Publicity.............................................................................. 75
Section 14.09. Consent to Jurisdiction................................................................ 75
Section 14.10. Fees and Expenses...................................................................... 76
Section 14.11. Costs of Enforcement................................................................... 76
Section 14.12. Third Parties.......................................................................... 76
Section 14.13. Counterparts........................................................................... 76
Section 14.14. Amendment.............................................................................. 76
Section 14.15. Waiver..................................................................... 76
Section 14.16. Severability........................................................................... 77
SCHEDULES
Schedule 1.01 Defined Terms
Schedule 2.02 Seller's Liabilities
Schedule 3.08 Permitted Transfers
Schedule 4.01 Assets
Schedule 4.02 Excluded Assets
Schedule 4.03 Assumed Liabilities
Schedule 5.01 Qualifications
Schedule 5.03 Capitalization
Schedule 5.04 Subsidiaries
Schedule 5.05 Defaults; Breaches
Schedule 5.06 Required Consents and Approvals
Schedule 5.07 Personal Property; Adequacy of Assets
Schedule 5.08 Real Property
Schedule 5.09 Litigations of Seller Entities
Schedule 5.10 Intellectual Property
Schedule 5.11 Contracts
Schedule 5.13 Liabilities of the Businesses
(v)
Schedule 5.14 Certain Changes
Schedule 5.15 Taxes
Schedule 5.16 Compliance with Laws; Permits
Schedule 5.17 Employee Matters
Schedule 5.18 ERISA
Schedule 5.19 Environmental Compliance
Schedule 5.20 Insurance
Schedule 5.22 Transactions with Affiliates
Schedule 5.28 Affiliated Party Transactions
Schedule 6.03 No Default; Non Contravention
Schedule 6.04 Required Consents and Approvals
Schedule 6.06 Litigations of Purchaser Entities
Schedule 6.07 Compliance with Laws
Schedule 6.10 No Material Adverse Change
Schedule 7.02 Certain Acts
Schedule 7.08 Affiliates
Schedule 11.01 Certain Tax Matters
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Employment Agreement
Exhibit C Continuity of Interest Agreement
Exhibit D Form of Purchase Price Escrow Agreement
(vi)
AGREEMENT AND PLAN OF MERGER AND ASSET PURCHASE AGREEMENT, dated as of
December 10, 1997, by and among SFX ENTERTAINMENT, INC., a Delaware corporation
("SFX"), CONTEMPORARY INVESTMENT CORPORATION, a Missouri corporation ("CIC"),
CONTEMPORARY INVESTMENTS OF KANSAS, INC., a Kansas corporation ("CI-Kansas"),
CONTINENTAL ENTERTAINMENT ASSOCIATES, INC., a Missouri corporation
("Continental"), CAPITAL TICKETS, LP, a Missouri limited partnership
("Capital"), DIALTIX, INC., a Missouri corporation ("Dialtix" and, together
with CIC, CI-Kansas, Continental and Capital, the "Sellers"), CONTEMPORARY
INTERNATIONAL PRODUCTIONS CORPORATION, a Missouri corporation ("CIPC"), ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ LIVING TRUST, dated 10/22/82 (the "Schankman Trust"), ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ LIVING TRUST, dated 11/24/81 (the "▇▇▇▇▇▇▇▇▇ Trust" and, together
with the Schankman Trust, the "Trusts"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇" and, together with Schankman and the Trusts,
the "Principals").
W I T N E S E T H:
WHEREAS, CIPC, its subsidiaries and the Sellers operate certain
concert, live entertainment, event marketing, telemarketing and related
businesses (collectively, the "Businesses") and the Principals, directly or
indirectly, own or control all of the outstanding securities of, or other
ownership interests in, such entities;
WHEREAS, SFX desires to acquire the Businesses from the Principals
through the merger (the "Merger") of CIPC into SFX, and the acquisition by
Acquisition Corp., a wholly-owned subsidiary of SFX ("Acquisition Corp."), of
substantially all of the assets of the Sellers (the "Asset Acquisition"), on
the terms, and subject to the conditions set forth herein;
WHEREAS, the Principals, CIPC and the Sellers desire to consummate the
Merger and the Asset Acquisition on the terms, and subject to the conditions
set forth herein; and
WHEREAS, the Merger is intended to qualify as a tax-free
reorganization pursuant to the provisions of Section 368 of the Code (as
hereinafter defined);
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. For purposes of this Agreement, the
terms set forth on Schedule 1.01 shall have the respective meanings set forth
therein.
Section 1.02. Interpretation. In this Agreement, (a) words used herein
regardless of the gender specifically used shall be deemed and construed to
include any other gender, masculine, feminine or neuter, as the context shall
require, (b) all terms defined in the singular shall have the same meanings
when used in the plural and vice versa, and (c) words denoting natural person
shall include corporations, partnerships and other entities and vice versa,
unless the context otherwise requires.
ARTICLE II
THE CLOSING; ESCROW DEPOSIT
Section 2.01. Closing. The closing of the Merger and the Asset
Acquisition (the "Closing") shall take place simultaneously at 10:00 a.m., on
the fifth business day after the fulfillment or waiver of the last of the
conditions specified in Articles IX and X hereof, at the offices of Rosenman &
Colin LLP, 575 Madison Avenue, New York, New York, or at such other time, date
and place as may be agreed upon in writing by the parties hereto. The date on
which the Closing shall take place is referred to herein as the "Closing Date."
Notwithstanding the foregoing, in no event shall the Closing occur before
January 1, 1998 or, except as otherwise provided in Section 12.01 hereof, after
February 15, 1998.
2
Section 2.02. Effective Date of Closing. Solely for accounting
purposes, the parties intend that SFX will receive the benefits of and assume
the liabilities and obligations with respect to the operation of the Businesses
effective as of January 1, 1998, regardless of the actual date of the Closing.
Notwithstanding the foregoing, (a) neither Purchaser Entity shall assume
responsibility for the actual operation of the Business prior to the Closing
Date and (b) the obligations of the Seller Entities under Article VII hereof
and with respect to all other matters hereunder shall continue to be in effect
through the actual date of the Closing, and neither Acquisition Corp. nor SFX
shall assume any liability for any acts or omissions with respect to the
Businesses or the Seller Entities prior to the Closing Date, except (i) for
liabilities incurred prior to the Closing Date by the Sellers, CIPC or any of
its subsidiaries in the ordinary course of business and consistent with past
practice and (ii) liabilities incurred prior to the Closing Date by the
Sellers, CIPC or any of its subsidiaries directly in connection with the
matters set forth on Schedule 2.02.
Section 2.03. Escrow Deposit. Simultaneously with the execution and
delivery hereof, SFX, on its own behalf and on behalf of Acquisition Corp., has
delivered to the Escrow Agent, the sum of $2,000,000 (the "Escrow Deposit") to
be held and disposed of by the Escrow Agent in accordance with the terms of the
Escrow Agreement.
Section 2.04. Closing Adjustment. To the extent not otherwise covered
by this Agreement, there shall be a closing adjustment among the parties such
that the Seller Entities (other than CIPC), in addition to any other
consideration set forth under this Agreement, will receive credit for all
expenses associated with events to be performed in 1998, including, but not
limited to, expenses paid by the Seller Entities during 1997 related to events
to be performed after December 31, 1997 and SFX or Acquisition Corp. will
receive credit for any and all cash received by the Seller Entities (other than
to the extent earned prior to January 1, 1998) for events to be performed after
December 31, 1997. By way of example, the Seller Entities (other than CIPC)
shall receive credit in an amount corresponding to all talent deposits, venue
deposits, advertising and promotion costs and the like made by any Seller
Entity for events to be performed after December 31, 1997 and SFX or
Acquisition Corp shall receive credit in an amount equal to all ticket deposits
(net of service
3
charges) for events to be performed in 1998. Any difference in the credits
will accrue to the benefit of the party with the larger aggregate sum of
credits as a cash reduction, or an increase in the cash portion, of the
purchase price, as the case may be.
ARTICLE III
THE MERGER
Section 3.01. The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with Section 251 of the General Corporation
Law of the State of Delaware, on the Closing Date, CIPC shall be merged into
SFX, SFX shall continue its existence as the surviving corporation in the
Merger (and is hereinafter sometimes referred to as the "Surviving
Corporation") and the separate corporate existence of CIPC shall terminate at
the Effective Time.
Section 3.02. Effective Time. The Merger shall become effective upon
the later to occur of the filing of appropriate certificates of merger (the
"Certificates of Merger"), in form and substance reasonably satisfactory to
SFX, by each of the Secretary of State of the State of Delaware, in accordance
with Section 251 of the General Corporation Law of the State of Delaware, and
the Secretary of State of the State of Missouri, in accordance with Chapter 351
of the General and Business Corporation Law of Missouri or at such later time
as is specified in the Certificates of Merger (the "Effective Time").
Section 3.03. Corporate Organization.
(a) Immediately subsequent to the Effective Time, the Surviving
Corporation (i) shall continue its separate corporate existence with all its
purposes, objects, rights, privileges, powers, certificates and franchises
unimpaired by the Merger under the laws of the State of Delaware and (ii) shall
succeed to all rights, assets, liabilities and obligations of CIPC in
accordance with the General Corporation Law of the State of Delaware and the
General and Business Corporation Law of Missouri. The separate corporate
existence of CIPC shall terminate at the Effective Time.
4
(b) The Certificate of Incorporation and By-laws of SFX immediately
preceding the Effective Time shall be the Certificate of Incorporation and
By-laws, respectively, of the Surviving Corporation after the Effective Time,
and, thereafter, may be amended in accordance with their respective terms and
as provided by applicable law.
(c) At the Effective Time, the Board of Directors of SFX immediately
preceding the Effective Time shall be the Board of Directors of the Surviving
Corporation immediately after the Effective Time.
(d) At the Effective Time, the officers of SFX immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, each of
them to hold office in accordance with the Certificate of Incorporation and
By-Laws of the Surviving Corporation.
Section 3.04. Conversion of Shares. At the Effective Time:
(a) Each share of capital stock of SFX outstanding immediately prior
to the Effective Time shall remain outstanding and constitute one validly
issued, fully paid and nonassessable share of capital stock of the Surviving
Corporation.
(b) Each share of CIPC Stock outstanding immediately prior to the
Effective Time, by reason of the Merger and without any action by the holder
thereof, shall be converted into the right to receive (i) $1,200,000 at the
Closing and (ii) 140,285.07 shares of Class A Stock (subject to adjustment as
provided in Section 11.05(c)). No certificate or scrip representing fractional
shares of Class A Stock shall be issued upon the surrender for exchange of
shares of CIPC Stock and such fractional share interests shall not entitle the
owner thereof to vote or to any rights of a holder of Class A Stock. In lieu of
any such fractional share, each holder of CIPC Stock who otherwise would be
entitled to receive a fractional share of Class A Stock shall receive an amount
of cash determined by multiplying (i) the fraction of a share of Class A Stock
to which such holder would otherwise be entitled by (ii) $13.33 (subject to
adjustment as provided in Section 11.05(c)). Notwithstanding the foregoing, if
the Spin-off shall not have been effected on or prior to the Closing Date, each
share of CIPC Stock outstanding immediately prior to the Effective Time, by
reason of the Merger and without any action by the holder thereof, shall be
converted
5
into the right to receive (i) $1,200,000 at the Closing and (ii) the number of
shares of Preferred Stock that would be convertible into an aggregate of
140,285.07 shares of Class A Stock (subject to adjustment as provided in
Section 11.05(c)) upon the completion of the Spin-off.
(c) The Principals acknowledge and agree that the consideration to be
received for the shares of CIPC Stock pursuant to Section 3.04(b) hereof
includes the one-third interest of Contemporary Sports, Inc., a wholly-owned
subsidiary of CIPC ("Contemporary Sports"), in United Sports of America, a
Missouri general partnership ("USA Sports"). Therefore, notwithstanding
anything in this Agreement to the contrary (including, without limitation, the
provisions of Section 3.08 hereof), if Contemporary Sports' interest in USA
Sports is sold on or prior to the Closing Date in accordance with Section 7.05
hereof, the after tax proceeds of such sale (i.e., the purchase price less any
Taxes paid or payable by CIPC, the Principals and/or Contemporary Sports with
respect to any income or gain) shall be included as cash of CIPC to be acquired
by Acquisition Corp. as a result of the Merger.
(d) The parties hereto acknowledge that the consideration to be
received in the Merger by the Principals pursuant to Section 3.04(b) is subject
to adjustment pursuant to and in accordance with that certain side letter,
dated of even date herewith, by and between the parties hereto, relating to the
representations and warranties set forth in Sections 5.15, 5.17 and 5.18
hereof.
Section 3.05. Stock Certificates; Surrender.
(a) At the Effective Time, each certificate representing capital stock
of SFX (the "Certificates"), shall thereupon represent the same number of
shares of capital stock of the Surviving Corporation and SFX shall not be
required to surrender any such Certificates for cancellation and exchange.
(b) At the Closing, the Trusts shall surrender to SFX, for
cancellation by the Surviving Corporation, certificates for all of the
outstanding shares of CIPC Stock accompanied by duly executed instruments of
transfer or assignment in blank. The Trusts shall have no rights after the
Effective Time with respect
6
to the CIPC Stock, except the right to receive the consideration provided for
in Section 3.04(b) hereof in exchange therefor.
Section 3.06. No Further Transfers. At the Effective Time,
the stock transfer books of CIPC shall be closed, and no further
transfer of CIPC Stock shall thereafter be made.
Section 3.07. Certain Effects of the Merger. At the Effective Time,
the Surviving Corporation shall thereupon and thereafter possess all of the
rights, privileges, powers and franchises, of a public as well as of a private
nature, and be subject to all restrictions, disabilities and duties, of each of
SFX and CIPC (sometimes hereinafter referred to as the "Constituent
Corporations"); all property, real, personal and mixed, and all debts due to
either of the Constituent Corporations on whatever account, as well as for
stock subscriptions and all other things, in action or belonging to each of the
Constituent Corporations shall be vested in the Surviving Corporation; and all
and every other interest of the Constituent Corporations shall be thereafter as
effectively the property of the Surviving Corporation as they were of the
several and respective Constituent Corporations; and the title to any real
estate, vested by deed or otherwise, under the laws of the State of Delaware or
elsewhere, in either of the Constituent Corporations shall not revert or in any
way be impaired by reason of the Merger; but all rights of creditors and liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of each of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
Section 3.08. Transfer of Assets. SFX acknowledges and agrees that it
is not acquiring and, prior to the Effective Time, CIPC may transfer or
distribute to the Trusts or, at the Trusts' direction, to Schankman and
▇▇▇▇▇▇▇▇▇, the assets of CIPC listed on Schedule 3.08 hereto.
Section 3.09. Tax Consequences. It is intended that the Merger
constitute a tax-free reorganization within the meaning of Section 368(a) of
the Code, and that this Agreement constitute a "plan of reorganization" for
purposes of Section 368 of the Code. The foregoing shall not be deemed or
construed to be a
7
representation of any party hereto to another that the Merger qualifies as a
tax-free reorganization and the parties acknowledge that they have relied on
their own respective counsel and accountants with respect to the tax effect of
the Merger.
ARTICLE IV
THE ASSET ACQUISITION
Section 4.01. Transfer of Assets. Subject to the terms and conditions
of this Agreement, at the Closing, the Sellers shall sell, assign, transfer,
convey and deliver to Acquisition Corp. and Acquisition Corp. shall purchase,
acquire and accept from the Sellers, all of the Sellers' respective right,
title and interest in and to all property, assets, interest and claims, real
and personal, tangible and intangible, of every type and description, wherever
located, owned, used or held for use in connection with the Businesses or
otherwise, other than the Excluded Assets, free and clear of all Liens except
as hereinafter provided (but as to property leased by or to a Seller, subject
to the respective lease and the Lien thereon attributable to such lease) with
such changes, deletions or additions thereto (other than with respect to the
Real Property) as may occur from the date hereof to the Closing Date in the
ordinary course of business and consistent with the terms and conditions of
this Agreement (the "Assets"), including, without limitation, the following:
(a) all right, title and interest in the Real Property and interests
in Real Property identified on part (c) of Schedule 5.08, together with all
easements, rights of way, privileges, appurtenances and other rights and
interests benefiting such Real Property, subject to the Liens set forth in part
(a) of Schedule 5.08;
(b) all leasehold interests in the properties identified on part (d)
of Schedule 5.08;
(c) all machinery and equipment, tools, replacement and spare parts,
furniture, fixtures, office supplies and other similar property, including,
without limitation, each item of machinery and equipment with a value in excess
of $10,000, each of which is identified in part (c) of Schedule 4.01;
8
(d) subject to Section 4.02(b) hereof, all accounts receivable and
other receivables arising with respect to services provided and goods delivered
or otherwise in connection with the operation of the Businesses on or after
January 1, 1998, including, without limitation, notes receivable arising out of
the Businesses;
(e) all rights in, to and under all Intellectual Property,
including all the goodwill represented thereby, all of which are
identified in part (e) of Schedule 4.01;
(f) all trade secrets, know-how (including, without limitation,
proprietary know-how and use and application know-how), manufacturing,
engineering and other drawings, screens, technology, technical information,
engineering data, design and engineering specifications, sales and promotional
literature, customer and supplier lists and similar knowledge, in whatever form
stored, including, without limitation, in the form of electronic data or data
in writing;
(g) subject to Section 4.02(e) hereof, all contracts, agreements,
leases (whether for real or personal property), arrangements and/or commitments
of any kind pertaining to the Assets or Businesses, whether written or oral,
executory or otherwise (the "Contracts"), including, without limitation, (i)
all leases and subleases of real property to which any Seller is a party, (ii)
all leases for personal property (capitalized or otherwise) requiring payments
in excess of $25,000 per annum, (iii) all indemnification agreements, (iv) all
non-competition, confidentiality and non-disclosure agreements, (v) all
employment and consulting agreements, (vi) all insurance policies, (vii) all
sponsorship agreements; (viii) all talent agreements; and (ix) all other
material contracts, agreements and arrangements; provided, however, that
Acquisition Corp. is not acquiring any contract, agreement, lease (whether for
real or personal
9
property), arrangement and/or commitment which requires payment by the Sellers,
severally or jointly, in excess of $25,000 per annum (except for talent
agreements entered into in the ordinary course of business and in accordance
with past practice) or any contract, agreement, lease (whether for real or
personal property), arrangement and/or commitment between or among the Seller
Entities and or any of their affiliates unless such contract, agreement, lease
(whether for real or personal property), arrangement and/or commitment is
identified in part (g) of Schedule 4.01;
(h) all Permits, to the extent assignable;
(i) all right, title and interest in and to any and all vehicles
identified in part (i) of Schedule 4.01;
(j) except to the extent an Excluded Asset, all general, financial and
personnel records, and all correspondence and other files and records, and any
other files and records pertaining solely to the Business, wherever located;
(k) all claims, causes of action, choses in action, rights of recovery
and rights of set-off of any kind pertaining to, and arising out of, the
Businesses or the Real Property, wherever located, other than in respect of
Excluded Liabilities;
(l) all goodwill, if any, in the Businesses, together with the right
of Acquisition Corp. to represent itself to third parties as the successor in
interest to the Business;
(m) all prepaid charges, sums and fees;
(n) all assets of the Sellers reflected on the audited balance sheet
of the Businesses as of September 30, 1997 included in the Financial
Statements, except for the Excluded Assets and assets which have thereafter
been disposed of in the ordinary course of business;
(o) all of CIC's right, title and interest in and to the Riverport
Amphitheatre Joint Venture (other than CIC's interest in the cash and cash
equivalents on hand prior to January 1, 1998, and in the accounts receivable
for services performed and goods delivered and otherwise in connection with the
operation of the Riverport Amphitheatre Joint Venture before January 1, 1998);
and
(p) all cash attributable to services to be performed, goods to be
delivered or other obligations to be performed in connection with the operation
of the Businesses after December 31, 1997 (including, without limitation, cash
received with respect to the advance sale of tickets and the after-tax proceeds
from a sale or other disposition, if any, of Contemporary Sports'
10
interest in USA Sports) and all increases in the cash, cash equivalents,
securities and other investments held by the Sellers (including, without
limitation, increases in the cash and cash equivalents held by the Riverport
Amphitheatre Joint Venture) after December 31, 1997, except to the extent
attributable to the collection of accounts receivable which belong to the
Sellers pursuant to this Agreement.
Notwithstanding anything herein to the contrary, nothing herein shall
be construed to obligate any of the Sellers to purchase and transfer title to
any property in which it only has a leasehold interest and such Seller shall
only be obligated to assign and transfer to Acquisition Corp. such Seller's
leasehold in such property.
Section 4.02. Excluded Assets. The parties to this Agreement expressly
understand and agree that no Seller is selling, assigning, transferring or
conveying to Acquisition Corp. the following assets, rights and properties,
which shall be specifically excluded from the transactions contemplated by this
Agreement (the "Excluded Assets"):
(a) except as otherwise provided in Section 4.01(p) hereof, any cash,
cash equivalents, securities or other investments held by such Seller prior to
January 1, 1998;
(b) all accounts receivable and other receivables of such Seller for
services provided and goods delivered or otherwise in connection with the
operation of the Businesses prior to January 1, 1998;
(c) the minute books, stock record books, stock ledgers, Tax Returns,
tax books and records and similar financial and other records of such Seller
which (i) relate to income taxes; provided, however, that Acquisition Corp. and
its affiliates shall have access during regular business hours to such records,
including for purposes of making summaries and copies thereof (at their own
expense), as they pertain to any of the Businesses and the Assets upon
reasonable notice to such Seller or a Principal; and provided further, however,
that in the event that within seven years after the Closing Date such Seller
desires to destroy or dispose of any such records, such Seller shall first
offer to deliver, at Acquisition Corp.'s (or its affiliate's) expense, any or
all of such Tax Returns, tax books and records and similar
11
financial or other records relating to income taxes payable with respect to any
of the Businesses as Acquisition Corp. (or its affiliate) may request; and (ii)
in the case of all other Tax Returns and tax books and records, do not pertain
primarily to any of the Businesses; provided, however, that Acquisition Corp.
and its affiliates shall have access during regular business hours to such
records, including for purposes of making summaries and copies thereof (at
their own expense), as they pertain to any of the Businesses and Assets upon
reasonable notice to such Seller;
(d) such Seller's claim, right or interest in any refunds
of Taxes paid by such Seller; or
(e) any assets, properties or contracts listed in part (e)
of Schedule 4.02 hereto.
Section 4.03. Assumption of Liabilities. If the Closing occurs, then
effective as of January 1, 1998, Acquisition Corp. will assume and agree to
pay, perform and discharge all of the following liabilities and obligations of
the Sellers (hereinafter collectively referred to as the "Assumed
Liabilities"):
(a) all unperformed and unfulfilled obligations which are required to
be performed and fulfilled on or after January 1, 1998 under the Contracts;
provided, however, that if an obligation is to an affiliate of a Seller, such
obligation shall be assumed only if (i) such obligation is incurred by such
Seller in the ordinary course of business, consistent with past practice and on
terms no less favorable to such Seller than such Seller could obtain from an
unaffiliated third party or (ii) Acquisition Corp., in its sole and absolute
discretion, shall agree in writing to assume it;
(b) any liabilities or obligations to an affiliate of such Seller (i)
incurred by such Seller on or after January 1, 1998 in the ordinary course of
business, consistent with past practice and on terms no less favorable to such
Seller than such Seller could obtain from an unaffiliated third party or (ii)
which Acquisition Corp., in its sole and absolute discretion, shall agree in
writing to assume;
(c) all accounts payable of the Sellers arising out of the Businesses
in the ordinary course of business and consistent with
12
past practice with respect to services provided or goods delivered or otherwise
in connection with the operation of the Businesses on or after January 1, 1998;
provided, however, that if an account payable is owed to an affiliate of a
Seller, such account payable shall be assumed only if (i) such account payable
is incurred by such Seller in the ordinary course of business, consistent with
past practice and on terms no less favorable to such Seller than such Seller
could obtain from an unaffiliated third party or (ii) Acquisition Corp., in its
sole and absolute discretion, shall agree in writing to assume it;
(d) except as otherwise provided in Section 4.03(b) hereof, all
obligations and liabilities incurred by such Seller on or after January 1, 1998
in the ordinary course of business and consistent with past practice; and
(e) the liabilities listed in part (e) of Schedule 4.03.
Section 4.04. Exclusion of Liabilities. Neither Acquisition Corp. nor
any of its affiliates (including, without limitation, SFX) shall assume, nor
shall any of them be liable for, any liabilities of any Seller other than as
expressly provided in Section 4.03 hereof (the "Excluded Liabilities"). Without
limiting the generality of the foregoing and notwithstanding anything in
Section 4.03 to the contrary, neither Acquisition Corp. nor any of its
affiliates shall assume nor shall any of them be liable for any of the
following liabilities or obligations of the Sellers (or any of them):
(a) any and all Taxes levied by any foreign, federal, state or local
taxing authority for periods prior to January 1, 1998;
(b) any liabilities or obligations for severance or similar payments
arising as a result of consummation of the transactions contemplated hereby or
any other liabilities or obligations of the Sellers (or any of them) which
arise out of or are incurred with respect to this Agreement and the
transactions contemplated hereby (including the Sellers' legal and accounting
fees);
(c) any liabilities or obligations which are not directly incident
to or arising out of or incurred with respect to the Businesses or the Assets;
13
(d) any liability arising under Environmental Laws, the Code, ERISA or
any Multiemployer Pension Plan with respect to the conduct of the Businesses or
conditions in connection with the Businesses prior to January 1, 1998 (or on or
prior to the Closing Date if such liability was not incurred in the ordinary
course of business and consistent with past practice or was incurred as a
result of a violation of a Governmental Rule);
(e) any indebtedness for borrowed money, any indebtedness of a Seller
with respect to its purchase of any of the Real Property or any other interest
bearing obligations;
(f) any amounts payable to any affiliate of any Seller except for such
amounts described in Section 4.03(b) or in part
(e) of Schedule 4.03;
(g) any liability or obligation of any Seller or any affiliates of
any Seller to the extent related to the Excluded Assets;
(h) any workers' compensation claims relating to occurrences prior to
January 1, 1998, and any damages or liabilities arising out of or in connection
with any litigation or other claims pending against any Seller and/or any of
its affiliates prior to January 1, 1998 (or on or prior to the Closing Date if
such claim, damage or liability did not arise in the ordinary course of
business and consistent with past practice or was incurred as a result of a
violation of a Governmental Rule);
(i) any liability arising out of or in connection with a violation of
any law relating to occupational safety and health or discrimination on the
basis of age, race, creed, color or disability which arose as the result of an
act occurring prior to the Closing Date;
(j) any account payable arising prior to January 1, 1998 except to the
extent attributable to services to be provided or goods to be delivered on or
after January 1, 1998 (or on or prior to the Closing Date if such liability was
not incurred in the ordinary course of business and consistent with past
practice or was incurred as a result of a violation of a Governmental Rule);
and
14
(k) any income Tax on or in any manner attributable to the Asset
Acquisition.
Section 4.05. Transfer of Assets. The Sellers and Acquisition Corp.
shall comply with Sections 7.07, 7.09, 8.03 and 8.05 hereof, as applicable, in
obtaining all required approvals, consents or waivers in respect of the
purchase and sale of the Assets, including, without limitation, the Contracts
and the Permits. To the extent that any such required approval, consent or
waiver with respect to any Asset is not obtained prior to the Closing, this
Agreement shall not constitute a transfer of such Asset, or an attempted
transfer of such Asset, and Acquisition Corp. and the Sellers, to the extent
commercially reasonable, at or prior to the Closing, shall enter into other
arrangements (which shall not, however, obligate any Seller or Acquisition
Corp. (or any of its affiliates) to make any payment to effectuate any such
arrangement) with respect to any such Asset so that Acquisition Corp. and the
Sellers shall be in substantially the same economic position, including as to
the assumption of corresponding liabilities and obligations, as if such
approval, consent or waiver had been obtained and the transfer thereof effected
at the Closing. Notwithstanding the foregoing, nothing contained herein shall
limit the conditions set forth in Sections 9.05, 9.09, 10.05 and 10.10 hereof.
Section 4.06. Conveyance and Transfer; Assumption. The parties hereto
agree that the purchase and sale of the Assets shall be effected by bills of
sale, endorsements, deeds, assignments and other instruments of transfer, all
in such form as may be reasonably requested to vest in Acquisition Corp.
ownership of the Assets and to evidence Acquisition Corp.'s assumption of the
Assumed Liabilities.
Section 4.07. Purchase Price. The aggregate purchase price for the
Assets shall be $59,300,000, which shall be payable at the Closing by delivery
of the Escrow Deposit and the balance by wire transfer of immediately available
funds to one or more accounts designated by the Sellers at least two business
days before the Closing or by certified or official bank check, shall be
allocated among the Assets in accordance with Section 4.08 hereof and shall be
subject to adjustment as provided in Section 4.09 hereof (the "Asset Purchase
Price").
15
Section 4.08. Allocation of Purchase Price. Within 30 days after the
Closing, Acquisition Corp. shall provide to the Sellers copies of Internal
Revenue Service Form 8594 and any required exhibits thereto with Acquisition
Corp.'s proposed allocation of the Asset Purchase Price among the Assets. Such
allocation shall be based on the fair market value of each Asset at Closing and
otherwise in a manner consistent with Section 1060 of the Code and the
regulations thereunder. Within 30 days after the receipt of such Form 8594, the
Sellers shall propose to Acquisition Corp. any changes to such Form 8594 or
shall indicate its concurrence therewith. The failure by the Sellers to propose
any changes within such 30 days shall be deemed to be an indication of the
Sellers' concurrence with such form as proposed by Acquisition Corp.
Acquisition Corp. and the Sellers shall endeavor in good faith to resolve
promptly any differences with respect to the items on Form 8594.
Notwithstanding the foregoing, if Acquisition Corp. and the Sellers are unable
to resolve such differences, Acquisition Corp. and the Sellers shall, subject
to the requirements of any applicable Tax law or election, file all Tax Returns
in a manner consistent with such Form 8594, except with respect to any items
that are the subject of such differences.
Section 4.09. Adjustment of Asset Purchase Price. The Sellers
acknowledge and agree that the Asset Purchase Price reflects the intent of the
parties that the third party interests in the Riverport Amphitheatre Joint
Venture be acquired at or before the Closing (although such acquisition is not
a condition to Closing). The Asset Purchase Price will be adjusted pursuant to
that certain side letter agreement, dated as of even date herewith, by and
between the parties hereto, depending on the timing of the acquisition, if any,
of such interests and the purchase price, if any, therefor.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER ENTITIES
CIPC, the Sellers and the Principals, jointly and severally, represent
and warrant to the Purchaser Entities that:
16
Section 5.01. Organization, Good Standing and Qualification.
(a) Each of the Sellers (other than Capital and the Trusts), CIPC and
each subsidiary of CIPC and each Seller is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and is duly licensed or qualified to do business as a foreign
corporation and, where available, is in good standing in each jurisdiction in
which the nature of the business transacted by it or the character of the
property owned or leased by it makes such licensing or qualification by it
necessary, other than in such jurisdictions where the failure to be so licensed
or qualified would not, individually or in the aggregate, have a Material
Adverse Effect on it.
(b) Capital is duly organized, validly existing and in good standing
as a limited partnership under the laws of the State of Missouri and is duly
licensed or qualified to do business as a foreign limited partnership and,
where available, is in good standing in each jurisdiction in which the nature
of the business transacted by it or the character of the property owned or
leased by it makes such licensing or qualification by it necessary, other than
in such jurisdictions where the failure to be so licensed or qualified would
not, individually or in the aggregate, have a Material Adverse Effect on it.
(c) Each Trust is duly organized and validly existing as a
revocable trust under the laws of the State of Missouri.
(d) Part (d) of Schedule 5.01 sets forth a correct and complete list
of all jurisdictions in which each Seller, CIPC and each subsidiary of CIPC and
each Seller is organized or incorporated and in which it is licensed or
qualified to do business.
Section 5.02. Authority. Each of the Sellers (other than Capital and
the Trusts), CIPC and each subsidiary of CIPC and each Seller has all requisite
corporate power and authority, and Capital has the requisite limited
partnership power and authority to own and operate its properties and to carry
on its business as it is now being conducted. Each Trust has the requisite
power and authority to own the stock or other equity interests in the Sellers
and CIPC owned by them. Each of the Sellers and CIPC has
17
all requisite corporate power and authority (or, in the case of Capital, the
limited partnership power and authority, or, in the case of the Trusts, the
Trusts and the Trustees thereof have the requisite power and authority) to
execute and deliver this Agreement and each of the other documents, instruments
and agreements to be executed pursuant hereto (collectively, the "Documents")
to which it is or will be a party, and to perform its obligations hereunder and
thereunder. The execution and delivery by each of the Sellers and CIPC of this
Agreement and each of the Documents to which it is a party and the consummation
by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action (or, in the case of Capital, all
necessary limited partnership action, or, in the case of the Trusts, all
necessary trust action). Assuming the due authorization, execution, delivery
and performance hereof and of any Documents to be executed by SFX and/or
Acquisition Corp., this Agreement constitutes, and each of the Documents to be
executed by a Seller, CIPC or a Principal upon execution and delivery thereof
by such party, will constitute, a legal, valid and binding obligations of such
party, in each case enforceable in accordance with their respective terms,
subject to bankruptcy, insolvency and similar laws affecting the rights and
remedies of creditors and secured parties generally and general principles of
equity.
Section 5.03. Capitalization.
(a) CIPC is authorized to issue 30,000 shares of CIPC Stock, of which
10 are outstanding as of the date hereof. There are no other series or classes
of capital stock of CIPC authorized or issued and outstanding nor are any
shares of CIPC stock held in treasury.
(b) Except as specified in part (b) of Schedule 5.03, there are no
issued or outstanding bonds, debentures, notes or other indebtedness of CIPC or
any of its subsidiaries or of any subsidiary of any Seller which has the right
to vote (or which is convertible into other securities having the right to
vote) on any matters on which stockholders of CIPC may vote ("Voting Debt").
Except as specified in part (b) of Schedule 5.03, there are no outstanding or
authorized subscriptions, warrants, options, contracts, rights (preemptive or
otherwise), calls, commitments or demands of any character relating to any
authorized and issued or unissued shares of capital stock of
18
CIPC, including, without limitation, the CIPC Stock or outstanding securities,
obligations, rights, Voting Debt or other instruments convertible into or
exchangeable for such stock, or which obligate CIPC to seek authorization to
issue additional shares of any class of stock or Voting Debt, nor will any be
created by virtue of this Agreement or the transactions hereby contemplated.
(c) All of the outstanding shares of CIPC Stock have been duly
authorized and validly issued, are fully paid and nonassessable and are owned
beneficially by Schankman and ▇▇▇▇▇▇▇▇▇ and of record by the Trusts, as set
forth in part (c) of Schedule 5.03 hereto.
(d) Except as set forth in part (d) of Schedule 5.03, CIPC does not
own any shares of stock or any other securities of any corporation or have any
interest in any firm, partnership, association or other entity. All of the
outstanding shares of capital stock of each subsidiary of CIPC (i) have been
duly authorized and validly issued, (ii) are fully paid and nonassessable,
(iii) are owned beneficially and of record by CIPC, free and clear of all Liens
and (iv) are not subject to, nor have they been issued in violation of, any
preemptive rights. Except as set forth in part (d) of Schedule 5.03, there are
no outstanding or authorized subscriptions, warrants, options, contracts,
rights (preemptive or otherwise), calls, commitments or demands of any
character that, directly or indirectly, (i) call for or relate to the sale,
pledge, transfer or other disposition by CIPC or any subsidiary of CIPC of any
shares of capital stock, any partnership or other equity interests, or any
Voting Debt of CIPC or any subsidiary thereof or (ii) relate to the voting or
control of such capital stock, partnership or other equity interests or Voting
Debt.
Section 5.04. Subsidiaries of the Sellers. Except as set forth in
Schedule 5.04, neither CIPC nor any Seller owns, beneficially or of record, or
controls, directly or indirectly, any capital stock, securities convertible
into or exchangeable for capital stock or any other ownership or participation
interest in any corporation, association, partnership, joint venture, limited
liability company or other entity.
Section 5.05. No Default; Non-Contravention. Neither the execution and
delivery by any of the Sellers, CIPC or any
19
Principal of this Agreement and all of the Documents to which each is a party
nor the consummation by each of the transactions hereby and thereby
contemplated shall (a) constitute any violation or breach of any Seller's or
CIPC's Certificate of Incorporation or By-laws (or, in the case of Capital, its
Certificate of Limited Partnership or Agreement of Limited Partnership or, in
the case of the Trusts, their respective trust agreements), or (b) except as
disclosed in Schedule 5.05, (i) constitute a default under or a breach of, or
result in acceleration of any obligation under, any provision of any contract,
lease, mortgage or other instrument to which any Seller, any Principal or CIPC
or any of its subsidiaries is a party or by which any of the Businesses, any of
the CIPC Stock or any of the Assets may be affected or secured, directly or
indirectly, which default, breach or acceleration has not been waived; (ii)
violate any Governmental Rule directly or indirectly affecting any Seller, any
Principal, CIPC, any of the Businesses, any of the CIPC Stock or any of the
Assets; (iii) result in the creation of any Lien on any of the Assets or any of
the CIPC Stock; or (iv) result in the termination of any license, franchise,
lease or Permit to which any Seller, any Principal or CIPC is a party or by
which it is bound, except in the case of those items specified in this clause
(b) which would not, individually or in the aggregate, limit the ability of any
Seller, any Principal or CIPC to consummate the transactions hereby
contemplated or have a Material Adverse Effect on such party.
Section 5.06. Consents and Approvals. Except for the filing of the
Certificate of Merger, all filings and the termination of the waiting period
under the HSR Act and as set forth on Schedule 5.06, no authorization,
approval, order, license, permit, franchise or consent and no registration,
declaration, notice or filing by or with any Governmental Body and no consent
by or from any third party is required for the execution and delivery by any
Seller, any Principal or CIPC of this Agreement or any Document or the
consummation by any such party of the transactions contemplated hereby and
thereby, including, without limitation, consents from landlords of each lease
to which a Seller Entity is a party, where such consent is required.
Section 5.07. Personal Property.
20
(a) Except as set forth in part (a) of Schedule 5.07 hereto, each
Seller has good and marketable title to all of its personal property included
in the Assets, tangible and intangible, free and clear of all Liens of every
nature, other than Liens for Taxes not yet due and payable or being contested
in good faith and for which adequate reserves have been accounted for in
accordance with GAAP. Except as set forth in part (a) of Schedule 5.07, the
Assets are adequate and suitable for the conduct of the Businesses of the
Sellers as presently conducted and comprise the capacity and right to perform
the same services in the same manner as presently being performed by the
Sellers.
(b) Except as set forth in part (b) of Schedule 5.07, each of CIPC and
its subsidiaries has good and marketable title, free and clear of all Liens to
all of its personal properties and assets, tangible or intangible, except for
(i) Liens for taxes not yet due and payable or being contested in good faith
and for which adequate reserves have been accounted for in accordance with
GAAP, or (ii) such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent. Except as set forth in part
(b) of Schedule 5.07, the assets of CIPC and its subsidiaries are adequate and
suitable for the conduct of their Businesses.
(c) Except as set forth in part (c) of Schedule 5.07, by acquiring
the stock of CIPC and the Assets, Acquisition Corp. and SFX are acquiring all
of the assets used by the Seller Entities in the Businesses (other than the
Excluded Assets) and no other assets are needed to conduct the Businesses as
the same are presently conducted by the Seller Entities.
Section 5.08. Real Property.
(a) Each Seller and each of its subsidiaries has good and marketable
title, free and clear of all Liens, to all of the Real Property included in the
Assets, except (i) for Liens for Taxes not yet due and payable or being
contested in good faith and for which adequate reserves have been accounted for
in accordance with GAAP, (ii) for the portion of the Real Property included in
the Assets which has been leased and is disclosed as such in part (c) of
Schedule 5.08 or (iii) except as set forth in part (a) of Schedule 5.08. No
Lien with respect to the Real Property included in the Assets has had a
Material Adverse Effect on any
21
of the Seller Entities or the Businesses through the date of this Agreement.
(b) CIPC and each of its subsidiaries has good and marketable title,
free and clear of all Liens, to all of the Real Property (other than the Real
Property included in the Assets), except (i) for Liens for Taxes not yet due
and payable or being contested in good faith and for which adequate reserves
have been accounted for in accordance with GAAP, (ii) for the portion of the
Real Property (other than the Real Property included in the Assets) which has
been leased and is disclosed as such in part (c) of Schedule 5.08 or (iii)
except as set forth in part (b) of Schedule 5.08. No Lien with respect to the
Real Property (other than the Real Property included in the Assets) has had a
Material Adverse Effect on any of the Seller Entities or the Businesses through
the date of this Agreement.
(c) Set forth in part (c) of Schedule 5.08 is a list of all of the
real property owned, directly or indirectly, in whole or in part, by the
Sellers, CIPC and its subsidiaries or leased, licensed or used by the Sellers,
CIPC and its subsidiaries in connection with the operation of the Businesses
(collectively, the "Real Property").
(d) Except as set forth in part (d) of Schedule 5.08 or as disclosed
in part (c) of Schedule 5.08, neither CIPC, nor any of its subsidiaries nor any
Seller is a party to any license, lease, sublease or other arrangement or
agreement with respect to any Real Property. Except as set forth in part (d) of
Schedule 5.08, all of the licenses, leases, subleases and other rights to use
any of the Real Property set forth in part (d) of Schedule 5.08 are in full
force and effect, free of subtenancies and other occupancy rights.
(e) Part (e) of Schedule 5.08 sets forth a correct and complete list
of all Permits currently held by the Sellers, CIPC and its subsidiaries with
respect to the Real Property, the absence of which would have a Material
Adverse Effect on such party's ability to operate the Real Property as
currently operated. Neither CIPC, nor any of its subsidiaries, nor any Seller
nor either Principal has received any notice of any violation or revocation of
any of such Permits, nor to any such parties' knowledge, has any such
revocation been threatened.
22
(f) There are no special or other assessments for public improvements
or otherwise now affecting the Real Property owned, in whole or in part,
directly or indirectly, by any Seller Entity, or to the knowledge of the Seller
Entities, the Real Property leased by the Seller Entities, nor do any of the
Seller Entities know of (i) any pending or threatened special assessments
affecting the Real Property or (ii) any contemplated improvements affecting the
Real Property that may result in special assessments affecting the Real
Property.
(g) The Real Property owned, in whole or in part, directly or
indirectly by any Seller Entity, or to the knowledge of the Seller Entities,
the Real Property leased by the Seller Entities and the current use, occupation
and condition thereof do not violate any Permits, Contracts or Permitted Liens
or any site plan approvals, zoning or subdivision regulations, urban
development plans or, to the knowledge of any Seller Entity, other Governmental
Rules applicable to the Real Property.
(h) Except as set forth in part (h) of Schedule 5.08, all roads
bounding the Real Property are public roads and the deeds to be executed to
effect the transfer to Acquisition Corp. of the Real Property owned, in whole
or in part, directly or indirectly, by any Seller Entity are the only
instruments necessary to convey such Real Property to Acquisition Corp.
(i) Except as set forth in part (i) of Schedule 5.08, no subdivision
or other approvals of any Governmental Body are necessary in connection with
the conveyance of the Real Property.
(j) There has been no condemnation or taking of any part of the Real
Property owned, in whole or in part, directly or indirectly, by any Seller
Entity and no condemnation or taking is pending or, to the knowledge of the
Seller Entities, threatened.
(k) No Seller Entity has received any notices (i) from any
Governmental Body alleging any fire, health, safety, building, pollution,
environmental, zoning or other violation of Governmental Rule with respect to
the Real Property which has not been corrected as of the date hereof, except as
set forth in part (k) of Schedule 5.08, or (ii) from any insurance company
concerning the discontinuation or potential discontinuation of any insurance
coverage on the Real Property or any recommended work, and no Seller Entity has
any knowledge of any condition
23
which violates any such Governmental Rules, except as set forth in part (k) of
Schedule 5.08.
(l) All 1997 real property Taxes due on or with respect to the Real
Property (and, if payable by any Seller Entity as a tenant on leased
properties, real property Taxes due on or with respect to such leased
properties) and all pending Tax certiorari proceedings with respect to the Real
Property owned by any Seller Entity, are set forth in part (l) of Schedule
5.08.
(m) Except as set forth in part (m) of Schedule 5.08, other than the
Seller Entities there are no parties in possession of the Real Property and
there are no parties with any use or other possessory rights covering all or
any portion of the Real Property or the leased properties.
(n) There are no security deposits under any leases, except
as set forth in part (n) of Schedule 5.08.
(o) To the knowledge of any Seller Entity, no tax lot of
any other party encroaches on the Real Property.
(p) Except as set forth in part (p) of Schedule 5.08, sufficient
parking facilities for current use and satisfaction of applicable Governmental
Rules exist with respect to the Real Property, such facilities are in adequate
condition to be used as such and the Seller Entities possess and are
transferring to Acquisition Corp. hereunder, all of their right, title and
interest therein, including, without limitation, the leases and Permits with
respect thereto.
(q) Except as set forth in part (q) of Schedule 5.08, to the knowledge
of the Seller Entities, (i) there is no building system with respect to the
American Theatre, Westport Playhouse, Riverport Amphitheatre or Sandstone
Amphitheatre (collectively, the "Theatres") which is not in working order; (ii)
there is no physical damage to any Theatre which would prevent the use of any
Theatre in the manner in which it has been represented to SFX by the Seller
Entities that such Theatre has been used by the Seller Entities with respect to
the Businesses; (iii) there are no structural defects relating to any of the
Theatres which would prevent the use of any Theatre in the manner in which it
has been represented to SFX by the Seller Entities that such Theatre has been
used by the Seller Entities with respect to the Businesses;
24
and (iv) there is no current renovation or restoration or tenant improvements
to any Theatre which would prevent the use of any Theatre in the manner in
which it has been represented to SFX by the Seller Entities that such Theatre
has been used by the Seller Entities with respect to the Businesses.
Section 5.09. Litigation. Set forth on Schedule 5.09 is a complete and
accurate list of all litigations in which the Seller Entities are currently
involved, regardless of size, its merits or whether covered by insurance.
Schedule 5.09 also contains an accurate and fair summary of each such
litigation which is not covered by insurance, including the description of the
claims, the perceived merit thereof, the name of counsel to the Seller
Entities, the court in which the action is pending and the amount of any damage
claim, and further contains an insurance run listing all claims covered by
insurance, the relevant deductible with respect to each such claim and whether
the premiums have been paid to date on the applicable policy. Except as
specifically noted on Schedule 5.09, (i) there are no legal actions, suits,
proceedings, arbitrations, controversies or investigations (whether or not
purportedly on behalf of or against any Seller Entity) pending (except for
pending proceedings with respect to which process has not been served on any
Seller Entity) or, to the knowledge of each Seller Entity, threatened or
contemplated, by any Governmental Body or other party against any Seller Entity
in any way relating to or affecting the CIPC Stock, the Assets or the
Businesses or the transactions contemplated by this Agreement and (ii) none of
the Seller Entities is a party to or subject to any judgment, order, writ,
injunction or decree in any way relating to or affecting the CIPC Stock, the
Assets or the Businesses or the transactions contemplated by this Agreement.
Section 5.10. Intellectual Property. Schedule 5.10 sets forth a
correct and materially complete list and brief identification of the assets of
the Sellers, CIPC and its subsidiaries utilized in or relating to the
marketing, advertising and commercial exploitation of the products of the
Businesses, patents, patent rights, unpatented inventions, trademarks, trade
names, service marks, copyrights or applications therefor which are presently
or were ever used in any of the Businesses (the "Intellectual Property"). No
interest in any Intellectual Property or any manufacturing process or trade
secrets used in the Businesses has been assigned,
25
transferred or licensed to any third party. Each Seller, CIPC and each of its
subsidiaries owns or possesses licenses or other rights to use all Intellectual
Property, manufacturing processes, know-how and trade secrets necessary to
conduct its Business as now operated. The use of the Intellectual Property in
connection with the Businesses does not, to the knowledge of any Seller Entity,
infringe upon the rights of any third party. There are no suits, claims or
assessments pending (except for pending proceedings with respect to which
process has not been served on any Seller Entity) or, to the knowledge of any
Seller Entity, threatened relating to the use of the Intellectual Property in
the Businesses. No Seller Entity is aware of any pending or threatened
cancellation or revocation of any agreement granting to CIPC, any of its
subsidiaries or any Seller rights to any of the Intellectual Property,
manufacturing processes or know-how of others used in the Businesses. Except as
set forth in Schedule 5.10, no person is entitled to any payment in connection
with any Intellectual Property, manufacturing process or trade secret used in
the Businesses.
Section 5.11. Contracts.
(a) Except as set forth on Schedule 5.11, Schedule 4.01 or in parts
(c) and (d) of Schedule 5.08 hereto, with respect to the Businesses and the
Real Property:
(i) there are no contracts, commitments or agreements for the
purchase of any equipment, materials or supplies that involve an
expenditure by any Seller, CIPC or any of its subsidiaries of more
than $25,000 for any one contract other than those which are
terminable upon 30 days' notice by such party without penalty;
(ii) there are no leases or other rental agreements for real
or personal property under which any Seller, CIPC or any of its
subsidiaries is either lessor or lessee that require annual payments
or provide for any receipts of $25,000 or more other than those which
are terminable upon 30 days' notice by such party without penalty;
(iii) there are no agreements, contracts or commitments that
involve a payment to any Seller, CIPC or any of its subsidiaries of
more than $25,000;
26
(iv) there are no written contracts for the employment or
compensation of any employee individually in excess of $25,000 in
salary and/or bonus per year;
(v) there are no management or distributor contracts
involving annual payments by any Seller, CIPC or any of its
subsidiaries in excess of $25,000;
(vi) there are no contracts or agreements for the furnishing
of services or products to any Seller, CIPC or any of its subsidiaries
involving an annual expenditure in excess of $25,000, other than those
which are terminable upon 30 days' notice by such party without
penalty (other than talent agreements or venue agreements entered into
in the ordinary course of business and consistent with past practice
and agreements for the rental of venues entered into in the ordinary
course of business and consistent with past and industry practice);
(vii) there are no partnership or joint venture contracts or
arrangements or any other agreements involving a sharing of profits
material to the CIPC Stock, the Assets or the Businesses;
(viii) there are no (A) licenses to which any Seller, CIPC or
any of its subsidiaries is a party or by which any of them are bound
relating to the use of Intellectual Property, except for those
identified on Schedule 5.10, (B) licenses granted to others to use any
Intellectual Property owned by any Seller, CIPC or any of its
subsidiaries, except as identified on Schedule 5.10, and (C) royalty
contracts to which any Seller, CIPC or any of its subsidiaries is a
party or by which any of them are bound involving annual payments in
excess of $100,000;
(ix) there are no fire, liability or other insurance policies
carried by any Seller, CIPC or any of its subsidiaries with respect to
their respective assets or the Businesses, except as set forth on
Schedule 5.20 hereto;
(x) there are no contracts or agreements for the sale of any
of the Assets (other than sales in the ordinary course of business) or
any of the CIPC Stock (or any assets of CIPC or its subsidiaries,
other than in the ordinary
27
course of business) or the grant of any rights to purchase any of the
Assets or any of the CIPC Stock (or any assets of CIPC or its
subsidiaries, other than in the ordinary course of business), except
as contemplated under this Agreement;
(xi) there are no contracts or agreements with agents,
consultants, advisors, salesmen, sales representatives, distributors,
dealers or independent contractors involving the payment of more than
$25,000 in any year;
(xii) there are no contracts or agreements to which any
Seller, CIPC, any of its subsidiaries or any Principal is a party by
which any of them is bound restricting the Seller Entities from
carrying on the Businesses anywhere in the United States or, to the
knowledge of the Seller Entities (without investigation), anywhere
else in the world; and
(xiii) there are no other orders, leases, commitments,
agreements and instruments (including but not limited to mortgages,
pledges, deeds of trust, financing statements, indentures and other
agreements and instruments relating to indebtedness for borrowed money
or guarantees or undertakings to answer for the debts or defaults of
another) to which any Seller Entity is a party or by which any of
them, their respective properties or the Assets are bound that, in any
such case, require payment of more than $100,000, other than those
which are terminable upon 30 days' notice by such party without
penalty.
(b) True and complete copies of the contracts, agreements,
commitments, leases and other instruments listed on Schedules 4.01, 5.10 and
5.11 (the "Material Contracts") have been delivered or made available to the
Purchaser Entities.
(c) Except as set forth in part (c) of Schedule 5.11, no Seller Entity
has received written notice of any event of default by it under any of the
Material Contracts which has not been cured and, to its knowledge, no event has
occurred which, with the giving of notice or lapse of time or both would
constitute an event of default by it thereunder, nor does any Seller Entity
have any knowledge of a default under any Material Contract by any other party.
The Material Contracts are valid and binding obligations of the applicable
Seller Entity and are enforceable
28
by and against each Seller Entity in accordance with their respective terms.
Except as set forth on Schedule 5.11, there are no other contracts (other than
talent agreements or venue agreements entered into in the ordinary course of
business and consistent with past practice and agreements for the rental of
venues entered into in the ordinary course of business and consistent with past
and industry practice) which were material to any of the Businesses which have
lapsed in the last 12 months and which have not been replaced by a comparable
contract. Except as set forth in part (c) of Schedule 5.11, the Seller Entities
have performed all obligations required to be performed by them, have paid all
amounts required to be paid by them and are not in default in any material
respect, under any Material Contract and, to the knowledge of the Seller
Entities, no other party to any Material Contract is in default in any material
respect thereunder.
Section 5.12. Financial Statements. True and complete copies of the
audited consolidated balance sheets of the Businesses as of December 31, 1996
and September 30, 1997, and the related audited statements of operations, cash
flows and stockholders' equity for each of the years and the nine-month period
then ended, respectively, all of which have been certified by Ernst & Young
LLP, independent certified public accountants (together with the notes and
schedules relating thereto, the "Financial Statements") have heretofore been
delivered to SFX. The Financial Statements have been, and any other financial
statements (whether audited or unaudited) required to be delivered pursuant to
the terms hereof are or will be, prepared from the books and records of the
Seller Entities in accordance with GAAP and fairly present the financial
condition of the Businesses at such dates and the results of their operations
as of the dates or throughout the periods indicated.
Section 5.13. Absence of Liabilities. Except as set forth in the
audited balance sheet of the Businesses as of September 30, 1997 or disclosed
on Schedule 5.13, the Businesses did not have any direct or indirect
indebtedness, liability, claim, loss, damage, deficiency or obligation, fixed
or unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise (collectively, the
"Liabilities") relating to the Businesses. Except as otherwise set forth in
Schedule 5.13, there are no other Liabilities with respect to the Businesses
relating to or arising out of any act,
29
transaction, circumstance or state of facts which occurred or existed on or
after September 30, 1997, other than those Liabilities arising in the ordinary
course of business consistent with past practice and the terms and conditions
of this Agreement and of the same character, type and magnitude as incurred in
the past and, since September 30, 1997, except as set forth on Schedule 2.02,
no Seller Entity has assumed, incurred or guaranteed any indebtedness for
borrowed money or any other interest bearing obligation or agreed to or entered
into an agreement to do the same. Section 5.14. Absence of Certain Changes.
Since September 30, 1997, except as set forth on Schedule 5.14, no Seller
Entity has:
(a) failed to maintain its status as a corporation, limited
partnership or trust subsisting under the laws of its jurisdiction of
incorporation or organization, if applicable;
(b) directly or indirectly, declared or paid any dividend or any
similar distribution of cash or properties to its stockholders or partners nor
has it made any payments or transferred any of its assets to any of its
affiliates other than in the ordinary course of business and consistent with
past practice;
(c) made any capital expenditures or commitments for capital
expenditures, including any capitalized lease obligations (for purchase of
equipment or otherwise), in excess of $50,000 or entered into or committed to
enter into any operating lease in connection with the Assets or the Businesses
for any property or equipment calling for net increased rentals in excess of
five percent annually per lease (over present rentals), or acquired any assets
or properties in connection with the Assets or the Businesses or contracted to
do so except in the ordinary course of business;
(d) made any advance or investment either by purchase of stock or
other securities or by contributions to capital of any individual, firm,
corporation or other entity;
(e) incurred any obligation or Liability relating to any of the
Businesses, other than those Liabilities arising in the ordinary course of
business consistent with past practice and the
30
terms and conditions of this Agreement and of the same character, type and
magnitude as incurred in the past, or accelerated the payment of any Liability;
(f) purchased, sold, assigned or transferred or entered into any
contract or agreement for the purchase, sale, assignment or transfer of any of
the assets relating to the Businesses which are valued in excess of $50,000, or
cancelled any debts or claims, other than in the ordinary course of business;
(g) subjected to a Lien, (i) any assets relating to the Businesses,
tangible or intangible, other than Permitted Liens or (ii) the CIPC Stock or
the stock of any subsidiary or the ownership interest in any other affiliated
entity;
(h) waived any rights of substantial value relating to any of its
assets (other than the Excluded Assets and assets of the Principals not being
acquired hereunder) or the Businesses, whether or not in the ordinary course of
business;
(i) made or suffered, or agreed to make or suffer, any new material
contract or agreement relating to the Assets, the CIPC Stock or the Businesses
or any amendment, modification or termination of any existing material
contract, lease or other agreement relating to the Businesses, whether or not
in the ordinary course of business;
(j) except as set forth in part (j) of Schedule 5.14, made or entered
into any bonus payment (except for bonus payments to employees in an amount not
exceeding 5% of such employees' respective salaries for the year immediately
preceding the payment of such payment, such bonuses not to exceed $50,000 in
the aggregate) or arrangement with any of its employees, officers or agents or
granted any increase in the compensation or fringe benefits (whether or not
provided under or pursuant to a Plan) of any employee or officer, except for
ordinary and regular course changes due to changes in responsibilities of any
such officer or employee or taken any action that results in a material
increase in the cost of any Plan;
(k) changed any of its business policies, including, without
limitation, advertising, marketing policy, payment, collection, budget or other
material policies, or terminated any of its operations;
31
(l) altered or revised the accounting principles, procedures, methods
or practices relating to the Businesses or any of the assets or liabilities
with respect thereto, including, without limitation, the creation or
modification of any reserves other than as required by GAAP;
(m) disposed of or permitted to lapse any Intellectual Property which
comprises a part of its assets or which is used by or in the Businesses;
(n) entered into any agreements or arrangements or engaged in any
transactions with or made any cash payments to any of the Seller Entities or
their affiliates, except for such agreements, arrangements or transactions
entered into on an arm's length basis in the ordinary course of business and
consistent with past practice;
(o) created, suffered or incurred any damage, destruction or loss
(whether or not covered by insurance) or any other event or condition of any
character which would have a Material Adverse Effect on CIPC, any of its
subsidiaries, the Assets or any of the Businesses;
(p) failed to maintain in full force and effect each Plan (whether or
not listed in Schedule 5.18) in which any employees of CIPC, any of its
subsidiaries or any of the Sellers participate and timely make all required
contributions thereto and administer each such Plan in accordance with its
terms and all applicable laws;
(q) authorized for issuance, issued, or sold any shares of its capital
stock or other securities or ownership interests, acquired directly or
indirectly, by redemption or otherwise, any such capital stock or other
securities or ownership interests, reclassified or split-up any such capital
stock, or granted or entered into any options, warrants, calls, or commitments
of any kind with respect thereto;
(r) made any Tax election or entered into any agreement or settlement
with any Tax Authority that affects or could affect the basis for Tax purposes
of the Assets or the timing for Tax purposes of income or deduction;
32
(s) effected or caused to occur any "plant closing" or "mass layoff"
as those terms are defined in WARN or taken any action which caused or is
reasonably likely to cause any liability under any other Governmental Rule
affecting any site of employment, facility, operating unit or employee of any
Business; or
(t) agreed, whether in writing or otherwise, to take any action
described in this Section 5.14.
Section 5.15. Taxes. Except as set forth on Schedule 5.15:
(a) Each of the Seller Entities has filed, within the time and manner
prescribed by law, all Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all respects. All Taxes owed by any of the
Seller Entities (whether or not shown on any Tax Return) have been paid or
contested in good faith. None of the Seller Entities currently is the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by any Tax Authority in a jurisdiction where any of
the Seller Entities does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Liens on any of the assets of any
of the Seller Entities that arose in connection with any failure (or alleged
failure) to pay any Tax. All written assessments of Taxes due and payable by,
on behalf of or with respect to each of the Sellers, CIPC or any of its
subsidiaries have been paid by such party, or are being contested in good faith
by appropriate proceedings and have been reserved against in accordance with
GAAP.
(b) Each of the Seller Entities has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
(c) No Seller Entity or director or officer (or employee responsible
for Tax matters) of any of the Seller Entities has any reason to believe that
any Tax Authority will assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
Liability of any of the Seller Entities either (i) claimed or raised by any Tax
Authority in writing or (ii) as to which any of the Principals and the
directors and officers (and employees
33
responsible for Tax matters) of the Seller Entities has knowledge based upon
personal contact with any agent of any Tax Authority. Part (c) of Schedule 5.15
lists income Tax Returns filed with respect to any of the Seller Entities for
taxable periods ended on or after December 31, 1991, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Seller Entities have delivered to SFX correct and
complete copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by any of the Seller
Entities since December 31, 1993.
(d) None of the Seller Entities has waived or extended any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(e) None of the Seller Entities has filed a consent under Code Section
341(f) concerning collapsible corporations. None of the Seller Entities has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. None of the
Seller Entities has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). Each of the Seller Entities has
disclosed on its federal Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662. None of the Seller Entities is a party to any Tax
allocation or sharing agreement. None of the Seller Entities (i) has ever been
a member of an affiliated group filing a consolidated federal income Tax Return
(other than a group that consisted of only the members of the Seller Entities)
or (ii) has any Liability for the Taxes of any Person (other than any of the
Seller Entities) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law) as a transferee or successor, by
contract, or otherwise.
(f) Part (f) of Schedule 5.15 sets forth the following information
with respect to each of the Seller Entities (or, in the case of clause (ii)
below, with respect to each subsidiary of a Seller Entity) as of the most
recent practicable date: (i) the basis of each of the Seller Entities in its
assets; (ii) the
34
basis of any of the Seller Entities in any of their subsidiaries in its stock
(or the amount of any excess loss account); (iii) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to any of the Seller
Entities; and (iv) the amount of any deferred gain or loss allocable to the
Seller Entities arising out of any deferred intercompany transaction.
(g) The unpaid Taxes of the Seller Entities (excluding the Principals)
(i) did not, as of the most recent fiscal month end, exceed the reserve for Tax
liabilities (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
most recent balance sheet (rather than in any notes thereto) and (ii) do not
exceed that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Seller Entities
(excluding the Principals) in filing their Tax Returns.
Section 5.16. Compliance with Laws. Schedule 5.16 sets forth a correct
and complete list of all Permits of any Governmental Body presently held by the
Seller Entities in connection with the Businesses. To the knowledge of the
Seller Entities, the Permits listed in Schedule 5.16 constitute all Permits
which are required in order to allow the Seller Entities to continue to carry
on the Businesses and use their assets and properties with respect thereto as
now conducted. Except as set forth on Schedule 5.16, each Seller Entity, to the
extent applicable, is in compliance in all material respects with such Permits
and all applicable Governmental Rules required to be complied with in order to
allow it to continue to carry on its Businesses and use the Assets as now being
conducted and used by it. No Seller Entity has received any written
notification of, or is aware of, any asserted failure to comply with any such
Permits or Governmental Rules.
Section 5.17. Employee Matters.
(a) Set forth in part (a) of Schedule 5.17 is a true and complete list
of the name and position of each current employee of the Businesses who earned
more than $50,000 in salary, bonus and overtime in the year ended December 31,
1996 or who is
35
expected to earn at least such amount in the year ending December 31, 1997.
(b) Except as set forth in part (b) of Schedule 5.17, the
Sellers, CIPC and its subsidiaries are each in material compliance with all
applicable Governmental Rules respecting employment and employment practices,
terms and conditions of employment, wages and hours and non-discrimination in
employment and is not engaged in any unfair labor practice. Except as set forth
in part (b) of Schedule 5.17, there are no pending (except for pending
proceedings with respect to which process has not been served on any Seller
Entity) or threatened disputes, grievances, charges, complaints, petitions or
proceedings involving the employees of any of the Businesses or any collective
bargaining representatives, and none of the Businesses has suffered, nor is
there pending or threatened, any strike, lockouts or general work stoppages
which have caused or would cause a cessation of operations of such Business or
any facility of such Business, nor is any such strike, lockout or work stoppage
pending or threatened. None of the Businesses has been the subject of any
orders to show cause, notices of debarment or administrative proceedings
relating to its employment practices.
(c) Except as set forth in part (c) of Schedule 5.17, none of the
employees of the Businesses, CIPC or its subsidiaries is covered by a
collective bargaining agreement.
Section 5.18. Employees and Related Agreements; ERISA.
(a) Except as set forth in part (a) of Schedule 5.18, no Seller Entity
nor any ERISA Affiliate maintains or contributes to, or has any obligation to
contribute to or, during the last six years, has maintained, contributed to or
been obligated to contribute to, and no Seller Entity nor any ERISA Affiliate
has any liability (including, without limitation, a liability arising out of an
indemnification, guarantee, hold harmless or similar agreement) with respect
to, any Plan. Except as set forth in part (a) of Schedule 5.18, no severance
pay policy or procedure is maintained by any Seller Entity which does or could
apply to employees of any of the Businesses in any form, whether written or
unwritten, and whether or not disclosed to one or more employees. All Plans are
in compliance in all material respects with the applicable provisions of ERISA,
the Code and the Plan documents.
36
(b) No Seller Entity nor any ERISA Affiliate maintains, contributes to
or is obligated to contribute to, or, during the last six years, has
maintained, contributed to or been obligated to contribute to, any Single
Employer Defined Benefit Plan and no Seller Entity nor any ERISA Affiliate
maintains, contributes to or is obligated to contribute to or, during the last
six years, has maintained, contributed to or been obligated to contribute to,
any Multiemployer Plan or any Multiple Employer Plan or multiple employer
welfare arrangement as defined in Section 3(40) of ERISA, except as set forth
in part (b) of Schedule 5.18.
(c) [Except as set forth in part (c) of Schedule 5.18, to the
knowledge of the Seller Entities, no event has occurred in connection with
which any Seller Entity or any Plan identified in Schedule 5.18 or any "plan
administrator" (as defined in Section 3(16) of ERISA) thereof, directly or
indirectly, is or could be subject to liability, other than for routine claims
for benefits, contingent or otherwise, or any lien, whether or not perfected,
under the terms of any Plan or under ERISA, the Code or any other law,
regulation or governmental order applicable to any Plan at any time maintained
or contributed to by any Seller Entity or any ERISA Affiliate, including,
without limitation, Sections 302(f), 404, 406, 409, 502(c)(1), 502(c)(3),
502(g), 502(i), 502(1), 601, 602, 603, 604, 605, 606, 607, 608, 4062, 4063,
4064, 4068, 4069, 4071 or 4201 of ERISA, or Sections 412(n), 4971, 4975, 4976,
4980B or 5000 of the Code, or under any agreement, instrument, statute, rule of
law or regulation pursuant to or under which such Seller Entity has agreed to
indemnify or is required to indemnify any person against liability incurred
under, or for a violation or failure to satisfy the requirements of, any such
statute, regulation or order. Except as set forth in part (c) of Schedule 5.18,
no Plan listed in Schedule 5.18 is subject to Section 302 of ERISA or Section
412 of the Code.
(d) Except as set forth in part (d) of Schedule 5.18, all payments and
contributions due from the Seller Entities under each Plan identified in
Schedule 5.18 have been made and all amounts properly accrued to date as
liabilities of the Seller Entities which have not been paid have been or will,
prior to the Closing Date, have been properly recorded on the books of the
Seller Entities and, to the extent not theretofore paid, will be reflected as a
liability on Schedule 5.18 hereto.
37
(e) No Welfare Benefit Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
any current or former employee of any of the Businesses beyond his or her
retirement or other termination of service other than (i) coverage mandated by
applicable law or (ii) disability benefits that have been fully provided for by
insurance or otherwise.
(f) Except as set forth in part (f) of Schedule 5.18, the transactions
contemplated by this Agreement will not result in any payment or series of
payments by Acquisition Corp. or any Seller Entity to any person of a parachute
payment within the meaning of Section 280G of the Code.
(g) Except as set forth in part (g) of Schedule 5.18, the consummation
of the transactions contemplated by this Agreement will not (i) entitle any
employee or former employee of any of the Businesses to severance pay,
unemployment compensation or any other payment except as expressly provided in
this Agreement or (ii) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available.
(h) There has been delivered or made available to the Purchaser
Entities with respect to each Plan (other than a Multiemployer Plan) identified
in Schedule 5.18:
(i) A copy of the annual report (with accompanying schedules
and exhibits), if required under ERISA, which has been filed with
respect to such Plan for the two most recently completed plan years.
The information contained in such report (including such schedules and
exhibits) is true and complete and there has been no material adverse
change in the condition of such Plan, financial or otherwise, since
the date thereof;
(ii) A copy of the actuarial report, if any, with respect to
each such Plan for the last two years. The information contained
therein, and the information furnished by the administrator of such
Plan or by any Seller Entity or any ERISA Affiliate in connection with
the preparation thereof, is true and complete and there has been no
material adverse change therein since the date thereof;
38
(iii) A copy of the most recent summary plan description,
together with each Summary of Material Modifications with respect
thereto, required under ERISA with respect to such Plan, all material
employee communications relating to such Plan, distributed within the
last 12 months and a true and complete copy of such Plan together with
any current filings with the Internal Revenue Service;
(iv) If such Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding vehicle
and the latest financial statements thereof; and
(v) The most recent determination letter received from the
Internal Revenue Service with respect to each Plan that is intended to
qualify under Section 401 of the Code.
(i) Neither any Seller Entity nor any ERISA Affiliate has made any
agreement, understanding or promise, whether written or oral, to create,
establish, sponsor, maintain or contribute, directly or indirectly, to or under
any additional Plan for the benefit of current or former employees of the
Businesses nor, except as set forth in Schedule 5.18, to amend or modify any
existing Plan identified in Schedule 5.18 in any manner not reflected in the
plan documents of such Plan delivered or made available to the Purchaser
Entities on or before the date hereof.
(j) Except as set forth in part (j) of Schedule 5.18, each Plan to
which any Seller Entity or any ERISA Affiliate contributes or has any
obligation to contribute which is intended to be qualified under Section 401 of
the Code, has received a favorable determination letter from the Internal
Revenue Service with respect to such qualification and with respect to the
exemption from tax of the trusts created thereunder under Section 501(a) of the
Code, and nothing has occurred that has affected or, to any Seller Entities'
knowledge, is likely adversely to affect such qualification or exemption since
the date of such letter with respect to each Plan.
(k) Except as set forth in part (k) to Schedule 5.18, all reports and
other information required under ERISA or any other applicable law or
regulation to be filed in respect of any Plan by the administrator thereof or
by any Seller Entity or any ERISA
39
Affiliate on or prior to the date hereof with the relevant governmental
authority and/or distributed or made available to any Plan participant and
beneficiary (including "alternate payees", as such term is defined in Section
206(d)(3)(K) of ERISA), as the case may be, have been filed, distributed or
made available in accordance with ERISA or such other applicable law or
regulation, as the case may be, except where such failure to so file,
distribute or make available such reports or other information, individually or
in the aggregate, would not have a Material Adverse Effect on any Seller
Entity, and all such reports and other information are true and complete in all
material respects as of the date given.
(l) No Seller Entity has entered into any agreement, written or
otherwise, relating to any Plan providing medical benefits obligating such
Seller Entity or its successor in interest to make any supplemental or
retrospective premium payments for the current or any prior contract period in
the event of adverse experience, termination of the minimum premium arrangement
or termination of an insurance contract relating to such Plan.
(m) Except as disclosed in part (m) of Schedule 5.18, there are no
claims, lawsuits, arbitrations or other actions pending (except for pending
proceedings with respect to which process has not been served on any Seller
Entity) or, to the knowledge of any Seller Entity, threatened against any
Seller Entity or any ERISA Affiliate or any administrator, trustee or other
fiduciary of any Plan listed in Schedule 5.18 with respect to any Plan listed
in Schedule 5.18. No prohibited transaction has occurred under any Plan.
(n) No Plan (other than a Multiemployer Plan) listed in Schedule 5.18
is under audit or to the knowledge of the Seller Entities, under investigation
by the Internal Revenue Service or the U.S. Department of Labor or any other
governmental body, and no completed audit or investigation of any such Plan, if
any, has resulted in the imposition of any tax or penalty. To the knowledge of
the Seller Entities, no Multiemployer Plan listed in Schedule 5.18 is under
audit or under investigation by the Internal Revenue Service or the U.S.
Department of Labor or any other governmental body, and no completed audit or
investigation of any such Plan, if any, has resulted in the imposition of any
tax or penalty.
40
Section 5.19. Environmental Compliance. Except as set
forth in Schedule 5.19:
(a) (i) Hazardous Substances have not been generated, used, treated,
handled, stored, released or disposed of, on, at, from, under or about any
property or facility now or previously owned, operated or occupied by any
Seller Entity or any of its affiliates and used in connection with such Seller
Entity's or its affiliate's business (or any of their predecessors) (the
"Premises"), or transported, by any Seller Entity, or, to the knowledge of the
Seller Entities, by any other party, to or from such Premises, (ii) the
activities, operations and business carried out at or on the Premises by the
Seller Entities, their affiliates and, to the knowledge of the Seller Entities,
their predecessors, including, but not limited to, the businesses conducted at
the Premises or any past or ongoing alterations or improvements at the Premises
is, and has been at all times in compliance with all Environmental Laws, and
with all agreements with governmental agencies, court orders, and
administrative orders regarding Environmental Laws and Environmental Conditions
at or relating to the Premises, and (iii) no further action is required to
remedy any Environmental Condition or the violation of any Environmental Law.
(b) There are no pending (except for pending proceedings with respect
to which process has not been served on any Seller Entity), and no Seller
Entity is aware of any threatened, litigations or proceedings before any
Governmental Body in which any person or entity alleges the violation of any
Environmental Law, or any Environmental Condition at, from or caused by
operations now or previously conducted at the Premises or by the Businesses,
and no Seller Entity has (i) received any notice of and has no actual or
constructive knowledge that any third party, Governmental Body or any employee
or agent thereof, has determined or has alleged, threatens to determine or
requires an investigation to determine that there exists any Environmental
Condition or any violation of any Environmental Law or the presence, release,
threat of release, or placement on, at, under or about the Premises, or the
use, handling, manufacturing, generation, production, storage, treatment,
processing, transportation or disposal of any Hazardous Substances on, at,
under, from or about the Premises; (ii) received any notice under the citizen
suit provision of any Environmental Law in connection therewith; or (iii)
received any request for inspection or
41
request for information, notice, demand, administrative inquiry or any formal
or informal complaint or claim with respect to or in connection with any
Environmental Condition or any Environmental Law, including, without
limitation, any Environmental Law referring or relating to Hazardous Substances
relating to the Premises or any facilities, operations or activities conducted
thereon or any business conducted by any Seller Entity or any of its affiliates
or any of their predecessors.
(c) No Lien has been imposed or asserted on any assets of any Seller
Entity by any Governmental Body or other person in connection with any
Environmental Law or Environmental Condition.
(d) Each Seller, CIPC and its subsidiaries (i) has all Permits
required pursuant to any Environmental Laws necessary for its activities and
operations of its Business and for any past or ongoing alterations or
improvements at any Premises, (ii) is not in violation of any such Permits and
has applied for renewals where necessary and (iii) such Permits are assignable
to Acquisition Corp.
(e) No storage tanks have been installed or otherwise placed by any
Seller Entity on, at, under or about any Premises or on any adjoining property.
To the knowledge of the Seller Entities, no storage tanks presently exist on,
at, under or about any Premises, or previously existed on, at, under or about
any Premises or on any adjoining property.
(f) The Seller Entities have heretofore delivered or made available to
the Purchaser Entities copies of all documents, records, and information in the
possession or control or, to knowledge of the Seller Entities (without any duty
to make inquiries of third parties or undertake environmental studies),
available to the Seller Entities concerning Environmental Conditions relevant
to its business, the Premises, any predecessors and/or any facilities or
operations of its business, whether generated by a Seller Entity or others,
including, without limitation, environmental audits, environmental risk
assessments, or site assessments of the Premises and/or any adjacent property
or other property in the vicinity of any Premises owned or operated by any
Seller Entity or others, documentation regarding offsite disposal of Hazardous
Substances, reports and correspondence (the "Environmental Documents").
42
(g) To the knowledge of each of the Seller Entities, the Businesses
have been operated in compliance with all Governmental Rules regarding
so-called noise pollution. Each of the Sellers, CIPC and its subsidiaries has
all Permits required pursuant to any applicable Governmental Rules necessary
for its activities and operations of its Business, is not in violation of any
such Permits and has applied for renewals where necessary and such Permits are
assignable to Acquisition Corp. There are no pending (except for pending
proceedings with respect to which process has not been served on any Seller
Entity), and no Seller Entity is aware of any threatened, litigations or
proceedings before any Governmental Body in which any person or entity alleges
the violation of any Governmental Rule regarding noise or seeks,
directly or indirectly, to revoke or limit the relevant Permits or the
activities of the Businesses with respect to such matter.
Section 5.20. Insurance. Each Seller, CIPC and each of CIPC's
subsidiaries reasonably believes that it has adequate insurance coverage for
the Assets and operations of its Business. Set forth on Schedule 5.20 is a
complete and correct list of all policies of insurance carried by each Seller,
CIPC and each of its subsidiaries or pursuant to which such party is named
beneficiary or pursuant to which the Assets or the Businesses are insured for
the past five years and a brief description of each such policy, including,
without limitation, the identification of the insured, the amount and purpose
of the insurance and the amount of the deductible. True and complete copies of
all such policies have been delivered or made available to the Purchaser
Entities. All of such policies are in full force and effect; all premiums due
and payable in respect of such policies have been paid in full; and there
exists no default or other circumstance which, to the knowledge of any Seller
Entity, would create the substantial likelihood of the cancellation or
non-renewal of any such policy. The Seller Entities have notified such insurers
of any claim known to them which they believe is covered by any such insurance
policy and has delivered or made available to the Purchaser Entities a copy of
any such claim.
Section 5.21. Accounts Receivable. All accounts receivable of the
Businesses arose from bona fide transactions in the ordinary course of
business, represent credit extended in a manner consistent with the historic
trade and credit practices of the Businesses and are reserved against in
accordance with GAAP.
43
Section 5.22. Transactions with Affiliates. Except as set forth in
Schedule 5.22, neither CIPC, nor any of its subsidiaries nor any Seller is, and
for the past year has not been, a party to, bound by, benefited from, or
obligated under, any agreements, understandings, indebtedness, obligation or
any other transaction with any Seller Entity, its subsidiaries or affiliates,
except for such agreements, understandings, indebtedness, obligation or
transaction entered into or incurred on an arm's length basis in the ordinary
course of business and consistent with past practice.
Section 5.23. Finder's Fees. No Seller Entity has incurred
any liability for finder's or brokerage fees or agent's
commissions in connection with this Agreement or the transactions
hereby contemplated.
Section 5.24. Absence of Certain Business Practices. Except where such
practices would not be in contravention of applicable laws, regulations and
agreements, (a) all tickets sold in connection with the operation of the
Businesses are sold solely through recognized ticket outlets or the Businesses
themselves, and not through ticket brokers or scalpers, and (b) no Seller
Entity authorizes, or, after due inquiry upon the appropriate key employees of
the Businesses, is aware of, the withholding of any tickets from public on-sale
availability for the purpose of making such tickets available to ticket brokers
or scalpers.
Section 5.25. Certain Payments. Except as set forth on Schedule 5.25,
neither any Seller, nor CIPC nor any of its subsidiaries, nor any of the
Principals, nor, to the knowledge of any Seller Entity, any director, officer,
agent, partner or employee thereof or any other person associated with or
acting for or on behalf of such Seller Entity (other than any of the
Principals) has directly or indirectly (a) made or agreed to make any
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment (whether in cash or otherwise) to any person, private or public,
regardless of form, whether in money, property, or services, in violation of
any applicable law, rule or regulation (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already
obtained, for or in respect of any Seller Entity or (iv) to pay for any
lobbying or similar services or
44
(b) established or maintained any fund or asset that has not been recorded in
the books and records of such Seller Entity.
Section 5.26. [RESERVED].
Section 5.27. Disclosure. No representations or warranties made by the
Seller Entities in this Agreement and no statement contained in any Document
(including, without limitation, the Schedules hereto), certificate, or other
writing to be executed and delivered by any of the Seller Entities pursuant to
the provisions hereof or the transactions contemplated hereby, contains or will
contain any untrue statement of material fact, or omits to state any material
fact necessary in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
Section 5.28. Affiliated Party Transactions. Except as set forth on
Schedule 5.28, neither the Principals nor any director or officer of the
Sellers or CIPC, nor any of their respective affiliates (i) has any ownership
interest, directly or indirectly, in any competitor, supplier or customer of
any of the Sellers or CIPC or any of their subsidiaries; (ii) has any
outstanding loan or other extension of credit to or from any of the Sellers or
CIPC or any of their subsidiaries; (iii) is a party to, or has any interest in,
any contract or agreement with any of the Sellers or CIPC or any of their
subsidiaries; or (iv) has engaged in any transaction with any of the Sellers or
CIPC or any of their subsidiaries during the periods covered by the Financial
Statements, other than on an arm's length basis in the ordinary course of
business and consistent with past practice.
Section 5.29. Accredited Investors.
(a) Each Principal acquiring shares of the Preferred Stock, or, if the
Spin-off occurs, acquiring shares of the Class A Stock, is acquiring such stock
for its own account, for investment only and not as nominee or agent and not
with a view to, or for sale in connection with, a distribution of the Preferred
Stock or the Class A Stock, as the case may be, and with no present intention
of selling, transferring, granting a participation in or otherwise
distributing, the Preferred Stock or the Class A Stock, all within the meaning
of the Securities Act and any applicable state, securities or blue-sky laws,
except (i) pursuant to an effective registration statement under the
45
Securities Act or (ii) in compliance with Rule 144 under the Securities Act.
(b) None of the Principals is a party or subject to or bound by any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge the Preferred Stock or the Class A Stock to any person, and
has no present intention to enter into such a contract, undertaking, agreement
or arrangement.
(c) Each of the Principals is an "accredited investor" as defined in
Regulation D under the Securities Act.
(d) Respecting SFX, its business, plans and financial condition, and
any other matters relating to the shares of Preferred Stock or Class A Stock:
the Principals have received all materials which have been requested by the
Principals; have had a reasonable opportunity to ask questions of SFX and its
representatives; and SFX has answered all inquiries that the Principals or the
Principals' representatives have put to it. The Principals have had access to
all additional information necessary to verify the accuracy of the information
set forth in this Agreement and any other materials furnished herewith, and
have taken all the steps necessary to evaluate the merits and risks of
ownership of the Preferred Stock and/or Class A Stock.
(e) Each Principal or its representatives has such knowledge and
experience in finance, securities, investments and other business matters so as
to be able to protect the interests of such Principal in connection with this
transaction, and each Principal's investment in the Preferred Stock and/or the
Class A Stock hereunder is not material when compared to such Principal's total
financial capacity.
(f) Each Principal understands the various risks of an investment in
the Preferred Stock and/or the Class A Stock as proposed herein and can afford
to bear such risks, including, but not limited to, the risks of losing the
entire investment.
46
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SFX
SFX represents and warrants to the Seller Entities that:
Section 6.01. Organization, Good Standing and Qualification. SFX is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly licensed or qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the nature of the business transacted by it or the character of the property
owned or leased by it makes such licensing or qualification by it necessary,
other than in such jurisdictions where the failure so to qualify would not,
individually or in the aggregate, have a Material Adverse Effect on SFX and its
subsidiaries, taken as a whole.
Section 6.02. Authority. SFX has all requisite corporate power and
authority to own and operate its properties and to carry on its business as it
is now being conducted and to execute and deliver this Agreement and each of
the Documents to which it is or will be a party, and to perform its obligations
hereunder and thereunder. The execution and delivery by SFX of this Agreement
and each of the Documents to which it is a party and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action of SFX. This Agreement constitutes, and each of
the Documents upon execution and delivery thereof will constitute, the legal,
valid and binding obligations of SFX, in each case enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency and similar laws
affecting the rights and remedies of creditors and secured parties generally
and general principles of equity.
Section 6.03. No Default; Non-Contravention. SFX is not in violation
of any term of its Certificate of Incorporation or its By-laws. Neither the
execution and delivery of this Agreement and all of the Documents nor the
consummation of the transactions hereby and thereby contemplated shall (a)
constitute any violation or breach of the Certificate of Incorporation or
By-laws of SFX, (b) except as listed in Schedule 6.03 hereto, (i) constitute a
default under or a breach of, or result in acceleration of any obligation
under, any provision of any contract, lease, mortgage or other instrument to
which it is a
47
party or by which any of its assets may be affected or secured, which default,
breach or acceleration has not been waived; (ii) violate any Governmental Rule
affecting SFX or any of its assets; (iii) result in the creation of any Lien on
any of the assets or properties of SFX; or (iv) result in the termination of
any license, franchise, lease or permit to which SFX is a party or by which it
is bound, except in the case of those items specified in clause (b) above which
would not, individually or in the aggregate, limit the ability of SFX to
consummate the transactions hereby contemplated or have a Material Adverse
Effect on SFX and its subsidiaries taken as a whole.
Section 6.04. Consents and Approvals. Except for the filing of the
Certificate of Merger and the filing and the termination of the waiting period
under the HSR Act, and except as set forth on Schedule 6.04, no authorization,
approval, order, license, permit, franchise or consent, and no registration,
declaration, notice or filing by or with any Governmental Body and no consent
by or from any third party is required in connection with the execution and
delivery by SFX of this Agreement and the other Documents to which it is a
party and the consummation by it of the transactions contemplated hereby and
thereby, except such consents as shall have been obtained on or prior to the
Closing Date.
Section 6.05. Capitalization. (a) All of the issued and outstanding
shares of SFX Class A Stock, SFX Class B Stock and SFX Preferred Stock, when
issued, will be duly authorized and validly issued and fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(b) SFX owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of its significant subsidiaries,
free and clear of all Liens, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. As of the date
of this Agreement, no significant subsidiary of SFX has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character with any party that is not a direct or indirect subsidiary of
SFX calling for the purchase or issuance of any shares of capital stock or any
other equity security of such significant subsidiary or any securities
48
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such significant subsidiary.
(c) The shares of Class A Stock or Preferred Stock to be issued to the
Principals in accordance with Section 3.04 hereof, when so issued, will be
validly issued, fully paid and nonassessable, free of preemptive rights and
with no personal liability attaching to the ownership thereof.
(d) The Purchaser Entities have no reason to believe that the
materials provided to the Seller Entities entitled "Presentation to SFX
Broadcasting, Inc. regarding SFX Entertainment, Inc.," dated November 14, 1997,
which materials were prepared by ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., are not true and correct
in all material respects.
Section 6.06. Litigation. Except as set forth on Schedule 6.06, (i)
there are no legal actions, suits, proceedings, arbitrations, controversies or
investigations (whether or not purportedly on behalf of or against any
Purchaser Entity) pending or, to the knowledge of SFX, threatened or
contemplated, by any Governmental Body or other party against any Purchaser
Entity in any way relating to or affecting the transactions contemplated by
this Agreement and (ii) none of the Purchaser Entities is a party to or subject
to any judgment, order, writ, injunction or decree in any way relating to or
affecting the transactions contemplated by this Agreement.
Section 6.07. Compliance with Laws. Except as set forth on Schedule
6.07, each Purchaser Entity is in compliance in all material respects with all
applicable Governmental Rules required to be complied with in order to allow it
to continue to carry on its businesses and use its assets as now being
conducted and used by it and to consummate transactions hereby contemplated. No
Purchaser Entity has received any written notification of, or is aware of, any
asserted failure to comply with any such Governmental Rules.
Section 6.08. Reports; Examinations. Except where the failure of any
of the following to be true and correct would not, individually or in the
aggregate, have a Material Adverse Effect on SFX: (i) each of SFX and its
affiliates has timely filed all material reports, registrations and statements,
together with any
49
amendments required to be made with respect thereto, that it was required to
file since December 31, 1991 with any Governmental Authority and has paid all
fees and assessments due and payable in connection therewith; (ii) except for
normal examinations conducted by a Governmental Authority in the regular course
of the business of SFX and its subsidiaries, no Governmental Authority has
initiated any proceeding or, to the knowledge of SFX, investigation into the
business or operations of SFX or any of its affiliates since December 31, 1991;
and (iii) there is no unresolved material violation, criticism, or exception by
any Governmental Authority with respect to any report or statement relating to
any examinations of SFX or any of its affiliates.
Section 6.09. Financial Statements. SFX has previously delivered to
the Seller Entities copies of (a) the consolidated balance sheets of the Parent
and its subsidiaries as of December 31, 1995 and 1996 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1994 through 1996, inclusive, as reported in the
Parent's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, filed with the Commission under the Exchange Act, in each case
accompanied by the audit report of Ernst & Young LLP, independent public
accountants with respect to the Parent, and (b) the unaudited consolidated
balance sheets of the Parent and its subsidiaries as of September 30, 1996 and
September 30, 1997 and the related unaudited consolidated statements of income,
changes in shareholders' equity and cash flows for the nine-month periods then
ended as reported in the Parent's Quarterly Report on Form 10-Q for the period
ended September 30, 1997, filed with the Commission under the Exchange Act. The
December 31, 1996 consolidated balance sheet of the Parent (including the
related notes, where applicable) fairly presents the consolidated financial
position of the Parent and its subsidiaries as of the date thereof, and the
other financial statements referred to in this Section 6.09 (including the
related notes, where applicable) fairly present the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of the Parent and its subsidiaries for the respective fiscal periods
or as of the respective dates therein set forth; each of such statements
(including the
50
related notes, where applicable) comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto; and each of such statements (including
the related notes, where applicable) has been prepared in accordance with GAAP,
except in the case of unaudited statements, as permitted by Form 10-Q. The
books and records of the Parent and its subsidiaries have been, and are being,
maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions.
Section 6.10. No Material Adverse Change. As of the date hereof,
except as disclosed on Schedule 6.10 or as otherwise permitted hereunder, since
September 30, 1997, there has not been (a) any material adverse change in the
business, assets, prospects, financial condition or results of operations of
the Parent or its subsidiaries, (b) any damage, destruction or loss, whether or
not covered by insurance, which has materially adversely affected the business
or assets of the Parent or its subsidiaries or (c) any event or condition of
any character whatsoever, the occurrence of which affects or threatens to
affect, the business, assets, prospects, financial condition or results of
operations of the Parent or its subsidiaries.
Section 6.11. Acquisition Corp. On the Closing Date, (i) Acquisition
Corp. will be a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; (ii) will be duly licensed or
qualified to do business as a foreign corporation and in good standing in each
jurisdiction in which the nature of the business transacted by it or the
character of the property owned or leased by it makes such licensing or
qualification by it necessary, other than in such jurisdictions where the
failure so to qualify would not, individually or in the aggregate, have a
Material Adverse Effect on Acquisition Corp.; (iii) Acquisition Corp. will have
the corporate power and authority to execute and deliver the Employment
Agreements and perform its obligations thereunder, and to take all other
actions required to be taken by it pursuant to the provisions thereof; (iv) the
execution, delivery and performance of the Employment Agreements will have been
duly authorized by any and all necessary corporate action of Acquisition Corp.;
(v) the Employment Agreements will constitute legal, valid and binding
obligations of Acquisition Corp. enforceable in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy and
other laws affecting the enforceability of creditors' rights generally or laws
governing the availability of specific performance or other
51
equitable remedies; (vi) the execution and delivery of the Employment
Agreements and the performance of Acquisition Corp.'s obligations thereunder
shall not constitute any violation or breach of the Certificate of
Incorporation or By-laws of Acquisition Corp.; (vii) Acquisition Corp. will not
conduct any business nor will have any operating assets except as contemplated
hereby; and (viii) SFX will have good and valid title to all of the issued and
outstanding shares of Acquisition Corp.
ARTICLE VII
PRE-CLOSING COVENANTS OF THE SELLER ENTITIES
Each of the Seller Entities, jointly and severally, agrees that,
subsequent to the date hereof and until the Closing:
Section 7.01. Conduct of Business. Except as otherwise consented to or
approved by SFX in writing and except as otherwise agreed to or disclosed on
the Schedules attached to this Agreement, each of the Seller Entities shall:
(a) operate the Assets and the Businesses in the ordinary course and
consistent with prior practice and use all reasonable efforts to (i) preserve
the present business organization of each Seller, CIPC and its subsidiaries
intact, (ii) keep available the services of the present officers of each
Seller, CIPC and its subsidiaries, (iii) preserve the present relationships of
each Seller, CIPC and its subsidiaries with employees and independent
contractors (except to the extent of voluntary terminations of employment and
fluctuations of business in the ordinary course of business), customers,
patrons and suppliers of its Business, (iv) maintain in force, and renew upon
expiration, all insurance policies with respect to its assets and its Business,
as the same have been previously represented to SFX and (v) maintain in effect
all Permits;
(b) maintain its books, accounts and records with respect to its
Business, in the usual and ordinary manner, and reflect income, expenses,
assets and liabilities with respect to its Business in a manner consistent with
its past practices; and
52
(c) maintain its assets in good repair, order and condition and
consistent with prior practice, reasonable wear and tear excepted.
Section 7.02. Extraordinary Acts. Without limiting the general
applicability of Section 7.01 hereof, except as otherwise consented to or
approved by SFX in writing or disclosed on the Schedules attached to this
Agreement, no Seller Entity shall take any action which shall cause any Seller,
CIPC or any of its subsidiaries to,
(a) fail to maintain its status as a corporation, limited partnership
or Trust subsisting under the laws of its state of incorporation or
organization;
(b) except as otherwise expressly permitted hereunder, declare or
make any dividend or any distribution or transfer of any of its assets or
properties;
(c) make any capital expenditures or commitments for capital
expenditures, including any capitalized lease obligations (for purchase of
equipment or otherwise), in excess of $50,000, or enter into or commit to enter
into any operating lease in connection with its Business for any property or
equipment calling for net increased rentals in excess of five percent annually
per lease (over present rentals), or acquire any assets or properties in
connection with its Business or contract to do so except in the ordinary course
of business and consistent with past practice;
(d) make any advance or investment either by purchase of stock or
other securities or contributions to capital of any individual, firm,
corporation or other entity;
(e) incur any obligation or Liability relating to its Business, other
than those obligations and Liabilities arising in the ordinary course of
business and consistent with past practice (and, in the case of obligations and
Liabilities of an affiliate, which are also on terms no less favorable to such
Seller Entity than would be available from an unaffiliated third party) and the
terms and conditions of this Agreement and of the same character, type and
magnitude as incurred in the past, or accelerate the payment of any Liability;
provided, however, that nothing herein shall be deemed to prevent any Seller
Entity from performing its
53
obligations under that certain Agreement, dated as of January 1, 1996, by and
between Contemporary Marketing, Inc. (a wholly-owned subsidiary of CIPC) and
▇▇▇▇▇ ▇▇▇▇▇▇ (the "▇▇▇▇▇▇ Agreement"), as the same may be amended substantially
on the terms set forth in part (e) of Schedule 7.02.
(f) purchase, sell, assign or transfer or enter into any contract or
agreement for the purchase, sale, assignment or transfer of any of the assets
or properties relating to its Business which are valued in excess of $50,000,
or cancel any debts or claims, other than in the ordinary course of business
and consistent with past practice, other than a sale of Contemporary Sports'
interest in USA Sports in accordance with Sections 3.04(c) and 7.05 hereof;
(g) subject to a Lien any assets relating to its Business, other than
Permitted Liens;
(h) waive any rights of substantial value relating to its assets,
properties or Business, whether or not in the ordinary course of business;
(i) make or suffer, or agree to make or suffer, any new material
contract or agreement relating to its assets, properties or Business or any
amendment, modification or termination of any existing material contract, lease
or other agreement relating to its assets, properties or Business, except in
the ordinary course of business and consistent with past practice and in any
event not requiring a payment in excess of $50,000, other than talent contracts
(which shall not be limited by such $50,000 payment limitation);
(j) make or enter into any salary adjustments or bonus payment or
arrangement with any of its employees, officers or agents or grant any increase
in the compensation or fringe benefits (whether or not provided under or
pursuant to a Plan) of any employee or officer, except for ordinary and regular
course changes (not exceeding an increase in excess of five percent annually
over such employee's or officer's aggregate cash compensation paid with respect
to the prior year) due to changes in responsibilities of any such officer or
employee, or take any action that results in a material increase in the cost of
any Plan;
54
(k) change any of its business policies, including, without
limitation, advertising, marketing policy, purchasing, payment, collection,
budget or other material policies, or terminate any of its operations;
(l) alter or revise the accounting principles, procedures, methods or
practices relating to the Business or any of the assets or liabilities with
respect thereto, including, without limitation, the creation or modification of
any reserves other than as required by GAAP;
(m) dispose of or permit to lapse any Intellectual Property which
comprises a part of its assets or which is used by or in its Business;
(n) enter into any agreements or arrangements or engage in any
transaction with any other Seller Entity or its affiliates, except for such
agreements, arrangements or transactions entered into on an arm's length basis
in the ordinary course of business and consistent with past practice;
(o) create, suffer or incur any damage, destruction or loss (whether
or not covered by insurance) or any other event or condition of any character
which would have a Material Adverse Effect on its assets, properties or
Business;
(p) fail to maintain in full force and effect each Plan in which any
of its employees participate and timely make all required contributions thereto
and administer each such Plan in accordance with its terms and all applicable
laws;
(q) authorize for issuance, issue, or sell any shares of its capital
stock or other securities, acquire directly or indirectly, by redemption or
otherwise, any such capital stock, reclassify or split-up any such capital
stock, or grant or enter into any options, warrants, calls or commitments of
any kind with respect thereto;
(r) make any Tax election or enter into any agreement or settlement
with any Tax Authority that affects or could affect the basis for Tax purposes
of its assets or the timing for Tax purposes of income or deduction;
55
(s) except with respect to the items described on Schedule 2.02,
assume, incur or guarantee any indebtedness for borrowed money or any other
interest bearing obligation or lend or advance any amount to any person or
entity, other than advance payments in connection with goods or services to be
provided to a Business and in the ordinary course of business, consistent with
past practice; or
(t) agree, whether in writing or otherwise, to take any
action described in this Section 7.02.
Section 7.03. No Breach of Representations and Warranties. None of the
Seller Entities shall intentionally take any action or intentionally refuse to
take any action which would cause or constitute a material breach of any of the
representations and warranties set forth in Article V hereof. Each of the
Seller Entities shall, in the event of, or promptly after the occurrence of, or
promptly after obtaining knowledge of the occurrence of or the impending or
threatened occurrence of, any fact or event which would cause or constitute a
breach of any of the representations and warranties set forth in Article V
hereof at any time after the date hereof and through the Closing Date, give
detailed notice thereof to SFX and shall use its best efforts to prevent or
promptly to remedy such breach.
Section 7.04. Access by SFX. The officers, employees and
representatives of SFX (collectively, the "Purchaser Representatives") shall be
permitted access, during usual business hours and as often as may be reasonably
requested (provided that such access does not unreasonably interfere with the
operation of the Businesses), to, and will be permitted to make copies of and
extracts from, the accounts, minute books, other records, books of account,
other books, deeds, leases, title documents, insurance policies, contracts,
commitments, sale orders, purchase orders, Tax Returns, records, files and such
other information relating to the Sellers, CIPC and its subsidiaries, the
Assets and the Businesses as SFX shall reasonably request. The Purchaser
Representatives shall be permitted access, during usual business hours, and as
often as may be reasonably requested, to the Premises and physical properties
used in connection, in whole or in part, with or by the Seller Entities in
connection with the operation of the Businesses. The Purchaser Representatives
shall be permitted to discuss the affairs, finances and accounts of the
Sellers, CIPC
56
and its subsidiaries with officers and key employees and, with
the consent of the Seller Entities (which consent shall not be unreasonably
withheld or delayed), with distributors, sales representatives, licensees,
licensors, suppliers and customers of the Businesses.
Section 7.05. No Solicitation. No Seller Entity shall, nor shall any
Seller Entity permit any of its affiliates, officers, directors,
representatives or agents to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information) any person, entity or
group concerning any merger, business combination, sale of a significant amount
of assets outside of the ordinary course of business, sale of shares of capital
stock outside of the ordinary course of business or similar transaction
involving any Seller Entity, its assets or business or any of its subsidiaries
or divisions or involving any of the Sellers, CIPC or its subsidiaries (an
"Acquisition Transaction"), other than the transactions contemplated by this
Agreement; provided, however, that any of the Seller Entities may participate
in negotiations with or furnish information to a third party which has
initiated contact with such Seller Entity with respect to an Acquisition
Transaction if and to the extent such action is required in satisfaction of the
fiduciary obligations of its Board of Directors under applicable law, as set
forth in a written opinion of legal counsel to such Board. Each of the Seller
Entities shall promptly advise SFX of any such proposals or inquiries regarding
an Acquisition Transaction presented to such Seller Entity, including the terms
thereof; and provided further, however, that the foregoing shall not in any way
limit or restrict the ability of CIPC or the efforts of its officers, employees
and agents from seeking a buyer for USA Sports or Contemporary Sports' interest
therein, except that the Seller Entities shall be obligated to keep SFX
currently apprised of, and consult with SFX with respect to, all developments
in connection with any discussions and negotiations regarding the sale of USA
Sports (or Contemporary Sports' interest therein) and CIPC shall not, and the
Principals shall not permit CIPC to, sell USA Sports or Contemporary Sports'
interest therein in a transaction other than an acquisition thereof for cash,
without the prior written consent of SFX, which consent shall not be
unreasonably withheld or delayed.
Section 7.06. HSR Act. The Seller Entities shall file promptly (if
such filing has not been made prior to the date
57
hereof), and in no event later than December 22, 1997, with the United States
Department of Justice and the United States Federal Trade Commission its
pre-merger notification report forms and any other information and documents
required under the HSR Act in connection with the transactions contemplated
hereby and shall promptly notify SFX of any communications in respect of either
filing from the Department of Justice or the Federal Trade Commission. The
Seller Entities shall promptly furnish to SFX (a) copies of all pleadings,
notices or other communications received by them that relate to the
transactions contemplated by this Agreement and (b) all other information in
their possession as may be necessary for completion of the reports or
notifications to be filed by SFX under the HSR Act with respect to the
transactions contemplated hereby.
Section 7.07. Consents; Notices; Termination. The Seller Entities
shall use their best efforts (which shall not require payments of money to
third parties) to obtain and deliver to SFX written consents, in form and
substance reasonably satisfactory to SFX required in connection with this
Agreement or the transactions hereby contemplated. The Seller Entities shall
also deliver all notices to third parties required to be delivered in
connection with the execution of this Agreement and the transactions hereby
contemplated.
Section 7.08. Certain Payments;Assumption of Certain Liabilities. At
or prior to the Closing, the Seller Entities shall satisfy out of the cash
proceeds of the Asset Acquisition and the Merger or out of the cash to which
they are entitled in accordance with provisions of Sections 3.08 and 4.02(a)
hereof and/or, in the case of the matters set forth in clause (c) of this
Section 7.08, the Sellers and/or the Principals shall assume:
(a) their expenses incurred in connection with the
transactions contemplated hereby (including, without limitation,
attorneys' fees and expenses);
(b) all monetary Liens on the assets of the Sellers and CIPC and their
respective subsidiaries being acquired hereunder by the Purchaser Entities,
other than Permitted Liens which are incurred or arise out of the conduct of
any Business after December 31, 1997 in the ordinary course of business and
58
consistent with past practice and other than Liens related to leased personal
property, leased cars and leased equipment; and
(c) all other liabilities and obligations of CIPC and its
subsidiaries of the type defined as Excluded Liabilities under
Section 4.04 hereof.
Section 7.09. Best Efforts. Each of the Seller Entities shall use
their best efforts to effectuate the transactions hereby contemplated and to
fulfill the conditions to the obligations of the Purchaser Entities under
Article IX of this Agreement.
Section 7.10. WARN Act. None of the Seller Entities shall effectuate a
"plant closing" or "mass layoff," as those terms are defined in WARN or take
any action that causes, or could reasonably be expected to cause, liability
under any other Governmental Rule affecting any site of employment facility,
operating unit or employee of any Business.
Section 7.11. S-Election. Prior to the Closing, but in no event later
than March 16, 1998, the Trusts (or Schankman or ▇▇▇▇▇▇▇▇▇, if they then own
the CIPC Stock), as the sole shareholders of CIPC, will file with the Internal
Revenue Service and all other appropriate state and local Tax Authorities a
notice revoking the Election made by CIPC to be treated as subchapter "S"
corporation under the Code; provided, however, that if the Closing shall not
have occurred on or prior to March 16, 1998, then the Trusts (or Schankman or
▇▇▇▇▇▇▇▇▇, if they then own the CIPC Stock) may, in their sole discretion,
determine whether or not to make such filings.
Section 7.12. ERISA. The Seller Entities shall, at their sole cost and
expense, (i) file, or shall cause to be filed, with the Internal Revenue
Service, requests for a favorable determination letter from the Internal
Revenue Service with respect to the 401(k) Plan and (ii) shall cure any
qualification defects relating to the 401(k) Plan.
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ARTICLE VIII
PRE-CLOSING COVENANTS OF SFX
SFX agrees that, subsequent to the date hereof and until the Closing:
Section 8.01. No Breach of Representations and Warranties. SFX shall
not intentionally take any action or intentionally refuse to take any action
which would cause or constitute a material breach of any of the representations
and warranties set forth in Article VI hereof. SFX shall, in the event of, or
promptly after the occurrence of, or promptly after obtaining knowledge of the
occurrence or the impending or threatened occurrence of, any fact or event
which would cause or constitute a breach of any of the representations and
warranties set forth in Article VI hereof at any time after the date hereof and
through the Closing Date, give detailed notice thereof to the Seller Entities
and SFX shall use its best efforts to prevent or promptly to remedy such
breach.
Section 8.02. HSR Act. SFX shall promptly file (if such filing has not
been made prior to the date hereof), and in no event later than December 22,
1997, with the United States Department of Justice and the United States
Federal Trade Commission its pre-merger notification report forms and any other
information and documents required under the HSR Act in connection with the
transactions contemplated hereby and shall promptly notify the Seller Entities
of any communications with respect to the Merger or the Asset Acquisition in
respect of either filing from the Department of Justice or the Federal Trade
Commission. SFX shall promptly furnish to the Seller Entities (a) copies of all
pleadings, notices or other communications received by it that relate to the
transactions contemplated by this Agreement and (b) all other information in
their possession as may be necessary for the completion of the reports or
notifications to be filed by the Seller Entities under the HSR Act with respect
to the transactions contemplated hereby.
Section 8.03. Consents and Approvals; Notices. SFX shall use its best
efforts to obtain and deliver to the Seller Entities written consents, in form
and substance reasonably satisfactory to the Seller Entities, required in
connection with this Agreement or the transactions hereby contemplated. SFX
shall also deliver all notices to third parties required to be
60
delivered in connection with the execution of this Agreement and the
transactions hereby contemplated.
Section 8.04. Governing Documents. SFX shall not amend its Certificate
of Incorporation or By-laws or other governing instrument in a manner that
would adversely affect the ability of SFX to consummate the transactions
contemplated hereby.
Section 8.05. Best Efforts. SFX shall use its best efforts to
effectuate the Spin-off, the transactions hereby contemplated and to fulfill
the conditions to the Seller Entities' obligations under Article X of this
Agreement.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SFX
All obligations of SFX under this Agreement are subject to the
fulfillment, at or prior to the Closing, of each of the following conditions,
any or all of which may be waived in whole or in part by SFX in their sole
discretion:
Section 9.01. Representations and Warranties. The representations
and warranties of each of the Seller Entities contained in Article V hereof
and elsewhere herein, if specifically qualified by materiality, shall be true
and correct and, if not so qualified, shall be true and correct in all material
respects in each case as of the Closing Date, as though such representations
and warranties were made on and as of such date, except for those
representations and warranties which are expressly made as of a specified
earlier date.
Section 9.02. Covenants. The Seller Entities shall have performed and
complied in all material respects with all agreements, covenants and conditions
on their part required by this Agreement to be performed or complied with on or
prior to the Closing Date.
Section 9.03. Officer's Certificate. SFX shall have received a
certificate of the Co-Presidents of each of the Sellers and CIPC and a
certificate of each Principal, dated the Closing Date, certifying to the
fulfillment of the conditions specified in Sections 9.01 and 9.02 hereof.
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Section 9.04. Opinion of Counsel. SFX shall have received an opinion
of counsel for the Seller Entities, dated the Closing Date, in form and
substance reasonably acceptable to SFX and its counsel.
Section 9.05. Governmental Consents. SFX shall have received (in form
and substance reasonably satisfactory to them) all approvals set forth in
Schedule 6.04 from all Governmental Bodies in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions hereby contemplated.
Section 9.06. HSR Act. The Seller Entities shall have made all
pre-merger notification filings required to be made by it under the HSR Act,
all applicable waiting periods thereunder shall have expired or been terminated
without any request from any appropriate governmental agency for additional
information or, if additional information has been requested, all applicable
extended waiting periods shall have expired.
Section 9.07. Legality. No change shall have occurred in any law, rule
or regulation which would prohibit the performance of the obligations of the
Purchaser Entities under Articles II, III and IV hereof.
Section 9.08. Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of the obligations of the Purchaser Entities under
Article II or Article III hereof. No statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any Governmental Body of competent jurisdiction which prohibits the
consummation of the Merger or the Asset Acquisition.
Section 9.09. Contract Consents. The Seller Entities shall have
obtained all necessary consents and approvals to the transactions contemplated
hereby under the agreements listed on Schedule 5.06, which consents shall be in
form and substance reasonably acceptable to SFX, except where the failure to
obtain such consent or approval would not so materially and adversely affect
the economic or business benefits to the Purchaser Entities of the transactions
contemplated by this Agreement so as
62
to render inadvisable, in the good faith judgment of SFX, the consummation of
such transactions.
Section 9.10. Institution of Proceedings. There shall not have been
instituted by any third party any suit or proceeding to restrain or invalidate
this Agreement or the transactions hereby contemplated or seeking damages from
or to impose obligations upon any of the Purchaser Entities by reason of this
Agreement or the transactions hereby contemplated which, in the good faith
judgment of SFX, would involve expenses or lapse of time that would be
materially adverse to the interests of the Purchaser Entities.
Section 9.11. Title Insurance. A reputable title insurer and such
co-insurers and/or reinsurers as SFX shall reasonably require shall, at the
Closing, deliver an owner's policy of title insurance for each Real Property
owned, in whole or in part, directly or indirectly, by any Seller Entity in the
aggregate amount equal to the greater of the appraised value or assessed value
of such Real Property, at its standard rates, with nonimputation endorsement
and survey coverage insuring Acquisition Corp. as fee owner of such Real
Property, subject only to, and free and clear of, all Liens other than
Permitted Liens and those encumbrances disclosed on Schedule 5.08. The Sellers
shall take such actions, and deliver such affidavits and instruments, as may be
required to cause the title company to issue such insurance.
Section 9.12. Employment Agreements. Acquisition Corp.
shall have entered into employment agreements with each of
Schankman and ▇▇▇▇▇▇▇▇▇, substantially in the form thereof
attached hereto as Exhibit B and neither Schankman nor ▇▇▇▇▇▇▇▇▇
shall have indicated any intent to leave Acquisition Corp.'s
employ.
Section 9.13. FIRPTA Certificates. Each Seller Entity shall have
delivered to Acquisition Corp. a certificate which states, under penalty of
perjury, the taxpayer identification number and office address of each
transferor of Real Property as well as a statement that such transferor is not
a "foreign person" within the meaning of Section 1445(f)(3) of the Code.
Section 9.14. Merger. The Certificates of Merger shall have been filed
by the Secretary of State of the State of
63
Delaware and the Secretary of State of the State of Missouri and the Merger
shall have been consummated.
Section 9.15. Leases. The Sellers shall use their best efforts to
deliver estoppel certificates in form and substance reasonably acceptable to
the Purchaser Entities from each landlord under a lease, and shall use their
best efforts to deliver estoppel certificates and non-disturbance and/or
recognition agreements from each mortgagee or superior lessor of a leased
property relating to the Sandstone Amphitheatre, the Westport Playhouse and the
American Theatre.
ARTICLE X
CONDITIONS TO THE OBLIGATIONS
OF THE SELLER ENTITIES
The obligations of the Seller Entities to consummate the Merger and
the Asset Acquisition are subject to the fulfillment as of the Closing Date of
each of the following conditions, any or all of which may be waived, in whole
or in part, by the Seller Entities in their sole discretion:
Section 10.01. Representations and Warranties. The representations and
warranties of SFX contained in Article VI hereof and elsewhere herein shall, if
specifically qualified by materiality, be true and correct and, if not so
qualified, be true and correct in all material respects in each case on and as
of the Closing Date as though such representations and warranties were made on
and as of such date, except for those representations and warranties which are
expressly made as of a specified earlier date.
Section 10.02. Covenants. Each of the Purchaser Entities shall have
performed and complied in all material respects with all agreements, covenants
and conditions on its part required by this Agreement to be performed or
complied with on or prior to the Closing Date.
Section 10.03. Officer's Certificate. The Seller Entities shall have
received a certificate of the President of each of the Purchaser Entities,
dated the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 10.01 and 10.02 hereof.
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Section 10.04. Opinion of Counsel. The Seller Entities shall have
received an opinion of counsel for the Purchaser Entities, dated the Closing
Date, in form and substance reasonably acceptable to the Seller Entities and
their counsel.
Section 10.05. Governmental Consents. The Seller Entities shall have
received (in form and substance reasonably satisfactory to them) all approvals
set forth in Schedule 5.06 hereto from all Governmental Bodies in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions hereby contemplated.
Section 10.06. HSR Act. The Purchaser Entities shall have made all
pre-merger notification filings required to be made by them under the HSR Act,
all applicable waiting periods thereunder shall have expired or been terminated
without any request from any appropriate governmental agency for additional
information or, if additional information has been requested, all applicable
extended waiting periods shall have expired.
Section 10.07. Legality. No change shall have occurred in any law,
rule or regulation which would prohibit the performance of any of the Seller
Entities' obligations under Articles II, III and IV hereof.
Section 10.08. Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of any of the Seller Entities' obligations under
Article III hereof. No statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Body of competent jurisdiction which prohibits the consummation of
the Merger or the Asset Acquisition.
Section 10.09. Merger. The Certificates of Merger shall have been
filed by the Secretary of State of the State of Delaware and the Secretary of
State of the State of Missouri and the Merger shall have been consummated.
Section 10.10. Contract Consents. The Purchaser Entities shall have
obtained all necessary consents and approvals to the transactions contemplated
hereby under the agreements listed on Schedule 6.04, which consents shall be in
form and substance reasonably acceptable to the Seller Entities, except where
the
65
failure to obtain such consent or approval would not so materially and
adversely affect the economic or business benefits to the Purchaser Entities of
the transactions contemplated by this Agreement so as to render inadvisable, in
the good faith judgment of the Seller Entities, the consummation of such
transactions.
Section 10.11. Institution of Proceedings. There shall not have been
instituted by any third party any suit or proceeding to restrain or invalidate
this Agreement or the transactions hereby contemplated or seeking damages from
or to impose obligations upon any of the Seller Entities by reason of this
Agreement or the transactions hereby contemplated which, in their good faith
judgment, would involve expenses or lapse of time that would be materially
adverse to their interests.
Section 10.12. Delivery of Consideration. There shall have
been delivered to each of the Trusts or, if the Trusts so instruct, to
Schankman and ▇▇▇▇▇▇▇▇▇ a certificate or certificates registered in its (his)
name representing the shares of Preferred Stock or Class A Stock to be issued
to it (or him) pursuant to Section 3.04(b) hereof and there shall have been
delivered to the Principals and the Seller Entities, as the case may be, all
consideration required to be paid hereunder. The deposit of any amounts into
escrow pursuant to Section 12.02(c) or 12.02(d) shall be deemed delivery of
consideration for purposes of this Section 10.12 to the extent placed in
escrow.
Section 10.13. Delivery of Guarantee. If the Spin-off has not
occurred, there shall have been delivered to the Trusts, in form and substance
reasonably acceptable to the Trusts and their counsel, a guarantee of the
Parent, guaranteeing payment of the redemption price, together with evidence of
the proper authorization thereof.
ARTICLE XI
ADDITIONAL AGREEMENTS OF THE PARTIES
Section 11.01. Tax Matters.
(a) From and after the Closing, each of the Sellers and Principals, on
the one hand, and the Purchaser Entities, on the other hand, shall cooperate
fully with each other and make
66
available or cause to be made available to each other for consultation,
inspection and copying (at such other party's expense) in a timely fashion such
personnel, tax data, Tax Returns and filings, files, books, records, documents,
financial, technical and operating data, computer records and other information
as may be reasonably required (i) for the preparation by any of them of any Tax
Returns, elections, consents or certificates required to be prepared and filed
by such parties or any of their subsidiaries or (ii) in connection with any
audit or proceeding relating to Taxes relating to the Assets or the Business
for which any of them is responsible.
(b) None of the parties hereto shall cause an election to be made, an
accounting method for Tax purposes to be adopted, or a position to be taken on
any Tax Return, or in any Tax Proceeding, that is inconsistent with the
provisions of this Agreement. In addition to the foregoing and not in
limitation thereof, except as set forth in part (b) of Schedule 11.01, the
Principals and the Sellers shall not, without the written consent of
Acquisition Corp., cause any election to be made, or any accounting method to
be adopted or any position to be taken with respect to the Assets in any Tax
Return that has not yet been filed or in any Tax Proceeding if such election,
method or position is inconsistent with any election, accounting method or
position previously adopted, taken or elected by any Seller Entity or is
inconsistent with any representation herein or covenant hereunder.
(c) Except as otherwise provided in the side letter dated as of even
date herewith, by and between the parties hereto, relating to the
representations and warranties set forth in Sections 5.15, 5.17 and 5.18, from
and after the Closing, the Principals and the Sellers shall pay, and shall
jointly and severally indemnify and hold harmless the Purchaser Entities from
and against, any and all Taxes levied by any foreign, federal, state or local
Taxing Authority with respect to the ownership or use of the Assets or the
conduct of the Businesses on or prior to January 1, 1998, including, without
limitation, any and all of any such Seller Entity's Tax liabilities, whether a
direct liability or a joint and several liability imposed pursuant to Treasury
Regulation Section 1.1502-6 or any comparable provision under foreign, state or
local laws by reason of any Seller Entity having been a member of any
consolidated, combined, unitary or similar group at any time, and the Purchaser
Entities shall pay,
67
and shall indemnify and hold harmless the Principals and Sellers from and
against, any and all such Taxes with respect to the ownership or use of the
Assets or the conduct of the Businesses after January 1, 1998. The
indemnification agreements of the Sellers on the one hand, and the Purchaser
Entities on the other hand, pursuant to this Section 11.01(c) shall not be
subject to Section 13.04 of this Agreement.
(d) The parties hereto agree that, subject to the consummation of the
Closing hereunder, pursuant to the "Alternative Procedure" provided in Section
5 of Revenue Procedure 84-77, 1984-2 C.B. 753, with respect to filing and
furnishing Internal Revenue Service Forms W-2, W-3 and 941, (i) the Sellers and
Acquisition Corp. shall report on a "predecessor-successor" basis as set forth
therein with respect to all employees of any Seller Entity who becomes an
employee of any Purchaser Entity or an affiliate thereof upon the Closing
(collectively, "Continuing Employees") (including, for purposes of this Section
11, all employees covered under any collective bargaining agreement covering
the employees of the Businesses); (ii) the Sellers and their respective
subsidiaries shall be relieved from furnishing Forms W-2 to such Continuing
Employees; and (iii) Acquisition Corp. shall assume the Sellers' obligation to
furnish such Forms to such Continuing Employees for the full 1997 calendar
year.
(e) Except as set forth in Section 11.01(g), each of the Sellers and
the Principals shall be responsible, jointly and severally, for the payment of
any and all sales, recordation, gains, transfer or similar taxes or fees with
respect to the transfer of the Assets hereunder (including any interest or
penalties with respect thereto) and shall deliver copies of all Tax Returns and
other documentation filed with respect thereto to Acquisition Corp. promptly
after filing.
(f) The parties hereto intend to treat the Merger as effecting a
reorganization pursuant to Section 368(a) of the Code. In connection therewith,
the Seller Entities and the Purchaser Entities shall execute and deliver at the
Closing a continuity of interest agreement, in substantially the form of
Exhibit C hereto. No party hereto shall take any position on a Tax Return or in
a Tax Proceeding that is inconsistent with any of the foregoing.
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(g) Notwithstanding anything to the contrary contained herein, from
and after the closing, the Purchaser Entities shall hold harmless and indemnify
the appropriate Principals from any Losses resulting to them by reason of all
taxes which CIPC or its successors may pay or become subject to pay, directly
as a result of the imposition of corporate income taxes on CIPC by reason of
the Merger failing to qualify as a tax-free reorganization under Section 368(a)
of the Code solely due to the issuance in the Merger of the Preferred Stock or
as provided in the Continuity of Interest Agreement to be entered into between
the parties, substantially in the form of Exhibit C hereto.
Section 11.02. Audits. The Sellers and Principals agree to cooperate
with SFX and Acquisition Corp. with respect to a consolidated audit of the
Businesses for the two-year period ended December 31, 1997 to be conducted on
behalf of SFX and Acquisition Corp. by Ernst & Young LLP.
Section 11.03. Employee Matters. Notwithstanding anything to the
contrary contained herein, from and after the Closing, the Principals and the
Sellers shall pay, and shall jointly and severally indemnify and hold harmless
the Purchaser Parties from and against, any and all Losses (other than legal,
consulting and accounting fees, except as hereinafter provided in this Section
11.03) which each may suffer, incur or pay after the Closing, by reason of (i)
the failure of any of the Seller Entities to have obtained a favorable
determination letter from the Internal Revenue Service with respect to the
Contemporary Group 401(k) Plan (the "401(k) Plan"), (ii) the process of or
delay in obtaining a favorable determination letter with respect to the 401(k)
Plan and (iii) any qualification defects relating to the 401(k) Plan, it being
understood that for purposes of this Section 11.03, Losses shall include,
without limitation, Taxes, fees, penalties and all other charges imposed by the
Internal Revenue Service upon any Seller Entity, any Purchaser Entity, the
401(k) Plan or any participant in the 401(k) Plan. If, after the Closing, the
Seller Entities shall fail to diligently and satisfactorily pursue resolution
of the matters heretofore described in this Section 11.03, then the Purchaser
Entities may assume responsibility for the resolution thereof and the Seller
Entities shall, in addition to indemnifying the Purchaser Entities as
heretofore described in this Section 11.03, pay all of the legal, consulting
and accounting fees incurred by the
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Purchaser Entities in connection with the pursuit of such resolution.
Section 11.04. Merger Consideration.
(a) If the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) are to receive shares
of Preferred Stock pursuant to Section 3.04(b) hereof, the Trusts (or Schankman
and ▇▇▇▇▇▇▇▇▇) and SFX shall cooperate and take such actions as are necessary
to cause SFX to authorize and issue such shares. The terms of the Preferred
Stock shall include a provision that such stock will be automatically redeemed
as of July 1, 1998 unless the outstanding shares thereof shall have been
previously converted into shares of Class A Stock. The aggregate redemption
price for the shares of Preferred Stock to be issued to the Trusts (or
Schankman and ▇▇▇▇▇▇▇▇▇) would be their fair market value, but in no event less
than $18,700,000. The payment, if any, of the redemption price in accordance
with the preceding sentence shall be guaranteed by the Parent. No certificate
or script representing fractional shares of Class A Stock shall be issued upon
the surrender for exchange of shares of CIPC Stock, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
holder of Preferred Stock. In lieu of any such fractional share, each holder of
CIPC Stock who otherwise would be entitled to receive a fractional share of
Class A Stock will receive an amount of cash determined by multiplying (i) the
fraction of a share of Class A Stock to which such holder would otherwise be
entitled by (ii) $13.33, as adjusted pursuant to Section 11.05(c) hereof.
(b) If, pursuant to Section 3.04(b) hereof, the Trusts (or Schankman
and ▇▇▇▇▇▇▇▇▇) are to receive shares of Class A Stock, such shares to be issued
to the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) shall be, at the time of issuance to
the Trusts (or Schankman or ▇▇▇▇▇▇▇▇▇), (i) of a class of stock registered
under the Exchange Act, (ii) of the same class of stock distributed to the
holders of the Parent's publicly-traded Class A common stock in the Spin-off,
and (iii) subject to compliance by the Principals with the provisions of Rule
144 under the Securities Act, to the extent applicable, freely tradeable. From
and after the Closing, the Purchaser Entities shall pay, and shall indemnify
and hold harmless the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) from and against, any
and all Losses which the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) may suffer, incur
or pay, directly
70
as a result of the Trusts' (or Schankman's and ▇▇▇▇▇▇▇▇▇'▇) inability to sell
any of such shares then held by them which the Trusts (or Schankman and
▇▇▇▇▇▇▇▇▇) could otherwise have sold pursuant to and in compliance with Rule
144 under the Securities Act if such inability is solely the result of any
Purchaser Entity's violation of, or failure to comply with, the Exchange Act.
If any of the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) owns any shares of Class A
Stock received in the Merger on the second anniversary of the Closing Date and
the average trading price of the Class A Stock over the 20-day period ending on
such anniversary date is less than $13.33 (subject to adjustment as provided in
Section 11.05(c)) per share, then SFX shall make a one-time cash payment to
each Trust (or each of Schankman and ▇▇▇▇▇▇▇▇▇) holding any such shares that is
equal to the product of (i) the quotient of the difference between (A) the
actual average trading price per share over such 20-day period and (B) $13.33
(subject to adjustment as provided in Section 11.05(c)) divided by 2, times
(ii) the number of shares of Class A Stock received by such Trust (or Schankman
or ▇▇▇▇▇▇▇▇▇) in the Merger and owned as of such anniversary date.
(c) SFX hereby covenants to use its best efforts to file in a timely
manner all reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
(or, if at any time SFX is not required to file such reports, it will, upon the
request of either Trust (or Schankman or ▇▇▇▇▇▇▇▇▇) make publicly available
other information so long as necessary to permit sales under Rule 144 under the
Securities Act), and it will take such further action as either Trust (or
Schankman or ▇▇▇▇▇▇▇▇▇) may reasonably request, all to the extent required from
time to time to enable either Trust (or Schankman or ▇▇▇▇▇▇▇▇▇) to sell shares
of Class A Stock without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the Commission.
Section 11.05. Adjustment of Class A Shares.
(a) If SFX shall, at any time prior to the conversion of shares of the
Preferred Stock issued to the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) into shares
of Class A Stock, declare or pay to the holders of Class A Stock, a dividend
payable in any kind of
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shares of stock or other securities of SFX (other than Class A Stock), or in
property (other than cash), the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) shall be
entitled to receive, upon conversion of the Preferred Stock, in addition to the
shares of Class A Stock to which these Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) are
otherwise entitled (the "Class A Stock Amount"), such additional share or
shares of stock or scrip representing fractions of a share or other securities
or property as such party would have received in the form of such dividend if
it had been the holder of record of the Class A Stock Amount on the record date
for the determination of common stockholders entitled to receive such dividend.
(b) If SFX shall, at any time prior to the conversion of shares of the
Preferred Stock issued to the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) into shares
of Class A Stock, effect a recapitalization of such character that the shares
of Class A Stock covered hereby shall be changed into or become exchangeable
for a larger or smaller number of shares (including any stock dividend, stock
split or other issuance of Class A Stock without consideration), then
thereafter, the number of shares of Class A Stock of SFX which the Trusts (or
Schankman or ▇▇▇▇▇▇▇▇▇) shall be entitled to receive hereunder, shall be
increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Class A Stock of SFX, by reason
of such recapitalization.
(c) Whenever the number of shares of Class A Stock to be received by
the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) is adjusted as provided in Sections
11.05(a) and (b) or a similar transaction occurs after such Principals receive
Class A Stock but prior to the second anniversary of the Closing Date, the
$13.33 per share price referenced in Sections 3.04(b), 11.04(a), 11.04(b),
12.02(c), 12.02(d) and 13.04(b) shall be adjusted by multiplying $13.33 by a
fraction, the numerator of which shall be the number of shares of Class A Stock
to be received by the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇) immediately prior to
such adjustment and the denominator of which shall be the number of shares of
Class A Stock to be received by the Trusts (or Schankman and ▇▇▇▇▇▇▇▇▇)
immediately thereafter.
Section 11.06. Use of Name. From and after the Closing Date, none of
the Sellers or Principals shall have any interest in or right to use the names
"Contemporary," "Continental" or
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"Dialtix" or any derivation or abbreviation thereof or any logo, trademark or
trade name included in the Intellectual Property or any name which is likely to
be confused with any of the foregoing and, on the Closing Date, each Seller and
each affiliate of the Principals which is to remain under their Control after
the Closing Date shall change its name to comply with the foregoing.
Section 11.07. Access by Either Party. From and after the
Closing, each of the Sellers and Principals, on the one hand, and
the Purchaser Entities, on the other hand, shall cooperate fully with each
other and make available or cause to be made available to each other for
consultation, inspection and copying (at such other party's expense) in a
timely fashion such personnel, data, and filings, files, books, records,
documents, financial, technical and operating data, computer records and other
information as may be reasonably required in connection with any litigation,
threatened litigation or similar proceeding or threatened proceeding against
such other party.
Section 11.08. Registration of Class A Stock.
(a) Within 60 days of the effectiveness of the completion of the
Spin-off, SFX agrees to file with the Commission a registration statement on
Form S-1 under the Securities Act (the "Registration Statement") for purposes
of registering for resale (in non-underwritten offering) the shares of Class A
Stock issued to the Principals upon conversion of the Preferred Stock and still
owned by them (the "Registration Shares"). SFX shall use its best efforts to
cause the Registration Statement to be declared effective by the Commission as
soon as practicable after its filing with the Commission, and to remain
effective and current (either by means of post-effective amendment(s) to the
Registration Statement or conversion of the Registration Statement to Form S-3)
until the earlier of (x) such time as all of the Registration Shares are sold
pursuant to the Registration Statement or (y) the conclusion of the period of
two years immediately following the consummation of the Merger (or such shorter
period of time after the lapse of which the Principals may sell the
Registration Shares without the restrictions currently set forth in paragraph
(e) of Rule 144 under the Securities Act) (the "Effective Period").
Notwithstanding the foregoing, (i) each Principal shall provide written notice
to SFX 10 days prior to any sale of Registration Shares and (ii) SFX shall have
no obligation to cause the Registration Statement to
73
remain effective for the benefit of a particular Principal if such Principal is
able without undue effort to sell all remaining Registration Shares owned by
such Principal in compliance with Rule 144 in a single transaction to which the
volume limitations of Rule 144(e) do not apply or, if such volume limitations
are applicable, without exceeding such limitation. In addition to the foregoing
and not in limitation thereof, but subject to the last sentence of this Section
11.08(a), SFX shall have the right to suspend use of the Registration Statement
and the related prospectus if its Board of Directors determines in good faith
that there is a valid purpose for such suspension. For purposes of this
Agreement, a valid purpose shall include, but is not limited to, (i) a good
faith determination that the Registration Statement may contain a material
misstatement or omission (including as a result of SFX having under
consideration a significant acquisition or disposition or other material
transaction that has not been publicly disclosed) in which case SFX may cause
the Registration Statement not to be used by the Principals until such time as
the Commission has declared effective a post-effective amendment to the
Registration Statement filed by SFX or if the misstatement or omission can be
corrected by incorporation by reference in the Registration Statement of
another Commission filing of SFX, SFX has made another filing on Form 8-K or
other appropriate form ("Incorporated Filing") to correct such misstatement or
omission, and (ii) an underwritten public offering of its securities. SFX shall
have the right to suspend use of the Registration Statement and related
prospectus for up to 30 days in any 12-month period for public offerings and up
to 45 days in any 12-month period for any other valid purpose.
(b) SFX shall use its best efforts to cause the shares of
Class A Stock to be approved for quotation on the New York Stock Exchange, the
American Stock Exchange, the NASDAQ-NMS, or other national securities exchange
in which the securities of SFX are principally traded, as soon as practicable
after filing the Registration Statement. SFX shall also use its best efforts to
register or qualify the Registration Shares under such other securities or blue
sky laws of the United States and keep such registration or qualification in
effect for the Effective Period, and do any and all other acts and things which
may be reasonably necessary or advisable to enable Principals to have the right
to sell or otherwise dispose of the Registration Shares in such jurisdictions.
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(c) In connection with any registration of the Registration
Shares pursuant to this Agreement, each Principal shall furnish SFX with such
written information concerning such Principal as SFX may reasonably request for
use in the preparation of the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto ("Prospectus"), or any other public or private
financing undertaken by the Purchaser Entities, and shall cooperate fully in
the preparation and filing of any Registration Statement or any other documents
filed with the Commission in connection therewith. Each Principal hereby agrees
to indemnify SFX, its officers and directors, and each person, if any, who
controls SFX within the meaning of Section 15 of the Securities Act, against
any Losses, joint or several, to which SFX or any such officer or director or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue (or alleged untrue) statement of any material fact
contained in, or any material fact omitted from (or allegedly omitted from) the
Registration Statement or Prospectus covering the Registration Shares, or from
any other document made, prepared or filed with any Governmental Body in
connection with any public or private financing undertaken by SFX (a "Financing
Document"), if such statement or omission was made in reliance upon and in
conformity with written information furnished to SFX by such Principal for use
in such Registration Statement, Prospectus or Financing Document.
(d) SFX shall, prior to filing the Registration Statement,
furnish to a representative selected by the Principals a copy of the draft of
such document which is proposed to be filed. SFX shall promptly notify such
representative of any stop order issued or threatened by the Commission with
respect to the Registration Statement and shall take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
SFX shall notify such representative and each holder of Registration Shares,
during the effectiveness of the Registration Statement, of the occurrence of an
event that would require the preparation of a supplement or amendment to the
Prospectus in order for such Prospectus to not (i) contain an untrue statement
of a material fact or (ii) omit to state any material fact required to be
stated therein or necessary to make
75
the statements therein not misleading. SFX shall provide such representative
with a copy of any such supplement or amendment.
(e) SFX hereby indemnifies and holds harmless each Principal
and each person deemed to be an "underwriter" under the Securities Act, if any,
and each person controlling any Principal within the meaning of Section 15 of
the Securities Act, if any, against any Losses severally, but not jointly, to
which such Principal or any of the foregoing persons may become subject under
the Securities Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue (or alleged untrue) statement of any material fact
contained in the Registration Statement or any Prospectus covering the
Registration Shares, or any Financing Document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such untrue (or alleged
untrue) statement or omission (or alleged omission) was made in reliance upon
and in conformity with written information furnished to SFX by such Principal
for use in such Registration Statement, Prospectus or Financing Document.
(f) In circumstances in which any indemnity provided by the
preceding paragraphs of this Section 11.08 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any Losses (or
actions or proceedings in respect thereof), then each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such Losses (or
actions or proceedings in respect thereof) in such proportion as is appropriate
to reflect (A) the relative fault of the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand in connection
with the statements or omissions or alleged statements or omissions that
resulted in such Losses (or actions or proceedings in respect thereof) and (B)
any other relevant equitable considerations.
(g) The registration rights set forth in this Section 11.08
with respect to the Registration Shares are not assignable without the express
written consent of SFX.
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Section 11.09. Restrictive Legend. Each of the Principals acknowledges
and agrees that any certificates representing the Class A Stock will bear a
restrictive legend in substantially the following form and a stop-transfer
order may be placed against their transfer:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be
sold, transferred or assigned in the absence of an effective
registration statement for the securities under the Securities
Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act or unless sold
pursuant to Rule 144.
The legend set forth above shall be removed and SFX shall issue a
certificate without such legend to the holder of Class A Stock upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (i)
such Securities are included in an effective registration statement under the
Securities Act covering the resale thereof, or (ii) such holder provides SFX
with an opinion of legal counsel, in form, substance and scope reasonably
acceptable to SFX to the effect that a public sale or transfer of such Class A
Stock may be made without registration under the Securities Act and such Class
A Stock is being sold or transferred in accordance with the method described
therein, or (iii) such holder provides SFX with reasonable assurances that such
Class A Stock can be sold pursuant to Rule 144 under the Securities Act (or a
successor rule thereto) without any restriction as to the number of shares of
Class A Stock acquired as of a particular date that can then be immediately
sold (such holder shall thereafter be entitled to receive unlegended
certificates evidencing the shares not subject to Rule 144). The Principals
agree not to sell or in any way transfer any shares of Class A Stock unless and
until one of the conditions set forth in clause (i), (ii) or (iii) of the
preceding sentence is satisfied. Each of the Principals agrees to sell all of
the Class A Stock including those represented by a certificate(s) from which
the legend has been removed, in compliance with the prospectus delivery
requirements, if any, under applicable securities laws.
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ARTICLE XII
TERMINATION
Section 12.01. Termination. This Agreement may be
terminated at any time prior to the Closing Date:
(a) by mutual consent of the parties hereto;
(b) subject to the last paragraph of this Section 12.01, by any of the
Purchaser Entities, on February 15, 1998, if there has been a material
violation or breach by any of the Seller Entities of any representation,
warranty, covenant or agreement contained in this Agreement or any failed
condition to the obligations of SFX under Article IX hereof, and (i) such
breach, violation or failed condition is not cured within a reasonable period,
not to exceed the later of March 17, 1998 or 30 days after written notice
thereof is given, or (ii) the Seller Entities are not otherwise able to provide
protection for the interests of the Purchaser Entities in a manner reasonably
satisfactory to the Purchaser Entities;
(c) subject to the last paragraph of this Section 12.01, by any of the
Seller Entities, on February 15, 1998, if there has been a material violation
or breach by any Purchaser Entity of any representation, warranty, covenant or
agreement contained in this Agreement or any failed condition to the
obligations of the Seller Entities under Article X hereof and (i) such breach,
violation or failed condition is not cured within a reasonable period, not to
exceed the later of March 17, 1998 or 30 days after written notice thereof is
given or (ii) the Purchaser Entities are not otherwise able to provide
protection for the interests of the Seller Entities in a manner reasonably
satisfactory to the Seller Entities; or
(d) by any party, if (i) the conditions to obligations of such party
or any other party shall have become impossible to satisfy, other than as a
result of its own acts or omissions in violation of its obligations hereunder
or (ii) any permanent injunction or other order of a court or other competent
authority preventing the consummation of the Merger of the Asset Acquisition
shall have become final and nonappealable.
(e) by the Purchaser Entities, prior to January 9, 1998, if any of the
Liens on the Real Property would, as determined by the
78
Purchaser Entities acting reasonably, have a Material Adverse Effect on the
ability to conduct the Businesses as conducted in the past.
Notwithstanding anything to the contrary in Sections 12.01(b) and (c)
hereof, neither party may terminate this Agreement pursuant to Section 12.01(b)
or (c), as the case may be, if the Merger and the Asset Acquisition shall not
have been consummated on February 15, 1998 solely as a result of the applicable
waiting periods under the HSR Act not having expired or been terminated on or
prior to such date, in which event either party may terminate this Agreement
only if the Merger and the Asset Acquisition shall not have been consummated on
or before April 30, 1998. If the Closing is delayed beyond February 15, 1998 in
accordance with the terms of this paragraph then, notwithstanding the
occurrence of an event that has a Material Adverse Effect on any Business, the
Purchaser Entities shall be required to close the transactions contemplated
hereby upon the termination of the waiting period under the HSR Act (unless
such termination has not occurred by April 30, 1998, in which case Section
12.01(d) shall be applicable) unless such Material Adverse Effect was the
result of the intentional (as such term has meaning in a tort context) acts or
intentional (as such term has meaning in a tort context) omissions of a Seller
Entity or its affiliates or an act or omission of a Seller Entity or one of its
affiliates that constitutes gross negligence in which case the Purchaser
Entities shall have the right, without any liability, to refuse to close or may
proceed to close in accordance with the provisions of Section 12.02(c) hereof.
Section 12.02. Effect of Termination. (a) If this Agreement shall be
terminated pursuant to Section 12.01 hereof, this Agreement shall forthwith
become void and have no effect, other than the provisions of Sections 14.07 and
14.08 hereof without any liability on the part of any party hereto or its
affiliates, directors, officers or stockholders, other than the provisions of
Sections 14.07 and 14.08 hereof; except as otherwise provided in Sections
12.02(b), 12.02(c) and 12.02(d) hereof.
(b) If this Agreement is terminated by a Seller Entity pursuant to
Section 12.01(c) hereof by reason of (i) a material violation or breach of any
representation, warranty, covenant or agreement of the Purchaser Entities
contained herein or (ii) the
79
failure of a condition set forth in Section 10.01 or 10.02, then the Escrow
Deposit, plus all interest or other proceeds from the investment thereof
pursuant to the Escrow Agreement, shall be paid to the Seller Entities as
liquidated damages, it being agreed that the Escrow Deposit and such other
amounts (if any), shall constitute full payment for any and all damages
suffered by the Seller Entities due to the termination of this Agreement, it
being further agreed that actual damages would be difficult to ascertain.
Except as provided in this Section 12.02(b), the Seller Entities shall have no
other remedies if this Agreement is terminated by any of them pursuant to
Section 12.01(c) hereof.
(c) Notwithstanding anything to the contrary contained in this
Agreement, if this Agreement is subject to termination by a Purchaser Entity
pursuant to Section 12.01(b) hereof by reason of (i) a material violation or
breach of any representation, warranty, covenant or agreement of the Seller
Entities contained herein or (ii) the failure of a condition set forth in
Section 9.01 or 9.02 hereof, and such failed condition is the result of an
intentional (as such word has a meaning in a tort context) act or intentional
(as such word has meaning in a tort context) omission by a Seller Entity or the
gross negligence of a Seller Entity, then the Purchaser Entities' sole remedies
are (x) to terminate, without further remedy or (y) to effect the Closing
without waiving in any manner any remedies or rights to damages with respect to
any such violation, breach or failed condition, subject to the limitations on
its damages and on the amount to be placed in escrow set forth in this Section
12.02(c). If the Purchaser Entities elect to effect the Closing, then, not less
than one business day prior to the Closing, the Purchaser Entities shall
deliver a written notice to the Seller Entities setting forth the Purchaser
Entities' good faith estimate of the Losses incurred or reasonably expected to
be incurred as a result of such violation, breach or failed condition and, at
the Closing, the Purchaser Entities shall place in escrow their good faith
estimate of the Losses incurred or reasonably expected to be incurred as a
result of such violation, breach or failed condition; provided, however, that
in no event shall the Seller Entities' (not including CIPC, which shall have no
liability) liability for such violation, breach or failed condition exceed, nor
shall the Purchaser Entities so place into escrow (i) $3,100,000 in cash and
(ii) one-half of the shares of Class A Stock received by the Principals in the
Merger. Seventy-five percent of the amount, if any, so placed into escrow by
the
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Purchaser Entities pursuant hereto, shall, unless otherwise agreed to by
the parties hereto, be accomplished through the placement into escrow by the
Purchaser Entities of shares of Class A Stock and the remainder of such amount
so placed into escrow shall be satisfied through the placement into escrow of
cash. The parties hereto agree that, solely for purposes of this Section
12.02(c), the value of each share of Class A Stock shall be $13.33 (subject to
adjustment as provided in Section 11.05(c) hereof). Any cash or shares of Class
A Stock so placed in escrow shall be deposited, held and distributed in
accordance with the terms of the Purchase Price Escrow Agreement. The parties
hereto acknowledge and agree that the Purchaser Entities would not have an
adequate remedy at law for money damages in the event that the Purchaser
Entities elect to effect the Closing and pursue the remedies and rights set
forth in this Section 12.02(c) and the Seller Entities do not effect the
Closing in accordance with the terms of this Agreement and, therefore, the
Seller Entities agree that, in addition to its rights to damages under this
Section 12.02(c), the Purchaser Entities shall be entitled to such equitable
relief, including preliminary and injunctive relief and specific performance,
in order to cause the Seller Entities to close the Merger and Asset Acquisition
in accordance with the terms of this Section 12.02(c) and the other terms
hereof.
(d) Notwithstanding anything to the contrary contained in this
Agreement, if this Agreement is subject to termination by a Purchaser Entity
pursuant to Section 12.01(b) hereof by reason of the failure of a condition set
forth in Section 9.01 or 9.02 hereof, and such failed condition is or was
capable of cure through the payment of monies (it being expressly agreed that
any failed condition resulting from any easement with respect to the Real
Property is not capable of cure through the payment of monies), and is not the
result of an intentional (as such word has a meaning in a tort context) act or
intentional omission by a Seller Entity or the gross negligence of a Seller
Entity, then the Purchaser Entities' sole remedies are (i) to terminate,
without further remedy or (ii) to effect the Closing without waiving in any
manner any remedies or rights to damages with respect to any such failed
condition, subject to the limitations on its damages and the amount to be
placed in escrow set forth in this Section 12.02(d). If the Purchaser Entities
elect to effect the Closing then, not less than one business day prior to the
Closing, the Purchaser Entities shall deliver a written notice to the Seller
Entities setting forth the Purchaser Entities' good
81
faith estimate of the Losses incurred or reasonably expected to be incurred as
a result of such violation, breach or failed condition and, at the Closing, the
Purchaser Entities shall place in escrow their good faith estimate of the
Losses incurred or reasonably expected to be incurred as a result of such
failed condition; provided, however, that in no event shall the Seller
Entities' (not including CIPC, which shall have no liability) liability for
such failed condition exceed, nor shall the Purchaser Entities so place into
escrow an amount in excess of, $3,000,000. Seventy-five percent of the amount,
if any, so placed into escrow by the Purchaser Entities pursuant hereto, shall,
unless otherwise agreed to by the parties hereto be accomplished through the
placement into escrow by the Purchaser Entities of shares of Class A Stock and
the remainder of such amount so placed into escrow shall be satisfied through
the placement into escrow of cash. The parties hereto agree that, solely for
purposes of this Section 12.02 (d), the value of each share of Class A Stock
shall be $13.33 (subject to adjustment as provided in Section 11.05(c) hereof).
Any amount so placed in escrow shall be deposited, held and distributed in
accordance with the terms of the Purchase Price Escrow Agreement. The parties
hereto acknowledge and agree that the Purchaser Entities would not have an
adequate remedy at law for money damages in the event that the Purchaser
Entities elect to effect the Closing and pursue the remedies and rights set
forth in this Section 12.02(d) and the Seller Entities do not effect the
Closing in accordance with the terms of this Agreement and, therefore, the
Seller Entities agree that, in addition to its rights to damages under this
Section 12.02(d), the Purchaser Entities shall be entitled to such equitable
relief, including preliminary and injunctive relief and specific performance,
in order to cause the Seller Entities to close the Merger and Asset Acquisition
in accordance with the terms of this Section 12.02(d) and the other terms
hereof.
(e) Notwithstanding any of the foregoing provisions, the maximum that
may be escrowed under Sections 12.02(c) and 12.02(d) shall not in the aggregate
exceed the amounts set forth in Section 12.02(c).
(f) Notwithstanding anything to the contrary contained in this
Agreement, if this Agreement is terminated by the Purchaser Entities pursuant
to Section 12.01(e) hereof, this Agreement shall forthwith become void and have
no effect, other than the
82
provisions of Sections 14.07 and 14.08 hereof without any liability on the part
of any party hereto or its affiliates, directors, officers or stockholders,
other than the provisions of Sections 14.07 and 14.08 hereof.
ARTICLE XIII
INDEMNIFICATION
Section 13.01. Survival of Representations and Warranties. All
representations and warranties made hereby by the parties to this Agreement,
unless waived in writing and notwithstanding any examination by or on behalf
of any party hereto and the consummation of the transactions hereby
contemplated, shall survive the Closing until completion of the audit referred
to in Section 11.02 hereof; provided, however, that the representations and
warranties made in Sections 5.15 and 11.01 hereto shall survive for the statute
of limitations applicable thereto. Notwithstanding the foregoing, any
representation or warranty hereof shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence, if notice of the
inaccuracy or breach thereof or the claim thereunder shall have been given to
the party from whom indemnity may be sought in respect thereof prior to the
expiration of the applicable survival period therefor. All covenants and
agreements made hereby by the parties to this Agreement shall, unless waived in
writing, survive the Closing.
Section 13.02. By the Seller Entities. Each of the Seller Entities,
jointly and severally, agrees to indemnify and hold harmless each of the
Purchaser Entities and their respective directors, officers, employees and
agents (the "Purchaser Parties") against, and to reimburse the Purchaser
Parties on demand with respect to, any and all losses, liabilities,
obligations, suits, proceedings, demands, judgments, damages, claims, expenses
and costs (including, without limitation, reasonable fees, expenses and
disbursements of counsel) (collectively, "Losses") which each may suffer, incur
or pay, by reason of (i) the breach by any Seller Entity of any representation
or warranty contained in this Agreement or in any agreement, certificate or
other document executed by a Seller Entity and delivered to a Purchaser Entity
pursuant to the provisions of this Agreement, (ii) the failure of any Seller
Entity to perform any agreement or covenant required hereby or
83
any agreement executed pursuant to the provisions hereof, or (iii) any
liability or debt of any of the Seller Entities (including, without limitation,
the Excluded Liabilities, any Losses with respect to any litigation involving
the Seller Entities to the extent attributable to matters, claims or events
which occurred or arose prior to January 1, 1998, and any liabilities arising
pursuant to Section 5.19 hereof which may first exist or be incurred as a
result of events first occurring or actions or omissions prior to the Closing
Date) other than the Assumed Liabilities. Notwithstanding anything to the
contrary contained herein, the indemnification obligations of CIPC set forth
herein, including, without limitation, in Article XIII hereof, shall terminate
on the Closing Date.
Section 13.03. By the Purchaser Entities. Each of the Purchaser
Entities agrees to indemnify and hold harmless the Seller Entities against, and
to reimburse them on demand with respect to, any and all Losses which each may
suffer, incur or pay by reason of (i) the breach by any Purchaser Entity of any
representation or warranty contained in this Agreement or in any agreement,
certificate or other document executed by any Purchaser Entity and delivered to
the Seller Entities pursuant to the provisions of this Agreement, (ii) the
failure of any Purchaser Entity to perform any agreement required hereby or any
agreement executed pursuant to the provisions hereof, or (iii) the Assumed
Liabilities.
Section 13.04. Limitations on Indemnification.
(a) Neither the Purchaser Parties, on the one hand, nor the Seller
Entities, on the other hand, shall be entitled to be indemnified pursuant to
Section 13.02, Section 13.03 or any other provision hereof unless and until the
aggregate of all Losses incurred by the Purchaser Parties or the Seller
Entities, as the case may be, exceeds $500,000, at which time the indemnifying
party shall be obligated to indemnify the indemnified party (i) if the
indemnifying party is a Purchaser Party, for all Losses (and not only the
Losses in excess of $500,000) and (ii) if the indemnifying party is a Seller
Entity, for all Losses in excess of $100,000 (and not only the Losses in excess
of $500,000); provided, however, that this threshold limitation does not apply
in any respect to (i) the failure of the Purchaser Entities to pay in full the
merger consideration or the Asset Purchase Price, (ii) the indemnification
obligations of the Principals and the
84
Sellers set forth in Section 11.03, (iii) the indemnification obligations of
the Purchaser Entities set forth in Section 11.01(g), (iv) the rights of the
Purchaser Entities pursuant to Section 12.02(c) hereof and (v) the
indemnification obligations of the Seller Entities with respect to their
representations and warranties set forth in Section 5.15 hereof; provided,
however, that any amount paid under the indemnification obligation referenced
in this subpart (v) shall be ignored in calculating the $500,000 threshold
described above. Notwithstanding anything herein to the contrary, to the extent
any party may seek indemnification under more than one provision of this
Agreement for the same reason or event, the indemnified party shall only be
subject to such $500,000 threshold once and may only recover its Losses once.
(b) Absent fraud and except (i) with respect to the representations
and warranties set forth in Section 5.15 hereof (and any other representations
and warranties of any Seller Entity with respect to any Tax) and the matters
addressed in that certain side letter, dated as of even date herewith, by and
between the parties hereto, relating to the representations and warranties set
forth in Sections 5.15, 5.17 and 5.18 hereof, and (ii) as otherwise expressly
provided in the proviso to Section 13.04(a) hereof (other than part (iv)
thereof), the liability of the Principals and the Sellers arising under this
Agreement for the breach of any and all representations or warranties shall not
exceed an aggregate amount equal to the sum of $3,100,000 and one-half of the
shares of Class A Stock received by the Trusts (or Schankman or ▇▇▇▇▇▇▇▇▇) in
the Merger. The liability of the Principals and the Sellers with respect to the
matters set forth in clauses (i) and (ii) of the prior sentence shall be
unlimited, except as otherwise provided in that certain side letter, dated as
of even date herewith, by and between the parties hereto, relating to the
representations and warranties set forth in Sections 5.15, 5.17 and 5.18
hereof. The parties hereto agree that, solely for purposes of this Section
13.04(b), the value of each share of Class A Stock shall be $13.33 (subject to
adjustment as provided in Section 11.05(c)). Notwithstanding the foregoing,
such shares of Class A Stock shall only be available to satisfy a claim for
indemnification if such notice is given with respect thereto within the
six-month period immediately following the Closing and, thereafter, except as
otherwise provided in the first sentence of this Section 13.04(b), the
liability of the Principals and the Sellers for a breach of a
85
representation or warranty shall not exceed $3,100,000 for the remainder of the
applicable survival period under Section 13.01 hereof. After the expiration of
such survival period, the indemnification obligations of the parties with
respect to the non-surviving representations and warranties shall terminate
completely.
Section 13.05. Indemnification Procedure for Third Party Claims.
Promptly, and in any event within 30 days after the receipt by any party hereto
of notice of any claim or the commencement of any action or proceeding by a
third party, such party will, if a claim with respect thereto is to be made
against any party obligated to provide indemnification hereunder (the
"Indemnifying Party"), give such Indemnifying Party written notice of such
claim or the commencement of such action or proceeding, but any failure to
notify timely the Indemnifying Party shall not relieve the Indemnifying Party
of its obligations hereunder except to the extent the Indemnifying Party was
actually prejudiced by the failure to be notified timely and except as provided
in Section 13.04(b). Upon unconditional and unqualified written acknowledgment
of the Indemnified Party's entitlement to indemnification therefor and if the
Indemnifying Party has sufficient resources to pay any final judgment, such
Indemnifying Party shall have the right, at its option, to settle, compromise
or defend, at its own expense and with its own counsel, any such claim, action
or proceeding involving the asserted liability of the party seeking such
indemnification (the "Indemnified Party"), provided that the Indemnifying Party
shall not settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding except with the consent of
the Indemnified Party (which consent shall not be unreasonably withheld or
delayed). If the Indemnifying Party fails to assume the defense of such claim,
action or proceeding within 30 days of receipt of notice of such claim, action
or proceeding, or if at any time the Indemnifying Party shall fail to defend in
good faith any such claim, action or proceeding, the Indemnified Party may
assume the defense thereof and may employ counsel with respect thereto and all
fees and expenses of such counsel shall be paid by the Indemnifying Party, and
the Indemnified Party may conduct and defend such claim, action or proceeding
in such manner as it may deem appropriate, subject, however, to the last
sentence of this Section 13.05. If any Indemnifying Party undertakes to
compromise, settle or defend any such asserted liability, it shall promptly
notify the Indemnified
86
Party of its intention to do so, and the Indemnified Party agrees to cooperate
fully with the Indemnifying Party and its counsel in the compromise of, or
defense against, any such asserted liability. The Indemnified Party may
appoint, at its own expense, associate counsel to participate in the joint
defense of any such matter with respect to which the Indemnifying Party has
undertaken the defense, and the Indemnifying Party may appoint, at its own
expense, associate counsel to participate in the joint defense of any such
matter which the Indemnified Party is defending. No Indemnified Party shall
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding except (i) with the consent of the
Indemnifying Party (which consent shall not be unreasonably withheld or
delayed), or (ii) where the Indemnifying Party is relieved of any and all
liabilities and obligations in connection with any settlement, compromise or
consent to the entry of any judgment.
ARTICLE XIV
MISCELLANEOUS
Section 14.01. Further Assurances. Each of the parties shall cooperate
fully with the other parties and each of the parties agrees and covenants
promptly to execute and deliver, or cause to be executed and delivered, to each
of the other parties such documents or instruments, in addition to those
expressly required by the Agreement to be executed and delivered, as any of the
other parties may reasonably deem necessary or desirable to carry out or
implement any provision of the Agreement and the transactions contemplated
hereby. In addition to the foregoing and not in limitation thereof, effective
as of the Closing Date and provided the Closing occurs, each of the Seller
Entities hereby constitutes and appoints SFX and Acquisition Corp, severally
and jointly, as its true and lawful attorney, with full power of substitution,
in the name of the Seller Entities and each of them, but for the benefit of the
Purchaser Entities, (a) to collect, assert or enforce any claim, right or title
of any kind in or to the assets and properties to be conveyed, transferred,
assigned and delivered to Acquisition Corp. pursuant to the terms hereof, to
institute and prosecute claims, actions, suits and proceedings which the
Purchaser Entities may deem proper in order to collect, assert or enforce any
such claim, right or title, to defend and compromise all claims, actions,
87
suits and proceedings in respect of any such asset or property and to do all
acts and things in relation thereto as the Purchaser Entities shall deem
advisable and (b) to take all such action which the Purchaser Entities may deem
proper in order to provide for them the benefits under any such asset or
property, including, without limitation, where any required consent of a third
party to the assignment thereof to Acquisition Corp. shall not have been
obtained (which shall not require the payment of money). Each of the Seller
Entities acknowledges that such powers are coupled with an interest and may not
be revoked by it in any manner or for any reason.
Section 14.02. Entire Agreement. This Agreement, together with all
agreements, Schedules, Exhibits, Documents and other instruments attached
hereto or to be delivered hereunder, or contemporaneously herewith, sets forth
the entire understanding between the parties, there are no terms, conditions,
representations, warranties or covenants other than those contained herein and
in such agreements, Schedules, Exhibits, Documents and other instruments
attached hereto or to be delivered hereunder or contemporaneously herewith, and
all prior agreements, contracts, promises, representations and statements, if
any, among the parties hereto as to the subject matter hereof, are merged into
this Agreement.
Section 14.03. Notices. (a) All notices, consents, demands or other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed sufficiently given on (i) the day on
which delivered personally or by telecopy (with prompt confirmation by mail)
during a business day to the appropriate location listed as the address below,
(ii) three business days after the posting thereof by United States registered
or certified first class mail, return receipt requested with postage and fees
prepaid, or (iii) one business day after deposit thereof for overnight delivery
with a nationally recognized overnight delivery service which receives
88
written acknowledgement of receipt. Such notices, consents, demands or other
communications shall be addressed respectively:
As to the Purchaser Entities:
c/o SFX Entertainment, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Rosenman & Colin LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
As to any of the Seller Entities:
c/o The Contemporary Group
One Magna Place
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Co-Presidents
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
Riezman & Blitz, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Seventh Floor
Bonhomme Place
St. Louis (Clayton), Missouri 63105
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to any other address or telecopy number which such party may have
subsequently communicated to the other parties in writing in accordance with
the terms of this Section 14.03, except such notice shall only be effective
upon actual receipt by the intended recipient.
89
(b) Except as otherwise provided in this Agreement, any notice,
consent, demand or other communication given hereunder may be signed on behalf
of a party by any duly authorized representative of that party.
Section 14.04. Binding Effect; Successors and Assigns. Each and every
representation, warranty, covenant, agreement, indemnification, and provision
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.
This Agreement may not be assigned by any party hereto without the prior
written consent of the other parties hereto, except that (i) SFX may assign
this Agreement to any financially capable publicly-held company that acquires
SFX's concert business or the assets thereof and (ii) subsequent to the
Closing, SFX and/or Acquisition Corp. may transfer its rights and obligations
hereunder, and may transfer the assets acquired by it from the Seller Entities
hereunder, to a wholly-owned subsidiary of SFX. Any purported assignment in
violation of this Agreement shall be null and void.
Section 14.05. Governing Law. This Agreement and any other agreement
entered into in connection herewith shall be governed by, and construed under
and in accordance with, the laws of the State of New York without giving effect
to the conflict of laws principles thereof, except that the General Corporation
Law of the State of Delaware and the General and Business Corporation Law of
the State of Missouri shall apply to the Merger.
Section 14.06. Captions. The captions and the table of contents
appearing in this Agreement are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope or intent of
this Agreement or any of the provisions hereof.
Section 14.07. Confidentiality of Disclosures. Any corporate
information, records, documents, descriptions or other disclosures of
whatsoever nature or kind made or disclosed by any of the parties to any of the
other parties, or to the authorized representative thereof, or learned or
discovered by such other party or by any representative thereof in the course
of the investigations pursuant to the consummation of the transactions
contemplated by this Agreement (whether prior to or after the date of the
execution of this Agreement) and not known by or
90
available to the public at large, shall be received in confidence and none of
the parties nor any such authorized representative shall disclose or make use
of such information or authorize anyone else to disclose or make use thereof
without the written consent of the other relevant parties hereto, except (a) as
necessary to consummate the transactions contemplated hereby or (b) as
compelled by judicial or administrative process or by other requirements of
applicable law including any disclosure under federal securities laws;
provided, however, that in the case of any disclosure contemplated pursuant to
this clause (b), the party seeking to disclose such information shall give the
other party or parties reasonable prior written notice thereof in order to
afford such other party or parties reasonable opportunity to seek a protective
order or other limitation under such disclosure. The obligations of SFX with
respect to the matters referred to in this Section 14.07 shall be further
governed by that certain confidentiality agreement dated as of September 12,
1997, by and between SFX and the Contemporary Group.
Section 14.08. Publicity. Any communications and notices to third
parties and all other publicity concerning the transactions contemplated by
this Agreement (other than governmental or regulatory filings) shall be planned
and coordinated by and among each of the parties. Unless required by applicable
law, none of the parties shall disseminate or make public or cause to be
disseminated or made public any information regarding the transactions
contemplated hereunder without the prior written approval of the other parties,
which approval shall not be unreasonably withheld or delayed, except (and only
to the extent) as necessary to consummate the transactions contemplated
thereby.
Section 14.09. Consent to Jurisdiction. With respect to any claim
arising out of this Agreement, each of the parties hereto irrevocably submits
to the non-exclusive jurisdiction of the courts of (i) the State of New York
and the United States District Court located in the Borough of Manhattan, the
City of New York and (ii) the State of Missouri and the United States District
Court located in the City of St. Louis (and of the appropriate appellate courts
thereof, respectively). In addition, each of the parties hereto irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any action, suit or proceeding arising out of or
91
relating to this Agreement brought in such courts, irrevocably waives any claim
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum and further irrevocably waives the right to
object with respect to such claim, action, suit or proceeding brought in any
such court, that such court does not have jurisdiction over him or it, as the
case may be, or any other party hereto. The parties hereto hereby agree that
process in any such action or proceeding may be served on any party anywhere in
the world, whether within or without the State of New York or the State of
Missouri, provided that notice thereof is provided pursuant to the provisions
of Section 14.03 hereof.
Section 14.10. Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses.
Section 14.11. Costs of Enforcement. Except as otherwise set forth
herein, the prevailing party in any proceeding brought to enforce any provision
of this Agreement shall be entitled to recover the reasonable fees and costs of
its counsel, plus all other costs of such proceeding.
Section 14.12. Third Parties. Other than the parties hereto and
Acquisition Corp., and as otherwise provided in Section 14.04 hereof, no person
shall have any rights under or to enforce any provision of this Agreement.
Section 14.13. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original and all of which taken together shall
constitute one and the same agreement.
Section 14.14. Amendment. This Agreement shall not be changed,
modified or amended except by a writing signed by the party to be charged and
this Agreement may not be discharged except by performance in accordance with
its terms or by a writing signed by the party to which performance is to be
rendered and only to the extent set forth therein.
Section 14.15. Waiver. No waiver shall be deemed to be made by any
of the parties to any of its rights hereunder unless that waiver shall be in
a writing signed by the waiving party and
92
then only to the extent therein set forth. No failure of any of the parties to
exercise any power given such party hereunder or to insist upon strict
compliance by any other party with its obligations hereunder, and no custom or
practice of the parties at variance with the terms hereof shall constitute a
waiver of the right of any party to demand precise compliance with the terms of
the Agreement.
Section 14.16. Severability. If any provision of this Agreement or the
application of any provision hereof to any person or in any circumstances is
held invalid, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected unless the
provision held invalid shall substantially impair the benefits of the remaining
portions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
93
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
SFX ENTERTAINMENT, INC.
By: /s/ ▇▇▇▇▇▇ F.X. Sillerman
------------------------------------
Name: ▇▇▇▇▇▇ F.X. Sillerman
Title: Executive Chairman
CONTEMPORARY INVESTMENTS
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Co-President
CONTEMPORARY INVESTMENTS OF KANSAS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Co-President
CONTINENTAL ENTERTAINMENT
ASSOCIATES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
CAPITAL TICKETS, LP
By: GP CAPITAL TICKETS, INC., its
General Partner
By : /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Co-President
DIALTIX, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Co-President
CONTEMPORARY INTERNATIONAL
PRODUCTIONS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Co-▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ LIVING TRUST,
DATED 10/22/92
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ LIVING TRUST,
DATED 11/24/81
By:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee
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96