PARTNERSHIP AGREEMENT
FOR
WESTERN AMPHITHEATER PARTNERS
This Partnership Agreement ("Agreement") is made and entered into
effective as of this 4th day of April , 1997 by and between PAVILION PARTNERS,
a Delaware general partnership, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ AMPHITHEATER, a California
general partnership. For and in consideration of the mutual covenants herein
contained, the parties to this Agreement hereby form and create a general
partnership, under and pursuant to the Partnership Act for the purposes and
upon the terms, provisions, and conditions as hereinafter set forth:
ARTICLE I
Definitions
Capitalized terms used in this Agreement shall have the respective
meanings indicated in the glossary of terms attached hereto as Exhibit "A".
ARTICLE II
Name of Business: Offices
2.01 Partnership Name. The name of the Partnership shall be Western
Amphitheater Partners. In addition to the foregoing name, the activities and
business of the Partnership may be conducted under such other name or names as
may be designated from time to time by the Executive Committee. The Partners
shall execute and file such certificates, if any, as are required by the
provisions of any assumed name law or statute in any jurisdiction in which the
Partnership conducts business, as may be required to reflect the Partnership's
operation under such names.
2.02 Partnership Offices. The principal places of business of the
Partnership shall be at ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and
at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Partnership
shall also maintain an office at each of the Subject Amphitheaters.
ARTICLE III
Purpose and Power of the Partnership
3.01 Purposes. As the owners of the Subject Amphitheaters, each of the
Partners agrees that the integration of the resources and management of the
Subject Amphitheaters will result in substantial and significant operating
efficiencies by, among other things, eliminating unnecessary duplication of
efforts in the area of marketing, sponsorship sales, management
oversight, facility maintenance and other essential operations necessary for
the proper use, operation and maintenance of the Subject Amphitheaters.
Accordingly, the character and purposes of the specific business to be
conducted by the Partnership are (i) to operate, use and exploit each of the
Subject Amphitheaters and (ii) to perform and fulfill all obligations and
duties imposed upon the Partnership pursuant to the terms and provisions
contained in each of the Amphitheater Contribution Agreements and (iii) to take
any and all other actions which may be incidental to or otherwise reasonably
related to the foregoing business and purposes. Notwithstanding anything to the
contrary contained herein, reference is made to the fact that the Underlying
Owner of each of the Subject Amphitheater has retained the right to make the
following major decisions with respect to such Subject Amphitheater:
(a) selling, transferring, conveying or otherwise disposing
of such Subject Amphitheater (subject to the provisions of Section
14.01 hereof);
(b) creating a mortgage, lien or other encumbrance upon the
Underlying Owner's interest in such Subject Amphitheater (subject to
the provisions of the Amphitheater Contribution Agreement which make
the Underlying Owner solely and exclusively obligated to discharge all
indebtedness and obligations secured by any such mortgage, lien or
other encumbrance); and
(c) making capital improvements at the Subject Amphitheaters
(subject to the provisions of the Amphitheater Contribution Agreement
which requires the Underlying Owner to be solely and exclusively
obligated to pay the costs of any such capital improvements).
Accordingly, the Partnership shall not have the authority to effect any of the
foregoing major decisions.
3.02 Powers. The Partnership shall have the power, in fulfilling the
purposes set forth in Section 3.01, to conduct any business or take any action
which is lawful and which is not prohibited by the Partnership Act.
ARTICLE IV
Term of Partnership
The term of the Partnership shall begin on the date first set forth
above and shall continue until November 30, 2016, unless sooner dissolved
pursuant to Section 17.01 or by operation of law.
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ARTICLE V
Contributions to Partnership
5.01 Pavilion's Initial Contribution.
(a) Pavilion shall hereafter contribute to the capital of the
Partnership on the Closing Date certain rights, licenses, assets and
other benefits relating to ▇▇▇▇ ▇▇▇▇▇ Amphitheater on, subject to and
pursuant to the terms and provisions contained in the Amphitheater
Contribution Agreement for ▇▇▇▇ ▇▇▇▇▇ Amphitheater.
(b) The Partners hereby agree that the combined fair market
value of the rights, licenses, assets and other benefits to be
hereafter contributed by Pavilion to the capital of the Partnership
(net of liabilities assumed by the Partnership or to which such
rights, licenses, assets and other benefits are subject) pursuant to
the Amphitheater Contribution Agreement for ▇▇▇▇ ▇▇▇▇▇ Amphitheater is
$5,000,000 ("Initial Contribution Amount") and that the initial
balance of Pavilion's Capital Account shall therefore equal the
Initial Contribution Amount.
5.02 IMA's Initial Contribution.
(a) IMA shall hereafter contribute to the capital of the
Partnership on the Closing Date certain rights, licenses, assets and
other benefits relating to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater on, subject to
and pursuant to the terms and provisions contained in the Amphitheater
Contribution Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater.
(b) The Partners hereby agree that the combined fair market
value of the rights, licenses, assets and other benefits to be
hereafter contributed by IMA to the capital of the Partnership (net of
liabilities assumed by the Partnership or to which such rights,
licenses, assets and other benefits are subject) pursuant to the
Amphitheater Contribution Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater is
equal to the Initial Contribution Amount and that the initial balance
of IMA's Capital Account shall therefore equal the Initial
Contribution Amount.
5.03 Operational Shortfalls. If an Operational Shortfall occurs at any
time and a Deficit Loan is not made by one or both of the Partners pursuant to
the provisions of Article VI hereof in an amount sufficient to cover such
Operational Shortfall, then each Partner shall be obligated to contribute to
the capital of the Partnership its Percentage Interest of the amount of funds
needed to cover such Operational Shortfall.
5.04 No Other Capital Contribution Obligations. Except for the
specific obligations to make contributions to the capital of the Partnership as
expressly set forth in this Article V and in
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Section 17.03 hereof, neither Partner shall have any other obligation to make
contributions to capital of the Partnership.
ARTICLE VI
Deficit Loans
If an Operational Shortfall occurs at any time, then any Partner shall
have the right, but not the obligation, to extend a loan ("Deficit Loan") to
the Partnership in the amount of such Operational Shortfall. If both Partners
elect to extend a Deficit Loan to the Partnership upon the occurrence of an
Operational Shortfall, then each shall fund its Percentage Interest of the
amount of such Operational Shortfall. If one of the Partners elects to refrain
from extending a Deficit Loan with respect to any Operational Shortfall, then
the other Partner shall have the right to extend a Deficit Loan up to the full
amount thereof. Each Deficit Loan shall bear interest at a variable rate of
interest per annum equal to the Permitted Rate and shall be repayable as soon
as the Partnership has funds available therefor. No distributions shall be made
to the Partners pursuant to Article IX hereof at any time during which any
Deficit Loan remains outstanding.,
ARTICLE VII
Tax Matters and
Maintenance of Capital Accounts
7.01 Generally. For each taxable year of the Partnership, the income,
gains, losses, credits and deductions of the Partnership shall be allocated
between the Partners in accordance with each Partner's Percentage Interest.
7.02 Section 704(c). Income, gain, loss and deduction with respect to
any item of property contributed to the Partnership shall, solely for federal
income tax purposes, be allocated between the Partners so as to take into
account any difference between the Gross Asset Value of such item of property
and its adjusted basis for federal income tax purposes on the date of such
contribution, in accordance with the requirements of Section 704(c) of the
Code. All allocations under this Section 7.02 shall be made in such a manner as
the Executive Committee shall determine reasonably reflects the requirements of
Section 704(c) of the Code. No allocations pursuant to this Section 7.02 shall
be reflected as an adjustment to any Partner's Capital Account.
7.03 Maintenance of Capital Accounts. A Capital Account shall be
established and maintained for each Partner in accordance with the following
provisions:
(a) Increases in Capital Accounts. Each Partner's Capital
Account shall be increased by (i) the amount of cash and the fair
market value of all property contributed by such Partner to the
Partnership (net of liabilities assumed by the Partnership or to which
the contributed property is subject) and (ii) that Partner's allocable
share of income
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and gain for federal income tax purposes (excluding any allocations
made pursuant to Section 7.02 hereof).
(b) Decreases in Capital Accounts. Each Partner's Capital
Account shall be decreased by (i) the amount of cash and the fair
market value of all property distributed to such Partner (net of
liabilities assumed by the Partner or to which the property is
subject) and (ii) that Partner's allocable share of losses and other
items of deduction for federal income tax purposes (excluding any
allocations made pursuant to Section 7.02 hereof).
(c) Use of Gross Asset Value. For purposes of computing the
amount of any item of income, gain, loss, or deduction to be reflected
in the Partners' Capital Accounts, the determination, recognition and
classification of such items shall be the same as their determination,
recognition and classification for federal income tax purposes, except
that (i) gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed with reference to the Gross
Asset Value of the property disposed of, rather than its adjusted
basis, and (ii) depreciation, amortization, or other cost recovery
deductions with respect to an item of Partnership property shall be
computed with reference to the Gross Asset Value of such property
rather than its adjusted basis.
(d) Compliance with Treasury Regulations. The foregoing
provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with the
Treasury Regulations issued pursuant to Section 704(b) of the Code,
and shall be interpreted and applied in a manner consistent with such
regulations. If the Partners shall determine that it is prudent to
modify the manner in which the Capital Accounts are computed or
maintained in order to comply with such regulations, the Partners may
make such modification.
7.04 Taxes Attributable to Post-1996 Receipts.
(a) All Post-1996 Receipts received prior to the Closing Date
shall be, for purposes of federal, state and local income tax, the
income of the recipient thereof. Accordingly, the recipient of all
Post-1996 Receipts received prior to the Closing Date shall be
responsible for payment of, and shall indemnify the Partnership with
respect to, all federal, state and local taxes payable on account of
such Post-1996 Receipts.
(b) All Post-1996 Receipts received after the Closing Date
shall be, for purposes of federal, state and local income tax, the
income of the Partnership and allocated to the Partners pursuant to
the provisions of Section 7.01 hereof.
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ARTICLE VIII
Fees
8.01 Generally. Except as specifically provided in Section 8.02
hereof, neither Partner shall be entitled to receive any fees from the
Partnership without the express prior written approval of both Partners.
8.02 Pavilion's Fee for Sponsorship Services. In consideration for the
services to be rendered by Pavilion in respect of the solicitation and
procurement of sponsors for the Subject Amphitheaters (as described in Section
12.09(a)(i) hereof), the Partnership shall pay a fee to Pavilion, within 30
days following the completion of each Amphitheater Fiscal Year, in an amount
equal to 20% of the amount (if any) by which (i) the Net Sponsorship Revenue
for such Amphitheater Fiscal Year exceeds (ii) the Net Sponsorship Revenue for
the Amphitheater Fiscal Year which ended on December 31, 1996. If the Executive
Committee should, at any time hereafter, elect to remove Pavilion as the party
primarily responsible for directing the efforts of soliciting, procuring and
obtaining sponsors for each of the Subject Amphitheaters pursuant to the
provisions of Section 12.09(c) hereof, then the fee provided for in this
Section 8.02 shall not be payable to Pavilion for any Amphitheater Fiscal Year
thereafter.
ARTICLE IX
Rent Obligations and Cash Distributions
9.01 Advance of Rental Payments. Reference is made to the fact that
pursuant to the provisions of each of the Amphitheater Contribution Agreements,
(i) Pavilion is responsible for payment of all lease payments and rental
obligations due under and pursuant to its Lease Agreement with the County of
San Bernardino at the ▇▇▇▇ ▇▇▇▇▇ Amphitheater and (ii) IMA is responsible for
the payment of all lease payments and rental obligations due under and pursuant
to its Lease Agreement with The Irvine Company at the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Amphitheater. To the extent that the Executive Committee determines that the
Partnership has cash available which is not required for a reasonable working
capital reserve for the obligations or business needs of the Partnership, the
Partnership shall fund the lease payments and rental obligations due in respect
of the Lease Agreements at each of the Subject Amphitheaters as and when due
and payable. All amounts so advanced by the Partnership shall be deemed to be a
loan made by the Partnership to (x) Pavilion with respect to all amounts so
funded in respect of the ▇▇▇▇ ▇▇▇▇▇ Amphitheater and (y) IMA with respect to
all amounts so funded in respect of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater (such loans
being herein collectively called the "Rental Loans").
9.02 Annual Distribution of Available Cash. All Available Cash of the
Partnership, as of December 31 of each calendar year, shall be distributed by
the Partnership to the Partners on
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or before January 31 of the next succeeding calendar year in the amounts
determined in accordance with the following provisions:
(a) Subject to the other provisions of this Section 9.02, the
Partnership shall distribute to each Partner an amount equal to its
Percentage Interest of the amount of Available Cash being distributed.
(b) Prior to making the distribution of the amount specified
in clause (a) of this Section 9.02, the Partnership shall reduce,
deduct and offset against such distribution to each Partner the then
amount (if any) of the Rental Loan owed by such Partner to the
Partnership.
(c) All amounts withheld by the Partnership pursuant to
clause (b) of this Section 9.02 in repayment of the then outstanding
Rental Loans shall then be distributed to each of the Partners in
proportion to their respective Percentage Interests.
If a Partner's distributable share of Available Cash determined pursuant to
Section 9.02(a) hereof is less than the then amount of the Rental Loan owed by
such Partner, then such Partner shall immediately be obligated to pay to the
Partnership a cash sum to be applied against such Partner's Rental Loan in the
amount by which the then balance of such Rental Loan exceeds such Partner's
distributable share of Available Cash. All amounts received by the Partnership
pursuant to the immediately preceding sentence shall immediately thereafter be
distributed to the Partners in proportion to their respective Percentage
Interests.
ARTICLE X
Ownership of Partnership Property
All real or personal property acquired by the Partnership shall be
owned by the Partner ship, such ownership being subject to the other terms and
provisions of this Agreement. Each Partner hereby expressly waives the right to
require partition of any Partnership property or any part thereof.
ARTICLE XI
Fiscal Matters
11.01 Fiscal Year. The fiscal year of the Partnership for tax purposes
shall end at such time as is required pursuant to the application of the
provisions of the Code or the U.S. Treasury Regulations promulgated thereunder.
The fiscal year of the Partnership for accounting purposes shall end on
December 31; provided, however, the Partnership's Accounting Staff shall
provide to Pavilion such data and information as may be reasonably necessary to
permit Pavilion to incorporate the operating results of the Partnership into
Pavilion's financial reports and
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statements as of the end of each of Pavilion's fiscal years (which currently
ends on September 30 of each year).
11.02 Books and Records.
(a) Proper books and records shall be kept by the staff at
each of the Subject Amphitheaters reflecting all financial
transactions, receipts and expenditures relating to the operation,
use, maintenance and exploitation of such Subject Amphitheater. The
Executive Committee shall establish certain financial reporting
requirements from time to time that shall apply equally to each of the
Subject Amphitheaters. The staff at each Subject Amphitheater, under
the direction of the general manager of such Subject Amphitheater,
shall be responsible for complying with such financial reporting
requirements, and all reports so generated will be provided
simultaneously to both of the Partners.
(b) Pursuant to the provisions of Section 12.05 hereof,
certain accounting personnel employed by an Affiliate of a partner of
IMA will be loaned to the Partnership ("Partnership's Accounting
Staff"), upon terms consistent with the Operating Budget or otherwise
approved by the Executive Committee, who will be responsible for
consolidating the books and records of the Partnership, and each
Partner shall at all reasonable times during business hours have
access to those consolidated books and records. The Partnership's
Accounting Staff shall prepare (in a form and manner promulgated by
Pavilion) and distribute to each of the Partners (1) monthly financial
statements within 20 days after the end of each calendar month and
(ii) annual financial statements within 45 days after the end of each
fiscal year of the Partnership. All financial reports prepared by the
Partnership's Accounting Staff (and the underlying accounting data)
shall be made available to the Partners, upon the request of either
Partner, in a manner enabling such Partner to load the information on
a computer.
(c) All items of income and deductions recognized during a
fiscal year shall be allocated as of the end of each fiscal year,
based on the facts and circumstances existing as of the end of that
year. Interim monthly reports may be based on the facts and
circumstances existing at the time of those reports subject to
year-end adjustments.
11.03 Partnership Bank Accounts. All funds of the Partnership shall be
deposited in its name in an account or accounts maintained at a national or
state bank selected by the Executive Committee. Checks shall be drawn upon the
Partnership and may be signed by such persons as may be designated from time to
time by the Executive Committee.
11.04 Tax Matters and Reports. Any provision hereof to the contrary
notwithstanding, solely for federal income tax purposes, each of the Partners
hereby recognizes that the Partnership will be subject to all provisions of
Subchapter K of Chapter 1 of Subtitle A of the Code; provided, however, the
filing of U.S. Partnership Returns of Income shall not be construed
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to extend the purposes of the Partnership or expand the obligations or
liabilities of the Partners. Pavilion shall be the "Tax Matters Partner" for
all purposes related to federal, state and local income tax laws.
11.05 Tax Returns. The Partnership's Accounting Staff shall prepare,
or cause to be prepared, all tax returns and statements, if any, which must be
filed on behalf of the Partnership with any taxing authority, and shall submit
copies of all such returns and statements to the Partners. To the extent
provided for in the then effective Operating Budget or otherwise approved by
the Executive Committee, the fees, charges and other expenses payable to third
party professionals such as attorneys or accountants relating to the
preparation and filing of tax returns and statements or otherwise reporting of
financial results of the Partnership, shall be properly chargeable as expenses
of the Partnership.
11.06 Section 754 Election. In the case of distribution of Partnership
property within the provisions of Section 734 of the Code or in the case of a
transfer of a Partnership interest permitted by this Agreement made within the
provisions of Section 743 of the Code, the Partnership shall file an election
under Section 754 of the Code in accordance with the procedures set forth in
the applicable Treasury Regulations upon the request of any Partner if such
requesting Partner agrees to pay all costs incurred by the Partnership in
connection with the making of such election.
11.07 No Interest. No Partner shall be entitled to be paid interest on
either the balance of its Capital Account or any contributions made by it to
the Partnership.
11.08 Operational Audits. Each Partner shall have the right, at any
time and from time to time, without prior notice to the other Partner, to cause
one or more employees or other representative of the auditing Partner, at the
sole cost and expense of the auditing Partner, to enter into and go upon the
premises of one or both of the Subject Amphitheaters to conduct audits of the
operational procedures and practices of the Subject Amphitheaters. Each Partner
hereby covenants and agrees with the Partnership and with the other Partner,
that no such audit of the operational procedures and practices of either of the
Subject' Amphitheaters shall be conducted in a manner which is disruptive to
the business of the Partnership or either of the Subject Amphitheaters.
11.09 Complimentary Tickets. Each Partner shall have the right to
receive up to 48 complimentary tickets, subject to availability, for each Event
presented at the Subject Amphitheaters. If either Partner (or any of such
Partner's constituent partners or any Affiliate of any of much Partner's
constituent partners) should sell, or knowingly permit to be sold, any such
complimentary tickets (unless the sales price does not exceed the face value of
equivalent non-complimentary tickets and the proceeds are immediately remitted
to the Partnership), then such Partner shall be obligated and required to pay
to the Partnership, as liquidated damages and not as a penalty, the sum of (i)
125% of all proceeds of such sales and (ii) interest on the amounts
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so owed from the date of such sales until payment at a daily compounded rate of
interest equal to 4% over the national prime rate.
11.10 Prohibition Against Scalping. If either Partner (or any of such
Partner's constituent partners or any Affiliate of any of such Partner's
constituent partners) should sell, or knowingly permit to be sold, without
Executive Committee approval, any ticket to an Event being presented at either
of the Subject Amphitheaters for an amount that exceeds the face value thereof
and any applicable service charge, then such Partner shall be obligated and
required to pay to the Partnership, as liquidated damages and not as a penalty,
the sum of (i) 125% of all proceeds of such sales in excess of the face value
thereof and (ii) interest on the amounts so owed from the date of such sales
until payment at a daily compounded rate of interest equal to 4% over the
national prime rate.
11.11 Formation Costs. The Partners agree that the legal fees incurred
by each of the Partners in connection with the negotiation, preparation and
execution of this Agreement, the Amphitheater Contribution Agreements, the
Promotion Agreement and the T.B.A. Marketing Agreement are reasonable and
necessary costs related to the formation of the Partnership and shall be
reimbursed by the Partnership to each of the Partners.
ARTICLE XII
Management of Partnership Affairs
12.01 Management. The management and control of the Partnership's
business shall be vested in the Partners, who shall exercise such management
and control exclusively through and by virtue of their respective selection of
the Representatives to serve on the Executive Committee in accordance with the
provisions of this Article XII.
12.02 Executive Committee.
(a) Executive Committee's Authority. The Executive Committee
shall have (i) full, exclusive and complete authority and discretion
to manage and control, and shall make all decisions affecting, the
Partnership's business; (ii) full authority to effectuate the purposes
of the Partnership and to take any action required, permitted or
authorized pursuant to the terms of this Agreement; and (iii) full
power to exercise all rights and powers generally inferred or
conferred by law in connection therewith. Notwithstanding the
foregoing, the Executive Committee shall not have the right to make
the major decisions referenced in Section 3.01 hereof, it being agreed
that the authority to make such major decisions with respect to each
of the Subject Amphitheaters has been retained by the Underlying Owner
of such Subject Amphitheater.
(b) Unanimous Approval Required. Actions and decisions to be
taken by the Executive Committee shall require the unanimous approval
of the Representatives of the
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Executive Committee attending a duly called and held meeting of the
Executive Committee at which a quorum of the Representatives are in
attendance.
(c) Selection of Representatives on Executive Committee. The
Executive Committee shall be comprised of six (6) individual
Representatives. Pavilion shall have the right, at any time, and from
time to time, to designate and select three (3) out of the six (6)
Representatives who shall serve on the Executive Committee. IMA shall
have the right, at any time, and from time to time, to designate and
select three (3) out of the six (6) Representatives who shall serve on
the Executive Committee. Each Partner's Representatives on the
Executive Committee may be removed or replaced at any time, for any
reason, temporarily or permanently, by such Partner upon notice
thereof to the other Partner.
(d) Meetings of the Executive Committee.
(1) Meetings of the Executive Committee may be held
at such regular times as may be specified by the Executive
Committee and, in addition, may be called by any
Representative by giving at least ten (10) days prior notice
thereof to each of the Representatives. Notice of each
meeting shall be in writing and shall state the date, time,
and place at which such meeting is to be held (which must be
a place in either Houston, Texas or Los Angeles, California)
and the purposes for which such meeting is called. The
attendance of a Representative at a meeting shall constitute
a waiver of notice of such meeting.
(2) An annual meeting of the Executive Committee
shall be held on the last Monday of March in each year
(unless such date is a holiday, in which event such meeting
shall be held on the next business day thereafter) or at such
other time and place as the Executive Committee may
designate.
(3) Any action required or permitted to be taken at
a meeting of the Executive Committee may be taken (i) by
means of a telephone conference in which all Representatives
participating in the meeting and constituting a quorum can
hear and speak to each other or (ii) by means of unanimous
written consent executed by all of the Representatives. All
action taken pursuant to the immediately preceding sentence
shall be deemed for all purposes to have been taken at a
meeting of the Executive Committee.
(4) The presence at a meeting of at least four (4)
of the Representatives shall constitute a quorum for the
transaction of all business of the Executive Committee. Any
meeting of the Executive Committee which is properly called
and at which a quorum is present may be adjourned to a date
which is no later than twenty-one (21) days from the date
upon which the initial meeting was called.
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12.03 Annual Operating Budgets. Attached hereto as Exhibit "B" is the
Operating Budget for the Amphitheater Fiscal Year ending on December 31, 1997.
On or before November 30 of each calendar year, commencing on November 30,
1997, the Partnership's Accounting Staff shall prepare and provide to the
Representatives (i) a proposed Operating Budget for the forthcoming
Amphitheater Fiscal Year setting forth in reasonable detail the various
categories of Budgeted Operating Expenses and the amounts for each such
category to be incurred by the Partnership during the forthcoming Amphitheater
Fiscal Year and (ii) such information and materials related to the proposed
Operating Budget as may be requested by any of the Representatives so long as
such information and materials can be generated in the ordinary course of
business. To be adopted, a proposed Operating Budget must be approved by the
Executive Committee; however, if no Operating Budget is approved by the
Executive Committee for any Amphitheater Fiscal Year prior to the commencement
of such Amphitheater Fiscal Year, then the Operating Budget for such
Amphitheater Fiscal Year shall be deemed to be, until a different Operating
Budget is approved by the Executive Committee, the Operating Budget for the
prior Amphitheater Fiscal Year with each line item increased by the greater of
(i) 5% or (ii) the percentage increase in the CPI Index during the immediately
preceding Amphitheater Fiscal Year.
12.04 Transactions with Partners and Affiliates of Partners. Each
Partner hereby agrees that, with respect to any and all contracts and
agreements entered into by and between the Partnership (on the one hand) and
any Partner, the constituent partner of any Partner or any Affiliate of a
constituent partner of any Partner (on the other hand), (i) the existence of
such affiliation shall be disclosed to the other Partner prior to such
agreement or contract being made and entered into, (ii) copies thereof shall be
made available to such other Partner upon its request along with any details
and other information related thereto and (iii) the execution of each such
contract and agreement shall require the prior written consent of the other
Partner (which consent shall not be unreasonably withheld or delayed).
12.05 Partnership Staffing. Subject to the provisions hereof relating
to the Partnership's Operating Budget and the approval of the Executive
Committee, the staffing needs of the Partnership shall be filled by having
employees of the Partners, the constituent partners of the Partners, and
Affiliates of the constituent partners of the Partners, loaned to the
Partnership on a full or part-time basis. Each such employee who is so loaned
to the Partnership shall have all or such appropriate portion of his or her
salary and benefit costs reimbursed by the Partnership to the actual employer
of such employee. If the Executive Committee is unable to reach agreement
concerning the staffing needs of the Partnership at any time, then (i)
Pavilion's designated Representatives shall have the right to select and
appoint the employees who provide services in respect of the operation,
maintenance and use of the ▇▇▇▇ ▇▇▇▇▇ Amphitheater, subject to the limitations
of the Partnership's Operating Budget, and (ii) IMA's designated
Representatives shall have the right to select and appoint the employees who
provide services in respect of the operation, maintenance and use of the ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Amphitheater, subject to the limitations of the Partnership's Operating
Budget.
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12.06 Special Right to Enforce Rights under Amphitheater Contribution
Agreement. Notwithstanding anything to the contrary contained in this Article
XII, (A) Pavilion shall have the exclusive right, power and authority, for and
on behalf of the Partnership, to (i) enforce all of the Partnership's rights,
benefits and privileges created under, by or pursuant to the Amphitheater
Contribution Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, including, without
limitation, the right to make elections thereunder on behalf of the Partnership
and to enforce any remedies available to the Partnership thereunder and (ii)
conduct and direct the defense of any claims made by IMA against the
Partnership for any alleged breach by the Partnership of the provisions thereof
and (B) IMA shall have the exclusive right, power and authority, for and on
behalf of the Partnership, to (i) enforce all of the Partnership's rights,
benefits and privileges created under, by or pursuant to the Amphitheater
Contribution Agreement for ▇▇▇▇ ▇▇▇▇▇ Amphitheater, including, without
limitation, the right to make elections thereunder on behalf of the Partnership
and to enforce any remedies available to the Partnership thereunder and (ii)
conduct and direct the defense of any claims made by Pavilion against the
Partnership for any alleged breach by the Partnership of the provisions
thereof.
12.07 Promotion Agreement. Notwithstanding anything to the contrary
contained in this Article XII:
(a) The Partnership shall delegate the booking and logistical
production of all Events to be presented at the Subject Amphitheaters
to the Promoter on, subject to and in accordance with the terms,
provisions and conditions contained in the Promotion Agreement.
(b) Either Partner (acting alone or together with the other
Partner) shall have the right, power and authority, for and on behalf
of the Partnership, to (i) enforce all of the Partnership's rights,
benefits and privileges created under, by or pursuant to the Promotion
Agreement including, without limitation, the right to make elections
thereunder on behalf of the Partnership and to enforce any remedies
available to the Partnership thereunder and (ii) conduct and direct
the defense of any claims made by the Promoter against the Partnership
for any alleged breach by the Partnership of the provisions thereof.
Without limiting the generality of the foregoing, it is specifically
recognized, agreed and acknowledged that either Partner (acting alone
or together with the other Partner) shall have the right and
authority, for and on behalf of the Partnership, to (A) exercise the
right, if available, to terminate the Promotion Agreement pursuant to
the provisions of Section 4(b), (c) or (d) thereof and (B) elect to
exercise the right, if available, to send a Probationary Notice (as
defined in the Promotion Agreement) pursuant to the provisions of
Section 4(c) thereof.
(c) Notwithstanding the provisions of clause (b) of this
Section 12.07, only the Executive Committee, acting unanimously, shall
have the right and authority, for and on behalf of the Partnership, to
(i) accept any offer made by the Promoter pursuant to the provisions
of Section 5(a) of the Promotion Agreement and (ii) exercise the right
created
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pursuant to the provisions of Section 6(a) of the Promotion Agreement
to approve of booking offers proposed to be made by the Promoter after
a Probationary Notice has been provided pursuant to the provisions of
Section 4(c) of the Promotion Agreement; provided, however, that all
Promoter-Related Representatives shall be excluded from voting on any
matter brought before the Executive Committee which is described in
this Section 12.07(c).
(d) If the Promotion Agreement should be terminated at any
time during the Term, then the selection of a new "booking agent" for
the Partnership shall be made by Pavilion, subject to IMA's consent
(which consent shall not be unreasonably withheld or delayed).
(e) If (i) the Promotion Agreement should be terminated at
any time during the Term pursuant to the provisions of section 4(b),
(c) or (d) of the Promotion Agreement by the unilateral action of
Pavilion without the written approval of Azoff Inc. and (ii) as a
result of such termination, Geddes Inc. exercises the IMA Put Option,
then the following provisions shall thereafter apply and become
effective:
(1) IMA shall (i) deliver, or cause to be delivered,
to Pavilion, within three business days following receipt, a
copy of the notice of the exercise of the IMA Put Option and
(ii) obtain, or cause to be obtained, the consent of Pavilion
(such consent not to be unreasonably withheld or delayed) as
to decisions related to the selection and designation of
appraisers in connection with the IMA Put Option.
(2) At any time within thirty (30) days following
receipt by Azoff Inc. of the "Accountant's Notice" of the
"Purchase Price" (as such terms are defined in Section 3.03
of the Partnership Agreement of IMA), Azoff Inc. may provide
written notice (the "No-Interest Notice") to Pavilion that
Azoff Inc. does not wish to purchase all or its "Percentage
Interest" (as determined under Section 3.03 of the
Partnership Agreement of IMA) of the interest of Geddes Inc.
in IMA pursuant to the IMA Put Option. A No-Interest Notice
given by Azoff Inc. to Pavilion pursuant to the foregoing
provisions shall not be considered to have been received by
Pavilion for purposes hereof until Pavilion has received a
copy of the Accountant's Notice of the Purchase Price.
(3) At any time within ten (10) days after ▇▇▇▇
Inc.'s receipt of a No-Interest Notice from Azoff Inc., but
in no event later than forty (40) days after Azoff Inc.'s
receipt of the Accountant's Notice of the Purchase Price,
▇▇▇▇ Inc. may provide written notice (also a "No-Interest
Notice") to Pavilion that ▇▇▇▇ Inc. does not wish to purchase
the interest of Geddes Inc. in IMA pursuant to the IMA Put
Option.
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(4) If Pavilion should receive (A) a No-Interest
Notice from Azoff Inc. within 30 days following receipt by
Azoff Inc. of the Accountant's Notice of the Purchase Price
and (B) a No Interest Notice from ▇▇▇▇ Inc. by the earlier of
(i) 10 days after ▇▇▇▇ Inc.'s receipt of the No-Interest
Notice from Azoff Inc. or (ii) 40 days following receipt by
Azoff Inc. of the Accountant's Notice of the Purchase Price,
then Pavilion shall provide a written notice to IMA that
Pavilion has elected to do one of the following:
(A) purchase all of the interest of Geddes
Inc. in IMA in accordance with the terms and
provisions of the IMA Put Option; or
(B) terminate the Partnership effective as
of the last day of the Amphitheater Fiscal Year in
which such notice is provided.
If Pavilion fails to fulfill its obligation to provide such
notice to IMA within thirty (30) days after the later of (i)
receipt of the No-Interest Notice from Azoff Inc. or (ii)
receipt of the No-Interest Notice from ▇▇▇▇ Inc., then
Pavilion shall be deemed to have elected to terminate the
Partnership pursuant to clause (B) above.
If Azoff Inc. should, at any time hereafter, agree to amend, without the
express prior consent of Pavilion, any of the terms, provisions or conditions
contained in the IMA Put Option which relate to the methodology of calculating
the purchase price, the timing of the payment of the purchase price, the
deadlines for exercising the put option or any other similar provision in a
manner which makes such terms less favorable to Pavilion, then the foregoing
provisions of this Section 12.07(e) shall be of no further force or effect.
[The remainder of this page is left intentionally blank.]
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12.08 Marketing Agreement. Not withstanding anything to the contrary
contained in this Article XII:
(a) The Partnership shall delegate the responsibility of
marketing and advertising all Events to be presented at the Subject
Amphitheaters to T.B.A. on, subject to and in accordance with the
terms, provisions and conditions contained in the T.B.A.
Marketing Agreement.
(b) Either Partner (acting alone or together with the other
Partner) shall have the right, power and authority, for and on behalf
of the Partnership, to (i) enforce all of the Partnership's rights,
benefits and privileges created under, by or pursuant to the T.B.A.
Marketing Agreement including, without limitation, the right to make
elections thereunder on behalf of the Partnership and to enforce any
remedies available to the Partnership thereunder and (ii) conduct and
direct the defense of any claims made by T.B.A. against the
Partnership for any alleged breach by the Partnership of the
provisions thereof. If the T.B.A. Marketing Agreement should be
terminated at any time during the Term, then the selection of a new
"marketing agent" for the Partnership shall be made by the Executive
Committee.
12.09 Sponsorship Services.
(a) Notwithstanding the other provisions contained in this
Article XII, it is hereby agreed that (i) Pavilion shall be primarily
responsible for overseeing and directing, for and on behalf of the
Partnership, the solicitation, procurement and obtaining of sponsors
for each of the Subject Amphitheaters, (ii) a mutually approved
employee of Pavilion (or an Affiliate of a partner of Pavilion) shall
be loaned on a part-time or full-time basis to the Partnership
pursuant to Section 12.05 hereof, upon terms consistent with the
Operating Budget or otherwise approved by the Executive Committee, to
assist in the procurement and implementation of sponsorship
arrangements applicable to the ▇▇▇▇ ▇▇▇▇▇ Amphitheater and (iii) a
mutually approved employee of IMA, a constituent partner of IMA or an
Affiliate of a constituent partner of IMA will be loaned on a
part-time basis to the Partnership, upon terms approved by the
Executive Committee, to assist in the procurement and implementation
of sponsorship arrangements applicable to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Amphitheater. Except for the employee referenced in clause (ii) of the
immediately preceding sentence, Pavilion shall not be reimbursed for
the cost of any other employees of Pavilion providing the services
referenced in clause (i) of the immediately preceding sentence, it
being agreed that the sole and exclusive compensation to Pavilion for
the fulfillment of such services referenced in clause (i) of the
immediately preceding sentence shall be the fee set forth in Section
8.02 of this Agreement.
(b) Notwithstanding the provisions of clause (a) of this
Section 12.09, no sponsorship arrangement may be accepted on behalf of
the Partnership except in accordance with the following provisions:
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(1) If such sponsorship arrangement is for three or
fewer Events, then such sponsorship arrangement may be approved by the
general manager of the Subject Amphitheater to which such sponsorship
arrangement relates.
(2) For all other sponsorship arrangements not
described in clause (1), the Executive Committee must unanimously
approve the acceptance of such sponsorship arrangement before it is
executed and entered into for and on behalf of the Partnership.
(c) If Pavilion's performance of the services referenced in
Section 12.09(a)(i) hereof during any Amphitheater Fiscal Year results
in sponsorship revenues at the Subject Amphitheaters during such
Amphitheater Fiscal Year which (i) are materially less than the amount
of sponsorship revenues generated at similar outdoor entertainment
facilities or (ii) fails to meet an objective standard hereafter
adopted by the Executive Committee, then IMA shall have the right,
power and authority, for and on behalf of the Partnership, to remove
Pavilion as the party primarily responsible for overseeing and
directing the solicitation, procurement and obtaining of sponsors for
each of the Subject Amphitheaters in which case a successor
"sponsorship person" shall be selected for the Partnership by the
Executive Committee.
(d) Reference is made to the fact that certain existing
sponsorship arrangements applicable to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater
which will be contributed to the capital of the Partnership by IMA on
the Closing Date are burdened by certain commission obligations
referenced in Exhibit "C" attached hereto. The Partnership hereby
acknowledges such commission obligations and agrees to honor such
commission obligations to the extent identified on Exhibit "C"
attached hereto, as and when the applicable sponsorship revenues are
received by the Partnership. The foregoing provisions shall not apply
to any renewals or replacements of the existing contractual
sponsorship arrangements identified on Exhibit "C" attached hereto.
12.10 Legal Review of Form of Contracts. Pavilion's legal staff and
IMA's legal staff shall each have the right to review and provide input on the
form of contracts to be used for various types of standard arrangements in
connection with the operation, use, management and exploitation of the Subject
Amphitheaters.
12.11 Liability Insurance. Selection and purchase of the Partnership's
liability insurance covering the operations and activities at each of the
Subject Amphitheaters shall be an Executive Committee decision taking into
account the best interest of the Partnership's economic and financial
considerations. If the Executive Committee should so approve, the Partnership's
liability insurance may be separately placed at each of the Subject
Amphitheaters.
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ARTICLE XIII
Other Activities
13.01 Restrictions on Concert Promotion. During the Term, neither
Partner shall Promote an Amphitheater Event in the Restricted Area, or permit
any of such Partner's Related Parties to Promote an Amphitheater Event in the
Restricted Area, unless and except such Partner ("Promoting Partner") has first
offered, or caused to be offered, to the Partnership an option and right to
co-Promote such Amphitheater Event on an equal economic basis with the
Promoting Partner or its Related Party, as applicable. Any offer which a
Promoting Partner is required to make, or cause to be made, pursuant to the
provisions of the immediately preceding sentence with respect to any
Amphitheater Event to be presented in the Restricted Area must (i) be made in
writing to the other Partner ("Non-Promoting Partner"), (ii) include such
information concerning the economic terms and conditions of such Amphitheater
Event as the Non-Promoting Partner may reasonably request and (iii) be open for
acceptance for no less than five (5) business days. The decision on behalf of
the Partnership to accept or reject any offer made pursuant to the foregoing
provisions shall be made, notwithstanding anything to the contrary contained
herein, by the Non-Promoting Partner. If the economic terms and conditions upon
which an Amphitheater Event in the Restricted Area is to be Promoted should
change in any respect after the Non-Promoting Partner has declined on behalf of
the Partnership the offer made by the Promoting Partner pursuant to the
foregoing provisions but prior to the "on-sale" date for such Amphitheater
Event, then another offer ("New Offer") describing the changed terms and
conditions must be made, or caused to be made, by the Promoting Partner to the
Partnership in accordance with the foregoing provisions; provided, however if
the change in economic terms and conditions is not material, then the New Offer
may, by its terms, be open for acceptance for less than five (5) business days
but no less than forty-eight (48) hours.
13.02 Restrictions on Sell-Offs. If, during the Term, either Partner
("Sell Off Partner"), or any of its Related Parties, proposes to sell the right
to Promote an Amphitheater Event to a third party ("Unrelated Promoter") for
presentation in the Restricted Area, then the following provisions shall apply:
(a) Completion of the sale of the right to Promote such
Amphitheater Event in the Restricted Area may not be completed earlier
than five (5) business days following delivery of a notice to the
other Partner ("Non-Sell Off Partner") setting forth the specific
terms of such proposed sale to the Unrelated Promoter and such other
reasonable information related thereto as may be requested by the
Non-Sell Off Partner.
(b) The Non-Sell Off Partner shall have the right and
authority, notwithstanding anything to the contrary contained herein,
to require that the Partnership make a competing offer to the Sell-Off
Partner ("Partnership's Competing Offer") for the purchase from the
Sell-Off Partner of the right to Promote such Amphitheater Event at
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one of the Subject Amphitheaters for an amount up to, but not in
excess of, the amount being offered by the Unrelated Promoter.
(c) If the Non-Sell Off Partner exercises the right to issue
a Partnership's Competing Offer pursuant to the provisions of clause
(b) that matches the economics of the offer made by the Unrelated
Promoter, then the Sell-Off Partner shall exercise its reasonable
efforts to cause the Partnership's Competing Offer to be accepted with
the express understanding that the final decision as to which offer
will be accepted may not belong to the Sell-Off Partner.
13.03 No Other Restrictions. Except as expressly provided in Sections
13.01 and 13.02 above, this Agreement shall not preclude or limit in any
respect the right of any Partner to engage or invest in any business activity
of any nature or description, including those which may be similar to the
business of the Partnership. Neither the Partnership nor any Partner shall have
any right by virtue of this Agreement or any relationships created hereby in or
to such other ventures or activities or to the income or proceeds derived
therefrom. Notwithstanding the foregoing provisions or anything else to the
contrary contained herein or implied hereby, (i) the restrictions, limitations
and prohibitions set forth in the Promotion Agreement shall not be affected,
limited, lessened or otherwise altered in any respect by the provisions of this
Article XIII and all such matters contained in the Promotion Agreement shall
apply independently of, and cumulatively with, the provisions hereof and (ii)
the provisions of this Article XIII shall not limit, restrict or affect the
right of ▇▇▇▇▇▇ ▇▇▇▇▇ to serve as an artist manager and to perform the
functions and services customarily performed by him in that capacity.
13.04 Certain Defined Terms. As used in this Article XIII, the
following terms shall have the respective meanings indicated below:
(a) "Amphitheater Event" shall mean any Event which is part
of a tour in which seventy percent (70%) or more of the total number
of dates included in such tour are being played in outdoor
entertainment facilities with a seating capacity of more than 7500 and
less than 30,000.
(b) "Restricted Area" shall mean the geographical area
encompassed by the counties of San Bernardino, California and Orange
County, California.
(c) "Related Parties" shall mean, with respect to either
Partner, the constituent partners of such Partner and the Affiliates
of each constituent partner of such Partner.
(d) "Promote" shall mean, with respect to any Amphitheater
Event, the business activity of (i) acquiring from the artist
appearing in such Amphitheater Event (or his agent or other
representative) the right to present such Amphitheater Event at a
specific venue on a specific date in exchange for an appearance fee
and (ii) taking the risk that
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gross revenues from the presentation of such Amphitheater Event will
exceed the sum of the appearance fee and other costs of presenting
such Amphitheater Event.
ARTICLE XIV
Rights of Refusal
14.01 Subject Amphitheaters. Except as expressly permitted by the
provisions of this Section 14.01, neither Partner shall sell, transfer or
convey the Subject Amphitheater owned by it. If one Partner ("Selling Partner")
receives after December 31, 1999, but not before, a written offer from a third
party ("Proposed Purchaser") to purchase the Subject Amphitheater owned by the
Selling Partner which the Selling Partner desires to accept, then the Selling
Partner shall have the right, to sell all, but not less than all, of its
interest in its Subject Amphitheater if, but only if, the Selling Partner
complies with all of the following provisions:
(a) The Selling Partner shall provide prompt written notice
to the other Partner ("Non-Selling Partner") upon the commencement of
negotiation concerning any proposed sale of the Selling Partner's
Subject Amphitheater to the Proposed Purchaser.
(b) Upon request of the Non-Selling Partner at any time
following the notice given pursuant to clause (a), the Selling Partner
shall provide an oral report as to the status of the negotiations for
the proposed sale of the Selling Partner's Subject Amphitheater to the
Proposed Purchaser.
(c) The Selling Partner shall provide to the Non-Selling
Partner, from time to time after receipt, copies of all written
drafts, letters or other documentation pertaining to such proposed
sale of the Selling Partner's Subject Amphitheater to the Proposed
Purchaser.
(d) Within five (5) days following the execution of a binding
letter of intent or other binding agreement ("Purchase Agreement")
pursuant to which the Selling Partner agrees to sell its Subject
Amphitheater to the Proposed Purchaser, the performance of each party
thereto being conditioned expressly upon the provisions of this
Section 14.01, the Selling Partner shall provide a true, correct,
complete and accurate copy thereof to the Non-Selling Partner.
[The remainder of this page is left intentionally blank.]
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(e) Following receipt of a Purchase Agreement, the
Non-Selling Partner shall have the right and option ("Purchase
Option"), exercisable in its sole discretion, to purchase the Selling
Partner's Subject Amphitheater upon the same terms, provisions and
conditions contained in such Purchase Agreement.
(f) The Purchase Option may be exercised by the Non-Selling
Partner at any time within fifteen (15) days after receipt of a
Purchase Agreement by providing written notice thereof to the Selling
Partner. If the Non-Selling Partner should exercise the Purchase
Option in a timely manner, then (A) the closing of the sale of the
Selling Partner's Subject Amphitheater to the Non-Selling Partner
shall occur on or before the later of (i) sixty (60) days following
the exercise of the Purchase Option or (ii) the outside date for
closing the transaction contemplated by the Purchase Agreement which
was the subject of the Purchase Option and (B) the Selling Partner
shall, simultaneously with the closing of the sale of the Subject
Amphitheater to the Non-Selling Partner, sell, transfer, assign and
convey its interest in the Partnership to the Non-Selling Partner for
no additional consideration.
(g) If, at any time after delivery of a Purchase Agreement to
the Non-Selling Partner, whether before or after the deadline for the
Non-Selling Partner's decision to exercise the Purchase Option, any of
the terms or provisions contained in such Purchase Agreement should be
amended by agreement between the Selling Partner and the Proposed
Purchaser in a manner which is favorable to the Proposed Purchaser to
any material extent, then the Selling Partner shall provide prompt
written notice of such modification to the Non-Selling Partner, and
the Purchase Option shall be extended until the date which is fifteen
(15) days after the provision of such notice of such amendment.
(h) If the Non-Selling Partner does not exercise the Purchase
Option within fifteen (15) days after receipt of a Purchase Agreement
(or, if applicable, after receipt of notification pursuant to clause
(g) of an amendment to a Purchase Agreement which is favorable to the
Proposed Purchaser to any material extent), then the Selling Partner
may thereafter complete the proposed sale of its Subject Amphitheater
to the Proposed Purchaser upon the same terms, conditions and
provisions contained in the Purchase Agreement previously provided to
the Non-Selling Partner in accordance with the provisions thereof,
provided that the following provisions are complied with at the
closing of the sale:
(1) The Proposed Purchaser must execute such
reasonable documentation as may be requested or required by
the Non-Selling Partner to indicate the Proposed Purchaser's
agreement that it is acquiring title to the Subject
Amphitheater subject to and burdened by the provisions of the
Amphitheater Contribution Agreement for such Subject
Amphitheater through and until the end of the Amphitheater
Fiscal Year in which such sale occurs.
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(2) The Selling Partner must pay to the Non-Selling
Partner, as a breakup fee, a lump sum amount equal to the
Non-Selling Partner's Percentage Interest of two times the
Average Cash Flow Amount for the most recently completed
Amphitheater Fiscal Year; provided, however, such break-up
fee shall not be payable to the Non-Selling Partner if the
Proposed Purchaser simultaneously acquires and purchases the
Partnership Interest of the Selling Partner and the
Non-Selling Partner consents and agrees, in its sole
discretion, to the admission of the Proposed Purchaser as a
substitute general partner in the Partnership.
If any such sale of the Selling Partner's Subject Amphitheater is
completed to a Proposed Purchaser in accordance with the foregoing
provisions, then, unless the Non-Selling Partner consents and agrees
(in its sole discretion) to the admission of the Proposed Purchaser as
a substitute general partner in the Partnership, the Partnership shall
be dissolved effective as of the last day of the Amphitheater Fiscal
Year in which such sale occurs.
14.02 IMA Partnership Interests. By executing this Agreement on behalf
of IMA, each of the partners of IMA hereby agree, in their respective
individual capacities, that Pavilion shall have a subordinate right and option
("Secondary Refusal Option") to purchase any partnership interest in IMA which
any such partner proposes to sell, transfer, convey or assign. The Secondary
Refusal Option shall be upon the same terms, conditions and provisions as the
right and option that each partner in IMA has to purchase the partnership
interests of the other partners in IMA ("First Refusal Option") but shall only
apply to the extent that any partnership interest proposed to be sold,
transferred, conveyed or assigned by a partner in IMA is not acquired by the
other partners in IMA pursuant to the First Refusal Option. Copies of all
notices given pursuant to the First Refusal Option shall be provided to
Pavilion. If Pavilion wishes to exercise the Secondary Refusal Option, then
Pavilion must conditionally exercise the Secondary Refusal Option within the
time periods granted pursuant to the First Refusal Option; however, any such
exercise shall only be effective to the extent that the partnership interest in
IMA that is then subject to the Secondary Refusal Option is not acquired by the
other partners in IMA pursuant to the First Refusal Option.
14.03 Specific Performance. It is expressly agreed that the remedy at
law for breach of the obligations created in this Article XIV is inadequate in
view of (i) the complexities and uncertainties in measuring the actual damages
that would be sustained by reason of such breach and (ii) the uniqueness of the
Partnership business, the Partnership relationship and the Subject
Amphitheaters. Accordingly, it is agreed that the obligations created by this
Article XIV shall be enforceable by an equitable order of specific performance.
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ARTICLE XV
Defaults and Remedies
15.01 Default by Partner If any Partner ("Defaulting Partner") fails
to timely perform any of its obligations contained in this Agreement, or
materially violates the terms of this Agreement, then the other Partner
("Non-Defaulting Partner") shall have the right to give the Defaulting Partner
a notice ("Default Notice") specifically setting forth the nature of such
failure or violation and stating that the Defaulting Partner shall have a
period of ten (10) days to pay any sums of money specified therein as due and
owing to the Partnership or to any Partner or, if the failure or violation is a
non-monetary default and is capable of being cured, thirty (30) days to cure
such default specified therein. If the monies specified in the Default Notice
are not paid within such ten (10) day period, or if such non-monetary failures
or violations are not capable of being cured or, if capable of being cured,
such Defaulting Partner has not cured such non monetary failures or violations
within such thirty (30) day period, then a "Partner Default" shall be deemed to
have occurred with respect to such Defaulting Partner. If a Defaulting Partner
cures in all material respects all of its failures or violations which are
capable of being cured within the aforesaid notice and cure periods, then such
defaults shall be deemed no longer to exist and such Partner shall be deemed no
longer to constitute a Defaulting Partner.
15.02 Rights and Remedies. Upon the occurrence of a Partner Default,
the Non-Defaulting Partner and the Partnership shall each have the following
rights, options and remedies which shall be cumulative and may be exercised
concurrently or independently in the sole and absolute discretion of the
Non-Defaulting Partner:
(a) The right to bring an action at law by or on behalf of
the Partnership or the Non-Defaulting Partner in order to recover the
amounts owed, if any, and any damages arising from such default
(including, without limitation, reasonable attorneys' fees and
disbursements incurred or paid by the Partnership or the
Non-Defaulting Partner, as the case may be, in prosecuting any such
action).
(b) The right to bring any proceeding in the nature of
injunction, specific performance or other equitable remedy, it being
acknowledged by each of the Partners that damages at law may be an
inadequate remedy for such default.
(c) If a sum of money is owed to the Partnership, the
Non-Defaulting Partner may advance the sum of money owed to the
Partnership by the Defaulting Partner with the following results:
(i) The sum thus advanced shall be deemed to be a
loan from the Non-Defaulting Partner to the Defaulting
Partner;
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(ii) The principal balance of such deemed loan shall
be due and payable in whole upon written demand from the
Non-Defaulting Partner to the Defaulting Partner;
(iii) The principal balance of such deemed loan
shall bear interest at the Permitted Rate compounded monthly;
and
(iv) All distributions from the Partnership that
would otherwise be made to the Defaulting Partner (whether
before or after dissolution of the Partnership) shall,
instead, be paid to the Non-Defaulting Partner until such
loan and all interest accrued thereon has been repaid in
full.
(d) If a sum of money is owed by the Defaulting Partner to
the Non-Defaulting Partner pursuant to the provisions of this
Agreement, then the Non-Defaulting Partner may require that all
distributions that would otherwise be made to the Defaulting Partner
(whether before or after dissolution of the Partnership) shall,
instead, be paid to the NonDefaulting Partner until all such amounts
owed have been repaid in full.
(e) For purposes of voting or giving any consents or
approvals under any provisions of this Agreement, the right to deny
the Defaulting Partner any of its voting, consent or approval rights
under this Agreement.
ARTICLE XVI
Voluntary Withdrawal
No Partner shall have the fight to, and each Partner agrees that it
will not, withdraw voluntarily from the Partnership. In the event any Partner
withdraws from the Partnership in contravention of this Agreement, such
withdrawing Partner shall remain liable for its Percentage Interest of the
Partnership liabilities in existence at the time of its withdrawal and shall,
in addition, be liable for all damages attributable to its breach of this
Agreement. The withdrawal of a Partner in contravention of this Article XVI
shall not cause the Partnership to be dissolved, and such withdrawing Partner
shall be deemed to be an assignee of a Partner's Partnership Interest and shall
have only the rights provided a Partner's assignee under the provisions of the
Partnership Act.
ARTICLE XVII
Dissolution and Termination
17.01 Dissolution. The Partnership shall be dissolved upon the
occurrence of any of the following:
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(a) the unanimous agreement of the Partners;
(b) expiration of the Term,
(c) a valid termination of the Partnership's exclusive
license for the use, possession and enjoyment of either of the Subject
Amphitheaters created pursuant to the Amphitheater Contribution
Agreement for such Subject Amphitheater;
(d) the election of either Partner by providing a notice of
dissolution to the other Partner within 60 days following the
completion of any Amphitheater Fiscal Year for which one of the
following conditions exist:
(1) the Partnership's Cash Flow for such Amphitheater
Fiscal Year is less than $0.00; or
(2) the Promotion Agreement was terminated at least
three years prior to the end of such Amphitheater Fiscal Year
and the Average Cash Flow Amount for such Amphitheater Fiscal
Year is less than the Cash Flow Target Amount for such
Amphitheater Fiscal Year;
(e) the election of Pavilion by providing a notice of
dissolution to IMA within 60 days following the completion of any
Amphitheater Fiscal Year for which one of the following conditions
exist:
(1) the paid attendance at the Events presented at
▇▇▇▇ ▇▇▇▇▇ Amphitheater during such Amphitheater Fiscal Year
is less than 35% of the total paid attendance at all of the
Events presented at both of the Subject Amphitheaters during
such Amphitheater Fiscal Year; or
(2) the total paid attendance at all of the Events
presented at ▇▇▇▇ ▇▇▇▇▇ Amphitheater during such Amphitheater
Fiscal Year and each of the 2 immediately preceding
Amphitheater Fiscal Years is less than 35% of the total paid
attendance at all of the Events presented at both or the
Subject Amphitheaters during such Amphitheater Fiscal Year
and each of the 2 immediately preceding Amphitheater Fiscal
Years.
(f) the election of IMA by providing a notice of dissolution
to Pavilion within sixty (60) days following the completion of any
Amphitheater Fiscal Year for which both of the following conditions
exist:
(1) the Promotion Agreement was terminated prior to
the commencement of such Amphitheater Fiscal Year; and
- 25 -
(2) the paid attendance at the Events presented at
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater during such Amphitheater Fiscal
Year is less than 42.5% of the total paid attendance at all
of the Events presented at both of the Subject Amphitheaters
during such Amphitheater Fiscal Year;
(g) the election of Pavilion by providing a notice of
dissolution to IMA at any time following the occurrence of a Use
Termination Event with respect to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater;
(h) the election of IMA by providing a notice of dissolution
to Pavilion at any time following the occurrence of an Use Termination
Event with respect to the ▇▇▇▇ ▇▇▇▇▇ Amphitheater;
(i) the last day of any Amphitheater Fiscal Year during,
which one of the Subject Amphitheaters is sold to a third party
purchaser in accordance with, and as permitted by, the provisions of
Section 14.01 hereof unless the Non-Selling Partner consents and
agrees, in its sole discretion, to the admission of the Proposed
Purchaser as a substitute general partner in the Partnership;
(j) the election or deemed election of Pavilion to terminate
the Partnership pursuant to the provisions of Section 12.07(e)(2)
hereof following receipt of a No Interest Notice given by Azoff Inc.
pursuant to Section 12.07(e)(1) hereof, and
(k) any event or circumstance which requires a dissolution of
the Partnership pursuant to the provisions of the Partnership Act.
The dissolution shall be effective on the day on which the event occurs causing
dissolution ("Effective Date of Dissolution"), but the Partnership shall not
terminate until the assets have been distributed in accordance with the
provisions of this Agreement.
17.02 Distributions Upon Dissolution. On dissolution of the
Partnership, the Partners shall proceed diligently to wind up the affairs of
the Partnership and distribute its assets as soon as reasonably practicable
without causing any interference with the operation of the Subject
Amphitheaters. The assets of the Partnership are to be distributed in kind,
unless expressly approved otherwise by the Executive Committee. The
Partnership's assets shall be applied or distributed (after all adjustments to
the Capital Accounts of the Partners which are required (i) following any sale
of Partnership property or (ii) by the Treasury Regulations upon a distribution
of an item of Partnership property in kind) in the following order of priority:
(a) In payment of all liabilities of the Partnership to
creditors other than Partners. If any liability is contingent or
uncertain in amount, a reserve equal to the maximum amount for which
the Partnership could be reasonably held liable shall be established.
Upon the satisfaction or other discharge of that contingency, the
amount of
- 26 -
the reserve not required, if any, will be treated as income to the
extent previously treated as a deduction.
(b) In payment of any loans owed by the Partnership to any
Partner.
(c) (i) A cash sum equal to the amount of Post-Dissolution
Receipts for ▇▇▇▇ ▇▇▇▇▇ Amphitheater received prior to the making of
this distribution and all of the then existing Operating Assets of
▇▇▇▇ ▇▇▇▇▇ Amphitheater shall be distributed to Pavilion (subject to
the ordinary course payables, obligations and liabilities related to,
or associated with, the use, operation or maintenance of ▇▇▇▇ ▇▇▇▇▇
Amphitheater, to the extent not then past due) and (ii) a cash sum
equal to the amount of Post-Dissolution Receipts for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Amphitheater received prior to the making of this distribution and all
of the then existing Operating Assets of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater
shall be distributed to IMA (subject to the ordinary course payables,
obligations and liabilities related to, or associated with, the use,
operation or maintenance of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, to the extent
not then past due).
(d) To the Partners in proportion to and to the extent of the
balance in their respective Capital Accounts (after adjustments to the
Capital Account balances for the distributions made pursuant to clause
(c) of this Section 17.02).
(e) To the Partners in proportion to their respective
Percentage Interests.
17.03 Capital Account Make-Up. If a Partner's Capital Account has a
deficit balance following, completion of the liquidating distribution required
to be made by the provisions of Section 17.02(c) hereof (after taking into
account all Capital Account adjustments for the taxable year of the Partnership
in which liquidation occurs), the Partner shall, immediately following the
receipt of such distribution, contribute to the Partnership a cash sum in an
amount necessary to increase the balance in its Capital Account to zero. Any
amount so contributed shall be distributed as provided in Section 17.02(d)
hereof or, if applicable, Section 17.02(e) hereof.
ARTICLE XVIII
Transfer Restrictions
Neither Partner shall have the right to sell, assign, convey,
transfer, pledge or hypothecate, by operation of law or otherwise, all or any
portion of its Partnership Interest without the prior consent of the other
Partner, it being agreed and acknowledged that such consent may be withheld in
such other Partner's sole discretion for any reason whatsoever. Any purported
sale, assignment, conveyance, transfer, pledge or hypothecation of any
Partner's Partnership Interest in violation of the provisions of this Article
XVIII shall be voidable at the option of the other Partner. Notwithstanding the
foregoing, either Partner may pledge its Partnership Interest as security for
borrowed money.
- 27 -
ARTICLE XIX
Dispute Resolution
19.01 Generally. In the event of (i) any dispute between the Partners
or assignees of the Partners or the Partnership or (ii) any Major Operational
Deadlock (any such dispute or Major Operational Deadlock being herein
collectively called a "Dispute"), which cannot be otherwise informally resolved
by the Partners, the Partners will utilize the procedures specified in this
Article XIX (the "Procedure") to resolve the Dispute. The Partner seeking to
initiate the Procedure (the "Initiating Party") shall give written notice to
the other Partner and the Partnership, describing in general terms the nature
of the Dispute, the Initiating Party's claim for relief and identifying one or
more individuals with authority to settle the Dispute on such Partner's behalf.
The Partner receiving such notice (the "Responding Party") shall have ten (10)
business days within which to designate by written notice to the Initiating
Party, one or more individuals with authority to settle the Dispute on such
Party's behalf. The individuals so designated shall be known as the "Authorized
Individuals."
19.02 Negotiations. The Authorized Individuals shall be entitled to
make such investigation of the Dispute as they deem appropriate, but agree to
promptly, and in no event later than thirty (30) days from the date of the
Initiating Party's written notice, meet to discuss resolution of the Dispute.
The Authorized Individuals shall meet at such times and places and with such
frequency as they may agree. The Partners agree to participate in good faith in
the direct negotiations to resolve the Dispute. If the Dispute has not been
resolved within thirty (30) days from the date of their initial meeting, the
Partners shall cease direct negotiations and shall submit the Dispute to
arbitration in accordance with the following procedure.
19.03 Arbitration. All Disputes will be settled by arbitration by an
arbitrator mutually acceptable to the Partners in an arbitration proceeding
conducted in (i) Houston, Texas (if IMA is the Initiating Party) or (ii) in Los
Angeles, California (if Pavilion is the Initiating Party), in accordance with
the rules as then in effect of the American Arbitration Association. If the
Partners hereto cannot agree on an arbitrator within ten (10) business days of
the initiation of the arbitration proceeding, an arbitrator with experience in
the live entertainment industry shall be selected for the Partners by the
American Arbitration Association. The decision of such arbitrator shall be
final (except that errors of law shall be subject to appeal) , and judgment
upon the award rendered by the arbitration may be entered in any court having
jurisdiction thereof. The costs (including, without limitation, reasonable fees
and expenses of counsel and experts for the Partners) of such arbitration
(including the costs to enforce or preserve the rights awarded in the
arbitration) shall be borne by the Partners in the amounts and proportions
specified by the arbitrator in his final decision.
19.04 Press Releases. All press releases which are issued by the
Partnership or any Partner (or any constituent partner of a Partner or any
Affiliate of a Partner or a constituent
- 28 -
partner of a Partner) concerning the subject matter of this Agreement shall
first be approved by the Executive Committee before the release thereof.
ARTICLE XX
Miscellaneous Provisions
20.01 Notices. All notices, offers, approvals, elections, consents,
acceptances, waivers, reports, requests and other communications required or
permitted to be given hereunder (all of the foregoing hereinafter collectively
referred to as "Communications") shall be in writing and shall be deemed to
have been duly given if delivered personally with receipt acknowledged or sent
by registered or certified mail or equivalent, if available, return receipt
requested, or by facsimile, telex or cablegram (which shall be confirmed by a
writing sent by registered or certified mail or equivalent on the same day that
such facsimile, telex or cablegram is sent), or by recognized overnight courier
for next day delivery, addressed or sent to the parties at the following
addresses and facsimile numbers or to such other additional address or
facsimile number as any party shall hereafter specify by Communication to the
other parties:
Pavilion: c/o SM/PACE, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with copies to: c/o SM/PACE, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
and Sony Music Entertainment Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
- 29 -
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
IMA: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copies to: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
20.02 California Law to Apply. This Agreement shall be construed under
and in accordance with laws of the State of California without giving any
effect to the choice of law principles in the State of California
20.03 Other Instruments. The parties hereto covenant and agree that
they will execute such other and further instruments and documents as are or
may become necessary or convenient to effectuate and carry out the Partnership
created by this Agreement.
20.04 Amendment. This Agreement may be amended or modified by the
Partners from time to time but only upon approval by all of the Partners
contained in a written instrument.
20.05 Headings. The headings used in this Agreement are used for
administrative purposes only and do not constitute substantive matter to be
considered in construing the terms of this Agreement.
20.06 Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Agreement.
- 30 -
20.07 Legal Construction. In case any one or more of the provisions
contained in this Partnership Agreement shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision hereof and this
Partnership Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
20.08 Counterparts. This Partnership Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original.
20.09 Gender. Wherever the context shall so require, all words herein
in the male gender shall be deemed to include the female or neuter gender, all
singular words shall include the plural, and all plural words shall include the
singular.
20.10 Prior Agreements Superseded. This Agreement supersedes any prior
understandings or written or oral agreements between the parties respecting the
within subject matter.
20.11 Attorneys Fees. The prevailing party in any dispute, litigation
or other proceeding between the parties hereto involving the subject matter of
this Agreement shall be entitled to be reimbursed by the other party for all of
its reasonable attorneys' fees incurred in connection with the pursuit of such
dispute, litigation or other proceeding.
ARTICLE XXI
Use Impairments and Use Termination Events
21.01 Use Impairments. If a Use Impairment occurs at either of the
Subject Amphitheaters, then the following provisions shall apply:
(a) The Underlying Owner of such Subject Amphitheater (and
not the Partnership) shall be entitled to receive and retain any
property insurance proceeds or condemnation award payable on account
of the occurrence of such Use Impairment.
(b) The Partnership (and not the Underlying Owner of such
Subject Amphitheater) shall be entitled to receive and retain any
business interruption insurance proceeds payable on account of the
occurrence of such Use Impairment.
(c) The Underlying Owner of such Subject Amphitheater shall
have the option of either (i) agreeing to correct, cure or repair the
event, circumstance or condition giving rise to such Use Impairment
("Cure Option") or (ii) refusing to correct, cure or repair the
condition giving rise to such Use Impairment ("Non-Cure Option"). If
the Underlying Owner of such Subject Amphitheater has not exercised
the option referred to in the immediately preceding sentence by
providing notice thereof to the other Partner
- 31 -
within sixty (60) days following written notice from the other Partner
that such Use Impairment is in existence, then the Underlying Owner of
such Subject Amphitheater shall be deemed to have exercised the
Non-Cure Option for all purposes hereof. If the Underlying Owner of
such Subject Amphitheater elects the Cure Option, then such Underlying
Owner shall be obligated pursuant to this Agreement to (x) thereafter
diligently pursue the correction, cure and repair of the event,
circumstance or condition giving rise to such Use Impairment and (y)
in any event to complete such correction, cure and repair within one
(1) year following the electing of the Cure Option.
(d) If the Underlying Owner of such Subject Amphitheater
elects, or is deemed to elect, the Non-Cure Option following the
occurrence of a Use Impairment, then a "Use Termination Event" shall
be deemed to have occurred with respect to such Subject Amphitheater.
21.02 Continue Covenants Following Termination of Partnership as a
Result of a Use Termination Event. If the Partnership should be dissolved
pursuant to the provisions of clauses (g) or (h) of Section 17.01 hereof
following the occurrence of a Use Termination Event with respect to a Subject
Amphitheater, then the Underlying Owner of such Subject Amphitheater shall not
place such Subject Amphitheater back into operation as a venue for the
performance of live entertainment events at any time during the next 10 years
without first offering to the other Partner the right and option of reforming
the Partnership upon the terms and conditions contained in this Agreement. The
right and option referenced in the immediately preceding sentence shall be
available for exercise for a period of sixty (60) days after receipt of written
notice of the offering of such right and option. The covenants and agreements
contained in this Section 21.02 shall survive the dissolution and termination
of the Partnership.
EXECUTED as of the day and year first written above.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, a California partnership
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Investment Corp., a
California corporation
By: Name: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
- 32 -
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc., a California
Corp
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
By: ▇▇▇▇▇▇ & ▇▇▇▇., a California-
corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
By: Peach Street Partners, L.P., a
California limited partnership
By: Imua, Inc.
By: /s/ ▇▇▇▇ ▇.▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
"IMA"
PAVILION PARTNERS, a
Delaware general partnership
By: SM/P a Texas corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
"PAVILION"
- 33 -
Exhibit "A"
GLOSSARY OF TERMS
Affiliate: With respect to any Person, any other Person that directly
or indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Person specified. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and under "common control with") when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
Amphitheater Contribution Agreement: With respect to either of the
Subject Amphitheaters, the Amphitheater Contribution and License Agreement
executed and entered of even date herewith by and between the Partner who owns
title to such Subject Amphitheater and the Partnership.
Amphitheater Fiscal Year: Each twelve month period commencing on
January 1 of a calendar year and ending on December 31 of such calendar year.
Available Cash: After repayment of all outstanding Deficit Loans, cash
held by the Partnership on each December 31st during the Term which, in the
judgment of the Executive Committee, is not required for a reasonable working
capital reserve for the obligations or business needs of the Partnership
through the next revenue generating period.
Avalon: New Avalon, Inc., a California corporation and an Affiliate of
one of the partners of IMA.
Average Cash Flow Amount: (i) With respect to the Amphitheater Fiscal
Year ending on December 31, 1999, the average of the Partnership's Cash Flow
for the Amphitheater Fiscal Years ending on December 31, 1998 and 1999 and (ii)
with respect to the Amphitheater Fiscal Year ending on December 31, 2000 and
each Amphitheater Fiscal Year thereafter, the average of the Partnership's Cash
Flow for such Amphitheater Fiscal Year and the two immediately preceding
Amphitheater Fiscal Years.
Azoff Inc.: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc., a California corporation wholly
owned by ▇▇▇▇▇▇ ▇▇▇▇▇ and one of the constituent partners of IMA.
Budgeted Operating Expenses: The overhead and operating, expenses of
the Partnership which relate to the day-to-day operation and maintenance of the
Subject Amphitheaters such as salaries for employees and staff for the Subject
Amphitheaters, utility costs for the Subject Amphitheaters, insurance costs
relating to the maintenance of casualty and liability insurance for the Subject
Amphitheaters, costs relating to maintenance, repair and upkeep of the Subject
Amphitheaters and the personal property and equipment used in connection with
the operation
A - 1
of the Subject Amphitheaters and costs for the purchase of office supplies and
equipment. Notwithstanding anything to the contrary implied by the immediately
preceding sentence, Show Expenses shall not be "Budgeted Operating Expenses"
for purposes of this Agreement.
Capital Account: The tax capital account maintained by the Partnership
for each Partner in accordance with, and as required by, the provisions of
Section 7.03 of this Agreement.
Cash Flow: For any Amphitheater Fiscal Year, the amount (if any) by
which (A) the sum of (i) the cash receipts received by the Partnership which
are properly attributable to the use, operation and exploitation of the Subject
Amphitheaters during such Amphitheater Fiscal Year and (ii) the net profit (or
net loss) of the Partnership attributable to the co-promotion of Events during
such Amphitheater Fiscal Year which were offered to it by the Promoter pursuant
to Section 5(a)(ii) of the Promotion Agreement exceeds (B) the cash
expenditures paid or payable by the Partnership which are properly attributable
to the operation, use, maintenance and exploitation of the Subject
Amphitheaters during such Amphitheater Fiscal Year (excluding Rental Loans made
to the Partners pursuant to the provisions of Section 9.01 hereof and
expenditures attributable to capital asset additions or improvements).
Cash Flow Target Amount: With respect to the Amphitheater Fiscal Year
ending, on December 31, 1999, a monetary amount equal to $2,000,000. For each
subsequent Amphitheater Fiscal Year, the Cash Flow Target Amount shall be equal
to the Cash Flow Target Amount for the immediately preceding Amphitheater
Fiscal Year increased in the same percentage amount by which the CPI Index
increased during the twelve (12) calendar months since the beginning of the
immediately preceding Amphitheater Fiscal Year.
Closing Date: The date upon which the capital contributions required
to be made pursuant to the terms of the Amphitheater Contribution Agreements
are made. In accordance with the terms of the Amphitheater Contribution
Agreements, the Closing Date shall be March 3, 1997.
Code: The Internal Revenue Code of 1986, as amended.
CPI Index: Consumer Price Index for All Urban Consumers (all U.S.
cities), 1982 - 84 equals 100 Base, published monthly by the U.S. Department of
Labor's Bureau of Labor Statistics, or any successor publication.
Default Notice: Shall have the meaning assigned to it pursuant to
Section 15.01 hereof.
Defaulting Partner: Shall have the meaning assigned to it pursuant to
Section 15.01 hereof.
Deficit Loan: A loan extended by a Partner to the Partnership pursuant
to the provisions of Article VI hereof.
A - 2
Effective Date of Dissolution: Shall have the meaning assigned to it
pursuant to Section 17.01 hereof.
Event: Any live public performance or concert featuring professional
musicians, performers or artists, including "free" performances or concerts for
which no patron or spectator is required to pay an admission price.
Executive Committee: The committee of individuals selected, from time
to time, by the Partners pursuant to the provisions of Section 12.02(c) of this
Agreement, to whom the responsibility of managing and controlling the
operations of the Partnership is delegated.
Geddes Inc.: ▇▇▇▇▇▇ & ▇▇▇▇, Inc., a California corporation
wholly-owned by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and one of the constituent partners of IMA.
▇▇▇▇ ▇▇▇▇▇ Amphitheater: ▇▇▇▇ ▇▇▇▇▇ Blockbuster Pavilion, an outdoor
entertainment facility located in San Bernardino, California.
Gross Asset Value: Subject to the adjustments described in the next
succeeding sentence, the fair market value of each item of Partnership property
at the time of contribution to the capital of the partnership. The Gross Asset
Value of each item of Partnership property shall be adjusted by depreciation,
amortization or other cost recovery deductions determined pursuant to Section
7.03(c)(ii) of this Agreement.
IMA: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, a California general partnership.
IMA Put Option: The currently existing provisions contained in Section
3.03 of the Partnership Agreement of IMA whereby Geddes Inc. is given the right
to require Azoff Inc. or ▇▇▇▇ Inc. to purchase the partnership interest of
Geddes Inc. in IMA upon the occurrence of certain events specified therein, a
true, correct and complete copy of such provisions being attached to this
Agreement as Exhibit "13".
Initial Contribution Amount: Shall have the meaning assigned to it
pursuant to Section 5.01(b) hereof.
Initial Promoter: Azoff Inc. and Geddes Inc., jointly and severally.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, an outdoor
entertainment facility located in Orange County, California.
▇▇▇▇ Inc.: IMA Investment Corp., a California corporation wholly-owned
by ▇▇▇▇▇▇ ▇. ▇▇▇▇ and one of the constituent partners of IMA.
A - 3
Major Operational Deadlock: The circumstance of the Executive
Committee or the Partners being unable to reach agreement with respect to an
operational decision (i) which must be made in order to permit the Subject
Amphitheaters to be used and operated consistent with their intended purpose
and (ii) for which another procedure of resolution is not provided for
elsewhere in this Agreement. An example of a "Major Operational Deadlock" would
be failure of the Partners to reach agreement pursuant to Section 12.07(d)
hereof on the selection of a "booking agent" to be engaged by the Partnership
following a termination of the Promotion Agreement.
Net Sponsorship Revenue: With respect to any Amphitheater Fiscal Year,
the excess of (A) all of the sponsorship revenues properly attributable to the
operation of the subject Amphitheaters during such Amphitheater Fiscal Year
over (B) all of the expenses, costs and other charges (i) incurred in
connection with the solicitation, acquisition or implementation of any
sponsorship arrangement at the Subject Amphitheaters (including the costs of
any benefits conferred upon or granted to sponsors and the costs of the
Partnership for the employees referenced in Section 12.09(a)(ii) and (iii)
hereof) and (ii) properly attributable to the operation of the Subject
Amphitheaters during such Amphitheater Fiscal Year.
Non-Defaulting Partnership: Shall have the meaning assigned to it
pursuant to Section 15.01 hereof.
Operating Assets: With respect to either of the Subject Amphitheaters,
as of any time, all concession contracts, sponsorship agreements, service
contracts, maintenance agreements, utility agreements, accounts receivable,
trademarks, trade names, customer lists, price lists, vehicles, sound
equipment, copy machines, phone equipment, computers, facsimile machines,
office supplies, furniture, fixtures, equipment and other intangible assets or
personal property then owned by, or leased or licensed to, the Partnership and
used in connection with, or having been acquired on account of, the use,
operation, maintenance or management of such Subject Amphitheater.
Operating Budget: The budget of Budgeted Operating Expenses of the
Partnership to be prepared for each Amphitheater Fiscal Year in accordance with
and pursuant to the provisions of Section 12.03 hereof.
Operational Shortfall: The occurrence or happening, at any time, of
the circumstance of the Partnership having an insufficient amount of cash to
pay or cover any of its debts, liabilities or obligations as they become due.
Partners: Pavilion and IMA. The term "Partners" shall not include any
assignee of a Partner's Partnership Interest, unless the other Partner agrees
to admit such assignee to the Partnership.
Partnership: The Partnership created by this Agreement.
A - 4
Partnership Act: The Uniform Partnership Act as set forth in Title 2,
Chapter 1 of the California Corporations Code.
Partnership Interest: All of the interest of any Partner in the
Partnership, including his (i) right to a distributive share of the profits and
losses of the Partnership, (ii) right to a distributive share of the assets of
the Partnership, and (iii) right to participate in the management of the
affairs of the Partnership.
Partnership Purposes: The purposes for which the Partnership is formed
as set forth in Article III of this Agreement.
Partnership's Accounting Staff Shall have the meaning assigned thereto
pursuant to the provisions of Section 11.02(b) hereof.
Pavilion: Pavilion Partners, a Delaware general partnership.
Percentage Interest: The respective Partnership Interest of each
Partner in the Partnership expressed as a percentage of the Partnership
Interests owned by all Partners. The Percentage Interest of Pavilion is fifty
percent (50%) and the Percentage Interest of IMA is fifty (50%).
Permitted Rate: The lesser of (a) two percent (2%) per annum over the
Prime Rate or (b) the maximum non-usurious interest rate permitted by
applicable law from time to time in effect.
Person: Any individual, corporation, partnership, joint venture,
association, Joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other form of
entity.
Post-1996 Receipts: Revenues which are properly attributable to the
operation, use or exploitation of either of the Subject Amphitheaters after the
Closing Date, whether received before or after the Closing Date.
Post-Dissolution Receipts: Revenues which are properly attributable to
the operation, use or exploitation of either of the Subject Amphitheaters after
the Effective Date of Dissolution, whether received before or after the
Effective Date of Dissolution.
Prime Rate: The prime rate of interest per annum announced, from time
to time, by major U.S. money center banks as published daily in the "Money
Rates" column of The Wall Street Journal; provided, however, that if The Wall
Street Journal should ever cease, for any reason, 'to publish such rate on a
daily basis, then the Prime Rate shall be the rate of interest designated, and
in effect from time to time, by Citibank, N.A., in New York, New York as its
prime rate or base rate charged on commercial loans.
A - 5
Promoter: As of any time, the person or entity then responsible for
performing the booking and promotion services under the Promotion Agreement. As
of the date hereof, the Promoter is Avalon.
Promoter Related Representative: Any Representative on the Executive
Committee who is either (i) selected and designated as a Representative by an
officer, director, constituent partner or shareholder of the Promoter or by an
Affiliate of an officer, director, constituent partner or shareholder of the
Promoter or (ii) an officer, director, constituent partner or shareholder of
the Promoter.
Promotion Agreement: That certain Promotion Agreement being executed
of even date herewith by and between the Partnership and the Initial Promoter
whereby the Partnership has engaged and retained the services of the Initial
Promoter to provide booking and promotion services in respect of all Events to
be presented at the Subject Amphitheaters. Upon execution of the Promotion
Agreement, the Initial Promoter is subcontracting and delegating its
responsibilities thereunder to Avalon.
Representatives: The individuals who serve on the Executive Committee.
Show Expenses: Costs attributable to the production, promotion or
presentation of Events at the Subject Amphitheaters including, without
limitation, (i) fees payable to the performers appearing at such Event, (ii)
advertising costs directly associated with the promotion of such Event, (iii)
marginal costs of staffing which are directly attributable to such Event for
ushers, ticket takers, security personnel, parking attendants and similar
temporary employees and (iv) marginal costs for utilities and insurance which
are directly attributable to such Event.
Subject Amphitheaters: ▇▇▇▇ ▇▇▇▇▇ Amphitheater and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Amphitheater.
T.B.A.: T.B.A. Media, Inc., a corporation and an Affiliate of one of
the partners of IMA.
T.B.A. Marketing Agreement: That certain Marketing Agreement to be
hereafter executed and entered into by and between the Partnership and T.B.A.
whereby the Partnership shall engage and retain the services of T.B.A. to
provide marketing and advertising services with respect to all Events to be
presented at the Subject Amphitheaters upon terms and provisions to be
hereafter approved and adopted by the Executive Committee.
Term: The term of the Partnership as specified in Article IV hereof.
Treasury Regulations: The Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
A - 6
Underlying Owner: With respect to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Amphitheater, IMA and
with respect to ▇▇▇▇ ▇▇▇▇▇ Amphitheater, Pavilion Partners.
Use Impairment: With respect to either of the Subject Amphitheaters,
the occurrence of any event, circumstance or condition which results in the
Partnership suffering a material impairment (or termination) of its right or
ability to book, produce, present and promote Events at such Subject
Amphitheater consistent with past practices and with a maximum capacity of at
least 90% of current maximum capacities. The following are examples (which are
intended to be illustrative and not exclusive) of events or circumstances which
would constitute a "Use Impairment" with respect to one of the Subject
Amphitheaters for purposes of this Agreement:
(a) Loss by the Underlying Owner of such Subject Amphitheater
of its possessory right to such Subject Amphitheater as a result of a
failure of title, a default under the applicable Lease Agreement or
any other reason.
(b) A determination that such Subject Amphitheater is an
unsafe locale for the presentation of public events because of the
presence of toxic or hazardous waste on the site at which such Subject
Amphitheater is located.
(c) A fire, earthquake, flood or other casualty which results
in such Subject Amphitheater no longer being able to be used for its
intended purposes at 90% or more of its current maximum capacity.
(d) Condemnation of all or any portion of such Subject
Amphitheater through the exercise of any governmental authority's
power of eminent domain which results in such Subject Amphitheater no
longer being able to be used for its intended purposes at 90% or more
of its current maximum capacity.
(e) The discovery of any defects in the buildings, structures
or other improvements constituting a part of such Subject Amphitheater
which would materially and adversely interfere with the use of such
Subject Amphitheater as presently operated.
(f) The occurrence of any event or circumstance resulting in
a loss or restriction of access to public roads necessary to satisfy
the current and reasonably anticipated normal transportation
requirements of such Subject Amphitheater's business as presently
operated.
(g) The occurrence of any event or circumstance resulting in
such Subject Amphitheater no longer having parking availability
sufficient to satisfy the parking requirements for an Event at which
the Subject Amphitheater is sold-out at its current maximum capacity.
A - 7
(h) Loss of the use of necessary utilities (including water,
electricity, natural gas, sewer and telephone) in such quantity and
quality as are necessary to satisfy the current business activities of
such Subject Amphitheater as currently operated.
Use Termination Event: Shall have the meaning assigned thereto
pursuant to the provisions of Section 21.01(d) hereof.
A - 8
EXHIBIT "B"
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WESTERN AMPHITHEATRE PARTNERS
OPERATING BUDGET 1997
-------------------------------------------------------------------------------
IMA BBP WAP
-------------------------------------------------------------------------------
OVERHEAD EXPENSES
SALARIES - ADMINISTRATIVE $399,400 $275,039 $674,439
SALARIES - TEMPORARY HELP 1,800 0 1,800
SALARIES - BOX OFFICE/STAGE 0 0 0
PAYROLL TAXES 53,919 30,231 84,150
EMPLOYEE BENEFITS 13,200 23,261 36,461
WORKERS COMP 5,000 0 5,000
RENT - OFFICE 52,200 0 52,200
EQUIPMENT RENTAL 6,000 0 6,000
ALLOCATED G&A - BOOKING DEPARTMENT 0 0 0
ADVERTISING 24,000 7,374 31,374
ADVERTISING - SPONSORSHIP 6,000 13,000 19,000
BANK CHARGES 200 250 450
BUSINESS ENTERTAINMENT 10,000 6,000 16,000
CONTRIBUTIONS 1,200 4,400 5,600
CONSULTING FEES 15,000 0 15,000
CUSTODIAL SERVICES 6,000 74,999 80,999
DUES & SUBSCRIPTIONS 2,400 2,502 4,902
EQUIPMENT 2,400 4,847 7,247
INSURANCE EXPENSE 26,016 37,199 63,215
LEGAL & PROFESSIONAL 40,000 31,170 71,170
MESSENGER SERVICE 180 0 180
OFFICE EXPENSES 18,000 15,198 33,198
PRINTING 2,000 0 2,000
POSTAGE 6,600 8,748 15,348
FEDERAL EXPRESS 3,000 0 3,000
PROMOTION 10,000 3,000 13,000
REPAIRS & MAINTENANCE - STAGE 20,000 10,000 30,000
REPAIRS & MAINTENANCE - HOUSE 72,000 10,000 82,000
REPAIRS & MAINTENANCE - GENERAL 113,500 49,002 162,502
SECURITY 12,000 2,000 14,000
SERVICE BUREAU 10,800 0 10,800
SMALL TOOLS & EQUIPMENT 2,800 9,999 12,799
TELEPHONE 50,000 24,000 74,000
TRAVEL - OTHER 24,000 17,594 41,594
UTILITIES 124,000 74,881 198,881
TAXES & LICENSES 2,400 6,000 8,400
MISCELLANEOUS 6,000 500 6,500
TOTAL OVERHEAD EXPENSES $1,142,015 $741,194 $1,883,209
B - 1
Exhibit "C"
List of Existing Sponsorship Commission Obligations at ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
15% commission due to ▇▇▇▇/▇▇▇▇▇▇▇▇ Marketing on each of the following:
Sponsor Sponsorship Revenue
------- -------------------
Mission Viejo Imports $40,000
Coors Brewing Company $200,000 (+$25,000 bonus)
▇▇▇▇▇▇ ▇▇▇▇ $2,300
Domino's Pizza $11,000
Round Hill Wineries $2,500
Specialty Coffee Company $9,200
Del Taco $12,500
Ruby's Diner $12,500
Evian $7,077
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $12,000
Better Beverage $3,500
C - 1
EXHIBIT "D"
Paragraph 3.03 Appraised Buy-Out of the Partnership Interest of A&J, is hereby
amended and restated in its entirety to read as follows:
3.03 If, and only if SMI and A&J are terminated as the booking agents
for WAP pursuant to the terms of the Promotion Agreement with WAP, as it now
exists or as it may be modified in the future, then for a period of thirty (30)
days following such termination, A&J shall have the right, but not the
obligation, by delivering written notice ("Election Notice") to IMA Corp. and
SMI, to cause the purchase of the entire Partnership Interest of A&J in
accordance with the provisions of this Section 3.03. In the event A&J timely
and validly makes such an election, then except as hereinafter otherwise
provided SMI shall be required to purchase the entire Partnership Interest of
A&J in accordance with the provisions of this Section 3.03; provided, however,
for a period of thirty (30) days following the effective date of the
"Accountant's Notice" of the "Purchase Price" (as such terms are hereinafter
defined), SMI shall have the right, but not the obligation, to elect either (A)
by delivering written notice (the "Pro Rata Notice") to IMA Corp., to cause IMA
Corp. and SMI to each purchase the portion of the Partnership Interest of A&J
that corresponds, in the case of SMI, to the fraction obtained by dividing (i)
the Percentage Interest (as of the effective date of the Accountant's Notice)
of SMI by (ii) the aggregate Percentage Interests (as of the effective date of
the Accountant's Notice) of SMI and the ▇▇▇▇ Partners, and, in the case of IMA
Corp., to the fraction found by dividing (i) the aggregate Percentage Interests
(as of the effective date of the Accountant's Notice) of the ▇▇▇▇ Partners by
(ii) the aggregate Percentage Interests (as of the effective date of the
Accountant's Notice) of SMI and the ▇▇▇▇ Partners; or (B) by written notice
(the "No-Interest Notice") to IMA Corp., A&J and Pavilion Partners, to decline
to purchase any portion of the Partnership Interest of A&J. If SMI fails to
timely make either such election, then SMI shall be required to purchase the
entire Partnership Interest of A&J in accordance with the provisions of this
Section 3.03. If SMI timely gives the No-Interest Notice, then IMA Corp. may,
at any time within ten (10) days after its receipt of SMI Is No-Interest
Notice, provide written notice (also a "No-Interest Notice") to Pavilion
Partners, SMI and A&J that IMA Corp. does not wish to purchase the Partnership
Interest of A&J. If IMA Corp. fails to timely give the No-Interest Notice, then
IMA Corp. shall be required to purchase the entire Partnership Interest of A&J
in accordance with the provisions of this Section 3.03. Any such purchase and
sale of the Partnership Interest of A&J by SMI alone or by SMI and IMA Corp.,
or by IMA Corp. alone (the "Purchasing Partner(s)"), as the case may be, shall
be made in accordance with the following terms and conditions:
(a) The Election Notice shall include the name of an appraiser with at
least five (5) years experience appraising businesses similar in nature to the
Project. Within forty (40) days after the effective date of the Election
Notice, the Purchasing Partner(s) shall either agree to such appraiser or
select a second appraiser (with similar appraisal experience) and notify A&J of
such second appraiser. If two (2) appraisers are selected, then they shall
appoint a third appraiser (with similar appraisal experience) within five (5)
days of the selection of the second appraiser. In the
D - 1
event A&J, on the one hand, or the Purchasing Partner(s), on the other hand,
fail to appoint an appraiser within the time period specified, and after the
expiration of five (5) days following the effective date of written demand that
an appraiser be appointed, then the appraiser duly appointed by the party
making such demand and appointing such appraiser shall proceed to make the
appraisal as herein set forth and the determination of such appraiser shall be
conclusive. Upon the failure of the two (2) appointed appraisers to timely
appoint a third appraiser within the time period specified therefor, either
A&J, on the one hand, or the Purchasing Partner(s), on the other hand, may
petition a court of competent jurisdiction to appoint a third appraiser, in the
same manner as provided for the appointment of an arbitrator pursuant to Code
of Civil Procedure Section 1281.6.
(b) The appraiser or three (3) appraisers, as the case may be, shall
promptly fix a time for the completion of the appraisal, which shall not be
later than thirty (30) days from the date of appointment of the last appraiser.
Each appraiser shall determine the fair market value of the combined business
and assets of the Partnership which shall be the fairest price estimated in
terms of money which the Partnership could obtain if such business and assets
were sold in the open market as a going concern, allowing a reasonable time to
find a purchaser who purchases with knowledge of the uses which such business
and assets in their then condition are adapted and for which such business and
assets are capable of being used as of the effective date of the Election
Notice.
(c) Upon the submission of the appraisal setting forth the opinions as
to the fair market value of the combined business and assets of the Partnership
(determined by each appraiser in accordance with Section 3.03(b)), the two (2)
such appraisals which are nearest in amount shall be retained, and the third
appraisal shall be discarded. The average of the two (2) retained appraisals
shall constitute the "Appraised Value", provided, however, that if one of the
appraisals is the mean of the other two (2), then that appraisal shall
constitute the "Appraised Value".
(d) Within fifteen (15) days after the determination of the Appraised
Value, the certified public accountants regularly employed by the Partnership
shall determine the purchase price ("Purchase Price") for the Partnership
Interest of A&J. The Purchase Price shall be equal to the greater of (i) the
sum of the balances standing in the Unrecovered Contribution Account and
Unrecovered Additional Contribution Account of A&J, determined as of the
effective date of the Election Notice, or (ii) one hundred percent (100%) of
the aggregate amount of cash that would be distributed to A&J pursuant to
Section 8.02(c) if (A) the combined business and assets of the Partnership were
sold for the Appraised value thereof as of the effective date of the Election
Notice; (B) the liabilities of the Partnership were liquidated pursuant to
Section 8.02(a); (C) a reserve were established for any contingent or
unforeseen liabilities of the Partnership pursuant to Section 8.02(b); and (D)
the Partnership make its required distributions to the Partners pursuant to
Section 8.02(c). Upon the determination by the accountants of the Purchase
Price, such accountants shall give A&J, SMI and IMA Corp. written notice
("Accountant's Notice") of the Purchase Price. The determination by such
accountants of the Purchase Price, and any and all
D - 2
components thereof (including, without limitation, the amount of any reserve)
shall be deemed conclusive.
(e) The closing of a purchase and sale pursuant to this Section 3.03
shall be held at the principal place of business of the Partnership on such
date as is designated by the Purchasing Partner(s), but in no event later than
the one hundred twentieth (120th) day following the effective date of the
Accountant's Notice. A&J shall transfer to the Purchasing Partner(s) the entire
Partnership Interest of A&J free and clear of all liens, security interests,
and competing claims (other than security interests granted in favor of the
Purchasing Partner(s)) and shall deliver to the Purchasing Partner(s) such
instruments of transfer, and such evidence of due authorization, execution, and
delivery, and of the absence of any such liens, security interests, or
competing claims, as the Purchasing Partner(s) shall reasonably request. The
Purchasing Partner(s) shall pay the Purchase Price to A&J at the closing by
delivering to A&J cash, a certified or bank cashier's check or a confirmed wire
transfer of funds payable to the order of A&J.
(f) The portion of the Purchase Price for the Partnership Interest of
A&J to be paid by any Purchasing Partner shall be offset by the unpaid balance
of any and all Partner Loan(s) (together with all accrued interest thereon)
made by such Purchasing Partner to A&J. Such Partner Loan(s) (together with all
accrued interest thereon) shall be deemed paid to the extent of such offset,
with such deemed payment to be applied first to the accrued interest thereon
and thereafter to the payment of the outstanding principal amount thereof. If
the Purchase Price for the Partnership Interest of A&J is insufficient to fully
offset the outstanding, unpaid balances (including all principal amounts
thereof and all accrued interest thereon) made by any and all of the Purchasing
Partners to A&J, then such loans shall be offset in proportion to their
respective outstanding balances (including all principal amounts thereof and
all accrued, unpaid interest thereon). In addition, the outstanding, unpaid
balances (including all principal amounts thereof and all accrued interest
thereon) made by any one or more non-purchasing Partners to A&J shall be due
and payable at the closing of the transfer of the Partnership Interest of A&J
pursuant to this Section 3.03 and shall be repaid, in proportion to such
respective outstanding balances, out of any and all of the proceeds of the
Purchase Price (after reduction of such price otherwise payable to A&J pursuant
to this Section 3.03 pursuant to the offset described above in this Section
3.03(f)), prior to any payment of such proceeds to A&J pursuant to this Section
3.03. To the extent any portion of any Partner Loan made by a Partner to A&J is
not satisfied pursuant to the foregoing provisions of this Section 3.03(f),
then A&J shall pay the remaining outstanding balance (including all principal
amounts thereof and all accrued, unpaid interest thereon) at the closing. Also,
notwithstanding any provision of this Agreement to the contrary, the
outstanding unpaid balance of any and all Partner Loan(s) (including all
principal amounts thereof and all accrued, unpaid interest thereon) made by A&J
to any Partner shall be due and payable in full to A&J at the closing of the
purchase of the Partnership Interest of A&J pursuant to Section 3.03(e).
(g) All costs (including, without limitation, the costs of
the appraisers and the accountants referenced in Sections 3.03(a)
and/or 3.03(d) of the purchase and sale of the
D - 3
Partnership Interest of A&J pursuant to this Section 3.03 shall be
paid one half (1/2) by A&J and one-half (1/2) by the Purchasing
Partner(s) (with such costs being divided between such Purchasing
Partners based upon the relative portion of the Partnership Interest
of A&J purchased by each such Purchasing Partner).
(h) on or before the closing of a purchase and sale
transaction held pursuant to this Section 3.03, the Purchasing
Partner(s) shall use such Partner's(s) reasonable, diligent, and good
faith efforts to obtain written releases of A&J and/or any Affiliates
of A&J from all guarantees of liabilities of the Partnership
previously executed by A&J and/or such Affiliates. To the extent such
releases cannot be obtained by the Purchasing Partner(s), the
Purchasing Partner(s) shall severally in proportion to their
respective Percentage Interests as of the effective date of the
Election Notice) indemnify, defend, and hold free and harmless A&J
from and against any and all claims, liabilities, causes of action,
liens, charges, and all other matters arising out of or in connection
with the business and affairs of the Partnership, whether arising
prior to or subsequent to the effective date of such closing, except
for unknown liabilities arising prior to the effective date of such
closing and not taken into account in calculating the Purchase Price
for the Partnership Interest of A&J.
Provided, however, that if IMA Corp. and SMI both timely give their respective
No-Interest Notice, then, pursuant to the terms of the WAP Agreement, Pavilion
Partners shall be obligated either to purchase the entire Partnership Interest
of A&J or to terminate the WAP Agreement. In any event or circumstance where
IMA Corp. and SMI, elect after Determination of the Purchase Price not to
effect the purchase, thereby giving rise to an obligation to Pavilion Partners
to effect such purchase, and in the circumstance where Pavilion Partners, for
any reason fails or refuses to effect such purchase, then the Partnership shall
immediately proceed to dissolve the WAP Partnership, thereby causing,
concurrent with such dissolution, the reinstatement of the Agreement from the
date of dissolution forward, without regard to, the terms or the effects of
this First Amendment which shall, from the date of dissolution forward be null,
void, and without further effect. Moreover, in the event of any such failure or
refusal by Pavilion Partners, A&J acknowledges and agrees that the obligations
of IMA Corp. and/or SMI to effect any purchase of A&J's interest, pursuant to
this paragraph 3.03, shall be null, void, and without effect, and further that
A&J agrees to indemnify and hold IMA Corp., SMI, and their respective
shareholders, officers and agents free and harmless from and against any such
obligation to effect any such purchase.
D - 4