DISTRIBUTION AGREEMENT
DATED AS OF APRIL 20, 1998
AMONG
SFX BROADCASTING, INC.,
SFX ENTERTAINMENT, INC.
AND
SBI HOLDING CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS..................................................................2
Section 1.1 General....................................................2
ARTICLE 2
REORGANIZATION AND RELATED TRANSACTIONS .....................................4
Section 2.1 The Reorganization.........................................4
Section 2.2 Working Capital Adjustment.................................5
Section 2.3 SFX Approval...............................................8
ARTICLE 3
ASSUMPTION AND RETENTION OF LIABILITIES......................................8
Section 3.1 Assumed Liabilities........................................8
Section 3.2 Retained Liabilities.......................................8
Section 3.3 Construction of Agreements.................................8
ARTICLE 4
THE DISTRIBUTION.............................................................9
Section 4.1 The Distribution...........................................9
Section 4.2 Fractional Shares..........................................9
Section 4.3 SFX Employees.............................................10
Section 4.4 SFX Board Action..........................................10
Section 4.5 Registration and Listing; SEC Filings.....................10
Section 4.6 Third Party Consents......................................11
Section 4.7 Waivers...................................................11
Section 4.8 Termination of Merger Agreement...........................11
ARTICLE 5
SURVIVAL; MUTUAL RELEASE AND INDEMNIFICATION ...............................11
Section 5.1 Survival and Indemnification..............................11
Section 5.2 Mutual Release, Etc.......................................12
Section 5.3 Indemnification...........................................12
Section 5.4 Procedure for Indemnification.............................13
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ARTICLE 6
TAX MATTERS.................................................................14
Section 6.1 Tax Sharing Agreements....................................14
Section 6.2 Employee Benefits Agreement...............................15
ARTICLE 7
CERTAIN ADDITIONAL MATTERS .................................................15
Section 7.1 Conveyancing and Assumption Instruments...................15
Section 7.2 No Representations or Warranties..........................15
Section 7.3 Further Assurances; Subsequent Transfers..................15
Section 7.4 Sales and Transfer Taxes..................................16
Section 7.5 Change of Name............................................16
ARTICLE 8
ACCESS TO INFORMATION AND SERVICES..........................................16
Section 8.1 Provision of Corporate Records............................16
Section 8.2 Access to Information.....................................17
Section 8.3 Retention of Records......................................17
Section 8.4 Confidentiality...........................................17
Section 8.5 Privileged Matters........................................17
ARTICLE 9
INSURANCE...................................................................18
Section 9.1 General...................................................18
Section 9.2 Certain Insured Claims....................................18
ARTICLE 10
CONDITIONS..................................................................19
Section 10.1 Conditions................................................19
ARTICLE 11
MEDIATION...................................................................19
Section 11.1 Mediation and Binding Arbitration.........................19
Section 11.2 Initiation................................................19
Section 11.3 Submission to Mediation...................................20
Section 11.4 Selection of Mediator.....................................20
Section 11.5 Mediation.................................................20
Section 11.6 Selection of Arbitrator...................................20
Section 11.7 Cost of Arbitration.......................................20
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ARTICLE 12
MISCELLANEOUS...............................................................20
Section 12.1 Complete Agreement.........................................20
Section 12.2 Governing Law..............................................20
Section 12.3 Notices....................................................20
Section 12.4 Amendment and Modification.................................21
Section 12.5 Termination................................................22
Section 12.6 Successor and Assigns......................................22
Section 12.7 No Third Party Beneficiaries...............................22
Section 12.8 Counterparts...............................................22
Section 12.9 Interpretation.............................................22
Section 12.10 Annexes, Etc...............................................22
Section 12.11 Legal Enforceability.......................................22
Annex I ASSUMED LIABILITIES.......................................I-1
Annex II TRANSFERRED ASSETS.......................................II-1
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated as of April 20, 1998, by and among SFX
Broadcasting, Inc., a Delaware corporation ("SFX"), SFX Entertainment, Inc., a
Delaware corporation and a wholly-owned subsidiary of SFX ("Entertainment"),
and, with respect to Section 12.4 only, SBI Holding Corporation, a Delaware
corporation ("Parent"). Capitalized terms used and not defined herein have the
respective meanings ascribed them in the Merger Agreement. Unless the context
requires otherwise, "SFX" refers to SFX Broadcasting, Inc. and its subsidiaries
(other than Entertainment and its subsidiaries) and "Entertainment" refers to
SFX Entertainment, Inc. and its subsidiaries.
WHEREAS, SFX has entered into that Agreement and Plan of Merger dated
as of August 24, 1997, as subsequently amended, among Parent, SBI Radio
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and SFX pursuant to which SFX will become a wholly-owned
subsidiary of Parent (the "Merger Agreement");
WHEREAS, Entertainment has, among other endeavors, been engaged in the
business of venue ownership, operation and management and the booking,
promotion and/or production of entertainment events, including, without
limitation, related merchandising, concession management and Internet-based
marketing through its wholly owned subsidiary SFX Concerts, Inc., formerly
known as Delsener/▇▇▇▇▇▇ Enterprises, Inc., and its Subsidiaries and Affiliates
(the "Transferred Businesses"), which Transferred Businesses are principally
outside the scope of SFX's core radio broadcasting business;
WHEREAS, the Board of Directors of SFX has determined that the
interests of SFX's stockholders would be best served by restructuring the
ownership of the Transferred Businesses and ownership of the core radio
broadcasting business prior to the Merger as contemplated by Section 5.07 of
the Merger Agreement;
WHEREAS, SFX wishes to transfer and assign to Entertainment all of the
Transferred Assets as specified in this Agreement in exchange for the
assumption by Entertainment of the Assumed Liabilities as specified in this
Agreement;
WHEREAS, Entertainment is willing to assume such Assumed Liabilities;
WHEREAS, SFX intends to distribute all of the outstanding shares of
the Class A Common Stock, par value $.01 per share, of Entertainment (the
"Entertainment Class A Common Stock") and the Class B Common Stock of
Entertainment, par value $.01 per share (the "Entertainment Class B Common
Stock" and, together with the Entertainment Class A Common Stock, the
"Entertainment Common Stock"), owned by SFX to the holders of (i) the common
stock of SFX (the "SFX Common Stock"), (ii) the 6 1/2% Series D Cumulative
Convertible Exchangeable Preferred Stock due May 31, 2007 of SFX (the "Series D
Preferred Stock"), (iii) interests in the SFX Director Deferred Stock Ownership
Plan dated as of January 1, 1997 (the "SFX Director Deferred Stock Ownership
Plan") and (iv) certain warrants of SFX, with the holders of the Class A Common
Stock, par value $.01 per share, of SFX (the "SFX Class A Common Stock"), the
Series D Preferred Stock, interests in the SFX Director Deferred Stock
Ownership Plan and certain warrants of SFX receiving Entertainment Class A
Common Stock and the holders of the Class B Common Stock, par value $.01 per
share, of SFX (the "SFX Class B Common Stock") receiving Entertainment Class B
Common Stock (such distribution hereinafter referred to as the "Distribution")
on the Distribution Date (as hereinafter defined);
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WHEREAS, SFX and Entertainment have determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect the Distribution and to set forth other agreements that will govern
certain other matters in connection with the Distribution; and
WHEREAS, Parent has joined as a signatory and a party to this
Agreement in order to preserve and protect its rights under the Merger
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and intending to be legally bound
hereby, SFX and Entertainment hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 General. As used in this Agreement, capitalized terms
defined immediately after their use shall have the respective meanings thereby
provided and the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
Action: any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: with respect to any specified person, a person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified person;
provided, however, that SFX and Entertainment shall not be deemed to be
Affiliates of each other for purposes of this Agreement.
Agent: ChaseMellon Shareholder Services, LLC, the distribution agent
appointed by SFX to distribute shares of Entertainment Common Stock pursuant to
the Distribution.
Assumed Liabilities: collectively, all of the Liabilities and other
obligations of SFX listed on Annex I hereto.
Books and Records: the books and records of SFX (or true and complete
copies thereof), including all computerized books and records owned by SFX,
that relate principally to the Transferred Businesses and are necessary for
Entertainment to operate the Transferred Businesses, including, without
limitation, all such books and records relating to Employees and the
Transferred Assets, the purchase of materials, supplies and services, the sale
of products by the Transferred Businesses or dealings with customers of the
Transferred Businesses and all litigation files relating to any Action being
assumed by Entertainment as part of the Assumed Liabilities.
Code: the Internal Revenue Code of 1986, as amended.
Consent Solicitation Documents: collectively, the Consent Solicitation
Statements mailed to the holders of SFX's 12 5/8% Cumulative Exchangeable
Series E Preferred Stock and 10 3/4% Senior Subordinated Notes due 2006 on
January 7, 1998 and the Information Statement related thereto, as
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supplemented or amended.
Conveyancing and Assumption Instruments: collectively, the various
agreements, instruments and other documents to be entered into in order to
effect the transfer to Entertainment of Transferred Assets, and the assumption
by Entertainment of the Assumed Liabilities in the manner contemplated by this
Agreement, each of which shall be in a form reasonably satisfactory to Parent.
Distribution Date: April 27, 1998 or if the Distribution shall not
have been effected on such date, any other date as of which the Distribution
shall be effected, as determined by the SFX Board of Directors, which, in any
event, shall be a date on or prior to the Closing Date.
Distribution Employees: the employees of SFX listed or referred to on
Section 5.07(h) of the Company Disclosure Schedule to the Merger Agreement.
Employee: any Distribution Employee and any employee shown on the
records of SFX as being employed by SFX and assigned to the Transferred
Businesses as of the Distribution Date, including any laid-off Employee or any
Employee on leave of absence.
Exchange Act: the Securities Exchange Act of 1934, as amended.
Form 8-A: the registration statement on Form 8-A filed by
Entertainment with the SEC to effect the registration of the Entertainment
Class A Common Stock pursuant to the Exchange Act.
Guarantees: the guarantees provided by SFX in connection with the
following agreements: (i) Agreement and Plan of Merger and Asset Purchase
Agreement, dated as of December 10, 1997 by and among SFX Entertainment, Inc.,
Contemporary Investments Corporation, Contemporary Investments of Kansas, Inc.,
Contemporary International Productions Corporation, ▇▇▇▇▇▇ ▇. Schanman Living
Trust, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Living Trust, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, (ii) Stock and Asset Purchase Agreement, dated December 2, 1997, by
and among SFX Network Group, L.L.C. and SFX Entertainment, Inc., and ▇▇▇▇▇ ▇.
▇▇▇▇, individually and as Trustee under the Bird Family Trust, ▇▇▇▇ ▇. ▇▇▇▇,
individually and as Trustee under the ▇▇▇▇ ▇. ▇▇▇▇ Corporation Trust, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, individually and as Trustee under the ▇▇▇▇▇ Family Trust, June ▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and The Network 40, Inc. and (iii) Stock Purchase
Agreement, dated as of December 12, 1997 by and among Pace Entertainment
Corporation and SFX Entertainment, Inc.
Indemnifiable Losses: with respect to any claim by an Indemnitee for
indemnification authorized pursuant to this Agreement, all losses, Liabilities,
claims, damages, obligations, payments, costs and expenses (including, without
limitation, the costs and expenses of any and all Actions, demands,
assessments, judgments, settlements and compromises relating thereto and
reasonable attorneys' fees and expenses in connection therewith) suffered by
such Indemnitee with respect to such claim.
Indemnifying Party: any party who is required to indemnify any other
person pursuant to this Agreement.
Indemnitee: any party who is entitled to receive indemnification from
an Indemnifying Party pursuant to this Agreement.
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Indemnity Payment: the amount an Indemnifying Party is required to pay
an Indemnitee pursuant to this Agreement.
Insurance Program: collectively, the series of property and casualty
policies pursuant to which various insurance carriers provide insurance
coverage to SFX (including Entertainment and its subsidiaries) in respect of
claims or occurrences relating to, without limitation, property damage,
business interruption, transit, fire, extended coverage, fiduciary, fidelity,
environmental impairment, employee crime, general liability, products'
liability, automobile liability and employer's liability. The term Insurance
Program shall not include any SFX Welfare Plan (as such term is defined in the
Employee Benefits Agreement).
Liabilities: any and all debts, liabilities and obligations, whether
or not accrued, contingent, known or unknown, or reflected on a balance sheet,
including, without limitation, those arising under any law, rule, regulation,
Action, order or consent decree of any governmental entity or any judgment of
any court of any kind or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
Record Date: April 20, 1998 or if the Distribution is not effected on
April 27, 1998, such other date as determined by the Board of Directors of SFX
as the record date for the Distribution.
Registration Statement: the registration statement on Form S-1 (Reg.
No. 333-43287) filed by Entertainment with the SEC on December 24, 1997, as
amended, to effect the registration pursuant to the Securities Act of 1933, as
amended, of the issuance in the Distribution of Entertainment Class A Common
Stock and Class B Common Stock.
Related Agreements: the Tax Sharing Agreement and the Employee
Benefits Agreement.
Retained Liabilities: all Liabilities and obligations of SFX other
than the Assumed Liabilities.
SEC: the Securities and Exchange Commission.
Transaction Documents: collectively, the Merger Agreement and the
related documents entered into on August 24, 1997, as amended.
Transferred Assets: collectively, all of the assets and properties of
SFX identified on Annex II hereto.
ARTICLE 2
REORGANIZATION AND RELATED TRANSACTIONS
SECTION 2.1 The Reorganization. Subject to the terms and conditions of
this Agreement, SFX and Entertainment shall use their respective best efforts
to cause, prior to the Distribution Date, all of SFX's right, title and
interest in and to the Transferred Assets to be conveyed, assigned, transferred
and delivered to Entertainment, free and clear of all liens or encumbrances in
favor of SFX or its subsidiaries, and all of SFX's duties, obligations and
responsibilities under the Assumed Liabilities to be assumed by Entertainment
(the "Asset and Liability Transfer"). Such transfer and assumption shall be
effected by means of the Conveyancing and Assumption Instruments, which shall
be executed and delivered by each of SFX and
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Entertainment prior to the Distribution Date. Subject to Section 7.3 hereof, to
the extent that any such conveyances, assignments, transfers and deliveries
shall not have been so consummated on the Distribution Date, SFX and
Entertainment shall cooperate to effect such consummation as promptly
thereafter as shall be practicable, it nonetheless being understood and agreed
by SFX and Entertainment that neither shall be liable in any manner to any
person who is not a party to this Agreement for any failure of any of the
transfers contemplated by this Article II to be consummated on or subsequent to
the Distribution Date. Whether or not all of the Transferred Assets or the
Assumed Liabilities shall have been legally transferred to, or assumed by,
Entertainment as of the Distribution Date, SFX and Entertainment agree that, as
of the Distribution Date, Entertainment shall have, and shall be deemed to have
acquired, complete and sole beneficial ownership over all of the Transferred
Assets, together with all of SFX's and its subsidiaries' rights, powers and
privileges incident thereto, and shall be deemed to have assumed all of the
Assumed Liabilities and all of SFX's and its subsidiaries' duties, obligations
and responsibilities incident thereto in accordance with the terms of this
Agreement.
SECTION 2.2 Working Capital Adjustment.
(a) In the event that the Distribution occurs prior to the Closing
Date, then on the Distribution Date, the management of SFX shall make an
allocation of working capital between Entertainment and SFX, consistent with
the proper operation of SFX in its usual, regular and ordinary course and,
immediately after the effective time of the Distribution, SFX shall deliver to
Entertainment, in immediately available funds by wire transfer to such bank
account as Entertainment shall specify, any positive amount allocated to
Entertainment.
(b) Not less than five business days prior to the Closing Date, SFX
shall deliver to Entertainment a good faith estimate of Working Capital (as
defined in Section 2.3(d)) as of the Closing Date (the "Estimated Working
Capital"), accompanied by a certificate by the Chief Executive Officer and
Chief Financial Officer of SFX certifying that the Estimated Working Capital
has been calculated in accordance with the Merger Agreement and this Agreement.
If the Estimated Working Capital is a positive number, then at the Closing SFX
shall deliver to Entertainment, in immediately available funds by wire transfer
to such bank account as Entertainment shall specify, an amount of cash equal to
the Estimated Working Capital. If the Estimated Working Capital is a negative
number, then at the Closing Entertainment shall deliver to SFX, in immediately
available funds by wire transfer to such bank account as SFX shall specify, an
amount of cash equal to the Estimated Working Capital.
(c)(i) As soon as practicable after the Closing Date, SFX will prepare
a statement of Working Capital as of the Closing Date, which will be audited by
Ernst & Young LLP (the "SFX's Working Capital Statement") at the expense of
SFX. SFX will deliver SFX's Working Capital Statement to Entertainment as soon
as practicable and in any event within ninety days after the Closing Date. If
within fifteen days following delivery of SFX's Working Capital Statement to
Entertainment, Entertainment has not given SFX notice of its objection to SFX's
Working Capital Statement (such notice must contain a statement of the basis of
such objection), then the Working Capital reflected on SFX's Working Capital
Statement shall be deemed final and conclusive and shall be the "Final Working
Capital." If Entertainment gives such notice of objection within the fifteen
day period, then the issues in dispute will be submitted to a "big six"
accounting firm (other than Ernst & Young LLP) to be selected jointly by
Entertainment and Parent within the following fifteen days or, if they fail to
agree, such accounting firm shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Chicago office) (it being
understood that the Chicago office of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ was chosen because of
representations made that neither Parent and its Affiliates, SFX and its
Affiliates nor
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Entertainment and its Affiliates have a material relationship with such office,
and if any of such parties prior to the calculation of the Final Working
Capital develops a material relationship with such office, the party having
such a relationship shall promptly notify the other party of such relationship
and the parties shall select another office of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or another "big
six" accounting firm with which none of such parties has a material
relationship to serve as the accountants) (the "Accountants"), for resolution,
and the Accountants shall determine the "Final Working Capital" within thirty
days after the dispute is submitted to them. If issues in dispute are submitted
to the Accountants for resolution, (A) each party will furnish to the
Accountants such work papers and other documents and information relating to
the disputed issues as the Accountants may request and are available to that
party or its Subsidiaries (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and to discuss the determination with the Accountants; (B)
the determination by the Accountants of Final Working Capital, as set forth in
a notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (C) Entertainment and SFX will each bear
one-half of the fees and expenses of the Accountants for such determination.
SFX shall make its employees and books and records available to Entertainment
for purposes of verifying Final Working Capital and shall cause Ernst & Young
LLP to make its work papers used in determining Final Working Capital available
to Entertainment.
(ii) On the third business day following the determination of the
Final Working Capital (the "Payment Date"), (A) if the Working Capital
Adjustment Amount (as defined below) is a positive number, then SFX will pay
such amount to Entertainment in immediately available funds by wire transfer to
such bank account as Entertainment shall specify and (B) if the Working Capital
Adjustment Amount is a negative number, then Entertainment will pay such amount
to SFX in immediately available funds by wire transfer to a bank account
specified by SFX. Notwithstanding the foregoing, if Entertainment has notified
SFX in writing prior to the Payment Date that it wishes to have all or any
portion of the Final Working Capital (such amount, the "Consideration
Adjustment") treated as an adjustment to the Class A Common Stock Merger
Consideration and the Class B Common Stock Merger Consideration, the Class A
Common Stock Merger Consideration and the Class B Common Stock Merger
Consideration shall be increased by an amount equal to the quotient of the
Consideration Adjustment divided by the fully diluted number of shares of SFX
Common Stock outstanding immediately prior to the Effective Time, and SFX shall
(X) promptly distribute the appropriate amount to the appropriate holders,
immediately prior to the Effective Time, of SFX Common Stock and Series D
Preferred Stock, (Y) promptly distribute upon exercise the appropriate amount
to holders of Options, Warrants and Unit Purchase Options unexercised
immediately prior to the Effective Time, and (Z) promptly distribute the
appropriate amount to holders of Options, Warrants, and Unit Purchase Options
who exercised such securities on and after the Effective Time and prior to the
Payment Date; provided that as a condition precedent to SFX's obligations under
this sentence, Entertainment shall have paid to SFX in immediately available
funds by wire transfer to an account specified by SFX the difference, if any,
between the Consideration Adjustment and the Working Capital Adjustment Amount
so that the aggregate net amount to be paid or received by SFX, as the case may
be, pursuant to this sentence is equal to the amount that would have been paid
or received, as the case may be, pursuant to the first sentence of this
paragraph had the Consideration Adjustment not been made.
(d) The term "Working Capital" shall mean, as of the point in time
immediately prior to the Effective Time, the sum of all current assets of SFX
and its consolidated Subsidiaries minus the sum of all current liabilities of
SFX and its consolidated Subsidiaries, each as determined in accordance with
GAAP applied on a basis consistent with the balance sheet of SFX as of June 30,
1997 included in Company SEC Documents (as defined in the Merger Agreement)
(provided that no liabilities or reserves reflected on
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such balance sheet shall be reduced or eliminated except by reason of a
payment or credit occurring in the ordinary course of business and consistent
with past practices).
Notwithstanding the foregoing, Working Capital shall, without
duplication either in this computation or as between this computation and the
computation of Excess Debt, (i) be increased by the lesser of (A) 50% of all
fees and expenses incurred by SFX in connection with acquiring consents from
holders of the Series E Preferred Stock and the 2006 Notes in connection with
the transactions contemplated by the Merger Agreement and (B) $1,000,000, (ii)
be increased by, if a positive number, or decreased by, if a negative number,
the product of (A) the Class A Common Stock Merger Consideration and (B) the
difference between 15,589,083 less the sum of the fully diluted number of
shares of SFX Common Stock outstanding immediately prior to the Effective Time
(excluding the ▇▇▇▇▇▇▇ Shares (as defined below)) (calculated in a manner
consistent with Section 3.01(c)(i) of the Company Disclosure Schedule, such
calculation to include, without limitation, derivative securities that will
become issuable upon consummation of the transactions contemplated by the
Merger Agreement), (iii) be reduced by the difference between $84,554,649 less
the sum of (A) the aggregate exercise price of all Options, Warrants and Unit
Purchase Options outstanding immediately prior to the Effective Time plus (B)
the aggregate exercise price of all Unit Purchase Option Warrants underlying
Unit Purchase Options outstanding immediately prior to the Effective Time plus
(C) the aggregate base price of all SARs outstanding immediately prior to the
Effective Time, (iv) be reduced by the product of (A) $42 and (B) the aggregate
number of shares of SFX Common Stock subject to a right of repurchase in favor
of SFX (the "▇▇▇▇▇▇▇ Shares") granted pursuant to that certain Agreement of
Merger dated February 12, 1997 among SFX, Nederlander of Connecticut, Inc. and
the other parties thereto outstanding immediately prior to the Effective Time,
(v) be increased by all capital expenditures paid by SFX and its Subsidiaries
after June 30, 1997 and immediately prior to the Effective Time permitted by
Section 4.01(a)(viii) of the Merger Agreement, (vi) be decreased by all accrued
capital expenditures of SFX as of immediately prior to the Effective Time (to
the extent not reflected in current liabilities), (vii) be increased by
dividends that have been accrued immediately prior to the Effective Date whose
regularly scheduled payment date has not then yet occurred, (viii) except as
required by clause (xi) below, exclude any liabilities attributable to
Indebtedness, (ix) exclude any liabilities included in clauses (i) through (v)
of the following sentence, (x) be decreased by unpaid costs, fees and expenses
of SFX arising out of, based upon or that will arise from the transactions
contemplated by the Merger Agreement (other than as a result of actions taken
by Sub) (including, without limitation, amounts related to the termination of
any employees, broker fees, legal, accounting and advisory fees and fees
incurred in connection with third party consents, waivers and amendments of
creditors or holders of Preferred Stock), (xi) be reduced by the amount of the
Excess Debt, if a positive number, or be increased by the amount of the Excess
Debt, if a negative number, (xii) be reduced by the amount of the Series E
Premium (as defined below), and (xiii) be reduced by the difference between (A)
the aggregate amount to be paid by SFX pursuant to the Memorandum of
Understanding dated March 17, 1998, relating to the shareholder litigation in
connection with the Merger and (B) any amounts to be paid by SFX's director and
officer insurance policy.
The term "Series E Premium" shall mean the difference between (i) the
Average Trading Price times 142,032 and (ii) 14,203,200. The term "Average
Trading Price" shall mean the highest of the following averages: (i) the
average of the last sales price of the Series E Preferred Stock during the 15
consecutive business days ending on the Closing Date, or (ii) the average of
the last sales price of the Series E Preferred Stock during the 15 consecutive
business days immediately preceding February 9, 1998.
(e) The term "Excess Debt" shall mean, as of immediately prior to the
Effective Time, the difference between the sum of the following and
$899,700,000: (i) the difference between (A)
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Indebtedness of SFX and its consolidated Subsidiaries less (B) the difference
between $70,000,000 and any amounts (other than the reimbursement of expenses)
actually received by SFX and its consolidated subsidiaries after August 24,
1997 under agreements relating to the sale or LMA (such LMA payments not to
exceed $30,000 per month) of its WVGO-FM and the sale or LMA of its
▇▇▇▇▇▇▇/Biloxi radio stations, less (C) any Indebtedness incurred to finance
acquisitions approved by Parent of stock of or substantially all of the assets
of radio stations, less (D) interest accrued as of immediately prior to the
Effective Time that is not then due and payable, (ii) the Series B Merger
Consideration, (iii) the Series C Merger Consideration, (iv) the liquidation
preference amount of the Series E Preferred Stock, and (v) Environmental Costs
or Liabilities accrued and not paid after June 30, 1997 to the extent they
exceed $100,000 in the aggregate. "Working Capital Adjustment Amount" shall
mean an amount equal to the Final Working Capital, less the Estimated Working
Capital, together with interest on the absolute value of the difference at 10%
per annum beginning on the Closing Date and ending on the date of payment of
the Working Capital Adjustment Amount as provided in Section 2.02(c)(ii)
hereof.
Notwithstanding the foregoing, Working Capital shall not include any
asset transferred to Entertainment or any of its Subsidiaries, any Liability
assumed by Entertainment, or any Liability to which none of SFX or any of its
Subsidiaries is a party immediately after the Effective Time and any such
computation shall assume that the Distribution has been consummated.
(f) All amounts loaned to Entertainment by SFX to (i) acquire (whether
by merger, stock or asset acquisition or otherwise) additional businesses
engaged in the business in which Entertainment is engaged or (ii) make capital
improvements on assets owned or leased by Entertainment, shall be paid by
Entertainment to SFX by wire transfer of immediately available funds to a bank
account specified by SFX on the Distribution Date and shall not be considered
for purposes of computing Working Capital under clause (b) of this Section 2.3.
(g) If the Merger Agreement is terminated for any reason in accordance
with its terms, then the working capital shall be allocated in accordance with
Section 2.3(a) above, and no further adjustments to working capital shall be
made.
SECTION 2.3 SFX Approval. Prior to the Distribution Date, SFX shall
cooperate with Entertainment in effecting, and if so requested by
Entertainment, SFX shall, as the sole stockholder of Entertainment, ratify any
actions which are reasonably necessary or desirable to be taken by
Entertainment to effectuate the transactions contemplated by this Agreement in
a manner consistent with the terms of this Agreement, including, without
limitation, the following: (a) the election or appointment of directors and
officers of Entertainment to serve in such capacities following the
Distribution Date, and (b) the preparation and implementation of appropriate
plans, agreements and arrangements for Employees (including, without
limitation, plans, agreements or arrangements pursuant to which Entertainment
Common Stock would be acquired by Employees).
ARTICLE 3
ASSUMPTION AND RETENTION OF LIABILITIES
SECTION 3.1 Assumed Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement and in addition to any other Liabilities
otherwise expressly assumed by Entertainment pursuant to this Agreement, the
Related Agreements or any other agreement contemplated by this Agreement,
8
Entertainment assumes all Assumed Liabilities and agrees with SFX to pay,
perform and discharge in due course any and all Assumed Liabilities. SFX shall
use its commercially reasonable efforts to cause Entertainment and its
Subsidiaries to be released from all debt and accrued liabilities other than
the Assumed Liabilities, prior to the Effective Time.
SECTION 3.2 Retained Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement and in addition to any other Liabilities
otherwise expressly retained by SFX pursuant to this Agreement, the Related
Agreements or any other agreement contemplated by this Agreement, SFX hereby
agrees with Entertainment that SFX shall pay, perform and discharge in due
course any and all Retained Liabilities.
SECTION 3.3 Construction of Agreements. Notwithstanding any other
provisions in this Agreement to the contrary, in the event and to the extent
there shall be a conflict between the provisions of this Agreement and the
Related Agreements (or any Conveyancing and Assumption Instrument or other
instrument of assumption entered into pursuant to this Agreement) and (a) the
provisions of the Merger Agreement, then (i) prior to the Effective Time, the
provisions of the Merger Agreement shall control and (ii) subsequent to the
Effective Time, the provisions of this Agreement and the Related Agreements (or
any Conveyancing and Assumption Instrument or other instrument of assumption
entered into pursuant to this Agreement) shall control and (b) the provisions
of any other agreement entered into by SFX or Entertainment, then the
provisions of this Agreement and the Related Agreements (and any Conveyancing
and Assumption Instrument or other instrument of assumption entered into
pursuant to this Agreement) shall control. In the event and to the extent there
shall be a conflict between the provisions of this Agreement and the provisions
of the Related Agreements, then the provisions of the Related Agreements shall
control.
ARTICLE 4
THE DISTRIBUTION
SECTION 4.1 The Distribution.
(a) On or prior to the Distribution Date, SFX shall deliver to the
Agent for the benefit of holders of record of SFX Common Stock, Series D
Preferred Stock and interests in the SFX Director Deferred Stock Ownership Plan
on the Record Date, (i) certificates representing, in the aggregate, the number
of shares of Entertainment Class A Common Stock equal to the sum of (A) the
number of shares of SFX Class A Common Stock outstanding on the Record Date,
(B) the aggregate number of shares of SFX Class A Common Stock credited
pursuant to the SFX Director Deferred Stock Ownership Plan and (C) the product
of the number of shares of Series D Preferred Stock outstanding on the Record
Date multiplied by the Conversion Rate (as defined in the certificate of
designations governing the Series D Preferred Stock) and (ii) certificates
representing, in the aggregate, the number of shares of Entertainment Class B
Common Stock equal to the number of shares of SFX Class B Common Stock
outstanding on the Record Date. SFX shall instruct the Agent to distribute as
promptly as practicable following the Distribution Date to holders of the SFX
Common Stock, Series D Preferred Stock and interests in the SFX Director
Deferred Stock Ownership Plan on the Record Date (i) one share of Entertainment
Class A Common Stock for every one share of SFX Class A Common Stock, (ii) one
share of Entertainment Class A Common Stock for every one share of SFX Class A
Common Stock credited pursuant to the SFX Director Deferred Stock Ownership
Plan, (iii) the number of shares of Entertainment Class A Common Stock (rounded
down to the next whole share for each holder) equal to the Conversion Rate (as
defined in the Certificate of Designations governing the
9
Series D Preferred Stock) for every one share of Series D Preferred Stock and
(iv) one share of Entertainment Class B Common Stock for every one share of SFX
Class B Common Stock. Simultaneously with the Distribution, SFX shall place
that number of shares of the Entertainment Class A Common in an escrow account
with an escrow agent selected by SFX and governed by an escrow agreement
reasonably acceptable to SFX and Parent for delivery to the holders of the IPO
Warrants, and SCMC Warrants upon exercise of such warrants that equals the
number of shares of Entertainment Class A Common Stock that the holders of such
warrants would have been entitled to receive if they had exercised all of their
IPO Warrants, and SCMC Warrants immediately prior to the Record Date. SFX and
Entertainment agree to provide to the Agent sufficient certificates in such
denominations as the Agent may request in order to effect the Distribution. All
of the shares of Entertainment Common Stock issued in the Distribution shall be
fully paid, nonassessable and free of preemptive rights.
(b) The Distribution shall be deemed to be effective on the
Distribution Date.
SECTION 4.2 Fractional Shares. No certificate or scrip representing
fractional shares of Entertainment Common Stock shall be issued as part of the
Distribution and in lieu of receiving fractional shares, each holder of a
warrant who would otherwise be entitled to receive a fractional share of
Entertainment Common Stock upon exercise of such warrant, after aggregating all
shares of Entertainment Common Stock which such holder would be entitled to
receive under Section 4.1, will receive cash for such fractional share. SFX and
Entertainment agree that Entertainment shall instruct the Agent to determine
the number of whole shares and fractional shares of Entertainment Common Stock
allocable to each holder of record of such warrant as of the date of exercise,
to aggregate all such fractional shares into whole shares and sell the whole
shares obtained thereby in the open market at the then prevailing prices on
behalf of holders who otherwise would be entitled to receive fractional shares
interests and to distribute to each such holder such holder's ratable share of
the total proceeds of such sale promptly after the date of exercise. SFX shall
bear the costs of commissions incurred in connection with such sale.
SECTION 4.3 SFX Employees. If the Distribution occurs prior to the
Closing Date, the Distribution Employees shall continue to be employed by SFX
(at SFX's expense), but shall devote such time as deemed reasonably necessary
to, consistent with their obligations to SFX, support the conduct of the
Entertainment Business by Entertainment on a basis consistent with the time and
scope of services that such employees devoted and provided to the Entertainment
Business prior to the Distribution. Effective immediately prior to the
Effective Time, Entertainment shall assume all obligations arising under any
employment agreement or arrangement (written or oral) between SFX or any of its
Subsidiaries and the Distribution Employees other than the rights, if any, of
the Distribution Employees to receive the options upon termination following a
change of control as defined in their respective employment agreements (the
"Termination Options") immediately prior to the Effective Time (with such
Termination Options being deemed granted as of such time) and all existing
rights to indemnification. SFX and its Subsidiaries, effective as of the
Effective Time (or effective as of the Distribution Date as to any member of
the Distribution Employees that devotes substantially all of his or her
business time to the Entertainment Business), shall be indemnified by
Entertainment in accordance with Article 5 hereof from all obligations arising
under such employment agreements or arrangements (except in respect of the
Termination Options and all existing rights to indemnification). Neither party
shall, directly or indirectly, solicit the employment of any employees of the
other party or its subsidiaries (other than as a result of a general
solicitation for employment); provided, however, that Entertainment may solicit
and contract for the employment effective no earlier than the Effective Time of
the Merger, of Distribution Employees.
10
SECTION 4.4 SFX Board Action. The Board of Directors of SFX, in its
discretion, shall establish the Record Date and the Distribution Date and all
appropriate procedures in connection with the Distribution, subject to the
satisfaction or waiver of the conditions contained in Article 10.
SECTION 4.5 Registration and Listing; SEC Filings.
(a) Prior to the Distribution Date:
(i) SFX and Entertainment shall register the Distribution under
applicable federal and state securities laws if such registration is either
required under applicable law or would otherwise be required to cause the
securities issued in connection with the Distribution to be freely transferable
by Persons not Affiliates of Entertainment. SFX and Entertainment shall use
reasonable efforts to cause the Registration Statement to become effective
under the Securities Act as promptly as reasonably practicable. In connection
with such registration, Entertainment shall file a Form 8-A, if necessary, with
the SEC.
(ii) The parties hereto shall use reasonable efforts to take all such
action as may be necessary or appropriate under state securities and blue sky
laws in connection with the transactions contemplated by this Agreement.
(iii) Entertainment shall prepare, file and seek to make effective,
subject to official notice of issuance, an application for the listing of the
Entertainment Class A Common Stock on a national exchange, or for the inclusion
of quotations for the Entertainment Class A Common Stock on the Nasdaq Stock
Market.
(iv) The parties hereto shall cooperate in preparing, filing with the
SEC and causing to become effective any registration statements or amendments
thereto which are necessary or appropriate in order to effect the transactions
contemplated hereby.
(b) Entertainment hereby represents and warrants to SFX that each of
the Registration Statement and the Consent Solicitation Documents and each
amendment or supplement thereto did not, at the time it became effective or was
mailed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement or material omission was made by Entertainment
in reliance upon and in conformity with written information furnished by
Parent, its representatives or affiliates to Entertainment specifically for use
in such filing.
SECTION 4.6 Third Party Consents. SFX shall obtain all necessary third
party consents to the Distribution except where the failure to obtain such
consents, in the aggregate, would not (a) have a Material Adverse Effect on
SFX, (b) impair the ability of SFX to perform its obligations under the
Transaction Documents in any material respect or (c) delay in any material
respect or prevent the consummation of any of the transactions contemplated by
the Transaction Documents. The Distribution shall be effected in compliance
with SFX's certificate of incorporation and by-laws and in material compliance
with all applicable laws and shall be subject to obtaining all applicable
consents of Governmental Entities.
SECTION 4.7 Waivers. Prior to the Distribution Date, SFX and
Entertainment shall obtain from
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▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ a release or waiver of any rights that either of
them may have to purchase or acquire all or part of the Delsener/▇▇▇▇▇▇ Group.
SECTION 4.8 Termination of Merger Agreement. If the Merger Agreement
is terminated for any reason in accordance with its terms, the Boards of
Directors of SFX and Entertainment shall appoint committees (the "Independent
Committees") composed solely of independent directors (none of whom shall serve
on both Boards of Directors) and shall authorize the Independent Committees to
negotiate with each other in good faith with respect to (a) the Distribution
Employees, (b) a lease arrangement for the office space of Entertainment
utilized by SFX and (c) any other matters which the Boards deem necessary to
effectuate the separation of the respective affairs of SFX and Entertainment.
ARTICLE 5
SURVIVAL; MUTUAL RELEASE AND INDEMNIFICATION
SECTION 5.1 Survival and Indemnification.
(a) Except as specifically provided herein to the contrary, all
covenants and agreements of the parties contained in this Agreement shall
survive the Distribution Date.
(b) Except as specifically provided herein, the indemnification
provisions of this Article 5 shall terminate and be of no further force and
effect on the sixth (6th) anniversary of the Distribution Date; provided,
however, that such provisions shall survive thereafter as to any claims for
indemnification asserted prior to the sixth (6th) anniversary of the
Distribution Date. Such termination shall in no way limit the obligations of
Entertainment with respect to the Assumed Liabilities or the obligations of SFX
with respect to the Retained Liabilities and related indemnification rights
under this Agreement, which shall survive indefinitely.
(c) The obligations of Entertainment and SFX under this Article 5
shall survive the sale or other transfer by either of them of any assets or
businesses or the assignment by either of them of any Liabilities. To the
extent that SFX assigns any of its Retained Liabilities (except for such
amounts of Retained Liabilities which are not material individually or in the
aggregate), SFX shall cause such transferee of such Retained Liabilities to
assume specifically its obligations with respect thereto under this Agreement
and to fulfill its obligations related to such Retained Liabilities. To the
extent Entertainment transfers to another party other than a Subsidiary of
Entertainment any of the Assumed Liabilities (except for such amounts of
Assumed Liabilities which are not material individually or in the aggregate),
Entertainment shall cause the transferee of such Assumed Liabilities to assume
specifically its obligations with respect thereto under this Agreement and to
fulfill its obligations related to such Assumed Liabilities. In the event the
transferee of the Retained Liabilities or Assumed Liabilities does not fulfill
its obligations with respect thereto, SFX and Entertainment, respectively,
shall fulfill their obligations with respect thereto.
SECTION 5.2 Mutual Release, Etc.
(a) Effective on the Distribution Date, and except for Claims arising
from or attributable to the transactions contemplated by the Transaction
Documents, this Agreement, the Related Agreements or Claims otherwise asserted
prior to the Effective Time, SFX does hereby, for itself and its Subsidiaries
(other than the Delsener/▇▇▇▇▇▇ Group), and anyone claiming through SFX or its
Subsidiaries, remise, release
12
and forever discharge the Delsener/▇▇▇▇▇▇ Group, their respective Affiliates
(other than SFX and its Subsidiaries), successors and assigns, the Executive
Group (as defined in the Merger Agreement), and all Persons who at any time
prior to the Distribution Date have been shareholders, directors or agents or
employees of any member of the Delsener/▇▇▇▇▇▇ Group (in each case, in their
respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Claims whatsoever,
whether in law or in equity (including any right of contribution), whether
arising under any contract or arrangement, by operation of law or otherwise,
existing or arising from any acts or events occurring or failing to occur or
alleged to have occurred or to have failed to occur or any conditions existing
or alleged to have existed on or before the Distribution Date.
(b) Effective on the Distribution Date, and except for Claims arising
from or attributable to the transactions contemplated by the Transaction
Documents, this Agreement, the Related Agreements or Claims otherwise asserted
prior to the Effective Time, Entertainment does hereby, for itself and its
Subsidiaries, and anyone claiming through Entertainment or its Subsidiaries,
remise, release and forever discharge SFX, their respective Affiliates (other
than the Delsener/▇▇▇▇▇▇ Group), successors and assigns and all Persons who at
any time prior to the Distribution Date have been shareholders, directors or
agents or employees of any member of the SFX and its Subsidiaries (in each
case, in their respective capacities as such), and their respective heirs,
executors, administrators, successors and assigns, from any and all Claims
whatsoever, whether in law or in equity (including any right of contribution),
whether arising under any contract or arrangement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Distribution Date.
SECTION 5.3 Indemnification.
(a) SFX shall indemnify, defend and hold harmless the Delsener/▇▇▇▇▇▇
Group from and against any and all Indemnifiable Losses (other than income tax
liabilities) to which the Delsener/▇▇▇▇▇▇ Group may be or become subject that
(i) relate to the Retained Liabilities, assets, business, operations, debts or
Liabilities of SFX or its Subsidiaries (other than the Delsener/▇▇▇▇▇▇ Group)
whether arising prior to, concurrent with or after the Distribution or (ii)
result from a breach by SFX or its Subsidiaries (other than the Delsener/▇▇▇▇▇▇
Group) of any representation, warranty or covenant contained in this Agreement
or any Related Agreement. The rights of the directors, officers and employees
of the Delsener/▇▇▇▇▇▇ Group to seek indemnity from SFX shall continue to be
governed by the Merger Agreement or any other existing agreement addressing
such matter.
(b) Entertainment shall indemnify, defend and hold harmless SFX and
its Subsidiaries (other than the Delsener/▇▇▇▇▇▇ Group) from and against any
and all Indemnifiable Losses (other than income tax liabilities) to which SFX
or any of its Subsidiaries (other than the Delsener/▇▇▇▇▇▇ Group) may be or
become subject that (i) relate to the Transferred Businesses, Transferred
Assets, assets, business, operations, debts or Liabilities of the
Delsener/▇▇▇▇▇▇ Group, including, without limitation, Liabilities arising under
the Guarantees and Liabilities to be assumed by any member of the
Delsener/▇▇▇▇▇▇ Group as contemplated herein, whether arising prior to,
concurrent with or after the Distribution or (ii) result from a breach by a
member of the Delsener/▇▇▇▇▇▇ Group of any representation, warranty or covenant
contained in this Agreement or any Related Agreement.
(c) The amount which any party (an "Indemnifying Party") is required
to pay to any other party (an "Indemnitee") pursuant to Section 5.3(a) or
Section 5.3(b) shall be reduced (including,
13
without limitation, retroactively) by any insurance proceeds and other amounts
actually recovered by such Indemnitee in reduction of the related Indemnifiable
Loss. Amounts required to be paid are hereafter sometimes collectively called
"Indemnity Payments" and are individually called an "Indemnity Payment." If an
Indemnitee shall have received an Indemnity Payment in respect of an
Indemnifiable Loss and shall subsequently actually receive insurance proceeds
or other amounts in respect of such Indemnifiable Loss, then such Indemnitee
shall pay to such Indemnifying Party a sum equal to the lesser of the amount of
such insurance proceeds or other amounts actually received or the net amount of
Indemnity Payments actually received previously. The Indemnitee agrees that the
Indemnifying Party shall be subrogated to such Indemnitee under any insurance
policy and that the Indemnitee shall not waive any right of subrogation.
SECTION 5.4 Procedure for Indemnification.
(a) If an Indemnitee shall receive notice of the assertion by a person
who is not a party to this Agreement of any claim or of the commencement by any
such person of any Action (a "Third Party Claim") with respect to which an
Indemnifying Party is or may be obligated to make an Indemnity Payment, such
Indemnitee shall give such Indemnifying Party prompt notice thereof after
becoming aware of such Third Party Claim, specifying in reasonable detail the
nature of such Third Party Claim and the amount or estimated amount thereof to
the extent then feasible (which estimate shall not be conclusive of the final
amount of such claim); provided, however, that the failure of any Indemnitee to
give notice as provided in this Section 5.4 shall not relieve the related
Indemnifying Party of its obligations under this Article 5, except to the
extent that such Indemnifying Party is actually prejudiced by such failure to
give notice.
(b) An Indemnifying Party may elect to defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel (which counsel
shall be reasonably satisfactory to the Indemnitee), any Third Party Claim. If
an Indemnifying Party elects to defend a Third Party Claim, it shall, within 10
days of notice of such Third Party Claim (or sooner, if the nature of such
Third Party Claim so requires), notify the related Indemnitee of its intent to
do so, and such Indemnitee shall cooperate in the defense of such Third Party
Claim. Such Indemnifying Party shall pay such Indemnitee's actual out-of-pocket
expenses (other than officers' or employees' salaries) reasonably incurred in
connection with such cooperation. After notice from an Indemnifying Party to an
Indemnitee of its election to assume the defense of a Third Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this Article 5
for any legal or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, however, that such Indemnitee
shall have the right to employ separate counsel to represent such Indemnitee
if, in such Indemnitee's reasonable judgment, a conflict of interest between
such Indemnitee and such Indemnifying Party exists in respect of such claim,
and in that event the reasonable fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. Except as so provided, if an
Indemnitee desires to participate in the defense of a Third Party Claim, it may
do so but it shall not control the defense and such participation shall be at
its sole cost and expense. If an Indemnifying Party elects not to defend
against a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in this Section 5.4, such Indemnitee may defend, compromise and
settle such Third Party Claim; provided, however, that no such Indemnitee may
compromise or settle any such Third Party Claim without prior written notice to
such Indemnifying Party and except by payment of monetary damages or other
money payments. No Indemnifying Party shall consent to entry of any judgment or
enter into any compromise or settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all Liability in respect to such Third Party
claim.
(c) If an Indemnifying Party chooses to defend any claim, the
Indemnitee shall make
14
available to such Indemnifying Party any personnel or any books, records or
other documents within its control that are necessary or appropriate for such
defense (the cost of copying thereof to be paid by the Indemnifying Party).
(d) Notwithstanding the foregoing provisions of this Section 5.4,
there may be Third Party Claims which reasonably could result in both SFX and
Entertainment being liable to the other under indemnification provisions of
this Agreement. In any such events, the parties shall endeavor, acting
reasonably and in good faith, to agree upon a manner of conducting the defense
of or settlement of the Third Party Claim with a view to minimizing the legal
expenses and associated costs that might otherwise be incurred by the parties,
including to the use of the same legal counsel for the defense of such claim.
(e) Except to the extent expressly provided otherwise in this Section
5.4, the indemnification provided for by this Section 5.4 shall not inure to
the benefit of any third party or parties and shall not relieve any insurer who
would otherwise be obligated to pay any claim of the responsibility with
respect thereto or, solely by virtue of the indemnification provisions hereof,
provided any subrogation rights with respect thereto.
(f) Any claim on account of an Indemnifiable Loss which does not
result from a Third Party Claim shall be asserted by written notice given by
the related Indemnitee to the related Indemnifying Party. Such Indemnifying
Party shall have a period of 60 days within which to respond thereto. If such
Indemnifying Party does not respond within such 60-day period, such
Indemnifying Party shall be deemed to have accepted responsibility to make
payment and shall have no further right to contest the validity of such claim.
If such Indemnifying Party does respond within such 60-day period and rejects
such claim in whole or in part, such Indemnitee shall be free to pursue the
remedies provided in Article 11 hereof.
ARTICLE 6
RELATED AGREEMENTS
SECTION 6.1 Tax Sharing Agreement. Except as contemplated in this
Section 6.1 hereof, any tax sharing agreement between any of the
Delsener/▇▇▇▇▇▇ Group and any of SFX and its Subsidiaries shall be terminated
as of the Distribution Date and will have no further effect for any taxable
year (whether the current year, a future year, or a past year). On or prior to
the Distribution Date, SFX and the Delsener/▇▇▇▇▇▇ Group shall enter into a Tax
Sharing Agreement in the form attached hereto as Exhibit A (the "Tax Sharing
Agreement").
SECTION 6.2 Employee Benefits Agreement. On or prior to the
Distribution Date, SFX and the Delsener/▇▇▇▇▇▇ Group shall enter into an
Employee Benefits and Compensation Allocation Agreement in the form attached
hereto as Exhibit B (the "Employee Benefits Agreement").
15
ARTICLE 7
CERTAIN ADDITIONAL MATTERS
SECTION 7.1 Conveyancing and Assumption Instruments. In connection
with the transfer, conveyance, assignment and delivery of the Transferred
Assets and the assumption of Liabilities contemplated by this Agreement, SFX
and Entertainment agree to execute or cause to be executed by the appropriate
parties and to deliver to each other, as appropriate, the Conveyancing and
Assumption Instruments.
SECTION 7.2 No Representations or Warranties. Entertainment
understands and agrees that SFX is not, in this Agreement or in any other
agreement or document contemplated by this Agreement, nor shall SFX be deemed
or implied to be, representing or warranting in any way as to the value or
freedom from encumbrance of, or any other matter concerning, any Transferred
Assets or the Transferred Businesses or as to the legal sufficiency to convey
title to any Transferred Assets of the execution, delivery and filing of the
Conveyancing and Assumption Instruments, IT BEING AGREED AND UNDERSTOOD THAT
ALL SUCH ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS" and that Entertainment
shall bear the economic and legal risk that any conveyances of such assets
shall prove to be insufficient or that Entertainment's title to any such assets
shall be other than good and marketable and free from encumbrances.
SECTION 7.3 Further Assurances; Subsequent Transfers.
(a) Each of SFX and Entertainment will execute and deliver such
further instruments of conveyance, transfer and assignment and will take such
other actions as each of them may reasonably request of the other in order to
effectuate the purposes of this Agreement and to carry out the terms hereof.
Without limiting the generality of the foregoing, at any time and from time to
time after the Distribution Date, at the request of Entertainment, SFX will
execute and deliver to Entertainment such other instruments of transfer,
conveyance, assignment and confirmation and take such action as Entertainment
may reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign to Entertainment and to confirm Entertainment's
title to all of the Transferred Assets, to put Entertainment in actual
possession and operating control thereof and to permit Entertainment to
exercise all rights with respect thereto (including, without limitation, rights
under contracts and other arrangements as to which the consent of any third
party to the transfer thereof shall not have previously been obtained). SFX
will take such actions as Entertainment may reasonably request in order to
prepare and implement appropriate plans, agreements and arrangements for the
Employees, and Entertainment will execute and deliver to SFX all instruments,
undertakings or other documents and take such other action as SFX may
reasonably request in order to have Entertainment properly assume and discharge
the Assumed Liabilities and relieve SFX of any Liability or obligations with
respect thereto and evidence the same to third parties. Notwithstanding the
foregoing, SFX and Entertainment shall not be obligated, in connection with the
foregoing, to expend monies other than reasonable out-of-pocket expenses and
attorneys' fees (which expenses and fees shall be reimbursed by the requesting
party).
(b) SFX and Entertainment will use their commercially reasonable
efforts to obtain any consent required to assign all agreements, leases,
permits, licenses and other rights of any nature whatsoever relating to the
Transferred Assets to Entertainment; provided, however, that SFX shall not be
obligated to pay any consideration therefor (except as provided in Section 2.2
and except for filing fees and other administrative charges) to the third party
from whom such consents, approvals and amendments are
16
requested. In the event, and to the extent, that SFX is unable to obtain any
such required consent, SFX shall continue to be bound thereby and, unless not
permitted by law or the terms thereof, Entertainment shall pay, perform and
discharge fully all the obligations of SFX thereunder from and after the
Distribution Date and indemnify SFX for all Indemnifiable Losses arising out of
such performance by Entertainment in accordance with Article 5. SFX shall,
without further consideration therefor, pay, assign and remit to Entertainment
promptly all monies, rights and other considerations received in respect of
such performance. SFX shall exercise or exploit its rights and options under
all such agreements, leases, licenses and other rights and commitments referred
to in this Section 7.3(b) only as reasonably directed by Entertainment and at
Entertainment's expense. If and when any such consent shall be obtained or such
agreement, lease, license or other right shall otherwise become assignable or
able to be novated, SFX shall promptly assign and novate all its rights and
obligations thereunder to Entertainment without payment of further
consideration, and Entertainment shall, without the payment of any further
consideration therefore, assume such rights and obligations.
SECTION 7.4 Sales and Transfer Taxes. Entertainment and SFX agree to
cooperate to determine the amount of sales, transfer or other taxes or fees
(including, without limitation, all real estate, patent, copyright and
trademark transfer taxes and recording fees) payable in connection with the
transactions contemplated by this Agreement (the "Transaction Taxes"). SFX
agrees to file promptly and timely the returns for such Transaction Taxes with
the appropriate taxing authorities and remit payment of the Transaction Taxes,
and Entertainment will join in the execution of any such tax returns or other
documentation.
SECTION 7.5 Change of Name. Within 10 business days after the
consummation of the Merger, SFX and each of its Subsidiaries, if necessary,
shall file certificates of amendment with the appropriate Secretary of State,
amending such company's certificate of incorporation to change the name of such
Company to any name which does not include the letters "SFX." At the closing of
the Merger, SFX will assign to Entertainment or its designee all right, title
and interest, including all the good will related thereto, in and to the name
"SFX," together with all causes of action and the right to recover for past
infringements of the name "SFX." As soon as commercially practicable, but in no
event later than six months from the consummation of the Merger, SFX shall
cease all use of the name "SFX" or other trademarks, trade names or their
identifiers owned by, licensed to, or transferred pursuant to this Agreement
to, Entertainment in all modes.
ARTICLE 8
ACCESS TO INFORMATION AND SERVICES
SECTION 8.1 Provision of Corporate Records. As soon as practicable
after the Distribution Date, SFX shall deliver to Entertainment all Books and
Records in its possession. Such Books and Records shall be the property of
Entertainment from and after the Distribution Date, but shall be retained and
made available to SFX for review and duplication until the earlier of notice
from SFX that such records are no longer needed by SFX or the 20th anniversary
of the Distribution Date. Notwithstanding the foregoing, in lieu of retaining
any specific Books and Records, Entertainment may offer in writing to deliver
such Books and Records to SFX and, if such offer is not accepted within 90
days, the offered Books and Records may be destroyed or otherwise disposed of
at any time. If SFX shall request in writing prior to the scheduled date
17
for such destruction or disposal that any of the Books and Records proposed to
be destroyed or disposed of be delivered to SFX, Entertainment shall promptly
arrange for delivery of such of the Books and Records as was requested (at the
cost and expense of SFX).
SECTION 8.2 Access to Information. From and after the Distribution
Date, SFX and Entertainment shall afford to each other, and to each other's
authorized accountants, counsel and other designated representatives,
reasonable access and duplicating rights (with copying costs to be borne by the
requesting party) during normal business hours to all Books and Records and
other data and information (collectively, "Information") within each other's
possession relating to the Transferred Assets, the Transferred Businesses and
the Employees, insofar as such access is reasonably required by SFX or
Entertainment, as the case may be (and shall use reasonable efforts to cause
persons or firms possessing relevant Information to give similar access).
Information may be requested under this Article 8 for, without limitation,
audit, accounting, claims, litigation and tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations.
SECTION 8.3 Retention of Records. Except as otherwise required for a
longer period by law or agreed to in writing, SFX and Entertainment shall
retain, for a period of at least 20 years following the Distribution Date, all
material Information relating to the Transferred Businesses. Notwithstanding
the foregoing, in lieu of retaining any specific Information, SFX or
Entertainment may offer in writing to deliver such Information to the other
and, if such offer is not accepted within 90 days, the offered Information may
be destroyed or otherwise disposed of at any time. If a recipient of such offer
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for delivery of such of the Information as was
requested (at the cost and expense of the requesting party).
SECTION 8.4 Confidentiality. Each of SFX and Entertainment shall hold,
and shall cause its officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its legal counsel, by other
requirements of law (including, without limitation, any requirements imposed
under state and federal securities laws and stock exchange rules), all
non-public Information concerning the other party furnished it by such other
party or its representatives pursuant to this Agreement (except to the extent
that such Information can be shown to have been (i) available to such party on
a non-confidential basis prior to this disclosure by the other party, (ii) in
the public domain through no fault of such party or (iii) later lawfully
acquired from other sources by the party to which it was furnished), and each
party shall not release or disclose such Information to any other person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who shall be bound by the provisions of this Section
8.4. Each party shall be deemed to have satisfied its obligation to hold
confidential Information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar Information. SFX and Entertainment agree with each other that each will
maintain, preserve and assert, unless waived in writing by the other, all
attorney-client and work product privileges applicable to documents and other
Information that relate, directly or indirectly, to the Transferred Businesses
for any period prior to the Distribution Date.
SECTION 8.5 Privileged Matters. Anything herein or in the Merger
Agreement notwithstanding, the transactions contemplated hereby and by the
Merger Agreement shall not be deemed to transfer to or vest in SFX any right to
waive, nor shall they be deemed to waive, any attorney-client privilege between
SFX and its legal counsel with respect to legal advice concerning the business
or operations of Entertainment, including, without limitation, the transactions
contemplated by the Merger Agreement, this Agreement and
18
the Related Agreements, in any case, concerning privileged communications (or
work product related thereto) at any time prior to the Closing Date. SFX shall
assign to Entertainment SFX's rights (if any) to any attorney-client privilege
with respect to legal advice concerning the business or operations of
Entertainment including, without limitation, the transactions contemplated by
the Merger Agreement, this Agreement and the Related Agreements, concerning
privileged communications (or work product related thereto) at any time prior
to the Closing Date. Except as otherwise determined by a court of competent
jurisdiction, SFX and its successors and assigns shall not be entitled to waive
or have access to, nor shall they attempt to waive or seek access to, any
privileged communications (or work product related thereto) between
Entertainment and its legal counsel with respect to legal advice concerning the
business or operations of Entertainment.
ARTICLE 9
INSURANCE
SECTION 9.1 General. SFX shall keep in effect all policies under its
Insurance Program in effect as of the date hereof insuring the Transferred
Assets and operations of the Transferred Businesses until the earlier of (i)
the Effective Time and (ii) 12:00 midnight on the Distribution Date, unless
Entertainment shall have earlier obtained appropriate coverage and notified SFX
in writing to that effect. Insofar as any claims made or accrued under policies
under the Insurance Program prior to the Distribution Date relate to
Entertainment or the Transferred Businesses, SFX shall use its reasonable
efforts to assure that Entertainment can continue to make and/or pursue such
claims under the policies, or that SFX can continue to make and/or pursue such
claims on behalf of Entertainment, notwithstanding assignment or transfer of
the policies (provided that Entertainment shall reimburse SFX for any
reasonable out-of-pocket expenses incurred by SFX in connection therewith).
From and after the Distribution Date, Entertainment shall be responsible for
obtaining and maintaining insurance coverage for its own account. SFX shall, if
so requested by Entertainment, use reasonable efforts to assist Entertainment
in obtaining such initial insurance coverage from and after the Distribution
Date in such amounts as are agreed upon by SFX and Entertainment. Following the
Distribution Date, each of SFX and Entertainment shall cooperate with and
assist the other party in the prevention of conflicts or gaps in insurance
coverage and/or collection proceeds.
SECTION 9.2 Certain Insured Claims. SFX shall use its reasonable
efforts to assert and pursue, for the benefit of Entertainment, claims against
the Insurance Program for any losses resulting, directly or indirectly, from
claims made or deemed made under the applicable Insurance Program which relate
to the Transferred Businesses and which arise from or relate to events or
occurrences prior to the Distribution Date. Entertainment shall pay all costs
incurred by SFX after the Distribution Date in defending or pursuing any such
claims under an insurance policy relating to the Transferred Businesses,
including the salaries of employees based on the portion of time spent on such
claims. Entertainment shall make available to SFX such of its employees as SFX
may reasonably request as witnesses or deponents in connection with SFX's
defense or pursuit of any such claims, at Entertainment's sole cost and
expense.
19
ARTICLE 10
CONDITIONS
SECTION 10.1 Conditions. The obligations of SFX and Entertainment to
consummate the Distribution shall be subject to the fulfillment or waiver of
each of the following conditions:
(a) the Board of Directors of SFX shall be satisfied that SFX's
surplus would be sufficient to permit under Delaware law the Distribution and
shall have formally approved the Distribution;
(b) the Registration Statement shall have been declared effective by
the SEC, and no stop order shall have been issued or be pending with respect
thereto;
(c) the Entertainment Class A Common Stock shall have been accepted
for listing or trading, subject to official notice of issuance, on a national
exchange or the Nasdaq Stock Market;
(d) all necessary third party consents to the Distribution shall have
been obtained;
(e) the necessary stockholder approvals shall have been obtained to
consummate the Distribution as presently contemplated;
(f) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Distribution shall be in effect;
(g) SFX and Entertainment shall have entered into the Related
Agreements; and
(h) each of the covenants and provisions in this Agreement required to
be performed or complied with prior to the Distribution shall have been
performed or complied with.
Any determination by the Board of Directors of SFX on behalf of either
party hereto prior to the Distribution Date concerning the satisfaction or
waiver of any or all of the conditions set forth in this Section shall be
conclusive.
ARTICLE 11
MEDIATION
SECTION 11.1 Mediation and Binding Arbitration. If a dispute arises
between SFX and Entertainment as to the interpretation or the implementation of
this Agreement, the Related Agreements or any other agreement entered into
pursuant hereto (other than a dispute with respect to Working Capital, which
shall be resolved in accordance with the provisions of Section 2.2. hereof),
including, without limitation, any matter involving an Indemnifiable Loss, SFX
and Entertainment agree to use the following procedures, in lieu of either
party pursuing other available remedies and as the sole remedy, to resolve the
dispute.
20
SECTION 11.2 Initiation. A party seeking to initiate the procedures
shall give written notice to the other party, describing briefly the nature of
the dispute. A meeting shall be held between the parties within 10 days of the
receipt of such notice, attended by individuals with decision-making authority
regarding the dispute, to attempt in good faith to negotiate a resolution of
the dispute.
SECTION 11.3 Submission to Mediation. If, within 30 days after such
meeting, the parties have not succeeded in negotiating a resolution of the
dispute, they agree to submit the dispute to mediation in accordance with the
Commercial Mediation Rules of the American Arbitration Association and to bear
equally the costs of the mediation.
SECTION 11.4 Selection of Mediator. The parties will jointly appoint a
mutually acceptable mediator, seeking assistance in such regard from the
American Arbitration Association or another mutually agreed-upon organization
if they have been unable to agree upon such appointment within 20 days from the
conclusion of the negotiation period.
SECTION 11.5 Mediation; Submission to Arbitration. The parties agree
to participate in good faith in the mediation and negotiations related thereto
for a period of 30 days following the initial mediation session. If the parties
are not successful in resolving the dispute through the mediation by the end of
such 30-day period, then the parties agree to submit the matter to binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, by a sole arbitrator selected in accordance with the
provisions of Section 11.6 hereof. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. ss. 1-16, and judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof.
SECTION 11.6 Selection of Arbitrator. The parties shall have 10 days
from the end of the mediation period to agree upon a mutually acceptable
neutral person not affiliated with either of the parties to act as arbitrator.
If no arbitrator has been selected within such time, an arbitrator shall be
selected for the parties by the American Arbitration Association.
SECTION 11.7 Cost of Arbitration. The costs of arbitration shall be
apportioned between SFX and Entertainment as determined by the arbitrator in
such manner as the arbitrator deems reasonable, taking into account the
circumstances of the case, the conduct of the parties during the proceeding and
the result of the arbitration.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 Complete Agreement. Subject to Section 3.3 hereof, this
Agreement, including the Annexes and Exhibits and the agreements and other
documents referred to herein, shall constitute the entire agreement between SFX
and Entertainment with respect to the subject matter hereof and shall supersede
all previous negotiations, commitments and writings with respect to such
subject matter.
SECTION 12.2 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
(regardless of the laws that might otherwise govern under applicable principles
of conflicts law) as to all matters, including, without limitation, matters of
validity, construction, effect, performance and remedies.
21
SECTION 12.3 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party
to whom notice is given, on the day of transmission if sent via facsimile
transmission to the facsimile number given below, provided telephonic
confirmation of receipt is obtained promptly after completion of transmission,
on the business day after delivery to an overnight courier service or the
Express mail service maintained by the United States Postal Service, provided
receipt of delivery has been confirmed, or on the fifth day after mailing
provided receipt of delivery is confirmed, if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, properly addressed and return-receipt requested, to the party as
follows:
IF TO SFX:
PRIOR TO THE EFFECTIVE TIME: SFX Broadcasting, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
WITH A COPY TO: Hicks, Muse, ▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
AFTER THE EFFECTIVE TIME: Hicks, Muse, ▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
IF TO ENTERTAINMENT: SFX Entertainment, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
WITH A COPY TO: ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Two ▇▇▇▇▇ Center
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Any party may change its address by giving the other party written notice of
its new address in the manner set forth above.
22
SECTION 12.4 Amendment and Modification. Except as provided in Section
12.5, this Agreement may be amended, modified, supplemented, waived or
otherwise modified or terminated only by written agreement of SFX and
Entertainment and with the consent of Parent, which consent shall not be
unreasonably withheld.
SECTION 12.5 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of SFX without the approval of Entertainment or Parent. In the
event of such termination, no party shall have any Liability of any kind to any
other party.
SECTION 12.6 Successor and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party without the prior written consent of the other party.
SECTION 12.7 No Third Party Beneficiaries. Except for the
indemnification rights under this Agreement of any Indemnitee in their capacity
as such, and except for the mutual releases provided for in this Agreement,
this Agreement, the Exhibits hereto and the Related Agreements are solely for
the benefit of the parties hereto and are not intended to confer upon any other
person except the parties hereto any rights or remedies hereunder.
SECTION 12.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 12.9 Interpretation. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement. As used in this Agreement, the
term "person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
SECTION 12.10 Annexes, Etc. The Annexes, Schedules and Exhibits shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
SECTION 12.11 Legal Enforceability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Upon any such
determination that a provision of this Agreement is prohibited or unenforceable
in whole or in part, the court or arbitral panel making such determination
shall have the power to modify such invalidated provision so as to effect the
original intent of the parties as closely as possible.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the day and year first above written.
SFX BROADCASTING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
SFX ENTERTAINMENT, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
SBI HOLDING CORPORATION, with
respect to Section 12.4 only.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Title: Vice President
24
ANNEX I
ASSUMED LIABILITIES
(a) Lease Agreement dated May 1, 1986, as amended, between ARDE Realty
Corp., N.V. and ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇ Communications Management Corporation, assumed
by SFX, and that certain Lease Agreement dated May 27, 1997, between HIRO Real
Estate Co. and SFX (the "Leases");
(b) Debt and Liabilities incurred by SFX Concerts, Inc. or
Entertainment or their respective Subsidiaries after the date of execution of
the Merger Agreement in connection with acquisitions and capital expenditures
approved by their respective Boards of Directors and such other debt and
Liabilities as Entertainment deems appropriate;
(c) Liabilities under (i) the Purchase Agreement dated as of March 6,
1998 between SFX Delaware, Inc. and Bombardier Business Jet Solutions Inc. and
(ii) the Purchase Agreement dated as of February 10, 1997 between SFX Delaware,
Inc. and Bombardier Business Jet Solutions Inc. (collectively, the "Airplane
Agreements");
(d) Liabilities under the the Amended and Restated Financial
Consulting Agreement, dated as of February 1, 1996 by and between Sillerman
Communications Management Corporation and Triathlon Broadcasting Company;
(e) Liabilities under the following, subject to Section 4.3 of this
Agreement:
(i) Employment Agreement with ▇▇▇ ▇▇▇▇▇▇▇▇ dated January 2, 1997;
(ii) Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇▇ dated January 2,
1997;
(iii) Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇ dated June 1997;
(iv) Employment Agreement with ▇▇▇▇▇ Lybesma dated June 1997 and
all other concert division employees; and
(v) the employment agreements of all employees located on ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇;
(f) All Liabilities and obligations of SFX and its Subsidiaries
arising under the Asset Purchase and Sale Agreement, dated as of June 23, 1997,
by and among Sunshine Design, L.P., SFX Broadcasting, Inc., Tourdesign, Inc.,
P. ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
(g) All Liabilities and obligations arising under the Termination and
Assignment Agreement, dated as of April 15, 1996, by and between Sillerman
Communications Management Corporation and SFX Broadcasting, Inc.;
(h) All liabilities and obligations under SFX Entertainment's Senior
Subordinated Notes due 2008; and
(i) Obligations which accrue after the Distribution Date for all the
items above.
I-1
ANNEX II
TRANSFERRED ASSETS
Subject to Section 4.3 of this Agreement, the following are the
Transferred Assets:
(a) the rights under the Airplane Agreements;
(b) the rights under the Amended and Restated Financial
Consulting Agreement, dated as of February 1, 1996 by and between
Sillerman Communications Management Corporation and Triathlon
Broadcasting Company;
(c) the Leases, including the cash collateral on the leases, and
all assets located in the New York offices;
(d) the note receivable resulting from the sale of SFX's radio
stations in Myrtle Beach;
(e) Employment Agreement with ▇▇▇ ▇▇▇▇▇▇▇▇ dated January 2, 1997;
(f) Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇▇ dated January 2, 1997;
(g) Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇ dated June 1997;
(h) Employment Agreement with ▇▇▇▇▇ Lybesma dated June 1997 and
all other concert division employees;
(i) the employment agreements of all employees located on ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇;
(j) all accounts receivable relating to the Entertainment
Business of SFX;
(k) all assets used primarily in the Transferred Businesses
including, without limitation, permits, licences, intellectual
property and other rights;
(l) all of the capital stock of SFX Concerts, Inc. and its
subsidiaries; and
(m) rights which accrue after the Distribution Date for all of
the items listed above.
II-1