EXHIBIT 10.15
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HOB ENTERTAINMENT, INC.
PURCHASE AGREEMENT
FOR
CLASS D-2 PREFERRED STOCK,
12% SENIOR REDEEMABLE PREFERRED STOCK,
SENIOR CONVERTIBLE PREFERRED STOCK
AND
COMMON STOCK PURCHASE WARRANTS
Dated as of July 21, 1999
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TABLE OF CONTENTS
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Page
Purchase Agreement for Class D-2 Preferred Stock, 12% Senior Redeemable Preferred Stock, Senior Convertible Preferred
Stock and Common Stock Purchase Warrants...................................................................................... 1
Recitals...................................................................................................................... 1
1. Purchase and Sale of the Class D-2 Preferred Stock, the Senior Preferred Stock, the Bridge Preferred Stock and the
Warrants; Closings....................................................................................................... 2
1.1 Purchase and Sale of the Class D-2 Preferred Stock, the Senior Preferred Stock, the Bridge Preferred Stock
and the Warrants................................................................................................. 2
1.2 Closings......................................................................................................... 2
(a) The Initial Closing......................................................................................... 2
(b) Subsequent Closings......................................................................................... 2
2. Representations and Warranties of the Company.............................................................................. 3
2.1 Organization and Corporate Power................................................................................. 3
2.2 Authorization.................................................................................................... 3
2.3 Capitalization................................................................................................... 4
2.4 Subsidiaries..................................................................................................... 5
2.5 Financial Statements............................................................................................. 6
2.6 Absence of Undisclosed Liabilities............................................................................... 6
2.7 Absence of Certain Developments.................................................................................. 6
2.8 Title to Properties.............................................................................................. 6
2.9 Tax Matters...................................................................................................... 7
2.10 Contracts and Commitments........................................................................................ 7
2.10A Nonproduced Documents............................................................................................
2.11 No Defaults...................................................................................................... 8
2.12 Intellectual Property............................................................................................ 8
2.13 Effect of Transactions........................................................................................... 8
2.14 Consents and Approvals........................................................................................... 9
2.15 Litigation....................................................................................................... 9
2.16 Business.........................................................................................................10
2.17 Brokerage........................................................................................................10
2.18 Employees........................................................................................................10
2.19 Insurance........................................................................................................10
2.20 Environmental and Safety Laws....................................................................................11
2.21 Retirement Obligations, etc......................................................................................13
2.22 Transactions with Affiliates.....................................................................................13
2.23 Books and Records................................................................................................13
2.24 Material Facts...................................................................................................13
2.25 Securities Laws..................................................................................................14
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2.26 Small Business Matters; Use of Proceeds.......................................................................... 14
2.27 Year 2000........................................................................................................ 15
3. Representation and Warranties and other Agreements of the Investors..................................................... 15
3.1 Authorization................................................................................................... 15
3.2 Purchase Entirely for Own Account............................................................................... 16
3.3 Restricted Securities........................................................................................... 16
3.4 Formation....................................................................................................... 16
3.5 Suitability..................................................................................................... 16
3.6 Financial Condition............................................................................................. 16
3.7 Experience...................................................................................................... 16
3.8 Receipt of Information.......................................................................................... 16
3.9 Brokerage....................................................................................................... 17
3.10 Further Limitations on Disposition.............................................................................. 17
3.11 Legends......................................................................................................... 17
3.12 Certain Governmental Approvals.................................................................................. 18
4. Conditions to the Investors' Obligations at each of the Closings......................................................... 17
4.1 Performance of Covenants......................................................................................... 18
4.2 Compliance Certificate........................................................................................... 18
4.3 Amendment and Restatement of Certificate of Incorporation, By laws and Option Plan............................... 18
4.4 Other Agreements................................................................................................. 18
4.5 Opinion of Company Counsel....................................................................................... 18
4.6 Secretary's Certificate.......................................................................................... 18
4.7 Closing of Acquisition........................................................................................... 18
4.8 Governmental Filings and Consents................................................................................ 19
5. Conditions of the Company's Obligations at any Closing................................................................... 19
5.1 Representations and Warranties................................................................................... 19
5.2 Payment of Purchase Price........................................................................................ 19
5.3 Other Agreements................................................................................................. 19
5.4 Governmental Filings and Consents................................................................................ 19
6. Affirmative Covenants of the Company..................................................................................... 19
6.1 Financial and Other Information.................................................................................. 19
(a) Accounts and Reports........................................................................................ 19
(b) Annual and Quarterly Financial Statements................................................................... 20
(c) Monthly Financial Statements and Budgets.................................................................... 20
(d) Visits and Discussions...................................................................................... 20
(e) Adverse Change; Litigation.................................................................................. 21
(f) Other Information........................................................................................... 21
(g) Termination of Certain Obligations.......................................................................... 21
6.2 Confidentiality.................................................................................................. 21
6.3 Insurance......................................................................................................... 21
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6.4 Payment of Taxes; Corporate Existence.............................................................................. 22
6.5 Transactions with Affiliates....................................................................................... 22
6.6 Regulatory Compliance Cooperation.................................................................................. 23
6.7 Information Rights and Related Covenants........................................................................... 25
6.8 Remedies of Investors.............................................................................................. 26
6.9 Issue of Additional Warrants....................................................................................... 26
6.10 Issuance of Certain Warrants in the Event of a Failure to Issue Bridge
Preferred Shares................................................................................................... 27
6.11 Modifications of Certain Existing Instruments...................................................................... 27
6.12 Performance of UCI Stock Purchase Agreement........................................................................ 27
7. Restrictive Covenants in Favor of Holders of Senior Preferred Stock and Bridge Preferred Stock.......................... 27
7.1 Transactions with Affiliates...................................................................................... 27
7.2 Mergers and Consolidations........................................................................................ 28
7.3 Issuance of Senior or Pari Passu Equity Securities................................................................ 28
7.4 Restricted Payments............................................................................................... 28
7.5 Incurrence of Indebtedness........................................................................................ 28
7.6 Redemption of Bridged Preferred Stock............................................................................. 29
8. Miscellaneous ........................................................................................................... 29
8.1 Certain Defined Terms.............................................................................................. 29
8.2 Survival of Covenants; Assignability of Rights..................................................................... 29
8.3 Incorporation by Reference......................................................................................... 29
8.4 Parties in Interest................................................................................................ 30
8.5 Amendments and Waivers............................................................................................. 30
8.6 Governing Law...................................................................................................... 30
8.7 Notices............................................................................................................ 30
8.8 Subsidiaries....................................................................................................... 30
8.9 Effect of Headings................................................................................................. 31
8.10 Entire Agreement................................................................................................... 31
8.11 Severability....................................................................................................... 31
8.12 Counterparts....................................................................................................... 31
8.13 Fees and Expenses.................................................................................................. 31
8.13 Attorneys' Fees.................................................................................................... 31
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PURCHASE AGREEMENT
FOR
CLASS D-2 PREFERRED STOCK,
12% SENIOR REDEEMABLE PREFERRED STOCK,
SENIOR CONVERTIBLE PREFERRED STOCK
AND
COMMON STOCK PURCHASE WARRANTS
* * * * *
This PURCHASE AGREEMENT FOR CLASS D-2 PREFERRED STOCK, 12% SENIOR
REDEEMABLE PREFERRED STOCK, SENIOR CONVERTIBLE PREFERRED STOCK AND COMMON STOCK
PURCHASE WARRANTS (this "Agreement") is dated as of this 21st day of July, 1999,
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by and among HOB ENTERTAINMENT, INC., a Delaware corporation (the "Company"),
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and the Investors listed on Exhibits A-1 and A-2 attached hereto (each of whom
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is individually referred to herein as an "Investor" and collectively are
referred to herein as the "Investors").
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RECITALS
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WHEREAS, the Company has authorized the issuance and sale of up to (i)
73,379,630 shares of Class D-2 Preferred Stock, $.01 par value (the "Class D-2
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Preferred Stock"), (ii) 81,125 shares of the 12% Senior Redeemable Preferred
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Stock, $.01 par value (the "Senior Preferred Stock"), and (iii) 22,000 shares of
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the Senior Convertible Preferred Stock, $.01 par value (the "Bridge Preferred
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Stock"), each to be issued pursuant to this Agreement; and
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WHEREAS, the Company has authorized the issuance of warrants (the
"Warrants") to purchase up to 24,216,188 shares of common stock, $.0001 par
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value per share (the "Common Stock") to purchasers of the Senior Preferred Stock
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and the Bridge Preferred Stock pursuant to this Agreement; and
WHEREAS, the rights, privileges and preferences of the Class D-2 Preferred
Stock, the Senior Preferred Stock and the Bridge Preferred Stock are set forth
in the Company's Amended and Restated Certificate of Incorporation attached to
this Agreement as Exhibit B; and
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WHEREAS, the terms of the Warrants are set forth in the form of Warrant
Agreement (the "Warrant Agreement") attached to this Agreement as Exhibit C; and
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WHEREAS, the Company desires to issue and sell to the Investors and the
Investors desire to purchase from the Company shares of Class D-2 Preferred
Stock, the Senior Preferred Stock, the Bridge Preferred Stock and the Warrants;
and
WHEREAS, each of the parties hereto, in order to induce each of the other
parties hereto to enter into this Agreement and to consummate the transactions
contemplated hereby, agrees to the covenants and agreements set forth herein;
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NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Purchase and Sale of the Class D-2 Preferred Stock, the Senior Preferred
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Stock, the Bridge Preferred Stock and the Warrants; Closings.
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1.1. Purchase and Sale of the Class D-2 Preferred Stock, the Senior
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Preferred Stock, the Bridge Preferred Stock and the Warrants. Subject to the
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terms and conditions of this Agreement and on the basis of the representations,
warranties and covenants set forth herein, the Company agrees to sell to the
Investors and each such Investor, severally and not jointly, agrees to purchase
from the Company (i) the number of shares of Class D-2 Preferred Stock (the
"Class D-2 Shares") set forth opposite such Investor's name on either Exhibit A-
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1 or A-2 hereto under the heading "Total Class D-2 Shares Purchased" at a
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purchase price of $1.62 per share of Class D-2 Preferred Stock, (ii) the number
of shares of Senior Preferred Stock (the "Senior Preferred Shares") set forth
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opposite such on either Exhibit A-1 or A-2 hereto under the heading "Total
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Senior Preferred Shares Purchased" at a purchase price of $1,000.00 per share of
Senior Preferred Stock, (iii) the number of shares of Bridge Preferred Stock
(the "Bridge Preferred Shares" and together with the Class D-2 Preferred Shares
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and the Senior Preferred Shares, the "Shares") set forth opposite such
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Investor's name on Exhibit A hereto under the heading "Total Bridge Preferred
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Shares Purchased" at a purchase price of $1,000.00 per share of Bridge Preferred
Stock and (iv) in the case of Investors purchasing Senior Preferred Shares and
Bridge Preferred Shares, the number of detachable Warrants set forth opposite
such Investor's name on Exhibit A hereto under the heading "Total Warrants
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Purchased" for no additional consideration. Following Closing, the Company and
the Investors will mutually agree on an allocation of the aggregate purchase
price paid under this Agreement among the Senior Preferred Shares and the Bridge
Preferred Shares and the respective Warrants issued in connection therewith, and
all tax returns or other filings by the parties will reflect and be consistent
with such allocation.
1.2. Closings. Subject to the terms and conditions hereof, the purchase and
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sale of the Shares of Class D-2 Preferred Stock, Senior Preferred Stock, Bridge
Preferred Stock and Warrants contemplated by Section 1.1 hereof will take place
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at one or more closings (the "Closings") at such place as the parties shall
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mutually agree.
(a) The Initial Closing. The initial closing (the "Initial Closing")
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shall take place as soon as all requisite consents and conditions to closing
described herein have been satisfied, and contemporaneously with the closing of
the transactions contemplated by the UCI Stock Purchase Agreement (as defined in
Section 2.6 hereof). At the Initial Closing, the Company shall deliver to each
Investor identified on Exhibit A-1 one or more certificates and Warrant
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Agreements representing the number of Shares and Warrants, respectively, set
forth opposite such Investor's name on Exhibit A-1 hereto to be purchased at
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such Closing against the payment of the purchase price thereof pursuant to the
provisions of this Section 1.2(a), less the amount of any fees and expenses
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payable or reimbursable to such Investor pursuant to Section 8.13 hereof.
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(b) Subsequent Closings. The Company may conduct one or more
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subsequent Closings (each a "Subsequent Closing") for the issuance and sale of
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additional Shares of Class D-2 Preferred Stock and Senior Preferred Stock with
Warrants in units consisting of Shares of Class D-2 Preferred Stock (having an
aggregate liquidation preference equal to $6.25), Shares of Senior Preferred
Stock having an aggregate liquidation preference equal to $3.75, and Warrants
exercisable into 0.6135176 Shares of Common Stock at such time or times as the
parties shall mutually agree; provided, that the Company shall not issue more
than an aggregate of 10,030,864 additional Shares of Class D-2 Preferred Stock,
9,750 additional Shares of Senior Preferred Stock and additional Warrants
exercisable into 1,708,499 Shares of Common Stock. Each issuance at a Subsequent
Closing, except for issuances to existing stockholders of the Company pursuant
to their preemptive rights under the Amended Stockholders Agreement (as defined
herein), must be approved by the Company's Executive Committee. At such
Subsequent Closings, the Company shall deliver to each Investor one or more
certificates representing the total number of Shares and a Warrant Agreement for
the Warrants being purchased by such Investor against the payment of the
purchase price therefor pursuant to the provisions of this Section 1.2. Each
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Investor purchasing Shares and Warrants in a Subsequent Closing shall execute
and deliver signature pages to this Agreement and the other agreements
identified in Section 4.4, binding them to each such agreement. The Company
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shall amend Exhibit A-2 to reflect the names of such Investors and the number of
Shares and Warrants purchased by them.
2. Representations and Warranties of the Company.
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In order to induce the Investors to enter into this Agreement and to
purchase the Shares and Warrants hereunder, the Company hereby represents and
warrants to each Investor that, as of the date hereof and as of each Closing:
2.1. Organization and Corporate Power. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in each
jurisdiction where such qualification is required and in which failure to so
qualify would have a material adverse effect on the Company. The Company has
all required corporate power and authority to own its property, to carry on its
business as presently conducted or contemplated to be conducted and to carry out
the transactions contemplated hereby. The copies of the Amended and Restated
Certificate of Incorporation (the "Amended Certificate") and Amended and
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Restated Bylaws (the "Amended Bylaws") of the Company, as amended to date or as
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will be amended prior to the Initial Closing (in the case of the Amended
Certificate), which are in the form attached hereto as Exhibits B and D,
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respectively, are correct and complete; provided that the Amended Bylaws will be
further amended prior to the Initial Closing as necessary to give effect to the
transactions contemplated by this Agreement, such amendment to be in form and
substance reasonably satisfactory to the Investors.
2.2. Authorization. This Agreement and any other agreements, instruments or
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documents entered into by the Company pursuant to this Agreement (or
contemplated hereby, as identified on Schedule 2.2) have been duly executed and
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delivered by the Company and are the legal, valid and, assuming due execution
and delivery by the other parties hereto and thereto,
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binding obligations of the Company, enforceable against the Company in
accordance with their terms. The execution, delivery and performance of this
Agreement and any other agreement, instrument or document entered into by the
Company pursuant to this Agreement has been duly authorized by all necessary
corporate action of the Company.
2.3. Capitalization. The entire authorized capital stock of the Company
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consists of 195,480,322 shares of Common Stock, of which 3,393,500 shares are
issued and outstanding, 15,488,672 shares of Class A Preferred Stock, $.01 par
value per share (the "Class A Preferred Stock"), of which 13,683,596 shares are
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issued and outstanding, 21,700,404 shares of Class B Preferred Stock, $.01 par
value per share (the "Class B Preferred Stock"), of which 20,491,329 shares are
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issued and outstanding, 15,069,588 shares of Class C Preferred Stock, $.01 par
value per share (the "Class C Preferred Stock"), of which 10,833,356 shares are
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issued and outstanding, and 29,166,667 shares of Class D-1 Preferred Stock, of
which 16,892,148 shares are issued and outstanding, and as of the Initial
Closing will also include 73,379,630 shares of Class D-2 Preferred Stock,
49,768,519 shares of which will be issued and outstanding, 81,125 shares of
Senior Preferred Stock, 49,375 shares of which will be issued and outstanding
and 22,000 shares of Bridge Preferred Stock, 20,000 shares of which will be
issued and outstanding, after giving effect, in the case of the Class D-2
Preferred Stock, the Senior Preferred Stock and the Bridge Preferred Stock, to
the Shares to be issued and sold under this Agreement. For purposes hereof, the
Class A Preferred Stock, the Class B Preferred Stock and the Class C Preferred
Stock are collectively referred to as the "Junior Preferred Stock," and the
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Class A Preferred Stock, the Class B Preferred Stock, the Class C Preferred
Stock, the Class D-1 Preferred Stock, the Class D-2 Preferred Stock, the Senior
Preferred Stock and the Bridge Preferred Stock are collectively referred to as
the "Preferred Stock." Except for 1,592,105 shares of Class A Preferred Stock
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which have been previously repurchased from a stockholder and are held in
treasury but are not subject to reissuance, the Company holds no shares of
Common Stock and no shares of Preferred Stock in its treasury. In addition to
the Shares, Warrants, Conversion Shares and Warrants issuable in connection with
the transactions contemplated by the Agreement, the Company has reserved (i)
15,500,166 shares of Common Stock for issuance pursuant to options granted or
available for grant under the Company's 1993 Stock Option Plan; (ii) 2,946,296
shares of Common Stock for issuance pursuant to options granted outside of the
Company's 1993 Stock Option Plan; (iii) 1,470,013 shares of Common Stock for
issuance pursuant to warrants granted by the Company to consultants, development
partners and others; (iv) 212,963 shares of Class A Preferred Stock (and
underlying Common Stock) for issuance to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ upon exercise of
options granted to ▇▇. ▇▇▇▇▇▇; (v) 411,833 shares of Common Stock issuable upon
exercise of warrants ("Convertible Note Warrants") granted by the Company in
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connection with the issuance by the Company of convertible notes on November 5
and 19, 1996; (vi) 1,550,907 shares of Common Stock issuable upon exercise of
warrants ("Investor Warrants") granted by the Company in connection with the
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issuance of the Class C Preferred Stock; (vii) 1,636,047 shares of Common Stock
issuable upon exercise of warrants issued to Universal Studios, Inc. under the
UCI Stock Purchase Agreement; and (viii) 1,000,000 shares of Common Stock for
issuance pursuant to options granted or available for grant under the Company's
Spokesperson Plan. All of the issued and outstanding shares of capital stock of
the Company are duly authorized, validly issued and outstanding, fully paid and
nonassessable. The
4
Company has reserved all of the authorized shares of Class D-2 Preferred Stock,
Senior Preferred Stock and Bridge Preferred Stock for issuance hereunder.
The Company has authorized and reserved for issuance, (i) upon conversion
of the issued and outstanding Class A Preferred Stock, Class B Preferred Stock,
Class C Preferred Stock and Class D-1 Preferred Stock, upon conversion of the
Class D-2 Preferred Stock issuable hereunder, and upon conversion of Class D-2
Preferred Stock issuable upon conversion of the Bridge Preferred Stock issuable
hereunder, a sufficient number of shares of its Common Stock (the "Common
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Conversion Shares"), (ii) upon conversion of the Bridge Preferred Stock issuable
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hereunder, a sufficient number of shares of Senior Preferred Stock and Class D-2
Preferred Stock ("Preferred Conversion Shares" and together with the Common
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Conversion Shares, the "Conversion Shares"), (iii) upon exercise of the Warrants
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issuable hereunder, a sufficient number of shares of its Common Stock (the
"Warrant Shares") and (iv) upon the payment-in-kind of any dividends on the
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Bridge Preferred Stock, a sufficient number of shares of Bridge Preferred Stock.
The Conversion Shares, the Warrant Shares and the Shares referred to in clause
(iv) above will, upon such issuance in accordance with the terms of the Amended
Certificate and the Warrants, as the case may be, be duly authorized, validly
issued and outstanding, fully paid and nonassessable. Except as set forth in
Schedule 2.3, there are no outstanding warrants, options or other rights to
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purchase equity securities granted by the Company. Except as will be provided
in Section 8 of the Second Amended and Restated Stockholders Agreement among the
Company, the Investors and certain other stockholders of the Company (the
"Amended Stockholders Agreement"), a copy of which is attached hereto as Exhibit
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E, as of the Initial Closing and at all times thereafter, there will be no
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preemptive rights with respect to the issuance or sale by the Company of the
Shares, the Warrants, the Conversion Shares or the Warrant Shares. Except as
will be provided in the Amended Certificate, the Amended Bylaws, the Amended
Stockholders Agreement and the Second Amended and Restated Registration Rights
Agreement among the Company, the Investors and certain holders of the Company's
securities (the "Amended Registration Rights Agreement"), a copy of which is
-------------------------------------
attached hereto as Exhibit F, or as imposed by applicable securities laws, and
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except for any restrictions upon transfer or voting imposed by action of any
holder of Preferred Stock or Common Stock with respect to such holder, as of the
Initial Closing and at all times thereafter, there will be no restrictions on
the transfer or voting of any shares of the Company's Preferred Stock or Common
Stock. Except as set forth on Schedule 2.3 or as set forth in the Amended
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Registration Rights Agreement, as of the Initial Closing and at all times
thereafter, there will be no existing rights with respect to registration under
the Securities Act of 1933, as amended (the "1933 Act"), of any of the Company's
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Common Stock or Preferred Stock. On or prior to the Initial Closing, the
Company also will adopt certain amendments to its Amended and Restated Stock
Option Plan. The Company has not violated the 1933 Act or any state Blue Sky or
securities laws in connection with the issuance of any of its securities.
The consummation of the transactions contemplated by this Agreement,
including without limitation the issuance of the Shares, Warrants, Conversion
Shares and Warrant Shares, will not trigger "anti-dilution" rights or other
adjustments which would result in an increase of more than an aggregate of 1.0%
of the Company's total issued and outstanding capital stock,
5
assuming that all securities which are either directly or indirectly exercisable
or convertible into capital stock of the Company have been either fully
exercised or converted.
2.4 Subsidiaries. The subsidiaries of the Company are listed on Schedule
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2.4 (each a "Subsidiary" and collectively the "Subsidiaries"), and, except as
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set forth on Schedule 2.4, each Subsidiary is, directly or indirectly, wholly
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owned by the Company, and the Company has no investments in any other
corporation or business organization. All capital stock of each Subsidiary has
been duly authorized and is validly issued, fully paid, nonassessable and,
except as set forth on Schedule 2.4, free and clear of all liens. All such stock
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was issued in compliance with all applicable state and federal laws concerning
the issuance of securities. Except as set forth on Schedule 2.4, each of the
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Subsidiaries is duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization as set forth on Schedule 2.4
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and is duly qualified to do business as a foreign corporation in each
jurisdiction where such qualification is required and in which failure to so
qualify would have a material adverse effect on such Subsidiary. Each Subsidiary
has all required corporate power and authority to own its property and to carry
on its business as presently conducted or contemplated to be conducted.
2.5. Financial Statements. The Company has delivered to the initial
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Investors, (i) the Company's audited consolidated balance sheet as of December
27, 1998 and its audited consolidated statements of income and cash flows for
the 52-week period then ended (the "1998 Financials"), (ii) the Company's
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audited consolidated balance sheet as of December 28, 1997 and its audited
consolidated statements of income and cash flows for the 52-week period then
ended (the "1997 Financials") and (iii) the unaudited consolidated balance sheet
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as of June 27, 1999 and its unaudited consolidated statements of income and cash
flows for the 26-week period then ended (the "Interim Financial Statements,"
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along with the 1998 and 1997 Financials, the "Financial Statements"). The
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Financial Statements are complete and correct, in all material respects, have
been prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present, in all material respects, the
financial position of the Company as of each such date and the results of
operations for each such period then ended.
2.6. Absence of Undisclosed Liabilities. (i) Except as and to the extent
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reflected or reserved against in the 1998 Financials, (ii) except for
liabilities arising in the ordinary course of its business since December 27,
1998, (iii) except for obligations under that certain Stock Purchase Agreement
dated as of July 20, 1999 (the "UCI Stock Purchase Agreement") by and among the
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Company, Universal Studios, Inc. and Universal Studios Canada Ltd. or in respect
of the debt and equity financing transactions related thereto, and (iv) except
as disclosed on Schedule 2.6, neither the Company nor any Subsidiary has
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incurred any material accrued or contingent liability arising out of any
transaction or state of facts existing prior to the date hereof, which liability
exists on the date hereof.
2.7. Absence of Certain Developments. Since December 27, 1998, except as
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disclosed in Schedule 2.7, there has been no (i) material adverse change in the
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condition, financial or otherwise, of the Company or any Subsidiary or in the
assets, liabilities, properties, prospects or business of the Company or any
Subsidiary, (ii) declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of the Company or of any
6
Subsidiary, (iii) loss, destruction or damage to any property of the Company or
of any Subsidiary, whether or not insured, which loss would have a material
adverse effect on the Company or any Subsidiary, (iv) labor trouble involving
the Company or any Subsidiary or any material change in any of their respective
personnel or the terms and conditions of employment, (v) waiver of any valuable
right, (vi) loan or extension of credit to any officer or employee of the
Company or any Subsidiary, (vii) material change in any governmental permit of
the Company or (viii) acquisition or disposition of any material assets (or any
contract or arrangement therefor), or any other material transaction by the
Company or any Subsidiary otherwise than for fair value in the ordinary course
of business.
2.8. Title to Properties. Except as disclosed in Schedule 2.8, other than
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(i) any lien in respect of current taxes not yet due and payable, (ii) possible
minor liens and encumbrances which do not in any case materially detract from
the value of the property subject thereto or materially impair the operations of
the Company, or any Subsidiary, and which have arisen in the ordinary course of
business and shall be removed within a reasonable period, and (iii) any
materials or mechanics' liens which arise by the operation of law and which do
not materially impair the operations of the Company or any Subsidiary, each of
the Company and the Subsidiaries has good and marketable title to all properties
and assets owned by it necessary to its business as presently conducted and as
proposed to be conducted, free and clear of all mortgages, security interests,
liens, restrictions or encumbrances. Except as disclosed in Schedule 2.8, all
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machinery and equipment included in such properties which is necessary to the
business of the Company or of any Subsidiary is in good condition and repair
except for reasonable wear and tear, and all leases of real or personal property
to which the Company or any Subsidiary is a party are fully effective and afford
the Company or such Subsidiary, as the case may be, peaceful and undisturbed
possession of the subject matter of the lease. Except as disclosed in Schedule
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2.8, to the best of the Company's knowledge, neither the Company nor any
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Subsidiary is in material violation of any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the operation
of owned or leased properties likely to impede the normal operation of the
business of the Company or of any Subsidiary, and neither the Company nor any
Subsidiary has received any written notice of violation with which such
recipient has not complied.
2.9. Tax Matters. Except as disclosed in Schedule 2.9, the Company and the
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Subsidiaries have duly filed all federal, state, county and local tax returns
required to have been filed by them and have paid, or will pay, all taxes shown
on such returns to be due pursuant to any assessment, notice of deficiency or
other notice received by them. Except as disclosed in Schedule 2.9, there are in
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effect no waivers of applicable statutes of limitations with respect to taxes
for any year. The provisions for taxes in the Financial Statements are
sufficient for the payment of all accrued and unpaid federal, state, county and
local taxes of the Company and the Subsidiaries, whether or not assessed or
disputed as of the date of each such balance sheet. There have been no
examinations or audits of any tax returns or reports by any applicable federal,
state or local governmental agency.
2.10. Contracts and Commitments. Except for the contracts described in
-------------------------
Schedule 2.10 (the "Material Agreements"), neither the Company nor any
------------- -------------------
Subsidiary has any contract,
7
obligation or commitment which involves by its terms a commitment in excess of
$100,000, including any written employment contracts (including contracts with
any agent or independent contractor), stock redemption or purchase agreements,
financing agreements, distribution agreements, partnership or joint venture
agreements, confidentiality or non-competition agreements in which the Company
or any Subsidiary is an obligor, agreements with holders of the Company's
securities, royalty agreements, licenses under which either the Company or any
Subsidiary is licensee or licensor, leases of real property, pension, profit-
sharing, retirement or stock options plans. With respect to each Material
Agreement, except as disclosed on Schedules 2.7 and 2.11: (i) the agreement is
------------- ----
legal, valid, binding and in full force and effect; (ii) the agreement will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; and (iii) to the best of the Company's knowledge, no party has
repudiated any provision of the agreement.
2.10A. Nonproduced Documents. The Company acknowledges that certain
---------------------
documents identified in Schedule 2.10 hereto and the other Schedules attached
-------------
hereto, in each case as marked with an asterisk, have not been received by the
Investors or their respective legal counsel (the "Nonproduced Documents"). The
Company represents and warrants to the Investors that the Nonproduced Documents
do not contain provisions which, taken as a whole, could reasonably be expected
to have a material adverse impact on the decision by the Investors to purchase
the Shares and Warrants to be purchased by the Investors pursuant to this
Agreement.
2.11. No Defaults. Except as described on Schedule 2.11, neither the
----------- -------------
Company nor any Subsidiary is in default (which default would have a material
adverse effect on the Company's or any such Subsidiary's properties or assets or
the business of the Company or any such Subsidiary as presently conducted or
proposed to be conducted) (a) under its charter documents or its Amended Bylaws
or any note, indenture or Material Agreement to which it is a party or by which
it or any of its property is bound or affected or (b) with respect to any order,
writ, injunction or decree of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. To the best of the Company's knowledge,
there exists no condition, event or act which after notice, lapse of time, or
both, could constitute a default by the Company or any Subsidiary under any of
the foregoing. To the best of the Company's knowledge, no third party is in
default under any Material Agreement to which the Company or any Subsidiary is a
party or by which any of them or any of their property is affected, which
default would have a material adverse effect on the Company's or any such
Subsidiary's properties or assets or the business of the Company or any such
Subsidiary as presently conducted or proposed to be conducted.
2.12. Intellectual Property. Schedule 2.12A contains a list of all patents
--------------------- --------------
and of all registered and material non-registered trademarks and service marks
(in each case, whether issued or pending), and all licenses with respect to any
of the foregoing, owned or possessed by the Company or any Subsidiary, the loss
of which would have a material adverse effect on the Company. All of such
patents, registered and material non-registered trademarks and service marks,
and licenses are valid and enforceable and, except as disclosed on Schedule
--------
2.12A, are free and clear of all liens and encumbrances of any nature. Except as
-----
disclosed on Schedule 2.12B, to the best of the Company's knowledge, neither the
--------------
Company nor any
8
Subsidiary infringes any patent, copyright, or trademark rights of others.
Except as disclosed on Schedule 2.12C, the Company and each Subsidiary has the
--------------
right to use, free and clear of claims or rights of others, all material trade
secrets, customer lists, processes, computer software, patents, copyrights and
trademarks required for, incident to or included in its products and its
proposed products, and, to its knowledge, is not using and has not used any
confidential information, trade secrets or computer software required for its
products of any former employer of any of its past or present employees except
to the extent properly licensed to the Company or such Subsidiary.
2.13. Effect of Transactions. Except as disclosed on Schedule 2.13, the
---------------------- -------------
execution, delivery and performance of this Agreement and any other agreements,
instruments, or documents entered into by the Company pursuant to this Agreement
(as set forth on Schedule 2.2), the issuance, sale and delivery of the Shares,
------------
the Warrants, the Conversion Shares and the Warrant Shares, and compliance with
the provisions hereof and thereof by the Company, do not and will not, with or
without the passage of time or the giving of notice or both, (a) violate any
provision of law, statute, rule or regulation or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body, (b) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any Subsidiary under its respective
charter or by-laws or under any note, indenture, mortgage, lease, agreement,
contract, purchase order or other instrument, document or agreement to which the
Company or any Subsidiary is a party or by which any of them or any of their
property is bound or affected, or (c) result in (i) any payment under, (ii)
amendment or change of the terms of or rights under, or (iii) vesting,
acceleration or increase of rights, compensation or benefits under any
agreement, plan, policy, commitment, security, right to acquire securities of
the Company or other contract to which the Company or any of its Subsidiaries is
a party.
2.14. Consents and Approvals. No authorization, consent, approval or other
----------------------
order of, declaration to, or filing with, any governmental agency or body, and
no consent of any other person or entity, is required for or in connection with
the valid and lawful authorization, execution and delivery by the Company of
this Agreement or any other agreements, instruments or documents entered into by
the Company pursuant to this Agreement (as set forth on Schedule 2.2) or in
------------
connection with the valid and lawful authorization, issuance, sale and delivery
of the Shares and Warrants, except as set forth on Schedule 2.14, and except
-------------
where the failure to obtain any such authorization, consent, approval or order
or to make any such declaration or filing would not have a material adverse
effect on the business or financial condition of the Company and the
Subsidiaries, taken as a whole, or on the Investor or its ability to consummate
the transactions contemplated hereby.
2.15. Litigation. All significant claims pending against the Company or
----------
any Subsidiary are identified on Schedule 2.15. There is no action, suit,
-------------
proceeding or investigation pending or, to the Company's knowledge, threatened
against the Company or any Subsidiary which questions the validity of this
Agreement or any other agreements, instruments or documents entered into by the
Company pursuant to this Agreement (as set forth on Schedule 2.2) or the
------------
9
right of the Company to enter into them or to consummate the transactions
contemplated hereby or thereby, or which the Company reasonably believes will,
either individually or in the aggregate, result in any material adverse change
in the business, assets, conditions, operations, prospects or affairs of the
Company, or of any Subsidiary, financial or otherwise, or any change in the
current equity ownership of the Company or of any Subsidiary, nor is the Company
aware that there is any basis for the foregoing. The foregoing includes, without
limitation, actions pending or, to the best of the Company's knowledge,
threatened, involving the prior employment of any of the Company's employees or
those of any Subsidiary, their use in connection with the Company's or any
Subsidiary's business of any information, creations or techniques allegedly
proprietary to any of their former employers or other persons or entities, or
their obligations under any agreements with prior employers or other persons or
entities. None of the Company or any of its executive officers or directors or
any Subsidiary, or any Subsidiary's executive officers or directors, is a party
to, or subject to the provisions of, any order, writ, injunction, judgment or
decree of any court or governmental agency or instrumentality which might
result, either individually or in the aggregate, in any material adverse change
in the business, assets, conditions, operations, affairs, or, in the reasonable
business judgment of the Company, prospects of the Company or of any Subsidiary,
financial or otherwise, or any change in the current equity ownership of the
Company or of any Subsidiary. Except as disclosed on Schedule 2.15, there is no
action, suit or proceeding by the Company or any Subsidiary currently pending or
which the Company or any Subsidiary presently intends to initiate.
2.16. Business. Except as disclosed in Schedule 2.16, each of the Company
-------- -------------
and each Subsidiary has all necessary franchises, permits, licenses and other
rights and privileges necessary to permit it to own its property and to conduct
its present business. Neither the Company nor any Subsidiary is in violation of
any law, regulation, authorization or order of any public authority relevant to
the ownership of its properties or the carrying on of its present business which
in the aggregate would have a material adverse affect on the Company or on any
Subsidiary.
2.17. Brokerage. Except as disclosed on Schedule 2.17, there are no claims
--------- -------------
for brokerage commissions or finder's fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement
made by or on behalf of the Company, and the Company agrees to pay any such
brokerage commissions, finder's fees or similar compensation based on any
arrangement made by or on behalf of the Company whether or not listed on
Schedule 2.17 and to indemnify and hold the Investors harmless against any
-------------
damages incurred as a result of any such claim.
2.18. Employees. There are no controversies or labor troubles pending, or
---------
to the best of the Company's knowledge, threatened between it and its employees
or the employees of any Subsidiary or between any Subsidiary and the Company's
employees or the employees of any Subsidiary. Except as disclosed on Schedule
--------
2.18, to the best of the Company's knowledge: (a) no employee of the Company or
----
any Subsidiary is in violation of any term of any employment contract, patent or
other proprietary information disclosure agreement or any other material
contract or agreement relating to the right of any such employee to be employed
by the Company or such Subsidiary because of the nature of the business
conducted or proposed to be
10
conducted by the Company or such Subsidiary or for any other reason, and the
continued employment by the Company and each Subsidiary of its respective
present employees will not result in any such violation; (b) no officer of the
Company or any Subsidiary has any present intention of terminating his
employment therewith nor does the Company or any Subsidiary have any present
intention of terminating any such employment; and (c) the Company and each
Subsidiary has complied in all material respects with all applicable state and
federal laws and regulations respecting employment and employment practices,
terms and conditions of employment, wages and hours and other laws related to
employment, and there are no arrears in the payments of wages, withholding or
social security taxes, unemployment insurance premiums or other similar
obligations. Except as set forth in Schedule 2.10, neither the Company nor any
-------------
Subsidiary is a party to any agreement with any of its respective officers with
respect to such person's employment.
2.19. Insurance. The Company and each Subsidiary maintains in full force
---------
and effect such types and amounts of insurance issued by insurers of recognized
responsibility insuring each of them with respect to its respective business and
properties, in such amounts and against such losses and risks as are listed in
Schedule 2.19, which such insurance covers such risks and is maintained in such
-------------
amounts as is usually carried by persons engaged in the same or similar
businesses.
2.20. Environmental and Safety Laws.
-----------------------------
(a) As used in this Agreement, the terms "Removal," "Remedial
Action," "Release," "Hazardous Substance" and "National Priorities List" shall
have the same meaning as those terms are given in the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA") and its
implementing regulations, and the terms "Hazardous Waste" and "Solid Waste"
shall have the same meaning as those terms are given in the Resource
Conservation and Recovery Act, as amended ("RCRA") and its implementing
----
regulations.
(b) The ownership, use and operation by the Company or any
Subsidiary of each facility used in its business has been and all ownership, use
and operation of each such facility by any Person has been, in compliance in all
material respects with all Federal, state and local environmental, safety and
anti-pollution laws, including without limitation RCRA, its implementing
regulations and all applicable state hazardous waste laws; the Clean Water Act,
as amended, its implementing regulations and all applicable state and local
effluent discharge laws; the Clean Air Act, as amended, its implementing
regulations and all applicable state and local air emission laws; the Toxic
Substances Control Act, as amended, its implementing regulations and all
applicable state and local toxic substance laws; CERCLA, its implementing
regulations and all applicable state and local environmental response,
compensation and liability laws; the National Environmental Policy Act of 1969
and its implementing regulations; the Occupational Safety and Health Act, its
implementing regulations and all applicable state and local worker safety and
health laws; and all such laws concerning particulate emissions, hazard
communication, surface water pollution, groundwater pollution, air pollution,
solid wastes, hazardous wastes, hazardous substances, toxic substances, storage,
handling, treatment, transportation, spills or other releases, and disposal of
any substance, chemicals, materials or
11
wastes, and exposure to or notification regarding any substance, chemical,
material or waste, and neither the Company nor any Subsidiary has reason to
believe that any claim, action, lawsuit, proceeding, complaint or charge exists
or may be brought for violation of any such laws.
(c) To the best of the Company's knowledge, neither the Company nor
any Subsidiary has any liability, arising out of its own actions or inactions,
or to its knowledge, any other liability, whether fixed, unliquidated, absolute,
contingent or otherwise, under any Federal, state or local environmental, safety
or anti-pollution laws, including any liability, responsibility or obligation
for investigation, removal, Remedial Action or any fines, penalties, costs or
expenses to effect compliance with or discharge any duty, obligation or claim
under any such laws, and neither the Company nor any Subsidiary has reason to
believe that any claims, actions, suits, proceedings or investigations under
such laws exist or may be brought or threatened.
(d) There has not been, and is not occurring, at any facility owned
or operated or previously owned or operated by the Company or any Subsidiary any
Release or threatened Release of any Hazardous Substance, Hazardous Waste, Solid
Waste or petroleum, including crude oil or any fraction thereof, nor has the
Company or any Subsidiary any reason to believe such a Release either is
occurring or has occurred at any time in the past. Neither the Company nor any
Subsidiary has applied or disposed of any Hazardous Substance, Hazardous Waste,
Solid Waste or petroleum, including crude oil or any fraction thereof, in any
manner which may form the basis for any present or future claim, demand or
action seeking investigation, Removal, or Remedial Action at any facility, site,
location or body of water, surface or subsurface, including groundwater or any
costs or expenses related thereto.
(e) Neither the Company nor any Subsidiary has sent, arranged for
disposal or treatment, arranged with a transporter for transport for disposal or
treatment, transported, or accepted for transport any Hazardous Substance,
Hazardous Waste, Solid Waste or petroleum, including crude oil or any fraction
thereof, to a facility, site or location, which, pursuant to CERCLA or any
similar state or local law, (a) has been placed or is proposed to be placed, on
the National Priorities List or its state equivalent or (b) which is subject to
a claim, administrative order or other request to take clean up action, Removal
or Remedial Action by any person or entity (including any governmental entity)
or which is subject to a claim for damages by any person or entity (including
any governmental entity).
(f) Neither the Company nor any Subsidiary stores, generates or
produces any Hazardous Substance, Hazardous Waste, or petroleum in material
violation of any law. There has not been any contamination of groundwater,
surface waters, soils or sediments, as a result of the manufacture, storage,
processing, loss, leak, escape, spillage, disposal or other handling or
disposition by or on behalf of the Company or by or on behalf of any Subsidiary
of any product or substance on or prior to the Closing. All Hazardous
Substances, Hazardous Wastes and petroleum stored by or on behalf of the Company
or by or on behalf of any Subsidiary have been stored in all material respects
in compliance with all Federal, state and local environmental, safety and
antipollution laws.
12
(g) All facilities located on owned or leased real estate of the
Company and those of any Subsidiary have been approved by all necessary
governmental authorities, and each of the Company and each Subsidiary has
obtained and is in possession of all material environmental and safety permits
and licenses necessary for its business including permits required by local
zoning laws. Except as disclosed on Schedule 2.20, there have not been any
-------------
environmental audits or assessments or occupational health studies undertaken by
or on behalf of the Company or by or on behalf of any Subsidiary or governmental
agencies with respect to the Company or any Subsidiary or the Company's or any
Subsidiary's assets, employees, facilities or properties, the results of
groundwater and soil testing, the results of underground fuel, waste or waste
tank tests and soil samples, written communications with Federal, state or local
governments on environmental, safety or anti-pollution matters, or Occupational
Safety and Health Administration citations.
(h) Except as disclosed on Schedule 2.20, there have been no
-------------
Hazardous Substances, Hazardous Wastes, Solid Wastes, petroleum, tanks,
containers, cylinders, drums, bottles or cans buried, stored or deposited in
violation of any law in or on any real property currently or formerly owned or
operated by the Company or any Subsidiary while owned or operated by the Company
or any Subsidiary, or to the best of the Company's knowledge, before owned or
operated by the Company or any Subsidiary.
2.21. Retirement Obligations, etc. Except as disclosed on Schedule 2.21,
---------------------- -------------
neither the Company nor any Subsidiary has any pension, retirement or similar
plan or obligation, whether of a legally binding nature or in the nature of
informal understandings. Neither the Company nor any Subsidiary is a party to
any collective bargaining agreement and, to the best of the Company's knowledge,
no organizational efforts are presently being made with respect to any of its
employees or those of any Subsidiary. Schedule 2.21 lists the employee benefit
-------------
plans of the Company and each of the Subsidiaries.
2.22. Transactions with Affiliates. Except as disclosed on Schedule 2.22,
---------------------------- -------------
no 1% or greater stockholder, officer or director of the Company or of any
Subsidiary, nor any "affiliate" or "associate" of such persons (as such terms
are defined in the rules and regulations promulgated under the ▇▇▇▇ ▇▇▇) nor any
member of such person's family (herein, a "Related Party") is a party to any
-------------
transaction with the Company or any Subsidiary, including, without limitation,
any contract, agreement or other arrangement providing for the rental of real or
personal property from, or otherwise requiring payments to, any Related Party.
Except as set forth in Schedule 2.22 no employee of the Company or of any
-------------
Subsidiary nor any Related Party is indebted in an amount greater than $20,000
to the Company or any Subsidiary and neither the Company nor any Subsidiary is
indebted to any such employee or Related Party.
2.23. Books and Records. The minute books of the Company and those of each
-----------------
of the Subsidiaries as provided upon request to the Investors and their counsel
contain complete and accurate records of all meetings and all other corporate
actions of each of their respective stockholders, Board of Directors and all
committees, if any, appointed by its Board of Directors. The stock ledger of the
Company and that of each of the Subsidiaries as provided upon request to the
Investors and their counsel are complete and reflect all issuances, transfers,
repurchases and
13
cancellations of shares of capital stock of each of the Company and the
Subsidiaries. The books of account, ledgers, order books, records and documents
of the Company and those of each of the Subsidiaries as provided upon request to
the Investors and their counsel accurately and completely reflect all material
information relating to their respective business, the nature, acquisition,
maintenance, location and collection of their respective assets and the nature
of all transactions giving rise to their respective obligations and accounts
receivable.
2.24. Material Facts. This Agreement and the Schedules hereto and
--------------
furnished contemporaneously herewith, and each other agreement, document,
certificate or written statement, if any, furnished or to be furnished to the
Investors through the Closings by or on behalf of the Company or any Subsidiary
in connection with the transactions contemplated hereby, taken as a whole, do
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein or herein in light of
the circumstances in which they were made not misleading. To the best of the
Company's knowledge, there is no fact which has not been disclosed herein or
otherwise by the Company to the Investors and which may materially adversely
affect the business, properties, assets or condition, financial or otherwise, of
the Company or of any Subsidiary except for facts relating to general economic
conditions which may affect all companies which are in a similar industry.
2.25. Securities Laws. Assuming that the Investors' representations and
---------------
warranties contained in Section 3 of this Agreement are true and correct, the
---------
offer, issuance and sale by the Company to the Investors of the Shares,
Warrants, Conversion Shares and Warrant Shares are, and will be as of each
Closing or the date of issuance of Conversion Shares and Warrant Shares, as
applicable, exempt from the registration and prospectus delivery requirements of
the 1933 Act, and have been, or will be as of each Closing, registered or
qualified (or are, or will be as of each Closing, exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state Blue Sky and securities laws.
2.26. Small Business Matters; Use of Proceeds.
---------------------------------------
(a) The Company, together with its "affiliates" (as that term is
defined in Title 13, Code of Federal Regulations, (S) 121.103), is a "small
business concern" within the meaning of the Small Business Investment Act of
1958, as amended (the "SBIA") and the regulations thereunder, including 13 CFR
----
(S) 121.301(c) and (S) 121.302. The information set forth in the Small Business
Administration Forms 480, 652 and Parts A and B of Form 1031 regarding the
Company and its affiliates, when delivered to Chase Venture Capital Associates,
L.P. or any Investor controlled by it including, without limitation, Chase/HOB
1999 Partners (GC), L.L.C. ("Chase/HOB") a Delaware limited liability company
---------
(collectively, "CVCA"), will be accurate and complete and will be in form and
----
substance acceptable to CVCA. Copies of such forms, as applicable, shall be
completed and executed by the Company and delivered to CVCA at the Closing.
(b) The proceeds from the sale of the Shares will be used by the
Company to (1) acquire all of the stock of Universal Concerts, Inc., Universal
Arenas, Inc., Universal Events, Inc., and Universal Concerts Canada, Ltd.
pursuant to the UCI Stock Purchase Agreement, (2)
14
finance initial working capital and other corporate needs related to the
foregoing acquisitions, and (3) pay expenses related to the transactions
contemplated by this Agreement and the UCI Stock Purchase Agreement. Absent
completion of the sale of Shares to CVCA at the Initial Closing of this
financing, the Company does not have access to the capital resources necessary
to satisfy such obligations. No portion of such proceeds will be issued (i) to
provide capital to a corporation licensed under the SBIA, (ii) to acquire farm
land, (iii) to fund production of a single item or defined limited number of
items, generally over a defined production period, and such production will
constitute the majority of the activities of the Company and its Subsidiaries
(examples include motion pictures and electric generating plants), or (iv) for
any purpose contrary to the public interest (including, but not limited to,
activities which are in violation of law) or inconsistent with free competitive
enterprise, in each case, within the meaning of 13 CFR (S) 107.720.
(c) Neither the Company's nor any of its Subsidiaries' primary
business activity involves, directly or indirectly, providing funds to others
(other than its wholly owned subsidiaries), the purchase or discounting of debt
obligations, factoring or long-term leasing of equipment with no provision for
maintenance or repair, and neither the Company nor any of its Subsidiaries is
classified under Major Group 65 (Real Estate) of the SIC Manual. The assets of
the business of the Company and its Subsidiaries (the "Business") will not be
--------
reduced or consumed, generally without replacement, as the life of the Business
progresses, and the nature of the Business does not require that a stream of
cash payments be made to the Business's financing sources, on a basis associated
with the continuing sale of assets (examples of such businesses would include
real estate development projects and oil and gas ▇▇▇▇▇).
(d) The proceeds from the sale of the Shares to CVCA will not be
used substantially for a foreign operation; and at Closing or within one year
thereafter, no more than 49% of the employees or tangible assets of the Company
and its Subsidiaries will be located outside the United States. This subsection
(d) does not prohibit such proceeds from being used to acquire foreign materials
and equipment or foreign property rights for use or sale in the United States.
(e) To the best knowledge of the Company, prior to Closing no SBIC
owns any Securities (as defined herein) issued by the Company, other than CVCA.
Without the consent of Chase Venture Capital Associates, L.P., which will not be
unreasonably withheld, the Company will not issue Securities to any SBIC in the
future.
(f) If the Company breaches this representation in any material
respect, then in addition to all other remedies available to CVCA, CVCA may
demand that the Company repurchase all Shares acquired by CVCA at the original
cost thereof.
2.27. Year 2000.
---------
The Company and its Subsidiaries have implemented a comprehensive
program to address the "year 2000 problem" (that is, the risk that computer
applications may not be able to properly perform date-sensitive functions after
December 31, 1999) and expect to resolve on a timely basis (and in any case, in
advance of December 31, 1999) any material year 2000
15
problem. The Company and its Subsidiaries have also made or will timely make
inquiry of each supplier and vendor of the Company and its Subsidiaries that is
of material importance to the financial well-being of the Company and its
Subsidiaries with respect to the "year 2000 problem." On the basis of the
inquiries made to date, the Company reasonably believes that each such supplier
and vendor will resolve any material
year 2000 problem on a timely basis.
3. Representation and Warranties and other Agreements of the Investors.
-------------------------------------------------------------------
Each Investor, severally and not jointly, hereby represents, warrants and agrees
with the Company as follows:
3.1. Authorization. Such Investor has full corporate or partnership power
-------------
and authority, as the case may be, to execute, deliver and perform this
Agreement, the Amended Stockholders Agreement and the Amended Registration
Rights Agreement and to acquire the Shares and Warrants. This Agreement, the
Amended Stockholders Agreement and the Amended Registration Rights Agreement
constitute the legal, valid and, assuming due execution and delivery by the
other parties thereto, binding obligation of such Investor, enforceable in
accordance with their respective terms.
3.2. Purchase Entirely for Own Account. The Shares and Warrants to be
---------------------------------
received by such Investor and the Conversion Shares and Warrant Shares received
upon conversion of such Shares and Warrants, respectively (collectively, the
"Purchased Securities") will be acquired for investment for such Investor's own
--------------------
account, not as a nominee or agent and not with a view to the distribution of
any part thereof in contravention of applicable law. Such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same in contravention of applicable law. Such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Purchased Securities.
3.3. Restricted Securities. Such Investor understands that the Purchased
---------------------
Securities may not be sold, transferred, or otherwise disposed of without
registration under the 1933 Act, or an exemption therefrom, and in the absence
of an effective restriction statement covering the Purchased Securities or
available exemption from registration under the 1933 Act, the Purchased
Securities must be held indefinitely. In the absence of an effective
registration statement covering the Purchased Securities, such Investor will
sell, transfer or otherwise dispose of the Purchased Securities only in a manner
consistent with its representations and agreements set forth herein and the
terms and conditions set forth in the Amended Registration Rights Agreement and
the Amended Stockholders Agreement.
3.4. Formation. Except as disclosed on Schedule 3.4, such Investor
---------- ------------
represents that it was not organized for the purpose of making an investment in
the Company.
3.5. Suitability. Such Investor is an Accredited Investor as such term is
-----------
defined in Rule 501(a) promulgated pursuant to the 1933 Act.
16
3.6. Financial Condition. Such Investor's financial condition is such
-------------------
that it is able to bear the risk of holding the Purchased Securities for an
indefinite period of time and can bear the loss of its entire investment in its
Purchased Securities.
3.7. Experience. Such Investor has such knowledge and experience in
----------
financial and business matters and in making high-risk investments of this type
that it is capable of evaluating the merits and risks of the purchase of the
Purchased Securities.
3.8. Receipt of Information. Such Investor has been furnished access
----------------------
to the business records of the Company and such additional information and
documents as such Investor has requested and has been afforded an opportunity to
ask questions of and receive information from representatives of the Company
concerning the terms and conditions of this Agreement, the purchase of the
Purchased Securities, the Company's business, operations, market potential,
capitalization, financial condition and prospects, and all of the matters deemed
relevant by such Investor; provided, however, that Investor's receipt of such
-------- -------
information and documents shall not limit Investor's ability to rely upon the
Company's representations and warranties contained herein.
3.9. Brokerage. There are no claims for brokerage commissions or
---------
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of such Investor, and such Investor agrees to indemnify and hold the
Company and the other Investors harmless against any damages incurred as a
result of any such claims based on any arrangement or agreement made by or on
behalf of such Investor.
3.10. Further Limitations on Disposition.
-----------------------------------
(a) Each Investor further agrees not to make any disposition of
all or any portion of the Purchased Securities unless and until:
(i) There is then in effect a registration statement under
the 1933 Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement and all applicable state securities laws; or
(ii) (A) Such Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company
with a statement of the circumstances surrounding the proposed
disposition, and (B) such Investor shall have furnished the
Company with a reasonably satisfactory opinion from counsel,
reasonably satisfactory to the Company, that such disposition
will not require registration of such shares under the 1933 Act.
(b) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by any Investor pursuant to Rule 144(k) promulgated under the
1933 Act, or any other valid exception thereto, or a transfer by an Investor to
a partner, subsidiary, shareholder or affiliate of such Investor, if the
17
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were an original Investor hereunder.
3.11. Legends. It is understood that the certificates evidencing the
-------
Purchased Securities may bear substantially the following legends:
(a) "These securities have not been registered under the 1933 Act,
and may not be sold, offered for sale, pledged or hypothecated in the absence of
a registration statement in effect with respect to the securities under such Act
or an opinion of counsel satisfactory to the Company that such registration is
not required, or unless sold pursuant to Rule 144(k) of such Act.
(b) Any legend required by the Amended Stockholders Agreement, the
Amended Registration Rights Agreement or the laws of any other applicable
jurisdiction.
3.12. Certain Governmental Approvals. In the event that (x) all conditions
------------------------------
to the closing of the transactions contemplated by the UCI Stock Purchase
Agreement have been satisfied or, to the extent permitted, waived (subject to
the limitation on waivers contained in the equity commitment letters referred to
below), and (y) the Investors are obligated to fund the Company in accordance
with their respective equity commitment letters, dated July 21, 1999, delivered
to Universal Studios, Inc. but for the fact that one or more Investors have
failed to receive all regulatory approvals, including, without limitation, any
required by the HSR Act (a "Regulatory Issue"), and such Regulatory Issue would
----------------
not be present if the Investor acquired some or all of the Company securities to
be issued to it in the form of non-voting securities, then each Investor shall
nonetheless be required to close its investment in the Company, subject to the
following adjustments: (a) each Investor with a Regulatory Issue shall determine
the greatest number of voting securities ("Voting Securities") that it can
-----------------
acquire measured as a ratio of (i) the number of Voting Securities that the
Investor may acquire without causing a Regulatory Issue to (ii) the total number
of such securities that the Investor is required to purchase hereunder (such
ratio, the "Voting Ratio"); (b) if it has not already done so, the Company shall
------------
authorize non-voting securities that are otherwise identical in all substantive
respects to its related Voting Securities and in any event in form and substance
reasonably satisfactory to each Investor, and are convertible into such Voting
Securities on a share-for-share basis at the election of the holder (the "Non-
---
Voting Shares"); (c) each Investor shall then close its investment in the
-------------
Company and pay the aggregate cash purchase price due and payable at Closing,
whereupon the Company will issue to each Investor that was otherwise to have
acquired Voting Securities a combination of Voting Securities and Non-Voting
Securities in accordance with the Voting Ratio; and (d) each Investor will be
deemed to have covenanted and agreed with each other Investor not to convert any
Non-Voting Shares into Voting Shares unless each Investor has resolved its
Regulatory Issue and all shares can be so converted by all Investors. Each
Investor agrees that it will keep the Company and each other Investor apprised
of the status of any Regulatory Issue applicable to it, such advice to be
confirmed in writing upon request.
4. Conditions to the Investors' Obligations at each of the Closings.
----------------------------------------------------------------
18
The obligations of the Investors under Section 1 of this Agreement to
---------
purchase the Shares and Warrants at the Initial Closing and any Subsequent
Closing are subject to the fulfillment on or before the Initial Closing or any
Subsequent Closing, as the case may be, of each of the following conditions
unless waived by the Investors in accordance with Section 7.5 hereof:
-----------
4.1. Performance of Covenants. The Company shall have performed and
------------------------
complied in all material respects with all covenants contained in this Agreement
that are required to be performed or complied with by it on or before such
Closing; it being understood that the failure of any representations or
warranties contained in Section 2 to be true and correct when made or as of the
Closing shall not be deemed to constitute a failure of this condition; provided,
--------
however, that the Investors shall not be deemed to have waived any of their
-------
rights or remedies hereunder with respect to any breach or failure of such
representation or warranties.
4.2. Compliance Certificate. The President of the Company shall deliver to
----------------------
the Investors at such Closing a certificate certifying that, as with respect to
the Company, the conditions specified in Sections 4.1, 4.3, 4.4, 4.7 and 4.8
--------------------------- ---
have been fulfilled.
4.3. Amendment and Restatement of Certificate of Incorporation, Bylaws and
---------------------------------------------------------------------
Option Plan. The Company shall have filed with the Secretary of State of
-----------
Delaware the Amended Certificate which is attached hereto as Exhibit B.
---------
4.4. Other Agreements. The Amended Stockholders Agreement substantially in
----------------
the form of Exhibit E attached hereto, and the Amended Registration Rights
---------
Agreement substantially in the form of Exhibit F attached hereto, shall have
---------
each been executed and delivered by the parties thereto.
4.5. Opinion of Company Counsel. The Investors shall have received from
--------------------------
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Company, an opinion dated as of such Closing
addressing matters customary in transactions of the type contemplated by this
Agreement and containing customary qualifications and exemptions.
4.6. Secretary's Certificate. The Secretary or an Assistant Secretary of
-----------------------
the Company shall deliver to the Investors at such Closing a Certificate, dated
as of the Closing, certifying: (a) that attached thereto is a true and complete
copy of all resolutions and consents adopted by the Board of Directors and the
stockholders of the Company authorizing the issuance, sale and delivery of the
Shares and the reservation, issuance and delivery of the Conversion Shares and
Warrant Shares, and that all such resolutions are in full force and effect and
are all the resolutions adopted in connection therewith; and (b) to the
incumbency and specimen signature of certain officers of the Company.
4.7. Closing of Acquisition. All conditions precedent to the Company's
----------------------
obligation to consummate the transactions contemplated by the UCI Stock Purchase
Agreement shall have been satisfied or, with the consent of all Investors,
waived, such that the acquisition contemplated thereby shall be consummated
immediately following the Initial Closing, and the
19
UCI Stock Purchase Agreement shall not have been amended in a manner adverse to
any Investor without the consent of such Investor.
4.8. Governmental Filings and Consents. Subject to Section 3.12, with
---------------------------------
respect to the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act ("HSR") filings by
---
Chase/HOB 1999 Partners (GC), L.L.C. ("Chase"), affiliates of ▇. ▇. ▇▇▇▇▇▇▇ &
-----
Co. (collectively, "▇. ▇. ▇▇▇▇▇▇▇"), First Union Investors, Inc. ("First
------------- -----
Union"), and S.A. Blues Partners, L.P. ("S.A. Blues") and by the Company, the
----- ----------
waiting period shall have elapsed or early termination thereof shall have been
granted without adverse action by the Federal Trade Commission or the Department
of Justice; and all approval and consents under the Competition Act (Canada) and
Bank Act (Canada) applicable to the issuance and sale of the Shares and Warrants
shall have been received, provided that each Investor, with respect to itself,
shall (i) make any required filing pursuant to HSR, the Competition Act (Canada)
and the Bank Act (Canada) as soon as practicable after the date hereof, (ii)
supply as promptly as practicable to the appropriate governmental authorities
any additional information and documentary material that may be requested
pursuant thereto and (iii) use its reasonable best efforts to obtain all such
approvals and consents and such early termination.
5. Conditions of the Company's Obligations at any Closing.
------------------------------------------------------
The obligations of the Company under Section 1 of this Agreement are subject to
---------
the fulfillment on or before any such Closing of each of the following
conditions unless waived by the Company:
5.1. Representations and Warranties. The representations and warranties of
------------------------------
the Investors contained in Section 3 shall be true and correct on and as of the
---------
date of such Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
5.2. Payment of Purchase Price. The Investors shall have delivered payment
-------------------------
of the aggregate purchase price of the Shares and Warrants to be purchased by
them at such Closing as set forth in Section 1.2, by payment of cash.
-----------
5.3. Other Agreements. The Amended Registration Rights Agreement
----------------
substantially in the form of Exhibit F attached hereto and the Amended
---------
Stockholders Agreement substantially in the form of Exhibit E attached hereto
---------
shall have each been executed and delivered by the parties thereto.
5.4. Governmental Filings and Consents. With respect to the HSR filings by
---------------------------------
Chase, ▇. ▇. ▇▇▇▇▇▇▇, First Union and S.A. Blues and by the Company, the waiting
period shall have elapsed or early termination thereof shall have been granted
without adverse action by the Federal Trade Commission or the Department of
Justice; and all approvals and consents under the Competition Act (Canada) and
Bank Act (Canada) applicable to the issuance and sale of the Shares and Warrants
shall have been received, provided that the Company shall (i) make any required
filing pursuant to HSR, the Competition Act (Canada) and the Bank Act (Canada)
as soon as practicable after the date hereof, (ii) supply as promptly as
practicable to the appropriate
20
governmental authorities any additional information and documentary material
that may be requested pursuant thereto and (iii) use its reasonable best efforts
to obtain all such approvals and consents and such early termination.
6. Affirmative Covenants of the Company.
------------------------------------
6.1. Financial and Other Information.
-------------------------------
(a) Accounts and Reports. The Company will maintain a standard system
--------------------
of accounts in accordance with generally accepted accounting principles
consistently applied.
(b) Annual and Quarterly Financial Statements. The Company will
-----------------------------------------
deliver to each Investor: (i) within ninety (90) days after the end of each
fiscal year a copy of the balance sheet of the Company as of the end of such
year, together with consolidated and consolidating statements of income and of
cash flows of the Company for such year, all in reasonable detail, prepared in
accordance with generally accepted accounting principles, consistently applied,
and certified in an audit report by independent public accountants of national
standing selected by the Board of Directors of the Company, and (ii) copies of
all financial statements and reports which the Company shall send to its
stockholders or file with the Securities and Exchange Commission or any stock
exchange on which any securities of the Company may be listed. The Company shall
also deliver to each Investor who holds Shares having an aggregate liquidation
preference of at least $1,000,000 or Conversion Shares issued thereunder (each a
"Principal Holder"), within forty-five (45) days after the end of each of the
----------------
first three quarters of each fiscal year, a copy of the consolidated balance
sheet of the Company as of the end of such quarter and consolidated statements
of income and of cash flows of the Company for the fiscal quarter and for the
portion of the fiscal year ending on the last day of such quarter, each of the
foregoing balance sheets and statements to set forth in comparative form the
corresponding figures for the same period of the prior fiscal year, and actual
versus budgeted amounts, to be in reasonable detail; provided, however, such
-------- -------
financials are subject to year-end adjustments and may not contain all footnotes
required under generally accepted accounting principles and to be certified,
subject to normal year-end audit adjustments, by the principal financial officer
of the Company that they are true and accurate in all material respects as of
their dates.
(c) Monthly Financial Statements and Budgets. The Company will
----------------------------------------
furnish to each Principal Holder: within thirty (30) days after the end of each
month, other than the last month of any fiscal quarter or of the fiscal year of
the Company, a copy of the consolidated balance sheet of the Company as of the
end of such month and consolidated statements of income and of cash flows of the
Company for such month, each of the foregoing balance sheets and statements to
set forth in comparative form the corresponding figures for the prior fiscal
period, to be in reasonable detail, to be prepared in accordance with generally
accepted accounting principles, consistently applied, and to be certified,
subject to normal year-end audit adjustments, by the principal financial officer
of the Company that they are true and accurate in all material respects as of
their dates; and, to the extent provided to the Board of Directors, as soon as
possible, but in any event at least thirty (30) days prior to the beginning of
each fiscal year, a budget, prepared on a period by period basis with each
period including four or five
21
weeks, and operating plan for such fiscal year, each approved by the Company's
Board of Directors, including projected balance sheets and statements of income
and changes in financial condition of the Company for such months.
(d) Visits and Discussions. The Company will permit each Principal
----------------------
Holder and its authorized representatives, at all reasonable times during normal
business hours and as often as reasonably requested, to visit and inspect, at
the expense of such Investor, any of the properties of the Company, including
its books and records and, subject to reasonable arrangements with any transfer
agents of the Company, lists of security holders, and to make extracts therefrom
and to discuss the affairs, finances, and accounts of the Company with its
officers.
(e) Adverse Change; Litigation. The Company will promptly advise each
--------------------------
Principal Holder in writing of each suit or proceeding commenced or threatened
against the Company which, if adversely determined, would result in a material
adverse change in the condition or business, financial or otherwise, of the
Company and of any facts that come to the Company's attention which question the
accuracy or completeness of the representations and warranties contained herein
when made.
(f) Other Information. The Company will also furnish to each
-----------------
Principal Holder with reasonable promptness, such other information and data
with respect to the Company as such Investor may from time to time reasonably
request.
(g) Termination of Certain Obligations. The obligations of the
----------------------------------
Company to comply with Sections 6.1(b) - 6.1(f) above shall terminate upon the
--------------- ------
closing of a Qualified Public Offering (as such term is defined in the Amended
Certificate attached hereto as Exhibit B).
---------
6.2. Confidentiality. Each of the Investors further covenants and agrees
---------------
that any authorized representative of such Investor receiving information under
Sections 6.1(b) - 6.1(f), or exercising rights of visitation or inspection
-------------- ------
granted hereunder shall maintain the confidentiality of all financial,
confidential and proprietary information of the Company acquired by them in
exercising such rights. Notwithstanding the preceding sentence, each Investor
may (1) disclose such information when required by law or governmental order or
regulation, or when required by a subpoena or other process, (2) disclose such
information to the extent necessary to enforce this Agreement, (3) disclose such
information to its attorneys, accountants, governmental regulators, consultants
and other professionals to the extent necessary to obtain their services in
connection with its investment in the Company, provided that the requirements of
this subsection shall in turn be binding on any such attorney, accountant,
consultant or other professional, or (4) disclose such information as may be
required by any prospective purchaser of any Shares, Conversion Shares or
Warrant Shares from such Investor, provided that such prospective purchaser
agrees in writing to be bound by the provisions of this subsection. An Investor
may also disclose such information to any affiliate of such Investor provided
that the requirements of this Section 6.2 shall in turn be binding on any such
affiliate, or, to a partner, shareholder or subsidiary of such Investor if such
partner, shareholder or subsidiary agrees in writing to be bound by the
provisions of this Section 6.2.
-----------
22
6.3. Insurance. The Company will keep all its and its Subsidiaries'
---------
insurable properties properly insured against loss or damage by fire and other
risks; maintain public liability insurance against claims for personal injury,
death or property damage suffered by others upon or in or about any premises
occupied by it or arising from equipment owned by the Company or any of its
Subsidiaries and leased to and located upon or in or about any premises occupied
by any other person; maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which it may be engaged in business; and maintain such other insurance as is
usually maintained by persons engaged in the same or similar business as is the
Company or any of its Subsidiaries. All such insurance shall be maintained
against such risks and in at least such amounts as such insurance is usually
carried by persons engaged in the same or similar businesses, and all insurance
herein provided for shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company or any of its Subsidiaries may effect worker's compensation or similar
insurance in respect of operations in any state or other jurisdiction either
through an insurance fund operated by such state or other jurisdiction or by
causing to be maintained a system or systems of self-insurance which is in
accord with applicable laws. The Company's executive officers shall periodically
report to the Board of Directors on the status of the insurance coverage of the
Company and its Subsidiaries.
6.4 Payment of Taxes; Corporate Existence. The Company and each Subsidiary
-------------------------------------
will:
(a) pay and discharge promptly, or cause to be paid and discharged
promptly, when due and payable, all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or upon any of its property, real,
personal and mixed, or upon any part thereof, as well as all claims of any kind
(including claims for labor, materials and supplies) which if unpaid might by
law become a lien or charge upon its property; provided, however, that the
-------- -------
Company or any Subsidiary shall not be required to pay any tax, assessment,
charge, levy or claim if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company or any Subsidiary shall have set aside on its books reserves (classified
to the extent required by generally accepted accounting principles) deemed by it
adequate with respect thereto; and provided further, that the Company or any
-------- ------
Subsidiary shall have no obligation to make any payments under this paragraph
(a) with respect to property subject to leases pursuant to the terms of which
the lessees thereof have undertaken to make such payments;
(b) do or cause to be done all things necessary to preserve and keep
in full force and effect its respective corporate existence, rights and
franchises; provided, however, that nothing in this paragraph (b) shall (i)
-------- -------
prevent the abandonment or termination of the Company's or any Subsidiary's
authorization to do business in any foreign state or jurisdiction if, in the
opinion of the Company's or any Subsidiary's Board of Directors, such
abandonment or termination is in the interest of the Company or any Subsidiary
and not disadvantageous in any material respect to the equity holders of the
Company or (ii) require compliance with any law so long as the validity or
applicability thereof shall be disputed or contested in good faith; and
23
(c) maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time to time
make, or cause to be made, all repairs, renewals and replacements which in the
opinion of the Company are necessary and proper so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times.
6.5 Transactions with Affiliates. Except for transactions described on
----------------------------
Schedule 2.22, the Company will not, and will cause its Subsidiaries not to,
enter into any transaction of any kind with any officers or directors of the
Company or a holder of five percent (5%) or more of the Common Stock of the
Company outstanding or options to purchase such Common Stock or other securities
directly or indirectly convertible or exercisable into such Common Stock, any
member of their respective families, or any corporation or other entity directly
or indirectly controlled by, controlling or under common control with one or
more such officers, directors or five percent (5%) stockholders or members of
their families, other than (a) transactions between or among the Company and any
----------
Subsidiary, (b) transactions on terms at least as favorable to the Company and
its Subsidiaries as would be the case in an arm's-length transaction between
unrelated parties of equal bargaining power, (c) payment of reasonable and
customary fees paid to members of the board of directors of the Company, (d)
ordinary and usual compensation arrangements for officers, and (e) transactions
approved by a majority of the disinterested directors of the Company's or
applicable Subsidiary's board of directors.
6.6. Regulatory Compliance Cooperation.
---------------------------------
(a) In the event that CVCA or First Union determines that it has a
Regulatory Problem (as defined below), the Company agrees to use commercially
reasonable efforts to take all such actions as are reasonably requested by CVCA
or First Union, as the case may be, in order (i) to effectuate and facilitate
any transfer by CVCA or First Union of any Securities (as defined below) of the
Company then held by CVCA or First Union to any Person designated by CVCA or
First Union , (ii) to permit CVCA or First Union (or any affiliate of CVCA or
First Union) to exchange all or any portion of the voting Securities then held
by such Person on a share-for-share basis for shares of a class of non-voting
Securities of the Company, which non-voting Securities shall be identical in all
respects to such voting Securities, except that such new Securities shall be
non-voting and shall be convertible into voting Securities on such terms as are
requested by CVCA or First Union in light of regulatory considerations then
prevailing, and (iii) to continue and preserve the respective allocation of the
voting interests with respect to the Company provided for in the Amended
Stockholders Agreement and the Amended Certificate and with respect to CVCA's or
First Union's ownership of the Company's voting Securities. Such actions may
include, but shall not necessarily be limited to:
(A) entering into such additional agreements as are requested
by CVCA or First Union to permit any Person(s) designated by CVCA or First
Union to exercise any voting power which is relinquished by CVCA or First
Union upon any exchange of voting Securities for non-voting Securities of
the Company; and
24
(B) entering into such additional agreements, adopting such
amendments to the Amended Certificate and Amended Bylaws of the Company and
taking such additional actions as are reasonably requested by CVCA or First
Union in order to effectuate the intent of the foregoing.
If CVCA elects to transfer Securities of the Company to a Regulated Holder (as
defined below) in order to avoid a Regulatory Problem, the Company shall enter
into such agreements with such Regulated Holder as it may reasonably request in
order to assist such Regulated Holder in complying with applicable laws, rules
and regulations to which it is subject. Such agreements may include
restrictions on the redemption, repurchase or retirement of Securities of the
Company that would result or be reasonably expected to result in such Regulated
Holder holding more voting securities or total securities (equity and debt) than
it is permitted to hold under such regulations.
(b) In the event CVCA or First Union has the right to acquire any of the
Company's Securities (as the result of a preemptive offer, pro rata offer or
otherwise), at CVCA's or First Union's request the Company will offer to sell to
CVCA or First Union non-voting Securities (or, if the Company is not the
proposed seller, will arrange for the exchange of any voting Securities for non-
voting Securities immediately prior to or simultaneous with such sale) on the
same terms as would have existed had CVCA or First Union acquired the Securities
so offered and immediately requested their exchange for non-voting Securities
pursuant to paragraph (a) above.
(c) In the event that any Subsidiary of the Company ever offers to sell
any of its Securities to CVCA or First Union, then the Company will cause such
Subsidiary to enter into agreements with CVCA and First Union substantially
similar to this Section 6.6 and, if applicable, Section 6.7 below.
----------- -----------
(d) The Company shall grant to any subsequent holder of Securities
originally acquired by CVCA or First Union (a "Subsequent Purchaser"), upon such
--------------------
Person's request, the same rights granted to CVCA and First Union pursuant to
this Section 6.6 and, if applicable, Section 6.7 below.
----------- -----------
(e) In furtherance of the provisions of this Section 6.6, the Company
acknowledges that First Union is a Regulated Holder and, is subject, among other
things, to certain restrictions on the ownership of voting and non-voting
Securities of the Company. On or prior to the Initial Closing, the Company
agrees to take all such actions as are reasonably requested by First Union (and
reasonably acceptable to Chase and ▇. ▇. ▇▇▇▇▇▇▇) to permit First Union to
comply with Regulation Y in connection with the transactions contemplated
hereby, including without limitation:
(i) authorizing an additional class of preferred stock of the
Company identical in all respects to the Class D-2 Preferred Stock, except
that such class of preferred stock shall be non-voting and shall be
convertible into Common Stock or non-voting common stock of the Company (as
described below) on such terms as are requested by First Union in light of
prevailing regulatory considerations;
25
(ii) authorizing an additional class of common stock of the Company
identical in all respect to the Common Stock, except that such class of
common stock shall be non-voting and shall be convertible into Common Stock
on such terms as are requested by First Union in light of prevailing
regulatory considerations;
(iii) permitting First Union to purchase, in lieu of its commitment
to purchase certain shares of Class D-2 Preferred Stock and Warrants
hereunder, a requisite number of shares of the class of preferred stock
authorized pursuant to clause (i) and a requisite number of warrants to
purchase the class of non-voting common stock authorized pursuant to clause
(ii) so as to comply with Regulation Y; and
(iv) amending this Agreement (including the form of Amended
Certificate, Amended Stockholders Agreement and Amended Registration Rights
Agreement attached hereto) so as to properly reflect the transactions
contemplated by clauses (i), (ii) and (iii) above and so as to include any
other agreements deemed reasonably necessary by First Union, including
agreements of the nature set forth in Section 6.6(a).
(f) For purposes of this Agreement:
(i) "Regulated Holder" means any holder of the Company's Securities
----------------
that is (or that is a subsidiary of a bank holding company that is) subject
to the various provisions of Regulation Y of the Board of Governors of the
Federal Reserve System, 12 CFR, Part 225 (or any successor to Regulation Y)
("Regulation Y");
(ii) "Regulatory Problem" means (A) any set of facts or
------------------
circumstances wherein it has been asserted by any governmental regulatory
agency (or CVCA, First Union or any Subsequent Purchaser believes that
there is a significant risk of such assertion) that such Person (or any
bank holding company that controls such Person) is not entitled to hold, or
exercise any material right with respect to, all or any portion of the
Securities of the Company which such Person holds or (B) when such Person
and its affiliates would own, control or have power (including voting
rights) over a greater quantity of Securities of the Company than is
permitted under any law or regulation or any requirement of any
governmental authority applicable to such Person or to which such Person is
subject; and
(iii) "Securities" means, with respect to any Person, such Person's
----------
capital stock or any option, warrants or other Securities which are
directly or indirectly convertible into, or exercisable or exchangeable
for, such Persons' capital stock (whether or not such derivative Securities
are issued by the Company). Whenever a reference herein to Securities
refers to any derivative Securities, the rights of CVCA and First Union
shall apply to such derivative
26
Securities and all underlying Securities directly or indirectly
issuable upon conversion, exchange or exercise of such derivative
Securities.
6.7. Information Rights and Related Covenants.
----------------------------------------
(a) Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year), the Company shall, upon request, provide to
CVCA a written assessment, in form and substance reasonably satisfactory to
CVCA, of the economic impact of CVCA's financing hereunder, specifying the full-
time equivalent jobs created or retained, the impact of the financing on the
consolidated revenues and profits of the Business and on taxes paid by the
Business and its employees (as contemplated by 13 CFR (S) 107.630(e)) .
(b) Upon the request of CVCA or any affiliate of CVCA, the Company
will (A) provide to such Person such financial statements and other information
as such Person may from time to time reasonably request for the purpose of
assessing the Company's financial condition and (B) furnish to such Person all
information reasonably requested by it in order for it to prepare and file SBA
Form 468 and any other information reasonably requested or required by any
governmental agency asserting jurisdiction over such Person.
(c) For a period of one year following the date hereof, neither the
Company nor any of its Subsidiaries will change its business activity if such
change would render the Company ineligible to receive financial assistance from
an SBIC under the SBIA and the regulations thereunder (within the meanings of 13
CFR (S) 107.720 and (S) 107.760(b)).
(d) The Company will at all times comply with the non-discrimination
requirements of 13 CFR, Parts 112, 113 and 117.
(e) The Company understands that its violation of Sections 2.26, 6.6
------------- ---
or this Section 6.7 of this Agreement may result in CVCA being required by the
-----------
SBA to sell the Company Securities acquired by CVCA, and such sale may be at
depressed prices due to the circumstances and timing of the sale. Therefore, in
addition to any other remedies available to CVCA for the Company's violation of
this Agreement, the Company agrees that CVCA shall be entitled to seek specific
enforcement or other equitable relief to prevent a violation by the Company of
such specified terms of this Agreement, and the Company waives any requirement
that CVCA posts any bond as a condition to seeking or obtaining equity relief.
6.8. Remedies of Investors. If, pursuant to those certain equity
---------------------
commitment letters in favor of Universal Studios, Inc. executed substantially
concurrently herewith, the Investors are required to make an equity investment
in the Company, (i) such investment will take the form of an issuance of Shares
and Warrants as provided in this Agreement, (ii) the Company shall not be
released from liability for any breach of its obligations under this Agreement
(including Section 6.6) and (iii) the Investors shall be entitled to all rights
-----------
and remedies under this Agreement in respect of such investment or otherwise. To
that end, the Company agrees to use the proceeds received by the Company in
accordance with the first sentence of Section 2.26(b) within 45 days after
receipt thereof.
27
6.9. Issue of Additional Warrants With Respect to the Bridge Preferred
-----------------------------------------------------------------
Shares. If the Bridge Preferred Shares have not been redeemed in accordance with
------
the terms of the Amended Certificate on or before the 135th day following the
Initial Closing, then the Company will on such day issue to the Investors
holding such Bridge Preferred Shares additional Warrants, in a form identical to
the Warrants issued at the Initial Closing (except for date, amount and other
conforming changes) to exercisable for 3,338,871 shares of Common Stock in the
aggregate, with each such Investor receiving a pro rata portion of such Warrants
based on the number of Bridge Preferred Shared held by such Investor (and
------
reduced pro rata if there has been any partial redemption of Bridge Preferred
Shares). If the Bridge Preferred Shares have not been redeemed in accordance
with the terms of the Amended Certificate on or before the 270th day following
the Initial Closing, then the Company will on such day issue to the Investors
holding such Bridge Preferred Shares additional Warrants, in a form identical to
the Warrants issued at the Initial Closing (except for date, amount and other
conforming changes) exercisable for 1,686,299 shares of Common Stock in the
aggregate, with each such Investor receiving a pro rata portion of such Warrants
based on the number of Bridge Preferred Shared held by such Investor (and
reduced pro rata if there has been any partial redemption of Bridge Preferred
Shares). If the Bridge Preferred Shares have not been redeemed in accordance
with the terms of the Amended Certificate on or before the 350th day following
the Initial Closing, then the Company will on such day issue to the Investors
holding such Bridge Preferred Shares additional Warrants, in a form identical to
the Warrants issued at the Initial Closing (except for date, amount and other
conforming changes) exercisable for 1,703,332 shares of Common Stock in the
aggregate, with each such Investor receiving a pro rata portion of such Warrants
based on the number of Bridge Preferred Shared held by such Investor (and
reduced pro rata if there has been any partial redemption of Bridge Preferred
Shares) (such Warrants, together with any additional warrants issued as
described in the preceding two sentences, are referred to herein as the
"Additional Warrants"). The number of Additional Warrants issued as of each of
------------------
the relevant dates as set forth in this Section 6.9 shall be subject to
adjustment as necessary in order to give effect to the anti-dilution provisions
thereof as though all such Additional Warrants were deemed to be issued as of
the Initial Closing.
6.10. Company Election to Reduce or Eliminate Bridge Preferred Shares.
---------------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall have the right to elect not to issue Bridge Preferred Shares to
the Investors who have committed to purchase such Bridge Preferred Shares on
Exhibit A-1 hereto, or to issue fewer Bridge Preferred Shares than those
committed to be purchased, provided that all Investors who have committed to
purchase Bridge Preferred Shares hereunder are affected by such election on a
pro rata basis, and provided further that all Warrants associated with such
Bridge Preferred Shares are reduced on a pro rata basis or eliminated, as
applicable, subject to the following sentence. In the event that the
transactions contemplated by the UCI Stock Purchase Agreement are consummated
but the Bridge Preferred Shares are not issued, other than as a result of a
willful breach by an Investor who has agreed to purchase Bridge Preferred Shares
hereunder (each a "Bridge Investor"), the Bridge Investors nevertheless will be
---------------
entitled to receive Warrants to purchase 1,636,047 shares of Common Stock in
the aggregate, with each Bridge Investor receiving a pro rata portion of such
Warrants based on the total number of
28
Bridge Preferred Shares committed to be purchased by such Bridge Investor. The
Company shall not issue Bridge Preferred Shares to any person other than those
Investors identified on Exhibit A-1 as a purchaser of Bridge Preferred Shares,
unless all such persons have agreed in
writing
6.11. Modifications of Certain Existing Instruments. As of the Initial
---------------------------------------------
Closing, the Company agrees, for the benefit of each Investor that has committed
to purchase Shares with an aggregate value of at least $2,000,000 hereunder and
that holds Investor Warrants or Convertible Note Warrants (the "Bridge Note
-----------
Warrants"), to amend the Investor Warrants and Convertible Note Warrants held by
--------
such Investors to extend the exercise period thereof for five years beyond the
currently scheduled expiration thereof.
6.12. Performance of UCI Stock Purchase Agreement. The Company will use
-------------------------------------------
all commercially reasonable efforts to timely satisfy the conditions to its
obligations under the UCI Stock Purchase Agreement and will perform all of its
obligations thereunder.
7. Restrictive Covenants in Favor of Holders of Senior Preferred Stock and
-----------------------------------------------------------------------
Bridge Preferred Stock.
----------------------
So long as any Senior Preferred Stock or Bridge Preferred Stock
remain outstanding, the Company agrees, solely for the benefit of the holders of
such Senior Preferred Stock or Bridge Preferred Stock (it being understood that
Investors who do not hold, or cease to hold, Senior Preferred Stock or Bridge
Preferred Stock shall have no rights to enforce the following covenants), that
it will not, and will cause its Subsidiaries not to:
7.1 Transactions with Affiliates. Except for transactions described on
----------------------------
Schedule 2.22, enter into any transaction of any kind with any officers or
-------------
directors of the Company or a holder of five percent (5%) or more of the Common
Stock of the Company outstanding or options to purchase such Common Stock or
other securities directly or indirectly convertible or exercisable into such
Common Stock, any member of their respective families, or any corporation or
other entity directly or indirectly controlled by, controlling or under common
control with one or more of such officers, directors or five percent (5%)
stockholders or members of their families, other than (a) transactions between
----------
or among the Company and any Subsidiary, (b) transactions on terms at least as
favorable to the Company and its Subsidiaries as would be the case in an arm's-
length transaction between unrelated parties of equal bargaining power, (c)
payment of reasonable and customary fees paid to members of the board of
directors of the Company, (d) ordinary and usual compensation arrangements for
officers, and (e) transactions approved by a majority of the disinterested
directors of the Company's or applicable Subsidiary's board of directors.
7.2 Mergers and Consolidations. Merge, combine or consolidate with or into
--------------------------
any other entity, except (i) mergers, combinations and consolidations of a
Subsidiary into another Subsidiary or into the Company, (ii) mergers,
combinations or consolidations of a Subsidiary with another entity for the
purpose of effecting an acquisition, or a disposition of all or a part of the
stock or assets of such Subsidiary, (iii) mergers, combinations and
consolidations of the Company with another entity, provided that the Company is
the surviving corporation in such
29
merger, combination or consolidation or (iv) mergers, combinations and
consolidations of the Company with another entity in which the Company does not
survive, provided that the survivor is a corporation organized under the laws of
the United States and expressly assumes all obligations of the Company under
this Agreement.
7.3 Issuance of Senior or Pari Passu Equity Securities. Issue any
--------------------------------------------------
preferred stock or other equity securities that rank senior to or pari passu
with the Senior Preferred Stock or the Bridge Preferred Stock in respect of the
right to receive dividends or to receive distributions upon a liquidation or
dissolution of the Company (including upon change of control events).
7.4 Restricted Payments.
-------------------
(1) Declare or pay any dividend on, or make any distribution to
the holders (as such) in respect of any shares of capital stock of the
Company or any Subsidiary, except to the Company or another directly
or indirectly wholly-owned Subsidiary; or
(2) Purchase, redeem or otherwise retire for value any capital
stock of the Company or any Subsidiary (other than any such capital
stock owned by the Company or any other directly or indirectly wholly
owned Subsidiary), excluding repurchases of stock in an aggregate
amount not to exceed $250,000 in any fiscal year of the Company; and
excluding capital stock deemed to be repurchased upon exercise of
stock options or warrants if such capital stock represents a portion
of the exercise price of such options or warrants (i.e., a "cashless
----
exercise").
7.5 Incurrence of Indebtedness. Incur any Indebtedness if, as a result of
--------------------------
such incurrence, the Company and its Subsidiaries would have outstanding
Indebtedness in excess of $400 million in aggregate principal amount on a
consolidated basis. For purpose of the foregoing, (A) "Indebtedness" means, as
------------
to any person, (a) all indebtedness of such Person for borrowed money, (b) that
portion of the obligations of such Person under capital leases which is properly
recorded as a liability on a balance sheet of that Person prepared in accordance
with generally accepted accounting principles, (c) any obligation of such Person
that is evidenced by a promissory note or other instrument representing an
extension of credit to such Person, whether or not for borrowed money, (d) any
obligation of such Person for the deferred purchase price of Property or
services (other than trade or other accounts payable in the ordinary course of
----------
business in accordance with customary terms), (e) any obligation of such Person
that is secured by a lien on assets of such Person, whether or not that Person
has assumed such obligation or whether or not such obligation is non-recourse to
the credit of such Person, but only to the extent of the fair market value of
the assets so subject to the lien, (f) obligations of such Person arising under
acceptance facilities or under facilities for the discount of accounts
receivable of such Person and (g) obligations of such Person for unreimbursed
draws under letters of credit issued for the account of such Person and (B)
"Person" means any entity, whether an individual, trustee, corporation, general
partnership, limited partnership, joint stock company, limited liability
company, business trust, trust,
30
estate, unincorporated organization, business association, firm, joint venture,
government agency, or otherwise.
7.6 Redemption of Bridge Preferred Stock. Subject to Section 7.7, if the
------------------------------------
Company issues additional Shares and Warrants to existing stockholders of the
Company in a Subsequent Closing, and if and to the extent that the Executive
Committee of the Company's Board of Directors determines in its good faith
judgment that the Company's current and reasonably foreseeable working capital
needs have been provided for, then the Company will make an offer to each
Investor holding Bridge Preferred Stock to redeem, at the option of such
Investor and on a pro rata basis, Bridge Preferred Stock held by such Investor
on or before the 60th day following the Subsequent Closing, in accordance with
Section 6 of the Amended Certificate (except that redemption will be at the
option of the Investor), with and to the extent of the net proceeds of the sale
of Shares in the Subsequent Closing.
7.7 Limitation on Conversion of Bridge Preferred Stock. If the Company
--------------------------------------------------
gives notice of a redemption of Bridge Preferred Shares in accordance with
Section 6 of the Amended Certificate with and to the extent of the net proceeds
of any issuance of equity securities to (i) ▇▇▇▇ Capital or its affiliates, (ii)
existing stockholders of the Company pursuant to Section 8 of the Amended
Stockholders Agreement or (iii) other investors identified prior to the Initial
Closing by mutual agreement of the Company and ▇. ▇. ▇▇▇▇▇▇▇ & Co., then in any
such event the Investors holding Bridge Preferred Shares agree to refrain from
exercising their conversion rights set forth in Article Four, Section 5 of the
Amended Certificate for a period beginning on delivery of the applicable
redemption notice and ending on the applicable redemption date, provided that
full payment is made for such shares on such date. Any Investor who sells or
transfers Bridge Preferred Shares shall obtain the written agreement of its
transferee, for the benefit of the Company, to comply with the requirements of
this Section 7.7.
8. Miscellaneous.
-------------
8.1. Certain Defined Terms. As used in this Agreement, the term "Person"
--------------------- ------
shall mean an individual, corporation, trust, partnership, joint venture,
unincorporated organization, government agency or any agency or political
subdivision thereof, or other entity.
8.2. Survival of Covenants; Assignability of Rights. All covenants,
----------------------------------------------
agreements, representations and warranties of the Company made herein and in the
certificates, lists, exhibits, schedules or other written information delivered
or furnished to any Investor in connection herewith shall be deemed material and
to have been relied upon by such Investor, and except that representations and
warranties contained herein shall only survive thirty-six months after the last
Closing, shall survive the delivery of the Shares, and shall bind the Company's
successors and assigns, whether so expressed or not, and, except as provided
otherwise in this Agreement, all such covenants, agreements, representations and
warranties shall inure to the benefit of the Investor's successors and assigns
and to transferees of the Shares, whether so expressed or not.
8.3. Incorporation by Reference. All exhibits and schedules appended to
--------------------------
this Agreement are herein incorporated by reference and made a part hereof.
31
8.4. Parties in Interest. All covenants, agreements, representations,
-------------------
warranties and undertakings in this Agreement made by and on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
8.5. Amendments and Waivers. This Agreement may be amended and any term,
----------------------
covenant, agreement, condition or provision set forth herein may be omitted or
waived (either generally or in a particular instance and either retroactively or
prospectively), upon the written consent of the holders of Shares which
represent more than the Requisite Percentage of the outstanding Class D-2
Preferred Shares or the Common Conversion Shares issuable with respect thereto;
provided that no amendment may increase the financial obligations of any
Investor hereunder or make any other material economic change adverse to any
Investor without the consent of such Investor; and provided further that no
amendment may be made to Section 7 of this Agreement without the consent of
holders of 66% of the outstanding Senior Preferred Shares and Bridge Preferred
Shares, voting together for this purpose as a single class. The "Requisite
---------
Percentage" shall be 85% prior to the Initial Closing and 80% thereafter.
----------
8.6. Governing Law. This Agreement shall be deemed a contract made under
-------------
the laws of the state of Delaware and, together with the rights of obligations
of the parties hereunder, shall be construed under and governed by the laws of
the state of Delaware, without regard to the conflicts of law provision thereof.
8.7. Notices. All notices, requests, consents and demands shall be in
-------
writing and shall be personally delivered, mailed, postage prepaid, telecopied
or telegraphed :
To the Company: HOB Entertainment, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or to each Investor at its address set forth on Exhibit A hereto, or such other
---------
requests, demands and other communication shall, when mailed (registered or
certified mail, return receipt requested, postage prepaid), personally
delivered, or telegraphed, be effective four days after deposit in the mails,
when personally delivered, or when delivered to the telegraph company,
respectively, addressed as aforesaid, unless otherwise provided herein and, when
telecopied, shall be effective upon actual receipt.
8.8. Subsidiaries. The financial statements of the Company described in
------------
Section 6.1 shall include all subsidiaries of the Company, whether now owned or
-----------
hereafter acquired to the extent required by generally accepted accounting
principles and the other covenants, and
32
obligations of the Company set forth in this Agreement hereof shall apply where
relevant to such subsidiaries as well as the Company.
8.9. Effect of Headings. The section and paragraph headings herein are for
------------------
convenience only and shall not affect the construction hereof.
8.10. Entire Agreement. This Agreement and the Exhibits and Schedules
----------------
hereto together with any other agreement referred to herein (the "Additional
----------
Agreements") constitute the entire agreement among the Company and the Investors
----------
with respect to the subject matter hereof. This Agreement and such Additional
Agreements supersede all prior agreements between the parties with respect to
the subject matter hereof.
8.11. Severability. The invalidity or unenforceability of any provision
------------
hereof shall in no way affect the validity or enforceability of any other
provision.
8.12. Counterparts. This Agreement may be executed in counterparts, all of
------------
which together shall constitute one and the same instrument.
8.13. Fees and Expenses. (a) The parties will pay all of their respective
-----------------
expenses incurred by them in connection herewith, except that upon the Initial
Closing, the Company will reimburse Chase, ▇. ▇. ▇▇▇▇▇▇▇ and First Union (the
"Principal Investors") and S.A. Blues on demand for all reasonable out-of-pocket
--------------------
fees and expenses incurred by them or their affiliates, including reasonable
fees and expenses of counsel, fees under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act and other governmental filing fees, if any (such ▇▇▇▇-▇▇▇▇▇
▇▇▇▇▇▇ and other filing fees, the "Filing Fees"), and travel-related expenses.
In the event that Closing does not occur as a result of the failure of any
condition set forth herein or otherwise (other than as a result of a willful
breach by a Principal Investor), all reasonable costs and expenses, including
costs of conducting due diligence (but excluding Filing Fees) incurred by the
Principal Investors will be shared by them pro rata based on their aggregate
commitment amounts; provided, however, that the Company will reimburse any
Principal Investor for all such reasonable costs and expenses incurred by it
(including Filing Fees) if the Company completes the sale of its equity
securities for an aggregate purchase price of at least $20,000,000 on or before
the first anniversary of the date hereof, and such Principal Investor purchases
at least $5,000,000 of such equity securities.
(b) At each Closing, the Company will pay each Investor a closing fee
equal to 3% of the aggregate liquidation preference of the Senior Preferred
Stock purchased by such Investor, and, at the Initial Closing, an advisory fee
of $3,000,000 in the aggregate to certain Investors as follows: $250,000 to
First Union, $250,000 to S.A. Blues (provided that it purchases Shares for an
aggregate purchase price of at least $15,000,000 pursuant to this Agreement) and
the balance to Chase and ▇.▇. ▇▇▇▇▇▇▇ (or their respective designees) in equal
amounts. With regard to the portion of such advisory fees payable to ▇. ▇.
▇▇▇▇▇▇▇ or its designees, $781,250 shall be payable to ▇.▇. ▇▇▇▇▇▇▇ III
Management, L.L.C., and $468,750 shall be payable to Whitney Market Value Fund
Management Company, L.L.C.
33
8.14 Attorneys' Fees. In the event of any action brought by any party
---------------
hereto to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees and expenses.
8.15 Termination of Agreement. This Agreement shall terminate on the
------------------------
earlier to occur of the twelve month anniversary hereof and the date upon which
the UCI Stock Purchase Agreement terminates in accordance with its terms.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
34
IN WITNESS WHEREOF, this Purchase Agreement for Class D-2 Preferred
Stock, 12% Senior Redeemable Preferred Stock, Senior Convertible Preferred Stock
and Common Stock Purchase Warrants has been executed as of the date first above
written.
COMPANY
HOB ENTERTAINMENT, INC.
By:_________________________________________
Name:____________________________________
Title:___________________________________
35
ADDITIONAL SIGNATURE PAGE TO
PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, this Purchase Agreement for Class D-2 Preferred Stock,
12% Senior Redeemable Preferred Stock, Senior Convertible Preferred Stock and
Common Stock Purchase Warrants has been executed as of
___________________________, 1999.
INDIVIDUAL INVESTOR: ___________________________________
(Signature)
___________________________________
(Printed Name)
CORPORATE OR PARTNERSHIP ___________________________________
INVESTOR: (Name of Corporation or Partnership)
By:_________________________________
Name:____________________________
Title:_____________________________
TRUST INVESTOR: ____________________________________
(Full Name of Trust)
By:_________________________________
(Signature of Trustee)
Amount of each type of security to be purchased:
Class D-2 Preferred Stock: $__________________
Senior Preferred Stock: $__________________
Bridge Preferred Stock: $__________________
Warrants: _______________ (underlying shares)
36