March 9, 1998
SFX Entertainment, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X.X. Sillerman
Re: Acquisition by SFX Entertainment, Inc., a Delaware corporation, or an
affiliate thereof, (as the case may be, "Purchaser"), of one hundred
percent (100%) of the outstanding equity interests in New Avalon,
Inc., and TBA Media, Inc. (collectively d/b/a Avalon Attractions),
Xxxxxx Xxxxxxx Amphitheater and West Coast Amphitheater Corp. (each, a
"Company," collectively, the "Companies") owned severally by Xxxxxx
Xxxxxxx, Inc., Xxxxxx & Xxxx, Inc. and Peach Street Partners, Ltd.,
Xxxxxx X. Xxxxxx, Xxxxxx Xxxxxxxxxxx and Xxxxx X. Xxxxxx (each a
"Seller", collectively, "Sellers"), which equity interests represent
forty-nine percent (49%) of the outstanding equity interest of each of
the Companies
Gentlemen:
This letter agreement (this "Letter Agreement") is intent to set forth
the agreement between Sellers and Purchaser on the terms set forth herein and in
the definitive Acquisition Agreement referred to in paragraph 3 hereof regarding
Purchaser's acquisition of one hundred percent (100%) of the equity interests in
the Companies owned severally by Sellers, which equity interests represent
forty-nine percent (49%) of the outstanding equity interest of each of the
Companies. Sellers represent that the remaining fifty-one percent (51%) of the
equity interests in the Companies is owned by TBA Entertainment Corporation
("TBAEC").
Subject to the conditions set forth herein, Purchaser and Sellers agree
as follows:
1. Purchaser will purchase (the "Acquisition") from Seller (i)
partnership interests representing forty-nine percent (49%) partnership interest
in Xxxxxx Xxxxxxx Amphitheater, a California general partnership ("IMA
Partners"), and (ii) forty-nine percent (49%) of the capital stock or other
equity interests in each of New Avalon, Inc., a California corporation, TBA
Media, Inc., a California corporation and West Coast Amphitheater Corp., a
California corporation (collectively, the "Sellers' Interest"). Xxxxxx X.
Xxxxxx ("Xx. Xxxxxx") represents that the Companies represent all of the "at
risk" music and concert production or promotion businesses and the business
involved in the development of the amphitheater proposed to be constructed in
Camarillo, California (the
SFX Entertainment, Inc.
March 9, 1998
Page 2.
"Camarillo Creek Amphitheater") in which he has an ownership interest,
management interest, or from which he derives any economic advantage, other
than his interest in TBAEC. Purchaser shall have the right to condition its
obligations under the Acquisition Agreement upon the termination prior to the
closing of any contract between any of the Companies and any affiliate of any
of the Companies or of any of Sellers or TBAEC on terms such that Purchaser
shall have no liability with respect to such termination.
2. The aggregate purchase price (the "Purchase Price") payable to
Sellers as a group for the acquisition of Sellers' Interests and the covenants
not to compete will be $17,330,000. The Purchase Price payable to Sellers shall
be payable in multiple installments: (i) $16,830,00 in cash by wire transfer or
certified or cashier's check at closing, and (ii) $500,000 in cash by wire
transfer or certified or cashier's check on May 15, 1998, in the event that
the construction of the Camarillo Creek Amphitheater by Purchaser has been
completed pursuant to construction plans and Purchaser has commenced producing
entertainment events in such amphitheater. The Purchase Price shall be
allocated among Sellers in accordance with separate agreements among themselves.
3. The agreement relating to the Acquisition (the "Acquisition
Agreement") will contain: (i) customary representations and warranties for a
transaction of the proposed nature of the Acquisition including, but not
limited to, representations and warranties regarding (a) Authorization and
Binding Obligation; (b) Taxes; (c) Real Property (including land use and
zoning issues); (d) Contracts; (e) Environmental Matters; (f) Financial
Statements; (g) Personal Information; (h) Litigation; (i) Compliance with the
Laws; (j) State of Title to Assets and Real Property; and (k) Organization and
Standing; (ii) conditions relating to the operation of the entities comprising
the Companies in the normal course in accordance with good commercial practice
and prior established practices of the Companies, including but not limited to
(a) maintenance of insurance as appropriate and in accordance with past
practices; (b) preservation of the business relations of the Companies, both
contractual and otherwise, with suppliers, customers, employees and patrons;
and (c) maintenance of the Companies' physical assets in accordance with
governmental regulations and sound commercial practices; (iii) provisions
for the survival of all representations for a reasonable period after closing
(except that environmental-related representations and warranties shall survive
for a period of four years and tax and employment related representations and
warranties shall survive until the expiration of any applicable statute of
limitations including any voluntary extensions thereof); (iv) customary
indemnifications for the benefit of Purchaser with respect to the operations of
the Companies prior to the closing and for benefit of Sellers with respect to
the operations of the Companies after the closing, which indemnifications shall
not be triggered until at least $50,000 of claims have accrued and, as to
Sellers, shall be prorated in proportion to
SFX Entertainment, Inc.
March 9, 1998
Page 3.
their respective interests in the total outstanding equity interests in the
Companies; (v) a provision regarding the proration of expenses and revenue as of
the closing; and (vi) an allocation of the Purchase Price.
4. The closing of the Acquisition will be conditioned upon the
delivery by Sellers to Purchaser at the closing of all necessary consents to
the Acquisition so that Purchaser shall enjoy the same benefits of ownership
of the Companies as Sellers currently enjoy, and shall condition the closing
of the Acquisition upon, among other things; (i) the continued truth and
accuracy of the representations and warranties contained in the Acquisition
Agreement; (ii) the maintenance of the businesses of the Companies free of
material adverse damage of change; (iii) the continued conduct of the
business of the Companies in accordance with present practices; (iv) the
delivery of customary legal opinions including, without limitation, a zoning
opinion (unless Sellers provide a zoning endorsement to title coverage by
Seller's title insurance company); (v) the delivery of consolidated audited
financial statements for 1995, 1996 and 1997 from Xxxxxx Xxxxxxxx & Co.; (vi)
Purchaser's ability to obtain, at standard rates, leasehold title insurance;
and (vii) the termination of any Xxxx-Xxxxx-Xxxxxx Act waiting periods, if
applicable.
5. During the period from the date this letter is signed (the "Signing
Date") until the closing, Sellers will afford Purchaser full and free access to
the properties, contracts, books and records and all other documents and data
of Sellers relating to the Companies so that Purchaser can complete its
due diligence examinations of the Companies (including environmental and
engineering reviews).
6. Xx. Xxxxxx agrees that following the closing through the earlier of
completion of development of the Camarillo Creek Amphitheater of December 31,
1998, he will provide consulting services to Purchaser with respect to such
development at such times and on such terms as Purchaser and Xx. Xxxxxx may
reasonably determine; provided, however, that Xx. Xxxxxx shall assume no
liability with respect to such services and Purchaser shall agree to indemnify
Xx. Xxxxxx from and against and all liabilities that may arise with respect
to the development of the Camarillo Creek Amphitheater, except for liabilities
that may arise with respect to Xx. Xxxxxx' xxxxx negligence of wilful misconduct
or that are a result of a material misrepresentation of Xx. Xxxxxx in the
Acquisition Agreement.
7. At the Closing, Purchaser will, subject to receipt of the approval
of the Companies, offer the assume the Companies' existing employment
agreements with each of Xxxxx X. Xxxxxx, dated January 1, 1998, Xxxxx Xxxxxx,
dated January 1, 1998, and Xxxx
SFX Entertainment, Inc.
March 9, 1998
Page 4.
Xxxxx, dated January 1, 1998. In that event, Purchaser and the other parties
thereto will amend such contracts effective at closing to provide cash incentive
compensation and equity-based incentive compensation commensurate with
Purchaser's executives having similar responsibility.
8. Purchaser confirms to Sellers that it has the financial ability to
consummate the Acquisition as provided for herein or has the ability to obtain
financing for the Acquisition on terms and conditions satisfactory to Purchaser.
9. For the two (2) year period beginning on the date of closing of the
Acquisition, without the prior written consent to Purchaser, except for Xxxxx
X. Xxxxxx'x employment, if any, with Purchaser, Sellers shall not, directly or
indirectly, as a director, officer, agent, employee, consultant, or independent
contractor, or in any other individual or representative capacity (i) develop,
construct, operate or manage venues within the greater Los Angeles, California
area which shall include, but not be limited to, Los Angeles, Ventura and
Santa Xxxxxxx Counties, (ii) act in any such capacity with any business
engaged in the production or promotion of "at risk" music or concert
productions or promotions in the greater Los Angeles, California area, or
(iii) develop, construct, operate or manage a venue in Portland, Oregon. It is
specifically understood that Xxxxxx Xxxxx is not subject to any obligation
under this paragraph 9.
10. From the Signing Date to the closing of the Acquisition, Sellers
covenant and agree that no Seller shall authorize or knowingly permit any
officer, director, shareholder or employee of, or any investment banker,
attorney, accountant or other representative retained by, any Seller to make,
solicit, initiate, encourage or respond to a submission of a proposal or offer
from any person or entity (other than Purchaser or Purchaser) relating to the
liquidation, dissolution, recapitalization, merger, consolidation, acquisition
or purchase of all or a material portion of the assets of any of the Companies,
or the outstanding equity interests of any of the Companies, or other similar
transaction or business combination involving any of the Companies
(hereinafter collectively referred to as a "Third Party Offer"). Sellers will
immediately cease and cause to be terminated any contracts or negotiations
currently pending with respect to Third Party Offers, if any.
11. For the two (2) year period beginning on the date of closing of the
Acquisition, no Seller may, on his or its own behalf or on behalf of any other
person, partnership, association, corporation, or other entity, hire or solicit
any employee of any of the Companies, or any affiliate thereof, who is an
employee of any of the Companies, or any affiliate thereof, subsequent to the
closing of the Acquisition (an "Employee") or in any manner attempt to influence
or induce any Employee to leave the employment of any of the Companies;
provided, however, nothing in this paragraph 11 shall prevent a Seller
SFX Entertainment, Inc.
March 9, 1998
Page 5.
from hiring, or soliciting to hire, any Employee who is terminated by any of
the Companies, or any affiliate thereof, during such two (2) year period.
Purchaser acknowledges that certain general and administrative employees of the
Companies may terminate their employment prior to the closing of the
Acquisition.
12. Purchaser's obligations under the Acquisition Agreement is subject
to the condition that, from the Signing Date until the closing of the
Acquisition, none of the Companies will, unless approved in writing by
Purchaser, which approval shall not be unreasonably withheld, enter into any
contract with a value in excess of $50,000.00 (except artist's agreements) or
with a term in excess of one (1) year. If Purchaser does not notify Sellers of
its approval or disapproval of any matter submitted for its approval pursuant
to this paragraph 12 within three (3) business days after its receipt of a
request for approval, the matter shall have been deemed to have been approved
by Purchaser.
13. Financial statements of the Companies are attached on Exhibit "A"
attached hereto (collectively, the "Financial Statements"). To the knowledge of
Sellers, the Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods covered thereby. The Financial Statements present fairly the financial
condition of each of the Companies as of the dates for which they were
prepared, and the results of operations and changes in financial position for
such periods.
14. This Letter Agreement constitutes a binding agreement between the
parties hereto as to the matters set forth above and will inure to the benefit
of the parties and their respective successors and assigns. The execution of
this Letter Agreement has been approved by all necessary organizational action
by each of the organization signatories hereto. This Letter Agreement
contemplates, however, that the parties will negotiate in good faith and enter
into a mutually acceptable definitive Acquisition Agreement which sets forth,
among other things, the provisions described in paragraphs 1 through 13 above.
15. The parties hereto agree to use their best efforts to close the
Acquisition on or prior to March 23, 1998, subject to extension for the sole
purpose of obtaining required regulatory approvals. The parties hereto agree to
cooperate to expeditiously obtain such regulatory approvals. In the event that
the Acquisition is not consummated on or before March 26, 1998, through no
fault of Sellers (with "fault" including material misrepresentations of Sellers
in the negotiation of this Letter Agreement and the Acquisition Agreement)
subject to extension for the sole purpose of obtaining required regulatory
approvals), (i) Purchaser shall pay to Sellers on such date an amount in cash
equal to $1,500,000 and (ii) Purchaser shall, at the request of IMA Partners,
cause Pavilion Partners, a Delaware general partnership ("Pavilion"), to enter
into an amendment to that
SFX Entertainment, Inc.
March 9, 1998
Page 6.
certain Partnership Agreement for Western Amphitheater Partners (the "WAP
Agreement"), among Pavilion and IMA Partners, providing, solely as it relates
to Sellers, that effective as of March 26, 1998, the provisions of (i) Section
14.01 thereof restricting the right of IMA Partners to sell the Xxxxxx Xxxxxxx
Amphitheater, (ii) Section 14.02 thereof offering a second right of refusal to
Pavilion to purchase the partnership interests of IMA Partners, and (iii)
Article 18 thereof restricting the right of IMA Partners to transfer its
interest in Western Amphitheater Partners, shall terminate and shall no longer
be of any force and effect against IMA Partners or its partners.
16. Except as otherwise provided herein, this Letter Agreement may be
amended or modified only by a writing executed by all of the parties.
Prior to the consummation of the transactions contemplated herein, no
party hereto shall make any public release, statement or communication of any
information regarding, or otherwise disclose any information with respect to,
the matters contemplated herein except (i) that the parties hereto shall
continue such communications with directors, employees, customers, suppliers,
franchisees, lenders, lessors, shareholders, partners and other particular
groups as may be legally required or necessary or appropriate and not
inconsistent with the best interests of the other parties for the proper
consummation of the transactions contemplated herein, and (ii) as required by
law.
Please sign and date this letter in the space provided below to
confirm your understandings and agreements as set forth in this Letter
Agreement and return the signed copy thereof to the undersigned by fax to Xx.
Xxxxxx at (000) 000-0000 and by return mail to 00000 Xxxxxxx Xxxxxxxxx, Xxxxx
000, Xxxxxx Xxxxxxxxxx 00000. If agreed to, the parties shall proceed in good
faith and with collective best efforts to enter into a mutually acceptable
Acquisition Agreement and other related documents.
Each of Purchaser on the one hand and Sellers on the other hand will
be solely responsible for and bear all of their respective expenses, including,
without limitations, expenses of legal counsel, accountants and other advisors,
incurred at any time in connection with all negotiations and efforts to enter
into the Acquisition Agreement and any other related agreement and the
transactions contemplated thereby. This Letter Agreement may be executed in
counterparts, each of which shall be deemed and an original, and such
counterparts shall constitute but one and the same letter.
If this Letter Agreement is accepted, all parties agree to cooperate
promptly and negotiate in good faith in preparation of the Acquisition
Agreement and all other documents to effect this transaction. If the parties
fail to agree on the terms and conditions of the Acquisition Agreement or there
is any other dispute or controversy
SFX Entertainment, Inc.
March 9, 1998
Page 7.
between the parties with respect to or arising under this Letter Agreement or
any amendment or modification hereof that has not been resolved within thirty
(30) days from the date hereof, such dispute shall be resolved by arbitration
in Los Angeles, California in accordance with the Rules for Commercial
Arbitration of the American Arbitration's Association before a panel of three
(3) arbitrators, one appointed by Xxxxxxxxx, one appointed by Sellers, and
the third appointed by said association. In such event, the parties shall have
the right to submit examples of ordinary and customary agreements of the
nature of the agreements under dispute to the arbiration panel for review
together with this Letter Agreement. The decision and judgment or other may
be entered thereon by any court of competent jurisdiction and that decision and
judgment or order may include termination of negotiations and this Letter
Agreement and specific performance, it being agreed that the parties prefer
specific performance. The service of any notice, process, motion or other
document in connection with any arbitration under this Letter Agreement or the
enforcement of any arbitration award hereunder may be effected either by
personal service upon a party or by certified mail duly addressed to him or it,
or to his or its executors, administrators, personal representatives,
successors or assigns, at the last known address or addresses of such party or
parties.
Sincerely yours,
XXXXXX XXXXXXX, INC.*
By: /s/ Xxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxx, President
(*With respect to IMA Partners)
PEACH STREET PARTNERS, LTD.*
By: Imus, Inc., its general partner
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Xxxx X. Xxxxxxx, President
(*With respect to IMA Partners)
SFX Entertainment, Inc.
March 9, 1998
Page 8.
XXXXXX & XXXX, INC.*
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Xxxxxx X. Xxxxxx, President
(*With respect to IMA Partners)
/s/ Xxxxxx X. Xxxxxx
-----------------------------------
(*With respect to New Avalon, Inc.,
TBA Media, Inc., and West Coast
Amphitheater Corp.)
/s/ Xxxxxx Xxxxxxxxxxx
-----------------------------------
Xxxxxx Xxxxxxxxxxx*
(*With respect to New Avalon, Inc.,
TBA Media, Inc. and West Coast
Amphitheater Corp.)
/s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx*
(*With respect to New Avalon, Inc.,
TBA Media, Inc. and West Coast
Amphitheater Corp.)
SFX Entertainment, Inc.
March 9, 1998
Page 9.
AGREED TO AND ACCEPTED THIS
___ DAY OF MARCH, 1998:
SFX ENTERTAINMENT, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxx,
President and Chief Executive Officer
Joined in by the undersigned to evidence its consent to the Acquisition
and its waiver of its rights under Section 14.02 of the WAP Agreement.
PAVILION PARTNERS
By: SM/PACE, Inc.
By: /s/ Xxxxx Xxxxxx
-----------------------
Xxxxx Xxxxxx
March 9, 1998
SFX Entertainment, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
This letter shall serve as an amendment to that certain Letter Agreement of
such date herewith between the parties hereto (the "Agreement").
Notwithstanding any provision of the Agreement to the contrary, the obligation
of Purchaser (as that term is defined in the Agreement) to close the
transactions contemplated by the Agreement shall be conditioned upon the
simultaneous closing by the Purchaser of interests representing 100% of the
partnership interests or equity in each of the Companies (as defined in the
Agreement).
This letter may be executed in multiple counterparts, each of which shall be
deemed an original, and such counterparts shall constitute one and the same
letter.
Sincerely yours,
Agreed and Accepted: /s/ Xxxxxx Xxxxx
--------------------------
SFX ENTERTAINMENT, INC. XXXXXX XXXXX*
(*With respect to Xxxxxx Xxxxxxx, Inc.)
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------ /s/ Xxxxxx X. Xxxxxx
Name: --------------------------
Title: XXXXXX X. XXXXXX
(*With respect to Xxxxxx & Xxxx, Inc.,
New Avalon, Inc., TBA Media, Inc. and
