EXHIBIT 2.1
DISTRIBUTION AGREEMENT
DATED AS OF ____________, 1998
AMONG
SFX BROADCASTING, INC.,
SFX ENTERTAINMENT, INC.
AND
SBI HOLDING CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 General......................................................2
ARTICLE II
REORGANIZATION AND RELATED TRANSACTIONS
Section 2.1 The Reorganization...........................................4
Section 2.2 Working Capital Adjustment...................................5
Section 2.3 SFX Approval.................................................8
ARTICLE III
ASSUMPTION AND RETENTION OF LIABILITIES
Section 3.1 Assumed Liabilities..........................................9
Section 3.2 Retained Liabilities.........................................9
Section 3.3 Construction of Agreements...................................9
ARTICLE IV
THE DISTRIBUTION
Section 4.1 The Distribution.............................................9
Section 4.2 Fractional Shares...........................................10
Section 4.3 SFX Employees...............................................11
Section 4.4 SFX Board Action............................................11
Section 4.5 Registration and Listing; SEC Filings.......................11
Section 4.6 Third Party Consents........................................12
Section 4.7 Waivers.....................................................12
Section 4.8 Termination of Merger Agreement.............................12
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ARTICLE V
SURVIVAL; MUTUAL RELEASE AND INDEMNIFICATION
Section 5.1 Survival and Indemnification................................12
Section 5.2 Mutual Release, Etc.........................................13
Section 5.3 Indemnification.............................................14
Section 5.4 Procedure for Indemnification...............................16
ARTICLE VI
TAX MATTERS
Section 6.1 Prior Tax Sharing Agreements................................18
Section 6.2 Tax Sharing Agreement.......................................18
ARTICLE VII
CERTAIN ADDITIONAL MATTERS
Section 7.1 Conveyancing and Assumption Instruments.....................18
Section 7.2 No Representations or Warranties............................19
Section 7.3 Further Assurances; Subsequent Transfers....................19
Section 7.4 Entertainment Board.........................................20
Section 7.5 Resignations................................................20
Section 7.6 Sales and Transfer Taxes....................................20
Section 7.7 Change of Name..............................................20
ARTICLE VIII
ACCESS TO INFORMATION AND SERVICES
Section 8.1 Provision of Corporate Records..............................21
Section 8.2 Access to Information.......................................21
Section 8.3 Retention of Records........................................21
Section 8.4 Confidentiality.............................................21
Section 8.5 Privileged Matters..........................................22
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ARTICLE IX
INSURANCE
Section 9.1 General.....................................................22
Section 9.2 Certain Insured Claims......................................23
ARTICLE X
CONDITIONS
Section 10.1 Conditions..................................................23
ARTICLE XI
MEDIATION
Section 11.1 Mediation and Binding Arbitration...........................24
Section 11.2 Initiation..................................................24
Section 11.3 Submission to Mediation.....................................24
Section 11.4 Selection of Mediator.......................................24
Section 11.5 Mediation...................................................24
Section 11.6 Selection of Arbitrator.....................................25
Section 11.7 Cost of Arbitration.........................................25
ARTICLE XII
MISCELLANEOUS
Section 12.1 Complete Agreement..........................................25
Section 12.2 Governing Law...............................................25
Section 12.3 Notices.....................................................25
Section 12.4 Amendment and Modification..................................26
Section 12.5 Termination.................................................26
Section 12.6 Successor and Assigns.......................................27
Section 12.7 No Third Party Beneficiaries................................27
Section 12.8 Counterparts................................................27
Section 12.9 Interpretation..............................................27
Section 12.10 Annexes, Etc................................................27
Section 12.11 Legal Enforceability........................................27
Annex I ASSUMED LIABILITIES.............................................I-1
Annex II TRANSFERRED ASSETS..............................................II-1
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated as of ______________, 1997, by and
between SFX Broadcasting, Inc., a Delaware corporation ("SFX"), and SFX
Entertainment, Inc., a Delaware corporation and a wholly-owned subsidiary of
SFX ("Entertainment"). Capitalized terms used and not defined herein have the
respective meanings ascribed them in the Merger Agreement. Unless the context
requires otherwise, "SFX" refers to SFX and its subsidiaries (other than
Entertainment and its subsidiaries) and "Entertainment" refers to Entertainment
and its subsidiaries.
WHEREAS, SFX has entered into that Agreement and Plan of Merger dated
as of August 24, 1997, among SBI Holding Corporation, a Delaware corporation
("Parent"), SBI Radio Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and SFX pursuant to which SFX will
become a wholly-owned subsidiary of Parent (the "Merger Agreement");
WHEREAS, Entertainment has, among other endeavors, been engaged in the
business of venue ownership, operation and management and the booking,
promotion and/or production of entertainment events, including, without
limitation, related merchandising, concession management and Internet-based
marketing through its wholly owned subsidiary SFX Concerts, Inc., formerly
known as Delsener/Xxxxxx Enterprises, Inc., and its Subsidiaries and Affiliates
(the "Transferred Businesses"), which Transferred Businesses are principally
outside the scope of SFX's core radio broadcasting business;
WHEREAS, the Board of Directors of SFX has determined that the
interests of SFX's stockholders would be best served by restructuring the
ownership of the Transferred Businesses and ownership of the core radio
broadcasting business prior to the Merger as contemplated by Section 5.07 of
the Merger Agreement;
WHEREAS, SFX wishes to transfer and assign to Entertainment all of the
Transferred Assets as specified in this Agreement in exchange for the
assumption by Entertainment of the Assumed Liabilities as specified in this
Agreement;
WHEREAS, Entertainment is willing to assume such Assumed Liabilities;
WHEREAS, SFX intends to distribute all of the outstanding shares of
the Class A Common Stock, par value $.01 per share, of Entertainment (the
"Entertainment Class A Common Stock") and the Class B Common Stock of
Entertainment, par value $.01 per share (the "Entertainment Class B Common
Stock" and, together with the Entertainment Class A Common Stock, the
"Entertainment Common Stock"), owned by SFX to the holders of (i) the common
stock of SFX (the "SFX Common Stock"), (ii) the 6 1/2% Series D Cumulative
Convertible Exchangeable Preferred Stock due May 31, 2007 of SFX (the "Series D
Preferred Stock"), (iii)
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interests in the SFX Director Deferred Stock Ownership Plan dated as of January
1, 1997 (the "SFX Director Deferred Stock Ownership Plan") and (iv) certain
warrants of SFX, with the holders of the Class A Common Stock, par value $.01
per share, of SFX (the "SFX Class A Common Stock"), the Series D Preferred
Stock, interests in the SFX Director Deferred Stock Ownership Plan and certain
warrants of SFX receiving Entertainment Class A Common Stock and the holders of
the Class B Common Stock, par value $.01 per share, of SFX (the "SFX Class B
Common Stock") receiving Entertainment Class B Common Stock (such distribution
hereinafter referred to as the "Distribution") on the Distribution Date (as
hereinafter defined);
WHEREAS, SFX and Entertainment have determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect the Distribution and to set forth other agreements that will govern
certain other matters in connection with the Distribution; and
WHEREAS, Parent has joined as a signatory to this Agreement in order
to preserve and protect its rights under the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and intending to be legally bound
hereby, SFX and Entertainment hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 General. As used in this Agreement, capitalized terms
defined immediately after their use shall have the respective meanings thereby
provided and the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
Action: any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: with respect to any specified person, a person that,
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified person;
provided, however, that SFX and Entertainment shall not be deemed to be
Affiliates of each other for purposes of this Agreement.
Agent: ChaseMellon Shareholder Services, LLC, the distribution agent
appointed by SFX to distribute shares of Entertainment Common Stock pursuant to
the Distribution.
Assumed Liabilities: collectively, all of the Liabilities and other
obligations of SFX listed on Annex I hereto.
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Books and Records: the books and records of SFX (or true and complete
copies thereof), including all computerized books and records owned by SFX,
which relate principally to the Transferred Businesses and are necessary for
Entertainment to operate the Transferred Businesses, including, without
limitation, all such books and records relating to Employees, the purchase of
materials, supplies and services, the sale of products by the Transferred
Businesses or dealings with customers of the Transferred Businesses and all
litigation files relating to any Action being assumed by Entertainment as part
of the Assumed Liabilities.
Code: the Internal Revenue Code of 1986, as amended.
Conveyancing and Assumption Instruments: collectively, the various
agreements, instruments and other documents to be entered into in order to
effect the transfer to Entertainment of Transferred Assets, and the assumption
by Entertainment of the Assumed Liabilities in the manner contemplated by this
Agreement, each of which shall be in a form reasonably satisfactory to Parent.
Distribution Date: the date as of which the Distribution shall be
effected as determined by the SFX Board of Directors which, in any event, shall
be a date on or prior to the Closing Date.
Distribution Employees: the employees of SFX listed on Section 5.07(h)
of the Company Disclosure Schedule to the Merger Agreement.
Employee: the Distribution Employees and any employee shown on the
records of SFX as being employed by SFX and assigned to the Transferred
Businesses as of the Distribution Date, including any laid-off Employee or any
Employee on leave of absence.
Exchange Act: the Securities Exchange Act of 1934, as amended.
Form 8-A: the registration statement on Form 8-A to be filed by
Entertainment with the SEC to effect the registration of the Entertainment
Class A Common Stock pursuant to the Exchange Act.
Guarantees: the guarantees provided by SFX in connection with the
following agreements: (i) Agreement and Plan of Merger and Asset Purchase
Agreement, dated as of December 10, 1997 by and among SFX Entertainment, Inc.,
Contemporary Investments Corporation, Contemporary Investments of Kansas, Inc.,
Contemporary International Productions Corporation, Xxxxxx X. Schanman Living
Trust, Xxxxxx X. Xxxxxxxxx Living Trust, Xxxxxx X. Xxxxxxxxx and Xxxxxx X.
Xxxxxxxxx, (ii) Stock and Asset Purchase Agreement, dated December 2, 1997, by
and among SFX Network Group, L.L.C. and SFX Entertainment, Inc., and Xxxxx X.
Xxxx, individually and as Trustee under the Bird Family Trust, Xxxx X. Xxxx,
individually and as Trustee under the Xxxx X. Xxxx Corporation Trust, Xxxxxxx
X. Xxxxx, individually and as Trustee under the Xxxxx Family Trust, June X.
Xxxxx, Xxxxxx X. Xxxxxx, and The Network 40,
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Inc. and (iii) Stock Purchase Agreement, dated as of December 12, 1997 by and
among Pace Entertainment Corporation and SFX Entertainment, Inc.
Indemnifiable Losses: with respect to any claim by an Indemnitee for
indemnification authorized pursuant to Article V hereof, all losses,
Liabilities, claims, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and reasonable attorneys' fees and expenses in connection therewith) suffered
by such Indemnitee with respect to such claim.
Indemnifying Party: any party who is required to indemnify any other
person pursuant to Article V hereof.
Indemnitee: any party who is entitled to receive indemnification from
an Indemnifying Party pursuant to Article V hereof.
Indemnity Payment: the amount an Indemnifying Party is required to pay
an Indemnitee pursuant to Article V hereof.
Insurance Program: collectively, the series of property and casualty
policies pursuant to which various insurance carriers provide insurance
coverage to SFX (including Entertainment and its subsidiaries) in respect of
claims or occurrences relating to, without limitation, property damage,
business interruption, transit, fire, extended coverage, fiduciary, fidelity,
environmental impairment, employee crime, general liability, products'
liability, automobile liability and employer's liability.
Liabilities: any and all debts, liabilities and obligations, whether
or not accrued, contingent, known or unknown, or reflected on a balance sheet,
including, without limitation, those arising under any law, rule, regulation,
Action, order or consent decree of any governmental entity or any judgment of
any court of any kind or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
Record Date: the date determined by the Board of Directors of SFX as
the record date for the Distribution.
Registration Statement: the registration statement on Form S-1 (Reg.
No. 333-43287) filed by Entertainment with the SEC on December 24, 1997, as
amended, to effect the registration of the Entertainment Class A Common Stock
and Class B Common Stock pursuant to the Securities Act of 1933, as amended.
Related Agreements: the Tax Sharing Agreement and the Employee
Benefits Agreement.
Retained Liabilities: all Liabilities and obligations of SFX other
than the Assumed
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Liabilities.
SEC: the Securities and Exchange Commission.
Transferred Assets: collectively, all of the assets and properties of
SFX identified on Annex II hereto.
ARTICLE 2
REORGANIZATION AND RELATED TRANSACTIONS
Section 2.1 The Reorganization. Subject to the terms and conditions of
this Agreement, SFX and Entertainment shall use their respective best efforts
to cause, prior to the Distribution Date, all of SFX's right, title and
interest in and to the Transferred Assets to be conveyed, assigned, transferred
and delivered to Entertainment, free and clear of all liens or encumbrances in
favor of SFX or its subsidiaries, and all of SFX's duties, obligations and
responsibilities under the Assumed Liabilities to be assumed by Entertainment
(the "Asset and Liability Transfer"). Such transfer and assumption shall be
effected by means of the Conveyancing and Assumption Instruments which shall be
executed and delivered by each of SFX and Entertainment prior to the
Distribution Date. Subject to Section 7.3 hereof, to the extent that any such
conveyances, assignments, transfers and deliveries shall not have been so
consummated on the Distribution Date, SFX and Entertainment shall cooperate to
effect such consummation as promptly thereafter as shall be practicable, it
nonetheless being understood and agreed by SFX and Entertainment that neither
shall be liable in any manner to any person who is not a party to this
Agreement for any failure of any of the transfers contemplated by this Article
II to be consummated on or subsequent to the Distribution Date. Whether or not
all of the Transferred Assets or the Assumed Liabilities shall have been
legally transferred to, or assumed by, Entertainment as of the Distribution
Date, SFX and Entertainment agree that, as of the Distribution Date,
Entertainment shall have, and shall be deemed to have acquired, complete and
sole beneficial ownership over all of the Transferred Assets, together with all
of SFX's and its subsidiaries' rights, powers and privileges incident thereto,
and shall be deemed to have assumed all of the Assumed Liabilities and all of
SFX's and its subsidiaries' duties, obligations and responsibilities incident
thereto in accordance with the terms of this Agreement.
Section 2.2 Working Capital Adjustment.
(a) In the event that the Distribution occurs prior to the Closing
Date, then on the Distribution Date, the management of SFX shall make an
allocation of working capital between Entertainment and SFX, consistent with
the proper operation of SFX in its usual, regular and ordinary course and,
immediately after the effective time of the Distribution, SFX shall deliver to
Entertainment, in immediately available funds by wire transfer to such bank
account as Entertainment shall specify, any positive amount allocated to
Entertainment.
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(b) Not less than five business days prior to the Closing Date, SFX
shall deliver to Entertainment a good faith estimate of Working Capital (as
defined in Section 2.3(d)) as of the Closing Date (the "Estimated Working
Capital") accompanied by a certificate by the Chief Executive Officer and Chief
Financial Officer of SFX certifying that the Estimated Working Capital has been
calculated in accordance with the Merger Agreement and this Agreement. If the
Estimated Working Capital is a positive number, then at the Closing SFX shall
deliver to Entertainment, in immediately available funds by wire transfer to
such bank account as Entertainment shall specify, an amount of cash equal to
the Estimated Working Capital. If the Estimated Working Capital is a negative
number, then at the Closing SFX shall cause Entertainment to deliver, and
Entertainment shall deliver to SFX, in immediately available funds by wire
transfer to such bank account as SFX shall specify, an amount of cash equal to
the Estimated Working Capital.
(c) (i) As soon as practicable after the Closing Date, SFX will
prepare a statement of Working Capital as of the Closing Date, which will be
audited by Ernst & Young LLP (the "Company's Working Capital Statement") at the
expense of SFX. SFX will deliver SFX's Working Capital Statement to
Entertainment as soon as practicable and in any event within ninety days after
the Closing Date. If within fifteen days following delivery of SFX's Working
Capital Statement to Entertainment, Entertainment has not given SFX notice of
its objection to SFX's Working Capital Statement (such notice must contain a
statement of the basis of such objection), then the Working Capital reflected
on SFX's Working Capital Statement shall be deemed final and conclusive and
shall be the "Final Working Capital." If Entertainment gives such notice of
objection within the fifteen day period, then the issues in dispute will be
submitted to a "big six" accounting firm (other than Ernst & Young LLP) to be
selected jointly by Entertainment and Parent within the following fifteen days
or, if they fail to agree, such accounting firm shall be Xxxxxx Xxxxxxxx
(Chicago office) (it being understood that the Chicago office of Xxxxxx
Xxxxxxxx was chosen because of representations made that neither Parent and its
Affiliates, SFX and its Affiliates nor Entertainment and its Affiliates have a
material relationship with such office and if any of such parties prior to the
calculation of the Final Working Capital develops a material relationship with
such office, the party having such a relationship shall promptly notify the
other party of such relationship and the parties will select another office of
Xxxxxx Xxxxxxxx or another "big six" accounting firm with which none of such
parties has a material relationship to serve as the accountants) (the
"Accountants"), for resolution and the Accountants shall determine the "Final
Working Capital" within thirty days after the dispute is submitted to them. If
issues in dispute are submitted to the Accountants for resolution, (A) each
party will furnish to the Accountants such work papers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the
Accountants any material relating to the determination and to discuss the
determination with the Accountants; (B) the determination by the Accountants of
Final Working Capital, as set forth in a notice delivered to both parties by
the Accountants, will be binding and conclusive on the parties; and (C)
Entertainment and SFX will each bear one-half of the fees and expenses of the
Accountants for such determination. SFX shall make its employees and books
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and records available to Entertainment for purposes of verifying Final Working
Capital and shall cause Ernst & Young LLP to make its work papers used in
determining Final Working Capital available to Entertainment.
(ii) On the third business day following the determination of the
Final Working Capital (the "Payment Date"), (A) if the Working Capital
Adjustment Amount (as defined below) is a positive number, then SFX will pay
such amount to Entertainment in immediately available funds by wire transfer to
such bank account as Entertainment shall specify and (B) if the Working Capital
Adjustment Amount is a negative number, then Entertainment will pay such amount
to SFX in immediately available funds by wire transfer to a bank account
specified by SFX. Notwithstanding the foregoing, if Entertainment has notified
SFX in writing prior to the Payment Date that it wishes to have all or any
portion of the Final Working Capital (such amount, the "Consideration
Adjustment") treated as an adjustment to the Class A Common Stock Merger
Consideration and the Class B Common Stock Merger Consideration, the Class A
Common Stock Merger Consideration and the Class B Common Stock Merger
Consideration shall be increased by an amount equal to the quotient of the
Consideration Adjustment divided by the fully diluted number of shares of SFX
Common Stock outstanding immediately prior to the Effective Time, and SFX shall
(X) promptly distribute the appropriate amount to the appropriate holders,
immediately prior to the Effective Time, of SFX Common Stock and Series D
Preferred Stock, (Y) promptly distribute upon exercise the appropriate amount
to holders of Options, Warrants and Unit Purchase Options unexercised
immediately prior to the Effective Time, and (Z) promptly distribute the
appropriate amount to holders of Options, Warrants, and Unit Purchase Options
who exercised such securities on and after the Effective Time and prior to the
Payment Date; provided that as a condition precedent to SFX's obligations under
this sentence, Entertainment shall have paid to SFX in immediately available
funds by wire transfer to an account specified by SFX the difference, if any,
between the Consideration Adjustment and the Working Capital Adjustment Amount
so that the aggregate net amount to be paid or received by SFX, as the case may
be, pursuant to this sentence is equal to the amount that would have been paid
or received, as the case may be, pursuant to the first sentence of this
paragraph had the Consideration Adjustment not been made.
(d) The term "Working Capital" shall mean, as of the point in time
immediately prior to the Effective Time, the sum of all current assets of SFX
and its consolidated Subsidiaries minus the sum of all current liabilities of
SFX and its consolidated Subsidiaries, each as determined in accordance with
GAAP applied on a basis consistent with the balance sheet of SFX as of June 30,
1997 included in Company SEC Documents (provided that no liabilities or
reserves reflected on such balance sheet shall be reduced or eliminated except
by reason of a payment or credit occurring in the ordinary course of business
and consistent with past practices).
Notwithstanding the foregoing, Working Capital shall, without
duplication either in this computation or as between this computation and the
computation of Excess Debt, (i) be increased by the lesser of (A) 50% of all
fees and expenses incurred by SFX in connection with
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acquiring consents from holders of the Series E Preferred Stock and the 2006
Notes in connection with the transactions contemplated by the Merger Agreement
and (B) $1,000,000, (ii) be increased by, if a positive number, or decreased
by, if a negative number, the product of (A) the Class A Common Stock Merger
Consideration and (B) the difference between 15,589,083 less the sum of the
fully diluted number of shares of SFX Common Stock outstanding immediately
prior to the Effective Time (excluding the Xxxxxxx Shares (as defined below))
(calculated in a manner consistent with Section 3.01(c)(i) of the Company
Disclosure Schedule (as defined in the Merger Agreement), such calculation to
include, without limitation, derivative securities that will become issuable
upon consummation of the transactions contemplated by the Merger Agreement),
(iii) be reduced by the difference between $84,554,649 less the sum of (A) the
aggregate exercise price of all Options, Warrants and Unit Purchase Options
outstanding immediately prior to the Effective Time plus (B) the aggregate
exercise price of all Unit Purchase Option Warrants underlying Unit Purchase
Options outstanding immediately prior to the Effective Time plus (C) the
aggregate base price of all SARs outstanding immediately prior to the Effective
Time, (iv) be reduced by the product of (A) $42 and (B) the aggregate number of
shares of SFX Common Stock subject to a right of repurchase in favor of SFX
(the "Xxxxxxx Shares") granted pursuant to that certain Agreement of Merger
dated February 12, 1997 among SFX, Nederlander of Connecticut, Inc. and the
other parties thereto outstanding immediately prior to the Effective Time, (v)
be increased by all capital expenditures paid by SFX and its Subsidiaries after
June 30, 1997 and immediately prior to the Effective Time permitted by Section
4.01(a)(viii) of the Merger Agreement, (vi) be decreased by all accrued capital
expenditures of SFX as of immediately prior to the Effective Time (to the
extent not reflected in current liabilities), (vii) be increased by dividends
that have been accrued immediately prior to the Effective Date whose regularly
scheduled payment date has not then yet occurred, (viii) except as required by
clause (xi) below, exclude any liabilities attributable to Indebtedness, (ix)
exclude any liabilities included in clauses (i) through (v) of the following
sentence, (x) be decreased by unpaid costs, fees and expenses of SFX arising
out of, based upon or that will arise from the transactions contemplated by the
Merger Agreement (other than as a result of actions taken by Sub) (including,
without limitation, amounts related to the termination of any employees, broker
fees, legal, accounting and advisory fees and fees incurred in connection with
third party consents, waivers and amendments of creditors or holders of
Preferred Stock), and (xi) be reduced by the amount of the Excess Debt, if a
positive number, or be increased by the amount of the Excess Debt, if a
negative number.
(e) The term "Excess Debt" shall mean, as of immediately prior to the
Effective Time, the difference between the sum of the following and
$899,700,000: (i) the difference between (A) Indebtedness of SFX and its
consolidated Subsidiaries less (B) the difference between $70,000,000 and any
amounts (other than the reimbursement of expenses) actually received by SFX and
its consolidated subsidiaries after August 24, 1997 under agreements relating
to the sale or LMA (such LMA payments not to exceed $30,000 per month) of its
WVGO-FM and the sale or LMA of its Xxxxxxx/Biloxi radio stations, less (C) any
Indebtedness incurred to finance acquisitions approved by Parent of stock of or
substantially all of the assets of radio stations, less (D) interest accrued as
of immediately prior to the Effective
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Time that is not then due and payable, (ii) the Series B Merger Consideration,
(iii) the Series C Merger Consideration, (iv) the liquidation preference amount
of the Series E Preferred Stock, and (v) Environmental Costs or Liabilities
accrued and not paid after June 30, 1997 to the extent they exceed $100,000 in
the aggregate. "Working Capital Adjustment Amount" shall mean an amount equal
to the Final Working Capital, less the Estimated Working Capital, together with
interest on the absolute value of the difference at 10% per annum beginning on
the Closing Date and ending on the date of payment of the Working Capital
Adjustment Amount as provided in Section 2.02(c)(ii) hereof.
Notwithstanding the foregoing, Working Capital shall not include any
asset transferred to Entertainment or any of its Subsidiaries, any Liability
assumed by Entertainment, or any Liability to which none of SFX or any of its
Subsidiaries is a party immediately after the Effective Time and any such
computation shall assume that the Distribution has been consummated.
(f) All amounts loaned to Entertainment by SFX to (i) acquire (whether
by merger, stock or asset acquisition or otherwise) additional businesses
engaged in the business in which Entertainment is engaged or (ii) make capital
improvements on assets owned or leased by Entertainment, shall be paid by
Entertainment to SFX by wire transfer of immediately available funds to a bank
account specified by SFX on the Distribution Date and shall not be considered
for purposes of computing Working Capital under clause (b) of this Section 2.3.
(g) If the Merger Agreement is terminated for any reason in accordance
with its terms, than the working capital shall be allocated in accordance with
Section 2.3(a) above, and no further adjustments to working capital shall be
made.
Section 2.3 SFX Approval. Prior to the Distribution Date, SFX shall
cooperate with Entertainment in effecting, and if so requested by
Entertainment, SFX shall, as the sole stockholder of Entertainment, ratify any
actions which are reasonably necessary or desirable to be taken by
Entertainment to effectuate the transactions contemplated by this Agreement in
a manner consistent with the terms of this Agreement, including, without
limitation, the following: (a) the election or appointment of directors and
officers of Entertainment to serve in such capacities following the
Distribution Date, and (b) the preparation and implementation of appropriate
plans, agreements and arrangements for Employees (including, without
limitation, plans, agreements or arrangements pursuant to which Entertainment
Common Stock would be acquired by Employees).
ARTICLE 3
ASSUMPTION AND RETENTION OF LIABILITIES
Section 3.1 Assumed Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement and in addition to any other Liabilities
otherwise expressly assumed
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by Entertainment pursuant to this Agreement, the Related Agreements or any
other agreement contemplated by this Agreement, Entertainment hereby agrees
with SFX to assume, pay, perform and discharge in due course any and all
Assumed Liabilities.
Section 3.2 Retained Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement and in addition to any other Liabilities
otherwise expressly retained by SFX pursuant to this Agreement, the Related
Agreements or any other agreement contemplated by this Agreement, SFX hereby
agrees with Entertainment that SFX shall pay, perform and discharge in due
course any and all Retained Liabilities.
Section 3.3 Construction of Agreements. Notwithstanding any other
provisions in this Agreement to the contrary, in the event and to the extent
there shall be a conflict between the provisions of this Agreement and the
Related Agreements (or any Conveyancing and Assumption Instrument or other
instrument of assumption entered into pursuant to this Agreement) and (a) the
provisions of the Merger Agreement then (i) prior to the Effective Time, the
provisions of the Merger Agreement shall control and (ii) subsequent to the
Effective Time, the provisions of this Agreement and the Related Agreements (or
any Conveyancing and Assumption Instrument or other instrument of assumption
entered into pursuant to this Agreement) shall control and (b) the provisions
of any other agreement entered into by SFX or Entertainment, the provisions of
this Agreement and the Related Agreements (and any Conveyancing and Assumption
Instrument or other instrument of assumption entered into pursuant to this
Agreement) shall control.
ARTICLE 4
THE DISTRIBUTION
Section 4.1 The Distribution.
(a) On or prior to the Distribution Date, SFX shall deliver to the
Agent for the benefit of holders of record of SFX Common Stock and Series D
Preferred Stock on the Record Date, (i) certificates representing, in the
aggregate, the number of Entertainment Class A Common Stock equal to the sum of
(A) the number of SFX Class A Common Stock outstanding on the Record Date (B)
the aggregate number of shares of SFX Class A Common Stock credited pursuant to
the SFX Director Deferred Stock Ownership Plan and (C) the product of the
number of Series D Preferred Stock outstanding on the Record date multiplied by
the Conversion Rate (as defined in the certificate of designations governing
the Series D Preferred Stock) and (ii) certificates representing, in the
aggregate, the number of Entertainment Class B Common Stock equal to the number
of SFX Class B Common Stock outstanding on the Record Date. SFX shall instruct
the Agent to distribute as promptly as practicable following the Distribution
Date to holders of the SFX Common Stock, Series D Preferred Stock and interests
in the SFX Director Deferred Stock Ownership Plan on the Record Date (i) one
share of Entertainment Class A Common Stock for every one share of SFX Class A
Common Stock, (ii) one share of
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Entertainment Class A Common Stock for every one share of SFX Class A Common
Stock credited pursuant to the SFX Director Deferred Stock Ownership Plan,
(iii) the number of shares of Entertainment Class A Common Stock equal to the
Conversion Rate (as defined in the Certificate of Designations governing the
Series D Preferred Stock) for every one share of Series D Preferred Stock and
(iv) one share of Entertainment Class B Common Stock for every one share of SFX
Class B Common Stock. Simultaneously with the Distribution, SFX shall place
that number of shares of the Entertainment Class A Common in an escrow account
with an escrow agent selected by SFX and governed by an escrow agreement
reasonably acceptable to SFX and Parent for delivery to the holders of the IPO
Warrants, Xxxx Warrants and SCMC Warrants upon exercise of such warrants that
equals the number of shares of Entertainment Class A Common Stock that the
holders of such warrants would have been entitled to receive if they had
exercised all of their IPO Warrants, Xxxx Warrants and SCMC Warrants
immediately prior to the Record Date. SFX and Entertainment agree to provide to
the Agent sufficient certificates in such denominations as the Agent may
request in order to effect the Distribution. All of the shares of Entertainment
Common Stock issued in the Distribution shall be fully paid, nonassessable and
free of preemptive rights.
(b) The Distribution shall be deemed to be effective on the
Distribution Date.
Section 4.2 Fractional Shares. No certificate or scrip representing
fractional shares of Entertainment Common Stock shall be issued as part of the
Distribution and in lieu of receiving fractional shares, each holder of a
warrant who would otherwise be entitled to receive a fractional share of
Entertainment Common Stock upon exercise of such warrant, after aggregating all
shares of Entertainment Common Stock which such holder would be entitled to
receive under Section 4.1, will receive cash for such fractional share. SFX and
Entertainment agree that Entertainment shall instruct the Agent to determine
the number of whole shares and fractional shares of Entertainment Common Stock
allocable to each holder of record of such warrant as of the date of exercise,
to aggregate all such fractional shares into whole shares and sell the whole
shares obtained thereby in the open market at the then prevailing prices on
behalf of holders who otherwise would be entitled to receive fractional shares
interests and to distribute to each such holder such holder's ratable share of
the total proceeds of such sale. SFX shall bear the costs of commissions
incurred in connection with such sale.
Section 4.3 SFX Employees. If the Distribution occurs prior to the
Closing Date, the Distribution Employees shall continue to be employed by SFX
(at SFX's expense), but shall devote such time as deemed reasonably necessary
to, consistent with their obligations to SFX, in support of the conduct of the
Entertainment Business by Entertainment on a basis consistent with the time and
scope of services that such employees devoted and provided to the Entertainment
Business prior to the Distribution. Effective immediately prior to the
Effective Time, Entertainment shall assume all obligations arising under any
employment agreement or arrangement (written or oral) between SFX or any of its
Subsidiaries and the Distribution Employees other than the rights, if any, of
the Distribution Employees to receive the options upon termination following a
change of control as defined in their respective employment
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agreements (the "Termination Options") immediately prior to the Effective Time
(with such Termination Options being deemed granted as of such time) and all
existing rights to indemnification. SFX and its Subsidiaries, effective as of
the Effective Time (or effective as of the Distribution Date as to any member
of the Distribution Employees that devotes substantially all of his or her
business time to the Entertainment Business), shall be indemnified by
Entertainment from all obligations arising under such employment agreements or
arrangements (except in respect of the Termination Options and all existing
rights to indemnification). Neither party shall, directly or indirectly,
solicit the employment of any employees of the other party or its subsidiaries
(other than as a result of a general solicitation for employment); provided
however that Entertainment may offer to employ the Distribution Employees.
Section 4.4 SFX Board Action.
(a) This Agreement, the Related Agreements and any other agreement
contemplated hereby and the consummation of each of the transactions provided
for herein or therein shall be subject to approval of the Board of Directors of
SFX.
(b) The Board of Directors of SFX, in its discretion, shall establish
the Record Date and the Distribution Date and all appropriate procedures in
connection with the Distribution, subject to the satisfaction or waiver of the
conditions contained in Article X.
Section 4.5 Registration and Listing; SEC Filings.
(a) Prior to the Distribution Date:
(i) SFX and Entertainment shall register the Distribution under
applicable federal and state securities laws if such registration is either
required under applicable law or would otherwise be required to cause the
securities issued in connection with the Distribution to be freely transferable
by Persons not Affiliates with Entertainment. SFX and Entertainment shall use
reasonable efforts to cause the Registration Statement to become effective
under the Securities Act as promptly as reasonably practicable. In connection
with such registration, Entertainment shall file a Form 8-A, if necessary, with
the SEC.
(ii) The parties hereto shall use reasonable efforts to take all such
action as may be necessary or appropriate under state securities and blue sky
laws in connection with the transactions contemplated by this Agreement.
(iii) Entertainment shall prepare, and Entertainment shall file and
seek to make effective, an application for the listing of the Entertainment
Class A Common Stock on the a national exchange, subject to official notice of
issuance, or for the inclusion of quotations for the Entertainment Class A
Common Stock on the Nasdaq Stock Market.
(iv) The parties hereto shall cooperate in preparing, filing with the
SEC
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and causing to become effective any registration statements or amendments
thereto which are necessary or appropriate in order to effect the transactions
contemplated hereby.
(b) Entertainment agrees that the Registration Statement and each
amendment or supplement thereto will not, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that the foregoing shall not apply to the extent that any
such untrue statement or material omission was made by Entertainment in
reliance upon and in conformity with written information furnished by Parent,
its representatives or affiliates to Entertainment specifically for use in such
filing.
Section 4.6 Third Party Consents. SFX shall obtain all necessary third
party consents to the Distribution except where the failure to obtain such
consents, in the aggregate, would not (a) have a Material Adverse Effect on
SFX, (b) impair the ability of SFX to perform its obligations under the
Transaction Documents in any material respect or (c) delay in any material
respect or prevent the consummation of any of the transactions contemplated by
the Transaction Documents. The Distribution shall be effected in compliance
with SFX's certificate of incorporation and by-laws and in material compliance
with all applicable laws and shall be subject to obtaining all applicable
consents of Governmental Entities.
Section 4.7 Waivers. Prior to the Distribution Date, SFX and
Entertainment shall obtain from Xxx Xxxxxxxx and Xxxxx Xxxxxx a release or
waiver of any rights that either of them may have to purchase or acquire all of
part of the Delsener/Xxxxxx Group.
Section 4.8 Termination of Merger Agreement. If the Merger Agreement
is terminated for any reason in accordance with its terms, the Boards of
Directors of SFX and Entertainment shall appoint committees (the "Independent
Committees") composed solely of independent directors (none of whom shall serve
on both Boards of Directors) and shall authorize the Independent Committees to
negotiate with each other in good faith with respect to (a) the Distribution
Employees, (b) a lease arrangement for the office space of Entertainment
utilized by SFX and (c) any other matters which the Boards deem necessary to
effectuate the separation of the affairs of SFX and Entertainment.
ARTICLE 5
SURVIVAL; MUTUAL RELEASE AND INDEMNIFICATION
Section 5.1 Survival and Indemnification.
(a) Except as otherwise contemplated by this Agreement, all covenants
and agreements of the parties contained in this Agreement shall survive the
Distribution Date.
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(b) Except as specifically provided herein, the indemnification
provisions of this Article 5 shall terminate and be of no further force and
effect on the sixth (6th) anniversary of the Distribution Date; provided,
however, that such provisions shall survive thereafter as to any claims for
indemnification asserted prior to the sixth (6th) anniversary of the
Distribution Date. Such termination shall in no way limit the obligations of
Entertainment with respect to the Assumed Liabilities or the obligations of SFX
with respect to the Retained Liabilities and related indemnification rights
under this Agreement, which shall survive indefinitely.
(c) The obligations of Entertainment and SFX under this Article 5
shall survive the sale or other transfer by either of them of any assets or
businesses or the assignment by either of them of any Liabilities. To the
extent that SFX assigns any of its Retained Liabilities (except for such
amounts of Retained Liabilities which are not material individually or in the
aggregate), SFX shall cause such transferee of such Retained Liabilities to
assume specifically its obligations with respect thereto under this Agreement
and to fulfill its obligations related to such Retained Liabilities. To the
extent Entertainment transfers to another party other than a Subsidiary of
Entertainment any of the Assumed Liabilities (except for such amounts of
Assumed Liabilities which are not material individually or in the aggregate),
Entertainment will cause the transferee of such Assumed Liabilities to assume
specifically its obligations with respect thereto under this Agreement and will
cause such transferee to fulfill its obligations related to such Assumed
Liabilities. In the event the transferee of the Retained Liabilities or Assumed
Liabilities does not fulfill its obligations with respect thereto, SFX and
Entertainment, respectively, shall fulfill their obligations with respect
thereto.
Section 5.2 Mutual Release, Etc.
(a) Effective on the Distribution Date, and except for Claims arising
from or attributable to the transactions contemplated by the Transaction
Documents, this Agreement, the Related Agreements or Claims otherwise asserted
prior to the Effective Time, SFX does hereby, for itself and its Subsidiaries,
their respective Affiliates (other than the Delsener/Xxxxxx Group), successor
and assigns, and all Persons who at any time prior to the Distribution Date
have been stockholders, directors, officers, agents or employees of SFX or its
Subsidiaries (in each case, in their respective capacities as such), remise,
release and forever discharge the Delsener/Xxxxxx Group, their respective
Affiliates (other than SFX and its Subsidiaries), successors and assigns, the
Executive Group, and all Persons who at any time prior to the Distribution Date
have been shareholders, directors or agents or employees of any member of the
Delsener/Xxxxxx Group (in each case, in their respective capacities as such),
and their respective heirs, executors, administrators, successors and assigns,
from any and all Claims whatsoever, whether in law or in equity (including any
right of contribution), whether arising under any contract or arrangement, by
operation of law or otherwise, existing or arising from any acts or events
occurring or failing to occur aor alleged to have occurred or to have failed to
occur or any conditions existing or alleged to have existed on or before the
Distribution Date.
(b) Effective on the Distribution Date, and except for Claims arising
from or
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attributable to the transactions contemplated by the Transaction Documents,
this Agreement, the Related Agreements or Claims otherwise asserted prior to
the Effective Time, Entertainment does hereby, for itself and its Subsidiaries,
their respective Affiliates (other than SFX and its Subsidiaries), successor
and assigns, and all Persons who at any time prior to the Distribution Date
have been stockholders, directors, officers, agents or employees of
Entertainment or its Subsidiaries (in each case, in their respective capacities
as such), remise, release and forever discharge the SFX, their respective
Affiliates (other than the Delsener/Xxxxxx Group), successors and assigns and
all Persons who at any time prior to the Distribution Date have been
shareholders, directors or agents or employees of any member of the SFX and its
Subsidiaries (in each case, in their respective capacities as such), and their
respective heirs, executors, administrators, successors and assigns, from any
and all Claims whatsoever, whether in law or in equity (including any right of
contribution), whether arising under any contract or arrangement, by operation
of law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the Distribution
Date.
Section 5.3 Indemnification.
(a) SFX shall indemnify, defend and hold harmless the Delsener/Xxxxxx
Group and each of its directors, officers, employees and agents from and
against any and all Indemnifiable Losses (other than income tax liabilities) to
which the Delsener/Xxxxxx Group may be or become subject that relate to the
Retained Liabilities, assets, business, operations, debts or Liabilities of SFX
or its Subsidiaries (other than the Delsener/Xxxxxx Group) whether arising
prior to, concurrent with or after the Distribution.
(b) Entertainment shall indemnify, defend and hold harmless SFX and
its Subsidiaries (other than the Delsener/Xxxxxx Group) and each of its
directors, officers, employees and agents from and against any and all
Indemnifiable Losses (other than income tax liabilities) to which SFX or any of
its Subsidiaries (other than the Delsener/Xxxxxx Group) may be or become
subject that relate to the Transferred Businesses, Transferred Assets, assets,
business, operations, debts or Liabilities of the Delsener/Xxxxxx Group
including, without limitation, Liabilities arising under the Guarantees and
Liabilities to be assumed by any member of the Delsener/Xxxxxx Group as
contemplated herein, whether arising prior to, concurrent with or after the
Distribution or as a result of the failure to obtain all necessary third party
consents to the Distribution.
(c) The amount which any party (an "Indemnifying Party") is required
to pay to any other party (an "Indemnitee") pursuant to Section 5.3(a) or
Section 5.3(b) shall be reduced (including, without limitation, retroactively)
by any insurance proceeds and other amounts actually recovered by such
Indemnitee in reduction of the related Indemnifiable Loss. Amounts required to
be paid are hereafter sometimes collectively called "Indemnity Payments" and
are individually called an "Indemnity Payment." If an Indemnitee shall have
received an Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently actually receive insurance proceeds or other amounts in respect of
such Indemnifiable Loss, then such Indemnitee shall pay
15
to such Indemnifying Party a sum equal to the lesser of the amount of such
insurance proceeds or other amounts actually received or the net amount of
Indemnity Payments actually received previously. The Indemnitee agrees that the
Indemnifying Party shall be subrogated to such Indemnitee under any insurance
policy and that the Indemnitee shall not waive any right of subrogation.
Section 5.4 Procedure for Indemnification.
(a) If an Indemnitee shall receive notice of the assertion by a person
who is not a party to this Agreement of any claim or of the commencement by any
such person of any Action (a "Third Party Claim") with respect to which an
Indemnifying Party is or may be obligated to make an Indemnity Payment, such
Indemnitee shall give such Indemnifying Party prompt notice thereof after
becoming aware of such Third Party Claim, specifying in reasonable detail the
nature of such Third Party Claim and the amount or estimated amount thereof to
the extent then feasible (which estimate shall not be conclusive of the final
amount of such claim); provided, however, that the failure of any Indemnitee to
give notice as provided in this Section 5.4 shall not relieve the related
Indemnifying Party of its obligations under this Article 5, except to the
extent that such Indemnifying Party is actually prejudiced by such failure to
give notice.
(b) An Indemnifying Party may elect to defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel (which counsel
shall be reasonably satisfactory to the Indemnitee), any Third Party Claim. If
an Indemnifying Party elects to defend a Third Party Claim, it shall, within 10
days of notice of such Third Party Claim (or sooner, if the nature of such
Third Party Claim so requires), notify the related Indemnitee of its intent to
do so, and such Indemnitee shall cooperate in the defense of such Third Party
Claim. such Indemnifying Party shall pay such Indemnitee's actual out-of-pocket
expenses (other than officers' or employees' salaries) reasonably incurred in
connection with such cooperation. After notice from an Indemnifying Party to an
Indemnitee of its election to assume the defense of a Third Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this Article 5
for any legal or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, however, that such Indemnitee
shall have the right to employ separate counsel to represent such Indemnitee
if, in such Indemnitee's reasonable judgment, a conflict of interest between
such Indemnitee and such Indemnifying Party exists in respect of such claim,
and in that event the reasonable fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. Except as so provided, if an
Indemnitee desires to participate in the defense of a Third Party Claim, it may
do so but it shall not control the defense and such participation shall be at
its sole cost and expense. If an Indemnifying Party elects not to defend
against a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in this Section 5.4, such Indemnitee may defend, compromise and
settle such Third Party Claim; provided, however, that no such Indemnitee may
compromise or settle any such Third Party Claim without prior written notice to
such Indemnifying Party and except by payment of
16
monetary damages or other money payments. No Indemnifying Party shall consent
to entry of any judgment or enter into any compromise or settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a release from all Liability in respect to such
Third Party claim.
(c) If an Indemnifying Party chooses to defend any claim, the
Indemnitee shall make available to such Indemnifying Party any personnel or any
books, records or other documents within its control that are necessary or
appropriate for such defense (the cost of copying thereof to be paid by the
Indemnifying Party).
(d) Upon any final determination of a Third Party Claim pursuant to
this Section 5.4, except as provided by Section 5.4(d), the Indemnifying Party
shall pay promptly on behalf of the Indemnitee, or to the Indemnitee in
reimbursement of any amount theretofore required to be paid by it, the amount
so determined. Upon the payment in full by the Indemnifying Party of any such
amount, the Indemnifying Party shall be subrogated to the rights of such
Indemnitee, to the extent not waived in settlement, against the persons who
made such Third Party Claim with respect to the subject matter of such claim.
(e) Notwithstanding the foregoing provisions of this Section 5.4,
there may be Third Party Claims which reasonably could result in both SFX and
Entertainment being liable to the other under indemnification provisions of
this Agreement. In any such events, the parties shall endeavor, acting
reasonably and in good faith, to agree upon a manner of conducting the defense
of or settlement of the Third Party Claim with a view to minimizing the legal
expenses and associated costs that might otherwise be incurred by the parties,
including to the use of the same legal counsel for the defense of such claim.
(f) Except to the extent expressly provided otherwise in this Section
5.4, the indemnification provided for by this Section 5.4 shall not inure to
the benefit of any third party or parties and shall not relieve any insurer who
would otherwise be obligated to pay any claim of the responsibility with
respect thereto or, solely by virtue of the indemnification provisions hereof,
provided any subrogation rights with respect thereto.
(g) Any claim on account of an Indemnifiable Loss which does not
result from a Third Party Claim shall be asserted by written notice given by
the related Indemnitee to the related Indemnifying Party. Such Indemnifying
Party shall have a period of 60 days within which to respond thereto. If such
Indemnifying Party does not respond within such 60-day period, such
Indemnifying Party shall be deemed to have accepted responsibility to make
payment and shall have no further right to contest the validity of such claim.
If such Indemnifying Party does respond within such 60-day period and rejects
such claim in whole or in party, such Indemnitee shall be free to pursue
mediation as provided in Article 10 hereof.
ARTICLE 6
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RELATED AGREEMENTS
Section 6.1 Tax Sharing Agreement. Except as contemplated in Section
6.2 hereof, any tax sharing agreement between any of the Delsener/Xxxxxx Group
and any of SFX and its Subsidiaries shall be terminated as of the Distribution
Date and will have no further effect for any taxable year (whether the current
year, a future year, or a past year). On or prior to the Distribution Date, SFX
and the Delsener/Xxxxxx Group shall enter into a Tax Sharing Agreement in the
form attached hereto as Exhibit A.
Section 6.2 Employee Benefits Agreement. On or prior to the
Distribution Date, SFX and the Delsener/Xxxxxx Group shall enter into a
Employee Benefits Agreement in the form attached hereto as Exhibit B.
ARTICLE 7
CERTAIN ADDITIONAL MATTERS
Section 7.1 Conveyancing and Assumption Instruments. In connection
with the transfer, conveyance, assignment and delivery of the Transferred
Assets and the assumption of Liabilities contemplated by this Agreement, SFX
and Entertainment agree to execute or cause to be executed by the appropriate
parties and to deliver to each other, as appropriate, the Conveyancing and
Assumption Instruments.
Section 7.2 No Representations or Warranties. Entertainment
understands and agrees that SFX is not in this Agreement or in any other
agreement or document contemplated by this Agreement, nor shall SFX be deemed
or implied to be, representing or warranting in any way as to the value or
freedom from encumbrance of, or any other matter concerning, any Transferred
Assets or as to the legal sufficiency to convey title to any Transferred Assets
of the execution, delivery and filing of the Conveyancing and Assumption
Instruments, IT BEING AGREED AND UNDERSTOOD THAT ALL SUCH ASSETS ARE BEING
TRANSFERRED "AS IS, WHERE IS" and that Entertainment shall bear the economic
and legal risk that any conveyances of such assets shall prove to be
insufficient or that Entertainment's title to any such assets shall be other
than good and marketable and free from encumbrances.
Section 7.3 Further Assurances; Subsequent Transfers.
(a) Each of SFX and Entertainment will execute and deliver such
further instruments of conveyance, transfer and assignment and will take such
other actions as each of them may reasonably request of the other in order to
effectuate the purposes of this Agreement and to carry out the terms hereof.
Without limiting the generality of the foregoing, at any time and from time to
time after the Distribution Date, at the request of Entertainment, SFX will
execute and deliver to Entertainment such other instruments of transfer,
conveyance, assignment and confirmation and take such action as Entertainment
may reasonably deem necessary or desirable in
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order to more effectively transfer, convey and assign to Entertainment and to
confirm Entertainment's title to all of the Transferred Assets, to put
Entertainment in actual possession and operating control thereof and to permit
Entertainment to exercise all rights with respect thereto (including, without
limitation, rights under contracts and other arrangements as to which the
consent of any third party to the transfer thereof shall not have previously
been obtained) and SFX will take such actions as Entertainment may reasonably
request in order to prepare and implement appropriate plans, agreements and
arrangements for the Employees and Entertainment will execute and deliver to
SFX all instruments, undertakings or other documents and take such other action
as SFX may reasonably request in order to have Entertainment properly assume
and discharge the Assumed Liabilities and relieve SFX of any Liability or
obligations with respect thereto and evidence the same to third parties.
Notwithstanding the foregoing, SFX and Entertainment shall not be obligated, in
connection with the foregoing, to expend monies other than reasonable
out-of-pocket expenses and attorneys' fees (which expenses and fees shall be
reimbursed by the requesting party).
(b) SFX and Entertainment will use their commercially reasonable
efforts to obtain any consent required to assign all agreements, leases,
permits, licenses and other rights of any nature whatsoever relating to the
Transferred Assets to Entertainment; provided, however, that SFX shall not be
obligated to pay any consideration therefor (except as provided in Section 2.2
and except for filing fees and other administrative charges) to the third party
from whom such consents, approvals and amendments are requested. In the event
and to the extent that SFX is unable to obtain any such required consent, SFX
shall continue to be bound thereby and unless not permitted by law or the terms
thereof, Entertainment shall pay, perform and discharge fully all the
obligations of SFX thereunder from and after the Distribution Date and
indemnify SFX for all Indemnifiable Losses arising out of such performance by
Entertainment. SFX shall, without further consideration therefor, pay, assign
and remit to Entertainment promptly all monies, rights and other considerations
received in respect of such performance. SFX shall exercise or exploit its
rights and options under all such agreements, leases, licenses and other rights
and commitments referred to in this Section 7.3(b) only as reasonably directed
by Entertainment and at Entertainment's expense. If and when any such consent
shall be obtained or such agreement, lease, license or other right shall
otherwise become assignable or able to be novated, SFX shall promptly assign
and novate all its rights and obligations thereunder to Entertainment without
payment of further consideration and Entertainment shall, without the payment
of any further consideration therefore, assume such rights and obligations.
Section 7.4 Sales and Transfer Taxes. Entertainment and SFX agree to
cooperate to determine the amount of sales, transfer or other taxes or fees
(including, without limitation, all real estate, patent, copyright and
trademark transfer taxes and recording fees) payable in connection with the
transactions contemplated by this Agreement (the "Transaction Taxes"). SFX
agrees to file promptly and timely the returns for such Transaction Taxes with
the appropriate taxing authorities and remit payment of the Transaction Taxes,
and Entertainment will join in the execution of any such tax returns or other
documentation.
Section 7.5 Change of Name. Within 10 business days after the
consummation of the Merger, SFX and each of its Subsidiaries, if necessary,
shall file certificates of amendment
19
with the appropriate Secretary of State, amending such company's certificate of
incorporation to change the name of such Company to any name which does not
include the letters "SFX". At the closing of the Merger, SFX will assign to
Entertainment or its designee all right, title and interest, including all the
good will related thereto, in and to the name "SFX" together with all causes of
action and the right to recover for past infringements of the name "SFX." As
soon as commercially practicable, but in no event later than six months from
the consummation of the Merger, SFX shall cease all use of the name "SFX" or
other trademarks, trade names or their identifiers owned by, licensed to, or
transferred pursuant to this Agreement to, Entertainment ("Non-Permitted
Names") in all modes.
ARTICLE 8
ACCESS TO INFORMATION AND SERVICES
Section 8.1 Provision of Corporate Records. As soon as practicable
after the Distribution Date, SFX shall deliver to Entertainment all Books and
Records in its possession. Such Books and Records shall be the property of
Entertainment, but shall be retained and made available to SFX for review and
duplication until the earlier of notice from SFX that such records are no
longer needed by SFX or the 20th anniversary of the Distribution Date.
Section 8.2 Access to Information. From and after the Distribution
Date, SFX and Entertainment shall afford to each other and to each other's
authorized accountants, counsel and other designated representatives reasonable
access and duplicating rights (with copying costs to be borne by the requesting
party) during normal business hours to all Books and Records and other data and
information (collectively, "Information") within each other's possession
relating to the Transferred Assets, the Transferred Businesses and the
Employees, insofar as such access is reasonably required by SFX or
Entertainment, as the case may be (and shall use reasonable efforts to cause
persons or firms possessing relevant Information to give similar access).
Information may be requested under this Article 8 for, without limitation,
audit, accounting, claims, litigation and tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations.
Section 8.3 Retention of Records. Except as otherwise required for a
longer period by law or agreed to in writing, SFX and Entertainment shall
retain, for a period of at least 20 years following the Distribution Date, all
material Information relating to the Transferred Businesses. Notwithstanding
the foregoing, in lieu of retaining any specific Information, SFX or
Entertainment may offer in writing to deliver such Information to the other
and, if such offer is not accepted within 90 days, the offered Information may
be destroyed or otherwise disposed of at any time. If a recipient of such offer
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for delivery of such of the Information as was
requested (at cost of requesting party).
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Section 8.4 Confidentiality. Each of SFX and Entertainment shall hold,
and shall cause its officers, employees, agents, consultants and advisors to
hold, in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its legal counsel, by other
requirements of law (including, without limitation, any requirements imposed
under state and federal securities laws and stock exchange rules), all
non-public Information concerning the other party furnished it by such other
party or its representatives pursuant to this Agreement (except to the extent
that such Information can be shown to have been available to such party on a
non- confidential basis prior to this disclosure by the other party, in the
public domain through no fault of such party or later lawfully acquired from
other sources by the party to which it was furnished), and each party shall not
release or disclose such Information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
shall be bound by the provisions of this Section 8.4. Each party shall be
deemed to have satisfied its obligation to hold confidential Information
concerning or supplied by the other party if its exercises the same care as it
takes to preserve confidentiality for its own similar Information. SFX and
Entertainment agree with each other that each will maintain, preserve and
assert, unless waived in writing by the other, all attorney-client and work
product privileges applicable to documents and other Information which relates,
directly or indirectly, to the Transferred Businesses for any period prior to
the Distribution Date.
Section 8.5 Privileged Matters. Anything herein or in the Merger
Agreement notwithstanding, the transactions contemplated hereby and by the
Merger Agreement shall not be deemed to transfer to or vest in SFX any right to
waive, nor shall they be deemed to waive, any attorney-client privilege between
SFX and its legal counsel, with respect to legal advice concerning the business
or operations of Entertainment including, without limitation, the transactions
contemplated by the Merger Agreement, this Agreement and the Related
Agreements, in either case, concerning privileged communications (or work
product related thereto) at any time prior to the Closing Date. SFX shall
assign to Entertainment SFX's rights (if any) to any attorney-client privilege
with respect to legal advice concerning the business or operations of
Entertainment including, without limitation, the transactions contemplated by
the Merger Agreement, this Agreement and the Related Agreements, concerning
privileged communications (or work product related thereto) at any time prior
to the Closing Date. SFX and its successors and assigns shall not be entitled
to waive or have access, nor shall they attempt to waive or seek access, to any
privileged communications (or work product related thereto) between
Entertainment and its legal counsel with respect to legal advice concerning the
business or operations of Entertainment.
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ARTICLE 9
INSURANCE
Section 9.1 General. SFX shall keep in effect all policies under its
Insurance Program in effect as of the date hereof insuring the Transferred
Assets and operations of the Transferred Businesses until the earlier of (i)
the Effective Time and (ii) 12:00 midnight on the Distribution Date, unless
Entertainment shall have earlier obtained appropriate coverage and notified SFX
in writing to that effect. In so far as any claims made or accrued under
policies under the Insurance Program prior to the Distribution Date relate to
Entertainment, SFX shall use its reasonable efforts to assure that
Entertainment can continue to make and/or pursue such claims under the
policies, or that SFX can continue to make and/or pursue such claims on behalf
of Entertainment, notwithstanding assignment or transfer of the policies
(provided that Entertainment shall reimburse SFX for any reasonable
out-of-pocket expenses incurred by SFX in connection therewith). From and after
the Distribution Date, Entertainment shall be responsible for obtaining and
maintaining insurance coverage for its own account. SFX shall, if so requested
by Entertainment, use reasonable efforts to assist Entertainment in obtaining
such initial insurance coverage for Entertainment from and after the
Distribution Date in such amounts as are agreed upon by SFX and Entertainment.
Following the Distribution Date, each of SFX and Entertainment shall cooperate
with and assist the other party in the prevention of conflicts or gaps in
insurance coverage and/or collection proceeds.
Section 9.2 Certain Insured Claims. Notwithstanding anything to the
contrary in this Agreement, SFX will indemnify and hold Entertainment harmless
from and against any and all Indemnifiable Losses resulting, directly or
indirectly, from claims made or deemed made (under the applicable insurance
policy) which relate to the Transferred Businesses and which arise from or
relate to events or occurrences prior to the Distribution Date, if such claims
would be covered by the Insurance Program; provided, however, that SFX shall be
required to indemnify and hold Entertainment harmless for any Indemnifiable
Loss only up to the amount that is covered by the Insurance Program for each
such claim and collected or received by SFX. SFX will use its reasonable
commercial efforts to obtain coverage for the Entertainment claims that may be
made against current and past insurers. To the extent that Entertainment seeks
any indemnity pursuant to this Section 9.2, the provisions of Article 5 hereof
shall apply thereto, and Entertainment shall be treated as the Indemnitee and
SFX shall be treated as the Indemnifying Party under such provisions; provided,
however, that Entertainment shall pay all costs incurred by SFX after the
Distribution Date in defending any such claims under an insurance policy
relating to the Transferred Businesses, including the salaries of employees
based on the portion of time spent on such claims and Entertainment shall make
available to SFX such of its employees as SFX may reasonably request as
witnesses or deponents in connection with SFX's defense of claims, at
Entertainment's sole cost and expense. In addition to any of the obligations of
Entertainment contained in this Agreement, Entertainment shall be obligated to
pay over to SFX any proceeds that are received from any other party under the
Insurance Program to the extent of, and with respect to, any Indemnifiable Loss
(as limited by the proviso to the first sentence of this Section 9.2) suffered
by Entertainment relating to the Transferred Businesses provided that SFX has
fulfilled its obligations under this Section 9.2.
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ARTICLE 10
CONDITIONS
Section 10.1 Conditions. The obligations of SFX and Entertainment to
consummate the Distribution shall be subject to the fulfillment or waiver of
each of the following conditions:
(a) the Board of Directors of SFX shall be satisfied that SFX's
surplus would be sufficient to permit under Delaware law the Distribution and
shall have formally approved the Distribution;
(b) the Registration Statement shall have been declared effective by
the SEC and no stop order shall have been issued or be pending with respect
thereto;
(c) the Entertainment Class A Common Stock shall have been accepted
for listing or trading, subject to official notice of issuance, on a national
exchange or the Nasdaq Stock Market;
(d) all necessary third party consents to the Distribution shall have
been obtained;
(e) the necessary stockholder approvals shall have been obtained to
consummate the Distribution as presently contemplated;
(f) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Distribution shall be in effect;
(g) SFX and Entertainment shall have entered into the Related
Agreements; and
(h) each of the covenants and provisions in this Agreement required to
be performed or complied with prior to the Distribution shall have been
performed or complied with.
Any determination by the Board of Directors of SFX on behalf of either
party hereto prior to the Distribution Date concerning the satisfaction or
waiver of any or all of the conditions set forth in this Section shall be
conclusive.
ARTICLE 11
MEDIATION
Section 11.1 Mediation and Binding Arbitration. If a dispute arises
between SFX and Entertainment as to the interpretation or the implementation of
this Agreement, the Related Agreements or any other agreement entered into
pursuant hereto (other than a dispute with respect
23
to Working Capital which shall be resolved in accordance with the provisions of
Section 2.2. hereof), including, without limitation, any matter involving an
Indemnifiable Loss, SFX and Entertainment agree to use the following
procedures, in lieu of either party pursuing other available remedies and as
the sole remedy, to resolve the dispute.
Section 11.2 Initiation. A party seeking to initiate the procedures
shall give written notice to the other party, describing briefly the nature of
the dispute. A meeting shall be held between the parties within 10 days of the
receipt of such notice, attended by individuals with decision-making authority
regarding the dispute, to attempt in good faith to negotiate a resolution of
the dispute.
Section 11.3 Submission to Mediation. If, within 30 days after such
meeting, the parties have not succeeded in negotiating a resolution of the
dispute, they agree to submit the dispute to mediation in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and to
bear equally the costs of the mediation.
Section 11.4 Selection of Mediator. The parties will jointly appoint a
mutually acceptable mediator, seeking assistance in such regard from the
American Arbitration Association or another mutually agreed-upon organization
if they have been unable to agree upon such appointment within 20 days from the
conclusion of the negotiation period.
Section 11.5 Mediation. The parties agree to participate in good faith
in the mediation and negotiations related thereto for a period of 30 days
following the initial mediation session. If the parties are not successful in
resolving the dispute through the mediation by the end of such 30-day period,
then the parties agree to submit the matter to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, by a sole arbitrator selected in accordance with the provisions of
Section 11.6 hereof. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. ss. 1-16, and judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction thereof.
Section 11.6 Selection of Arbitrator. The parties shall have 10 days
from the end of the mediation period to agree upon a mutually acceptable
neutral person not affiliated with either of the parties to act as arbitrator.
If no arbitrator has been selected within such time, an arbitrator shall be
selected for the Disputing Parties by the American Arbitration Association.
Section 11.7 Cost of Arbitration. The costs of arbitration shall be
apportioned between SFX and Entertainment as determined by the arbitrator in
such manner as the arbitrator deems reasonable taking into account the
circumstances of the case, the conduct of the parties during the proceeding,
and the result of the arbitration.
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ARTICLE 12
MISCELLANEOUS
Section 12.1 Complete Agreement. This Agreement, including the Annexes
and Exhibits and the agreements and other documents referred to herein, shall
constitute the entire agreement between SFX and Entertainment with respect to
the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter.
Section 12.2 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
(regardless of the laws that might otherwise govern under applicable principles
of conflicts law) as to all matters, including, without limitation, matters of
validity, construction, effect, performance and remedies.
Section 12.3 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the part to
whom notice is given, on the day of transmission if set via facsimile
transmission to the facsimile number given below, provided telephonic
confirmation of receipt is obtained promptly after completion of transmission,
on the business day after delivery to an overnight courier service or the
Express mail service maintained by the United States Postal Service, provided
receipt of delivery has been confirmed, or on the fifth day after mailing
provided receipt of delivery is confirmed, if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, properly addressed and return-receipt requested, to the party as
follows:
If to SFX
prior to the Effective Time: SFX Broadcasting, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000)000-0000
Attention: Xxxxxx X. Xxxxx
with a copy to: Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxx, Xx.
after the Effective Time: Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
25
Attention: Xxxxxxxx X. Xxxxxx, Xx.
If to Entertainment: SFX Live Entertainment, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000)000-0000
Attention: Xxxxxx X. Xxxxx
with a copy to: Xxxxx & XxXxxxxx
Two Xxxxx Center
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxxxxx
Any party may change its address by giving the other party written notice of
its new address in the manner set forth above.
Section 12.4 Amendment and Modification. This Agreement may be
amended, modified or supplemented only by written agreement of SFX and
Entertainment and with the consent of Parent, which consent shall not be
unreasonably withheld..
Section 12.5 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of SFX without the approval of Entertainment or Parent. In the
event of such termination, no party shall have any Liability of any kind to any
other party.
Section 12.6 Successor and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party without the prior written consent of the other party.
Section 12.7 No Third Party Beneficiaries. Except for the
indemnification rights under this Agreement of any Indemnity in their capacity
as such and except for the mutual releases provided for in this Agreement, this
Agreement, the Exhibits hereto and the Related Agreements are solely for the
benefit of the parties hereto and are not intended to confer upon any other
person except the parties hereto any rights or remedies hereunder.
Section 12.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26
Section 12.9 Interpretation. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement. As used in this Agreement, the
term "person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
Section 12.10 Annexes, Etc. The Annexes, Schedules and Exhibits shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
Section 12.11 Legal Enforceability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the day and year first above written.
SFX BROADCASTING, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SFX ENTERTAINMENT, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SBI HOLDING CORPORATION, with
respect to Section 12.4 only.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
28
ANNEX I
ASSUMED LIABILITIES
(a) Lease Agreement dated May 1, 1986, as amended, between AR DE
Realty Corp., N.V. and Xxxxxxxxx-Xxxxx Communications Management Corporation,
assumed by SFX, and that certain Lease Agreement dated May 27, 1997, between
HIRO Real Estate Co. and SFX (the "Leases"),
(b) Debt and Liabilities incurred by SFX Concerts, Inc. or
Entertainment or their respective Subsidiaries after the date of execution of
the Merger Agreement in connection with acquisitions and capital expenditures
approved by their respective Boards of Directors and such other debt and
Liabilities as Entertainment deems appropriate;
(b) Liabilities under the Airplane Agreement and the Triathlon SCMC
Agreement, as well as the New York Leases (both leases);
(c) Liabilities under the following, subject to Section 4.3 of this
Agreement:
(i) Employment Agreement with Xxx Xxxxxxxx dated January 2, 1997;
(ii) Employment Agreement with Xxxxx Xxxxxx dated January 2, 1997;
(iii) Employment Agreement with Xxxxx Xxxxx dated June 1997;
(iv) Employment Agreement with Xxxxx Lybesma dated June 1997 and all
other concert division employees;
(v) the employment agreements of all employees located on 000 Xxxx
00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000.
(d) All Liabilities and obligations of SFX and its Subsidiaries
arising under the Sunshine Agreement.
(e) All Liabilities and obligations arising under the SCMC Termination
Agreement described in Section 4.06 of the Company Disclosure Schedule to the
Merger Agreement; and
(g) obligations which accrue after the Distribution Date for all the
items above.
(h) all liabilities and obligations under SFX Entertainments proposed
private placement of $275 million of debt.
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SFX shall cause Entertainment and its Subsidiaries to be released from
all other debt and accrued liabilities.
I-2
ANNEX II
TRANSFERRED ASSETS
Transferred Assets. Subject to Section 4.3 of this Agreement, the
following assets and properties as of the Distribution Date:
(a) the assets under the Airplane Agreement
(b) the assets under the Triathlon SCMC Agreement
(c) the New York Leases (both leases), including the cash
collateral on the leases, and all assets located in the New York
offices;
(d) the note receivable resulting from the sale of SFX's radio
stations in Myrtle Beach;
(e) Employment Agreement with Xxx Xxxxxxxx dated January 2, 1997;
(f) Employment Agreement with Xxxxx Xxxxxx dated January 2, 1997;
(g) Employment Agreement with Xxxxx Xxxxx dated June 1997;
(h) Employment Agreement with Xxxxx Lybesma dated June 1997 and
all other concert division employees;
(i) the employment agreements of all employees located on 000
Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000.
(j) rights which accrue after the Distribution Date for all of
the items listed above;
(k) all accounts receivable relating to the Entertainment
Business of SFX; and
(l) all assets used primarily in the Transferred Businesses
including, without limitation, permits, licences, intellectual
property and other rights.
(m) all of the capital stock of SFX Concerts, Inc. and its
subsidiaries.
II-1
