PARTNERSHIP FORMATION AGREEMENT
This Partnership Formation Agreement (such agreement, as amended,
supplemented or modified from time to time, herein called the "Agreement") is
entered into as of the 22nd day of January, 1988, by and among MCA Concerts II,
Inc., a California corporation ("MCA"), and PACE Entertainment Group, Inc., a
Delaware corporation ("PACE"), and evidences the following:
WHEREAS, PACE and MCA desire to investigate the feasibility of purchasing,
owning, constructing and operating Amphitheatres (as defined below) in the
Metropolitan areas in which following cities ("Optional Cities") are located:
Hartford, Connecticut, Miami, Florida, New York, New York, San Diego,
California, Tampa, Florida, Minneapolis, Minnesota, and Washington, D.C. and if
feasible, to form a limited partnership to purchase, own, construct and operate
an Amphitheatre in one or more such Optional Cities;
NOW THEREFORE, for and in consideration of the premises the parties hereto
agree as follows:
Section 1. Purposes of Agreement. MCA and PACE shall, subject to the terms
and conditions set forth herein, (i) during the EDP (as defined below), jointly
investigate the feasibility of purchasing, owning, constructing and operating
Amphitheatres in one or more of the Optional Cities, and (ii) if they should
mutually select a site and agree on the estimated costs of development,
acquisition and construction based upon preliminary plans and specifications,
enter into one or more limited partnership agreements, substantially in the form
of that Limited Partnership Agreement ("Existing Limited Partnership Agreement")
of even date herewith between MCA and PACE Amphitheatres, Inc., a wholly-owned
subsidiary of PACE (such agreement(s), if and when entered into pursuant to this
Agreement, are herein referred to as the "Venture Agreement" and, collectively,
as the "Venture Agreements"), and thereby form one or more limited partnerships
(a "Venture" and, collectively, the "Ventures"). Each of PACE and MCA will
cooperate in good faith to select a site on which to construct an Amphitheatre,
provided that nothing herein shall be construed to require the parties to so
agree on a site. The purpose of any such Venture will be to develop, acquire,
construct and operate an Amphitheatre in one or more of the Optional Cities. As
used herein, "Amphitheatre" shall be as defined in the Existing Limited
Partnership Agreement.
Section 2. Proposed Activities.
(a) During the EDP, as defined below, PACE and MCA will cooperate in
good faith to locate one or more available cites for the construction of an
Amphitheatre in each of the Optional Cities. Without limiting the generality of
the fore-
going, the parties will negotiate with potential governmental jurisdictions,
property owners, architects, consultants, builders and others with the intent of
selecting an available site in each Optional City for purchase, lease or use by
a Venture and of acquiring favorable financing or other assistance in
constructing and operating the Amphitheatre in such Optional City. Based upon
such negotiations, the projections generated under Section 3 and the possible
financing arrangements (discussed under Section 4), the parties will cooperate
in good faith and use reasonable efforts to select and arrange for the purchase,
lease or use of a site for an Amphitheatre and to agree upon preliminary plans
and specifications for the construction of such Amphitheatres.
(b) Should the parties, during the EDP, agree upon a site that is
reasonably available for construction of an Amphitheatre based upon zoning,
noise ordinances, and other applicable considerations, and agree on estimated
project costs based upon mutually agreed upon preliminary plans and
specifications, then, at such time, the parties will form a limited partnership
pursuant to a Venture Agreement. PACE and MCA, or their affiliates, will be
general partners of the Venture, and the Funder (as defined in Section 4(b))
will be the limited partner. The parties will agree upon such changes, additions
or deletions to the form of Venture Agreement as are necessary to reflect the
negotiations and arrangements concerning the construction and ownership of the
Amphitheatre(s) in such Optional City(ies). Neither PACE nor MCA shall enter
into any contracts or agreements for the purchase or lease of property or
construction or operation of an Amphitheatre without the consent of the other.
All such contracts or agreements will be entered into by the Venture, in
accordance with the provisions of the Venture Agreement.
(c) If a Venture is formed, PACE and MCA will use reasonable efforts
to cause the Venture to be taxable as a partnership under the Internal Revenue
Code of 1986, as amended, ("Code"). Without limiting the generality of the
foregoing, if PACE or MCA forms or uses a corporate subsidiary to act as general
partner of the Venture, such subsidiary will have the net worth necessary to
satisfy the attribute of unlimited liability as provided in the Internal Revenue
Service's regulations.
Section 3. Projections. As soon as practicable, an accounting firm will be
selected by PACE and MCA to prepare an audited projection analysis relating to
the acquisition, construction and operation of Amphitheatres in those Optional
Cities the parties hereto may hereafter mutually designate. The cost of the
audit will be a Shared Cost (as hereinafter defined). The final audit will be
submitted to potential Funders and shall be owned by the Venture; provided, that
until such time as the Venture is formed, or if the Venture terminates, such
audited projections shall be jointly owned by PACE and MCA and may be utilized
by either of them for any and all purposes.
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Section 4. Capital Contributions and Financing.
(a) Any Venture formed will require capital contributions and
financing for the development, acquisition and construction of its
Amphitheatre(s), including costs to purchase, lease or use property, prepare
plans and specifications for the Amphitheatre(s), and construct the
Amphitheatre(s) ("Required Financing"). Prior to the commencement of this
Agreement, PACE and MCA have individually undertaken certain tasks and expended
funds for the generation of various work product, goodwill plans, specifications
and ideas (collectively "Work Product") relating to the development of
Amphitheatres in the Optional Cities (such Work Product existing on the date
hereof is referred to as "Existing Work Product"). If a Venture is formed with
respect to one or more of the Optional Cities, each party shall contribute its
Existing Work Product with respect to such Optional City to such Venture. All
Work Product developed during the term of this Agreement ("Joint Work Product")
shall be jointly owned by PACE and MCA, and if a Venture is formed, shall be
contributed to the Venture and shall have an agreed value to be determined
jointly by PACE and MCA, one-half of which will be allocated to each of PACE's
and MCA's (or their respective affiliates') capital account. If, prior to the
expiration of this Agreement, a Venture is not formed to develop an Amphitheatre
in a particular Optional City, then all Work Product relating to such Optional
City will be owned jointly by the parties and either party may utilize it for
any purpose; provided, that, if following the termination of this Agreement,
either party individually acquires an Amphitheatre in an Optional City, it will
pay the other party one-half of the Shared Costs incurred under this Agreement.
Reference is hereby made to that certain Term Loan Agreement of even date (the
"Loan Agreement"), between MCA and PACE Amphitheatres, Inc. ("Borrower"). If (i)
at the time of Formation (as defined below) of the Venture formed to construct,
purchase, own and/or operate the first Amphitheatre contemplated hereunder
Borrower has paid or contemporaneously pays at least 50% of the aggregate
principal amounts loaned as of such date under the Loan Agreement (including all
accrued interest as of such date), then upon Formation of said Venture, PACE's
Existing Work Product with respect to said first Amphitheatre shall be
contributed to the capital of said Venture and shall be deemed to have an agreed
value of $590,000; (ii) the condition in (i) is met and at the time of Formation
of the Venture formed to construct, purchase, own or operate the second
Amphitheatre contemplated hereunder Borrower has paid or contemporaneously pays
100% of the aggregate principal amounts loaned as of such date under the Loan
Agreement (including all accrued interest as of such date), then upon Formation
of the said Venture, PACE's Existing Work Product with respect to said second
Amphitheatre shall be contributed to the capital of said Venture and shall be
deemed to have an agreed value of $590,000; and (iii) the conditions in (i) and
(ii) are met and at the time of Formation of the Venture formed to construct,
purchase, own or operate the third Amphitheatre contemplated hereunder Borrower
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has paid or contemporaneously pays 100% of the aggregate principal amounts
loaned as of such date under the Loan Agreement (including all accrued interest
as of such date), then upon Formation of the said Venture, PACE's Existing Work
Product with respect to said third Amphitheatre shall be contributed to the
capital of said Venture and shall be deemed to have an agreed value of $750,000.
For purposes of this Section 4 and Section 10, "Formation" of a Venture with
respect to a particular Amphitheatre shall be the date of the funding of the
capital for said Venture. The agreed value of MCA's Existing Work Product to be
contributed to any Venture is zero, and, unless the conditions set forth in (i),
(ii) and/or (iii) above are met at the applicable time, PACE's Existing Work
Product to be contributed to any Venture will also have an agreed value of zero.
PACE and MCA, as the case may be, agree to contribute to each Venture cash in an
amount such that the amount of cash plus the agreed value of property (including
Work Product) contributed to the capital of any Venture by PACE and MCA are
equal.
(b) If a Venture is formed, MCA agrees to use its reasonable efforts
to acquire, for and on behalf of the Venture, non-recourse financing for 80% or
more of the Required Financing on terms similar to MCA's loan pursuant to the
Credit Agreement (as defined in the Existing Venture Agreement). The party
agreeing to provide such financing ("Funder") may be admitted as a limited
partner to the Venture, with a maximum interest of 35 percent thereof. MCA or an
affiliate of MCA may, but shall not be obligated to, act as Funder of one or
more Ventures, if MCA should, in its sole discretion, elect to act as Funder.
Nothing herein contained shall obligate MCA or any of its affiliates to make,
guarantee, secure, or pledge any assets as security for, any such financing. It
is the intent of the parties hereto that they obtain financing under terms as
close as possible to those described in this paragraph 4(b).
Section 5. Costs and Expenses.
(a) PACE and MCA agree to pay an equal amount of all "Shared Costs"
incurred in selecting a site, preparing the preliminary plans and
specifications, forming each Venture and otherwise acting under this Agreement.
As used herein, "Shared Costs" shall mean only out of pocket costs and expenses
paid to any third party reasonably incurred in connection with performing
pursuant to this Agreement, including without limitation, costs and expenses of
travel, lodging, meals, consultants and entertainment, and shall in each case be
mutually approved by the parties before incurred.
(b) Each party hereunder will maintain complete and accurate records
of any Shared Costs incurred by such party, and will provide copies of such
records to the other party at the end of each month. The party hereto which
incurred more Shared Costs than the other party during any month will be
reimbursed by
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the party incurring less Shared Costs within 30 days of the end of such month so
that both parties pay Shared Costs equally.
(c) Either party hereto may notify the other that such party does
not believe that any further Shared Costs should be incurred in a particular
Optional City or with respect to a site or proposed activity in an Optional
City. Following such notification, neither party shall incur any additional
Shared Costs with respect to such Optional City, site or activity except as are
reasonably necessary to terminate existing contractual obligations with respect
to such Optional City, site or activity.
Section 6. Decisions. All decisions made under this Agreement shall be
made jointly by PACE and MCA. PACE and MCA shall cooperate and act in good faith
with the goal and purpose of forming a Venture and acquiring, constructing and
operating an Amphitheatre in one or more of the Optional Cities as contemplated
herein and in the Venture Agreement. Both parties will use reasonable efforts to
keep the other party hereunder apprised of such party's activities and plans
with regard to the subject matter hereof.
Section 7. Miami. If formed, the Venture will own 100% of all rights in
each Amphitheatre constructed in any Optional City, except, possibly, the
Amphitheatre to be constructed in Miami, if any. PACE represents that PACE and
Bufman ("Bufman") each currently own a 50% interest in the Amphitheatre intended
to be constructed in Miami. PACE will attempt to cause Bufman to sell his
interest, but such is not a condition of this agreement or any Venture
Agreement. However, PACE and MCA shall jointly determine how Bufman will absorb
his pro-rata share of the costs of developing, constructing and operating the
Miami Amphitheatre, and propose same to Bufman. PACE shall, immediately upon
request by MCA, deliver to MCA a complete and accurate description of the
principal terms of the agreement between PACE and Bufman with respect to an
Amphitheatre in Miami. If PACE fails to cause Bufman to sell his interest, and
provided Bufman agrees upon an equitable absorption of costs and expenses, the
Venture, if formed, shall own 50% of the Miami Amphitheatre, if any.
Section 8. Exclusive Development Period. The Exclusive Development Period
("EDP") and the term of this Agreement shall commence on the date hereof and
shall continue for the next succeeding two years.
Section 9. Non-Competition; Exclusivity.
(a) Except as otherwise provided herein, during the EDP, neither MCA
nor PACE nor any affiliate of MCA or PACE shall, directly or indirectly, through
an entity which it controls, construct, own, manage, control, operate, be
employed by or lend its name to an Amphitheatre within the lessor of 75 miles or
the applicable Metropolitan Statistical Area (as defined
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by the Office of Management and Budget as of June 30, 1983) ("MSA") of any
Optional City, other than through a Venture formed hereunder for such purpose,
as herein provided. Unless the non-competition provisions contained in Section
10 hereof, or contained in any other agreement between the parties, have become
operative, if prior to the expiration of the EDP a site has not been mutually
selected for the purpose of constructing an Amphitheatre in a particular
Optional City, then following the expiration of the EDP, either party shall have
the right to independently acquire, construct and/or operate an Amphitheatre in
any such Optional Cities, without regard to this or any other agreement or any
Venture, and, accordingly, such city shall no longer be considered an Optional
City. PACE and MCA agree that monetary damages will not adequately compensate
either party for a violation by the other party or its affiliates of the
covenants set forth herein not to independently acquire, construct or operate an
Amphitheatre, and that specific performance and injunctive relief shall be
available for a violation of this Agreement, including without limitation the
provisions of Sections 9 and 10 hereof.
(b) Without limiting the foregoing, each party agrees that for so
long as this Agreement (or any Venture Agreement executed hereunder) is in
effect with respect to an Optional City, such party's services, and those of its
respective employees, shall be exclusive to each other (or any Venture formed
hereunder) only with respect to the development, construction and operation of
Amphitheatres (excluding the entertainment promotion business) in (or within the
greater of 75 miles or the applicable MSA of any such Optional City).
(c) Subject to exceptions and restrictions as may be included in any
Venture Agreement executed hereunder as a Venture is formed, or in that certain
Co-Promotion Agreement of even date herewith between PACE and MCA/PACE
Amphitheatres Group, L.P., a Delaware limited partnership, neither this Section
9 nor Section 10 shall prohibit a party hereto from engaging in all aspects of
the entertainment promotional business, or owning an interest in such a
business.
(d) As used in this Agreement, an "affiliate" of a party hereto
shall be any person, firm, corporation or other entity that, directly or
indirectly, controls, is controlled by, or is under common control with such
party, "control" meaning more than 50% of the voting or decisional power of the
party or entity in question.
Section 10. Termination Because of Disagreement. The following shall be
incorporated into any Venture Agreement between MCA and PACE relating to the
development, acquisition and/or construction of an Amphitheatre in any Optional
City, and shall also apply to "Type A Disagreements" and "Type B Disagreements"
(as defined herein) arising after a site with respect to an Amphitheatre in a
particular Optional City has been
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mutually agreed upon by the parties (but before a Venture Agreement for such
Amphitheatre has been executed by the parties):
(a) If a Type A Disagreement occurs, then, subject to and as
provided in this subsection, the Proffering Party (as defined herein) shall have
the right to act outside and independently of the Venture and the Disagreeing
Party (as defined herein) to acquire, construct, own and operate an Amphitheatre
in the applicable Optional City. The Proffering Party shall promptly send notice
of the Type A Disagreement to the Disagreeing Party (outlining the areas of
disagreement). Within ten (10) days following the receipt of such notice, the
Disagreeing Party:
(i) if MCA, may (i) notify PACE that it agrees with the
position taken by PACE, in which event a Type A Disagreement shall
not exist, (ii) notify PACE that the Type A Disagreement is a Type B
Disagreement in which case the procedure set forth for resolution of
a Type B Disagreement shall be followed, or (iii) agree with PACE
that a Type A Disagreement exists; failure by MCA to respond shall
be deemed agreement that a Type A Disagreement exists;
(ii) if PACE, may (i) notify MCA that it agrees with the
position taken by MCA, in which event a Type A Disagreement shall
not exist; (ii) notify MCA the Type A Disagreement is a Type B
Disagreement in which case the procedure set forth for resolution of
a Type B Disagreement shall be followed, provided that PACE has
satisfied the condition in Section 10(d)(ii) hereof; or (iii) agree
with MCA that a Type A Disagreement exists; failure by PACE to
respond shall be deemed agreement that a Type A Disagreement exist;
If, following such ten (10) day period, a Type A Disagreement exists, the
Proffering Party shall immediately pay to the Disagreeing Party the Shared Costs
paid by the Disagreeing Party with respect to such Optional City, and neither
the Disagreeing Party nor any affiliate of the Disagreeing Party shall directly
or indirectly, through an entity which it controls, construct, own, manage,
control, operate, be employed by, or lend its name to any person or entity that
owns, operates or manages an Amphitheatre within the lesser of 75 miles or the
applicable MSA of such Optional City for a period of two years following the
date of such payment.
(b) If a Type B Disagreement occurs, then the Proffering Party shall
send notice ("Commencement Notice") to the Disagreeing Party that it desires to
purchase the right to develop the site independently of the Venture and the
Disagreeing
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Party (outlining the areas of disagreement, but without obligation to disclose
the amount of the Proffering Party's offer). Ten days following the date of the
Commencement Notice, the Proffering Party and Disagreeing Party shall meet at
MCA's office at 10:00 a.m. and at such time and place, the Proffering Party
shall submit a written offer to the Disagreeing Party to purchase the
Disagreeing Party's interest under this Agreement in the site for a specified
dollar amount, all payable in cash. At any time prior to the meeting, the
Disagreeing Party shall have the right to acquiesce to the Proffering Party's
position with regard to the disagreements, in which case a Type B Disagreement
shall no longer exist. The Disagreeing Party shall have the right to refuse the
Proferring Party's offer if, but only if, the Disagreeing Party offers to
purchase the Proffering Party's interest in the Partnership for an amount that
exceeds the sum offered by the Proffering Party. Such procedure of offering to
purchase, refusing such offer and making a counter-offer shall continue until
such time as either Party fails to make a counter-offer, it being understood
that a failure to make a counter-offer shall be deemed to constitute an
acceptance by the last offeree of such last offer made. All offers and
counter-offers shall be limited to the purchase of the offeree's rights to the
site hereunder for a specific dollar amount, payable in cash within 30 days
following the acceptance of the offer. Any counter-offer must be made within 24
hours after receipt of the preceding offer. All offers and counter-offers shall
be in writing, delivered in person or by telefax or telex. The interest of the
Partner whose interest is purchased shall be deemed sold, assigned and
transferred to the Party purchasing such interest upon the payment of the
consideration as specified above. Neither the Party whose interest is purchased
nor any of its affiliates shall, directly or indirectly, through an entity which
it controls, construct, own, manage, control, operate, be employed by, or lend
its name to an Amphitheatre within the lesser of 75 miles or the applicable MSA
of such Optional City for two years following the date of purchase.
(c) As used herein, a Type A Disagreement shall be deemed to occur
if:
(i) one of the parties hereto ("Disagreeing Party") does not
agree with the position taken by the other party ("Proffering Party") in
connection with a material matter or matters relating to the acquisition and/or
construction of an Amphitheatre in an Optional City, including, without
limitation, matters relating to cost of site acquisition, cost of construction
and architectural plans and financing terms; and
(ii) the Disagreeing Party's opposition to the position taken
by the Proffering Party would, in the reasonable and good faith opinion of the
Proffering Party result in delays which, if not immediately terminated, preclude
the Venture or either of the parties hereto either from acquiring, leasing or
arranging for the use of the specific
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mutually approved site in the applicable Optional City, which property has been
offered to the Venture or either of the parties hereto on specific terms
acceptable to the Proffering Party, and/or would preclude the Venture or either
of the parties hereto from obtaining available financing under specific terms
acceptable to the Proferring Party; and
(iii) if the Disagreeing Party is PACE, PACE has not received
a commitment for and on behalf of the Venture or either party hereto from a
financial institution or other third party capable of providing such financing
to provide financing, subject only to documentation and other normal and
reasonable conditions to similar commitments, adequate to construct the
Amphitheatre.
(d) As used herein, a Type B Disagreement shall be deemed to occur
if:
(i) the events set forth in Sections 10(c)(i) and (ii) occur;
and
(ii) if the Disagreeing Party is PACE, PACE has received a
commitment for and on behalf of the Venture or either party hereto from a
financial institution or other third party reasonably capable of providing such
financing to provide financing, subject only to documentation and other normal
and reasonable conditions to similar commitments, adequate to construct the
Amphitheatre.
Section 11. Severability. If any term, covenant or condition of this
Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement or such
other documents, or the application of such term, covenant or condition to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term, covenant or
condition of this Agreement or such other documents shall be valid and shall be
enforced to the fullest extent permitted by law.
Section 12. No Partnership. Nothing herein shall be construed as making
PACE and MCA joint venturers or partners until the Formation of a Venture.
Section 13. Modification; Termination. Any amendment, modification,
termination or release hereof may be effected only by a written instrument
executed by PACE and MCA.
Section 14. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their successors and
permitted assigns. This Agreement cannot be assigned by PACE or MCA without the
express written consent of such other party.
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Section 15. Total Agreement. This Agreement is a total and complete
integration of any and all undertakings existing between PACE and MCA with
respect to the subject matter hereof and supersedes any prior oral or written
agreements, promises or representations between them. Without limiting the
foregoing, this Agreement is separate and apart from the Existing Limited
Partnership Agreement.
Section 16. California Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE WHOLLY-PERFORMED THEREIN,
EXCLUDING ANY LAWS RELATING TO THE CONFLICT OR CHOICE OF LAWS. Notwithstanding
the foregoing, the interpretation and enforcement of the non-competition
provisions of Sections 9 and 10 above shall be governed by the laws of the state
where the alleged violative conduct occurs, and the courts (state and federal)
of such state shall also have jurisdiction (along with the courts in Los
Angeles) over such issues.
Section 17. Notices. All notices or other communications required or
permitted to be given pursuant to this Agreement will be in writing and will be
considered as properly given if mailed by first class United States mail,
postage prepaid, by prepaid telegram, or by personal delivery. Notice shall be
deemed given on the date received. For purposes of notice, the address of each
party hereto shall be as set forth below their signatures below, unless changed
in a written notice to the other party in conformity with the foregoing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MCA CONCERTS II, INC. PACE ENTERTAINMENT GROUP, INC.
By:____________________________ By: /s/ [ILLEGIBLE]
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Xxxxx 000
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