ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of this 19th
day of September, 1996, by and among XXXXX ENTERTAINMENT, INC., an Illinois
corporation ("Seller"), and the shareholders of Seller listed on the signature
page hereto (collectively, the "Shareholders") and PLATINUM ENTERTAINMENT, INC.,
a Delaware corporation ("Buyer").
WHEREAS, Seller is engaged in the music publishing business and has its
principal offices located at 000 Xxxxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx
00000 ("Seller's Business"); and
WHEREAS, Seller desires to sell and Buyer desires to purchase
substantially all of Seller's assets; and
NOW, THEREFORE, in consideration of the mutual covenants of the parties
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 ASSETS. On the terms and subject to the conditions hereinafter
set forth, at the Closing, Seller shall sell, convey, transfer, assign and
deliver to Buyer, free and clear of all liens, claims, mortgages, security
interests, charges, pledges or other encumbrances or adverse claims or interest
of any nature ("Liens"), and Buyer shall purchase from Seller, all of Seller's
right, title and interests in and to all of the property and assets of every
kind and nature which are used in or arise out of the conduct of the Business or
are considered to be assets of Seller in connection with the Business as of the
Closing Date (defined below), wherever located (collectively, the "Assets"),
including but not limited to, the following:
(a) all of Seller's musical compositions and master recordings;
(b) all contracts, agreements, relationships or commitments,
oral or written, to which any of the Assets are bound or relates,
directly or indirectly, to Seller's Business, including but not limited
to, all publishing agreements, artist contracts and license agreements
(collectively the "Contracts");
(c) all of Seller's inventory, including raw materials,
components, work-in-process, finished products, and supplies
(collectively, the "Inventory");
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(d) all of Seller's tangible personal property, including
fixtures, machinery, office furniture and equipment, computer equipment
and software and any licenses therefor (collectively, the "Personal
Property");
(e) all accounts receivable and notes, bonds or other evidences
of indebtedness of any Person held by or for the benefit of Seller
(collectively, "Accounts Receivable");
(f) all cash, cash equivalents, money on deposit with banks and
others and certificates of deposit (collectively the "Cash Amount");
provided, however, in no event shall the Cash Amount exceed $10,000;
(g) all of Seller's trademarks, trademark registrations and
trademark applications, trade-names, including d/b/a's, logos,
copyrights, patents and patent applications, patent and other licenses
thereof, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice), know-how, trade secrets, lists of
past and present customers, potential customers, recorded knowledge,
business plans, performance standards, catalogues, research data,
analyses and computer software and programs, sales data, sales and
advertising materials, scheduling and service methods, sales and service
manuals and all other proprietary, confidential and other similar
information (in whatever form or medium) relating to the manufacture,
merchandising, publication, sale or distribution of products and the
conduct of the Business (collectively, "INTELLECTUAL PROPERTY"), and
rights to xxx for past infringements thereof;
(h) all of Seller's supplier lists, customer lists, sales and
marketing records and materials, general business records, and accounting
records;
(i) all deferred charges, advances, payments, prepaid items,
credits for refunds, rights of offset, and credits;
(j) all licenses, permits, franchises, and approvals and
authorizations by or of any Governmental Body or other persons required
for the conduct of the Business or in connection with ownership of the
Assets (the "Licenses"); and
(k) all causes of action, judgments, claims and demands of
whatever nature of Seller against any Person relating to the Assets or
arising out of or in connection with Seller's Business heretofore
existing or hereinafter accruing to Seller.
1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary
contained herein, the Assets do not include the following (collectively, the
"Excluded Assets"):
(a) Seller's corporate records, such as its Articles of
Incorporation, corporate seal, minute books, stock books, and other
records dealing exclusively with the corporate organization of Seller;
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(b) Seller's rights under this Agreement, including the
consideration paid to Seller pursuant to this Agreement;
(c) Seller's tax records;
(d) Seller's Employee Benefit Plans (as defined below) and any
and all rights therein or in the assets thereof;
(e) all cash, cash equivalents, money on deposit with banks and
others and certificates of deposit in excess of $10,000;
(f) The Seller's counterclaims and/or motions for sanctions
which have been, or may be filed in connection with the litigation
involving Xxxxx Xxxxx and Xxxxxxx Xxxxxxx.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 PURCHASE PRICE. The purchase price for the Assets (the "Purchase
Price") to be paid by Buyer to Seller at Closing for the Business and the Assets
shall be (i) $1,050,000 payable in Purchase Shares, as set forth below, which is
the equivalent of the fair market value of $1,500,000 in Purchase Shares reduced
by a 30% discount to reflect the lack of marketability of such Purchase Shares,
plus (ii) an amount equal to the value of the Assumed Liabilities (as defined in
SECTION 2.2). The "Purchase Shares" are that number of Buyer's common stock,
par value $0.001 per share determined as follows: (i) if the average closing
price of Buyer's common stock as quoted on the Nasdaq National Market for the
five consecutive trading days ending on the last trading day prior to the
Closing Date (the "Average Price") is less than $17.00 per share, the number of
Purchase Shares shall be the result of $1,500,000 divided by $17.00; (ii) if the
Average Price is greater than or equal to $17.00 per share but less than or
equal to $20.00 per share, the number of Purchase Shares shall be $1,500,000
divided by the Average Price, and; (iii) if the Average Price is greater than
$20.00 per share, the number of Purchase Shares shall be the result of
$1,500,000 divided by $20.00.
2.2 ASSUMPTION OF LIABILITIES. Notwithstanding anything to the
contrary contained in this Agreement or any of the Seller's or Buyer's
Agreements (as defined below), and regardless of whether such liability is
disclosed in this Agreement or any of the Seller's or Buyer's Agreements, or in
the Disclosure Letter (as defined below) or Exhibit hereto or thereto, Buyer
will not assume, agree to pay, perform or discharge or in any way be responsible
for any debts, liabilities, or obligations Seller or any Affiliate (as defined
below) of Seller of any kind or nature whatsoever (whether due or to become due,
absolute or contingent, direct or indirect, asserted or unasserted, known or
unknown, and regardless of whether such debts, liabilities, or obligations
relate to Seller's Business) (the "Excluded Liabilities"), except for those
liabilities stated on PART 2.2 OF THE DISCLOSURE LETTER (the "Assumed
Liabilities"); provided, however, in no event shall the Assumed Liabilities
exceed $100,000, in the aggregate.
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2.2.1 ASSUMPTION OF LIABILITIES. Buyer will execute and
deliver to Seller a counterpart of an Assignment and Assumption
Agreement, in substantially the form of EXHIBIT 2.2.1 ("Xxxx of Sale and
Assignment and Assumption Agreement"), whereby Buyer agrees to assume the
Assumed Liabilities.
2.2.2 PRORATION. The parties acknowledge that after the
Closing, Buyer shall continue to utilize the office space currently
leased by Seller. Therefore, the parties agree to pro rate, as of the
Closing Date, all prepaid rent.
2.3 INDEMNITY ESCROW. The parties hereto agree that at Closing,
Seller and the Shareholders shall deliver a number of shares equal to 15% of the
Purchase Shares into an escrow account pursuant to the terms of an Escrow
Agreement in the form of EXHIBIT 2.3, attached hereto (the "Escrow Agreement").
2.4 CLOSING EXPENSES AND RELATED TAXES. Seller shall pay at the
Closing any stamp or other sales, transfer, or transaction tax imposed on the
transfer of the Assets by Seller to Buyer.
2.5 ALLOCATION OF PURCHASE PRICE. The purchase price shall be
allocated among the Assets as set forth on EXHIBIT 2.5, with said allocation to
be mutually agreed upon by the Buyer and Seller. Buyer and Seller agree to
report on its respective tax returns the transactions which are the subject of
this Agreement in a manner consistent with the allocation agreed-upon by the
respective parties.
2.6 NONCOMPETITION CONSIDERATION. In consideration of Xx. Xxxxx X.
Xxxxx entering into the Noncompetition Agreement in the form attached hereto as
EXHIBIT 2.6 (the "Non-Competition Agreement") and abiding by the restrictive
covenants contained therein, Buyer shall pay $45,000 in cash to Xx. Xxxxx
payable by check or wire transfer at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE ACTIVE
SHAREHOLDERS. Seller and the Active Shareholders (and the Passive Shareholders,
solely with respect to SECTION 3.1.33), jointly and severally, hereby represent
and warrant to Buyer as of the Closing Date as follows:
3.1.1 ORGANIZATION. Seller is a corporation duly organized,
existing, and in good standing under the laws of the State of Illinois
and has all requisite power and authority to conduct Seller's Business
and to own or hold under lease the Assets. Seller has been a valid
S-corporation under the Code since its inception.
3.1.2 AUTHORITY.
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(a) Seller has full right, power, and authority to execute
and deliver this Agreement, and all other agreements, documents,
certificates and instruments delivered in connection with the
transactions contemplated hereby, to which it is a party and any
other document to be delivered by it at Closing (collectively, the
"Seller's Agreements"). The execution and performance of this
Agreement and the Seller's Agreements have been duly authorized by
all necessary corporate action, including the unanimous approval
by the Board of Directors of Seller and each of the Shareholders.
This Agreement and the Seller's Agreements have been duly and
validly executed and delivered by Seller and constitute the valid
and binding obligations of Seller, enforceable against it in
accordance with their respective terms;
(b) Each of the Shareholders has full right, power and
authority to enter into and perform his obligations under this
Agreement and all other documents entered into in connection with
the transactions contemplated hereby. This Agreement and each of
the other documents entered into by the Shareholders in connection
herewith have been duly and validly executed and delivered by each
of the Shareholders and constitutes the valid and binding
obligation of each Shareholder executing such agreement or
document, enforceable against each of them in accordance with
their respective terms.
3.1.3 QUALIFICATION OF SELLER. There are no other
jurisdictions (other than Illinois and Tennessee) in which the conduct of
Seller's Business or its ownership of the Assets requires any
qualification under the law of such jurisdiction.
3.1.4 NO SUBSIDIARIES. Seller does not have, directly or
indirectly, any equity or ownership interest in any Person.
3.1.5 ARTICLES OF INCORPORATION, BYLAWS, OFFICERS, AND
DIRECTORS. Seller has previously delivered to Buyer true and complete
copies of Seller's Articles of Incorporation and all amendments thereof
to date, certified by the Secretary of State of Illinois, and Seller's
Bylaws as amended to date, certified by an officer of Seller. PART 3.1.5
OF THE DISCLOSURE LETTER is a true and complete list of all of Seller's
officers and directors.
3.1.6 CAPITALIZATION. The authorized capital of Seller
consists of 20,000 shares of common stock, no par value, of which 18,000
are issued and outstanding. The foregoing shares of common stock
constitute the "Shares." The shareholders listed on PART 3.1.6 OF THE
DISCLOSURE LETTER are and on the Closing Date will be the sole record and
beneficial owners and holders of the Shares.
3.1.7 ASSETS USED IN SELLER'S BUSINESS. Except for the
Excluded Assets, the Assets constitute all of the rights, properties, and
other assets of every type and
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description (whether tangible or intangible, real or personal) used in
the conduct of Seller's Business.
3.1.8 TITLE TO ASSETS. Subject only to SECTION 8.1(A) and only
to the extent of the limitations set forth in SECTION 8.1(A), Seller
holds good and marketable title to all of the Assets, free and clear of
all Liens.
3.1.9 NO RESTRICTIONS AGAINST SALE OF ASSETS. Seller has full
right, power, and authority to sell the Assets to Buyer as provided in
this Agreement without obtaining the consent or approval of any
Governmental Body or other Person. The execution and delivery by Seller
of, and the performance by Seller of its respective obligations under,
the Seller's Agreements do not require Seller to obtain any consent,
approval, or waiver of any acceleration, termination, or other right or
remedy by, or to make any filing with or give any notice to, any other
person, except as set forth in PART 3.1.9 OF THE DISCLOSURE LETTER.
3.1.10 BUYER'S TITLE ON CONSUMMATION. Upon consummation of the
transactions which are subject of this Agreement, Buyer will be vested
with good and marketable title to all of the Assets, free and clear of
all Liens.
3.1.11 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth
in PART 3.1.11 OF THE DISCLOSURE LETTER, the Seller has no liabilities or
obligations of any nature (whether absolute, accrued, contingent, or
otherwise) other than (i) liabilities or obligations reflected or
reserved against in the Financial Statements (as defined below), (ii)
current liabilities incurred in the Seller's ordinary course of business
since June 30, 1996, (iii) obligations under the Contracts that are set
forth in PART 3.1.14 OF THE DISCLOSURE LETTER or that are required to be
so set forth and which obligations are to be performed in the ordinary
course of business, which obligations are apparent from the plain reading
of such Contracts; (none of which liabilities, obligations or matters
would result from a breach of contract, breach of warranty, tort,
infringement or lawsuit) and (iv) those liabilities which relate to the
Claims specifically disclosed in PART 3.1.17 OF THE DISCLOSURE LETTER.
3.1.12 FINANCIAL STATEMENTS. Seller has furnished Buyer with
Seller's balance sheets and income statements as of and for the fiscal
year ended December 31, 1995, and as of the end of the three months ended
March 31, 1996 and June 30, 1996 (collectively, the "Financial
Statements"). Except as set forth in PART 3.1.12 OF THE DISCLOSURE
LETTER, such Financial Statements are complete and correct in all
material respects in accordance with GAAP, are consistent with Seller's
books and records, and fairly present the financial condition, assets and
liabilities as of their respective dates and results of operations and
cashflows for the periods related thereto, in accordance with GAAP. No
financial statements of any Person or Affiliate of Seller are required by
GAAP to be consolidated with the Financial Statements of Seller.
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3.1.13 TAX RETURNS. Seller has filed all Tax Returns (as
defined below) that it is required to have filed, and such Tax Returns
are true and correct. Seller has paid all Taxes (as defined below)
reflected on such Tax Returns or otherwise due and payable by it in
connection with the Assets or the operation of the Business as of the
Closing. Seller has paid or made adequate provision for the payment of
all Taxes that have or may become due pursuant to such Tax Returns or
pursuant to any notice of deficiency or assessment received with respect
to such Tax Returns. There are no unexpired waivers by Seller of any
statute of limitations with respect to any Taxes, and neither Seller nor
the Shareholders is a party to any action or proceedings by any
Governmental Body for the collection or assessment of Taxes.
3.1.14 CONTRACTS. Attached hereto as PART 3.1.14 OF THE
DISCLOSURE LETTER is a list of all Contracts, correct and complete
copies of which have been previously furnished to the Buyer. To the
Actual Knowledge of Seller, except as set forth in PART 3.1.14 OF THE
DISCLOSURE LETTER, all of the Contracts may be assigned to Buyer without
the consent, approval, novation or waiver of any Person. To the Actual
Knowledge of the Seller, Seller is not in default, and no event has
occurred which the giving of notice or the passage of time or both would
constitute a default, under any Contract or any other obligation owed by
Seller, an no event has occurred which with the giving of notice or the
passage of time or both would constitute a default by any other party to
any such Contract or obligation.
3.1.15 LEASED PROPERTIES. The only real estate used in the
operation of Seller's Business are the real properties listed in PART
3.1.15 OF THE DISCLOSURE LETTER, which are collectively referred to
herein as the "Leased Properties." All of such Leased Properties are
leased pursuant to leases described in said Disclosure Letter, a true and
correct copy of each having been previously delivered to Buyer (the
parties from whom the Leased Properties are leased are referred to herein
as the "Landlords"), and which have not been amended, modified or
assigned. With respect to each of the Leased Properties:
(a) Seller is not aware of any material problems with,
the buildings, plants, improvements, structures and fixtures on
the Leased Property, including, without limitation, heating,
ventilation and air conditioning systems, roof, foundation and
floors and believe that the Leased Property is in good operating
condition and repair and the Seller has received a Certificate of
Occupancy regarding such Leased Property;
(b) to the Actual Knowledge of the Seller, since Seller
has not received any notice of any special assessment, or any
notice alleging violation of any applicable building, zoning, fire
or health codes, or any notice requiring or calling attention to
the need for any work, repairs, construction, alteration or
installation on or in connection with the Leased Property which
has not been heretofore complied with by Seller at its sole cost
and expense or the Landlord,
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and is not aware of any such notices which may have been issued
but not yet received by Seller;
(c) to the Actual Knowledge of the Seller, there are no
leases, subleases, licenses, concessions, or other agreements
(whether written or oral) to which Seller is a party, that grant
to any Person the right to use or occupy any portion of the Leased
Property;
(d) to the Actual Knowledge of the Seller, there are no
Persons (other than Seller) in possession of the Leased Property;
(e) to the Actual Knowledge of Seller, the Leased
Property is supplied with utilities and other services necessary
for the operation of Seller's Business; and
(f) to the Actual Knowledge of Seller, the lease for the
Leased Property is being fully performed and is in full force and
effect, is enforceable in accordance with its terms and neither
Seller nor to the knowledge of Seller, the Landlord is in breach
or default, or alleged to be in breach or default with respect
thereto, and no conditions exist or events have occurred which
with the giving of notice or the passage of time on both could
give rise to a breach or default thereunder.
3.1.16 PERSONAL PROPERTY. PART 3.1.16 OF THE DISCLOSURE LETTER
is a true and complete list of the Personal Property owned by Seller or
used in the Business. Except as set forth in PART 3.1.16 OF THE
DISCLOSURE LETTER, to Seller's Actual Knowledge, no Personal Property is
held under any lease, security agreement, conditional sales contract, or
other title retention or security arrangement. To the Actual Knowledge
of the Seller, all such Personal Property is in good operating condition
repair.
3.1.17 LITIGATION. Except as set forth in PART 3.1.17 OF THE
DISCLOSURE LETTER (which discloses the parties to, nature of, and relief
sought for each matter to be disclosed in PART 3.1.17 OF THE DISCLOSURE
LETTER):
3.1.17.1 CLAIMS. There is no suit, action,
proceeding, investigation, arbitration, claim, or order (a) that
is, pending or to Seller's knowledge, threatened against Seller
(or, pending or to Seller's knowledge, threatened against any of
the officers, directors, or employees of Seller with respect to
Seller's Business), (b) to which, Seller is otherwise a party, or
(c) that may, affect Seller, the Assets, or Seller's Business,
before any court or any other Governmental Body (collectively,
"Claims"); and to Seller's knowledge, there is no basis for any
such Claim.
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3.1.17.2 ORDERS. Seller is not subject to or bound by
any judgment, order, or decree of any court or any other
Governmental Body. Seller has not received any opinion or
memorandum from legal counsel to the effect that it is exposed to
any liability or disadvantage that may be material to Seller's
Business, and Seller is not engaged in any legal action to recover
monies due it or for damages sustained by it.
3.1.18 COMPLIANCE WITH APPLICABLE LAWS. Seller has complied and
is currently in compliance with all laws, regulations, writs,
injunctions, decrees, orders, and other decisions applicable to it or to
the operation of Seller's Business (collectively, "Laws") and has not
received any notice of any alleged violation of or liability under any
such Law. Without limiting the generality of the foregoing, Seller has
complied in all respects with all applicable federal, state, and local
Laws related to antitrust and trade regulations, the protection of the
environment, and the employment of labor and collective bargaining.
3.1.19 INTELLECTUAL PROPERTY. PART 3.1.19 OF THE DISCLOSURE
LETTER contains a complete and accurate description of all Intellectual
Property of Seller, including information regarding Seller's ownership of
such Intellectual Property and licenses, rights, or immunities in such
Intellectual Property and the registration of such Intellectual Property.
To the Actual Knowledge of Seller, Seller owns all of the Intellectual
Property, and all of the Intellectual Property is valid and in good
standing, free and clear of any Liens, and are not being challenged in
any way. To the Actual Knowledge of Seller, Seller has not infringed and
is not now infringing on any copyright, trademark, service xxxx or trade
name of, or belonging to, any person. To the Actual Knowledge of Seller,
there is no claim pending or, threatened against Seller related to
alleged infringement of any Intellectual Property owned by any Person.
To the Actual Knowledge of Seller, the operation of Seller's Business in
the manner in which it has been operated prior to the date of this
Agreement or is presently operated does not give rise to any such claim.
3.1.20 TRANSACTIONS NOT A BREACH. The execution, delivery, or
performance by Seller and the Shareholders of this Agreement and the
Seller's Agreements will not:
(a) violate, conflict with, or result in a breach of any
provision of any Law binding on Sellers and/or the Shareholder;
(b) violate or conflict with Seller's Articles of
Incorporation or Bylaws or with any provision of any contract,
agreement, mortgage, note, bond, license, or other instrument or
obligation to which Seller and/or the Shareholders is a party or
by which Seller, the Shareholders or any of the Assets may be
bound or affected;
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(c) constitute an event that would permit any party to
terminate any agreement, or accelerate the maturity of any
indebtedness or other obligation, to which Seller and/or the
Shareholders is a party or by which Seller and/or the Shareholders
is bound;
(d) result in the creation or imposition of any lien,
security interest, charge, or encumbrance upon the Assets; or
(e) have a material adverse effect on Seller or the
Assets.
3.1.21 CONDUCT OF SELLER'S BUSINESS. Except as set forth in
PART 3.1.21 OF THE DISCLOSURE LETTER, since December 31, 1995, Seller has
conducted its business with respect to the Assets only in the ordinary
course of business, and has incurred no liabilities in connection with
the Assets other than in the ordinary course of business, and there has
been no material adverse change in the assets, condition (financial or
otherwise), operating results, employee or customer relations, business
activities or business prospects involving the Assets as of such date.
Set forth in PART 3.1.21 OF THE DISCLOSURE LETTER is a description of all
bonuses, dividends or other distributions declared or paid in 1995 to any
shareholder, director or employee of Seller for who aggregate bonuses,
dividends and other distributions declared or paid in 1995 exceed
$10,000.
3.1.22 INSURANCE POLICIES. PART 3.1.22 OF THE DISCLOSURE LETTER
contains a complete and accurate list and description of all insurance
policies (including "self-insurance" programs) now maintained by Seller
(the "Insurance Policies") and all general liability policies maintained
by Seller during the past two years with respect to Seller's Business or
the Assets. To the Actual Knowledge of the Seller, the Insurance
Policies are in full force and effect, Seller is not in default under any
Insurance Policy, and no claim for coverage under any Insurance Policy
has been denied. Seller covenants and agrees that all of the Insurance
Policies will be maintained in full force and effect until the Closing
Date.
3.1.23 ACCOUNTS RECEIVABLE. Attached hereto as PART 3.1.23 OF
THE DISCLOSURE LETTER is a true and complete list of Seller's accounts
receivable as of August 31, 1996. To the Actual Knowledge of the Seller,
all such accounts receivable are valid, collectible (subject to any
reserves set forth on the Financial Statements) and have arisen in the
ordinary course of business and, to Seller's knowledge, not subject to
any counterclaim or setoff.
3.1.24 INVENTORY. To the Actual Knowledge of the Seller, all
Inventory owned by Seller is and will be fit for the purpose for which it
was produced and is in good and marketable condition. All Inventory
consists of quality and quantity historically usable in Seller's ordinary
course of business except for items which are obsolete, damaged or
unsalable all of which have been determined and written down to net
realizable value in accordance with GAAP.
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3.1.25 LICENSES. PART 3.1.25 OF THE DISCLOSURE LETTER is a
complete and accurate list of all of the Licenses. To the Actual
Knowledge of the Seller, Seller owns or possesses all right, title, and
interest in and to all such Licenses, and to Seller's Actual Knowledge,
all such Licenses are valid, binding, and in full force and effect.
3.1.26 EMPLOYEES. Seller previously has delivered to Buyer a
correct and complete list setting forth (a) the name, job title, current
salary, accrued vacation and years of employment for each employee of
Seller, and (b) the names and total annual compensation for all
independent contractors who render services on a regular basis to Seller.
Except as disclosed in PART 3.1.26 OF THE DISCLOSURE LETTER, to the
knowledge of the Seller, no employee or independent contractor of Seller
has received any bonus or increase in compensation and there has been no
general increase in the compensation or rate of compensation payable to
any employees or independent contractors of Seller, since December 31,
1995 nor has there been any change in any Employee Benefit Plan or any
promise by Seller to employees or independent contractors orally or in
writing of any bonus or increase in compensation or a general increase or
change in any Employee Benefit Plan, whether or not legally binding.
Except as disclosed on PART 3.1.26 OF THE DISCLOSURE LETTER, and to the
knowledge of Seller, no former or current employee or current or former
officer or director of Seller is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee,
officer or director and any other Person that in any way adversely
affected, affects, or will affect (x) the performance of this or her
duties as an employee, officer or director of Buyer, or (y) the ability
of Buyer to conduct its business. To the knowledge of Seller, except for
Xx. Xxxxx Xxxxx, each officer or other employee of Seller intends to
become an employee of Buyer.
3.1.27 ENVIRONMENTAL MATTERS.
3.1.27.1 COMPLIANCE WITH ENVIRONMENTAL LAWS. Seller
is in compliance with all Environmental and Safety Requirements (as
defined below), Seller has not received notice of any violation or
alleged violation of any such Environmental and Safety Requirements.
Seller possesses all required Licenses relating to health, safety or
protection of the environment which, if not possessed, could result or
has resulted in adverse consequences for the Business, the Assets, or a
violation of any applicable Environmental and Safety Requirements.
3.1.27.2 NO HAZARDOUS SUBSTANCES. Seller has not
generated, transported, treated, stored, or disposed of, nor has there
been a release or threatened release of, any Hazardous Substances (as
defined below) in, under, upon or from any real property, equipment or
other personal property now or heretofore owned, leased, used or operated
by Seller, except in compliance with all applicable Environmental and
Safety Requirements. There are no underground storage tanks under or
upon any real property now or heretofore owned, leased, used or operated
by Seller.
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3.1.27.3 NO ACTIONS OR PROCEEDINGS. Seller is not,
nor has been subject to, nor has received any notice of, any private,
administrative or judicial action, or notice of any intended private,
administrative, or judicial action, relating to the presence or alleged
presence of Hazardous Substances in, under or upon any real property,
equipment or other personal property now or heretofore owned, leased,
used or operated by Seller or any property, whether or not it was owned,
leased, used or operated by Seller, which was used by Seller for the
storage of inventory or production of finished goods or for the storage,
treatment or disposal of any waste, product or by-product and there is no
basis for any such notice or action. There are no pending or, to
Seller's knowledge, threatened actions or proceedings or notices of
potential actions or proceedings from any government body or any other
Person against Seller regarding any matter relating to health, safety or
protection of the environment.
3.1.27.4 CONTINUED COMPLIANCE. Without limiting any
of the other representations or warranties of Seller herein, there are
and have been no past or present events, conditions, circumstances,
activities, practices, incidents or actions which could be expected to
interfere with or prevent continued compliance with any Environmental Law
or License relating to the health, safety or protection of the
environment or which may give rise to any legal liability or otherwise
form the basis of any claim, action, suit, proceeding, hearing or
investigation against Seller or involving any real property now or
heretofore owned, leased, used or operated by Seller, or the Assets,
based on any condition, release, violation or alleged violation of any
Environmental and Safety Requirements relating to health, safety or
protection of the environment.
3.1.28 EMPLOYEE BENEFIT PLANS. Except for those plans, policies
and agreements described in PART 3.1.28 OF THE DISCLOSURE LETTER, neither
Seller nor any Plan Affiliate of Seller has at any time, with respect to
any employees of Seller, maintained, sponsored, adopted, made
contributions to or obligated itself to make contributions to or to pay
any benefits or grant rights under or with respect to any Employee
Benefit Plans, whether or not written or pursuant to a collective
bargaining agreement, which could give rise to or result in Seller or
such Plan Affiliate having any debt, liability, claim or obligation of
any kind of nature, whether accrued, absolute, contingent, direct,
indirect, known or unknown, perfected or inchoate or otherwise and
whether or not due or to become due. Correct and complete copies of all
Employee Benefit Plans previously have been furnished to Buyer. The
Employee Benefit Plans are in substantial compliance with governing
documents and agreements and with applicable Laws.
3.1.29 AFFILIATE TRANSACTIONS. PART 3.1.29 OF THE DISCLOSURE
LETTER contains a complete and accurate list of the parties to and the
date, nature, and amount of each transaction involving the transfer of
any cash, property, or rights to or from Seller from, to, or for the
benefit of any Affiliate or former Affiliate of Seller ("Affiliate
Transactions") within the two years preceding the date of this Agreement
and any existing commitments of Seller to engage in the future in any
Affiliate Transactions. Except as noted in said Disclosure Letter, each
Affiliate Transaction was effected on
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terms equivalent to those that would have been established in an
arms-length negotiation. As used in this Agreement, "Affiliate" has the
meaning given to that term in Rule 405 under the Securities Act of 1933,
as amended (the "Securities Act") and includes each past and present
Affiliate of a person.
3.1.30 BANK ACCOUNTS. Attached as PART 3.1.30 OF THE DISCLOSURE
LETTER is a true and complete list of each bank in which Seller has an
account or safe deposit box, the account number thereof, and the name of
all persons authorized to draw thereon or to have access thereto.
3.1.31 BROKERS. Seller has not incurred any liability to any
broker, finder, or agent, and there are no claims for any brokerage fees,
finder's fees, or commissions in connection with the transactions
contemplated hereby.
3.1.32 SECURITIES. The Seller represents that it has received
the prospectus, dated March 12, 1996, filed in connection with the
initial public offering of the Buyer's common stock (the "Prospectus"),
all of Buyer's quarterly reports on Form 10-Q filed with the Securities
and Exchange Commission ("SEC") since March 12, 1996 and Buyer's 10-K for
fiscal year 1996.
3.1.33 SECURITIES LAW REPRESENTATIONS. Upon consummation of the
transactions contemplated hereby, the Seller shall distribute the
Purchase Shares to the Shareholders in the form of S-Corporation
distributions. In connection with such distribution, the Shareholders
represent and warrant the following:
(1) Each Shareholder represents that he and his Purchaser
Representative (as defined below):
(a) has received and reviewed the Prospectus and all of
Buyer's quarterly reports on Form 10-Q filed since March 12, 1996.
(b) (i) was provided the opportunity to ask questions of
and receive answers from Buyer, or its representative, concerning the
operations, business and financial condition of Buyer, and all such
questions have been answered to his full satisfaction and any information
necessary to verify such responses has been made available to him; (ii)
has received such documents, materials and information as he deems
necessary or appropriate for evaluation of the Purchase Shares, and
further confirms that he has carefully read and understands these
materials and has made such further investigation as was deemed
appropriate to obtain additional information to verify the accuracy of
such materials; (iii) confirms that the Purchase Shares were not offered
to him by any means of general solicitation or general advertising; (iv)
believes that he has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of
an investment in the Purchase Shares; (v) is acquiring the Purchase
Shares for his own account, for investment purposes only, and
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not with a view towards the sale or other distribution thereof, other
than pursuant to an effective resale registration statement in whole or
in part; (vi) understands that the Purchase Shares have not been
registered under the securities laws of any state or under the Securities
Act and are offered in reliance on exemptions therefrom, that the
Purchase Shares have not been approved or disapproved by the SEC or by
any other federal or state agency; and (vii) understands that: (A) there
are restrictions on the transferability of the Purchase Shares; (B)
owners of Purchase Shares have only such rights to require the Purchase
Shares to be registered under the Securities Act as will be provided
hereunder; and (C) it may not be possible for him to sell his Purchase
Shares and accordingly, he may have to hold the Purchase Shares, and bear
the economic risk of this investment for an extended period of time. The
foregoing, however, does not limit or modify the representations and
warranties of Buyer in SECTION 3.2 of this Agreement or the right of the
Shareholders to rely thereon.
(c) Except Xx. Xxxx X. Xxxxxxxxx, are "accredited investors" as
such term is defined in the Securities Act.
(2) Each Shareholder agrees with Buyer that the Purchase Shares
will not be sold or otherwise disposed of except pursuant to (a) an
exemption or exclusion from the registration requirements under the
Securities Act which does not require the filing by Buyer with the SEC of
any registration statement, offering circular or other document, in which
case the Shareholder shall first supply to Buyer an opinion of counsel
(which opinion and counsel shall be reasonably satisfactory to Buyer)
that such exemption or exclusion is available, or (b) a registration
statement filed by Buyer with the SEC under the Securities Act (which the
Shareholder acknowledges Buyer has no obligation to file, except as may
otherwise be required hereunder).
(3) Each Shareholder agrees that the certificates for the
Purchase Shares received shall bear the following legend:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 or with any
state securities commission, and may not be transferred or
disposed of by the holder in the absence of a registration
statement which is effective under the Securities Act of
1933 and applicable state laws and rules, or unless,
immediately prior to the time set for transfer, such
transfer can be effected without violation of the
Securities Act of 1933 and other applicable state laws and
rules.
The Purchase Shares are being sold to, and acquired
by, the Investor in a transaction exempt under
Section 517.061(11) of the Florida Securities Act.
The Purchase Shares have not been registered under
that act in the State of Florida. In addition, the
Florida Securities Act provides that where sales are
made to 5 or more Florida Investors, all Florida
Investors shall have the privilege of
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voiding the purchase within 3 days after the first tender of
consideration is made by such Purchaser to the Issuer, an Agent of
the Issuer or an Escrow Agent, or within 3 days after the
availability of that privilege is communicated to such Purchaser,
whichever occurs later.
In addition, each Shareholder agrees that Buyer may place stop transfer
orders with its transfer agents with respect to such certificates. The
appropriate portions of the legend will be removed from the certificate
for the Purchase Shares of the Shareholder promptly upon delivery to
Buyer of such satisfactory evidence as may be reasonably required by
Buyer that such legend is not required to ensure compliance with the
Securities Act.
(4) The Shareholders have appointed Xxxxx X. Xxxxx as their
purchaser representative (the "Purchaser Representative"). The Purchaser
Representative shall have such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of an
investment in the Purchase Shares.
3.1.34 NO MISREPRESENTATION. None of the representations and
warranties of Seller and the Shareholders in this Agreement (for the
Passive Shareholders, only with respect to SECTION 3.1.33), or the
Seller's Agreements contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading. To the knowledge of Seller and the
Active Shareholders, there is no material fact which has not been
disclosed to the Buyer which materially affects or could reasonably be
anticipated to materially adversely affect the Assets, Seller's Business
or Seller's ability to consummate the transactions contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
and warrants to Seller and the Active Shareholders as of the Closing Date as
follows:
3.2.1 ORGANIZATION. Buyer is a corporation duly organized,
existing, and in good standing under the laws of the State of Delaware.
3.2.2 AUTHORITY. Buyer has full corporate power and authority to
execute and deliver this Agreement, and all other agreements, documents,
certificates and instruments delivered in connection with the
transactions contemplated hereby to which it is a party, and any other
documents to be delivered by it at Closing (collectively, the "Buyer's
Agreements") and to perform its obligations under this Agreement and the
Buyer's Agreements. The execution and performance of this Agreement and
the Buyer's Agreements by Buyer have been duly authorized by all
necessary corporate action on the part of Buyer, in accordance with law
and with Buyer's Articles of Incorporation and Bylaws. This Agreement
and the Buyer's Agreements have been duly and validly executed and
delivered by Buyer and constitute the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective
terms.
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3.2.3 TRANSACTIONS NOT A BREACH. Buyer's execution and
performance of this Agreement and the Buyer's Agreements will not
violate, delivery, and conflict with, or result in a breach of any
provision of any Law binding on Buyer or conflict with or result in the
breach of any of the terms, conditions, or provisions of the Buyer's
Articles of Incorporation or Bylaws or of any contract, agreement,
mortgage, or other instrument or obligation of any nature to which Buyer
is a party or by which Buyer is bound.
3.2.4 BROKER. Buyer has not incurred any liability to any
broker, finder, or agent, and there are no claims for any brokerage fees,
finder's fees, or commissions in connection with the transactions
contemplated hereby.
3.2.5 NO MISREPRESENTATION. None of the representations and
warranties of Buyer in this Agreement or the Buyer's Agreements contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein and therein not
misleading.
ARTICLE IV
CLOSING
4.1 TIME AND PLACE. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Platinum
Entertainment, Inc., 0000 Xxxxxxxxxxx Xx., Xxxxxxx Xxxxx, Xxxxxxxx, on a date to
be specified by the parties, which shall be no later than the second business
day after the satisfaction or waiver of the conditions set forth in Article VI
or at such other time, date and location as the parties may agree (the "Closing
Date"). Subject to the provisions of SECTION 5.1, failure to consummate the
transactions contemplated hereby will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
4.2 DELIVERIES. At the Closing:
4.2.1 SELLER DELIVERIES. Seller shall, at its sole cost and
expense, execute and deliver or cause to be executed and delivered to
Buyer:
(a) such bills of sale, assignments and other good and
sufficient instruments of conveyance as shall be effective to vest
Buyer with good and marketable title to the Assets, including,
without limitation, trademark and copyright assignments suitable
for filing with the U.S. Copyright Office;
(b) a counterpart of the Xxxx of Sale and Assignment and
Assumption Agreement, pursuant to which Seller assigns the
Contracts to Buyer;
(c) an employment agreement between Buyer and Xx. Xxxx
Xxxxxxxxx;
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(d) a counterpart of the Escrow Agreement, executed by
Seller and each of the Active Shareholders;
(e) a counterpart of the Non-Competition Agreement,
executed by Xxxxx X. Xxxxx;
(f) A Certificate of Good Standing, dated not more than
fifteen (15) days prior to the Closing, with respect to Seller
issued by the Secretary of State of Illinois;
(g) a Payoff Letter from Nations Bank, indicating the
amount to be paid as of the Closing Date in order to fully pay all
amounts outstanding under Seller's loan;
(h) any required consents and certificates of assignment
required of Seller to transfer the Assets, Assumed Liabilities and
the Contracts, and otherwise consummate the transactions
contemplated hereby;
(i) Certificates of Estoppel executed by each of the
songwriters in connection with those songwriter agreements listed
in PART 3.1.14 OF THE DISCLOSURE LETTER;
(j) an opinion of Xxxx Xxxxxx, counsel for Seller, dated
as of the Closing Date, in form and substance satisfactory to
Buyer;
(k) copies of unanimous resolutions of the Board of
Directors of Seller and the Shareholders, certified by the
secretary of Seller as having been duly and validly adopted and in
full force and effect, authorizing the execution and delivery of
this Agreement and the Seller's Agreements and the performance of
Seller's obligations under this Agreement and the Seller's
Agreements and approval of the consummation of the transactions
contemplated hereby;
(l) an written statement setting forth the
qualifications of the Purchaser Representative to hold such
position;
(m) Tax clearance certificates or similar documents
required by any state taxing authority in order to relieve Buyer
of any obligation to withhold any portion of the purchase price,
if previously obtained;
(n) all of Seller's business papers and records that are
part of the Assets, including, without limitation, originals of
all Contracts, sales and advertising materials and customer and
supplier lists, publishing agreements and customer accounts
receivable files; provided, that all such business papers,
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records and materials shall be deemed delivered to the extent that
they are located at any of the Leased Properties as of the Closing
Date;
(o) checks or other instruments of transfer pursuant to
which Buyer will obtain, or obtain control over, Seller's cash,
cash equivalents, money on deposit with banks and certificates of
deposits; and
(p) such other documents and instruments as Buyer or its
counsel may reasonably request.
All documents delivered to Buyer shall be in form and substance
reasonably satisfactory to Xxxxxx Xxxxxx & Zavis, counsel for Buyer.
4.2.2 BUYER DELIVERIES. Buyer shall execute and deliver or cause
to be executed and delivered to Seller simultaneously with delivery of
the items referred to in subsection 4.2.1 above:
(a) stock certificates representing the Purchase Shares;
(b) a counterpart of the Xxxx of Sale and Assignment and
Assumption Agreement, whereby Buyer assumes Seller's obligations
under the Contracts and the Assumed Liabilities;
(c) a counterpart of the Escrow Agreement, executed by
Buyer;
(d) a counterpart of the employment agreement, executed
by Buyer;
(e) a counterpart of the Non-Competition Agreement,
executed by Buyer:
(f) a Certificate of Good Standing, dated not more than
fifteen (15) days prior to the Closing, with respect to Buyer,
issued by the Secretary of State of Delaware;
(g) copies of resolutions of the stockholders and Board
of Directors of Buyer, certified by the secretary of Buyer as
having been duly and validly adopted and in full force and effect,
authorizing the execution and delivery of this Agreement and the
Buyer's Agreements and the performance of Buyer's obligations
under this Agreement and the Buyer's Agreements and approving the
consummation of the transactions contemplated hereby;
(h) an opinion of Xxxxxx Xxxxxx & Zavis, counsel for the
Buyer, dated as of the Closing Date, in form and substance
satisfactory to Seller; and
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(i) such other documents and instruments as Seller or
its counsel may reasonably request.
All documents delivered to Seller shall be in form and substance
reasonably satisfactory to counsel for Seller.
ARTICLE V
TERMINATION
5.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time prior to Closing under the following described circumstances:
(i) upon the mutual written consent of Buyer and Seller;
and
(ii) by Buyer if at any time Buyer determines in its sole
discretion that it is not satisfied with its due diligence review
of the Seller or the disclosures set forth in the Disclosure
Letter.
ARTICLE VI
CLOSING CONDITIONS
6.1 COVENANTS OF SELLER.
6.1.1 ACCESS AND INVESTIGATION. During the period from the date
of this Agreement to the Closing Date, the Seller will, (i) afford Buyer
full and free access to the Seller's personnel, properties, contracts,
books, and records, and other documents and data, (ii) furnish Buyer with
access to or copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (iii)
furnish Buyer with such additional financial, operating, and other data
and information as Buyer may reasonably request. No information or
knowledge obtained in any investigation pursuant to this SECTION 6.1
shall affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the transactions contemplated hereby.
6.1.2 OPERATION OF THE BUSINESSES OF THE SELLER. During the
period from the date of this Agreement to the Closing Date, the Seller
will:
(a) conduct the business of the Seller only in the ordinary
course of business, including maintaining the Seller's assets in good
repair, order, and condition;
(b) use its best efforts to preserve intact the current
business organization of the Seller, keep available the services of the
current officers, employees, and agents of
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such the Seller, and maintain the relations and goodwill with its
suppliers, customers, artists, landlords, creditors, employees, agents,
and others having business relationships with the Seller;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of Seller.
6.1.3 NON-NEGOTIATION. In consideration of the substantial
expenditure of time, effort and expense undertaken by Buyer in connection
with its due diligence review and the preparation and execution of this
Agreement, Seller agrees that neither it nor its representatives, agents
or employees will, after the execution of this Agreement until the
earlier of (i) the termination of this Agreement, or (ii) the Closing,
directly or indirectly, solicit, encourage, negotiate or discuss with any
third party (including by way of furnishing any information concerning
Seller) any acquisition proposal relating to or affecting Seller or any
part of it, or any direct or indirect interests in Seller, whether by
purchase of assets or stock, purchase of interests, merger or other
transaction substantially similar in effect, and that Seller will
promptly advise Buyer orally and in writing of the terms of any
communications Seller may receive or become aware of relating to any bid
for all or any part of Seller.
6.1.4 REQUIRED APPROVALS AND CONSENTS. As promptly as
practicable after the date of this Agreement, Seller will (i) make all
filings required to be made by it and (ii) obtain all necessary consents
or approvals required under the Contracts, in order to consummate the
transactions contemplated hereby.
6.1.5 NOTIFICATION. Between the date of this Agreement and the
Closing Date, Seller will promptly notify Buyer in writing if Seller or
any Shareholder becomes aware of any occurrence or any fact or condition
which will result in any of Seller's, or the Shareholders'
representations and warranties hereunder (for the Passive Shareholders,
only with respect to SECTION 3.1.33), not being true and correct if
restated as of the Closing Date.
6.1.6 DISCLOSURE LETTER. Seller and the Active Shareholders
shall use their best efforts to deliver to Buyer a complete Disclosure
Letter, setting forth the disclosure required pursuant to the terms
hereof, but no later than three (3) days prior to Closing.
6.2 COVENANTS OF BUYER.
6.2.1 NOTIFICATION. Between the date of this Agreement and the
Closing Date, Buyer will promptly notify Seller in writing if Buyer
becomes aware of any occurrence or any fact or condition which will
result in any of Buyer's representations and warranties hereunder not
being true and correct if restated as of the Closing Date.
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6.3 MUTUAL CONDITIONS PRECEDENT TO PARTIES' OBLIGATION TO CLOSE.
6.3.1 MUTUAL CONDITIONS. Each of the parties' obligations to
consummate the transactions contemplated hereby and to take other actions
required to be taken by the parties at the Closing is subject to the
satisfaction at or prior to the Closing, of the condition that no
temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the
transactions contemplated hereby shall be in effect.
6.4 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS TO CLOSE.
Buyer's obligations to consummate the transactions contemplated hereby
and to take the other actions required to be taken by Buyer at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in whole or in part):
6.4.1 ACCURACY OF REPRESENTATIONS. Each of Seller's and the
Shareholders' representations and warranties in this Agreement (for the
Passive Shareholders, only with respect to SECTION 3.1.33), must have
been accurate in all respects as of the date of this Agreement, and must
be accurate in all respects as of the Closing Date as if made on the
Closing Date.
6.4.2 SELLER'S AND THE ACTIVE SHAREHOLDERS' PERFORMANCE.
(a) Each of the covenants and obligations that Seller and the
Active Shareholders are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing must have been duly performed
and complied with in all respects.
(b) Seller and the Active Shareholders must have delivered or
caused to be delivered, each of the documents required to be delivered or
caused to be delivered, by it pursuant to SECTION 4.2.1.
6.4.3 MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the assets, liabilities of any kind, operations,
condition (financial or otherwise), operating results, employee, customer
or supplier relations, business activities or prospects of Seller since
December 31, 1995.
6.4.4 DUE DILIGENCE AND DISCLOSURE LETTER. The Buyer shall be
satisfied, in its sole discretion, with (i) its due diligence review (and
the due diligence review completed by its representatives) of Seller and
(ii) the disclosures made by Seller and the Active Shareholders in the
Disclosure Letter.
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6.5 CONDITIONS PRECEDENT TO THE SELLER'S AND THE ACTIVE SHAREHOLDERS'
OBLIGATION TO CLOSE.
Seller's and the Active Shareholders' obligation to consummate the
transactions contemplated hereby and to take the other actions required to be
taken by Seller at the Closing is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions (any of which may be waived by
Seller in whole or in part):
6.5.1 ACCURACY OF REPRESENTATIONS. Each of Buyer's
representations and warranties in this Agreement must have been accurate
in all respects as of the date of this Agreement and must be accurate in
all respects as of the Closing Date as if made on the Closing Date.
6.5.2 BUYER'S PERFORMANCE.
(a) Each of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been performed and complied with in all
respects; and
(b) Buyer must have delivered each of the documents required to
be delivered by them pursuant to SECTION 4.2.2.
ARTICLE VII
OTHER AGREEMENTS
7.1 BOOKS AND RECORDS. After the Closing, neither party shall destroy
(or permit the destruction of) any of the books and records pertaining to the
Assets or the Seller's Business in such party's possession that may be required
by the other party in connection with any tax audit, examination or other
proceeding without first offering them to the other party in writing at least
thirty (30) days prior to the date of their proposed destruction. After the
Closing Date, either party may inspect and make copies from such books and
records in the possession of the other party on reasonable notice and at
reasonable times.
7.2 COOPERATION AFTER CLOSING. From time to time after the Closing,
at Buyer's request and without further consideration, Seller will execute and
deliver such other instruments of sale, transfer, conveyance and assignment and
take such action as Buyer may reasonably deem necessary in order more
effectively to transfer, convey and assign to Buyer, and to confirm Buyer's
title to the Assets.
7.3 PUBLIC DISCLOSURE. Buyer and the Seller shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to this Agreement or the transactions contemplated hereby and shall
not issue any such press release
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or make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with a national securities exchange or
the Nasdaq National Market.
7.4 MAIL. All mail relating to the Assets that is delivered to Seller
or any of the Shareholders after the Closing Date shall forthwith be delivered
to Buyer.
7.5 ASSUMED LIABILITIES. Buyer agrees to discharge, as and when due,
the Assumed Liabilities.
7.6 XXXXX XXXXX LITIGATION. Reference is made to that certain
litigation matter known as Xxxxxx X. Xxxxx x. Xxxxx Entertainment Inc., d/b/a
Double J Music Group and Xxxx Xxxx Music, Case No. 96-1326-I (the "Xxxxx
Litigation"). The parties hereto acknowledge that Xx. Xxxxx is alleging, among
other things, that his songwriter's agreement dated April 11, 1995, by and
between Xx. Xxxxx and Seller (the "Xxxxx Agreement"), is not enforceable. The
parties hereto agree that although Seller is transferring all of its rights in
and to the Xxxxx Agreement hereunder, Buyer is specifically not assuming or
agreeing to discharge in any manner any Losses (as defined below) of Seller or
any other parties in connection with the Xxxxx Litigation. Furthermore, Seller
and/or Xxxxx X. Xxxxx, individually, agree to (i) pay for any and all and costs,
expenses, fines, penalties, actual, consecutive, punitive or other damages or
any other amounts (including attorneys' fees and expenses) directly or
indirectly in connection with the Xxxxx Litigation (the "Litigation Expenses").
In the event that (a) a court of competent jurisdiction issues a final and
nonappealable order or judgment declaring the Xxxxx Agreement enforceable or a
settlement between the parties which requires musical compositions be delivered
by Xx. Xxxxx after the Closing Date and (b) Buyer realizes any future royalty
income from the exploitation of musical compositions delivered by Xx. Xxxxx to
Buyer after Closing Date (the "Option Income"), as a direct result of such order
or judgment or settlement Buyer agrees to reimburse Seller and/or Xx. Xxxxx, as
the case may be, on a priority basis, solely out of the money received from such
Option Income, for the Litigation Expenses incurred by Xx. Xxxxx less any monies
collected by Seller (or Xx. Xxxxx, as the case may be) in connection with the
Xxxxx Litigation, including, without limitation, an award of sanctions. Xx.
Xxxxx agrees to provide Buyer reasonable supporting documentation evidencing his
payment of the Litigation Expenses for which he is seeking reimbursement and
fully disclose to Buyer any monies collected as a result of counterclaim
judgements in connection with the Xxxxx Litigation. In the event that the Xxxxx
Litigation is resolved in a settlement, the parties hereto agree that Buyer
shall not incur any obligations, liabilities or Losses as a direct or indirect
result of such settlement.
7.7 TAXES. Seller shall be liable for filing all Tax Returns and
shall pay all Taxes (whether assessed or unassessed) applicable to the Assets
and the Seller's Business, in each case attributable to periods (or portions
thereof) ending on or prior to the Closing Date. Buyer shall be liable for
filing all Tax Returns and shall pay all Taxes (whether assessed or unassessed)
applicable to the Assets attributable to periods (or portions thereof) beginning
after the Closing Date. For purposes of this SECTION 7.7, any period beginning
before and ending after the Closing Date shall be treated as two partial
periods, one ending on the Closing Date and the
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other beginning after the Closing Date. Buyer and Seller agree to timely sign
and deliver such certificates or forms as may be necessary or appropriate to
establish an exemption from (or otherwise reduce) or make a report with respect
to, such taxes, including filings required under Section 1060 of the Code (as
defined below) or any successor statute thereof.
7.8 NONASSIGNABLE CONTRACTS. To the extent that the assignment
hereunder by Seller to Buyer of any Contract is not permitted or is not
permitted without the consent of any other party to the Contract, this Agreement
shall not be deemed to constitute an assignment of any such Contract if such
consent is not given or if such assignment otherwise would constitute a breach
of, or cause a loss of contractual benefits under, any such Contract, and Buyer
shall not assume any obligations or liabilities thereunder. Without in any way
limiting Seller's obligations to obtain all consents and waivers necessary for
the sale, transfer, assignment and delivery of the Contracts and the Assets to
Buyer hereunder, if any such consent is not obtained or if such assignment is
not permitted irrespective of consent and the Closing hereunder is consummated,
Seller shall continue to use its reasonable efforts to obtain such consents and
shall cooperate with Buyer in any arrangement designed to provide Buyer with the
rights and benefits (subject to the obligations) under any such Contracts.
7.9 TRANSFEREE/SUCCESSOR LIABILITY. The parties agree that Buyer will
not by virtue of the transactions contemplated hereby assume any liabilities or
obligations of Seller other than the Assumed Liabilities and, accordingly,
Seller agrees to take all necessary actions to fully protect Buyer from and
against any and all transferee or successor liability (other than with respect
to the Assumed Liabilities) arising out of the transactions contemplated hereby,
including any and all liabilities relating to COBRA, Taxes, Environmental and
Safety Requirements and Employee Benefit Plans.
7.10 PIGGYBACK REGISTRATION RIGHTS.
7.10.1 RIGHT TO INCLUDE THE REGISTRABLE SECURITIES. Subject to
the limitations set forth herein, if Buyer, at any time before the
Shareholders no longer hold any Registerable Securities (as defined
below), proposes to register securities under the Securities Act by
registration on Forms X-0, X-0 or S-3 or any successor or similar form(s)
(except registrations on such Forms S-4 or S-8 and any successor or
similar forms) whether for sale for its own account or pursuant to
another demand for registration granted any other party, it will give
prompt written notice each such time to the Shareholders of its intention
to do so and of such Shareholders' rights under this SECTION 7.10. Upon
the written request of any Shareholder (specifying the Registrable
Securities intended to be disposed of and the intended method of
disposition thereof), made within 15 business days after the receipt of
any such notice (10 business days if Buyer gives telephonic notice to the
Shareholders with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such
shorter period of time is required because of a planned filing date)
(which request shall specify the Registrable Securities to be disposed of
by any Shareholder), Buyer will include in its proposed registration the
Registrable Securities specified in any such
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request, subject to the priorities set forth in SECTION 7.10.2 below. If
Buyer thereafter determines for any reason not to register or to delay
registration of such securities, Buyer may, at its election, give written
notice of such determination to each Shareholder participating in such
registration and, thereupon, (i) in the case of a determination not to
register, shall be relieved of the obligation to register such
Registrable Securities in connection with such registration (but not from
any obligation of Buyer to pay the Registration Expenses (as defined in
SECTION 7.13) in connection therewith), and (ii) in the case of a
determination to delay registration, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay
in registration of such other securities.
7.10.2 PRIORITY OF PIGGYBACK REGISTRATION RIGHTS IN CONNECTION
WITH REGISTRATIONS FOR BUYER'S ACCOUNT. If the registration referred to
in this SECTION 7.10 is to be an underwritten registration and the
managing underwriter(s) advise Buyer (or the other shareholders
participating therein) in writing that in their good faith opinion such
offering would be adversely affected by the inclusion therein of the
total number of Registrable Securities requested to be included therein
by a Shareholder participating in such registration under this Agreement,
Buyer shall include in such registration: (1) first, all securities Buyer
proposes to sell for its own account and (2) second, up to the full
number of securities proposed to be registered for the account of (A) the
shareholders (other than the Shareholders) on behalf of whom registration
may have initially been requested and who are entitled to a priority in
such case and (B) the Shareholders, on a pari passu basis with the
shareholders contemplated by (A) above ((A) and (B) above shall be
defined as the "Priority Shareholders") and (3) other shareholders (other
than the Priority Shareholders) entitled to participate in the
registration, drawn from them pro rata based on the number each has
requested to be included in such registration.
7.10.3 LIMITATIONS; EXCEPTIONS. Buyer shall not be required to
effect any registration of Registrable Securities under this SECTION 7.10
incidental to the registration of any of its securities in connection
with mergers, acquisitions, exchange offers, subscription offers or any
Employee Benefit Plan.
7.10.4 NUMBER OF PIGGYBACK REGISTRATIONS; EFFECTIVE REGISTRATION
STATEMENT. Each Shareholder may exercise his right to piggyback
registration under this SECTION 7.10 one (1) time after the Closing Date.
A registration requested pursuant to this SECTION 7.10 shall not be
deemed to have been effected (i) unless a registration statement with
respect thereto has become effective, or (ii) if, after it has become
effective, it does not remain effective and available to a Shareholder
for resale for a period of at least 45 days (unless the Registrable
Securities registered thereunder have been sold or disposed of prior to
the expiration of such 45-day period) or such registration is interfered
with by any stop order, injunction or other order or requirement of the
United States Securities and Exchange Commission (the "SEC") or other
Governmental Body or court for any reason and has not thereafter become
effective.
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7.11 DEMAND REGISTRATION.
7.11.1 REQUEST. Subject to the terms of this Agreement,
beginning on the one year anniversary of the Closing Date, the holders of
Registrable Securities may request, in writing, registration of all or
part of their Registrable Securities (the Shareholders making such a
request being referred to as "Requesting Shareholders") by Buyer under
the Securities Act, specifying the number of Registrable Securities to be
registered and the intended method of disposition thereof. Buyer will
deliver within two (2) business days of receipt of such written request a
written notice of such request to the other Shareholders and thereupon
Buyer will use its best efforts to effect the registration in the most
expeditious manner possible under the Securities Act of the Registrable
Securities which Buyer has been requested to register by the Requesting
Shareholders, and all other Registrable Securities which Buyer has been
requested to register by written request of the other Shareholders and
given to Buyer within 21 business days after receipt of the written
notice by the Shareholders, specifying the number and intended method of
disposition of such Registrable Securities, all to the extent requisite
to permit the intended disposition of the Registrable Securities to be so
registered; provided, however, that a Shareholder shall not be entitled
to have his Registrable Securities registered pursuant to this SECTION
7.11 if such Shareholder has previously had the opportunity to exercise
his right to piggyback registration under SECTION 7.10 or if his
Registrable Securities are saleable under any securities law, including
without limitation Rule 144 of the Securities Act ("Rule 144"), in which
case all rights under this SECTION 7.11 shall be deemed terminated and of
no further force and effect.
7.11.2 REGISTRATION OF OTHER SECURITIES. Whenever Buyer shall
effect a registration pursuant to this SECTION 7.11, securities other
than Registrable Securities may be included among the securities covered
by such registration without restriction.
7.11.3 REGISTRATION STATEMENT FORM. Registrations under this
SECTION 7.11 shall be on such appropriate registration form of the SEC
(i) as shall be selected by the Buyer and (ii) as shall permit the
disposition of such Registrable Securities in accordance with the
intended method or methods of disposition specified in the request for
registration and consistent with Buyer's obligation to effect the
registration in the most expeditious manner possible.
7.11.4 EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this SECTION 7.11 shall not be deemed to have been
effected and will not be considered a demand registration which may be
requested by the Shareholders hereunder (i) unless a registration
statement with respect thereto has become effective, or (ii) if, after it
has become effective, it does not remain effective and available to a
shareholder of the Seller for resale for a period of at least 30 days
(unless the Registrable Securities registered thereunder have been sold
or disposed of prior to the expiration of such 30 day period) or such
registration is interfered with by any stop order, injunction or other
order or
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requirement of the SEC or other governmental agency or court for any
reason and has not thereafter become effective.
7.11.5 NUMBER OF DEMAND REGISTRATIONS; LIMITATIONS.
Notwithstanding anything in this Agreement to the contrary, the Buyer shall not
be required to effect more than one (1) demand registration for the
Shareholders, taken as a whole, pursuant to this SECTION 7.11, without regard to
any subsequent transfer of any Registrable Securities by a shareholder of the
Seller.
7.12 SHAREHOLDER OBLIGATIONS. Each Shareholder shall furnish to Buyer
in writing such information relating to such Person as Buyer may reasonably
request in writing in connection with the preparation of such registration
statement and each such Person agrees to notify Buyer as promptly as practicable
of any inaccuracy or change in information it has previously furnished to Buyer
or of the happening of any event, in either case as a result of which any
prospectus relating to such registration contains an untrue statement of a
material fact regarding such Person or the distribution of such Registrable
Securities or omits to state any material fact regarding such Person or the
distribution of such Registrable Securities required to be stated therein or
necessary to make the statement therein not misleading in light of the
circumstances then existing, and to promptly furnish to Buyer any additional
information required to correct and update any previously furnished information
or required such that such prospectus shall not contain, with respect to such
Person or the distribution of such Registrable Securities, an 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 not misleading in light of
the circumstances then existing. Each such Shareholder agrees that, upon
receipt of any notice from Buyer of an event which Buyer believes necessitates
the Shareholder discontinue the disposition of such Registrable Securities, such
holder will forthwith discontinue disposition of such Registrable Securities
covered by such registration statement or prospectus until such holder's receipt
of the copies a supplemented or amended prospectus relating to such registration
statement or prospectus, or until it is advised in writing by Buyer that the use
of the applicable prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in such
prospectus, and, if so directed by Buyer, such holder will deliver to Buyer (at
Buyer's expense) all copies, other than permanent file copies then in such
person's possession, of the prospectus covering the Registrable Securities
current at the time of receipt of such notice. In addition, Buyer shall not be
obligated to register such Registrable Securities in any underwritten
registration unless, each Shareholder participating in the registration is party
to and performs its obligations pursuant to the underwriting agreement entered
into with respect to such underwritten registration.
7.13 REGISTRATION EXPENSES. Buyer will pay all Registration Expenses
(as defined below) in connection with the registration of Registrable Securities
requested under SECTION 7.10 or SECTION 7.11. Buyer will pay all Registration
Expenses other than (i) counsel's fees and expenses for the Shareholders
participating in such registrations and (ii) the fees and expenses of any other
Person retained by the Shareholders. "Registration Expenses" include all
expenses incident to the Buyer's performance of or compliance with this
Agreement, including without
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limitation all registration and filing fees, including fees with respect to
filings required to be made with the National Association of Securities Dealers,
Inc., fees and expenses of compliance with securities or blue sky laws,
including, without limitation, reasonable fees and disbursements of counsel for
the underwriters, all word processing, duplicating and printing expenses,
messenger, telephone and delivery expenses, and fees and disbursements of
counsel of Buyer and of all independent certified public accountants of Buyer
(including the expenses of any special audit and "cold comfort" letters required
by or incident to such performance), underwriters fees and disbursements
(excluding discounts, commissions, fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Registrable Securities), fees and expenses of other persons
retained by Buyer (all such expenses being herein called "Registration
Expenses"). Except as otherwise provided above, Buyer will also pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange, rating
agency fees and the fees and expenses of any person, including special experts,
retained by Buyer.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLER. From and after the Closing, Seller and
the Active Shareholders, on behalf of themselves and their respective heirs,
successors and assigns, hereby agree jointly and severally to indemnify, defend,
and save Buyer and its Affiliates, and each of their respective officers,
directors, employees, and agents (each a "Buyer Indemnified Party"), forever
harmless from and against, and to promptly pay to a Buyer Indemnified Party or
reimburse a Buyer Indemnified Party for, any and all liabilities (whether
contingent, fixed, or unfixed, liquidated or unliquidated, or otherwise),
obligations, deficiencies, demands, claims, suits, actions, or causes of action,
assessments, losses, costs, expenses, interest, fines, penalties, actual or
punitive damages, or costs or expenses of any and all investigations,
proceedings, judgments, environmental analyses, remediations, settlements, and
compromises (including reasonable fees and expenses of attorneys, accountants,
and other experts) (collectively, the "Losses") sustained or incurred by any
Buyer Indemnified Party relating to, resulting from, arising out of, or
otherwise by virtue of any of the following:
8.1.1 any breach of any covenant, agreement, representation or
warranty of Seller or the Active Shareholders (or a breach of SECTION
3.1.33 of any Shareholder) under this Agreement or any of the Seller's
Agreements;
8.1.2 the operation of Seller's Business prior to the Closing
Date or any liabilities, actions or omissions of Seller or the Active
Shareholders (except for the Assumed Liabilities), including, without
limiting the generality of the foregoing, Losses relating, directly or
indirectly, to (i) Taxes, (ii) wages and salaries, (iii) rents and any
other operating or non-operating expenses or liabilities, (iv) violations
or obligations
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under Environmental and Safety Requirements, (v) COBRA and (vi) Employee
Benefit Plans, it being understood and agreed that Buyer is not to assume
any liabilities of Seller of any kind or character, contingent or
otherwise, except for the Assumed Liabilities;
8.1.3 any assertion against Buyer or its Affiliates with
respect to the Excluded Liabilities; and
8.1.4 any of the Claims disclosed in PART 3.1.17 OF THE
DISCLOSURE LETTER, including, but not limited to, any money damages
incurred by a Buyer Indemnified Party in connection with such Claims.
8.1(A) Notwithstanding anything to the contrary, neither Seller nor the
Active Shareholders shall (i) make any representation or warranty or be
construed to have made any representation and warranty with respect to the
existence or nonexistence of any third party claim of infringement which arises
after the Closing and involves any of the musical compositions constituting
Intellectual Property or contract rights under that certain agreement between
Victoria Xxx Xxxxxxxxx and Xxxx X. Xxxxxxxxx, Partners, d/b/a Xxxxxxxx Xxx Music
and American Society of Composers, Authors & Publishers, dated June 4, 1992 or
that certain agreement between Xxxx X. Xxxxxxxxx, d/b/a Xxxx Xxxx Music and
Broadcast Music, Inc., dated January 19, 1990 (the "ASCAP and BMI Agreements")
purchased by Buyer hereunder. Further, neither Seller nor the Active
Shareholders have any indemnification obligation relating to the existence or
nonexistence of any third party claim of infringement which arises after the
Closing and involves any of the musical compositions constituting Intellectual
Property or the contract rights under the ASCAP and BMI Agreements purchased by
Buyer hereunder. Nothing herein shall limit the indemnification obligations of
Seller for acts or omissions of Seller or the Active Shareholders with respect
to any third party claim of infringement which arises after the Closing and
involves any of the musical compositions constituting the Intellectual Property
or contract rights under the ASCAP and BMI Agreements purchased by Buyer
hereunder. The parties agree that in the event this provision contradicts any
other provision of this Agreement, this provision shall prevail.
8.2 INDEMNIFICATION BY BUYER. From and after the Closing, Buyer
agrees to indemnify, defend, and save Seller and its officers, directors,
employees, and agents and the Active Shareholders, on behalf of themselves and
their respective heirs, successors and assigns (each a "Seller Indemnified
Party") forever harmless from and against, and to promptly pay to a Seller
Indemnified Party or reimburse a Seller Indemnified Party for, any and all
Losses sustained or incurred by any Seller Indemnified Party related to,
resulting from, arising out of, or otherwise by virtue of any of the following:
8.2.1 any breach of any covenant, agreement representation or
warranty of Buyer under this Agreement and any of the Buyer's Agreements;
or
8.2.2 breach by Buyer of any of its obligations with respect to
the Assumed Liabilities.
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8.3 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. In the event
that subsequent to the Closing any Person or entity entitled to indemnification
under this Agreement (an "Indemnified Party") asserts a claim for
indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement or an Affiliate of a party to this Agreement (including, but not
limited to any domestic or foreign court or Governmental Body) (a "Third Party
Claim") against such Indemnified Party, against which a party to this Agreement
is required to provide indemnification under this Agreement (an "Indemnifying
Party"), the Indemnified Party shall give written notice together with a
statement of any available information (other than privileged information)
regarding such claim to the Indemnifying Party within thirty (30) business days
after learning of such claim (or within such shorter time as may be necessary to
give the Indemnifying Party a reasonable opportunity to respond to such claim).
The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party (the "Defense Notice") within fifteen days (15) after receipt
from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("Defense Counsel"), to conduct at its expense the defense against such
claim in its own name, or if necessary in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense Counsel, which approval shall not be unreasonably withheld, and in
the event the Indemnifying Party and the Indemnified Party cannot agree upon
such counsel within ten (10) days after the Defense Notice is provided, then the
Indemnifying Party shall propose an alternate Defense Counsel, which shall be
subject again to the Indemnified Party's approval which approval shall not be
unreasonably withheld. If the parties still fail to agree on the Defense
Counsel, then, at such time, they shall mutually agree in good faith on a
procedure to determine the Defense Counsel.
(a) In the event that the Indemnifying Party shall fail to give
the Defense Notice within said 15 day period, it shall be deemed to have
elected not to conduct the defense of the subject claim, and in such
event the Indemnified Party shall have the right to conduct the defense
in good faith and to compromise and settle the claim in good faith
without prior consent of the Indemnifying Party and the Indemnifying
Party will be liable for all reasonable costs, expenses, settlement
amounts or other Losses paid or incurred in connection therewith.
(b) In the event that the Indemnifying Party does deliver a
Defense Notice and thereby elects to conduct the defense of the subject
claim, the Indemnifying Party shall be entitled to have the exclusive
control over said defense settlement of the subject claim and the
Indemnified Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as it may reasonably
request, all at the expense of the Indemnifying Party, and the
Indemnified Party shall have the right at its expense to participate in
the defense assisted by counsel of its own choosing. In such an event,
the Indemnifying Party will not settle the subject claim without the
prior written consent of the Indemnified Party, which consent will not be
unreasonably withheld.
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(c) Without the prior written consent of the Indemnified Party,
the Indemnifying Party will not enter into any settlement of any Third
Party Claim or cease to defend against such claim, if pursuant to or as a
result of such settlement or cessation, (i) injunctive relief or specific
performance would be imposed against the Indemnified Party, or (ii) such
settlement or cessation would lead to liability or create any financial
or other obligation on the part of the Indemnified Party for which the
Indemnified Party is not entitled to indemnification hereunder.
(d) Notwithstanding paragraph (b) above, the Indemnifying Party
shall not be entitled to control, but may participate in, and the
Indemnified Party shall be entitled to have sole control over, the
defense or settlement of any claim (i) that seeks a temporary restraining
order, a preliminary or permanent injunction or specific performance
against the Indemnified Party, (ii) to the extent such claim involves
criminal allegations against the Indemnified Party, (iii) that if
unsuccessful, would set a precedent that would materially interfere with,
or have a material adverse effect on, the business or financial condition
of the Indemnified Party, or (iv) to the extent such claim imposes
liability on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder. In such an event,
the Indemnifying Party will still have all of its obligations hereunder
provided that the Indemnified Party will not settle the subject claim
without the prior written consent of the Indemnifying Party, which
consent will not be unreasonably withheld.
(e) Any final judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party, and
shall conclusively be deemed to be an obligation with respect to which
the Indemnified Party is entitled to prompt indemnification hereunder.
(f) A failure by an Indemnified Party to give timely, complete
or accurate notice as provided in this SECTION 8.3 will not affect the
rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially
damaged as a result of such failure to give timely notice.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICE. Any notices, consents, or other communication required to
be sent or given by any of the parties shall in every case be in writing and
will be deemed properly served if (a) delivered personally, (b) sent by
telecopier, provided that a copy is mailed by Certified U.S. mail, return
receipt requested; (c) sent by Certified U.S. mail, return receipt requested, or
(d) sent by a recognized overnight courier service, in each case, to the parties
at the addresses
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and telecopier numbers as set forth below or at such other addresses and
telecopier numbers as may be furnished to the other parties in writing.
9.1.1 If to Seller or the Shareholders:
Xxxxx Entertainment, Inc.
000 Xxxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy: (000) 000-0000
with a copy to:
The Law Offices of Xxxx Xxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telecopy: (000) 000-0000
9.1.2 If to Buyer:
Platinum Entertainment, Inc.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
Date of service of such notice will be (i) the date such notice is personally
delivered, (ii) three days after the date of mailing if sent by certified or
registered mail, or (iii) one day after delivery to the overnight courier.
9.2 SEVERABILITY. The unenforceability or invalidity of any provision
of this Agreement will not affect the enforceability or validity of any other
provision.
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9.3 SUCCESSORS. This Agreement will be binding upon and inure to the
benefit of the parties and their respective successors, permitted assigns,
heirs, and personal representatives.
9.4 DOCUMENTS. At and after the Closing, each party will execute all
documents and take such other actions as the other parties may reasonably
request in order to consummate the Acquisition and to accomplish the purposes of
this Agreement.
9.5 COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, each of which will be deemed an original but all of
which together will constitute one and the same instrument.
9.6 EXPENSES. Except as otherwise specifically provided herein, each
of the parties shall pay all costs and expenses incurred or to be incurred by it
in negotiating and preparing this Agreement and in consummating the Acquisition.
9.7 GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Illinois, without giving effect to
principles of conflicts of law.
9.8 HEADINGS. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only an will not affect the
construction or interpretation of any of its provisions.
9.9 ASSIGNMENT. This Agreement will not be assignable or delegable by
any party without the prior written consent of the other parties; provided,
however, that nothing in this Agreement will limit Buyer's ability to assign its
rights or delegate its responsibilities, liabilities, and obligations under this
Agreement to any Person at any time without the consent of the other parties.
9.10 NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
9.11 INVESTMENT DECISION. IN MAKING AN INVESTMENT DECISION, SELLER AND
THE SHAREHOLDERS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS
OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES BEING
SOLD HEREUNDER HAVE NOT BEEN RECOMMENDED, APPROVED OR DISAPPROVED BY ANY STATE
SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY. NONE OF THE FOREGOING
AUTHORITIES HAVE PASSED UPON, OR ENDORSED THE MERITS OF, THIS OFFERING OR THE
ACCURACY OR ADEQUACY OF INFORMATION PROVIDED. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE PURCHASE SHARES BEING SOLD HEREUNDER HAVE NOT BEEN REGISTERED WITH
THE SEC UNDER THE SECURITIES ACT, OR UNDER THE SECURITIES LAWS OF ANY STATES,
AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH STATE LAWS. THE PURCHASE SHARES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREUNDER.
9.12 DEFINITIONS. As used in this Agreement, (a) the term "Person"
means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated association, corporation, entity, or Government Body, (b) the
term "Governmental Body" means any foreign, federal, state, or local
governmental or regulatory body, including any instrumentality, division,
agency, or department of such a body, (c) the term "ordinary course of business"
means an action taken by a Person will be deemed to have been taken in the
ordinary course of Seller's business if (i) such action is consistent with the
past practices of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; (ii) such action is not required to be
authorized by the board of directors of such Person (or by any Person or group
of Persons exercising similar authority) and does not require any other separate
or special authorization of any nature; and (iii) such action is similar in
nature and magnitude to actions customarily taken without any separate or
special authorization, in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business as such
Person, (d) the term "to the knowledge of Seller," "to Seller's knowledge" or
any similar term means knowledge possessed, or which should have been possessed
after due inquiry in connection therewith, by the officers, and/or Active
Shareholders of Seller; and (e) "to the Actual Knowledge of Seller," "to
Seller's Actual Knowledge" means knowledge possessed by the officers, and/or
Active Shareholders of Seller or the Active Shareholders as of the Closing Date.
For the purposes of this Agreement, the following terms have the meaning set
forth below:
"ACTIVE SHAREHOLDERS" means, together, Xxxxx X. Xxxxx and Xxxx X.
Xxxxxxxxx, shareholders of the Company.
"COBRA" means the limited continued medical benefit coverage
required to be provided under Section 4980B of the Code or state continuation
coverage laws.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DISCLOSURE LETTER" means the letter delivered by the Seller and
the Shareholders to Buyer concurrently with the execution and delivery of this
Agreement.
"EMPLOYEE BENEFIT PLANS" means any Employee Pension Benefit Plan
as defined in Section 3(2) of ERISA, "Employee Welfare Benefit Plan" (as defined
in Section 3(1) of
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ERISA), "multi-employer plan" (as defined in Section 3(37) of ERISA), plan of
deferred compensation, medical plan, life insurance plan, long-term disability
plan, dental plan or other plan providing for the welfare of any of Seller's or
any Plan Affiliate's employees or former employees or beneficiaries thereof,
personnel policy (including but not limited to vacation time, holiday pay, bonus
programs, moving expense reimbursement programs and sick leave), excess benefit
plan, bonus or incentive plan (including but not limited to stock options,
restricted stock, stock bonus and deferred bonus plans), salary reduction
agreement, change-of-control agreement, employment agreement, consulting
agreement or any other benefit, program or contract.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal, state
and local laws, rules, regulations, ordinances, orders, statutes, actions,
policies and requirements relating to public health and safety, worker health
and safety, pollution or protection of the environment, all as amended or
hereafter amended.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or any successor
authority) that are applicable as the date of determination, as consistently
applied by Seller.
"HAZARDOUS SUBSTANCES" means any pollutant or contaminant (as that
term is defined in 42 U.S.C. Section 9601(33)), toxic pollutant (as that term is
defined in 33 U.S.C. Section 1362(13)), hazardous substance (as that term is
defined in 42 U.S.C. Sections 9601 ET SEQ. and the regulations promulgated
thereunder), hazardous chemical (as that term is defined by 29 C.F.R. Section
1910.1200(c)), hazardous waste (as that term is defined in 42 U.S.C. Section
6903(5)), radioactive material, including without limitation any naturally
occurring radioactive material, any source, special nuclear or by-product
material as defined in 42 U.S.C. Sections 2011 ET SEQ., friable asbestos and
asbestos containing material, regulated levels of polychlorinated biphenyls,
petroleum and petroleum waste, including crude oil or any petroleum derived
substance, waste or breakdown or decomposition product thereof, or any
constituent of any such petroleum substance or waste, or any substance or
material which because of its toxicity, corrosiveness, ignitability, reactivity
or infectious characteristics may pose a threat to human health or the
environment and which is subject to any Environmental and Safety Requirements.
"PLAN AFFILIATE" means any Person or entity with which Seller
constitutes all or part of a controlled group of corporations, a group of trades
or businesses under common control or an affiliated service group, as each of
those terms are defined in Section 414 of the Code.
"PASSIVE SHAREHOLDERS" means, collectively, Xxxxxx X. Xxxxx Family
Trust, Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxxxx Revocable Trust,
Xxxxxxxxx X. Xxxxxxx Revocable Trust, Xxxx Xxxxxx, Co. Xxxxxxx Xxxxx III, Xxxxx
X. Xxxxx, Xxxxx X.
-35-
XxXxxxx, Xxxxxxxxx Xxxxx, V. Xxxxx Xxxx Estate and Xxxxxxx X. Xxxxxxx,
shareholders of the Company.
"REGISTRABLE SECURITIES" The Purchase Shares (as presently
constituted) and any stock or other securities held by a Shareholder into which
such Purchase Shares shall have hereafter been changed, converted or exchanged;
PROVIDED, HOWEVER, that any such securities shall cease to be Registrable
Securities with respect to a proposed offer or sale thereof (i) when a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with the plan of distribution set forth in such
registration statement (ii) to the extent that such securities, in the opinion
of counsel to Buyer are permitted to be distributed pursuant to Rule 144 under
the Securities Act or (iii) they shall have ceased to be outstanding.
"TAX" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; the foregoing shall include any
transferee or secondary liability for a Tax and any liability assumed by
agreement or arising as a result of being (or ceasing to be) a member of any
Affiliated Group, as defined in Section 1504 of the Code, (or being included (or
required to be included) in any Tax Return relating thereto).
"TAX RETURNS" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting schedules, statements or information) filed or required to be filed
in connection with the determination, assessment or collection of any Taxes of
any party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
9.13 ENTIRE AGREEMENT. This Agreement and the Disclosure Letter and
all Exhibits attached to the Agreement (which will be deemed incorporated in the
Agreement and made a part of this Agreement) set forth the entire understanding
of the parties and may be modified only by instruments signed by all of the
parties.
9.14 THIRD PARTIES. Nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give to any person, other than
the parties to this Agreement, any rights or remedies under or by reason of this
Agreement.
9.15 INTERPRETATIVE MATTERS. Unless the context otherwise requires,
(i) all references to Articles, Sections, the Disclosure Letter, or Exhibits are
to Articles, Sections, the Disclosure Letter, or Exhibits in this Agreement,
(ii) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with generally accepted accounting
principles, (iii) words in the singular or plural include the singular and
plural and pronouns
-36-
stated in either the masculine, feminine, or neuter gender will include the
masculine, feminine, and neuter and (iv) the term "including" shall mean by way
of example and not by way of limitation.
-37-
IN WITNESS WHEREOF, the parties have executed this Agreement of the date
first above written.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Xxxxxx Xxxxxx
-------------------------
Xxxxxx Xxxxxx
Its: President and Chief Executive Officer
XXXXX ENTERTAINMENT, INC.
/s/ Xxxx X. Xxxxxxxxx
-------------------------
Xxxx X. Xxxxxxxxx
Its: President
SHAREHOLDERS
/s/ Xxxxx X. Xxxxx
----------------------------
Xxxxx X. Xxxxx
/s/ Xxxx X. Xxxxxxxxx
----------------------------
Xxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxx Family Trust
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Its: Trustee
/s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
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Xxxxxxxx X. Xxxxxxx Revocable Trust
By: /s/ Xxxxxxxx X. Xxxxxxx
--------------------------------
Its: Trustee
Xxxxxxx X. Xxxxxxx Revocable Trust
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Its: Trustee
/s/ Xxxx Xxxxxx
-----------------------------------
Xxxx Xxxxxx
/s/ C. Xxxxxxx Xxxxx III
-----------------------------------
C. Xxxxxxx Xxxxx III
/s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx
/s/ Xxxxx X. XxXxxxx
-----------------------------------
Xxxxx X. XxXxxxx
/s/ Xxxxxxxxx Xxxxx
-----------------------------------
Xxxxxxxxx Xxxxx
V. Xxxxx Xxxx Estate
By: /s/ Xxxxx Xxxxxx Agent
--------------------------------
Its: Trustee
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx
-39-
EXHIBIT 2.2.1
XXXX OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS XXXX OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Agreement") is executed as of September 19, 1996, by and between Xxxxx
Entertainment, Inc., an Illinois corporation ("Seller"), and Platinum
Entertainment, Inc., a Delaware corporation ("Buyer"). Capitalized terms used
but not defined herein shall have the meaning ascribed them in that certain
Asset Purchase Agreement dated as of September 19, 1996, by and between Seller
and Buyer (the "Purchase Agreement").
1. SALE AND ASSIGNMENT OF ASSETS. Seller, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby grants, transfers, sells, conveys, assigns and delivers to Buyer, free of
all Liens, all of Seller's right, title and interest in and to all of the
Assets.
2. ASSIGNMENT OF CONTRACTS. Seller, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby assigns, conveys and delivers to Buyer, all of Seller's right, title and
interest in and to the Contracts, to be held and enjoyed by Buyer and its
successors and assigns as fully and entirely as the same would have been held by
the Seller had this assignment and sale not have been made.
3. ASSUMPTION OF CONTRACTS. Buyer hereby accepts the assignment of
Contracts and assumes all of Seller's obligations relating to the Contracts.
4. ASSUMPTION OF LIABILITIES. Buyer hereby assumes and undertakes to
pay, perform and otherwise discharge all of the Assumed Liabilities.
5. FURTHER ASSURANCES. Each party hereto shall execute, acknowledge
and deliver to the other party all documents, and shall take all actions,
reasonably required by such other party from time to time to confirm or effect
the matters set forth herein, or otherwise to carry out the purpose of the
Purchase Agreement and this Agreement.
6. PURCHASE AGREEMENT. This Agreement is entered into pursuant to
and is subject to all of the terms of the Purchase Agreement, and nothing herein
shall be deemed to modify any of the representations, warranties, covenants and
obligations of the parties thereunder.
7. INTERPRETATION. In the event of any conflict or inconsistency
between the terms, provisions and conditions of this Agreement and the Purchase
Agreement, the terms, provisions and conditions of the Purchase Agreement shall
govern.
8. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute a single agreement.
9. EFFECTIVE DATE. This Agreement shall be effective as of the start
of business on September 19, 1996.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
duly executed as of the date first above written.
XXXXX ENTERTAINMENT, INC.,
an Illinois corporation
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------------------
Xxxx X. Xxxxxxxxx
Its: President
PLATINUM ENTERTAINMENT, INC.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxx
---------------------------------------------
Xxxxxx Xxxxxx
Its: President and Chief Executive Officer
-2-
September 12, 1996
Xxxxxx Xxxxxxx
Xxxxxx Xxxxxx & Xxxxx
000 X. Xxxxxx Xx.
Xxxxx 0000
Xxxxxxx, XX 00000-0000
RE: Xxxxx Entertainment, Inc.: Sale of Assets to Platinum Entertainment, Inc.
The following DISCLOSURE STATEMENT, signed by Xxxx X. Xxxxxxxxx, President
of Xxxxx Entertainment, Inc. and Xxxxx X. Xxxxx, is submitted to comply with
the Seller's disclosure requirements under the above-referenced ASSET PURCHASE
AGREEMENT.
DISCLOSURE STATEMENT
2.2 ASSUMPTION OF LIABILITIES
Buyer expressly agrees to assume, to the maximum amount of
$100,000, the Seller's balance on its line of credit with
NationsBank. Buyer expressly agrees to indemnify and hold Seller
harmless from any and all liabilities, damages or expenses of any
kind or nature whatsoever that may accrue to Seller as a result
of Buyer's failure to pay the sum of $100,000.00 to NationsBank
upon closing. Seller agrees to pay off any balance on the
NationsBank line of credit in excess of $100,000.00 upon closing.
1
3.1.5 ARTICLES OF INCORPORATION, BYLAWS, OFFICERS AND DIRECTORS
The Officers and Directors of Sellers are as follows, to wit:
Xxxx Xxxxxxxxx - President, Secretary/Treasurer
Xxxx Xxxxxxxxx - Director
Xxxxx X. Xxxxx - Director
Xxxxxx X. Xxxxx - Director
3.1.6 CAPITALIZATION
The list of Seller's shareholders is as follows:
Xxxxx X. Xxxxx
Xxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxx Family Trust
Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Xxxxxxxx X. Xxxxxxx Rev Trust
Xxxxxxxxx X. Xxxxxxx Rev Trust
Xxxx Xxxxxx
Xxxxxxx Xxxxx III
Xxxxx X. Xxxxx
Xxxxx X. XxXxxxx
Xxxxxxxxx Xxxxx
Xxxxx Xxxx Estate
Xxxxxxx X. Xxxxxxx
3.1.9 NO RESTRICTIONS AGAINST SALE OF ASSETS
There are no restrictions against the sale of the assets.
3.1.11 ABSENCE OF UNDISCLOSED LIABILITIES
There are no undisclosed liabilities.
3.1.12 FINANCIAL STATEMENTS
None.
2
3.1.14 CONTRACTS
Copies of all Writer's contracts have been previously delivered
to Seller. Copies of all Seller's licensing agreements are
attached hereto marked Exhibit "A". The following is a list of
the Writers under contract and the expiration date for each such
agreement:
WRITER EXPIRATION DATE
------ ---------------
XXXXX XXXXXXX April 9, 1997
XXXX XXXXXX March 11, 1997
XXXXXXX XXXXXXX XXXXXXXX November 1, 1996
XXXXXXX XXXXXXX December 1, 1996
XXXXX XXXXX November 14, 1996
XXXXXXX X. XXXX Month-to-month/terminable at will
XXXXX XXXXXXXX " " "
3.1.15 LEASED PROPERTIES
The only real properties used in the operation of Seller's
business is located at 000 00xx Xxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxx, 00000, which is leased pursuant to an oral month to
month lease agreement. The Lessor is Xxxxx Xxxxxxx and the
amount of the monthly rent is $1,700.00, which includes all
utilities except telephone.
3.1.16 PERSONAL PROPERTY
A complete list of the personal property owned by Seller or used
in Seller's business is attached hereto, marked Exhibit "B,"
which consist of 2 pages.
3.1.17 LITIGATION
Seller is a party to two matters in litigation, to wit:
Xxxxxxx X. Xxxxxxx vs. Double J. Music Group et al.,
Case #96-471-I, Chancery Court for Davidson County,
Tennessee;
3
The Plaintiff, Xxxxxxx X. Xxxxxxx, instituted suit against
the Seller for sexual harassment under the Tennessee Human
Rights Act, constructive discharge, wrongful discharge, and
breach of contract for failure to perform what Xx. Xxxxxxx
has characterized as a "BONUS AGREEMENT."
Xxxxx X. Xxxxx vs. Xxxxx Entertainment, Inc. et al.,
Case #00-0000-X, Xxxxxxxx Xxxxx for Davidson County,
Tennessee;
The Plaintiff, Xxxxx X. Xxxxx, has instituted suit against
the Seller seeking a declaratory judgment that the
Plaintiff's Writer's Contract has expired and has not been
effectively extended by the exercise of any valid option by
the Seller. The Plaintiff has summarily alleged violations
of his constitutional rights, as well as negligence and
fraud on the part of the Seller.
BUYER HAS RECEIVED TRUE AND CORRECT COPIES OF THE COMPLAINTS
FILED IN THE FOREGOING LISTED PROCEEDINGS.
3.1.17.1 CLAIMS
See 3.1.17 SUPRA.
3.1.17.2 ORDER
None.
3.1.19 INTELLECTUAL PROPERTY
A copy of Seller's catalog of musical compositions and sound
recordings is attached hereto marked Exhibit "C," which consists
of 5 pages. Seller's tradenames are as follows: DOUBLE J MUSIC
GROUP, XXXX XXXX MUSIC, XXXXXXXX XXX MUSIC.
3.1.21 CONDUCT OF SELLER'S BUSINESS
Bonus paid to Xxxx Xxxxxxxxx in September, 1996 - $15,000.00.
4
3.1.22 INSURANCE POLICIES
Copies of the insurance policies maintained by the Seller during
the previous 2 years are reflected in Exhibit "D" attached
hereto, which consists of 3 pages. The Seller's Worker's
Compensation insurance policy with the United States Fidelity and
Guarantee, Policy No. 5114642952, expired July 13, 1996, and has
not been renewed. The Seller's property Casualty Insurance on
its personal property items has also lapsed and has not been
renewed.
3.1.23 ACCOUNTS RECEIVABLE
The only accounts receivable to which Seller is entitled are
pursuant to licensing agreements disclosed in Section 3.1.25
INFRA. The amounts receivable under said licensing agreements
are unknown until such time as royalties are actually received by
Seller/license holder.
3.1.25 LICENSES
Copies of all Seller's licenses are attached hereto, marked
Exhibit "A."
3.1.26 EMPLOYEES
All non-officer employees of the Seller were granted a 5% wage
increase in May, 1996. No officers, directors or employees are
bound by confidential, non-compete or proprietary rights
agreements adversely affecting this transaction.
3.1.28 EMPLOYEE BENEFIT PLANS
The Seller's group medical insurance and term life insurance is
with Time Insurance Company, Policy No. 360687. No other
employee benefit plans.
3.1.31 AFFILIATE TRANSACTIONS
None.
5
3.1.32 BANK ACCOUNTS
NationsBank, Xxx XxxxxxxXxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx, 00000,
Account #011301-079 (Royalty Savings Account).
NationsBank, Xxx XxxxxxxXxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx, 00000,
Account #011301-069 (Investor Savings Account).
Authorized person for such accounts is Xxxx Xxxxxxxxx.
XXXXX ENTERTAINMENT, INC.
BY: /s/ XXXX XXXXXXXXX
------------------------------
Xxxx Xxxxxxxxx, President
/s/ XXXXX X. XXXXX
------------------------------
Xxxxx X. Xxxxx
6
EXHIBIT 2.3
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement") is made and entered into as of
September 19, 1996, by and among PLATINUM ENTERTAINMENT, INC., a Delaware
corporation ("Buyer"), XXXXX ENTERTAINMENT, INC., an Illinois corporation
("Seller"), the Xxxxx X. Xxxxx and Xxxx X. Xxxxxxxxx, (the "Active
Shareholders"), and American National Bank and Trust Company of Chicago, as
Escrow Agent ("Escrow Agent").
WHEREAS, the parties hereto are entering into this Agreement pursuant to
the terms of that certain Asset Purchase Agreement dated of even date herewith
(the "Purchase Agreement"), by and among Buyer, Seller, and the Active
Shareholders;
WHEREAS, pursuant to the Purchase Agreement, Seller will be receiving a
certain number of Purchase Shares as part of the Purchase Price to be paid to
Seller by Buyer; and
WHEREAS, the Active Shareholders own outstanding capital of Seller and,
as such, will derive substantial direct and indirect economic benefit from
Seller consummating the transactions contemplated by the Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITION OF TERMS. Terms not otherwise defined herein shall
have the meaning ascribed to such terms in the Purchase Agreement. The Escrow
Agent shall not be responsible for any other provisions of the Purchase
Agreement.
2. APPOINTMENT AND ACCEPTANCE. Buyer, Seller and the Active
Shareholders hereby appoint Escrow Agent as escrow agent for the purposes and
upon the terms and conditions hereinafter set forth. Escrow Agent hereby
accepts such appointment and agrees to serve as escrow agent as described
herein.
3. THE ESCROW DEPOSIT. On the date hereof, Buyer shall deliver to
Escrow Agent for deposit in escrow pursuant to the provisions hereof, a stock
certificate which stock certificate represents 13,235 shares (the number of
shares equal to 15% of the Purchase Shares received by Seller pursuant to the
terms of the Purchase Agreement) (the "Escrowed Shares"). The parties hereto
acknowledge that upon any S-distribution of the Purchase Shares by Seller to its
shareholders, the Escrowed Shares shall be transferred into the names of the
Active Shareholders, with 6,617 Escrowed Shares being transferred into the name
of Xxxxx Xxxxx and 6,618 Escrowed Shares being transferred into the name of Xxxx
X. Xxxxxxxxx. Such transferred shares shall remain in escrow pursuant to the
terms hereof.
4. PURPOSE OF AGREEMENT. The Seller, Active Shareholders and Buyer
represent that this Agreement has been executed and the deposit of the Escrowed
Shares hereunder shall be made pursuant to SECTION 2.3 of the Purchase Agreement
for the purpose of paying any amounts
-1-
due to Buyer pursuant to Sellers' and Active Shareholders' obligations under
SECTION 6.1 of the Purchase Agreement ("Covered Claims").
5. DELIVERY OF ESCROWED SHARES. Subject to the terms set forth in
SECTION 6.1 of the Purchase Agreement, if at any time Buyer shall claim that it
is entitled to all or a portion of the Escrowed Shares as a result of any
Covered Claim, Buyer shall give notice of such Covered Claim (the "Notice of
Claim") to Seller and the Escrow Agent. The Notice of Claim shall be an
affidavit describing the event or circumstances giving rise to the Covered
Claim, specifying Buyer's estimate of the reasonably foreseeable maximum amount
of the alleged damages (which amount may be revised by Buyer at any time prior
to the release of Escrowed Shares with respect to such Covered Claims) and
certifying that the Notice of Claim is being submitted in good faith.
If Escrow Agent shall have received a Notice of Claim from Buyer, Escrow
Agent shall promptly deliver a copy thereof to Seller. Within thirty (30)
calendar days ("Dispute Period") after delivery by Escrow Agent of a copy of
such Notice of Claim to Seller, Seller may deliver to Escrow Agent a written
notice (the "Notice of Dispute") contesting a request for payment in the Notice
of Claim. The Notice of Dispute shall be an affidavit specifying the amount
being disputed (the "Disputed Amount"), describing in reasonable detail the
reasons for such dispute and certifying that the Notice of Dispute is being
submitted in good faith. If Escrow Agent has not received a Notice of Dispute
prior to the expiration of Dispute Period referred to above, then Escrow Agent
shall immediately transfer to Buyer that number of Escrowed Shares having a Fair
Market Value determined as of the date of transfer equal to the full amount
requested in the Notice of Claim and will notify Seller of such transfer. As
used herein, the term "Fair Market Value" means, with respect to each Escrowed
Share, the average closing (last sale) price per share of Buyer's common stock
on the trading day immediately prior to the date of determination as quoted on
the Nasdaq National Market or such other national exchange or quotation system
upon which Buyer's common stock is then listed or quoted and provided in writing
to Escrow Agent by Buyer. If Escrow Agent has received a Notice of Dispute
during the Dispute Period which contests in part a payment in the Notice of
Claim, then Escrow Agent shall, following receipt of such Notice of Claim,
immediately transfer to Buyer, the number of Escrowed Shares having a Fair
Market Value determined as of the date of transfer equal to the amount requested
in the Notice of Claim which is in excess of the Disputed Amount.
If Escrow Agent receives a Notice of Dispute from Seller, Escrow Agent
shall promptly deliver a copy of the Notice of Dispute to Buyer, and shall not
deliver the portion of the Escrowed Shares constituting the Disputed Amount
until Escrow Agent shall have received one of the following:
(a) A certified copy of an order, decree or judgment issued or
rendered by a court of competent jurisdiction, which order, decree or
judgment has been finally affirmed on appeal or which by lapse of time or
otherwise is no longer subject to appeal (a "Final Decision") with
respect to the Notice of Claim which is the subject to the Notice of
Dispute; or
-2-
(b) A joint written direction executed by Buyer and Seller
directing the distribution of the Escrowed Shares.
Upon receipt of either (a) or (b) above, Escrow Agent shall immediately transfer
the Escrowed Shares in respect of the Disputed Amount to Buyer in accordance
with the terms of such Final Decision or joint direction, as the case may be.
6. VOTING AND RIGHTS OF OWNERSHIP.
(a) Except for any stock splits, stock paid in shares of
capital stock of Buyer or recapitalizations declared with respect to the
common stock of Buyer, any cash dividends, dividends payable in
securities other than common stock or other distributions of any kind
made with respect to the Escrowed Shares will be distributed by Buyer to
Seller (or, as applicable, to the permitted assignees thereof on a pro
rata basis). Any shares of capital stock of Buyer to be issued as a
consequence of any stock split, stock dividend paid in shares of capital
stock of Buyer or recapitalization shall be deemed to be included with
the Escrowed Shares previously placed in escrow under this Agreement and
shall be deposited by Seller or each permitted assignee thereof or on his
or her behalf, into escrow along with any necessary additional
assignments in blank therefor executed by Seller or each permitted
assignee thereof, as applicable.
(b) Seller or the permitted assignees thereof, as applicable,
will have the right to vote, or not vote, the Escrowed Shares, or any
portion thereof, deposited in escrow, so long as such Escrowed Shares are
held in escrow, and Escrow Agent will take all steps necessary to allow
the exercise of such rights and, at Seller's expense, Escrow Agent shall
promptly forward, or cause to be forwarded, copies of any proxies, proxy
statements and other soliciting materials to Seller or the permitted
assignees thereof, as applicable, and Escrow Agent shall vote by proxy
the applicable portion of the Escrowed Shares in accordance with any
written instructions timely received from Seller or the permitted
assignees thereof, as applicable. While the Escrowed Shares remain in
escrow pursuant to this Agreement, Seller and the permitted assignees
thereof, as applicable, will retain and will be able to exercise all
other incidents of ownership of said Escrowed Shares that are not
inconsistent with the terms and conditions hereof.
(c) No Escrowed Shares or any beneficial interest therein may
be pledged, sold, hedged, assigned or otherwise transferred (including by
operation of law) by Seller or any permitted assignee thereof or may be
taken or reached by any legal or equitable process in satisfaction of any
debt or other liability of Seller and/or such permitted assignee thereof
(other than as expressly contemplated by this Agreement) prior to the
release from escrow of such Escrowed Shares to such party pursuant to
this Agreement.
-3-
7. RELEASE DATE AND TERMINATION OF ESCROW.
(a) On the first anniversary of the Closing Date (the "Release
Date"), Escrow Agent shall ascertain the balance of the number of
Escrowed Shares (the "Escrow Balance"), which shall equal the number of
Escrowed Shares then held hereunder LESS the number of Escrowed Shares,
if any, then (i) covered by a pending Notice of Claim which is subject to
a Notice of Dispute as provided in SECTION 5 hereof, (ii) covered by a
pending Notice of Claim which was delivered by Escrow Agent to Seller at
any time prior to the Release Date, or (iii) covered by a Notice of Claim
determined to be valid and no longer subject to a Notice of Dispute, but
not yet transferred. On the Release Date, Escrow Agent shall deliver to
Seller the Escrow Balance. If, on the Release Date, a pending Notice of
Claim is subject to a Notice of Dispute as described in clause (i) above
or if, after the Release Date, a pending Notice of Claim described in
clause (ii) above is disputed by a Notice of Dispute in accordance with
SECTION 5 hereof, then this Escrow Agreement shall continue in full force
and effect with respect to the aggregate amount in dispute until Escrow
Agent shall have been instructed as to the disposition thereof in
accordance with the terms of SECTION 5. To the extent that a Notice of
Claim described in clause (ii) above is not contested by a Notice of
Dispute in accordance with the provisions of SECTION 5 hereof, the
uncontested portion of the Notice of Claim shall be paid to Buyer
immediately after the expiration of the Dispute Period referred to in
SECTION 5. Once all requests for payment of Covered Claims have been
settled and all of the Escrowed Shares have been transferred in
accordance with the foregoing provisions, this Agreement and all of the
obligations of the Escrow Agent hereunder shall terminate (such date
being referred to herein as the "Termination Date").
(b) Notwithstanding the foregoing, this Agreement may be
terminated at any time by and upon the receipt by Escrow Agent of written
notice of termination executed by Buyer and Seller directing the
distribution of all property then held by Escrow Agent under and pursuant
to this Agreement, and this Agreement shall automatically terminate if
and when all the Escrowed Shares (and all the securities in which any of
the Escrowed Shares shall have been invested) shall have been distributed
by Escrow Agent in accordance with the terms of this Agreement.
8. NOTICES. Any notices or other communication required to be sent
or given hereunder by any of the parties shall in every case be in writing and
shall be deemed properly served if (a) delivered personally, (b) sent by
registered or certified mail, in all such cases with first class postage
prepaid, return receipt requested, (c) delivered by a recognized overnight
courier service, or (d) sent by facsimile transmission to the parties at the
addresses as set forth below or at such other addresses as may be furnished in
writing.
-4-
(a) If to Seller or Active Shareholders:
Xxxxx Entertainment, Inc.
000 Xxxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy: (000) 000-0000
with a copy to:
The Law Offices of Xxxx Xxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telecopy: (000) 000-0000
(b) If to Buyer:
Platinum Entertainment, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
(c) If to Escrow Agent:
American National Bank and Trust Company
of Chicago
00 X. XxXxxxx Xx.
Corporate Trust Department
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three days after the date of mailing if sent by certified or
registered mail, (y) the next succeeding
-5-
business day after date of delivery to the overnight courier if sent by
overnight courier or (z) the next succeeding business day after transmission by
facsimile.
9. ESCROW AGENT'S LIABILITY. Escrow Agent undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement against
Escrow Agent. In the absence of bad faith, gross negligence or wilful
misconduct on its part, Escrow Agent may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to Escrow Agent. Escrow Agent may act upon
any instrument, certificate, opinion or other writing believed by it in good
faith and without gross negligence to be genuine, and shall not be liable in
connection with the performance by it of its duties pursuant to the provisions
of the Agreement, except for its own bad faith, gross negligence or wilful
misconduct. Escrow Agent may consult with counsel of its own choice and shall
have full and complete authorization and protection for any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion of such counsel. Escrow Agent may execute powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys.
10. INDEMNIFICATION OF ESCROW AGENT. Buyer, Seller and the Active
Shareholders hereby agree severally and jointly to indemnify Escrow Agent for,
and to hold it harmless against, any loss, liability or expense incurred without
gross negligence, wilful misconduct or bad faith on the part of Escrow Agent,
arising out of or in connection with its entering into the Agreement, carrying
out its duties hereunder and accepting the Escrowed Shares, including the costs
and expenses of defending itself against any claim of liability in connection
with the exercise or performance of any of its powers or duties hereunder
(including reasonable fees, expenses and disbursements of its counsel).
11. ESCROW AGENT TO FOLLOW INSTRUCTIONS OF BUYER AND SELLER.
Notwithstanding any provision contained herein to the contrary, Escrow Agent
shall at any time and from time to time take such action hereunder with respect
to the Escrowed Shares as shall be directed in writing by Buyer and Seller,
provided that Escrow Agent shall first be indemnified to its satisfaction with
respect to any of its costs or expenses which might be involved.
12. RESIGNATION OF ESCROW AGENT. Escrow Agent, or any successor, may
resign at any time upon giving written notice, thirty (30) days before such
resignation shall take effect, to Buyer and Seller. In the event Escrow Agent
shall resign or be unable to serve, it shall be succeeded by such bank or trust
company as Buyer and Seller shall appoint, or if no appointment is made, by a
bank or trust company appointed by a court of competent jurisdiction. In the
absence of a successor so appointed by Buyer and Seller, Escrow Agent may
petition such a court to appoint a successor escrow agent. The resigning escrow
agent shall transfer to its successor all monies, securities and investments
then held subject to this escrow and all pending notices, instructions and
directions then in its possession, and shall thereupon be discharged, and the
successor shall thereupon succeed to all the rights, powers and duties and shall
assume all of the obligations of the resigning escrow agent.
-6-
13. ESCROW AGENT'S FEE AND EXPENSES, ETC..
(a) Escrow Agent shall be entitled to a $2,000.00 annual fee,
which annual fee shall be prorated to the date of termination of this
Agreement, for services rendered and for reimbursement of extraordinary
expenses incurred in performance of its duties which expenses are not
included in said fee. Such fees and expenses shall be divided equally
between the Buyer, on one hand and Seller, on the other hand.
(b) In case said property shall be attached, garnished, or
levied upon any court order, or the delivery thereof shall be stayed or
enjoined by an order of court, or any order, judgement or decree shall be
made or entered by any court order affecting the property deposited under
this Agreement, or any part thereof, Escrow Agent is hereby expressly
authorized in its sole direction, to obey and comply with all writs,
orders or decrees so entered or issued, which it is advised by legal
counsel of its own choosing is binding upon it, whether with or without
jurisdiction, and in case Escrow Agent obeys or complies with any such
writ, order or decree it shall not be liable to any of the parties hereto
or to any other person, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed,
modified, annulled, set aside or vacated.
(c) In case said Escrow Agent becomes involved in litigation on
account of this deposit or of this Agreement, it shall have the right to
retain counsel and shall have a lien on the property deposited hereunder
for any and all costs, attorneys' and solicitors' fees, charges,
disbursements, and expenses in connection with such litigation; and shall
be entitled to reimburse itself therefor out of the property deposited
hereunder, and if it shall be unable to reimburse itself from the
property deposited hereunder, the parties hereto jointly and severally
agree to pay to said Escrow Agent on demand, its reasonable charges,
counsel and attorneys' fees, disbursements, and expenses in connection
with such litigation.
(d) In case conflicting demands are made upon it for any
situation not addressed in this Agreement, Escrow Agent may withhold
performance of this escrow until such time as said conflicting demands
shall have been withdrawn or the rights of the respective parties shall
have been settled by court adjudication, arbitration, joint order or
otherwise.
(e) The parties acknowledge that Escrow Agent will have no
obligations or responsibilities with respect to tax reporting of the
parties.
14. SUCCESSORS. The obligations imposed and the rights conferred by
this Escrow Agreement shall be binding upon and inure to the benefit of the
respective heirs (including estates), successors and permitted assigns of the
parties hereto, but will not be assignable or delegable by any party without the
prior written consent of the other parties.
-7-
15. GOVERNING LAW. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, without giving
effect to principles of conflicts of law.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein.
17. AMENDMENT. This Agreement cannot be terminated, altered or
amended except pursuant to an instrument in writing signed by Buyer, the Active
Shareholders and Escrow Agent.
18. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any
corporation into which Escrow Agent may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which Escrow Agent shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of Escrow
Agent, shall be the successor of Escrow Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
19. ENFORCEABILITY. If any provision of the Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other provision of this Escrow Agreement, and the Agreement
shall be carried out as if any such invalid or unenforceable provision were not
contained herein.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed on original and all of which
together shall constitute one and the same instrument.
21. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party hereto.
[INTENTIONALLY LEFT BLANK]
-8-
IN WITNESS WHEREOF, the parties hereto have caused the this Agreement to
be signed as of the date first above written.
SELLER:
XXXXX ENTERTAINMENT, INC.
/s/ Xxxx X. Xxxxxxxxx
--------------------------------------
Xxxx X. Xxxxxxxxx
Its: President
ACTIVE SHAREHOLDERS:
/s/ Xxxxx X. Xxxxx
--------------------------------------
Xxxxx X. Xxxxx
/s/ Xxxx X. Xxxxxxxxx
--------------------------------------
Xxxx X. Xxxxxxxxx
BUYER:
PLATINUM ENTERTAINMENT, INC.
/s/ Xxxxxx Xxxxxx
--------------------------------------
Xxxxxx Xxxxxx
Its: President and Chief Executive
Officer
ESCROW AGENT:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, AS ESCROW
AGENT
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Its: Assistant Vice President
---------------------------
-9-
EXHIBIT 2.5
ALLOCATION OF PURCHASE PRICE
1. The Assumed Liabilities will be allocated based on the amount assumed by
Buyer, on a dollar for dollar basis.
2. The $50,000 payment to Xxxxx X. Xxxxx shall be allocated, in total, to
the Noncompetition Agreement.
3. The value of the Purchase Shares shall be allocated as follows:
(a) To cash equivalents on a dollar for dollar basis;
(b) To prepaids and deposits on a dollar for dollar basis;
(c) To net accounts receivable based on amounts outstanding at
Closing;
(d) To net fixed assets based on the assessed fair market value
of such assets; and
(e) The remainder of the Purchase Price shall be allocated to
copyrights.
This allocation assumes that all writer advances will be fully
reserved.
EXHIBIT 2.6
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (the "Agreement") is made as of this 19th
day of September, 1996 by and between XXXXX X. XXXXX ("Shareholder") and
PLATINUM ENTERTAINMENT, INC., a Delaware corporation ("Buyer").
WHEREAS, on the date of this Agreement, Buyer is buying substantially all
of the assets and business (the "Asset Purchase") of Xxxxx Entertainment, Inc.,
an Illinois corporation ("Xxxxx"), pursuant to an Asset Purchase Agreement of
even date herewith (the "Asset Purchase Agreement"); and
WHEREAS, Shareholder is a principal shareholder and member of the Board
of Directors of Xxxxx and has intimate and detailed knowledge of the operations
of Xxxxx; and
WHEREAS, the execution of this Agreement is a condition to the closing of
the Asset Purchase;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties agree as follows:
A. SHAREHOLDER'S ACKNOWLEDGEMENT. Xxxxx has been engaged in the
business of music publishing (the "Business"). Shareholder acknowledges that,
as a result of his long-term relationship with and position as a shareholder and
board member of Xxxxx, he has developed knowledge about the business of Xxxxx
that is special, unique, and of intellectual character. Such knowledge includes
information concerning operation of Xxxxx'x business, its contracts with artists
and songwriters, its techniques, copyrights, and other assets. Such business
information is considered confidential and proprietary by Xxxxx and Buyer and
will, upon consummation of the Asset Purchase constitute valuable assets of
Buyer, the value of which would be destroyed by its use in competition with
Buyer.
B. SHAREHOLDER COVENANTS. In light of the foregoing, the additional
monetary benefit accruing to Shareholder by virtue of the consummation of the
Asset Purchase, and as an inducement to Buyer to consummate the Asset Purchase,
Shareholder is agreeing to the covenants set forth in this Agreement.
Shareholder acknowledges that compliance with these covenants will not preclude
him from earning a living and supporting his family during the Restricted
Period. Accordingly, Shareholder hereby agrees as follows:
(a) NON-COMPETITION COVENANTS. Shareholder will NOT, during the
Restricted Period (as defined below), anywhere within the United States,
and specifically in Nashville, Tennessee and its greater metropolitan
area, (the "Restricted Territory"), directly or indirectly (whether as an
owner, partner, shareholder, agent, officer, director, employee,
independent contractor, consultant, or otherwise):
(i) perform services for, or engage in, the Business in
any capacity;
(ii) except on behalf of Buyer, solicit any person or
entity who is now or was at any time during the eighteen months
prior to the intended solicitation,
an artist, songwriter, customer or distributor of Buyer or Xxxxx
for the sale, publication or distribution of any music or any
products relating to the Business; or
(iii) solicit for employment any person who is, or was at
any time during the eighteen months prior to the intended
solicitation, an employee of Xxxxx.
The term "Restricted Period" shall mean the period commencing on the date hereof
and continuing thereafter until fifteen months from the date hereof. Nothing
contained in Section 2(b) above shall be construed to prevent Shareholder from
investing in the stock of any company which operates in the Business (including
House of Blues Records, Inc.), but only if Shareholder (i) is solely a passive
investor, (ii) and is not involved in any manner in any aspect of the business
or operations of said corporation and (iii) if Shareholder and his associates
(as such term is defined in Regulation 14(A) promulgated under the Securities
Exchange Act of 1934, as in effect on the date hereof), collectively, do not own
more than an aggregate of 4.9 percent of the stock of such corporation.
(b) NEGATIVE COMMENT COVENANT. Shareholder will NOT, at
anytime, make any statements, whether orally or in writing, which would bring
disrepute to Buyer or Xxxxx, their products or services, or otherwise hinder the
business prospects thereof.
3. CONSIDERATION. Shareholder agrees that the $45,000 payable to him
under the Asset Purchase Agreement and the material benefits accruing to him as
a result of the Asset Purchase are in consideration for Shareholder's abiding by
the covenants set forth in Section 2 of this Agreement,
4. SCOPE/SEVERABILITY. The parties acknowledge that the businesses
of Buyer and Xxxxx are and will be national and international in scope and thus
the covenants in Section 2 would be particularly ineffective if the covenants
were to be limited to a particular geographic area of the United States. If any
court of competent jurisdiction at any time deems the Restricted Period
unreasonably lengthy, or the Restricted Territory unreasonably extensive, or any
of the covenants set forth in Sections 2(a) or (b) not fully enforceable, the
other provisions of Section 2, and this Agreement in general, will nevertheless
stand and to the full extent consistent with law continue in full force and
effect, and it is the intention and desire of the parties that the court treat
any provisions of this Agreement which are not fully enforceable as having been
modified to the extent deemed necessary by the court to render them reasonable
and enforceable and that the court enforce them to such extent (for example,
that the Restricted Period be deemed to be the longest period permissible by
law, but not in excess of the length provided for in Section 2(a), and the
Restricted Territory be deemed to comprise the largest territory permissible by
law under the circumstances).
5. EQUITABLE REMEDIES. Shareholder acknowledges and agrees that the
agreements and covenants set forth in this Agreement are reasonable and
necessary for the protection of Buyer's and Xxxxx'x business interests, that
irreparable injury will result to Buyer and Xxxxx if Shareholder breaches any of
the terms of these agreements and covenants, and that in the event of the
Shareholder's actual or threatened breach of any covenant set forth in Section
2, Buyer
2
will have no adequate remedy at law. Shareholder accordingly agrees that in the
event of any actual or threatened breach by him of such covenant, Buyer will be
entitled to immediate injunctive and other equitable relief, without bond and
without the necessity of showing actual monetary damages. Nothing in this
Agreement will be construed as prohibiting Buyer from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of any damages that Buyer is able to prove.
6. INDEPENDENT COVENANTS. Each of the covenants in Section 2 will be
construed as independent of any other covenant or provision in Section 2 or in
any other part of this Agreement.
7. REPRESENTATIONS OF SHAREHOLDER. Shareholder represents and
warrants to Buyer that he has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and to perform his
obligations hereunder.
8. GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Illinois without regard to conflicts
of law principles.
9. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any person.
10. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute a single agreement.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties, and supersedes and preempts all prior oral or
written understandings and agreements, with respect to the subject matter
hereof, except as otherwise expressly set forth in the Asset Purchase Agreement.
IN WITNESS WHEREOF, Shareholder and Buyer have executed this Agreement as
of the date first written above.
PLATINUM ENTERTAINMENT, INC.
/s/ Xxxxx X. Xxxxx By: /s/ Xxxxxx Xxxxxx
-------------------------------- -------------------------------
Xxxxx X. Xxxxx Its: CEO
-------------------------------
3
LICENSING AGREEMENTS
1. Agreement by and between Victoria Xxx Xxxxxxxxx and Xxxx X. Xxxxxxxxx,
Partners, d/b/a/ Xxxxxxxx Xxx Music and
2. American society of Composers, Authors & Publishers, dated June 4, 1992.
3. Agreement by and between Xxxx X. Xxxxxxxxx, d/b/a Xxxx Xxxx Music and
Broadcast Music, Inc. (BMI), dated January 17, 1990.
4. Mechanical License Agreement by and between Xxxx Xxxx Music and EMI Music
Canada, dated March 13, 1995 regarding "Desperate Measures."
5. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and Sound
Source, dated January 8, 1996 regarding "Check Yes or No."
6. Mechanical License Agreement by and between Xxxxxxx Xxx Music and Pocket
Songs, dated January 8, 1996 regarding "Check Yes or No."
7. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and
Xxxxxxxx Xxxxx/ MCA Music Entertainment Group, dated September 28, 1995
regarding "Check Yes or No."
8. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and Xxxxxx
Xxxxx, dated March 12, 1996 regarding "Check Yes or No."
9. Music License Agreement by and between Xxxxxxxx Xxx Music and Xxxx Xxxx
Music and The Xxxxxx Agency, as agent for Wrangler, dated August 10, 1995
regarding "Check Yes or No."
10. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and
Atlantic Records, dated May 30, 1995 regarding "I'm on Your Side."
11. Mechanical License Agreement by and between Xxxx Xxxx Music and Xxxxxxxx
Xxxxx/MCA Music Entertainment Group, dated April 12, 1995 regarding "Love
a Little Stronge."
12. Mechanical License Agreement by and between Xxx Xxxx Music and Xxx
Xxxxxxxxx/MCA Records, dated September 7, 1995 regarding "Love a Little
Stronger."
13. Mechanical License Agreement by and between Xxxx Xxxx Music and The Music
Maestro, dated August 30, 1995 regarding "Love a Little Stronger."
14. Mechanical License Agreement by and between Xxxx Xxxx Music and Sound
Source, dated February 27, 1995 and received March 24, 1995 regarding
"Love a Little Stronger."
15. Mechanical License Agreement by and between Xxxx Xxxx Music and Xxxxxxx
Enterprises, dated March 8, 1995 regarding "Love a Little Stronger."
16. Mechanical License Agreement by and between Xxxx Xxxx Music and BMG
Entertainment, dated May 6, 1996 regarding "Love a Little Stonger."
17. Mechanical License Agreement by and between Xxxx Xxxx Music and BMG Music
Canada, dated March 26, 1996 regarding "Love a Little Stronger."
18. Mechanical License Agreement by and between Xxxx Xxxx Music and Vanguard
Records dated March 29, 1995, regarding "Love a Little Stronger".
19. Mechanical License Agreement by and between Xxxx Xxxx Music and Honest
Entertainment Group, dated May 18, 1995 regarding "That Was the One."
20. Mechanical License Agreement by and between Xxxx Xxxx Music and Rep-Con,
dated June 27, 1994 regarding "Give it a Push."
21. Mechanical License Agreement by and between Xxxx Xxxx Music and The
Atlantic Group, dated January 9, 1995 regarding "That Ol' Train."
22. Mechanical License Agreement by and between Xxxx Xxxx Music and Sony
Music dated, March 12, 1996 regarding "You're Backin' Up."
23. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and Zion
Music Group, dated January 8, 1996 regarding "Xxxxx and Xxxxx."
24. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and Sun
Entertainment Corporation, dated July 20, 1994 regarding
"Honkytonkville."
25. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and
Pageant Tapes, Inc./Express Trax, dated April 4, 1995 regarding "You
Can't Make a Heart Love Somebody."
26. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and Pocket
Songs, dated January 8, 1996 regarding "You Can't Make a Heart Love
Somebody."
27. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and Sound
Source, dated February 27, 1995 regarding "You Can't Make a Heart Love
Somebody."
28. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and MCA
Records Canada, a division of MCA Canada Ltd., dated October 24, 1994
regarding "You Can't Make a Heart Love Somebody."
29. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and MCA
Records, dated January 16, 1994 and January 1995 regarding "You Can't
Make a Heart Love Somebody."
30. Mechanical License Agreement by and between Xxxxxxxx Xxx Music and Image
Marketing, c/o MCA Music Entertainment Group, dated March 16, 1995
regarding "You Can't Make a Heart Love Somebody."
