December 22, 1997
Pace Entertainment Corporation
000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000
Re: Pavilion Partners
Gentlemen:
Reference is made to (i) the Partnership Agreement for Pavilion Partners
("Pavilion") between SM/Pace, Inc. ("Pace") and Amphitheater Entertainment
Partnership ("AEP"), dated as of April 1, 1994 (the "Pavilion Partnership
Agreement"), and (ii) the Second Amended and Restated Partnership Agreement for
AEP, between Westside Amphitheater Corporation ("WAC"), San Bernardino
Amphitheater Corporation ("SBAC"), Charlotte Amphitheater Corporation ("CAC",
and, together with SBAC and WAC, "Blockbuster") and YM Corp. ("Sony"), dated as
of April 1, 1994 (the "AEP Partnership Agreement").
Xxxx has advised Sony that (i) Pace has entered into an agreement with SFX
Entertainment, Inc. ("SFX"), pursuant to which SFX agreed to acquire Pace's
parent corporation, Pace Entertainment corporation ("PEC"; SFX's acquisition of
PEC, the "Pace Acquisition") and (ii) Pace has entered into an agreement with
Blockbuster, pursuant to which Xxxx agreed to acquire Blockbuster's entire
partnership interest in AEP (the "Blockbuster Partnership Interest"; Xxxx'x
acquisition of the Blockbuster Partnership Interest, the "Blockbuster
Acquisition"). Sony has agreed to consent to the Pace Acquisition (including a
waiver of the provisions of Section 12.1(b) of the Pavilion Partnership
Agreement) and the Blockbuster Acquisition, and Pace and Sony have agreed to the
acquisition by Pace of Sony's entire interest in AEP (the "Sony Partnership
Interest") substantially simultaneously with the closing of the Pace Acquisition
(the "Pace Closing") and the Blockbuster Acquisition (the "Blockbuster closing",
and with the Pace Closing, the "Closing") on the terms, and subject to the
conditions set forth herein and in the Term Sheet annexed hereto as Exhibit A.
The consents granted and other agreements set forth herein and in the
annexed Term Sheet are subject to, and conditioned on, Blockbuster's consent to
the transfer of the Sony Partnership Interest as required by the AEP Partnership
Agreement unless the Blockbuster Closing has occurred prior to the Sony Closing
(as defined below).
The consents and waiver granted and other agreements set forth herein and
in the annexed Term Sheet are subject to, and conditioned on, (i) the parties
obtaining any required regulatory approvals for Pace's acquisition of the Sony
Partnership Interest (including under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended), and (ii) the occurrence of the Pace
Closing. The closing of Pace's acquisition of the Sony Partnership Interest (the
"Sony Closing") must occur no later than the first to occur of (i) 5 business
days following the Pace Closing, (ii) midnight on the same day as the
Blockbuster closing, or (iii) March 30, 1998 (the "Outside Date"); provided,
however, that Pace shall have the right to extend the Outside Date to a date
that is not later than May 31, 1999 if the Pace Closing or the Sony Closing
shall not occur on or prior to March 30, 1998, solely by reason of a request for
additional information by the Justice Department or the Federal Trade Commission
and related extension of the waiting period under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, in connection with any filings
made for the Pace Acquisition, Blockbuster Acquisition or Pace's acquisition of
the Sony Partnership Interest. If for any reason (other than a breach by the
terminating party), the Sony Closing has not occurred on or before the Outside
Date, either party shall have the right to terminate this Letter Agreement by
written notice to the other and upon such termination, the consents and waiver
granted herein shall be withdrawn and neither party shall have any liability or
obligation to the other hereunder, except for any breach hereof.
The parties intend to enter into a more formal Purchase Agreement,
reflecting the terms hereof. However, unless and until such more formal Purchase
Agreement is executed and delivered, this Letter Agreement and the annexed Term
Sheet shall constitute a binding agreement between the parties.
All publicity relating to the acquisition of the Sony Partnership Interest
shall be subject to the mutual approval of Sony and Pace and, except as
otherwise may be required by applicable law, no public announcement or
disclosure of Pace's acquisition of the Sony Partnership Interest shall be made
by any party or SFX (or any of their respective affiliates or representatives)
without the prior written consent of the other party. To the extent that any
party or SFX is required by applicable law to make any public announcement or
disclosure
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relating to the acquisition of the Sony Partnership Interest, such party shall
use its reasonable efforts, within the applicable time constraints, to arrive at
a mutually agreeable form for such disclosure.
Subject to paragraph 6 of the annexed Term Sheet, each party shall bear
its own legal, accounting and other expenses relating to the transactions
contemplated hereby and by the Term Sheet, whether or not such transactions are
consummated.
Each party, by its signature below, confirms to the other that it has not
incurred and will not incur any liability for finder's, brokerage, agents,
advisory or similar fees or commissions in connection with transactions
contemplated hereby and by the annexed Term Sheet.
This Letter Agreement shall be construed in accordance with and governed
by the laws of the State of New York applicable to agreements wholly to be
performed therein and may not be amended or waived except in writing signed by
each of Sony, Pace and PEC. This Letter Agreement may be signed in counterparts.
If you are in agreement with the foregoing, please so indicate by signing
in the space indicated below, whereupon this Letter Agreement shall become a
binding agreement between us.
Very truly yours,
YM CORP.
By: /s/ [illegible]
______________________
AGREED TO:
PACE ENTERTAINMENT CORPORATION
By: /s/ [illegible]
_________________________
SM/PACE, INC.
By: /s/ [illegible]
_________________________
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Exhibit A
Term Sheet
1. At the Sony Closing, Pace shall purchase the Sony Partnership Interest
for $27.5 million (the "Purchase Price"), payable at the Sony Closing by wire
transfer of immediately available funds to an account designated by Sony.
Subject to the provisions of the Letter Agreement to which this Term Sheet is
annexed, if the Sony Closing shall not have occurred on or before March 30,
1998, the Purchase Price shall bear interest from March 30, 1998 to the date of
the Sony Closing at the rate of 8% per annum, compounded monthly.
2. At the Sony Closing, Sony and its parents and affiliates shall be
released by the applicable banks and other third parties from all guarantees,
indemnification agreements, assurances, joinders, undertakings, covenants and
other obligations to banks and other third parties relating to Pavilion, its
amphitheaters or its business (other than obligations arising solely by reason
of Sony's status as a general partner of AEP, which shall be assumed by Pace
pursuant to Paragraph 3 below).
3. At the Sony Closing, Pace shall assume (and to the extent the obligee
is pavilion, Pace or any affiliate of Pace, Sony and its parents and affiliates
shall be released from) all of Sony's and its parents' and affiliates' (i)
contractual obligations and liabilities arising under the Pavilion Partnership
Agreement and AEP Partnership Agreement and any related executory contracts,
joinder agreements and guarantees (including, without limitation, any
obligations relating to the PNC expansion) and (ii) obligations and liabilities
(in contract, tort or otherwise), which in the past existed, now exist or may
exist in the future, whether known or unknown, asserted or unasserted, arising
out of Pavilion's or its predecessors' ownership or operation of any
amphitheater, or any contractual arrangement, business activities or other
actions or omissions of Pavilion (all of the foregoing, the "Assumed
Liabilities"); provided, however, that notwithstanding the foregoing, Pace shall
continue to comply with the provisions of Sections 13.5 and 13.6 of the Pavilion
Partnership Agreement from and after the Sony Closing with respect to all tax
years of Pavilion ending on or prior to the date of the Sony Closing. Without
limiting the generality of the foregoing, Pace hereby waives the provisions of
Section 13.9 of the Pavilion Partnership Agreement in connection with Xxxx'x
acquisition of the Sony Partnership Interest and the Blockbuster Partnership
Interest. From and after the Sony Closing, Pace shall indemnity, defend and hold
harmless Sony and its parents, subsidiaries, affiliates, officers, directors,
employees and agents from and against any and all losses, claims,
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damages, liabilities, deficiencies, defaults, assessments, fees, penalties or
related costs or expenses, including but not limited to court costs and
attorneys' and accountants' fees and disbursements arising out of, relating to
or based upon (i) any of the Assumed Liabilities or (ii) the Pace Acquisition or
the Blockbuster Acquisition other than by reason of any actions taken or omitted
to be taken by Sony in connection therewith. At or prior to the Sony Closing,
Sony will deliver to Pace a true and correct copy of the AEP Partnership
Agreement.
4. At the Sony Closing, Xxxx will not assume any direct or indirect
duties, liabilities or obligations of Sony or its parents and affiliates of any
kind or nature other than the Assumed Liabilities. It is understood and agreed
that all liabilities of Sony and its parents and affiliates other than those
being assumed by Pace are retained by Sony and its parents and affiliates, and
Sony and its parents and affiliates shall be responsible for the payment and
discharge of all such retained liabilities including, without limitation, the
obligation to pay all income taxes imposed on Sony by reason of income allocated
by Pavilion and AEP to Sony for periods of operation (determined assuming that
the tax years of Pavilion and AEP respectively close on the date of the Sony
Closing) through and until the open of business on the day of the Sony Closing.
For purposes of this paragraph 4, AEP and Pavilion shall not be deemed to be
affiliates of Sony.
5. At the Sony Closing, (i) Pavilion shall distribute and return to Sony
"Sony/Block Note #l" (as defined in the Pavilion Partnership Agreement) and (ii)
AEP shall distribute and return to Sony the "Sony Note" (as defined in the AEP
Partnership Agreement).
6. Any taxes in the nature of sales or transfer taxes or similar taxes
(explicitly excluding taxes in the nature of income taxes imposed on net income)
payable by reason of the sale or transfer of the Sony Partnership Interest or
Blockbuster Partnership Interest shall be paid by Xxxx.
7. Between the date hereof and the Sony Closing or the Outside Date,
whichever is earlier, (i) Sony and its affiliates shall not be required to make
any additional contributions or provided additional funds, loans or guarantees
to Pavilion and (ii) there shall be no distributions made by Pavilion to its
partners or by AEP to its partners notwithstanding any provision or requirement
contained in the Pavilion Partnership Agreement or the AEP Partnership Agreement
to the contrary. Notwithstanding the foregoing provisions, if this Letter
Agreement should be terminated prior to the occurrence of the Sony Closing, then
Sony and its affiliates shall be required to promptly thereafter upon not less
than five business days' notice from Pavilion make such
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additional contributions or provide such additional funds, loans or guarantees
to Pavilion as would have otherwise been required had this Letter Agreement not
been executed during the period between the date hereof and the date of the
termination of this Letter Agreement.
8. Each party shall execute, deliver and make such assignments,
assumptions, releases, indemnifications, bills of sale, filings and other
instruments, consents and assurances and take or cause to be taken all such
actions as the other party may reasonably request and shall otherwise use their
reasonable best efforts in order to carry out the terms of this Agreement and to
enable the completion of the Sony Closing on the terms set forth herein,
including, without limitation, delivering any consents, mutual releases or other
customary and commercially reasonable documents or instruments (which do not
obligate Sony to assume any liability or pay any consideration) reasonably
necessary to enable completion of the Blockbuster Closing.
9. Pace may assign its right to purchase the Sony Partnership Interest
hereunder only to and/or may cause the Blockbuster Partnership Interest to be
purchased only by, a wholly owned subsidiary of PEC or SFX. PEC hereby
guarantees Pace's performance of its obligations hereunder and under the Letter
Agreement to which this Term Sheet is annexed and shall cause SFX to similarly
guarantee Pace's (and its permitted assignee's) obligations at the Sony Closing.
10. Sony represents and warrants as follows to Pace, which representations
and warranties shall be true and accurate as of the Sony Closing as if made on
that date:
(a) The execution, delivery and performance of this Letter Agreement
by Sony and the consummation by Sony of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on
Sony's part. No other corporate, director, shareholder or partner action
or approval is necessary for the authorization, execution, delivery and
performance by Sony of this Letter Agreement and the consummation by Sony
of the transactions contemplated hereby (except for Blockbuster's consent
pursuant to the AEP Partnership Agreement). This Letter Agreement has been
duly executed and delivered by Sony and constitutes the legal, valid and
binding obligation of Sony, enforceable in accordance with its terms.
(b) Subject to obtaining the consents, releases and regulatory
approvals specified herein, the execution, delivery and performance of
this Letter Agreement by Sony and the consummation by Sony of the
transactions contemplated hereby (i) will not violate (with or without
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the giving of notice or lapse of time, or both) or require any consent,
approval, filing or other notice under, any provision of any applicable
law and (ii) will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or require
any consent or approval, or result in the acceleration of the performance
of the obligations of Sony under, or result in the creation of an
encumbrance upon Sony's partnership interest in AEP pursuant to, the
charter or bylaws of Sony, the Pavilion Partnership Agreement or the AEP
Partnership Agreement, or any indenture, mortgage, deed of trust, lease,
contract, instrument or other agreement to which Sony is a party or by
which Sony or any of its assets are bound or affected.
(c) Upon consummation of the transactions contemplated by this
Letter Agreement, Pace shall be vested with good and marketable title to
Sony's fifty percent partnership interest in AEP free and clear of all
encumbrances, other than those contained in or created by the AEP
Partnership Agreement or Pavilion Partnership Agreement. Upon consummation
of the transactions contemplated by this Letter Agreement, Sony will not
own any rights or interest, directly or indirectly, in Pavilion or AEP or
have any option, warrant or other right to acquire any such interests.
(d) To the best of Sony's knowledge, (i) AEP has no assets or
properties other than its partnership interest in Pavilion (which
partnership interest is owned free and clear of all encumbrances other
than those contained in or created by the Pavilion Partnership Agreement
or AEP Partnership Agreement) and conducts no business activities
unrelated to such ownership, (ii) AEP has no liabilities other than
liabilities as a general partner of Pavilion, (iii) AEP is not a party to
any contract or commitment other than those entered into with Pavilion or
Pace, and (iv) AEP does not have (and never has had) any employees.
From and after the Sony Closing, Sony shall indemnify, defend and hold harmless
Pace and its parents, subsidiaries, affiliates, officers, directors, employees
and agents against all claims and liabilities relating to or arising out of the
breach of any of the foregoing representations and warranties; provided that
Sony's liability in the aggregate under this Paragraph 10 shall not exceed the
Purchase Price.
11. Pace represents and warrants as follows to Sony, which representations
and warranties shall be true and accurate as of the Sony Closing as if made on
that date:
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(a) The execution, delivery and performance of this Letter Agreement
by Xxxx and the consummation by Xxxx of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on
Pace's part. No other corporate, director, shareholder or partner action
or approval is necessary for the authorization, execution, delivery and
performance by Xxxx of this Letter Agreement and the consummation by Pace
of the transactions contemplated hereby. This Letter Agreement has been
duly executed and delivered by Xxxx and constitutes the legal, valid and
binding obligations of Pace, enforceable in accordance with its terms.
(b) Subject to obtaining the consents, releases and regulatory
approvals specified herein, the execution, delivery and performance of
this Letter Agreement by Pace and the consummation by Pace of the
transactions contemplated hereby (i) will not violate (with or without the
giving of notice or lapse of time, or both) or require any consent,
approval, filing or other notice under, any provision of any applicable
law and (ii) will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or require
any consent or approval, or result in the acceleration of the performance
of the obligations of Pace under, the charter or bylaws of Pace, the
Pavilion Partnership Agreement, or any indenture, mortgage, deed of trust,
lease, contract, instrument or other agreement to which Pace is a party or
by which Pace or any of its assets are bound or affected.
(c) Blockbuster has (i) acknowledged the fact that Xxxx is
discussing a potential purchase of the Sony Partnership Interest with Sony
and that Pace need not advise Blockbuster of the terms thereof, and (ii)
agreed to exchange mutual releases with Sony at the Blockbuster Closing
with respect to any claims in connection with Pavilion, all as set forth
in Sections 4.4 and 2.5 of the Purchase Agreement between Pace and
Blockbuster, true and correct copies of which Sections have been provided
to Sony.
From and after the Sony closing; Pace shall indemnify, defend and hold harmless
Sony and its parents, subsidiaries, affiliates, officers, directors, employees
and agents against all claims and liabilities relating to or arising out of the
breach of any of the foregoing representations and warranties; provided that
Xxxx'x liability in the aggregate under this Paragraph 11 shall not exceed the
Purchase Price.
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