Exhibit B to the Distribution Agreement
EMPLOYEE
BENEFITS
AND
COMPENSATION ALLOCATION AGREEMENT
DATED AS OF April 20, 1998
AMONG
SFX BROADCASTING, INC.,
SFX ENTERTAINMENT, INC.
AND
SBI HOLDING CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS.................................................. 1
Section 1.1 General................................... 1
ARTICLE II. RETIREMENT AND WELFARE PLANS................................. 4
Section 2.1 SFX 401(k) Plan........................... 4
Section 2.2 Welfare Plans............................. 5
ARTICLE III. GENERAL PROVISIONS........................................... 7
Section 3.1 Employment Transfers...................... 7
Section 3.2 Costs and Expenses........................ 7
ARTICLE IV. MISCELLANEOUS................................................ 7
Section 4.1 Guarantee of Subsidiaries' Obligations.... 7
Section 4.2 Sharing of Information.................... 7
Section 4.3 Termination............................... 7
Section 4.4 Rights to Amend or Terminate Plans;
No Third Party Beneficiaries............ 8
Section 4.5 Complete Agreement........................ 8
Section 4.6 Governing Law............................. 8
Section 4.7 Notices................................... 8
Section 4.8 Amendment and Modification................ 8
Section 4.9 Successors and Assigns.................... 8
Section 4.10 Counterparts.............................. 8
Section 4.11 Interpretation............................ 9
Section 4.12 Legal Enforceability...................... 9
Section 4.13 References; Construction.................. 9
Section 4.14 Disputes.................................. 9
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EMPLOYEE BENEFITS AND COMPENSATION
ALLOCATION AGREEMENT
EMPLOYEE BENEFITS AND COMPENSATION ALLOCATION AGREEMENT, dated as of
April 20, 1998 by and between SFX Broadcasting, Inc., a Delaware corporation
("SFX"), and SFX Entertainment, Inc., a Delaware corporation and wholly-owned
subsidiary of SFX ("Entertainment"). Unless the context requires otherwise,
"SFX" refers to SFX and its subsidiaries (other than Entertainment and its
subsidiaries) and "Entertainment" refers to Entertainment and its subsidiaries.
WITNESSETH:
WHEREAS, pursuant to the terms of that certain Distribution Agreement
by and between SFX and Entertainment and dated as of April 20, 1998 (the
"Distribution Agreement), the parties have entered into this Agreement
regarding certain employment, compensation and benefit matters occasioned by
the Distribution; and
WHEREAS, SBI Holding Corporation (the "Parent") has joined as a
signatory and a party to this Agreement in order to preserve and protect its
rights under the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement and the Distribution Agreement, each
of the parties hereto, on behalf of itself and its subsidiaries, hereby agrees
as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 GENERAL. Any capitalized terms that are used in this Agreement but
not defined herein shall have the meanings set forth in the Distribution
Agreement (or, if not defined therein, the meanings set forth in the Merger
Agreement), and, as used herein, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
Adverse Consequences: means all actions, suits, proceedings,
investigations, charges, complaints, claims, demands, judgments, orders,
decrees, rulings, damages, fines, costs, amounts paid in settlement,
liabilities, losses, and expenses, including court costs and reasonable
attorneys' fees and expenses.
Agreement: this Employee Benefits and Compensation Allocation
Agreement.
Alternate Payee: an alternate payee under a domestic relations order
which has been determined by the appropriate Plan administrator to be
qualified under Section 414(p) of the Code and Section 206(d) of ERISA and
which creates or recognizes an alternate payee's right to, or assigns to an
alternate payee, all or a portion of the benefits payable to a participant
under any Plan, or an alternate recipient under a medical child support
order which has been determined by the appropriate Plan administrator to be
qualified under Section 609(a) of ERISA and which creates or recognizes the
existence of an alternate recipient's right to, or assigns to an alternate
recipient the right to, receive benefits for which a participant or
beneficiary is eligible under any Plan.
Beneficiary: a beneficiary, dependent or Alternate Payee of a
participant in a Plan or the estate of a deceased participant in a Plan, in
each case, in his, her or its capacity as such a beneficiary, dependent,
Alternate Payee or estate.
Delsener/Xxxxxx Group: defined in Section 5.07(a) of the Merger
Agreement.
Distribution Agreement: defined in the recitals.
Distribution Date: defined in the Distribution Agreement.
Distribution Employees: defined in the Distribution Agreement.
Effective Time: defined in the Merger Agreement.
Employee: a Distribution Employee and any employee shown on the
payroll and other records of the Pre-Distribution Group as being assigned
to the Transferred Businesses as of the Distribution Date, if such
individual is, at the relevant time, actively at work or on a leave of
absence (including, but not limited to, vacation, holiday, sick leave,
family and medical leave, disability leave, military leave, jury duty,
layoff with rights of recall, and any other leave of absence or similar
interruption of active employment that is not considered, according to the
policies and practices of such entity, to have resulted in a permanent
termination of such individual's employment).
Entertainment: defined in the preamble.
Entertainment Participant: any individual who is an Employee or a
Beneficiary of an Employee.
Entertainment 401(k) Plan: a defined contribution plan and any related
trust established by Entertainment to receive the SFX 401(k) Plan account
balances described in Section 2.1(a).
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Entertainment Plans: Plans provided by, contributed to or sponsored by
one or more members of the Delsener/Xxxxxx Group which are initially
effective on or after the Distribution Date to provide benefits to
Entertainment Participants.
Entertainment Welfare Plan: a Welfare Plan provided by, contributed to
or sponsored by one or more members of the Delsener/Xxxxxx Group which is
not a SFX Welfare Plan and is initially effective on or after the
Distribution Date to provide benefits to Entertainment Participants.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation, and the regulations promulgated
thereunder.
Executive Group: defined in the Merger Agreement.
Merger Agreement: defined in the Distribution Agreement.
Parent: defined in the recitals.
Plan: any written or unwritten plan, policy, program, payroll
practice, ongoing arrangement, trust, fund, contract, insurance policy or
other agreement or funding vehicle provided by, contributed to or sponsored
by one or more members of the SFX Group or the Delsener/Xxxxxx Group,
providing benefits to SFX Participants or Entertainment Participants,
regardless of whether it is mandated under local law or negotiated or
agreed to as a term or condition of employment or otherwise, and regardless
of whether it is governmental, private, funded, unfunded, financed by the
purchase of insurance, contributory or noncontributory.
Pre-Distribution Group: SFX and its subsidiaries prior to the
Distribution.
SFX: defined in the preamble.
SFX Employee: any individual who is not an Employee who is actively
employed or on a leave of absence from (including, but not limited to,
vacation, holiday, sick leave, family and medical leave, disability leave,
military leave, jury duty, layoff with rights of recall, and any other
leave of absence or similar interruption of active employment that is not
considered, according to the policies and practices of such entity, to have
resulted in a permanent termination of such individual's employment) or was
formerly employed by one or more members of the Pre-Distribution Group.
SFX 401(k) Plan: the SFX Broadcasting 401(k) Plan, or any successor
thereto (by merger of plans or otherwise) and any related trust.
SFX Group: the Pre-Distribution Group, excluding the Delsener/Xxxxxx
Group.
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SFX Welfare Plan: any Welfare Plan provided by, contributed to or
sponsored by one or more members of the SFX Group on, prior to or after the
Distribution Date.
Welfare Plan: any Plan that is an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA (whether or not such plan is subject to
ERISA) and any Plan that is or is intended to be a cafeteria plan under
Code Section 125; provided such term shall not include any severance
obligations to the Executive Group nor any stock-based plan or arrangement.
ARTICLE II.
RETIREMENT AND WELFARE PLANS
SECTION 2.1 SFX 401(K) PLAN
(a) SFX and Entertainment shall take all actions necessary or
appropriate so that, as of the Distribution Date, all members of the
Delsener/Xxxxxx Group shall cease to be participating employers and sponsors of
the SFX 401(k) Plan. To the extent the parties determine that distribution of
the account balances of Entertainment Participants under the SFX 401(k) Plan
cannot be made in accordance with applicable law and the provisions of the SFX
401(k) Plan within ninety (90) days after the Effective Time or such other date
or dates mutually agreeable to the parties ("401(k) Distribution Deadlines"),
SFX and Entertainment shall take all actions as may be necessary or appropriate
in order to effect the transfer of the account balances of the Entertainment
Participants under the SFX 401(k) Plan to the Entertainment 401(k) Plan on or
as soon as practicable after the 401(k) Distribution Deadlines. Prior to such
transfer, SFX and Entertainment shall cooperate to preserve, subject to the
terms of the Plan, the rights of Entertainment Participants. The assets
transferred shall be equal to the liabilities transferred and shall consist of
the assets held in the SFX 401(k) Plan on behalf of the Entertainment
Participants, unless the parties mutually agree otherwise. To the extent such
transfer is made or any distributions from the SFX 401(k) Plan are submitted
for acceptance to the Entertainment 401(k) Plan as rollover contributions, such
transfers and rollover contributions shall be subject to receipt by
Entertainment of notification from SFX that the SFX 401(k) Plan is intended to
be a tax qualified plan under section 401(a) of the Code. Furthermore,
acceptance or non-acceptance of any rollover contribution from the SFX 401(k)
Plan by the Entertainment 401(k) Plan shall be solely at Entertainment's
discretion and, if accepted, shall be subject to any other conditions and
restrictions that Entertainment in its sole discretion decides to impose.
(b) With respect to the SFX 401(k) Plan and the Entertainment 401(k)
Plan, SFX and Entertainment shall cooperate in good faith in making all
submissions or filings related to the implementation of this Section 2.1 and/or
pre-Effective Time matters that are required under the Code or ERISA and the
regulations thereunder and any other applicable laws. SFX and Entertainment
shall also cooperate in good faith in providing information and copies of
documents
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that SFX or Entertainment considers appropriate or necessary with respect to
any of the aforementioned submissions or filings, implementing all appropriate
communications with partici pants, maintaining and transferring appropriate
records, notifying the other party of any Internal Revenue Service, Department
of Labor or other governmental entity examinations or other actions with
respect to the SFX 401(k) Plan and taking all such other actions as may be
necessary or appropriate to implement the provisions of this Section 2.1 and to
cause the transfers pursuant to Section 2.1(a) to take place as soon as
practicable after the date or dates described in Section 2.1(a).
SECTION 2.2 WELFARE PLANS.
(a) SFX and Entertainment shall take all actions necessary or
appropriate so that, as of the later of the Effective Time or June 1, 1998, all
members of the Delsener/Xxxxxx Group shall cease to be participating employers
and sponsors of the SFX Welfare Plans. The SFX Group shall have sole
responsibility for retaining and discharging: (1) all Liabilities and Adverse
Consequences relating to or arising out of the SFX Welfare Plans by or in
respect of Entertainment Participants who are not Distribution Employees or
Beneficiaries of Distribution Employees with respect to claims incurred on or
prior to the later of the Distribution Date or the date all members of the
Delsener/Xxxxxx Group cease to be participating employers and sponsors of the
relevant SFX Welfare Plan (which date shall not be later than the later of the
Effective Time or June 1, 1998), provided such claims are filed or submitted
within the time period required under the SFX Welfare Plan; (2) all Liabilities
and Adverse Consequences relating to or arising out of the SFX Welfare Plans by
or in respect of Entertainment Participants who are Distribution Employees or
Beneficiaries of Distribution Employees with respect to claims incurred on or
prior to the later of the Effective Time or the date all members of the
Delsener/Xxxxxx Group cease to be participating employers and sponsors of the
relevant SFX Welfare Plan (which date shall not be later than the later of the
Effective Time or June 1, 1998), provided such claims are filed or submitted
within the time period required under the SFX Welfare Plan; and (3) all
Liabilities and Adverse Consequences relating to or arising out of the SFX
Welfare Plans by or in respect of individuals who are not Entertainment
Participants. Effective as of the Distribution Date, the Delsener/Xxxxxx Group
shall have no Liabilities and shall not be responsible for any Adverse
Consequences relating to or arising out of the SFX Welfare Plans except, to the
extent one or more of its members continues to be a participating employer or
sponsor of a SFX Welfare Plan, for the amounts described in Section 2.2(c). For
purposes of this Section 2.2, a claim shall be deemed incurred when the service
is rendered and not when an individual is formally billed or charged for the
service.
(b) Except as specifically set forth in this Section 2.2,
Entertainment shall take all actions necessary or appropriate to establish
Entertainment Welfare Plans to provide such Welfare Plan benefits as
Entertainment determines necessary or appropriate, if any, to Entertainment
Participants. Entertainment shall have sole responsibility for retaining and
discharging all Liabilities and Adverse Consequences relating to or arising out
of the Entertainment Welfare Plans. Any Entertainment Welfare Plan established
on or shortly after the Effective Time to
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replace the primary self-funded medical and dental SFX Welfare Plan covering
the Entertainment Participants and their Beneficiaries as of the Effective Time
shall provide that all Entertainment Participants and their Beneficiaries who
are covered by such plan as of the Effective Time shall be initially eligible
to participate in such Entertainment Welfare Plan without being subject to any
waiting period to participate nor any limitation on pre-existing conditions.
(c) Prior to the month in which the Distribution Date occurs, the
Delsener/Xxxxxx Group shall pay premiums and contributions with respect to the
coverage of Entertainment Participants and Beneficiaries of Entertainment
Participants under the SFX Welfare Plans in accordance with past practices and
procedures. With respect to the month in which the Distribution Date occurs and
any month thereafter (or portion thereof) that one or more members of the
Delsener/Xxxxxx Group is a participating employer or sponsor of a SFX Welfare
Plan, the Delsener/Xxxxxx Group shall retain the portion of the premiums and
contributions with respect to such SFX Welfare Plans that would have otherwise
been paid by the participants employed by the Delsener/Xxxxxx Group and their
covered Beneficiaries for such month (or portion thereof) and pay to SFX as
soon as practicable after such month either the following amounts or such other
amounts mutually agreeable to SFX, Entertainment and SBI Holding Corporation:
(i) with respect to a fully insured SFX Welfare Plan (i.e., the life,
supplemental life and long term disability insurance plan), the employer and
participant portions of the premiums for the coverage of the participants in
the fully insured SFX Welfare Plan who are employed by the Delsener/Xxxxxx
Group and their covered Beneficiaries for such month (or portion thereof); and
(ii) with respect to a SFX Welfare Plan that is not fully insured (i.e., the
partially self-funded medical and dental plan): the sum of (A) the fixed cost
(i.e., the amount charged by New York Life or any other third party
administrator each month for all of the SFX Welfare Plan's costs other than
claims, including but not limited to, costs related to stop loss coverage,
claims administration, and state and local governmental levies and taxes) for
those participants in the SFX Welfare Plan who are employed by the
Delsener/Xxxxxx Group and their covered Beneficiaries for such month (or
portion thereof), and (B) the amount of claims for which New York Life or any
other third party administrator charges SFX for such month (or portion thereof)
with respect to the participants employed by the Delsener/Xxxxxx Group and
their covered Beneficiaries which are filed or submitted within the time period
required under the SFX Welfare Plan and are not in excess of the amounts
covered by the stop loss coverage of the SFX Welfare Plan. Until the later of
the Effective Time or June 1, 1998, SFX shall maintain under its SFX Welfare
Plans that are not fully insured the same stop loss coverages as existed prior
to the Distribution Date with respect to the participants employed by the
Delsener/Xxxxxx Group and their covered Beneficiaries. Additionally, with
respect to a SFX Welfare Plan that is not fully insured (i.e., the partially
self-funded medical and dental plan), Entertainment shall pay SFX the amount
charged by New York Life or any other third party administrator for the run-off
claims of those participants in the SFX Welfare Plan who are employed by the
Delsener/Xxxxxx Group and their covered Beneficiaries (i.e., claims incurred
prior to the later of the Distribution Date or the date these individuals cease
to participate in the relevant SFX Welfare Plan -- which date shall be no later
than the later of the Effective Time or June 1, 1998 -- that are not otherwise
paid by Entertainment provided such claims are filed or submitted
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within the time period required under the SFX Welfare Plan and are not in
excess of the stop loss coverage of the SFX Welfare Plan).
ARTICLE III.
GENERAL PROVISIONS
SECTION 3.1 EMPLOYMENT TRANSFERS. Subject to Section 4.3 of the
Distribution Agreement and Section 5.07 of the Merger Agreement, Entertainment
and SFX shall take all steps necessary and appropriate so that, on or
immediately after the Distribution Date, all Employees who are not Distribution
Employees are employed, or (where employment does not continue by operation of
law) are offered employment, by a member of the Delsener/Xxxxxx Group, and all
SFX Employees who are not former employees of the Pre-Distribution Group are
employed, or (where employment does not continue by operation of law) are
offered employment, by a member of the SFX Group. Such steps shall include,
where necessary or appropriate under local law, making employment offers and/or
transferring contracts of employment.
SECTION 3.2 COSTS AND EXPENSES. The Delsener/Xxxxxx Group and SFX
Group shall bear their own costs and expenses with respect to actions taken to
comply with this Agreement, except as otherwise provided in this Agreement.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1 GUARANTEE OF SUBSIDIARIES' OBLIGATIONS. Each of SFX and
Entertainment shall cause to be performed, and hereby guarantees the
performance and payment of, all actions, agreements, obligations and
Liabilities set forth herein to be performed or paid by any subsidiary of such
party which is contemplated by the Distribution Agreement to be a subsidiary of
such party on or after the Distribution Date.
SECTION 4.2 SHARING OF INFORMATION. Each of SFX and Entertainment
shall provide to the other all such information and copies of documents in its
possession as the other may reasonably request to enable it to administer its
employee benefit plans and programs, and to determine the scope of, and
fulfill, its obligations under this Agreement. Such information and copies of
documents shall, to the extent reasonably practicable, be provided in the
format and at the times and places requested, but in no event shall the party
providing such information be obligated to incur any direct expense not
reimbursed by the party making such request (but any such direct expense to be
reimbursed shall be reasonable in amount), nor to make such information
available outside its normal business hours and premises.
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SECTION 4.3 TERMINATION. This Agreement shall be terminated in the
event that the Distribution Agreement is terminated and the Distribution
abandoned prior to the Distribution Date. In the event of such termination,
neither party shall have any liability of any kind to the other party under
this Agreement.
SECTION 4.4 RIGHTS TO AMEND OR TERMINATE PLANS; NO THIRD PARTY
BENEFICIARIES. No provisions of this Agreement shall be construed (i) to limit
the right of SFX, any other member of the SFX Group, Entertainment or any other
member of the Delsener/Xxxxxx Group to amend any Plan or terminate any Plan, or
(ii) to create any right or entitlement whatsoever in any employee of the
Pre-Distribution Group, former employee of the Pre-Distribution Group or
Beneficiary, including a right to continued employment or to any benefit under
a Plan or any other compensation. This Agreement is solely for the benefit of
the parties hereto and their respective subsidiaries and should not be deemed
to confer upon third parties any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this
Agreement.
SECTION 4.5 COMPLETE AGREEMENT. This Agreement and the agreements and
other documents referred to herein (including, but not limited to, the
Distribution Agreement, Merger Agreement and Tax Sharing Agreement) shall
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter.
SECTION 4.6 GOVERNING LAW. Subject to applicable U.S. federal law,
this Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware (other than the laws that might otherwise govern under
applicable principles of conflicts law) as to all matters, including matters of
validity, construction, effect, performance and remedies.
SECTION 4.7 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be given in accordance with the provisions of
the Distribution Agreement.
SECTION 4.8 AMENDMENT AND MODIFICATION. Except as set forth in Section
4.3, no provision of this Agreement may be waived, amended, modified,
supplemented or terminated without the written agreement of SFX and
Entertainment and without the consent of the Parent, which consent shall not be
unreasonably withheld.
SECTION 4.9 SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests and obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
party.
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SECTION 4.10 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 4.11 INTERPRETATION. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties hereto and shall not in any way affect the
meaning or interpretation of this Agreement.
SECTION 4.12 LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Upon any such
determination that a provision of this Agreement is prohibited or unenforceable
in whole or in part, the court or arbitral panel making such determination
shall have the power to modify such invalidated provision so as to effect the
original intent of the parties as closely as possible.
SECTION 4.13 REFERENCES; CONSTRUCTION. References to any "Article" or
"Section," without more, are references to Articles or Sections of this
Agreement. Unless otherwise expressly stated, clauses beginning with the term
"including" set forth examples only and in no way limit the generality of the
matters thus exemplified.
SECTION 4.14 DISPUTES. If a dispute arises between SFX and
Entertainment as to the interpretation or the implementation of this Agreement,
the provisions of Article XI of the Distribution Agreement shall be used to
resolve the dispute.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the day and year first above written.
SFX BROADCASTING, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
SFX ENTERTAINMENT, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
SBI HOLDING CORPORATION
(with respect to Section 4.8 only)
By: /s/ Xxxxxxx Xxxxxxxx, Xx.
--------------------------------
Name: Xxxxxxx Xxxxxxxx, Xx.
Title: Vice President
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