ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 21 day of July, 1997 (the "Execution Date") by and among QBQ
ENTERTAINMENT, INC., a New York corporation ("Seller") XXXXXX XXXX, an
individual ("Arfa"); MARQUEE MUSIC, INC., a Delaware corporation ("Marquee
Music"), and THE MARQUEE GROUP, INC., a Delaware corporation ("Marquee Group";
Marquee Group and Marquee Music are hereinafter referred to collectively as
"Buyer");
WHEREAS, Seller is in the business of booking tours and appearances
for musical and comedy entertainers (the "Booking Business"); and
WHEREAS, Seller desires to sell and Buyer desires to purchase certain
assets and assume certain liabilities associated with the Booking Business, all
on the terms and subject to the conditions set forth herein; and
WHEREAS, Arfa is the sole shareholder of the Seller and shall benefit
from the transaction contemplated hereby.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
------------------
1.1 Transfer of Assets. On the Closing Date, Seller shall sell,
assign, transfer and convey to Buyer, and Buyer shall purchase and assume from
Seller, all of the assets, properties, interests and rights of Seller of
whatsoever kind and nature, real and personal, tangible and intangible, owned
or
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leased by the Seller as the case may be, which are used or held for use by or
relate to the Booking Business as the same shall exist on the Closing Date (the
"Assets"), including but not limited to the following (but excluding the assets
specified in Section 1.2 hereof):
1.1.1 all of Seller's rights in and to the licenses, permits and
other authorizations issued to Seller by any governmental authority and used
directly in, or relating directly to, the conduct of the Booking Business along
with renewals or modifications of such items between the date hereof and the
Closing Date;
1.1.2 all equipment, office furniture and fixtures, office
materials and supplies, inventory, spare parts and other tangible personal
property of every kind and description, owned, leased or held by Seller and
used in the conduct of the Booking Business, and which are described more fully
in Section 7.7, together with any replacements of equal quality thereof and
additions thereto, made between the date hereof and the Closing Date, and less
any retirements or dispositions thereof made between the date hereof and the
Closing Date in the ordinary course of business and consistent with past
practices of the Seller;
1.1.3 all of Seller's rights in and under such contracts,
agreements, leases, commitments, purchase orders, sale orders and other
agreements written or oral, relating directly or exclusively to the conduct of
the Booking Business and which are described more fully in Sections 7.7, 7.8
and 7.9 (collectively, "Contracts"), together with all Contracts entered into
or acquired by Seller between the date hereof and the Closing Date in the
ordinary course of business and consistent with the terms of this Agreement
(collectively, "Additional Contracts");
1.1.4 all of Seller's rights in and to the trademarks, trade
names, service marks, franchises, copyrights, including registrations and
applications for registration of any of them, logos and slogans or licenses to
use same owned or held by it and used directly and exclusively in, or relating
directly and exclusively to, the conduct of the Booking Business, as described
more fully in Section 7.12, together with any associated good will and any
additions thereto between the date hereof and the Closing Date;
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1.1.5 all of Seller's rights in and to the files, records, and
books of account of the Booking Business including, without limitation,
executed copies of all written Contracts to be assigned hereunder; provided,
however, that Seller shall for a period of six (6) years following the Closing
Date have access to all of the foregoing for audit, inspection and duplication
by Seller or its designees, at Seller's expense, upon reasonable prior notice
during normal business hours;
1.1.6 all of Seller's rights under manufacturers' and vendors'
warranties relating to items included in the Assets and all similar rights
against third parties relating to items included in the Assets; and
1.1.7 all accounts receivable of Seller created after the later of
September 30, 1997 or the date of the Closing (the "Revenue Cut-Off Date").
The Assets shall be transferred to Buyer free and clear of all debts,
security interests, mortgages, trusts, claims, pledges, conditional sales
agreements or other liens, liabilities and encumbrances whatsoever
(collectively, "Encumbrances") other than Permitted Encumbrances (as
hereinafter defined). As used herein, "Permitted Encumbrances" shall mean: (a)
such of the following as to which no enforcement, collection, execution, levy
or foreclosure proceeding shall have been commenced prior to the Closing Date:
(i) liens for taxes, assessments and governmental charges or levies not yet due
and payable or which are being contested in good faith by appropriate
procedures, (ii) Encumbrances arising in the ordinary course of business
securing obligations that (A) are not overdue for a period of more than 60 days
and (B) are not in excess of $1,000 in the case of a single property or $5,000
in the aggregate at any time, (iii) pledges or deposits to secure obligations
under workers' compensation laws or similar legislation or to secure public or
statutory obligations, and (iv) liens of materialmen, warehousemen, couriers
and like persons disclosed as of the date hereof; and (b) Encumbrances on
furniture, fixtures or equipment incurred in connection with the purchase or
lease of such furniture, fixtures or equipment in the ordinary course of
business disclosed as of the date hereof.
1.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, it is
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expressly understood and agreed that the Assets shall not include the following
assets along with all rights, title and interest therein which shall be
referred to as the "Excluded Assets":
1.2.1 all cash, cash equivalents or similar type investments of
Seller, such as certificates of deposit, Treasury bills and other marketable
securities on hand and/or in banks;
1.2.2 all tangible and intangible personal property disposed of or
consumed in the ordinary course of business between the date of this Agreement
and the Closing Date, or as permitted under the terms hereof;
1.2.3 all Contracts that have terminated or expired prior to the
Closing Date in the ordinary course of business or as permitted hereunder;
1.2.4 Seller's corporate seal, minute books, charter documents,
corporate stock record books and such other books and records as pertain to the
organization, existence or share capitalization of Seller and duplicate copies
of such records as are necessary to enable Seller to file its tax returns and
reports as well as any other records or materials relating to Seller generally
and not involving specific aspects of the Stations's operation;
1.2.5 Contracts of insurance and all insurance proceeds or claims
made by Seller relating to property or equipment repaired, replaced or restored
by Seller prior to the Closing Date;
1.2.6 any and all other claims made by Seller with respect to
transactions prior to the Closing Date and the proceeds thereof;
1.2.7 all pension, profit sharing or cash or deferred (Section
401(k)) plans and trusts and the assets thereof and any other employee benefit
plan or arrangement and the assets thereof, if any, maintained by Seller or its
parent organization;
1.2.8 any and all accounts and notes receivable created on or
prior to the Revenue
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Cut-Off Date (the "Excluded Receivables"; without limiting the generality of
the foregoing, it is understood and agreed that Excluded Receivables shall
include commission receipts from tour events at venues at which performances
have taken place on or prior to the Revenue Cut-Off Date, regardless of the
actual date of receipt of such commission receipts); and
1.2.9 any books and records relating to any of the foregoing.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
-------------------------
2.1 Assumption of Obligations. Subject to the provisions of this
Section 2.1 and Section 2.2, on the Closing Date, Buyer shall only assume and
undertake to pay, satisfy or discharge the liabilities, obligations and
commitments of Seller arising under (i) the Contracts described more fully in
Sections 7.7, 7.8 and 7.9; (ii) all Additional Contracts; and (iii) any other
Contracts entered into between the date hereof and the Closing Date which Buyer
expressly agrees in writing to assume. All of the foregoing liabilities and
obligations shall be referred to herein collectively as the "Assumed
Liabilities".
2.2 Limitation. Except as set forth in Section 2.1 hereof, Buyer
expressly does not, and shall not, assume or be deemed to assume, under this
Agreement or otherwise by reason of the transactions contemplated hereby, any
liabilities, obligations or commitments of Seller of any nature whatsoever.
Without limiting the generality of the foregoing, except as set forth in
Section 2.1, Buyer shall not assume or be liable for any liability or
obligation of Seller arising out of any contract of employment, collective
bargaining agreement, insurance, pension, retirement, deferred compensation or
incentive bonus, or profit sharing or employee benefit plan or trust, or any
judgment, litigation, proceeding or claim by any person or entity relating to
any business of the Seller prior to the Closing Date, whether or not such
judgment, litigation, proceeding or claim is pending, threatened or asserted
before, on or after the Closing Date.
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ARTICLE 3
CONSIDERATION
-------------
3.1 Purchase Price. The aggregate consideration (the "Purchase Price")
for the transfer of the Assets from the Seller to the Buyer shall be Six
Million One Hundred and Two Thousand Five Hundred Dollars ($6,102,500), plus
the assumption at Closing of the Assumed Liabilities, plus the Additional
Payments in accordance with Section 3.3.
3.2 Payment. (a) Buyer shall pay to Seller the Purchase Price as
follows: (i) the $400,000 Cash Deposit (as defined below) payable upon the
execution and delivery of this Agreement; pursuant to Section 3.5; and (ii) the
following amounts: (A) upon the Closing Date, $2,702,500 by wire transfer in
immediately available funds to a bank designated in writing by Seller; (B)
$1,000,000 by certified or official bank check in equal annual installments of
$125,000 over eight (8) years the ("Installment Payments"); and (C) upon the
Closing Date, by issuing shares of Class A Common Stock $.01 par value (the
"Consideration Stock") of Marquee Group to Seller or its designees, with a
market value as of the close of business on the date prior to the Closing Date
of $2 million, such market value to be determined by the average official
closing price per share of said stock from the date hereof through the date
which is five (5) business days prior to the Closing Date in the market in
which it is publicly traded (the "Closing Price"); provided, however, that in
no event shall the Closing Price be greater than $8.50 per share of
Consideration Stock for all purposes of this Agreement.
(b) Anything contained herein to the contrary notwithstanding, the
unpaid Installment Payments to be paid to the Seller pursuant to Section
3.2(a)(ii)(B) shall be paid in one lump sum within ten (10) days after Xxxxxx
Xxxx ("Arfa") shall no longer be employed by Buyer (i) if Buyer shall fail to
make an Offer of Comparable Employment (as hereafter defined) to Arfa at least
one hundred twenty (120) days prior to the termination of Arfa's employment
with Buyer, or (ii) other than by reason of his death, total disability or
termination for cause as defined and pursuant to his employment agreement with
Buyer as then in effect. As used herein, "Offer of Comparable Employment" shall
mean an offer of employment containing (i) a minimum employment term of
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not less than three (3) years, (ii) a minimum initial base salary of $325,000
per annum, subject to adjustment for inflation (which shall be at least 5% per
annum) and to discretionary annual increases, (iii) bonuses which are
comparable to the Income Bonus and the Cash Flow Bonus in the Arfa Employment
Agreement (as hereinafter defined) which the Buyer in good faith reasonably
believes will result in Arfa receiving aggregate annual bonuses of not less
than $200,000 based on targets of comparable difficulty and/or probability of
achieving as the targets set forth in the Arfa Employment Agreement; and (iv)
annual stock option grants on terms no less favorable than those contained in
the Employment Agreement.
3.3 Additional Payments. Buyer shall pay to Seller (or its designee)
the following additional payments (the "Additional Payments"): (i) an aggregate
amount equal to the revenues actually received by Marquee Music on or prior to
the Revenue Cut-Off Date, which amount shall be paid as and when such revenues
are received; (ii) an aggregate amount equal to the revenues received by Buyer
with respect to Excluded Receivables, which amount shall be paid as and when
such revenues are received (whether before, on or after the Revenue Cut-Off
Date) ; (iii) $150,000 on April 1st in each of 1998 and 1999; and (iv) $105,000
on April 1st in each of 2000, 2001, and 2002.
3.4 Stock Legend. (a) In addition to any legend imposed by applicable
state securities laws or the certificate of incorporation of Marquee Group, all
stock issued by the Marquee Group pursuant to this Agreement, shall bear a
restrictive legend stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
FURTHERMORE, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN HOLDING PERIODS,
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"CALL" AND "PUT" PROVISIONS SET FORTH IN THAT CERTAIN ASSET
PURCHASE AGREEMENT BY AND AMONG MARQUEE MUSIC, INC., THE MARQUEE
GROUP, INC., QBQ ENTERTAINMENT, INC. AND XXXXXX XXXX, DATED AS OF
JULY 21, 1997 (THE "AGREEMENT").
(b) Notwithstanding the foregoing provisions of Section 3.4(a),
the restrictions imposed by the legend contained in Section 3.4(a) upon the
transferability of stock issued by Marquee Group hereunder shall cease and
terminate when: (i) the provisions of Sections 18.1.3. and 18.2.3 shall
terminate or have expired; and (ii) any such securities are or will be sold or
otherwise disposed of (A) in accordance with the Registration Rights Agreement
(as hereinafter defined) (B) pursuant to an exemption from the Securities Act
of 1933, as amended (the "Securities Act") which is described in a written
opinion of counsel reasonably satisfactory to Marquee Group or (c) by a holder
who meets the requirements for the transfer of such securities pursuant to Rule
144 promulgated by the Securities and Exchange Commission under the Securities
Act. Whenever the restrictions imposed by the legend contained in Section
3.4(a) shall terminate, the holder of any securities as to which such
restrictions have terminated shall be entitled to receive from Marquee Group,
without expense, a new certificate or certificates not bearing the restrictive
legends set forth in Section 3.4(a) and not containing any other legend.
3.5 Deposit. Simultaneously with the execution and delivery of this
Agreement, the Buyer shall pay to Seller $400,000 by wire transfer of
immediately available funds into an account designated by Seller (the "Cash
Deposit"). The Seller shall be permitted to utilize the Cash Deposit for its
own account, and the Cash Deposit shall be non-refundable to Buyer unless this
Agreement is terminated by Buyer by reason of the Seller's default in
accordance with Section 17.1(a).
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3.6 Proration of Expenses.
3.6.1 Except as otherwise provided herein, all expenses incurred
prior to Closing Date arising from the conduct of the business and operations
of the Booking Business shall be prorated between Buyer and Seller in
accordance with generally accepted accounting principles as of 11:59 p.m.,
local time, on the date immediately preceding the Closing Date. Such prorations
shall include, without limitation, all ad valorem, real estate and other
property taxes (but excluding taxes arising by reason of the transfer of the
Assets as contemplated hereby, which shall be paid as set forth in Article 13
of this Agreement), business and license fees (including any retroactive
adjustments thereof), wages and salaries of employees, including accruals up to
the Closing Date for bonuses, commissions, vacations and sick pay, and related
payroll taxes, utility expenses, rents and similar prepaid and deferred items
attributable to the ownership and operation of the Booking Business. Real
estate taxes shall be apportioned on the basis of taxes assessed for the
preceding year, with a reapportionment as soon as the new tax rate and
valuation can be ascertained.
3.6.2 The prorations and adjustments contemplated by this Section,
to the extent practicable, shall be made on the Closing Date. As to those
prorations and adjustments not capable of being ascertained on the Closing
Date, an adjustment and proration shall be made within ninety (90) calendar
days of the Closing Date.
3.6.3 In the event of any disputes between the parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at the time
provided in Section 3.6.2 and such disputes shall be determined by an
independent certified public accountant mutually acceptable to the parties, and
the fees and expenses of such accountant shall be paid one-half by Seller and
one-half by Buyer.
3.7 Additional Consideration. At the Closing, the Buyer shall issue to
Seller (or its designee) and deposit additional shares of Class A Common Stock
, $.01 par value, of Marquee Group having a market value equal to $500,000
based upon the Closing Price (the "Additional Stock") into an escrow account
(the "Escrow Account"). The Additional Stock shall be released from the Escrow
Account to the Seller if the Operating Income (as hereinafter defined) of
Marquee
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Music exceeds: (i) $1,000,000 in any of the first three (3) Fiscal Years (as
defined below) ending after the Closing Date; or (ii) $1,250,000 in the fourth
Fiscal Year ending after the Closing Date (the "Performance Goals"). For the
purposes hereof, "Operating Income" shall, with respect to the applicable
period, be defined as the net revenues of Marquee Music during such period
derived from all Contracts and Additional Contracts and from clients or
business opportunities introduced to Marquee Music by Arfa (and Xxxx Xxxxxxxx),
less direct operating expenses and less allocable corporate overhead expenses;
provided, however, that the calculation of Operating Income shall be made
without deduction for (i) Federal, state and local income taxes; (ii) the cost
and expense relating to the transactions contemplated by this Agreement and any
other acquisition of the equity interests or assets of a person, corporation or
business entity by Buyer, including, without limitation, depreciation and
amortization expense relating to any of the foregoing transactions; (iii)
extraordinary depreciation and amortization expense; (iv) any advances, signing
bonuses, salaries, benefits and other compensation paid to agents other than
Arfa and Xxxxxxxx who become employees of Marquee Music except to the extent
that the revenues generated by such agents are included in Operating Income, in
which case any such advances, signing bonuses, salaries, benefits and other
compensation will be included on a proportionate basis based on the ratio of
the revenues of such agents included in Operating Income to all revenues
generated by such agents; and (v) any bonuses paid to Arfa (including, without
limitation, the Income Bonus and Operating Bonus, as such terms are defined in
the Arfa Employment Agreement); and provided, further, that any allocation of
general corporate overhead expense to Marquee Music from Marquee Group shall be
at the more favorable of an allocation determined by the Chief Executive
Officer of Marquee Music or a percentage of such general corporate overhead
expenses based on the ratio of Marquee Music's revenues to all revenues of
Buyer on a consolidated basis. Subject to Section 4.2, achievement of the
Performance Goals shall be based on Marquee Music's annual Financial Statements
as determined by Marquee Group's independent auditors. Anything contained
herein to the contrary notwithstanding, the Additional Stock shall be released
from the Escrow Account to the Seller upon: (i) Arfa's resignation as an
employee of Marquee Music for Good Reason, as defined in and pursuant to the
Arfa Employment Agreement; or (ii) upon the termination of Arfa as an employee
of Marquee Music by Buyer in breach of the Arfa Employment Agreement (each
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of the foregoing being hereinafter referred to as an "Acceleration Event").
ARTICLE 4
CLOSING
-------
4.1 Closing. Except as otherwise mutually agreed upon by Seller and
Buyer, the consummation of the transactions contemplated herein (the "Closing")
shall occur upon the first to occur of the following: (i) at any time
determined by the Buyer, provided the Buyer has given the Seller five (5) days
prior notice, within ninety (90) business days following the date on which the
last of the conditions contained in Article 11 and Article 12 below have been
satisfied; or (ii) at any time determined by Seller, provided, Seller has given
Buyer five (5) days prior notice, at any time following the later of: (A) the
date on which the conditions provided in Section 11.5 shall have been satisfied
and the Seller states in such notice that it is ready, willing and able to
fulfill the remaining conditions contained in Article XI; or (ii) October 1,
1997. The Closing shall be held at the offices of Buyer in New York City, or at
such other place as the parties shall mutually agree upon. As used herein, the
term ("Business Day") shall mean any day that is not a Saturday, Sunday or
banking holiday in the State of New York.
4.2 Operating Income Statements. (a) Buyer shall deliver to Seller
within thirty (30) days after the end of each Fiscal Year of Marquee Music
(defined as October 1st to September 30th), a written calculation (the "Annual
Statement"), in reasonable detail, of the Operating Income for such Fiscal
Year, which Annual Statement shall include a profit and loss statement,
statement of cash flow and a balance sheet. Except as otherwise required
pursuant to this Agreement, the calculation of Operating Income to be made
hereunder shall be determined in accordance with generally accepted accounting
principles consistently applied, shall be in accordance with the books and
records of Marquee Music and shall be consistent with the audited financial
statements of Buyer.
(b) In the event that Seller shall dispute the calculation of the
Operating Income for any
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Fiscal Year, Seller shall notify Buyer in writing no later than sixty (60) days
after receipt of the Annual Statement. In the event of such dispute such
calculation shall be submitted to a Big Six Firm mutually agreed upon by Buyer
and Seller for review and recalculation (or, if the Buyer and the Seller cannot
agree on such Big-Six Firm within twenty (20) days after such written
notification has been delivered to the Buyer, Buyer and Seller shall within
twenty (20) days thereafter each select a Big-Six Firm and such two Big-Six
Firms shall select a third Big-Six Firm, and such dispute shall be submitted to
such third Big-Six Firm as aforesaid for review and recalculation or, if such
third Big-Six Firm shall not for any reason have been designated within such
twenty (20) day period, then a Big-Six Firm (which shall in any event not be a
Big Six Firm regularly employed by the Buyer) shall be designated as promptly
as is practicable by the American Arbitration Association in accordance with
its rules then obtaining and such dispute shall be submitted to such Big-Six
Firm so designated for review and recalculation). The Big-Six Firm(s)
ultimately undertaking such review and recalculation is hereinafter sometimes
hereinafter referred to as the "Accountants" and the determination of the
Accountants as to the amount of Operating Income shall be final and binding
upon the parties. Any such review and recalculation shall be made in accordance
with the definition of Operating Income and other guidelines contained in this
Agreement. The fees, costs and expenses of such review and recalculation shall
be borne by Seller unless the Operating Income calculated by the Accountants
shall exceed the Operating Income set forth in the Annual Statement by more
than seven and one-half percent (7.5%) in which case such fees, costs and
expenses shall be borne by Buyer. Buyer agrees to cooperate with the
Accountants and to provide all such information as is reasonably necessary to
the Accountants in the performance of their review and recalculation.
ARTICLE 5
[RESERVED]
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby jointly and severally makes the following representations
and warranties to Seller, each of which is true and correct on the date hereof,
shall remain true and correct in all material respects through and including
the Closing Date, shall be unaffected by any notice to Seller other than in the
Disclosure Schedule (as defined herein) and shall survive the Closing to the
extent provided in Section 16.4.
6.1 Organization and Standing. Each of the Buyers is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and are duly qualified to do business and shall be in good
standing in the State of New York at the Closing Date.
6.2 Authorization and Binding Obligation. Buyer has all necessary
power and authority to enter into and perform this Agreement, the Escrow
Agreement, the Registration Rights Agreement (as defined in Section 12.5), the
Assumption Agreement (as defined in Section 15.2.5), Xxxxxxxx Employment
Agreement (as defined in Section 11.2) and the Arfa Employment Agreement, (all
of such agreements other than this Agreement being hereinafter referred to
collectively as "Transaction Agreements") and the transactions contemplated
hereby and thereby, and to own or lease the Assets and to carry on the Booking
Business as it is now being conducted, and Buyer's execution, delivery and
performance of this Agreement and the Transaction Agreements and the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action on its part. This Agreement has been duly
executed and delivered by Buyer and this Agreement constitutes, and the
Transaction Agreements will constitute the valid and binding obligation of
Buyer, enforceable in accordance with their terms, except as limited by laws
affecting creditors' rights or equitable principles generally.
6.3 Absence of Conflicting Agreements or Required Consents. The
execution, delivery and performance of this Agreement and the Transaction
Agreements by Buyer: (a) does not require the consent of any third party; (b)
will not violate any applicable law, judgment, order, injunction,
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decree, rule, regulation or ruling of any governmental authority applicable to
Buyer; and (c) will not, either alone or with the giving of notice or the
passage of time, or both, conflict with, constitute grounds for termination of
or result in a breach of the terms, conditions or provisions of, or constitute
a default under, any agreement, instrument, license or permit to which Buyer is
now subject, including, without limitation, the Charter and By-laws (and any
other organizational documents or certificates) of each of the Buyers.
6.4 Litigation and Compliance with Law. There is no litigation,
administrative, arbitration or other proceeding, or petition, complaint or
investigation before any court or governmental body, pending, or to the
knowledge of Buyer, threatened against Buyer or any of its principals that
would adversely affect Buyer's ability to perform its obligations pursuant to
this Agreement or the Transaction Agreements. There is no violation of any law,
regulation or ordinance or any other requirement of any governmental body or
court which would have a material adverse effect on Buyer or its ability to
perform its obligations pursuant to this Agreement or the Transaction
Agreements.
6.5 Issuance of Consideration Stock. The Consideration Stock and the
Additional Stock, when issued, will be validly issued, fully paid and
non-assessable, will not be subject to any preemptive rights and will not be
subject to any Encumbrances other than those created by this Agreement and the
Transaction Agreements.
6.6 SEC Documents. (a) The Common Stock of Marquee Group is registered
pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and to the best of its knowledge, Marquee Group has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the Securities and Exchange Commission ("SEC") pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant
to Section 13(a) or 15(d), in addition to one or more registration statements
and amendments thereto heretofore filed by the Company with the SEC. Marquee
Group has delivered to the Seller true and complete copies of (i) its annual
reports on Form 10-K and quarterly reports on Form 10-Q for its 1996 fiscal
year and for the quarter ending Xxxxx 00, 0000, (xx) proxy
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statements, information and solicitation materials filed by it with the SEC,
and (iii) each other report, registration statement, proxy statement and other
document filed with the SEC since the filing of its most recent Form 10-K (all
of the foregoing, collectively, the "SEC Documents").
(b) To the best knowledge of Marquee Group, as of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6.7 Financial Statements. (a) Attached hereto as Schedule 6.7 are the
audited balance sheet of the Marquee Group at December 31, 1996 (the "Balance
Sheet"), and the related audited statements of income, retained earnings and
cash flows for the fiscal year then ended, in each case certified by Ernst &
Young LLP, the independent certified public accountant for Buyer and the
unaudited balance sheet of the Marquee Group of March 31, 1997, and the related
statements of income, retained earning and cash flows for such period
(collectively, the "Buyer Financial Statements").
(b) To the best knowledge of Marquee Group, the Buyer Financial
Statements and the financial statements of Marquee Group included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except
(a) as may be otherwise indicated in such financial statements or the notes
thereto or (b) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of Buyer as of the
dates thereof and the results
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of operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
6.8 No Material Adverse Change. Since March 31, 1997, the date through
which the most recent quarterly report of Buyer on Form 10-Q has been prepared
and filed with the SEC, a copy of which is included in the SEC Documents, and
until the date hereof, there has been no material adverse change in the
businesses, properties, prospects, operations or financial condition of Buyer
and its Affiliates (as such term is defined in the Securities Act of 1993, as
amended), except as otherwise disclosed or reflected in other SEC Documents.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER AND ARFA
-------------------------------------------------
Subject to Section 19.4, Seller and Arfa hereby jointly and severally
make the following representations and warranties to Buyer, each of which is
true and correct on the date hereof, shall remain true and correct in all
material respects to and including the Closing Date, shall be unaffected by any
notice to Buyer other than in the Disclosure Schedule (as defined herein) and
shall survive the Closing to the extent provided in Section 16.4. Such
representations and warranties are subject to, and qualified by, any fact or
facts disclosed in the separate Disclosure Schedule which is hereby made a part
of this Agreement (the "Disclosure Schedule").
7.1 Organization and Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
is duly qualified to do business in the State New York and has the corporate
power and authority to own, lease and operate the Assets and to carry on the
Booking Business as now being conducted and as proposed to be conducted by
Seller between the date hereof and the Closing Date.
7.2 Authorization and Binding Obligation. Seller has the corporate
power and authority to enter into and perform this Agreement and the
Transaction Agreements (other than the Arfa
16
Employment Agreement and Xxxxxxxx Employment Agreement), and the transactions
contemplated hereby and thereby, and Seller's execution, delivery and
performance of this Agreement, and the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on its part. This Agreement has been duly executed and delivered by Seller and
this Agreement constitutes, and the Transaction Agreements (other than the Arfa
Employment Agreement and Xxxxxxxx Employment Agreement) will constitute, the
valid and binding obligation of Seller enforceable in accordance with their
terms, except as limited by laws affecting the enforcement of creditor's rights
or equitable principles generally.
7.3 Absence of Conflicting Agreements or Required Consents. Except as
set forth in Section 7.3 of the Disclosure Schedule and Exhibit 11.5 attached
hereto with respect to consents required in connection with the assignment of
certain Contracts (it being agreed that Seller shall not be required to deliver
the consents set forth in said Exhibit 11.5), the execution, delivery and
performance of this Agreement by Seller: (a) does not require the consent of
any third party; (b) will not violate any applicable law, judgment, order,
injunction, decree, rule, regulation or ruling of any governmental authority to
which Seller is a party or by which it or the Assets are bound; (c) will not,
either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination of or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
Contract, agreement, instrument, license or permit to which Seller or the
Assets is now subject; and (d) will not result in the creation of any lien,
charge or encumbrance on any of the Assets, except to the extent that any such
matter or matters referred to in sub parts (a) through (d) would not in the
aggregate have a material adverse effect on the Buyer.
7.4 Government Authorizations. There are no material licenses, permits
or other authorizations from governmental and regulatory authorities which are
required for the lawful conduct of the Booking Business in the manner and to
the full extent it is presently conducted, the failure of which to have or
obtain would have a material adverse effect upon the Booking Business.
7.5 [RESERVED]
17
7.6 Taxes. Except as set forth on Section 7.6 of the Disclosure
Schedule, Seller has filed all federal, state, local and foreign income,
franchise, sales, use, property, excise, payroll and other tax returns required
by law and has paid in full all taxes, estimated taxes, interest, assessments,
and penalties due and payable. All returns and forms which have been filed have
been true and correct in all material respects and no tax or other payment in a
material amount other than as shown on such returns and forms are required to
be paid and have been paid by Seller. There are no present disputes as to taxes
of any nature payable by Seller which in any event could materially adversely
affect any of the Assets or the Booking Business.
7.7 Personal Property.
7.7.1 Section 7.7 of the Disclosure Schedule contains a list of
all material tangible personal property and assets owned and leased by the
Seller and used primarily or exclusively in the conduct of the Booking
Business. Except as may be subject to lease agreements of the Seller (the
"Personal Property Contracts") and except for Permitted Encumbrances, Seller
owns and has, and will have on the Closing Date, good title to all such
property (and to all other tangible personal property and assets to be
transferred to Buyer hereunder), and none of such property is, or at the
Closing will be, subject to any security interest, mortgage, pledge,
conditional sales agreement or other lien or Encumbrance. All of the items of
the tangible personal property and assets included in the Assets are in all
material respects in reasonable operating condition (ordinary wear and tear
excepted) and are available for immediate use in the conduct of the business
and operations of the Seller. The properties listed in said Section 7.7 include
all such properties used to conduct in all material respects the business and
operations of the Seller as now conducted.
7.7.2 The Personal Property Contracts listed on such Section 7.7
constitute valid and binding obligations of Seller to Seller's and Arfa's
actual knowledge, such Personal Property Contracts are in full force and effect
as of the date hereof and will on the Closing Date constitute valid and binding
obligations of Seller. Seller is not in default under any of such Personal
Property Contracts and has not received or given written notice of any default
thereunder from or to any of the other parties thereto. Seller is not aware
that any other party to such Personal Property Contracts is in default with
respect thereto. Seller will use reasonable efforts to obtain all required
third-party
18
consents from all third parties to the Personal Property Contracts to be
conveyed and assigned to Buyer as part of the Assets, so as to insure the Buyer
will enjoy all of the privileges of Seller thereunder. Except as set forth in
Section 7.7 of the Disclosure Schedule, Seller has full legal power and
authority to assign its rights under the Personal Property Contracts to Buyer
in accordance with this Agreement on terms and conditions no less favorable
than those in effect on the date hereof, and to Seller's actual knowledge, such
assignment will not affect the validity and enforceability of any of the
Personal Property Contracts. Neither Seller nor Arfa has received any notice
from any party to any of the Personal Property Contracts disputing the
enforceability of any such agreements.
7.8 Real Property.
7.8.1 Section 7.8 to the Disclosure Schedule contains a complete
and accurate list of all real property leased by the Seller (collectively the
"Real Estate Contracts") and a summary of the applicable leases, Seller owns no
real property.
7.8.2 The Real Estate Contracts listed on such Section 7.8
constitute valid and binding obligations of Seller and, to Seller's and Arfa's
knowledge, of all other persons purported to be parties thereto and are in full
force and effect as of the date hereof and will on the Closing Date constitute
valid and binding obligations of Seller and, to Seller's and Arfa's actual
knowledge, of all other persons purported to be parties thereto and shall be in
full force and effect. Seller is not in default under any of such Real Estate
Contracts and has not received or given written notice of any default
thereunder from or to any of the other parties thereto. Seller is not aware
that any other party to such Real Estate Contract is in default with respect
thereto. Seller has or will obtain all required third party consents from all
third parties to the Real Estate Contracts to be conveyed and assigned to Buyer
as part of the Assets, so as to insure that Buyer will enjoy all of the
privileges of Seller thereunder. Except as set forth in Section 7.8 of the
Disclosure Schedule, Seller has full legal power and authority to assign its
rights under the Real Estate Contracts to Buyer in accordance with this
Agreement on terms and conditions no less favorable than those in effect on the
date hereof, and such assignment will not affect the validity, enforceability
and continuity of any of the Real Estate Contracts.
19
7.9 Contracts. Section 7.9 of the Disclosure Schedule lists and
describes all Contracts of the Seller as of the date of this Agreement which
shall be assumed by the Buyer as of the Closing Date. Notwithstanding the
foregoing, if it is discovered before Closing that Seller failed to list a
contract in said Section 7.9 which was required to be listed, then the Buyer
may elect in its sole discretion to accept or reject such contract.
7.10 Status of Contracts. Except as noted in Section 7.9 of the
Disclosure Schedule, Seller has delivered to Buyer true and complete copies of
all written Contracts, including any and all amendments and other modifications
to such Contracts. To the actual knowledge of Arfa and the Seller, all
Contracts are valid, binding and enforceable by Seller in accordance with their
respective terms, except as limited by laws affecting creditors' rights or
equitable principles generally. To the Seller's and Arfa's knowledge, Seller
has complied in all material respects with all Contracts and is not in default
beyond any applicable grace periods under any of the Contracts, and the Seller
is not aware that any other contracting party is in default under any of the
Contracts. Except as set forth in Section 7.9 of the Disclosure Schedule,
Seller has full legal power and authority to assign its respective rights under
the Contracts to Buyer in accordance with this Agreement on terms and
conditions no less favorable than those in effect on the date hereof, and to
Seller's and Arfa's actual knowledge, such assignment will not affect the
validity and enforceability of any of the Contracts.
7.11 Copyrights, Trademarks and Similar Rights. Seller has no
copyrights, trademarks, trade names, licenses, patents, permits, and other
similar intangible property rights and interests, whether applied for, issued
to, or owned by the Seller, or under which Seller is a licensee or franchisee
and used exclusively or primarily in the conduct of the business and operations
of the Seller.
7.12 Financial Statements. Seller has delivered to Buyer complete
audited copies of the statement of income and the balance sheet for Seller for
the period ending December 31, 1996 and December 31, 1995, a compilation copy
of the statement of income and balance sheet for Seller for the period ending
December 31, 1994 and an unaudited statement of income and balance sheet for
the four (4) months ending April 30, 1997 (collectively, the "Seller Financial
Statements"). The
20
Seller Financial Statements have been prepared in accordance with the books and
records of the Seller and accurately represent and present fairly the financial
condition and results of operations of the Seller for the periods indicated.
From April 30, 1997, there has been no material adverse change in the business,
property, assets or condition (financial or otherwise) of the Seller and
(except for the transaction contemplated herein) Seller has operated the
Booking Business in all respects only in the ordinary course of business.
Except for (a) liabilities as and to the extent reflected or reserved
against in the Seller Financial Statements, (b) liabilities not yet due and
payable or obligations to be performed or satisfied after the date hereof under
contracts and agreements listed in the Disclosure Schedule, or excluded from
the Disclosure Schedule pursuant to the terms of this Agreement, (c)
liabilities incurred between April 30, 1997 and the date hereof in the ordinary
and usual course of business (including tax liabilities resulting solely from
the normal operations of the Seller during such period) and (d) any other
liabilities disclosed in this Agreement or in the Disclosure Schedule, Seller
has no material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, of a nature customarily reflected in
financial statements reflecting the accrual basis of accounting.
7.14 Personnel Information.
7.14.1 Section 7.14 of the Disclosure Schedule contains a true and
complete list of all persons employed by the Seller. Seller has not received
notification that any of the current key employees of Seller presently plan to
terminate their employment, whether by reason of the transactions contemplated
hereby or otherwise and Seller shall immediately notify Buyer upon receipt of
any such notice. The representations and warranties set forth herein shall not
be deemed to be materially changed if the Company terminates its employment
relationship with or hires any non-key employee prior to the Closing.
7.14.2 Seller is not a party to any Contract with any labor
organization, nor has Seller agreed to recognize any union or other collective
bargaining unit, nor has any union or other collective bargaining unit been
certified as representing any of Seller's employees. Seller has no knowledge of
any organizational effort currently being made or threatened by or on behalf of
any
21
labor union with respect to employees of Seller. During the past three (3)
years, Seller has not experienced any strikes, work stoppages, grievance
proceedings, claims of unfair labor practices filed or other significant labor
difficulties of any nature.
7.14.3 Except as disclosed in Section 7.14 of the Disclosure
Schedule, Seller has complied in all material respects with respect to any laws
relating to the employment of labor, including, without limitation, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
those laws relating to wages, hours, collective bargaining, unemployment
insurance, workers' compensation, equal employment opportunity and payment and
withholding of taxes, the failure of which to comply with would have a material
adverse effect on the Seller.
7.15 Litigation. Except as set forth in Section 7.15 of the Disclosure
Schedule, Seller is subject to no judgment, award, order, writ, injunction,
arbitration decision or decree materially adversely affecting the conduct of
the Booking Business or the Assets, and there is no litigation or proceeding
or, to the Seller's knowledge, investigation pending or, to the Seller's and
Arfa's knowledge, threatened against Seller in any federal, state or local
court, or before any administrative agency or arbitrator, or before any other
tribunal duly authorized to resolve disputes, which would reasonably be
expected to have any material adverse effect upon the business, property,
assets or condition (financial or otherwise) of the Seller or which seeks to
enjoin or prohibit, or otherwise questions the validity of, any action taken or
to be taken pursuant to or in connection with this Agreement.
7.16 Compliance With Laws. Except as set forth in Section 7.16 of the
Disclosure Schedule, Seller has not received any notice asserting any
non-compliance by it in connection with the business or operation of the Seller
with any applicable statute, rule or regulation, federal, state or local.
Seller is not in default with respect to any judgment, order, injunction or
decree as to which it is a named party of any court, administrative agency or
other governmental authority or any other tribunal duly authorized to resolve
disputes in any respect material to the transactions contemplated hereby.
Seller has not received notice that it is not in compliance in all material
respects with all laws, regulations and governmental orders applicable to the
conduct of its business and operations,
22
the failure to comply with which would have a material adverse effect on the
business, operations or financial condition of the Seller.
7.17 Employee Benefit Plans. Section 7.17 of the Disclosure Schedule
contains a true and complete list as of the date of this Agreement of all
employee benefit plans applicable to the employees of Seller. Seller maintains
no other employee benefit plan as the term is defined in Section 3 of the
Employee Retirement Income Security Act of 1984, as amended, applicable to the
employees of Seller.
7.18 Business. Seller is involved primarily in the Booking Business
and holds no equity interests in any other business other than the Booking
Business.
7.19 Accuracy of Information. No written statements made by Seller
herein and no information provided by Seller herein or in the documents,
instruments or other written communications made or delivered directly by
Seller to Buyer in connection with the purchase and sale of the Assets contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained therein or herein not misleading. To the extent
that a representation or other information is made to the Seller's knowledge or
is otherwise qualified by its terms, this representation shall not be
interpreted to expand such limitations or qualifications.
ARTICLE 8
COVENANTS OF BUYER
------------------
8.1 Closing. On the Closing Date, Buyer or its assignee shall purchase
the Assets from Seller as provided in Article 1 hereof and shall assume the
Assumed Liabilities of Seller as provided in Article 2 hereof.
8.2 Notification. Buyer shall notify Seller of any litigation,
arbitration or administrative proceeding pending or, to its knowledge,
threatened against Buyer which challenges the transactions
23
contemplated hereby.
8.3 No Inconsistent Action. Buyer shall not take any other action
which is materially inconsistent with its obligations under this Agreement.
8.4 Buyer's Post-Closing Covenant. Buyer, for a period of six (6)
years following the Closing Date, shall make available for audit and inspection
by Seller and its representatives for any reasonable purpose all records,
files, documents and correspondence transferred to it hereunder. Buyer shall at
no time dispose of or destroy any such records, files, documents and
correspondence without giving sixty (60) days prior notice to Seller to permit
Seller, at its expense, to examine, duplicate or take possession of and title
to such records, files, documents and correspondence. All personnel records
shall be maintained as confidential if required by any applicable state or
federal law.
8.5 Issuance of Consideration Stock. The Consideration Stock and the
Additional Stock, when issued, will be validly issued, fully paid and
non-assessable.
8.6 Name. Buyer shall comply with the last sentence of Section 11.10.
ARTICLE 9
COVENANTS OF SELLER
-------------------
9.1 Seller's Pre-Closing Covenants. Seller and Arfa covenant and agree
with respect to Seller's operations that between the date hereof and the
Closing Date, except as expressly permitted by this Agreement or with the prior
written consent of Buyer, Seller shall act in accordance with the following:
9.1.1 Seller shall and Arfa shall cause the Seller to conduct its
business and operations in the ordinary and prudent course of business and with
the intent of preserving its ongoing operations and assets including, but not
limited to, using its best efforts to retain the services
24
of key employees.
9.1.2 Seller shall and Arfa shall cause the Seller to use
commercially reasonable efforts to preserve its operations intact and to
preserve its relations with its customers, suppliers and others having business
relations with the Seller and continue to conduct its financial operations,
including its credit and collection policies, in the ordinary course of
business with substantially the same effort, and to substantially the same
extent, and in the same manner, as in the prior conduct of its business.
9.1.3 Seller shall and Arfa shall cause the Seller to not, other
than in the ordinary course of business or after receiving Buyer's prior
written approval: (i) sell or dispose of or commit to sell or dispose of any of
the Assets; (ii) grant or agree to grant any general increases in the rates of
salaries or compensation payable to its employees; (iii) except as provided in
Section 11.2, grant or agree to grant any specific bonus or increase to any of
its executive or management employees; or (iv) provide for any new pension,
retirement or other employment benefits for its employees or any increases in
any existing benefits.
9.1.4 Seller shall and Arfa shall cause the Seller to provide
Buyer prompt written notice of any material change in any of the information
contained in the representations and warranties made in Article 7 hereof, or
any Exhibits or Schedules herein or attached hereto.
9.1.5 Seller may enter into or renew any contract, agreement,
commitment or other understanding or arrangement in the ordinary course of
business; provided, however, that the fixed liability of Seller under said
contracts to be assumed by Buyer at Closing shall not exceed Five Thousand
Dollars ($5,000) per contract or Fifty Thousand Dollars ($50,000) in the
aggregate, without the written approval of the Buyer.
9.1.6 The Seller shall and Arfa shall cause the Seller to give the
Buyer and the Buyer's counsel, accountants, engineers and other
representatives, full and reasonable access during normal business hours (upon
reasonable prior notice) to all of the Seller's personnel, properties,
25
books, contracts, reports and records, including financial information and tax
returns with supporting work papers to all real estate buildings and equipment
relating to its operations, and to its employees in order that the Buyer may
have full opportunity to make such investigation as it desires of the affairs
of the Seller. Seller shall and Arfa shall cause the Seller to furnish Buyer
with information and copies of all documents and agreements including, but not
limited to, financial and operating data and other information concerning the
financial condition, results of operations and business of the Seller, that the
Buyer may reasonably request in order to complete the Buyer's due diligence
examination of the Seller. The rights of the Buyer under this Section shall not
be exercised in such a manner as to materially interfere with the business of
the Seller.
9.1.7 Notwithstanding anything in this Agreement to the contrary,
Seller may enter into any contract without the consent of Buyer, but if any
such contract is outside the scope of the restrictions set forth in this
Section 9.1, Buyer shall not be obligated to accept and assume such contract at
Closing.
9.1.8 Seller shall and Arfa shall cause the Seller to use
reasonable efforts to maintain the employment with the Seller the "key
employees" listed in part (a) of Section 7.14 of the Disclosure Schedule.
Between the date hereof and for a period of three (3) years from the Closing
Date, neither the Seller nor any executive officer of Seller shall and Arfa
shall cause the Seller to, directly or indirectly, through any agent or
otherwise, hire or solicit the employment of any of the "key employees" listed
in part (a) of Section 7.14 of the Disclosure Schedule, who are hired by Buyer
at or after the Closing, or who are subject to non-competition agreements with
Buyer (but only to the extent limited by such non-competition agreements),
except as agreed to in writing by Buyer and Seller.
9.1.9 Within thirty-five (35) days of the end of each month,
Seller shall and Arfa shall cause the Seller to deliver to Buyer at Buyer's
request an unaudited statement of revenue and expenses of the Seller for the
month then ended. The monthly statements of revenue and expenses shall be
certified by the Chairman or President of Seller, shall be true and complete to
the best of Seller's knowledge and shall fairly and accurately represent the
results of operation of the Seller for
26
the period covered by such reports and statements. Seller shall and Arfa shall
cause the Seller to also furnish to Buyer any and all other information at such
times as is customarily prepared by Seller concerning the financial condition
of the Seller as Buyer may reasonably request.
9.1.10 The Seller shall and Arfa shall cause the Seller to
cooperate with the Buyer by providing the Buyer with such financial and
accounting records as Buyer may reasonably request in connection with the
preparation of financial statements of the Seller.
9.1.11 Seller shall and Arfa shall cause the Seller to use
reasonable commercial efforts to assist Buyer in obtaining employment
agreements with those of Seller's employees who Buyer desires to employ (it
being understood and agreed that the Seller shall not be obligated to expend
any monies pursuant to this Section 9.1.11).
9.2 Notification. Seller shall and Arfa shall cause the Seller to
notify Buyer of any material litigation, arbitration or administrative
proceeding pending or, to its knowledge, threatened against Seller which would
materially adversely affect the transactions contemplated hereby.
9.3 No Inconsistent Action. Seller shall not and Arfa shall cause the
Seller to take any action which is materially inconsistent with its obligations
under this Agreement.
9.4 Closing Covenant. On the Closing Date, Seller shall and Arfa shall
cause the Seller to transfer, convey, assign and deliver to Buyer the Assets
and the Assumed Liabilities as provided in Articles 1 and 2 of this Agreement.
9.5 Restrictions on Transfer. Except as otherwise permitted by the
terms of this Agreement, the Seller will not and Arfa Shall not permit the
Seller to, during the period commencing on the Closing Date and ending on the
second anniversary of the Closing Date: (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer,
or dispose of, directly or indirectly, any of the Consideration Stock or
Additional Stock; or (2) enter into any swap or other arrangement
27
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Consideration Stock or the Additional Stock
owned by the Seller, whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of the Consideration Stock or Additional
Stock, in cash or otherwise.
9.6 Audits. The Seller shall and Arfa have caused the Seller to
deliver to the Buyer audits of the Seller's statement of income and balance
sheet for the periods ending December 31, 1995 and December 31, 1996 (the
"Audits"). Seller shall, and Arfa shall cause the Seller to, use reasonable
efforts to cause Xxxxx Xxxxxx & Co, LLP, to prepare audited financial
statements which the Buyer can use in any of Buyer's filings with the
Securities and Exchange Commission, including providing comfort letters with
respect thereto. Buyer shall be responsible for the fees and expenses of Xxxxx
Xxxxxx & Co., LLP, in connection with the preparation of the Audits and the
other financial statements to be delivered pursuant to this Section 9.6.
ARTICLE 10
JOINT COVENANTS
---------------
Buyer, Seller and Arfa covenant and agree that between the date hereof
and the earlier of the termination of this Agreement pursuant to Section 17.1
or Closing Date, they shall act in accordance with the following:
10.1 Conditions. If any event should occur, either within or without
the control of any party hereto, which would prevent fulfillment of the
conditions upon the obligations of any party hereto to consummate the
transactions contemplated by this Agreement, the parties hereto shall use best
efforts to cure the event as expeditiously as possible.
10.2 Confidentiality. Buyer shall continue to observe the provisions
of the Confidentiality Agreement dated as of April 14, 1997, among Seller,
Marquee Group and SFX Broadcasting, Inc.
28
(the "Confidentiality Agreement"). In addition, Seller shall, and Arfa shall
cause the Seller to, each keep confidential all confidential information
obtained by it with respect to the Buyer in connection with this Agreement and
the negotiations preceding this Agreement in accordance with the terms of the
Confidentiality Agreement as if Marquee Group were the "Company" as such term
is defined in the Confidentiality Agreement". Notwithstanding the foregoing,
the Buyer shall be permitted to issue a press release announcing this
transaction and the economic terms contained herein upon the execution hereof;
provided, however, that Seller shall have the right to approve any such press
release.
10.3 Cooperation. Buyer and Seller shall and Arfa shall cause the
Seller to cooperate fully with each other in taking any actions, including
actions to obtain the required consent of any governmental instrumentality or
any third party necessary or helpful to accomplish the transactions
contemplated by this Agreement; provided, however, that no party shall be
required to take any action which would have a material adverse effect upon it
or any affiliated entity.
10.4 Consents to Assign. To the extent that any Contract set forth in
Section 7.3 of the Disclosure Schedule is not capable of being sold, assigned,
transferred, delivered or subleased without the waiver or consent of any third
person (including a government or governmental unit), or if such sale,
assignment, transfer, delivery or sublease or attempted sale, assignment,
transfer, delivery or sublease would constitute a breach thereof or a violation
of any law or regulation, this Agreement and any Assignment executed pursuant
hereto shall not constitute a sale, assignment, transfer, delivery or sublease
or an attempted sale, assignment, transfer, delivery or sublease thereof. In
those cases where consents, assignments, releases and/or waivers have not been
obtained at, or prior to the Closing Date to the transfer and assignment to the
Buyer of the Contracts, this Agreement and any Assignment executed pursuant
hereto, to the extent permitted by law, shall constitute an equitable
assignment by Seller to the Buyer of all of Seller's rights, benefits, title
and interest in and to the Contracts, and where necessary or appropriate, the
Buyer shall be deemed to be the Seller's Agent for the purpose of completing,
fulfilling and discharging all of Seller's rights and liabilities arising after
the Closing Date under such Contracts. Seller shall use its reasonable efforts
to provide the Buyer with the benefits of such Contracts (including, without
limitation,
29
permitting the Buyer to enforce any rights of Seller arising under such
Contracts), and the Buyer shall, to the extent the Buyer is provided with the
benefits of such Contracts, assume, perform and in due course pay and discharge
all debts, obligations and liabilities of Seller under such Contracts.
10.6 Bulk Sales Laws. The Buyer hereby waives compliance by Seller
with the provisions of the "bulk sales" or similar laws of any state. Seller
agrees to indemnify the Buyer and hold it harmless against any and all claims,
losses, damages, liabilities, costs and expenses incurred by the Buyer or any
affiliate as a result of any failure to comply with any "bulk sales" or similar
laws.
10.7 Employee Matters. Buyer may, but shall not be obligated, to hire
substantially all of the employees of the Seller immediately following the
Closing. Seller shall be responsible for all salary and benefits of the
employees of the Seller for the period prior to the Closing Date. All employees
of the Seller shall cease active participation in all of Seller's employee
benefit plans on the Closing Date, in accordance with the terms of such plans.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
------------------------------
The obligations of Buyer hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
11.1 Representations, Warranties and Covenants.
11.1.1 All representations and warranties of Seller made in this
Agreement shall be true and complete in all material respects as of the date
hereof, and on and as of the Closing Date as if made on and as of that date,
except for changes expressly permitted or contemplated by the terms of this
Agreement.
30
11.1.2 All of the terms, covenants and conditions to be complied
with and performed by Seller on or prior to Closing Date shall have been
complied with or performed in all material respects.
11.1.3 Buyer shall have received a certificate, dated as of the
Closing Date, executed by a senior executive officer of Seller, to the effect
that the representations and warranties of Seller contained in this Agreement
are true and complete in all material respects on and as of the Closing Date,
as if made on and as of that date, and that Seller has complied with or
performed all terms, covenants and conditions to be complied with, or performed
by it in all material respects on or prior to the Closing Date.
11.2 Employment Agreements. Xxxxxx Xxxx and Xxxx Xxxxxxxx shall have
entered into employment agreements with Buyer (the "Arfa Employment Agreement")
and (the "Xxxxxxxx Employment Agreement", as applicable) in the forms attached
hereto as Exhibit B.
11.3 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered against
any party hereto, which would render it unlawful as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
11.4 Legal Opinion. Seller shall have delivered to Buyer a written
opinion of its counsel (which may be Grubman Indursky & Xxxxxxxxx, P.C. or
Kramer, Levin, Naftalis and Xxxxxxx or other counsel reasonably satisfactory to
Buyer), dated as of the Closing Date, addressed to Buyer substantially in the
form attached hereto as Exhibit D.
11.5 Third-Party Consents. Seller shall have obtained and shall have
delivered to Buyer all third party consents to the Contracts contemplated by
Section 7.3 of the Disclosure Schedule, it being understood and agreed that the
Seller shall not be required to deliver those consents described on Exhibit
11.5 hereto.
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11.6 Closing Documents. Seller shall have delivered or caused to be
delivered to Buyer on the Closing Date, the Xxxx of Sale in the form attached
hereto as Exhibit C, and the documents required to be delivered pursuant to
Section 15.1.
11.7 Financing Statements. Seller shall have delivered to Buyer
releases, if any, under the Uniform Commercial Code of any financing statements
filed against any Assets in the jurisdiction in which the Assets are, and have
been located since such Assets were acquired by Seller, except for purchase
money, leasehold or informational filings made by equipment, vendors or lessors
on lease obligations or purchase money being specifically assumed by Buyer as
set forth in Section 7.7 of the Disclosure Schedule.
11.8 Employee Notification. Seller shall have delivered to Buyer an
Employee Notification substantially in the form attached hereto as Exhibit E.
11.9 Escrow Agreement. Seller shall have entered into the Escrow
Agreement.
11.10. Change of Name. Marquee Music shall file a Certificate of
Amendment with the Secretary of State of the State of Delaware amending the
Certificate of Incorporation of Marquee Music so as to change the name of
Marquee Music to "QBQ Entertainment, Inc., a division of the Marquee Group,
Inc.," such Certificate of Amendment shall be substantially in the form of
Exhibit 11.10 hereto. After such change, Buyer hereby covenants and agrees that
Marquee Music's name shall be "QBQ Entertainment, Inc., a division of the
Marquee Group, Inc., and that the name of Marquee Music shall not be changed
again for a period of five (5) years without Seller's consent which shall not
be unreasonably withheld.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER
-------------------------------
The obligations of Seller hereunder are, at its option, subject to
satisfaction, at or prior to the
32
Closing Date, of each of the following conditions:
12.1 Representations, Warranties and Covenants.
12.1.1 All representations and warranties of Buyer made in this
Agreement shall be true and complete in all material respects as of the date
hereof, and on and as of the Closing Date as if made on and as of that date,
except for changes expressly permitted or contemplated by the terms of this
Agreement.
12.1.2 All the terms, covenants and conditions to be complied
with and performed by Buyer on or prior to the Closing Date shall have been
complied with or performed in all material respects.
12.1.3 Seller shall have received a certificate, dated as of the
Closing Date, executed by senior executive officers of Buyer, to the effect
that the representations and warranties of Buyer contained in this Agreement
are true and complete in all material respects on and as of the Closing Date,
as if made on and as of that date, and that Buyer has complied with or
performed all terms, covenants and conditions to be complied with or performed
by it in all material respects on or prior to the Closing Date.
12.2 Employment Agreements. The Buyer shall have entered into the: (i)
Arfa Employment Agreement and make the Loan (as defined therein) on the Closing
Date; and (ii) Xxxxxxxx Employment Agreement on or prior to the Closing Date.
12.3 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no other, decree or judgment of any
court, agency or other governmental authority shall have been rendered against
any party hereto, which would render it unlawful as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
12.4 Legal Opinion. Buyer shall have delivered to Seller an opinion of
its counsel, dated as of the Closing Date, addressed to Seller substantially in
the form attached hereto as Exhibit F.
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12.5 Registration Rights Agreement. The Buyer shall have entered into
a Registration Rights Agreement for the Consideration Stock and the Additional
Stock substantially in the form attached hereto as Exhibit G (the "Registration
Rights Agreement").
12.6 Escrow Agreement. The Buyer and the Seller shall have entered
into the Escrow Agreement.
12.7 Consideration Stock. The Buyer shall have delivered the
Consideration Stock to the Seller.
12.8 Additional Stock. The Buyer shall have deposited the Additional
Stock described in Section 3.5 into the Escrow Account.
12.9 Closing Documents. Buyer shall have delivered or cause to be
delivered to Seller, on the Closing Date, the documents required to be
delivered pursuant to Section 15.2.
12.10 Change of Name. Seller shall have delivered to Buyer a duplicate
original of a Certificate of Amendment, substantially in the form of Exhibit
12.10 attached hereto, amending the charter of the Seller to so as to change
the name of Seller to DLA Holding Corporation. Seller shall file such
Certificate of Amendment with the Secretary of State of the State of New York
simultaneously with the Closing.
ARTICLE 13
TRANSFER TAXES; FEES AND EXPENSES
---------------------------------
13.1 Expenses. Except as set forth in Section 13.2 hereof, each party
hereto shall be solely responsible for all costs and expenses incurred by it in
connection with the negotiation, preparation and performance of and compliance
with the terms of this Agreement.
13.2 Transfer Taxes and Similar Charges. All costs of transferring the
Assets in
34
accordance with this Agreement, including recordation, transfer and documentary
taxes and fees, and any excise, sales or use taxes, shall be borne by Seller.
ARTICLE 14
COMMISSIONS OR FINDER'S FEE
---------------------------
14.1 Buyer's Representation and Agreement to Indemnify. Buyer
represents and warrants to Seller that neither it nor any person or entity
acting on its behalf has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement, or any matter related hereto to any
person or entity except to The Sillerman Companies. Buyer further agrees to
indemnify, defend and hold Seller harmless from and against any and all claims,
losses, liabilities and expenses (including reasonable attorney's fees) arising
out of a claim by The Sillerman Companies, or any other person or entity based
on any such arrangement or agreement made or alleged to have been made by
Buyer. Buyer shall be solely responsible for any fees due to The Sillerman
Companies.
14.2 Seller's Representation and Agreement to Indemnify. Seller
represents and warrants to Buyer that neither it nor any person or entity
acting on its behalf has agreed to pay a commission, finder's fee or similar
payment in connection with this Agreement, or any matter related hereto to any
person or entity. Seller further agrees to indemnify, defend and hold Buyer
harmless from and against any and all claims, losses, liabilities and expenses
(including reasonable attorney's fees) arising out of a claim by any person or
entity based on any such arrangement or agreement made or alleged to have been
made by Seller.
ARTICLE 15
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
15.1 Seller's Documents. At the Closing, Seller shall and Arfa shall
cause the Seller to deliver or cause to be delivered to Buyer the following
(which shall be executed by Seller as applicable):
35
15.1.1 Certified resolutions of the Board of Directors of Seller
approving the execution and delivery of this Agreement and each of the other
documents and authorizing the consummation of the transactions contemplated
hereby and thereby;
15.1.2 A certificate, dated the Closing Date, by Seller
containing the statement described in Section 11.1.3 above,
15.1.3 Governmental Certificates showing that Seller is duly
incorporated and in good standing in the State of New York, dated not more than
forty-five (45) days before the Closing Date;
15.1.4 Articles of Incorporation and Bylaws of Seller certified
by Seller's secretary as of the Closing Date;
15.1.5 Xxxx of Sale;
15.1.6 The opinion letter of Seller's counsel referenced in
Sections 11.4 above; and
15.2 Buyer's Documents. At the Closing, Buyer shall deliver or cause
to be delivered to Seller the following (which shall be executed by Buyer as
applicable):
15.2.1 The Purchase Price in accordance with Section 3.3 hereof
and the Loan;
15.2.2 A certificate, dated the Closing Date, by Buyer in the
form containing the statement described in Section 12.1.3 above.
15.2.3 The opinion of Buyer's counsel, dated the Closing Date, to
the effect set forth in Section 12.4;
15.2.4 Governmental certificates showing that Buyer is duly
incorporated and in
36
good standing in the State of Delaware and qualified and in good standing in
the State of New York dated not more than forty-five (45) days before the
Closing Date;
15.2.5 An assignment and assumption agreement substantially in
the form of Exhibit 15.2.5, effecting the assumption of the Assumed Liabilities
(the "Assumption Agreement");
15.2.6 Certified resolutions of the Board of Directors of each
Buyer approving the execution and delivery of this Agreement and each of the
other documents and agreements referred to herein, and authorizing the
consummation of the transactions contemplated hereby and thereby;
15.2.7 Articles of Incorporation and Bylaws of each Buyer
certified by each Buyer's secretary as of the Closing Date; and
15.2.8 The Arfa Employment Agreement and the Xxxxxxxx Employment
Agreement.
15.2.9 The Registration Rights Agreement.
15.2.10 The Additional Stock and the Letter of Credit shall be
deposited into the Escrow Account with copies of these items delivered to the
Seller.
ARTICLE 16
INDEMNIFICATION
---------------
16.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) "Losses" shall mean any and all losses, claims, shortages,
damages, liabilities or expenses (including interest, penalties and reasonable
attorneys' fees and disbursements and other professional fees) suffered,
sustained or incurred by any indemnified
37
person arising from any such matter which is the subject of indemnification
under this Agreement; provided, that the amount of Losses of any indemnified
person under this Agreement shall not include the amount, if any, of insurance
proceeds that such indemnified person (including the Buyer in the event of an
indemnification under Section 16.2) shall have received that are paid because
of the event, or matter the existence or occurrence of which gave rise to such
indemnification.
16.2 Seller's Indemnities. Seller and Arfa hereby agree (subject to
Section 19.4) to indemnify, defend and hold Buyer harmless with respect to any
and all Losses asserted against, resulting from, imposed upon or incurred by
Buyer relating to or arising out of:
16.2.1 Any and all liabilities, obligations, or commitments of
Seller not included in the Assumed Liabilities of any nature, whether absolute,
accrued, contingent, or otherwise, including those relating to all periods
prior to the Closing, whether the claim is asserted prior to or after the
Closing, by reason of or resulting from liabilities or obligations of or claims
against Seller or Arfa in connection with Seller's operations prior to the
Closing, (it being understood and agreed that the liabilities, obligations, or
commitments of Seller included in the Assumed Liabilities are being assumed by
the Buyer pursuant to Section 2.1);
16.2.2 The breach of any of the representations, warranties,
covenants, conditions or agreements of Seller or Arfa set forth in this
Agreement and the Transaction Agreements;
16.2.3 Any failure to comply with any "bulk sales" laws
applicable to the transactions contemplated hereby;
16.2.4 The failure of Seller or Arfa to pay, perform or discharge
when due any of Seller's obligations, liabilities or Contracts not assumed by
Buyer pursuant to this Agreement;
16.2.5 The litigation (if any) listed on Section 7.15 of the
Disclosure Schedule; and
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16.2.6 Any employee benefit plan maintained by Seller.
16.3 Buyer's Indemnities. Buyer hereby agrees to indemnify, defend and
hold Seller harmless with respect to any and all Losses asserted against,
resulting from, imposed upon or incurred by Seller relating to or arising out
of:
16.3.1 The use or operation of the Assets after the Closing Date;
16.3.2 The conduct of the Booking Business (and any other
business conducted by the Buyer) after the Closing Date;
16.3.3 The breach of any of the representations, warranties,
covenants, conditions or agreements of Buyer set forth in this Agreement or in
any of the Transaction Agreements;
16.3.4 Any and all liabilities, obligations or commitments of
Seller included in the Assumed Liabilities of any nature, whether absolute,
accrued, contingent or otherwise; and
16.3.5 Any employee benefit plan maintained by Buyer.
16.4 Survival of Representations and Warranties. Either party shall
have the right to bring an action with respect to the representations and
warranties contained herein for a period of fifteen (15) months following the
Closing Date, and upon the expiration of such period such right shall lapse and
be of no further force or effect.
16.5 Limitation on Indemnity. (a) Notwithstanding anything to the
contrary contained in this Agreement, neither the Seller nor Arfa shall have
any liability or obligation to the Buyer for breach of any representation,
warranty, condition, covenant or agreement of the Seller in this Agreement
unless, until and only to the extent that the aggregate of all losses for such
breaches exceeds One Hundred Eighty Thousand Dollars ($180,000) (the "Threshold
Amount"), in which event the Seller and Arfa shall then be jointly and
severally liable only for all losses in excess of
39
Sixty-Five ($65,000) Thousand Dollars (the "Basket Amount").
(b) Notwithstanding anything to the contrary contained in the
Agreement: (i) the aggregate liability of the Seller for all claims for
indemnification asserted pursuant to this Article 16 shall not exceed
$2,500,000; and (ii) Arfa and/or the Seller shall be permitted to surrender to
Buyer shares of Marquee Group Class A Common Stock, $.01 par value, having an
aggregate market value, based on the Closing Price, equal to not less than the
amount of any indemnification obligations of Arfa and Seller pursuant to
Article XVI, in payment and satisfaction of their obligations under Article
XVI.
16.6 Procedures.
16.6.1 Promptly after the receipt by either party (the
"Indemnified Party") of notice of (A) any claim or (B) the commencement of any
action or proceeding which may entitle such party to indemnification under this
Section, such party shall give the other party (the "Indemnifying Party")
written notice of such claim or the commencement of such action or proceeding
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting from such claim. The failure to give the
Indemnifying Party timely notice under this Section 16.6.1 shall not preclude
the Indemnified Party from seeking indemnification from the Indemnifying Party
with respect to such claim or litigation, unless such failure has materially
prejudiced the Indemnifying Party's ability to defend the claim or litigation.
16.6.2 If the Indemnifying Party assumes the defense of any such
claim or litigation resulting therefrom with counsel reasonably acceptable to
Indemnified Party, the obligations of the Indemnifying Party as to such claim
shall be limited to taking all steps necessary in the defense or settlement of
such claim or litigation resulting therefrom and to holding the Indemnified
Party harmless from and against any losses, damages and liabilities caused by
or arising out of any settlement approved by the Indemnifying Party or any
judgment in connection with such claim or litigation resulting therefrom;
provided, however, that the Indemnified Party may participate, at its expense,
in the defense of such claim or litigation provided that the Indemnifying Party
shall direct and control the defense of such claim or litigation. The
Indemnified Party shall cooperate and make
40
available all books and records reasonably necessary and useful in connection
with the defense. The Indemnifying Party shall not, in the defense of such
claim or any litigation resulting therefrom, consent to entry of any judgment,
except with the written consent of the Indemnified Party, or enter into any
settlement, except with the written consent of the Indemnified Party, which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party of a release from all liability in
respect of such claim or litigation.
16.6.3 If the Indemnifying Party shall not assume the defense of
any such claim or litigation resulting therefrom, the Indemnified Party may,
but shall have no obligation to, defend against such claim or litigation in
such manner as it may deem appropriate, and the Indemnified Party may
compromise or settle such claim or litigation with the Indemnifying Party's
consent. The Indemnifying Party shall promptly pay any such settlement of such
claim or litigation and shall also promptly reimburse the Indemnified Party for
the amount of all expenses, legal or otherwise, incurred by the Indemnified
Party in connection with the defense against or settlement of such claim or
litigation. If no settlement of the claim or litigation is made, the
Indemnifying Party shall promptly reimburse the Indemnified Party for the
amount of any judgment rendered with respect to such claim or in such
litigation and of all expenses, legal or otherwise, incurred by the Indemnified
Party in the defense against such claim or litigation.
16.7 Limitation of Remedies. Anything contained herein to the contrary
notwithstanding, except as otherwise set forth herein, the remedies provided
for in this Article XVI shall be the sole remedies, contractual or otherwise
(whether at law or in equity), of the Buyer, Seller and Arfa with respect to
any violation or breach of this Agreement, and shall preclude assertion by such
party of any other rights or the seeking of any other remedies against such
other party with respect to this Agreement.
ARTICLE 17
TERMINATION RIGHTS
------------------
41
17.1 Termination. This Agreement may be terminated by either Buyer or
Seller, if the party seeking to terminate is not in material default or breach
of this Agreement, upon written notice to the other upon the occurrence of any
of the following:
(a) if the other party defaults in any material respect in the
observance or in the due and timely performance of any of its covenants or
agreements herein contained (including, without limitation, such party's
obligation to consummate the transactions contemplated herein at the Closing,
in accordance with Section 4.1) and such material default shall not be cured
within fifteen (15) days of the date of notice of default served by the party
claiming such material default; or
(b) on the first anniversary of this Agreement, if there shall be
in effect any judgment, final decree or order that would prevent or make
unlawful the Closing of this Agreement;
17.2 Liability. The termination of this Agreement under Section 17.1
shall not relieve any party of any liability for breach of this Agreement prior
to the date of termination (including, without limitation, the failure to
consummate the transactions contemplated herein at the Closing in accordance
with Section 4.1). Anything contained herein to the contrary notwithstanding,
in the event that Seller shall terminate this Agreement pursuant to Section
17.1(a), the Buyer acknowledges and agrees that it shall comply with terms of
Section 19.2 below.
ARTICLE 18
PUT AND CALL PROVISIONS AFTER CLOSING
-------------------------------------
18.1 Put and Call with Respect to the Consideration Stock. The
Consideration Stock will be subject to the following put and call provision:
18.1.1 Put Option. The Seller may, at its option, by written
notice given to Buyer any time within thirty (30) days after the first to occur
of second anniversary of the Closing Date or
42
an Acceleration Event, elect to transfer and sell to the Buyer up to 75% of the
Consideration Stock, free and clear of any and all Encumbrances (other than
this Agreement and the other Transaction Agreements) for an aggregate purchase
price equal to the ratio of the number of shares of Consideration Stock so
transferred to all shares of Consideration Stock multiplied by $2,000,000.
18.1.2 Put Closing. The closing of any purchase under section
18.1.1 shall be held at a place and date specified by the Buyer by written
notice given to Seller not more than twenty (20) days after the Seller shall
have exercised the option pursuant hereto; the date of the closing shall not be
more than thirty (30) days after the Seller shall have exercised the option
pursuant to Section 18.1.1. At the closing, (i) the Seller shall deliver to
Buyer a certificate or certificates for the Shares of Consideration Stock so
transferred duly endorsed in blank and with all required stock transfer stamps
attached, if any, and (ii) Buyer or its designee shall pay to Seller the
purchase price for such Shares after first deducting any amounts then
outstanding under the Loan as an offset to the Loan. The purchase price shall
be payable by wire transfer of immediately available funds to an account
specified by the Seller by written notice given to Buyer at least two business
days before the closing.
18.1.3 Call Option. The Buyer (or its assignee) may, at its
option, by written notice given to the Seller at any time within thirty (30)
days after the first to occur of the second anniversary of the Closing Date or
a Pledge Event (as hereinafter defined), elect to purchase from the Seller 50%
(and not more than 50%) of the Consideration Stock, less any shares of
Consideration Stock previously transferred pursuant to Section 18.1.1, free and
clear of any and all Encumbrances (other than this Agreement and the other
Transaction Agreements) for an aggregate purchase price equal to the ratio of
the number of shares of Consideration Stock so purchased to 75% of the Shares
of Consideration Stock multiplied by $2,250,000. The Seller shall be prohibited
from causing the Buyer to purchase pursuant to Section 18.1.1 or otherwise
conveying that number of shares of Consideration Stock which Buyer has elected
to purchase pursuant to this Section 18.1.3 after delivery of a notice by Buyer
pursuant to this Section 18.1.3, notwithstanding any prior election by the
Seller to exercise its rights pursuant to Section 18.1.1. As used herein,
"Pledge Event" shall mean the exercise of Marquee Group's right pursuant to
Section 2(e)(ii) of the Pledge Agreement dated as of the Effective Date between
Marquee Group and Arfa.
43
18.1.4 Call Closing. The closing or any purchase under Section
18.1.3. shall be held at a place and date specified by the Buyer or its
assignee in a written notice given to the Seller not more than ten (10) days
after the Buyer or its assignee shall have exercised the option pursuant
hereto; the date of the closing shall not be more than thirty (30) days after
the Buyer or its assignee shall have exercised the option pursuant to Section
18.1.3. At the closing, (i) the Seller shall deliver to the Buyer or its
assignee a certificate or certificates for the Shares of Consideration Stock so
purchased, duly endorsed in blank and with all required stock transfer stamps
attached, and (ii) the Buyer or its assignee shall pay such holders the
purchase price for such Shares of Consideration Stock in accordance with the
amount set forth herein after first deducting any amounts then outstanding
under the Loan as an offset to the Loan. The purchase price shall be payable by
wire transfer of immediately available funds to accounts specified by the
Seller by written notice given to the Buyer or its assignee at least two
business days before the closing.
18.2 The Additional Stock shall be subject to the following put and
call provisions:
18.2.1 Put Option. If the Additional Stock is released from the
Escrow Account to the Seller, the Seller may, at its option, by written notice
given to Buyer any time within thirty (30) days after the first to occur of (a)
an Acceleration Event, or (b) the later of the second anniversary of the
Closing Date or the date of the release of the Additional Stock from the Escrow
Account pursuant to the Escrow Agreement, elect in either case to transfer and
sell to the Buyer up to 75% of the Additional Stock, free and clear of any and
all Encumbrances (other than this Agreement and the other Transaction
Agreements) for an aggregate purchase price equal to the ratio of the number of
shares of Additional Stock transferred to all shares of Additional Stock
multiplied by $500,000.
18.2.2 Put Closing. The closing of any purchase under Section
18.2.1 shall be held at a place and date specified by the Buyer by written
notice given to Seller not more than twenty (20) days after the Seller shall
have exercised the option pursuant hereto; the date of the closing shall not be
more than thirty (30) days after the Seller shall have exercised the option
pursuant to Section 18.2.1. At the closing, (i) the Seller shall deliver to
Buyer a certificate or certificates for all the Shares of Additional Stock duly
endorsed in blank and with all required stock transfer stamps attached, if any,
and (ii) Buyer shall pay to Seller the purchase price for the Shares after
first
44
deducting any amounts then outstanding under the Loan as an offset to the Loan.
The purchase price shall be payable by wire transfer of immediately available
funds to an account specified by the Seller by written notice given to Buyer at
least two business days before the closing.
18.2.3 Call Option. If the Additional Stock is released from the
Escrow Account to the Seller, the Buyer (or its assignee) may, at its option,
by written notice given to the Seller at any time within thirty (30) days after
the later of the second anniversary of the Closing Date or the date of the
release of the Additional Stock from the Escrow Account pursuant to the Escrow
Agreement Closing Date, elect to purchase from the Seller 50% (and not more
than 50%) of the Additional Stock, less any shares of Additional Stock
previously transferred pursuant to Section 18.2.1, free and clear of any and
all Encumbrances for an aggregate purchase price equal to the ratio of the
number of shares of Additional Stock so purchased to 50% of the Additional
Stock multiplied by $750,000. The Seller shall be prohibited from causing the
Buyer to purchase pursuant to Section 18.2.1 or otherwise conveying that number
of shares of Additional Stock which Buyer has elected to purchase pursuant to
this Section 18.2.3 after delivery of a notice by Buyer pursuant to this
Section, notwithstanding any prior election by the Seller to exercise its
rights pursuant to Section 18.2.1.
18.2.4 Call Closing. The closing or any purchase under Section
18.2.3 shall be held at a place and date specified by the Buyer in a written
notice given to the Seller not more than ten (10) days after the Buyer shall
have exercised the option pursuant hereto; the date of the closing shall not be
more than thirty (30) days after the Buyer shall have exercised the option
pursuant to Section 18.2.3. At the closing, (i) the Seller shall deliver to the
Buyer a certificate or certificates for the Shares of Additional Stock so
purchased, duly endorsed in blank and with all required stock transfer stamps
attached, and (ii) the Buyer shall pay such holders the purchase price for the
Shares of Additional Stock in accordance with the amount set forth herein,
after first deducting any amounts then outstanding under the Loan as an offset
to the Loan. The purchase price shall be payable by wire transfer of
immediately available funds to accounts specified by the Seller by written
notice given to the Buyer at least two business days before the closing.
ARTICLE 19
45
OTHER PROVISIONS
----------------
19.1 Specific Performance. Seller recognizes that, in the event Seller
refuses to perform the provisions of this Agreement, monetary damages alone
will not be adequate. Buyer shall, therefore, be entitled in such event, in
addition to bringing suit at law or equity for money or other damages, to
obtain specific performance of the terms of this Agreement. In any action to
enforce the provisions of this Agreement, Seller shall waive the defense that
there is an adequate remedy at law or equity and agrees that Buyer shall have
the right to obtain specific performance of the terms of this Agreement without
being required to prove actual damages, post bond or furnish other security.
19.2 Liquidated Damages. If the Seller terminates this Agreement
pursuant to Section 17.1(a) above due to Buyer's breach of any material
representation, warranty, covenant or condition hereunder, and Seller is not at
that time in breach of any material representation, warranty, covenant or
condition hereunder, then Seller would suffer direct and substantial damages,
which damages cannot be determined within reasonable certainty. Therefore,
because of the expense and delay which would be incurred in such event by
Seller, Buyer shall pay to Seller the amount of One Million Dollars
($1,000,000), which amount shall constitute liquidated damages (the "Liquidated
Damage Amount"). Buyer shall be required to pay the Liquidated Damage Amount to
the Seller by certified check or wire transfer to an account designated by the
Seller, after deduction for the Cash Deposit, within two (2) business days
after the expiration of all cure periods pursuant to Section 17.1 (a) above. It
is understood and agreed that such liquidated damage amount represents Buyer's
and Seller's reasonable estimate of actual damages and does not constitute a
penalty, except that this liquidated damages provision shall not apply with
respect to any breach of Section 10.2 and/or the Confidentiality Agreement.
Except with respect to any breach of Section 10.2 or the Confidentiality
Agreement, recovery of liquidated damages from the Cash Deposit and from the
Buyer pursuant to this Section 19.2 shall be the sole and exclusive remedy of
Seller against Buyer for failing to consummate this Agreement on the Closing
Date and shall be applicable regardless of the actual amount of damages
sustained. In the event that either of the parties hereto bring suit to enforce
(or to obtain injunctive relief with respect to) the provisions of Section
10.2, the Confidentiality Agreement, this Section 19.2 or Section 19.1 above,
the prevailing party in any such action shall, in
46
addition to any remedies set forth in this Agreement or otherwise at law or in
equity, be entitled to recover reasonable attorney's fees from the other party.
19.3 Class A Common Stock. All references in this Agreement to the
Class A Common Stock, $.01 par value, of Marquee Group, Consideration Stock or
Additional Stock shall be deemed to include any successor securities issued in
replacement therefor or in consideration thereof in connection with any merger,
recapitalization or otherwise.
19.4 Risk of Loss.
(a) Except as otherwise set forth herein, the risk of loss or
damage to any of the Contracts or Assets prior to Closing shall be upon Seller.
Seller may replace any such lost Contract or repair, replace and restore any
such damaged or lost Asset to its prior condition as soon as possible and in no
event later than the Closing Date. If Seller fails to restore or replace such
Asset or Contract and Buyer does not elect to terminate this Agreement, Seller
shall assign to Buyer at Closing Seller's rights under any insurance policy or
pay over to Buyer all proceeds of insurance covering such Contracts or Asset's
damage, destruction or loss. If the restoration and replacement of any damaged
or destroyed property has not been completed at the time the Closing would
otherwise be held, then unless Seller and Buyer otherwise agree, the Closing
Date shall be delayed and shall take place within fifteen (15) days after
Seller gives written notice to Buyer of completion of the restoration or
replacement of such Contract Asset.
(b) Notwithstanding anything contained herein to the contrary:
(i) the loss of any Contracts or Assets having an aggregate value (as defined
in Section 19.4 (c)) of less than Two Hundred Thousand Dollars ($200,000) prior
to the Closing shall not be deemed to be a breach of this Agreement and the
Purchase Price adjustment in Section 19.4(c) and the termination rights
referenced in Section 19.4(b) (iii) shall not become operative; (ii) the loss
of any Contracts or Assets having an aggregate value equal to or greater than
Two Hundred Thousand Dollars ($200,000) but not in excess of Three Hundred
Fifty Thousand Dollars ($350,000) which are not repaired, replaced or restored,
as applicable, prior to the Cosing Date (or within 15 days thereafter as
contemplated by
47
Section 19.4 (a)), shall result in an adjustment of the Purchase Price pursuant
to Section 19.4(c) as the sole and exclusive remedy of the Buyer hereunder
contractual or otherwise (whether at law or in equity) and the termination
rights referenced in Section 19.4(b)(iii) shall not become operative; and (iii)
Seller may only elect to terminate this Agreement pursuant to Article 17 hereof
if the aggregate value of such lost Contracts or Assets exceeds Three Hundred
Fifty Thousand Dollars ($350,000) and such Assets or Contracts are not
repaired, replaced or restored, as applicable, prior to the Closing Date (or
within 15 days thereafter as contemplated by Section 19.4 (a)).
(c) If the Seller loses Contracts having an aggregate value in
excess of Two Hundred Thousand Dollars ($200,000) which are not replaced or
restored as aforesaid, and the Buyer shall be required to, or shall elect to,
consummate the Closing pursuant to this Section 19.4, then each component of
the Purchase Price payable upon the Closing Date pursuant to Sections 3.2 and
3.7 shall be adjusted, such adjustment to be equal to the product of such
component of the Purchase Price multiplied by a fraction, (i) the numerator of
which shall be the Seller's net commission revenues during the preceding three
(3) calendar years from all Contracts other than the Contracts which were not
replaced or restored and (ii) the denominator of which shall be Seller's net
commission revenues from all Contracts during the preceding three (3) calendar
years. For all purposes of this Section 19.4 , the "value" of any Contract
shall, in the case of a Contract pertaining to an artist or entertainer, be
equal to the average annual net commission revenues generated by such artist or
entertainer under such Contract during the preceding three (3) calendar years.
19.5 Further Assurances. After the Closing, Seller shall from time to
time, at the request of and at the expense of Buyer, execute and deliver such
other instruments of conveyance and transfer and take such other actions as may
reasonably requested in order to more effectively consummate the transactions
contemplated hereby to vest in Buyer good title to the Assets being transferred
hereunder (subject to Permitted Encumbrances), and Buyer shall from time to
time, at the request of and without further cost or expense to Seller, execute
and deliver such other instruments and take such other actions as may
reasonably be requested in order to more effectively relieve Seller of any
obligations being assumed by Buyer hereunder.
19.6 Joint and Several Liability. Each of Marquee Group and Marquee
Music shall be
48
jointly and severally liable for the obligations of the other under this
Agreement. Each of Arfa and the Seller shall be jointly and severally liable
for the obligations of the other under this Agreement.
19.7 Disclosure Generally. If, and to the extent, any information
required to be furnished in any Schedule is contained herein, in the Exhibits,
or in any other Schedule, such information shall be deemed to be included in
all Schedules in which it is required to be included.
19.8 Waiver. No delay or failure by any party hereto in exercising any
right, power or privilege under this Agreement, or under any other instrument
or document given in connection with or pursuant to this Agreement, shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of any right,
power of privilege, or the exercise of any other right, power or privilege.
19.9 Severability. If any part or any provision of this Agreement
shall be invalid or unenforceable under applicable law, said part or provisions
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining provisions of this Agreement which
shall be construed as if such invalid parts or provisions had not been
inserted, and such invalid or unenforceable provisions shall become and be
immediately amended and reformed to include only the portions thereof as are
enforceable by the court or such other body having jurisdiction of this
Agreement; and the parties agree that such portions as so amended and reformed
shall be valid and binding as though any wholly invalid or unenforceable
portion had not been included herein.
19.10 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may voluntarily or involuntarily
assign its interest under this Agreement ( directly or indirectly, whether by
merger, sale of stock, sale of assets, or otherwise) without the prior written
consent of the other party (except that Seller may assign its rights and
interest hereunder to Arfa).
49
19.11 Entire Agreement. This Agreement and the Exhibits hereto embody
the entire agreement and understanding of the parties hereto and supersede any
and all prior agreements, arrangements and understandings relating to the
matters provided for herein. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
19.12 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
19.13 Governing Law. The construction and performance of this
Agreement shall be governed by the laws of the State of New York applicable to
agreements made and performed wholly therein.
19.14 Notices. Any notice, demand or request required or permitted to
be given under the provisions of this Agreement shall be in writing and shall
be deemed to have been duly delivered, given and received on the date of
personal delivery or five (5) days after mailing, if mailed by registered or
certified first class U.S. mail, postage prepaid and return receipt requested,
or on the date of a stamped receipt, if sent by an overnight delivery service,
and shall be addressed to the following addresses, or to such other address as
any party may request, in the case of Seller, by notifying Buyer, and in the
case of Buyer, by notifying Seller:
To Seller and/or QBQ Entertainment, Inc.
Xxxxxx Xxxx: 000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxx
Copy to: Grubman Indursky & Xxxxxxxxx, P.C.
000 Xxxx 00 Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
To Buyer: The Marquee Group, Inc.
000 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx
50
Copy to: The Sillerman Companies
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxx
[end of page]
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19.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SELLER:
-------
QBQ ENTERTAINMENT, INC.
/s/ Xxxxxx Xxxx
-----------------------------------
Xxxxxx Xxxx
/s/ Xxxxxx Xxxx
-----------------------------------
Xxxxxx Xxxx
BUYER:
------
THE MARQUEE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
MARQUEE MUSIC, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
52
