EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
MAGICWORKS ENTERTAINMENT INCORPORATED
MAGICSPACE CORPORATION
SPACE AGENCY, INC.
XXXX X. XXXXXXX
AND
XXXXXXX X. XXXXXX
TABLE OF CONTENTS
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ARTICLE I - THE MERGER..................................................................... 1
1.01 The Merger......................................................................... 1
1.02 Effective Time of the Merger....................................................... 1
ARTICLE II - THE SURVIVING CORPORATION..................................................... 2
2.01 Articles of Incorporation of the Surviving Corporation............................. 2
2.02 Bylaws of the Surviving Corporation................................................ 2
2.03 Directors and Officers of the Surviving Corporation................................ 2
ARTICLE III - CONVERSION OF SHARES......................................................... 2
3.01 Exchange Ratio..................................................................... 2
3.02 Exchange of Shares................................................................. 2
3.03 Dividends; Transfer Taxes.......................................................... 3
3.04 No Fractional Securities........................................................... 3
3.05 Supplementary Action............................................................... 3
ARTICLE IV - CLOSING....................................................................... 4
4.01 Closing............................................................................ 4
4.02 Deliveries by Sellers.............................................................. 4
4.03 Deliveries by Buyers............................................................... 5
4.04 Termination in Absence of Closing.................................................. 5
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................................. 6
5.01 Corporate Existence and Qualification; Corporate Documents......................... 6
5.02 Authority, Approval and Enforceability............................................. 6
5.03 Capitalization and Ownership....................................................... 6
5.04 Seller Defaults or Consents........................................................ 7
5.05 No Company Defaults or Consents.................................................... 7
5.06 No Proceedings..................................................................... 7
5.07 Employee Benefit Matters........................................................... 7
5.08 Financial Statements; Liabilities; Accounts Receivable............................. 10
5.09 [Reserved]......................................................................... 10
5.10 Absence of Certain Changes......................................................... 11
5.11 Compliance with Laws............................................................... 12
5.12 Litigation; Default................................................................ 12
5.13 Ownership of Assets................................................................ 13
5.14 Commitments........................................................................ 13
5.15 Insurance.......................................................................... 14
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5.16 Equipment and Other Tangible Property.............................................. 15
5.17 Permits; Environmental Matters..................................................... 15
5.18 Banks.............................................................................. 15
5.19 Suppliers.......................................................................... 15
5.20 [Reserved] ........................................................................ 15
5.21 Warranties and Returns............................................................. 16
5.22 Projections........................................................................ 16
5.23 Purchase for Investment............................................................ 16
5.24 Other Information.................................................................. 17
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF BUYERS.......................................17
6.01 Corporate Existence and Qualification.............................................. 17
6.02 Authority, Approval and Enforceability............................................. 17
6.03 No Default or Consents............................................................. 17
6.04 No Proceedings..................................................................... 18
6.05 Magicworks Entertainment SEC Filings............................................... 18
ARTICLE VII - OBLIGATIONS PRIOR TO CLOSING................................................. 18
7.01 Buyers' Access to Information and Assets........................................... 18
7.02 Company's Conduct of Business and Operations....................................... 19
7.03 General Restrictions............................................................... 19
7.04 Notice Regarding Changes........................................................... 20
7.05 Preferential Purchase Rights....................................................... 20
7.06 Ensure Conditions Met; Xxxx-Xxxxx-Xxxxxx Filings................................... 20
7.07 Termination of Insurance Policies.................................................. 21
7.08 Options and Warrants............................................................... 21
7.09 Casualty Loss...................................................................... 21
7.10 Employee Matters................................................................... 21
7.11 Publicity.......................................................................... 21
7.12 Sales Taxes........................................................................ 21
7.13 Affiliates; Pooling Agreements..................................................... 21
ARTICLE VIII - CONDITIONS TO SELLERS' AND BUYERS' OBLIGATIONS.............................. 22
8.01 Conditions to Obligations of Sellers............................................... 22
8.02 Conditions to Obligations of Buyers................................................ 22
ARTICLE IX - POST-CLOSING OBLIGATIONS...................................................... 25
9.01 Further Assurances................................................................. 25
9.02 Publicity.......................................................................... 25
9.03 Post-Closing Indemnity by the Sellers.............................................. 25
9.04 Access to Records.................................................................. 25
9.05 Non-Competition.................................................................... 26
9.06 Sellers' Agreements re Buyers...................................................... 26
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9.07 Buyers' Agreement re Sellers....................................................... 26
ARTICLE X - TAX MATTERS.................................................................... 27
10.01 Representations and Obligations Regarding Taxes.................................... 27
10.02 Indemnification for Taxes.......................................................... 28
10.03 Section 338 Election............................................................... 29
ARTICLE XI - MISCELLANEOUS................................................................. 30
11.01 Limitation on Liability............................................................ 30
11.02 Confidentiality.................................................................... 31
11.03 Brokers............................................................................ 32
11.04 Costs and Expenses................................................................. 32
11.05 Notices............................................................................ 32
11.06 No Shop............................................................................ 33
11.07 Governing Law...................................................................... 33
11.08 Representations and Warranties..................................................... 34
11.09 Entire Agreement; Amendments and Waivers........................................... 34
11.10 Binding Effect and Assignment...................................................... 34
11.11 Remedies........................................................................... 34
11.12 Interest on Overdue Payments....................................................... 34
11.13 Setoff; Withholding of Payments.................................................... 34
11.14 Exhibits and Schedules............................................................. 35
11.15 Multiple Counterparts.............................................................. 35
11.16 References......................................................................... 35
11.17 Survival........................................................................... 35
11.18 Attorneys' Fees.................................................................... 36
ARTICLE XII - DEFINITIONS.................................................................. 36
12.01 Affiliate.......................................................................... 36
12.02 Assets............................................................................. 36
12.03 Collateral Agreements.............................................................. 36
12.04 Contracts.......................................................................... 37
12.05 Damages............................................................................ 37
12.06 Financial Statements............................................................... 37
12.07 Governmental Authorities........................................................... 37
12.08 Knowledge of Sellers............................................................... 37
12.09 Legal Requirements................................................................. 37
12.10 Permits............................................................................ 37
12.11 Properties......................................................................... 37
12.12 Regulations........................................................................ 37
12.13 Used............................................................................... 37
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LIST OF SCHEDULES
Schedule 5.01...............................Qualifications as Foreign Corporation
Schedule 5.03...............................Stock Ownership
Schedule 5.04...............................Seller Defaults or Consents
Schedule 5.05...............................Company Defaults or Consents
Schedule 5.07(a)............................Employee Arrangements
Schedule 5.07(b)............................Benefit Plan Liabilities
Schedule 5.07(d)............................Guarantees
Schedule 5.07(e)............................Current Employees
Schedule 5.08(a)............................Financial Statements
Schedule 5.08(b)............................Scheduled Liabilities
Schedule 5.08(c)............................Accounts Receivable
Schedule 5.08(d)............................Guarantees
Schedule 5.09...............................Inventory
Schedule 5.10(a)............................Certain Changes
Schedule 5.10(b)............................Certain Actions
Schedule 5.11(1)............................Compliance with Law
Schedule 5.11(2)............................Citations
Schedule 5.12(1)............................Litigation
Schedule 5.12(2)............................Default
Schedule 5.13(a)............................Encumbrances
Schedule 5.13(c)............................Intellectual Property
Schedule 5.14...............................Commitments
Schedule 5.14(c)............................Non-Arm's Length Contracts
Schedule 5.14(d)............................Summary of Contemplated Leases
Schedule 5.15...............................Insurance
Schedule 5.16...............................Tangible Company Assets Condition
Schedule 5.17(a)............................Permits
Schedule 5.17(b)............................Environmental Matters
Schedule 5.18...............................Banks, Accounts and Authorized Signatories
Schedule 5.19...............................Suppliers
Schedule 5.20...............................Product Claims
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Schedule 5.21...............................Warranties
Schedule 6.03...............................Buyer Defaults or Consents
Schedule 7.14...............................Company Affiliates
Schedule 10.01(a)...........................Tax Returns
Schedule 10.01(b)...........................Tax Claims
Schedule 10.01(c)...........................Tax Extensions
Schedule 12.02(ii)..........................Material Tangible Property and Fixtures
Schedule 12.02(iii).........................Permits
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LIST OF EXHIBITS
Exhibit A Opinion of Sellers' Counsel...................................A-1
Exhibit B Opinion of Buyers' Counsel....................................B-1
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 31, 1996, by and
among Magicworks Entertainment Incorporated, a Florida corporation
("Magicworks"), Magicspace Corporation, a Florida corporation and wholly-owned
subsidiary of Magicworks ("Magicspace"), Space Agency, Inc., a Utah corporation
(the "Company"), and Xxxx X. Xxxxxxx and Xxxxxxx Xxxxxx (the "Sellers"). The
Sellers are referred to herein collectively as the "Shareholders" and
individually as a "Shareholder." Magicworks and Magicspace are sometimes
referred to herein collectively as the "Buyers" and individually as a "Buyer."
WHEREAS, the respective Boards of Directors of the Buyers and the
Company deem it advisable and in the best interests of their respective
stockholders that each of Magicspace and the Company combine their businesses by
the merger of the Company with and into Magicspace upon the terms and subject to
the conditions set forth herein (the "Merger"); and
WHEREAS, the Sellers beneficially own all of the Company's capital stock
and will receive significant consideration in connection with the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I - THE MERGER
1.01 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.02 hereof) the Company shall be
merged with and into Magicspace, with Magicspace being the surviving corporation
in the Merger (the "Surviving Corporation") and the separate existence of the
Company shall thereupon cease. The Merger shall have the effects set forth in
Section 607.1106 of the Florida Business Corporation Act (the "FBCA") and
Section 16-10a-1107, Utah Code, as applicable.
1.02 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective
upon the completion of the later to occur of the filing of (a) properly executed
Articles of Merger relating to the Merger with the Department of State of the
State of Florida, and (b) properly executed Articles of Merger relating to the
Merger with the Division of Corporations and Commercial Code, Department of
Commerce, of the State of Utah, each of which filings shall be made on the
Closing Date (as hereinafter defined) after satisfaction of the conditions set
forth in Article VIII
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hereof. When used in this Agreement, the term "Effective Time" shall mean the
date and time at which both such Articles of Merger are successfully filed.
ARTICLE II - THE SURVIVING CORPORATION
2.01 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The
Articles of Incorporation of Magicspace shall be the Articles of Incorporation
of the Surviving Corporation until thereafter amended in accordance with such
Articles and applicable law.
2.02 BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of Magicspace as in
effect at the Effective Time shall be the Bylaws of the Surviving Corporation
until thereafter amended in accordance with applicable law.
2.03 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of Magicspace shall be the directors and officers of the Surviving
Corporation until their respective successors are duly elected in accordance
with Magicspace's bylaws and applicable law. Sellers shall both be elected as
directors and officers of Magicspace as of the Effective Time. It is agreed that
Xxxx X. Xxxxxxx shall hold the office of Chief Executive Officer of the
Surviving Corporation, and is authorized to sign on behalf of the Company any
documents filed with the State of Utah as are necessary to consummate the
Merger.
ARTICLE III - CONVERSION OF SHARES
3.01 EXCHANGE RATIO. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
(a) Each share of common stock of the Company ("Company Shares")
issued and outstanding immediately prior to the Effective Time shall be
converted at the Effective Time into the right to receive 118.80118 shares (the
"Exchange Ratio") of common stock, par value $.001 per share, of Magicworks
("Magicworks Shares").
(b) At the Effective Time, each certificate previously
representing any Company Shares shall thereafter represent the number of whole
Magicworks Shares into which such Company Shares have been converted.
Certificates representing Company Shares shall be exchanged for certificates
representing whole Magicworks Shares issued in consideration therefor upon the
surrender of such certificates in accordance with the provisions hereof. If
prior to the Effective Time Magicworks or the Company should split or combine
the Magicworks Shares or the Company Shares, or pay a stock dividend or other
stock distribution in Magicworks Shares or Company Shares, then the Exchange
Ratio will be appropriately adjusted to reflect such split, combination,
dividend or other distribution.
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(c) Each Company Share held in the Company's treasury immediately
prior to the Effective Time shall be canceled and retired and cease to exist,
and no Magicworks Shares shall be issued in exchange therefor.
3.02 EXCHANGE OF SHARES.
(a) On the Closing Date and after the Effective Time, Magicworks
shall make available, and each holder of Company Shares will be entitled to
receive upon surrender to Magicworks of one or more certificates representing
Company Shares for cancellation, certificates representing the number of whole
Magicworks Shares into which such Company Shares are converted in the Merger.
The Magicworks Shares into which the Company Shares shall be converted in the
Merger shall be deemed to have been issued at the Effective Time.
(b) In the event that any stock certificate representing Company
Shares shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed, Magicworks will issue or cause to be issued in exchange for
such lost, stolen or destroyed certificate the number of Magicworks Shares into
which such Company Shares are converted in the Merger in accordance with this
Article III. When authorizing such issuance in exchange therefor, the Board of
Directors of Magicworks may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate to give Magicworks a bond in such sum as it may direct as indemnity,
or such other form of indemnity, as it shall direct, against any claim that may
be made against Magicworks with respect to the certificate alleged to have been
lost, stolen or destroyed.
(c) At and after the Effective Time, the holders of stock
certificates representing Company Shares to be exchanged for Magicworks Shares
pursuant to this Agreement ("Certificates") shall cease to have any rights as
stockholders of the Company except for the right to surrender such Certificates
in exchange for certificates for Magicworks Shares as provided hereunder.
3.03 DIVIDENDS; TRANSFER TAXES. No dividends that are declared on
Magicworks Shares will be paid to persons entitled to receive Magicworks Shares
until such persons surrender their Certificates. Upon such surrender, there
shall be paid to the person in whose name the certificates representing such
Magicworks Shares shall be issued any dividends which shall have become payable
with respect to such Magicworks Shares between the Effective Time and the time
of such surrender. In no event shall the person entitled to receive such
dividends be entitled to receive interest on such dividends. If any certificates
for any Magicworks Shares are to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the person requesting such exchange shall pay to
Magicworks any transfer or other taxes required by reason of the issuance of
such certificates for such Magicworks Shares, or shall establish to the
satisfaction of Magicworks that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither Magicworks nor any party hereto shall be
liable to a holder of Company Shares for any Magicworks Shares or dividends
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thereon or, in accordance with Section 3.04 hereof, the cash payment for
fractional interests, delivered to a public official pursuant to applicable
escheat laws.
3.04 NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional Magicworks Shares shall be issued upon the surrender for exchange of
Certificates pursuant to this Article III and no dividend, stock split or other
change in the capital structure of Magicworks shall relate to any fractional
security, and such fractional interests shall not entitle the owner thereof to
vote or to any rights of a security holder. In lieu of any such fractional
securities, each holder of Company Shares who would otherwise have been entitled
to a fraction of a Magicworks Share upon surrender of Certificates for exchange
pursuant to this Article III shall be paid cash upon such surrender in an amount
equal to the product of such fraction multiplied by the closing sales price for
a Magicworks Share on the Nasdaq National Market on the date upon which the
Effective Time occurs or, if the Magicworks Shares are not then listed on the
Nasdaq National Market, multiplied by the average of the closing bid and asked
price for a Magicworks Share.
3.05 SUPPLEMENTARY ACTION. If at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of the Company, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered, in the name of and on
behalf of the Company, to execute and deliver any and all things necessary or
proper to vest or to perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes and provisions of
this Agreement.
ARTICLE IV - CLOSING
4.01 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Greenberg, Traurig,
Hoffman, Lipoff, Xxxxx & Quentel, P.A., 0000 Xxxxxxxx Xxxxxx, Xxxxx, Xxxxxxx
00000, at 10:00 am., local time, on the first business day (the "Closing Date")
after the day on which all of the conditions set forth in Article VIII hereof
are satisfied or waived, or at such other date, time and place as Magicworks and
the Company shall agree.
4.02 DELIVERIES BY SELLERS. At or prior to the Closing, the Sellers
shall deliver (or cause to be delivered) to Magicworks:
(i) certificates representing all of the outstanding shares of
the Company's capital stock;
(ii) the resignations of all the officers and directors of the
Company;
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(iii) the stock book, stock ledger, minute book and corporate
seal of the Company;
(iv) a certificate executed by the Sellers to the effect that
the conditions set forth in Sections 8.02(a) and 8.02(d) have been satisfied;
(v) a list of all agreements, licenses related to the
Company or its business, instruments, documents, deeds, books, records, files,
tax returns and other data which are material to the Company and its business
(collectively, the "Records"); and, at the request of Magicworks, copies of any
Records then in the possession or control of either the Company or the Sellers;
(vi) evidence satisfactory to Magicworks that with
respect to each of the Company's accounts, credit lines, safe deposit boxes or
vaults required to be set forth in SCHEDULE 5.18, (1) the authority of the
individuals identified in such Schedule with respect thereto has been, in each
case if requested by Magicworks, modified or terminated, or (2) if Magicworks so
requests in writing, the account or credit line in question has been closed;
(vii) Articles of incorporation of the Company, certified by the
appropriate governmental official as of a recent date; and bylaws of the
Company, certified by its Secretary;
(viii) certificates of good standing with respect to the Company,
issued as of recent dates by the State of Utah and each of the other
jurisdictions listed on Schedule 5.01;
(ix) all other documents, instruments, and agreements
necessary to be delivered to Buyers by Sellers, other Shareholders, the Company
and its affiliates in order to satisfy the conditions in Article VIII hereof,
and all other certificates and other evidence as Magicworks or its counsel may
reasonably request as to the satisfaction of the conditions to Buyers'
obligations set forth herein and as to such other matters as Magicworks may
reasonably request; and
(x) the Merger filings contemplated by Section 1.02 hereof,
duly executed by the Company.
(xi) the opinion of Ray, Xxxxxxx & Xxxxxxx, counsel to
the Company and the Sellers, or such other counsel acceptable to Magicworks,
dated the Closing Date, which opinion shall be in form and substance reasonably
satisfactory to counsel for Magicworks and shall be to the effect set forth in
Exhibit A hereto.
4.03 DELIVERIES BY BUYERS. At or prior to the Closing, the Buyers
shall deliver (or cause to be delivered) to the Sellers:
(i) a certificate executed by an authorized officer of
each of the Buyers on behalf of the Buyers to the effect that the conditions set
forth in Section 8.01(b) have been satisfied;
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(ii) a certificate of good standing of each of the Buyers,
issued as of a recent date by the Secretary of State of its state of
incorporation;
(iii) the Merger filings contemplated by Section 1.02 hereof,
duly executed by Magicspace; and
(iv) a certificate or certificates representing the Magicworks
Shares.
(v) the opinion of Greenberg, Traurig, Hoffman, Lipoff,
Xxxxx & Quentel, P.A., counsel to the Buyers, which opinion shall be in form and
substance reasonably acceptable to counsel for Sellers and for the Company.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby jointly and severally represent and warrant to each
of the Buyers that:
5.01 CORPORATE EXISTENCE AND QUALIFICATION; CORPORATE DOCUMENTS.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah. The Company has the
corporate power to own, manage, lease and hold its currently owned Assets and to
carry on its business as and where such Assets are presently located and such
business is presently conducted; and neither the character of the Company's
Assets nor the nature of the Company's business requires the Company to be duly
qualified to do business as a foreign corporation in any jurisdiction outside
those identified in SCHEDULE 5.01 attached hereto; and the Company is qualified
as a foreign corporation and is in good standing in each such listed
jurisdiction.
(b) The stock and minute books of the Company that have been made
available to Buyers for review contain a complete and accurate record of all
shareholders of the Company and all formal actions taken by the shareholders and
directors (and any committees thereof) of the Company. The Company has
previously furnished to Buyers true and complete copies of the Company's
articles of incorporation and bylaws as currently in effect.
(c) The Company has no subsidiaries, does not participate in any
partnership or joint venture, and does not own any outstanding capital stock of
any other corporation.
5.02 AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by the Company and each Seller. The Company and each
Seller has all requisite power and legal capacity to execute and deliver this
Agreement and all Collateral Agreements to which it or he is or will be a party
and which are or will be executed and delivered in connection with the
transactions provided for hereby, to consummate the transactions contemplated
hereby and by the Collateral Agreements to which it or
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he is or will be a party, and to perform its or his obligations hereunder and
under the Collateral Agreements to which it or he is or will be a party. This
Agreement and each Collateral Agreement to which any Seller or the Company is or
will be a party constitutes, or upon execution and delivery will constitute, the
legal, valid and binding obligation of each of the Sellers and the Company that
are parties thereto, enforceable against such parties in accordance with its
terms, except as such enforcement may be limited by general equitable principles
or by applicable bankruptcy, insolvency, moratorium, or similar laws and
judicial decisions from time to time in effect which affect creditors' rights
generally.
5.03 CAPITALIZATION AND OWNERSHIP. The entire authorized capital stock
of the Company consists of Fifty Thousand (50,000) shares of common stock $.50
par value (the "Common Stock"), Eleven Thousand One Hundred Eleven (11,111)
shares of which are currently outstanding. The issued and outstanding shares of
Common Stock are owned beneficially and of record as shown in SCHEDULE 5.03, in
each case free and clear of any and all liens, mortgages, adverse claims,
charges, security interests, encumbrances or other restrictions or limitations
whatsoever except as set forth on SCHEDULE 5.03. All of such shares of Common
Stock are duly authorized, validly issued, fully paid and nonassessable and were
not issued in violation of (i) any preemptive or other rights of any Person to
acquire any securities of the Company, or (ii) any applicable federal or state
securities laws, and the rules and regulations promulgated thereunder
(collectively "Securities Laws"). Except as expressly set forth in SCHEDULE 5.03
(which schedule shall disclose for all options, warrants and similar rights each
holder, date of grant, exercise price and vesting schedule, if any), there are
no outstanding subscriptions, options, convertible securities, rights
(preemptive or other), warrants, calls or agreements relating to any capital
stock or other securities of the Company. Immediately prior to the Closing Date,
there shall be no outstanding subscriptions, options, convertible securities,
rights (preemptive or other), warrants, calls or agreements relating to any
capital stock or other securities of the Company.
5.04 SELLER DEFAULTS OR CONSENTS. Except as otherwise set forth in
SCHEDULE 5.04 hereto, the execution and delivery of this Agreement and the
Collateral Agreements by the Sellers and the performance by the Sellers of their
obligations hereunder and thereunder will not violate any provision of law or
any judgment, award or decree applicable to either Seller or any other
Shareholder of the Company or any indenture, agreement or other instrument to
which either Seller or any other Shareholder is a party, or by which either
Seller or any other Shareholder or any properties or assets of such persons is
bound or affected, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under, any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge, security interest or encumbrance of any nature whatsoever upon any
of the properties or assets of either Seller or any other Shareholder of the
Company.
5.05 NO COMPANY DEFAULTS OR CONSENTS.
(a) Except as otherwise set forth in SCHEDULE 5.05 attached
hereto, neither the execution and delivery of this Agreement nor the carrying
out of the transactions contemplated hereby will:
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(i) violate or conflict with any of the terms, conditions
or provisions of the Articles of incorporation or bylaws of the Company;
(ii) violate any Legal Requirements applicable to the
Company;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Contract or Permit
applicable to the Company;
(iv) result in the creation of any lien, charge or other
encumbrance on the shares of capital stock or any Asset of the Company; or
(v) require either of the Sellers or the Company to
obtain or make any waiver, consent, action, approval or authorization of, or
registration, declaration, notice or filing with, any private non-governmental
third party or any Governmental Authority.
(b) Without limiting the generality of the foregoing, no
condition exists or is pending that adversely affects or could reasonably be
expected to adversely affect the Company's ability to timely obtain any required
consents of the landlords under the "Real Property Leases" (as defined in
Section 5.14) to the transactions contemplated under this Agreement.
5.06 NO PROCEEDINGS. No suit, action or other proceeding is pending or,
to the Knowledge of Sellers, threatened before any Governmental Authority
seeking to restrain either of the Sellers or prohibit their entry into this
Agreement or prohibit the Closing, or seeking damages against the Company or its
Assets as a result of the consummation of this Agreement or the transactions
contemplated hereby.
5.07 EMPLOYEE BENEFIT MATTERS.
(a) SCHEDULE 5.07(A) provides a description of each of the
following, if any, which is sponsored, maintained or contributed to by the
Company for the benefit of the employees or agents of the Company, or has been
so sponsored, maintained or contributed to at any time during the Company's
existence, true and correct copies of which have been provided to Buyers:
(i) each "employee benefit plan", as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA") (including, but not limited to, employee benefit plans, such as
foreign plans, which are not subject to the provisions of ERISA) ("Plan"), and
(ii) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy,
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severance pay policy or agreement, deferred compensation agreement or
arrangement, consulting agreement, employment contract and each other employee
benefit plan, agreement, arrangement, program, practice or understanding which
is not described in Section 5.07(a)(i) ("Benefit Program or Agreement").
(b) True, correct and complete copies of each of the Plans (if
any), and related trusts, if applicable, including all amendments thereto, have
been furnished to Buyers. There has also been furnished to Buyers, with respect
to each Plan required to file such report and description, the three most recent
reports on Form 5500 and the summary plan description. True, correct and
complete copies or descriptions of all Benefit Programs or Agreements have also
been furnished to Buyers.
(c) Except as otherwise set forth in SCHEDULE 5.07(C),
(i) The Company does not contribute to and does not have
any obliga- tion to contribute to, and has not at any time contributed to or had
an obligation to contribute to, a multiemployer plan within the meaning of
Section 3(37) of ERISA ("Multiemployer Plan") or a multiple employer plan within
the meaning of Section 413(b) and (c) of the Code;
(ii) The Company has substantially performed all
obligations, whether arising by operation of law or by contract, required to be
performed by it before or on the date hereof in connection with the Plan and
Benefit Programs and Agreements (including without limitation the filing of any
required Form 5500 for any of the Plans), and to the Knowledge of Sellers, there
have been no defaults or violations by any other party to the Plans or Benefit
Programs or Agreements;
(iii) All reports and disclosures relating to the Plans
required to be filed with or furnished to governmental agencies, Plan
participants or Plan beneficiaries have been filed or furnished in accordance
with applicable law in a timely manner, and each Plan and each Benefit Program
or Agreement has been administered in substantial compliance with its governing
documents;
(iv) Each of the Plans intended to be qualified under
Section 401 of the Code satisfies the requirements of such Section and has
received a favorable determination letter from the Internal Revenue Service
regarding such qualified status and has not, since receipt of the most recent
favorable determination letter, been amended or operated in a way which could
adversely affect such qualified status;
(v) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the Knowledge of Sellers, threatened
against, or with respect to, any of the Plans or Benefit Programs or Agreements
or their assets;
9
(vi) All contributions required to be made to the Plans
pursuant to their terms and provisions and applicable law have been made timely;
(vii) As to any Plan subject to Title IV of ERISA, there
has been no event or condition which presents the material risk of Plan
termination, no accumulated funding deficiency, whether or not waived, within
the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section 4043 of ERISA (for
which the disclosure requirements of Regulation ss. 2615.3 promulgated by the
Pension Benefit Guaranty Corporation ("PBGC") have not been waived) has
occurred, no notice of intent to terminate the Plan has been given under Section
4041 of ERISA, no proceeding has been instituted under Section 4042 of ERISA to
terminate the Plan, there has been no termination or partial termination of the
Plan within the meaning of Section 411(d)(3) of the Code, no liability to the
PBGC has been incurred, and the assets of the Plan equal or exceed the aggregate
present value of the benefit liabilities (within the meaning of Section
4001(a)(16) of ERISA) under the Plan, computed on a "plan termination basis"
based upon reasonable actuarial assumptions and the asset valuation principles
established by the PBGC;
(viii) None of the Plans nor any trust created thereunder or
with respect thereto has engaged in any "prohibited transaction" or
"party-in-interest transaction" as such terms are defined in Section 4975 of the
Code and Section 406 of ERISA which could subject any Plan, the Company or any
officer, director or employee thereof to a tax or penalty on prohibited
transactions or party-in-interest transactions pursuant to Section 4975 of the
Code or Section 502(i) of ERISA;
(ix) Each trust funding a Plan, which trust is intended
to be exempt from federal income taxation pursuant to Section 501(c)(9) of the
Code, satisfies the requirements of such section and has received a favorable
determination letter from the Internal Revenue Service regarding such exempt
status and has not, since receipt of the most recent favorable determination
letter, been amended or operated in a way which would adversely affect such
exempt status;
(x) The Company does not have any obligation to provide
health benefits to former employees, except as specifically required by law;
(xi) Neither the execution and delivery of this Agreement
nor the consummation of any or all of the transactions contemplated hereby will:
(A) entitle any current or former employee of the Company to severance pay,
unemployment compensation or any similar payment, other than unemployment
compensation claims resulting from any termination by Buyers of employees of the
Company following the Closing, (B) accelerate the time of payment or vesting or
increase the amount of any compensation due to any such employee or former
employee, or (C) directly or indirectly result in any payment made to or on
behalf of any person to constitute a "parachute payment" within the meaning of
Section 280G of the Code;
10
(xii) The Company has not incurred any liability or taken
any action, and, to the Knowledge of Sellers, no action or event has occurred
that could cause the Company to incur any liability (A) under Section 412 of the
Code or Title IV of ERISA with respect to any "single-employer plan" within the
meaning of Section 4001(a)(15) of ERISA, (B) to any Multi- employer Plan,
including without limitation an account of a partial or complete withdrawal
within the meaning of Sections 4203 and 4205 of ERISA; and
(xiii) There are no (i) unresolved labor union grievances
or, to the Knowledge of Sellers, organizational efforts, or (ii) unfair labor
practice or labor arbitration proceedings pending or, to the Knowledge of
Sellers, threatened, with respect to the Company.
(d) Except as set forth in SCHEDULE 5.07(d), the Company is not a
party to any agreement, and has not established any policy or practice,
requiring the Company to make a payment or provide any other form or
compensation or benefit to any person performing services for the Company upon
termination of such services which would not be payable or provided in the
absence of the consummation of the transactions contemplated by this Agreement.
(e) SCHEDULE 5.07(e) sets forth (i) by number and employment
classification the approximate numbers of employees employed by the Company as
of the date of this Agreement, and (ii) the names of and the compensation paid
to (including a breakdown of salary, bonus or commission) the ten most highly
compensated employees of the Company during calendar year 1996. Except as
otherwise set forth in SCHEDULE 5.07(e), the Company has not at any time had or,
to the Knowledge of Sellers, been threatened with any work stoppages or other
labor disputes or controversies with respect to its employees, and the Company
is not subject to any union or collective bargaining agreement.
5.08 FINANCIAL STATEMENTS; LIABILITIES; ACCOUNTS RECEIVABLE.
(a) The Sellers have delivered to Buyers true and complete copies
of the audited Financial Statements for the Company as of and for the years
ended December 31, 1993, December 31, 1994 and December 31, 1995 and unaudited
Financial Statements for the Company as of and for the nine months ended
September 30, 1996, and said Financial Statements are attached hereto as
SCHEDULE 5.08(a). All of such Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods indicated and present fairly the
financial condition and results of operations of the Company for the dates or
periods indicated therein.
(b) The Company has no liabilities or obligations (whether
accrued, absolute, contingent, known, unknown or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with GAAP), except (i) liabilities reflected in the Financial
Statements attached as Schedule 5.08(a), (ii) liabilities expressly set forth on
SCHEDULE 5.08(b), and (iii) liabilities and obligations accrued in the Company's
financial records and incurred by the Company since September 30, 1996 in the
ordinary course of business and
11
consistent with past practices (collectively, the "Permitted Liabilities"). All
accrued expenses and accounts payable of the Company incurred since September
30, 1996 have been paid when due, except as set forth on SCHEDULE 5.08(b).
Attached hereto as part of SCHEDULE 5.08(b) is a true, complete and correct list
of accounts payable of the Company as of September 30, 1996, including an aging
schedule of such accounts payable.
(c) Except as otherwise set forth in SCHEDULE 5.08(c), the
accounts receivable reflected on the September 30, 1996 balance sheet included
in the Financial Statements attached as SCHEDULE 5.08(a) and all accounts
receivable arising since September 30, 1996 (the "Balance Sheet Date"), arose
from bona fide transactions in the ordinary course of business, and the goods
and services involved have been sold, delivered and performed to the account
obligors, and no further filings (with governmental agencies, insurers or
others) are required to be made, no further goods are required to be provided
and no further services are required to be rendered in order to complete the
sales and fully render the services and to entitle the Company to collect the
accounts receivable in full. Except as set forth in SCHEDULE 5.08(c), no such
account has been assigned or pledged to any other person, firm or corporation,
and, except only to the extent fully reserved against as set forth in the
Financial Statements attached as SCHEDULE 5.08(a) or as set forth in SCHEDULE
5.08(c), no defense or setoff to any such account has been asserted by the
account obligor or exists.
(d) Except as set forth in SCHEDULE 5.08(d), the Company has not
guaranteed any obligation or indebtedness of any Person (including the Sellers)
and no Person (including the Sellers) has guaranteed any obligation or
indebtedness of the Company.
(e) Neither the Company nor any shareholder of the Company has
taken or allowed to be taken any action which could jeopardize the treatment of
the transactions contemplated hereby as a "pooling of interests" for accounting
and financial reporting purposes.
5.09 [RESERVED].
5.10 ABSENCE OF CERTAIN CHANGES.
(a) Except as otherwise set forth in SCHEDULE 5.10(a) attached
hereto, since December 31, 1995, there has not been:
(i) any change in circumstances that had or might have
an adverse effect on the results of operations, financial condition, Assets,
prospects or business of the Company;
(ii) any damage, destruction or loss (whether or not
covered by insurance) that had or might have an adverse effect on the results of
operations, financial condition, Assets, prospects or business of the Company;
or
12
(iii) any adverse change in the Company's sales patterns,
pricing policies, refunds, relationships with landlords, collection of accounts
receivable or payment of accounts payable;
(iv) any material reduction in the gross profit margins
of the Company.
(b) Except as otherwise set forth in SCHEDULE 5.10(B) attached
hereto, since December 31, 1995, the Company has not done any of the following:
(i) declared, set aside or paid any dividends, or made
any distributions or payments, in respect of its equity securities, or
repurchased, redeemed or otherwise acquired any such securities or issued
additional shares;
(ii) merged into or with or consolidated with, any other
corporation or acquired the business or assets of any Person;
(iii) purchased any securities of any Person;
(iv) amended its Articles of incorporation or bylaws;
(v) issued any securities relating to its shares, or
granted, or entered into any agreement to grant, any options, convertability
rights, other rights, warrants, calls or agreements relating to its shares, or
redeemed, repurchased or otherwise reacquired any of its shares;
(vi) created, incurred, assumed, guaranteed or otherwise
became liable or obligated with respect to any indebtedness, or made any loan or
advance to, or any investment in, any Person;
(vii) made any change in any existing election, or made
any new election, with respect to any tax law in any jurisdiction which election
could reasonably be expected to have an effect on the tax treatment of the
Company or its business operations;
(viii) entered into, amended or terminated any material
agreement;
(ix) sold, transferred, leased, mortgaged, encumbered or
otherwise disposed of, or agreed to sell, transfer, lease, mortgage, encumber or
otherwise dispose of, any Assets except (i) in the ordinary course of business,
or (ii) pursuant to any agreement set forth in SCHEDULE 5.14;
(x) settled any claim or litigation, or filed any
motions, orders, briefs or settlement agreements in any proceeding before any
Governmental Authority or any arbitrator;
13
(xi) incurred or approved, or entered into any agreement
or commitment to make, any expenditures not included in the Company's 1996
budget plan or not otherwise previously approved in writing by Magicworks, other
than those required pursuant to any agreement set forth in SCHEDULE 5.14;
(xii) maintained its books of account other than in the
usual, regular and ordinary manner in accordance with GAAP and on a basis
consistent with prior periods or made any change in any of its accounting
methods or practices that would be required to be disclosed under GAAP;
(xiii) engaged in any one or more activities or
transactions outside the ordinary course of business;
(xiv) made any increase in (a) the rate of compensation
payable or to become payable by the Company to any of its directors, officers,
agents or employees, or (b) the payment of any bonus, payment or arrangement
made to, for or with any directors, officers, agents or employees of the
Company, except as required pursuant to any agreement set forth in SCHEDULE 4.14
or any Benefit Program or Agreement set forth in SCHEDULE 5.07(a);
(xv) made any change, whether oral or written, to any
agreement or understanding with any of the suppliers listed or required to be
listed on SCHEDULE 5.19, or entered into any new agreements or understandings
with suppliers other than as set forth in SCHEDULE 5.14;
(xvi) used cash flow of the Company for any purposes
other than to pay debt service on indebtedness, accounts payable, compensation
expense and accrued expenses, each in the ordinary course of business and
consistent with past practices, provided, HOWEVER, that the Company may use such
cash flow to pay legal and accounting expenses in connection with the
transactions contemplated hereby, which expenses shall not exceed $35,000 in the
aggregate; or
(xvii) committed to do any of the foregoing.
5.11 COMPLIANCE WITH LAWS. Except as otherwise set forth in SCHEDULE
5.11(1), the Company is and has been in compliance in all respects with any and
all Legal Requirements applicable to the Company. Except as otherwise set forth
in SCHEDULE 5.11(2), the Company has not received or entered into any citations,
complaints, consent orders, compliance schedules or other similar enforcement
orders or received any written notice from any Governmental Authority or any
other written notice that would indicate that there is not currently compliance
with all such Legal Requirements. To the Knowledge of Sellers, there is no basis
for, any claim, action, suit, investigation or proceeding that might result in a
finding that the Company is not or has not been in compliance with all such
Legal Requirements.
14
5.12 LITIGATION; DEFAULT. Except as otherwise set forth in SCHEDULE
5.12(1), there are no claims, actions, suits, investigations or proceedings
against the Company pending or, to the Knowledge of Sellers, threatened in any
court or before or by any Governmental Authority, or before any arbitrator, and,
to the Knowledge of Sellers, there is no basis for any such claim, action, suit,
investigation or proceeding. Except as otherwise set forth in SCHEDULE 5.12(2),
the Company is not in default under, and no condition exists (whether covered by
insurance or not) that with or without notice or lapse of time or both would
constitute a default under, or breach or violation of, or accelerate or permit
the acceleration of the performance required under, or give any other party the
right to terminate, any Permit applicable to the Company or any Contract set
forth or required to be set forth in SCHEDULE 5.14.
5.13 OWNERSHIP OF ASSETS.
(a) Except as provided under the provisions of the Contracts set
forth in SCHEDULE 5.14, or as otherwise set forth in SCHEDULE 5.13(a), the
Company has legal and beneficial ownership of its Assets, free and clear of any
and all liens, mortgages, pledges, adverse claims, encumbrances or other
restrictions or limitations whatsoever, other than liens for non- delinquent
taxes and assessments, landlord liens and liens, claims and encumbrances or
charges that do not in any material respect detract from the value of the Assets
or interfere in any material respect with the present or contemplated use of the
Assets.
(b) Neither of the Sellers nor any of their Affiliates or any of
the other Shareholders has directly or indirectly acquired any interests in any
Assets of the Company or any assets, rights or interests related to any Assets
of the Company.
(c) The Company owns or has the right to use and shall as of the
Closing Date own or have the right to use any and all information, trade
secrets, patents, copyrights, trademarks, tradenames and other intangible
properties that are necessary or customarily Used by the Company for the
ownership, management or operation of its Assets ("Intangible Rights"). SCHEDULE
5.13(C) hereto sets forth a list of all trademarks, trade names, service marks
and copyrights (or pending registrations and applications therefor) owned or
Used under license by the Company and each invention, formula, method and
process used under license by any of the Companies (collectively the
"INTELLECTUAL Property"). Except as set forth on SCHEDULE 5.13(C), (i) no claims
have been asserted or, to the Knowledge of Sellers, threatened by any third
person in connection with the use by the Company of any Intellectual Property,
(ii) to the Knowledge of the Sellers, no third persons are infringing upon any
of the Company's rights with respect to the Intellectual Property, and (iii) the
use by the Company of the Intellectual Property does not infringe on the rights
of any third persons.
15
5.14 COMMITMENTS.
(a) Except as otherwise set forth in SCHEDULE 5.14 hereof, the
Company is not a party to or bound by any of the following, whether written or
oral:
(i) any Contract that cannot by its terms be terminated
by the Company with 30 days' or less notice without penalty or whose term
continues beyond one year after the date of this Agreement;
(ii) contract or commitment for capital expenditures by
the Company not included in the Company's 1996 budget plan or not otherwise
previously approved in writing by Magicworks;
(iii) lease or license with respect to any Property, real
or personal, whether as landlord, tenant, licensor or licensee;
(iv) agreement, contract, indenture or other instrument
relating to the borrowing of money or the guarantee of any obligation or the
deferred payment of the purchase price of any Assets;
(v) partnership agreement;
(vi) contract with either Seller or any other shareholder
of the Company or any Affiliate of either Seller or the Company relating to the
provision of goods or services by or to any of the Company or any other matter;
(vii) agreement for the sale of any Assets not included
in the Company's 1996 budget plan or not otherwise previously approved in
writing by Magicworks;
(viii) agreement that purports to limit the Company's
freedom to compete freely in any line of business or in any geographic area;
(ix) preferential purchase right, right of first refusal,
or similar agreement;
(x) any shareholders' or other agreement relating to
shares of any of the Company's corporate stock; or
(xi) other Contract, that, to the Knowledge of Sellers,
is material to the business of the Company.
16
(b) All of the Contracts listed or required to be listed in
SCHEDULE 5.14 are valid, binding and in full force and effect, and the Company
has not been notified or advised by any party thereto of such party's intention
or desire to terminate or modify any such Contract in any respect, except as
disclosed in SCHEDULE 5.14. Except as disclosed on SCHEDULE 5.14, neither the
Company nor, to the Knowledge of Sellers, any other party is in breach of any of
the terms or covenants of any Contract listed or required to be listed in
SCHEDULE 5.14. True, correct and complete copies of each of the agreements
(including all amendments thereto) listed and/or summarized on SCHEDULE 5.14
have been delivered to Buyers.
(c) Except as otherwise set forth in SCHEDULE 5.14(C), the
Company is not a party to or bound by any Contract or Contracts the terms of
which were arrived at by or otherwise reflect less-than-arm's-length
negotiations or bargaining.
(d) SCHEDULE 5.14(d) sets forth a true and complete summary of
each existing real property lease of the Company (the "Real Property Leases").
5.15 INSURANCE. SCHEDULE 5.15 hereto is a complete and correct list of
all insurance policies presently in effect that relate to the Company, its
Assets or employees and the scheduled renewal date of each such policy. All such
policies have been in full force and effect from and after the date(s) set forth
on SCHEDULE 5.15 and all premiums due and payable with respect to such policies
have been paid. There is no inaccuracy in any application for any such policy
which may reasonably be expected to form a basis for termination of any such
policy. The Company has complied in all material respects with the provisions of
such policies, and such policies (i) provide adequate insurance covering risks
and in amounts customary for the Company's business, and (ii) are sufficient for
compliance in all material respects with all Contracts to which the Company is a
party and all requirements of law. Except as otherwise disclosed on SCHEDULE
5.15, the Company has not been, prior to the date hereof, subject to liability
as a self-insurer. Within the prior five years, the Company has not been denied
insurance, nor has any prospective or actual carrier or underwriting board
recommended or required material capital expenditures by the Company in order to
obtain, or in connection with obtaining insurance. No notices of cancellation or
indication of an intention not to renew any insurance policy has been received
by the Company or any Seller. Attached as part of SCHEDULE 5.15 is a true,
complete and correct listing of all claims made under the Company's insurance
policies since 1994.
5.16 EQUIPMENT AND OTHER TANGIBLE PROPERTY. Except as otherwise set
forth on SCHEDULE 5.16, the Company's equipment, machinery, vehicles,
structures, fixtures and other tangible Property included in the Assets (the
"Tangible Assets") other than inventory is, and shall as of the Closing Date be,
in all material respects in good operating condition and repair consistent with
normal industry standards, except for ordinary wear and tear, and except for
such Tangible Assets as shall have been taken out of service on a temporary
basis for repairs or replacement consistent with the Company's prior practices.
17
5.17 PERMITS; ENVIRONMENTAL MATTERS.
(a) Except as otherwise set forth in SCHEDULE 5.17(a), the
Company has all Permits necessary for the Company to construct, own, operate,
use and/or maintain its Properties and to conduct its business and operations as
presently conducted and as expected to be conducted in the future. Except as
otherwise set forth in SCHEDULE 5.17(a), all such Permits are in effect, no
proceeding is pending or, to the Knowledge of Sellers, threatened to modify,
suspend or revoke, withdraw, terminate, or otherwise limit any such Permits, and
no administrative or governmental actions have been taken or, to the Knowledge
of Sellers, threatened in connection with the expiration or renewal of such
Permits which could adversely affect the ability of the Company to own, operate,
use or maintain any of its Properties or to conduct its business and operations
as presently conducted and as expected to be conducted in the future. Except as
otherwise set forth in SCHEDULE 5.17(a), (i) no violations have occurred that
remain uncured, unwaived, or otherwise unresolved, or are occurring in respect
of any such Permits, other than inconsequential violations, and (ii) no
circumstances exist that would prevent or delay the obtaining of any requisite
consent, approval, waiver or other authorization of the transactions
contemplated hereby with respect to any such Permits that by their terms or
under applicable law may be obtained only after Closing.
(b) Except as otherwise set forth in SCHEDULE 5.17(b), there have
been no present or past conditions in any way relating to the business,
operations or Assets of the Company involving or resulting from past or present
spill, discharge, leak, emission, injection, escape, dumping or release of any
kind whatsoever of any substance or exposure of any type in any work place or to
any medium, including, but not limited to, air, land, surface waters and ground
waters, or from any generation, transportation, treatment, storage, disposal of
waste materials, raw materials or products of any kind, or from the storage, use
or handling of any hazardous or toxic materials or other substances that has
had, has or could have an adverse effect on the Assets, business, operations,
prospects or financial condition of the Company.
5.18 BANKS. SCHEDULE 5.18 sets forth (i) the name of each bank, trust
company or other financial institution and stock or other broker with which the
Company has an account, credit line or safe deposit box or vault, (ii) the names
of all persons authorized to draw thereon or to have access to any safe deposit
box or vault, (iii) the purpose of each such account, safe deposit box or vault,
and (iv) the names of all persons authorized by proxies, powers of attorney or
other like instrument to act on behalf of the Company in matters concerning any
of its business or affairs. Except as otherwise set forth in SCHEDULE 5.18, no
such proxies, powers of attorney or other like instruments are irrevocable.
5.19 SUPPLIERS. SCHEDULE 5.19 sets forth each of the Company's top ten
suppliers (by dollar amount) during 1996, together with the dollar amount of
goods purchased by the Company from each such supplier during such period.
Except as otherwise set forth in SCHEDULE 5.19, the Company maintains good
relations with all suppliers listed or required to be listed in SCHEDULE 5.19
and no such party has cancelled, terminated, or made any threat to any of the
Sellers or the
18
Company to cancel or otherwise terminate its relationship with the Company or to
materially decrease its services or supplies to the Company. Except as set forth
in SCHEDULE 5.19, the Company is not past due (in accordance with the stated
invoice terms) with respect to any amounts owed to any of the suppliers listed
or required to be listed on SCHEDULE 5.19.
5.20 [RESERVED].
5.21 PROJECTIONS. The Projections of the Company's annual operating
budgets, balance sheets and cash flow statements prepared on an annual basis for
calendar 1997 (by month) and the most recent financial statement for the month
of December 1996, copies of which have been delivered to the Buyers (the
"Projections"), disclose all assumptions made with respect to general economic,
financial and market conditions in formulating such Projections. To the
Knowledge of Sellers, no facts exist which would result in any material change
in any of such Projections. The Projections are based upon reasonable estimates
and assumptions, all of which are fair in light of current conditions, have been
prepared on the basis of the assumptions stated therein, and reflect the
reasonable estimate of Sellers of the results of operations and other
information projected therein.
5.22 PURCHASE FOR INVESTMENT.
(a) Each Shareholder is acquiring the Magicworks Shares issuable
pursuant to the Merger for his or her own account and not with a view to, or for
sale in connection with, any "distribution," as such term is used in Section
2(11) of the Securities Act of 1933, as amended (the "Securities Act"), of any
Magicworks Shares in violation of the Securities Act.
(b) Each Shareholder is an "accredited investor," as that term is
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
(c) Each Shareholder understands (i) that the Magicworks Shares
issued in the Merger will be restricted securities within the meaning of Rule
144 of the Securities Act ("Rule 144"); (ii) that such securities are not
registered; (iii) that such securities must be held indefinitely and that no
transfer of such securities may be made by Shareholder unless (A) such
securities have been registered under the Securities Act and any applicable
state securities laws, or (B) an exemption from registration is available under
applicable state securities laws and the Securities Act, including in accordance
with the terms and conditions of Rule 144; and (iv) that, in any event, the
exemption from registration under Rule 144 will not be available unless such
securities have been beneficially owned for at least two years.
(d) Each Shareholder understands that the certificates
representing Magicworks Shares issued pursuant to this Agreement shall bear a
legend substantially as follows:
19
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any applicable
state law. They may not be offered for sale, sold, transferred or
pledged without (1) registration under the Securities Act of 1933
and any applicable state law, or (2) at holder's expense, an
opinion (satisfactory to the Company) of counsel (satisfactory to
the Company) that registration is not required.
5.23 OTHER INFORMATION. The information furnished by Sellers to Buyer
pursuant to this Agreement (including, without limitation, information contained
in the schedules and exhibits hereto, the instruments referred to in such
schedules and the certificates and other documents to be executed or delivered
pursuant hereto by Sellers at or prior to the Closing) is not, nor at the
Closing will be, false or misleading in any material respect, or contains, or at
the Closing will contain, any misstatement of material fact, or omits, or at the
Closing will omit, to state any material fact required to be stated in order to
make the statements therein not misleading.
5.24 INVESTMENT INTENT. The Shareholders do not have a present intent
to, and agree that they will not, sell in excess of 49% of the Magicworks Shares
prior to January 1, 1998.
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF BUYERS
The Buyers represent and warrant to Sellers that:
6.01 CORPORATE EXISTENCE AND QUALIFICATION. Each Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation; has the corporate power to own, manage, lease and
hold its properties and to carry on its business as and where such properties
are presently located and such business is presently conducted; and is duly
qualified to do business and is in good standing as a foreign corporation in
each juris- diction where the character of its properties or the nature of its
business requires it to be so qualified.
6.02 AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by each Buyer and each Buyer has all requisite
corporate power and legal capacity to execute and deliver this Agreement and all
Collateral Agreements executed and delivered or to be executed and delivered by
it in connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its obligations hereunder and under the Collateral Agreements. The
execution and delivery of this Agreement and the Collateral Agreements and the
performance of the transactions contemplated hereby and thereby have been duly
and validly authorized and approved by all corporate action necessary on behalf
of each Buyer. This Agreement and each Collateral Agreement to which each Buyer
is a party constitutes, or upon execution and delivery will constitute, the
legal, valid and binding obligation of each Buyer, enforceable in accordance
with
20
its terms, except as such enforcement may be limited by general equitable
principles or by applicable bankruptcy, insolvency, moratorium, or similar laws
and judicial decisions from time to time in effect which affect creditors'
rights generally.
6.03 NO DEFAULT OR CONSENTS. Except as otherwise set forth in SCHEDULE
6.03 attached hereto, neither the execution and delivery of this Agreement nor
the carrying out of the transactions contemplated hereby will:
(i) violate or conflict with any of the terms, conditions
or provisions of either Buyer's certificate or articles of incorporation or
bylaws;
(ii) violate any Legal Requirements applicable to either
Buyer;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any contract or Permit
applicable to either Buyer;
(iv) result in the creation of any lien, charge or other
encumbrance on the shares of capital stock or any Property of either Buyer; or
(v) require either Buyer to obtain or make any waiver,
consent, action, approval or authorization of, or registration, declaration,
notice or filing with, any private non- governmental third party or any
Governmental Authority that has not been obtained or made.
6.04 NO PROCEEDINGS. No suit, action or other proceeding is pending or,
to each Buyer's knowledge, threatened before any Governmental Authority seeking
to restrain either Buyer or prohibit its entry into this Agreement or prohibit
the Closing, or seeking Damages against either Buyer or its Properties as a
result of the consummation of this Agreement.
6.05 MAGICWORKS SEC FILINGS. Magicworks has heretofore delivered to
Sellers copies of (i) Magicworks's Registration Statement, including the related
Prospectus included therein dated December 20, 1996 (the "Magicworks S-1")
relating to the Company's most recent registration of Common Stock, and (ii)
Magicworks's Quarterly Report on Form 10-Q for the nine months ended September
30, 1996. As of their respective dates, such prospectus and report complied in
all material respects with all applicable requirements of the Securities Act or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
consolidated interim financial statements of Magicworks included in such
prospectus and report have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto and, as to unaudited statements,
21
except for the absence of notes thereto), and present fairly in all material
respects the financial position of Magicworks as of the dates thereof and the
results of Magicworks's operations for the periods then ended (subject, in the
case of unaudited interim financial statements, to year-end adjustments).
6.06 CAPITALIZATION AND OWNERSHIP. The entire authorized capital stock
of Magicworks consists of Fifty Million (50,000,000) shares of common stock
$.001 par value (the "Common Stock"), Twenty-Three Million Seventy Four Thousand
Two Hundred Ninety-Nine (23,074,299) shares of which were outstanding as of
December 19, 1996. Except as expressly set forth in the Magicworks S-1 and
grants of stock options made in connection with the service of the Board of
Directors of Magicworks as described in the Magicworks S-1, there are no
outstanding subscriptions, options, convertible securities, rights (preemptive
or other), warrants, calls or agreements relating to any capital stock or other
securities of the Company.
6.07 FINANCIAL STATEMENTS; LIABILITIES; ACCOUNTS RECEIVABLE.
(a) The Buyers have delivered to Sellers true and complete copies
of the audited Financial Statements for Magicworks as of and for the year ended
December 31, 1995 and unaudited Financial Statements for the Company as of and
for the nine months ended September 30, 1996, which financial statements are
included in the Magicworks S-1. All of such Financial Statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated and present
fairly the financial condition and results of operations of Magicworks for the
dates or periods indicated therein.
(b) Magicworks has no liabilities or obligations (whether
accrued, absolute, contingent, known, unknown or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with GAAP), except (i) liabilities reflected in the Financial
Statements, and (ii) liabilities and obligations accrued in the Company's
financial records and incurred by the Company since September 30, 1996 in the
ordinary course of business and consistent with past practices (collectively,
the "Permitted Liabilities").
(c) The accounts receivable reflected on the September 30, 1996
balance sheet included in the Financial Statements and all accounts receivable
arising since September 30, 1996 (the "Balance Sheet Date"), arose from bona
fide transactions in the ordinary course of business, and the goods and services
involved have been sold, delivered and performed to the account obligors, and no
further filings (with governmental agencies, insurers or others) are required to
be made, no further goods are required to be provided and no further services
are required to be rendered in order to complete the sales and fully render the
services and to entitle the Company to collect the accounts receivable in full.
22
(d) Neither the Buyers nor any shareholder of the Buyers have
taken or allowed to be taken any action which could jeopardize the treatment of
the transactions contemplated hereby as a "pooling of interests" for accounting
and financial reporting purposes.
6.08 COMPLIANCE WITH LAWS. The Buyers are and have been in compliance in
all respects with any and all Legal Requirements applicable to the Buyers.
6.09 LITIGATION; DEFAULT. Except as otherwise set forth in the
Magicworks S-1, there are no claims, actions, suits, investigations or
proceedings against the Buyers pending or, to the Knowledge of Buyers,
threatened in any court or before or by any Governmental Authority, or before
any arbitrator, and, to the Knowledge of Buyers, there is no basis for any such
claim, action, suit, investigation or proceeding. Except as otherwise set forth
in the Magicworks S-1, the Buyers are not in default under, and no condition
exists (whether covered by insurance or not) that with or without notice or
lapse of time or both would constitute a default under, or breach or violation
of, or accelerate or permit the acceleration of the performance required under,
or give any other party the right to terminate, any Permit applicable to the
Buyers or any Contract applicable thereto.
6.10 PERMITS; ENVIRONMENTAL MATTERS.
(a) Except as otherwise set forth in the Magicworks S-1, the
Buyers have all Permits necessary for the Buyers to construct, own, operate, use
and/or maintain their respective Properties and to conduct their respective
business and operations as presently conducted and as expected to be conducted
in the future. All such Permits are in effect, no proceeding is pending or, to
the Knowledge of Buyers, threatened to modify, suspend or revoke, withdraw,
terminate, or otherwise limit any such Permits, and no administrative or
governmental actions have been taken or, to the Knowledge of Buyers, threatened
in connection with the expiration or renewal of such Permits which could
adversely affect the ability of the Buyers to own, operate, use or maintain any
of their Properties or to conduct their business and operations as presently
conducted and as expected to be conducted in the future. Except as otherwise set
forth in the Magicworks S-1, (i) no violations have occurred that remain
uncured, unwaived, or otherwise unresolved, or are occurring in respect of any
such Permits, other than inconsequential violations, and (ii) no circumstances
exist that would prevent or delay the obtaining of any requisite consent,
approval, waiver or other authorization of the transactions contemplated hereby
with respect to any such Permits that by their terms or under applicable law may
be obtained only after Closing.
(b) Except as otherwise set forth in the Magicworks S-1, there
have been no present or past conditions in any way relating to the business,
operations or Assets of the Buyers involving or resulting from past or present
spill, discharge, leak, emission, injection, escape, dumping or release of any
kind whatsoever of any substance or exposure of any type in any work place or to
any medium, including, but not limited to, air, land, surface waters and ground
waters, or from any generation, transportation, treatment, storage, disposal of
waste materials, raw materials or products of any kind, or from the storage, use
or handling of any hazardous or toxic
23
materials or other substances that has had, has or could have an adverse effect
on the Assets, business, operations, prospects or financial condition of the
Buyers.
ARTICLE VII - OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
7.01 BUYERS' ACCESS TO INFORMATION AND ASSETS. The Sellers shall cause
the Company to permit each Buyer and its authorized employees, agents,
accountants, legal counsel and other representatives to have access to the
books, records, employees, counsel, accountants, and other representatives of
the Company at all times reasonably requested by Buyers for the purpose of
conducting an investigation of each Company's financial condition, corporate
status, operations, business and properties. The Sellers shall, and shall cause
the Company to, make available to Buyers for examination and reproduction all
documents and data of every kind and character relating to the Company in
possession or control of, or subject to reasonable access by, the Sellers or the
Company, including, without limitation, all files, records, data and information
relating to the Company's Assets (whether stored in paper, magnetic or other
storage media) and all agreements, instruments, contracts, assignments,
certificates, orders, and amendments thereto.
7.02 COMPANY'S CONDUCT OF BUSINESS AND OPERATIONS. The Sellers shall
keep Buyers advised as to all material operations and proposed material
operations relating to the Company's or its Assets. The Sellers shall cause the
Company to (a) conduct its business in the ordinary course, (b) keep available
the services of present employees, (c) maintain and operate its Assets in a good
and workmanlike manner, (d) pay or cause to be paid all costs and expenses
(including but not limited to insurance premiums) incurred in connection
therewith in a timely manner, (e) use its best efforts to keep all Contracts
listed or required to be listed on SCHEDULE 5.14 in full force and effect, (f)
comply with all of the covenants contained in all such Contracts, (g) maintain
in force until the Closing Date insurance policies (subject to the provisions of
Section 7.08) equivalent to those in effect on the date hereof, and (h) comply
in all material respects with all applicable Legal Requirements. Except as
otherwise contemplated in this Agreement, the Sellers will use their best
efforts to preserve the present relationships of the Company with persons having
significant business relations therewith.
7.03 GENERAL RESTRICTIONS. Except as otherwise expressly permitted in
this Agreement, without the prior written consent of Magicworks, which consent
shall not be unreasonably withheld, the Sellers will not permit the Company to:
(i) declare, set aside or pay any dividends, or make any
distributions or payments, in respect of its equity securities, other than
dividends intended solely to (and not in excess of the amount necessary to)
reimburse Shareholders for income tax liabilities attributable to Shareholders'
ownership of the Company's common stock and the Company's taxable income in 1995
and 1996 through the Closing (after taking into account any prior distributions
that may
24
have been made for such purpose), or repurchase, redeem or otherwise acquire any
equity or other securities or issue any shares or other units of any equity or
other securities, PROVIDED, however, that Sellers may cause the Company to
distribute out to Sellers any and all Subchapter S distributions due to Sellers
in connection with Company operations prior to August 1, 1996 and such
distributions shall take place at the sole direction of the Sellers at such time
in 1997 when the Company's certified public accountants have completed the
Company's accounting for the period ended August 1, 1996, PROVIDED, HOWEVER,
that $100,000 shall be deposited in the Ray, Xxxxxxx & Xxxxxxx trust account to
provide funds that may be owing to the Shareholders with respect to such
distributions. It is further agreed that any S-Corporation distributions
distributed to the Shareholders in excess of what such Shareholders were
entitled to receive for the period prior to August 1, 1996 shall be repaid to
the Company within 30 days after such overpayment is discovered.
(ii) merge into or with or consolidate with, any other
corporation or acquire the business or assets of any Person;
(iii) purchase any securities of any Person;
(iv) amend its articles of incorporation or bylaws;
(v) issue any securities relating to its shares, or
grant, or enter into any agreement to grant, any options, convertability rights,
other rights, warrants, calls or agreements relating to its shares, or redeem,
repurchase or otherwise reacquire any of its shares;
(vi) create, incur, assume, guarantee or otherwise become
liable or obligated with respect to any indebtedness, or make any loan or
advance to, or any investment in, any Person, except in each case in the
ordinary course of business;
(vii) make any change in any existing election, or make
any new election, with respect to any tax law in any jurisdiction which election
could have an effect on the tax treatment of the Company or its business
operations on or after the Closing Date;
(viii) enter into, amend or terminate any material
agreement;
(ix) sell, transfer, lease, mortgage, encumber or
otherwise dispose of, or agree to sell, transfer, lease, mortgage, encumber or
otherwise dispose of, any Properties except (i) in the ordinary course of
business, or (ii) pursuant to any agreement specified in SCHEDULE 5.14;
(x) settle any material claim or litigation, or file any
material motions, orders, briefs or settlement agreements in any proceeding
before any Governmental Authority or any arbitrator;
25
(xi) incur or approve, or enter into any agreement or
commitment to make, any expenditures not included in the Company's 1996 budget
plan (other than those required pursuant to currently outstanding matters
described in SCHEDULE 5.14);
(xii) maintain its books of account other than in the
usual, regular and ordinary manner in accordance with generally accepted
accounting principles and on a basis consistent with prior periods or make any
change in any of its accounting methods or practices;
(xiii) engage in any one or more activities or
transactions outside the ordinary course of business;
(xiv) make any increase in (a) the rate of compensation
payable or to become payable to its directors, officers, agents or employees, or
(b) the payment of any bonus, payment or arrangement made to, for or with any of
its directors, officers, agents or employees, except as required in an agreement
set forth in SCHEDULE 5.14 or by any Benefit Program or Agreement set forth in
SCHEDULE 5.07(a);
(xv) make any change, whether oral or written, to any
agreement or understanding with any of the suppliers listed or required to be
listed on SCHEDULE 5.19, or enter into any new agreements or understandings with
suppliers;
(xvi) enter into any transaction or make any commitment
which could result in any of the representations, warranties or covenants of the
Sellers contained in this Agreement not being true and correct after the
occurrence of such transaction or event;
(xvii) knowingly take or allow to be taken any action
which could jeopardize the treatment of the transactions contemplated hereby as
a "pooling of interests" for accounting and financial reporting purposes;
(xviii) become a party to or bound by any of the matters
described in Section 5.14(a) or Section 5.07(a) above, whether written or oral;
or
(ix) commit to do any of the foregoing.
7.04 NOTICE REGARDING CHANGES. The Sellers shall promptly inform Buyers
in writing of any change in facts and circumstances that could render any of the
representations and warranties made herein by the Sellers inaccurate or
misleading if such representations and warranties had been made upon the
occurrence of the fact or circumstance in question. The Buyers shall promptly
inform the Sellers in writing of any change in facts and circumstances that
could render any of the representations and warranties made herein by Buyers'
inaccurate or misleading if such representations and warranties had been made
upon the occurrence of the fact or circumstance in question.
26
7.05 PREFERENTIAL PURCHASE RIGHTS. To the extent there are any parties
entitled or who may become entitled to exercise preferential purchase or consent
rights with respect to the xxxx- sactions contemplated hereby, the Sellers shall
promptly use their best efforts to obtain the agreement in writing of such
parties to waive or not exercise such rights, which request shall be in form
reasonably satisfactory to and approved by Magicworks.
7.06 INSURANCE POLICIES. The Sellers shall take (or cause the Company to
take) all actions necessary or appropriate to cause any and all insurance
coverage currently carried by or for the benefit of the Company to remain in
full force and effect; provided, however, that the Sellers shall cooperate with
Buyers to cause termination as of the renewal date for each such policy as
listed on Schedule 5.15 hereto of the insurance coverages identified in writing
for this purpose by Buyer to the Sellers and the Sellers shall take (or cause
the Company to take) all actions necessary to discharge any and all liabilities
or obligations of the Company arising with respect to any such coverage that is
to be so terminated. It is understood that the Company and Magicspace shall
renew and keep in force the Company's existing general show liability policy
until January 1, 1998.
7.07 OPTIONS AND WARRANTS. Sellers shall cause all options, warrants and
similar rights to purchase common stock or other securities of the Company to be
exercised or terminated prior to Closing.
7.08 CASUALTY LOSS. If, between the date of this Agreement and the
Closing, any of the Assets of the Company shall be destroyed or damaged in whole
or in part by fire, earthquake, flood, other casualty or any other cause, then
the Sellers shall, at Magicworks's election, (i) cause the Company to cause such
Assets to be repaired or replaced prior to the Closing with Assets of
substantially the same condition and function, (ii) cause the Company to deposit
in a separate account an amount sufficient to cause such Assets to be so
repaired or replaced, or (iii) enter into contractual arrangements satisfactory
to Magicworks so that the Company will have at the Closing the same economic
value as if such casualty had not occurred.
7.09 EMPLOYEE MATTERS. The Sellers shall take (or cause the Company to
take) all actions necessary or appropriate to cause each Plan or Benefit Program
or Agreement in effect on the date of this Agreement to remain in full force and
effect; provided, however, that to the extent requested in writing by
Magicworks, the Sellers shall cause the Company to cease to sponsor, maintain or
contribute to any Plan or Benefit Program or Agreement specified by Magicworks
in such written request, and shall further assume all past, present and future
obligations and liabilities of the Company (including contingent liabilities)
with respect to each such Plan or Benefit Program or Agreement effective as of
the last business day prior to the Closing Date.
7.10 PUBLICITY. None of the Sellers nor the Company shall issue or make,
or cause to have issued or made, any public release or announcement concerning
this Agreement or the transactions contemplated hereby,without the advance
approval in writing of the form and
27
substance thereof by the other parties to this Agreement, which approval will
not be unreasonably withheld.
7.11 AFFILIATES; POOLING AGREEMENTS. Sellers represent and warrant that
attached as SCHEDULE 7.14 is a list of all persons who could in connection with
the Merger be deemed to be "affiliates" of the Company for purposes of Rule 145
under the Securities Act ("Rule 145") or applicable "pooling" accounting
restrictions, and Sellers shall promptly notify Buyers of any change in such
list from time to time through the Closing Date. Sellers shall cause each person
listed or required to be listed on Schedule 7.14 to deliver to Buyers, at least
10 days prior to the Closing Date, a written "affiliates" agreement, in form
satisfactory to Magicworks, restricting the disposition by such affiliate of the
Magicworks Shares to be received by such person in the Merger, as contemplated
by Rule 145 and as required to qualify the Merger for pooling of interest
accounting treatment and tax-free reorganization treatment under the Code.
Certificates surrendered for exchange by any such "affiliate" within the meaning
of Rule 145 shall not be exchanged for certificates for Magicworks Shares
pursuant to Section 3.02 until Magicworks has received the agreement of such
person as described in the preceding sentence.
ARTICLE VIII - CONDITIONS TO SELLERS' AND BUYERS' OBLIGATIONS
8.01 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations of the
Sellers to carry out the transactions contemplated by this Agreement are
subject, at the option of the Sellers to the satisfaction, or waiver by the
Sellers of the following conditions:
(a) Each Buyer shall have furnished Sellers with a certified copy
of all necessary corporate action on its behalf approving its execution,
delivery and performance of this Agreement.
(b) All representations and warranties of each Buyer contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing as if such representations and warranties were made at and as of the
Closing, except for changes contemplated by the terms of this Agreement, and
each Buyer shall have performed and satisfied in all material respects all
covenants and agreements required by this Agreement to be performed and
satisfied by such Buyer at or prior to the Closing.
(c) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on behalf of the Sellers or the
Company) shall be pending or threatened before any Governmental Authority
seeking to restrain Sellers or prohibit the Closing or seeking Damages against
Sellers as a result of the consummation of this Agreement.
(d) Sellers shall have received the opinion of Greenberg,
Traurig, Hoffman, Lipoff, Xxxxx & Xxxxxxx, P.A., counsel to Buyers, dated as of
the Closing Date, in form and substance reasonably satisfactory to the Sellers,
to the effect of Sections 6.01, 6.02 and 6.03(i).
28
In rendering such opinion, Greenberg, Traurig, Hoffman, Lipoff, Xxxxx & Quentel,
P.A. may rely as to factual matters on certificates of officers and directors of
Buyers and on certificates of governmental officials.
(e) Each Buyer shall have furnished Sellers with a certified copy
of all necessary corporate action on its behalf approving its execution,
delivery and performance of this Agreement.
(f) All notices required to be given in connection with the
transactions contemplated by this Agreement shall have been duly and timely
given.
(g) This Agreement and the Merger shall have been approved and
adopted by the vote of each of the Buyers' shareholders as required under
applicable laws.
(h) All proceedings to be taken by Buyers in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to each Seller and its counsel, and each
Seller and said counsel shall have received all such counterpart originals or
certified or other copies of such documents as it or they may reasonably
request.
8.02 CONDITIONS TO OBLIGATIONS OF BUYERS. The obligations of Buyers to
carry out the transactions contemplated by this Agreement are subject, at the
option of Magicworks, to the satisfaction, or waiver by Magicworks, of the
following conditions:
(a) All representations and warranties of Sellers contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing as if such representations and warranties were made at and as of the
Closing, except for changes contemplated by the terms of this Agreement, and the
Sellers shall have performed and satisfied in all material respects all
agreements and covenants required by this Agreement to be performed and
satisfied by Sellers at or prior to the Closing.
(b) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on behalf of any Buyer) shall be
pending or threatened before any court or governmental agency seeking to
restrain any Buyer or prohibit the Closing or seeking Damages against any Buyer
or the Company as a result of the consummation of this Agreement.
(c) All notices required to be given in connection with the
transactions contemplated by this Agreement shall have been duly and timely
given, and there shall not be any preferential purchase rights or consent
requirements with respect to the transactions contemplated by this Agreement
that have not expired or been satisfied or waived.
(d) Except for matters disclosed in SCHEDULE 5.10(A) attached
hereto, since September 30, 1996 and up to and including the Closing there shall
not have been:
29
(i) any change in the business, operations, prospects or
financial condition of the Company that had or might have a material adverse
effect on the business, operations, prospects, Assets or financial condition of
the Company; or
(ii) any damage, destruction or loss relating to the
Company (whether or not covered by insurance) that had or might have an adverse
effect on the business, operations, prospects, Assets or financial condition of
the Company.
(e) Buyers shall have received written evidence, in form and
substance satisfactory to Magicworks, of the consent to the transactions
contemplated by this Agreement of all governmental, quasi-governmental and
private third parties (including, without limitation, persons or other entities
leasing real or personal property to the Company) where the absence of any such
consent would result in a violation of law or a breach or default under any
agreement to which the Company is a party.
(f) The Buyers shall have received the opinion of the firm of
Ray, Xxxxxxx & Xxxxxxx, counsel to the Company and Sellers, dated as of the
Closing Date, addressed to the Buyers and in form and substance reasonably
satisfactory to the Buyers, to the effect set forth on EXHIBIT A hereto. In
rendering such opinion, such firm may rely as to factual matters on certificates
of officers, directors and shareholders of the Company and on certificates of
governmental officials, and as to legal matters on opinions of other counsel
reasonably acceptable to Buyers.
(g) All agreements, commitments and understandings between the
Company (on the one hand) and any Seller or Affiliate of the Company or any
Seller (on the other), shall have been terminated in all respects on terms
satisfactory to Magicworks, and all obligations, claims or entitlements
thereunder shall be unconditionally satisfied, waived and/or released by each of
the Sellers and/or such Affiliates, as applicable, and written evidence thereof
satisfactory in form and substance to Magicworks shall have been delivered to
Magicworks.
(h) All of the earnings of the Company since August 1, 1996 shall
have been retained by the Company and none of such earnings shall have been
distributed to the Shareholders.
(i) Buyers shall have received financial statements of the
Company sufficient to satisfy Magicworks's reporting obligations under the
Securities Act and the Exchange Act with respect to the transactions
contemplated hereby.
(j) This Agreement and the Merger shall have been approved and
adopted by the vote of the Company's Shareholders as required under applicable
laws and none of the Shareholders shall have exercised or perfected their rights
of appraisal under any applicable law.
30
(k) All proceedings to be taken by Sellers and the Company in
connection with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in form and substance to each Buyer and its
counsel, and each Buyer and said counsel shall have received all such
counterpart originals or certified or other copies of such documents as it or
they may reasonably request.
(m) Buyers shall have received written evidence, in form and
substance satisfactory to Magicworks, of the termination, at or prior to the
Closing, of any and all liens that encumber any of the Company's Assets.
(n) Buyers shall have received letters from Xxxxxx Xxxxxxxx LLP,
dated the Closing Date and in form and substance reasonably satisfactory to
Magicworks, to the effect that the transactions contemplated by this Agreement
qualify for "pooling of interests" treatment for financial reporting purposes
and that such accounting treatment is in accordance with GAAP.
(o) Buyers shall have received executed copies of (i) all
"affiliate" agreements required under Section 7.13 hereof, (ii) a representation
letter from each holder of Company securities who will receive Magicworks Shares
to the effect of Section 5.23 hereof, in form satisfactory to Magicworks, and
(iii) an employment agreement with each of the Sellers, in form satisfactory to
each party.
(p) All options, warrants and similar rights to purchase common
stock or other securities of the Company shall be exercised or terminated prior
to Closing.
(q) Other than with respect to assignment or change in control
provisions under the Real Property Leases, all notices required to be given in
connection with the transactions contemplated by this Agreement shall have been
duly and timely given, and there shall not be any consent requirements
specifically identified in SCHEDULE 5.05 with respect to the transactions
contemplated by this Agreement that have not expired or been satisfied or
waived.
ARTICLE IX - POST-CLOSING OBLIGATIONS
9.01 FURTHER ASSURANCES. Following the Closing, each of the Sellers and
Buyers shall execute and deliver such documents, and take such other action, as
shall be reasonably requested by any other party hereto to carry out the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, the Sellers shall use their best efforts to assist Buyers to
obtain any and all consents required under the Real Property Leases with respect
to the transactions contemplated by this Agreement.
9.02 PUBLICITY. Sellers shall not issue or make, or cause to have issued
or made, any public release or announcement concerning this Agreement or the
transactions contemplated
31
hereby, without the advance approval in writing of the form and substance
thereof by Magicworks, except as required by law.
9.03 POST-CLOSING INDEMNITY BY THE SELLERS. Subject to the provisions of
Section 11.01, from and after the Closing, each of the Sellers shall jointly and
severally indemnify and hold harmless Buyers, the Company and each of their
respective Affiliates, directors, officers and employees from and against any
and all Damages arising out of, resulting from or in any way related to (i) a
breach of, or the failure to perform or satisfy any of, the representations,
warran- ties, covenants and agreements made by either of the Sellers in this
Agreement or in any document or certificate delivered by either of the Sellers
at the Closing pursuant hereto, (ii) the occurrence of any event on or prior to
the date of Closing that is (or would be, but for any deductible thereunder)
covered by individual policies of insurance, blanket insurance policies or self
insurance programs maintained by the Company that will not cover the Company
following the Closing, (iii) the existence of any liabilities or obligations of
the Company (whether accrued, absolute, contingent, known or unknown, or
otherwise, and whether or not of a nature appropriate for inclusion in a balance
sheet in accordance with GAAP) other than the Permitted Liabilities, and (iv)
any claim that any of the Company's securities were issued or acquired in
violation of any applicable Securities Laws. Any satisfaction by the Sellers (or
either of them) of their indemnification obligations under this Section 9.03 or
Section 10.02 may be effected, in the sole discretion of Magicworks, by
Magicwork's cancellation of all or a portion of the Magicworks Shares issued to
Sellers hereunder (it being agreed that each Magicworks Share shall be deemed to
have a value for such purpose equal to the closing price per share of Magicworks
Shares on the NASDAQ National Market on the date such cancellation is effected
or, if the Magicworks Shares are not then listed on the NASDAQ National Market,
equal to the average of the closing bid and asked price per Magicworks Share on
such date (the "Share Value")).
9.04. POST-CLOSING INDEMNITY BY THE BUYERS. From and after the Closing,
each of the Buyers shall jointly and severally indemnify and hold harmless the
Sellers and each of their respective Affiliates, directors, officers and
employees from and against any and all Damages arising out of, resulting from or
in any way related to a breach of, or the failure to perform or satisfy any of,
the representations, warranties, covenants and agreements made by either of the
Buyers in this Agreement or in any document or certificate delivered by either
of the Buyers at the Closing pursuant hereto.
9.05 LIMITATION ON INDEMNIFICATION. Notwithstanding any other provision
of Sections 9.03 or 9.04, no party hereto shall have any obligation to indemnify
any other party pursuant to Section 9.03 or 9.04 unless and until the damages
incurred by such other party, individually or in the aggregate, shall exceed
$50,000, whereupon the party to be indemnified shall be entitled to seek
indemnification for the full amount of damages incurred by it, and in no event
shall the Buyers' or the Sellers' indemnification obligations pursuant to
Sections 9.03 or 9.04 exceed the aggregate Share Value of all of the Magicworks
Shares to be delivered to the Sellers pursuant hereto on the date hereof or the
most recent date prior hereto on which bid and asked prices per share of
Magicworks' common stock is available.
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9.06 ACCESS TO RECORDS.
(a) From and after the Closing, each of the Sellers shall (i)
permit each Buyer and its authorized employees, agents, accountants, legal
counsel and other representatives to have access to the books, records, files,
agreements and other information in the possession of the Sellers or their
respective Affiliates relating to the business of the Company, and (ii) use his
or her best efforts to permit each Buyer and its authorized employees, agents,
accountants, legal counsel and other representatives to have access to the
employees, counsel, accountants and other representatives of the Sellers and
their respective Affiliates, in each case to the extent and at all times
reasonably requested by Magicworks for the purpose of investigating or defending
any claim made against the Company in connection with periods ending on or
before the Closing Date.
(b) From and after the Closing, Buyer shall (i) permit the
Sellers and their authorized employees, agents, accountants, legal counsel and
other representatives to have access to the books, records, files, agreements
and other information in the possession of Buyers or any of their Affiliates,
and (ii) use their best efforts to permit the Sellers and their authorized
employees, agents, accountants, legal counsel and other representatives to have
access to the employees, counsel, accountants, engineers, and other
representatives of the Company, Buyers and their Affiliates, in each case to the
extent and at all times reasonably requested by the Sellers for the purpose of
investigating or defending any claim made against the Company or against any
Buyer for which the Sellers are responsible hereunder or for the purpose of
responding to any Internal Revenue Service audit applicable to the business of
the Company prior to Closing.
9.07 SELLERS' AGREEMENTS RE BUYERS. The Company and each Seller agrees
that for a period of three years from the date of this Agreement that neither
Seller nor any of their respective Affiliates will (nor shall either of the
Sellers assist or encourage any other person to), directly or indirectly, unless
specifically requested or consented to in writing in advance by Magicworks's
Board of Directors: (i) acquire or offer, seek, propose or agree to acquire
ownership (including, but not limited to, beneficial ownership as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of any of
Magicwork's common stock, property or any other securities issued by Magicworks,
or any rights or options to acquire such ownership or securities, other than the
Magicworks Shares to be issued to the Sellers under this Agreement, (ii) seek or
propose to influence or control the management or policies of Magicworks, or
(iii) make any public disclosure with respect to any of the foregoing.
9.08 BUYERS' AGREEMENTS RE SELLERS.
(a) Through May 1998, funds from ticket sales from the Salt Lake
City broadway subscription series shall be under the direct oversight of the
Chief Executive Officer of Magicspace and shall be used for expenses related to
the Theater League of Utah or shall be invested in a conservative manner.
33
(b) The profit sharing plan currently maintained by the Company
shall remain in effect through December 31, 1997.
ARTICLE X - TAX MATTERS
10.01 REPRESENTATIONS AND OBLIGATIONS REGARDING TAXES. Each of the
Sellers jointly and severally represents and warrants to and agrees with the
Buyers as follows:
(a) Except as set forth in SCHEDULE 10.01(a), (i) all returns and
reports, including without limitation, information and withholding returns and
reports ("Tax Returns") of or relating to any foreign, federal, state or local
tax assessment or other governmental charge (all herein referred to collectively
as "Taxes" or singularly as a "Tax") that are required to be filed by or with
respect to the income, business, operations or property of the Company have been
duly and timely filed, (ii) all items of income, gain, loss, deduction and
credit or other items required to be included in such Tax Returns have been so
included, (iii) all information provided in such Tax Returns is true, correct
and complete, (iv) all Taxes that have become due with respect to the taxable
years covered by such Tax Returns have been timely paid in full, (v) no penalty,
interest or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax, and (vi) all withholding
Tax requirements imposed on the Company for all taxable periods have been
satisfied in full in all respects.
(b) There is no claim against the Company with respect to any
Taxes and no assessment, deficiency or adjustment has been asserted or proposed
with respect to any Tax Return of or with respect to the Company or either
Seller, other than those disclosed (and to which are attached true and complete
copies of all audit or similar reports) in SCHEDULE 10.01(b).
(c) Except as set forth in SCHEDULE 10.01(c), there is not in
force any extension of time with respect to the date on which any Tax Return of
or with respect to the Company or either Seller is due to be or have been filed,
or any waivers or agreements by or with respect to the Company or either Seller
of or for any extension of time for the assessment or payment of any Tax.
(d) Except as set forth in SCHEDULE 5.08(b), the total amounts
set up as liabilities for Taxes in the Financial Statements are sufficient to
cover the payment of all Taxes, including any penalties or interest thereon and
whether or not assessed or disputed, which are, or are hereafter found to be, or
to have been, due with respect to the conduct of the business of the Company for
the taxable periods covered thereby.
(e) The consummation of the Merger will not result in any Tax
liability to the Surviving Corporation or any Buyer arising from the business
operations of the Company prior to the Merger.
34
(f) The Company has not at any time consented to have the
provisions of section 341(f)(2) of the Code apply with respect to a sale of its
stock.
(g) None of the Shareholders nor the Company has taken or will
take any action which could result in a deemed election under section 338 of the
Code with respect to the Merger.
(h) The Sellers shall allow each Buyer or its designees access at
all reasonable times to all of their books and records (including tax workpapers
and returns and correspondence with tax authorities) insofar as they relate to
the operations of the Company, including the right to take extracts therefrom
and make copies thereof, to the extent such books and records relate to taxable
periods ending on or prior to or that include the Closing Date. Buyers shall (i)
allow Sellers access at all reasonable times to all of the Company's books and
records (including tax workpapers and returns and correspondence with tax
authorities), including the right to take extracts therefrom and make copies
thereof, to the extent that such books and records relate to taxable periods
ending on or prior to or that include the Closing Date, and (ii) otherwise
cooperate with the Sellers in connection with any audit of Taxes that relate to
the business of the Company prior to Closing.
(i) The Company has been duly qualified as, and has maintained at
all times since its organization, a valid "S" corporation status under the Code.
(j) After the Closing Date, the individual Shareholders shall
prepare and file Federal "S" corporation income Tax Returns (and, if applicable,
State income Tax Returns) on behalf of the Company reflecting all items of
income, gain, loss, deduction or other items required to be included in such Tax
Returns for the periods prior to the Closing Date (collectively, the "Short-Year
Tax Returns"). All income Taxes due with respect to the Short- Year Tax Returns
shall be borne by the Shareholders. The Short-Year Tax Returns shall be subject
to approval by Magicworks, which approval shall not be unreasonably withheld or
delayed.
(k) Notwithstanding the foregoing, any Tax assessed against the
value of Assets owned by the Company for the taxable period that includes the
Closing Date shall be borne by Sellers (and paid by Sellers to Magicspace at or
after Closing for payment by Magicspace to the applicable taxing authority when
due) to the extent of the amount determined by multiplying the amount of such
Tax for the entire taxable year by a fraction, the numerator of which is the
number of days in such taxable period up to an including the Closing Date, and
the denominator of which is the total number of days in such taxable period.
35
10.02 INDEMNIFICATION FOR TAXES.
(a) Each of the Sellers hereby jointly and severally indemnifies
each Buyer and the Company (each herein sometimes referred to as an "Indemnified
Taxpayer") against, and agrees to protect, save and hold harmless each
Indemnified Taxpayer from, any and all claims, damages, deficiencies, losses
(including Taxes, interest and penalties) and all expenses, including attorneys'
and accountants' fees and disbursements (all herein referred to as "Losses")
resulting from:
(i) A claim by any taxing authority for (A) any Taxes of
the Company allocable to any period ending on or prior to the Closing Date, and
(B) any Taxes of the Sellers or any corporation that is or was a member of an
affiliated group of corporations of which the Company was a member for any
period ending on or prior to the Closing Date;
(ii) A claim by any taxing authority for any Taxes of the
Company arising from or occasioned by any transaction contemplated by this
Agreement, including, but not limited to, the Merger; or
(iii) Any misrepresentation or breach of any warranty or
obligation set forth in this Article X.
(b) Subject to the resolution of any Tax contest pursuant to
Section 10.02(c), upon notice from any Buyer to the Sellers that an Indemnified
Taxpayer is entitled to an indemnification payment for a Loss pursuant to
Section 10.02(a), the Sellers shall thereupon jointly and severally pay to the
Indemnified Taxpayer an amount that, net of any Taxes imposed on the Indemnified
Taxpayer with respect to such payment, will indemnify and hold the Indemnified
Taxpayer harmless from such Loss.
(c) (i) If a claim shall be made by any taxing authority that, if
successful, would result in the indemnification of an Indemnified Taxpayer, the
Indemnified Taxpayer shall promptly notify the Sellers in writing of such fact.
(ii) The Indemnified Taxpayer shall take such action in
connection with contesting such claim as the Sellers shall reasonably request in
writing from time to time; provided that (A) within 30 days (or such earlier
date that any payment of Taxes is due by the Indemnified Taxpayer) after the
notice described in (i) above has been delivered, the Sellers request that such
claim be contested, (B) the Sellers shall have agreed to pay to the Indemnified
Taxpayer on demand all costs and expenses that the Indemnified Taxpayer may
incur in connection with contesting such claim, including, without limitation,
reasonable attorneys' and accountants' fees and disbursements, and (C) if the
Indemnified Taxpayer is requested to pay the Tax claimed and xxx for a refund,
the Sellers shall have advanced to the Indemnified Taxpayer, on an interest free
basis, the amount of such claim. In the case of any such claim referred to
above, the Indemnified Taxpayer shall not make payment of such claim for at
least 30 days (or
36
such shorter period as may be required by applicable law) after the giving of
the notice required by (i) above, shall give to the Sellers any information
reasonably requested relating to such claim and otherwise shall cooperate with
the Sellers in good faith in order to contest effectively any such claim.
(iii) Subject to the provisions of paragraph (ii) above,
the Indemnified Taxpayer shall prosecute such contest to a determination in a
court of initial jurisdiction, and if the Sellers shall request, the Indemnified
Taxpayer shall prosecute such contest to a determination in an appellate court.
(iv) If, after actual receipt by the Indemnified Taxpayer
of an amount advanced by the Sellers pursuant to paragraph (ii)(C) above, the
extent of the liability of the Indemnified Taxpayer with respect to the
indemnified matter shall be established by the final judgment or decree of a
court or a final or binding settlement with an administrative agency having
jurisdiction thereof, the Indemnified Taxpayer shall promptly pay to the Sellers
any refund received by or credited to the Indemnified Taxpayer with respect to
the indemnified matter (together with any interest paid or credited thereon by
the taxing authority and any recovery of legal fees from such taxing authority).
Notwithstanding the foregoing, the Indemnified Taxpayer shall not be required to
make any payment hereunder before such time as the Sellers shall have made all
payments or indemnities then due with respect to Indemnified Taxpayer pursuant
to this Article X.
(d) Anything to the contrary in this Agreement notwithstanding,
the indemnification obligations of the Sellers under this Article X shall
survive the Closing and any applicable statutes of limitations.
Notwithstanding any other provision of this Section 10.02, the
Sellers shall have no obligation to indemnify Buyers pursuant to this Section
10.02, unless and until the damages incurred by Buyers, shall exceed $50,000,
whereupon the Buyers shall be entitled to seek indemnification for the full
amount of damages incurred by it.
ARTICLE XI - REGISTRATION RIGHTS
11.01 (a) Magicworks shall register all of the Magicworks Shares
acquired by Sellers pursuant hereto for resale through a registration statement
filed with the Securities and Exchange Commission as soon as practicable
following the Closing. Magicworks may delay its obligation to register such
Shares until Magicworks has met all applicable requirements to enable it to file
a "shelf" registration statement on Form S-3 and under Rule 415 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"); PROVIDED,
however, that if Magicworks has not otherwise registered all of the Magicworks
Shares acquired by Sellers pursuant hereto for resale on or before January 1,
1998, it shall as soon as practicable thereafter prepare and file with the
Securities and Exchange Commission a registration statement covering such Shares
on whatever
37
form of registration statement Magicworks is then able to use, and shall use its
best efforts to obtain the rapid and complete effectiveness of such registration
statement. Magicworks shall maintain the effectiveness of whatever registration
statement it files pursuant to this Section 11.01 for a period of two years or
for whatever period of time remains before Sellers can resell their Magicworks
Shares into the public market without restriction under Rule 144 promulgated
under the Securities Act or its then existing corollary.
(b) The Shareholders shall indemnify and hold harmless
Magicworks, each director of Magicworks, each officer of Magicworks who shall
sign such Registration Statement and any person who controls Magicworks within
the meaning of the Securities Act, with respect to any untrue statement or
omission from such Registration Statement or final prospectus contained therein
or any amendment or supplement thereto, if such untrue statement or omission was
(i) made in reliance upon and in conformity with information furnished to
Magicworks by the Shareholder for use in the preparation of such Registration
Statement, final prospectus or amendment or supplement or (ii) contained in any
Registration Statement which was utilized by the Shareholder or any controlling
person or affiliate of the Shareholder after the Shareholder was notified, in
accordance with Section 12.05 hereof, that such Registration Statement contained
an untrue statement of a material fact or omitted to state any material fact.
Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in this Section
11, such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party, give written notice to the latter of such claim
and/or the commencement of such action. In case any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate in and assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party shall be responsible for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, provided that if any indemnified party shall have reasonably
concluded that there may be one or more legal defenses available to such
indemnified party which conflict in any material respect with those available to
the indemnifying party, or that such claim or litigation involves or could have
an effect upon matters beyond the scope of the indemnity agreement provided in
this Section 11, such indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party and such indemnifying
party shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which are reasonably related to the matters
covered by the indemnity agreement provided in this Section 11. The indemnifying
party shall not make any settlement of any claims indemnified against thereunder
without the written consent of the indemnified party or parties, which consent
shall not be unreasonably withheld.
(c) Magicworks shall indemnify and hold harmless Shareholders,
with respect to any untrue statement or omission from such Registration
Statement or final prospectus
38
contained therein or any amendment or supplement thereto, if such untrue
statement or omission was contained in any Registration Statement which was
utilized by Magicworks or any controlling person or affiliate of Magicworks
after Magicworks was notified, in accordance with Section 12.05 hereof, that
such Registration Statement contained an untrue statement of a material fact or
omitted to state any material fact.
(d) Notwithstanding the other provisions of this Agreement,
Magicworks shall not be obligated to register the Shares of the Shareholders if,
in the opinion of counsel to Magicworks, the sale or other disposition of the
Shareholders' Shares may be effected without registering such Shares under the
Securities Act. Magicwork's obligations under this Section 11 are also expressly
conditioned upon the Shareholders furnishing to Magicworks in writing such
information concerning the Shareholders and the Shareholders' controlling
persons and the terms of the Shareholders' proposed offering of Shares as
Magicworks shall reasonably request for inclusion in the Registration Statement.
ARTICLE XII - MISCELLANEOUS
12.01 LIMITATION ON LIABILITY.
(a) The representations, warranties, agreements and indemnities
of the Sellers set forth in this Agreement or in connection with the
transactions contemplated hereby shall survive the Closing except as expressly
provided in Section 12.01(b).
(b) All representations and warranties of the parties contained
in this Agreement shall expire, terminate and be of no force and effect (or
provide the basis for any claim) and no party shall have any obligation to
indemnify any other party hereunder unless written notice of any indemnifiable
claim resulting from any breach thereof is received prior to the second
anniversary of the Closing Date; provided, however, that (i) with respect to
claims resulting from a breach of any representation or warranty contained in
Article X (a "Tax Claim"), written notice of any such Tax Claim must be received
prior to the expiration of the statutory period during which any taxing
authority may bring a claim against the Company or Buyers for Taxes which are
the subject of any such Tax Claim, and (ii) with respect to any claim relating
to a breach of the representations and warranties set forth in Section 5.03 or
with respect to any claim pursuant to Section 11.01(d) hereto, no such time
limitations shall be applicable.
(c) For purposes of this Section 12.01(d), a party making a claim
for indemnity under this Section 11 is hereinafter referred to as an
"Indemnified Party" and the party against whom such claim is asserted is
hereinafter referred to as the "Indemnifying Party". All claims by any
Indemnified Party under Section 11 hereof shall be asserted and resolved in
accordance with the following provisions. If any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party is asserted against
or sought to be collected from such Indemnified Party by such third party, said
Indemnified Party shall with reasonable promptness
39
notify in writing the Indemnifying Party of such claim or demand stating with
reasonable specificity the circumstances of the Indemnified Party's claim for
indemnification; provided, however, that any failure to give such notice will
not waive any rights of the Indemnified Party except to the extent the rights of
the Indemnifying Party are actually prejudiced or to the extent that any
applicable period set forth in Section 12.01(b) has expired without such notice
being given. After receipt by the Indemnifying Party of such notice, then upon
reasonable notice from the Indemnifying Party to the Indemnified Party, or upon
the request of the Indemnified Party, the Indemnifying Party shall defend,
manage and conduct any proceedings, negotiations or communications involving any
claimant whose claim is the subject of the Indemnified Party's notice to the
Indemnifying Party as set forth above, and shall take all actions necessary,
including but not limited to the posting of such bond or other security as may
be required by any Governmental Authority, so as to enable the claim to be
defended against or resolved without expense or other action by the Indemnified
Party. Upon request of the Indemnifying Party, the Indemnified Party shall, to
the extent it may legally do so and to the extent that it is compensated in
advance by the Indemnifying Party for any costs and expenses thereby incurred,
(i) take such action as the Indemnifying Party may
reasonably request in connection with such action,
(ii) allow the Indemnifying Party to dispute such action
in the name of the Indemnified Party and to conduct a defense to such action on
behalf of the Indemnified Party, and
(iii) render to the Indemnifying Party all such
assistance as the Indemnifying Party may reasonably request in connection with
such dispute and defense.
12.02 CONFIDENTIALITY.
(a) Prior to the Closing, each Buyer shall, and shall cause its
Affiliates and its and their employees, agents, accountants, legal counsel and
other representatives and advisers to, hold in strict confidence all, and not
divulge or disclose any, information of any kind concerning the Company and its
business; provided, however, that the foregoing obligation of confidence shall
not apply to (i) information that is or becomes generally available to the
public other than as a result of a disclosure by any Buyer or its Affiliates or
any of its or their employees, agents, accountants, legal counsel or other
representatives or advisers, (ii) information that is or becomes available to a
Buyer or its Affiliates or any of its or their employees, agents, accountants,
legal counsel or other representatives or advisers on a nonconfidential basis
prior to its disclosure by a Buyer or its Affiliates or any of its or their
employees, agents, accountants, legal counsel or other representatives or
advisers and (iii) information that is required to be disclosed by a Buyer or
its Affiliates or any of its or their employees, agents, accountants, legal
counsel or other representatives or advisers as a result of any applicable law,
rule or regulation of any Governmental Authority; and provided further that
Buyers shall promptly notify the Sellers of any disclosure pursuant to clause
(iii) of this Section 12.02(a); and, provided, further, that the
40
foregoing obligation of confidence shall not apply to the furnishing of
information by a Buyer in bona fide discussions or negotiations with prospective
lenders as long as the Buyer first obtains from such prospective lenders an
undertaking of confidentiality to the effect of this Section 12.02(a).
(b) Each of the Company and the Sellers shall, and shall cause
his or her Affiliates (including the Company) and the Company's other
shareholders and their employees, agents, accountants, legal counsel and other
representatives and advisers to, hold in strict confidence all, and not divulge
or disclose any, information of any kind concerning the transactions
contemplated by this Agreement, the Company, any Buyer or their businesses;
provided, however, that the foregoing obligation of confidence shall not apply
to (i) information that is or becomes generally available to the public other
than as a result of a disclosure by a Seller or his or her Affiliates or any of
his or their employees, agents, accountants, legal counsel or other
representatives or advisers, (ii) information that is or becomes available to
such Seller or his or her Affiliates or any of his or their employees, agents,
accountants, legal counsel or other representatives or advisers after the
Closing on a nonconfidential basis prior to its disclosure by such Seller or his
Affiliates or any of his or their employees, agents, accountants, legal counsel
or other representatives or advisers and (iii) information that is required to
be disclosed by such Seller or his Affiliates or any of his or their employees,
agents, accountants, legal counsel or other representatives or advisers as a
result of any applicable law, rule or regulation of any Governmental Authority;
and provided further that such Seller shall promptly shall notify Buyers of any
disclosure pursuant to clause (iii) of this Section 12.02(b). In addition, the
Company and Sellers hereby acknowledge that they are aware of the restrictions
imposed by federal securities laws on persons possessing material non-public
information with respect to SEC reporting companies and agree that neither
Sellers nor any of their Affiliates (including the Company) will effect any
transactions in the stock of Magicworks without compliance with such laws.
12.03 BROKERS. Regardless of whether the Closing occurs, (i) each Seller
shall jointly and severally indemnify and hold harmless the Buyers and the
Company from and against any and all liability for any brokers or finders' fees
arising with respect to brokers or finders retained or engaged by the Company or
any of the Sellers in respect of the transactions contemplated by this Agreement
and (ii) each Buyer shall indemnify and hold harmless Sellers from and against
any and all liability for any brokers' or finders' fees arising with respect to
brokers or finders retained or engaged by a Buyer in respect of the transactions
contemplated by this Agreement.
12.04 COSTS AND EXPENSES. Each of the parties to this Agreement shall
bear its own expenses incurred in connection with the negotiation, preparation,
execution and closing of this Agreement and the transactions contemplated
hereby.
12.05 NOTICES. Any notice, request, instruction, correspondence or other
document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in
41
writing and delivered personally or mailed by registered or certified mail,
postage prepaid and return receipt requested, or by telecopier, as follows:
Either or both of BUYERS: Magicworks Entertainment Incorporated
Magicspace Corporation
000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telecopy No. (000) 000-0000
WITH A COPY TO:
Greenberg, Traurig, Hoffman, Lipoff,
Xxxxx & Quentel, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxx
Telecopy No. (000) 000-0000
Either or Both of SELLERS: Space Agency, Inc.
000 X. 000xx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxx
WITH A COPY TO:
A. Xxxxxx Xxxxxx, Esq.
Ray, Xxxxxxx & Xxxxxxx
00 Xxxxx Xxxx Xxxxxx
000 Xxxxxxx Xxxxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Telecopy No. (000) 000-0000
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, notices to any party hereto shall not
be deemed effective with respect to such party until such
42
Notice would, but for this sentence, be effective both as to such party and as
to all other persons to whom copies are provided above to be given.
12.06 NO SHOP. The Sellers shall not, and shall cause the Company and
the other Shareholders, their respective officers, directors, employees and
other agents, not to, directly or indirectly (x) take any action to solicit or
initiate any Acquisition Proposal (as hereinafter defined), or (y) continue,
initiate or engage in negotiations concerning any Acquisition Proposal with, or
disclose any non-public information relating to the Company, or afford access to
the properties, books or records of the Company to, any corporation,
partnership, person or other entity (except the Buyers and their
representatives) that may be considering or has made an Acquisition Proposal, or
(z) enter into any agreement or take any action that by its terms or effect
could reasonably be expected to affect adversely the ability of any parties
hereto to consummate the transactions contemplated hereby. The term "Acquisition
Proposal" as used herein means any offer or proposal for, or indication of
interest in, any acquisition of the Company, whether by way of a merger,
consolidation or other business combination involving any equity interest in, or
a substantial portion of the assets of, the Company or the acquisition of any
capital stock of the Company.
12.07 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida, without regard to any
conflict of law, rule or principle that would give effect to the laws of another
jurisdiction. In the event that any dispute shall arise with respect to this
Agreement, then such disagreement shall be submitted for resolution to
arbitration in Cleveland, Ohio in accordance with the rules of the American
Arbitration Association then in effect. The non-prevailing party in such
arbitration shall pay all reasonable fees and expenses of the prevailing party,
including fees and expenses of counsel for the prevailing party.
12.08 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of each of the parties to this Agreement shall be deemed to have been
made, and the certificates delivered pursuant to clause (iv) of Section 4.02 and
clause (i) of Section 4.03 by a party are agreed to and shall be deemed to
constitute the making of such representations and warranties, again at and as of
the Closing by and on behalf of the party on behalf of whom such certificates
are delivered.
12.09 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together
with all exhibits and schedules attached hereto, constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
43
12.10 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party, provided, however, that nothing herein shall prohibit the assignment of
Buyer's rights to any Buyer's lender. Nothing in this Agreement, express or
implied, is intended to confer upon any person or entity other than the parties
hereto and their respective permitted successors and assigns, any rights,
benefits or obligations hereunder.
12.11 REMEDIES. The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy by any party hereto shall not
preclude or constitute a waiver of its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights and remedies
a party may have by law, statute, or otherwise.
12.12 INTEREST ON OVERDUE PAYMENTS. If any amount payable under this
Agreement is not paid when due, the amount unpaid shall bear interest from the
due date to the actual date of payment calculated and compounded at a rate equal
to the lesser of (i) an annual rate equal to five percent plus the commercial
annual borrowing rate quoted from time to time during the applicable time period
by NationsBank of Florida, National Association, as its "prime" or "reference"
rate of interest, or (ii) the maximum lawful interest rate permitted under
applicable law.
12.13 EXHIBITS AND SCHEDULES. The exhibits and schedules referred to
herein are attached hereto and incorporated herein by this reference. Disclosure
of a specific item in any one schedule shall be deemed restricted only to the
Section to which such disclosure specifically relates except where (i) there is
an explicit cross-reference to another Schedule, and (ii) a Buyer could
reasonably be expected to ascertain the scope of the modification to a
representation intended by such cross-reference.
12.14 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.15 REFERENCES. Whenever required by the context, and is used in this
Agreement, the singular number shall include the plural and pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural, as the identification the person may require. The parties
hereto recognize that references to the "prime" or "reference" rate of
NationsBank of Florida, National Association, take into account the fact that
such rate is set by said bank as a general reference rate of interest, taking
into account such factors as said bank may deem appropriate, it being understood
that many of said bank's commercial or other loans are priced in relation to
such rate, that it is not necessarily the lowest or best rate actually charged
to any customer, and that said bank may make various commercial or other loans
at rates of interest having no relationship to such rate. References to monetary
amounts, specific named
44
statutes and generally accepted accounting principles are intended to be and
shall be construed as references to United States dollars, statutes of the
United States of the stated name and United States generally accepted accounting
principles, respectively, unless the context otherwise requires.
12.16 SURVIVAL. Any provision of this Agreement which contemplates
performance or the existence of obligations after the Closing Date, and any and
all representations and warranties set forth in this Agreement, shall not be
deemed to be merged into or waived by the execution and delivery of the
instruments executed at the Closing, but shall expressly survive Closing and
shall be binding upon the party or parties obligated thereby in accordance with
the terms of this Agreement, subject to any limitations expressly set forth in
this Agreement.
12.17 ATTORNEYS' FEES. In the event any arbitration, suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding.
ARTICLE XIII - DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article XIII or elsewhere in this Agreement.
13.01 AFFILIATE. The term "Affiliate" shall mean, with respect to any
Person, any other Person controlling, controlled by or under common control with
such Person. The term "Control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any Person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person.
13.02 ASSETS.
(a) The term "Assets" shall mean, with respect to the Company,
all of the Properties, Contracts and Permits, that were Used by such Company as
of September 30, 1996 and those Used by the Company at any time after that date
until the Closing Date, and shall include without limitation the following:
(i) the Company's leasehold interests pursuant to the
Real Property Leases summarized on SCHEDULE 5.14;
45
(ii) the material tangible property and fixtures
described in SCHEDULE 13.02(ii);
(iii) the Contracts set forth on SCHEDULE 5.14 and the
Permits set forth in SCHEDULE 13.02(iii);
(iv) the trademarks, trademark registrations, trademark
applications, service marks, service xxxx registrations, service xxxx
applications, trade names specified in SCHEDULE 5.13(c) and the Contracts for
the licensing of the same to or from third parties, including, but not limited
to, the other proprietary rights and Contracts described in SCHEDULE 5.13(c);
(v) the trade secrets, know-how, formulas, processes and
other intangible Properties, and Contracts for the licensing of the same to or
from a third party, set forth in SCHEDULE 5.13(C);
(vi) any and all cash and other liquid assets, including
but not limited to accounts receivable, on hand at the Closing.
13.03 COLLATERAL AGREEMENTS. The term "Collateral Agreements" shall mean
the Registration Rights Agreement and any and all other agreements, instruments
or documents required or expressly provided under this Agreement to be executed
and delivered in connection with the transactions contemplated by this
Agreement.
13.04 CONTRACTS. The term "Contracts", when described as being those of
or applicable to any Person, shall mean any and all contracts, agreements,
franchises, understandings, arrangements, leases, licenses, registrations,
authorizations, easements, servitudes, rights of way, mortgages, bonds, notes,
guaranties, liens, indebtedness, approvals or other instruments or undertakings
to which such Person is a party or to which or by which such Person or the
property of such Person is subject or bound, excluding any Permits.
13.05 DAMAGES. The term "Damages" shall mean any and all damages,
liabilities, obligations, penalties, fines, Judgments, claims, deficiencies,
losses, costs, expenses and assessments (including without limitation income and
other taxes, interest, penalties and attorneys' and accountants' fees and
disbursements).
13.06 FINANCIAL STATEMENTS. The term "Financial Statements" shall mean
any or all of the financial statements, including balance sheets and related
statements of income, cash flow, shareholders equity and the accompanying notes
thereto, of the Company prepared in accordance with generally accepted
accounting principles consistently applied, except as may be otherwise provided
herein.
46
13.07 GOVERNMENTAL AUTHORITIES. The term "Governmental Authorities"
shall mean any nation or country (including but not limited to the United
States) and any commonwealth, territory or possession thereof and any political
subdivision of any of the foregoing, including but not limited to courts,
departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
13.08 KNOWLEDGE. The term "Knowledge" shall mean the actual knowledge of
either of the parties to which such term relates or any of the directors,
officers or managerial personnel of the parties to which such term relates with
respect to the matter in question, and all knowledge with respect to such matter
that any of the parties to which such term relates or any of the directors,
officers or managerial personnel of such party reasonably should have obtained
upon due investigation and inquiry into the matter in question.
13.09 LEGAL REQUIREMENTS. The term "Legal Requirements", when described
as being applicable to any Person, shall mean any and all laws (statutory,
judicial or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees or awards of, and any Contracts with, any
Governmental Authority, in each case as and to the extent applicable to such
Person or such Person's business, operations or Properties.
13.10 PERMITS. The term "Permits" shall mean any and all permits, legal
status, orders or Contracts under any Legal Requirement or otherwise granted by
any Governmental Authority.
13.11 PROPERTIES. The term "Properties" shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible).
13.12 REGULATIONS. The term "Regulations" shall mean any and all
regulations promulgated by the Department of the Treasury pursuant to the Code.
13.13 USED. The term "Used" shall mean, with respect to the Properties,
Contracts or Permits of the Company, those owned, leased, licensed or otherwise
held by the Company which were acquired for use or held for use by the Company
in connection with its business and operations, whether or not reflected on the
Company's books of account.
EXECUTED as of the date first written above.
BUYERS:
Magicworks Entertainment Incorporated
By:
---------------------------------------
Xxxx Xxxxxxxx, Co-Chairman of the Board
and Chief Executive Officer
47
Magicspace Corporation
By:
---------------------------------------
Xxxx Xxxxxxxx, President
SELLERS:
-------------------------------------------
Xxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxx
COMPANY:
Space Agency, Inc.
By:
---------------------------------------
Xxxx X. Xxxxxxx
President
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