TBA ENTERTAINMENT CORPORATION
000 Xxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxx Xxxxxx, Xxxxxxxxx 00000
March 6, 1998
SFX Entertainment, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Re: Acquisition by SFX Entertainment, Inc., a Delaware corporation (the
"Company"), of one hundred percent (100%) of the outstanding equity
interests in New Avalon, Inc. and TBA Media, Inc. (collectively d/b/a
Avalon Attractions), Xxxxxx Xxxxxxx Amphitheater and West Coast
Amphitheater Corp. (singularly, a "Target Entity" and collectively,
the "Target Entities") owned by TBA Entertainment Corporation
(through its wholly owned subsidiary AWC Acquisition Corp.) (the
"Seller"), which equity interests represent fifty-one percent (51%)
of the outstanding equity of each of the Target Entities
Gentlemen:
This letter agreement (the "Letter Agreement") is intended to set forth
the agreement between the Seller and the Company on the terms set forth herein
and in the definitive Acquisition Agreement (as hereinafter defined)
contemplated hereby regarding the Company's acquisition of one hundred percent
(100%) of the equity interests in the Target Entities owned by Seller, which
equity interests represent fifty-one percent (51%) of the outstanding equity
of each of the Target Entities. Contemporaneously with the executive of this
Letter Agreement, the Company's acquisition of the remaining forty-nine percent
(49%) of the equity interests in the Target Entities owned severally by Xxxxxx
& Xxxx, Inc., Xxxxxx Xxxxxxx, Inc., Peach Street Partners, Ltd., Xxxxxx X.
Xxxxxx, Xxxxxx Xxxxxxxxxxx and Xxxxx X. Xxxxxx (collectively, the "Other
Sellers"; Seller and the Other Sellers may hereinafter collectively be referred
to as the "Sellers").
Subject to the conditions set forth herein, the Company and the Seller
agree as follows:
1. The Company or an affiliate thereof (the "Buyer") will purchase (the
"Acquisition") from the Seller (i) a fifty-one percent (51%) partnership
interest in Xxxxxx Xxxxxxx Amphitheater, a California general partnership ("IMA
Partners"), and (ii) fifty-one percent (51%) of the capital stock or other
equity interests in each of New Avalon, Inc., a California corporation, TBA
Media, Inc., a California corporation and West Cost Amphitheater Corp., a
California corporation. The Buyer shall have the right to require that the
Seller terminate any contract between a Target Entity and an affiliate of any
Target entity or of Seller prior to the closing and the Buyer shall have no
liability with respect to such termination.
SFX Entertainment, Inc.
March 6, 1998
Page 2
2. The aggregate purchase price (the "Purchase Price") payable to the
Sellers as a group for the acquisition of the outstanding equity interests in
the Target Entities and the covenants not to compete will be $28,000,000, plus
Sellers' substantiated third-party out-of-pocket costs and expenses (excluding
any internal allocations of costs and expenses to any affiliated company or
person) incurred in connection with the development of the Camarillo Creek
Amphitheater, all of such costs and expenses currently reflected in the
existing construction budget for Camarillo Creek Amphitheater. The Purchase
Price payable to Seller shall be payable in multiple installments: (i)
$27,000,000 minus the consideration paid to the Other Sellers pursuant to the
acquisition agreement contemplated in the Second Letter Agreement (other than
any consideration paid the Other Sellers on May 15, 1998 as a result of the
completion of construction of the Camarillo Creek Amphitheater and any
reimbursement paid the Other Sellers of substantiated third-party out-of-
pocket costs and expenses incurred in connection with the development of the
Camarillo Creek Amphitheater) in cash by wire transfer or certified or
cashier's check at closing, (ii) an amount at closing equal to all
substantiated costs and expenses of Seller, as set forth above, in the
development of Camarillo Creek Amphitheater and paid by Seller prior to
closing, (iii) an amount equal to all substantiated costs and expenses of
Seller, as set forth above, in the development of the Camarillo Creek
Amphitheater and paid by Seller after closing, within thirty (30) days of
submission of such substantiation to Buyer in a form reasonably acceptable to
Buyer, and (iv) $500,000 in cash by wire transfer or certified or cashier's
check on May 15, 1998, in the event that the construction of the Camarillo
Creek Amphitheater by the Company has been completed pursuant to construction
plans and the Company has commenced producing entertainment events in such
amphitheater.
3. The agreement relating to the Acquisition (the "Acquisition Agreement")
shall contain: (i) customary representations and warranties for a transaction
of the proposed nature of the Acquisition including, but not limited to,
representations and warranties regarding (a) Authorization and Binding
Obligation; (b) Taxes; (c) Real Property (including land use and zoning
issues); (d) Contracts; (e) Environmental Matters; (f) Financial Statements;
(g) Personnel Information; (h) Litigation; (i) Compliance with Laws; (j) State
of Title to Assets and Real Property; and (k) Organization and Standing; (ii)
covenants as to the operation of the entities comprising the Target Entities in
the normal course in accordance with good commercial practice and the prior
established practices of the Seller, including but not limited to (a)
maintenance of insurance as appropriate and in accordance with past practices;
(b) preservation of the business relations of the entities comprising the
Target Entities, both contractual and otherwise, with suppliers, customers,
employees and patrons; and (c) the required maintenance of the Target
Entities' physical assets in accordance with governmental regulations and
sound commercial practices; (iii) provisions for the survival of all
representations for a reasonable period after closing (except for
environmental, tax and employment related representations and warranties which
shall survive until the expiration of any applicable statute of limitations
including any voluntary extensions thereof); (iv) customary indemnifications
from the operations of the Seller prior to the closing to Buyer from the Seller
and from the operations of the Buyer after the closing to the Seller from the
Buyer, each of which indemnifications shall not be triggered until at least
$50,000 of claims have accrued; and (v) a provision regarding the proration of
expenses and revenue as of the closing.
SFX Entertainment, Inc.
March 6, 1998
Page 3
4. The Acquisition Agreement will obligate the Seller to deliver at
closing, among other things, all necessary consents to the Acquisition so that
the Company shall enjoy the same benefits of ownership of the Target Entities
as the Seller currently enjoys, and shall condition the closing of the
Acquisition upon, among other things, (i) the continued truth and accuracy of
the representations and warranties contained in the Acquisition Agreemeent;
(ii) the maintenance of the businesses of the Target Entities free of material
adverse damage or change; (iii) the conduct of the business of the Target
Entities in accordance with present practices; (iv) delivery of customary
legal opinions including, without limitation, a zoning opinion (unless Seller
provides a zoning endorsement to title coverage by Seller's title insurance
company") including, without limitation, public assembly issues; (v) delivery
of consolidated audited financial statements for 1995, 1996 and 1997 from
Xxxxxx Xxxxxxxx & Co.; (vi) ability to obtain, at standard rates, leasehold
title insurance and delivery by the Target Entities of mortgagee's title
insurance; and (vii) termination of any Xxxx/Xxxxx-Xxxxxx
Act waiting periods, if applicable.
5. During the period from the date this letter is signed (the "Signing
Date") until the closing, Seller will afford the Buyer full and free access to
the properties, contracts, books and records and all other documents and data
of the Seller relating to the Target Entities so that Buyer can complete its
under diligence examinations of the Target Entities (including environmental and
engineering reviews).
6. At the Closing, the Buyer will assume the existing employment
agreements with each of Xxxxx X. Xxxxxx, dated January 1, 1998, Xxxxx Xxxxxx,
dated January 1, 1998. The Buyer and the other parties thereto will amend such
contracts effective at closing to provide cash incentive compensation and
equity-based incentive compensation commensurate with executives of similar
responsibility in the Company.
7. By executing this Letter Agreement, the Company confirms to the
Seller that it has the financial ability to consummate the Acquisition as
provided for herein or it has the ability to obtain financing for the
Acquisition on terms and conditions satisfactory to the Company. In the event
that the Acquisition is not consummated on or before March 26, 1998, through no
fault of the Seller or the Other Sellers (with "fault" including material
misrepresentations of the Seller or the Other Sellers in the negotiation of
this Letter Agreement and the Acquisition Agreement) (subject to extension for
the sole purpose of obtaining required regulatory approvals), (i) the Company
shall pay to the Seller on such date an amount in cash equal to $1,500,000 and
(ii) the Company shall cause Pavilion Partners, a Delaware general partnership
("Pavilion"), to enter into an amendment to that certain Partnership Agreement
for Western Amphitheater Partners (the "WAP Agreement"), among Pavilion and IMA
Partners, providing that effective as of March 26, 1998, the provisions of (i)
Section 14.01 thereof restricting the right of IMA Partners to sell the Xxxxxx
Xxxxxxx Amphitheater, (ii) Section 14.02 thereof offering a second right of
refusal to Pavilion to purchase the partnership interests of IMA Partners, and
(iii) Article 18 thereof restricting the right of IMA Partners to transfer its
interest in Western Amphitheater Partners, shall terminate and shall no longer
be of any force and effect against IMA Partners or its partners.
SFX Entertainment, Inc.
March 6, 1998
Page 4
8. For the two (2) year period beginning on the date of closing of the
Acquisition, without the prior written consent of the Company, the Seller shall
not, directly or indirectly, either itself or through affiliates, (i) develop,
construct, operate or manage venues within the greater Los Angeles, California
area which shall include, but no be limited to, Los Angeles, Ventura and Santa
Xxxxxxx counties, (ii) conduct business operations resulting in aggregate annual
gross revenue from the production or promotion of "at risk" music or concert
productions or promotions in the greater Los Angeles, California area which
exceeds $10,000,000, or (iii) develop, construct, operate or manage a venue in
Portland, Oregon.
9. From the Signing Date to the closing of the Acquisition, the Seller
covenants and agrees that neither it nor any Target Entity shall authorize or
knowingly permit any officer, director, shareholder or employee of, or any
investment banker, attorney, accountant or other representative retained by,
any Target Entity or Seller to make, solicit, initiate, encourage or respond to
a submission of a proposal or offer from any person or entity (other than the
Company or Buyer) relating to any liquidation, dissolution, recapitalization,
merger, consolidation, acquisition or purchase of all or a material portion of
the assets of any Target Entity, or the outstanding equity interests of any
Target Entity, or other similar transaction or business combination involving
any Target Entity (hereinafter collectively referred to as a "Third Party
Offer"). The Sellers will immediately cease and cause to be terminated any
contracts or negotiations currently pending with respect to Third Party Offers,
if any.
10. For the two (2) year period beginning on the date of closing of
the Acquisition, Seller may not, on its own behalf or on behalf of any other
person, partnership, association, corporation, or other entity, hire or solicit
any employee of any Target Entity, or any affiliate thereof, who is an employee
of a Target Entity, or any affiliate thereof, subsequent to the closing of the
Acquisition (an "Employee") or in any manner attempt to influence or induce any
Employee to leave the employment of a Target Entity; provided, however,
nothing in this paragraph 10 shall prevent the Seller from hiring, or
soliciting to hire, any Employee who is terminated by a Target Entity, or any
affiliate thereof, during such two (2) year period. The Company acknowledges
that certain general and administrative employees of the Target Entities may
terminate their employment prior to the closing of the Acquisition. Prior to
the closing, Seller and the Company shall reasonably determine which employees
of the Target Entities shall remain employees of the Target Entities and which
shall be reassigned to other affiliates of Seller.
11. From the Signing Date until the closing of the Acquisition, no
Target Entity may, unless approved in writing by the Company, which approval
shall not be unreasonably withheld, enter into any contract with a value in
excess of $50,000.00 (except artist's agreements) or with a term in excess of
one (1) year. If the Company does not notify the Target Entity of its approval
or disapproval of any matter submitted for its approval pursuant to this
paragraph 11 within three (3) business days after its receipt of a request for
approval, the matter shall have been deemed to have been approved by the
Company.
SFX Entertainment, Inc.
March 6, 1998
Page 5
12. The Seller, in conjunction with the Other Sellers, has delivered
to the Company the financial statements of the Target Entities as attached on
Exhibit "A" attached hereto (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepting
accounting principles consistently applied throughout the periods covered
thereby and present fairly the financial condition of each of the Target
Entities as of the dates for which they were prepared, and the results of
operations and changes in financial position for such periods.
13. The Company acknowledges that the Seller owns the outstanding
equity of Avalon Entertainment Group, Inc., a Tennessee corporation, which
corporation conducts business under its own name and under the name
"Warner/Avalon", a joint venture with Warner Custom Music Corp. The Company and
Seller agree that upon the closing of the Acquisition, the Company and the
Target Entities will be entitled to continue to operate the businesses of the
Target Entities under their respective names and that Seller, Avalon
Entertainment Group, Inc. and Warner/Avalon will be entitled to continue to
operate their respective businesses under their respective names.
14. Except as set forth in the next five sentences, this Letter
Agreement constitutes a binding agreement between the parties hereto as to the
matters set forth above and will inure to the benefit of the parties and their
respective successors. The execution of this Letter Agreement has been approved
by all necessary corporate action by the Company. Seller submits this Letter
Agreement as evidence of its agreement to the terms set forth herein subject
to approval hereof by its Board of Directors. This Letter Agreement shall not
be binding on Seller until approved by its Board of Directors. Seller submitted
the form of this Letter Agreement to its Board of Directors on February 26,
1998. Should the Board of Directors of TBA Entertainment Corporation fail to
approve the terms and provisions of this Letter Agreement on or before March 20,
1998, the Company may, by notice to Seller, rescind and revoke this Letter
Agreement, without payment or liability, in its sole and absolute discretion.
This letter Agreement contemplates, however, that the parties will negotiate in
good faith and enter into a mutually acceptable definitive Acquisition
Agreement which set forth, among other things, the provisions described in
paragraphs 1 through 13 above. The parties hereto agree to use their best
efforts to close the Acquisition on or prior to March 23, 1998, subject to
extension for the sole purpose of obtaining required regulatory approvals. The
parties hereto agree to cooperate each with the other to expeditiously obtain
such regulatory approvals.
15. Except as otherwise provided herein, this Letter Agreement may be
amended or modified only by a writing executed by all of the parties.
16. The obligations of the Company to close the Acquisition is
conditioned upon the simultaneous closing of the acquisition of the remaining
forty-nine percent (49%) equity interests in the Target Entities from the Other
Sellers as contemplated in the Second Letter Agreement. Should such closings
not occur simultaneously, or should the requirement that both closing occur
simultaneously not be waived by the Company, the Company shall have no
obligation under this Letter Agreement or the Acquisition Agreement
contemplated hereby.
SFX Entertainment, Inc.
March 6, 1998
Page 6
Prior to the consummation of the transactions contemplated herein, no
party hereto shall make any public release, statement or communication of any
information regarding, or otherwise disclose any information with respect to,
the matters contemplated herein except (i) that a press release in conformity
with SEC disclosure requirements, in a form previously approved by Seller,
shall be issued by the Company and/or Seller if deemed necessary, (ii) that the
parties hereto shall continue such communications with directors, employees,
customers, suppliers, franchisees, lenders, lessors, shareholders, partners and
other particular groups as may be legally required or necessary or appropriate
and not inconsistent with the best interests of the other parties for the
proper consummation of the transactions contemplated herein, and (iii) as
required by law.
Please sign and date this letter in the space provided below to
confirm your understandings and agreements as set forth in this Letter Agreement
and return the signed copy thereof to the undersigned by fax to Xxxxxx Xxxxxxx
Xxxxxx III at (000)000-0000 and by return mail to 000 Xxxxxxxx Xxxxxxxxxx Xxx,
Xxxxxxx Xxxxxx, Xxxxxxxxx 00000. If agreed to, the parties shall proceed in
good faith and with collective best efforts to enter into a mutually acceptable
Acquisition Agreement and other related documents.
Each of the Company on the one hand and the Seller on the other hand
will be solely responsible for and bear all of their respective expenses,
including, without limitations, expenses of legal counsel, accountants and other
advisors, incurred at any time in connection with all negotiations and efforts
to enter into the Acquisition Agreement and any other related agreement and the
transactions contemplated thereby. This Letter Agreement may be executed in
counterparts, each of which shall be deemed an original, and such counterparts
shall constitute but one and the same letter.
If this Letter Agreement is accepted, all parties agree to cooperate
promptly and negotiate in good faith in preparation of the Acquisition
Agreement and all other documents to effect this transaction. If the parties
fail to agree on the terms and conditions of the Acquisition Agreement or there
is any other dispute or controversy between the parties with respect to or
arising under this Letter Agreement or any amendment or modification hereof
which has not been resolved within thirty (30) days from the date hereof, such
dispute shall be resolved by arbitration in New York City in accordance with the
Rules for Commercial Arbitration of the American Arbitration's Association
before a panel of three (3) arbitrators, one appointed by the Company, one
appointed by the Seller, and the third appointed by said association. In such
event, the parties shall have the right to submit examples of ordinary and
customary agreements of the nature of the agreements under dispute to the
arbitration panel for review together with this Letter Agreement. The decision
and judgment or order may be entered thereon by any court of competent
jurisdiction and that decision and judgment or order may include termination of
negotiations and this Letter Agreement and specific performance, it being agreed
that the parties prefer specific performance. The service of any notice,
process, motion or other document in connection with any arbitration under this
Letter Agreement or the enforcement of any arbitration award hereunder may be
effectuated either by personal service upon a party or by certified mail duly
addressed to him or it, or to his or its executors, administrators, personal
representatives, successors or assigns, at the last known address or addresses
of such party or parties.
SFX Entertainment, Inc.
March 6, 1998
Page 7
Sincerely yours,
TBA ENTERTAINMENT CORPORATION
By: /s/ Xxxxxx Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxxx Xxxxxx III, Chairman
CONSENTED TO AND AGREED TO FOR PURPOSES OF PARAGRAPH 6 HEREOF:
/s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxxx
------------------------------------
Xxxx Xxxxx
AGREED TO AND ACCEPTED THIS
DAY OF MARCH , 1998:
---
SFX ENTERTAINMENT, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
SFX Entertainment, Inc.
March 6, 1998
Page 8
Jointly in by the undersigned to evidence its consent to the
Acquisition and its waiver of its rights under Section 14.02 of the WAP
Agreement.
PAVILION PARTNERS
By: SM/PACE, INC.
By:/s/ Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
DB980620015
030998 v8
000-0000-0
