EXHIBIT 10.9
NOTE ESCROW AGREEMENT
AGREEMENT made as of the 30th day of July, 1996, by and among
MAGICWORKS ENTERTAINMENT INCORPORATED and its successor by merger (the
"Issuer"), CAPITAL GROWTH INTERNATIONAL, L.L.C. (the "Placement Agent"), as
agent for the holders of the Notes (as defined below) and STERLING NATIONAL BANK
& TRUST COMPANY OF NEW YORK, a national banking association with offices at 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or any successor escrow agent
appointed in accordance with the terms hereof (the "Note Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Issuer proposes to offer (the "Offering") for sale,
through the Placement Agent and pursuant to a Confidential Private Placement
Memorandum dated June 6, 1996 (as may be supplemented or amended from time to
time), certain securities of the Issuer in the form of units (the "Units"),
which Units will include, among other securities, an unsecured senior
convertible note (each, a "Note");
WHEREAS, the Notes provide that, on each of the Principal Escrow
Payment Dates (as defined in the Note), the Issuer shall irrevocably deposit
into escrow an amount equal to the Principal Escrow Payments due on such
Principal Escrow Payment Date as provided in the Note and summarized in the
Information Sheet attached hereto; and
WHEREAS, the Issuer and the Placement Agent propose to establish an
escrow account with the Note Escrow Agent in connection with the Offering and
the Note Escrow Agent is willing to establish such escrow account on the terms
and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. INFORMATION SHEET. Each capitalized term not otherwise defined in
this Agreement shall have the meaning set forth for such term on the information
sheet which is attached to this Agreement and is incorporated by reference
herein and made a part hereof (the "Information Sheet").
2. ESTABLISHMENT OF THE PRINCIPAL ESCROW ACCOUNT.
2.1 The parties hereto shall establish an interest bearing escrow
account at the Trust Department of the Note Escrow Agent bearing the designation
"Principal Escrow Account".
2.2 On or before each of the following dates (the "Principal Escrow
Payment Dates"), the Company shall (a) send a notice, substantially in the form
attached hereto as EXHIBIT A, to the Note Escrow Agent, with a copy to the
Placement Agent, of the principal amount of each Note then outstanding and the
amount of the Principal Escrow Payment due on such Principal Escrow Payment Date
and (b) irrevocably deposit in the Principal Escrow Account the following cash
amounts (the "Principal Escrow Payments") to secure the Company's obligation to
pay principal on the Notes outstanding on July 30, 2001 (the "Maturity Date"):
PRINCIPAL ESCROW PAYMENTS DUE
(REPRESENTED AS A PERCENT OF THE
AGGREGATE PRINCIPAL AMOUNT OF
NOTES OUTSTANDING ON SUCH PRINCIPAL
PRINCIPAL ESCROW PAYMENT DATES ESCROW PAYMENT DATE)
Seven payment dates commencing on the first business day following the third
anniversary of the first closing of the Offering and every ninety days
thereafter, provided that such day is a business day, otherwise on the first
business day
following each such date......................................... 10.714286%
The Company's obligations under this Section 2 shall survive until the Notes are
no longer outstanding. The Note Escrow Agent shall not be required to accept any
amounts for deposit in such Escrow Account prior to its receipt of the notice
described in this Section 2.2.
3. DEPOSITS IN THE ESCROW ACCOUNT.
3.1 All amounts received from the Company shall be deposited in the
Principal Escrow Account, which amount will be in the form of checks, cash, or
wire transfers representing the payment of money.
3.2 Amounts deposited in the Principal Escrow Account which have
cleared the banking system and have been collected by the Note Escrow Agent for
the payment of principal are sometimes referred to herein as the "Principal
Funds."
2
4. DISBURSEMENTS FROM THE PRINCIPAL ESCROW ACCOUNT.
4.1. The Note Escrow Agent will hold the Principal Escrow Payments in
the Principal Escrow Account until the Maturity Date, on which date, the Note
Escrow Agent shall use the Principal Funds in the Principal Escrow Account to
make payments of principal in accordance with the terms of the Notes. Not later
than three (3) business days before the Maturity Date, the Company will deliver
to the Note Escrow Agent, with a copy to the Placement Agent, an Officers'
Certificate signed by the Chairman or a Co-Chairman of the Board of Directors,
the President or the Chief Executive Officer and by the Chief Financial Officer
of the Company specifying the respective principal amounts due on the Notes
outstanding on the Maturity Date. The Escrow Agent shall, without any further
authorization by the Company, subject to Section 5 hereof, make such payments of
principal on the Notes directly to the respective Holders at each such Holder's
respective address, which addresses, and such other information as is necessary
to satisfy any reporting requirements, shall be delivered to the Escrow Agent by
the Company within five (5) business days after each closing of the Offering and
updated promptly thereafter by the Company. The Note Escrow Agent may rely upon
such certification and shall have no responsibility to verify the contents
thereof.
4.2. Upon disbursement of the Principal Funds in the Principal Escrow
Account pursuant to the terms of this Section 4, the Note Escrow Agent shall be
relieved of all further obligations and released from all liability under this
Agreement with respect to its obligation under this Section 4. It is expressly
agreed and understood that in no event shall the aggregate amount of payments
made by the Note Escrow Agent with respect to the Principal Funds exceed the
amount of such Principal Funds.
5. EVENTS OF PREPAYMENT OR CONVERSION.
5.1. Except for Notes previously converted in accordance with the terms
thereof, all, but not less than all, of the outstanding principal amount of the
Notes, together with accrued but unpaid interest thereon, may be prepaid by the
Company in accordance with Section 4 thereof. Within three (3) business days
after the Company mails a notice of prepayment to the holders of the Notes, the
Company shall send such prepayment notice to the Note Escrow Agent, with a copy
to the Placement Agent, which notice shall include the Prepayment Price (as
defined in the Notes) payable to each of such holders. Not later than five (5)
business days before the prepayment date, the Company shall deposit in the
Principal Escrow Account cash equal to the amount sufficient to prepay all of
the then outstanding Notes, considering that any amounts in the Principal Escrow
Account may, at the direction of the Company, be applied toward the Prepayment
Price. The Note Escrow Agent shall, on the prepayment date set forth in the
Company's notice of prepayment, use the Principal Funds to pay to each Holder of
outstanding Notes their respective Prepayment Price in accordance with the terms
of the notice of prepayment.
5.2. If the Notes are not prepaid by the Company in accordance with
Section 5.1 above and Section 4 of the Notes, each Holder has the option, at any
time prior to the Maturity Date, to convert all, but not less than all, of the
principal amount of such Holder's
3
Notes and accrued but unpaid interest thereon into shares of the Company's
Common Stock, pursuant to Section 6 of the Notes. Within five (5) business days
after conversion of any Note, the Company shall send a notice to the Note Escrow
Agent, with a copy to the Placement Agent, together with a copy of the Notice of
Conversion sent by the holder. The notice shall state the name of the holder of
the Note and the amount of principal and interest converted. The Note Escrow
Agent shall be entitled to rely on such notice without independent verification
thereof. The Company's obligation to pay the principal amount and accrued but
unpaid interest on each Note converted shall, upon conversion, be discharged;
and, unless the Note Escrow Agent shall have received a notice from the
Placement Agent as agent for the Noteholders that an Event of Default under the
Notes has occurred and is continuing, any Principal Funds attributable to such
converted Note shall be applied by the Note Escrow Agent, first, to reduce the
next due Principal Escrow Payment pursuant to Section 2.2 hereof, which
reduction shall be set forth on the notice delivered to the Note Escrow Agent
pursuant to Section 2.2 hereof and, second, if any Principal Funds remain after
all the Notes are either prepaid or converted in accordance with their terms,
such remaining Principal Funds shall be returned to the Company provided that no
outstanding amounts hereunder are due to the Note Escrow Agent.
6. EVENTS OF DEFAULT. If an Event of Default shall occur and be
continuing under Section 2 of the Notes, the Placement Agent shall promptly give
notice to the Note Escrow Agent and upon receipt of such notice, the Note Escrow
Agent shall be entitled to hold the Principal Funds, or a portion thereof, in
the Principal Escrow Account pending the resolution of any uncertainty as to the
proper disbursement of the Principal Funds to the Note Escrow Agent's sole
satisfaction, by final judgment of a court of competent jurisdiction or
otherwise, provided, however, that the Note Escrow Agent shall be entitled to
rely without independent verification on any instructions received with respect
to the Principal Funds that is executed by the Company and by or on behalf of
the holders of at least 50% of the aggregate principal amount of the Notes then
outstanding; or the Note Escrow Agent, at its sole option, may deposit the
Principal Funds (and any other amounts that thereafter become part of the
Principal Funds) with the Clerk of a court of competent jurisdiction in a
proceeding to which all parties in interest are joined. Upon the deposit by the
Note Escrow Agent of the Principal Funds with the Clerk of any court, the Note
Escrow Agent shall be relieved of all further obligations and released from all
liability hereunder.
7. RIGHTS, DUTIES AND RESPONSIBILITIES OF NOTE ESCROW AGENT.
It is understood and agreed that the duties of the Note Escrow Agent are purely
ministerial in nature, and that:
7.1 The Note Escrow Agent shall not be responsible for or be required
to enforce any of the terms or conditions of the Notes or of any agreement
between the Placement Agent and the Issuer nor shall the Note Escrow Agent be
responsible for the performance by the Issuer of its obligations under the
Notes, or by the Placement Agent or the Issuer of their respective obligations
under this Agreement.
7.2 The Note Escrow Agent shall be under no duty or responsibility to
enforce collection of any check delivered to it hereunder.
4
7.3 The Note Escrow Agent shall be entitled to rely upon the accuracy,
act in reliance upon the contents, and assume the genuineness, of any notice,
instruction, certificate, signature, instrument or document which is given to
the Note Escrow Agent pursuant to this Agreement whether containing original or
facsimile signatures without the necessity of the Note Escrow Agent verifying
the truth or accuracy thereof, including, without limitation, the accuracy of
the Issuer's calculations of interest and principal payments and the addresses
of the holders of the Notes as furnished by the Issuer. The Note Escrow Agent
shall not be obligated to make any inquiry as to the authority, capacity,
existence or identity of any person purporting to give any such notice or
instruction or to execute any such certificate, instrument or document.
7.4 In the event that the Note Escrow Agent shall be uncertain as to
its duties or rights hereunder or shall receive instructions with respect to the
Principal Escrow Account or the Principal Funds which, in its sole
determination, are in conflict either with other instructions received by it or
with any provisions of this Agreement, it shall be entitled to hold the
Principal Funds, or a portion thereof, in such Principal Escrow Account pending
the resolution of such uncertainty to the Note Escrow Agent's sole satisfaction,
by final judgment of a court of competent jurisdiction or otherwise; or the Note
Escrow Agent, at its sole option, may deposit the Principal Funds (and any other
amounts that thereafter become part of the Principal Funds) with the Clerk of a
court of competent jurisdiction in a proceeding to which all parties in interest
are joined. Upon the deposit by the Note Escrow Agent of the Principal Funds
with the Clerk of any court, the Note Escrow Agent shall be relieved of all
further obligations and released from all liability hereunder.
7.5. The Note Escrow Agent shall not be liable for any action taken or
omitted hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of gross negligence or willful misconduct.
The Note Escrow Agent shall be entitled to consult with counsel of its own
choosing and shall not be liable for any action taken, suffered or omitted by it
in accordance with the advice of such counsel.
7.6. The Note Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the Principal Funds or
any part of the Principal Funds or to file any financing statement under the
Uniform Commercial Code with respect to the Principal Funds or any part of the
Principal Funds.
7.7. The Note Escrow Agent shall be relieved from its obligations
hereunder to make any payment of principal on the Notes if the Issuer shall have
defaulted on its obligations to deposit funds with the Note Escrow Agent
sufficient to make such payments pursuant to Sections 2 and 5 hereof until such
default is cured.
8. AMENDMENT; RESIGNATION; TERMINATION. This Agreement may be altered
or amended only with the written consent of the Issuer, the Placement Agent and
the Note Escrow Agent. The Note Escrow Agent may resign and be discharged from
its duties and obligations hereunder by giving notice of such resignation to the
Issuer and the Placement Agent, specifying the date upon which such resignation
shall take effect; provided, however, that such date shall be not less than 20
days from the date of such notice and provided
5
further, that in the event a successor Note Escrow Agent shall not have been
appointed by such resignation date, the Note Escrow Agent shall deposit the
Principal Funds (and any other amounts that thereafter become part of the
Principal Funds) with the Clerk of any New York State or federal court sitting
in New York County, New York (any such court a "New York Court") in a proceeding
to which all parties in interest are joined. Upon the deposit by the Note Escrow
Agent of the Principal Funds a New York Court, the Note Escrow Agent shall be
relieved of all further obligations and released from all liability hereunder.
The Issuer and the Placement Agent shall also have the right, by mutual
agreement, to terminate the appointment of the Note Escrow Agent hereunder by
giving to it notice of such termination, specifying the date upon which such
termination shall take effect and designating a successor Note Escrow Agent. In
any such event, the Issuer and the Placement Agent shall, by mutual agreement,
reasonably approve and designate a successor Note Escrow Agent to such resigning
or terminated Note Escrow Agent. Upon demand of a successor Note Escrow Agent,
all property in the Principal Escrow Account shall be turned over and delivered
to such successor Note Escrow Agent who shall, thereupon, be bound by all of the
provisions hereof. Without limiting the provisions of Section 10 hereof, the
resigning Note Escrow Agent upon submission of proper documentation, shall be
entitled to be reimbursed by the Issuer for any expenses incurred in connection
with its resignation, transfer of the Principal Funds to a successor escrow
agent or distribution of the Principal Funds pursuant to this Section 8.
9. REPRESENTATIONS AND WARRANTIES. The Issuer hereby represents
and warrants to the Note Escrow Agent that:
9.1 To the best of its knowledge, no party other than the parties
hereto and the Noteholders have, or shall have, any lien, claim or security
interest in the Principal Funds or any part of the Principal Funds.
9.2 To the best of its knowledge, no financing statement under the
Uniform Commercial Code is on file in any jurisdiction claiming a security
interest in or describing (whether specifically or generally) the Principal
Funds or any part of the Principal Funds.
9.3 All of the information contained in the Information Sheet is, as of
the date hereof, and will be, at the time of any disbursement of the Principal
Funds, true and correct in all material respects.
9.4 The information contained in any notice given pursuant to Sections
2.2, 5.1 or 5.2 hereof shall be true and correct in all material respects on the
date such notice is given and on the date any funds are disbursed pursuant to
such notice, and that all of the information contained in any certificate given
under this Agreement shall be true and correct in all material respects on the
date such certificate is given and on the date any funds are disbursed pursuant
to such certificate.
10. FEES AND EXPENSES. The Note Escrow Agent shall be entitled
to the Note Escrow Agent Fee set forth on the Information Sheet, payable upon
execution of this Agreement. In addition, the Issuer agrees to reimburse, upon
submission of proper
6
documentation, the Note Escrow Agent for any reasonable expense incurred in
connection with this Agreement.
11. INDEMNIFICATION AND CONTRIBUTION.
11.1 The Issuer (the "Indemnitor") agrees to indemnify the Note Escrow
Agent and its officers, directors, employees, agents and shareholders (jointly
and severally the "Indemnitees") against, and hold them harmless of and from,
any and all loss, liability, cost, damage and expense, including without
limitation, reasonable counsel fees, which the Indemnitees may suffer or incur
by reason of any action, claim or proceeding brought against the Indemnitees
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates, unless such action, claim or proceeding is the
result of the willful misconduct or gross negligence of the Indemnitees.
11.2 If the indemnification provided for in this Section 11 is
applicable, but for any reason is held to be unavailable, the Indemnitor shall
contribute such amounts as are just and equitable to pay, or to reimburse the
Indemnitees for, the aggregate of any and all losses, liabilities, costs,
damages and expenses, including reasonable counsel fees, actually incurred by
the Indemnitees as a result of or in connection with, any amount paid in
settlement of, any action, claim or proceeding arising out of or relating in any
way to any actions or omission of the Indemnitor.
11.3 The provisions of this Section 11 shall survive any termination of
this Agreement, whether by disbursement of the Principal Funds, resignation of
the Note Escrow Agent or otherwise.
12. GOVERNING LAW AND ASSIGNMENT. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York and shall be
binding upon the parties hereto and their respective successors and assigns;
provided, however, that any assignment or transfer by any party of its rights
under this agreement or with respect to the Principal Funds shall be void as
against the Note Escrow Agent unless:
(a) written notice thereof shall be given to the Note
Escrow Agent; and
(b) the Note Escrow Agent shall have consented in
writing to such assignment or transfer.
The Note Escrow Agent hereby acknowledges notice of the merger (the
"Merger") of the Issuer with and into Shadow Wood Corporation, a Delaware
corporation ("Shadow Wood"), pursuant to which Shadow Wood will succeed to all
the rights and obligations of the Issuer, including those under the Notes and
under this Agreement. The Note Escrow Agent hereby consents to the Merger and is
authorized to accept and act upon any and all notices, certificates and other
communications from Shadow Wood, which will be renamed Magicworks Entertainment
Incorporated, as if such notices, certificates and communications were submitted
by the Issuer.
7
13. NOTICES. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express Mail
service offered by the United States Post Office, or by any overnight delivery
service, or by facsimile if confirmation of such transmission is received by the
sender thereof, and addressed, if to the Issuer or the Placement Agent, at their
respective addresses set forth on the Information Sheet, and if to the Note
Escrow Agent, at its address set forth above, to the attention of the Trust
Department.
14. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
15. EXECUTION IN SEVERAL COUNTERPARTS. This Agreement may be
executed in several counterparts or by separate instruments and all of such
counterparts and instruments shall constitute one agreement, binding on all of
the parties hereto.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings (written or oral) of the
parties in connection herewith.
8
IN WITNESS WHEREOF, the undersigned have executed this Note Escrow
Agreement as of the day and year first above written.
STERLING NATIONAL BANK & TRUST
COMPANY OF NEW YORK
By:
-------------------------------------
Name:
Title:
MAGICWORKS ENTERTAINMENT
INCORPORATED
By:
-----------------------------------
Xxxx Xxxxxxxx
Co-Chairman of the Board and
Chief Executive Officer
By:
------------------------------------
Xxx Xxxxxxxx
President and Chief Operating Officer
CAPITAL GROWTH INTERNATIONAL,
L.L.C., as agent for the holders of the Notes
By:
-------------------------------------
Xxxxxxx X. Xxxxxx
Senior Vice President
9
STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK
ESCROW AGREEMENT INFORMATION SHEET
1. THE ISSUER
Name: Magicworks Entertainment Incorporated and its
successor by merger
Address: 000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxx, Xxxxxxx 00000
State of incorporation or organization: Florida
2. THE PLACEMENT AGENT
Name: Capital Growth International, L.L.C.
Address: 000 Xxxxxxxxx Xxxx, 0xx Xxxxx, Xxxxxxxxx,
Xxxxxxxxxxx 00000
State of incorporation or organization: Delaware
3. THE NOTES
Rate of Interest: 10% per annum
Maturity Date: July 30, 2001
Principal Escrow Payment Dates: July 30, 1999 and every
ninety days thereafter,
provided that such day is
a business day
Principal Escrow Payments: 10.714286% of the aggregate
principal amount of Notes
outstanding on each such
Principal Escrow Payment
Date.
4. THE PRINCIPAL ESCROW ACCOUNT
Title of the Principal Escrow Account: "SNB f/b/o Magicworks
Entertainment Incorporated Note Holders' Principal Account"
Branch address where the Escrow Accounts are to be
established: New York
5. NOTE ESCROW AGENT FEE
Principal Account Escrow Fee:
(a) $2,500 upon execution of this Agreement; and
(b) $4,000 on the Maturity Date.
10
EXHIBIT A
For Principal Escrow Payment Date: ____________________________ , 199_
NOTEHOLDER NAME AND ADDRESS PRINCIPAL AMOUNT OUTSTANDING PRINCIPAL ESCROW PAYMENT
TOTALS $____________________
Less principal previously
deposited with Note Escrow
Agent with respect to any
converted Note: $(___________________)
Total $____________________
====================
Dated: ________________________ , 19_
MAGICWORKS ENTERTAINMENT INCORPORATED
By:
------------------------------------
Name:
Title:
11
