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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 29, 1997
(October 14, 1997)
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THE MARQUEE GROUP, INC.
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(Exact name of registrant as specified in charter)
Delaware 0-21711 13-3878295
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
888 Seventh Avenue 37th Floor, New York, New York 10019
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 728-2000
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N/A
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITIONS OR DISPOSITIONS OF ASSETS
Acquisition of ProServ
On October 14, 1997, The Marquee Group, Inc. (the "Company")
consummated its acquisition of all of the outstanding stock of ProServ, Inc.
and ProServ Television, Inc. (collectively, "ProServ"), an established
provider of international sports event management, television production,
marketing and consulting services (the "ProServ Acquisition"). The aggregate
purchase price for ProServ was approximately $10.8 million in cash and 250,000
shares of the Company's common stock. The shares of ProServ were purchased
from Donald Dell, the chairman and chief executive officer of ProServ, William
Allard, the president and chief operating officer of ProServ, and certain
other shareholders. The Company also repaid approximately $2.4 million of the
outstanding indebtedness of ProServ. The Company used a portion of the
proceeds of its public offering, which was consummated on the same date (the
"Offering"), to finance the acquisition of ProServ and the repayment of such
debt.
In connection with the ProServ Acquisition, the Company entered into
employment agreements with Mr. Dell, Mr. Allard, and certain other officers of
ProServ, and appointed Mr. Dell and Mr. Allard to the Company's Board of
Directors. Mr. Dell's employment agreement provides that he will serve as the
chairman and chief executive officer of ProServ for an initial term of three
years, subject to extension under certain circumstances, for an annual base
salary of not less than $300,000 plus certain incentive based bonuses. Mr.
Allard's employment agreement provides that he will serve as president, chief
operating officer and managing director of ProServ through December 31, 2000
for an annual base salary of $300,000 plus certain incentive based bonuses.
Acquisition of QBQ
On October 14, 1997, the Company also consummated its acquisition of
substantially all of the assets of QBQ Entertainment, Inc. ("QBQ"), a company
that books tours and appearances for a variety of entertainers (the "QBQ
Acquisition"). The aggregate purchase price for QBQ was approximately $3.1
million in cash, $1.6 million in annual installments payable over eight years
and up to $2.5 million payable in shares of Common Stock, of which shares
relating to $500,000 are held in escrow and subject to forfeiture if certain
financial performance tests are not met.
In connection with the QBQ Acquisition, the Company entered into an
employment agreement with Dennis Arfa, who was the founder, chief executive
officer and sole shareholder of QBQ. Mr. Arfa's employment agreement provides
that he will serve as chairman, president and chief executive officer of QBQ
through October 1, 2002 for an annual base salary of not less than $200,000
plus certain incentive based bonuses.
ITEM 5. OTHER EVENTS
Consummation of Public Offering
On October 14, 1997, the Company consummated its public offering of
7.5 million shares of the Company's common stock, par value $0.01 per share,
at $5.00 per share. The net proceeds to the Company after deducting the
underwriting discount and commissions and other expenses of the Offering was
approximately $34.4 million. The Offering was underwritten by Prudential
Securities Incorporated and Cowen & Company pursuant to an Underwriting
Agreement among the Company and Prudential Securities Incorporated and Cowen &
Company, as representatives of the underwriters, dated October 7, 1997.
Repayment of Bridge Facility with Huff
On October 14, 1997, the Company used a portion of the proceeds from
the Offering to repay approximately $10.6 million of borrowings, including
accrued interest, pursuant to a loan agreement with The Huff Alternative
Income Fund, L.P. (the "Bridge Facility"). The Company's borrowings under the
Bridge Facility were made in order to fund the purchase of approximately 4.0
million of the Company's outstanding warrants in the Company's recently
completed tender offer.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND
EXHIBITS
(a) Financial Statements of Business Acquired.
(1) The following financial statements and related documents of
ProServ are incorporated herein by reference to the Company's Final Prospectus
(File No. 333-1879), filed with the Securities and Exchange Commission on
October 8, 1997 under Rule 424(b)(4):
Report of Independent Accountants;
Consolidated Balance Sheets as of December 31, 1996 and June 30, 1997
(unaudited);
Consolidated Statements of Operations for the three years ended
December 31, 1996 and 1995 and for the six months ended June
30, 1997 and 1996 (unaudited);
Consolidated Statements of Stockholders' Equity/(Deficit) for the
years ended December 31, 1996 and 1995 and for the six
months ended June 30, 1997 and 1996 (unaudited);
Consolidated Statements of Cash Flows for the years ended December
31, 1996 and 1995 and for the six months ended June 30, 1997
and 1996 (unaudited); and
Notes to Consolidated Financial Statements.
(2) The following financial statements and related documents of QBQ
are incorporated herein by reference to the Company's Final Prospectus (File
No. 333-1879), filed with the Securities and Exchange Commission on October 8,
1997 under Rule 424(b)(4):
Report of Independent Accountants;
Balance Sheets as of December 31, 1996 and June 30, 1997 (unaudited);
Statements of Operations for the years ended December 31, 1996 and
1995 and for the six months ended June 30, 1997 and 1996
(unaudited);
Statements of Stockholder's Equity (Deficiency) for the years ended
December 31, 1996 and 1995 and the six months ended June 30,
1997 (unaudited);
Statements of Cash Flows for the years ended December 31, 1996 and
1995 and for the six months ended June 30, 1997 and 1996
(unaudited); and
Notes to Consolidated Financial Statements.
(b) Pro Forma Financial Information.
The following pro forma financial information relating to the ProServ
Acquisition and the QBQ Acquisition is incorporated herein by reference to the
Company's Final Prospectus (File No. 333-1879), filed with the Securities and
Exchange Commission on October 8, 1997 under Rule 424(b)(4):
Unaudited Pro Forma Condensed Combined Statement of Operations Year
Ended December 31, 1996; Unaudited Pro Forma Condensed Combined
Statement of Operations Six Months Ended June 30, 1997; and Unaudited
Pro Forma Condensed Combined Balance Sheet June 30, 1997.
(c) Exhibits.
10.1 Underwriting Agreement, dated October 7, 1997, among The Marquee
Group, Inc. and Prudential Securities Incorporated and Cowen &
Company, as Representatives of the several underwriters.
10.2 Employment Agreement, dated October 14, 1997, between The Marquee
Group, Inc. and Donald Dell.
10.3 Employment Agreement, dated July 18, 1997, between The Marquee Group,
Inc. and William Allard.
10.4 Employment Agreement, dated October 14, 1997, between The Marquee
Group, Inc. and Dennis Arfa.
10.5 Press Release, dated October 14, 1997.
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99.1 Financial Statements of ProServ, Inc. and subsidiaries (incorporated
herein by reference to The Marquee Group, Inc.'s Final Prospectus
(File No. 333-1879) filed with the Securities and Exchange Commission
on October 8, 1997 under Rule 424(b)(4)).
99.2 Financial Statements of QBQ Entertainment, Inc. (incorporated herein
by reference to The Marquee Group, Inc.'s Final Prospectus (File No.
333-1879) filed with the Securities and Exchange Commission on
October 8, 1997 under Rule 424(b)(4)).
99.3 Pro Forma Financial Information (incorporated herein by reference to
The Marquee Group, Inc.'s Final Prospectus (File No. 333-1879) filed
with the Securities and Exchange Commission on October 8, 1997 under
Rule 424(b)(4)).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
THE MARQUEE GROUP, INC.
By: /s/ Jan E. Chason
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Name: Jan E. Chason
Title: Chief Financial Officer
and Treasurer
Date: October 29, 1997
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The Marquee Group, Inc.
7,500,000 Shares
Common Stock
UNDERWRITING AGREEMENT
October 7, 1997
PRUDENTIAL SECURITIES INCORPORATED
COWEN & COMPANY
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Dear Sirs:
The Marquee Group, Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement with the several underwriters named in Schedule
1 hereto (the "Underwriters"), for whom you have been duly authorized to act
as representatives (in such capacities, the "Representatives"), as set forth
below.
1. Securities. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the several Underwriters an
aggregate of 7,500,000 shares (the "Firm Securities") of the Company's Common
Stock, par value $.01 per share ("Common Stock"). The Company also proposes to
issue and sell to the several Underwriters not more than 1,125,000 additional
shares of Common Stock if requested by the Representatives as provided in
Section 3 of this Agreement. Any and all shares of Common Stock to be
purchased by the Underwriters pursuant to such option are referred to herein
as the "Option Securities", and the Firm Securities and any Option Securities
are collectively referred to herein as the "Securities".
Simultaneously with closing on the Firm Securities by the
Underwriters, the Company will acquire the Acquired Subsidiaries (as
hereinafter defined), the consideration for which will be a combination of
cash and shares of the Company's Common Stock as described in the Registration
Statement (as hereinafter defined).
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the several Underwriters
that (it being understood that in making its representations and warranties
with respect to the Acquired Subsidiaries (as hereinafter defined), the
Company has relied on the representations and warranties provided
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to it in the Purchase and Sale Agreement, dated June 25, 1997 by and among
ProServ, Inc., ProServ Television, Inc., Donald Dell and the Company (the
"ProServ Agreement"), and the Asset Purchase Agreement, dated July 2, 1997, by
and among QBQ Entertainment, Inc., Marquee Music, Inc., Dennis Arfa and the
Company (the "QBQ Agreement," and together with the ProServ Agreement, the
"Acquisition Agreements") and any exceptions to the representation and
warranties contained in the Acquisition Agreements shall be deemed to be
included in the applicable representation or warranty contained in this
Agreement):
(a) A registration statement on Form SB-2 (File No. 333-31879) with
respect to the Securities, including a prospectus subject to completion, has
been filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and
one or more amendments to such registration statement may have been so filed.
After the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (A) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Securities, that shall identify the
Preliminary Prospectus (as hereinafter defined) that it supplements containing
such information as is required or permitted by Rules 434, 430A and 424(b)
under the Act or (B) if the Company does not rely on Rule 434 under the Act, a
prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed, in
such registration statement), with such changes or insertions as are required
by Rule 430A under the Act or permitted by Rule 424(b) under the Act, and in
the case of either clause (i)(A) or (i)(B) of this sentence as have been
provided to and approved by the Representatives prior to the execution of this
Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the
Act, an amendment to such registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and approved by
the Representatives prior to the execution of this Agreement. The Company may
also file a related registration statement with the Commission pursuant to
Rule 462(b) under the Act for the purpose of registering certain additional
Securities, which registration shall be effective upon filing with the
Commission. As used in this Agreement, the term "Original Registration
Statement" means the registration statement initially filed relating to the
Securities, as amended at the time when it was or is declared effective,
including all financial schedules and exhibits thereto and including any
information omitted therefrom pursuant to Rule 430A under the Act and included
in the Prospectus (as hereinafter defined); the term "Rule 462(b) Registration
Statement" means any registration statement filed with the Commission pursuant
to Rule 462(b) under the Act (including the Registration Statement and any
Preliminary Prospectus or Prospectus incorporated therein at the time such
Registration Statement becomes effective); the term "Registration Statement"
includes both the Original Registration Statement and any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus" means each
prospectus subject to completion filed with such registration statement or any
amendment thereto (including the prospectus subject to completion, if any,
included in the Registration Statement or any amendment thereto at the time it
was or is declared effective); the term "Prospectus" means:
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(A) if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus
identified therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the Act, the
prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act; or
(C) if the Company does not rely on Rule 434 under the Act and if no
prospectus is required to be filed pursuant to Rule 424(b) under the
Act, the prospectus included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference herein to the "date" of a Prospectus
that includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or suspending
use of any Preliminary Prospectus. When any Preliminary Prospectus was filed
with the Commission it (i) contained all statements required to be stated
therein in accordance with, and complied in all material respects with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. When the Registration Statement or any amendment thereto was or is
declared effective, it (i) contained or will contain all statements required
to be stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. When the Prospectus
or any Term Sheet that is a part thereof or any amendment or supplement to the
Prospectus is filed with the Commission pursuant to Rule 424(b) (or, if the
Prospectus or part thereof or such amendment or supplement is not required to
be so filed, when the Registration Statement or the amendment thereto
containing such amendment or supplement to the Prospectus was or is declared
effective) and on the Firm Closing Date and any Option Closing Date (both as
hereinafter defined), the Prospectus, as amended or supplemented at any such
time, (i) contained or will contain all statements required to be stated
therein in accordance with, and complied or will comply in all material
respects with the requirements of, the Act and the rules and regulations of
the Commission thereunder and (ii) did not or will not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The foregoing provisions of this
paragraph (b) do not apply to statements or omissions made in any Preliminary
Prospectus, the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein.
(c) If the Company has elected to rely on Rule 462(b) and the Rule
462(b) Registration Statement has not been declared effective (i) the Company
has filed a Rule 462(b) Registration Statement in compliance with and that is
effective upon filing pursuant to Rule
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462(b) and has received confirmation of its receipt and (ii) the Company has
given irrevocable instructions for transmission of the applicable filing fee
in connection with the filing of the Rule 462(b) Registration Statement, in
compliance with Rule 111 promulgated under the Act or the Commission has
received payment of such filing fee.
(d) The Company, each of its subsidiaries and each of the Acquired
Subsidiaries, as hereinafter defined, has been duly organized and is validly
existing as a corporation in good standing under the laws of its respective
jurisdiction of incorporation and is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of all other
jurisdictions where the ownership or leasing of its respective properties or
the conduct of its respective business requires such qualification, except
where the failure to be so qualified would not constitute a material adverse
change, or any development involving a prospective material adverse change in
the condition (financial or otherwise), management, properties, assets,
liabilities, net worth or results of the operations of the Company, any of its
subsidiaries or any of the Acquired Subsidiaries, taken as a whole (a
"Material Adverse Change"). The "Acquired Subsidiaries" shall mean the
companies set forth on Schedule 3 hereto, specifically ProServ, Inc. and its
subsidiaries (collectively, "ProServ") and QBQ Entertainment, Inc.
("QBQ").
(e) The Company, each of its subsidiaries and each of the Acquired
Subsidiaries has full power (corporate and other) to own or lease its
respective properties and conduct its respective business as described in the
Registration Statement and the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus; and the Company has full
power (corporate and other) to enter into this Agreement and to carry out all
the terms and provisions hereof to be carried out by it.
(f) The issued shares of capital stock of each of the Company's
subsidiaries and ProServ have been duly authorized and validly issued, and are
fully paid and nonassessable. The issued shares of capital stock of each of
the Company's subsidiaries are owned beneficially by the Company free and
clear of any security interests, liens, encumbrances, equities or claims,
except as provided in the Prospectus and the Preliminary Prospectus. Upon the
acquisition of ProServ (which will occur simultaneously with the closing on
the Firm Securities by the Underwriters), the issued shares of capital stock
of ProServ will be owned beneficially by the Company free and clear of any
security interests, liens, encumbrances, equities or claims, except as
provided in the Prospectus and the Preliminary Prospectus.
(g) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus under the caption
"Capitalization." All of the issued shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. The Firm Securities and the Option Securities have been duly
authorized and at the Firm Closing Date or the related Option Closing Date (as
the case may be), after payment therefor in accordance herewith, will be
validly issued, fully paid and nonassessable. No holders of outstanding shares
of capital stock of the Company are entitled as such to any preemptive or
other rights to subscribe for any of the Securities, and no holder of
securities of the Company has any right which has not been fully exercised or
waived to require the Company to register
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the offer or sale of any securities owned by such holder under the Act in the
public offering contemplated by this agreement.
(h) The capital stock of the Company conforms to the description
thereof contained in the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus.
(i) Except as disclosed in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), there are no
outstanding (A) securities or obligations of the Company, any of its
subsidiaries or the Acquired Subsidiaries convertible into or exchangeable for
any capital stock of the Company or any such subsidiary, (B) warrants, rights
or options to subscribe for or purchase from the Company or any such
subsidiary any such capital stock or any such convertible or exchangeable
securities or obligations, or (C) obligations of the Company or any such
subsidiary to issue any shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such warrants, rights or
options, except for options issuable pursuant to existing employment
agreements.
(j) The consolidated financial statements of the Company and its
consolidated subsidiaries, to the Company's best knowledge, the consolidated
financial statements of ProServ and the financial statements of QBQ, included
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) fairly present the
financial position of the Company and its consolidated subsidiaries, ProServ
and QBQ and the results of operations and changes in financial condition as of
the dates and periods therein specified. Such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise
noted therein). The selected financial data set forth under the caption
"Selected Consolidated Financial Data" in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) fairly
present, on the basis stated in the Prospectus (or such Preliminary
Prospectus), the information included therein. The pro forma financial data
included in the Registration Statement and the Prospectus present fairly the
information shown therein, comply in all material respects with the
requirements of the Act and the rules and regulations thereunder with respect
to pro forma financial statements, have been properly compiled on the pro
forma basis described therein and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to
give effect to the transactions or circumstances referred to therein.
(k) Each of Ernst & Young LLP, Coopers & Lybrand L.L.P. and David
Berdon & Co. LLP, respectively, who has certified certain financial statements
of (i) the Company and its consolidated subsidiaries, (ii) ProServ and (iii)
QBQ, respectively, and delivered its report with respect to such respective
audited financial statements included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), is an independent public accountant as required by
the Act and the applicable rules and regulations thereunder.
(l) The execution and delivery of this Agreement have been duly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company, and constitutes the legal, valid and binding
agreement of the Company, enforceable against the
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Company in accordance with its terms, except to the extent that (i) the same
may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, or other laws now or hereinafter in effect relating to
creditors' rights generally or by general principles of equity whether
asserted at law or equity, and (ii) rights to indemnity and contribution
hereunder may be limited by state or federal securities laws.
(m) No legal or governmental proceedings are pending to which the
Company, any of its subsidiaries or any of the Acquired Subsidiaries is a
party or to which the property of the Company, any of its subsidiaries or any
of the Acquired Subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not described therein
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), and, to the best knowledge of the Company, no such proceedings
have been threatened against the Company, any of its subsidiaries or any of
the Acquired Subsidiaries or with respect to any of their respective
properties; and no contract or other document is required to be described in
the Registration Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement that is not described therein (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) or
filed as required.
(n) The issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the compliance by the
Company with the other provisions of this Agreement and the consummation of
the other transactions herein contemplated do not (i) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained, such as may be
required under state securities or blue sky laws and, if the registration
statement filed with respect to the Securities (as amended) is not effective
under the Act as of the time of execution hereof, such as may be required (and
shall be obtained as provided in this Agreement) under the Act, or (ii)
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Company, any of its
subsidiaries or any of the Acquired Subsidiaries is a party or by which the
Company, any of its subsidiaries or any of the Acquired Subsidiaries or any of
their respective properties are bound, or the charter documents or by-laws of
the Company, any of its subsidiaries or any of the Acquired Subsidiaries, or
any statute or any judgment, decree, order, rule or regulation of any court or
other governmental authority or any arbitrator applicable to the Company, any
of its subsidiaries or any of the Acquired Subsidiaries.
(o) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus, neither the
Company, any of its subsidiaries nor, to the best knowledge of the Company,
any of the Acquired Subsidiaries has sustained any material loss or
interference with their respective businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding and there has
not been any occurrence which would constitute a Material Adverse Change,
except in each case as described in or contemplated by the Prospectus or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus.
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(p) No transaction has occurred between or among the Company and any
of its officers or directors or any affiliate or affiliates of any such
officer or director that is required to be described in and is not described
in the Registration Statement and the Prospectus.
(q) Except as disclosed in the Preliminary Prospectus, the Company
has not, directly or indirectly, (i) taken any action designed to cause or to
result in, or that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities or (ii) since
the filing of the Registration Statement (A) sold, bid for, purchased, or paid
anyone any compensation for soliciting purchases of, the Securities or (B)
paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(r) The Company has not distributed and, prior to the later of (i)
the Firm Closing Date and (ii) the completion of the distribution of the
Securities, will not distribute any offering material in connection with the
offering and sale of the Securities other than the Registration Statement or
any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or other materials, if any permitted by the
Act.
(s) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), (1) the Company,
its subsidiaries and, to the best knowledge of the Company, the Acquired
Subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary
course of business; (2) the Company, its subsidiaries and the Acquired
Subsidiaries have not purchased any of their outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind on
their capital stock; and (3) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company and its
consolidated subsidiaries or any of the Acquired Subsidiaries, except in each
case as described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus).
(t) The Company, each of its subsidiaries and each of the Acquired
Subsidiaries has good and marketable title in fee simple to all items of real
property owned by it, in each case free and clear of any security interests,
liens, encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such property by the
Company or such subsidiary, and any real property and buildings held under
lease by the Company or any such subsidiary are held under valid, subsisting
and enforceable leases, with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property and
buildings by the Company or such subsidiary, in each case except as described
in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). The Company, each of its
subsidiaries and each of the Acquired Subsidiaries has good and marketable
title to all items of personal property owned by it, in each case free and
clear of any security interests, liens, encumbrances, equities, claims and
other defects, except such as do not result in a material liability or
disability to the Company, its subsidiaries and the Acquired Subsidiaries
taken as a whole.
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(u) No labor dispute with the employees of the Company, any of its
subsidiaries or any of the Acquired Subsidiaries exists or, to the best
knowledge of the Company, is threatened or imminent that could result in a
Material Adverse Change, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(v) The Company, its subsidiaries and, to the best knowledge of the
Company, the Acquired Subsidiaries own or possess adequate and enforceable
rights to use all material patents, patent applications, trademarks, service
marks, trade names, licenses, copyrights and proprietary or other confidential
information currently employed by them in connection with their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of infringement of or conflict with asserted rights of any third party
with respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in a
Material Adverse Change, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). None of the Company, its subsidiaries and, to the
best knowledge of the Company, the Acquired Subsidiaries has received any
notice of infringement of any of the foregoing items of such intellectual
property by any third party, and none of the Company, its subsidiaries and the
Acquired Subsidiaries knows of any basis therefore.
(w) The Company, each of its subsidiaries and each of the Acquired
Subsidiaries is insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management reasonably
believes are prudent and customary in the business in which it is engaged; and
neither the Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not result in a
Material Adverse Change, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(x) The Company, its subsidiaries and the Acquired Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Change, except as described in or contemplated by
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(y) The Company will conduct its operations in a manner that will not
subject it to registration as an investment company under the Investment
Company Act of 1940, as amended, and this transaction will not cause the
Company to become an investment company subject to registration under such
Act.
(z) The Company, each of its subsidiaries and each of the Acquired
Subsidiaries has filed all foreign, federal, state and local tax returns that
are required to be filed or has requested extensions thereof (except in any
case in which the failure so to file would not
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constitute a Material Adverse Change) and has paid all taxes required to be
paid by it and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good faith or
as described in or contemplated by the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus).
(aa) Each certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter
as to the matters covered thereby.
(bb) The Company has obtained signed agreements as described in
Section 7(j) hereof from each person listed in the "Principal Stockholders"
table in the Registration Statement as well as from Dennis Arfa.
(cc) The Company, each of its subsidiaries and, to the best knowledge
of the Company, each of the Acquired Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(1) transactions are executed in accordance with management's general or
specific authorizations; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (3) access to
assets is permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(dd) No default exists, and no event has occurred which, with notice
or lapse of time or both, would constitute a default in the due performance
and observance of any term, covenant or condition of any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which the Company,
any of its subsidiaries or any of the Acquired Subsidiaries is a party or by
which the Company, any of its subsidiaries or any of the Acquired Subsidiaries
or any of their respective properties is bound or may be affected in any
manner which would result in a Material Adverse Change.
3. Purchase, Sale and Delivery of the Securities. (a) On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters,
severally and not jointly, agrees to purchase from the Company, at a purchase
price of $4.675 per share, the number of Firm Securities set forth opposite
the name of such Underwriter in Schedule 1 hereto. One or more certificates in
definitive form for the Firm Securities that the several Underwriters have
agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as the Representatives request upon notice to
the Company at least 48 hours prior to the Firm Closing Date, shall be
delivered by or on behalf of the Company to the Representatives for the
respective accounts of the Underwriters, against payment by or on behalf of
the Underwriters of the purchase price therefor by wire transfer in same-day
funds (the "Wired Funds") to the account of the Company. Such delivery of and
payment for the Firm Securities shall be made at the offices of Morgan, Lewis
& Bockius LLP, 101 Park Avenue, New York, New York 10178 at 9:30 A.M., New
York time, on October 14, 1997, or at such other place, time or date as
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<PAGE>
the Representatives and the Company may agree upon or as the Representatives
may determine pursuant to Section 9 hereof, such time and date of delivery
against payment being herein referred to as the "Firm Closing Date". The
Company will make such certificate or certificates for the Firm Securities
available for checking and packaging by the Representatives at the offices in
New York, New York of the Company's transfer agent or registrar or of
Prudential Securities Incorporated at least 24 hours prior to the Firm Closing
Date.
(b) For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Securities as contemplated by the
Prospectus, the Company hereby grants to the several Underwriters an option to
purchase, severally and not jointly, the Option Securities. The purchase price
to be paid for any Option Securities shall be the same price per share as the
price per share for the Firm Securities set forth above in paragraph (a) of
this Section 3. The option granted hereby may be exercised as to all or any
part of the Option Securities from time to time within thirty days after the
date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or
a holiday, on the next business day thereafter when the New York Stock
Exchange is open for trading). The Underwriters shall not be under any
obligation to purchase any of the Option Securities prior to the exercise of
such option. The Representatives may from time to time exercise the option
granted hereby by giving notice in writing or by telephone (confirmed in
writing) to the Company setting forth the aggregate number of Option
Securities as to which the several Underwriters are then exercising the option
and the date and time for delivery of and payment for such Option Securities.
Any such date of delivery shall be determined by the Representatives but shall
not be earlier than two business days or later than five business days after
such exercise of the option and, in any event, shall not be earlier than the
Firm Closing Date. The time and date set forth in such notice, or such other
time on such other date as the Representatives and Company may agree upon or
as the Representatives may determine pursuant to Section 9 hereof, is herein
called the "Option Closing Date" with respect to such Option Securities. Upon
exercise of the option as provided herein, the Company shall become obligated
to sell to each of the several Underwriters, and, subject to the terms and
conditions herein set forth, each of the Underwriters (severally and not
jointly) shall become obligated to purchase from the Company, the same
percentage of the total number of the Option Securities as to which the
several Underwriters are then exercising the option as such Underwriter is
obligated to purchase of the aggregate number of Firm Securities, as adjusted
by the Representatives in such manner as they deem advisable to avoid
fractional shares. If the option is exercised as to all or any portion of the
Option Securities, one or more certificates in definitive form for such Option
Securities, and payment therefor, shall be delivered on the related Option
Closing Date in the manner, and upon the terms and conditions, set forth in
paragraph (a) of this Section 3, except that reference therein to the Firm
Securities and the Firm Closing Date shall be deemed, for purposes of this
paragraph (b), to refer to such Option Securities and Option Closing Date,
respectively.
(c) The Company hereby acknowledges that the wire transfer by or on
behalf of the Underwriters of the purchase price for any Securities does not
constitute closing of a purchase and sale of the Securities. Only execution
and delivery of a receipt for Securities by the Underwriters indicates
completion of the closing of a purchase of the Securities from the Company.
Furthermore, in the event that the Underwriters wire funds to the Company
prior to the completion of the closing of a purchase of Securities, the
Company hereby
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acknowledges that until the Underwriters execute and deliver a receipt for the
Securities, by facsimile or otherwise, the Company will not be entitled to the
wired funds and shall return the wired funds to the Underwriters as soon as
practicable (by wire transfer of same-day funds) upon demand. In the event
that the closing of a purchase of Securities is not completed and the wire
funds are not returned by the Company to the Underwriters on the same day the
wired funds were received by the Company, the Company agrees to pay to the
Underwriters in respect of each day the wire funds are not returned by it, in
same-day funds, interest on the amount of such wire funds in an amount
representing the Underwriters' cost of financing as reasonably determined by
Prudential Securities Incorporated.
(d) It is understood that either of you, individually and not as one
of the Representatives, may (but shall not be obligated to) make payment on
behalf of any Underwriter or Underwriters for any of the Securities to be
purchased by such Underwriter or Underwriters. No such payment shall relieve
such Underwriter or Underwriters from any of its or their obligations
hereunder.
4. Offering by the Underwriters. Upon your authorization of the
release of the Firm Securities, the several Underwriters propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus.
5. Covenants of the Company. The Company covenants and agrees with
each of the Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and
any amendments thereto to become effective as promptly as possible. If
required, the Company will file the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. During any time when a prospectus relating to the
Securities is required to be delivered under the Act, the Company (i) will
comply with all requirements imposed upon it by the Act and the rules and
regulations of the Commission thereunder to the extent necessary to permit the
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and of the Prospectus, as then amended or supplemented, and
(ii) will not file with the Commission the prospectus, Term Sheet or the
amendment referred to in the second sentence of Section 2(a) hereof, any
amendment or supplement to such Prospectus, Term Sheet or any amendment to the
Registration Statement or any Rule 462(b) Registration Statement of which the
Representatives previously have been advised and furnished with a copy for a
reasonable period of time prior to the proposed filing and as to which filing
the Representatives shall not have given their consent. The Company will
prepare and file with the Commission, in accordance with the rules and
regulations of the Commission, promptly upon request by the Representatives or
counsel for the Underwriters, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or advisable
in connection with the distribution of the Securities by the several
Underwriters, and will use its best efforts to cause any such amendment to the
Registration Statement to be declared effective by the Commission as promptly
as possible. The Company will advise the Representatives, promptly after
receiving notice thereof, of the time when the Registration Statement or any
amendment thereto has been filed or declared effective or the
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<PAGE>
Prospectus or any amendment or supplement thereto has been filed and will
provide evidence satisfactory to the Representatives of each such filing or
effectiveness.
(b) The Company will advise the Representatives, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Original
Registration Statement or any Rule 462(b) Registration Statement or any
amendment thereto or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, (ii) the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, (iii) the institution, threatening or
contemplation of any proceeding for any such purpose or (iv) any request made
by the Commission for amending the Original Registration Statement or any Rule
462(b) Registration Statement, for amending or supplementing the Prospectus or
for additional information. The Company will use its best efforts to prevent
the issuance of any such stop order and, if any such stop order is issued, to
obtain the withdrawal thereof as promptly as possible.
(c) The Company will arrange for the qualification of the Securities
for offering and sale under the securities or blue sky laws of such
jurisdictions as the Representatives may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Securities, provided, however, that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction.
(d) If, at any time prior to the later of (i) the final date when a
prospectus relating to the Securities is required to be delivered under the
Act or (ii) the Option Closing Date, any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Prospectus to comply with the
Act or the rules or regulations of the Commission thereunder, the Company will
promptly notify the Representatives thereof and, subject to Section 5(a)
hereof, will prepare and file with the Commission, at the Company's expense,
an amendment to the Registration Statement or an amendment or supplement to
the Prospectus that corrects such statement or omission or effects such
compliance.
(e) The Company will, without charge, provide (i) to the
Representatives and to counsel for the Underwriters a conformed copy of the
registration statement originally filed with respect to the Securities and
each amendment thereto (in each case including exhibits thereto) or any Rule
462(b) Registration Statement, certified by the Secretary or an Assistant
Secretary of the Company to be true and complete copies thereof as filed with
the Commission by electronic transmission, (ii) to each other Underwriter, a
conformed copy of such registration statement or any Rule 462(b) Registration
Statement and each amendment thereto (in each case without exhibits thereto)
and (iii) so long as a prospectus relating to the Securities is required to be
delivered under the Act, as many copies of each Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto as the Representatives may
reasonably request; without limiting the application of clause (iii) of this
sentence, the Company, not later than (A) 6:00 PM, New York City time, on the
date of determination of the
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<PAGE>
public offering price, if such determination occurred at or prior to 10:00
A.M., New York City time, on such date or (B) 2:00 PM, New York City time, on
the business day following the date of determination of the public offering
price, if such determination occurred after 10:00 A.M., New York City time, on
such date, will deliver to the Underwriters, without charge, as many copies of
the Prospectus and any amendment or supplement thereto as the Representatives
may reasonably request for purposes of confirming orders that are expected to
settle on the Firm Closing Date.
(f) The Company, as soon as practicable, will make generally
available to its securityholders and to the Representatives a consolidated
earnings statement of the Company and its subsidiaries that satisfies the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
(g) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will not, directly or indirectly, without the prior
written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for, shares of Common Stock
for a period of 180 days after the date hereof, except (i) pursuant to this
Agreement, (ii) as contemplated in the Prospectus or Preliminary Prospectus
and (iii) for issuances pursuant to the grant and/or exercise of stock options
pursuant to plans described in the Prospectus or Preliminary Prospectus.
(i) The Company will not, directly or indirectly, (i) take any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) (A) sell, bid for, purchase, or pay anyone any compensation
for soliciting purchases of, the Securities or (B) pay or agree to pay to any
person any compensation for soliciting another to purchase any other
securities of the Company.
(j) The Company will deliver the agreements described in Section 7(j)
hereof prior to the Firm Closing Date.
(k) If at any time during the 25-day period after the Registration
Statement becomes effective or the period prior to the Option Closing Date,
any rumor, publication or event relating to or affecting the Company shall
occur as a result of which in your opinion the market price of the Common
Stock has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or amendment of
the Prospectus), the Company will, after notice from you advising the Company
to the effect set forth above, forthwith prepare, consult with you concerning
the substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
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<PAGE>
(l) If the Company elects to rely on Rule 462(b), the Company shall
both file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with
Rule 111 promulgated under the Act by the earlier of (i) 10:00 P.M. Eastern
time on the date of this Agreement and (ii) the time confirmations are sent or
given, as specified by Rule 462(b)(2).
(m) The Company has caused the Securities to be duly authorized for
listing on the American Stock Exchange (the "AMEX") prior to the Firm Closing
Date and will use its best efforts to ensure that the Securities remain listed
on the AMEX following the Firm Closing Date.
(n) The Company will: (i) use its best efforts to satisfy all
conditions to the consummation of the acquisition of the Acquired Subsidiaries
as set forth in the agreements related thereto, (ii) use its best efforts to
cause each other party to such agreements to satisfy all conditions to the
consummation of the acquisition of the Acquired Subsidiaries, and (iii)
promptly notify the Representatives of the occurrence of any event which may
result in the non-consummation of the acquisition of the Acquired Subsidiaries
on the Firm Closing Date.
6. Expenses. The Company will pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing or other production of documents with respect to
the transactions, including any costs of printing the registration statement
originally filed with respect to the Securities and any amendment thereto, any
Rule 462(b) Registration Statement, any Preliminary Prospectus and the
Prospectus and any amendment or supplement thereto, this Agreement and any
blue sky memoranda, (ii) all arrangements relating to the delivery to the
Underwriters of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or
advisors retained by the Company, (iv) preparation, issuance and delivery to
the Underwriters of any certificates evidencing the Securities, including
transfer agent's and registrar's fees, (v) the qualification of the Securities
under state securities and blue sky laws, including filing fees and fees and
disbursements of counsel for the Underwriters relating thereto not to exceed
$25,000, (vi) the filing fees of the Commission and the National Association
of Securities Dealers, Inc. relating to the Securities, (vii) any listing of
the Securities on the AMEX, (viii) any meetings with prospective investors in
the Securities (other than as shall have been specifically approved by the
Representatives to be paid for by the Underwriters) and (ix) advertising
relating to the offering of the Securities (other than as shall have been
specifically approved by the Representatives to be paid for by the
Underwriters). If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 11 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations and satisfy
all conditions on its part to be performed or satisfied hereunder other than
by reason of a default by any of the Underwriters, the Company will reimburse
the Underwriters severally upon demand for all out-of-pocket expenses
(including counsel fees and disbursements) that shall have been reasonably
incurred by them in connection with the proposed purchase and sale of the
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Securities. The Company shall not in any event be liable to any of the
Underwriters for the loss of anticipated profits from the transactions covered
by this Agreement.
7. Conditions of the Underwriters' Obligations. The obligations of
the several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company (including those representations
and warranties which relate to the Company's subsidiaries and the Acquired
Subsidiaries) contained herein as of the date hereof and as of the Firm
Closing Date, as if made on and as of the Firm Closing Date, to the accuracy
of the statements of the Company's officers made pursuant to the provisions
hereof, to the performance by the Company of its covenants and agreements
hereunder and to the following additional conditions:
(a) If the Original Registration Statement or any amendment thereto
filed prior to the Firm Closing Date has not been declared effective as of the
time of execution hereof, the Original Registration Statement or such
amendment and, if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have been declared effective not later
than the earlier of (i) 11:00 A.M., New York time, on the date on which the
amendment to the registration statement originally filed with respect to the
Securities or to the Registration Statement, as the case may be, containing
information regarding the public offering price of the Securities has been
filed with the Commission and (ii) the time confirmations are sent or given as
specified by Rule 462(b)(2), or with respect to the Original Registration
Statement, or such later time and date as shall have been consented to by the
Representatives; if required, the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto shall have
been filed with the Commission in the manner and within the time period
required by Rules 434 and 424(b) under the Act; no stop order suspending the
effectiveness of the Registration Statement or any amendment thereto shall
have been issued, and no proceedings for that purpose shall have been
instituted or threatened or, to the knowledge of the Company or the
Representatives, shall be contemplated by the Commission; and the Company
shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Representatives shall have received an opinion, dated the
Firm Closing Date, of Baker & McKenzie, counsel for the Company, to the effect
that:
(i) each of the Company and its subsidiaries listed in
Exhibit 21 to the Registration Statement and Marquee Music, Inc. (the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of its respective
jurisdiction of incorporation and is duly qualified to transact
business as a foreign corporation and is in good standing under the
laws of all of the jurisdictions listed on Schedule 2 hereto, except
where the failure to be so qualified would not result in a material
adverse change, or any development involving a prospective material
adverse change in the condition (financial or otherwise), management,
properties, assets, liabilities, net worth or results of the
operations of the Company, the Subsidiaries, ProServ, Inc. and its
subsidiaries (collectively, "ProServ") and QBQ
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Entertainment, Inc. ("QBQ," and together with ProServ, the "Acquired
Subsidiaries"), taken as a whole (a "Material Adverse Change");
(ii) each of the Company and the Subsidiaries has corporate
power to own or lease its respective properties and conduct its
respective businesses as described in the Registration Statement and
the Prospectus, and the Company has corporate power to enter into
this Agreement and to carry out all the terms and provisions hereof
to be carried out by it;
(iii) the issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and are owned beneficially by the Company, to
the knowledge of such counsel, free and clear of any perfected
security interests or any other security interests, liens,
encumbrances, equities or claims, except as disclosed in the
Prospectus;
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption
"Capitalization"; all of the issued shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and nonassessable, have been issued in compliance with all
applicable federal securities laws and were not issued in violation
of or subject to any preemptive rights or other rights to subscribe
for or purchase securities under statute or the Company's certificate
of incorporation or, to such counsel's knowledge, any other
agreement; the Firm Securities have been duly authorized by all
necessary corporate action of the Company and, when issued and
delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable; the
Securities have been duly authorized for listing on the AMEX; no
holders of outstanding shares of capital stock of the Company are
entitled under statute or the Company's certificate of incorporation
or, to such counsel's knowledge, any other agreement, as such to any
preemptive or other rights to subscribe for any of the Securities;
and, to such counsel's knowledge, no holders of securities of the
Company are entitled to have such securities registered under the
Registration Statement;
(v) the statements set forth under the headings "Risk
Factors--Shares Eligible for Future Sale and Registration Rights;"
"Description of Securities;" and "Shares Eligible for Future Sale" in
the Prospectus, insofar as such statements purport to summarize
certain provisions of the capital stock of the Company, provide a
fair summary of such provisions; and the statements relating to the
Company, the Subsidiaries and the Acquired Subsidiaries set forth
under the headings "Risk Factors--Possible Adverse Effects of
Authorization of Preferred Stock;" "Business--Agreements Related to
the Pending Acquisitions;" "--Employment Agreements;" "--Stock Option
Plans;" and "Certain Relationships and Related Transactions" in the
Prospectus, insofar as such statements constitute a summary of the
legal matters, documents or transactions referred to therein, provide
a fair summary of such legal matters, documents and proceedings;
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(vi) the execution and delivery of this Agreement have been
duly authorized by all necessary corporate action of the Company and
this Agreement has been duly executed and delivered by the Company;
(vii) to the knowledge of such counsel, (A) no legal or
governmental proceedings are pending to which the Company or any of
the Subsidiaries is a party or to which the property of the Company
or any of the Subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not
described therein, and no such proceedings have been threatened
against the Company or any of the Subsidiaries or with respect to any
of their respective properties and (B) no contract or other document
is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
that is not described or incorporated therein or filed as required;
(viii) the issuance, offering and sale of the Securities to
the Underwriters by the Company pursuant to this Agreement, the
compliance by the Company with the other provisions of this Agreement
and the consummation of the other transactions herein contemplated
(other than the acquisition of the Acquired Subsidiaries) do not (A)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained and such as may be required under state securities
or blue sky laws, or (B) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument, known to such counsel, to which the Company
or any of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries or any of their respective properties are bound,
or the charter documents or by-laws of the Company or any of the
Subsidiaries or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator known to such counsel and applicable to the Company or any
of the Subsidiaries;
(ix) the Registration Statement is effective under the Act;
any required filing of the Prospectus, or any Term Sheet that
constitutes a part thereof, pursuant to Rules 434 and 424(b) has been
made in the manner and within the time period required by Rules 434
and 424(b); and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or any
amendment thereto has been issued, and no proceedings for that
purpose have been instituted or threatened or, to the knowledge of
such counsel, are contemplated by the Commission;
(x) the Registration Statement when declared effective and
any amendment thereto, any Rule 462(b) Registration Statement and the
Prospectus (in each case, other than the financial statements and
other financial, statistical, numerical and accounting information
contained therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable
requirements of the Act and the rules and regulations of the
Commission thereunder on the date of filing thereof with the
Commission and on the Firm Closing Date; and
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(xi) if the Company elects to rely on Rule 434, the
Prospectus is not "materially different", as such term is used in
Rule 434, from the prospectus included in the Registration Statement
at the time of its effectiveness or an effective post-effective
amendment thereto (including such information that is permitted to be
omitted pursuant to Rule 430A).
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, the
Representatives and counsel to the Underwriters at which the contents of the
Registration Statement and Prospectus and related matters were discussed and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as otherwise
expressly set forth in its opinion), on the basis of the foregoing no facts
have come to the attention of such counsel that caused them to believe that
any part of the Registration Statement (other than the financial statements
and notes thereto and other financial, statistical, numerical and accounting
data included therein, or omitted therefrom, as to which it expresses no
opinion), as amended or supplemented, at the time such part of the
Registration Statement became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading (other than
information omitted therefrom in reliance on Rule 430A under the Act), or the
Prospectus (other than the financial statements and notes thereto and other
financial, statistical, numerical and accounting data included therein, or
omitted therefrom, as to which it expresses no opinion) as amended or
supplemented, on the date of filing thereof with the Commission and on the
Firm Closing Date, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company, the Subsidiaries and the Acquired
Subsidiaries and public officials. Such counsel may also state that in
rendering such opinion, any statement or opinion set forth therein that is
qualified by the phrase "to our knowledge" or any similar phrase, is intended
to indicate that, during the course of such counsel's representation of the
Company in the subject transaction, no information that would give current
actual knowledge of the inaccuracy of such statement or opinion has come to
the attention of the lawyer who is the current primary contact for the Company
or any lawyer who has devoted substantive attention to matters on behalf of
the Company during the preceding twelve months and who is still currently
employed by or a member of Baker & McKenzie. Further, such counsel may state
that Howard J. Tytel, a director of the Company and a stockholder of The
Sillerman Companies, Inc., a principal stockholder of the Company, is a
director, Executive Vice President and General Counsel of Sillerman
Communications Management Corporation ("SCMC") and Executive Vice President
and General Counsel of the Sillerman Companies, Inc. ("TSC"), each of which is
a principal financial advisor and consultant to the Company, is of Counsel to
Baker & McKenzie, and that no assumption should be made that Baker & McKenzie
is privy to information and knowledge which is available to and known by Mr.
Tytel solely in his capacities with the Company, SCMC or TSC. Such counsel may
further state that they have not undertaken any independent
18
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investigation to determine the accuracy of such statement or opinion and no
inference as to their knowledge of any matters bearing on the accuracy of any
such statement or opinion should be drawn from the fact of their
representation of the Company.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(c) The Representatives shall have received an opinion, dated the
Firm Closing Date, of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York,
New York, counsel for the Underwriters, with respect to the issuance and sale
of the Firm Securities, the Registration Statement and the Prospectus, and
such other related matters as the Representatives may reasonably require, and
the Company shall have furnished to such counsel such documents as they may
reasonably request for the purpose of enabling them to pass upon such matters.
(d) The Representatives shall have received from Ernst & Young LLP a
letter or letters dated, respectively, the date hereof and the Firm Closing
Date, in form and substance satisfactory to the Representatives, to the effect
that:
(i) they are independent accountants with respect to the
Company and its consolidated subsidiaries within the meaning of the
Act and the applicable rules and regulations thereunder;
(ii) in their opinion, the audited consolidated financial
statements and schedules and pro forma financial statements examined
by them and included in the Registration Statement and the Prospectus
comply in form in all material respects with the applicable
accounting requirements of the Act and the related published rules
and regulations and are in conformity with generally accepted
accounting principles;
(iii) on the basis of their limited review in accordance
with standards established by the American Institute of Certified
Public Accountants of any interim unaudited consolidated financial
statements of the Company and its consolidated subsidiaries as
indicated in their reports included in the Registration Statement and
the Prospectus, a reading of the minute books of the shareholders,
the board of directors and any committees thereof of the Company and
its consolidated subsidiaries, and inquiries of certain officials of
the Company and its consolidated subsidiaries who have responsibility
for financial and accounting matters, nothing came to their attention
that caused them to believe that:
(A) the unaudited consolidated financial statements of the Company,
and its consolidated subsidiaries included in the Registration
Statement and the Prospectus do not comply in form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations thereunder or are not in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited consolidated
financial statements included in the Registration Statement and the
Prospectus;
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<PAGE>
(B) at a specific date not more than five business days prior to the
date of such letter, there were any changes in the capital stock or
long-term debt of the Company and its consolidated subsidiaries or
any decreases in net current assets or stockholders' equity of the
Company and its consolidated subsidiaries, in each case compared with
amounts shown on the June 30, 1997 unaudited consolidated balance
sheets of such companies included in the Registration Statement and
the Prospectus, or for the period from July 1, 1997 to such specified
date there were any decreases, in sales, net revenues, net income
before income taxes or total or per share amounts of net income of
the Company and its consolidated subsidiaries, except in all
instances for changes, decreases or increases set forth in such
letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages
and financial information that are derived from the general
accounting records of the Company and its consolidated subsidiaries
and the Acquired Subsidiaries and are included in the Registration
Statement and the Prospectus, and have compared such amounts,
percentages and financial information with such records of the
Company and its consolidated subsidiaries and the Acquired
Subsidiaries with information derived from such records and have
found them to be in agreement, excluding any questions of legal
interpretation;
(v) on the basis of a reading of the unaudited pro forma
consolidated financial statements included in the Registration
Statement and the Prospectus, carrying out certain specified
procedures that would not necessarily reveal matters of significance
with respect to the comments set forth in this paragraph (v),
inquiries of certain officials of the Company and its consolidated
subsidiaries and the Acquired Subsidiaries who have responsibility
for financial and accounting matters and proving the arithmetic
accuracy of the application of the pro forma adjustments to the
historical amounts in the unaudited pro forma consolidated condensed
financial statements, nothing came to their attention that caused
them to believe that the unaudited pro forma consolidated condensed
financial statements do not comply in form in all material respects
with the applicable accounting requirements of Rule 11-02 of
Regulation S-X or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of such
statements.
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by
a written explanation of the Company as to the significance thereof, unless
the Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the purchase and delivery
of the Securities as contemplated by the Registration Statement, as amended as
of the date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (d) with respect to either letter referred to above shall include
any amendment or supplement thereto at the date of such letter.
20
<PAGE>
(e) The Representatives shall have received from Coopers & Lybrand
LLP a letter or letters dated, respectively, the date hereof and the Firm
Closing Date, in form and substance satisfactory to the Representatives, to
the effect that:
(i) they are independent accountants with respect to ProServ
within the meaning of the Act and the applicable rules and
regulations thereunder;
(ii) in their opinion, the audited consolidated financial
statements and schedules examined by them and included in the
Registration Statement and the Prospectus comply in form in all
material respects with the applicable accounting requirements of the
Act and the related published rules and regulations and are in
conformity with generally accepted accounting principles;
(iii) on the basis of their limited review in accordance
with standards established by the American Institute of Certified
Public Accountants of any interim unaudited consolidated financial
statements of ProServ as indicated in their reports included in the
Registration Statement and the Prospectus, a reading of the minute
books of the shareholders, the board of directors and any committees
thereof of ProServ, and inquiries of certain officials of ProServ who
have responsibility for financial and accounting matters, nothing
came to their attention that caused them to believe that:
(A) the unaudited consolidated financial statements of ProServ
included in the Registration Statement and the Prospectus do not
comply in form in all material respects with the applicable
accounting requirements of the Act and the related published rules
and regulations thereunder or are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited consolidated financial statements
included in the Registration Statement and the Prospectus;
(B) at a specific date not more than five business days prior to the
date of such letter, there were any changes in the capital stock or
long-term debt of ProServ or any decreases in net current assets or
stockholders' equity of ProServ, in each case compared with amounts
shown on the June 30, 1997 unaudited consolidated balance sheets of
ProServ included in the Registration Statement and the Prospectus, or
for the period from July 1, 1997 to such specified date there were
any decreases, in sales, net revenues, net income before income taxes
or total or per share amounts of net income of ProServ, except in all
instances for changes, decreases or increases set forth in such
letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages
and financial information that are derived from the general
accounting records of ProServ and are included in the Registration
Statement and the Prospectus, and have compared such amounts,
percentages and financial information with such records of ProServ
with information derived from such records and have found them to be
in agreement, excluding any questions of legal interpretation;
21
<PAGE>
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by
a written explanation of the Company as to the significance thereof, unless
the Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the purchase and delivery
of the Securities as contemplated by the Registration Statement, as amended as
of the date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (e) with respect to either letter referred to above shall include
any amendment or supplement thereto at the date of such letter.
(f) The Representatives shall have received from David Berdon & Co.
LLP a letter or letters dated, respectively, the date hereof and the Firm
Closing Date, in form and substance satisfactory to the Representatives, to
the effect that:
(i) they are independent accountants with respect to QBQ
within the meaning of the Act and the applicable rules and
regulations thereunder;
(ii) in their opinion, the audited financial statements and
schedules examined by them and included in the Registration Statement
and the Prospectus comply in form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations and are in conformity with generally
accepted accounting principles;
(iii) on the basis of their limited review in accordance
with standards established by the American Institute of Certified
Public Accountants of any interim unaudited financial statements of
QBQ as indicated in their reports included in the Registration
Statement and the Prospectus, a reading of the minute books of the
shareholders, the board of directors and any committees thereof of
QBQ, and inquiries of certain officials of QBQ who have
responsibility for financial and accounting matters, nothing came to
their attention that caused them to believe that:
(A) the unaudited financial statements of QBQ included in the
Registration Statement and the Prospectus do not comply in form in
all material respects with the applicable accounting requirements of
the Act and the related published rules and regulations thereunder or
are not in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements included in the Registration Statement and the
Prospectus;
(B) at a specific date not more than five business days prior to the
date of such letter, there were any changes in the capital stock or
long-term debt of QBQ or any decreases in net current assets or
stockholders' equity of QBQ, in each case compared with amounts shown
on the June 30, 1997 unaudited balance sheets of QBQ included in the
Registration Statement and the Prospectus, or for the period from
July 1, 1997 to such specified date there were any decreases, in
sales, net revenues, net income
22
<PAGE>
before income taxes or total or per share amounts of net income of
QBQ, except in all instances for changes, decreases or increases set
forth in such letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages
and financial information that are derived from the general
accounting records of QBQ and are included in the Registration
Statement and the Prospectus, and have compared such amounts,
percentages and financial information with such records of QBQ with
information derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation;
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by
a written explanation of the Company as to the significance thereof, unless
the Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the purchase and delivery
of the Securities as contemplated by the Registration Statement, as amended as
of the date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (f) with respect to either letter referred to above shall include
any amendment or supplement thereto at the date of such letter.
(g) The Representatives shall have received a certificate, dated the
Firm Closing Date, of the principal executive officer and the principal
financial or accounting officer of the Company to the effect that:
(i) the representations and warranties of the Company
(including those representations and warranties which relate to the
Company's subsidiaries and the Acquired Subsidiaries) in this
Agreement are true and correct as if made on and as of the Firm
Closing Date; the Registration Statement, as amended as of the Firm
Closing Date, does not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not misleading, and the Prospectus, as amended or
supplemented as of the Firm Closing Date, does not include any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and the
Company has performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to
the Firm Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and
no proceedings for that purpose have been instituted or threatened
or, to the best of the Company's knowledge, are contemplated by the
Commission; and
(iii) subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, neither the Company nor any of its
23
<PAGE>
subsidiaries nor, to such officer's best knowledge, any of the
Acquired Subsidiaries has sustained any material loss or interference
with their respective businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding, and there has not been any material adverse change, or
any development involving a prospective material adverse change, in
the condition (financial or otherwise), management, business
prospects, net worth or results of operations of the Company, any of
its subsidiaries or, to such officer's best knowledge, any of the
Acquired Subsidiaries, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or
supplement thereto).
(iv) the acquisition of ProServ shall have been completed
upon the terms set forth in the Prospectus simultaneously with the
closing of the purchase of the Firm Securities by the Underwriters.
(h) The Representatives shall have received a certificate, dated the
Firm Closing Date, of the principal executive officer and the principal
financial or accounting officer of ProServ to the effect that:
(i) solely with respect to information pertaining to
ProServ, the Registration Statement, as amended as of the Firm
Closing Date, does not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not misleading, and the Prospectus, as amended or
supplemented as of the Firm Closing Date, does not include any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(ii) subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, ProServ has not sustained any material loss or
interference with respect to its business or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental
proceeding, and there has not been any material adverse change, or
any development involving a prospective material adverse change, in
the condition (financial or otherwise), management, business
prospects, net worth or results of operations of ProServ, except in
each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto).
(iii) the acquisition of ProServ shall have been completed
upon the terms set forth in the Prospectus simultaneously with the
closing of the purchase of the Firm Securities by the Underwriters.
(i) The Representatives shall have received a certificate, dated the
Firm Closing Date, of the principal executive officer of QBQ to the effect
that:
(i) solely with respect to information pertaining to QBQ,
the Registration Statement, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to
state any material fact necessary to make the
24
<PAGE>
statements therein not misleading, and the Prospectus, as amended or
supplemented as of the Firm Closing Date, does not include any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(ii) subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, QBQ has not sustained any material loss or interference
with respect to its business or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding, and, to the best of such officer's knowledge after due
inquiry, there has not been any material adverse change in the
condition (financial or otherwise), management, net worth or results
of operations of QBQ, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or
supplement thereto) or such changes as may occur in the ordinary
course of QBQ's business.
(j) The Representatives shall have received from each person listed
in the "Principal Stockholders" table in the Registration Statement as well as
from Dennis Arfa an agreement to the effect that such person will not,
directly or indirectly, without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, offer, sell, offer to
sell, contract to sell, pledge, grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, grant of an option to purchase or other sale or disposition) of any
shares of Common Stock or any securities convertible into, or exchangeable or
exercisable for, shares of Common Stock for a period of 180 days after the
date of this Agreement, except for (i) bona fide gifts of Common Stock,
provided that any donee receiving such a gift agrees to be bound by the terms
of such lock-up agreement, (ii) the exercise of options or warrants for shares
of Common Stock, provided that the shares issued thereunder shall be bound by
the terms of such lock-up agreement and (iii) with respect to Dennis Arfa, as
contemplated in the Prospectus or the Preliminary Prospectus.
(k) On or before the Firm Closing Date, the Representatives and
counsel for the Underwriters shall have received such further certificates,
documents or other information as they may have reasonably requested from the
Company.
(l) Prior to the commencement of the offering of the Securities, the
Securities shall have been approved for listing on the AMEX and shall remain
listed thereon as of the Firm Closing Date.
All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase
and pay for any Option Securities shall be subject, in their discretion, to
each of the foregoing conditions to
25
<PAGE>
purchase the Firm Securities, except that all references to the Firm
Securities and the Firm Closing Date shall be deemed to refer to such Option
Securities and the related Option Closing Date, respectively.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act"),
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter or such controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by
the Company in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto, executed by the
Company or based upon written information furnished by or on behalf
of the Company filed in any jurisdiction in order to qualify the
Securities under the securities or blue sky laws thereof or filed
with the Commission or any securities association or securities
exchange (each an "Application"),
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto,
or any Application a material fact required to be stated therein or
necessary to make the statements therein not misleading or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials used in
connection with the marketing of the Securities, including without
limitation, slides, videos, films, tape recordings,
and will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement or any amendment thereto, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein; and provided, further, that the Company will not be liable to any
Underwriter or any person controlling such Underwriter with respect to any
such untrue statement or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage or liability purchased
26
<PAGE>
Securities from such Underwriter but was not sent or given a copy of the
Prospectus (as amended or supplemented) at or prior to the written
confirmation of the sale of such Securities to such person in any case where
such delivery of the Prospectus (as amended or supplemented) is required by
the Act, unless such failure to deliver the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section 5(d)
and (e) of this Agreement. This indemnity agreement will be in addition to any
liability which the Company may otherwise have. The Company will not, without
the prior written consent of the Underwriter or Underwriters purchasing, in
the aggregate, more than fifty percent (50%) of the Securities, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any such Underwriter
or any person who controls any such Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of all of the Underwriters and such
controlling persons from all liability arising out of such claim, action, suit
or proceeding.
(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein: and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or any
action in respect thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party under
this Section 8, notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 8. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
27
<PAGE>
indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or
more legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such
action on behalf of such indemnified party or parties and such indemnified
party or parties shall have the right to select separate counsel to defend
such action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in
any one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Representatives in the case of paragraph (a) of this Section
8, representing the indemnified parties under such paragraph (a) who are
parties to such action or actions) or (ii) the indemnifying party does not
promptly retain counsel satisfactory to the indemnified party or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Underwriters, the parties' relative intents, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any
other equitable
28
<PAGE>
considerations appropriate in the circumstances. The Company and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (d). Notwithstanding any
other provision of this paragraph (d), no Underwriter shall be obligated to
make contributions hereunder that in the aggregate exceed the total public
offering price of the Securities purchased by such Underwriter under this
Agreement, less the aggregate amount of any damages that such Underwriter has
otherwise been required to pay in respect of the same or any substantially
similar claim, and no person guilty of fraudulent misrepresentation (within
the meaning of Section II (f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute hereunder are several in proportion to
their respective underwriting obligations and not joint, and contributions
among Underwriters shall be governed by the provisions of the Prudential
Securities Incorporated Master Agreement Among Underwriters. For purposes of
this paragraph (d), each person, if any, who controls an Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall
have the same rights to contribution as such Underwriter, and each director of
the Company, each officer of the Company who signed the Registration Statement
and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Company.
9. Default of Underwriters. If one or more Underwriters default in
their obligations to purchase Firm Securities or Option Securities hereunder
and the aggregate number of such Securities that such defaulting Underwriter
or Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by
all of the Underwriters at such time hereunder, the other Underwriters may
make arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or
Option Securities that such defaulting Underwriter or Underwriters agreed but
failed to purchase. If one or more Underwriters so default with respect to an
aggregate number of Securities that is more than ten percent of the aggregate
number of Firm Securities or Option Securities, as the case may be, to be
purchased by all of the Underwriters at such time hereunder, and if
arrangements satisfactory to the Representatives are not made within 36 hours
after such default for the purchase by other persons (who may include one or
more of the non-defaulting Underwriters, including the Representatives) of the
Securities with respect to which such default occurs, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Company other than as provided in Section 10 hereof. In the event of any
default by one or more Underwriters as described in this Section 9, the
Representatives shall have the right to postpone the Firm Closing Date or the
Option Closing Date, as the case may be, established as provided in Section 3
hereof for not more than seven business days in order that any necessary
changes may be made in the arrangements or documents for the purchase and
delivery of the Firm Securities or Option Securities, as the case may be. As
used in this Agreement, the term "Underwriter" includes any person
29
<PAGE>
substituted for an Underwriter under this Section 9. Nothing herein shall
relieve any defaulting Underwriter from liability for its default.
10. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company (including those
which relate to the Company's subsidiaries and the Acquired Subsidiaries), its
officers and the several Underwriters set forth in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall remain in
full force and effect, regardless of (i) any investigation made by or on
behalf of the Company, any of its officers or directors, any Underwriter or
any controlling person referred to in Section 8 hereof and (ii) delivery of
and payment for the Securities. The respective agreements, covenants,
indemnities and other statements set forth in Sections 6 and 8 hereof shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
11. Termination. (a) This Agreement may be terminated with respect to
the Firm Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company given prior to the Firm Closing Date
or the related Option Closing Date, respectively, in the event that the
Company shall have failed, refused or been unable to perform all obligations
and satisfy all conditions on its part to be performed or satisfied hereunder
at or prior thereto or, if at or prior to the Firm Closing Date or such Option
Closing Date, respectively,
(i) the Company, any of its subsidiaries or any of the
Acquired Subsidiaries shall have, in the sole judgment of the
Representatives, sustained any material loss or interference with
their respective businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding or there shall have been any material adverse change, or
any development involving a prospective material adverse change
(including without limitation a change in management or control of
the Company), in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company, its
subsidiaries and the Acquired Subsidiaries, except in each case as
described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto);
(ii) trading in the Common Stock shall have been suspended
by the Commission or the AMEX or trading in securities generally on
the New York Stock Exchange shall have been suspended or minimum or
maximum prices shall have been established on any such exchange or
market system;
(iii) a banking moratorium shall have been declared by New
York or United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or
material adverse change in general economic, political or financial
conditions having an effect on the U.S. financial markets that, in
the sole judgment of the
30
<PAGE>
Representatives, makes it impractical or inadvisable to proceed with
the public offering or the delivery of the Securities as contemplated
by the Registration Statement, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by Underwriters. The statements set forth in
the last paragraph on the front cover page and under the heading
"Underwriting" in any Preliminary Prospectus or the Prospectus (to the extent
such statements relate to the Underwriters) constitute the only information
furnished by any Underwriter through the Representatives to the Company for
the purposes of Sections 2(b) and 8 hereof. The Underwriters confirm that such
statements (to such extent) are correct.
13. Notices. All communications hereunder shall be in writing and, if
sent to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Equity
Transactions Group; and if sent to the Company, shall be delivered or sent by
mail, telex or facsimile transmission and confirmed in writing to the Company
at The Marquee Group, Inc., 888 Seventh Avenue, 37th Floor, New York, New York
10019.
14. Successors. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Company and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of such persons and for the benefit of no other person
except that (i) the indemnities of the Company contained in Section 8 of this
Agreement shall also be for the benefit of any person or persons who control
any Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and (ii) the indemnities of the Underwriters contained in
Section 8 of this Agreement shall also be for the benefit of the directors of
the Company, the officers of the Company who have signed the Registration
Statement and any person or persons who control the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of
Securities from any Underwriter shall be deemed a successor because of such
purchase.
15. Applicable Law. The validity and interpretation of this
Agreement, and the terms and conditions set forth herein, shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to any provisions relating to conflicts of laws.
16. Consent to Jurisdiction and Service of Process. All judicial
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of New York and
by execution and delivery of this Agreement, the Company accepts for itself
and in connection with its properties, generally and unconditionally,
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<PAGE>
the nonexclusive jurisdiction of the aforesaid courts and waives any defense
of forum non conveniens and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement.
17. Counterparts. This Agreement may be executed in two or more
counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
32
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company and
each of the several Underwriters.
Very truly yours,
THE MARQUEE GROUP, INC.
By /s/ Robert M. Gutkowski
----------------------------
Robert M. Gutkowski
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
PRUDENTIAL SECURITIES INCORPORATED
COWEN & COMPANY
By PRUDENTIAL SECURITIES INCORPORATED
By /s/ Jean-Claude Canfin
------------------------------------
Jean-Claude Canfin
Managing Director
For itself and on behalf of the Representatives.
33
<PAGE>
SCHEDULE 1
UNDERWRITERS
Number of Firm
Securities to
Underwriter be Purchased
----------- ------------
Prudential Securities Incorporated ............................2,975,000
Cowen & Company................................................2,975,000
Bear, Stearns & Co. Inc........................................ 200,000
BT Alex. Brown Incorporated.................................... 200,000
Donaldson, Lufkin & Jenrette Securities Corporation............ 200,000
Lehman Brothers Inc............................................ 200,000
Oppenheimer & Co., Inc. ....................................... 200,000
Smith Barney Inc............................................... 200,000
Furman Selz LLC................................................ 100,000
Sutro & Co. Incorporated....................................... 100,000
Chatsworth Securities LLC...................................... 50,000
Royce Investment Group, Inc.................................... 50,000
The Seidler Companies Incorporated............................. 50,000
---------
Total........................................7,500,000
=========
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<PAGE>
SCHEDULE 2
SUBSIDIARIES
Jurisdictions Where Jurisdiction
Name Qualified of Incorporation
- ---- ------------------- ----------------
The Marquee Group, Inc. New York Delaware
Athletes & Artists, Inc. None New York
Marquee Music, Inc. New York Delaware
Sports Marketing & None Connecticut
Television, Inc.
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<PAGE>
SCHEDULE 3
ACQUIRED SUBSIDIARIES
Name Jurisdiction of Incorporation
- ---- -----------------------------
ProServ, Inc. Delaware
ProServ Television, Inc. Delaware
ProServ UK, Inc. Delaware
ProServ Europe, S.A. France
ProServ Financial Services, Inc. Delaware
36
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 14th
day of October, 1997 by and between THE MARQUEE GROUP, INC., a Delaware
corporation with an office for the conduct of its business at 888 Seventh
Avenue, New York, New York 10019 (the "Company"), and DONALD L. DELL, an
individual residing at 1220 Stoney Creek Road, Potomac, Maryland 20854 (the
"Executive").
WHEREAS, the Company is engaged in the business of providing
management, licensing, sponsorship sales, marketing, consulting and production
services to sports related businesses and talent; and
WHEREAS, the Company has entered into a Purchase and Sale Agreement
with the Executive, ProServ, Inc. ("ProServ"), and ProServ Television, Inc.
("TV") (ProServ and TV are sometimes collectively referred to herein as the
"Subsidiaries"), each a Delaware corporation, dated as of June 25, 1997, for
the acquisition of certain issued and outstanding shares of the capital stock
of ProServ and TV (the "Stock Acquisition"); and
WHEREAS, upon the closing of the Stock Acquisition, ProServ and TV
shall become subsidiaries of the Company; and
WHEREAS, at the closing of the Stock Acquisition, the Company desires
to employ the Executive as the Chairman of the Board of Directors and Chief
Executive Officer of ProServ and of TV and as a member of the Board of
Directors of the Company, and the Executive is willing to be employed in such
capacity; and
<PAGE>
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein set forth, the parties hereto agree as follows:
1. Employment and Acceptance; Term.
The Company hereby employs the Executive, and the Executive
agrees to be employed by the Company, for a term (the "Term") commencing on
the date of the closing of the Stock Acquisition (the "Effective Date") and
continuing for a period of four (4) years thereafter, provided, however, that
(a) the Executive may, in his sole discretion, and without further obligation
or liability to the Company, terminate his employment as of the end of the
third year of the Term upon written notice delivered by the Executive to the
Company not less than ninety (90) days prior to the end of the third year of
the Term, and (b) in the event that the Executive shall not elect to so
terminate his employment, the Company shall have the option to extend the
Executive's employment for a fifth year, commencing on the fourth anniversary
of the Effective Date and continuing for a period of one (1) year thereafter,
upon written notice delivered from the Company to the Executive no later than
ninety (90) days prior to the expiration of the fourth year of the Term, and
upon the Company's exercise of such option such additional period shall be
deemed included within the Term for the purposes of this Agreement.
2. Duties
(a) During the Term of this Agreement, the Executive shall
be employed as the Chief Executive Officer of ProServ and of TV, and shall
perform his duties and responsibilities in accordance with the standards
observed by senior executives in comparable businesses, subject at all times
to the direction of the Board of Directors of the Company and the Board of
Directors of the Subsidiaries. The Executive's duties shall be those
appropriate to a
2
<PAGE>
chief executive officer of a wholly-owned subsidiary of a public company,
which chief executive officer's primary focus is on business development,
policymaking and long-range strategic planning.
(b) During the Term of this Agreement, the Company agrees
(i) to cause the Executive to be elected and re-elected as a Director and the
Chairman of the Board of Directors of each of ProServ and TV, and (ii) to
nominate the Executive for election to the Board of Directors of the Company
and to use its best efforts to cause the Executive's election to such
position. The Executive agrees to serve in such capacities upon such
appointments.
(c) The Executive shall devote substantially all of his
business time, labor, skill and energy to the business and affairs of ProServ,
TV, and the Company and to the duties and responsibilities specified in
Sections 2(a) and (b) of this Agreement. Notwithstanding the foregoing
provision in this Section 2(a), however, the Executive may continue to engage
in activities unrelated to the business of ProServ, TV, or the Company and may
retain compensation from such activities, provided, however, that such
activities (i) are for entities that are not in competition with ProServ, TV
or the Company, (ii) do not occupy more than approximately 20% of the
Executive's working time, and (iii) do not interfere with the Executive's
responsibilities to the Company under this Agreement.
(d) The Executive covenants and agrees that for so long as
he is actively employed by the Company, he shall inform the Company of each
business opportunity related to the business of ProServ, TV, the Company or
any of the Company's subsidiaries of which he becomes aware, and that he will
not, directly or indirectly, exploit any such opportunity for his own account,
nor will he render any services to any other person or business, or acquire
any
3
<PAGE>
interest of any type in any other business, which is in competition with
ProServ, TV, the Company, or any of the Company's subsidiaries; provided,
however, that the foregoing shall not be deemed to prohibit the Executive from
acquiring, solely as an investment: (i) up to 5% of any securities of a
non-publicly traded partnership, trust, corporation or other entity so long as
he remains a passive investor in such entity, or (ii) up to 5% of any
securities of any publicly traded partnership, trust, corporation or other
entity provided he remains a passive investor in such entity.
3. Location of Employment. The headquarters for the performance of
Executive's services, as specified in Sections 2(a) and (b) of this Agreement,
shall be located in the Washington, D.C./Arlington, Virginia area (the
"ProServ Principal Office") and the Company shall not, during the Term,
relocate the ProServ Principal Office outside of the Washington, D.C.
metropolitan area without the Executive's prior written consent. The Company
shall maintain for the Executive at the Company's principal offices, currently
located at 888 Seventh Avenue, New York, New York 10019, a suitable permanent,
non-exclusive office and, upon reasonable notice, shall make available to the
Executive secretarial service at such office consistent with that afforded to
other senior executives of the Company.
4. Compensation Benefits and Expenses.
(a) The Company shall, during the continuance of the
Executive's employment hereunder, pay to the Executive, and the Executive
agrees to accept, in consideration of his services, an annual salary (the
"Base Salary") of THREE HUNDRED THOUSAND DOLLARS ($300,000.00) with annual
adjustments representing any annual percentage increase in the Consumer Price
Index for the New York, New York Metropolitan
4
<PAGE>
Statistical Area. The Base Salary shall be payable bi-weekly in accordance
with the Company's normal payroll practices. Executive's Base Salary may be
increased, but in no event decreased, in the discretion of the Company's Board
of Directors.
(b) During the Term of this Agreement, the Executive shall
be entitled to participate in all employee benefit, pension, profit-sharing,
savings, group insurance, hospitalization, medical, health and accident,
disability or similar plans or programs of the Company to the same extent as
provided to other senior executives of the Company. The Executive also shall
be entitled to participate in any other benefits that, from time to time, may
be provided to employees having a similar position in the Company as
Executive. Nothing contained herein shall be deemed as an obligation on the
part of the Company to adopt or maintain any such employee benefits or to
provide any specific amounts of such benefits.
(c) The Company shall deduct from the Base Salary and all
other cash amounts payable by the Company under the provisions of this
Agreement to the Executive, or, if applicable, to his estate, legal
representatives or other beneficiary designated in writing by the Executive (a
"designee"), all social security taxes, all federal, state and municipal taxes
and all other charges and deductions which now or hereafter are imposed by law
as charges on the compensation of the Executive or charges on cash benefits
payable by the Company hereunder to his estate, legal representatives or
designee.
(d) During the Term of this Agreement, the Executive shall
be entitled to receive an annual bonus (the "Bonus"), payable within thirty
(30) days after the Company's fiscal year end audit is complete, in the amount
of not less than $150,000 for any year during the Term
5
<PAGE>
in which ProServ and TV together achieve either: (a) 100% of the combined
budgeted revenue for ProServ and TV for such year or (b) 75% of the combined
budgeted Operating Income (as defined below) for ProServ and TV for such year
(the "Low End Performance Goals"). The annual Bonus shall be increased to not
less than $250,000 for any year during the Term in which ProServ and TV
together achieve either: (a) 115% of the combined budgeted revenue for ProServ
and TV for such year or (b) 100% of the combined budgeted Operating Income for
ProServ and TV for such year (the "High End Performance Goals"). The annual
Bonus shall be adjusted for any year during the Term in which ProServ and TV
together achieve any performance goal between the Low End Performance Goals
and the High End Performance Goals. In addition, the annual Bonus shall be
prorated for any fiscal year during the Term in which the Employee is employed
by the Company for less than an entire fiscal year. The budgeted revenue and
budgeted Operating Income shall be determined in accordance with the regular
management practices of the Company, in which process the Executive will
participate as the Chief Executive Officer of the Subsidiaries. "Operating
Income" shall be defined as pretax income determined in accordance with the
historical accounting practices of ProServ and TV and shall be determined so
as to (i) include only operating income generated by the Subsidiaries to the
exclusion of other businesses owned and operated by the Company that are in
competition with the Subsidiaries and (ii) exclude any overhead, management or
similar charge or burden imposed or allocated among its subsidiaries by the
Company. The Board of Directors of the Company, in its discretion, may
increase (but not decrease) the annual Bonus in any year during the Term. In
the event of any combination of the Company or any affiliates and any of the
Subsidiaries, the Company and the Executive shall negotiate in good faith a
suitable adjustment to the bonus plan so as to accord as closely as
practicable with the current bonus plan.
6
<PAGE>
(e) The Executive shall be entitled to receive annually, on
the Effective Date and upon each anniversary thereof during the Term, options
to purchase 40,000 shares of the Company's Class A Common Stock, adjusted for
any stock split, stock dividend or the like subsequent to the Effective Date
(the "Stock Options"). The exercise price of each set of the Stock Options
shall be based upon the closing price of the Company's publicly traded Class A
Common Stock on the date of issuance of the Stock Options to the Executive.
Each grant of Stock Options shall fully vest on the date of their issuance to
the Executive and shall be exercisable for the longer of (i) the average
exercise period for grants of options to senior executives by the Company in
the relevant year or (ii) seven (7) years from the date of their issuance,
irrespective of any earlier termination of the Term or of this Agreement. Each
grant of Stock Options shall, except as set forth herein, be subject to the
same terms and provisions as those granted to other senior executives of the
Company. The Company shall reserve at all times from its authorized but
unissued shares (or treasury shares) of Class A Common Stock sufficient shares
of such stock to satisfy the exercise of all Stock Options then held by the
Executive. All shares issued pursuant to the exercise of any Stock Options
shall be registered under the Securities Exchange Act of 1934, and the
immediate resale thereof by the Executive shall be registered under Section 5
of the Securities Act of 1933.
(f) The Company shall reimburse the Executive, upon
production of reasonably detailed accounts and vouchers or other reasonable
evidence of payment by the Executive, all in accordance with the Company's
regular procedures in effect from time to time, all ordinary, reasonable and
necessary travel, entertainment and other expenses as shall be incurred by him
in the performance of his duties in accordance with the Company's policies and
procedures hereunder.
5. Vacation.
7
<PAGE>
The Executive shall be entitled to paid vacation time at the
average rate afforded to other senior officers of the Company but in no event
less than four (4) weeks per year during the Term of this Agreement. In
addition, Executive will be permitted to observe religious holidays as
personal days, and such days off will not be applied against Executive's
vacation time.
6. Total Disability.
If the Executive becomes disabled during his employment
hereunder so that he is unable for a period of twenty-six (26) consecutive
weeks to perform his duties under this Agreement ("Total Disability"), the
Company shall pay to the Executive all compensation and maintain in effect all
employee benefit, pension and insurance (including group health insurance
coverage) during such period; thereafter, the Company shall pay the Executive
all compensation and maintain in effect all employee benefit, pension and
insurance (including group health insurance coverage) for an additional six
(6) month period, after which no further obligations shall be due to the
Executive from the Company hereunder. The Company shall have the right to
offset against the foregoing payments the amount of any proceeds received by
the Company and paid to the Executive under any disability insurance policies
maintained by the Company.
7. Confidential Information.
All records, papers, models, programs and other documents
kept or made by the Executive during the Term of this Agreement relating to
the business or affairs of ProServ, TV, or the Company and/or its clients or
customers shall be and remain the property of the Company, and to the extent
available shall be delivered by the Executive to the Company as may be
required, upon the expiration or earlier termination of this Agreement.
8. Restrictive Covenants.
8
<PAGE>
(a) The Executive shall be prohibited from disclosing to
anyone (except to the extent reasonably necessary to perform the Executive's
duties hereunder) any confidential information concerning the business or
affairs of ProServ, TV, the Company or its Subsidiaries which the Executive
may have acquired in the course of and as incident to his employment or prior
dealing with ProServ, TV, the Company or its subsidiaries, including, without
limitation, client lists, business or trade secrets, or methods or techniques
used by ProServ, TV, the Company or its subsidiaries in or about its business,
provided, however, that the Executive need not keep confidential any
information that (i) is obtained through other lawful sources not bound by a
confidentiality agreement with the Company or either Subsidiary, (ii) is or
becomes known within the trade or the public through no fault of the
Executive, (iii) is required to be disclosed pursuant to an order or request
of a judicial or governmental authority or to protect the judicial rights of
the Executive (provided the Company is given reasonable prior notice to the
extent lawful) or (iv) is developed by the Executive independently of the
disclosure by the Company or either Subsidiary.
(b) Subject to Section 8(e), during the Term of this
Agreement, the Executive will not:
(i) influence or attempt to influence any employee
of ProServ, TV, the Company or its subsidiaries to terminate his or her
employment with ProServ, TV, or the Company;
(ii) influence or attempt to influence any person
or persons, firm, association, syndicate, partnership, company, corporation or
other entity that is then a contracting party with ProServ, TV, the Company or
its subsidiaries to terminate any written or oral agreement with ProServ, TV,
the Company or its subsidiaries;
9
<PAGE>
(iii) employ and will not solicit employment
elsewhere of any employee or consultant of ProServ, TV, the Company or its
subsidiaries; and
(iv) subject to Sections 2(c) and 2(d), directly or
indirectly, individually or with others, own, manage, operate, control, be
employed by, participate in, solicit any business from, perform consultation
services for, or be connected in any manner to the business of providing
management, licensing, sponsorship sales, marketing, consulting and production
services to sports related businesses and talent, in any area.
(c) The Executive hereby acknowledges that:
(i) the respective times, area and scope of
activities agreed to in subsections (a) and (b), above, are reasonable in
scope and necessary for the protection of the business and good will of the
Company:
(ii) since it is the understanding and desire of
the parties hereto that the covenants contained in subsections (a) and (b),
above, be enforced to the fullest extent possible under the laws and public
policies applied in each jurisdiction in which enforcement may be sought,
should any particular provision of such covenant be deemed invalid or
unenforceable, such provision shall be deemed amended to delete therefrom the
invalid portion, and the deletion shall apply only with respect to the
operation of such provisions;
(iii) to the extent a provision is deemed
unenforceable by virtue of its scope, but may be made enforceable by
limitation thereof, such provision shall be enforceable only to the extent
permissible under the laws and public policies applied in the jurisdiction to
which enforcement is sought; and
10
<PAGE>
(iv) the Executive's obligation and undertaking
provided for in this Section 8 shall, to the extent applicable, continue
beyond the termination of the Executive's relationship with the Company
hereunder to the extent provided herein.
(d) The Executive acknowledges that the services to be
rendered by him hereunder are extraordinary and unique and are vital to the
success of the Company's business, and that the breach of any of the covenants
undertaken hereunder would cause substantial damage to the Company, impossible
to exact ascertainment. Therefore, in the event of the breach or threatened
breach by the Executive of any of the terms and conditions of this Agreement
to be performed by him, the Company shall be entitled, in addition to any
other rights or remedies available to it, to institute and prosecute
proceedings in any court of competent jurisdiction, to seek immediate
injunctive relief with notice but without bond.
(e) In the event that (i) the Company terminates the
Executive for "Cause" pursuant to Section 9(a)(iii) or (ii) the Executive
voluntarily terminates his employment in violation of this Agreement and
without "Adequate Justification" (as defined in Section 9(b)(ii)), the
Executive shall remain subject to the non-compete provisions of Section 8(b)
for one year following such termination, but shall otherwise have no further
liability or obligation hereunder to the Company. In the event that the
Executive (i) exercises his right to terminate his employment at the end of
the third year of the Term pursuant to clause (a) to the proviso contained in
Section 1 and (ii) further elects, in his sole discretion, to remain subject
to the noncompete provisions of Section 8(b) for a one-year period beginning
on the third anniversary of the Effective Date, the Company shall grant to the
Executive, in consideration thereof, on such third anniversary of the
Effective Date, additional Stock Options for 40,000 shares of Class A Common
Stock (adjusted as in Section 4(e)).
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The vesting, exercise period, exercise price determination and all other terms
and provisions of such Stock Options shall be the same as for those Stock
Options granted to the Executive during the Term pursuant to Section 4(e). In
all other circumstances involving the early termination or expiration of the
Term, including the extension by the Company of the Term for a fifth year
pursuant to clause (b) to the proviso contained in Section 1 followed by the
termination or expiration of the Term, the Executive shall be subject to no
non-compete provisions unless the Company and the Executive reach a separate
agreement on mutually agreeable terms with respect thereto.
9. Termination of Executive's Employment
(a) Notwithstanding the provisions of Section 1 hereof, the
Executive's employment hereunder may be terminated prior to the expiration of
the term by the Board of Directors of the Company, upon the happening of any
of the following events:
(i) Upon the death of the Executive;
(ii) Upon the Total Disability of the Executive; or
(iii) For Cause, which shall be defined as (A) the
occurrence of any material breach of the restrictive covenants contained in
Section 2, Section 7, and Section 8 herein; (B) an event of willful
malfeasance or gross negligence in the performance of the Executive's duties
hereunder or the willful failure of Executive to perform his duties hereunder,
which malfeasance, negligence or failure has a material adverse effect on the
business of ProServ, TV, or the Company, taken as a whole, and continues for a
period fifteen (15) days after written notice is delivered to the Executive
specifying such malfeasance, negligence or failure; (C) the conviction of the
Executive of a felony criminal offense; (D) any act of fraud or embezzlement
upon ProServ, TV, the Company or its subsidiaries; or (E) determination by a
court of competent jurisdiction that (1) the Executive
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personally made a willful misrepresentation in the Stock Acquisition, (2) the
Company made a proper claim with respect thereto prior to the end of the
twelfth month following the closing of the Stock Acquisition and (3) the
effect of such willful misrepresentation was such as to misstate the value of
the Subsidiaries by in excess of $1,000,000, provided, however, that in the
event that any conviction under clause (C) ,or determination under clause E is
subsequently reversed on appeal (y) Executive shall be entitled to prompt
reimbursement of all compensation previously denied him hereunder as a result
of such conviction or determination (without reduction for any earnings of
Executive in the interim) and (z) the Company shall, at its sole option,
either reinstate Executive to his prior position and contractual status or
deem Executive to have terminated his employment with "Adequate Justification"
pursuant to Section 9(b)(ii) hereof.
(b) Notwithstanding the provisions of Section I hereof, the
Executive may terminate his employment hereunder prior to expiration of the
Term without liability or further obligation to the Company:
(i) in accordance with clause (a) of the proviso
contained in Section 1; or
(ii) with "Adequate Justification" Adequate
Justification shall mean (A) an involuntary reduction (formal or informal) in
the Executive's titles or reporting lines below those contemplated by this
Agreement, (B) an involuntary reduction in the Executive's normal duties as
contemplated by Sections 2(a) and 2(b) of this Agreement, (C) a relocation of
the ProServ Principal Office in violation of Section 3, (D) the sale or other
disposition to a nonaffiliated party of all or substantially all of the stock
or assets of ProServ or TV prior to the second anniversary of the effective
date of this Agreement; or (E) any other material breach by the Company of
this Agreement
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that continues for a period of fifteen (15) days following delivery of written
notice thereof by the Executive to the Company.
10. Consequences of Termination of this Agreement.
(a) In the event that Executive's employment is terminated
in accordance with Section 9(a) (i) above, the Executive's estate, legal
representatives or designee shall be entitled to receive, in full satisfaction
of all obligations due to the Executive from the Company hereunder, (i) all
accrued but unpaid Base Salary through the date of termination and a ratable
portion of any Bonus otherwise payable with respect to the year during which
the termination occurred (a "Ratable Bonus") plus (ii) an amount equal to
twelve (12) months Base Salary at the rate then in effect.
(b) In the event that Executive's employment is terminated
in accordance with Section 9 (a) (ii) above, the Executive (or, if applicable,
his estate, legal representatives or designee) shall be entitled to receive,
in full satisfaction of all obligations due to the Executive from the Company
hereunder, the benefits set forth in Section 6 of this Agreement.
(c) In the event that Executive's employment is terminated
in accordance with Section 9 (a) (iii) above, the Executive shall be entitled
to receive, in full satisfaction of all obligations due to the Executive from
the Company hereunder, all accrued but unpaid Base Salary through the date of
termination and a Ratable Bonus.
(d) In the event that the Executive terminates his
employment in accordance with Section 9(b)(i) above, the Executive shall be
entitled to receive, in full satisfaction of all obligations due to the
Executive from the Company hereunder, all accrued but unpaid Base Salary
through the date of termination and a Ratable Bonus.
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(e) In the event that (i) the Company terminates Executive's
employment other than as provided in Section 9(a), or (ii) the Executive
terminates his employment in accordance with Section 9 (b)(ii) above, the
Executive shall be entitled to receive, in full satisfaction of all
obligations due to the Executive from the Company hereunder, all accrued but
unpaid Base Salary through the date of termination, a Ratable Bonus and all
Base Salary, Bonus and other benefits otherwise payable pursuant to Section 4
for the remainder of the Term of this Agreement.
11. No Mitigation.
The Executive shall have no duty to seek to mitigate any
damages or other payments payable hereunder and caused by the termination of
his employment prior to expiration of the Term. In the event that the
Executive shall engage in any other employment thereafter, whether
self-employment or employment for a third party, there shall be no reduction
of or offset to any payments otherwise payable to him hereunder as a result of
such termination as a result of any compensation or other payments to the
Executive arising from such other employment.
12. Assignability; Sale of Company.
This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company in the event that the Company shall
(a) sell all or substantially all of the assets of the Company, or (b)
consolidate with or merge into any other entity, in either which event the
purchaser or successor entity shall expressly assume and be liable for all of
the obligations of the Company under this Agreement. In the circumstances of a
sale of all or substantially all of the Company's assets to a creditworthy
successor who assumes all of the Company's obligations hereunder, and who is
no less financially capable than the Company of meeting its obligations under
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this Agreement, the Executive shall release the Company from any further
obligations hereunder. In no event may the Executive assign his obligations
under this Agreement.
13. Merger of the Company and the Subsidiaries.
The Company shall consult with the Executive prior to any merger,
consolidation, or other combination of the Company and any of the
Subsidiaries. In the event that the Company and any of the Subsidiaries enter
into such combination during the Tenn or while the Executive is subject to the
non-compete provisions of Section 8 hereof, the name of the resulting entity
shall: (i) contain the term "ProServ", (ii) reflect the historical value and
quality associated with the name "ProServ" and (iii) be chosen only after
meaningful consultation with the Executive. In addition, in the event that the
Executive is employed by the Subsidiaries or the Company at the time of such
consolidation, the Executive shall be employed as the co-chairman of the board
of directors of the surviving entity of the combination.
14. Alternative Dispute Resolution.
(a) In the event of any dispute, controversy or claim
between the Company and the Executive arising out of or relating to this
Agreement, the Executive and representatives of the Company shall meet at a
place mutually agreed upon by such parties as soon as reasonably possible (but
not later than ten (10) days after notice from any party hereto to the other
that the party giving notice has such a dispute) and shall enter into good
faith negotiations aimed at resolving the dispute. If they are unable to
resolve the dispute in a mutually satisfactory manner within ten (10) days
from the date of such meeting, they shall proceed as set forth below.
(b) First, the parties shall endeavor to: (i) choose a
mutually acceptable alternative dispute resolution ("ADR") mechanism,
including without limitation choosing one or more third
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party arbitrators; and (ii) set forth the general framework for the ADR
process. If the parties are unable to agree to a mutually acceptable ADR
mechanism within ten (10) days from the date of the initial proposal from any
party with respect thereto, the parties shall enter into binding arbitration
as set forth below.
(c) All disputes among the parties arising out of or
relating to this Agreement that are not resolved by good faith negotiations
between the parties or by an ADR mechanism as set forth above shall be
resolved solely by binding arbitration pursuant to the United States
Arbitration Act, 9 U.S.C. Section 1 et seq. All disputes as to whether any
dispute is subject to arbitration shall also be settled by binding
arbitration. Either party may commence arbitration proceedings at any time
after the fifth (5th) day after delivery of notice from one party to the other
of the inability of the parties to agree upon a mutually acceptable ADR
mechanism as set forth above.
(d) Any arbitration shall be conducted in the Washington,
D.C. metropolitan area (or such other area mutually agreeable to all parties)
before a single arbitrator mutually selected by the parties thereto or, in the
event the parties shall fail to agree, by a three-person panel acting pursuant
to the Commercial Arbitration Rules and, if applicable at such time, the
Streamlined Arbitration Rules and Procedures, then in effect of the American
Arbitration Association. Any three person arbitration panel shall consist of
one arbitrator selected by each disputing party and one arbitrator selected by
the first two arbitrators. The presentation of evidence shall be governed by
the Federal Rules of Evidence. Discovery shall be controlled by the
arbitrator/panel.
(e) Any arbitration award made shall:
(i) set forth the arbitrator/panel's findings of
fact and conclusions of law and afford any such remedy as is within the scope
of the Agreement;
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(ii) be made on an expedited basis to the extent
feasible;
(iii) be final and binding upon the parties and may
be entered for enforcement in any court of competent jurisdiction; and
(iv) include as part of the arbitrator's/ panel's
determination the responsibility among the parties for payment of the
arbitrator's/panel's fees and expenses, and the prevailing party on any issue
in any arbitration shall be entitled to recover from the other party all fees
and expenses (including without limitation reasonable attorneys' and other
professionals' fees and disbursements) incurred in pursuing such issue if the
arbitrator/panel, in its discretion, determines that such an award is
warranted.
(f) Each party will participate in any such arbitration in
good faith and will (and will cause its representatives, employees and
affiliates to, and will request each participant in any ADR mechanism and each
arbitrator to) hold the existence, content and result of any dispute in
confidence except to the extent that disclosure of any such information is
required by law.
(g) This Paragraph 14 shall be a complete defense to any
suit, action or proceeding instituted before any court or agency with respect
to any matter resolvable hereunder, provided, however, that, notwithstanding
this provision, any party may seek interim judicial relief in aid of ADR or
arbitration, to prevent a violation of this Agreement pending ADR or
arbitration or to enforce any ADR or arbitration award.
15. Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of New York applicable to contracts executed
in and to be performed solely within the State of New York without giving
effect to any otherwise applicable principles of conflicts of laws.
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16. Ability to Fulfill Obligations.
Neither the Company nor the Executive is a party to or bound
by any agreement that would be violated by the terms of this Agreement.
17. Notice.
Any notice, direction or instruction required or permitted
to be given hereunder shall be given in writing and may be given by telegram,
facsimile transmission or similar method if confirmed by mail or courier as
herein provided; by mail if sent postage prepaid by registered or certified
mail, return receipt requested; by prepaid courier; or by hand delivery to any
party, in each case at the address of the party first above set forth. Any
notice, direction or instruction shall be deemed to have been given or made on
the day on which it was delivered to the address provided for in this section
or tendered thereat and refused. Any party may, from time to time, by like
notice give notice of any change of address and in such event the address of
such party shall be deemed to be changed accordingly.
18. Further Assurances.
The parties hereto agree that, after the execution of this
Agreement, they will make, do, execute or cause or permit to be made, done or
executed all such further and other lawful acts, deeds, things, devices,
conveyances and assurances in law whatsoever as may be required to carry out
the true intention and to give full force and effect to this Agreement.
19. Entire Agreement.
This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous oral and written agreements and understandings,
including all relevant portions of that certain letter of intent between
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the parties hereto dated as of May 16, 1997. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof or in effect among
the parties. No custom or trade usage, nor course of conduct among the
parties, shall be relied upon to vary the terms hereof. This Agreement may not
be amended, and no provision hereof shall be waived, except by a writing
signed by all of the parties to this Agreement that states that it is intended
to amend or waive a provision of this Agreement. Any waiver of any rights or
failure to act in a specific instance shall relate only to such instance and
shall not be construed as an agreement to waive any rights or fail to act in
any other instance, whether or not similar.
20. Severability.
Should any provision of this Agreement be unenforceable or
prohibited by any applicable law, this Agreement shall be considered divisible
as to such provision which shall be inoperative, and the remainder of this
Agreement shall be valid and binding as though such provision were not
included herein.
21. Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original. It shall not be necessary
when making proof of this Agreement to account for more than one counterpart.
22. Headings.
All headings in this Agreement are for convenience only and
will not affect the meaning of any provision hereof.
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23. Survival of Certain Provisions.
The provision of Sections 7, 8, 10, 13, 14, 25 and 26 shall,
to the extent applicable, continue in full force and effect notwithstanding
the expiration or earlier termination of the Term of this Agreement or of the
Executive's employment in accordance with the terms of this Agreement.
24. Successors and Assigns.
Except as otherwise provided herein, this Agreement shall
inure to the benefit of, and be binding upon, the Company and any successor or
assign, and upon the Executive and his executors, administrators, heirs and
legal representatives.
25. Indemnification and Exoneration.
Executive shall be entitled to the benefit of the most
expansive indemnification and exoneration provisions of each of the Company
and the Subsidiaries that are applicable at any time to any director or
officer thereof, provided, however, that in no event shall such provisions, as
applied to Executive, ever be less expansive or more restrictive in any way
than those in effect as of the effective date of the Purchase and Sale
Agreement referred to in the second WHEREAS clause hereof.
26. Interpretation.
No provision of this Agreement shall be interpreted or
construed against any party because that party or its legal representative
drafted such provision. For all purposes of this Agreement, unless the context
otherwise requires or as otherwise expressly provided, (a) all defined terms
shall include both the singular and the plural forms thereof; (b) reference to
any gender shall include all other genders; (c) all references to words such
as "herein", "hereof', and the like shall refer to this Agreement as a whole
and not to any particular Section within this Agreement; (d) the term
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"include" means "include without limitation"; and (e) the term "or" is
intended to include the term "and/or".
IN WITNESS WHEREOF, the Executive has executed this Agreement and the
Company has caused this Agreement to be executed by a duly authorized officer
as of the day and year first above written.
THE MARQUEE GROUP, INC.
By: /s/ Jan E. Chason
------------------------------------
Jan E. Chason
Chief Financial Officer & Treasurer
/s/ Donald L. Dell
---------------------------------------
Donald L. Dell
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<PAGE>
THE MARQUEE GROUP, INC.
888 Seventh Avenue
New York, New York 10019
July 18, 1997
Mr. William Allard
c/o ProServ, Inc.
1101 Wilson Boulevard, Suite 1800
Arlington, Virginia 22209
Dear Bill:
As you know, we have been in active negotiations concerning your
employment by The Marquee Group ("Marquee") in anticipation of Marquee's
purchase of ProServ, Inc. Although we have now reached agreement, it appears
that we will not have sufficient time to revise and finalize your Employment
Agreement prior to the filing of our securities documents. Accordingly, by our
signatures below, you and we agree that the following are the principal terms
and conditions of your employment by Marquee and for the purchase of your
shares in ProServ. This letter will serve as a binding agreement between us
unless and until it is supplemented by a formal Employment Agreement. (Unless
defined in this letter, capitalized terms below follow the definitions in the
draft Employment Agreement which we sent to you on July 1, 1997 (the "July 1
Draft")).
Term.
The term of your employment will commence on the Effective Date and
terminate on December 31, 2000. Neither party will have a contractual right to
an Extension Term.
Title and Duties.
You will serve as "President and Chief Operating Officer" of ProServ.
You will report directly to the CEO of Marquee. You will also serve as a
"Managing Director" of ProServ, and you will be a member of the Marquee board
of directors. As Chief Operating Officer, you duties will include operating
control, including authority over hiring and firing, budget development and
control, event planning and commitments, promotional matters, new venues, and
administrative matters.
Compensation.
(a) Your base compensation will be $300,000 per year. (Your base
compensation will be paid pro rata over the stub year in
calendar 1997).
<PAGE>
Robert M. Gutkowski
July 18, 1997
Page 2
(b) Your bonus formula will be:
(i) $100,000 for each fiscal year (i.e., January 1 -
December 31) in which ProServ achieves either 75%
of its budgeted Operating Income ("BOI") or 90% of
its budgeted Revenue:
(ii) $150,000 for each fiscal year in which ProServ
achieves either 90% of its BOI or 100% of its
budgeted Revenue;
(iii) $200,000 for each fiscal year in which ProServ
achieves either 100% of its BOI or 110% of its
budgeted Revenue;
(iv) 10% off all Operating Income about 110% of BOI.
1997 Bonus.
You will receive on December 31, 1997, a bonus of $25,000 for your
performance for calendar/fiscal 1997.
Options.
You will receive the following stock options for Marquee's Class A
Common Stock:
(i) One the Effective Date, stock options for 25,000
shares;
(ii) On each anniversary of the Effective Date, stock
options for 25,000 shares;
(iii) Within 60 days after each fiscal year, if ProServ
has achieved 90% of its BOI during that fiscal year
or 110% of budgeted Revenue, stock options to
purchase 5,000;
(iv) Within 60 days after each fiscal year, if ProServ
has achieved 100% of its BOI during that fiscal
year or 110% of budgeted Revenue, stock options to
purchase 5,000 shares (in addition to the 5,000
shares for 90% of BOI).
All stock options will be issued pursuant to a qualified plan, bear an
exercise price based upon the closing price of Marquee's stock on the date of
issuance, shall vest on the date of issuance, and shall be exercisable for 10
years.
<PAGE>
Robert M. Gutkowski
July 18, 1997
Page 3
Sale of ProServ Stock.
You agree to sell and we agree to purchase, on or before the
Effective Date, all of your stock and stock options in ProServ, for the
purchase price of $605,040, payable in cash.
Noncompetition Covenants.
You and we agree that the Restrictive Covenants, as drafted in
Section 8 of the July 1 Draft, shall not apply if (i) your employment is
terminated without cause, or (ii) your employment agreement expires without
renewal. If your employment is terminated during the term for cause, the
Company may, but shall not be obligated to trigger a one-year covenant by you,
under the terms of Section 8(b) of the July 1 Draft. If the Company opts to
bind you to these covenants, it will pay you $150,000 in consideration for
your compliance with those covenants.
Severance.
If your employment is terminated without cause, the Company will pay
you the greater of (i) the balance of the obligations owed to you under this
letter or your employment agreement, or (ii) one year's base compensation,
provided, however, that if you receive severance compensation from the Company
relating to the period after December 31, 2000, and you obtain other
employment, any amounts earned by you after December 31, 2000 will be credited
against the such severance payments. (If you are terminated without cause, you
will in all events receive full payment of obligations owed to you through
December 31, 2000 without set-off). If you employment is terminated with
cause, you will not be entitled to this severance minimum.
Cause for Termination.
The Company shall have the right to terminate your employment for
"Cause" only under the terms of Sections 9(a)B), (D) and (E) of the July 1
Draft. (Sections 9(A) and (C) of Section 9(a) shall not apply to your
employment, and, if and when we execute a final Employment Agreement, they
will be deleted).
<PAGE>
Robert M. Gutkowski
July 18, 1997
Page 4
Other Benefits
You will receive such other benefits as are provided from
time-to-time to senior executives of the Company.
We look forward to a long and profitable association with you.
Sincerely,
THE MARQUEE GROUP, INC.
By: /s/ Robert M. Gutkowski
---------------------------
Robert M. Gutkowski
President
Agreed and accepted this 18th day of July, 1997:
/s/ William Allard
- -----------------------
William Allard
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of October 14, 1997 (the "Effective Date")
(this "Agreement"), between MARQUEE MUSIC, INC., a Delaware corporation (the
"Employer"), and THE MARQUEE GROUP, INC., a Delaware corporation (the
"Parent") and the owner of all the outstanding capital stock of the Employer,
and DENNIS ARFA (the "Executive").
WHEREAS, the Executive is desirous of serving the Employer
on the terms and conditions herein provided;
NOW, THEREFORE, for good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Employer, the
Parent and the Executive agree as follows:
1. Employment. Upon the terms and subject to the conditions of
this Agreement, the Employer hereby employs the Executive and the Executive
hereby accepts employment by the Employer on the terms hereinafter set forth.
2. Term. The term of the Executive's employment hereunder shall
commence on the date first set forth above (the "Effective Date") and continue
until the fifth anniversary of October 1, 1997, and shall terminate at the
close of business on such date (the "Termination Date") unless terminated
earlier in accordance with the provisions of this Agreement (such period of
employment shall be hereinafter referred to as the "Term").
3. Executive's Position, Duties and Authority.
3.1 Position. The Employer shall employ the Executive, and
the Executive shall serve, as the Chairman, President and Chief Executive
Officer of the Employer and of any
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successor to the Employer by merger, acquisition of all or substantially all
of the assets of the Employer or otherwise. The Executive shall also serve as
a member of the Board of Directors of the Employer at no additional
remuneration.
3.2 Description. The Executive shall: (i) be responsible for
procuring new clients for the Employer who seek representation in the booking
of stage performances and for the negotiation and booking of musical concerts
and stage performances for the Employer's clients; (ii) subject to the
ultimate authority of the Board of Directors of the Parent, be responsible
for, and have full authority and control for, all operations of the Employer
including, without limitation, the full power and authority to act for and
bind the Employer in the normal and ordinary course of business; (iii) have
the exclusive authority to appoint or remove, any employee of the Employer,
fill any vacancy in any office, establish compensation for each employee
(provided that compensation of any employee in excess of $100,000 per annum
shall require the approval of Employer's Board of Directors) and establish,
alter or amend the duties of any employee of the Employer; (iv) full power and
authority to make expenditures on behalf of the Employer in accordance with
the Employer's annual budget; and (v) subject to the Employer's annual budget,
the exclusive authority to draw upon the Credit Line (as defined below). The
Executive shall, at all times, be the highest ranking officer of the Employer
and a member of the Board of Directors of the Employer. The Executive shall
report solely to the Chief Executive Officer of the Parent and the Board of
the Directors of the Parent; provided, however, that such reporting obligation
shall not diminish or reduce the Executive's authority hereunder.
4. Full-Time Services.
4.1 General. The Executive shall devote substantially all of
his business time, labor, skill and energy to conducting the business and
affairs of the Employer and to satisfying the duties and responsibilities
referred to in Section 3.2 of this Agreement. Notwithstanding the foregoing,
the Executive shall have the right to devote a portion of his business time to
personal investments and commitments not related to the business of the
Employer or the Parent; provided, that the time
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devoted thereto shall not interfere in any material respect with the
performance of the Executive's services hereunder. In addition, except as
provided in Section 14, the Executive may serve on boards of directors of
not-for-profit organizations and companies which do not compete with the
business of the Employer or the Parent, and, with the consent of the Parent,
on boards of directors of any other organizations or companies; provided, that
the service on any such boards of directors shall not interfere in any
material respect with the performance of the Executive's services hereunder.
4.2 Opportunities; Investments. The Executive covenants and
agrees that, during the Term, he shall inform the Employer of each business
opportunity related to the business of the Employer and any of the Employer's
subsidiaries, the Parent or any of the Parent's subsidiaries in each case of
which he becomes aware, and that he will not, directly or indirectly, exploit
any such opportunity for his own account, nor will he render any services to
any other person or business, or acquire any interest of any type in any other
business, that competes with any material business of the Employer or any of
the Employer's subsidiaries, the Parent or any of the Parent's subsidiaries;
provided, however, that the foregoing shall not be deemed to prohibit the
Executive from acquiring, solely as a passive investor, up to 10% of any
securities or other interests in any partnership, trust, corporation or other
entity; provided that, the Executive may not acquire any interest in any
entity that derives revenues from the business of booking concerts unless such
revenues are not material in relation to the other revenues of such entity
with the exception of up to 2% interest in any entity having a class of
securities which are publicly traded on a national or regional securities
exchange.
5. Location of Employment. Unless the Executive consents
otherwise in writing, the headquarters for performance of his services
hereunder, shall be at a suitable office facility within New York City.
6. Base Salary/Bonus.
6.1 Base Salary. During the Term, the Employer shall pay or
cause to be paid to the Executive a base salary at the annual rate of not less
than $200,000 (the "Base Salary"),
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payable in accordance with the Employer's normal payroll practices. The Base
Salary will be increased annually on the anniversary of the date of this
Agreement by the greater of 5% per annum or a percentage equal to the
percentage increase, if any, in the Consumer Price Index for all Urban
Consumers, for all items in the New York, New York Consolidated Statistical
Area, as promulgated by the Department of Labor, Bureau of Statistics (the
"CPI"), for the immediately preceding twelve-month period. In addition, the
Executive's Base Salary shall be subject to review by the Board at least once
per calendar year during the Term and shall be increased by such amounts as
the Board shall determine in its discretion. Any such higher annual rate shall
thereafter be deemed to be the Base Salary for all purposes of this Agreement.
The Base Salary shall be payable in equal installments in accordance with the
Employer's regular payroll practices during the Term for senior executives
(but in no event less than monthly).
6.2 Discretionary Bonus. The Executive shall be entitled to
receive an annual incentive cash bonus (the "Discretionary Bonus") during the
continuance of the Executive's employment hereunder at the sole discretion of
the Board of Directors of the Parent based upon criteria to be established by
the Board of Directors of the Parent, which criteria shall include, but shall
not be limited to, the performance of the Executive and business opportunities
and ideas introduced to the Parent and its subsidiaries and affiliates by the
Executive. The Discretionary Bonus shall be payable within a reasonable period
of time not to exceed ninety (90) days following the end of each fiscal year
of the Employer.
6.3 Income Bonus. (a) The Executive shall be entitled to
receive an annual incentive cash bonus (the "Income Bonus") during each Fiscal
Year (as hereinafter defined) during the Term equal to 10% of the first
$1,500,000 of Operating Income (as defined below) of the Employer for such
fiscal year and 15% of the Employer's Operating Income in excess $1,500,000
and up to $2,000,000 for such fiscal year. Notwithstanding the foregoing, if
the Employer's Operating Income is in excess of $2,000,000 during any Fiscal
Year during the Term, the Income Bonus shall be equal to 15% of the Employer's
Operating Income for such Fiscal Year. The Income Bonus shall be payable
within a reasonable period of time not to exceed ninety (90) days following
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the end of each Fiscal Year of the Employer during the Term.
(b) As used herein, the following terms shall have the
following respective meanings:
(i) "Operating Income" shall, as to any period,
mean the result of (A) the sum of the revenues of Employer derived during such
period derived from those clients or business opportunities of Employer as of
the date hereof, and from clients or business opportunities who are introduced
to Employer by Executive or by agents employed by Employer in the ordinary
course of business (which shall include Adam Kornfeld) with the exception of
Acquisition Clients (as hereinafter defined) plus fifty percent (50%) of
revenues of Employer from all clients or business opportunities introduced to
Employer by Parent or an Affiliate of Parent (other than Employer) with the
exception of Acquisition Clients plus ten percent (10%) of revenues of
Employer from Acquisition Clients less (B) the sum of Employer's direct
operating expenses, plus Employer's Allocable Share of the Parent's corporate
overhead expenses; provided, however, that the calculation of Operating Income
shall be made without deduction for: (i) Federal, state and local income
taxes; (ii) the cost and expense and amortization expense relating to the
transactions contemplated by the Purchase Agreement (as hereinafter defined)
and 90% of the cost and expense of any other Acquisition (as hereinafter
defined), including without limitation, depreciation and amortization expense
relating to any of the foregoing transactions; (iii) extraordinary
depreciation and amortization expense; (iv) any advances, signing bonuses,
salaries, benefits and other compensation paid to agents other than Executive
and Kornfeld who become employees of the Employer except to the extent that
revenues generated by such agents are included in Operating Income, in which
case any such advances, signing bonuses, salaries, benefits and other
compensation will be included on a proportionate basis based on the ratio of
the revenues of such agents included in Operating Income to all revenues
generated by such agents; (v) any bonuses paid to Executive (including,
without limitation, the Income Bonus and Operating Bonus), and provided,
further, that any allocation of general corporate overhead expense to Employer
from Parent shall be at the more favorable of an allocation determined by the
Chief Executive Officer of Employer or a percentage of such general corporate
overhead expenses based
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on the ratio of Employer's revenues to all revenues of Parent on a
consolidated basis. Notwithstanding anything contained herein to the contrary,
if the Effective Date shall be a date later than October 1, 1997, the
Operating Income for the Fiscal Year ending September 30, 1998 shall be for
all purposes of this Agreement, deemed to be the actual Operating Income for
such period multiplied by the ratio of 12 months to the actual number of
calendar months occurring in such Fiscal Year.
(ii) "Allocable Share" shall mean the ratio,
expressed as a percentage, of the revenues of Employer included in the
calculation of Operating Income to all revenues of the Parent.
(iii) "Acquisition" shall mean any acquisition by
Employer of the equity interests or assets of a person, corporation or
business entity, or similar transaction (i.e. long term employment
agreements).
(iv) "Acquisition Clients" shall mean the clients
of any agent or agency as of the date of the acquisition of such agent or
agency by means of a transaction in which Employer made payments (which are
not intended to be a salary whether or not so characterized) of cash in excess
of $300,000 or payments of stock of the Parent (which stock shall not be
subject to vesting) having a Market Value in excess of $300,000 or any
combination thereof in excess of $300,000 in the aggregate; and any clients
introduced to Employer by an agent or agency after the consummation of an
Acquisition shall not be Acquisition Clients for all purposes of this
Agreement and shall not be deemed to have been introduced to Employer by
agents employed by Employer in the ordinary course of business.
(v) "Market Value" shall mean the value of the
stock of Parent of Employer determined by the official average closing price
per share of said stock for the twenty (20) trading days immediately preceding
the date of determination in the market in which it is publicly traded.
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(vi) "Fiscal Year" shall mean each consecutive
twelve month period commencing October 1st and ending September 30th,
commencing with the Fiscal Year beginning October 1, 1997 (it being understood
that the Fiscal Year ending September 30, 1998 may commence after October 1,
1997).
(vii) "Purchase Agreement" shall mean the Asset
Purchase Agreement dated as of July 21, 1997 among Employer, Parent, Executive
and QBQ Entertainment, Inc. ("QBQ").
6.4 Cash Flow Bonus. The Executive shall be entitled to
receive an annual incentive cash bonus (the "Cash Flow Bonus") during each
Fiscal Year during the Term equal to $50,000 if the Employer's Operating
Income for such Fiscal Year equals or exceeds $1,000,000. Notwithstanding the
foregoing, if the Employer's Operating Income is less than $1,000,000 during
any Fiscal Year during the Term, but at the end of any future Fiscal Year end
during the Term the average of the Employer's Operating Income during each
Fiscal Year of the Term is in excess of $1,000,000 per Fiscal Year, the
Executive shall be entitled to receive any Cash Flow Bonus not previously paid
with respect to any prior Fiscal Year, because of Operating Income shortfalls
in a previous year. The Cash Flow Bonus shall be payable within a reasonable
period of time not to exceed ninety (90) days following the end of each Fiscal
Year during the Term.
6.5 Options. During the Term, the Executive shall be granted
options to purchase shares of the Parent's Class A Common Stock at the rate of
5,000 options per $100,000 of Income Bonus earned by the Executive during any
Fiscal Year of the Term. Each such option shall have terms not less favorable
to the Executive then the following: an exercise price equal to the Market
Value per share on the date of the grant, they shall be exercisable for ten
years, and shall vest in two equal installments on each anniversary of the
date of grant (provided, that each such option shall vest in full in the event
that Executive's employment shall be terminated by reason of death, Total
Disability (as defined below), or a termination by Executive for Good Reason
(as defined below) or an Acceleration Event (as defined in the Purchase
Agreement), and shall be not less favorable than
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as set forth in the form of Option Agreement attached hereto as Exhibit 6.5.
6.6 Calculation of Bonuses. (a) Employer shall deliver to
Executive, within sixty (60) days after the end of each Fiscal Year, a written
calculation (the "Annual Statement"), in reasonable detail, of the Operating
Income, Cash Flow Bonus, Income Bonus and stock options issuable with respect
to such Fiscal Year, which Annual Statement shall include a profit and loss
statement, statement of cash flow and a balance sheet, and shall be certified
by the Chief Financial Officer of Employer as being accurate. Except as
otherwise required pursuant to this Agreement, the calculation of Operating
Income to be made hereunder shall be determined in accordance with generally
accepted accounting principles consistently applied, shall be in accordance
with the books and records of Employer and shall be consistent with the
audited financial statements of Employer.
(b) In the event that Executive shall dispute the
calculation of the Operating Income, Income Bonus, Cash Flow Bonus or stock
options issuable with respect to Income Bonus for any Fiscal Year, Executive
shall notify Employer in writing no later than sixty (60) days after receipt
of the Annual Statement. In the event of such dispute such calculation shall
be submitted to a Big Six Firm mutually agreed upon by Employer and Executive
for review and recalculation (or, if the Employer and the Executive cannot
agree on such Big-Six Firm within twenty (20) days after such written
notification has been delivered to the Employer, Employer and Executive shall
within twenty (20) days thereafter each select a Big-Six Firm and such two
Big-Six Firms shall select a third Big-Six Firm, and such dispute shall be
submitted to such third Big-Six Firm as aforesaid for review and recalculation
or, if such third Big-Six Firm shall not for any reason have been designated
within such twenty (20) day period, then a Big-Six Firm (which shall in any
event not be a Big Six Firm regularly employed by the Employer) shall be
designated as promptly as is practicable by the American Arbitration
Association in accordance with its rules then obtaining and such dispute shall
be submitted to such Big-Six Firm so designated for review and recalculation).
The Big-Six Firm(s) ultimately undertaking such review and recalculation is
hereinafter sometimes hereinafter referred to as the "Accountants" and the
determination of the
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Accountants as to the amount of Operating Income, Income Bonus, Cash Flow
Bonus an/or stock options issuable shall be final and binding upon the
parties. Any such review and recalculation shall be made in accordance with
the definition of Operating Income and other guidelines contained in this
Agreement. The fees, costs and expenses of such review and recalculation shall
be borne by Executive unless the Operating Income (or bonus compensation)
calculated by the Accountants shall exceed the Operating Income (or bonus
compensation) set forth in the Annual Statement by more than seven and
one-half percent (7.5%) in which case such fees, costs and expenses shall be
borne by Employer. Employer agrees to cooperate with the Accountants and to
provide all such information as is reasonably necessary to the Accountants in
the performance of their review and recalculation.
6.7 Withholding. The Employer shall, in accordance with
applicable law, withhold from the Base Salary and all other cash amounts
payable by the Employer under the provisions of this Agreement to the
Executive, or, if applicable, to his estate, legal representatives or other
beneficiary designated in writing by the Executive, all social security taxes,
all Federal, state and municipal taxes and all other charges and deductions
which now or hereafter are required by law to be charges on the compensation
of the Executive or charges on cash benefits payable by the Employer hereunder
to his estate, legal representatives or other beneficiary.
7. Loan.
7.1 Loan. Upon the full execution and delivery of this
agreement, the Parent shall make a non-recourse loan to the Executive in the
amount of $1,500,000 (the "Loan") evidenced by a Promissory Note in the form
attached hereto as Exhibit A (the "Note"). The Loan shall accrue interest at
the rate of 7% per annum and will mature on the fifth anniversary of the date
hereof (but shall be prepayable) with quarterly interest only payments. The
Loan shall be secured by a pledge of 100% of the shares of the "Consideration
Stock" issued pursuant to Purchase Agreement. At the Executive's option,
interest payments may be accrued but not paid provided that at the time that
such payment is due, the value of the Consideration Stock pledged to the
Employer is such that it shall
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represent not less than 125% of the unpaid balance of the Loan including
accrued and unpaid interest thereon. The value of the Stock shall be
determined by the Market Value (as defined in the Note) of such stock.
8. Expenses and Vacation.
8.1 The Employer shall reimburse the Executive, upon
production of reasonably detailed accounts and vouchers or other reasonable
evidence of payment by the Executive, all in accordance with the Employer's
regular procedures in effect from time to time and in form suitable to
establish the validity of such expenses for tax purposes, all ordinary,
reasonable and necessary travel, entertainment and other expenses as shall be
incurred by him in the performance of his duties hereunder and in accordance
with the Employer's policies and procedures. Without limiting the generality
of the foregoing, it is understood and agreed that Executive shall be entitled
to first class travel and accommodations.
8.2 The Employer hereby agrees that, during the Term, it
shall have available a working capital line of credit, either from the Parent
or an outside source, of not less than $1,500,000 (the "Credit Line").
8.3 Executive shall be entitled to vacation with pay during
the Term in accordance with the Employer's vacation policy in effect from time
to time; provided, however, that the Executive shall be entitled to paid
vacation time at the rate of not less than four weeks per calendar year during
the Term.
9. Benefits. During the Term, the Executive shall be entitled to
participate in any pension or profit-sharing plan or program of the Parent now
existing or established hereafter, on terms no less favorable than those made
available to the other senior executives of the Parent. The Executive shall
also be eligible to participate in any group life insurance, hospitalization,
medical, health and accident, disability or similar plan or program of the
Parent now existing or established hereafter, on terms no less favorable than
those made available to the other senior executives of the
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Parent. Employer shall, at all times during the Term, pay Executive an
automobile allowance of $900 per month within ten (10) days of the
commencement of each month.
10. Insurance. The Executive agrees to submit himself, upon request
of the Parent and within a reasonable period of time from such request for
physical examination by any physician designated by the Parent's Board as
required or advisable in connection with the obtaining of any key man
insurance policy or similar coverage which the Parent may wish to obtain. The
Executive knows of no reason why he is not insurable at commercially
reasonable rates for a person of his age.
11. Indemnification. The Employer shall indemnify the Executive and
his legal representatives to the fullest extent permitted by the laws of the
State of Delaware, and the Executive shall be entitled to the protection of
such insurance policies which the Employer hereby agrees to maintain for the
benefit of its directors and officers, against all costs, charges or expenses
whatsoever incurred or sustained by him or his legal representatives in
connection with any action, suit or proceeding to which he or his legal
representatives may be made a party by reason of his being or having been a
director or officer of the Employer or the Parent (or any subsidiary or
affiliate thereof), or because of actions taken purportedly on behalf of the
Employer or the Parent (or any subsidiary or affiliate thereof) after the
Effective Date. The Employer shall, upon request by the Executive, promptly
advance or pay any amount for costs, charges or expenses (including, without
limitation, legal fees and expenses incurred by counsel retained by the
Executive) in respect of his right to indemnification hereunder, subject to a
later determination as to the Executive's ultimate right to receive such
payment. This Section 11 shall survive any termination of the Term of this
Agreement.
12. Confidential Information. All records, papers, models, programs
and other documents and those kept or made by the Executive relating to the
business or affairs of the Employer and/or its clients or customers (which
shall contain confidential and proprietary information) shall be and remain
the property of the Employer, and to the extent available shall be delivered
by the Executive to the Employer as required by the Board and, in any event,
upon the expiration or earlier termination of the Executive's employment by
the Employer.
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13. Termination.
13.1.1 Notwithstanding the provisions of Sections 1 and 2
hereof, this Agreement may be terminated prior to the expiration of the Term
by the Chief Executive Officer of the Parent only upon the happening of any of
the following events (and for no other reason):
(i) Upon the death of the Executive;
(ii) Upon the Total Disability of the Executive
(defined as the inability of the Executive to perform his duties on account of
illness or other incapacity for 6 consecutive months in any period of 12
consecutive months);
(iii) For Cause, which shall be defined as:
(a) Executive is convicted of a felony or the
Executive commits any act of embezzlement against the Employer;
(b) a final non-appealable determination by a
court of competent jurisdiction that the Executive has made a fraudulent
material misrepresentation in the Purchase Agreement; or
(c) upon the occurrence of any willful
material breach of any material covenant of the Executive contained in this
Agreement, or in the event of willful malfeasance, gross negligence, or gross
or willful misconduct in the performance of his duties hereunder in each case
having a material adverse effect on the business of the Employer, which is not
cured within 30 days after written notice is given to the Executive specifying
such material breach, gross negligence, willful malfeasance or gross or
willful misconduct.
13.1.2 Notwithstanding the provisions of Section 1 and 2
hereof, this Agreement may be terminated by Executive with Good Reason (as
hereinafter defined) prior to the expiration
of the Term upon written notice to the Employer. As used herein:
(a) "Good Reason" shall mean a breach of a material
obligation of Employer or Parent of this Agreement, the Purchase Agreement or
any of the other Transaction Agreements (as such term is defined in the
Purchase Agreement) which (if curable) is not cured within thirty (30)
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days after receipt of written notice from Executive. Such a breach described
in this Section 13.1.2 shall include any of the following events: (i) the
removal of Executive from his position as Chairman, President and/or Chief
Executive Officer of Employer (other than a termination of Executive's
employment for Cause); (ii) Executive shall not be elected as a director of
Employer; (iii) Executive shall have been required to report to anyone other
than as provided in Section 3.2 of this Agreement; (iv) a material decrease in
Executive's responsibilities or authority as provided under this Agreement
without his consent; (v) a Change in Control; (vi) a reduction in Executive's
Base Salary without his consent or the failure of the Employer to pay to
Executive without his consent any amounts owed to Executive pursuant to this
Agreement within ten (10) days of the date such payment was due to Executive;
(vii) if the Employer shall require Executive's principal place of employment
to be located other than as provided in Section 5; (viii) the failure of the
Parent and Employer to provide and maintain the Credit Line of $1,500,000.
(b) "Change of Control" shall mean (i) the
acquisition of all or substantially all of the assets of Employer or the
Parent (whether by means of a merger, consolidation, sale of stock, sale of
assets or otherwise) other than by an affiliate (as such term is defined in
Rule 405 of the Securities Act of 1933, as amended) of the Employer or Parent,
(ii) the acquisition by any party (or group, as such term is defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) not
currently a holder of more than 5% of Employer's or Parent's capital stock
entitled to vote for the election of directors of such number of additional
shares of capital stock (whether in one transaction or in a series of
transactions), which results in such party (or such group) owning 50% or more
of such stock other than by an affiliate of the Employer or Parent, or (iii)
any merger, combination, consolidation or similar transaction involving Parent
following which the holders of the capital stock of Employer or Parent
immediately prior to such transaction will not own more than 50% of Employer's
or Parent's capital stock entitled to vote for directors of the resulting
entity other than by a merger, combination, consolidation or similar
transaction by an affiliate of the Employer or Parent (provided, that an
affiliate of Employer or Parent shall not include any person or group which
becomes an affiliate solely by virtue of its acquisition of 10% or more of the
capital stock of the Parent), or (iv) the Parent's Board of Directors ceasing
to consist of the Continuing Directors (as
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hereinafter defined).
(c) "Continuing Directors" shall mean all of the
directors of Parent as of the Effective Date and all subsequent directors of
Parent who were nominated or otherwise approved by a majority of the directors
who were directors on the Effective Date or were nominated or approved in
accordance with this definition.
13.2 Consequences of Termination of this Agreement.
13.2.1 In the event that this Agreement is terminated in
accordance with Sections 13.1.1 (i) or (ii) above, the Executive, his estate,
legal representatives or designee shall be entitled to receive from Employer,
in full satisfaction of all obligations due to the Executive from the Employer
hereunder, all accrued but unpaid Base Salary and any unpaid Bonus in respect
of a Fiscal Year ended prior to the Executive's death and a lump sum amount
equal to 12 months Base Salary and upon payment of said sum the Employer shall
have no further obligations or liabilities to the Executive hereunder.
Notwithstanding the foregoing, the Employer shall be entitled to offset
against any amounts due the Executive pursuant to this Section, any amounts
then outstanding under the Loan.
13.2.2 In the event that this Agreement is terminated in
accordance with Section 13.1(iii) above, the Executive shall be entitled to
receive from Employer, in full satisfaction of all obligations due to the
Executive from the Employer hereunder, all accrued but unpaid Base Salary and
any unpaid Bonus if any, in respect of a Fiscal Year ended prior to the
Executives's termination and upon payment of said sum the Employer shall have
no further obligations or liabilities to the Executive hereunder.
Notwithstanding the foregoing, the Employer shall be entitled to off-set
against any amounts due the executive pursuant to this Section, any amounts
then outstanding under the Loan.
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13.2.3 If Executive shall terminate his employment during
the Term for Good Reason, he shall be paid (or be issued or be entitled to, as
applicable) the following by or from the Employer: (a) all accrued and unpaid
Base Salary and any unpaid Income Bonus or Cash Flow Bonus in respect of a
Fiscal Year ended prior to such termination; (b) a lump sum amount equal to
the Base Salary payable for the lesser of twenty-four (24) months or the
remainder of the Term (assuming for such purpose that the Term ended on
October 1, 2002), provided, however, that such amount shall in no event be
less than the Base Salary for one (1) full calendar year; (c) an additional
lump sum amount equal to the amount of the Income Bonus and the Cash Flow
Bonus paid or payable with respect to the full Fiscal Year in which such
termination shall occur (which amount shall be calculated using the greater of
the Income Bonus and Cash Flow Bonus, as applicable, for the last two full
Fiscal Years ended prior to such termination); (d) the Additional Stock (as
defined in the Purchase Agreement), which shall be released from the Escrow
Account (as defined in the Purchase Agreement); and (e) the Seller (as defined
in the Purchase Agreement) shall have the right to exercise the put rights
pursuant to Sections 18.1.1 and 18.2.1 of the Purchase Agreement for thirty
(30) days after such termination. If the Income Bonus or Cash Flow Bonus
actually calculated with respect to the full Fiscal Year in which such
termination occurs shall be greater than the amount paid to Executive pursuant
to Section 13.2.3 (c), then the Company shall pay the difference to the
Executive. Notwithstanding the foregoing, the Employer shall be entitled to
off-set against any amounts due the Executive pursuant to this Section, any
amounts then outstanding under the Loan.
13.2.4 Upon any termination of the Term the Employer shall
be obligated to the Executive as follows: (a) Executive will be entitled to
receive any benefits then vested, and to make all elections and receive all
rights, under all employee benefit, pension, profit sharing, insurance and
other plans in which Executive participated in accordance with the provisions
of the plan concerned; (b) Executive will be entitled to the payment of all
reimbursable business expenses that have not been reimbursed, at the time of
such termination; and (c) Employer shall pay any monies owing to Executive
hereunder not later than ten (10) business days following such termination;
provided, however, that the payment of any monies accrued under any benefit
plan shall be subject to the terms of the applicable plan and any elections
Executive has made; and provided, further, that, in the event
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any of the aforesaid unreimbursed business expenses cannot be computed and
paid at such date of termination, such monies shall be paid as soon thereafter
as reasonably practical. Anything contained herein to the contrary
notwithstanding, the obligations of the Employer (and Parent) to make payments
to Executive pursuant to this Agreement shall survive any termination of the
Term or this Agreement. Notwithstanding the foregoing, the Employer shall be
entitled to off-set against any amounts due the executive pursuant to this
Section, any amounts then outstanding under the Loan.
13.2.5 Anything contained herein to the contrary
notwithstanding, if Executive's employment is terminated for any reason,
Executive shall in no event be required to seek any other employment or take
any other action by way of mitigation or otherwise with respect to the amounts
payable to Executive under this Agreement, or to pay any amounts to the
Employer (or Parent) that Executive may receive from any other employment or
otherwise at any time after the termination of Executive's employment (nor
shall any such amounts be applied to reduce any payment which Executive are
entitled to receive from the Employer or Parent), or to account to the
Employer (or Parent) for any such amounts.
14. Noncompetition.
14.1 By Executive During Term. Subject to Section 4.2 above,
during the period of Executive's employment hereunder, the Executive will not,
without the prior written approval of the Board, become employed by, or become
an officer, director or general partner of, any partnership, corporation or
other entity that competes with any business of the Employer, any subsidiary
of the Employer, the Parent or any subsidiary of the Parent, whether now or
hereafter conducted.
14.2 By Executive After Term. Subject to Section 4.2 above,
for a period of one year following the termination of the Executive's
employment hereunder prior to the Termination Date by the Employer pursuant to
Section 13.1.1(iii) or by the Executive on his own initiative other than for
Good Reason, the Executive will not become employed by, or become an officer,
director or
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general partner of, any partnership, corporation or other entity that competes
with the Booking Business (as defined in the Purchase Agreement) of Employer
on the date of such termination nor will he render any services to any other
person or business, or acquire any interest of any type in any other business,
that competes with the Booking Business of Employer on the date of such
termination. This Section 14.2 shall not apply if the Executive's employment
hereunder shall terminate for any reason other than as specified in the
immediately preceding sentence, including, without limitation, by reason of
the passage of time.
14.3 Liquidated Damages. If Executive shall breach Section
14.2, Employer and Parent shall suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. Therefore, because of
the expense and delay which would be incurred in such event by Employer and
Parent, Executive shall pay to Employer and Parent an aggregate amount of Five
Hundred Thousand Dollars ($500,000), which amount shall constitute liquidated
damages. It is understood and agreed that such liquidated damage amount
represents Executive's and Employer's and Parent's reasonable estimate of
actual damages and does not constitute a penalty. Recovery of these liquidated
damages shall be the sole and exclusive remedy of Employer and Parent against
Executive, contractual or otherwise (and whether at law, equity or otherwise)
for a material breach of Section 14.2 and shall be applicable regardless of
the actual amount of damages sustained.
15. Notices. Any notice, direction or instruction required or
permitted to be given hereunder shall be given in writing and may be given by
telex, telegram, facsimile transmission or similar method if confirmed by mail
as herein provided; by mail if sent postage prepaid by registered mail, return
receipt requested; or by hand delivery to any party at the address of the
party set forth below. If notice, direction or instruction is given by telex,
telegram or facsimile transmission or similar method or by hand delivery, it
shall be deemed to have been given or made on the day on which it was given,
and if mailed, shall be deemed to have been given or made on the fifth
business day following the day after which it was mailed. Any party may, from
time to time, by like notice give notice of any change of address and in such
event, the address of such party shall be deemed to be changed accordingly.
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(a) If to the Employer or the Parent:
The Marquee Group, Inc.
888 7th Avenue, 16th Floor
New York, NY 10019
Attn: Robert Gutkowski
Copy to:
The Sillerman Companies
150 East 58th Street, 19th Floor
New York, NY 10155
Attn: Kraig G. Fox
(b) If to the Executive:
QBQ Entertainment, Inc.
341 Madison Avenue
New York, NY 10017
Attn: Dennis Arfa
Copy to:
Grubman Indursky & Schindler, P.C.
152 West 57 Street
New York, NY 10019
Attn: Jess H. Drabkin
16. General.
16.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
New York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws.
16.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
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16.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, between or among the parties, except as specifically provided
herein. There are no oral promises, conditions, representations,
understandings, interpretations or terms of any kind as conditions or
inducements to the execution hereof or in effect among the parties. No custom
or trade usage, nor course of conduct among the parties, shall be relied upon
to vary the terms hereof.
16.4 Successors and Assigns. This Agreement, and the
Executive's rights and obligations hereunder, may not be assigned by the
Executive or the Employer or Parent, except that the Executive may designate
pursuant to Section 16.6 one or more beneficiaries to receive any amounts that
would otherwise be payable hereunder to the Executive's estate. This Agreement
shall be binding on any successor to the Employer or the Parent, as the case
may be, but only in the event a merger, consolidation or acquisition of all or
substantially all of the Employer's or the Parent's assets or business, as
fully as if such successor were a signatory hereto, and the Employer or the
Parent, as the case may be, shall cause such successor to, and such successor
shall, expressly assume the Employer's or the Parent's, as the case may be,
obligations hereunder. The terms "Employer" and "Parent" as used in this
Agreement shall include all such successors.
16.5 Amendments; Waivers. This Agreement cannot be changed,
modified or amended, and no provision or requirement hereof may be waived,
without an affirmative vote of the Board and the Parent's Board, and the
consent in writing of the Executive, the Employer and the Parent. The failure
of a party at any time or times to require performance of any provision hereof
shall in no manner affect the right of such party at a later time to enforce
the same. No waiver by a party of the breach of any term or covenant contained
in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any other term or
covenant contained in this Agreement.
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16.6 Beneficiaries. Whenever this Agreement provides for any
payment to the Executive's estate, such payment may be made instead to such
beneficiary or beneficiaries as the Executive may have designated in a writing
filed with the Employer. The Executive shall have the right to revoke any such
designation and to redesignate a beneficiary or beneficiaries by written
notice to the Employer (and any applicable insurance company) to such effect.
16.7 Further Assurances. The parties hereto agree that,
after the execution of this Agreement, they will make, do, execute or cause or
permit to be made, done or executed all such further and other lawful acts,
deeds, things, devices, conveyances and assurances in law whatsoever as may be
required to carry out the true intention and to give full force and effect to
this Agreement.
16.8 Severability. Should any provision of this Agreement be
unenforceable or prohibited by any applicable law, this Agreement shall be
considered divisible as to such provision which shall be inoperative, and the
remainder of this Agreement shall be valid and binding as though such
provision were not included herein.
16.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original. It shall
not be necessary when making proof of this Agreement to account for more than
one counterpart.
16.10 Survival of Certain Provisions. The provisions of
Section 11, 12, 13, 14 and this Section 16 shall, to the extent applicable,
continue in full force and effect notwithstanding the expiration or earlier
termination of this Agreement or of the Executive's employment in accordance
with the terms of this Agreement.
16.11 Joint and Several Liability. Employer and Parent shall be
jointly and severally liable for all obligations and liabilities of Employer
hereunder.
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16.12 During the Term, the Executive shall have the right to use the
name "QBQ Entertainment" in the conduct of the business of the Employer, such
use to be consistent with the usual and customary use of a name of a company
including stationery, business cards and telephone answering.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
MARQUEE MUSIC, INC.
By: /s/ Rober M. Gutkowski
----------------------------
Name:
Title:
THE MARQUEE GROUP, INC.
By: /s/ Rober M. Gutkowski
----------------------------
Name:
Title:
/s/ Dennis Arfa
-------------------------------
Dennis Arfa
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FOR IMMEDIATE RELEASE
FROM: The Marquee Group, Inc. CONTACT:
888 Seventh Avenue Timothy L Klahs
40th Floor Director, Corporate Communications
New York, NY 10019 The Sillerman Companies
150 East 58th Street
New York, NY 10155
212-407-9126
THE MARQUEE GROUP, INC. CLOSES COMMON STOCK OFFERING
NEW YORK, October 14,1997 -- The Marquee Group, Inc. (AMEX MRT) today
announced that it has completed a public offering of 7.5 million shares of its
common stock priced at $5.00 per share. The issue was underwritten by
Prudential Securities Incorporated and Cowen & Company. Simultaneously, the
company closed on its acquisition of ProServ, Inc. and subsequently completed
its acquisition of the assets of QBQ Entertainment, Inc.
ProServ is an established provider of international sports event management,
television production, marketing, talent representation and consulting
services. The company anticipates increased revenues through the sharing of
business development opportunities, contacts and expertise. In addition,
ProServ's existing international operations will facilitate the company's goal
of becoming a major competitor in the rapidly growing business of
international sports. ProServ was founded by Donald Dell, who pioneered the
commercial development of tennis. He will continue to serve as chairman and
CEO of ProServ and will become a director of Marquee. The total consideration
was approximately $10.7 million cash plus 250,000 shares of Marquee common
stock.
QBQ Entertainment, whose assets will be acquired by Marquee Music, Inc., a
wholly-owned subsidiary of the company, books tours and appearances for a
variety of entertainers, including Billy Joel, Metallica, Lynyrd Skynyrd,
Luther Vandross, Rodney Dangerfield and Bruce Hornsby. The company believes
the music business offers commercial opportunities similar to the sports
business. The Marquee Group's CEO, Bob Gutkowski, has significant expertise in
the music concert business, having served as President of Madison Square
Garden Corporation, a premier indoor concert venue, Dennis Arfa, the founder
of QBQ, will become CEO of Marquee Music. The aggregate purchase price was
approximately $7 million.
Robert A Gutkowski, Marquee's President and Chief Executive Officer, said, "We
are extremely pleased to conclude this public offering of common stock and to
complete the acquisition of these two great sports and entertainment
companies. From our stockholders' perspective, this sort of transactions
provides additional market liquidity for their holdings and enhances their
interests by the creation of a significantly larger and more powerful company.
The consolidation of these two prestigious organizations into the Marquee
Group fulfills and exceeds the growth plans which we made at the time of our
initial public offering a short ten months ago, and it establishes our
presence at the forefront of the sports and entertainment business. From our
clients' viewpoint, this combination. will provide important additional
resources. It will enable the corporations, individuals and other sports and
entertainment entities which we serve to rely even more fully on the complete
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package of integrated services which we can offer them. Our blue chip roster
of clients for whom we provide personal representation will have the added
strength of more powerful opportunities as well as broader insight and
intelligence regarding trends in their. business. Looking forward, we
anticipate continued success in the periods ahead in forging a unique company,
structured and operated to take advantage of the many great opportunities in
this dynamic business."
Marquee provides integrated event management, television production.,
marketing, talent representation and consulting services in the sports, news
and other entertainment industries. The company's event management, television
production and marketing services involve managing sporting events, producing
television programming and marketing professional and collegiate athletic
leagues and organizations. The company also arranges and negotiates sports and
entertainment-related television rights, advertising, corporate sponsorships
and naming rights, or entitlements, for its clients. The talent representation
services provided by the company include negotiating employment agreements and
creating and evaluating various business opportunities for sports, news and
entertainment personalities. The company also provides a variety of consulting
services to clients either engaged in, or seeking exposure in, sports and
entertainment related industries.
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