<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
MAGICWORKS ENTERTAINMENT INCORPORATED
(Name of Subject Company)
MWE ACQUISITION CORP.
SFX ENTERTAINMENT, INC.
(Bidders)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
---------------
558909 10 7
(CUSIP Number of Class of Securities)
---------------
HOWARD J. TYTEL, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
SFX ENTERTAINMENT, INC.
650 MADISON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10022
(212) 838-3100
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidders)
---------------
Copies to:
AMAR BUDARAPU, ESQ.
BAKER & MCKENZIE
TWO ALLEN CENTER
1200 SMITH STREET, SUITE 1200
HOUSTON, TEXAS 77002
(713) 427-5000
---------------
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$121,753,016 $24,350.60
* For purposes of calculating amount of filing fee only. The amount assumes
the purchase of 30,438,254 shares of Common Stock, par value $.001 per
share (collectively, the "Shares"), at a price per Share of $4.00 in
cash. Such number of shares represents the Shares outstanding as of
August 11, 1998, determined on a fully diluted basis.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: None Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
===============================================================================
<PAGE>
CUSIP NO. 558909 10 7 14D-1 PAGE 2 OF 9 PAGES
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
MWE Acquisition Corp.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,171,800*
- --------------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 73.8% of the Shares outstanding as of August 11, 1998*
- --------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
* See footnote on page 4.
<PAGE>
CUSIP NO. 558909 10 7 14D-1 PAGE 3 OF 9 PAGES
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
SFX Entertainment, Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
BK and WC
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,171,800*
- --------------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 73.8% of the Shares outstanding as of August 11, 1998*
- --------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
* See footnote on page 4.
<PAGE>
- ----------
* SFX Entertainment, Inc., a Delaware corporation ("Parent"), and MWE
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent (the "Purchaser"), entered into certain Stockholder Agreements
as of August 6, 1998 (the "Stockholder Agreements") with certain
principal stockholders (the "Principal Stockholders") of Magicworks
Entertainment Incorporated, a Delaware corporation (the "Company"),
pursuant to which each Principal Stockholder has agreed to tender into
the Offer (as hereinafter defined) all the shares of Common Stock, par
value $.001 per share, of the Company (the "Subject Shares") that the
Principal Stockholder owns. As of August 11, 1998, there were 19,171,800
Shares subject to the Stockholder Agreements, representing approximately
73.8% of the outstanding Shares and approximately 63.0% of the
outstanding Shares on a fully diluted basis. As of August 11, 1998 there
were 25,986,243 Shares outstanding and the Company had outstanding
options, warrants and convertible notes pursuant to which up to an
aggregate of 4,452,011 additional Shares may be issued. Under the
Stockholder Agreements, each Principal Stockholder has granted an
irrevocable proxy for the benefit of Parent (and the Purchaser as its
nominee) with respect to the Subject Shares to vote such Subject Shares
under certain circumstances. Parent's (and Purchaser's) right to purchase
and vote the Subject Shares is reflected in Rows 7 and 9 of each of the
tables above. Copies of the Stockholder Agreements are attached hereto as
Exhibits (c)(2)-(c)(6), and the Stockholder Agreements are described more
fully in Section 12 of the Offer to Purchase dated August 13, 1998 (the
"Offer to Purchase") attached hereto as Exhibit (a)(1), each of which is
incorporated by reference herein.
Page 4 of 9 Pages
Exhibit Index on Page 9
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Magicworks Entertainment
Incorporated, which has its principal executive offices at 930 Washington
Avenue, Miami Beach, Florida 33139.
(b) This Schedule 14D-1 relates to the offer by the Purchaser to purchase
all outstanding shares at a price of $4.00 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. Information concerning the number of outstanding Shares is set
forth in "Introduction" of the Offer to Purchase and is incorporated herein by
reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of Shares for each quarterly period
during the past two years is set forth in Section 6 ("Price Range of the
Shares; Dividends on the Shares") of the Offer to Purchase and is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed by the Purchaser and
Parent. Information concerning the principal business and the address of the
principal offices of the Purchaser and Parent is set forth in the
"Introduction" and Section 9 ("Certain Information Concerning the Purchaser and
Parent") of the Offer to Purchase and is incorporated herein by reference. The
names, business addresses, present principal occupations or employment,
material occupations, positions, offices or employments during the last five
years and citizenship of the directors and executive officers of the Purchaser
and Parent are set forth in Schedule I to the Offer to Purchase and are
incorporated herein by reference.
(e) and (f) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser and Parent") of the Offer to Purchase is incorporated
herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 11 ("Contacts with the
Company; Background of the Offer") and Section 12 ("Purpose of the Offer; The
Merger Agreement; The Stockholder Agreements") of the Offer to Purchase is
incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "Introduction," Section 12
("Purpose of the Offer; The Merger Agreement; The Stockholder Agreements") and
Section 13 ("Dividends and Distributions") of the Offer to Purchase is
incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ("Effect of the Offer
on the Market for the Shares; Stock Quotation; Exchange Act Registration;
Margin Regulations") of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in "Introduction," Section 9
("Certain Information Concerning the Purchaser and Parent") and Section 12
("Purpose of the Offer; The Merger Agreement; The Stockholder Agreements") of
the Offer to Purchase is incorporated herein by reference.
Page 5 of 9 Pages
Exhibit Index on Page 9
<PAGE>
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in "Introduction," Section 9 ("Certain
Information Concerning the Purchaser and Parent"), Section 11 ("Contacts with
the Company; Background of the Offer") and Section 12 ("Purpose of the Offer;
The Merger Agreement; The Stockholder Agreements") of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning
the Purchaser and Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement; The Stockholder Agreements") of the Offer to Purchase is
incorporated herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for the Shares; Stock Quotation; Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal, the Agreement and Plan of Merger dated as of August 6, 1998, among
the Purchaser, Parent and the Company, and the Stockholder Agreements each
dated as of August 6, 1998, among the Purchaser, Parent and certain
Stockholders of the Company, copies of which are attached hereto as Exhibits
(a)(1), (a)(2) and (c)(1) - (c)(6), respectively, is incorporated herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other
Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust
Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9
(a)(7) Form of Summary Advertisement dated August 13, 1998
(a)(8) Text of Press Release dated August 7, 1998, issued by Parent and
the Company
(b) Credit and Guarantee Agreement, dated as of February 26, 1998, by
and among Parent, the subsidiary guarantors party thereto, the
lenders party thereto, Goldman Sachs Partners, L.P., as
co-documentation agent, Lehman Commercial Paper, Inc., as
co-documentation agent and The Bank of New York, as
administrative agent (incorporated by reference from Exhibit 10.3
to the Current Report on Form 8-K (File No. 333-43287) filed with
the SEC on March 10, 1998)
Page 6 of 9 Pages
Exhibit Index on Page 9
<PAGE>
(c)(1) Agreement and Plan of Merger, dated as of August 6, 1998, among
the Purchaser, Parent and the Company
(c)(2) Stockholder Agreement, dated as of August 6, 1998, among the
Purchaser, Parent and Krassner Family Investments Limited
Partnership
(c)(3) Stockholder Agreement, dated as of August 6, 1998, among the
Purchaser, Parent and Joe Marsh
(c)(4) Stockholder Agreement, dated as of August 6, 1998, among the
Purchaser, Parent and Lee Marshall
(c)(5) Stockholder Agreement, dated as of August 6, 1998, among the
Purchaser, Parent and Glenn Bechdel
(c)(6) Stockholder Agreement, dated as of August 6, 1998, among the
Purchaser, Parent and John W. Ballard
(c)(7) Amendment to Employment Agreement, dated as of August 6, 1998,
among Parent, the Company and Brad Krassner
(c)(8) Amendment to Employment Agreement, dated as of August 6, 1998,
among Parent, the Company and Joe Marsh
(c)(9) Amendment to Employment Agreement, dated as of August 6, 1998,
among Parent, the Company and Lee Marshall
(d) None
(e) Not applicable
(f) None
Page 7 of 9 Pages
Exhibit Index on Page 9
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 13, 1998
MWE ACQUISITION CORP.
By: /s/ Howard J. Tytel
------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
and Secretary
SFX ENTERTAINMENT, INC.
By: /s/ Howard J. Tytel
------------------------------------
Name: Howard J. Tytel
Title: Executive Vice President,
General Counsel and Secretary
Page 8 of 9 Pages
Exhibit Index on Page 9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT NAME
------ ------------
<S> <C>
(a)(1) Offer to Purchase
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and
Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(7) Form of Summary Advertisement dated August 13, 1998
(a)(8) Text of Press Release dated August 7, 1998, issued by Parent and the
Company
(b) Credit and Guarantee Agreement, dated as of February 26, 1998, by and
among Parent, the subsidiary guarantors party thereto, the lenders party
thereto, Goldman Sachs Partners, L.P., as co-documentation agent, Lehman
Commercial Paper, Inc., as co-documentation agent and The Bank of New
York, as administrative agent (incorporated by reference from Exhibit 10.3
to the Current Report on Form 8-K (File No. 333-43287) filed with the SEC
on March 10, 1998)
(c)(1) Agreement and Plan of Merger dated as of August 6, 1998, among the
Purchaser, Parent and the Company
(c)(2) Stockholder Agreement, dated as of August 6, 1998, among the Purchaser,
Parent and Krassner Family Investments Limited Partnership
(c)(3) Stockholder Agreement, dated as of August 6, 1998, among the Purchaser,
Parent and Joe Marsh
(c)(4) Stockholder Agreement, dated as of August 6, 1998, among the Purchaser,
Parent and Lee Marshall
(c)(5) Stockholder Agreement, dated as of August 6, 1998, among the Purchaser,
Parent and Glenn Bechdel
(c)(6) Stockholder Agreement, dated as of August 6, 1998, among the Purchaser,
Parent and John W. Ballard
(c)(7) Amendment to Employment Agreement, dated as of August 6, 1998,
among Parent, the Company and Brad Krassner
(c)(8) Amendment to Employment Agreement, dated as of August 6, 1998,
among Parent, the Company and Joe Marsh
(c)(9) Amendment to Employment Agreement, dated as of August 6, 1998,
among Parent, the Company and Lee Marshall
(d) None
(e) Not applicable
(f) None
</TABLE>
Page 9 of 9 Pages
Exhibit Index on Page 9
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
AT
$4.00 NET PER SHARE
BY
MWE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
[SFX ENTERTAINMENT, INC. LOGO]
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, SEPTEMBER 10, 1998, UNLESS EXTENDED.
THE BOARD OF DIRECTORS OF MAGICWORKS ENTERTAINMENT INCORPORATED (THE
"COMPANY") AND A SPECIAL COMMITTEE OF THE INDEPENDENT DIRECTORS OF THE COMPANY
(THE "INDEPENDENT COMMITTEE") HAVE EACH UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER REFERRED TO HEREIN. THE BOARD OF DIRECTORS OF THE COMPANY HAS
UNANIMOUSLY DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE
ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS) AND
(2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER, APPLICABLE TO THE PURCHASE
OF SHARES PURSUANT TO THE OFFER, HAVING EXPIRED OR BEEN TERMINATED. CERTAIN
PRINCIPAL STOCKHOLDERS OF THE COMPANY HOLDING APPROXIMATELY 73.8% OF THE
OUTSTANDING SHARES AND HOLDING MORE THAN A MAJORITY OF THE OUTSTANDING SHARES
ON A FULLY DILUTED BASIS HAVE AGREED TO TENDER THEIR SHARES INTO THE OFFER.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such
stockholder's Shares (as defined herein) should either (1) complete and sign
the Letter of Transmittal or a facsimile copy thereof in accordance with the
instructions in the Letter of Transmittal, have such stockholder's signature
thereon guaranteed if required by Instruction 1 to the Letter of Transmittal,
mail or deliver the Letter of Transmittal or such facsimile, or, in the case of
a book-entry transfer effected pursuant to the procedure set forth in Section
2, an Agent's Message (as defined herein), and any other required documents, to
the Depositary and either deliver the certificates for such Shares to the
Depositary along with the Letter of Transmittal or facsimile or deliver such
Shares pursuant to the procedure for book-entry transfer set forth in Section 2
or (2) request such stockholder's broker, dealer, bank, trust company or other
nominee to effect the transaction for such stockholder. A stockholder having
Shares registered in the name of a broker, dealer, bank, trust company or other
nominee must contact such broker, dealer, bank, trust company or other nominee
if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply in a timely manner
with the procedure for book-entry transfer, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedure for guaranteed delivery set forth in
Section 2.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at its address and telephone
number set forth on the back cover of this Offer to Purchase.
---------------
The Information Agent for the Offer is:
[GEORGESON & COMPANY INC. LOGO]
August 13, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction ...................................................................... 1
1. Terms of the Offer ............................................................ 2
2. Procedure for Tendering Shares ................................................ 4
3. Withdrawal Rights ............................................................. 6
4. Acceptance for Payment and Payment............................................. 7
5. Certain Federal Income Tax Consequences ....................................... 8
6. Price Range of the Shares; Dividends on the Shares ............................ 9
7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange
Act Registration; Margin Regulations .......................................... 9
8. Certain Information Concerning the Company .................................... 10
9. Certain Information Concerning the Purchaser and Parent ....................... 12
10. Source and Amount of Funds .................................................... 13
11. Contacts with the Company; Background of the Offer ............................ 15
12. Purpose of the Offer; The Merger Agreement; The Stockholder Agreements ........ 16
13. Dividends and Distributions ................................................... 24
14. Certain Conditions of the Offer ............................................... 25
15. Certain Legal Matters ......................................................... 26
16. Fees and Expenses ............................................................. 28
17. Miscellaneous ................................................................. 28
Schedule I -- Directors and Executive Officers of Parent and the Purchaser .... 29
</TABLE>
<PAGE>
To the Holders of Common Stock
of Magicworks Entertainment Incorporated:
INTRODUCTION
MWE Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of SFX Entertainment, Inc., a Delaware corporation
("Parent"), is offering to purchase all outstanding shares (the "Shares") of
Common Stock, par value $.001 per share ("Company Common Stock"), of Magicworks
Entertainment Incorporated, a Delaware corporation (the "Company"), at $4.00
per Share (the "Offer Price"), net to the seller in cash, upon the terms and
subject to the conditions set forth in this Offer to Purchase dated August 13,
1998 and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
The Purchaser will pay all fees and expenses of The Bank of New York, which is
acting as the Depositary (the "Depositary"), and Georgeson & Company Inc.,
which is acting as Information Agent (the "Information Agent"), incurred in
connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY AND THE INDEPENDENT COMMITTEE HAVE
EACH UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (AS DEFINED BELOW). THE
BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF
THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF,
THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF
THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES.
SMITH BARNEY INC. AND SALOMON BROTHERS INC (COLLECTIVELY DOING BUSINESS AS
SALOMON SMITH BARNEY) HAVE DELIVERED TO THE INDEPENDENT COMMITTEE A WRITTEN
OPINION DATED AUGUST 6, 1998 TO THE EFFECT THAT, AS OF SUCH DATE AND BASED UPON
AND SUBJECT TO CERTAIN MATTERS STATED IN SUCH OPINION, THE $4.00 PER SHARE CASH
CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF SHARES (OTHER THAN PARENT AND
ITS AFFILIATES) PURSUANT TO THE OFFER AND THE MERGER WAS FAIR TO SUCH HOLDERS
FROM A FINANCIAL POINT OF VIEW. SUCH OPINION IS SET FORTH IN FULL AS AN EXHIBIT
TO THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE
"SCHEDULE 14D-9"), WHICH IS BEING MAILED TO STOCKHOLDERS OF THE COMPANY
HEREWITH. STOCKHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS
ENTIRETY.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in Section
1) at least a majority of the outstanding Shares (determined on a fully diluted
basis) (the "Minimum Condition") and (2) any waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"), applicable to the purchase of Shares
pursuant to the Offer, having expired or been terminated. The Purchaser
reserves the right (subject to obtaining the consent of the Company and the
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC")), which it presently has no intention of exercising, to waive or reduce
the Minimum Condition and to elect to purchase, pursuant to the Offer, less
than the number of Shares required to satisfy the Minimum Condition. See
Sections 1 and 14.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of August 6, 1998 (the "Merger Agreement"), among Parent, the Purchaser and
the Company, pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company, with the Company surviving the merger (as such, the
"Surviving Corporation") as a wholly owned subsidiary of Parent (the "Merger").
In the Merger, each outstanding Share (other than Shares owned by the Company,
any subsidiary of the Company, Parent, the Purchaser, any other subsidiary of
Parent or stockholders, if any, who are entitled to and who properly exercise
dissenters' rights under the General Corporation Law of the State of Delaware
("Delaware Law")) will be converted into the right to receive the per Share
price paid in the Offer in cash, without interest (the "Merger Consideration").
See Section 12.
The Merger is subject to a number of conditions, including approval by
stockholders of the Company, if such approval is required by applicable law.
See Section 14. In the event the Purchaser acquires 90% or
1
<PAGE>
more of the outstanding Shares pursuant to the Offer or otherwise, the
Purchaser will effect the Merger pursuant to the short-form merger provisions
of Delaware Law, without prior notice to, or any action by, any other
stockholder of the Company. See Section 12.
Parent and the Purchaser entered into Stockholder Agreements dated as of
August 6, 1998 (the "Stockholder Agreements") with certain principal
stockholders of the Company (the "Principal Stockholders"), pursuant to which
each Principal Stockholder has agreed to tender into the Offer all the Shares
that the Principal Stockholder owns. These Shares represent more than a
majority of the outstanding Shares (determined on a fully diluted basis) and,
upon the tendering of these Shares, the Minimum Condition will be satisfied. As
of August 11, 1998, there were 19,171,800 Shares subject to the Stockholder
Agreements, representing approximately 73.8% of the outstanding Shares and
approximately 63.0% of the outstanding Shares on a fully diluted basis. As of
August 11, 1998, there were 25,986,243 Shares outstanding and the Company had
outstanding options, warrants and convertible notes pursuant to which up to an
aggregate of 4,452,011 additional Shares may be issued. As used herein, "fully
diluted" gives effect to the issuance of the Shares upon the exercise or
conversion of the outstanding options, warrants and convertible notes.
Once the Minimum Condition is satisfied and the Purchaser accepts for
payment Shares tendered pursuant to the Offer, the Purchaser will be entitled,
under the terms of the Merger Agreement, to elect a majority of the members of
the Company's Board of Directors and will be able to effect the Merger without
the affirmative vote of any other stockholder of the Company.
The Merger Agreement and the Stockholder Agreements are more fully
described in Section 12. Certain U.S. Federal income tax consequences of the
sale of Shares pursuant to the Offer and the exchange of Shares for the Merger
Consideration pursuant to the Merger are described in Section 5.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3. The
term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday,
September 10, 1998, unless and until the Purchaser shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Subject to the terms of the Merger Agreement (see Section 12) and the
applicable rules and regulations of the SEC, the Purchaser expressly reserves
the right, in its sole discretion, at any time and from time to time, and
regardless of whether or not any of the events set forth in Section 14 hereof
shall have occurred or shall have been determined by the Purchaser to have
occurred, to (1) extend the period of time during which the Offer is open, and
thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (2) amend
the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON
THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If by 12:00 Midnight, New York City time, on Thursday, September 10, 1998
(or any other date or time then set as the Expiration Date), any or all
conditions to the Offer have not been satisfied or waived, the Purchaser
reserves the right (but shall not be obligated), subject to the terms and
conditions contained in the Merger Agreement and to the applicable rules and
regulations of the SEC, to (1) terminate the Offer and not accept for payment
any Shares and return all tendered Shares to tendering stockholders, (2) waive
all of the unsatisfied conditions (other than the Minimum Condition, which can
only be waived with the consent of the Company, and the condition with respect
to the HSR Act) and, subject to complying with the terms of the Merger
Agreement and the applicable rules and regulations of the SEC, accept for
payment and pay for all Shares validly tendered prior to the Expiration Date
and not
2
<PAGE>
theretofore withdrawn, (3) extend the Offer and, subject to the right of
stockholders to withdraw Shares until the Expiration Date, retain the Shares
that have been tendered during the period or periods for which the Offer is
extended or (4) amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer (other than as required by any Rule, regulation,
interpretation or position of the SEC). Any extension, waiver, amendment or
termination will be followed as promptly as practicable by public announcement.
In the case of an extension, Rule 14e-l(d) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), requires that the announcement be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change), and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
In the Merger Agreement, the Purchaser has agreed that it will not,
without the prior consent of the Company, (1) reduce the Offer Price, (2)
reduce the number of Shares subject to the Offer, (3) add or modify conditions
to the Offer or (4) extend, amend or change the terms of the Offer in any
manner materially adverse to the holders of the Shares, provided that, without
the consent of the Company, the Purchaser may extend the Offer (a) if at the
scheduled expiration date of the Offer, any of the conditions to the
Purchaser's obligations to purchase Shares have not been satisfied or waived,
until such time as such conditions are satisfied or waived, (b) from time to
time for an aggregate period of not more than 15 business days beyond the
latest expiration date otherwise permitted pursuant to this sentence, if on
such expiration date there has not been tendered at least 90% of the Shares or
(c) for any period required by any rule, regulation, interpretation or position
of the SEC or the staff thereof applicable to the Offer or any period required
by applicable law. However, notwithstanding the foregoing, the Offer may not,
without the Company's prior written consent (1) be extended beyond the date of
termination as provided in the Merger Agreement or (2) be extended pursuant to
clause (4)(a) of the preceeding sentence, if the failure to satisfy any
condition was caused by a material breach by Parent or the Purchaser of any of
their representations, warranties, covenants or other agreements set forth in
the Merger Agreement. As used in this Offer to Purchase, "business day" has the
meaning set forth in Rule 14d-1 under the Exchange Act.
If the Purchaser extends the Offer, or if the Purchaser is delayed in its
acceptance for payment of or payment for Shares or it is unable to pay for
Shares pursuant to the Offer for any reason (whether before or after its
acceptance for payment of Shares), then, without prejudice to the Purchaser's
rights under the Offer, the Depositary may retain tendered Shares on behalf of
the Purchaser, and such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to withdrawal rights as described in
Section 3. However, the ability of the Purchaser to delay the payment for
Shares that the Purchaser has accepted for payment is limited by Rule 14e-1
under the Exchange Act, which requires that a bidder pay the consideration
offered or return the securities deposited by or on behalf of holders of
securities promptly after the termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or in
the information concerning the Offer or waives a material condition of the
Offer (including, with the Company's consent, a waiver of the Minimum
Condition), the Purchaser will disseminate additional tender offer materials
and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and
14e-l under the Exchange Act. The minimum period during which an offer must
remain open following material changes in the terms of the offer or information
concerning the offer, other than a change in price or a change in the
percentage of securities sought, will depend upon the facts and circumstances
then existing, including the relative materiality of the changed terms or
information. With respect to a change in price or a change in the percentage of
securities sought, a minimum period of 10 business days is generally required
to allow for adequate dissemination to stockholders.
3
<PAGE>
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition (which will be satisfied following the tendering of the Shares
subject to the Stockholder Agreements), the expiration or termination of all
waiting periods imposed by the HSR Act and the other conditions set forth in
Section 14. Subject to the terms and conditions contained in the Merger
Agreement, the Purchaser reserves the right (but shall not be obligated) to
waive any or all such conditions (including, with the consent of the Company,
the Minimum Condition).
The Company has provided the Purchaser with the Company's stockholder
lists and security position listings for the purpose of disseminating the Offer
to holders of the Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed by the Purchaser to
record holders of Shares and will be furnished by the Purchaser to brokers,
dealers, banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
Valid Tender. For a stockholder to validly tender Shares pursuant to the
Offer, either (1) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees, or in
the case of a book-entry transfer, an Agent's Message, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date and either certificates for tendered Shares must
be received by the Depositary at one of such addresses or such Shares must be
delivered pursuant to the procedure for book-entry transfer set forth below
(and a Book-Entry Confirmation (as defined below) received by the Depositary),
in each case prior to the Expiration Date, or (2) the tendering stockholder
must comply with the guaranteed delivery procedure set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents, must, in any case, be transmitted
to, and received by, the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering stockholder must comply with the guaranteed delivery procedure
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN
4
<PAGE>
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (1) the Letter of Transmittal is signed by the registered holder
(which term, for purposes of this Section, includes any participant in the
Book-Entry Transfer Facility's system whose name appears on a security position
listing as the owner of the Shares) of Shares tendered therewith unless such
registered holder has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal or (2) such Shares are tendered for the account of a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (such participant, an "Eligible
Institution"). In all other cases, all signatures on the Letters of Transmittal
must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the
Letter of Transmittal. If the certificates for Shares are registered in the
name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made or certificates for Shares not tendered or not accepted
for payment are to be issued to a person other than the registered holder of
the certificates surrendered, the tendered certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as
aforesaid. See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser is received by the
Depositary, as provided below, prior to the Expiration Date; and
(3) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to such Shares), together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other
documents required by the Letter of Transmittal, are received by the
Depositary within three trading days after the date of execution of
such Notice of Guaranteed Delivery. A "trading day" is any day on
which the American Stock Exchange, Inc. (the "AMEX") is open for
business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted
for payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (1) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (2) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (3) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations are actually
received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. SEE SECTION 4.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
5
<PAGE>
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder will irrevocably appoint designees of the Purchaser as
such stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after August 13, 1998. All such proxies shall be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such stockholder as provided herein. Upon such
acceptance for payment, all prior powers of attorney and proxies given by such
stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be empowered to exercise all voting and
other rights with respect to such Shares or other securities or rights in
respect of any annual, special or adjourned meeting of the Company's
stockholders, or otherwise, as they in their sole discretion deem proper. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares, the Purchaser must be able to exercise full voting and other
rights with respect to such Shares and other securities or rights, including
voting at any meeting of stockholders then scheduled.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of, or payment for, which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in any tender with respect to any particular Shares,
whether or not similar defects or irregularities are waived in the case of
other Shares. No tender of Shares will be deemed to have been validly made
until all defects or irregularities relating thereto have been cured or waived.
None of the Purchaser, Parent, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a stockholder
surrendering Shares in the Offer must, unless an exemption applies, provide the
Depositary with such stockholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 and certify under penalty of perjury that such
TIN is correct and that such stockholder is not subject to backup withholding.
If a stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may impose
a penalty on such stockholder and payment of cash to such stockholder pursuant
to the Offer may be subject to backup withholding of 31%. All stockholders
surrendering Shares pursuant to the Offer should complete and sign the main
signature form and the Substitute Form W-9 included as part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is proven in a
manner satisfactory to the Purchaser and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
stockholders should complete and sign the main signature form of the Letter of
Transmittal and a Form W-8, Certificate of Foreign Status, a copy of which may
be obtained from the Depositary, in order to avoid backup withholding. See
Instruction 9 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after October 11, 1998.
6
<PAGE>
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must
specify the name of the person having tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of the
Shares to be withdrawn, if different from the name of the person who tendered
the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted
to the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by
an Eligible Institution. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not validly
tendered for any purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in Section 2 at
any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms, and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will accept for payment, and will pay
for, all Shares validly tendered prior to the Expiration Date and not properly
withdrawn in accordance with Section 3 promptly after the Expiration Date. Any
determination concerning the satisfaction of such terms and conditions will be
within the sole discretion of the Purchaser, and such determination will be
final and binding on all tendering stockholders. See Sections 1 and 14. The
Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of or payment for Shares in order to comply in whole or
in part with any applicable law, including, without limitation, the HSR Act.
Any such delays will be effected in compliance with Rule 14e-1(c) under the
Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered Shares promptly after the termination or withdrawal of the Offer).
Parent has filed a Notification and Report Form with respect to the Offer
under the HSR Act. The waiting period under the HSR Act with respect to the
Offer will expire at 11:59 p.m., New York City time, on August 22, 1998, unless
early termination of the waiting period is granted. In addition, the Antitrust
Division of the Department of Justice (the "Antitrust Division") or the Federal
Trade Commission (the "FTC") may extend the waiting period by requesting
additional information or documentary material from Parent. If such a request
is made, such waiting period will expire at 11:59 p.m., New York City time, on
the 10th day after substantial compliance by Parent with such request. See
Section 15 hereof for additional information concerning the HSR Act and the
applicability of the antitrust laws to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (1)
certificates for such Shares (or timely Book-Entry Confirmation of a transfer
of such Shares as described in Section 2), (2) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees and (3) any other documents required by the Letter of
Transmittal. The per Share consideration paid to any stockholder pursuant to
the Offer will be the highest per Share consideration paid to any other
stockholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares.
Payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of
7
<PAGE>
receiving payment from the Purchaser and transmitting payment to tendering
stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment
for Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return
the tendered securities promptly after the termination or withdrawal of a
tender offer), the Depositary may, nevertheless, on behalf of the Purchaser,
retain tendered Shares. Any such Shares may not be withdrawn except to the
extent tendering stockholders are entitled to exercise, and duly exercise,
withdrawal rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer because of
an invalid tender or otherwise, certificates for any such Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedure set forth
in Section 2, such Shares will be credited to an account maintained at the
Book-Entry Transfer Facility), as promptly as practicable after the expiration
or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to
the Offer. Any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to the Offer or the Merger will constitute a
taxable transaction for Federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and may also constitute a taxable
transaction under applicable state, local, foreign and other tax laws. As a
result, a tendering stockholder will generally recognize gain or loss for
Federal income tax purposes in an amount equal to the difference between the
amount of cash received by the stockholder pursuant to the Offer or the Merger
and such stockholder's aggregate adjusted tax basis in the Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or
loss will be calculated separately for each block of Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger). If
tendered Shares are held by a tendering stockholder as capital assets (within
the meaning of Section 1221 of the Code), any gain or loss recognized by the
tendering stockholder will constitute capital gain or loss, and will constitute
long-term capital gain or loss if the tendering stockholder held the underlying
Shares for more than 12 months as of the date of disposition.
Under the Internal Revenue Service Restructuring and Reform Act of 1998,
in the case of noncorporate stockholders, if the underlying Shares have been
held for more than 12 months as of the date of disposition, any long-term
capital gain recognized by a noncorporate stockholder generally will be subject
to Federal income tax at a maximum rate of 20%. There are limits on the
deductibility of losses.
A stockholder (other than certain exempt stockholders, including, among
others, all corporations and certain foreign individuals) that tenders Shares
may be subject to backup withholding at a rate of 31% unless the stockholder
provides its correct TIN (or certifies that it is awaiting a TIN) and certifies
as to no loss of exemption from backup withholding and otherwise complies with
the applicable requirements of the backup withholding rules. A stockholder that
does not furnish its correct TIN in the prescribed manner or that does not
otherwise establish a basis for an exemption from backup withholding may be
subject to a penalty imposed by the IRS, and gross proceeds of the Offer or the
Merger payable to such stockholder may be subject to backup withholding at a
rate of 31%. Each stockholder should complete and sign the Substitute Form W-9
included as part of the Letter of Transmittal so as to provide the information
and certification necessary to avoid backup withholding. See Section 2.
8
<PAGE>
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained
by the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL
TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT
APPLY TO A HOLDER OF SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE
MERGER.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
Since June 11, 1997, the Shares have been traded on the AMEX under the
symbol "MJK." From August 2, 1996 to June 10, 1997, the Shares were traded in
the Nasdaq over-the-counter market (the "OTC Bulletin Board") under the symbol
"MAJK." The following table sets forth, for each of the periods indicated, the
high and low reported bid prices per Share, as reported by the OTC Bulletin
Board, or the high and low reported last sale prices per Share, as reported by
the AMEX, as appropriate.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1996
Third Quarter ............................. $4.25 $3.50
Fourth Quarter ............................ 4.00 3.00
1997
First Quarter ............................. $4.38 $2.75
Second Quarter ............................ 4.00 2.25
Third Quarter ............................. 2.81 1.75
Fourth Quarter ............................ 2.50 1.19
1998
First Quarter ............................. $2.00 $1.38
Second Quarter ............................ 2.69 1.56
Third Quarter (through August 11) ......... 3.94 2.44
</TABLE>
On August 6, 1998, the last full day of trading before the public
announcement of the execution of the Merger Agreement, the reported last sale
price of the Shares on the AMEX was $3.56 per Share. On August 11, 1998, the
reported last sale price of the Shares on the AMEX was $3.81 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (the "Form 10-K"), the Company has not paid cash
dividends on the Shares to date and does not plan to pay cash dividends to its
stockholders in the foreseeable future.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
9
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Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements for continued listing on the AMEX,
which requires that an issuer have at least 200,000 publicly held shares, held
by at least 300 stockholders of round lots and with a market value of at least
$1,000,000. According to the Company, as of August 11, 1998, there were
approximately 375 holders of record of Shares, and 25,986,243 Shares were
outstanding. If, as a result of the purchase of Shares pursuant to the Offer,
the Shares no longer meet the requirements for continued listing on the AMEX,
then the Shares could be delisted, and the market for Shares could be adversely
affected.
In the event that the AMEX delists the Shares, it is possible that the
Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interests in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
The Shares are currently registered under the Exchange Act. Registration
of the Shares under the Exchange Act may be terminated upon application of the
Company to the SEC if the Shares are neither listed on a national securities
exchange nor held by 300 or more holders of record. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and to the SEC and
would make certain provisions of the Exchange Act no longer applicable to the
Company, such as the shortswing profit recovery provisions of Section 16(b) of
the Exchange Act, the requirement of furnishing a proxy statement pursuant to
Section 14(a) of the Exchange Act in connection with stockholders' meetings,
the related requirement of furnishing an annual report to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933, as amended (the "Securities Act"), may be impaired or eliminated. The
Purchaser intends to seek to cause the Company to apply for termination of
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will cease to be traded on the AMEX and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices
at 930 Washington Avenue, Miami Beach, Florida 33139. According to the Form
10-K, the Company, through its subsidiaries and related partnerships, acquires
domestic and international stage and ancillary rights to theatrical
productions, produces and promotes live entertainment, manages and books
performances and shows, and provides ancillary services (including
transportation and merchandising of a broad range of products associated with
its productions and performers).
Set forth below is certain selected consolidated financial information
with respect to the Company and its subsidiaries excerpted or derived from the
information contained in the Form 10-K or the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 (the "Form 10-Q"). More
comprehensive financial information is included in those reports and other
documents filed by the
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Company with the Commission, and the following summary is qualified in its
entirety by reference to those reports and such other documents and all the
financial information (including any related notes) contained therein. The Form
10-K, the Form 10-Q and such other documents should be available for inspection
and copies thereof should be obtainable in the manner set forth below under
"Available Information."
MAGICWORKS ENTERTAINMENT INCORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------------- ----------------------------------------
1998 1997 1997 1996 1995
---------- ---------- -------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total revenues ......................... $37,135 $12,784 $63,916 $ 71,667 $ 54,129
Income from operations ................. 1,907 1,854 2,807 3,356 5,007
Net income and net income before pro
forma income taxes for periods prior to
July 29, 1996 ......................... $ 913 $ 939 $ 1,117 $ 2,566 $ 3,739
Pro forma income taxes(1) .............. -- -- -- (1,162) (1,458)
Pro forma net income(1) ................ -- -- -- 1,404 2,281
Net income and pro forma net income per
share basic and diluted ............... $ 0.04 $ 0.04 $ 0.05 $ 0.06 $ 0.10
Weighted average common shares
outstanding ........................... 24,417 24,394 24,399 22,907 21,831
AT JUNE 30, AT DECEMBER 31,
-------------- --------------------------
1998 1997 1996
------- --------- ---------
BALANCE DATA SHEET:
Working capital ................................................ $ 4,127 $ 3,701 $ 6,633
Total assets ................................................... 27,096 17,445 14,927
Long term debt ................................................. 5,810 6,047 6,177
Stockholders' equity ........................................... 6,471 5,477 4,607
</TABLE>
- ----------
(1) Reflects the effect of a pro forma provision for income taxes on
historical statement of income data at 39% which would have been recorded
had the Company been a taxable entity for all periods presented.
Available Information. The Company is subject to the reporting
requirements of the Exchange Act and, in accordance therewith, is required to
file reports and other information with the SEC relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
stockholders and filed with the SEC. Such reports, proxy statements and other
information should be available for inspection at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the SEC located in the Northwestern
Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661
and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies
should be obtainable, by mail, upon payment of the SEC's customary charges, by
writing to the SEC's principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549. The SEC maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. Such reports, proxy and information statements and
other information may be found on the SEC's web site, the address of which is:
http://www.sec.gov. Such information should also be on file at the American
Stock Exchange, 86 Trinity Place, New York, New York 10006-1881.
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Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the SEC and other publicly available
information. Although the Purchaser and Parent do not have any knowledge that
any such information is untrue, neither the Purchaser nor Parent takes any
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
The Purchaser, a Delaware corporation and a wholly owned subsidiary of
Parent, was organized to acquire the Company and has not conducted any
unrelated activities since its organization. The principal offices of the
Purchaser are located at 650 Madison Avenue, 16th Floor, New York, New York
10022. All outstanding shares of capital stock of the Purchaser are owned by
Parent.
Parent is a leading integrated promoter, producer and venue operator in
the live entertainment industry. In addition, Parent is a leading full-service
marketing and management company specializing in the representation of team
sports athletes, primarily in professional basketball. Parent believes that it
currently controls the largest network of venues used principally for music
concerts and other live entertainment events in the United States, with 44
venues either directly owned or operated under lease or exclusive booking
arrangements in 22 of the top 50 markets, including 11 amphitheaters in 7 of
the top 10 markets. Parent is a Delaware corporation with its principal offices
located at 650 Madison Avenue, 16th Floor, New York, New York 10022.
Financial information with respect to Parent and its subsidiaries is
included in Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, its Quarterly Report on Form 10-Q for the quarter ended June
30, 1998, its Prospectus, as supplemented, filed on June 30, 1998 pursuant to
Rule 424(b) under the Securities Act and other documents filed by Parent with
the SEC. Such reports and other documents should be available for inspection
and copies thereof should be obtainable in the manner set forth below under
"Available Information."
Except as described in this Offer to Purchase, the Purchaser and Parent
(together, the "Corporate Entities") do not, and, to the best knowledge of the
Corporate Entities, none of the persons listed in Schedule I or any associate
or majority-owned subsidiary of the Corporate Entities or any of the persons so
listed, beneficially owns any equity security of the Company, and none of the
Corporate Entities or, to the best knowledge of the Corporate Entities, any of
the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days.
Except as described in this Offer to Purchase, (1) there have not been any
contacts, transactions or negotiations between the Corporate Entities, any of
their respective subsidiaries or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand,
that are required to be disclosed pursuant to the rules and regulations of the
SEC and (2) none of the Corporate Entities or, to the best knowledge of the
Corporate Entities, any of the persons listed in Schedule I has any contract,
arrangement, understanding or relationship with any person with respect to any
securities of the Company.
During the last five years, none of the Corporate Entities or, to the best
knowledge of the Corporate Entities, any of the persons listed in Schedule I
(1) has been convicted in a criminal proceeding (excluding traffic violations
and similar misdemeanors) or (2) was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, Federal
or state securities laws or finding any violation of such laws. The name,
business address, present principal occupation or employment, five-year
employment history and citizenship of each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I.
Available Information. Parent is subject to the reporting requirements of
the Exchange Act and, in accordance therewith, is required to file reports and
other information with the SEC relating to its business, financial condition
and other matters. Information, as of particular dates, concerning Parent's
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<PAGE>
directors and officers, their remuneration, stock options granted to them, the
principal holders of Parent's securities and any material interest of such
persons in transactions with Parent is disclosed in Parent's reports and filed
with the SEC. Such reports and other information should be available for
inspection at the public reference facilities of the SEC located at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC
located in the Northwestern Atrium Center, 500 West Madison Street (Suite
1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies should be obtainable, by mail, upon payment of the
SEC's customary charges, by writing to the SEC's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The SEC maintains a web site that
contains reports and other information regarding registrants that file
electronically with the SEC. Such reports and other information may be found on
the SEC's web site, the address of which is: http://www.sec.gov. Such material
should also be available for inspection at the library of the Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase the Shares
pursuant to the Offer and to pay fees and expenses related to the Offer and the
Merger is estimated to be approximately $118.0 million. The Purchaser plans to
obtain the funds required to consummate the Offer and the Merger through a
capital contribution from Parent. Parent intends to fund such contribution by
using available cash and borrowing under the Credit Facility (as defined
below). In the event that Parent is unable to borrow under the Credit Facility,
Parent intends to seek additional financing from other sources in order to
consummate the Offer and the Merger. The Offer is not conditioned on the
receipt by Parent of sufficient financing.
Parent and the subsidiary guarantors thereto, entered into a Credit and
Guarantee Agreement among the lender banks party thereto, Goldman Sachs
Partners, L.P. and Lehman Commercial Paper, Inc., as co-documentation agents
and The Bank of New York, as administrative agent on February 26, 1998 and
subsequently amended, which provides for up to $300.0 million of senior secured
credit facilities subject to certain covenants and conditions (the "Credit
Facility"). The Credit Facility is comprised of (a) a $150.0 million eight-year
term loan (the "Term Loan") and (b) the $150.0 million seven-year reducing
revolving loan (the "Revolver"). Parent has recieved a commitment to increase
the amount available under the Revolver by $50.0 million. Borrowings under the
Credit Facility are secured by substantially all the assets of Parent,
including a pledge of the outstanding stock of substantially all of its
subsidiaries, and are guaranteed by substantially all of Parent's subsidiaries.
Borrowings under the Credit Facility may be used by Parent to finance
Permitted Acquisitions (as defined in the Credit Facility), for working capital
and for general corporate purposes.
The effective interest rate for the Credit Facility is 8.06%. Parent will
pay an annual commitment fee on unused availability under the Revolver of 0.50%
if Parent's Total Leverage Ratio is greater than or equal to 4.0 to 1.0, and
0.375% if that ratio is less than 4.0 to 1.0. Parent will also pay an annual
letter of credit fee equal to the Applicable LIBOR Margin (as defined in the
Credit Facility) for the Revolver then in effect.
The Credit Facility also includes customary covenants relating to
compliance with ERISA, environmental and other laws, payment of taxes,
maintenance of corporate existence and rights, maintenance of insurance and
financial reporting. In addition, the Credit Facility requires Parent to
maintain compliance with certain specified financial covenants relating to: (1)
a maximum ratio (the "Total Leverage Ratio") of (a) all outstanding amounts
under the Credit Facility and any other borrowed money and similar type
indebtedness (including capital lease obligations) of Parent and its
subsidiaries, on a consolidated basis ("Total Debt"), less cash and cash
equivalents in excess of $5.0 million, to (b) for the most recently completed
four fiscal quarters, (i) revenues less (ii) expenses (excluding depreciation,
amortization other than capitalized pre-production costs, interest expense and
income tax expense), plus (iii) non-recurring expense items or non-cash expense
items mutually agreed upon by Parent and the Required Lenders, plus (iv) the
lesser of (a) the equity income from Unconsolidated Investments (as defined in
the Credit Facility) and (B) cash dividends and other cash distributions from
Unconsolidated
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<PAGE>
Investments (however, the total amount determined under this clause (iv) will
not exceed 10.0% of Operating Cash Flow before overhead) (the amount referred
to in this clause (b), "Operating Cash Flow"); Operating Cash Flow is to be
adjusted to reflect acquisitions and dispositions consummated during the
calculation period as if those transactions were consummated at the beginning
of the period (with adjustment, "Adjusted Operating Cash Flow"); (2) a maximum
ratio (the "Senior Leverage Ratio") of (a) Total Debt less the principal amount
outstanding under the Parent's 9 1/8% Senior Subordinated Notes due 2008 to,
less cash and cash equivalents in excess of $5.0 million, to (b) Operating Cash
Flow; (3) a minimum ratio (the "Pro Forma Interest Expense Ratio") of (a)
Adjusted Operating Cash Flow to (b) the sum of all interest expense and
commitment fees calculated for the four fiscal quarters following the
calculation quarter, giving effect to the Total Debt outstanding and the
interest rates in effect as of the date of the determination and the commitment
reductions and debt amortization scheduled during that period of a minimum
ratio (the "Debt Service Ratio") of (a) Adjusted Operating Cash Flow to (b) the
sum of (i) the sum of all interest expense and commitment fees calculated for
the four fiscal quarters following the calculation quarter, giving effect to
the Total Debt outstanding and the interest rates in effect as of the date of
the determination and the commitment reductions and debt amortization scheduled
during that period and (ii) the scheduled current maturities of Total Debt and
current commitment reductions with respect to the Revolver, each measured for
the four fiscal quarters immediately succeeding the date of determination; and
(4) a minimum ratio (the "Fixed Charges Ratio") of (a) the sum of Operating
Cash Flow to (b) the sum of, for the four most recently completed fiscal
quarters, the following paid during that period: (i) Interest Expense (as
defined in the Credit Facility) plus the scheduled maturities of Total Debt and
current commitment reductions with respect to the Revolver, (ii) cash income
taxes, (iii) capital expenditures (excluding certain special capital
expenditures to be mutually agreed upon) and (iv) Unconsolidated Investments.
The Total Leverage Ratio for the most recently completed 12-month period
may not at any time exceed (a) 6.75x from the Credit Facility Closing Date to
September 29, 1998, (b) 6.50x from September 30, 1998 to December 30, 1998, (c)
6.25x from December 31, 1998 to June 29, 1999, (d) 5.75x from June 30, 1999 to
December 30, 1999, (e) 5.25x from December 31, 1999 to December 30, 2000, (f)
4.50x from December 31, 2000 to December 30, 2001 and (g) 3.75x on December 31,
2001 and thereafter. The Senior Leverage Ratio for the most recently completed
12-month period may not at any time exceed (a) 3.50x from the Credit Facility
Closing Date to September 29, 1998, (b) 3.25x from September 30, 1998 to
December 30, 1999, (c) 3.00x from December 31, 1999 to December 30, 2000 and
(d) 2.50x on December 31, 2000 and thereafter. The Pro Forma Interest Expense
Ratio may not at the end of any fiscal quarter be less than (a) 1.50x from the
Credit Facility Closing Date to December 31, 1998 and (b) 2.00x on January 1,
1999 and thereafter. The Pro Forma Debt Service Ratio may not at any fiscal
quarter end be less than (a) 1.25x from the Credit Facility Closing Date to
December 31, 1998 and (b) 1.50x on January 1, 1999 and thereafter. The Fixed
Charges Ratio may not at any quarter end be less than 1.05x. The Credit
Facility also prohibits prepayment of any subordinated notes.
The Credit Facility contains various covenants that, subject to certain
specified exceptions, restrict Parent's and its subsidiaries' ability to: (1)
incur additional indebtedness and other obligations; (2) grant liens; (3)
consummate mergers, acquisitions, investments and asset dispositions; (4)
declare or pay Restricted Payments (as defined in the Credit Facility); (5)
declare or pay dividends, distributions and other prepayments or repurchases of
other indebtedness; (6) amend certain agreements, including Parent's
organizational documents; (7) make acquisitions and dispositions; (8) engage in
transactions with affiliates; (9) engage in sale and leaseback transactions;
and (10) change lines of business.
The Credit Facility also contains customary events of default, including
payment defaults, the occurrence of a Change of Control (as defined in the
Credit Facility), the invalidity of guarantees or security documents under the
Credit Facility, any Material Adverse Change (as defined in the Credit
Facility), breach of any representation or warranty under the Credit Facility
and any cross-default to other indebtedness of Parent and its subsidiaries. The
occurrence of any event of default could result in termination of the
commitments to extend credit under the Credit Facility and foreclosure on the
collateral securing those obligations, each of which, individually, could have
a material adverse effect on Parent.
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<PAGE>
"Change of Control" is defined in the Credit Facility as, inter alia: (i)
the failure of Robert F.X. Sillerman, the Executive Chairman and a Member of
the Office of Chairman of the Parent, any affiliate (as defined therein) of Mr.
Sillerman, or any affiliate of Mr. Sillerman together with any executor, heir
or successor appointed to take control of Mr. Sillerman's affairs in the event
of his death, disability or incapacity, to own directly or indirectly, in the
aggregate, of record and beneficially, more than 30% of the voting power of all
issued and outstanding capital stock of Parent or (ii) the occurrence of any
Person (as defined in the Credit Facility), other than as provided in clause
(i) above, owning, beneficially, more than 10% of the voting power of all
issued and outstanding capital stock of Parent.
It is anticipated that the indebtedness incurred through borrowing under
the Credit Facility will be repaid from funds generated internally by Parent
and its subsidiaries. No final decisions have been made concerning the method
Parent will employ to repay such indebtedness. Such decisions, when made, will
be based upon Parent's review from time to time of the availability of
particular actions, as well as on prevailing interest rates and financial and
other economic conditions.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER
From time to time the Company and PACE Entertainment Corporation ("PACE"),
a wholly owned subsidiary of Parent, have in the ordinary course of business,
entered into contracts, agreements, arrangements or understandings in
connection with the production of theatrical and concert performances.
Additionally, the Company and PACE are two of the three principal co-owners of
the country's largest theatrical booking agency.
In October 1997, SFX Broadcasting, Inc. (SFX Entertainment's parent prior
to its spinoff in April 1998) expressed to the Company its interest in pursuing
a possible business combination. On October 27, 1997, the Company and SFX
Broadcasting, Inc. entered into a confidentiality agreement in connection with
discussions concerning a possible business combination.
In late March 1998, Robert F.X. Sillerman, the Executive Chairman, a
Member of the Office of the Chairman and a Director of Parent, called Joe
Marsh, Co-Chairman of the Board and a Director of the Company, and again
expressed an interest in acquiring the Company.
On April 2, 1998, at the invitation of Mr. Sillerman, a meeting took place
between Mr. Sillerman and Mr. Marsh. Lee Marshall, the President, Chief
Operating Officer and a Director of the Company also participated in this
meeting. At such meeting, Mr. Sillerman expressed Parent's interest in
acquiring all of the outstanding Shares for a purchase price of approximately
$3.00 per Share, a portion of which would be paid in cash and the remainder of
which would be paid in Parent's Class A common stock. At the conclusion of such
meeting, Messrs. Marsh and Marshall informed Mr. Sillerman that they did not
believe that the Company's Board of Directors would be interested in
considering a sale of the Company at such a price.
In early July 1998, Mr. Sillerman again contacted Mr. Marsh regarding
Parent's potential acquisition of the Company.
On July 13, a meeting was held among Messrs. Marsh, Marshall and Sillerman
at which time Mr. Sillerman expressed Parent's interest in acquiring all of the
outstanding Shares at a price of $4.00 per Share. Mr. Sillerman also indicated
that up to 70% of the purchase price could be paid in cash.
On July 14, a meeting was held between Mr. Sillerman, Mr. Marshall, Brad
Krassner, the Co-Chairman of the Board and Chief Executive Officer of the
Company, and Robert Kreusler, the General Counsel of the Company, to further
discuss Parent's offer to acquire all of the outstanding Shares. A second
meeting was held later that day between Mr. Kreusler and Howard J. Tytel, the
Executive Vice President, General Counsel, Secretary and a Director of Parent
to discuss this transaction and the status of the Company's proposed
acquisitions. Further discussions and negotiations were held on July 15.
15
<PAGE>
On July 17, counsel to Parent sent drafts of the Merger Agreement and the
Stockholder Agreements to the Company's counsel. The Stockholder Agreements,
which were to be executed by the Principal Stockholders, who beneficially own
an aggregate of approximately 73.8% of the outstanding Shares, provided, among
other things, that such Principal Stockholders would tender all of their Shares
into the Offer.
From July 20 until August 6, Parent and its representatives negotiated the
terms of the Merger Agreement and the Stockholder Agreements with the Company's
counsel and the Independent Committee. Representatives of the Company
participated in the negotiations with respect to certain terms of the proposed
transaction.
On July 21, the Board of Directors of Parent, after receiving drafts of
the Merger Agreement and the Stockholder Agreements and after being briefed on
the transactions, approved the transactions contemplated thereby.
On July 23, the Company informed the Parent that the Board of Directors of
the Company established the Independent Committee, consisting of two
independent directors of the Company, to evaluate the offer proposed by Parent,
to negotiate with Parent regarding the terms thereof, and to determine whether
the Company should enter into a transaction with Parent. The Independent
Committee retained separate legal counsel and Salomon Smith Barney to provide
certain financial advisory services to the Independent Committee.
On July 23, the representatives of the Company and the Independent
Committee expressed their desire to structure the transaction as a cash tender
offer for all of the Shares followed by a second step merger to expedite the
closing of the transaction. Parent agreed to such a structure and on July 24
sent revised drafts of the Merger Agreement and the Stockholder Agreements to
counsel for the Company and the Independent Committee reflecting such
structure.
On July 24, the Company issued a press release announcing that it had been
approached by a prospective purchaser to acquire all of the outstanding Shares
at a price per Share which represented a small premium over the then current
trading price. The Company also announced that the Independent Committee had
been formed to consider the transaction and had retained legal counsel.
On August 4, the Company informed the Parent that the Board of Directors
of the Company and the Independent Committee had each unanimously approved the
Offer and the Merger and that the Board of Directors of the Company unanimously
determined that the terms of the Offer and the Merger are advisable, fair to,
and in the best interests of, the stockholders of the Company and unanimously
recommended that stockholders of the Company accept the Offer and tender their
Shares. The Board of Directors of the Company further approved and authorized
the execution and delivery of the Merger Agreement and the Stockholder
Agreements in substantially the form reviewed at the meeting.
On August 6, the Merger Agreement and Stockholder Agreements and other
related agreements were executed. On the morning of August 7, 1998, Parent and
the Company issued a press release announcing that the execution of the Merger
Agreement.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; THE STOCKHOLDER AGREEMENTS
Purpose. The purpose of the Offer is to enable Parent to acquire control
of the entire equity interest in the Company. Following the consummation of the
Offer, the Purchaser and Parent intend to acquire any remaining equity interest
in the Company not acquired in the Offer by consummating the Merger.
The Merger Agreement. The Merger Agreement provides that, following the
satisfaction or waiver of the conditions described below under "Conditions to
the Merger," the Purchaser will be merged with and into the Company, and each
then outstanding Share (other than Shares owned by the Company or any
subsidiary of the Company or by Parent, the Purchaser or any other subsidiary
of Parent or by stockholders, if any, who are entitled to and who properly
exercise dissenters' rights under Delaware Law), will be converted into the
right to receive an amount in cash, without interest, equal to the price per
Share paid pursuant to the Offer.
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Vote Required to Approve the Merger. Delaware Law provides that, if a
parent company owns at least 90% of each class of stock of a subsidiary, then
the parent company can effect a "short-form" merger with that subsidiary
without the action of the other stockholders of the subsidiary. Accordingly,
if, as a result of the Offer or otherwise, the Purchaser acquires or controls
the voting power of at least 90% of the outstanding Shares, the Purchaser could
effect the Merger using the "short-form" merger procedures without prior notice
to, or any action by, any other stockholder of the Company. Delaware Law also
requires, among other things, that the adoption of any plan of merger or
consolidation of the Company must be approved by the Board of Directors of the
Company and, if the "short form" merger procedure described above is not
available, by the holders of a majority of the Company's outstanding Shares.
The Board of Directors of the Company has approved the Offer, the Merger and
the Merger Agreement; consequently, the only additional action of the Company
that may be necessary to effect the Merger is approval by such stockholders if
the "short-form" merger procedure described above is not available. Under
Delaware Law, the affirmative vote of holders of a majority of the outstanding
Shares (including any Shares owned by the Purchaser), is generally required to
approve the Merger. If the Purchaser acquires, through the Offer or otherwise,
voting power with respect to at least a majority of the outstanding Shares
(which would be the case if the Minimum Condition were satisfied and the
Purchaser were to accept for payment Shares tendered pursuant to the Offer), it
would have sufficient voting power to effect the Merger without the vote of any
other stockholder of the Company.
Conditions to the Merger. The Merger Agreement provides that the Merger is
subject to the satisfaction or waiver of the following conditions: (1) if
required by applicable law, approval by the Stockholders of the Company must
have been obtained with respect to the approval and adoption of the Merger
Agreement and the Merger; (2) no Federal, state, local or foreign government,
or governmental, regulatory or administrative authority, agency or commission
or court of competent jurisdiction ("Governmental Authority") will have
enacted, issued, promulgated, enforced or entered any order, executive order,
stay, decree, judgment or injunction (each an "Order") or law which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger; (3) any applicable waiting period under
the HSR Act relating to the Merger must have expired or been terminated; and
(4) Purchaser or its permitted assignee must have previously purchased all
Shares validly tendered and not withdrawn pursuant to the Offer.
Termination of the Merger Agreement. The Merger Agreement may be
terminated prior to the effective time of the Merger (the "Effective Time"),
notwithstanding any requisite approval and adoption of the Merger Agreement (1)
by mutual written consent duly authorized by the Boards of Directors of each of
Parent and the Company; (2) by either Parent or the Company, if either: (a) the
Offer is not consummated on or before January 31, 1999 (the "Termination
Date"); provided, however, that the right to terminate the Merger Agreement
pursuant to clause (a) of this sentence will not be available to any party
whose failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of the Offer to be so consummated on or
before such date; or (b) there is any Order which is final and nonappealable
preventing the consummation of the Merger or the Offer, except if the party
relying on such Order has not complied with its obligations pursuant to the
relevant sections of the Merger Agreement; (3) by Parent, prior to the date the
Purchaser elects a majority of the Board of Directors of the Company
("Purchaser's Election Date"), if (a) the Board of Directors of the Company or
an independent committee thereof, has withdrawn or modified in a manner adverse
to Parent, its approval or recommendation with respect to the Merger Agreement,
Merger or the Offer, (b) a tender offer or exchange offer for 50% or more of
the outstanding Shares (other than the Offer) is commenced and the Board of
Directors of the Company fails to timely recommend against the stockholders of
the Company tendering their Shares into such tender or exchange offer, or (c) a
proposal for a merger, consolidation or other business combination involving
the Company or any proposal or offer to acquire in any manner, directly or
indirectly, an equity interest in, any more than 25% of the voting power of, or
a substantial portion of the assets of, the Company and its subsidiaries (a
"Takeover Proposal"), has been publicly announced and the Board of Directors of
the Company has failed to publicly reaffirm its approval or recommendation of
the Offer, the Merger and the Merger Agreement on or before the fifth day
following the date on which such Takeover Proposal is announced; provided that
Parent in exercising its termination rights pursuant to clause (c) of this
sentence may condition the effectiveness of such
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termination upon receipt of a termination fee and certain specified expenses as
provided in the Merger Agreement and discussed under "--Fees and Expenses"
below; (4) by Parent if, due to an occurrence or circumstance that results in a
failure to satisfy any condition set forth in "Certain Conditions of the Offer"
(Section 14), (a) Parent, the Purchaser or any of their affiliates will have
failed to commence the Offer on or prior to 10 days following the date of the
Merger Agreement or (b) the Offer has expired or terminated without any Shares
being purchased therein, unless any such failure has been caused by or resulted
from the failure of Parent or the Purchaser to perform in any material respect
any of their respective covenants or agreements contained in the Merger
Agreement or the material breach by Parent or the Purchaser of any of their
respective representations or warranties contained in the Merger Agreement; (5)
by the Company if (a) Parent, the Purchaser or any of their affiliates has
failed to commence the Offer on or prior to 10 days following the date of the
Merger Agreement or (b) the Offer has expired or terminated without any Shares
being purchased therein, unless such failure to purchase the Shares has been
caused by or resulted from the failure of the Company to satisfy certain
conditions set forth in paragraph (d) or (j) of "Certain Conditions of the
Offer" (Section 14); (6) by either Parent or the Company, if the Effective Time
has not occurred before June 30, 1999; provided, however, that the right to
terminate the Merger Agreement pursuant to this clause (6) is not available to
any party whose failure to fulfill any obligation under the Merger Agreement
has been the cause of, or resulted in, the failure of the Merger to be so
consummated on or before such date; (7) by the Company, prior to the
Purchaser's Election Date, if (a) the Board of Directors of the Company has
determined in good faith, based on the advice of outside counsel, that it is
necessary, in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, to terminate the Merger Agreement in order
to enter into an agreement with respect to, or to consummate a transaction
constituting, a Takeover Proposal from a third party for 50% or more of the
Shares or substantially all of the assets of the Company which the Company's
Board of Directors determines is more favorable to the stockholders of the
Company than the Offer and the Merger (a "Superior Proposal"), (b) the Company
has given notice to Parent advising Parent that the Company has received a
Superior Proposal specifying the material terms and conditions of such Superior
Proposal (including the identity of the third party) and the material terms and
conditions of any agreements or arrangements to be entered into in connection
with a Superior Proposal with respect to the Principal Stockholders and that
the Company intends to terminate the Merger Agreement in accordance with this
clause (7), and (c) either (i) Parent has not revised its takeover proposal
within five business days after the date on which such notice is deemed to have
been given to Parent, or (ii) if Parent within such period has revised its
takeover proposal, the Board of Directors of the Company, after receiving
advice from its financial advisor, has determined in its good faith reasonable
judgment that the third party's Takeover Proposal is superior to Parent's
revised takeover proposal; provided that the Company may not effect such
termination pursuant to this clause (7) unless the Company has
contemporaneously with such termination tendered to Parent the termination fee
and certain specified expenses discussed in "--Fees and Expenses" below; (8) by
Parent, if the number of Shares outstanding, on a fully-diluted basis, exceeds
28.9 million plus the number of Shares the issuance of which has been expressly
approved in writing by Parent; (9) by the Company, at any time prior to the
consummation of the Offer, if (a) the conditions set forth in paragraphs
(d)(ii) or (i) of "Certain Conditions of the Offer" (Section 14) have not been
satisfied or becomes untrue (other than as a result of the failure of the
condition set forth in paragraph (d)(i) of "Conditions to the Offer" (Section
14)), (b) such failure cannot be cured, (c) the Company has delivered to Parent
a written notice specifically setting forth, fully and fairly, in good faith,
the basis for such failure in sufficient detail to permit a reasonable
evaluation by Parent, (d) within 30 days after receipt by Parent of such
notice, Parent has not either waived the failure of such condition or
terminated this Agreement pursuant to the clause (10) below, and (e) no
Takeover Proposal has been made prior to the date of any notice by the Company;
or (10) by Parent, at any time prior to the consummation of the Offer, if
Parent elects to terminate the Merger Agreement as contemplated by the
preceding clause (9).
Fees and Expenses. The Merger Agreement provides that, except for filing
fees under the HSR Act and under certain events of termination, all fees and
expenses incurred in connection with the Offer, Merger, the Merger Agreement,
and the Stockholder Agreements will be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated. In addition, if the Merger
Agreement is (a) terminated pursuant to clause (3) in the preceding paragraph
(including a termination conditioned on the
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receipt of a termination fee or specified expenses) or clause (7) or (8) of the
preceding paragraph; or (b) terminated (other than by the Company pursuant to
clause (5) of the preceding paragraph) and a Takeover Proposal has been made
prior to such termination, and definitive documentation with respect to the
same or another Takeover Proposal from the same or another person is entered
into within 12 months of such termination, then, in either case, the Company
will pay a termination fee of $3.3 million and certain specified expenses not
to exceed $850,000. The Merger Agreement also provides that if the Merger
Agreement is terminated by Parent pursuant to clause (4) of the preceding
paragraph other than due to an occurrence or circumstance that results in a
failure to satisfy paragraphs (a), (b) or (h) of "Certain Conditions of the
Offer" (Section 14) or due to the fact that any applicable waiting period under
the HSR Act has not expired or been terminated prior to the expiration of the
Offer, the Company will pay certain specified expenses not to exceed $850,000.
Conduct of Business by the Company. In the Merger Agreement the Company
agrees that, until the earlier of (x) the date on which the Merger Agreement is
terminated and (y) the Purchaser's Election Date, except as contemplated by the
Merger Agreement, the Company will, and will cause its subsidiaries to, carry
on their respective businesses in the usual, regular and ordinary course in
substantially the same manner as previously conducted and in compliance in all
material respects with all applicable laws. In addition, the Merger Agreement
provides that the Company, without the consent of Parent, will not, and will
not permit any subsidiary of the Company to: (1)(a) declare, set aside or pay
any dividends on, or make any other distributions in respect of, any of its
capital stock, other than dividends and distributions by a direct or indirect
wholly owned subsidiary of the Company to its parent, (b) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (c) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any subsidiary of the Company or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities; (2) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities other than as
otherwise permitted in the Merger Agreement; (3) amend its Certificate of
Incorporation, Bylaws (except as contemplated by the Merger Agreement) or other
comparable organizational documents; (4) acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, except as contemplated by the Merger Agreement, (a) any
business or any corporation, limited liability company, partnership, joint
venture, association or other business organization or division thereof or (b)
any assets that individually, or in the aggregate, are material to the Company
and its subsidiaries, taken as a whole; (5) sell, lease, license, mortgage or
otherwise encumber or subject to any lien or otherwise dispose of any of its
properties or assets, other than in the ordinary course of business consistent
with past practice, that are material to the Company and its subsidiaries taken
as a whole; (6) except in the ordinary course of business consistent with past
practice (to the extent not in excess of $50,000) and for intercompany
indebtedness between the Company and any subsidiary of the Company or between
subsidiaries of the Company, (a) incur or guarantee any indebtedness, or (b)
make any loans, advances or capital contributions to, or investments in, any
other person, other than to the Company or any direct or indirect wholly owned
subsidiary of the Company or to officers and employees of the Company or any
subsidiary of the Company for travel, business or relocation expenses in the
ordinary course of business; (7) make or agree to make any new capital
expenditures which in the aggregate are in excess of $50,000; (8) make any tax
election that could reasonably be expected to have a material adverse effect on
the Company or settle or compromise any material income tax liability; (9)
enter into, modify, amend or terminate any material contract or agreement
(including any contract or agreement (x) which is required by its terms or is
currently expected to result in the payment or receipt of more than $50,000,
(y) for a term of more than one year, or (z) of employment, deferred
compensation or similar arrangement with any director, officer or employee of
the Company or any subsidiary of the Company) to which the Company or any
subsidiary of the Company is or may be a party or waive, release or assign any
material rights or claims thereunder; (10) except as required by law, modify,
amend or terminate any acquisition contract or waive, release or assign any
material rights or claims thereunder; (11) make any material change to its
accounting methods, principles or practices, except as may be required by GAAP;
(12) fail to act in the ordinary course of
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business consistent with the past practice of the Company, exercising
commercially reasonable care to (a) preserve substantially intact the Company's
and each of its subsidiaries' present business organization, (b) keep available
the services of any employee with an employment contract with the Company or
any subsidiary of the Company, and (c) preserve its present relationships with
clients, sponsors, suppliers and others having significant business dealings
with them; (13) fail to use commercially reasonable efforts to maintain the
material assets of the Company and each subsidiary of the Company in their
current physical condition, except for ordinary wear and tear and damage; (14)
merge or consolidate with or into any other legal entity or dissolve or
liquidate any subsidiary of the Company; (15) except as required by the terms
and provisions of written contracts between the Company or any subsidiary of
the Company and an employee thereof as in existence on the date of the Merger
Agreement, (a) adopt or amend any employee benefit plan other than in the
ordinary course of business consistent with past practice or as required by
law, or (b) materially increase in any manner the aggregate compensation or
fringe benefits (including, without limitation, commissions) of any officer,
director, or employee or other personnel of the Company or any subsidiary of
the Company (whether employees or independent contractors) other than as
required by law; (16) pay, discharge, or satisfy any material (on a
consolidated basis for the Company and its subsidiaries taken as a whole)
claims, liabilities, or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the ordinary course of business
consistent with past practice, or fail to pay or otherwise satisfy (except if
being contested in good faith) any material (on a consolidated basis for the
Company and its subsidiaries taken as a whole) accounts payable, liabilities,
or obligations when due and payable; (17) engage in any transactions with any
of its affiliates other than transactions between the Company and any
subsidiary of the Company or among subsidiaries of the Company; or (18)
authorize, or commit or agree to take, any of the foregoing actions.
Board of Directors. The Merger Agreement provides that, promptly upon the
purchase by the Purchaser of Shares pursuant to the Offer, the Purchaser will
be entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company's Board of Directors as shall give the Purchaser
representation on the Company's Board of Directors equal to the product of the
total number of directors on the Company's Board of Directors (giving effect to
the directors elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by the Purchaser or any
affiliate of the Purchaser at such time bears to the total number of Shares
then outstanding. The Company will be required, at such time, to promptly take
all actions necessary to cause the Purchaser's designees to be elected as
directors of the Company, including increasing the size of the Company's Board
of Directors or securing the resignations of incumbent directors or both. The
Company is required to use its best efforts to cause persons designated by the
Purchaser to constitute the same percentage as persons designated by the
Purchaser shall constitute of the Company's Board of Directors of (a) each
committee of the Company's Board of Directors (some of whom may be required to
be independent as required by applicable law or the rules of the AMEX), (b)
each board of directors of each subsidiary of the Company and (c) each
committee of each such board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, until the Effective Time, such
Board of Directors shall have at least one director who is a director on the
date hereof and who is not a designee or officer, director, employee or
affiliate of Parent or the Purchaser or officer or employee of the Company
("Independent Director"), provided that if the number of Independent Directors
shall be reduced below one for any reason, the Board of Directors shall
designate a person to fill such vacancy who is not a designee or officer,
director, employee or affiliate of Parent, the Purchaser or the Company. In
addition, the Company is required to promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations pursuant to the Merger Agreement
and will include in the Schedule 14D-9 that it has agreed to file with the SEC
such information with respect to the Company and its officers and directors as
is required under Section 14(f) and Rule 14f-1 to fulfill such obligations.
No Solicitation. The Merger Agreement provides that, until its
termination, neither the Company nor any of its subsidiaries, nor any of their
respective officers, directors, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries) (collectively,
"Representatives") will, and the Company will cause the employees of the
Company and its subsidiaries not to, directly or indirectly, (a) solicit,
initiate or
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encourage the submission of any Takeover Proposal, (b) enter into any agreement
with respect to any Takeover Proposal or give any approval with respect to any
Takeover Proposal or (c) participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal.
The Merger Agreement also provides that if, at any time prior to the
consummation of the Offer, the Board of Directors of the Company determines in
good faith, based on the advice of outside counsel, that it is necessary to do
so in order to comply with its fiduciary duties to the Company's stockholders
under applicable law, then the Company (and its Representatives) may, in
response to an unsolicited Takeover Proposal for at least 50% of the Shares on
substantially all the assets of the Company that involves consideration to the
Company's stockholders with a value that the Company's Board of Directors
reasonably believes, after receiving advice from the Company's financial
advisor, is superior to the consideration provided for in the Merger, and
provided that Parent is notified of any such Takeover Proposal, (x) furnish
information with respect to the Company pursuant to a customary confidentiality
agreement to any person making such proposal and (y) participate in
negotiations regarding such proposal. The Merger Agreement further prohibits
the Board of Directors of the Company and any committee thereof from (x)
withdrawing or modifying, or proposing to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of Directors or
such committee of the Offer, the Merger Agreement or the Merger or (y)
approving or recommending, or proposing to approve or recommend, any Takeover
Proposal, except in the case of clause (x) or (y), in connection with a
Superior Proposal and then only at or after the termination of the Merger
Agreement.
Indemnification. The Merger Agreement provides that the Certificate of
Incorporation and Bylaws of the Company after the Effective Time will contain
provisions no less favorable with respect to indemnification than are set forth
in the Certificate of Incorporation and Bylaws of the Company, as in effect on
the date of the Merger Agreement, which provisions will not be amended,
repealed or otherwise modified for a period of six years from the Effective
Time in any manner that would affect adversely the rights thereunder of
individuals who at any time prior to the Effective Time were directors,
officers or employees of the Company or any of its subsidiaries, unless such
modification shall be required by law.
From and after the Purchaser's Election Date, the Parent has agreed to
indemnify, defend and hold harmless each person who is now, or who has been at
any time prior to the date of the Merger Agreement or who becomes prior to the
Effective Time, an officer or director of the Company or any of its
subsidiaries, or an employee of the Company or any of its subsidiaries who acts
as a fiduciary under any employee benefit plan of the Company or any of its
subsidiaries (collectively, the "Indemnified Parties") against all losses,
expenses (including reasonable attorneys' fees), claims, damages, liabilities
or amounts that are paid in settlement of, or otherwise in connection with, any
threatened or actual claim, action, suit, proceeding or investigation (a
"Claim"), based in whole or in part on or arising in whole or in part out of
the fact that the Indemnified Party (or the person controlled by the
Indemnified Party) is or was a director, officer or such an employee of the
Company or any of its subsidiaries and pertaining to any matter existing or
arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, any Claim arising out of the Merger Agreement
or any of the transactions contemplated thereby), whether asserted or claimed
prior to, at or after the Effective Time, in each case to the fullest extent
permitted under Delaware Law or the Company's Certificate of Incorporation or
Bylaws, and shall pay any expenses, as incurred, in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under Delaware Law or the Company's Certificate of
Incorporation or Bylaws; provided, however, that the Parent shall not be liable
for any settlement effected without its written consent (which shall not be
unreasonably withheld). In addition, the Merger Agreement provides that for a
period of six (6) years after the Effective Time, the Company shall cause to be
maintained in effect the current policies of directors' and officers' liability
insurance maintained by the Company covering all of the individuals currently
covered thereby (provided that the Company may substitute therefor policies of
at least the same coverage and amounts containing terms and conditions which
are no less advantageous to such officers and directors) with respect to claims
arising from facts or events which occurred at or prior to the Effective Time,
with certain limitations.
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Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
The foregoing summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit
(c)(1) to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed with
the SEC on the date hereof (the "Schedule 14D-1") and incorporated by reference
herein. The Merger Agreement should be read in its entirety for a more complete
description of the matters summarized above.
The Stockholder Agreements. Pursuant to the Stockholder Agreements, the
Principal Stockholders have agreed to tender into the Offer the Shares that
each such Principal Stockholder held of record or beneficially owned on the
date of such Stockholder Agreement, as well as any Shares that they thereafter
acquire (the "Stockholder's Shares"), however, excluding stock options,
warrants or convertible notes of the Company (the "Convertible Securities").
The Principal Stockholders have agreed to sell to the Purchaser, and the
Purchaser has agreed to purchase, all the Stockholder's Shares, excluding
Convertible Securities, at a price per Share of $4.00, subject only to the
condition (which may be waived only by the Purchaser in its sole discretion)
that the Purchaser will have accepted for payment and paid for Stockholder's
Shares pursuant to the Offer (the "Purchase"). The closing of the Purchase is
anticipated to be effected by each Principal Stockholder tendering all such
Stockholder's Shares into the Offer, and by the Purchaser accepting for payment
and paying for such Subject Shares pursuant to the terms of the Offer. The
Merger Agreement further provides that if for any reason any Stockholder's
Shares are not purchased in the Offer and either (1) other Shares are purchased
in the Offer or (2) the Offer is not consummated due to a failure of the
Minimum Condition, the Purchaser shall purchase, and each Principal Stockholder
shall sell all of his Stockholder's Shares at a price per Share of $4.00 within
five business days (after obtaining all applicable consents and approvals)
following the expiration of the Offer.
The Stockholder's Shares represent more than a majority of the outstanding
Shares (determined on a fully diluted basis) and, upon the tendering of these
Shares, the Minimum Condition will be satisfied. As of August 11, 1998, there
were 19,171,800 Stockholder's Shares, representing approximately 73.8% of the
outstanding Shares and approximately 63.0% of the outstanding Shares on a fully
diluted basis. Once the Minimum Condition is satisfied and the Purchaser
accepts for payment Shares tendered pursuant to the Offer, the Purchaser will
be able to elect a majority of the members of the Company's Board of Directors
and to effect the Merger without the affirmative vote of any other stockholder
of the Company.
In the Stockholder Agreements, each of the Principal Stockholders has
agreed not to: (1) offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) or understanding with
respect to the offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, his Stockholder's Shares to any person
other than the Purchaser or the Purchaser's designee, (2) enter into any voting
arrangement, whether by proxy, voting agreement, voting trust,
power-of-attorney or otherwise, with respect to his Stockholder's Shares or (3)
take any other action that would in any way restrict, limit or interfere with
the performance of his obligations under his respective Stockholder Agreement
or the transactions contemplated thereby.
Each Principal Stockholder has further agreed in the Stockholder
Agreements that, at any meeting of stockholders of the Company called to vote
upon the Merger and the Merger Agreement or at any adjournment thereof or in
any other circumstances upon which a vote, consent or other approval (including
by written consent) with respect to the Merger and the Merger Agreement is
sought, each Principal Stockholder will, including by initiating a written
consent solicitation if requested by Parent, vote (or cause to be voted) his
Stockholder's Shares, and any other Shares that such Principal Stockholder has
the right to direct or control the vote of such Shares, in favor of the Merger,
the adoption by the Company of the Merger Agreement and the approval of the
other transactions contemplated by the Merger Agreement and the Stockholder
Agreements. At any meeting of stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which a Principal Stockholder's
vote, consent or other approval is sought, each Principal Stockholder will vote
(or cause to be voted) his Stockholder's Shares (1) against any action or
agreement that would result in a breach in any material
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respect of any covenant, representation or warranty or any other material
obligation or agreement of the Company under the Merger Agreement (2) against
any of the following actions (a) any agreement, letter of intent, proposal or
offer (other than the transactions contemplated in the Merger Agreement)
involving the Company or any of its subsidiaries for, or an inquiry or
indication of interest that reasonably could be expected to lead to: (i) any
merger, consolidation, share exchange, recapitalization, reorganization,
dissolution, liquidation, business combination or other similar transaction
with the Company or any of its subsidiaries, (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of a material portion of the
assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or series of transactions or (iii) any tender offer or exchange
offer for all or any portion of the outstanding shares of capital stock of the
Company or any of its subsidiaries or the filing of a registration statement
under the Securities Act in connection therewith, but shall not include the
Offer, the Merger Agreement or an arrangement where the Merger Consideration is
increased (each an "Acquisition Proposal") and (b) to the extent that such are
intended to, or could reasonable be expected to, (i) impede, interfere with,
delay, postpone or materially adversely affect the Merger or the transactions
contemplated by the Merger Agreement or (ii) implement or lead to any
Acquisition Proposal (other than an Acquisition Proposal with Parent or any
affiliate thereof): (A) any change in a majority of the persons who constitute
the Board of Directors or the Company; (B) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or Bylaws; or (C) any other material change in the Company's
corporate structure or business.
Under the Stockholder Agreements, each Principal Stockholder has granted
an irrevocable proxy with respect to his Stockholder's Shares to Parent, and
appoints, Parent, and any other person who shall be designated by Parent, to
vote such Principal Stockholder's Subject Shares, or grant a consent in respect
of such Subject Shares, in connection with any matter concerning the Offer.
The foregoing summary of the Stockholder Agreements is qualified in its
entirety by reference to the Stockholder Agreements, copies of which are filed
as Exhibits (c)(2) - (c)(5) to the Schedule 14D-1 and incorporated by reference
herein. The Stockholder Agreements should be read in their entirety for a more
complete description of the matters summarized above.
Certain Agreements with Company Executives. Parent and the Company have
entered into amendments to the employment agreements between the Company and
each of Brad Krassner, a Co-Chairman of the Board of Directors, the Chief
Executive officer and a Director of the Company; Joe Marsh, a Co-Chairman of
the Board of Directors and a Director of the Company; and Lee Marshall, the
President, Chief Operating Officer and a Director of the Company. Pursuant to
these amendments, the Company will maintain the employment of these individuals
on the same terms as they currently exist in their respective employment
agreements, except as of the Purchaser's Election Date, among other things (1)
the Company will have the right to terminate Mr. Krassner's employment without
cause and with no monetary obligation other than accrued and unpaid base salary
through the date of termination, provided that Mr. Krassner's one-year non
compete obligation will not apply and (2) Messrs. Marsh and Marshall (a)
relinquish their rights to voluntarily terminate their respective employment
agreements prior to the stated expiration of their terms and (b) grant the
Company the option to unilaterally extend the term of their respective
employment agreements for an additional two years. In addition, the amendments
provide for defined reporting responsibilities for these individuals and the
maintenance of the separate corporate existence of the Company for one year
after the consummation of the Offer.
Appraisal Rights. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
will have certain rights pursuant to the provisions of Section 262 of Delaware
Law to dissent and demand appraisal of, and to receive payment in cash of the
fair value of, their Shares. If the statutory procedures were complied with,
such rights could lead to a judicial determination of the fair value required
to be paid in cash to such dissenting holders for their Shares. Any such
judicial determination of the fair value of Shares could be based upon
considerations other than or in addition to the Offer Price or the market value
of the Shares, including asset values and the investment value of the Shares.
The value so determined could be more or less than the Offer Price or the
Merger Consideration.
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<PAGE>
If any holder of Shares who demands appraisal under Section 262 of
Delaware Law fails to perfect, or effectively withdraws or loses his right to
appraisal, as provided in Delaware Law, the Shares of such stockholder will be
converted into the Merger Consideration in accordance with the Merger
Agreement. A stockholder may withdraw his demand for appraisal by delivery to
the Company of a written withdrawal of his demand for appraisal and acceptance
of the Merger.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under Delaware Law and is qualified in its entirety by the
full text of Section 262 of Delaware Law.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF DELAWARE LAW FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Going Private Transactions. The Merger would have to comply with any
applicable Federal law operative at the time of its consummation. Rule 13e-3
under the Exchange Act is applicable to certain "going private" transactions.
The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger
unless the Merger is consummated more than one year after the termination of
the Offer. If applicable, Rule 13e-3 would require, among other things, that
certain financial information concerning the Company and certain information
relating to the fairness of the Merger and the consideration offered to
minority stockholders be filed with the Commission and disclosed to minority
stockholders prior to consummation of the Merger.
Other Matters. Except as otherwise described in this Offer to Purchase,
the Purchaser and Parent have no current plans or proposals that would relate
to, or result in, any extraordinary corporate transaction involving the Company
or any of its subsidiaries, such as a merger, reorganization or liquidation
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries, any change
in the present Board of Directors of the Company or management of the Company,
any material change in the Company's capitalization or dividend policy or any
other material change in the Company's business, corporate structure or
personnel.
13. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, the Company is prohibited,
without the consent of Parent, from taking any of the actions described in the
two succeeding paragraphs, and nothing herein shall constitute a waiver by the
Purchaser or Parent of any of its rights under the Merger Agreement or a
limitation of remedies available to the Purchaser or Parent for any breach of
the Merger Agreement, including termination thereof.
If, between the date of the Merger Agreement and the Effective Time,
except as otherwise contemplated by the Merger Agreement, the outstanding
Shares shall have been changed into a different number of shares or a different
class, by reason of any stock dividend, reclassification, recapitalization,
split, division, combination or exchange of shares, then the Merger
Consideration shall be correspondingly adjusted as necessary to reflect such
stock dividend, reclassification, recapitalization, split, division,
combination or exchange of shares.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any cash dividend on the Shares or other distribution on the
Shares, or issue with respect to the Shares any additional Shares, shares of
any other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, payable or distributable to stockholders of
record on a date prior to the transfer of the Shares purchased pursuant to the
Offer to the Purchaser or its nominee or transferee on the Company's stock
transfer records, then, subject to the provisions of Section 14 below, (1) the
Offer Price may, in the sole discretion of the Purchaser, be reduced by the
amount of any such cash dividend or cash distribution and (2) the whole of any
such noncash dividend, distribution or issuance to be received by the tendering
stockholders will (a) be received and held by the tendering stockholders for
the account of the Purchaser and will be required to be promptly remitted and
transferred by each tendering stockholder to the Depositary for the account of
the Purchaser, accompanied by appropriate documentation of transfer, or (b) at
the direction of the Purchaser, be exercised for the benefit of the Purchaser,
in which case the proceeds of such exercise will promptly be remitted to the
Purchaser. Pending such remittance and subject to applicable law, the
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<PAGE>
Purchaser will be entitled to all rights and privileges as owner of any such
noncash dividend, distribution, issuance or proceeds and may withhold the
entire Offer Price or deduct from the Offer Price the amount or value thereof,
as determined by the Purchaser in its sole discretion.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, but subject to (a) the
terms and conditions of the Merger Agreement and (b) any applicable rules at
the SEC, the Purchaser will not be required to accept for payment or pay for
any Shares tendered pursuant to the Offer, and may terminate or amend the Offer
and may postpone the acceptance for payment of and payment for Shares tendered,
if (i) the Minimum Condition has not been satisfied, (ii) any applicable
waiting period under the HSR Act has not expired or has not been terminated
prior to the expiration of the Offer or (iii) at any time on or after the date
of the Merger Agreement, and prior to the acceptance for payment of Shares, any
of the following conditions shall exist:
(a) there shall have been any judgment, order or decree resulting from
litigation brought by any Governmental Authority or other person, or before
any court or Governmental Authority, seeking to: (i) prohibit the
acquisition by Parent or Purchaser of any Shares; (ii) prohibit or limit in
any material respect the ownership or operation by Parent, Purchaser or any
of their respective subsidiaries of any material portion of the business or
assets of the Company, or to compel Parent, Purchaser or any of their
respective subsidiaries to dispose of or hold separate any material portion
of the business or assets of the Company or any of its subsidiaries, (iii)
restrain or prohibit the making of the Offer or the consummation of the
Merger; (iv) impose limitations on the ability of Parent or Purchaser to
exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares acquired by Purchaser
pursuant to the Offer, or otherwise on all matters properly presented to
the Company's stockholders, including, without limitation, the approval of
the Merger Agreement and the transactions contemplated thereby; or (v)
require divestiture by Parent or Purchaser of any Shares;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Authority, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c) (i) the Company's Board of Directors or an independent committee
thereof shall have withdrawn or modified in a manner adverse to Parent or
Purchaser the approval or recommendation of the Offer, the Merger or the
Merger Agreement or approved or recommended, or failed to timely recommend
against, any Takeover Proposal or any other acquisition of Shares other
than the Offer and the Merger or (ii) the Company's Board of Directors or
an independent committee thereof shall have resolved to do any of the
foregoing;
(d) (i) the Company shall have failed to perform or comply in any
material respects with all agreements and covenants required by the Merger
Agreement to be performed or complied with by it at or prior to the
Purchaser's Election Date, which failure to perform or comply cannot be
cured or has not been cured within two business days after the Company
receives written notice from Parent of such breach or failure to perform,
or (ii) any of the representations and warranties of the Company contained
in the Merger Agreement that are qualified as to Material Adverse Effect
(as defined in the Merger Agreement) shall fail to be true and correct, or
any such representations and warranties that are not so qualified shall
fail to be true and correct in any respect having a Material Adverse Effect
on the Company, in each case at the date of the Merger Agreement and at the
scheduled or extended expiration of the Offer, except that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date;
(e) the Merger Agreement shall have been terminated in accordance with
its terms;
(f) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder;
25
<PAGE>
(g) it shall have been publicly disclosed or Parent or Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the outstanding Shares has been acquired
by any corporation (including the Company or any of its subsidiaries or
affiliates), partnership, person or other entity or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act), other than Parent,
Purchaser or any of their affiliates;
(h) all consents of and notices to or filings with Governmental
Authorities and third parties required in connection with the transactions
contemplated by the Merger Agreement to be made or obtained by the Company
(other than any approvals under the HSR Act), shall not have been obtained
or made other than those the absence of which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company or
prevent or materially delay consummation of any of the transactions
contemplated by the Merger Agreement;
(i) there shall have occurred any event, circumstance or fact (whether or
not covered by insurance), individually or in the aggregate, having or
reasonably likely to have a material adverse effect on the Company since
the date of the Merger Agreement; or
(j) release agreements relating to stock options of the Company shall not
have been obtained from the holders of such options as contemplated in the
Merger Agreement.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser or Parent in
whole or in part at any time and from time to time in their sole discretion.
The failure by Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right; the waiver of any such
right with respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and circumstances; and each
such right shall be deemed an ongoing right that may be asserted at any time
and from time to time.
15. CERTAIN LEGAL MATTERS
Based on a review of publicly available filings made by the Company with
the SEC and other publicly available information concerning the Company,
neither the Purchaser nor Parent is aware of any license or regulatory permit
that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the
Purchaser's acquisition of Shares as contemplated herein or of any approval or
other action, except as otherwise described in this Section 15, by any
Governmental Entity that would be required for the acquisition or ownership of
Shares by the Purchaser as contemplated herein. Should any such approval or
other action be required, the Purchaser and Parent currently contemplate that
such approval or other action will be sought, except as described below under
"State Takeover Laws." While, except as otherwise expressly described in this
Section 15, the Purchaser does not presently intend to delay the acceptance for
payment of or payment for Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial conditions or that failure to obtain any such approval or other
action might not result in consequences adverse to the Company's business or
that certain parts of the Company's business might not have to be disposed of
if such approvals were not obtained or such other actions were not taken or in
order to obtain any such approval or other action. If certain types of adverse
action are taken with respect to the matters discussed below, the Purchaser
could decline to accept for payment or pay for any Shares tendered. See Section
14 for certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places or business in such states.
In Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may,
26
<PAGE>
as a matter of corporate law, and, in particular, those laws concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of a target corporation without prior approval of the
remaining stockholders; provided that such laws were applicable only under
certain conditions.
Section 203 of Delaware Law limits the ability of a Delaware corporation
to engage in business combinations with "interested stockholders" (defined
generally as any beneficial owner of 15% or more of the outstanding voting
stock of the corporation) unless, among other things, the corporation's board
of directors has given its prior approval to either the business combination or
the transaction which resulted in the stockholder becoming an "interested
stockholder." The Company's Board of Directors has approved the Merger
Agreement and the Stockholder Agreements and the Purchaser's acquisition of
Shares pursuant to the Offer and, therefore, Section 203 is inapplicable to the
Offer, the Merger and the Stockholder Agreements.
Based on information supplied by the Company, the Purchaser does not
believe that any other state takeover statutes purport to apply to the Offer,
the Merger or the Stockholder Agreements. Neither the Purchaser nor Parent has
currently complied with any state takeover statute or regulation. The Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer, the Merger or the Stockholder Agreements
and nothing in this Offer to Purchase or any action taken in connection with
the Offer, the Merger or the Stockholder Agreements is intended as a waiver of
such right. If it is asserted that any state takeover statute is applicable to
the Offer, the Merger or the Stockholder Agreements and if an appropriate court
does not determine that it is inapplicable or invalid as applied to the Offer,
the Merger or the Stockholder Agreements, the Purchaser might be required to
file certain information with, or to receive approvals from, the relevant state
authorities, and the Purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in consummating the Offer
or the Merger. In such case, the Purchaser may not be obliged to accept for
payment or pay for any Shares tendered pursuant to the Offer.
Antitrust. Under the provisions of the HSR Act applicable to the Offer,
the purchase of Shares under the Offer may be consummated following the
expiration of a 15-calendar day waiting period following the filing by Parent
of a Notification and Report Form with respect to the Offer, unless Parent
receives a request for additional information or documentary material from the
Antitrust Division or the FTC or unless early termination of the waiting period
is granted. Parent is in the process of making such filing. If, within the
initial 15-day waiting period, either the Antitrust Division or the FTC
requests additional information or material from Parent concerning the Offer,
the waiting period will be extended and would expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance
by Parent with such request. Only one extension of the waiting period pursuant
to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of Parent. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with
a proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The FTC and the Antitrust Division frequently scrutinize the legality
under the antitrust laws of transactions such as the Purchaser's proposed
acquisition of the Company. At any time before or after the Purchaser's
purchase of Shares pursuant to the Offer, the Antitrust Division or FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Purchaser or the divestiture of
substantial assets of Parent or its
27
<PAGE>
subsidiaries, or the Company or its subsidiaries. Private parties may also
bring legal action under the antitrust laws under certain circumstances. There
can be no assurance that a challenge to the Offer on antitrust grounds will not
be made or, if such a challenge is made, of the results thereof.
16. FEES AND EXPENSES
The Purchaser has retained Georgeson & Company Inc. to act as the
Information Agent and The Bank of New York to serve as the Depositary in
connection with the Offer. The Information Agent and the Depositary each will
receive reasonable and customary compensation for their services, be reimbursed
for certain reasonable out-of-pocket expenses and be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the Federal securities laws.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent and the
Depositary) in connection with the solicitation of tenders of Shares pursuant
to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by
the Purchaser upon request for customary mailing and handling expenses incurred
by them in forwarding material to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. None of the Purchaser or Parent is aware of any jurisdiction
in which the making of the Offer or the tender of Shares in connection
therewith would not be in compliance with the laws of such jurisdiction. To the
extent the Purchaser or Parent becomes aware of any state law that would limit
the class of offerees in the Offer, the Purchaser will amend the Offer and,
depending on the timing of such amendment, if any, will extend the Offer to
provide adequate dissemination of such information to holders of Shares prior
to the expiration of the Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser or Parent has filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act
setting forth its recommendation with respect to the Offer and the reasons for
such recommendation and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection, and copies should be obtainable, in the manner set forth in
Sections 8 and 9 (except that they will not be available at the regional
offices of the SEC).
MWE ACQUISITION CORP.
August 13, 1998
28
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND THE PURCHASER
1. Directors and Executive Officers of the Parent. The name, present principal
occupation or employment and five-year employment history of each of the
directors and executive officers of Parent are set forth below. The business
address of the directors and executive officers listed below is 650 Madison
Avenue, 16th Floor, New York, New York 10022. All directors and executive
officers listed below are citizens of the United States.
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY
- ------------------------------- ------------------------------------------------------------------
<S> <C>
Robert F.X. Sillerman ......... Mr. Sillerman has served as the Executive Chairman, a Member
of the Office of the Chairman and a Director of Parent since its
formation in December 1997. Mr. Sillerman also served as the
Executive Chairman of SFX Broadcasting, Inc. ("SFX
Broadcasting") from July 1, 1995 until the consummation of its
merger with and into an affiliate of Hicks, Muse, Tate and Furst,
Incorporated (the "SFX Merger"). From 1992 through June 30,
1995, Mr. Sillerman served as Chairman of the Board of
Directors and Chief Executive Officer of SFX Broadcasting.
Mr. Sillerman is Chairman of the Board of Directors and Chief
Executive Officer of Sillerman Communications Management
Corporation, a private company that makes investments in and
provides financial consulting services to companies engaged in
the media business ("SCMC"), and of The Sillerman Companies,
Inc., a private company that makes investments in and provides
financial advisory services to media-related companies ("TSC").
Through privately held entities, Mr. Sillerman controls the
general partner of Sillerman Communications Partners, L.P., an
investment partnership. Mr. Sillerman is also the Chairman of
the Board and a founding stockholder of The Marquee Group,
Inc. ("Marquee"), a publicly-traded company organized in 1995,
which is engaged in various aspects of the sports, news and
other entertainment industries and has signed a definitive
merger agreement to be acquired by Parent. Mr. Sillerman is
also a founder and a significant stockholder of Triathlon
Broadcasting Company, a publicly-traded company that owns
and operates radio stations in medium and small-sized markets
in the mid-western and western United States ("Triathlon").
For the last twenty years, Mr. Sillerman has been a senior
executive of and principal investor in numerous entities
operating in the broadcasting business. In 1993, Mr. Sillerman
became the Chancellor of the Southampton campus of Long
Island University.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY
- --------------------------- -----------------------------------------------------------------
<S> <C>
Michael G. Ferrel ......... Mr. Ferrel has served as the President, Chief Executive Officer,
a Member of the Office of the Chairman and a Director of
Parent since its formation in December 1997. Mr. Ferrel also
served as the President, Chief Executive Officer and a director
of SFX Broadcasting from November 22, 1996 until the
consummation of the SFX Merger. Mr. Ferrel served as President
and Chief Operating Officer of Multi-Market Radio ("MMR"),
and a member of MMR's board of directors since MMR's
inception in August 1992 and as Co-Chief Executive Officer of
MMR from January 1994 to January 1996, when he became the
Chief Executive Officer. From 1990 to 1993, Mr. Ferrel served
as Vice President of Goldenberg Broadcasting, Inc., the former
owner of radio station WPKX-FM, Springfield, Massachusetts,
which was acquired by MMR in July 1993.
Brian Becker .............. Mr. Becker has served as an Executive Vice President, a
Member of the Officer of the Chairman and a Director of the
Company since the consummation of the acquisition of
PACE Entertainment Corporation ("PACE") in February
1998. Mr. Becker has served as Chief Executive Officer of
PACE since 1994 and was appointed as President of PACE in
1996. He first joined PACE as the Vice President and
General Manager of PACE's theatrical division at the time of
that division's formation in 1982, and subsequently directed
PACE's amphitheater development efforts. He served as
Vice Chairman of PACE from 1992 until he was named its
Chief Executive Officer in 1994.
David Falk ................ Mr. Falk has served as a Member of the Office of the
Chairman and a Director of Parent since the consummation
of the acquisition of Falk Associates Management
Enterprises, Inc. ("FAME") in June 1998. Mr. Falk also
serves as a Director and as Chairman of the Parent's sports
group and several subsidiaries within the Parent's sports
group. Mr. Falk, who has represented professional athletes
for over twenty years, is a director, Chairman and Chief
Executive Officer of FAME, positions he has held since he
founded FAME in 1992. Mr. Falk also serves as Chairman of
the HTS Sports-a-Thon to benefit the Leukemia Society of
America, is a member of the Executive Committee of the
College Fund and is on the Board of Directors of the
Juvenile Diabetes Foundation and Share the Care for
Children.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY
- -------------------------- ---------------------------------------------------------------
<S> <C>
Howard J. Tytel .......... Mr. Tytel has served as an Executive Vice President, General
Counsel, Secretary and a Director of Parent since its
formation in December 1997. Mr. Tytel also served as a
Director, General Counsel, Executive Vice President and
Secretary of SFX Broadcasting from 1992 until the
consummation of the SFX Merger. Mr. Tytel is Executive
Vice President, General Counsel and a Director of SCMC
and TSC and holds an economic interest in those companies.
Mr. Tytel is a Director and a founder of Marquee and a
founder of Triathlon. Mr. Tytel was a Director of Country
Music Television from 1988 to 1991. From March 1995 until
March 1997, Mr. Tytel was a Director of Interactive Flight
Technologies, Inc., a publicly-traded company providing
computer-based in-flight entertainment. For the last twenty
years, Mr. Tytel has been associated with Mr. Sillerman in
various capacities with entities operating in the broadcasting
business. From 1993 to 1998, Mr. Tytel was Of Counsel to the
law firm of Baker & McKenzie, which represented SFX
Broadcasting and currently represents Parent and other
entities with which Messrs. Sillerman and Tytel are affiliated
on various matters.
Thomas P. Benson ......... Mr. Benson has served as the Vice President, Chief Financial
Officer and a Director of Parent since its formation in
December 1997. Mr. Benson also served as the Chief Financial
Officer and a Director of SFX Broadcasting, having served in
such capacity from November 22, 1996 until the
consummation of the SFX Merger. Mr. Benson became the
Vice President of Financial Affairs of SFX Broadcasting in
June 1996. He was the Vice President--External and
International Reporting for American Express Travel Related
Services Company from September 1995 to June 1996. From
1984 through September 1995, Mr. Benson worked at Ernst
& Young LLP as a staff accountant, senior accountant,
manager and senior manager.
Richard A. Liese ......... Mr. Liese has served as a Vice President, Associate General
Counsel and a Director of Parent since its formation in
December 1997. Mr. Liese also served as a Director, Vice
President and Associate General Counsel of SFX
Broadcasting, having served in such capacity from 1995 until
the consummation of the SFX Merger. Mr. Liese has also
been the Assistant General Counsel and Assistant Secretary
of SCMC since 1988. In addition, from 1993 until April 1995,
he served as Secretary of MMR.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY
- ------------------------------- -----------------------------------------------------------------
<S> <C>
D. Geoffrey Armstrong ......... Mr. Armstrong has served as an Executive Vice President
and a Director of Parent since its formation in December
1997. It is anticipated that, effective as of September 1, 1998,
Mr. Armstrong will no longer serve as an executive officer of
Parent but will remain as a Director. Mr. Armstrong also
served as the Chief Operating Officer and an Executive Vice
President of SFX Broadcasting, having served in such capacity
from November 22, 1996 until the consummation of the SFX
Merger. Mr. Armstrong has served as a Director of SFX
Broadcasting since 1993. Mr. Armstrong became the Chief
Operating Officer of SFX Broadcasting in June 1996 and the
Chief Financial Officer, Executive Vice President and
Treasurer of SFX Broadcasting in April 1995. Mr. Armstrong
was Vice President, Chief Financial Officer and Treasurer of
SFX Broadcasting from 1992 until March 1995. He had been
Executive Vice President and Chief Financial Officer of
Capstar, a predecessor of SFX Broadcasting, since 1989.
From 1988 to 1989, Mr. Armstrong was the Chief Executive
Officer of Sterling Communications Corporation.
James F. O'Grady, Jr. ......... Mr. O'Grady has served as a Director of Parent since its
formation in December 1997. Mr. O'Grady also served as a
Director of SFX Broadcasting prior to the consummation of
the SFX Merger. Mr. O'Grady has been President of O'Grady
and Associates, a media brokerage and consulting company,
since 1979. Mr. O'Grady has been a Director of Orange and
Rockland Utilities, Inc. and of Video for Broadcast, Inc.
since 1980 and 1991, respectively. Mr. O'Grady has been the
co-owner of Allcom Marketing Corp., a corporation that
provides marketing and public relations services for a variety
of clients, since 1985, and has been Of Counsel to Cahill and
Cahill, Brooklyn, New York, since 1986. He also served on
the Broad of Trustees of St. John's University from 1984 to
1996, and has served as a Director of The Insurance Broadcast
System, Inc. since 1994.
Paul Kramer ................... Mr. Kramer has served as a Director of Parent since its
formation in December 1997, served as a Director of SFX
Broadcasting prior to the SFX Merger and currently serves
as a director of Nations Flooring, Inc. Mr. Kramer has been
a partner in Kramer & Love, financial consultants specializing
in acquisitions, reorganizations and dispute resolution, since
1994. From 1992 to 1994, Mr. Kramer was an independent
financial consultant. Mr. Kramer was a partner in the New
York office of Ernst & Young LLP from 1968 to 1992.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME 5-YEAR EMPLOYMENT HISTORY
- ------------------------- --------------------------------------------------------------
<S> <C>
Edward F. Dugan ......... Mr. Dugan has served as a Director of Parent since its
formation in December 1997. Mr. Dugan also served as a
Director of SFX Broadcasting prior to the SFX Merger. Mr.
Dugan is President of Dugan Associates, Inc., a financial
advisory firm to media and entertainment companies, which
he founded in 1991. Mr. Dugan was an investment banker
with Paine Webber Inc., as a Managing Director, from 1978
to 1990, with Warburg Paribas Becker Inc., as President, from
1975 to 1978 and with Smith Barney Harris Upham & Co., as
a Managing Director, from 1961 to 1975.
</TABLE>
2. Directors and Executive Officers of the Purchaser. The name and present
positions with the Purchaser of each of the directors and executive officers of
the Purchaser are set forth below. The business address of the directors and
executive officers listed below is 650 Madison Avenue, 16th Floor, New York,
New York 10022. The directors and executive officers listed below are citizens
of the United States. Further information concerning the directors and
executive officers listed below, each of whom also serves as a director and
executive officer of Parent, is provided above.
<TABLE>
<CAPTION>
NAME POSITION WITH PURCHASER
- ------------------------------- ---------------------------------------------------------------
<S> <C>
Robert F.X. Sillerman ......... Mr. Sillerman has served as a Director and Executive
Chairman of the Purchaser since its formation in July 1998.
Michael G. Ferrel ............. Mr. Ferrel has served as a Director, Chief Executive Officer
and President of Purchaser since its formation in July 1998.
Howard J. Tytel ............... Mr. Tytel had served as a Director, Executive Vice President
and Secretary of Purchaser since its formation in July 1998.
Thomas P. Benson .............. Mr. Benson has served as Chief Financial Officer and
Treasurer of Purchaser since its formation in July 1998.
Richard A. Liese .............. Mr. Liese has served as Vice President and Assistant Secretary
of Purchaser since July 1998.
</TABLE>
33
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand/Overnight Courier:
(For Eligible Institutions Only)
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
For Information Telephone:
(800) 507-9357
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A stockholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
[GEORGESON & COMPANY INC. LOGO]
Wall Street Plaza
New York, New York
Banks and Brokers call collect (212) 440-9800
CALL TOLL FREE: (800) 223-2064
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 13, 1998
BY
MWE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SFX ENTERTAINMENT, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, SEPTEMBER 10, 1998, UNLESS EXTENDED.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand/Overnight Courier:
Tender & Exchange Department (For Eligible Institutions Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
For Information Telephone:
(800) 507-9357
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 2 of the Offer to Purchase (as defined below)) is
utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary at the Book-Entry Transfer Facility as
defined in and pursuant to the procedures set forth in Section 2 of the Offer
to Purchase. Stockholders who deliver Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders" and other Stockholders are
referred to herein as "Certificate Stockholders." Stockholders whose
certificates for Shares are not immediately available or who cannot deliver
either the certificates for, or a Book-Entry Confirmation (as defined in
Section 2 of the Offer to Purchase) with respect to, their Shares and all
other documents required hereby to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) must tender their
Shares in accordance with the guaranteed delivery procedures set forth in
Section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS
TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
<PAGE>
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S)
(PLEASE FILL IN, EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON SHARES TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- -----------------------------------------------------------------------------------------------------------
SHARE NUMBER OF SHARES
CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
TOTAL SHARES
- -----------------------------------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described herein are being tendered.
See Instruction 4.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY
PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY
BOOK-ENTRY TRANSFER):
Name of Tendering Institution
-------------------------------------------------
The Depository Trust Company Account Number
-----------------------------------
Transaction Code Number
-------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s)
-------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------
If delivered by book-entry transfer check box: [ ]
The Depository Trust Company Account Number
------------------------------------
Transaction Code Number
--------------------------------------------------------
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to MWE Acquisition Corp., a Delaware
corporation (the "Purchaser") which is a wholly owned subsidiary of SFX
Entertainment, Inc., a Delaware corporation ("Parent"), the above-described
shares of Common Stock, par value $.001 per share (the "Shares"), of
Magicworks Entertainment Incorporated, a Delaware corporation (the
"Company"), upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated August 13, 1998 (the "Offer to
Purchase"), and this Letter of Transmittal (which, together with any
amendments or supplements thereto or hereto, collectively constitute the
"Offer"), receipt of which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance
for payment of, and payment for, the Shares tendered herewith in accordance
with the terms of the Offer, the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Purchaser all right, title and
interest in and to all the Shares that are being tendered hereby (and any and
all other Shares or other securities or rights issued or issuable in respect
thereof on or after August 6, 1998), and irrevocably constitutes and appoints
The Bank of New York (the "Depositary"), the true and lawful agent and
attorney-in-fact of the undersigned, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to the full extent of the undersigned's rights with respect to
such Shares (and any such other Shares or securities or rights), (a) to
deliver certificates for such Shares (and any such other Shares or securities
or rights) or transfer ownership of such Shares (and any such other Shares or
securities or rights) on the account books maintained by the Book-Entry
Transfer Facility together, in any such case, with all accompanying evidences
of transfer and authenticity to, or upon the order of, the Purchaser, (b) to
present such Shares (and any such other Shares or securities or rights) for
transfer on the Company's books and (c) to receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and any such
other Shares or securities or rights), all in accordance with the terms of
the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the tendered
Shares (and any and all other shares or other securities or rights issued or
issuable in respect of such Shares on or after August 6, 1998) and, when the
same are accepted for payment by the Purchaser, the Purchaser will acquire
good title thereto, free and clear of all liens, restrictions, claims and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned will, upon request, execute any additional documents deemed by
the Depositary or the Purchaser to be necessary or desirable to complete the
sale, assignment and transfer of the tendered Shares (and any and all such
other Shares or securities or rights).
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal shall be binding upon the successors, assigns, heirs,
executors, administrators and legal representatives of the undersigned and
shall not be affected by, and shall survive, the death or incapacity of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned hereby irrevocably appoints Robert F. X. Sillerman and
Howard J. Tytel, and each of them, and any other designees of the Purchaser,
the attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote at any annual, special or adjourned meeting of the
Company's stockholders or otherwise in such manner as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion
deem proper with respect to, to execute any written consent concerning any
matter as each such attorney-in-fact and proxy or his substitute shall in his
sole discretion deem proper with respect to, and to otherwise act as each
such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, the Shares tendered hereby that have
been accepted for payment by the Purchaser prior to the time any such action
is taken and with respect to which the undersigned is entitled to vote (and
any and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after August 6, 1998). This appointment is
effective when, and only to the extent that, the Purchaser accepts for
payment such Shares as provided in the Offer to Purchase. This power of
attorney and proxy are irrevocable and are granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the
Offer. Upon such acceptance for payment, all prior powers of attorney,
proxies and consents given by the undersigned with respect to such Shares
(and any such other Shares or securities or rights) will, without further
action, be revoked and no subsequent powers of attorney, proxies, consents or
revocations may be given (and, if given, will not be deemed effective) by the
undersigned.
The undersigned understands that the valid tender of Shares pursuant to
any of the procedures described in Section 2 of the Offer to Purchase and in
the Instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
<PAGE>
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing
under "Description of Shares Tendered." In the event that both "Special
Delivery Instructions" and "Special Payment Instructions" are completed,
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment (and any accompanying
documents, as appropriate) in the name of, and deliver such check and/or
return such certificates (and any accompanying documents, as appropriate) to,
the person or persons so indicated. Please credit any Shares tendered
herewith by book-entry transfer that are not accepted for payment by
crediting the account at the Book-Entry Transfer Facility. The undersigned
recognizes that the Purchaser has no obligation pursuant to "Special Payment
Instructions" to transfer any Shares from the name of the registered holder
thereof if the Purchaser does not accept for payment any of the Shares so
tendered.
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN
HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of Shares represented by the lost or destroyed certificates:
- -----------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be issued in the name of someone other than the
undersigned.
Issue [ ] Check [ ] Certificate(s) to:
Name
----------------------------------------------------------------------------
(Please Print)
Address
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Include Zip Code)
----------------------------------------------------------------------------
(Taxpayer Identification or Social Security Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be sent to someone other than the undersigned,
or to the undersigned at an address other than that above.
Mail [ ] Check [ ] Certificate(s) to:
Name
----------------------------------------------------------------------------
(Please Print)
Address
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Include Zip Code)
---------------------------------------------------------------------------
(Taxpayer Identification or Social Security Number)
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S))
Dated:
----------------------------------------------------------------------------
(Must be signed by registered holder(s) as name(s) appear(s) on the
Certificate(s) for the Shares or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide the
following information and see Instruction 5.)
Name(s)
---------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
-------------------------------------------------------
Address
---------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.
-----------------------------------------
Employer Identification or Social Security Number
--------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
----------------------------------------------------------------------------
AUTHORIZED SIGNATURE
----------------------------------------------------------------------------
NAME (PLEASE PRINT)
----------------------------------------------------------------------------
NAME OF FIRM
----------------------------------------------------------------------------
ADDRESS
----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
----------------------------------------------------------------------------
DAYTIME AREA CODE AND TELEPHONE NO.
Dated:
----------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES.
No signature guarantee is required on this Letter of Transmittal (a) if
this Letter of Transmittal is signed by the registered holder(s) (which term,
for purposes of this Section, includes any participant in the Book-Entry
Transfer Facility's system whose name appears on a security position listing
as the owner of the Shares) of Shares tendered herewith, unless such
registered holder(s) has completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on this
Letter of Transmittal or (b) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (such
participant, an "Eligible Institution"). In all other cases, all signatures
on this Letter of Transmittal must be guaranteed by an Eligible Institution.
See Instruction 5.
2. REQUIREMENTS OF TENDER.
This Letter of Transmittal is to be completed by stockholders either if
certificates are to be forwarded herewith or, unless an Agent's Message (as
defined below) is utilized, if delivery of Shares is to be made pursuant to
the procedures for book-entry transfer set forth in Section 2 of the Offer to
Purchase. For a stockholder validly to tender Shares pursuant to the Offer,
either (a) a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date and either certificates for
tendered Shares must be received by the Depositary at one of such addresses
or such Shares must be delivered pursuant to the procedures for book-entry
transfer set forth herein (and a Book-Entry Confirmation received by the
Depositary), in each case prior to the Expiration Date, or (b) the tendering
stockholder must comply with the guaranteed delivery procedures set forth
below and in Section 2 of the Offer to Purchase.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates for Shares are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date, such stockholder's tender may be effected by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to
the guaranteed delivery procedures set forth in Section 2 of the Offer to
Purchase. Pursuant to such procedures, (a) such tender must be made by or
through an Eligible Institution, (b) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Purchaser, must be received by the Depositary prior to the Expiration Date
and (c) the certificates for all tendered Shares in proper form for transfer
(or a Book-Entry Confirmation with respect to all such Shares), together with
a Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents,
must be received by the Depositary within three trading days after the date
of execution of such Notice of Guaranteed Delivery as provided in Section 2
of the Offer to Purchase. A "trading day" is any day on which the American
Stock Exchange, Inc. is open for business.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile hereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE.
If the space provided herein is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATED STOCKHOLDERS ONLY).
If fewer than all the Shares evidenced by any certificate submitted are to
be tendered, fill in the number of Shares that are to be tendered in the box
entitled "Number of Shares Tendered." In any such case, new certificate(s)
for the remainder of the Shares that were evidenced by the old certificate(s)
will be sent to the registered holder, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after
the acceptance for payment of, and payment for, the Shares tendered herewith.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder of the
Shares tendered hereby, the signature must correspond with the name as
written on the face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of
the Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued
to, a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES.
The Purchaser will pay any stock transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or if certificates
for Shares not tendered or accepted for payment are to be registered in the
name of, any person(s) other than the registered owner(s), or if tendered
certificates are registered in the name(s) of any person(s) other than the
person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered owner(s) or such person(s))
payable on account of the transfer to such person(s) will be deducted from
the purchase price unless satisfactory evidence of the payment of such taxes
or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER
OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS.
If a check is to be issued in the name of, and/or certificates for Shares
not accepted for payment are to be returned to, a person other than the
signer of this Letter of Transmittal or if a check is to be sent and/or such
certificates are to be
<PAGE>
returned to a person other than the signer of this Letter of Transmittal or
to an address other than that shown above, the appropriate boxes on this
Letter of Transmittal should be completed.
8. WAIVER OF CONDITIONS.
The Purchaser reserves the absolute right in its sole discretion to waive
any of the specified conditions of the Offer, in whole or in part, in the
case of any Shares tendered.
9. 31% BACKUP WITHHOLDING.
In order to avoid backup withholding of Federal income tax on payments of
cash pursuant to the Offer, a stockholder surrendering Shares in the Offer
must, unless an exemption applies, provide the Depositary with such
stockholder's correct taxpayer identification number ("TIN") on Substitute
Form W-9 below in this Letter of Transmittal and certify under penalty of
perjury that such TIN is correct and that such stockholder is not subject to
backup withholding. If a stockholder does not provide such stockholder's
correct TIN or fails to provide the certifications described above, the
Internal Revenue Service (the "IRS") may impose a $50 penalty on such
stockholder and payment of cash to such stockholder pursuant to the Offer may
be subject to backup withholding of 31%.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the U.S. federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the stockholder upon filing
an income tax return.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and
the Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 may be directed to the Information Agent at its address
set forth below.
11. LOST, DESTROYED OR STOLEN CERTIFICATES.
If any certificate representing Shares has been lost, destroyed or stolen,
the stockholder should promptly notify the Depositary by checking the box
immediately preceding the special payment/special delivery instructions and
indicating the number of Shares lost. The stockholder will then be instructed
as to the steps that must be taken in order to replace the certificate. This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER,
AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED
PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE
EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES
FOR GUARANTEED DELIVERY.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder is required to provide the
Depositary such stockholder's TIN (i.e., social security number or employer
identification number) on Substitute Form W-9 (or otherwise establish a basis
for exemption from backup withholding) and certify under penalty of perjury
that such TIN is correct and that such stockholder is not subject to backup
withholding. If the Shares are held in more than one name or are not in the
name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report. If the Depositary is not provided with a
stockholder's correct TIN, the stockholder or other payee may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, any amounts
payable to such stockholder in connection with the Offer may be subject to
backup withholding at a 31% rate.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the stockholder
<PAGE>
or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN
is provided to the Depositary.
Certain stockholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup
withholding. Noncorporate foreign stockholders should complete and sign the
main signature form and a Form W-8, Certificate of Foreign Status, a copy of
which may be obtained from the Depositary, in order to avoid backup
withholding. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for more instructions.
PAYER'S NAME: THE BANK OF NEW YORK
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX --------------------------------------
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number(s)
BELOW. or
Department of the Treasury
Internal Revenue Service --------------------------------------
Taxpayer Identification Number(s)
Payer's Request for Taxpayer
Identification Number ("TIN")
- --------------------------------------------------------------------------------------------------------------------------
PART 2--CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends or (c) the IRS
has notified me that I am no longer subject to backup withholding.
Certification Instructions--You must cross out item (2) in Part 2
above if you have been notified by the IRS that you are subject to
backup withholding because of under reporting interest or dividends on
your tax returns. However, if after being notified by the IRS that you
were subject to backup withholding you received another notification
from the IRS stating that you are no longer subject to backup
withholding, do not cross out such item (2). If you are exempt from
backup withholding, check the box in Part 4 above.
- -------------------------------------------------------------------------------
SIGNATURE PART 3
- ------------------------------------ Awaiting TIN [ ]
DATE PART 4
- ------------------------------------ Exempt TIN [ ]
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that, if I do not provide a taxpayer identification number to
the Depositary by the time of payment, 31% of all reportable payments made
to me thereafter will be withheld until I provide a properly certified
taxpayer identification number to the Depositary.
Signature Date
------------------------------------- -----------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
INFORMATION.
THE INFORMATION AGENT FOR THE OFFER IS:
[GEORGESON & COMPANY INC. LOGO]
Wall Street Plaza
New York, New York 10005
Bank and Brokers call collect (212) 440-9800
CALL TOLL FREE (800) 223-2064
AUGUST 13, 1998
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
As set forth in Section 2 of the Offer to Purchase (as defined below),
this form or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for shares of Common Stock, par
value $.001 per share (the "Shares"), of Magicworks Entertainment
Incorporated, a Delaware corporation (the "Company"), are not immediately
available or if the procedure for book-entry transfer cannot be completed on
a timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer
to Purchase). This form may be delivered by hand to the Depositary or
transmitted by facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution (as defined in Section 2 of
the Offer to Purchase). See Section 2 of the Offer to Purchase.
<TABLE>
<CAPTION>
The Depositary for the Offer is:
THE BANK OF NEW YORK
By Mail:
<S> <C> <C>
Tender & Exchange Department By Facsimile Transmission: By Hand/Overnight Courier:
P.O. Box 11248 (For Eligible Institutions Only) Tender & Exchange Department
Church Street Station (212) 815-6213 101 Barclay Street
New York, New York 10286-1248 Receive and Deliver Window
New York, New York 10286
For Information Telephone:
1-800-507-9357
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to MWE Acquisition Corp., a Delaware
corporation (the "Purchaser"), a wholly owned subsidiary of SFX
Entertainment, Inc., a Delaware corporation, upon the terms and subject to
the conditions set forth in the Purchaser's Offer to Purchase dated August
13, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer"), receipt of which is hereby acknowledged, the number
of Shares set forth below, all pursuant to the guaranteed delivery procedures
set forth in Section 2 of the Offer to Purchase.
Number of Shares:
------------------------------------------------------------
Name(s) of Record Holder(s):
-------------------------------------------------
- -----------------------------------------------------------------------------
Please Print
Address(es):
-----------------------------------------------------------------
- -----------------------------------------------------------------------------
Zip Code
Daytime Area Code and Tel. No.:
----------------------------------------------
Certifiate Nos. (if available):
----------------------------------------------
Signature(s):
----------------------------------------------------------------
- -----------------------------------------------------------------------------
Dated:
-----------------------------------------------------------------------
Check box if Shares will be tendered by book-entry transfer: [ ]
The Depository Trust Company Account No.:
------------------------------------
<PAGE>
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, hereby guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby,
in proper form for transfer, or a Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to such Shares, in any such case together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or an Agent's
Message (as defined in the Offer to Purchase), and any other required
documents, within three trading days (as defined in the Offer to Purchase)
after the date hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown
herein. Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm:
----------------------------------------------------------------
- -----------------------------------------------------------------------------
Authorized Signature
Name:
------------------------------------------------------------------------
Please Print
Title:
-----------------------------------------------------------------------
Address:
---------------------------------------------------------------------
- -----------------------------------------------------------------------------
Zip Code
Area Code and Tel. No.:
------------------------------------------------------
Dated:
-----------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
AT
$4.00 NET PER SHARE
BY
MWE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SFX ENTERTAINMENT, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, SEPTEMBER 10, 1998, UNLESS EXTENDED.
August 13, 1998
To Brokers, Dealers, Banks,
Trust Companies and Other Nominees:
We have been appointed by MWE Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of SFX Entertainment, Inc., a
Delaware corporation ("Parent"), to act as Information Agent in connection
with the Purchaser's offer to purchase all outstanding shares of Common
Stock, par value $.001 per share (the "Shares"), of Magicworks Entertainment
Incorporated, a Delaware corporation (the "Company"), at $4.00 per Share, net
to the seller in cash, upon the terms and subject to the conditions set forth
in the Purchaser's Offer to Purchase dated August 13 , 1998 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with any
supplements or amendments thereto, collectively constitute the "Offer").
Please furnish copies of the enclosed materials to those of your clients
for whom you hold Shares registered in your name or in the name of your
nominee. Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated August 13, 1998;
2. Letter of Transmittal to be used by stockholders of the Company
accepting the Offer;
3. The Letter to Stockholders of the Company from the Co-Chairman of the
Board and Chief Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of a nominee, with space
provided for obtaining such client's instructions with regard to the Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to The Bank of New York, the Depositary.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER
OF SHARES THAT WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES
(DETERMINED ON A FULLY DILUTED BASIS) (THE "MINIMUM CONDITION") AND (2) ANY
WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, AS AMENDED, AND THE REGULATIONS THEREUNDER, APPLICABLE TO THE PURCHASE
OF SHARES PURSUANT TO THE OFFER, HAVING EXPIRED OR BEEN TERMINATED. CERTAIN
PRINCIPAL STOCKHOLDERS OF THE COMPANY HOLDING APPROXIMATELY 73.8% OF THE
OUTSTANDING SHARES AND HOLDING MORE THAN A MAJORITY OF THE OUTSTANDING SHARES
ON A FULLY DILUTED BASIS HAVE AGREED TO TENDER THEIR SHARES INTO THE OFFER.
<PAGE>
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
THURSDAY, SEPTEMBER 10, 1998, UNLESS EXTENDED.
The Board of Directors of the Company and a special committee of the
independent directors of the Company have each unanimously approved the Offer
and the Merger. The Board of Directors of the Company has unanimously
determined that the terms of the Offer and the Merger are advisable, fair to,
and in the best interests of, the stockholders of the Company and unanimously
recommends that stockholders of the Company accept the Offer and tender their
Shares.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of August 6, 1998 (the "Merger Agreement"), among Parent, the Purchaser
and the Company pursuant to which, following the consummation of the Offer
and the satisfaction or waiver of certain conditions, the Purchaser will be
merged with and into the Company, with the Company surviving the merger as a
wholly owned subsidiary of Parent (the "Merger"). In the Merger, each
outstanding Share (other than Shares owned by the Company or any subsidiary
of the Company or by Parent, the Purchaser or any other subsidiary of Parent
or by stockholders, if any, who are entitled to and who properly exercise
dissenters' rights under Delaware law) will be converted into the right to
receive $4.00 per Share, without interest, as set forth in the Merger
Agreement and described in the Offer to Purchase.
Parent and the Purchaser entered into Stockholder Agreements each dated as
of August 6, 1998 (the "Stockholder Agreements") with certain principal
stockholders of the Company (the "Principal Stockholders"), pursuant to which
each Principal Stockholder has agreed to tender into the Offer all the Shares
that such Principal Stockholder owns. These Shares represent more than a
majority of the outstanding Shares (determined on a fully diluted basis) and,
upon the tendering of these Shares, the Minimum Condition will be satisfied.
As of August 11, 1998, there were 19,171,800 Shares subject to the
Stockholder Agreements, representing approximately 73.8% of the outstanding
Shares and approximately 63.0% of the outstanding Shares on a fully diluted
basis.
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by The Bank of New York (the
"Depositary") of (a) certificates for (or a timely Book-Entry Confirmation
(as defined in the Offer to Purchase) with respect to) such Shares, (b) a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a
book-entry transfer effected pursuant to the procedure set forth in Section 2
of the Offer to Purchase, an Agent's Message (as defined in the Offer to
Purchase), and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent and the
Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. You will be
reimbursed upon request for customary mailing and handling expenses incurred
by you in forwarding the enclosed offering materials to your customers.
Questions and requests for additional copies of the enclosed material may
be directed to the Information Agent at the address and telephone number set
forth on the back cover of the enclosed Offer to Purchase.
Very truly yours,
GEORGESON & COMPANY INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE
INFORMATION AGENT OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR ANY OTHER
PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
AT
$4.00 NET PER SHARE
BY
MWE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SFX ENTERTAINMENT, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, SEPTEMBER 10, 1998, UNLESS EXTENDED.
August 13, 1998
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated August 13,
1998 (the "Offer to Purchase"), and a related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer") relating to an offer by MWE Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of SFX
Entertainment, Inc., a Delaware corporation ("Parent"), to purchase shares of
Common Stock, par value $.001 per share (the "Shares"), of Magicworks
Entertainment Incorporated, a Delaware corporation (the "Company"), at $4.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer. Also enclosed is the Letter to
Stockholders of the Company from the Co-Chairman of the Board and Chief
Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A
TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU
FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The tender price is $4.00 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer.
2. The Board of Directors of the Company and a special committee of the
independent directors of the Company have each unanimously approved the Offer
and the Merger (as defined below). The Board of Directors of the Company has
unanimously determined that the terms of the Offer and the Merger are
advisable, fair to, and in the best interests of, the stockholders of the
Company and unanimously recommends that the stockholders of the Company
accept the Offer and tender their Shares.
3. The Offer is being made for all outstanding Shares.
4. The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of August 6, 1998 (the "Merger Agreement"), among Parent, the
Purchaser and the Company pursuant to which, following the consummation of
the Offer and the satisfaction or waiver of certain conditions, the Purchaser
will be merged with and into the Company, with the Company surviving the
merger as a wholly owned subsidiary of Parent (the "Merger"). In the Merger,
each outstanding
<PAGE>
Share (other than Shares owned by the Company or any subsidiary of the
Company or by Parent, the Purchaser or any other subsidiary of Parent or by
stockholders, if any, who are entitled to and who properly exercise
dissenters' rights under Delaware law) will be converted into the right to
receive $4.00 per Share, without interest, as set forth in the Merger
Agreement and described in the Offer to Purchase.
5. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration of the Offer that
number of Shares which would represent at least a majority of the outstanding
Shares (determined on a fully diluted basis) (the "Minimum Condition") and
(2) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the regulations thereunder applicable to the
purchase of Shares pursuant to the Offer having expired or been terminated.
6. Parent and the Purchaser entered into Stockholder Agreements each
dated as of August 6, 1998 (the "Stockholder Agreements") with certain
principal stockholders of the Company (the "Principal Stockholders"),
pursuant to which each Principal Stockholder has agreed to tender into the
Offer all the Shares that such Principal Stockholder owns. These Shares
represent more than a majority of the outstanding Shares (determined on a
fully diluted basis) and, upon the tendering of these Shares, the Minimum
Condition will be satisfied. As of August 11, 1998, there were 19,171,800
Shares subject to the Stockholder Agreements, representing approximately
73.8% of the outstanding Shares and approximately 63.0% of the outstanding
Shares on a fully diluted basis.
7. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on September 10, 1998, unless the Offer is extended by the
Purchaser.
8. The Purchaser will pay any stock transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer, except
as otherwise provided in Instruction 6 of the Letter of Transmittal.
If you wish to have us tender any of or all your Shares, please so
instruct us by completing, executing, detaching and returning to us the
instruction form set forth below. An envelope to return your instructions to
us is enclosed. If you authorize tender of your Shares, all such Shares will
be tendered unless otherwise specified below. Your instructions to us should
be forwarded promptly to permit us to submit a tender on your behalf prior to
the expiration of the Offer.
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by The Bank of New York (the
"Depositary") of (a) certificates for (or a timely Book-Entry Confirmation
(as defined in the Offer to Purchase) with respect to) such Shares, (b) a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a
book-entry transfer effected pursuant to the procedure set forth in Section 2
of the Offer to Purchase, an Agent's Message (as defined in the Offer to
Purchase), and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
BY
MWE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SFX ENTERTAINMENT, INC.
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase, dated August 13, 1998, of MWE Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of SFX Entertainment, Inc., a
Delaware corporation, and the related Letter of Transmittal, relating to
shares of Common Stock, par value $.001 per share, of Magicworks
Entertainment Incorporated, a Delaware corporation (the "Shares").
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned on the terms and conditions set
forth in such Offer to Purchase and the related Letter of Transmittal.
Dated: , 1998
Number of Shares
to be Tendered*
Shares
------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SIGNATURE(S)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
PLEASE PRINT NAME(S)
Address(es)
------------------------------------------------------------------
- -----------------------------------------------------------------------------
City State Zip Code
- -----------------------------------------------------------------------------
Area Code and Telephone Number
Taxpayer Identification or
Social Security No.
----------------------------------------------------------
- ------------
* Unless otherwise indicated, it will be assumed that all your Shares are to
be tendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
- -------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE
NAME AND
SOCIAL SECURITY
NUMBER OF--
- -------------------------------------------------------------------------------
1.An individual's account The individual
2.Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on the
account(1)
3.Husband and wife The actual owner of
(joint account) the account or, if joint
funds, either person(1)
4.Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5.Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6.Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor,
or incompetent person
7.a.The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b.So-called trust account that The actual owner(1)
is not a legal or valid trust
under state law
- -------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE NAME
AND EMPLOYER
IDENTIFICATION
NUMBER OF--
- -------------------------------------------------------------------------------
8.Sole proprietorship account The owner(4)
9.A valid trust, estate, or The legal entity (Do not furnish
pension trust the identifying number of the
personal representative or trustee
unless the legal entity itself is
not designated in the account
title.)(5)
10.Corporate account The corporation
11.Religious, charitable, or The organization
educational organization
account
12.Partnership account held The partnership
in the name of the business
13.Association, club, or other The organization
tax-exempt organization
14.A broker or registered The broker or nominee
nominee
15.Account with the Department The public entity
of Agriculture in the name
of a public entity (such
as a state or local
government, school district,
or prison) that receives
agricultural program
payments
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show your individual name. You may also enter your business name. You may
use your Social Security number or employer identification number.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service ("IRS") and apply for
a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for
which no information reporting is required. For interest and dividends, all
listed payees are exempt except those identified in item (9). For broker
transactions, payees listed in items (1) through (13) and a person registered
under the Investment Advisers Act of 1940 who regularly acts as a broker are
exempt. Payments subject to reporting under Sections 6041 and 6041A of the
Internal Revenue Code (the "Code") are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except
a corporation that provides medical and health care services or bills and
collects payments for such services is not exempt from backup withholding or
information reporting. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions, patronage
dividends, and payments by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under Section 501(a) of the Code, or
an IRA, or a custodial account under Section 403(b)(7) of the Code.
(3) The United States or any agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States,
or any political subsidivisions, agencies or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any agencies, or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the
United States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under Section 584(a) of the
Code.
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under Section 664 of the Code or described in
Section 4947 of the Code.
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
o Payments to nonresident aliens subject to withholding under Section
1441.
o Section 404(k) Payments made by an ESOP.
Payments of interest not generally subject to backup withholding including
the following:
o Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number to the
payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under Section 852 of the Code).
o Payments described in Section 6049(b)(5) of the Code to nonresident
aliens.
o Payments on tax-free covenant bonds under Section 1451 of the Code.
o Payments made by certain foreign organizations.
o Payments of mortgage interest.
Exempt payees described above should file Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT
OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A
COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041A(a), 6045, 6050A and 6050N
of the Code and the regulations promulgated thereunder.
PRIVACY ACT NOTICE.--Section 6109 of the Code requires most recipients of
dividends, interest, or other payments to give taxpayer identification
numbers to payers who must report the payments to IRS. The IRS uses the
numbers for identification purposes. Payers must be given the numbers whether
or not recipients are required to file tax returns. Payers must generally
withhold 31% of taxable interest, dividends, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER NUMBER.--If you fail to furnish your taxpayer
identification number to a payer, you are subject to a penalty of $50 for
each such failure unless your failure is due to reasonable cause and not to
willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase dated
August 13,1998 and the related Letter of Transmittal and is not being made to
(nor will tenders be accepted from or on behalf of) holders of Shares in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. Notice of Offer to
Purchase for Cash All Outstanding Shares of Common Stock of Magicworks
Entertainment Incorporated at $4.00 Net Per Share by MWE Acquisition Corp. a
wholly owned subsidiary of SFX Entertainment, Inc. MWE Acquisition Corp., a
Delaware corporation (the Purchaser) and a wholly owned subsidiary of SFX
Entertainment, Inc., a Delaware corporation (Parent), is offering to purchase
all outstanding shares of Common Stock, par value $.001 per share (the Shares),
of Magicworks Entertainment Incorporated, a Delaware corporation (the Company),
at $4.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated August 13,1998 and in
the related Letter of Transmittal (which together with any amendments or
supplements thereto, collectively constitute the Offer).
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer such number of
Shares that would constitute at least a majority of the outstanding Shares
(determined on a fully diluted basis) (the Minimum Condition) and (ii) any
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, applicable to the purchase of Shares pursuant to the Offer having
expired or been terminated. The Offer is being made pursuant to an Agreement
and Plan of Merger dated as of August 6,1998 (the Merger Agreement), among
Parent, the Purchaser and the Company pursuant to which, following the
consummation of the Offer, the Purchaser will be merged with and into the
Company (the Merger). On the effective date of the Merger, each outstanding
Share (other than Shares owned by the Company or any subsidiary of the Company
or by Parent, the Purchaser or any other subsidiary of Parent or by
stockholders, if any, who are entitled to and who properly exercise dissenters
rights under Delaware law) will be converted into the right to receive $4.00,
in cash, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY AND A SPECIAL COMMITTEE OF THE
INDEPENDENT DIRECTORS OF THE COMPANY EACH HAVE UNANIMOUSLY APPROVED THE OFFER
AND THE MERGER. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY
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<PAGE>
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR
SHARES. PARENT AND THE PURCHASER ENTERED INTO STOCKHOLDER AGREEMENTS EACH DATED
AS OF AUGUST 6, 1998 WITH CERTAIN PRINCIPAL STOCKHOLDERS OF THE COMPANY (THE
PRINCIPAL STOCKHOLDERS), PURSUANT TO WHICH EACH PRINCIPAL STOCKHOLDER HAS
AGREED TO TENDER INTO THE OFFER ALL THE SHARES THAT SUCH PRINCIPAL STOCKHOLDER
OWNS. THESE SHARES REPRESENT APPROXIMATELY 73.8% OF THE OUTSTANDING SHARES AND
MORE THAN A MAJORITY OF THE OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED
BASIS) AND, UPON THE TENDERING OF THESE SHARES, THE MINIMUM CONDITION WILL BE
SATISFIED.
For purposes of the Offer, the Purchaser shall be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not properly withdrawn as, if and when the Purchaser gives oral or written
notice to the Depositary of the Purchasers acceptance for payment of such
Shares. Upon the terms and subject to the conditions of the Offer, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price therefor with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from the Purchaser and
transmitting payment to tendering stockholders whose Shares have been accepted
for payment. In all cases, payment for Shares purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates
for such Shares or timely confirmation of book-entry transfer of such Shares
into the Depositarys account at the Book-Entry Transfer Facility (as defined in
the Offer to Purchase) pursuant to the procedures set forth in Section 2 of the
Offer to Purchase, (b) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, or,
in the case of a book-entry transfer, an Agents Message (as defined in the
Offer to Purchase) and (c) any other documents required by the Letter of
Transmittal. Under no circumstances will interest be paid by the Purchaser on
the purchase price of the Shares to be paid by the Purchaser, regardless of any
extension of the Offer or any delay in making such payment. The term Expiration
Date means 12:00 Midnight, New York City time, on Thursday, September 10,1998,
unless and until the Purchaser, in its sole discretion but subject to the terms
of the Merger Agreement, shall have extended the period of time during which
the Offer is open, in which event the term Expiration Date shall mean the
latest time and date on which the Offer, as so extended by the Purchaser, shall
expire. The Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms of the Merger Agreement), at any time or from time to
time, and regardless of whether or not any of the events set forth in Section
14 of the Offer to Purchase shall have occurred, (i) to extend the period of
time during which the Offer is open and thereby delay acceptance for payment
of, and the payment for, any Shares, by giving oral or written notice of such
extension to the Depositary and (ii) to amend the Offer
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<PAGE>
in any other respect by giving oral or written notice of such amendment to the
Depositary. The Purchaser shall not have any obligation to pay interest on the
purchase price for tendered Shares, whether or not the Purchaser exercises its
right to extend the Offer. There can be no assurance that the Purchaser will
exercise the right to extend the Offer. Any such extension will be followed by
a public announcement thereof no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. During
any such extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer, subject to the right of a tendering stockholder to
withdraw such stockholders Shares.
Except as otherwise provided below, tenders of Shares are irrevocable. Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment and paid for by
the Purchaser pursuant to the Offer, may also be withdrawn at any time after
October 11, 1998. For a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution as defined in Section 2 of the Offer to Purchase, the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedures for
book-entry transfer as set forth in Section 2 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn shares and
otherwise comply with the Book-Entry Transfer Facilitys procedures. Withdrawals
of tenders of Shares may not be rescinded, and any Shares properly withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 2 of the Offer to Purchase at any time prior to
the Expiration Date. All questions as to the form and validity (including time
of receipt) of notices of withdrawal will be determined by the Purchaser, in
its sole discretion, whose determination will be final and binding.
The Offer to Purchase and the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and furnished to brokers,
dealers, banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agencys security position listing, for
subsequent transmittal to beneficial owner of Shares.
-3-
<PAGE>
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION
WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase, the Letter of Transmittal and all
other tender offer materials may be directed to the Information Agent as set
forth below, and copies will be furnished promptly at the Purchasers expense.
The Depositary for the Offer is:
The Bank of New York
<TABLE>
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By Mail: By Facsimile Transmission: By Hand/Overnight Courier:
Tender & Exchange Department (For Eligible Institutions Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
For Information Telephone:
(800) 507-9357
</TABLE>
The Information Agent for the Offer is:
GEORGESON & COMPANY INC. [LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800) 223-2064
August 13, 1998
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<PAGE>
(Exhibit (a)(8)
(-X-ENTERTAINMENT LETTERHEAD)
( BW)(SFX-ENT/MAGICWORKS)(SFXE)(MJK) SFX Entertainment to Acquire Magicworks
Entertainment
NEW YORK and MIAMI - (BUSINESS WIRE) - Aug. 7, 1998 - SFX
Entertainment, Inc. (NASDAQ: SFXE) and Magicworks Entertainment Incorporated
(AMEX: MJK) today announced that they have entered into a definitive merger
agreement pursuant to which SFX will commence a tender offer to acquire all
outstanding shares of Magicworks for $4.00 per share in cash.
The transaction has a total value of approximately $100 million. The
Boards of Directors of both companies have approved the transaction and certain
principal stockholders owning approximately 78.5% of the outstanding common
stock of Magicworks have agreed to tender all of their shares. Any shares not
purchased in the tender offer will be acquired in a second step merger for
$4.00 per share in cash. The tender offer is conditioned upon the tendering of
shares representing a majority of Magicworks' common stock determined on a
fully diluted basis, the expiration of the applicable Hart-Scott-Rodino waiting
period, and certain other customary conditions.
Magicworks is engaged in the management, production, presentation, and
merchandising of theatrical shows, musical concerts and other forms of live
entertainment. The company also provides personal representation and sports
marketing services to professional athletes in such sports as figure skating,
baseball, and tennis. From its origins as the worldwide producer and promoter
of "The Magic of David Copperfield", which it has produced since 1982,
Magicworks has significantly expanded its business through internal growth and
acquisitions. As a result, it is currently a leading producer of touring
Broadway shows and has a growing presence in musical concert production and
talent management. During 1997, Magicworks produced, co-produced or promoted
over 700 theatrical and concert events as part of 25 theatrical and 30 concert
tours. Magicworks is currently producing the theatrical tours of "Evita,"
"Cabaret," "The Gin Game" starring Julie Harris and Charles Durning, and the
European tour of "Lord of the Dance." Recent concert tours include artists such
as Janet Jackson, Fleetwood Mac, and Styx. Magicworks and SFX's Pace
Entertainment have a longstanding historical relationship having worked closely
together in the past, co-producing such events as the national tour of David
Copperfield, Jekyll & Hyde, and the upcoming tour of Evita. They have also
worked closely as two of the principal co-owners of the country's largest
theatrical booking agency.
Robert F. X. Sillerman, Executive Chairman of SFX Entertainment, Inc.,
stated, "Given Pace's extensive involvement with Magicworks in the past, we are
especially pleased to announce this acquisition. It further expands our
entertainment roster and represents an almost perfect complement to our current
operations. For example, we own the domestic rights to the very popular
presentation of 'Lord of the
650 Madison Avenue
New York, New York 10022
212.838.3100
<PAGE>
Dance', and Magicworks will now further contribute the international rights.
Magicworks also adds important new distribution outlets for theatrical tours in
seven new markets for us, including such locations as Salt Lake City, where it
has a particularly strong subscription base. In addition, we will be gaining
important strength in our sports marketing activities, an area of increasing
importance for SFX. On the cost side, because of our close relationship with
Magicworks, we also anticipate sharing many of our resources thereby achieving
significant savings by eliminating overhead. We look forward to welcoming the
management and clients of Magicworks to the SFX fold, and we anticipate an
exciting future together.
Magicworks Chairman, Joe Marsh, and Co-chairman and CEO, Brad
Krassner, in a joint statement said, "This is an excellent opportunity for
Magicworks Entertainment and our shareholders. SFX is the fastest growing, most
exciting company in the entertainment industry today. Our various businesses,
which will fit very well into SFX, will certainly flourish in this dynamic
environment. This is a classic case in which the whole will be greater than the
sum of the parts. This transaction is also consistent with our declared
intention to maximize value for our shareholders."
SFX Entertainment is a leading promoter, producer and venue operator for
live entertainment events. It owns and/or operates the largest network of
venues in the country used principally for music concerts and other live
entertainment events. Without including the Magicworks acquisition, the Marquee
acquisition, or a series of recently announced smaller acquisitions, it has 47
venues either directly owned or operated under lease or exclusive booking
arrangements in 22 of the top 50 markets, including 11 amphitheaters in 7 of
the top 10 markets. The company also develops and manages touring Broadway
shows, selling subscription series in 32 of the estimated 60 markets that
maintain active touring schedules with approximately 220,000 subscribers last
year. Through its large number of venues, its strong market presence and the
long operating histories of the businesses it has acquired, SFX operates an
integrated franchise that promotes and produces a broad variety of live
entertainment events locally, regionally and nationally. During 1997,
approximately 27 million people attended 9,600 events promoted and/or produced
by SFX, including approximately 4,400 music concerts, 4,900 theatrical shows
and over 200 specialized motor sports events.
This press release includes forward-looking statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.
These forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected, including the company's
absence of combined operating history with acquired businesses, potential
inability to integrate acquired businesses, risks related to recent
acquisitions, need for additional financing, high degree of leverage, future
charges to earnings, strategy of future acquisitions, indemnification and
deferred payment arrangements, granting of rights to acquire certain portions
of the company's operations, variable economic conditions and consumer tastes,
need for availability of appropriate artists and events, ability to retain
control of the company's venues, restrictions imposed by existing debt, payment
obligations to SFX Broadcasting, Inc., control by management, and dependence on
key personnel. For a more detailed discussion of these and other relevant risks
and uncertainties, see the company's latest annual report and other filings
with the Securities and Exchange Commission.
<PAGE>
Exhibit (c)(1)
===============================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
SFX ENTERTAINMENT, INC.
MWE ACQUISITION CORP.
AND
MAGICWORKS ENTERTAINMENT INCORPORATED
DATED AS OF AUGUST 6, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
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ARTICLE I -- THE OFFER
1.01. THE OFFER...............................................................................................2
1.02. TARGET ACTION...........................................................................................3
ARTICLE II -- THE MERGER
2.01. THE MERGER..............................................................................................4
2.02. CLOSING; EFFECTIVE TIME.................................................................................4
2.03. EFFECT OF THE MERGER....................................................................................5
2.04. CERTIFICATE OF INCORPORATION; BYLAWS....................................................................5
2.05. DIRECTORS AND OFFICERS..................................................................................5
2.06. CONVERSION OF SECURITIES................................................................................5
2.07. SURRENDER OF TARGET STOCK CERTIFICATES..................................................................6
2.08. STOCK TRANSFER BOOKS....................................................................................8
2.09. STOCK OPTIONS...........................................................................................8
2.10. WARRANTS................................................................................................9
2.11. CONVERTIBLE NOTES.......................................................................................9
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF TARGET
3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES............................................................9
3.02. CERTIFICATE OF INCORPORATION AND BYLAWS................................................................10
3.03. CAPITALIZATION.........................................................................................10
3.04. AUTHORITY RELATIVE TO THIS AGREEMENT...................................................................10
3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.............................................................11
3.06. PERMITS; COMPLIANCE....................................................................................12
3.07. SEC FILINGS; FINANCIAL STATEMENTS......................................................................12
3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS...................................................................13
3.09. ABSENCE OF LITIGATION..................................................................................14
3.10. EMPLOYEE BENEFIT MATTERS...............................................................................14
3.11. LABOR MATTERS..........................................................................................17
3.12. INTELLECTUAL PROPERTY..................................................................................17
3.13. TAXES ...............................................................................................18
3.14. OFFER DOCUMENTS; SCHEDULE 14D-9.......................................................................20
3.15. BROKERS ...............................................................................................20
3.16. TANGIBLE PROPERTY......................................................................................20
3.17. MATERIAL AND ACQUISITION CONTRACTS.....................................................................20
3.18. BOARD RECOMMENDATION...................................................................................21
3.19. CHANGE IN CONTROL......................................................................................21
3.20. ENVIRONMENTAL MATTERS..................................................................................22
3.21. ACCOUNTS RECEIVABLE....................................................................................23
3.22. INSURANCE..............................................................................................23
3.23. REAL PROPERTY AND LEASES...............................................................................23
3.24. INTERESTED PARTY TRANSACTIONS..........................................................................24
3.25. CLIENTS AND EVENTS.....................................................................................24
3.26. RESTRICTIONS ON BUSINESS ACTIVITIES....................................................................25
</TABLE>
(i)
<PAGE>
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3.27. CORPORATE RECORDS......................................................................................25
3.28. STATE TAKEOVER STATUTES................................................................................25
3.29. PARACHUTE PAYMENTS.....................................................................................25
3.30. OPINION OF FINANCIAL ADVISOR...........................................................................25
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUISITION SUB
4.01. CORPORATE ORGANIZATION AND QUALIFICATION...............................................................25
4.02. CERTIFICATE OF INCORPORATION AND BYLAWS................................................................26
4.03. OWNERSHIP OF ACQUISITION SUB; NO PRIOR ACTIVITIES......................................................26
4.04. AUTHORITY RELATIVE TO THIS AGREEMENT...................................................................26
4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.............................................................26
4.06. OFFER DOCUMENTS, PROXY STATEMENT.......................................................................27
4.07. FINANCING..............................................................................................27
4.08. BOARD RECOMMENDATION...................................................................................27
ARTICLE V -- CONDUCT OF BUSINESS PENDING THE MERGER
5.01. CONDUCT OF BUSINESS BY TARGET PENDING THE MERGER.......................................................27
5.02. OTHER ACTIONS..........................................................................................29
ARTICLE VI -- ADDITIONAL AGREEMENTS
6.01. PROXY STATEMENT........................................................................................30
6.02. TARGET BOARD REPRESENTATION............................................................................30
6.03. STOCKHOLDERS' MEETING..................................................................................31
6.04. APPROPRIATE ACTION; CONSENTS; FILINGS..................................................................31
6.05. ACCESS; CONFIDENTIALITY................................................................................32
6.06. NO SOLICITATION........................................................................................33
6.07. DIRECTORS' AND OFFICERS' INDEMNIFICATION...............................................................34
6.08. OBLIGATIONS OF ACQUISITION SUB.........................................................................35
6.09. PUBLIC ANNOUNCEMENTS...................................................................................36
6.10. NOTIFICATION OF CERTAIN MATTERS........................................................................36
6.11. FURTHER ACTION.........................................................................................36
6.12. EMPLOYEE BENEFIT PLANS.................................................................................36
6.13. PAYMENTS IN RESPECT OF TARGET OPTIONS..................................................................36
6.14. CERTAIN LITIGATION.....................................................................................37
ARTICLE VII -- CONDITIONS TO THE MERGER
7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY............................................................37
ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER
8.01. TERMINATION............................................................................................38
8.02. FEES AND EXPENSES; EFFECT OF TERMINATION...............................................................39
8.03. AMENDMENT..............................................................................................40
8.04. WAIVER ...............................................................................................41
ARTICLE IX -- GENERAL PROVISIONS
9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.............................................41
9.02. NOTICES ...............................................................................................41
9.03. CERTAIN DEFINITIONS....................................................................................42
9.04. SEVERABILITY...........................................................................................43
9.05. ASSIGNMENT; BINDING EFFECT; BENEFIT....................................................................43
9.06. INCORPORATION OF SCHEDULES.............................................................................44
9.07. SPECIFIC PERFORMANCE...................................................................................44
</TABLE>
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9.08. GOVERNING LAW..........................................................................................44
9.09. HEADINGS...............................................................................................44
9.10. COUNTERPARTS...........................................................................................44
9.11. WAIVER OF JURY TRIAL...................................................................................44
9.12. ENTIRE AGREEMENT.......................................................................................44
</TABLE>
(iii)
<PAGE>
Exhibit A - Conditions to the Offer
Exhibit B - Target Disclosure Schedule
Exhibit C - Acquiror Disclosure Schedule
Exhibit D - Form of Option Release Agreement
(iv)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 6, 1998 (this
"Agreement"), by and among SFX Entertainment, Inc., a Delaware corporation
("Acquiror"), MWE Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Acquiror ("Acquisition Sub"), and Magicworks Entertainment
Incorporated, a Delaware corporation ("Target").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Acquiror, Acquisition Sub and
Target (including a special committee of the independent directors of Target
(the "Target Independent Committee")), have each determined that it is
advisable and in the best interest of their respective stockholders for
Acquiror, through Acquisition Sub, to acquire Target upon the terms and subject
to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, it is proposed that
Acquisition Sub shall make a cash tender offer (as it may be amended from time
to time as permitted by this Agreement, the "Offer") to acquire all (but not
less than a majority of) the issued and outstanding shares of common stock, par
value $.001 per share, of Target ("Target Common Stock"; shares of Target
Common Stock being hereinafter collectively referred to as the "Shares") for
$4.00 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being hereinafter referred to as the "Per Share Amount") net to the
seller in cash, subject to applicable withholding of taxes, without interest
thereon, upon the terms and subject to the conditions of this Agreement and the
Offer;
WHEREAS, the Board of Directors of Acquiror and Acquisition Sub have
approved the making of the Offer and the transactions related thereto;
WHEREAS, the Board of Directors of Target and the Target Independent
Committee have each approved the making of the Offer and resolved and agreed,
subject to the terms and conditions contained herein, to recommend that holders
of Shares tender their Shares pursuant to the Offer;
WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of Acquiror, Acquisition Sub and Target and the Target Independent
Committee have each approved the merger (the "Merger") of Acquisition Sub with
and into Target in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law") following the consummation of the Offer and upon the
terms and subject to the conditions set forth herein;
WHEREAS, as a condition of the willingness of Acquiror to enter into
this Agreement, each of Joe Marsh, Lee Marshall, Brad Krassner, Glenn Bechdel
and John W. Ballard (the "Principal Stockholders"), who as of the date hereof
hold an aggregate of approximately 78.5% of the Shares, has entered into a
Stockholder Agreement dated the date hereof (collectively, the "Stockholder
Agreements") with Acquiror, which provides, among other things, that, subject
to the terms and conditions thereof, the Principal Stockholders will tender all
of their Shares into the Offer upon the terms and subject to the conditions set
forth in the Stockholder Agreements;
WHEREAS, the Board of Directors of Target and the Target Independent
Committee have approved the terms of the Stockholder Agreements and the
transactions contemplated thereby, including for purposes of Section 203 of
Delaware Law; and
<PAGE>
WHEREAS, Acquiror and Acquisition Sub are unwilling to enter into this
Agreement unless, contemporaneously with the execution and delivery hereof,
certain of the Principal Stockholders enter into amendments to their employment
agreements ("Employment Agreement Amendments").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Acquiror, Acquisition Sub and Target hereby agree as follows:
ARTICLE I -- THE OFFER
SECTION 1.01. THE OFFER. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.01 and that none of the
events set forth in Exhibit A hereto shall have occurred or be existing (unless
such event shall have been waived by Acquisition Sub), Acquiror shall cause
Acquisition Sub to commence, and Acquisition Sub shall commence, the Offer at
the Per Share Amount as promptly as reasonably practicable after the date
hereof, but in no event later than five business days after the public
announcement of Acquisition Sub's intention to commence the Offer. The initial
expiration date for the Offer shall be the 20th business day following the
commencement of the Offer. The obligation of Acquisition Sub to accept for
payment and pay for Shares tendered pursuant to the Offer shall be subject only
to (i) the condition (the "Minimum Condition") that at least the number of
Shares that constitute a majority of the then outstanding Shares (determined on
a fully-diluted basis (as defined herein)) shall have been validly tendered and
not withdrawn prior to the expiration of the Offer and (ii) the satisfaction or
waiver, in whole or in part by Acquisition Sub in its sole discretion, of the
other conditions set forth in Exhibit A hereto. Acquisition Sub expressly
reserves the right to waive any such condition (other than the Minimum
Condition), to increase the Per Share Amount, and to make any other changes in
the terms and conditions of the Offer; except that (notwithstanding Section
8.03), without the consent of Target, no change may be made by Acquisition Sub
which (A) decreases the Per Share Amount (or changes the form of consideration
to be paid in the Offer), (B) reduces the maximum number of Shares to be
purchased in the Offer, (C) adds to or modifies the conditions to the Offer set
forth in Exhibit A hereto, or (D) extends, amends or changes any other terms of
the Offer in any manner materially adverse to the holders of Shares.
Notwithstanding the foregoing sentence, Acquisition Sub may, without the
consent of Target, (i) extend the Offer, if at the scheduled expiration date of
the Offer any of the conditions to Acquisition Sub's obligations to purchase
the Shares have not been satisfied or waived, until such time as such
conditions are satisfied or waived, (ii) extend the Offer from time to time for
up to a maximum of an aggregate of 15 business days beyond the latest
expiration date that would otherwise be permitted in this sentence, if on such
expiration date there shall not have been tendered at least 90% of the
outstanding Shares, and/or (iii) extend the Offer for any period required by
any rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or the staff thereof applicable to the Offer or any
period required by applicable law. Notwithstanding the foregoing, (x) the Offer
may not, without Target's prior written consent, be extended beyond the date of
termination of this Agreement pursuant to Section 8.01 and (y) the Offer may
not, without Target's prior written consent, be extended pursuant to clause
(i), above, if the failure to satisfy any condition was caused by a material
breach by Acquiror or Acquisition Sub of any of their representations,
warranties, covenants or agreements set forth in this Agreement. The Per Share
Amount shall, subject to applicable withholding of taxes, be net to the seller
in cash, without interest thereon, upon the terms and subject to the conditions
of the Offer. Subject to the terms and conditions of the Offer (including,
without limitation, the Minimum Condition), Acquisition Sub shall accept for
payment and pay, as promptly as practicable after expiration of the Offer, the
Per Share Amount for all Shares validly tendered and not withdrawn. Acquisition
Sub may, at any time, transfer or assign to one or more corporations directly
or indirectly wholly-owned by Acquiror
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the right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment shall not relieve Acquisition Sub of
its obligations under the Offer or prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment. Acquiror shall provide or cause to be provided to Acquisition Sub on a
timely basis all funds necessary to accept for payment, and pay for, all Shares
that Acquisition Sub becomes obligated to accept for payment, and pay for,
pursuant to the Offer.
(b) As soon as reasonably practicable on the date of
commencement of the Offer, Acquisition Sub shall file with the SEC and
disseminate to holders of Shares to the extent required by law a Tender Offer
Statement on Schedule 14D-1 (together with all amendments and supplements
thereto, the "Schedule 14D-1") with respect to the Offer and the other
Transactions (as hereinafter defined). The Schedule 14D-1 shall contain or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Acquiror, Acquisition Sub and
Target agree to correct promptly any information provided by any of them for
use in the Offer Documents which shall have become false or misleading in any
material respect, and Acquiror and Acquisition Sub further agree to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with
the SEC and the other Offer Documents as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Target and its counsel shall be given an opportunity
to review and comment on the Offer Documents and any amendments thereto prior
to the filing thereof with the SEC. Acquiror and Acquisition Sub will provide
Target and its counsel with a copy of any written comments or telephonic
notification of any verbal comments Acquiror or Acquisition Sub may receive
from the SEC or its staff with respect to the Offer Documents promptly after
the receipt thereof and will provide Target and its counsel with a copy of any
written responses and telephonic notification of any verbal response of
Acquiror, Acquisition Sub or their counsel. In the event that the Offer is
terminated or withdrawn by Acquisition Sub, Acquiror and Acquisition Sub shall
cause all tendered Shares to be returned to the registered holders of the
Shares represented by the certificate or certificates surrendered to the Paying
Agent (as defined herein).
SECTION 1.02. TARGET ACTION. (a) (i) At a meeting duly called
and held in compliance with Delaware Law, (A) the Target Independent Committee
has unanimously adopted a resolution approving and consenting to the Agreement,
the Stockholder Agreements, the Employment Agreement Amendments (collectively,
the "Transaction Documents") and the transactions contemplated hereby,
including, without limitation, the terms of each of the Offer and the Merger
(the "Transactions") and recommended that the Board of Directors of Target
approve the Transaction Documents and the Transactions and (B) the Board of
Directors of Target has unanimously adopted a resolution (1) approving the
Transaction Documents and the Transactions, based on a determination that the
Transaction Documents and the Transactions, including the Offer and the Merger,
are advisable, fair to and in the best interests of, the Target stockholders,
(2) approving and adopting the Transaction Documents and the Transactions and
(3) recommending approval and adoption of this Agreement and the Merger by the
stockholders of Target if required by applicable Law; and (ii) Salomon Smith
Barney ("Target Banker") has delivered simultaneously herewith to the Target
Independent Committee an opinion to the effect that, as of the date of this
Agreement, the consideration to be received by the holders of Shares (other
than the Acquiror and its Affiliates) pursuant to the Offer and the Merger is
fair to such holders from a financial point of view. Target has been authorized
by Target Banker, subject to prior approval by Target Banker, to include such
opinion (or references thereto) in the Offer Documents (as defined in paragraph
(b) of this Section 1.02) and in the Schedule 14D-9 and the
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documents referred to in Section 6.01. Target hereby consents to the inclusion
in the Offer Documents of the recommendation of Target's Board of Directors and
the Target Independent Committee described above.
(b) As soon as reasonably practicable on the date of
commencement of the Offer, Target shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing the
recommendation of Target's Board of Directors and the Target Independent
Committee described in Section 1.02(a) and shall disseminate the Schedule 14D-9
to the extent required by Rule 14d-9 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and any other applicable federal
securities laws. Target, Acquiror and Acquisition Sub agree to correct promptly
any information provided by any of them for use in the Schedule 14D-9 which
shall have become false or misleading, and Target further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Acquiror, Acquisition
Sub and their counsel shall be given an opportunity to review and comment on
the Schedule 14D-9 and any amendments thereto prior to the filing thereof with
the SEC. Target will provide Acquiror and Acquisition Sub and their counsel
with a copy of any written comments or telephonic notification of any verbal
comments Target may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt thereof and will provide Acquiror and
Acquisition Sub and their counsel with a copy of any written responses and
telephonic notification of any verbal response of Target or its counsel.
(c) Target shall promptly furnish Acquisition Sub with
mailing labels containing the names and addresses of all record holders of
Shares and with security position listings of Shares held in stock
depositories, each as of the most recent date reasonably practicable, and of
those persons becoming record holders subsequent to such date. Target shall
furnish Acquisition Sub with such additional information, including, without
limitation, updated listings and computer files of stockholders, mailing labels
and security position listings, and such other assistance as Acquiror,
Acquisition Sub or their agents may reasonably request. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer or the Merger, Acquiror and Acquisition Sub shall hold in confidence
the information contained in such labels, listings and files, shall use such
information only in connection with the Offer and the Merger, and, if this
Agreement shall be terminated, shall deliver promptly, upon request, to Target
all copies of such information then in their possession or under their control.
ARTICLE II -- THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law, at the
Effective Time (as defined herein), (a) Acquisition Sub shall be merged with
and into Target, (b) the separate corporate existence of Acquisition Sub shall
cease, and (c) Target shall continue as the surviving corporation of the Merger
(the "Surviving Corporation") and shall succeed to and assume all the rights
and obligations of Acquisition Sub in accordance with Delaware Law.
SECTION 2.02. CLOSING; EFFECTIVE TIME. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which (subject to satisfaction or waiver of the
conditions set forth in Article VII) shall be no later than the third business
day after satisfaction of the conditions set forth in Section 7.01, at the
offices of Baker & McKenzie, 805 Third Avenue, New York, New York, unless
another time, date or place is agreed to in writing by the parties hereto.
Subject to
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the provisions of this Agreement, as soon as practicable on or after the
Closing Date, the parties shall file a Certificate of Merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of Delaware Law and shall make all
other filings or recordings required under Delaware Law. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of Delaware, or at such subsequent time as Acquiror and
Target shall agree and as is specified in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time").
SECTION 2.03. EFFECT OF THE MERGER. The effect of the Merger shall be
as provided in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
property, rights, privileges, powers and franchises of Target and Acquisition
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Target and Acquisition Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 2.04. CERTIFICATE OF INCORPORATION; BYLAWS. (a) The
Certificate of Incorporation of Target, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided therein or by applicable law.
(b) The Bylaws of Acquisition Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation, until
thereafter amended as provided therein or by applicable law.
SECTION 2.05. DIRECTORS AND OFFICERS. The directors of Acquisition Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are elected or appointed and qualified, as the case may
be. Target shall obtain such resignations as may be necessary to effect the
foregoing. The officers of Acquisition Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation until the earlier of
their resignation or removal or until their respective successors are duly
elected or appointed and qualified, as the case may be.
SECTION 2.06. CONVERSION OF SECURITIES. (a) At the Effective Time, by
virtue of the Merger and without any action on the part of Acquisition Sub,
Target or the holders of any of the following shares of capital stock, and
except as otherwise provided herein and subject to Section 2.07(d):
(i) each share of Target Common Stock then issued and
outstanding (other than shares to be canceled in accordance with
Section 2.06(a)(iii) and other than Dissenting Shares (as defined
herein)) shall be converted automatically into the right to receive an
amount per share equal to the Per Share Amount in cash (the "Merger
Consideration"), without interest, less any withholding taxes required
under applicable law;
(ii) all shares (other than Dissenting Shares) of Target
Common Stock shall no longer be outstanding and shall automatically be
canceled and cease to exist, and each certificate previously
evidencing any such shares (other than Dissenting Shares) shall
thereafter represent the right to receive the Merger Consideration
into which such shares of Target Common Stock were converted in the
Merger. The holders of certificates previously evidencing such shares
of Target Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Target Common
Stock except as otherwise provided herein or by Delaware Law. Such
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certificates previously evidencing Target Common Stock shall be
exchanged for the Merger Consideration issued in consideration
therefor upon the surrender of such certificates previously evidencing
Target Common Stock in accordance with the provisions of Section 2.07;
(iii) each share of Target Common Stock held in the treasury
of Target and any shares of Target Common Stock owned by Acquiror or
Target or any wholly-owned Subsidiary (as defined in Section 9.03) of
Acquiror or Target shall be canceled and extinguished without any
conversion thereof, and no payment shall be made with respect thereto;
and
(iv) each share of common stock, $.01 par value, of
Acquisition Sub (the "Acquisition Sub Common Stock"), then issued and
outstanding immediately prior to the Effective Time shall be converted
into and become a number of fully paid and nonassessable shares of
Common Stock, par value $.01 per share, of the Surviving Corporation
equal to the quotient realized by dividing (A) the aggregate number of
shares of Target Common Stock determined on a fully-diluted basis
immediately prior to the Effective Time by (B) the aggregate number of
shares of capital stock of Acquisition Sub issued and outstanding
immediately prior to the Effective Time. The phrase "fully-diluted
basis" shall mean, as of any date, the number of shares of Target
Common Stock then outstanding, together with the aggregate number of
shares of Target Common Stock that Target may be required, as of such
date or thereafter, to issue (with or without notice, lapse of time or
the action of any third party) pursuant to any outstanding securities,
options, warrants, commitments, agreements, arrangements or
undertakings of any kind and assuming the maximum number of shares of
Target Common Stock issuable thereunder.
(b) If between the date of this Agreement and the Effective Time,
except as otherwise contemplated herein, the outstanding Target Common Stock
shall have been changed into a different number of shares or a different class,
by reason of any stock dividend, reclassification, recapitalization, split,
division, combination or exchange of shares, then the Merger Consideration
shall be correspondingly adjusted as necessary to reflect such stock dividend,
reclassification, recapitalization, split, division, combination or exchange of
shares.
(c) Notwithstanding anything in this Agreement to the contrary, shares
of Target Common Stock that are issued and outstanding immediately prior to the
Effective Time and that are held by stockholders who have properly exercised
any applicable appraisal rights with respect thereto under Section 262 of
Delaware Law (the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration, but the holders of Dissenting Shares shall be
entitled to receive such payment as shall be determined pursuant to Section 262
of Delaware Law; provided, however, that if any such holder shall have failed
to perfect or shall withdraw or lose the right to appraisal and payment under
Delaware Law, each such holder's shares of Target Common Stock shall thereupon
be deemed to have been converted as of the Effective Time into the right to
receive the Merger Consideration, without any interest thereon, as provided in
Section 2.07, and such shares shall no longer be Dissenting Shares. Prior to
the Effective Time, Target (i) shall give Acquiror prompt notice of any written
demands for appraisal or withdrawals of demands for appraisal received by
Target, (ii) shall give Acquiror the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demand and (iii)
except with the prior written consent of Acquiror, shall not settle or offer to
settle any such demands.
SECTION 2.07. SURRENDER OF TARGET STOCK CERTIFICATES.
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(a) PAYING AGENT. (a) Prior to the Effective Time, Acquiror shall
designate a bank or trust company reasonably satisfactory to Target to act as
agent (the "Paying Agent") for the holders of Shares in connection with the
Merger to receive the funds to which such holders become entitled pursuant to
Section 2.06(a). At the Effective Time, Acquiror shall cause the Surviving
Corporation to have sufficient funds to deposit, and shall cause the Surviving
Corporation to deposit in trust with the Paying Agent, cash in the aggregate
amount equal to the product of (i) the number of Shares outstanding immediately
prior to the Effective Time (other than Shares owned by Acquiror or Acquiror
Sub) and (ii) the Per Share Amount. Such funds shall be invested by the Paying
Agent as directed by the Surviving Corporation, provided that such investments
shall be in obligations of or guaranteed by the United States of America or of
any agency thereof and backed by the full faith and credit of the United States
of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Services, Inc. or Standard & Poor's Corporation,
respectively, or in deposit accounts, certificates of deposit or banker's
acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar
time deposits purchased from, commercial banks with capital, surplus and
undivided profits aggregating in excess of $150 million (based on the most
recent financial statements of such bank which are then publicly available at
the SEC or otherwise) (it being understood that any and all interest or income
earned on funds made available to the Paying Agent pursuant to this Agreement
shall be turned over to Acquiror).
(b) SURRENDER PROCEDURES. As soon as reasonably practicable after the
Effective Time, Acquiror will instruct the Paying Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding Shares (other than shares canceled in
accordance with Section 2.06 (a)(iii) and other than Dissenting Shares) (each a
"Certificate" and collectively, the "Certificates") (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Acquiror may reasonably specify); and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration which such holder has the right to receive in respect
of the Shares formerly represented by such Certificate and the Certificate so
surrendered shall forthwith be canceled. Subject to Section 2.07(f), under no
circumstances will any holder of a Certificate be entitled to receive any part
of the Merger Consideration into which Shares were converted in the Merger
until such holder shall have surrendered such Certificate. In the event of a
transfer of ownership of Shares which is not registered in the transfer records
of Target, the Merger Consideration into which such shares of Target Common
Stock were converted in the Merger may be paid or issued in accordance with
this Article II to the transferee if the Certificate evidencing such shares of
Target Common Stock is presented to the Paying Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.07, each Certificate shall be deemed at any time
after the Effective Time to evidence only the right to receive upon such
surrender the Merger Consideration, which the holder has the right to receive
in respect of the Target Common Stock formerly represented by such Certificate.
No interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) NO FURTHER RIGHTS IN TARGET COMMON STOCK. The Merger Consideration
delivered upon conversion of the Shares in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares.
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(d) RETURN OF FUNDS. At any time following one year after the
Effective Time, the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any funds which had been made available to the
Paying Agent and not disbursed to holders of Shares (including, without
limitation, all interest and other income received by the Paying Agent in
respect of all funds made available to it), and, subject to Section 2.07(e),
any holders of Target Common Stock who have not theretofore complied with this
Article II shall thereafter look only to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) for the Merger Consideration
and any dividends or other distributions to which they are entitled pursuant to
this Section 2.07.
(e) NO LIABILITY. None of Acquiror, the Surviving Corporation or the
Paying Agent shall be liable to any Person (as defined in Section 9.03) in
respect of cash delivered in a reasonable manner to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(f) LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, then, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the execution of an indemnity agreement by such
Person and/or the posting by such Person of a bond in such reasonable amount as
the Surviving Corporation may reasonably direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration deliverable in respect thereof pursuant to this Agreement.
(g) WITHHOLDING RIGHTS. Acquiror or the Paying Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of shares of Target Common Stock such amounts as
Acquiror or the Paying Agent is required to deduct and withhold with respect to
the making of such payment under the Internal Revenue Code of 1986, as amended
(the "Code") or under any provision of state, local or foreign tax law. To the
extent that amounts are so withheld and paid over to the appropriate taxing
authority by Acquiror or the Paying Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Target Common Stock in respect of which such deduction and
withholding were made by Acquiror or the Paying Agent.
SECTION 2.08. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Target shall be closed, and there shall be no further
registration of transfers of Target Common Stock thereafter on the records of
Target. At or after the Effective Time, any Certificates presented to the
Paying Agent or Acquiror for any reason shall be canceled and converted into
the right to receive the Merger Consideration to which they are entitled
pursuant to Section 2.07.
SECTION 2.09. STOCK OPTIONS. With respect to each outstanding (a)
option to purchase shares of Target Common Stock granted by Target pursuant to
Target's 1996 Stock Option Plan and Directors Stock Option Plan (collectively,
the "Stock Option Plans") (collectively, the "Options") (whether or not then
exercisable) immediately prior to the Effective Time, Target shall (a) cancel
immediately prior to the Effective Time each Option that it has the right to
cancel, and (b) with respect to Options that it does not have the right to
cancel, use its commercially reasonable efforts to obtain the consent of the
holder of such Option to its cancellation and, subject to such consent, cancel
such Option immediately prior to the Effective Time. In consideration for the
cancellation of such Option, Target agrees to and shall pay to the holder of
each canceled Option, at the Effective Time (whether or not such Option was
exercisable immediately prior to its cancellation), an amount in cash equal to
the product of (i) the excess, if any, of the Per Share Amount over the
per-share exercise price for such Option, and (ii) the number of shares of
Target Common Stock previously subject to such Option. Each Option which is not
canceled as described above shall continue to have, and be subject to, the same
terms and conditions set forth in the stock option plans and agreements
pursuant to which such Options were issued as in effect immediately prior to
the Effective Time, except that such Options shall be exercisable for an amount
in cash equal to the product of (i) the excess, if any, of the Per Share Amount
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over the per-share exercise price for such Option, multiplied by
(ii) the number of shares of Target Common Stock previously subject to such
Option.
SECTION 2.10. WARRANTS. With respect to each outstanding warrant to
purchase shares of Target Common Stock (a) issued pursuant to the Common Stock
Purchase Warrant Agreement with Craig Brumfield, dated July 25, 1997, (b)
issued pursuant to the Common Stock Purchase Warrant Agreement with Capital
Growth International, L.L.C., dated July 30, 1996, and (c) issued to David
Copperfield (collectively, the "Warrants") immediately prior to the Effective
Time, Target shall (a) cancel immediately prior to the Effective Time each
Warrant that it has the right to cancel, and (b) with respect to Warrants that
it does not have the right to cancel, use its commercially reasonable efforts
to obtain the consent of the holder of such Warrant to its cancellation and,
subject to such consent, cancel such Warrant immediately prior to the Effective
Time. In consideration for the cancellation of such Warrant, Target agrees to
and shall pay to the holder of each canceled Warrant, at the Effective Time
(whether or not such Warrant was exercisable immediately prior to its
cancellation), an amount in cash equal to the product of (i) the excess, if
any, of the Per Share Amount over the per-share exercise price for such
Warrant, and (ii) the number of Shares of Target Common Stock previously
subject to such Warrant. Each Warrant which is not canceled as described above
shall continue to have, and be subject to, the same terms and conditions set
forth in such Warrants (including, without limitation, any provision contained
therein relating to the repurchase or redemption thereof), except that such
Warrants shall be exercisable for an amount in cash equal to the product of (i)
the excess, if any, of the Per Share Amount over the per-share exercise price
for such Warrant, multiplied by (ii) the number of shares of Target Common
Stock previously subject to such Warrant.
SECTION 2.11. CONVERTIBLE NOTES. At the Effective Time, each then
outstanding 10% unsecured senior convertible note due September 30, 2001
(collectively, the "Convertible Notes") shall, as of the Effective Time, be
assumed by Acquiror. The holders of such Convertible Notes shall continue to
have, and be subject to, the same terms and conditions set forth in the
Convertible Note (including, without limitation, any provision contained
therein relating to the conversion or prepayment thereof), except that each
Convertible Note shall be convertible for cash equal to the product of (a) the
aggregate amount of principal and accrued but unpaid interest outstanding on
the Convertible Note on the Conversion Date (as defined in the Convertible
Note) divided by $3.50 (subject to adjustment as provided in the Convertible
Note), and (b) the Per Share Amount.
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF TARGET
Except as set forth in the disclosure schedule delivered by Target to
Acquiror, and signed by Target and Acquiror for identification (the "Target
Disclosure Schedule"), which identify exceptions by specific section
references, Target hereby represents and warrants to Acquiror and Acquisition
Sub that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Target is
a corporation, and each subsidiary of Target is a corporation or a partnership,
as the case may be, in each case (a) duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and (b)
which has the requisite corporate power and authority (or partnership power and
authority) to own, lease and operate
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its properties and to carry on its business as it is now being conducted.
Target and each of its Subsidiaries are duly qualified or licensed as a foreign
corporation (or partnership) to do business, and are in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
them or the nature of their business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect on Target. As used in this Agreement, the term "Material Adverse
Effect" means any change or effect that, individually or when taken together
with all other changes or effects that have occurred on or prior to the date of
determination of the occurrence of the Material Adverse Effect and which are
continuing as of that date, is or is reasonably likely to be materially adverse
to the financial condition, business, or results of operations of such Person
and its Subsidiaries, taken as a whole, except for (x) any change or effect
relating (i) to the economy in general or (ii) to conditions or adverse changes
in or affecting the live entertainment business generally or (y) any change or
effect resulting from this Agreement or the transactions contemplated hereby.
Section 3.01 of the Target Disclosure Schedule sets forth, as of the date
hereof, a true and correct list of all of the Subsidiaries of Target, together
with the jurisdiction of organization and qualification of each Subsidiary and
the percentage of the outstanding capital stock (or other ownership interest)
of each Subsidiary owned by Target and each other Subsidiary. Except as
specifically disclosed in Section 3.01 of the Target Disclosure Schedule,
Target does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. Target has
delivered to Acquiror true, complete and correct copies of the Certificate of
Incorporation and Bylaws (or comparable organizational documents) of Target and
each of its Subsidiaries, each as amended to date. Neither Target nor any of
its Subsidiaries is in violation of any provision of its Certificate of
Incorporation or Bylaws or other organizational document, as applicable.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of Target
consists of 50,000,000 shares of Target Common Stock and 5,000,000 shares of
preferred stock, par value $.001 per share. As of the date hereof, (i)
24,431,243 shares of Target Common Stock were issued and outstanding, all of
which are validly issued, fully paid and non-assessable and not subject to
preemptive rights and (ii) no shares of preferred stock of Target were issued
and outstanding. Section 3.03(a) of the Target Disclosure Schedule sets forth a
complete and correct list, as of the date hereof, of the holders of all
options, warrants, stock appreciation rights or other rights relating to the
issued or unissued capital stock of Target or any of its Subsidiaries as
described above, the number, class and series of shares subject to each such
option, warrant, stock appreciation right or other rights, and the exercise
prices thereof. Except as specified in Section 3.03(a) of the Target Disclosure
Schedule, there are no options, warrants, stock appreciation rights or other
rights, agreements, arrangements or commitments of any character (including,
without limitation, employment and acquisition agreements) relating to the
issued or unissued capital stock of, or other equity interests in, Target or
any of its Subsidiaries or obligating Target or any of its Subsidiaries to
issue or sell any shares of capital stock of, or other equity interests in,
Target or any of its Subsidiaries. Except as set forth in Section 3.03(b) of
the Target Disclosure Schedule, there are no outstanding contractual
obligations of Target or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of Target Common Stock or any capital stock of, or
any equity interest in, any Subsidiary of Target. Each outstanding share of
capital stock of, or other equity interest in, each Subsidiary of Target is
duly authorized, validly issued, fully paid and nonassessable, and each such
share or interest owned by Target or another Subsidiary of Target is free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements,
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limitations on Target's or such other Subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever. Except as set forth in Section
3.03(c) of the Target Disclosure Schedule, there are no notes, bonds,
debentures or other indebtedness of Target having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which the stockholders of Target may vote.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Target has all
necessary corporate power and authority to execute and deliver the Transaction
Documents and, subject to, if applicable, an affirmative vote of the holders of
a majority of the voting power of the then outstanding Shares ("Stockholder
Approval"), to perform its obligations hereunder and to consummate the
transactions contemplated. The execution and delivery of each of the
Transaction Documents by Target and the consummation by Target of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
Target are necessary to authorize the Transaction Documents or to consummate
the Transactions (other than, with respect to the Merger, the approval and
adoption of this Agreement by the stockholders of Target as set forth in
Section 3.14 and the filing of an appropriate Certificate of Merger with the
Secretary of State of Delaware as required by Delaware Law). The Transaction
Documents have been duly and validly executed and delivered by Target and,
assuming the due authorization, execution and delivery of the Transaction
Documents by Acquiror and Acquisition Sub, constitutes a legal, valid and
binding obligation of Target, enforceable against Target in accordance with its
terms.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of the Transaction Documents by Target do not, and the
performance of the Transaction Documents by Target will not, subject to, (x)
with respect to the Merger, if applicable, obtaining the Stockholder Approval
of the Transaction Documents by Target's stockholders in accordance with this
Agreement and Delaware Law, and (y) obtaining the consents, approvals,
authorizations and permits and making the filings described in Section 3.05(b)
of this Agreement, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of Target or (ii) conflict with or violate the
organizational documents of any Subsidiary of Target, (iii) conflict with or
violate any domestic (federal, state or local) or foreign law, rule,
regulation, order, judgment or decree (collectively, "Law" or "Laws")
applicable to Target or any of its Subsidiaries or by which any property or
asset of Target or any of its Subsidiaries is bound or affected, or (iv) except
as described in Section 3.05(a)(iii) of the Target Disclosure Schedule, result
in any breach of or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
right of termination, unilateral amendment, acceleration or cancellation of, or
give to others any right to invalidate or terminate any purchase or other right
to acquire property under, or result in the creation of a lien or other
encumbrance on any property or asset of Target or any of its Subsidiaries or
require the consent of any third party pursuant to, any note, bond, mortgage,
indenture, evidence of Indebtedness, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Target or any of
its Subsidiaries is a party or by which Target or any of its Subsidiaries or
any property or asset of Target or any of its Subsidiaries is bound or
affected, except, in any of the cases enumerated in clauses (ii), (iii) and
(iv), for such conflicts, violations, breaches, defaults, rights, liens and
consents which individually or in the aggregate (x) would not reasonably be
expected to have a Material Adverse Effect on Target, and (y) would not prevent
or materially delay consummation of the Transactions or otherwise prevent
Target from timely performance of its obligations under any of the Transaction
Documents. For purposes of this Agreement, "Indebtedness" shall mean, with
respect to any Person, without duplication, (i) all obligations of such Person
for borrowed money, or with respect to deposits or advances of any kind to such
Person, (ii) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (iii) all obligations of such Person under
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conditional sale or other title retention agreements relating to property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (excluding obligations
of such Person to creditors for raw materials, inventory, services and supplies
incurred in the ordinary course of such Person's business), (v) all capitalized
lease obligations of such Person, (vi) all obligations of others secured by a
lien on property or assets owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (vii) all obligations of such
Person under interest rate or currency hedging transactions (valued at the
termination value thereof), (viii) all letters of credit issued for the account
of such Person and (ix) all guarantees and arrangements having the economic
effect of a guarantee of such Person of any Indebtedness of any other Person.
(b) The execution and delivery of the Transaction Documents do not,
and the performance of the Transaction Documents by the parties thereto will
not, result in any breach of or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to
others any right to invalidate or terminate any purchase or other right to
acquire property under, any Acquisition Contract (as herein defined).
(c) The execution and delivery of the Transaction Documents by Target
do not, and the performance of the Transaction Documents by Target will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) pursuant to the Exchange Act, the Securities Act of 1933, as amended
(the "Securities Act"), state securities or "blue sky" Laws ("Blue Sky Laws"),
the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR
Act"), and filing of an appropriate Certificate of Merger as required by
Delaware Law, and (ii) otherwise where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not reasonably be likely to have a Material Adverse Effect on Target,
would not prevent or delay consummation of the Transactions, or otherwise
prevent Target from timely performing its obligations under the Transaction
Documents in any material respect.
SECTION 3.06. PERMITS; COMPLIANCE. Each of Target and its Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any United States (federal, state or local) or foreign government, or
governmental, regulatory or administrative authority, agency or commission or
court of competent jurisdiction ("Governmental Authority") legally necessary
for Target or any of its Subsidiaries to own, lease and operate its properties
or to carry on its business as it is now being conducted, except for those
which the failure to possess would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect on Target (the "Target
Permits") and, as of the date hereof, no suspension or cancellation of any of
the Target Permits is pending or, to the knowledge of Target, threatened.
Neither Target nor any of its Subsidiaries is in conflict with, or in default
or violation of, or, with the giving of notice or the passage of time, would be
in conflict with, or in default or violation of, (i) any Law applicable to
Target or any of its Subsidiaries or by which any property or asset of Target
or any of its Subsidiaries is bound or affected, except in the case of any such
conflict, default or violation which would not reasonably be expected to have a
Material Adverse Effect, or (ii) any of the Target Permits.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Since July 1,
1996, Target has filed all forms, reports and documents required to be filed by
it with the SEC (collectively, the "Target SEC Reports"). The Target SEC
Reports, after giving effect to any amendments thereto prior to the date
hereof, (i) were prepared in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations thereunder and (ii) did not, at the time they
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were filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. No Subsidiary of Target is currently required to
file any form, report or other document with the SEC.
(b) Each of the financial statements (including, in each case, any
notes thereto) contained in the Target SEC Reports was prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis ("GAAP") throughout the periods indicated (except as may be
indicated in the notes thereto and except that financial statements included
with quarterly reports on Form 10-QSB or Form 10-Q do not contain all GAAP
notes to such financial statements) and each fairly presented in all material
respects the financial position, results of operations and changes in
stockholders' equity and cash flows of Target and its consolidated subsidiaries
as of the respective dates thereof and for the respective periods indicated
therein (subject, in the case of unaudited statements, to normal and recurring
year-end adjustments which were not and are not expected, individually or in
the aggregate, to have a Material Adverse Effect on Target).
(c) Except (i) to the extent set forth on the audited consolidated
balance sheet of Target as of December 31, 1997, including the notes to the
audited financial statements of which such balance sheet is a part and which is
included in Target's Form 10-KSB for the year ended December 31, 1997 (the
"Target Balance Sheet"), or (ii) to the extent set forth on the consolidated
balance sheet of Target as of March 31, 1998, including the notes to the
financial statements of which such balance sheet is a part and which is
included in Target's Form 10-Q for the three months ended March 31, 1998 (the
"Target Interim Balance Sheet"), neither Target nor any of its Subsidiaries has
any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected on a balance
sheet, or in the notes thereto, prepared in accordance with GAAP, except for
liabilities and obligations incurred in (x) the ordinary course of business
consistent with past practice since March 31, 1998 which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Target or (y) connection with the Transaction Documents.
(d) Target has heretofore delivered to Acquiror true, complete and
correct copies of all amendments and modifications (if any) that have not been
filed by Target with the SEC to all agreements, documents and other instruments
that previously had been filed by Acquiror as exhibits to the Target SEC
Reports and are currently in effect.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31,
1998, Target has conducted its business only in the ordinary course and in a
manner consistent with Target's past practice, and, without limiting the
foregoing, except as set forth in Section 3.08 of the Target Disclosure
Schedule or as contemplated by this Agreement since such date, there has not
been:
(a) any amendment or other change to the Certificate of Incorporation
or Bylaws of Target or the organizational documents of any Subsidiary of
Target;
(b) any issuance, sale, pledge, disposal, grant, encumbrance, or
authorization of the issuance, sale, pledge, disposition, grant or encumbrance
by Target or any of its Subsidiaries of (i) any shares of their capital stock
of any class, or any options, warrants, stock appreciation rights, convertible
securities or other rights of any kind to acquire any shares of such capital
stock, or any other ownership interest (including, without limitation, any
phantom interest), of Target or any of its Subsidiaries (except for the
issuance of
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shares of capital stock issuable pursuant to Options, Warrants and Convertible
Notes outstanding on March 31, 1998), or (ii) any of their assets;
(c) any declaration, setting aside, making or payment of any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to any of the capital stock of Target or any of its Subsidiaries;
(d) any reclassification, combination, split or division by Target or
any of its Subsidiaries of any of their capital stock or redemption, purchase
or other acquisition, directly or indirectly, of any of their capital stock or
securities or obligations convertible into or exchangeable or exercisable for
such capital stock;
(e) any commitment or incurrence by Target or any of its Subsidiaries
of any capital expenditure in excess of $50,000;
(f) any incurrence of any indebtedness for borrowed money in excess of
$50,000 or issuance of any debt securities or assumption, guarantee or
endorsement, or otherwise becoming responsible as an accommodation, for the
obligations of any Person, or making of any loans or advances;
(g) any contract or agreement material to the business, results of
operations, financial condition or prospects of Target or any of its
Subsidiaries entered into or modified, amended or terminated;
(h) any (i) grant of any severance or termination pay to any director,
officer or employee of Target or any Subsidiary of Target, (ii) employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of Target or any
Subsidiary of Target entered into, (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements or (iv)
increase in compensation, bonus or other benefits payable to directors,
officers or employees of Target or any Subsidiary of Target other than, in the
case of employees (other than directors and officers), in the ordinary course
of business;
(i) any material change by Target or any Subsidiary of Target in its
accounting methods, principles or practices, except as may be required by
generally accepted accounting principles; or
(j) any event, circumstance or fact (whether or not covered by
insurance), individually or in the aggregate, (i) having or reasonably likely
to have a Material Adverse Effect on Target or (ii) likely to prevent or
materially delay consummation of the Transactions or to otherwise prevent
Target from timely performance of its obligations under the Transaction
Documents.
SECTION 3.09. ABSENCE OF LITIGATION. Section 3.09 of the Target
Disclosure Schedule sets forth each instance in which any of Target and its
Subsidiaries (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, settlement, award or charge or (ii) is a party or, to the
knowledge of Target and its Subsidiaries, is threatened to be made a party to
any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator, which (x) would reasonably be
expected to have a Material Adverse Effect on Target or (y) would prevent or
materially delay consummation of the Transactions or otherwise prevent Target
from timely performance of its obligations under the Transaction Documents.
Neither Target
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nor any of its Subsidiaries nor any property or asset of Target
or any of its Subsidiaries is in violation of any order, writ, judgment,
injunction, decree, determination or award.
SECTION 3.10. EMPLOYEE BENEFIT MATTERS. Except as disclosed in Section
3.10 of the Target Disclosure Schedule:
(a) Target has delivered to Acquiror each "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (a "Pension Plan"), each "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), each stock option, stock
purchase, deferred compensation plan or arrangement and each other employee
fringe benefit plan or arrangement maintained, contributed to or required to be
maintained or contributed to by Paychex Business Solutions ("PBS") or by
Target, any of its Subsidiaries or any other Person that, together with Target,
is treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (each, a "Commonly Controlled Entity") which is currently in effect for
the benefit of any current or former employees, officers, directors or
independent contractors of Target or any of its Subsidiaries and any current or
former employees, officers, directors or independent contractors of PBS who
perform services for Target or any Commonly Controlled Entity, or with respect
to which Target or any Commonly Controlled Entity has any material contingent
liability (collectively, "Benefit Plans"). Target has delivered to Acquiror
true, complete and correct copies of (i) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Benefit Plan
for which the filing of any such report is required by ERISA or the Code, (ii)
the most recent summary plan description for each Benefit Plan for which the
preparation of any such summary plan description is required by ERISA, (iii)
each currently effective trust agreement, insurance or group annuity contract
and each other funding or financing arrangement relating to any Benefit Plan,
(iv) a schedule of employer expenses with respect to each Benefit Plan for the
current plan year of each Benefit Plan, and (v) each client service agreement,
automated clearing house agreement, and any other agreement between or among
PBS and Target or any Commonly Controlled Entity.
(b) Each Benefit Plan has been administered in material compliance
with its terms, the applicable provisions of ERISA, the Code and all other
applicable Laws and the terms of all applicable collective bargaining
agreements. To the knowledge of Target, there are no investigations by any
governmental agency, termination proceedings or other claims (except routine
claims for benefits payable under the Benefit Plans), suits or proceedings
pending or threatened against any Benefit Plan or asserting any rights or
claims to benefits under any Benefit Plan that, individually or in the
aggregate, (i) are reasonably likely to result in a Material Adverse Effect on
Target or (ii) would prevent or delay consummation of the Transactions or
otherwise prevent Target from timely performance of its obligations under this
Agreement.
(c) There has been no application for waiver of the minimum funding
standards imposed by Section 412 of the Code with respect to any Pension Plan.
No Pension Plan has or had at any time during the current plan year an
"accumulated funding deficiency" within the meaning of Section 412(a) of the
Code.
(d) Each Pension Plan that is intended to be a tax-qualified plan has
been the subject of a determination letter from the Internal Revenue Service to
the effect that such Pension Plan and related trust as adopted by Target or any
Commonly Controlled Entity is qualified and exempt from federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code. To the knowledge
of Target, (i) no such determination letter has been revoked, (ii) revocation
of such letter has not been threatened, and (iii) such Pension Plan has not
been amended since the effective date of its most recent determination letter
in any
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respect that would adversely affect its qualification. Target has
delivered to Acquiror a copy of the most recent determination letter received
with respect to each Pension Plan for which such a letter has been issued, as
well as a copy of any pending application for a determination letter. To the
knowledge of Target, no event has occurred that could subject any Pension Plan
to any tax under Section 511 of the Code that, individually or in the
aggregate, will result in a Material Adverse Effect on Target or would prevent
or delay consummation of the Transactions or otherwise prevent Target from
timely performance of its obligations under this Agreement.
(e) Neither Target nor any of its Subsidiaries has engaged in a
"prohibited transaction" (as defined in Section 4975 of the Code or Section 406
of ERISA) that involves the assets of any Benefit Plan that is reasonably
likely to subject Target, any of the its Subsidiaries, any employee of Target
or its Subsidiaries or, to the knowledge of Target, a non-employee trustee,
non-employee administrator or other non-employee fiduciary of any trust created
under any Benefit Plan to any tax or penalty on prohibited transactions imposed
by Section 4975 of the Code or Section 406 of ERISA that individually, or in
the aggregate, is reasonably likely to result in a Material Adverse Effect on
Target. Within the past five years, no Pension Plan that is subject to Title IV
of ERISA has been terminated other than in a standard termination in accordance
with Section 4041(b) of ERISA or, to the knowledge of Target, has been the
subject of a "reportable event" (as defined in Section 4043 of ERISA and the
regulations thereunder), and no such Pension Plan is reasonably expected to be
terminated other than in such a standard termination. None of Target, any of
the Subsidiaries of Target or, to the knowledge of Target, any non-employee
trustee, non-employee administrator or other non-employee fiduciary of any
Benefit Plan has breached the fiduciary duty provisions of ERISA or any other
applicable Law in a manner that, individually or in the aggregate, is
reasonably likely to, result in a Material Adverse Effect on Target.
(f) As of the most recent valuation date for each Pension Plan that is
a "defined benefit pension plan" (as defined in Section 3(35) of ERISA) (a
"Defined Benefit Plan"), (i) there was not any amount of "unfunded benefit
liabilities" (based upon the plan's ongoing actuarial assumptions used for
funding purposes as set forth in the most recent actuarial report or valuation)
under such Defined Benefit Plan in excess of $100,000, and (ii) the aggregate
amount of all such unfunded benefit liabilities under all such Defined Benefit
Plans did not exceed $100,000. There are no facts or circumstances that would
materially change the funded status of any such Defined Benefit Plan as of the
date hereof. Target has furnished to Acquiror the most recent actuarial report
or valuation with respect to each Defined Benefit Plan. To the knowledge of
Target, the information supplied to the plan actuary by Target and any of the
Subsidiaries of Target for use in preparing those reports or valuations was
complete and accurate in all material respects. The present value of all vested
benefits under each Defined Benefit Plan, determined on a termination basis as
of the most recent valuation date, does not exceed the value of the assets of
each such Defined Benefit Plan that are allocable to such vested benefits
determined as of such date.
(g) No Commonly Controlled Entity has incurred any liability under
Title IV of ERISA (other than for contributions not yet due to a Defined
Benefit Plan and other than for the payment of premiums to the Pension Benefit
Guaranty Corporation not yet due), which liability, to the extent currently
due, has not been fully paid and would not, individually or in the aggregate,
be reasonably likely to result in a Material Adverse Effect on Target.
(h) No Commonly Controlled Entity has engaged in a transaction
described in Section 4069 of ERISA that could subject Target to liability at
any time after the date hereof that individually, or in the aggregate, is
reasonably likely to result in a Material Adverse Effect on Target.
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(i) Neither Target nor any of its Subsidiaries contributes to or
participates in any multi-employer plan (as defined in Section 3(31) or
4001(a)(3) of ERISA). No Commonly Controlled Entity has withdrawn from any
multi-employer plan (as defined in Section 3(37) or 4001(a)(3) of ERISA) where
such withdrawal has resulted in any "withdrawal liability" (as defined in
Section 4201 of ERISA) that has not been fully paid.
(j) Prior to the date hereof, Target has delivered to Acquiror copies
of all agreements and Benefit Plans under which any employee of Target or any
of the Subsidiaries of Target and any current or former employee of PBS who
performs or performed services for Target, any of the Subsidiaries of Target or
any Commonly Controlled Entity will be entitled to any additional benefits or
any acceleration of the time of payment or vesting of any benefits under any
Benefit Plan or under any employment, severance, termination or compensation
agreement as a result of the Transactions. Section 3.10(j) of the Target
Disclosure Schedule sets forth any severance payments contained in such
agreements or Benefit Plans which provide for payments in excess of $100,000 to
any such employee.
(k) No Benefit Plan provides that payments pursuant to such Benefit
Plan may be made in securities of a Commonly Controlled Entity, nor does any
trust maintained pursuant to any Benefit Plan hold any securities of a Commonly
Controlled Entity.
(l) Notwithstanding any of the foregoing to the contrary, the
representations and warranties of this Section 3.10, other than clauses (a),
(g), (h) and (i), shall not apply to any multi-employer plan (as defined in
Section 3(37) or 4001(a)(3) of ERISA).
(m) There are no arrangements or contracts with any employee, director
or independent contractor that require any deferred compensation or benefits to
be paid or provided following either the consummation of the transactions
contemplated under this Agreement or the termination of service.
SECTION 3.11. LABOR MATTERS. Neither Target nor any Subsidiary of
Target is a party to any collective bargaining agreement, memorandum of
understanding, settlement or other labor union contract applicable to persons
employed by Target or any Subsidiary of Target. There are no material
representation or certificate proceedings or petitions seeking a representation
proceeding pending or, to the knowledge of Target, threatened to be brought or
filed with the National Labor Relations Board or any other labor relations
tribunal or authority. There are no material organizing activities of Target or
any of its Subsidiaries with respect to any group of employees of Target or the
Subsidiaries of Target and no union or labor organization has been recognized
by Target or any Subsidiary of Target as an exclusive bargaining representative
for employees of Target or any Subsidiary of Target. There (i) is no grievance,
arbitration, unfair labor practice, investigation, employment discrimination or
other labor or employment related charge, complaint or claim against Target or
any Subsidiary of Target pending before any court, arbitrator, mediator or
governmental agency or tribunal, or, to Target's knowledge, threatened, and
(ii) has been no adjudication by any court, arbitrator, mediator, or
governmental agency or tribunal that, in the case of either (i) or (ii), that
would reasonably be expected to have a Material Adverse Effect on Target or
otherwise limit or affect the business operations of Target.
SECTION 3.12. INTELLECTUAL PROPERTY.
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(a) The term "Intellectual Property Assets" includes: (i) all
fictional business names, designs, trade names, trade dress, registered and
unregistered trademarks, and service marks used or intended to be used by
Target or any Subsidiary of Target in relation to its goods or services or
events, including, without limitation, those names identified in Section
3.12(a)(i) of the Target Disclosure Schedule (collectively, "Marks"); (ii) all
copyrights and copyrightable works, including productions, plays, musical
scores, songs, and related items, authored or placed in a tangible medium by
any employee of, or any Person retained by, Target or any Subsidiary of Target
within the scope of such employment or retention, or otherwise acquired by
Target or any Subsidiary of Target, including, without limitation, those names
identified in Section 3.12(a)(ii) of the Target Disclosure Schedule
(collectively, "Copyrights"); (iii) all proprietary information, confidential
materials, trade secrets, know-how, marketing plans, strategies, forecasts,
customer information, customer lists, and the like, as well as all inventions,
improvements and discoveries, developed, designed, made, or conceived by any
employee of, or any Person retained by, Target or any Subsidiary of Target,
within the scope of such employment or retention, or otherwise acquired by
Target or any Subsidiary of Target (collectively, "Proprietary Information");
and (iv) all rights of Target or any Subsidiary of Target to any intellectual
property of a third party, including, without limitation, licenses with respect
to any trade name, trademark, service mark, patent, copyright, trade secret, or
other proprietary right of a third party.
(b) There are no outstanding and, to the best of Target's knowledge,
no threatened disputes or disagreements with respect to any contract, agreement
or arrangement relating to the Intellectual Property Assets to which Target or
any Subsidiary of Target is a party or by which Target or any Subsidiary of
Target is bound. The Intellectual Property Assets are all those necessary for
the operation of Target's and Subsidiaries of Target's businesses as they are
currently conducted or contemplated to be conducted by Target. Target or a
Subsidiary of Target is the owner of all right, title and interest in and to
each of the Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims, and has
the right to use all of the Intellectual Property Assets without payment to a
third party.
(c) All applications and registrations for any Mark, Copyright or
Proprietary Information are currently in compliance with all formal legal
requirements, are valid and in full force and effect, and are not subject to
any fees or taxes or actions falling due within ninety days after the Effective
Time. No application or registration for a Mark has been or is now involved in
any opposition, invalidation, or cancellation and, to the best of Target's
knowledge, (i) no such action is threatened with respect to any such
application or registration, and (ii) there is no potentially interfering
registration or application of any third party.
(d) No Mark, Copyright, or Proprietary Information is infringed or
violated by a third party or, to the best of Target's knowledge, has been
subject to any adverse claim or challenged or threatened in any way by a third
party.
(e) Neither Target nor any Subsidiary of Target infringes or violates,
or is alleged to infringe or violate, any trade name, trademark, service mark,
patent, copyright, trade secret or other proprietary right of any third party.
SECTION 3.13. TAXES. Except as described in Section 3.13 of the Target
Disclosure Schedule: (a) Target, each of its Subsidiaries, and each affiliated,
combined, consolidated, or unitary group of which the Target or any of its
Subsidiaries is a member (a "Target Group") has timely filed all Tax Returns
(as defined herein) required to be filed by them. All such Tax Returns were
correct and complete in all respects. Neither Target, any of its Subsidiaries,
nor any Target Group is the beneficiary of any extension of time within
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which to file any Tax Return. Target, each of its Subsidiaries, and any Target
Group have disclosed on all Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income tax within the
meaning of Section 6662 of the Code or any similar provision of state, local or
foreign law. All Taxes (as defined herein) due and owing by Target, any of its
Subsidiaries, or any Target Group (whether or not shown on any Tax Return) have
been paid and an adequate reserve on the financial statements has been taken in
accordance with generally accepted accounting principles for Taxes not yet due
and payable. No claims have ever been made by an authority in a jurisdiction
where Target, any of its Subsidiaries, or any Target Group do not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no liens or security interests on any assets of Target, any of its
Subsidiaries, or any Target Group that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) There is no presently pending, contemplated or scheduled audit,
examination, deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to Taxes. Neither Target nor any of its Subsidiaries
(or any director, officer, or employee responsible for tax matters) expects any
federal, state, local or foreign authority to assess any additional Taxes for
any period for which Tax Returns have been filed. Neither Target, any of its
Subsidiaries, nor any Target Group has filed any waiver of the statute of
limitations applicable to the assessment or collection of any Tax. All tax
deficiencies asserted or assessed against Target, each of its Subsidiaries, or
any Target Group have been paid or finally settled.
(c) Neither Target, any of its Subsidiaries, nor any Target Group is a
party to any Tax allocation agreement, Tax indemnity agreement, Tax sharing
agreement or other agreement under which Target, any of its Subsidiaries, or
any Target Group could become liable to another person as a result of the
imposition of a Tax upon any person, or the assessment or collection of such a
Tax.
(d) Neither Target nor any of its Subsidiaries (A) has been a member
of an affiliated group (within the meaning of Code section 1504 or any similar
group defined under a similar provision of state, local, or foreign law) filing
a consolidated Tax Return (other than any Target Group of which it is now a
member) or (B) has any liability for Taxes of any person under Treasury
Regulation ss. 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract or otherwise. There are no
excess loss accounts (within the meaning of Treas. Reg. ss. 1.1502-19) that
exist between Target and any or its Subsidiaries or between any members of any
Target Group. Neither Target, any of its Subsidiaries, nor any Target Group has
any deferred gain or loss arising from deferred intercompany transactions
within the meaning of Treas. Reg. ss. 1.1502-13. No election under Section
1504(d) of the Code has been made with respect to Target, any of its
Subsidiaries, or Target Group.
(e) Neither Target, any of its Subsidiaries, nor any Target Group
shall be required to include in a taxable period ending after the Effective
Time any taxable income attributable to income that economically accrued in a
prior taxable period as a result of Section 481 of the Code, the installment
method of accounting or any comparable provision of state, local, or foreign
Tax Law.
(f) Each of Target, its Subsidiaries, and any Target Group has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(g) Neither Target nor any of its Subsidiaries has made an election
under Section 341(f) of the Code.
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(h) Neither Target nor any of its Subsidiaries has been a United
States real property holding company within the meaning of Section 897(c)(2) of
the Code during the applicable period specified in Section 897(c)(1)(A)(ii).
(i) Section 3.13(i) of the Target Disclosure Schedule (i) lists all
federal, state, local, and foreign Tax Returns filed with respect to Target,
any of its Subsidiaries, or any Target Group for all taxable years for which
the statutes of limitations have not expired; (ii) indicates those Tax Returns
that have been audited; (iii) indicates those Tax Returns that are currently
the subject of an audit; and (iv) indicates the jurisdictions in which Target,
any of its Subsidiaries, and any Target Group are required to file a Tax
Return. Target also agrees to deliver to Acquiror correct and complete copies
of all Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by Target, any of its Subsidiaries, or any Target
Group relating to any taxable year for which the statute of limitations has not
expired.
(j) Target, each of its Subsidiaries, and any Target Group is in
compliance with, and its records contain all information and documents
necessary to comply with, all applicable reporting and tax withholding
requirements under federal, foreign, state, and local tax laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Code.
(k) As used in this Agreement, "Taxes" means all taxes, levies or
other like assessments, charges or fees (including estimated taxes, charges and
fees), including, without limitation, income, corporation, advance corporation,
gross receipts, transfer, excise, property, sales, use, value-added, license,
payroll, withholding, social security and franchise or other governmental taxes
or charges of any nature whatsoever, imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof, and such
term shall include any interest, penalties or additions to tax attributable to
such taxes. "Tax Return" means any return, report, declaration, claim for
refund, information statement or other documentation (including any additional
or supporting material and including any amendment thereof) filed or
maintained, or required to be filed or maintained, in connection with the
calculation, determination, assessment or collection of any Tax.
SECTION 3.14. OFFER DOCUMENTS; SCHEDULE 14D-9. Neither the Schedule
14D-9, any information to be filed by Target in connection with the Offer
pursuant to Rule 14f-1 promulgated under the Exchange Act, the proxy
statement/information statement (together with any amendments or supplements
thereto, the "Proxy Statement"), nor any information supplied by Target for
inclusion in the Offer Documents shall, at the respective times the Schedule
14D-9, the Offer Documents, the Proxy Statement, or any amendments or
supplements thereto are filed with the SEC or are first published, sent or
given to stockholders of Target, or, in the case of the Proxy Statement, at the
time the Proxy Statement is first mailed to Target's stockholders or at the
time of the Target Stockholders' Meeting (as defined in Section 6.03), as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
are made, not misleading, except that no representation or warranty is made by
Target with respect to information supplied by Acquisition Sub or Acquiror for
inclusion in the Schedule 14D-9. The Schedule 14D-9 and the Proxy Statement
shall comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations thereunder.
SECTION 3.15. BROKERS. Except for the engagement by Target of the
Target Banker, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Target or any of
its Subsidiaries.
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The fees, commissions, expenses and other amounts payable by Target to the
Target Banker with respect to the Transactions shall not exceed the amount set
forth in Section 3.15 of the Target Disclosure Schedule.
SECTION 3.16. TANGIBLE PROPERTY. Target and its Subsidiaries have good
title to, or a valid leasehold interest in, the tangible personal properties
and assets used by them or shown on the Target Balance Sheet or the Target
Interim Balance Sheet or acquired after the date thereof (except those sold or
otherwise disposed of for fair value since the date of the Target Balance Sheet
or the Target Interim Balance Sheet in the ordinary course of business
consistent with past practice and which would not otherwise have been in
violation of this Agreement), which are free and clear of any mortgage, pledge,
lien, encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's and similar liens arising or incurred in the ordinary
course of business, (b) liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through appropriate proceedings,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, (d) liens which would not reasonably be expected to have a
Material Adverse Effect on Target, (e) liens and encumbrances identified and
reflected on the Target Balance Sheet or the Target Interim Balance Sheet, as
the case may be, and (f) mortgages, pledges, liens, encumbrances, charges or
other security interests that do not, individually, or in the aggregate,
adversely affect the current use of such property. All of the assets of Target
and its Subsidiaries have been maintained in all material respects in
accordance with the past practice of Target and its Subsidiaries and generally
accepted industry practice, are in good operating condition and are usable in
the ordinary course of business, except as would not, individually or in the
aggregate, have a Material Adverse Effect on Target.
SECTION 3.17. MATERIAL AND ACQUISITION CONTRACTS. (a) Section 3.17(a)
of the Target Disclosure Schedule lists each contract which is required by its
terms or is currently expected to result in the payment or receipt by Target or
any Subsidiary of Target of more than $100,000 per year or $200,000 in the
aggregate over the term of the contract (collectively, "Material Contracts"),
to which Target or any Subsidiary of Target is a party; provided, however, that
Section 3.17(a) of the Target Disclosure Schedule contains a list of all
employment agreements. There are no oral contracts that, individually or in the
aggregate, are material to Target and its Subsidiaries, taken as a whole. Each
Material Contract is in full force and effect and, to the knowledge of Target,
is enforceable against the parties thereto in accordance with its terms. No
condition or state of facts exists that, with notice or the passage of time, or
both, would constitute a default by Target or any Subsidiary of Target or, to
the best knowledge of Target, any third party under such Material Contracts,
except for such defaults which individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect on Target. Target or
the applicable Subsidiary of Target has duly complied in all material respects
with the provisions of each Material Contract to which it is a party.
(b) Section 3.17(b) of the Target Disclosure Schedule lists: (i) each
contract, agreement, arrangement, understanding or letter or expression of
intent (whether written or oral, binding or non-binding) entered into by Target
or any Subsidiary of Target subsequent to July 1, 1997 regarding any proposed
or potential acquisition (whether by merger or otherwise) of the assets or
operations of any person (collectively, "Acquisition Contracts"); and (ii)
whether any such Acquisition Contract contains terms which are binding on
Target or any Subsidiary of Target (each a "Binding Acquisition Contract"). No
condition or state of facts exists that, with notice or the passage of time, or
both, would constitute a default or event of default by Target or any
Subsidiary of Target or, to the best knowledge of Target, any third party under
any Binding Acquisition Contract. Target or the applicable Subsidiary of Target
has duly complied in all material respects with the binding provisions of each
Binding Acquisition Contract. Target has delivered to Acquiror a true, complete
and correct copy of each Acquisition Contract, as amended or revised to the
date hereof, and Section 3.17(b) of the Target Disclosure Schedule lists the
material terms of all oral contracts, agreements, arrangements or
understandings with respect to each potential acquisition referred to above.
Each Binding
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Acquisition Contract is in full force and effect or contains terms which remain
in full force and effect and, to the knowledge of Target, such terms are
enforceable against the parties thereto in accordance with such terms, subject
to applicable bankruptcy, insolvency or other similar laws relating to
creditors' rights and general principles of equity. Target or the applicable
Subsidiary of Target is in compliance in all material respects with the binding
provisions of each Binding Acquisition Contract. No Acquisition Contract which
is not a Binding Acquisition Contract is binding upon Target, any subsidiary of
Target, Acquiror, Acquisition Sub or any of their respective assets or
properties.
SECTION 3.18. BOARD RECOMMENDATION. At a meeting duly called and held
in compliance with Delaware Law, (a) the Target Independent Committee has
unanimously adopted a resolution approving of and consenting to the Transaction
Documents and the Transactions and recommended that the Board of Directors of
Target approve the Transaction Documents and the Transactions and (b) the Board
of Directors of Target has unanimously adopted a resolution (i) approving the
Transaction Documents and the Transactions, based on a determination that the
Transaction Documents and the Transactions, including the Offer and the Merger,
are advisable, fair to and in the best interests of, the Target stockholders
and (ii) approving and adopting the Transaction Documents and the Transactions
and recommending approval and adoption of these Transaction Documents and the
Transactions by the stockholders of Target if required by applicable Law.
SECTION 3.19. CHANGE IN CONTROL. Except as set forth in Section 3.19
of the Target Disclosure Schedule, neither Target nor any Subsidiary of Target
is a party to any contract, agreement or understanding which is currently
expected to result in the payment or receipt by Target or any Subsidiary of
Target of $50,000 or more individually and $100,000 or more in the aggregate
which contains a "change in control," "potential change in control" or similar
provision. Except as set forth in Section 3.19 of the Target Disclosure
Schedule, neither the execution and delivery of the Transactions Documents nor
the consummation of the Transactions will (i) result in any payment (whether of
severance pay or otherwise) becoming due from Target or any Subsidiary of
Target to any Person, (ii) materially increase any benefits otherwise payable
by Target or any Subsidiary of Target or (iii) result in the acceleration of
the time of payment or vesting of any such benefits.
SECTION 3.20. ENVIRONMENTAL MATTERS. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i)
"Hazardous Materials" means (A) those substances, pollutants, contaminants or
hazardous waste defined in or regulated under the following federal statutes
and their state counterparts, as each may be amended from time to time, and all
regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Federal Water Pollution Control
Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, the Toxic Substances Control Act
and the Clean Air Act, (B) petroleum and petroleum products, byproducts and
breakdown products including crude oil and any fractions thereof, (C) natural
gas, synthetic gas, and any mixtures thereof, (D) polychlorinated biphenyls,
(E) asbestos, asbestos-containing material, or urea formaldehyde or material
that contains it (F) any other chemicals, materials or substances defined or
regulated as toxic or hazardous or as a pollutant or contaminant or as a waste
under any applicable Environmental Law, and (G) any substance with respect to
which a federal, state or local agency requires environmental investigation,
monitoring, reporting or remediation, and (ii) "Environmental Laws" means any
federal, state, foreign, or local Law, rule or regulation, now or hereafter in
effect and as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, relating to pollution or protection of the environment, health,
safety or natural resources,
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including without limitation, those relating to (A) minimizing, preventing,
punishing or remedying the consequences of actions that damage or threaten to
damage the environment or public and safety or (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Materials; (iii)
"Occupational Safety and Health Laws" means any legal requirement designed to
provide safe and healthful working conditions and reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
(b) Except as would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect on Target and except as
specified in Section 3.20 of the Target Disclosure Schedule: (i) Target and
each of its Subsidiaries are in compliance with all applicable Environmental
Laws and Occupational Safety and Health Laws, (ii) Target and each of its
Subsidiaries have obtained all permits, approvals, identification numbers,
licenses or other authorizations required under any applicable Environmental
Laws ("Environmental Permits") and are in compliance with their requirements,
(iii) such Environmental Permits are transferable to the Surviving Corporation
pursuant to the Merger without the consent of any Governmental Authority, (iv)
to Target's knowledge there are no underground or aboveground storage tanks or
any surface impoundments, landfills, dumps, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated, stored or
disposed of on any owned or leased real property or on any real property
formerly owned, leased or occupied by Target or any Subsidiary of Target, (v)
there is, to the knowledge of Target, no friable asbestos or
asbestos-containing material on any owned or leased real property in violation
of applicable Environmental Laws, (vi) Target and the Subsidiaries of Target
have not released, discharged or disposed of Hazardous Materials and have no
knowledge of a threat of release of Hazardous Materials on any owned or leased
real property or on any real property formerly owned, leased or occupied by
Target or any Subsidiary of Target, (vii) other than routine operational
matters neither Target nor any of its Subsidiaries is undertaking, and neither
Target nor any of its Subsidiaries has completed, any investigation or
assessment or remedial or response action relating to any such release,
discharge or disposal of or contamination with Hazardous Materials at any site,
location or operation, either voluntarily or pursuant to the order of any
Governmental Authority or the requirements of any Environmental Law, and (viii)
there are no pending or, to the knowledge of Target, past or threatened
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, consent orders or consent agreements relating in
any way to Environmental Laws, Occupational Safety and Health Laws, any
Environmental Permits or any Hazardous Materials ("Environmental and
Occupational Safety and Health Claims") against Target or any Subsidiary of
Target or any of their property or property to which Hazardous Materials
generated, manufactured, received, transferred, used or processed by Target or
any Subsidiary of Target or predecessor have been transported, treated, stored,
handled, transferred, disposed, recycled or received and to the knowledge of
Target there are no existing circumstances that can reasonably be expected to
form the basis of any such Environmental and Occupational Safety and Health
Claim.
(c) Target and its Subsidiaries have delivered to Acquiror or
Acquisition Sub copies of any environmental reports, studies or analyses in its
possession or under its control relating to owned or leased real property or
the operations of Target or its Subsidiaries.
SECTION 3.21. ACCOUNTS RECEIVABLE. Except as would not have a Material
Adverse Effect on Target, all of the accounts receivable reflected in the
Target Balance Sheet or the Target Interim Balance Sheet or created thereafter
(a) are valid receivables subject to no set-offs or counterclaims, (b) are
current and collectible in the ordinary course of business, and (c) will be
collected in accordance with their terms
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at their recorded amounts, subject only to the reserve for bad debts set forth
in the Target Balance Sheet or the Target Interim Balance Sheet, as the case
may be, as adjusted for operations and transactions through the Effective Time
in accordance with the past custom and practice of Target and its Subsidiaries.
SECTION 3.22. INSURANCE. Section 3.22 of the Target Disclosure
Schedule sets forth a list of each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which any of Target or any Subsidiary of
Target has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past one year. With respect to each such
insurance policy designated as "current": (a) the policy is in full force and
effect, (b) Target has not received notice from any insurance carrier of the
intention of such carrier to discontinue any such policy, (c) neither any of
Target or any Subsidiary of Target nor, to the knowledge of Target, any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy, and (d) no
party to the policy has repudiated any provision thereof. Section 3.22 of the
Target Disclosure Schedule lists any self-insurance arrangements affecting any
of Target and its Subsidiaries. All material assets and risks of Target and
each Subsidiary of Target are covered by valid and currently effective
insurance policies in such types and amounts as are consistent with customary
practices and standards of companies engaged in business and operations similar
to those of Target or such Subsidiary of Target.
SECTION 3.23. REAL PROPERTY AND LEASES.
(a) Section 3.23(a) of the Target Disclosure Schedule lists and
describes briefly all real property that any of Target and each Subsidiary of
Target owns. With respect to each such parcel of owned real property and except
as noted in Section 3.23(a) of the Target Disclosure Schedule: (i) Target or
any Subsidiary of Target has good and marketable title to the parcel of real
property, free and clear of any liens or encumbrances, easement, covenant, or
other restriction, except for installments of special assessments not yet
delinquent, recorded easements, covenants, and other restrictions, and utility
easements, building restrictions, zoning restrictions, and other easements and
restrictions existing generally with respect to properties of a similar
character which do not affect materially and adversely the current use,
occupancy, or value, or the marketability of title, of the property subject
thereto, (ii) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the parcel of real property that would have a
Material Adverse Effect on Target's use of such property, and (iii) there are
no outstanding options or rights of first refusal to purchase, lease or occupy
the parcel of real property, or any portion thereof or interest therein which
would have a Material Adverse Effect on Target's use of such property.
(b) Section 3.23(b) of the Target Disclosure Schedule lists and
describes briefly all real property leased or subleased to any of Target and
any Subsidiary of Target. With respect to each lease and sublease (i) the lease
or sublease is legal, valid, binding and enforceable against Target or such
Subsidiary of Target, and in full force and effect in all material respects,
(ii) to the knowledge of Target, no party to the lease or sublease is in
material breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a material breach or default or permit
termination, modification, or acceleration thereunder, (iii) no party to the
lease or sublease has repudiated any material provision thereof, (iv) there are
no material disputes, oral agreements, or forbearance programs in effect as to
the lease or sublease, (v) none of Target or any Subsidiary of Target has
assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or sub-leasehold, and (vi) except as would not have a
Material Adverse Effect on Target, all facilities leased or subleased
thereunder have received all approvals of Governmental
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Authorities (including material licenses and permits) legally required in
connection with the operation thereof, and have been operated and maintained in
accordance with applicable Laws, rules, and regulations in all material
respects.
SECTION 3.24. INTERESTED PARTY TRANSACTIONS. No event or transaction
has occurred or been entered into that would be required to be, and has not
been, reported by Target as a "Certain Relationship or Related Transaction"
pursuant to Item 404 of Regulation S-K promulgated by the SEC. Except as
disclosed in the Target SEC Reports filed as of the date of this Agreement,
neither Target nor any Subsidiary of Target has any liability or any other
obligation of any nature whatsoever to any officer, director or Affiliate of
Target or of any Subsidiary of Target.
SECTION 3.25. CLIENTS AND EVENTS. No client, sponsor or customer of
Target or any Subsidiary of Target that individually accounted for at least 1%,
or in the aggregate accounted for 5%, of Target's consolidated gross revenues
during the preceding 12 month period (a) has indicated to Target or any
Subsidiary of Target that it will stop, or decrease materially the rate of,
buying services or products of Target and its Subsidiaries or (b) has at any
time on or after March 31, 1998 decreased materially its usage of the services
or products of Target and its Subsidiaries. Except as set forth in Section 3.25
of the Target Disclosure Schedule, Target and its Subsidiaries have not
received any notice or other indication of the termination or reduction of
Target's or any of its Subsidiary's involvement in or receipt of fees from any
event that Target or such Subsidiary promoted, organized or otherwise derived
revenues from during the preceding 12 month period, except for such events that
individually accounted for less than 1%, or in the aggregate accounted for 5%,
of Target's consolidated gross revenues during the preceding 12 month period.
SECTION 3.26. RESTRICTIONS ON BUSINESS ACTIVITIES. To the knowledge of
Target, there is no material agreement, judgment, injunction, order or decree
binding upon Target or any Subsidiary of Target, or any of their respective
assets or properties, that has, or reasonably could be expected to have, the
effect of prohibiting or materially impairing any current or future business
practice of Target or any Subsidiary of Target, any acquisition of property by
Target or any Subsidiary of Target or the conduct of business by Target or any
Subsidiary of Target as currently conducted or as proposed to be conducted by
Target or any Subsidiary of Target.
SECTION 3.27. CORPORATE RECORDS. The books of account, minute books,
stock record books and other records of Target and its Subsidiaries are
complete and correct and have been maintained in accordance with sound business
practices in all material respects. The minute books of Target and the its
Subsidiaries made available to Acquiror contain true, complete and correct
records of all meetings of directors and stockholders or actions by written
consent since the time of incorporation of Target and each Subsidiary of
Target, and reflect all transactions referred to in such minutes accurately in
all material respects.
SECTION 3.28. STATE TAKEOVER STATUTES. The Board of Directors of
Target has taken all actions so that the restrictions contained in Section 203
of Delaware Law applicable to a "business combination" (as defined in such
Section 203) will not apply to the execution, delivery or performance of the
Transaction Documents or the consummation of the Merger or the other
Transactions. To Target's knowledge, no other state takeover statute or similar
statute or regulation applies or purports to apply to the Transaction Documents
or any of the Transactions.
SECTION 3.29. PARACHUTE PAYMENTS. Target has not entered into any
agreement that would result in the making of "parachute payments," as defined
in Section 280G of the Code, to any Person.
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SECTION 3.30. OPINION OF FINANCIAL ADVISOR. The Target Independent
Committee has simultaneously herewith received an opinion of Target Banker on
the date of this Agreement to the effect that the consideration to be received
by the holders of Shares (other than Acquiror and its Affiliates) pursuant to
the Offer and the Merger is fair from a financial point of view to such
holders.
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUISITION SUB
Except as set forth in the Disclosure Schedule delivered by Acquiror
to Target, and signed by Target and Acquiror for identification (the "Acquiror
Disclosure Schedule"), which identify exceptions by specific section
references, Acquiror and Acquisition Sub hereby, jointly and severally,
represent and warrant to Target that:
SECTION 4.01. CORPORATE ORGANIZATION AND QUALIFICATION. Acquiror is a
corporation, and each Subsidiary of Acquiror is a corporation or a partnership,
as the case may be, in each case (a) duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and (b)
which has the requisite corporate power and authority (or partnership power and
authority) to own, lease and operate its properties and to carry on its
business as it is now being conducted. Acquiror and each Subsidiary of Acquiror
are duly qualified or licensed as a foreign corporation (or partnership) to do
business, and are in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by them or the nature of their
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Material Adverse Effect on Acquiror.
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BYLAWS. Acquiror has
heretofore delivered to Target a complete and correct copy of the Certificate
of Incorporation and Bylaws of Acquiror, and the Certificate of Incorporation
and Bylaws of Acquisition Sub, each as amended to date. Neither Acquiror nor
Acquisition Sub is in violation of any provision of its Certificate of
Incorporation or Bylaws.
SECTION 4.03. OWNERSHIP OF ACQUISITION SUB; NO PRIOR ACTIVITIES.
Acquisition Sub is a direct or indirect wholly-owned Subsidiary of Acquiror.
Acquisition Sub was formed solely for the purpose of engaging in the
transactions contemplated by the Transaction Documents. Except for obligations
or liabilities incurred in connection with its incorporation or organization
and the Transactions and except for the Transaction Documents and any other
agreements or arrangements contemplated by the Transaction Documents,
Acquisition Sub has not incurred, directly or indirectly, through any
Subsidiary or Affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person.
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Acquiror
and Acquisition Sub has all necessary corporate power and authority to execute
and deliver the Transaction Documents and, with respect to the Merger, to
perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of the Transaction Documents by Acquiror and Acquisition
Sub and the consummation by Acquiror and Acquisition Sub of the Transactions
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of Acquiror or Acquisition Sub are
necessary to authorize the Transaction Documents or to consummate the
Transactions (other than, with respect to the Merger, the filing and
recordation of an appropriate Certificate of Merger with the
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Secretary of State of Delaware as required by Delaware Law). Each of the
Transaction Documents has been duly and validly executed and delivered by
Acquiror and Acquisition Sub and, assuming the due authorization, execution and
delivery of the Transaction Documents by Target, constitutes a legal, valid and
binding obligation of each of Acquiror and Acquisition Sub enforceable against
each of Acquiror and Acquisition Sub in accordance with its terms. There is no
vote of the holders of any class or series of the capital stock of Acquiror
necessary to approve the Merger.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of the Transaction Documents by Acquiror and Acquisition
Sub do not, and the performance of the Transaction Documents by Acquiror and
Acquisition Sub will not, subject to obtaining the consents, approvals,
authorizations and permits and making the filings described in Section 4.05(b)
of the Acquiror Disclosure Schedule or in Section 4.05(b) of this Agreement,
(i) conflict with or violate the Certificate of Incorporation or Bylaws of
Acquiror or any Subsidiary of Acquiror, (ii) conflict with or violate any Law
applicable to Acquiror or any Subsidiary of Acquiror or by which any property
or asset of any of them is bound or affected or (iii) except as specified in
Section 4.05(a)(iii) of the Acquiror Disclosure Schedule, result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Acquiror or
any Subsidiary of Acquiror or require the consent of any third party pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Acquiror or any
Subsidiary of Acquiror is a party or by which Acquiror or any Subsidiary of
Acquiror or any property or asset of any of them is bound or affected, except,
in any cases enumerated in clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect on Acquiror or prevent Acquiror and Acquisition Sub from timely
performing their respective obligations under the Transaction Documents and
consummating the Transactions.
(b) The execution and delivery of the Transaction Documents by
Acquiror and Acquisition Sub do not, and the performance of the Transaction
Documents by Acquiror and Acquisition Sub will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) pursuant
to the Exchange Act, the Securities Act, Blue Sky Laws, the HSR Act and filing
of an appropriate Certificate of Merger with the Secretary of State of Delaware
as required by Delaware Law, and (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not reasonably be likely to have a Material Adverse Effect on Acquiror
and would not prevent or delay consummation of the Transactions, or otherwise
prevent Acquiror or Acquisition Sub from performing their respective
obligations under the Transaction Documents.
SECTION 4.06. OFFER DOCUMENTS, PROXY STATEMENT. The Offer Documents
will not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of Target, as the case may be, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The information supplied by Acquiror or Acquisition Sub for
inclusion in the Proxy Statement and Schedule 14D-9 will not, on the date the
Proxy Statement or Schedule 14D-9 (or any amendment or supplement thereto) is
first mailed to stockholders of Target, at the time of the Target Stockholders'
Meeting and at the Effective Time, contain any statement which, at such time
and in light of the circumstances under which it is made, is false or
misleading with
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respect to any material fact, or omits to state any material fact required to
be stated therein or necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Target
Stockholders' Meeting which shall have become false or misleading; provided,
however, that Acquiror or Acquisition Sub makes no representation or warranty
with respect to information supplied by Target for inclusion in the Offer
Documents. The Offer Documents shall comply in all material respects as to form
with the requirements of the Exchange Act and the rules and regulations
thereunder.
SECTION 4.07. FINANCING. Acquiror will have all funds necessary to
consummate the Offer and the Merger and shall make such funds available to
Acquisition Sub for such purposes.
SECTION 4.08. BOARD RECOMMENDATION. At a meeting duly called and held
in compliance with Delaware Law, the Board of Directors of Acquiror has
unanimously adopted a resolution (a) approving the Transactions, based on a
determination that the Transactions are advisable, fair to, and in the best
interests of, the Acquiror stockholders, and (b) approving and adopting the
Transaction Documents and the Transactions.
ARTICLE V -- CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. CONDUCT OF BUSINESS BY TARGET PENDING THE MERGER. Target
covenants and agrees that, from the date of this Agreement until the earlier of
(x) the date on which this Agreement is terminated and (y) such time as
Acquisition Sub's designees pursuant to Section 6.02 shall constitute at least
a majority of Target's Board of Directors (the "Acquisition Sub's Election
Date"), except as expressly contemplated by this Agreement, Target shall, and
shall cause its Subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and in compliance in all material respects with all
applicable Laws. Without limiting the generality of the foregoing, during the
aforementioned period, except as expressly contemplated by this Agreement,
Target shall not, and shall not permit any Subsidiary of Target to, without the
consent of Acquiror (which shall not be unreasonably withheld):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends and
distributions by a direct or indirect wholly owned Subsidiary of Target to its
parent, (ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (iii) purchase, redeem or
otherwise acquire any shares of capital stock of Target or any Subsidiary of
Target or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(b) except as set forth on Section 5.01(b) of the Target Disclosure
Schedules, issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities;
(c) amend its Certificate of Incorporation, Bylaws (except as
contemplated by Section 6.02) or other comparable organizational documents;
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(d) except as set forth on Section 5.01(d) of the Target Disclosure
Schedules acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, (i)
any business or any corporation, limited liability company, partnership, joint
venture, association or other business organization or division thereof or (ii)
any assets that individually, or in the aggregate, are material to Target and
its Subsidiaries, taken as a whole;
(e) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets, other than in
the ordinary course of business consistent with past practice, that are
material to Target and its Subsidiaries taken as a whole;
(f) except in the ordinary course of business consistent with past
practice (to the extent not in excess of $50,000) and for intercompany
Indebtedness between Target and any Subsidiary of Target or between
Subsidiaries of Target, (i) incur or guarantee any Indebtedness, or (ii) make
any loans, advances or capital contributions to, or investments in, any other
Person, other than to Target or any direct or indirect wholly owned Subsidiary
of Target or to officers and employees of Target or any Subsidiary of Target
for travel, business or relocation expenses in the ordinary course of business;
(g) make or agree to make any new capital expenditures which in the
aggregate are in excess of $50,000;
(h) make any tax election that could reasonably be expected to have a
Material Adverse Effect on Target or settle or compromise any material income
tax liability;
(i) enter into, modify, amend or terminate any material contract or
agreement (including any contract or agreement (x) which is required by its
terms or is currently expected to result in the payment or receipt of more than
$50,000, (y) for a term of more than one year, or (z) of employment, deferred
compensation or similar arrangement with any director, officer or employee of
Target or any Subsidiary of Target) to which Target or any Subsidiary of Target
is or may be a party or waive, release or assign any material rights or claims
thereunder;
(j) except as required by Law, modify, amend or terminate any
Acquisition Contract or waive, release or assign any material rights or claims
thereunder;
(k) make any material change to its accounting methods, principles or
practices, except as may be required by GAAP;
(l) fail to act in the ordinary course of business consistent with the
past practice of Target, exercising commercially reasonable care to (i)
preserve substantially intact Target's and each of its Subsidiaries' present
business organization, (ii) keep available the services of any employee with an
employment contract with Target or any Subsidiary of Target, and (iii) preserve
its present relationships with clients, sponsors, suppliers and others having
significant business dealings with them;
(m) fail to use commercially reasonable efforts to maintain the
material assets of Target and each Subsidiary of Target in their current
physical condition, except for ordinary wear and tear and damage;
(n) merge or consolidate with or into any other legal entity or
dissolve or liquidate any Subsidiary of Target;
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(o) except as required by the terms and provisions of written
contracts between Target or any Subsidiary of Target and an employee thereof as
in existence on the date of this Agreement and as set forth in Section 5.01(o)
of the Target Disclosure Schedule, (i) adopt or amend any Benefit Plan other
than in the ordinary course of business consistent with past practice or as
required by Law, or (ii) materially increase in any manner the aggregate
compensation or fringe benefits (including, without limitation, commissions) of
any officer, director, or employee or other personnel of Target or any
Subsidiary of Target (whether employees or independent contractors) other than
as required by Law;
(p) pay, discharge, or satisfy any material (on a consolidated basis
for Target and its Subsidiaries taken as a whole) claims, liabilities, or
obligations (absolute, accrued, asserted or un-asserted, contingent or
otherwise), other than in the ordinary course of business consistent with past
practice, or fail to pay or otherwise satisfy (except if being contested in
good faith) any material (on a consolidated basis for Target and its
Subsidiaries taken as a whole) accounts payable, liabilities, or obligations
when due and payable;
(q) engage in any transactions with any of its Affiliates other than
transactions between Target and any Subsidiary of Target or among Subsidiaries
of Target; or
(r) authorize, or commit or agree to take, any of the foregoing
actions.
SECTION 5.02. OTHER ACTIONS. Between the date of this Agreement and
the Effective Time, Target and Acquiror shall use their commercially reasonable
efforts to cause the conditions to the Merger set forth in Article VII and the
conditions to the Offer listed on Exhibit A (other than with respect to
paragraphs (e) and (f) on Exhibit A) to be satisfied. Target and Acquiror shall
not, and shall not permit any of their respective Subsidiaries to, take any
action that would, or that could reasonably be expected to, (a) result in any
of the representations and warranties of such party set forth in this Agreement
becoming untrue, (b) result in any of the conditions set forth in Article VII
and Exhibit A (other than with respect to paragraphs (e) and (f) thereof) not
being satisfied, (c) have a Material Adverse Effect on Target or (d) prevent or
delay consummation of the Transactions or to otherwise prevent Target from
timely performance of its obligations under the Transaction Documents.
ARTICLE VI -- ADDITIONAL AGREEMENTS
SECTION 6.01. PROXY STATEMENT. If required by applicable Law in order
to consummate the Merger, as promptly as practicable after the purchase of all
Shares validly tendered and not withdrawn pursuant to the Offer, Target shall
file the Proxy Statement with the SEC under the Exchange Act, and shall use its
reasonable efforts to have the Proxy Statement cleared by the SEC. Acquiror,
Acquisition Sub and Target shall cooperate with each other in the preparation
of the Proxy Statement, and Target shall notify Acquiror of the receipt of any
comments of the SEC with respect to the Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to Acquiror promptly copies of all correspondence between
Target or any representative of Target and the SEC. Target shall give Acquiror
and its counsel the opportunity to review the Proxy Statement prior to its
being filed with the SEC and shall give Acquiror and its counsel the
opportunity to review all amendments and supplements to the Proxy Statement and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Each of Target, Acquiror
and Acquisition Sub agrees to use its commercially reasonable efforts, after
consultation with the other parties hereto, to respond
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promptly to all such comments of and requests by the SEC and to cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
the holders of Shares entitled to vote at the Target Stockholders' Meeting at
the earliest practicable time. Without limiting the generality of the
foregoing, Target agrees that its obligations pursuant to this Section 6.01
shall not be affected by the commencement, public proposal, public disclosure
or communication to Target of any Takeover Proposal (as defined in Section
9.03(g)).
SECTION 6.02. TARGET BOARD REPRESENTATION. (a) Promptly upon the
purchase by Acquisition Sub of Shares pursuant to the Offer, and from time to
time thereafter, Acquisition Sub shall be entitled to designate up to such
number of directors, rounded up to the next whole number, on Target's Board of
Directors as shall give Acquisition Sub representation on Target's Board of
Directors equal to the product of the total number of directors on Target's
Board of Directors (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Acquisition Sub or any Affiliate of Acquisition Sub at
such time bears to the total number of Shares then outstanding, and Target
shall, at such time, promptly take all actions necessary to cause Acquisition
Sub's designees to be elected as directors of Target, including increasing the
size of Target's Board of Directors (whether by amendment to Target's Bylaws or
otherwise) or securing the resignations of incumbent directors or both. At such
times, Target shall use its best efforts to cause persons designated by
Acquisition Sub to constitute the same percentage as persons designated by
Acquisition Sub shall constitute of Target's Board of Directors of (i) each
committee of Target's Board of Directors (some of whom may be required to be
independent as required by applicable Law or the rules of the American Stock
Exchange), (ii) each board of directors of each Subsidiary of Target and (iii)
each committee of each such board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, until the Effective Time, such
Board of Directors shall have at least one director who is a director on the
date hereof and who is not a designee or officer, director, employee or
Affiliate of Acquiror or Acquisition Sub or officer or employee of Target
("Independent Director"), provided that if the number of Independent Directors
shall be reduced below one for any reason, the Board of Directors shall
designate a person to fill such vacancy who is not a designee or officer,
director, employee or Affiliate of Acquiror, Acquisition Sub or Target, and
such person shall be deemed to be Independent Director for the purposes of this
Agreement.
(b) Target shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its obligations under this Section 6.02 and shall include in
the Schedule 14D-9 such information with respect to Target and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Acquiror or Acquisition Sub shall supply to Target any information
with respect to either of them and their nominees, officers, directors and
Affiliates required by such Section 14(f) and Rule 14f-1.
(c) Following the Acquisition Sub's Election Date and prior to the
Effective Time, any amendment or termination of this Agreement by Target,
extension for the performance or waiver of the obligations of Acquiror or
Acquisition Sub by Target, or waiver of Target's rights hereunder, shall
require the concurrence of the Independent Director.
SECTION 6.03. STOCKHOLDERS' MEETING. If required by applicable law in
order to consummate the Merger, Target shall call a meeting of its stockholders
(the "Target Stockholders' Meeting") for the purpose of voting upon the
approval of this Agreement and the Merger, and Target shall use all
commercially reasonable efforts to hold the Target Stockholders' Meeting as
soon as practicable after the consummation of the Offer. Without limiting the
generality of the foregoing, Target agrees that its obligations pursuant to
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the preceding sentence shall not be affected by the commencement, public
proposal, public disclosure or communication to Target of any Takeover
Proposal. Target will, through its Board of Directors and the Target
Independent Committee, unanimously recommend to its stockholders the approval
and adoption of this Agreement and the Merger and such recommendation and
approval shall be set forth in the Proxy Statement, except to the extent that
the Board of Directors of Target shall have withdrawn or modified its approval
or recommendation of this Agreement or the Merger and terminated this Agreement
in accordance with Section 8.01(g). The parties acknowledge that, in lieu of
the Target Stockholders' Meeting, to the extent permitted by Delaware Law, and
the Certificate of Incorporation and Bylaws of Target, the Target stockholders
may approve this Agreement and Merger by the execution of written consents by
the holders of at least a majority of the outstanding shares of Target Common
Stock. Notwithstanding the foregoing, if Acquisition Sub or any other
Subsidiary of Acquiror shall acquire 90% or more of the outstanding shares of
Target Common Stock, the parties shall, at the request of Acquiror, take all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after the expiration of the Offer without a
Target Stockholders' Meeting in accordance with Section 253 of Delaware Law.
SECTION 6.04. APPROPRIATE ACTION; CONSENTS; FILINGS. (a) Target,
Acquiror and Acquisition Sub shall use their commercially reasonable efforts to
(i) take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable under applicable Laws or
required to be taken by any Governmental Authority or otherwise to consummate
and make effective the Transactions as promptly as practicable, (ii) obtain
from all applicable Governmental Authorities all consents, licenses, permits,
waivers, approvals, authorizations or orders legally required to be obtained or
made by Acquiror or Target or any of their Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Transactions, including, without limitation, the Merger and the Offer, and
(iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement, the Merger
and the Offer required under (A) the Securities Act, the Exchange Act, and any
other applicable federal or state securities Laws, (B) the rules and
regulations of the Nasdaq National Market or the American Stock Exchange, (C)
Delaware Law, (D) the HSR Act and any related governmental request thereunder,
and (E) all other applicable Laws; provided that Acquiror and Target shall
cooperate fully with each other in connection with the making of all such
filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, accepting all
reasonable additions, deletions or changes suggested in connection therewith.
Target and Acquiror shall use commercially reasonable efforts to furnish to
each other all information required for each application or other filing to be
made pursuant to the rules and regulations of all applicable Laws (including
all information required to be included in the Proxy Statement and the Offering
Documents) in connection with the Transactions.
(b) (i) Each of Acquiror and Target shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and
use, and cause their respective Subsidiaries to use, their
commercially reasonable efforts to obtain any third party consents,
(A) legally necessary to consummate the Transactions, (B) disclosed or
required to be disclosed in the Target Disclosure Schedule or the
Acquiror Disclosure Schedule or (C) required to prevent a Material
Adverse Effect on Acquiror or Target from occurring prior to or after
the Effective Time; provided, however, that "commercially reasonable
efforts" as used in this Agreement shall not require any party to
undertake extraordinary or unreasonable measures to obtain any
approvals or consents, including, without limitation, the initiation
or prosecution of legal proceedings. Within 20 business days after the
date hereof, Target will deliver landlord estoppel certificates in
form reasonably satisfactory to Acquiror.
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(ii) If Acquiror or Target fails to obtain any third party
consent described in subsection (b)(i) above, then it shall use its
commercially reasonable efforts, and shall take any actions reasonably
requested by the other party, to minimize any adverse effect upon
Target and Acquiror, their respective Subsidiaries, and their
respective businesses resulting, or which could reasonably be expected
to result after the Effective Time, from the failure to obtain such
consent.
(c) From the date of this Agreement until the earlier of (x) the
termination of this Agreement and (y) the Effective Time, each party shall
promptly notify the other party of any actual or, to the knowledge of the first
party, threatened action, proceeding or investigation by or before any
Governmental Authority or any other Person (i) challenging or seeking material
damages in connection with the Transactions, including the Merger and the
Offer, or (ii) seeking to restrain or prohibit the consummation of the
Transactions or otherwise limit the right of Acquiror to own or operate all or
any portion of the businesses or assets of Target, which in either case is
reasonably likely to have a Material Adverse Effect on Target prior to the
Effective Time, or a Material Adverse Effect on Acquiror (including the
Surviving Corporation) after the Effective Time.
SECTION 6.05. ACCESS; CONFIDENTIALITY. (a) Subject to the
Confidentiality Agreement (as defined below), Target shall, and shall cause
each of its Subsidiaries to, afford to Acquiror and to the officers, employees,
accountants, counsel, financial advisors, lenders and other representatives of
Acquiror, reasonable access during normal business hours during the period
prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, Target
shall, and shall cause each of its Subsidiaries to, prepare or cause to be
prepared, or furnish promptly to Acquiror (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities Laws or the Federal
tax Laws, or state, local or foreign tax Laws and (ii) all other information
concerning its business, properties and personnel as Acquiror may reasonably
request (including Target's outside accountants' work papers). Each of Target
and Acquiror will hold, and will cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives and
Affiliates (as defined in Section 9.03(g)) to hold, any nonpublic information
in accordance with the terms of the Confidentiality Agreement dated as of
October, 1997, between Target and Acquiror (the "Confidentiality Agreement").
(b) Target shall cooperate fully (with Acquiror responsible for all
reasonable costs and expenses) with Acquiror in connection with such financing
transactions as Acquiror may undertake. In connection therewith, at the request
of Acquiror, Target (with Acquiror responsible for all reasonable costs and
expenses) will cause its officers, directors, employees, representatives,
consultants and advisors to assist in the preparation of offering memoranda and
pro forma financial information and to participate in any road show
presentations Acquiror shall undertake in connection therewith, provided that
such assistance shall not unreasonably interfere with the performance by any of
such officers, directors, employees, representatives, consultants or advisors
of services for Target. In furtherance of the foregoing, Target shall use its
commercially reasonable efforts to cause its auditors to provide and allow the
filing of consents and "comfort letters" and other documentation as may be
required for the inclusion of any financial statements of Target prepared at
the request of Acquiror, to allow such financial statements to be used in
public or private financing documents.
SECTION 6.06. NO SOLICITATION. (a) From and after the date hereof
until the termination of this Agreement, neither Target nor any of its
Subsidiaries, nor any of their respective officers, directors, representatives,
agents or Affiliates (including, without limitation, any investment banker,
attorney or
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accountant retained by Target or any of its Subsidiaries) (collectively,
"Representatives") will, and Target will cause the employees of Target and its
Subsidiaries not to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any Takeover Proposal (as defined in Section 9.03(h)), (ii)
enter into any agreement with respect to any Takeover Proposal or give any
approval of the type referred to in Section 3.28 with respect to any Takeover
Proposal or (iii) participate in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal; provided,
however, that if at any time prior to the consummation of the Offer, the Board
of Directors of Target or the Target Independent Committee determines in good
faith, based on the advice of outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to Target's stockholders under
applicable law, Target (and its Representatives) may, in response to an
unsolicited Takeover Proposal of the sort referred to in clause (x) of Section
9.03(g) that involves consideration to Target's stockholders with a value that
Target's Board of Directors reasonably believes, after receiving advice from
Target's financial advisor, is superior to the consideration provided for in
the Merger, and subject to compliance with Section 6.06(c), (x) furnish
information with respect to Target pursuant to a customary confidentiality
agreement (having terms substantially similar to those contained in the
Confidentiality Agreement (as defined in Section 6.05)) to any Person making
such proposal and (y) participate in negotiations regarding such proposal.
Target shall immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by Target or any Representatives with
respect to any Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any Representative of Target or any of its Subsidiaries, whether or
not such Person is purporting to act on behalf of Target or any of its
Subsidiaries or otherwise, shall be deemed to be a breach of this Section
6.06(a) by Target.
(b) Neither the Board of Directors of Target nor any committee
(including the Target Independent Committee) thereof shall (x) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Acquiror, the
approval or recommendation by such Board of Directors or such committee of the
Offer, this Agreement or the Merger or (y) approve or recommend, or propose to
approve or recommend, any Takeover Proposal, except in the case of clause (x)
or (y), in connection with a Superior Proposal (as defined in Section 9.03(g))
and then only at or after the termination of this Agreement pursuant to Section
8.01(g).
(c) In addition to the obligations of Target set forth in paragraphs
(a) and (b) of this Section 6.06, Target shall promptly advise Acquiror orally
and in writing of any request for information or of any Takeover Proposal or
any inquiry with respect to or which could reasonably be expected to lead to
any Takeover Proposal, the identity of the Person making any such request,
Takeover Proposal or inquiry and all the terms and conditions thereof
(including a copy of any written Takeover Proposal received). Target will keep
Acquiror fully informed of the status and details (including amendments or
proposed amendments) of any such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 6.06 shall prohibit Target from
taking and disclosing to its stockholders a position contemplated by Rule 14d-9
or Rule 14e-2 promulgated under the Exchange Act; provided, however, neither
Target nor its Board of Directors nor any committee (including the Target
Independent Committee) thereof shall, except as permitted by Section 6.06(b),
withdraw or modify, or propose to withdraw or modify, its approval or
recommendation with respect to the Offer (including, without
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limitation, either the Board of Directors' or the Target Independent
Committee's resolution providing for such approval) or approve or recommend, or
propose to approve or recommend, a Takeover Proposal.
(e) Nothing contained in this Section 6.06 (including any modified or
withdrawn recommendation contemplated by paragraph (b) of Section 6.06) shall
be deemed to prevent or impede Acquiror and Acquisition Sub, in its or their
discretion, from consummating the Offer, or to limit or affect any of the
actions taken by Target and described in Section 3.28 of this Agreement. In
addition, if Acquisition Sub purchases Shares pursuant to the Offer, Target and
its Board of Directors shall take all actions legally permitted to permit the
Merger to occur.
(f) During the period from the date of this Agreement through the
Effective Time, Target shall enforce and shall not terminate, amend, modify or
waive any standstill or other provision of, any confidentiality,
nonsolicitation or standstill agreement to which Target or any of its
Subsidiaries is a party (other than any involving Acquiror), including, without
limitation, any such agreement entered into with any party in connection with
the process conducted by Target to solicit acquisition proposals for Target.
SECTION 6.07. DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) The
Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in the certificate of incorporation and by-laws of the Target, as in
effect on the date hereof, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
any time prior to the Effective Time were directors, officers or employees of
Target or any of its Subsidiaries, unless such modification shall be required
by law.
(b) From and after the Acquisition Sub's Election Date, the Acquiror
and Surviving Corporation shall indemnify, defend and hold harmless each Person
who is now, or who has been at any time prior to the date of this Agreement or
who becomes prior to the Effective Time, an officer or director of Target or
any of its Subsidiaries, or an employee of Target or any of its Subsidiaries
who acts as a fiduciary under any employee benefit plan of Target or any of its
Subsidiaries (collectively, the "Indemnified Parties") against all losses,
expenses (including reasonable attorneys' fees), claims, damages, liabilities
or amounts that are paid in settlement of, or otherwise in connection with, any
threatened or actual claim, action, suit, proceeding or investigation (a
"Claim"), based in whole or in part on or arising in whole or in part out of
the fact that the Indemnified Party (or the person controlled by the
Indemnified Party) is or was a director, officer or such an employee of Target
or any of its Subsidiaries and pertaining to any matter existing or arising out
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, any Claim arising out of this Agreement or any of the
Transactions), whether asserted or claimed prior to, at or after the Effective
Time, in each case to the fullest extent permitted under Delaware Law or the
Surviving Corporation's Certificate of Incorporation or Bylaws, and shall pay
any expenses, as incurred, in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent permitted
under Delaware Law or the Surviving Corporation's Certificate of Incorporation
or Bylaws; provided, however, that neither the Acquiror nor the Surviving
Corporation shall be liable for any settlement effected without Acquiror's
written consent (which shall not be unreasonably withheld). Without limiting
the foregoing, in the event any such claim is brought against any of the
Indemnified Parties, such Indemnified Parties may retain counsel (including
local counsel) satisfactory to them and which shall be reasonably satisfactory
to Acquiror, and the Acquiror or the Surviving Corporation shall pay all fees
and expenses of such counsel for such Indemnified Parties. The Indemnified
Parties as a group shall retain only one law firm (plus appropriate local
counsel) to represent them with respect to each such Claim unless there
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is, as determined by counsel to the Indemnified Parties, under applicable
standards of professional conduct, a conflict or a reasonable likelihood of a
conflict on any significant issue between the positions of any two or more
Indemnified Parties, in which event each such Indemnified Party shall be
entitled to retain separate legal counsel at the expense of the Surviving
Corporation.
(c) For a period of six (6) years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by Target
covering all of the individuals currently covered thereby (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous to such officers and directors) with respect to claims arising
from facts or events which occurred at or prior to the Effective Time;
provided, however, that the Surviving Corporation shall not be required to pay
annual premiums for such insurance in excess of 200% in the aggregate of
Target's current annual premium unless Acquiror continues to maintain its
directors' and officers' liability insurance despite a comparable increase; and
provided further, that if the premium for such coverage exceeds such amount,
the Surviving Corporation shall purchase a policy with the greatest coverage
available for such 200% of the annual premium.
SECTION 6.08. OBLIGATIONS OF ACQUISITION SUB. Acquiror shall take all
action necessary to cause Acquisition Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement and hereby irrevocably and
unconditionally guarantees all such obligations of Acquisition Sub.
SECTION 6.09. PUBLIC ANNOUNCEMENTS. Acquiror and Target shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any Transaction and shall not
issue any such press release or make any such public statement prior to such
consultation. Prior to the Effective Time, Target will not issue any other
press release or otherwise make any public statements regarding its business,
except, in each case, as may be required by Law or any listing agreement with
the American Stock Exchange to which Target is a party. Target and Acquiror
shall consult with each other concerning the means by which the employees,
clients, sponsors and suppliers of, and others having dealings with, Target and
its Subsidiaries will be informed of the Transactions.
SECTION 6.10. NOTIFICATION OF CERTAIN MATTERS. Between the date of
this Agreement and the Closing Date, each of Target and Acquiror shall promptly
notify the other party in writing (a) if it becomes aware of any fact or
condition that causes or constitutes a breach of any of its representations and
warranties as of the date of this Agreement, (b) if it becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition, (c) in the event of any breach of any covenant contained in this
Agreement or (d) of the occurrence of any event or change (i) making, or which
insofar as can be reasonably foreseen would make, the satisfaction of the
conditions contained in Article VII or Exhibit A impossible or unlikely or (ii)
having, or reasonably likely to have, a Material Adverse Effect on such party.
If any such fact, condition or event would require any change in the Target
Disclosure Schedule or the Acquiror Disclosure Schedule if such disclosure
schedule were dated the date of the occurrence or discovery of any such fact or
condition, then Target or Acquiror, as the case may be, will promptly deliver
to the other party a supplement to such disclosure schedule specifying such
change. The delivery of any notice or supplement pursuant to this Section 6.10
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice or supplement and shall not be deemed to amend any
such disclosure schedule.
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SECTION 6.11. FURTHER ACTION. At any time and from time to time, each
party to this Agreement agrees, subject to the terms and conditions of this
Agreement, to take such actions and to execute and deliver such documents as
may be necessary to effectuate the purposes of this Agreement at the earliest
practicable time; provided, however, that this Section shall not require either
party to undertake extraordinary or commercially unreasonable measures in
connection therewith, including, without limitation, the initiation or
prosecution of legal proceedings.
SECTION 6.12. EMPLOYEE BENEFIT PLANS. Acquiror and Target agree that
the Benefit Plans in effect at the date of this Agreement shall, to the extent
practicable, remain in effect until otherwise determined by Acquiror after the
Effective Time. To the extent such Benefit Plans are not continued, it is the
current non-binding intent of the parties that employee benefit plans of
Acquiror shall be provided.
SECTION 6.13. PAYMENTS IN RESPECT OF TARGET OPTIONS. (a) As soon as
practicable after the date of this Agreement, the Board of Directors of Target
(or if appropriate, any committee administering the Stock Option Plans) shall
adopt such resolutions or take such other actions as are required to adjust the
terms of all outstanding Options to provide that each Option outstanding
immediately prior to the Effective Time shall be canceled in accordance with
Section 2.09 hereof. After the date of this Agreement, neither the Board of
Directors of Target nor any committee thereof shall cause any Option to become
exercisable as a result of the execution of this Agreement or the consummation
of the Transactions.
(b) All amounts payable pursuant to Section 2.09 shall be subject to
any required withholding of taxes and shall be paid without interest. Target
shall use its commercially reasonable efforts to obtain an Option Release
Agreement in substantially the form attached hereto as Exhibit D (a "Release
Agreement") from each Person who is the holder of any Options, as shall be
necessary to effectuate the provisions of this Agreement relating thereto.
Notwithstanding anything to the contrary contained in this Agreement, payment
shall, at Acquiror's request, be withheld in respect of any Option until all
necessary consents are obtained.
(c) The Stock Option Plans shall terminate as of the Effective Time,
and the provisions in any other Option providing for the issuance, transfer or
grant of any capital stock of Target or any interest in respect of any capital
stock of Target shall be deleted as of the Effective Time of the Merger, and
Target shall ensure that following the Effective Time of the Merger no holder
of a Option or any participant in any Stock Option Plan or other Option shall
have any right thereunder to acquire any capital stock of Target or the
Surviving Corporation.
SECTION 6.14. CERTAIN LITIGATION. Target agrees that it shall not
settle any litigation commenced after the date hereof against Target or any of
its directors by any stockholder of Target relating to the Transactions,
including the Offer and the Merger, or the Transaction Documents, without the
prior written consent of Acquiror, which consent shall not be unreasonably
withheld. Target shall give Acquiror the opportunity to participate in the
defense or settlement of any stockholder litigation against Target and its
directors relating to the Transactions. In addition, except as required by Law,
Target shall not voluntarily cooperate with any third party that may hereafter
seek to restrain or prohibit or otherwise oppose the Transactions or the
Transaction Documents and shall cooperate with Acquiror and Acquisition Sub to
resist any such effort to restrain or prohibit or otherwise oppose the
Transactions or the Transaction Documents.
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ARTICLE VII -- CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of Target, Acquiror and Acquisition Sub to consummate the Merger
are subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) if required by applicable law, the Stockholder Approval shall have
been obtained with respect to the approval and adoption of this Agreement and
the Merger;
(b) no Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any order, executive order, stay, decree, judgment or
injunction (each an "Order") or Law which is in effect and which has the effect
of making the Merger illegal or otherwise prohibiting consummation of the
Merger;
(c) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated; and
(d) Acquisition Sub or its permitted assignee shall have previously
purchased all Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the Transactions, as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Acquiror and Target;
(b) by either Acquiror or Target, if either: (i) the Offer shall not
have been consummated on or before January 31, 1999 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this
Section 8.01(b)(i) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Offer to be so consummated on or before such date; or (ii) there
shall be any Order which is final and nonappealable preventing the consummation
of the Merger or the Offer, except if the party relying on such Order has not
complied with its obligations under Section 6.04(a);
(c) by Acquiror, prior to the Acquiror Sub's Election Date, if (i) the
Board of Directors of Target or the Target Independent Committee shall have
withdrawn or modified in a manner adverse to Acquiror, its approval or
recommendation with respect to this Agreement, the Merger or the Offer, (ii) a
tender offer or exchange offer for 50% or more of the outstanding Shares (other
than the Offer) is commenced and the Board of Directors of Target fails to
timely recommend against the stockholders of Target tendering their shares into
such tender offer or exchange offer, or (iii) a Takeover Proposal has been
publicly announced and the Board of Directors of Target shall fail to publicly
reaffirm its approval or recommendation of the Offer, the Merger and this
Agreement on or before the fifth day following the date on which such Takeover
Proposal shall have been announced; provided that Acquiror in exercising its
termination rights hereunder may condition the effectiveness of such
termination upon receipt of the Termination Fee and Specified Expenses that are
due pursuant to Section 8.02;
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(d) by Acquiror if, due to an occurrence or circumstance that results
in a failure to satisfy any condition set forth in Exhibit A, (i) Acquiror, the
Acquisition Sub or any of their Affiliates shall have failed to commence the
Offer on or prior to 10 days following the date of this Agreement or (ii) the
Offer shall have expired or terminated without any Shares being purchased
therein, unless any such failure listed above shall have been caused by or
resulted from the failure of Acquiror or Acquisition Sub to perform in any
material respect any covenant or agreement of either of them contained in this
Agreement or the material breach by Acquiror or Acquisition Sub of any
representation or warranty of either of them contained in this Agreement;
(e) by Target if (i) Acquiror, the Acquisition Sub or any of their
Affiliates shall have failed to commence the Offer on or prior to 10 days
following the date of this Agreement or (ii) the Offer shall have expired or
terminated without any Shares being purchased therein, unless such failure to
purchase the Shares shall have been caused by or resulted from the failure of
Target to satisfy any of the conditions set forth in paragraphs (d) or (j) of
Exhibit A;
(f) by either Acquiror or Target, if the Effective Time shall not have
occurred before June 30, 1999; provided, however, that the right to terminate
this Agreement under this Section 8.01(f) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Merger to be so consummated on or before
such date;
(g) by Target, prior to the Acquisition Sub's Election Date, if (i)
the Board of Directors of Target shall have determined in good faith, based on
the advice of outside counsel, that it is necessary, in order to comply with
its fiduciary duties to the Target's stockholders under applicable law, to
terminate this Agreement to enter into an agreement with respect to or to
consummate a transaction constituting a Superior Proposal, (ii) the Target
shall have given notice to Acquiror advising Acquiror that Target has received
a Superior Proposal from a third party, specifying the material terms and
conditions of such Superior Proposal (including the identity of the third
party) and the material terms and conditions of any agreements or arrangements
to be entered into in connection with a Superior Proposal with respect to the
Principal Stockholders and that Target intends to terminate this Agreement in
accordance with this Section 8.01(g), and (iii) either (A) Acquiror shall not
have revised its takeover proposal within five business days after the date on
which such notice is deemed to have been given to Acquiror, or (B) if Acquiror
within such period shall have revised its takeover proposal, the Board of
Directors of Target, after receiving advice from Target's financial advisor,
shall have determined in its good faith reasonable judgment that the third
party's Takeover Proposal is superior to Acquiror's revised takeover proposal;
provided that Target may not effect such termination pursuant to this Section
8.01(g) unless Target has contemporaneously with such termination tendered
payment to Acquiror of the Termination Fee and Specified Expenses that is due
Acquiror pursuant to Section 8.02;
(h) by Acquiror, if the number of Shares outstanding, on a
fully-diluted basis, exceeds 28.9 million plus the number of Shares the
issuance of which has been expressly approved in writing by Acquiror;
(i) by Target, at any time prior to the consummation of the Offer, if
(i) the conditions set forth in paragraphs (d)(ii) or (i) of Exhibit A shall
not have been satisfied or become untrue (other than as a result of the failure
of the condition set forth in paragraph (d)(i) of Exhibit A), (ii) such failure
cannot be cured, (iii) Target shall have delivered to Acquiror a written notice
specifically setting forth, fully and fairly, in good faith, the basis for such
failure in sufficient detail to permit a reasonable evaluation by Acquiror,
(iv) within 30 days after receipt by Acquiror of such notice, Acquiror shall
not have either waived the failure of
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such condition or terminated this Agreement pursuant to Section 8.01 (j), and
(v) no Takeover Proposal shall have been made prior to the date of any notice
by Target; or
(j) by Acquiror, at any time prior to the consummation of the Offer,
if Acquiror elects to terminate this Agreement as contemplated by Section
8.01(i).
SECTION 8.02. FEES AND EXPENSES; EFFECT OF TERMINATION. (a) Except as
provided in this Section 8.02, and except for filing fees under the HSR Act in
connection with the transactions contemplated by this Agreement, 50% of which
shall be paid by Acquiror and 50% of which shall be paid by Target, all fees
and expenses incurred in connection with the Offer, Merger, this Agreement, the
Stockholder Agreements and the Transactions shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
(b) Target shall pay, or shall cause to be paid, upon demand in same
day funds, to Acquiror a termination fee (the "Termination Fee") of $3.3
million and Specified Expenses (as defined herein) if:
(i) this Agreement is terminated pursuant to Section 8.01(c)
(including a conditional termination pursuant to the provision
contained in Section 8.01(c)), Section 8.01(g) or 8.01(h); or
(ii) this Agreement is terminated (other than by Target
pursuant to Section 8.01(e)) and a Takeover Proposal has been made
prior to such termination, and definitive documentation with respect
to the same or another Takeover Proposal from the same or another
Person is entered into within 12 months of such termination.
(c) Target shall pay, or shall cause to be paid, upon demand in same
day funds, to Acquiror the Specified Expenses if this Agreement is terminated
by Acquiror pursuant to Section 8.01(d) (other than due to an occurrence or
circumstance that results in a failure to satisfy paragraphs (a), (b) or (h) of
Exhibit A or the HSR Condition).
(d) The fees and expenses pursuant to this section shall be paid
without reservation of rights or protests, and Target, upon making such
payment, shall be deemed to have released and waived any and all rights that it
may have to recover such amounts.
(e) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to Section 8.01, all obligations of the parties hereto
shall terminate, without any liability or obligation on the part of Acquiror,
Acquisition Sub or Target, (i) except the obligations of the parties pursuant
to Sections 1.02(c), 6.05, 8.02, 8.03 and 8.04 and Article IX and (ii) except
to the extent that such termination results from the material breach by a party
of any of its representations, warranties, covenants or agreements set forth in
this Agreement, in which case the non-breaching party will be entitled to
recover damages and its expenses.
Notwithstanding the foregoing, if Acquiror is required to file suit to
seek the Termination Fee or Specified Expenses, and it ultimately succeeds on
the merits, it shall be entitled to all expenses, including attorneys' fees,
which it has incurred in enforcing its rights under this Section 8.02.
(f) As used herein, "Specified Expenses" means all reasonable
out-of-pocket expenses and fees actually incurred or accrued by a party or on
its behalf in connection with the Transactions prior to the
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termination of this Agreement (including, without limitation, all fees and
expenses of counsel, financial advisors, banks or other entities providing
financing to such party (including financing, commitment and other fees payable
thereto), accountants and other experts and consultants to such party and its
Affiliates, and all printing and advertising expenses) and in connection with
the negotiation, preparation, execution, performance and termination of this
Agreement, the structuring of the Transactions, any agreements relating thereto
and any filings to be made in connection therewith; provided, however, that the
aggregate amount of such expenses shall not exceed $850,000.
(g) No termination of this Agreement pursuant to Section 8.01(b), (d),
(e), (f), (i) or (j) shall prejudice the ability of a non-breaching party from
seeking damages from any other party for any breach of this Agreement,
including, without limitation, attorneys' fees and the right to pursue any
remedy at law or in equity.
SECTION 8.03. AMENDMENT. Subject to the provisions of Section 6.02(c),
this Agreement may be amended by the parties at any time before or after the
approval of this Agreement and the Merger by the stockholders of Target;
provided, however, that after any such approval, there shall not be made any
amendment that by Law requires further approval by the stockholders of Target
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 8.04. WAIVER. Subject to the provisions of Section 6.02(c), at
any time prior to the Effective Time, any party hereto with the consent of its
Board of Directors may (a) extend the time for the performance of any
obligation or other act of any other party hereto, (b) waive any inaccuracy in
the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any agreement or
condition contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party or parties to be
bound thereby. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights. No waiver pursuant to Section 8.01(i) shall prejudice the ability of
Acquiror from seeking damages from Target for any breach of this Agreement,
including, without limitation, attorneys' fees and the right to pursue any
remedy at law or in equity.
ARTICLE IX -- GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, facsimile, telegram or telex, overnight courier or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 9.02):
if to Acquiror or Acquisition Sub:
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SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Attention: Howard J. Tytel
Facsimile: (212) 753-3188
with a copy to:
Baker & McKenzie
Two Allen Center, Suite 1200
1200 Smith Street
Houston, Texas 77002-4579
Attention: Amar Budarapu
Facsimile: (713) 427-5099
if to Target:
Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Attention: Robert Kreusler
Facsimile: (305) 532-4014
with a copy to:
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Gary Epstein
Facsimile: (305) 579-0717
with a copy to:
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
Wilmington, DE 19801
Attention: Frederick H. Alexander
Facsimile: (302) 658-3989
SECTION 9.03. CERTAIN DEFINITIONS. Unless the context requires
otherwise, for purposes of this Agreement, the term:
(a) "Affiliate" of a specified Person means a Person who, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such specified Person;
(b) "beneficial owner" with respect to any shares means a Person who
shall be deemed to be the beneficial owner of such shares (i) which such Person
or any of its Affiliates or associates (as such term is
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defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such Person or any of its Affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any agreement, arrangement or understanding,
(iii) which are beneficially owned, directly or indirectly, by any other
Persons with whom such Person or any of its Affiliates or associates or any
Person with whom such Person or any of its Affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any such shares, or (iv) pursuant to Section 13(d) of
the Exchange Act and any rules or regulations promulgated thereunder;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in New York, New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "Person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a
government;
(f) "Subsidiary" or "Subsidiaries" of any Person means any
corporation, partnership, joint venture or other legal entity of which such
Person (either alone or through or together with any other Subsidiary), owns or
has rights to acquire, directly or indirectly, more than 50% of the stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity (including any Subsidiaries acquired
subsequent to the date hereof);
(g) "Superior Proposal" means (x) a bona fide Takeover Proposal to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the shares and/or voting power of Target Common
Stock then outstanding or all or substantially all the assets of Target, and
(y) otherwise on terms which the Board of Directors of Target determines in its
good faith reasonable judgment to be more favorable to Target's stockholders
than the Offer and the Merger (after receiving advice of Target's independent
financial advisor that the value of the consideration provided for in such
proposal is superior to the value of the consideration provided for in the
Offer and the Merger), for which financing, to the extent required, is then
committed or which, in the good faith reasonable judgment of the Board of
Directors of Target, after receiving advice from Target's independent financial
advisor, is reasonably capable of being financed by such third party and for
which the Board of Directors of Target determines, in its good faith reasonable
judgment, that such proposed transaction is reasonably likely to be consummated
without undue delay; and
(h) "Takeover Proposal" means any proposal for a merger, consolidation
or other business combination involving Target or any proposal or offer to
acquire in any manner, directly or indirectly, an equity interest in, any more
than 25% of the voting power of, or a substantial portion of the assets of,
Target
43
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and its Subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement; provided, however, that such term does not
include the transactions contemplated hereby or in any ancillary documents.
SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
Law, or public policy, then all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the Transactions is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the Transactions be consummated as originally
contemplated to the fullest extent possible.
SECTION 9.05. ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties; provided,
however, that the rights, interests and obligations hereunder of Acquisition
Sub may be assigned to any Subsidiary of Acquiror. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except
for Sections 2.07, 2.09, 2.10, 2.11 and 6.07, nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the
parties hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
SECTION 9.06. INCORPORATION OF SCHEDULES. The Target Disclosure
Schedule and the Acquiror Disclosure Schedule referred to herein and all
Exhibits attached hereto and referred to herein are hereby incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or equity.
SECTION 9.08. GOVERNING LAW. EXCEPT TO THE EXTENT THAT DELAWARE LAW IS
MANDATORILY APPLICABLE TO THE MERGER AND THE RIGHTS OF THE STOCKHOLDERS OF
TARGET AND ACQUISITION SUB, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
RULES OF CONFLICTS OF LAW THEREOF. ALL ACTIONS AND PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN ANY COURT
SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK.
SECTION 9.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 9.10. COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed and delivered shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF ACQUIROR, TARGET AND
ACQUISITION SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
ACQUIROR, TARGET OR ACQUISITION SUB IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
SECTION 9.12. ENTIRE AGREEMENT. This Agreement, the Target Disclosure
Schedule, the Acquiror Disclosure Schedule, the Exhibits attached hereto, and
all documents delivered by the parties in connection herewith constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
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IN WITNESS WHEREOF, Acquiror, Acquisition Sub and Target have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
SFX ENTERTAINMENT, INC.
By:/s/Robert F.X. Sillerman
---------------------------------------
Robert F.X. Sillerman
Executive Chairman and
Member of the Office of the Chairman
MWE ACQUISITION CORP.
By:/s/Robert F.X. Sillerman
---------------------------------------
Robert F.X. Sillerman
Executive Chairman
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Brad Krassner
---------------------------------------
Name: Brad Krassner
Title:Co-Chairman of the Board and
Chief Executive Officer
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EXHIBIT A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, but subject to (a)
the terms and conditions of the Agreement and (b) any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Acquisition Sub's obligation to pay for or return tendered shares
after the termination or withdrawal of the Offer), Acquisition Sub shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance for
payment of and payment for Shares tendered, if (i) the Minimum Condition shall
not have been satisfied, (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the expiration of the Offer
(the "HSR Condition") or (iii) at any time on or after the date of this
Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist:
(a) there shall have been any judgment, order or decree
resulting from litigation brought by any Governmental Authority or other
Person, or before any court or Governmental Authority, agency or tribunal,
domestic or foreign: (i) prohibiting the acquisition by Acquiror or Acquisition
Sub of any Shares; (ii) prohibiting or limiting in any material respect the
ownership or operation by Acquiror, Acquisition Sub or any of their respective
Subsidiaries of any material portion of the business or assets of Target, or to
compel Acquiror, Acquisition Sub or any of their respective Subsidiaries to
dispose of or hold separate any material portion of the business or assets of
Target or any of its Subsidiaries; (iii) restraining or prohibiting the making
of the Offer or the consummation of the Merger; (iv) imposing limitations on
the ability of Acquiror or Acquisition Sub to exercise effectively full rights
of ownership of any Shares, including, without limitation, the right to vote
any Shares acquired by Acquisition Sub pursuant to the Offer, or otherwise on
all matters properly presented to Target's stockholders, including, without
limitation, the approval of this Agreement and the Transactions; or (v)
requiring divestiture by Acquiror or Acquisition Sub of any Shares;
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken by
any Governmental Authority, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences referred
to in clauses (i) through (v) of paragraph (a) above;
(c) (i) Target's Board of Directors or the Target Independent
Committee shall have withdrawn or modified in a manner adverse to Acquiror or
Acquisition Sub the approval or recommendation of the Offer, the Merger or this
Agreement or approved or recommended, or failed to timely recommend against,
any Takeover Proposal or any other acquisition of Shares other than the Offer
and the Merger or (ii) the Target's Board of Directors or the Target
Independent Committee shall have resolved to do any of the foregoing;
(d) (i) Target shall have failed to perform or comply in any
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it at or prior to the Acquisition Sub's
Election Date, which failure to perform or comply cannot be cured, or has not
been cured within 2 business days after Target receives written notice from
Acquiror of such breach or failure to perform; or (ii) any of the
representations and warranties of Target contained in this Agreement that are
A-1
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qualified as to Material Adverse Effect shall fail to be true and correct, or
any such representations and warranties that are not so qualified shall fail to
be true and correct in any respect having a Material Adverse Effect on Target,
in each case at the date of this Agreement and at the scheduled or extended
expiration of the Offer, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct as
of such date;
(e) this Agreement shall have been terminated in accordance
with its terms;
(f) Acquisition Sub and the Target shall have agreed that
Acquisition Sub shall terminate the Offer or postpone the acceptance for
payment of or payment for Shares thereunder;
(g) it shall have been publicly disclosed or Acquiror or
Acquisition Sub shall have otherwise learned that beneficial ownership
(determined for the purposes of this paragraph as set forth in Rule 13d-3
promulgated under the Exchange Act) of more than 25% of the outstanding Shares
has been acquired by any corporation (including the Target or any of its
Subsidiaries or Affiliates), partnership, person or other entity or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act), other than
Acquiror, Acquisition Sub or any of their Affiliates;
(h) all consents of and notices to or filings with
Governmental Authorities and third parties required in connection with the
Transactions to be made or obtained by Target (other than any approvals under
the HSR Act) shall not have been obtained or made other than those the absence
of which, individually or in the aggregate, would not have a Material Adverse
Effect on Target or prevent or materially delay consummation of any of the
Transactions;
(i) there shall have occurred any event, circumstance or fact
(whether or not covered by insurance), individually or in the aggregate, having
or reasonably likely to have a Material Adverse Effect on Target since the date
of this Agreement; or
(j) the Release Agreements have not been obtained as
contemplated by Section 6.13.
The foregoing conditions are for the sole benefit of
Acquisition Sub and Acquiror and may be asserted by Acquisition Sub or Acquiror
regardless of the circumstances giving rise to any such condition or may be
waived by Acquisition Sub or Acquiror in whole or in part at any time and from
time to time in their sole discretion. The failure by Acquiror or Acquisition
Sub at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
Terms used but not defined herein shall have the meanings assigned to such
terms in the Agreement of which this Exhibit is a part.
A-2
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Exhibit (c)(2)
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of August 6, 1998 (this
"Agreement"), is made and entered into by and among SFX Entertainment, Inc., a
Delaware corporation ("Acquiror"), MWE Acquisition Corp., a Delaware
corporation and a direct wholly-owned subsidiary of Acquiror ("Acquisition
Sub"), Krassner Family Investments Limited Partnership ("Stockholder"), and
Magicworks Entertainment Incorporated, a Delaware corporation ("Target").
RECITALS
WHEREAS, concurrently herewith, Acquiror, Acquisition Sub and the
Target are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which (a) Acquiror will make a cash tender offer (as such offer may be amended
from time to time as permitted by the Merger Agreement (the "Offer") by
Acquisition Sub for all the issued and outstanding shares of common stock, par
value $.001 per share, of Target (the "Target Common Stock"), and (b)
Acquisition Sub will be merged with and into Target (the "Merger"); capitalized
terms used but not defined herein and defined in the Merger Agreement have the
respective meanings ascribed to them in the Merger Agreement; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Merger Agreement,
the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENTS
1. Definitions. For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any agreement, letter
of intent, proposal or offer (other than the transactions contemplated in the
Merger Agreement) involving the Target or any of its Subsidiaries for, or an
inquiry or indication of interest that reasonably could be expected to lead to:
(i) any merger, consolidation, share exchange, recapitalization,
reorganization, dissolution, liquidation, business combination or other similar
transaction with the Target or any of its Subsidiaries, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of a material portion
of the assets of the Target and its Subsidiaries, taken as a whole, in a single
transaction or series of transactions or (iii) any tender offer or exchange
offer for all or any portion of the outstanding shares of capital stock of the
Target or any of its Subsidiaries or the filing of a registration statement
under the Securities Act of 1933 in connection therewith, but shall not include
the Offer, the Merger Agreement or Second Transaction (as defined herein).
<PAGE>
(b) "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such first Person.
(c) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all other
Persons (who are Affiliates of such Person excluding officers and directors of
the Target) who together with such Person would constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act and in any event with respect
to the Stockholder shall include Shares held of record by any of Brad Krassner
and his spouse and children.
(d) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
(e) "Shares" shall mean (i) shares of Target Common Stock and
(ii) shares of preferred stock, par value $.00l per share, of the Target.
(f) "Stockholder's Shares" shall mean all Shares held of
record or Beneficially Owned by the Stockholder, whether currently issued or
hereinafter acquired, and for the purposes of Section 3 of this Agreement shall
also include, without duplication, any securities convertible into, or
exercisable or exchangeable for, Shares, including without limitation the
unsecured senior convertible notes of the Target and any options, warrants or
stock appreciation rights held of record or Beneficially Owned by the
Stockholder (collectively, the "Convertible Securities").
(g) "Termination Date" shall mean the date that the Merger
Agreement has been terminated.
2. Provisions Concerning Shares.
(a) Acquisition Sub hereby agrees to purchase, and
Stockholder agrees to sell, or cause to be sold, all such Stockholder's Shares
(other than the Convertible Securities) at a price per share equal to the Per
Share Amount, subject only to the condition (which may be waived only by
Acquisition Sub in its sole discretion) that Acquisition Sub shall have
accepted for payment and paid for shares of Target Common Stock pursuant to the
Offer (the "Purchase"). The closing of the Purchase shall be effected by the
Stockholder validly tendering (or causing the record holder of such shares to
validly tender) all such Stockholder's Shares (other than the Convertible
Securities) into the Offer, and by Acquisition Sub accepting for payment and
paying for such Shares pursuant to the terms of the Offer. In furtherance of
the foregoing, Stockholder hereby agrees that it shall validly tender and not
withdraw the Stockholder's Shares (other than the Convertible Securities) into
the Offer. Subject to the terms and conditions of the Offer, Acquiror shall
comply, and shall cause Acquisition Sub to comply, with all provisions of
Article I of the Merger Agreement.
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(b) If for any reason any Stockholder's Shares (other than
the Convertible Securities) are not purchased in the Offer and either (i) other
shares of Target Common Stock are purchased in the Offer or (ii) the Offer is
not consummated due to a failure of the Minimum Condition, Acquisition Sub
shall purchase, and Stockholder shall sell, all of Stockholder's Shares (other
than the Convertible Securities) at a price per Share equal to the Per Share
Amount within five business days (after obtaining all applicable consents and
approvals) following the expiration of the Offer at a time and place to be
mutually agreed to between Acquisition Sub and Stockholder. Acquiror shall
provide or cause to be provided to Acquisition Sub on a timely basis the funds
sufficient to accept for payment, and pay for, any and all Shares that
Acquisition Sub becomes obligated to accept for payment, and pay for, pursuant
to the Offer or otherwise hereunder.
(c) From and after the date of this Agreement and ending as
of the first to occur of the Effective Time or the four month anniversary of
the Termination Date, at any meeting of the holders of Shares, however called,
or in any other circumstance upon which the vote, consent or other approval of
holders of one or more class or series of Shares is sought, the Stockholder
shall vote or cause to be voted (including by written consent, if applicable)
the issued and outstanding Stockholder's Shares (and each class thereof)
entitled to vote thereon, and those Shares entitled to vote thereon for which
Stockholder has the right to direct or control the vote, (i) in favor of the
Merger, the execution and delivery by the Target of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof, (ii) against any action or agreement that would result in a
breach in any material respect of any covenant, representation or warranty or
any other material obligation or agreement of the Target under the Merger
Agreement or this Agreement and (iii) against the following actions (other than
the Merger and the transactions contemplated by the Merger Agreement): (A) any
Acquisition Proposal other than an Acquisition Proposal with Acquiror or any
Affiliate thereof and (B) to the extent that such are intended to, or could
reasonably be expected to, (1) impede, interfere with, delay, postpone or
materially adversely affect the Merger or the transactions contemplated by the
Merger Agreement or this Agreement or (2) implement or lead to any Acquisition
Proposal (other than an Acquisition Proposal with Acquiror or any Affiliate
thereof): (w) any change in a majority of the persons who constitute the board
of directors of the Target; (x) any change in the present capitalization of the
Target or any amendment of the Target's Certificate of Incorporation or Bylaws;
or (y) any other material change in the Target's corporate structure or
business; provided that if any Second Transaction (as defined in Section 3(c)
of this Agreement) provides for Second Transaction Consideration (as defined in
3(c) of this Agreement) that is less than the Current Transaction Consideration
(as defined in Section 3(a) of this Agreement), as such amounts shall be
determined in accordance with Section 3 of this Agreement, then nothing herein
shall require the Stockholder to vote in favor of the Second Transaction. In
addition to the other covenants and agreements of the Stockholder provided for
elsewhere in this Agreement, during the above-described period the Stockholder
shall not enter into any agreement or understanding with any Person or entity
the effect of which would be inconsistent with or violate the provisions and
agreements contained in this Section 2. Nothing herein shall in any way
restrict or limit the Stockholder from taking any action in his capacity as a
director or officer of the Target or otherwise fulfilling his fiduciary
obligations as a director and officer of the Target.
(d) Stockholder, with respect to the Shares Beneficially
Owned by Stockholder, does hereby constitute and appoint Acquiror, or any
nominee of Acquiror, with full power of
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substitution, from the date hereof to the earlier to occur of the Effective
Time or the four month anniversary of the Termination Date, as its true and
lawful attorney and proxy (its "Proxy"), for and in its name, place and stead,
to demand that the Secretary of the Target call a special meeting of the
stockholders of the Target for the purpose of considering any action related to
the Merger Agreement or the Merger and to vote the Shares as its Proxy, at
every annual, special or adjourned meeting of the stockholders of the Target,
including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Target that the laws of the State
of Delaware may permit or require, in connection with the matters described in
the foregoing Section 2(c). The Proxy may not exercise this proxy on any other
matter. The Stockholder may vote the Shares on all such other matters. THIS
PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The
Stockholder represents that any proxies heretofore given in respect of the
Stockholder's Shares are not irrevocable, and that any such proxies are hereby
revoked.
(e) Stockholder hereby permits Acquiror and Acquisition Sub
to publish and disclose in the Offer Documents (including all documents and
schedules filed with the SEC) and, if approval of Target's stockholders is
required under applicable law, in the Proxy Statement its identity and
ownership of the Stockholder's Shares and the nature of its commitments,
arrangements and understandings under this Agreement.
3. Capture.
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(a) In the event that any of the Stockholder's Shares are
sold, transferred, exchanged, canceled or disposed of in connection with or as
a result of any Acquisition Proposal that is in existence on or that otherwise
has been made prior to the first anniversary of the Termination Date (an
"Alternative Disposition"), then, within five business days after the closing
of such Alternative Disposition, the Stockholder shall tender and pay to, or
shall cause to be tendered and paid to, the Acquiror, or its designee, in
immediately available funds, 100% of the Profit realized from such Alternative
Disposition. As used in this Section 3(a), "Profit" shall mean an amount equal
to the excess, if any, of (i) the Alternative Transaction Consideration over
(ii) the Current Transaction Consideration. As used in this Section 3,
"Alternative Transaction Consideration" shall mean all cash, securities,
settlement or termination amounts, notes or other debt instruments, and other
consideration received or to be received, directly or indirectly, by the
Stockholder and his Affiliates (excluding officers and directors of the Target)
in connection with or as a result of such Alternative Disposition or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of Target) as a part of or in
connection with the Alternative Disposition or associated Acquisition Proposal.
As used in this Agreement, "Current Transaction Consideration" shall mean the
sum of (x) all amounts to be received, directly or indirectly, by Stockholder
and his Affiliates (excluding officers and directors of the Target) pursuant to
Article II of the Merger Agreement and (y) all other amounts to be received by
Stockholder, directly or indirectly, pursuant to the Offer or any of the other
transactions or agreements contemplated by the Merger Agreement (other than the
employment agreements contemplated by Section 7.02 thereof).
(b) For purposes of determining Profits under this Section 3,
(i) all non-cash items shall be valued based upon the fair market value thereof
as determined by an independent expert selected by Acquiror and who is
reasonably acceptable to Stockholder, (ii) all deferred payments or
consideration shall be discounted to reflect a market rate of net present value
thereof as determined by the above-referenced independent expert, (iii) all
contingent payments will be assumed to have been paid, (iv) if less than all of
the Stockholder's Shares are subject to the Alternative Disposition or Second
Transaction then the Current Transaction Consideration shall be deemed to be an
amount equal to the Current Transaction Consideration multiplied by a fraction,
the numerator of which is the number of the Stockholder's Shares sold,
transferred, exchanged, canceled or disposed of in such Alternative Disposition
or Second Transaction and the denominator of which is the total number of the
Stockholder's Shares, and (v) the principal amount of all loans made to
Stockholder by the acquiror or any Affiliate thereof, or loans to Stockholder
that are forgiven, shall be added to the Alternative Transaction Consideration
or the Second Transaction Consideration (as defined herein), as the case may
be. In the event any contingent payments included in the determination of
Profits ultimately are not paid pursuant to an Alternative Disposition, then
Acquiror shall reimburse Stockholder for any amounts paid to Acquiror hereunder
in respect of such uncollected contingent payments promptly after receipt of
written notice of such non payment.
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(c) In the event that after the date of this Agreement, the
amount of Merger Consideration or the consideration payable in respect of the
Warrants, Options and Convertible Notes as currently provided for in the Merger
Agreement is increased (a "Second Transaction"), then, as may be requested by
Acquiror, either (i) Stockholder shall, and shall cause each of its Affiliates
who Beneficially Own any of the Stockholder's Shares to, execute and deliver to
Acquiror such documents or instruments as may be necessary to waive the right
to receive the amount of such increase to the extent that such increase results
in any Profit or (ii) Stockholder shall tender and pay, or cause to be tendered
and paid, to Acquiror or its designee, in immediately available funds, 100% of
the Profit realized from such Second Transaction. As used in this Section 3(c),
"Profit" shall mean an amount equal to the excess, if any, of (y) the Second
Transaction Consideration over (z) the Current Transaction Consideration. As
used in this Agreement, "Second Transaction Consideration" shall mean all cash,
securities, settlement or termination amounts, notes or other debt instruments,
and other consideration received or to be received, directly or indirectly, by
the Stockholder and his Affiliates (excluding officers and directors of the
Target) in connection with or as a result of the Second Transaction or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of the Target) with the Target as
a part of or in connection with the Second Transaction.
4. Covenants, Representations and Warranties.
(a) The Stockholder hereby represents, warrants and covenants
to Acquiror and Acquisition Sub that:
(i) Ownership. As of the date of this
Agreement, the Shares set forth on Schedule A hereto constitute all of the
issued and outstanding Shares owned of record or Beneficially Owned by the
Stockholder. Except as otherwise set forth in Schedule A, the Stockholder has
sole power of disposition, sole power of conversion, sole power to demand
appraisal rights and sole power to vote upon and agree to all of the matters
set forth in this Agreement and the Merger Agreement, in each case with respect
to all of the Shares set forth on Schedule A hereto, with no material
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(ii) Power: Binding Agreement. The Stockholder
has the legal capacity, power and authority to enter into and perform all of
the Stockholder's obligations under this Agreement. This Agreement has been
duly and validly executed and delivered by the Stockholder and constitutes a
valid and binding agreement of the Stockholder, enforceable against the
Stockholder in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity. There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the
6
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Stockholder is trustee whose consent is required for the execution and delivery
of this Agreement or the consummation by the Stockholder of the transactions
contemplated hereby. If the Stockholder is married and the Stockholder's Shares
constitute community property, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of,
the Stockholder's spouse, enforceable against such person in accordance with
its terms. Contemporaneously with the execution of this Agreement, Stockholder
has delivered to Acquiror a legal opinion of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A. to the foregoing effect in form reasonably
satisfactory to Acquiror.
(iii) No Conflicts. Except for the filing of an
amendment to the Stockholder's Schedule 13D (if any), no filing with, and no
permit, authorization, consent or approval of, any state or federal public body
or authority is necessary for the execution of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with the Stockholder's
ability to perform his obligations hereunder, and none of the execution and
delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof shall (A) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, (B) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets, in each such
case except to the extent that any conflict, breach, default or violation would
not interfere with the ability of the Stockholder to perform its obligations
hereunder, or (C) to the knowledge of the Stockholder, trigger a "change in
control" or similar provision of any contract, agreement or understanding to
which the Target or any of Target's Subsidiaries is a party, or by which any of
their respective property or assets are bound.
(iv) No Encumbrances. Except as required by
Sections 2 and 3 of this Agreement, at all times thereafter during the term
hereof, all of the Stockholder's Shares (excluding Shares identified in
Schedule A hereto as Shares with respect to which Stockholder does not possess
sole power to dispose or direct the disposition) will be held by the
Stockholder, or by a nominee or custodian for the benefit of such Stockholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any liens, claims, understandings or arrangements that
do not limit or impair Stockholder's ability to perform his obligations under
this Agreement.
(v) No Solicitation. The Stockholder shall
comply with the terms of Section 6.06 of the Merger Agreement.
(vi) Restriction on Transfer, Proxies and
Non-Interference. From and after the date of this Agreement and ending as of
the first to occur of the Effective Time or the first anniversary of the
Termination Date, the Stockholder shall not, and shall cause each of his
Affiliates who Beneficially Own any of the Stockholder's Shares not to,
directly or indirectly, without the
7
<PAGE>
consent of Acquiror, in respect of any Acquisition Proposal or otherwise: (A)
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Stockholder's Shares, or any interest therein, (B) except as provided
herein, grant any proxies or powers of attorney, deposit any Stockholder's
Shares into a voting trust or enter into a voting agreement with respect to any
Stockholder's Shares, (C) enter into any agreement or arrangement providing for
any of the actions described in clause (A) or (B) above or (D) take any action
that could reasonably be expected to have the effect of preventing or disabling
the Stockholder from performing the Stockholder's obligations under this
Agreement.
(vii) Waiver of and Agreement Not to Assert
Appraisal Rights. The Stockholder hereby waives and agrees not to assert, and
shall cause any of its Affiliates who hold of record any of the Stockholder's
Shares to waive and not to assert, any appraisal rights with respect to the
Merger (or any Second Transaction) that the Stockholder or such Affiliate may
now or hereafter have with respect to any Shares (or any other shares of
capital stock of the Target that the Stockholder shall hold of record at the
time that Stockholder may be entitled to assert appraisal rights with respect
to the Merger or any Second Transaction) whether pursuant to Section 262 of the
Delaware General Corporate Law or otherwise.
(viii) Further Assurances. From time to time, at
Acquiror's request and without further consideration, the Stockholder shall
execute and deliver such additional documents as may be necessary or desirable
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement. The Stockholder shall
cooperate fully with Target and Acquiror in connection with their respective
efforts to fulfill the conditions to the Offer and the Merger set forth in the
Merger Agreement.
(ix) Waiver of Rights of First Refusal. Set
forth on Schedule B is a complete list of all rights of first refusal,
preemptive rights or similar rights held by the Stockholder and any of its
Affiliates to purchase Shares upon transfer (collectively, "Rights of First
Refusal"). From and after the date of this Agreement and ending as of the first
to occur of the Effective Time or the first anniversary of the Termination
Date, the Stockholder shall not, and shall cause each its Affiliates who hold
Rights of First Refusal not to, directly or indirectly, without the consent of
Acquiror, in respect of the Offer, the Merger, any Acquisition Proposal, any
Second Transaction or otherwise, exercise any of such Rights of First Refusal
to purchase or otherwise acquire Shares.
(b) Acquiror and Acquisition Sub hereby represent, warrant
and covenant to the Stockholder as follows:
(i) Organization, Standing and Corporate Power.
Each of Acquiror and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
adequate corporate power and authority to own its properties and carry on its
business as presently conducted. Each of Acquiror and Acquisition Sub has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement and to consummate the transactions contemplated hereby.
8
<PAGE>
(ii) Execution, Delivery and Performance by
Acquiror and Acquisition Sub. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Boards of Directors of Acquiror and Acquisition
Sub, and each of Acquiror and Acquisition Sub has taken all other actions
required by law, its Certificate of Incorporation and its Bylaws (except as
described in the Merger Agreement) to consummate the transactions contemplated
by this Agreement. This Agreement constitutes the valid and binding obligations
of Acquiror and Acquisition Sub and is enforceable in accordance with its
terms, except as enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
(c) Target hereby represents and warrants to Acquiror and
Acquisition Sub that the Board of Directors of Target (including any committee
of the independent directors thereof) has approved the terms of this Agreement
and the transactions contemplated herein and such approval is sufficient to
render inapplicable to this Agreement and the transactions contemplated herein
the provisions of Section 203 of the Delaware General Corporation Law.
5. Stop Transfer. From and after the date of this Agreement and ending
as of the first to occur of the Effective Time or the first anniversary of the
Termination Date, Stockholder will not request that Target register (and Target
agrees not to register) the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Stockholder's
Shares (excluding shares identified in Schedule A as Shares with respect to
which Stockholder does not possess sole power to dispose or direct the
disposition), or as otherwise contemplated hereby.
6. Recapitalization. In the event of a stock dividend or distribution,
or any change in the Shares (or any class thereof) by reason of any split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall include, without limitation, all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
(or any class thereof) may be changed or exchanged as may be appropriate to
reflect such event.
7. Stockholder Capacity. The Stockholder does not make any agreement
or understanding herein in the Stockholder's capacity as a director or officer
of the Target and nothing herein shall limit or affect any action taken by the
Stockholder in such capacity.
8. Merger Agreement and Options. The Stockholder hereby consents and
agrees to the treatment of each warrant, option or unsecured senior convertible
note of the Target Beneficially Owned by Stockholder or its Affiliates as set
forth in Article II of the Merger Agreement.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that all of the provisions of this
9
<PAGE>
Agreement other than Sections 4(c), 5 and this Section 9(b) may be amended
without the consent of the Target.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses or the addresses set forth on
the signature pages hereto:
<TABLE>
<CAPTION>
<S> <C>
If to Stockholder: Krassner Family Investments Limited Partnership
2040 N. Bay Road
Miami Beach, Florida 33140
Attn: Brad Krassner
copy to: Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
Museum Tower, Suite 2200
150 West Flagler Street
Miami, Florida 33130
Telecopy: (305) 789-3395
Attn: Teddy Klinghoffer
If to the Target: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Telecopy: (305) 532-4014
Attn: Robert Kreusler
copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attn: Gary Epstein
If to Acquiror or Acquisition Sub:
SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Telecopy: (212) 753-3188
Attn: Howard J. Tytel
copy to: Baker & McKenzie
Two Allen Center, Suite 1200
Houston, Texas 77002
Telecopy: (713) 427-5099
</TABLE>
10
<PAGE>
Attn: Amar Budarapu
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, then such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by the Stockholder of any covenants
or agreements contained in this Agreement will cause the Acquiror and
Acquisition Sub to sustain damages for which they would not have an adequate
remedy at law for money damages, and therefore each of the parties hereto
agrees that, in the event of any such breach, the Acquiror or Acquisition Sub
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief, without the necessity of
posting bond or proving actual damages, in addition to any other remedy to
which they may be entitled, at law or in equity.
(f) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise of any
such right, power or remedy by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(h) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto; provided that, in the event of
the Stockholder's death, the obligations of the Stockholder hereunder shall
attach to the Stockholder's Shares and shall be binding upon any Person to
which legal or beneficial ownership of such Shares shall pass, whether by
operation of Law or otherwise, including without limitation the Stockholder's
heirs, guardians, administrators or successors.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
11
<PAGE>
(j) Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State of Delaware in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non convenience or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph and shall
not be deemed to be a general submission to the jurisdiction of said Court or
in the State of Delaware other than for such purposes. Each party hereto hereby
waives any right to a trial by jury in connection with any such action, suit or
proceeding.
(k) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(1) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement. This
Agreement shall not be effective as to any party hereto until such time as this
Agreement or a counterpart thereof has been executed and delivered by each
party hereto.
(m) Trust Funds. In the event that any party hereto should
receive any funds that are to be paid to another party pursuant to the terms of
this Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay such
funds to the party entitled to receive such funds in accordance with this
Agreement.
10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Acquisition
Sub may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Acquiror or to any direct or indirect wholly-owned
subsidiary of Acquiror. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Stockholder agrees that this
Agreement, and the obligations of the Stockholder hereunder, shall attach to
the Stockholder's Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by operation of Law or
otherwise, including without limitation the Stockholder's heirs, guardians,
administrators or successors.
11. Termination. This Agreement shall terminate without any further
action on the part of any party hereto (a) upon the occurrence of a termination
of the Merger Agreement pursuant to Sections 8.01(a), 8.01(b)(i) (provided that
no Takeover Proposal has been made prior to the date of such termination) or
8.01(b)(ii) thereof; or (b) the date that Acquiror or Acquisition Sub shall
have purchased and paid for all the Stockholder's Shares pursuant to Section 2.
Upon such termination, this Agreement shall forthwith become void and of no
further force or effect.
[Signature page follows]
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
Krassner Family Investments Limited Partnership
By: It's General Partner, Krassner Investments, Inc.
a Nevada Corporation
/s/ Brad Krassner
----------------------------------
Name: Brad Krassner
STOCKHOLDER SPOUSE - if community property State
----------------------------------
Name:
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
-------------------------------
Thomas P. Benson
Chief Financial Officer
MWE ACQUISITION CORP.
By: /s/ Thomas P. Benson
-------------------------------
Thomas P. Benson
Chief Financial Officer
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Brad Krassner
-------------------------------
Name: Brad Krassner
Title: Co-Chairman of the Board and
Chief Executive Officer
13
<PAGE>
SCHEDULE A
Class of Shares Number of Shares Record Owner Beneficial Owner
- --------------- ---------------- ------------ -----------------
Common Stock 3,217,498 Krassner Family Brad Krassner
Investment Limited
Partnership
<PAGE>
SCHEDULE B
None
B-1
<PAGE>
Exhibit (c)(3)
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of August 6, 1998 (this
"Agreement"), is made and entered into by and among SFX Entertainment, Inc., a
Delaware corporation ("Acquiror"), MWE Acquisition Corp., a Delaware
corporation and a direct wholly-owned subsidiary of Acquiror ("Acquisition
Sub"), Lee Marshall ("Stockholder"), and Magicworks Entertainment Incorporated,
a Delaware corporation ("Target").
RECITALS
WHEREAS, concurrently herewith, Acquiror, Acquisition Sub and the
Target are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which (a) Acquiror will make a cash tender offer (as such offer may be amended
from time to time as permitted by the Merger Agreement (the "Offer") by
Acquisition Sub for all the issued and outstanding shares of common stock, par
value $.001 per share, of Target (the "Target Common Stock"), and (b)
Acquisition Sub will be merged with and into Target (the "Merger"); capitalized
terms used but not defined herein and defined in the Merger Agreement have the
respective meanings ascribed to them in the Merger Agreement; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Merger Agreement,
the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENTS
1. Definitions. For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any agreement, letter
of intent, proposal or offer (other than the transactions contemplated in the
Merger Agreement) involving the Target or any of its Subsidiaries for, or an
inquiry or indication of interest that reasonably could be expected to lead to:
(i) any merger, consolidation, share exchange, recapitalization,
reorganization, dissolution, liquidation, business combination or other similar
transaction with the Target or any of its Subsidiaries, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of a material portion
of the assets of the Target and its Subsidiaries, taken as a whole, in a single
transaction or series of transactions or (iii) any tender offer or exchange
offer for all or any portion of the outstanding shares of capital stock of the
Target or any of its Subsidiaries or the filing of a registration statement
under the Securities Act of 1933 in connection therewith, but shall not include
the Offer, the Merger Agreement or Second Transaction (as defined herein).
<PAGE>
(b) "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such first Person.
(c) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all other
Persons (who are Affiliates of such Person excluding officers and directors of
the Target) who together with such Person would constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act and in any event with respect
to the Stockholder shall include Shares held of record by the Stockholder's
spouse and children.
(d) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
(e) "Shares" shall mean (i) shares of Target Common Stock and
(ii) shares of preferred stock, par value $.00l per share, of the Target.
(f) "Stockholder's Shares" shall mean all Shares held of
record or Beneficially Owned by the Stockholder, whether currently issued or
hereinafter acquired, and for the purposes of Section 3 of this Agreement shall
also include, without duplication, any securities convertible into, or
exercisable or exchangeable for, Shares, including without limitation the
unsecured senior convertible notes of the Target and any options, warrants or
stock appreciation rights held of record or Beneficially Owned by the
Stockholder (collectively, the "Convertible Securities").
(g) "Termination Date" shall mean the date that the Merger
Agreement has been terminated.
2. Provisions Concerning Shares.
(a) Acquisition Sub hereby agrees to purchase, and
Stockholder agrees to sell, or cause to be sold, all such Stockholder's Shares
(other than the Convertible Securities) at a price per share equal to the Per
Share Amount, subject only to the condition (which may be waived only by
Acquisition Sub in its sole discretion) that Acquisition Sub shall have
accepted for payment and paid for shares of Target Common Stock pursuant to the
Offer (the "Purchase"). The closing of the Purchase shall be effected by the
Stockholder validly tendering (or causing the record holder of such shares to
validly tender) all such Stockholder's Shares (other than the Convertible
Securities) into the Offer, and by Acquisition Sub accepting for payment and
paying for such Shares pursuant to the terms of the Offer. In furtherance of
the foregoing, Stockholder hereby agrees that it shall validly tender and not
withdraw the Stockholder's Shares (other than the Convertible Securities) into
the Offer. Subject to the terms and conditions of the Offer, Acquiror shall
comply, and shall cause Acquisition Sub to comply, with all provisions of
Article I of the Merger Agreement.
2
<PAGE>
(b) If for any reason any Stockholder's Shares (other than
the Convertible Securities) are not purchased in the Offer and either (i) other
shares of Target Common Stock are purchased in the Offer or (ii) the Offer is
not consummated due to a failure of the Minimum Condition, Acquisition Sub
shall purchase, and Stockholder shall sell, all of Stockholder's Shares (other
than the Convertible Securities) at a price per Share equal to the Per Share
Amount within five business days (after obtaining all applicable consents and
approvals) following the expiration of the Offer at a time and place to be
mutually agreed to between Acquisition Sub and Stockholder. Acquiror shall
provide or cause to be provided to Acquisition Sub on a timely basis the funds
sufficient to accept for payment, and pay for, any and all Shares that
Acquisition Sub becomes obligated to accept for payment, and pay for, pursuant
to the Offer or otherwise hereunder.
(c) From and after the date of this Agreement and ending as
of the first to occur of the Effective Time or the four month anniversary of
the Termination Date, at any meeting of the holders of Shares, however called,
or in any other circumstance upon which the vote, consent or other approval of
holders of one or more class or series of Shares is sought, the Stockholder
shall vote or cause to be voted (including by written consent, if applicable)
the issued and outstanding Stockholder's Shares (and each class thereof)
entitled to vote thereon, and those Shares entitled to vote thereon for which
Stockholder has the right to direct or control the vote, (i) in favor of the
Merger, the execution and delivery by the Target of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof, (ii) against any action or agreement that would result in a
breach in any material respect of any covenant, representation or warranty or
any other material obligation or agreement of the Target under the Merger
Agreement or this Agreement and (iii) against the following actions (other than
the Merger and the transactions contemplated by the Merger Agreement): (A) any
Acquisition Proposal other than an Acquisition Proposal with Acquiror or any
Affiliate thereof and (B) to the extent that such are intended to, or could
reasonably be expected to, (1) impede, interfere with, delay, postpone or
materially adversely affect the Merger or the transactions contemplated by the
Merger Agreement or this Agreement or (2) implement or lead to any Acquisition
Proposal (other than an Acquisition Proposal with Acquiror or any Affiliate
thereof): (w) any change in a majority of the persons who constitute the board
of directors of the Target; (x) any change in the present capitalization of the
Target or any amendment of the Target's Certificate of Incorporation or Bylaws;
or (y) any other material change in the Target's corporate structure or
business; provided that if any Second Transaction (as defined in Section 3(c)
of this Agreement) provides for Second Transaction Consideration (as defined in
3(c) of this Agreement) that is less than the Current Transaction Consideration
(as defined in Section 3(a) of this Agreement), as such amounts shall be
determined in accordance with Section 3 of this Agreement, then nothing herein
shall require the Stockholder to vote in favor of the Second Transaction. In
addition to the other covenants and agreements of the Stockholder provided for
elsewhere in this Agreement, during the above-described period the Stockholder
shall not enter into any agreement or understanding with any Person or entity
the effect of which would be inconsistent with or violate the provisions and
agreements contained in this Section 2. Nothing herein shall in any way
restrict or limit the Stockholder from taking any action in his capacity as a
director or officer of the Target or otherwise fulfilling his fiduciary
obligations as a director and officer of the Target.
(d) Stockholder, with respect to the Shares Beneficially
Owned by Stockholder, does hereby constitute and appoint Acquiror, or any
nominee of Acquiror, with full power of
3
<PAGE>
substitution, from the date hereof to the earlier to occur of the Effective
Time or the four month anniversary of the Termination Date, as its true and
lawful attorney and proxy (its "Proxy"), for and in its name, place and stead,
to demand that the Secretary of the Target call a special meeting of the
stockholders of the Target for the purpose of considering any action related to
the Merger Agreement or the Merger and to vote the Shares as its Proxy, at
every annual, special or adjourned meeting of the stockholders of the Target,
including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Target that the laws of the State
of Delaware may permit or require, in connection with the matters described in
the foregoing Section 2(c). The Proxy may not exercise this proxy on any other
matter. The Stockholder may vote the Shares on all such other matters. THIS
PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The
Stockholder represents that any proxies heretofore given in respect of the
Stockholder's Shares are not irrevocable, and that any such proxies are hereby
revoked.
(e) Stockholder hereby permits Acquiror and Acquisition Sub
to publish and disclose in the Offer Documents (including all documents and
schedules filed with the SEC) and, if approval of Target's stockholders is
required under applicable law, in the Proxy Statement its identity and
ownership of the Stockholder's Shares and the nature of its commitments,
arrangements and understandings under this Agreement.
3. Capture.
4
<PAGE>
(a) In the event that any of the Stockholder's Shares are
sold, transferred, exchanged, canceled or disposed of in connection with or as
a result of any Acquisition Proposal that is in existence on or that otherwise
has been made prior to the first anniversary of the Termination Date (an
"Alternative Disposition"), then, within five business days after the closing
of such Alternative Disposition, the Stockholder shall tender and pay to, or
shall cause to be tendered and paid to, the Acquiror, or its designee, in
immediately available funds, 100% of the Profit realized from such Alternative
Disposition. As used in this Section 3(a), "Profit" shall mean an amount equal
to the excess, if any, of (i) the Alternative Transaction Consideration over
(ii) the Current Transaction Consideration. As used in this Section 3,
"Alternative Transaction Consideration" shall mean all cash, securities,
settlement or termination amounts, notes or other debt instruments, and other
consideration received or to be received, directly or indirectly, by the
Stockholder and his Affiliates (excluding officers and directors of the Target)
in connection with or as a result of such Alternative Disposition or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of Target) as a part of or in
connection with the Alternative Disposition or associated Acquisition Proposal.
As used in this Agreement, "Current Transaction Consideration" shall mean the
sum of (x) all amounts to be received, directly or indirectly, by Stockholder
and his Affiliates (excluding officers and directors of the Target) pursuant to
Article II of the Merger Agreement and (y) all other amounts to be received by
Stockholder, directly or indirectly, pursuant to the Offer or any of the other
transactions or agreements contemplated by the Merger Agreement (other than the
employment agreements contemplated by Section 7.02 thereof).
(b) For purposes of determining Profits under this Section 3,
(i) all non-cash items shall be valued based upon the fair market value thereof
as determined by an independent expert selected by Acquiror and who is
reasonably acceptable to Stockholder, (ii) all deferred payments or
consideration shall be discounted to reflect a market rate of net present value
thereof as determined by the above-referenced independent expert, (iii) all
contingent payments will be assumed to have been paid, (iv) if less than all of
the Stockholder's Shares are subject to the Alternative Disposition or Second
Transaction then the Current Transaction Consideration shall be deemed to be an
amount equal to the Current Transaction Consideration multiplied by a fraction,
the numerator of which is the number of the Stockholder's Shares sold,
transferred, exchanged, canceled or disposed of in such Alternative Disposition
or Second Transaction and the denominator of which is the total number of the
Stockholder's Shares, and (v) the principal amount of all loans made to
Stockholder by the acquiror or any Affiliate thereof, or loans to Stockholder
that are forgiven, shall be added to the Alternative Transaction Consideration
or the Second Transaction Consideration (as defined herein), as the case may
be. In the event any contingent payments included in the determination of
Profits ultimately are not paid pursuant to an Alternative Disposition, then
Acquiror shall reimburse Stockholder for any amounts paid to Acquiror hereunder
in respect of such uncollected contingent payments promptly after receipt of
written notice of such non payment.
5
<PAGE>
(c) In the event that after the date of this Agreement, the
amount of Merger Consideration or the consideration payable in respect of the
Warrants, Options and Convertible Notes as currently provided for in the Merger
Agreement is increased (a "Second Transaction"), then, as may be requested by
Acquiror, either (i) Stockholder shall, and shall cause each of its Affiliates
who Beneficially Own any of the Stockholder's Shares to, execute and deliver to
Acquiror such documents or instruments as may be necessary to waive the right
to receive the amount of such increase to the extent that such increase results
in any Profit or (ii) Stockholder shall tender and pay, or cause to be tendered
and paid, to Acquiror or its designee, in immediately available funds, 100% of
the Profit realized from such Second Transaction. As used in this Section 3(c),
"Profit" shall mean an amount equal to the excess, if any, of (y) the Second
Transaction Consideration over (z) the Current Transaction Consideration. As
used in this Agreement, "Second Transaction Consideration" shall mean all cash,
securities, settlement or termination amounts, notes or other debt instruments,
and other consideration received or to be received, directly or indirectly, by
the Stockholder and his Affiliates (excluding officers and directors of the
Target) in connection with or as a result of the Second Transaction or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of the Target) with the Target as
a part of or in connection with the Second Transaction.
4. Covenants, Representations and Warranties.
(a) The Stockholder hereby represents, warrants and covenants
to Acquiror and Acquisition Sub that:
(i) Ownership. As of the date of this Agreement, the
Shares set forth on Schedule A hereto constitute all of the issued and
outstanding Shares owned of record or Beneficially Owned by the Stockholder.
Except as otherwise set forth in Schedule A, the Stockholder has sole power of
disposition, sole power of conversion, sole power to demand appraisal rights
and sole power to vote upon and agree to all of the matters set forth in this
Agreement and the Merger Agreement, in each case with respect to all of the
Shares set forth on Schedule A hereto, with no material limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(ii) Power: Binding Agreement. The Stockholder has
the legal capacity, power and authority to enter into and perform all of the
Stockholder's obligations under this Agreement. This Agreement has been duly
and validly executed and delivered by the Stockholder and constitutes a valid
and binding agreement of the Stockholder, enforceable against the Stockholder
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which the
6
<PAGE>
Stockholder is trustee whose consent is required for the execution and delivery
of this Agreement or the consummation by the Stockholder of the transactions
contemplated hereby. If the Stockholder is married and the Stockholder's Shares
constitute community property, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of,
the Stockholder's spouse, enforceable against such person in accordance with
its terms. Contemporaneously with the execution of this Agreement, Stockholder
has delivered to Acquiror a legal opinion of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A. to the foregoing effect in form reasonably
satisfactory to Acquiror.
(iii) No Conflicts. Except for the filing of an
amendment to the Stockholder's Schedule 13D (if any), no filing with, and no
permit, authorization, consent or approval of, any state or federal public body
or authority is necessary for the execution of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with the Stockholder's
ability to perform his obligations hereunder, and none of the execution and
delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof shall (A) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, (B) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets, in each such
case except to the extent that any conflict, breach, default or violation would
not interfere with the ability of the Stockholder to perform its obligations
hereunder, or (C) to the knowledge of the Stockholder, trigger a "change in
control" or similar provision of any contract, agreement or understanding to
which the Target or any of Target's Subsidiaries is a party, or by which any of
their respective property or assets are bound.
(iv) No Encumbrances. Except as required by Sections
2 and 3 of this Agreement, at all times thereafter during the term hereof, all
of the Stockholder's Shares (excluding Shares identified in Schedule A hereto
as Shares with respect to which Stockholder does not possess sole power to
dispose or direct the disposition) will be held by the Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and clear of all
liens, claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever, except for
any liens, claims, understandings or arrangements that do not limit or impair
Stockholder's ability to perform his obligations under this Agreement.
(v) No Solicitation. The Stockholder shall comply
with the terms of Section 6.06 of the Merger Agreement.
(vi) Restriction on Transfer, Proxies and
Non-Interference. From and after the date of this Agreement and ending as of
the first to occur of the Effective Time or the first anniversary of the
Termination Date, the Stockholder shall not, and shall cause each of his
Affiliates who Beneficially Own any of the Stockholder's Shares not to,
directly or indirectly, without the
7
<PAGE>
consent of Acquiror, in respect of any Acquisition Proposal or otherwise: (A)
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Stockholder's Shares, or any interest therein, (B) except as provided
herein, grant any proxies or powers of attorney, deposit any Stockholder's
Shares into a voting trust or enter into a voting agreement with respect to any
Stockholder's Shares, (C) enter into any agreement or arrangement providing for
any of the actions described in clause (A) or (B) above or (D) take any action
that could reasonably be expected to have the effect of preventing or disabling
the Stockholder from performing the Stockholder's obligations under this
Agreement.
(vii) Waiver of and Agreement Not to Assert
Appraisal Rights. The Stockholder hereby waives and agrees not to assert, and
shall cause any of its Affiliates who hold of record any of the Stockholder's
Shares to waive and not to assert, any appraisal rights with respect to the
Merger (or any Second Transaction) that the Stockholder or such Affiliate may
now or hereafter have with respect to any Shares (or any other shares of
capital stock of the Target that the Stockholder shall hold of record at the
time that Stockholder may be entitled to assert appraisal rights with respect
to the Merger or any Second Transaction) whether pursuant to Section 262 of the
Delaware General Corporate Law or otherwise.
(viii) Further Assurances. From time to time, at
Acquiror's request and without further consideration, the Stockholder shall
execute and deliver such additional documents as may be necessary or desirable
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement. The Stockholder shall
cooperate fully with Target and Acquiror in connection with their respective
efforts to fulfill the conditions to the Offer and the Merger set forth in the
Merger Agreement.
(ix) Waiver of Rights of First Refusal. Set forth on
Schedule B is a complete list of all rights of first refusal, preemptive rights
or similar rights held by the Stockholder and any of its Affiliates to purchase
Shares upon transfer (collectively, "Rights of First Refusal"). From and after
the date of this Agreement and ending as of the first to occur of the Effective
Time or the first anniversary of the Termination Date, the Stockholder shall
not, and shall cause each its Affiliates who hold Rights of First Refusal not
to, directly or indirectly, without the consent of Acquiror, in respect of the
Offer, the Merger, any Acquisition Proposal, any Second Transaction or
otherwise, exercise any of such Rights of First Refusal to purchase or
otherwise acquire Shares.
(b) Acquiror and Acquisition Sub hereby represent, warrant
and covenant to the Stockholder as follows:
(i) Organization, Standing and Corporate Power. Each
of Acquiror and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
adequate corporate power and authority to own its properties and carry on its
business as presently conducted. Each of Acquiror and Acquisition Sub has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement and to consummate the transactions contemplated hereby.
8
<PAGE>
(ii) Execution, Delivery and Performance by Acquiror
and Acquisition Sub. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of Acquiror and Acquisition Sub, and each
of Acquiror and Acquisition Sub has taken all other actions required by law,
its Certificate of Incorporation and its Bylaws (except as described in the
Merger Agreement) to consummate the transactions contemplated by this
Agreement. This Agreement constitutes the valid and binding obligations of
Acquiror and Acquisition Sub and is enforceable in accordance with its terms,
except as enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
(c) Target hereby represents and warrants to Acquiror and
Acquisition Sub that the Board of Directors of Target (including any committee
of the independent directors thereof) has approved the terms of this Agreement
and the transactions contemplated herein and such approval is sufficient to
render inapplicable to this Agreement and the transactions contemplated herein
the provisions of Section 203 of the Delaware General Corporation Law.
5. Stop Transfer. From and after the date of this Agreement and ending
as of the first to occur of the Effective Time or the first anniversary of the
Termination Date, Stockholder will not request that Target register (and Target
agrees not to register) the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Stockholder's
Shares (excluding shares identified in Schedule A as Shares with respect to
which Stockholder does not possess sole power to dispose or direct the
disposition), or as otherwise contemplated hereby.
6. Recapitalization. In the event of a stock dividend or distribution,
or any change in the Shares (or any class thereof) by reason of any split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall include, without limitation, all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
(or any class thereof) may be changed or exchanged as may be appropriate to
reflect such event.
7. Stockholder Capacity. The Stockholder does not make any agreement
or understanding herein in the Stockholder's capacity as a director or officer
of the Target and nothing herein shall limit or affect any action taken by the
Stockholder in such capacity.
8. Merger Agreement and Options. The Stockholder hereby consents and
agrees to the treatment of each warrant, option or unsecured senior convertible
note of the Target Beneficially Owned by Stockholder or its Affiliates as set
forth in Article II of the Merger Agreement.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that all of the provisions of this
9
<PAGE>
Agreement other than Sections 4(c), 5 and this Section 9(b) may be amended
without the consent of the Target.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses or the addresses set forth on
the signature pages hereto:
<TABLE>
<CAPTION>
<S> <C>
If to Stockholder: Joe Marsh
605 Surfside Drive
Akron, Ohio 44319
Telecopy: (330) 645-9309
copy to: Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Telecopy: (216) 479-8780
Attn: Jeffrey J. Margulies
If to the Target: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Telecopy: (305) 532-4014
Attn: Robert Kreusler
copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attn: Gary Epstein
If to Acquiror or Acquisition Sub:
SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Telecopy: (212) 753-3188
Attn: Howard J. Tytel
copy to: Baker & McKenzie
Two Allen Center, Suite 1200
Houston, Texas 77002
Telecopy: (713) 427-5099
</TABLE>
10
<PAGE>
Attn: Amar Budarapu
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, then such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by the Stockholder of any covenants
or agreements contained in this Agreement will cause the Acquiror and
Acquisition Sub to sustain damages for which they would not have an adequate
remedy at law for money damages, and therefore each of the parties hereto
agrees that, in the event of any such breach, the Acquiror or Acquisition Sub
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief, without the necessity of
posting bond or proving actual damages, in addition to any other remedy to
which they may be entitled, at law or in equity.
(f) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise of any
such right, power or remedy by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(h) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto; provided that, in the event of
the Stockholder's death, the obligations of the Stockholder hereunder shall
attach to the Stockholder's Shares and shall be binding upon any Person to
which legal or beneficial ownership of such Shares shall pass, whether by
operation of Law or otherwise, including without limitation the Stockholder's
heirs, guardians, administrators or successors.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
11
<PAGE>
(j) Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State of Delaware in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non convenience or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph and shall
not be deemed to be a general submission to the jurisdiction of said Court or
in the State of Delaware other than for such purposes. Each party hereto hereby
waives any right to a trial by jury in connection with any such action, suit or
proceeding.
(k) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(1) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement. This
Agreement shall not be effective as to any party hereto until such time as this
Agreement or a counterpart thereof has been executed and delivered by each
party hereto.
(m) Trust Funds. In the event that any party hereto should
receive any funds that are to be paid to another party pursuant to the terms of
this Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay such
funds to the party entitled to receive such funds in accordance with this
Agreement.
10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Acquisition
Sub may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Acquiror or to any direct or indirect wholly-owned
subsidiary of Acquiror. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Stockholder agrees that this
Agreement, and the obligations of the Stockholder hereunder, shall attach to
the Stockholder's Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by operation of Law or
otherwise, including without limitation the Stockholder's heirs, guardians,
administrators or successors.
11. Termination. This Agreement shall terminate without any further
action on the part of any party hereto (a) upon the occurrence of a termination
of the Merger Agreement pursuant to Sections 8.01(a), 8.01(b)(i) (provided that
no Takeover Proposal has been made prior to the date of such termination) or
8.01(b)(ii) thereof; or (b) the date that Acquiror or Acquisition Sub shall
have purchased and paid for all the Stockholder's Shares pursuant to Section 2.
Upon such termination, this Agreement shall forthwith become void and of no
further force or effect.
[Signature page follows]
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
STOCKHOLDER
/s/ Joe Marsh
-----------------------------------
Name: Joe Marsh
STOCKHOLDER SPOUSE - if community property State
-----------------------------------
Name:
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MWE ACQUISITION CORP.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Brad Krassner
------------------
Name: Brad Krassner
Title: Co-Chairman of the Board and
Chief Executive Officer
13
<PAGE>
SCHEDULE A
Class of Shares Number of Shares Record Owner Beneficial Owner
- --------------- ---------------- ------------ ----------------
Common Stock 8,487,012 Joe Marsh Joe Marsh
<PAGE>
SCHEDULE B
None
B-1
<PAGE>
Exhibit (c)(4)
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of August 6, 1998 (this
"Agreement"), is made and entered into by and among SFX Entertainment, Inc., a
Delaware corporation ("Acquiror"), MWE Acquisition Corp., a Delaware
corporation and a direct wholly-owned subsidiary of Acquiror ("Acquisition
Sub"), Lee Marshall ("Stockholder"), and Magicworks Entertainment Incorporated,
a Delaware corporation ("Target").
RECITALS
WHEREAS, concurrently herewith, Acquiror, Acquisition Sub and the
Target are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which (a) Acquiror will make a cash tender offer (as such offer may be amended
from time to time as permitted by the Merger Agreement (the "Offer") by
Acquisition Sub for all the issued and outstanding shares of common stock, par
value $.001 per share, of Target (the "Target Common Stock"), and (b)
Acquisition Sub will be merged with and into Target (the "Merger"); capitalized
terms used but not defined herein and defined in the Merger Agreement have the
respective meanings ascribed to them in the Merger Agreement; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Merger Agreement,
the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENTS
1. Definitions. For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any agreement, letter
of intent, proposal or offer (other than the transactions contemplated in the
Merger Agreement) involving the Target or any of its Subsidiaries for, or an
inquiry or indication of interest that reasonably could be expected to lead to:
(i) any merger, consolidation, share exchange, recapitalization,
reorganization, dissolution, liquidation, business combination or other similar
transaction with the Target or any of its Subsidiaries, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of a material portion
of the assets of the Target and its Subsidiaries, taken as a whole, in a single
transaction or series of transactions or (iii) any tender offer or exchange
offer for all or any portion of the outstanding shares of capital stock of the
Target or any of its Subsidiaries or the filing of a registration statement
under the Securities Act of 1933 in connection therewith, but shall not include
the Offer, the Merger Agreement or Second Transaction (as defined herein).
<PAGE>
(b) "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such first Person.
(c) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all other
Persons (who are Affiliates of such Person excluding officers and directors of
the Target) who together with such Person would constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act and in any event with respect
to the Stockholder shall include Shares held of record by the Stockholder's
spouse and children.
(d) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
(e) "Shares" shall mean (i) shares of Target Common Stock and
(ii) shares of preferred stock, par value $.00l per share, of the Target.
(f) "Stockholder's Shares" shall mean all Shares held of
record or Beneficially Owned by the Stockholder, whether currently issued or
hereinafter acquired, and for the purposes of Section 3 of this Agreement shall
also include, without duplication, any securities convertible into, or
exercisable or exchangeable for, Shares, including without limitation the
unsecured senior convertible notes of the Target and any options, warrants or
stock appreciation rights held of record or Beneficially Owned by the
Stockholder (collectively, the "Convertible Securities").
(g) "Termination Date" shall mean the date that the Merger
Agreement has been terminated.
2. Provisions Concerning Shares.
(a) Acquisition Sub hereby agrees to purchase, and
Stockholder agrees to sell, or cause to be sold, all such Stockholder's Shares
(other than the Convertible Securities) at a price per share equal to the Per
Share Amount, subject only to the condition (which may be waived only by
Acquisition Sub in its sole discretion) that Acquisition Sub shall have
accepted for payment and paid for shares of Target Common Stock pursuant to the
Offer (the "Purchase"). The closing of the Purchase shall be effected by the
Stockholder validly tendering (or causing the record holder of such shares to
validly tender) all such Stockholder's Shares (other than the Convertible
Securities) into the Offer, and by Acquisition Sub accepting for payment and
paying for such Shares pursuant to the terms of the Offer. In furtherance of
the foregoing, Stockholder hereby agrees that it shall validly tender and not
withdraw the Stockholder's Shares (other than the Convertible Securities) into
the Offer. Subject to the terms and conditions of the Offer, Acquiror shall
comply, and shall cause Acquisition Sub to comply, with all provisions of
Article I of the Merger Agreement.
2
<PAGE>
(b) If for any reason any Stockholder's Shares (other than
the Convertible Securities) are not purchased in the Offer and either (i) other
shares of Target Common Stock are purchased in the Offer or (ii) the Offer is
not consummated due to a failure of the Minimum Condition, Acquisition Sub
shall purchase, and Stockholder shall sell, all of Stockholder's Shares (other
than the Convertible Securities) at a price per Share equal to the Per Share
Amount within five business days (after obtaining all applicable consents and
approvals) following the expiration of the Offer at a time and place to be
mutually agreed to between Acquisition Sub and Stockholder. Acquiror shall
provide or cause to be provided to Acquisition Sub on a timely basis the funds
sufficient to accept for payment, and pay for, any and all Shares that
Acquisition Sub becomes obligated to accept for payment, and pay for, pursuant
to the Offer or otherwise hereunder.
(c) From and after the date of this Agreement and ending as
of the first to occur of the Effective Time or the four month anniversary of
the Termination Date, at any meeting of the holders of Shares, however called,
or in any other circumstance upon which the vote, consent or other approval of
holders of one or more class or series of Shares is sought, the Stockholder
shall vote or cause to be voted (including by written consent, if applicable)
the issued and outstanding Stockholder's Shares (and each class thereof)
entitled to vote thereon, and those Shares entitled to vote thereon for which
Stockholder has the right to direct or control the vote, (i) in favor of the
Merger, the execution and delivery by the Target of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof, (ii) against any action or agreement that would result in a
breach in any material respect of any covenant, representation or warranty or
any other material obligation or agreement of the Target under the Merger
Agreement or this Agreement and (iii) against the following actions (other than
the Merger and the transactions contemplated by the Merger Agreement): (A) any
Acquisition Proposal other than an Acquisition Proposal with Acquiror or any
Affiliate thereof and (B) to the extent that such are intended to, or could
reasonably be expected to, (1) impede, interfere with, delay, postpone or
materially adversely affect the Merger or the transactions contemplated by the
Merger Agreement or this Agreement or (2) implement or lead to any Acquisition
Proposal (other than an Acquisition Proposal with Acquiror or any Affiliate
thereof): (w) any change in a majority of the persons who constitute the board
of directors of the Target; (x) any change in the present capitalization of the
Target or any amendment of the Target's Certificate of Incorporation or Bylaws;
or (y) any other material change in the Target's corporate structure or
business; provided that if any Second Transaction (as defined in Section 3(c)
of this Agreement) provides for Second Transaction Consideration (as defined in
3(c) of this Agreement) that is less than the Current Transaction Consideration
(as defined in Section 3(a) of this Agreement), as such amounts shall be
determined in accordance with Section 3 of this Agreement, then nothing herein
shall require the Stockholder to vote in favor of the Second Transaction. In
addition to the other covenants and agreements of the Stockholder provided for
elsewhere in this Agreement, during the above-described period the Stockholder
shall not enter into any agreement or understanding with any Person or entity
the effect of which would be inconsistent with or violate the provisions and
agreements contained in this Section 2. Nothing herein shall in any way
restrict or limit the Stockholder from taking any action in his capacity as a
director or officer of the Target or otherwise fulfilling his fiduciary
obligations as a director and officer of the Target.
(d) Stockholder, with respect to the Shares Beneficially
Owned by Stockholder, does hereby constitute and appoint Acquiror, or any
nominee of Acquiror, with full power of
3
<PAGE>
substitution, from the date hereof to the earlier to occur of the Effective
Time or the four month anniversary of the Termination Date, as its true and
lawful attorney and proxy (its "Proxy"), for and in its name, place and stead,
to demand that the Secretary of the Target call a special meeting of the
stockholders of the Target for the purpose of considering any action related to
the Merger Agreement or the Merger and to vote the Shares as its Proxy, at
every annual, special or adjourned meeting of the stockholders of the Target,
including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Target that the laws of the State
of Delaware may permit or require, in connection with the matters described in
the foregoing Section 2(c). The Proxy may not exercise this proxy on any other
matter. The Stockholder may vote the Shares on all such other matters. THIS
PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The
Stockholder represents that any proxies heretofore given in respect of the
Stockholder's Shares are not irrevocable, and that any such proxies are hereby
revoked.
(e) Stockholder hereby permits Acquiror and Acquisition Sub
to publish and disclose in the Offer Documents (including all documents and
schedules filed with the SEC) and, if approval of Target's stockholders is
required under applicable law, in the Proxy Statement its identity and
ownership of the Stockholder's Shares and the nature of its commitments,
arrangements and understandings under this Agreement.
3. Capture.
4
<PAGE>
(a) In the event that any of the Stockholder's Shares are
sold, transferred, exchanged, canceled or disposed of in connection with or as
a result of any Acquisition Proposal that is in existence on or that otherwise
has been made prior to the first anniversary of the Termination Date (an
"Alternative Disposition"), then, within five business days after the closing
of such Alternative Disposition, the Stockholder shall tender and pay to, or
shall cause to be tendered and paid to, the Acquiror, or its designee, in
immediately available funds, 100% of the Profit realized from such Alternative
Disposition. As used in this Section 3(a), "Profit" shall mean an amount equal
to the excess, if any, of (i) the Alternative Transaction Consideration over
(ii) the Current Transaction Consideration. As used in this Section 3,
"Alternative Transaction Consideration" shall mean all cash, securities,
settlement or termination amounts, notes or other debt instruments, and other
consideration received or to be received, directly or indirectly, by the
Stockholder and his Affiliates (excluding officers and directors of the Target)
in connection with or as a result of such Alternative Disposition or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of Target) as a part of or in
connection with the Alternative Disposition or associated Acquisition Proposal.
As used in this Agreement, "Current Transaction Consideration" shall mean the
sum of (x) all amounts to be received, directly or indirectly, by Stockholder
and his Affiliates (excluding officers and directors of the Target) pursuant to
Article II of the Merger Agreement and (y) all other amounts to be received by
Stockholder, directly or indirectly, pursuant to the Offer or any of the other
transactions or agreements contemplated by the Merger Agreement (other than the
employment agreements contemplated by Section 7.02 thereof).
(b) For purposes of determining Profits under this Section 3,
(i) all non-cash items shall be valued based upon the fair market value thereof
as determined by an independent expert selected by Acquiror and who is
reasonably acceptable to Stockholder, (ii) all deferred payments or
consideration shall be discounted to reflect a market rate of net present value
thereof as determined by the above-referenced independent expert, (iii) all
contingent payments will be assumed to have been paid, (iv) if less than all of
the Stockholder's Shares are subject to the Alternative Disposition or Second
Transaction then the Current Transaction Consideration shall be deemed to be an
amount equal to the Current Transaction Consideration multiplied by a fraction,
the numerator of which is the number of the Stockholder's Shares sold,
transferred, exchanged, canceled or disposed of in such Alternative Disposition
or Second Transaction and the denominator of which is the total number of the
Stockholder's Shares, and (v) the principal amount of all loans made to
Stockholder by the acquiror or any Affiliate thereof, or loans to Stockholder
that are forgiven, shall be added to the Alternative Transaction Consideration
or the Second Transaction Consideration (as defined herein), as the case may
be. In the event any contingent payments included in the determination of
Profits ultimately are not paid pursuant to an Alternative Disposition, then
Acquiror shall reimburse Stockholder for any amounts paid to Acquiror hereunder
in respect of such uncollected contingent payments promptly after receipt of
written notice of such non payment.
5
<PAGE>
(c) In the event that after the date of this Agreement, the
amount of Merger Consideration or the consideration payable in respect of the
Warrants, Options and Convertible Notes as currently provided for in the Merger
Agreement is increased (a "Second Transaction"), then, as may be requested by
Acquiror, either (i) Stockholder shall, and shall cause each of its Affiliates
who Beneficially Own any of the Stockholder's Shares to, execute and deliver to
Acquiror such documents or instruments as may be necessary to waive the right
to receive the amount of such increase to the extent that such increase results
in any Profit or (ii) Stockholder shall tender and pay, or cause to be tendered
and paid, to Acquiror or its designee, in immediately available funds, 100% of
the Profit realized from such Second Transaction. As used in this Section 3(c),
"Profit" shall mean an amount equal to the excess, if any, of (y) the Second
Transaction Consideration over (z) the Current Transaction Consideration. As
used in this Agreement, "Second Transaction Consideration" shall mean all cash,
securities, settlement or termination amounts, notes or other debt instruments,
and other consideration received or to be received, directly or indirectly, by
the Stockholder and his Affiliates (excluding officers and directors of the
Target) in connection with or as a result of the Second Transaction or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of the Target) with the Target as
a part of or in connection with the Second Transaction.
4. Covenants, Representations and Warranties.
(a) The Stockholder hereby represents, warrants and covenants
to Acquiror and Acquisition Sub that:
(i) Ownership. As of the date of this Agreement, the
Shares set forth on Schedule A hereto constitute all of the issued and
outstanding Shares owned of record or Beneficially Owned by the Stockholder.
Except as otherwise set forth in Schedule A, the Stockholder has sole power of
disposition, sole power of conversion, sole power to demand appraisal rights
and sole power to vote upon and agree to all of the matters set forth in this
Agreement and the Merger Agreement, in each case with respect to all of the
Shares set forth on Schedule A hereto, with no material limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(ii) Power: Binding Agreement. The Stockholder has
the legal capacity, power and authority to enter into and perform all of the
Stockholder's obligations under this Agreement. This Agreement has been duly
and validly executed and delivered by the Stockholder and constitutes a valid
and binding agreement of the Stockholder, enforceable against the Stockholder
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which the
6
<PAGE>
Stockholder is trustee whose consent is required for the execution and delivery
of this Agreement or the consummation by the Stockholder of the transactions
contemplated hereby. If the Stockholder is married and the Stockholder's Shares
constitute community property, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of,
the Stockholder's spouse, enforceable against such person in accordance with
its terms. Contemporaneously with the execution of this Agreement, Stockholder
has delivered to Acquiror a legal opinion of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A. to the foregoing effect in form reasonably
satisfactory to Acquiror.
(iii) No Conflicts. Except for the filing of an
amendment to the Stockholder's Schedule 13D (if any), no filing with, and no
permit, authorization, consent or approval of, any state or federal public body
or authority is necessary for the execution of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with the Stockholder's
ability to perform his obligations hereunder, and none of the execution and
delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof shall (A) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, (B) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets, in each such
case except to the extent that any conflict, breach, default or violation would
not interfere with the ability of the Stockholder to perform its obligations
hereunder, or (C) to the knowledge of the Stockholder, trigger a "change in
control" or similar provision of any contract, agreement or understanding to
which the Target or any of Target's Subsidiaries is a party, or by which any of
their respective property or assets are bound.
(iv) No Encumbrances. Except as required by Sections
2 and 3 of this Agreement, at all times thereafter during the term hereof, all
of the Stockholder's Shares (excluding Shares identified in Schedule A hereto
as Shares with respect to which Stockholder does not possess sole power to
dispose or direct the disposition) will be held by the Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and clear of all
liens, claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever, except for
any liens, claims, understandings or arrangements that do not limit or impair
Stockholder's ability to perform his obligations under this Agreement.
(v) No Solicitation. The Stockholder shall comply
with the terms of Section 6.06 of the Merger Agreement.
(vi) Restriction on Transfer, Proxies and
Non-Interference. From and after the date of this Agreement and ending as of
the first to occur of the Effective Time or the first anniversary of the
Termination Date, the Stockholder shall not, and shall cause each of his
Affiliates who Beneficially Own any of the Stockholder's Shares not to,
directly or indirectly, without the
7
<PAGE>
consent of Acquiror, in respect of any Acquisition Proposal or otherwise: (A)
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Stockholder's Shares, or any interest therein, (B) except as provided
herein, grant any proxies or powers of attorney, deposit any Stockholder's
Shares into a voting trust or enter into a voting agreement with respect to any
Stockholder's Shares, (C) enter into any agreement or arrangement providing for
any of the actions described in clause (A) or (B) above or (D) take any action
that could reasonably be expected to have the effect of preventing or disabling
the Stockholder from performing the Stockholder's obligations under this
Agreement.
(vii) Waiver of and Agreement Not to Assert
Appraisal Rights. The Stockholder hereby waives and agrees not to assert, and
shall cause any of its Affiliates who hold of record any of the Stockholder's
Shares to waive and not to assert, any appraisal rights with respect to the
Merger (or any Second Transaction) that the Stockholder or such Affiliate may
now or hereafter have with respect to any Shares (or any other shares of
capital stock of the Target that the Stockholder shall hold of record at the
time that Stockholder may be entitled to assert appraisal rights with respect
to the Merger or any Second Transaction) whether pursuant to Section 262 of the
Delaware General Corporate Law or otherwise.
(viii) Further Assurances. From time to time, at
Acquiror's request and without further consideration, the Stockholder shall
execute and deliver such additional documents as may be necessary or desirable
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement. The Stockholder shall
cooperate fully with Target and Acquiror in connection with their respective
efforts to fulfill the conditions to the Offer and the Merger set forth in the
Merger Agreement.
(ix) Waiver of Rights of First Refusal. Set forth on
Schedule B is a complete list of all rights of first refusal, preemptive rights
or similar rights held by the Stockholder and any of its Affiliates to purchase
Shares upon transfer (collectively, "Rights of First Refusal"). From and after
the date of this Agreement and ending as of the first to occur of the Effective
Time or the first anniversary of the Termination Date, the Stockholder shall
not, and shall cause each its Affiliates who hold Rights of First Refusal not
to, directly or indirectly, without the consent of Acquiror, in respect of the
Offer, the Merger, any Acquisition Proposal, any Second Transaction or
otherwise, exercise any of such Rights of First Refusal to purchase or
otherwise acquire Shares.
(b) Acquiror and Acquisition Sub hereby represent, warrant
and covenant to the Stockholder as follows:
(i) Organization, Standing and Corporate Power. Each
of Acquiror and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
adequate corporate power and authority to own its properties and carry on its
business as presently conducted. Each of Acquiror and Acquisition Sub has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement and to consummate the transactions contemplated hereby.
8
<PAGE>
(ii) Execution, Delivery and Performance by Acquiror
and Acquisition Sub. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of Acquiror and Acquisition Sub, and each
of Acquiror and Acquisition Sub has taken all other actions required by law,
its Certificate of Incorporation and its Bylaws (except as described in the
Merger Agreement) to consummate the transactions contemplated by this
Agreement. This Agreement constitutes the valid and binding obligations of
Acquiror and Acquisition Sub and is enforceable in accordance with its terms,
except as enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
(c) Target hereby represents and warrants to Acquiror and
Acquisition Sub that the Board of Directors of Target (including any committee
of the independent directors thereof) has approved the terms of this Agreement
and the transactions contemplated herein and such approval is sufficient to
render inapplicable to this Agreement and the transactions contemplated herein
the provisions of Section 203 of the Delaware General Corporation Law.
5. Stop Transfer. From and after the date of this Agreement and ending
as of the first to occur of the Effective Time or the first anniversary of the
Termination Date, Stockholder will not request that Target register (and Target
agrees not to register) the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Stockholder's
Shares (excluding shares identified in Schedule A as Shares with respect to
which Stockholder does not possess sole power to dispose or direct the
disposition), or as otherwise contemplated hereby.
6. Recapitalization. In the event of a stock dividend or distribution,
or any change in the Shares (or any class thereof) by reason of any split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall include, without limitation, all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
(or any class thereof) may be changed or exchanged as may be appropriate to
reflect such event.
7. Stockholder Capacity. The Stockholder does not make any agreement
or understanding herein in the Stockholder's capacity as a director or officer
of the Target and nothing herein shall limit or affect any action taken by the
Stockholder in such capacity.
8. Merger Agreement and Options. The Stockholder hereby consents and
agrees to the treatment of each warrant, option or unsecured senior convertible
note of the Target Beneficially Owned by Stockholder or its Affiliates as set
forth in Article II of the Merger Agreement.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that all of the provisions of this
9
<PAGE>
Agreement other than Sections 4(c), 5 and this Section 9(b) may be amended
without the consent of the Target.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses or the addresses set forth on
the signature pages hereto:
<TABLE>
<CAPTION>
<S> <C>
If to Stockholder: Lee Marshall
199 E. Garfield Rd.
Aurora, Ohio 44202
Telecopy: (330) 995-0872
copy to: Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Telecopy: (216) 479-8780
Attn: Jeffrey J. Margulies
If to the Target: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Telecopy: (305) 532-4014
Attn: Robert Kreusler
copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attn: Gary Epstein
If to Acquiror or Acquisition Sub:
SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Telecopy: (212) 753-3188
Attn: Howard J. Tytel
copy to: Baker & McKenzie
Two Allen Center, Suite 1200
Houston, Texas 77002
Telecopy: (713) 427-5099
</TABLE>
10
<PAGE>
Attn: Amar Budarapu
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, then such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by the Stockholder of any covenants
or agreements contained in this Agreement will cause the Acquiror and
Acquisition Sub to sustain damages for which they would not have an adequate
remedy at law for money damages, and therefore each of the parties hereto
agrees that, in the event of any such breach, the Acquiror or Acquisition Sub
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief, without the necessity of
posting bond or proving actual damages, in addition to any other remedy to
which they may be entitled, at law or in equity.
(f) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise of any
such right, power or remedy by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(h) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto; provided that, in the event of
the Stockholder's death, the obligations of the Stockholder hereunder shall
attach to the Stockholder's Shares and shall be binding upon any Person to
which legal or beneficial ownership of such Shares shall pass, whether by
operation of Law or otherwise, including without limitation the Stockholder's
heirs, guardians, administrators or successors.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
11
<PAGE>
(j) Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State of Delaware in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non convenience or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph and shall
not be deemed to be a general submission to the jurisdiction of said Court or
in the State of Delaware other than for such purposes. Each party hereto hereby
waives any right to a trial by jury in connection with any such action, suit or
proceeding.
(k) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(1) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement. This
Agreement shall not be effective as to any party hereto until such time as this
Agreement or a counterpart thereof has been executed and delivered by each
party hereto.
(m) Trust Funds. In the event that any party hereto should
receive any funds that are to be paid to another party pursuant to the terms of
this Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay such
funds to the party entitled to receive such funds in accordance with this
Agreement.
10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Acquisition
Sub may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Acquiror or to any direct or indirect wholly-owned
subsidiary of Acquiror. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Stockholder agrees that this
Agreement, and the obligations of the Stockholder hereunder, shall attach to
the Stockholder's Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by operation of Law or
otherwise, including without limitation the Stockholder's heirs, guardians,
administrators or successors.
11. Termination. This Agreement shall terminate without any further
action on the part of any party hereto (a) upon the occurrence of a termination
of the Merger Agreement pursuant to Sections 8.01(a), 8.01(b)(i) (provided that
no Takeover Proposal has been made prior to the date of such termination) or
8.01(b)(ii) thereof; or (b) the date that Acquiror or Acquisition Sub shall
have purchased and paid for all the Stockholder's Shares pursuant to Section 2.
Upon such termination, this Agreement shall forthwith become void and of no
further force or effect.
[Signature page follows]
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
STOCKHOLDER
/s/ Lee D. Marshall
-----------------------------------
Name: Lee D. Marshall
STOCKHOLDER SPOUSE - if community property State
-----------------------------------
Name:
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MWE ACQUISITION CORP.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Brad Krassner
--------------------------------
Name: Brad Krassner
Title: Co-Chairman of the Board and
Chief Executive Officer
13
<PAGE>
SCHEDULE A
Class of Shares Number of Shares Record Owner Beneficial Owner
--------------- ---------------- ------------ -----------------
Common Stock 3,460,872 Lee Marshall Lee Marshall
<PAGE>
SCHEDULE B
None
B-1
<PAGE>
Exhibit (c)(5)
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of August 6, 1998 (this
"Agreement"), is made and entered into by and among SFX Entertainment, Inc., a
Delaware corporation ("Acquiror"), MWE Acquisition Corp., a Delaware
corporation and a direct wholly-owned subsidiary of Acquiror ("Acquisition
Sub"), Glen Bechdel ("Stockholder"), and Magicworks Entertainment Incorporated,
a Delaware corporation ("Target").
RECITALS
WHEREAS, concurrently herewith, Acquiror, Acquisition Sub and the
Target are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which (a) Acquiror will make a cash tender offer (as such offer may be amended
from time to time as permitted by the Merger Agreement (the "Offer") by
Acquisition Sub for all the issued and outstanding shares of common stock, par
value $.001 per share, of Target (the "Target Common Stock"), and (b)
Acquisition Sub will be merged with and into Target (the "Merger"); capitalized
terms used but not defined herein and defined in the Merger Agreement have the
respective meanings ascribed to them in the Merger Agreement; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Merger Agreement,
the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENTS
1. Definitions. For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any agreement, letter
of intent, proposal or offer (other than the transactions contemplated in the
Merger Agreement) involving the Target or any of its Subsidiaries for, or an
inquiry or indication of interest that reasonably could be expected to lead to:
(i) any merger, consolidation, share exchange, recapitalization,
reorganization, dissolution, liquidation, business combination or other similar
transaction with the Target or any of its Subsidiaries, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of a material portion
of the assets of the Target and its Subsidiaries, taken as a whole, in a single
transaction or series of transactions or (iii) any tender offer or exchange
offer for all or any portion of the outstanding shares of capital stock of the
Target or any of its Subsidiaries or the filing of a registration statement
under the Securities Act of 1933 in connection therewith, but shall not include
the Offer, the Merger Agreement or Second Transaction (as defined herein).
<PAGE>
(b) "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such first Person.
(c) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all other
Persons (who are Affiliates of such Person excluding officers and directors of
the Target) who together with such Person would constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act and in any event with respect
to the Stockholder shall include Shares held of record by the Stockholder's
spouse and children.
(d) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
(e) "Shares" shall mean (i) shares of Target Common Stock and
(ii) shares of preferred stock, par value $.00l per share, of the Target.
(f) "Stockholder's Shares" shall mean all Shares held of
record or Beneficially Owned by the Stockholder, whether currently issued or
hereinafter acquired, and for the purposes of Section 3 of this Agreement shall
also include, without duplication, any securities convertible into, or
exercisable or exchangeable for, Shares, including without limitation the
unsecured senior convertible notes of the Target and any options, warrants or
stock appreciation rights held of record or Beneficially Owned by the
Stockholder (collectively, the "Convertible Securities").
(g) "Termination Date" shall mean the date that the Merger
Agreement has been terminated.
2. Provisions Concerning Shares.
(a) Acquisition Sub hereby agrees to purchase, and
Stockholder agrees to sell, or cause to be sold, all such Stockholder's Shares
(other than the Convertible Securities) at a price per share equal to the Per
Share Amount, subject only to the condition (which may be waived only by
Acquisition Sub in its sole discretion) that Acquisition Sub shall have
accepted for payment and paid for shares of Target Common Stock pursuant to the
Offer (the "Purchase"). The closing of the Purchase shall be effected by the
Stockholder validly tendering (or causing the record holder of such shares to
validly tender) all such Stockholder's Shares (other than the Convertible
Securities) into the Offer, and by Acquisition Sub accepting for payment and
paying for such Shares pursuant to the terms of the Offer. In furtherance of
the foregoing, Stockholder hereby agrees that it shall validly tender and not
withdraw the Stockholder's Shares (other than the Convertible Securities) into
the Offer. Subject to the terms and conditions of the Offer, Acquiror shall
comply, and shall cause Acquisition Sub to comply, with all provisions of
Article I of the Merger Agreement.
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(b) If for any reason any Stockholder's Shares (other than
the Convertible Securities) are not purchased in the Offer and either (i) other
shares of Target Common Stock are purchased in the Offer or (ii) the Offer is
not consummated due to a failure of the Minimum Condition, Acquisition Sub
shall purchase, and Stockholder shall sell, all of Stockholder's Shares (other
than the Convertible Securities) at a price per Share equal to the Per Share
Amount within five business days (after obtaining all applicable consents and
approvals) following the expiration of the Offer at a time and place to be
mutually agreed to between Acquisition Sub and Stockholder. Acquiror shall
provide or cause to be provided to Acquisition Sub on a timely basis the funds
sufficient to accept for payment, and pay for, any and all Shares that
Acquisition Sub becomes obligated to accept for payment, and pay for, pursuant
to the Offer or otherwise hereunder.
(c) From and after the date of this Agreement and ending as
of the first to occur of the Effective Time or the four month anniversary of
the Termination Date, at any meeting of the holders of Shares, however called,
or in any other circumstance upon which the vote, consent or other approval of
holders of one or more class or series of Shares is sought, the Stockholder
shall vote or cause to be voted (including by written consent, if applicable)
the issued and outstanding Stockholder's Shares (and each class thereof)
entitled to vote thereon, and those Shares entitled to vote thereon for which
Stockholder has the right to direct or control the vote, (i) in favor of the
Merger, the execution and delivery by the Target of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof, (ii) against any action or agreement that would result in a
breach in any material respect of any covenant, representation or warranty or
any other material obligation or agreement of the Target under the Merger
Agreement or this Agreement and (iii) against the following actions (other than
the Merger and the transactions contemplated by the Merger Agreement): (A) any
Acquisition Proposal other than an Acquisition Proposal with Acquiror or any
Affiliate thereof and (B) to the extent that such are intended to, or could
reasonably be expected to, (1) impede, interfere with, delay, postpone or
materially adversely affect the Merger or the transactions contemplated by the
Merger Agreement or this Agreement or (2) implement or lead to any Acquisition
Proposal (other than an Acquisition Proposal with Acquiror or any Affiliate
thereof): (w) any change in a majority of the persons who constitute the board
of directors of the Target; (x) any change in the present capitalization of the
Target or any amendment of the Target's Certificate of Incorporation or Bylaws;
or (y) any other material change in the Target's corporate structure or
business; provided that if any Second Transaction (as defined in Section 3(c)
of this Agreement) provides for Second Transaction Consideration (as defined in
3(c) of this Agreement) that is less than the Current Transaction Consideration
(as defined in Section 3(a) of this Agreement), as such amounts shall be
determined in accordance with Section 3 of this Agreement, then nothing herein
shall require the Stockholder to vote in favor of the Second Transaction. In
addition to the other covenants and agreements of the Stockholder provided for
elsewhere in this Agreement, during the above-described period the Stockholder
shall not enter into any agreement or understanding with any Person or entity
the effect of which would be inconsistent with or violate the provisions and
agreements contained in this Section 2. Nothing herein shall in any way
restrict or limit the Stockholder from taking any action in his capacity as a
director or officer of the Target or otherwise fulfilling his fiduciary
obligations as a director and officer of the Target.
(d) Stockholder, with respect to the Shares Beneficially
Owned by Stockholder, does hereby constitute and appoint Acquiror, or any
nominee of Acquiror, with full power of
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<PAGE>
substitution, from the date hereof to the earlier to occur of the Effective
Time or the four month anniversary of the Termination Date, as its true and
lawful attorney and proxy (its "Proxy"), for and in its name, place and stead,
to demand that the Secretary of the Target call a special meeting of the
stockholders of the Target for the purpose of considering any action related to
the Merger Agreement or the Merger and to vote the Shares as its Proxy, at
every annual, special or adjourned meeting of the stockholders of the Target,
including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Target that the laws of the State
of Delaware may permit or require, in connection with the matters described in
the foregoing Section 2(c). The Proxy may not exercise this proxy on any other
matter. The Stockholder may vote the Shares on all such other matters. THIS
PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The
Stockholder represents that any proxies heretofore given in respect of the
Stockholder's Shares are not irrevocable, and that any such proxies are hereby
revoked.
(e) Stockholder hereby permits Acquiror and Acquisition Sub
to publish and disclose in the Offer Documents (including all documents and
schedules filed with the SEC) and, if approval of Target's stockholders is
required under applicable law, in the Proxy Statement its identity and
ownership of the Stockholder's Shares and the nature of its commitments,
arrangements and understandings under this Agreement.
3. Capture.
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(a) In the event that any of the Stockholder's Shares are
sold, transferred, exchanged, canceled or disposed of in connection with or as
a result of any Acquisition Proposal that is in existence on or that otherwise
has been made prior to the first anniversary of the Termination Date (an
"Alternative Disposition"), then, within five business days after the closing
of such Alternative Disposition, the Stockholder shall tender and pay to, or
shall cause to be tendered and paid to, the Acquiror, or its designee, in
immediately available funds, 100% of the Profit realized from such Alternative
Disposition. As used in this Section 3(a), "Profit" shall mean an amount equal
to the excess, if any, of (i) the Alternative Transaction Consideration over
(ii) the Current Transaction Consideration. As used in this Section 3,
"Alternative Transaction Consideration" shall mean all cash, securities,
settlement or termination amounts, notes or other debt instruments, and other
consideration received or to be received, directly or indirectly, by the
Stockholder and his Affiliates (excluding officers and directors of the Target)
in connection with or as a result of such Alternative Disposition or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of Target) as a part of or in
connection with the Alternative Disposition or associated Acquisition Proposal.
As used in this Agreement, "Current Transaction Consideration" shall mean the
sum of (x) all amounts to be received, directly or indirectly, by Stockholder
and his Affiliates (excluding officers and directors of the Target) pursuant to
Article II of the Merger Agreement and (y) all other amounts to be received by
Stockholder, directly or indirectly, pursuant to the Offer or any of the other
transactions or agreements contemplated by the Merger Agreement (other than the
employment agreements contemplated by Section 7.02 thereof).
(b) For purposes of determining Profits under this Section 3,
(i) all non-cash items shall be valued based upon the fair market value thereof
as determined by an independent expert selected by Acquiror and who is
reasonably acceptable to Stockholder, (ii) all deferred payments or
consideration shall be discounted to reflect a market rate of net present value
thereof as determined by the above-referenced independent expert, (iii) all
contingent payments will be assumed to have been paid, (iv) if less than all of
the Stockholder's Shares are subject to the Alternative Disposition or Second
Transaction then the Current Transaction Consideration shall be deemed to be an
amount equal to the Current Transaction Consideration multiplied by a fraction,
the numerator of which is the number of the Stockholder's Shares sold,
transferred, exchanged, canceled or disposed of in such Alternative Disposition
or Second Transaction and the denominator of which is the total number of the
Stockholder's Shares, and (v) the principal amount of all loans made to
Stockholder by the acquiror or any Affiliate thereof, or loans to Stockholder
that are forgiven, shall be added to the Alternative Transaction Consideration
or the Second Transaction Consideration (as defined herein), as the case may
be. In the event any contingent payments included in the determination of
Profits ultimately are not paid pursuant to an Alternative Disposition, then
Acquiror shall reimburse Stockholder for any amounts paid to Acquiror hereunder
in respect of such uncollected contingent payments promptly after receipt of
written notice of such non payment.
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<PAGE>
(c) In the event that after the date of this Agreement, the
amount of Merger Consideration or the consideration payable in respect of the
Warrants, Options and Convertible Notes as currently provided for in the Merger
Agreement is increased (a "Second Transaction"), then, as may be requested by
Acquiror, either (i) Stockholder shall, and shall cause each of its Affiliates
who Beneficially Own any of the Stockholder's Shares to, execute and deliver to
Acquiror such documents or instruments as may be necessary to waive the right
to receive the amount of such increase to the extent that such increase results
in any Profit or (ii) Stockholder shall tender and pay, or cause to be tendered
and paid, to Acquiror or its designee, in immediately available funds, 100% of
the Profit realized from such Second Transaction. As used in this Section 3(c),
"Profit" shall mean an amount equal to the excess, if any, of (y) the Second
Transaction Consideration over (z) the Current Transaction Consideration. As
used in this Agreement, "Second Transaction Consideration" shall mean all cash,
securities, settlement or termination amounts, notes or other debt instruments,
and other consideration received or to be received, directly or indirectly, by
the Stockholder and his Affiliates (excluding officers and directors of the
Target) in connection with or as a result of the Second Transaction or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of the Target) with the Target as
a part of or in connection with the Second Transaction.
4. Covenants, Representations and Warranties.
(a) The Stockholder hereby represents, warrants and covenants
to Acquiror and Acquisition Sub that:
(i) Ownership. As of the date of this Agreement, the
Shares set forth on Schedule A hereto constitute all of the issued and
outstanding Shares owned of record or Beneficially Owned by the Stockholder.
Except as otherwise set forth in Schedule A, the Stockholder has sole power of
disposition, sole power of conversion, sole power to demand appraisal rights
and sole power to vote upon and agree to all of the matters set forth in this
Agreement and the Merger Agreement, in each case with respect to all of the
Shares set forth on Schedule A hereto, with no material limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(ii) Power: Binding Agreement. The Stockholder has
the legal capacity, power and authority to enter into and perform all of the
Stockholder's obligations under this Agreement. This Agreement has been duly
and validly executed and delivered by the Stockholder and constitutes a valid
and binding agreement of the Stockholder, enforceable against the Stockholder
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which the
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<PAGE>
Stockholder is trustee whose consent is required for the execution and delivery
of this Agreement or the consummation by the Stockholder of the transactions
contemplated hereby. If the Stockholder is married and the Stockholder's Shares
constitute community property, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of,
the Stockholder's spouse, enforceable against such person in accordance with
its terms. Contemporaneously with the execution of this Agreement, Stockholder
has delivered to Acquiror a legal opinion of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A. to the foregoing effect in form reasonably
satisfactory to Acquiror.
(iii) No Conflicts. Except for the filing of an
amendment to the Stockholder's Schedule 13D (if any), no filing with, and no
permit, authorization, consent or approval of, any state or federal public body
or authority is necessary for the execution of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with the Stockholder's
ability to perform his obligations hereunder, and none of the execution and
delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof shall (A) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, (B) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets, in each such
case except to the extent that any conflict, breach, default or violation would
not interfere with the ability of the Stockholder to perform its obligations
hereunder, or (C) to the knowledge of the Stockholder, trigger a "change in
control" or similar provision of any contract, agreement or understanding to
which the Target or any of Target's Subsidiaries is a party, or by which any of
their respective property or assets are bound.
(iv) No Encumbrances. Except as required by Sections
2 and 3 of this Agreement, at all times thereafter during the term hereof, all
of the Stockholder's Shares (excluding Shares identified in Schedule A hereto
as Shares with respect to which Stockholder does not possess sole power to
dispose or direct the disposition) will be held by the Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and clear of all
liens, claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever, except for
any liens, claims, understandings or arrangements that do not limit or impair
Stockholder's ability to perform his obligations under this Agreement.
(v) No Solicitation. The Stockholder shall comply
with the terms of Section 6.06 of the Merger Agreement.
(vi) Restriction on Transfer, Proxies and
Non-Interference. From and after the date of this Agreement and ending as of
the first to occur of the Effective Time or the first anniversary of the
Termination Date, the Stockholder shall not, and shall cause each of his
Affiliates who Beneficially Own any of the Stockholder's Shares not to,
directly or indirectly, without the
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consent of Acquiror, in respect of any Acquisition Proposal or otherwise: (A)
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Stockholder's Shares, or any interest therein, (B) except as provided
herein, grant any proxies or powers of attorney, deposit any Stockholder's
Shares into a voting trust or enter into a voting agreement with respect to any
Stockholder's Shares, (C) enter into any agreement or arrangement providing for
any of the actions described in clause (A) or (B) above or (D) take any action
that could reasonably be expected to have the effect of preventing or disabling
the Stockholder from performing the Stockholder's obligations under this
Agreement.
(vii) Waiver of and Agreement Not to Assert
Appraisal Rights. The Stockholder hereby waives and agrees not to assert, and
shall cause any of its Affiliates who hold of record any of the Stockholder's
Shares to waive and not to assert, any appraisal rights with respect to the
Merger (or any Second Transaction) that the Stockholder or such Affiliate may
now or hereafter have with respect to any Shares (or any other shares of
capital stock of the Target that the Stockholder shall hold of record at the
time that Stockholder may be entitled to assert appraisal rights with respect
to the Merger or any Second Transaction) whether pursuant to Section 262 of the
Delaware General Corporate Law or otherwise.
(viii) Further Assurances. From time to time, at
Acquiror's request and without further consideration, the Stockholder shall
execute and deliver such additional documents as may be necessary or desirable
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement. The Stockholder shall
cooperate fully with Target and Acquiror in connection with their respective
efforts to fulfill the conditions to the Offer and the Merger set forth in the
Merger Agreement.
(ix) Waiver of Rights of First Refusal. Set forth on
Schedule B is a complete list of all rights of first refusal, preemptive rights
or similar rights held by the Stockholder and any of its Affiliates to purchase
Shares upon transfer (collectively, "Rights of First Refusal"). From and after
the date of this Agreement and ending as of the first to occur of the Effective
Time or the first anniversary of the Termination Date, the Stockholder shall
not, and shall cause each its Affiliates who hold Rights of First Refusal not
to, directly or indirectly, without the consent of Acquiror, in respect of the
Offer, the Merger, any Acquisition Proposal, any Second Transaction or
otherwise, exercise any of such Rights of First Refusal to purchase or
otherwise acquire Shares.
(b) Acquiror and Acquisition Sub hereby represent, warrant
and covenant to the Stockholder as follows:
(i) Organization, Standing and Corporate Power. Each
of Acquiror and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
adequate corporate power and authority to own its properties and carry on its
business as presently conducted. Each of Acquiror and Acquisition Sub has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement and to consummate the transactions contemplated hereby.
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(ii) Execution, Delivery and Performance by Acquiror
and Acquisition Sub. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of Acquiror and Acquisition Sub, and each
of Acquiror and Acquisition Sub has taken all other actions required by law,
its Certificate of Incorporation and its Bylaws (except as described in the
Merger Agreement) to consummate the transactions contemplated by this
Agreement. This Agreement constitutes the valid and binding obligations of
Acquiror and Acquisition Sub and is enforceable in accordance with its terms,
except as enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
(c) Target hereby represents and warrants to Acquiror and
Acquisition Sub that the Board of Directors of Target (including any committee
of the independent directors thereof) has approved the terms of this Agreement
and the transactions contemplated herein and such approval is sufficient to
render inapplicable to this Agreement and the transactions contemplated herein
the provisions of Section 203 of the Delaware General Corporation Law.
5. Stop Transfer. From and after the date of this Agreement and ending
as of the first to occur of the Effective Time or the first anniversary of the
Termination Date, Stockholder will not request that Target register (and Target
agrees not to register) the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Stockholder's
Shares (excluding shares identified in Schedule A as Shares with respect to
which Stockholder does not possess sole power to dispose or direct the
disposition), or as otherwise contemplated hereby.
6. Recapitalization. In the event of a stock dividend or distribution,
or any change in the Shares (or any class thereof) by reason of any split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall include, without limitation, all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
(or any class thereof) may be changed or exchanged as may be appropriate to
reflect such event.
7. Stockholder Capacity. The Stockholder does not make any agreement
or understanding herein in the Stockholder's capacity as a director or officer
of the Target and nothing herein shall limit or affect any action taken by the
Stockholder in such capacity.
8. Merger Agreement and Options. The Stockholder hereby consents and
agrees to the treatment of each warrant, option or unsecured senior convertible
note of the Target Beneficially Owned by Stockholder or its Affiliates as set
forth in Article II of the Merger Agreement.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that all of the provisions of this
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Agreement other than Sections 4(c), 5 and this Section 9(b) may be amended
without the consent of the Target.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses or the addresses set forth on
the signature pages hereto:
<TABLE>
<CAPTION>
<S> <C>
If to Stockholder: Glen Bechdel
4589 Bassett Road
Atwater, OH 44201
Telecopy: (330) 325-9169
copy to: Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Telecopy: (216) 479-8780
Attn: Jeffrey J. Margulies
If to the Target: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Telecopy: (305) 532-4014
Attn: Robert Kreusler
copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attn: Gary Epstein
If to Acquiror or Acquisition Sub:
SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Telecopy: (212) 753-3188
Attn: Howard J. Tytel
copy to: Baker & McKenzie
Two Allen Center, Suite 1200
Houston, Texas 77002
Telecopy: (713) 427-5099
</TABLE>
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Attn: Amar Budarapu
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, then such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by the Stockholder of any covenants
or agreements contained in this Agreement will cause the Acquiror and
Acquisition Sub to sustain damages for which they would not have an adequate
remedy at law for money damages, and therefore each of the parties hereto
agrees that, in the event of any such breach, the Acquiror or Acquisition Sub
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief, without the necessity of
posting bond or proving actual damages, in addition to any other remedy to
which they may be entitled, at law or in equity.
(f) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise of any
such right, power or remedy by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(h) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto; provided that, in the event of
the Stockholder's death, the obligations of the Stockholder hereunder shall
attach to the Stockholder's Shares and shall be binding upon any Person to
which legal or beneficial ownership of such Shares shall pass, whether by
operation of Law or otherwise, including without limitation the Stockholder's
heirs, guardians, administrators or successors.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
11
<PAGE>
(j) Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State of Delaware in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non convenience or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph and shall
not be deemed to be a general submission to the jurisdiction of said Court or
in the State of Delaware other than for such purposes. Each party hereto hereby
waives any right to a trial by jury in connection with any such action, suit or
proceeding.
(k) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(1) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement. This
Agreement shall not be effective as to any party hereto until such time as this
Agreement or a counterpart thereof has been executed and delivered by each
party hereto.
(m) Trust Funds. In the event that any party hereto should
receive any funds that are to be paid to another party pursuant to the terms of
this Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay such
funds to the party entitled to receive such funds in accordance with this
Agreement.
10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Acquisition
Sub may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Acquiror or to any direct or indirect wholly-owned
subsidiary of Acquiror. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Stockholder agrees that this
Agreement, and the obligations of the Stockholder hereunder, shall attach to
the Stockholder's Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by operation of Law or
otherwise, including without limitation the Stockholder's heirs, guardians,
administrators or successors.
11. Termination. This Agreement shall terminate without any further
action on the part of any party hereto (a) upon the occurrence of a termination
of the Merger Agreement pursuant to Sections 8.01(a), 8.01(b)(i) (provided that
no Takeover Proposal has been made prior to the date of such termination) or
8.01(b)(ii) thereof; or (b) the date that Acquiror or Acquisition Sub shall
have purchased and paid for all the Stockholder's Shares pursuant to Section 2.
Upon such termination, this Agreement shall forthwith become void and of no
further force or effect.
[Signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
STOCKHOLDER
/s/ Glen Bechdel
-----------------------------------
Name: Glen Bechdel
STOCKHOLDER SPOUSE - if community property State
-----------------------------------
Name:
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MWE ACQUISITION CORP.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Brad Krassner
-----------------------------------
Name: Brad Krassner
Title: Co-Chairman of the Board and
Chief Executive Officer
13
<PAGE>
SCHEDULE A
Class of Shares Number of Shares Record Owner Beneficial Owner
- --------------- ---------------- ------------ ----------------
Common Stock 61,200 Cede & Co. Glenn Bechdel
Common Stock 2,775,206 Glenn Bechdel Glenn Bechdel
<PAGE>
SCHEDULE B
None
B-1
<PAGE>
Exhibit (c)(6)
STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT, dated as of August 6, 1998 (this
"Agreement"), is made and entered into by and among SFX Entertainment, Inc., a
Delaware corporation ("Acquiror"), MWE Acquisition Corp., a Delaware
corporation and a direct wholly-owned subsidiary of Acquiror ("Acquisition
Sub"), John W. Ballard ("Stockholder"), and Magicworks Entertainment
Incorporated, a Delaware corporation ("Target").
RECITALS
WHEREAS, concurrently herewith, Acquiror, Acquisition Sub and the
Target are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which (a) Acquiror will make a cash tender offer (as such offer may be amended
from time to time as permitted by the Merger Agreement (the "Offer") by
Acquisition Sub for all the issued and outstanding shares of common stock, par
value $.001 per share, of Target (the "Target Common Stock"), and (b)
Acquisition Sub will be merged with and into Target (the "Merger"); capitalized
terms used but not defined herein and defined in the Merger Agreement have the
respective meanings ascribed to them in the Merger Agreement; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Merger Agreement,
the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENTS
1. Definitions. For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any agreement, letter
of intent, proposal or offer (other than the transactions contemplated in the
Merger Agreement) involving the Target or any of its Subsidiaries for, or an
inquiry or indication of interest that reasonably could be expected to lead to:
(i) any merger, consolidation, share exchange, recapitalization,
reorganization, dissolution, liquidation, business combination or other similar
transaction with the Target or any of its Subsidiaries, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of a material portion
of the assets of the Target and its Subsidiaries, taken as a whole, in a single
transaction or series of transactions or (iii) any tender offer or exchange
offer for all or any portion of the outstanding shares of capital stock of the
Target or any of its Subsidiaries or the filing of a registration statement
under the Securities Act of 1933 in connection therewith, but shall not include
the Offer, the Merger Agreement or Second Transaction (as defined herein).
<PAGE>
(b) "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such first Person.
(c) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all other
Persons (who are Affiliates of such Person excluding officers and directors of
the Target) who together with such Person would constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act and in any event with respect
to the Stockholder shall include Shares held of record by the Stockholder's
spouse and children.
(d) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
(e) "Shares" shall mean (i) shares of Target Common Stock and
(ii) shares of preferred stock, par value $.00l per share, of the Target.
(f) "Stockholder's Shares" shall mean all Shares held of
record or Beneficially Owned by the Stockholder, whether currently issued or
hereinafter acquired, and for the purposes of Section 3 of this Agreement shall
also include, without duplication, any securities convertible into, or
exercisable or exchangeable for, Shares, including without limitation the
unsecured senior convertible notes of the Target and any options, warrants or
stock appreciation rights held of record or Beneficially Owned by the
Stockholder (collectively, the "Convertible Securities").
(g) "Termination Date" shall mean the date that the Merger
Agreement has been terminated.
2. Provisions Concerning Shares.
(a) Acquisition Sub hereby agrees to purchase, and
Stockholder agrees to sell, or cause to be sold, all such Stockholder's Shares
(other than the Convertible Securities) at a price per share equal to the Per
Share Amount, subject only to the condition (which may be waived only by
Acquisition Sub in its sole discretion) that Acquisition Sub shall have
accepted for payment and paid for shares of Target Common Stock pursuant to the
Offer (the "Purchase"). The closing of the Purchase shall be effected by the
Stockholder validly tendering (or causing the record holder of such shares to
validly tender) all such Stockholder's Shares (other than the Convertible
Securities) into the Offer, and by Acquisition Sub accepting for payment and
paying for such Shares pursuant to the terms of the Offer. In furtherance of
the foregoing, Stockholder hereby agrees that it shall validly tender and not
withdraw the Stockholder's Shares (other than the Convertible Securities) into
the Offer. Subject to the terms and conditions of the Offer, Acquiror shall
comply, and shall cause Acquisition Sub to comply, with all provisions of
Article I of the Merger Agreement.
2
<PAGE>
(b) If for any reason any Stockholder's Shares (other than
the Convertible Securities) are not purchased in the Offer and either (i) other
shares of Target Common Stock are purchased in the Offer or (ii) the Offer is
not consummated due to a failure of the Minimum Condition, Acquisition Sub
shall purchase, and Stockholder shall sell, all of Stockholder's Shares (other
than the Convertible Securities) at a price per Share equal to the Per Share
Amount within five business days (after obtaining all applicable consents and
approvals) following the expiration of the Offer at a time and place to be
mutually agreed to between Acquisition Sub and Stockholder. Acquiror shall
provide or cause to be provided to Acquisition Sub on a timely basis the funds
sufficient to accept for payment, and pay for, any and all Shares that
Acquisition Sub becomes obligated to accept for payment, and pay for, pursuant
to the Offer or otherwise hereunder.
(c) From and after the date of this Agreement and ending as
of the first to occur of the Effective Time or the four month anniversary of
the Termination Date, at any meeting of the holders of Shares, however called,
or in any other circumstance upon which the vote, consent or other approval of
holders of one or more class or series of Shares is sought, the Stockholder
shall vote or cause to be voted (including by written consent, if applicable)
the issued and outstanding Stockholder's Shares (and each class thereof)
entitled to vote thereon, and those Shares entitled to vote thereon for which
Stockholder has the right to direct or control the vote, (i) in favor of the
Merger, the execution and delivery by the Target of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof, (ii) against any action or agreement that would result in a
breach in any material respect of any covenant, representation or warranty or
any other material obligation or agreement of the Target under the Merger
Agreement or this Agreement and (iii) against the following actions (other than
the Merger and the transactions contemplated by the Merger Agreement): (A) any
Acquisition Proposal other than an Acquisition Proposal with Acquiror or any
Affiliate thereof and (B) to the extent that such are intended to, or could
reasonably be expected to, (1) impede, interfere with, delay, postpone or
materially adversely affect the Merger or the transactions contemplated by the
Merger Agreement or this Agreement or (2) implement or lead to any Acquisition
Proposal (other than an Acquisition Proposal with Acquiror or any Affiliate
thereof): (w) any change in a majority of the persons who constitute the board
of directors of the Target; (x) any change in the present capitalization of the
Target or any amendment of the Target's Certificate of Incorporation or Bylaws;
or (y) any other material change in the Target's corporate structure or
business; provided that if any Second Transaction (as defined in Section 3(c)
of this Agreement) provides for Second Transaction Consideration (as defined in
3(c) of this Agreement) that is less than the Current Transaction Consideration
(as defined in Section 3(a) of this Agreement), as such amounts shall be
determined in accordance with Section 3 of this Agreement, then nothing herein
shall require the Stockholder to vote in favor of the Second Transaction. In
addition to the other covenants and agreements of the Stockholder provided for
elsewhere in this Agreement, during the above-described period the Stockholder
shall not enter into any agreement or understanding with any Person or entity
the effect of which would be inconsistent with or violate the provisions and
agreements contained in this Section 2. Nothing herein shall in any way
restrict or limit the Stockholder from taking any action in his capacity as a
director or officer of the Target or otherwise fulfilling his fiduciary
obligations as a director and officer of the Target.
(d) Stockholder, with respect to the Shares Beneficially
Owned by Stockholder, does hereby constitute and appoint Acquiror, or any
nominee of Acquiror, with full power of
3
<PAGE>
substitution, from the date hereof to the earlier to occur of the Effective
Time or the four month anniversary of the Termination Date, as its true and
lawful attorney and proxy (its "Proxy"), for and in its name, place and stead,
to demand that the Secretary of the Target call a special meeting of the
stockholders of the Target for the purpose of considering any action related to
the Merger Agreement or the Merger and to vote the Shares as its Proxy, at
every annual, special or adjourned meeting of the stockholders of the Target,
including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Target that the laws of the State
of Delaware may permit or require, in connection with the matters described in
the foregoing Section 2(c). The Proxy may not exercise this proxy on any other
matter. The Stockholder may vote the Shares on all such other matters. THIS
PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The
Stockholder represents that any proxies heretofore given in respect of the
Stockholder's Shares are not irrevocable, and that any such proxies are hereby
revoked.
(e) Stockholder hereby permits Acquiror and Acquisition Sub
to publish and disclose in the Offer Documents (including all documents and
schedules filed with the SEC) and, if approval of Target's stockholders is
required under applicable law, in the Proxy Statement its identity and
ownership of the Stockholder's Shares and the nature of its commitments,
arrangements and understandings under this Agreement.
3. Capture.
4
<PAGE>
(a) In the event that any of the Stockholder's Shares are
sold, transferred, exchanged, canceled or disposed of in connection with or as
a result of any Acquisition Proposal that is in existence on or that otherwise
has been made prior to the first anniversary of the Termination Date (an
"Alternative Disposition"), then, within five business days after the closing
of such Alternative Disposition, the Stockholder shall tender and pay to, or
shall cause to be tendered and paid to, the Acquiror, or its designee, in
immediately available funds, 100% of the Profit realized from such Alternative
Disposition. As used in this Section 3(a), "Profit" shall mean an amount equal
to the excess, if any, of (i) the Alternative Transaction Consideration over
(ii) the Current Transaction Consideration. As used in this Section 3,
"Alternative Transaction Consideration" shall mean all cash, securities,
settlement or termination amounts, notes or other debt instruments, and other
consideration received or to be received, directly or indirectly, by the
Stockholder and his Affiliates (excluding officers and directors of the Target)
in connection with or as a result of such Alternative Disposition or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of Target) as a part of or in
connection with the Alternative Disposition or associated Acquisition Proposal.
As used in this Agreement, "Current Transaction Consideration" shall mean the
sum of (x) all amounts to be received, directly or indirectly, by Stockholder
and his Affiliates (excluding officers and directors of the Target) pursuant to
Article II of the Merger Agreement and (y) all other amounts to be received by
Stockholder, directly or indirectly, pursuant to the Offer or any of the other
transactions or agreements contemplated by the Merger Agreement (other than the
employment agreements contemplated by Section 7.02 thereof).
(b) For purposes of determining Profits under this Section 3,
(i) all non-cash items shall be valued based upon the fair market value thereof
as determined by an independent expert selected by Acquiror and who is
reasonably acceptable to Stockholder, (ii) all deferred payments or
consideration shall be discounted to reflect a market rate of net present value
thereof as determined by the above-referenced independent expert, (iii) all
contingent payments will be assumed to have been paid, (iv) if less than all of
the Stockholder's Shares are subject to the Alternative Disposition or Second
Transaction then the Current Transaction Consideration shall be deemed to be an
amount equal to the Current Transaction Consideration multiplied by a fraction,
the numerator of which is the number of the Stockholder's Shares sold,
transferred, exchanged, canceled or disposed of in such Alternative Disposition
or Second Transaction and the denominator of which is the total number of the
Stockholder's Shares, and (v) the principal amount of all loans made to
Stockholder by the acquiror or any Affiliate thereof, or loans to Stockholder
that are forgiven, shall be added to the Alternative Transaction Consideration
or the Second Transaction Consideration (as defined herein), as the case may
be. In the event any contingent payments included in the determination of
Profits ultimately are not paid pursuant to an Alternative Disposition, then
Acquiror shall reimburse Stockholder for any amounts paid to Acquiror hereunder
in respect of such uncollected contingent payments promptly after receipt of
written notice of such non payment.
5
<PAGE>
(c) In the event that after the date of this Agreement, the
amount of Merger Consideration or the consideration payable in respect of the
Warrants, Options and Convertible Notes as currently provided for in the Merger
Agreement is increased (a "Second Transaction"), then, as may be requested by
Acquiror, either (i) Stockholder shall, and shall cause each of its Affiliates
who Beneficially Own any of the Stockholder's Shares to, execute and deliver to
Acquiror such documents or instruments as may be necessary to waive the right
to receive the amount of such increase to the extent that such increase results
in any Profit or (ii) Stockholder shall tender and pay, or cause to be tendered
and paid, to Acquiror or its designee, in immediately available funds, 100% of
the Profit realized from such Second Transaction. As used in this Section 3(c),
"Profit" shall mean an amount equal to the excess, if any, of (y) the Second
Transaction Consideration over (z) the Current Transaction Consideration. As
used in this Agreement, "Second Transaction Consideration" shall mean all cash,
securities, settlement or termination amounts, notes or other debt instruments,
and other consideration received or to be received, directly or indirectly, by
the Stockholder and his Affiliates (excluding officers and directors of the
Target) in connection with or as a result of the Second Transaction or any
agreements or arrangements (including, without limitation, any employment
agreement (except a bona fide employment agreement pursuant to which the
Stockholder is required to devote, and under which Stockholder in good faith
intends to devote, substantially all of his business time and effort to the
performance of executive services for the Target in a manner substantially
similar to Stockholder's current employment arrangements with the Target),
consulting agreement, non-competition agreement, confidentiality agreement,
settlement agreement, loan (or loan forgiveness) agreement or release
agreement) entered into, directly or indirectly, by the Stockholder or his
Affiliates (excluding officers and directors of the Target) with the Target as
a part of or in connection with the Second Transaction.
4. Covenants, Representations and Warranties.
(a) The Stockholder hereby represents, warrants and covenants
to Acquiror and Acquisition Sub that:
(i) Ownership. As of the date of this Agreement, the
Shares set forth on Schedule A hereto constitute all of the issued and
outstanding Shares owned of record or Beneficially Owned by the Stockholder.
Except as otherwise set forth in Schedule A, the Stockholder has sole power of
disposition, sole power of conversion, sole power to demand appraisal rights
and sole power to vote upon and agree to all of the matters set forth in this
Agreement and the Merger Agreement, in each case with respect to all of the
Shares set forth on Schedule A hereto, with no material limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(ii) Power: Binding Agreement. The Stockholder has
the legal capacity, power and authority to enter into and perform all of the
Stockholder's obligations under this Agreement. This Agreement has been duly
and validly executed and delivered by the Stockholder and constitutes a valid
and binding agreement of the Stockholder, enforceable against the Stockholder
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which the
6
<PAGE>
Stockholder is trustee whose consent is required for the execution and delivery
of this Agreement or the consummation by the Stockholder of the transactions
contemplated hereby. If the Stockholder is married and the Stockholder's Shares
constitute community property, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement of,
the Stockholder's spouse, enforceable against such person in accordance with
its terms. Contemporaneously with the execution of this Agreement, Stockholder
has delivered to Acquiror a legal opinion of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A. to the foregoing effect in form reasonably
satisfactory to Acquiror.
(iii) No Conflicts. Except for the filing of an
amendment to the Stockholder's Schedule 13D (if any), no filing with, and no
permit, authorization, consent or approval of, any state or federal public body
or authority is necessary for the execution of this Agreement by the
Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with the Stockholder's
ability to perform his obligations hereunder, and none of the execution and
delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof shall (A) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, (B) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets, in each such
case except to the extent that any conflict, breach, default or violation would
not interfere with the ability of the Stockholder to perform its obligations
hereunder, or (C) to the knowledge of the Stockholder, trigger a "change in
control" or similar provision of any contract, agreement or understanding to
which the Target or any of Target's Subsidiaries is a party, or by which any of
their respective property or assets are bound.
(iv) No Encumbrances. Except as required by Sections
2 and 3 of this Agreement, at all times thereafter during the term hereof, all
of the Stockholder's Shares (excluding Shares identified in Schedule A hereto
as Shares with respect to which Stockholder does not possess sole power to
dispose or direct the disposition) will be held by the Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and clear of all
liens, claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever, except for
any liens, claims, understandings or arrangements that do not limit or impair
Stockholder's ability to perform his obligations under this Agreement.
(v) No Solicitation. The Stockholder shall comply
with the terms of Section 6.06 of the Merger Agreement.
(vi) Restriction on Transfer, Proxies and
Non-Interference. From and after the date of this Agreement and ending as of
the first to occur of the Effective Time or the first anniversary of the
Termination Date, the Stockholder shall not, and shall cause each of his
Affiliates who Beneficially Own any of the Stockholder's Shares not to,
directly or indirectly, without the
7
<PAGE>
consent of Acquiror, in respect of any Acquisition Proposal or otherwise: (A)
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Stockholder's Shares, or any interest therein, (B) except as provided
herein, grant any proxies or powers of attorney, deposit any Stockholder's
Shares into a voting trust or enter into a voting agreement with respect to any
Stockholder's Shares, (C) enter into any agreement or arrangement providing for
any of the actions described in clause (A) or (B) above or (D) take any action
that could reasonably be expected to have the effect of preventing or disabling
the Stockholder from performing the Stockholder's obligations under this
Agreement.
(vii) Waiver of and Agreement Not to Assert
Appraisal Rights. The Stockholder hereby waives and agrees not to assert, and
shall cause any of its Affiliates who hold of record any of the Stockholder's
Shares to waive and not to assert, any appraisal rights with respect to the
Merger (or any Second Transaction) that the Stockholder or such Affiliate may
now or hereafter have with respect to any Shares (or any other shares of
capital stock of the Target that the Stockholder shall hold of record at the
time that Stockholder may be entitled to assert appraisal rights with respect
to the Merger or any Second Transaction) whether pursuant to Section 262 of the
Delaware General Corporate Law or otherwise.
(viii) Further Assurances. From time to time, at
Acquiror's request and without further consideration, the Stockholder shall
execute and deliver such additional documents as may be necessary or desirable
to consummate and make effective, in the most expeditious manner practicable,
the transactions contemplated by this Agreement. The Stockholder shall
cooperate fully with Target and Acquiror in connection with their respective
efforts to fulfill the conditions to the Offer and the Merger set forth in the
Merger Agreement.
(ix) Waiver of Rights of First Refusal. Set forth on
Schedule B is a complete list of all rights of first refusal, preemptive rights
or similar rights held by the Stockholder and any of its Affiliates to purchase
Shares upon transfer (collectively, "Rights of First Refusal"). From and after
the date of this Agreement and ending as of the first to occur of the Effective
Time or the first anniversary of the Termination Date, the Stockholder shall
not, and shall cause each its Affiliates who hold Rights of First Refusal not
to, directly or indirectly, without the consent of Acquiror, in respect of the
Offer, the Merger, any Acquisition Proposal, any Second Transaction or
otherwise, exercise any of such Rights of First Refusal to purchase or
otherwise acquire Shares.
(b) Acquiror and Acquisition Sub hereby represent, warrant
and covenant to the Stockholder as follows:
(i) Organization, Standing and Corporate Power. Each
of Acquiror and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
adequate corporate power and authority to own its properties and carry on its
business as presently conducted. Each of Acquiror and Acquisition Sub has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement and to consummate the transactions contemplated hereby.
8
<PAGE>
(ii) Execution, Delivery and Performance by Acquiror
and Acquisition Sub. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of Acquiror and Acquisition Sub, and each
of Acquiror and Acquisition Sub has taken all other actions required by law,
its Certificate of Incorporation and its Bylaws (except as described in the
Merger Agreement) to consummate the transactions contemplated by this
Agreement. This Agreement constitutes the valid and binding obligations of
Acquiror and Acquisition Sub and is enforceable in accordance with its terms,
except as enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally.
(c) Target hereby represents and warrants to Acquiror and
Acquisition Sub that the Board of Directors of Target (including any committee
of the independent directors thereof) has approved the terms of this Agreement
and the transactions contemplated herein and such approval is sufficient to
render inapplicable to this Agreement and the transactions contemplated herein
the provisions of Section 203 of the Delaware General Corporation Law.
5. Stop Transfer. From and after the date of this Agreement and ending
as of the first to occur of the Effective Time or the first anniversary of the
Termination Date, Stockholder will not request that Target register (and Target
agrees not to register) the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Stockholder's
Shares (excluding shares identified in Schedule A as Shares with respect to
which Stockholder does not possess sole power to dispose or direct the
disposition), or as otherwise contemplated hereby.
6. Recapitalization. In the event of a stock dividend or distribution,
or any change in the Shares (or any class thereof) by reason of any split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall include, without limitation, all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
(or any class thereof) may be changed or exchanged as may be appropriate to
reflect such event.
7. Stockholder Capacity. The Stockholder does not make any agreement
or understanding herein in the Stockholder's capacity as a director or officer
of the Target and nothing herein shall limit or affect any action taken by the
Stockholder in such capacity.
8. Merger Agreement and Options. The Stockholder hereby consents and
agrees to the treatment of each warrant, option or unsecured senior convertible
note of the Target Beneficially Owned by Stockholder or its Affiliates as set
forth in Article II of the Merger Agreement.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that all of the provisions of this
9
<PAGE>
Agreement other than Sections 4(c), 5 and this Section 9(b) may be amended
without the consent of the Target.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses or the addresses set forth on
the signature pages hereto:
<TABLE>
<CAPTION>
<S> <C>
If to Stockholder: John W. Ballard
682 E. 18th Avenue
Salt Lake City, Utah 84103
Telecopy: (801) 575-6208
copy to: Ray, Quinney & Nebeker
79 South Main
Salt Lake City, Utah 84111
Telecopy: (801) 532-1500
Attn: Bob Thorup
If to the Target: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Telecopy: (305) 532-4014
Attn: Robert Kreusler
copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attn: Gary Epstein
If to Acquiror or Acquisition Sub:
SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Telecopy: (212) 753-3188
Attn: Howard J. Tytel
copy to: Baker & McKenzie
Two Allen Center, Suite 1200
Houston, Texas 77002
Telecopy: (713) 427-5099
Attn: Amar Budarapu
</TABLE>
10
<PAGE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, then such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by the Stockholder of any covenants
or agreements contained in this Agreement will cause the Acquiror and
Acquisition Sub to sustain damages for which they would not have an adequate
remedy at law for money damages, and therefore each of the parties hereto
agrees that, in the event of any such breach, the Acquiror or Acquisition Sub
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief, without the necessity of
posting bond or proving actual damages, in addition to any other remedy to
which they may be entitled, at law or in equity.
(f) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise of any
such right, power or remedy by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(g) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(h) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto; provided that, in the event of
the Stockholder's death, the obligations of the Stockholder hereunder shall
attach to the Stockholder's Shares and shall be binding upon any Person to
which legal or beneficial ownership of such Shares shall pass, whether by
operation of Law or otherwise, including without limitation the Stockholder's
heirs, guardians, administrators or successors.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(j) Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State of Delaware in
any action, suit or proceeding
11
<PAGE>
arising in connection with this Agreement, and agrees that any such action,
suit or proceeding shall be brought only in such court (and waives any
objection based on forum non convenience or any other objection to venue
therein); provided, however, that such consent to jurisdiction is solely for
the purpose referred to in this paragraph and shall not be deemed to be a
general submission to the jurisdiction of said Court or in the State of
Delaware other than for such purposes. Each party hereto hereby waives any
right to a trial by jury in connection with any such action, suit or
proceeding.
(k) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(1) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement. This
Agreement shall not be effective as to any party hereto until such time as this
Agreement or a counterpart thereof has been executed and delivered by each
party hereto.
(m) Trust Funds. In the event that any party hereto should
receive any funds that are to be paid to another party pursuant to the terms of
this Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay such
funds to the party entitled to receive such funds in accordance with this
Agreement.
10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Acquisition
Sub may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Acquiror or to any direct or indirect wholly-owned
subsidiary of Acquiror. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Stockholder agrees that this
Agreement, and the obligations of the Stockholder hereunder, shall attach to
the Stockholder's Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by operation of Law or
otherwise, including without limitation the Stockholder's heirs, guardians,
administrators or successors.
11. Termination. This Agreement shall terminate without any further
action on the part of any party hereto (a) upon the occurrence of a termination
of the Merger Agreement pursuant to Sections 8.01(a), 8.01(b)(i) (provided that
no Takeover Proposal has been made prior to the date of such termination) or
8.01(b)(ii) thereof; or (b) the date that Acquiror or Acquisition Sub shall
have purchased and paid for all the Stockholder's Shares pursuant to Section 2.
Upon such termination, this Agreement shall forthwith become void and of no
further force or effect.
[Signature page follows]
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
STOCKHOLDER
/s/ John W. Ballard
-----------------------------------
Name: John W. Ballard
STOCKHOLDER SPOUSE - if community property State
-----------------------------------
Name:
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MWE ACQUISITION CORP.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Brad Krassner
-----------------------------------
Name: Brad Krassner
Title: Co-Chairman of the Board and
Chief Executive Officer
13
<PAGE>
SCHEDULE A
Class of Shares Number of Shares Record Owner Beneficial Owner
- --------------- ---------------- ------------ ----------------
Common Stock 1,170,012 John W. Ballard John W. Ballard
<PAGE>
SCHEDULE B
None
B-1
<PAGE>
Exhibit (c)(7)
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of August 6, 1998
(this "Agreement"), is made and entered into by and among SFX Entertainment,
Inc., a Delaware corporation ("Acquiror"), Brad Krassner ("Executive"), and
Magicworks Entertainment Incorporated, a Delaware corporation ("Target").
RECITALS
WHEREAS, Executive is party to that certain Employment Agreement, by
and between Executive and Target, dated as of June 30, 1996, as amended by that
certain First Amendment to Employment Agreement, dated as of July 24, 1998 (as
so amended, the "Employment Agreement"); capitalized terms used but not defined
herein and defined in the Employment Agreement have the respective meanings
ascribed to them in the Employment Agreement;
WHEREAS, concurrently herewith, Acquiror, MWE Acquisition Corp. and
Target are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which (a) Acquiror will make a cash tender offer (as such offer may be amended
from time to time as permitted by the Merger Agreement (the "Offer") by
Acquisition Sub for all the issued and outstanding shares of common stock, par
value $.001 per share, of Target (the "Target Common Stock"), and (b)
Acquisition Sub will be merged with and into Target (the "Merger"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Executive agree, and the Executive
has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Merger Agreement,
the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENTS
1. Employment Relationship. Executive hereby represents and warrants
that his employment relationship with Target is pursuant to and governed by the
Employment Agreement. A true and correct copy of the Employment Agreement is
attached hereto as Annex I.
2. Amendments to Employment Agreement.
(a) Effective as of the Acquisition Sub's Election Date (as
defined in the Merger Agreement), Executive and Target hereby amend the terms
of the Employment Agreement as follows:
<PAGE>
(i) Section 2.1 of the Agreement is deleted in its entirety,
and replaced as follows:
"2.1 EMPLOYMENT AND TERM. The Company shall employ the
Executive and the Executive shall serve the Company, on the terms and
conditions set forth herein, for the period commencing on the Effective Date
and expiring August 1, 2001, unless extended or sooner terminated as
hereinafter set forth (the "Term")."
(ii) A new Section 2.4 is added as follows:
"2.4 CONTINUED SEPARATE EXISTENCE. The Company shall be
maintained and operated as a separate subsidiary of SFX Entertainment, Inc. for
a period of not less than one year from the consummation of the Offer (as
defined in the Merger Agreement), during which period Executive shall report
directly to Robert F.X. Sillerman, Executive Chairman of Acquiror, or Michael
Farrell, Chief Executive Officer of Acquiror."
(iii) Section 5.4 is deleted in its entirety, and replaced as
follows:
"5.4 TERMINATION WITHOUT CAUSE. The Company shall have the
right to terminate the Executive's employment hereunder for any reason other
than as set forth in Sections 5.1, 5.2 or 5.3 upon thirty (30) days written
notice to the Executive; PROVIDED, HOWEVER, that upon any such termination
pursuant to this Section 5.4, the Company shall pay to the Executive any unpaid
Base Salary through the effective date of termination specified in such notice.
Notwithstanding anything to the contrary, and except as otherwise provided by
law, upon such termination pursuant to this Section 5.4, the Company shall have
no further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however,
to the provisions of Section 4.1)."
(iv) Section 6.1 is deleted in its entirety, and replaced as
follows:
"6.1 NON-COMPETITION. The Executive shall not, during the
Term of this Agreement and, unless the Company terminates the Executive's
employment pursuant to Section 5.4, for a one (1) year period thereafter, serve
as or be a consultant to or employee, officer, agent, director or owner of more
than five percent of another corporation, partnership or other entity which
competes, directly or indirectly, with the business in which the Company or its
affiliates were engaged (the "Business") as of July 30, 1998."
(v) Section 6.2 of the Agreement is hereby deleted in its
entirety, and replaced as follows:
"6.2 NONDISCLOSURE. The Executive shall not, during the Term
of this Agreement and, for a period ending on the second anniversary of the
expiration or termination of the Term, divulge, communicate or use or misuse to
the detriment of the Company, any Confidential Information (as hereinafter
defined) pertaining to the business of the Company or its affiliates. Any
Confidential Information now or hereafter acquired by the Executive with
respect to the Business (which shall include, but not be limited to, non-public
information concerning the Company's
2
<PAGE>
productions, processes, know-how, financial condition, prospects, technology,
customers, methods of doing business and marketing and promotion of the
Company's productions) shall be deemed a valuable, special and unique asset of
the Company that is received by the Executive in confidence and as a fiduciary.
For purposes of this Agreement, "Confidential Information" means proprietary
information concerning the business of the Company or its affiliates disclosed
to the Executive or known by the Executive as a consequence or through his
employment by the Company and not generally known. Notwithstanding the
foregoing, nothing herein shall be deemed to restrict the Executive from
disclosing Confidential Information to the extent required by law."
(vi) Section 6.3 of the Agreement is hereby deleted in its
entirety, and replaced as follows:
"6.3 NONSOLICITATION. The Executive shall not, during the
Term of this Agreement and, unless the Company terminates the Executive's
employment pursuant to Section 5.4, for a one (1) year period thereafter,
directly or indirectly, (i) solicit for employment or endeavor in any way to
entice away from employment with the Company or its affiliates as of July 30,
1998 any employee of the Company or its affiliates as of July 30, 1998 or (ii)
solicit or accept business competitive with the Business from any customers or
clients of the Business or from any customers or clients whose business the
Company or its affiliates as of July 30, 1998 is in the process of soliciting
at the time the Executive's employment with the Company terminated or ceased,
or from any former customers or clients of the Business within one (1) year
prior to the time the Executive's employment with the Company terminated or
ceased.
In the event that the Company terminates the Executive's employment
pursuant to Section 5.4, the Executive shall not for a period of six (6) months
thereafter, directly or indirectly, solicit for employment or endeavor in any
way to entice away from employment with the Company or its affiliates as of
July 30, 1998 any employee of the Company or its affiliates as of July 30,
1998."
(b) Except as amended or modified hereunder, the Employment
Agreement shall remain in full force and effect.
3. No Termination. Executive and Target agree, notwithstanding the
terms of the Employment Agreement, that the execution and delivery of the
Merger Agreement and the Transaction Documents (as defined in the Merger
Agreement), and the performance of the Offer, the Merger or the other
transactions contemplated thereby, shall not constitute a termination or
constructive termination of Executive.
4. Representations and Warranties. Executive hereby represents and
warrants to Target and Acquiror that (a) the Executive has the legal capacity,
power and authority to enter into and perform all of the Executive's
obligations under this Agreement and (b) this Agreement has been duly and
validly executed and delivered by the Stockholder and, together with the
Employment Agreement, constitute a valid and binding agreement of the
Executive, enforceable against the Executive in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
3
<PAGE>
5. Miscellaneous.
(a) Entire Agreement. This Agreement, together with the
Employment Agreement, constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that following the Effective Time (as defined in the
Merger Agreement), the consent of Acquiror shall not be required.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses or the addresses set forth on
the signature pages hereto:
<TABLE>
<CAPTION>
<S> <C>
If to Executive: Brad Krassner
2040 N. Bay Road
Miami Beach, Florida 33140
copy to: Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
Museum Tower, Suite 2200
150 West Flagler Street
Miami, Florida 33130
Telecopy: (305) 789-3395
Attn: Teddy Klinghoffer
If to the Target: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Telecopy: (305) 532-4014
Attn: Robert Kreusler
copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attn: Gary Epstein
</TABLE>
4
<PAGE>
If to Acquiror:
SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Telecopy: (212) 753-3188
Attn: Howard J. Tytel
copy to: Baker & McKenzie
Two Allen Center, Suite 1200
Houston, Texas 77002
Telecopy: (713) 427-5099
Attn: Amar Budarapu
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, then such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(f) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without giving
effect to the principles of conflicts of law thereof.
(h) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and
5
<PAGE>
the same Agreement. This Agreement shall not be effective as to any party
hereto until such time as this Agreement or a counterpart thereof has been
executed and delivered by each party hereto.
[Signature page follows]
6
<PAGE>
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 6th day of August, 1998.
EXECUTIVE
/s/ Brad Krassner
-----------------------------------
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Lee Marshall
--------------------------------
Name: Lee Marshall
Title: President and Chief
Operating Officer
7
<PAGE>
Exhibit (c)(8)
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of August 6, 1998
(this "Agreement"), is made and entered into by and among SFX Entertainment,
Inc., a Delaware corporation ("Acquiror"), Joe Marsh ("Executive"), and
Magicworks Entertainment Incorporated, a Delaware corporation ("Target").
RECITALS
WHEREAS, Executive is party to that certain Employment Agreement, by
and between Executive and Target, dated as of June 30, 1996, as amended by that
certain First Amendment to Employment Agreement, dated as of July 24, 1998 (as
so amended, the "Employment Agreement"); capitalized terms used but not defined
herein and defined in the Employment Agreement have the respective meanings
ascribed to them in the Employment Agreement;
WHEREAS, concurrently herewith, Acquiror, MWE Acquisition Corp. and
Target are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which (a) Acquiror will make a cash tender offer (as such offer may be amended
from time to time as permitted by the Merger Agreement (the "Offer") by
Acquisition Sub for all the issued and outstanding shares of common stock, par
value $.001 per share, of Target (the "Target Common Stock"), and (b)
Acquisition Sub will be merged with and into Target (the "Merger"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Executive agree, and the Executive
has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Merger Agreement,
the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENTS
1. Employment Relationship. Executive hereby represents and warrants
that his employment relationship with Target is pursuant to and governed by the
Employment Agreement. A true and correct copy of the Employment Agreement is
attached hereto as Annex I.
2. Amendments to Employment Agreement.
(a) Effective as of the Acquisition Sub's Election Date (as
defined in the Merger Agreement), Executive and Target hereby amend the terms
of the Employment Agreement as follows:
<PAGE>
(i) Section 5.5, "Voluntary Resignation," is deleted in
its entirety.
(ii) A new section 2.4 is added as follows:
"2.4 OPTIONAL EXTENSION. At any time prior to thirty (30)
days before the expiration of the initial Term hereunder, the Company shall be
entitled, at its sole option, to extend the Term for up to an additional two
(2) years beyond the initial Term, upon written notice to the Executive to such
effect (such Term, as so extended, the "Term")."
(iii) A new section 2.5 is added as follows:
"2.5 CONTINUED SEPARATE EXISTENCE. The Company shall be
maintained and operated as a separate subsidiary of SFX Entertainment, Inc. for
a period of not less than one year from the consummation of the Offer (as
defined in the Merger Agreement), during which period Executive shall report
directly to Robert F.X. Sillerman, Executive Chairman of Acquiror, or Michael
Farrell, Chief Executive Officer of Acquiror."
(b) Except as amended or modified hereunder, the Employment
Agreement shall remain in full force and effect.
3. No Termination. Executive and Target agree, notwithstanding the
terms of the Employment Agreement, that the execution and delivery of the
Merger Agreement and the Transaction Documents (as defined in the Merger
Agreement), and the performance of the Offer, the Merger or the other
transactions contemplated thereby, shall not constitute a termination or
constructive termination of Executive.
4. Representations and Warranties. Executive hereby represents and
warrants to Target and Acquiror that (a) the Executive has the legal capacity,
power and authority to enter into and perform all of the Executive's
obligations under this Agreement and (b) this Agreement has been duly and
validly executed and delivered by the Stockholder and, together with the
Employment Agreement, constitute a valid and binding agreement of the
Executive, enforceable against the Executive in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
5. Miscellaneous.
(a) Entire Agreement. This Agreement, together with the
Employment Agreement, constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that following the Effective Time (as defined in the
Merger Agreement), the consent of Acquiror shall not be required.
2
<PAGE>
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses or the addresses set forth on
the signature pages hereto:
<TABLE>
<CAPTION>
<S> <C>
If to Executive: Joe Marsh
605 Surfside Drive
Akron, Ohio 44319
Telecopy: (330) 645-9309
copy to: Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Telecopy: (216) 479-8780
Attn: Jeffrey J. Margulies
If to the Target: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Telecopy: (305) 532-4014
Attn: Robert Kreusler
copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attn: Gary Epstein
If to Acquiror:
SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Telecopy: (212) 753-3188
Attn: Howard J. Tytel
copy to: Baker & McKenzie
Two Allen Center, Suite 1200
Houston, Texas 77002
Telecopy: (713) 427-5099
Attn: Amar Budarapu
</TABLE>
3
<PAGE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, then such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(f) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflicts of law thereof.
(h) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement. This
Agreement shall not be effective as to any party hereto until such time as this
Agreement or a counterpart thereof has been executed and delivered by each
party hereto.
[Signature page follows]
4
<PAGE>
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 6th day of August, 1998.
EXECUTIVE
/s/ Joe Marsh
-------------------------------
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
------------------------------
Thomas P. Benson
Chief Financial Officer
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Brad Krassner
---------------------------------
Name: Brad Krassner
Title: Co-Chairman of the Board and
Chief Executive Officer
5
<PAGE>
Exhibit (c)(9)
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of August 6, 1998
(this "Agreement"), is made and entered into by and among SFX Entertainment,
Inc., a Delaware corporation ("Acquiror"), Lee Marshall ("Executive"), and
Magicworks Entertainment Incorporated, a Delaware corporation ("Target").
RECITALS
WHEREAS, Executive is party to that certain Employment Agreement, by
and between Executive and Target, dated as of June 30, 1996, as amended by that
certain First Amendment to Employment Agreement, dated as of July 24, 1998 (as
so amended, the "Employment Agreement"); capitalized terms used but not defined
herein and defined in the Employment Agreement have the respective meanings
ascribed to them in the Employment Agreement;
WHEREAS, concurrently herewith, Acquiror, MWE Acquisition Corp. and
Target are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which (a) Acquiror will make a cash tender offer (as such offer may be amended
from time to time as permitted by the Merger Agreement (the "Offer") by
Acquisition Sub for all the issued and outstanding shares of common stock, par
value $.001 per share, of Target (the "Target Common Stock"), and (b)
Acquisition Sub will be merged with and into Target (the "Merger"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Executive agree, and the Executive
has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein and the
benefits to be received by the parties under the terms of the Merger Agreement,
the parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENTS
1. Employment Relationship. Executive hereby represents and warrants
that his employment relationship with Target is pursuant to and governed by the
Employment Agreement. A true and correct copy of the Employment Agreement is
attached hereto as Annex I.
2. Amendments to Employment Agreement.
(a) Effective as of the Acquisition Sub's Election Date (as
defined in the Merger Agreement), Executive and Target hereby amend the terms
of the Employment Agreement as follows:
<PAGE>
(i) Section 5.5, "Voluntary Resignation," is deleted in
its entirety.
(ii) A new section 2.4 is added as follows:
"2.4 OPTIONAL EXTENSION. At any time prior to thirty (30)
days before the expiration of the initial Term hereunder, the Company shall be
entitled, at its sole option, to extend the Term for up to an additional two
(2) years beyond the initial Term, upon written notice to the Executive to such
effect (such Term, as so extended, the "Term")."
(iii) A new section 2.5 is added as follows:
"2.5 CONTINUED SEPARATE EXISTENCE. The Company shall be
maintained and operated as a separate subsidiary of SFX Entertainment, Inc. for
a period of not less than one year from the consummation of the Offer (as
defined in the Merger Agreement), during which period Executive shall report
directly to Robert F.X. Sillerman, Executive Chairman of Acquiror, or Michael
Farrell, Chief Executive Officer of Acquiror."
(b) Except as amended or modified hereunder, the Employment
Agreement shall remain in full force and effect.
3. No Termination. Executive and Target agree, notwithstanding the
terms of the Employment Agreement, that the execution and delivery of the
Merger Agreement and the Transaction Documents (as defined in the Merger
Agreement), and the performance of the Offer, the Merger or the other
transactions contemplated thereby, shall not constitute a termination or
constructive termination of Executive.
4. Representations and Warranties. Executive hereby represents and
warrants to Target and Acquiror that (a) the Executive has the legal capacity,
power and authority to enter into and perform all of the Executive's
obligations under this Agreement and (b) this Agreement has been duly and
validly executed and delivered by the Stockholder and, together with the
Employment Agreement, constitute a valid and binding agreement of the
Executive, enforceable against the Executive in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
5. Miscellaneous.
(a) Entire Agreement. This Agreement, together with the
Employment Agreement, constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto; provided that following the Effective Time (as defined in the
Merger Agreement), the consent of Acquiror shall not be required.
2
<PAGE>
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses or the addresses set forth on
the signature pages hereto:
<TABLE>
<CAPTION>
<S> <C>
If to Executive: Lee Marshall
199 E. Garfield Rd.
Aurora, Ohio 44202
Telecopy: (330) 995-0872
copy to: Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Telecopy: (216) 479-8780
Attn: Jeffrey J. Margulies
If to the Target: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Telecopy: (305) 532-4014
Attn: Robert Kreusler
copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attn: Gary Epstein
If to Acquiror:
SFX Entertainment, Inc.
650 Madison Avenue
New York, NY 10022
Telecopy: (212) 753-3188
Attn: Howard J. Tytel
copy to: Baker & McKenzie
Two Allen Center, Suite 1200
Houston, Texas 77002
Telecopy: (713) 427-5099
Attn: Amar Budarapu
</TABLE>
3
<PAGE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, then such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such jurisdiction,
and this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
(e) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(f) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflicts of law thereof.
(h) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement. This
Agreement shall not be effective as to any party hereto until such time as this
Agreement or a counterpart thereof has been executed and delivered by each
party hereto.
[Signature page follows]
4
<PAGE>
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 6th day of August, 1998.
EXECUTIVE
/s/ Lee Marshall
-----------------------------------
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
--------------------------------
Thomas P. Benson
Chief Financial Officer
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ Brad Krassner
--------------------------------
Name: Brad Krassner
Title: Co-Chairman of the Board and
Chief Executive Officer
5
