UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
ALLIANCE ENTERTAINMENT CORP.
------------------------------------------------------
(Name of Issuer)
Common Stock, Par Value $.0001 Per Share
------------------------------------------------------
(Title of Class of Securities)
018593 10 3
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(CUSIP Number)
Wasserstein Perella Group, Inc.
31 West 52nd Street, 27th Floor
New York, New York 10019-6163
Attention: W. Townsend Ziebold, Jr.
Telephone: (212) 969-2700
Copy to:
Peter Lyons, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Telephone: (212) 848-4000
------------------------------------------------------
(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications)
August 27, 1996
------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a Statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Check the following box if a fee is being paid with this Statement |X|.
(Continued on following pages)
<PAGE>
============================== ==============================
CUSIP No. 018593 10 3 Page 2 of 109 Pages
============================== ==============================
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
Wasserstein & Co., Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 13-3903212
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware, U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 2,904,766
SHARES -----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 0
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 2,904,766
REPORTING -----------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,904,766
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |X|
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.50%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON HC, CO
- -------------------------------------------------------------------------------
<PAGE>
============================== ==============================
CUSIP No. 018593 10 3 Page 3 of 109 Pages
============================== ==============================
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
Wasserstein Perella Group, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 13-3447267
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) |_|
(b) |X|
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO, WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(E) |_|
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware, U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 0 *
SHARES -----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 0
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 0 *
REPORTING -----------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 *
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |X|
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0 *
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON HC
- -------------------------------------------------------------------------------
* Wasserstein & Co., Inc. and Cypress Ventures, Inc. are wholly owned
subsidiaries of Wasserstein Perella Group, Inc. and Wasserstein & Co.,
Inc., respectively. Wasserstein & Co., Inc. has a 99% membership
interest in WP Management Partners, L.L.C., the sole general partner of
U.S. Equity Partners, L.P. and U.S. Equity Partners (Offshore), L.P., the
remaining 1% membership interest being owned by Cypress Ventures, Inc. As a
result, Wasserstein Perella Group, Inc. may be deemed the indirect
beneficial owner of the shares of Common Stock owned for itself by
Wasserstein & Co., Inc. and held by WP Management Partners, L.L.C.
on behalf of U.S. Equity Partners, L.P. and U.S. Equity Partners
(Offshore), L.P., of which it is the sole general partner.
<PAGE>
============================== ==============================
CUSIP No. 018593 10 3 Page 4 of 109 Pages
============================== ==============================
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
WP Management Partners, L.L.C.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 13-3891498
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) |_|
(b) |X|
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO, WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware, U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 4,903,162 *
SHARES -----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 0
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 4,903,162 *
REPORTING -----------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,903,162 *
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |X|
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.98%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON CO
- -------------------------------------------------------------------------------
* WP Management Partners, L.L.C. is holding its shares of Common Stock of
the Company on behalf of U.S. Equity Partners, L.P. and U.S. Equity
Partners (Offshore), L.P., of which it is the sole general partner.
<PAGE>
============================== ==============================
CUSIP No. 018593 10 3 Page 5 of 109 Pages
============================== ==============================
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
U.S. Equity Partners, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 13-3891500
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) |_|
(b) |X|
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO, WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware, U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 0 *
SHARES -----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 0
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 0 *
REPORTING -----------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 *
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |X|
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0 *
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON PN
- -------------------------------------------------------------------------------
* WP Management Partners, L.L.C. is holding its shares of Common Stock of
the Company on behalf of U.S. Equity Partners, L.P. and U.S. Equity
Partners (Offshore), L.P., of which it is the sole general partner.
<PAGE>
============================== ==============================
CUSIP No. 018593 10 3 Page 6 of 109 Pages
============================== ==============================
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
U.S. Equity Partners (Offshore), L.P.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |X|
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO, WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION Cayman Islands
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 0 *
SHARES -----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 0
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 0 *
REPORTING -----------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 *
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |X|
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0 *
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON PN
- -------------------------------------------------------------------------------
* WP Management Partners, L.L.C. is holding its shares of Common Stock of
the Company on behalf of U.S. Equity Partners, L.P. and U.S. Equity
Partners (Offshore), L.P., of which it is the sole general partner.
<PAGE>
============================== ==============================
CUSIP No. 018593 10 3 Page 7 of 109 Pages
============================== ==============================
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Alvin N. Teller
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP * (a) |_|
(b) |X|
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) |_|
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER 760,823
SHARES -----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 0
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 760,823
REPORTING -----------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
760,823
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES |X|
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.70%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON IN
- -------------------------------------------------------------------------------
<PAGE>
Item 1. Security and Issuer.
This Statement relates to shares of common stock, par value
$.0001 per share (the "Common Stock"), of Alliance Entertainment Corp. (the
"Company"). The Company is a corporation organized under the laws of the state
of Delaware and has its principal executive offices located at 110 East 59th
Street, New York, New York 10022. The Common Stock is traded on the New York
Stock Exchange under the ticker CDS.
Some of the shares of Common Stock to which this statement
relates more particularly were transferred pursuant to the terms of the Stock
Acquisition and Merger Agreement (the "Merger Agreement") dated as of August 15,
1996 and filed as Exhibit 1 hereto, among Wasserstein & Co., Inc. ("WCI"), a
Delaware corporation, Mr. Alvin N. Teller ("Mr. Teller"), Red Ant Box Inc., a
Delaware corporation wholly owned by Mr. Teller ("Red Ant Box"), U.S. Equity
Partners, L.P., a Delaware limited partnership ("USEP Delaware"), U.S. Equity
Partners (Offshore), L.P., a Cayman Islands limited partnership ("USEP Offshore"
and, together with USEP Delaware, "USEP"), Alliance Entertainment Corp., a
Delaware corporation ("Alliance") and Alliance Acquisition Co., Inc., a Delaware
corporation ("Acquisition Sub"). The Merger Agreement has resulted in WCI
holding 2,220,266 shares of Common Stock, Mr. Teller holding 760,823 shares of
Common Stock and WP Management Partners, L.L.C., a Delaware limited liability
company ("WPMP"), the general partner of each of USEP Delaware and USEP
Offshore, holding 3,737,662 shares of Common Stock on behalf of USEP. WPMP will
receive shares of Common Stock on behalf of USEP per the terms of an instruction
letter addressed to the Company, Messrs. Bianco and Narang filed as Exhibit 7
hereto.
In addition, on August 15, 1996, WCI and USEP entered into
Stock Purchase Agreements with each of Messrs. Joseph J. Bianco and Anil K.
Narang, respectively the CEO and the President of the Company (the "Stock
Purchase Agreements"), providing for the purchase from Mr. Bianco of 499,500 and
850,500 shares of Common Stock by WCI and USEP, respectively, and the purchase
from Mr. Narang of 185,000 and 315,000 shares of Common Stock by WCI and USEP,
respectively (see below). WPMP will hold shares of Common Stock on behalf of
USEP per the terms of an instruction letter addressed to the Company, Messrs.
Bianco and Narang filed as Exhibit 7 hereto. The Stock Purchase Agreements are
attached as Exhibits 2 and 3 hereto.
In connection with the Merger Agreement and the Stock Purchase
Agreements, Messrs. Joseph Bianco, John Friedman, Peter Kaufman, Elliot Newman,
Robert Marx and Alvin Teller, Bain Capital, Inc., BT Capital Partners, Inc.,
USEP and WCI entered into the Voting Agreement dated as of August 15, 1996 (the
"Voting Agreement"), attached as Exhibit 4 hereto, in their capacity as
stockholders of the Company (see below).
8
<PAGE>
Item 2. Identity and Background.
(a) This Statement is being filed by (i) Wasserstein Perella
Group, Inc., a Delaware corporation ("WPG"), (ii) Mr. Teller, (iii) WCI, (iv)
WPMP, acting on behalf of USEP, (v) USEP Delaware and (vi) USEP Offshore. Mr.
Teller, WCI and WPMP are referred to collectively as the "Holders". WPG, Mr.
Teller, WCI, USEP and WPMP are referred to collectively as the "Reporting
Persons". WPG is the sole stockholder of WCI which, in turn, has a 99%
membership interest in WPMP; WCI is the sole stockholder of Cypress Ventures,
Inc., a Delaware corporation ("Ventures"); Ventures has a 1% membership interest
in WPMP. WPMP is the sole general partner of USEP Delaware and USEP Offshore.
(b) Mr. Teller has its business address 110 East 59th Street,
New York, New York 10022. USEP Offshore has its principal office located at c/o
Caledonian Bank & Trust Limited, P.O. Box 1043, Georgetown, Grand Cayman, Cayman
Islands, B.V.I. The address of the principal business and office of the other
Reporting Persons is 31 West 52nd Street, 27th Floor, New York, New York
10019-6163.
Schedule I hereto, which is incorporated herein by reference,
sets forth the name, business address, present principal occupation or
employment (and the name, principal business and address of any corporation or
other organization in which such employment is conducted) and the citizenship of
the directors, executive officers and general partners of WPG, WCI, WPMP,
Ventures, USEP Delaware and USEP Offshore.
(c) The principal business of WPG is to engage, through its
subsidiaries, in merchant banking, investment banking and securities brokerage
activities. The principal business of WPMP is to act as general partner of
certain partnerships affiliated with Wasserstein Perella Group, Inc. The
principal business of Ventures is to engage in merchant banking and venture
capital activities. The principal business of WCI and USEP is to engage in
merchant banking activities.
Mr. Teller has been the Chief Executive Officer, Vice-Chairman
and President of the Company since August 15, 1996.
(d)-(e) None of the Reporting Persons and, to their knowledge,
none of the persons identified in Schedule I hereto has, during the last five
years, been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or been 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 or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
(f) Mr. Teller is a citizen of the United States.
9
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration.
Red Ant Holdings, Inc., a Delaware corporation ("RAH") and Red
Ant Box hold respectively a 60% membership interest and a 40% membership
interest in Red Ant, L.L.C., a Delaware limited liability company ("Red Ant").
Pursuant to the terms of the Merger Agreement, the shares of RAH and RAB were
exchanged for shares of Common Stock of the Company. Under the Merger Agreement,
on August 27, 1996 (the "Closing Date"), WCI and WPMP (acting on behalf of USEP)
contributed $12 million to Red Ant. WCI and USEP will contribute $5 million to
Red Ant within 6 months following the Closing Date (see below). On the Closing
Date, WCI and WPMP (acting on behalf of USEP) also paid an aggregate of
$11,100,000 in cash to Messrs. Bianco and Narang in connection with the stock
purchases contemplated by the Stock Purchase Agreements.
The source of funds of WCI, for its contributions to RAH and
purchases of shares of Common Stock from Messrs. Bianco and Narang, was its
working capital. The source of funds of USEP, for its contributions to RAH and
purchases of shares of Common Stock from Messrs. Bianco and Narang, was a pool
of capital raised for transactions of this type.
Item 4. Purpose of the Transaction.
The principal purposes of the transactions described under
Item 3 above were (i) the acquisition of an equity stake in the Company, (ii)
with participation in the management of the Company and (iii) the combination of
the Company's business with the business of Red Ant.
The Merger Agreement provides for contingent payments to WCI
and USEP in shares of Common Stock within a period of 4 years, based upon the
listed price of the shares of Common Stock (see below). WCI and USEP have
undertaken to contribute $5 million to Red Ant within 6 months (see above).
Item 5. Interest in the Securities of the Issuer.
(a) As a result of the Merger Agreement and the Stock Purchase
Agreements, WCI, USEP and Mr. Teller hold 2,904,766, 4,903,162 and 760,823
shares of Common Stock, respectively, representing 6.50%, 10.98% and 1.70% of
the total number of issued and outstanding shares of Common Stock of the
Company, respectively. To the best knowledge and belief of the Reporting
Persons, none of the persons listed on Schedule 1 hereto beneficially owns any
shares of Common Stock.
10
<PAGE>
As a parent of WCI, WPG may be deemed to be the indirect
beneficial owner of the shares of Common Stock owned by WCI, USEP Delaware
or USEP Offshore. As the sole general partner of USEP Delaware and USEP
Offshore, WPMP may be deemed the indirect beneficial owner of any shares of
Common Stock owned by USEP Delaware and USEP Offshore.
(b) Each Holder has sole power to dispose of its shares of
Common Stock. With the exception of the restrictions on voting provided in the
Voting Agreement, each holder has sole power to vote its shares of Common Stock.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to the Securities of the Issuer.
A. Merger Agreement
Pursuant to the Merger Agreement and subject to the
conditions set forth therein, on the Closing Date: (i) Acquisition Sub will be
merged into Red Ant Box Inc., a Delaware corporation wholly owned by Alvin
Teller and holding a 40% membership interest in Red Ant; (ii) the shares of Red
Ant Box Inc. held by Mr. Teller will be cancelled and converted into 760,823
shares of Common Stock of the Company; (iii) WCI and USEP will receive, in
aggregate, 5,957,928 newly issued shares of Common Stock in exchange for their
shares of RAH, owning a 60% membership interest in Red Ant.
Pursuant to the terms of the Merger Agreement, WCI and WPMP
(acting on behalf of USEP) contributed $12 million to Red Ant on the Closing
Date and will contribute $5 million to Red Ant within 6 months following the
Closing Date (see below).
The Merger Agreement contains customary representations and
warranties. It also contains customary conditions to closing, all of which,
including the expiration of all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and that certain amendments
to the By-laws of the Company be adopted, were satisfied or waived on or prior
to August 27, 1996.
The Merger Agreement provides for deferred, contingent,
payments in shares of Common Stock of the Company to WCI, USEP and Mr. Teller,
in the event that the price of the Common Stock of the Company reaches certain
thresholds. It also provides that so long as WCI and its affiliates and AT will
retain ownership of certain numbers of shares of Common Stock, they shall have
(i) approval rights in connection with certain transactions involving the
Company and (ii) the right to designate a specified number of directors of the
Company.
As mentioned above, the Merger Agreement provides for certain
amendments to the By-Laws of the Company. These amendments primarily relate to
the creation of a Finance
11
<PAGE>
Committee of the Board of Directors of the Company which must consider or
approve certain matters relating to the bank financing and equity issuances of
the Company.
B. Stock Purchase Agreement
Pursuant to the Stock Purchase Agreements entered into between
WCI, USEP, Mr. Joseph J. Bianco and Mr. Anil K. Narang pursuant to the Merger
Agreement simultaneously with the closing:
(i) WCI purchased 499,500 shares of Common Stock of the
Company from Mr. Joseph J. Bianco and 185,000 shares of Common Stock of the
Company from Mr. Anil V. Narang; and
(ii) USEP, purchased 850,500 shares of Common Stock of the
Company from Mr. Joseph J. Bianco and 315,000 shares of Common Stock of the
Company from Mr. Anil V. Narang.
Under the Merger Agreement, the Company granted WCI, USEP and
Mr. Teller the right to have all or part of their shares of Common Stock
registered upon request or incidentally to the registration of any of its
securities by the Company.
C. Voting Agreement
The Voting Agreement stipulates that the parties thereto will
vote for (a) the approval of the conversion rights of the Series A Convertible
Preferred Stock of the Company, (b) the approval of the Company's issuance of
Common Stock pursuant to any party's exercise of such conversion rights, (c)
transactions contemplated in the Merger Agreement, including the issuance of
contingent shares and (d) the election of directors designated by BT Capital
Partners, Inc., Bain Capital, Inc. and Mr. Joseph Bianco. The Voting Agreement
provides that Mr. Bianco shall use his best efforts to cause each of the parties
to the Stockholders Agreement executed as of November 30, 1993 and amended and
restated as of May 18, 1995 (the "Stockholders Agreement"), to grant an
irrevocable proxy to Mr. Teller with respect to their shares, such proxy to be
effective to the extent set forth in such Stockholders Agreement upon the death
of Mr. Bianco.
Although the Voting Agreement is limited in scope, the
Reporting Persons and the other parties to the Voting Agreement might be deemed
to constitute a group in the sense of Section 13(d)(3) of the Securities and
Exchange Act of 1934 (the "1934 Act"). The Reporting Persons might also be
deemed to constitute a group in the sense of Section 13(d)(3) of the 1934 Act.
The parties to the Voting Agreement other than the Reporting Persons may be
deemed to constitute a "group" as a result of their being parties to the
Stockholders Agreement. The Reporting Persons disclaim expressly that they have
formed a group among themselves. The Reporting Persons also expressly disclaim
that they have formed a group with the other parties to the Voting Agreement.
12
<PAGE>
D. Employment Agreement and Stock Option Agreement.
On August 15, 1996, Mr. Teller and the Company entered into a
5-year employment agreement and a stock option agreement. The employment
agreement provides for a base salary, stock options to purchase up to 5 million
shares of the Company and various other benefits that are customary for this
type of position. Under the stock option agreement, Mr. Teller is granted the
right to purchase up to 5 million shares of Common Stock of the Company. The
stock option agreement is attached as Exhibit 5 hereto. Pursuant to the 1996
Restricted Stock Plan attached hereto as Exhibit 8, Mr. Teller is awarded up to
500,000 shares of Common Stock of the Company, contingent upon the price of the
Common Stock remaining at or above certain price levels.
Item 7. Material to be Filed as Exhibits.
Exhibit
No. Description
- ------- -----------
1 Stock Acquisition and Merger Agreement dated as of August 15,
1996, among Wasserstein & Co., Inc., Mr. Alvin N. Teller, Red Ant
Box Inc., U.S. Equity Partners, L.P., U.S. Equity Partners
(Offshore), L.P., Alliance Entertainment Corp. and Alliance
Acquisition Co., Inc.
2 Stock Purchase Agreement dated as of August 15, 1996 among
Wasserstein & Co., Inc., U.S. Equity Partners, L.P., U.S. Equity
Partners (Offshore), L.P. and Mr. Joseph J. Bianco
3 Stock Purchase Agreement dated as of August 15, 1996 among
Wasserstein & Co., Inc., U.S. Equity Partners, L.P., U.S. Equity
Partners (Offshore), L.P. and Mr. Anil V. Narang
4 Voting Agreement dated as of August 15, 1996 among Joseph Bianco,
John Friedman, Peter Kaufman, Elliot Newman, Robert Marx, Alvin
Teller, Bain Capital, Inc., BT Capital Partners, Inc., U.S. Equity
Partners L.P., U.S. Equity Partners (Offshore), L.P. and
Wasserstein & Co., Inc.
5 Stock Option Agreement dated as of August 15, 1996 between Alvin
N. Teller and Alliance Entertainment Corp.
6 Joint Filing Agreement among Wasserstein Perella Group, Inc., Mr.
Teller, Wasserstein & Co., Inc., WP Management Partners, L.L.C.,
acting on behalf of U.S. Equity Partners, U.S. Equity Partners,
L.P. and U.S. Equity Partners (Offshore), L.P.
13
<PAGE>
7 Instruction Letter dated as of August 27, 1996 from WP Management
Partners, L.L.C., U.S. Equity Partners, L.P. and U.S. Equity
Partners (Offshore), L.P. to Alliance Entertainment Corp. and
Joseph J. Bianco and Anil K. Narang
8 Alliance Entertainment Corp.-1996 Restricted Stock Plan-
Award to Alvin N. Teller
14
<PAGE>
Signature
After reasonable inquiry and to the best of its knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct and agrees that this statement may be
jointly filed on behalf of it and each of the other undersigned.
Date: August 27, 1996 WASSERSTEIN PERELLA GROUP, INC.
By________________________________
Name:
Title:
WASSERSTEIN & CO. INC.
By________________________________
Name:
Title:
WP MANAGEMENT PARTNERS, L.L.C.
By________________________________
Name:
Title:
15
<PAGE>
ALVIN N. TELLER
__________________________________
U.S. EQUITY PARTNERS, L.P.
By WP MANAGEMENT PARTNERS, L.L.C.
Its Sole General Partner
By________________________________
Name:
Title:
U.S. EQUITY PARTNERS (OFFSHORE), L.P.
By WP MANAGEMENT PARTNERS, L.L.C.
Its Sole General Partner
By________________________________
Name:
Title:
16
<PAGE>
SCHEDULE I
Information with Respect to
Directors and Executive Officers of WPG, WCI, WPMP and VENTURES,
Members of WPMP, and General Partners of USEP Delaware and USEP Offshore
Each of the individuals listed below is a United States
citizen, except Mr. Takasu, who is a citizen of Japan. The business address of
each such individual is 31 West 52nd Street, 27th Floor, New York, New York
10019-6163.
WPG
Directors. Certain information with respect to each of the directors
is set forth below.
Michael J. Biondi is Vice-President, Treasurer and Chief
Operating Officer of WPG, a Director and a Vice President of
Cypress Ventures, Inc. and WCI.
Frederic M. Seegal is the President of WPG.
Bruce Wasserstein is Chairman of the Board and Chief
Executive Officer of WPG.
Kazuhiro Takasu.
Executive Officers. Certain information with respect to each
of the executive officers who is not also a director is set forth below.
Ashish Bhutani is Deputy Chairman.
Vincent J. Capurso is a Vice President and Director of Taxes
of WPG, WP Management Partners, L.L.C., Cypress Ventures, Inc., and
WCI.
Lee Siegel is the Assistant Secretary of Cypress Ventures,
Inc., General Counsel and Assistant Secretary of WPG and Assistant
Secretary of WCI.
James C. Kingsbery is the Secretary and Treasurer of WCI and
Cypress Ventures, Inc., Secretary of WP Management Partners, L.L.C.
and Chief Financial Officer and Secretary of WPG.
John M. Donovan is the Deputy General Counsel and Director of
Compliance.
17
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WCI
Directors. Certain information with respect to each of the directors
is set forth below.
Michael J. Biondi is a Director, Vice President, Treasurer
and Chief Operating Officer of Wasserstein Perella Group, Inc., a
Director and a Vice President of Cypress Ventures, Inc. and Vice
President of WCI.
Randall J. Weisenburger is President and Chief Executive
Officer of WP Management Partners, L.L.C., a Director and a Vice
President of Cypress Ventures, Inc., President and Chief Operating
Officer of WCI.
W. Townsend Ziebold, Jr. is Vice President of WP Management
Partners, L.L.C., a Director and President of Cypress Ventures,
Inc., and Vice President of WCI.
George L. Majoros is a Vice President of WP Management
Partners, L.L.C. and Vice President of WCI.
Executive Officers. Certain information with respect to each of the
executive officers who is not also a director is set forth below.
Vincent J. Capurso is a Vice President and Director of Taxes
of WPG, WP Management Partners, L.L.C., Cypress Ventures, Inc., and
WCI.
Lee Siegel is the Assistant Secretary of Cypress Ventures,
Inc., General Counsel and Assistant Secretary of WPG and Assistant
Secretary of WCI.
James C. Kingsbery is the Secretary and Treasurer of WCI and
Cypress Ventures, Inc., Secretary of WP Management Partners, L.L.C.
and Chief Financial Officer and Secretary of WPG.
WPMP
Members. Certain information with respect to each of the members
is set forth below.
Cypress Ventures, Inc. has a 1% membership interest in WPMP.
Wasserstein & Co., Inc. has a 99% membership interest in
WPMP.
18
<PAGE>
Executive Officers. Certain information with respect to each of the
executive officers is set forth below.
Randall J. Weisenburger is President and Chief Executive
Officer of WP Management Partners, L.L.C., Director and Vice President
of Cypress Ventures, Inc. and Director, President and Chief Operating
Officer of WCI.
W. Townsend Ziebold, Jr. is Vice President of WP Management
Partners, L.L.C., Director and President of Cypress Ventures, Inc.,
and a Director and Vice President of WCI.
George L. Majoros is a Vice President of WP Management
Partners, L.L.C. and a Director and Vice President of WCI.
Vincent J. Capurso is Vice President and Director of Taxes of
WPG, WP Management Partners, L.L.C., Cypress Ventures, Inc., and WCI.
Lee Siegel is Assistant Secretary of Cypress Ventures, Inc.,
General Counsel and Assistant Secretary of WPG and Assistant Secretary
of WCI.
James C. Kingsbery is Secretary and Treasurer of WCI and
Cypress Ventures, Inc., Secretary of WP Management Partners, L.L.C.
and Chief Financial Officer and Secretary of WPG.
Robert Mersten is Assistant Secretary.
VENTURES
Directors. Certain information with respect to each of the directors
is set forth below.
W. Townsend Ziebold, Jr. is a Vice President of WP Management
Partners, L.L.C., a Director and Vice President of WCI and President
of Cypress Ventures, Inc.
Michael J. Biondi is a Director and Vice President, Treasurer
and Chief Operating Officer of WPG, Vice President of Cypress
Ventures, Inc. and a Director and Vice President of WCI.
Randall J. Weisenburger is President and Chief Executive
Officer of WP Management Partners, L.L.C., Vice President of Cypress
Ventures, Inc. and Director, President and Chief Operating Officer of
WCI.
19
<PAGE>
Executive Officers. Certain information with respect to each of the
executive officers who is not also a director is set forth below.
Vincent J. Capurso is a Vice President and Director of Taxes
of WPG, WP Management Partners, L.L.C., Cypress Ventures, Inc., and
WCI.
Lee Siegel is the Assistant Secretary for Cypress Ventures,
Inc., General Counsel and Assistant Secretary of WPG and Assistant
Secretary of WCI.
James C. Kingsbery is Secretary and Treasurer of WCI and
Cypress Ventures, Inc., Secretary of WP Management Partners, L.L.C.
and Chief Financial Officer and Secretary of WPG.
USEP DELAWARE
General Partner
WP Management Partners, L.L.C. is the sole general partner of USEP
Delaware.
USEP OFFSHORE
General Partner
WP Management Partners, L.L.C. is the sole general partner of USEP
Offshore.
20
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INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
1 Stock Acquisition and Merger Agreement dated as of
August 15, 1996, among Wasserstein & Co., Inc., Mr. Alvin
N. Teller, Red Ant Box Inc., U.S. Equity Partners, L.P.,
U.S. Equity Partners (Offshore), L.P., Alliance Entertainment
Corp. and Alliance Acquisition Co., Inc.
2 Stock Purchase Agreement dated as of August 15, 1996
among Wasserstein & Co., Inc., U.S. Equity Partners, L.P.,
U.S. Equity Partners (Offshore), L.P. and Mr. Joseph J.
Bianco
3 Stock Purchase Agreement dated as of August 15, 1996
among Wasserstein & Co., Inc., U.S. Equity Partners, L.P.,
U.S. Equity Partners (Offshore), L.P. and Mr. Anil V.
Narang
4 Voting Agreement dated as of August 15, 1996 among
Joseph Bianco, John Friedman, Peter Kaufman, Elliot
Newman, Robert Marx, Alvin Teller, Bain Capital, Inc., BT
Capital Partners, Inc., U.S. Equity Partners, L.P., U.S.
Equity Partners (Offshore), L.P. and Wasserstein & Co., Inc.
5 Stock Option Agreement dated as of August 15, 1996 between
Alvin N. Teller and Alliance Entertainment Corp.
6 Joint Filing Agreement among Wasserstein Perella Group,
Inc., Mr. Teller, Wasserstein & Co., Inc., WP Management
Partners, L.L.C., acting on behalf of U.S. Equity Partners,
U.S. Equity Partners, L.P. and U.S. Equity Partners
(Offshore), L.P.
7 Instruction Letter dated as of August 27, 1996 from WP
Management Partners, L.L.C., U.S. Equity Partners, L.P.
and U.S. Equity Partners (Offshore), L.P. to Alliance
Entertainment Corp. and Joseph J. Bianco and Anil K.
Narang
8 Alliance Entertainment Corp.-1996 Restricted Stock Plan-
Award to Alvin N. Teller
21
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EXHIBIT 1
STOCK ACQUISITION AND MERGER AGREEMENT DATED AS OF AUGUST 15, 1996, AMONG
WASSERSTEIN & CO., INC., MR. ALVIN N. TELLER, RED ANT BOX INC., U.S. EQUITY
PARTNERS, L.P., U.S. EQUITY PARTNERS (OFFSHORE), L.P., ALLIANCE ENTERTAINMENT
CORP., AND ALLIANCE ACQUISITION CO., INC.
STOCK ACQUISITION AND MERGER AGREEMENT
STOCK ACQUISITION AND MERGER AGREEMENT, dated as of August 15, 1996
(the "Agreement"), by and among Alvin N. Teller ("AT"), Wasserstein & Co., Inc.,
a Delaware corporation ("WCI"), U.S. Equity Partners, L.P., a Delaware limited
partnership ("USEP Delaware"), U.S. Equity Partners (Offshore), L.P., a Cayman
Islands limited partnership ("USEP Offshore" and, together with USEP Delaware,
"USEP"), Red Ant Box, Inc., a Delaware corporation ("AT Sub"), Alliance
Entertainment Corp., a Delaware corporation (the "Company"), and Alliance
Acquisition Co. Inc., a Delaware corporation wholly owned by the Company
("Acquisition Sub").
RECITALS
WHEREAS, AT Sub and Red Ant Holdings, Inc., a Delaware corporation
("WPI"), either directly or indirectly through wholly-owned subsidiaries are the
sole members of Red Ant, L.L.C., a Delaware limited liability company ("RA");
WHEREAS, AT, WCI and USEP desire to transfer to the Company, and the
Company wishes to acquire, all of the stock interests in AT Sub and WPI in
exchange for Common Stock of the Company, all upon the terms and subject to the
conditions of this Agreement;
WHEREAS, the parties intend that the acquisitions of AT Sub and WPI be
characterized as tax-free reorganizations within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended; and
WHEREAS, AT, WCI, AT Sub, Acquisition Sub and the Company desire to
make certain representations, warranties, covenants and agreements in connection
with the transactions described above.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein, the
parties hereto agree as follows:
1. MERGER.
1.1. The Merger. (a) In accordance with the provisions of this
Agreement and the General Corporation Law of the State of Delaware ("DGCL"),
at the Closing Date (as defined in
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Section 2.3 hereof), Acquisition Sub shall be merged with and into AT Sub (the
"Merger"), and AT Sub shall be the surviving corporation (hereinafter sometimes
called the "Surviving Corporation") and shall continue its corporate existence
under the laws of the State of Delaware. The name of the Surviving Corporation
shall be "Red Ant Box, Inc." At the Effective Date (as defined in Section 1.3
hereof) the separate existence of the Acquisition Sub shall cease.
(b) The Surviving Corporation shall possess all the rights,
privileges, immunities, powers and purposes of each of Acquisition Sub and AT
Sub (referred to collectively herein sometimes as the "Constituent
Corporations") and shall by operation of law assume and be liable for all the
liabilities, obligations and penalties of each of the Constituent Corporations.
1.2. Filing. As soon as practicable after the satisfaction or waiver
of the conditions set forth in Section 7 and Section 8 hereof, AT and the
Company will cause a Certificate of Merger in compliance with the provisions of
Section 264 of the DGCL (the "Certificate of Merger") to be executed and filed
with the Secretary of State of the State of Delaware, and shall take any and all
other lawful actions and do any and all other lawful things to cause the Merger
to become effective.
1.3. Effective Date of the Merger. The Merger shall become effective
immediately upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware. The date of such filing is herein sometimes
referred to as the "Effective Date" and the time of such filing is herein
sometimes referred to as the "Effective Time." The Effective Date shall occur on
the Closing Date (as defined in Section 2.3 hereof). Both the Merger and the
Acquisition (as defined in Section 2.1 hereof) shall close simultaneously.
1.4. Articles of Incorporation. Upon the effectiveness of the
Merger, the Articles of Incorporation of Acquisition Sub, as in effect
immediately prior to the Effective Date, shall continue to be in full force and
effect as the Articles of Incorporation of the Surviving Corporation, except to
the extent amended to reflect the change in corporate name, until thereafter
amended as provided therein or by the DGCL.
1.5. By-laws. Upon the effectiveness of the Merger, the
By-laws of Acquisition Sub as in effect immediately prior to the Effective
Date shall continue to be in full force and
<PAGE>
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effect as the By-laws of the Surviving Corporation until thereafter amended or
repealed from time to time by the Board of Directors of the Surviving
Corporation.
1.6. Directors and Officers. The directors and officers of
Acquisition Sub immediately prior to the Effective Date shall be the directors
and officers of the Surviving Corporation and will hold office from and after
the Effective Date until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of Incorporation
and By-laws of the Surviving Corporation, or as otherwise provided by law.
1.7. Further Assurances. If, at any time after the Effective Date,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
1.8. Conversion of Shares. At the Effective Time (i) each share of
capital stock of AT Sub held by AT shall be cancelled and converted into (a)
7,608.23 shares of Common Stock, par value $.0001 per share, of the Company
("Common Stock") aggregating 760,823 shares and (b) the right to receive up to
10,000 additional shares of Common Stock, aggregating 1,000,000 shares (the
"Contingent Stock") upon the terms and conditions set forth in Section 1.9
below, subject to adjustment pursuant to Section 3 hereof, and (ii) each share
of capital stock of Acquisition Sub outstanding immediately prior to the
Effective Time shall be converted into and become one share of capital stock of
the Surviving Corporation with the same rights and privileges as the shares so
converted and shall
<PAGE>
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constitute the only outstanding shares of capital stock of the Surviving
Corporation.
1.9. Contingent Stock.
(a) Tranche 1. If, at any time during the period of two years
following the Closing Date, the price of the Common Stock remains at or
above any of the Target Contingent Acquisition Prices indicated on the
schedule below for any 25 trading days out of a period of 30 consecutive
trading days, then AT shall be entitled to receive the corresponding
percentage of 500,000 shares of Common Stock (the "Tranche 1 Contingent
Stock"):
Tranche 1 Contingent Stock Schedule
Target Contingent % of Tranche 1 Contingent
Acquisition Price Stock
$ 9.00 25.00%
$ 9.25 31.25%
$ 9.50 37.50%
$ 9.75 43.75%
$10.00 50.00%
$10.25 56.25%
$10.50 63.50%
$10.75 69.75%
$11.00 75.00%
$11.25 81.25%
$11.50 87.50%
$11.75 93.75%
$12.00 100.00%
(b) Tranche 2. If, at any time during the period of four years
following the Closing Date, the price of the Common Stock remains at or
above any of the Target Contingent Acquisition Prices indicated on the
schedule below for any 85 trading days out of a period of 90 consecutive
trading days, then AT shall be entitled to receive the corresponding
percentage of 500,000 shares of Common Stock (the "Tranche 2 Contingent
Stock"):
<PAGE>
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Tranche 2 Contingent Stock Schedule
Target Contingent % of Tranche 2 Contingent
Acquisition Price Stock
$13.00 50.00%
$13.50 56.25%
$14.00 62.50%
$14.50 68.75%
$15.00 75.00%
$15.50 81.25%
$16.00 87.50%
$16.50 93.75%
$17.00 100.00%
(c) Additional Provisions. The issuance of
Contingent Stock pursuant to this Section 1.9 shall be
subject to the terms and conditions contained in Section 3
hereof.
(d) AT's rights to any Contingent Stock pursuant to this Section 1.9
shall not be transferable or assignable, except by operation of law, and
except to a trust for the benefit of AT, his wife, and/or any of the
children of either, provided that such assignees shall agree to be bound
by the terms of this Agreement.
2. SHARE EXCHANGE.
2.1. Exchange. Subject to the terms and conditions of this
Agreement, and in consideration of the Exchange Consideration specified in
Section 2.2 hereof, on the Closing Date (as defined below), WCI and USEP shall
transfer to the Company all of the issued and outstanding shares of capital
stock of WPI, free and clear of all liens and encumbrances (the "Acquisition").
2.2. Exchange Consideration. The consideration for the Acquisition
(the "Exchange Consideration") shall be (i) 5,957,928 shares of Common Stock, of
which 2,220,266 shares shall be delivered to WCI and 3,737,662 shares shall be
delivered to USEP Delaware and USEP Offshore, pro rata with respect to their
holdings of shares of WPI, and (ii) the right to receive additional shares of
Common Stock upon the terms and conditions set forth in Section 2.4 hereof.
<PAGE>
-6-
2.3. Closing. The Closing shall occur at 10:00 A.M. on August 26,
1996 or such other date that the conditions set forth in Section 7.2 have been
satisfied or waived (the "Closing Date") at the offices of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York, or at such other time and place as
the parties hereto mutually agree.
2.4. Contingent Stock.
(a) Tranche 1. If, at any time during the period of two years
following the Closing Date, the price of the Common Stock remains at or
above any of the Target Contingent Acquisition Prices indicated on the
schedule below for any 25 trading days out of a period of 30 consecutive
trading days, then WCI and USEP shall be entitled to receive the
corresponding percentage of 277,500 shares and 472,500 shares,
respectively, of Common Stock (the "Tranche 1 Contingent Stock"):
Tranche 1 Contingent Stock Schedule
Target Contingent % of Tranche 1 Contingent
Acquisition Price Stock
$ 9.00 25.00%
$ 9.25 31.25%
$ 9.50 37.50%
$ 9.75 43.75%
$10.00 50.00%
$10.25 56.25%
$10.50 63.50%
$10.75 69.75%
$11.00 75.00%
$11.25 81.25%
$11.50 87.50%
$11.75 93.75%
$12.00 100.00%
(b) Tranche 2. If, at any time during the period of four years
following the Closing Date, the price of the Common Stock remains at or
above any of the Target Contingent Acquisition Prices indicated on the
schedule below for any 85 trading days out of a period of 90 consecutive
trading days, then WCI and USEP shall be entitled to receive the
corresponding percentage of 277,500
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shares and 472,500 shares, respectively, of Common Stock (the "Tranche 2
Contingent Stock"):
Tranche 2 Contingent Stock Schedule
Target Contingent % of Tranche 2 Contingent
Acquisition Price Stock
$13.00 50.00%
$13.50 56.25%
$14.00 62.50%
$14.50 68.75%
$15.00 75.00%
$15.50 81.25%
$16.00 87.50%
$16.50 93.75%
$17.00 100.00%
(c) Additional Provisions. The issuance of
Contingent Stock pursuant to this Section 2.4 shall be
subject to the terms and conditions contained in Section 3
hereof.
3. ADDITIONAL CONTINGENT STOCK PROVISIONS
3.1. Change of Control. In the event of a Change of Control, AT, WCI
and USEP shall be entitled to receive all of the Tranche 1 Contingent Stock and
the Tranche 2 Contingent Stock issuable to them pursuant to Section 1.9 and
Section 2.4 hereof. As used in this Agreement, "Change of Control" shall mean
(i) the acquisition of all or substantially all of the assets of the Company,
(ii) the acquisition by any party (or group, as such term is defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) not currently a holder of more than 5% of the outstanding Common Stock of
the Company of more than 50% of the outstanding Common Stock of the Company,
(iii) any merger, combination, consolidation or similar transaction involving
the Company following which the holders of Common Stock of the Company
immediately prior to such transaction will not own more than 50% of the Common
Stock of the Company.
3.2. Certain Events. In the event that either (a) at any time
the Common Stock of the Company is no longer required to be registered
pursuant to Section 12(b) of the 1934 Act or (b) the stockholders of the
Company have not approved this Agreement and the transactions contemplated
hereby (as
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contemplated by Section 9.10 below) by the later of (i) ninety days from the
Closing Date or (ii) the time AT, WCI, USEP are eligible to receive contingent
consideration pursuant to Sections 1.9 and 2.4 hereof, the Company shall engage
an investment bank unaffiliated with the Company (which investment bank shall be
reasonably acceptable to AT and WCI) to develop a method of equivalent
consideration for AT, WCI and USEP in accordance with the essential intent and
principles of Sections 1.9 and 2.4 hereof; provided, however, that in the case
of clause (b) above, the Company shall issue the maximum amount of Contingent
Shares it is entitled to issue without stockholder approval in accordance with
applicable rules and regulations and such investment bank shall only evaluate
equivalent consideration in respect of Contingent Stock that cannot be so
issued.
3.3. Stockholder Vote. Any acquisition of Contingent Stock by AT,
WCI and USEP pursuant to Section 1.9 or Section 2.4 hereof shall be contingent
upon the prior approval of this Agreement and the transactions contemplated
hereby by the stockholders of the Company for purposes of compliance with the
rules and regulations of the New York Stock Exchange as contemplated in Section
9.10 hereof.
3.4. Adjustments. In the event that the Company shall at any time
(a) subdivide (by any stock split, stock dividend or otherwise) one or more
classes of its outstanding Common Stock into a greater number of shares of
Common Stock, (b) combine (by reverse stock split or otherwise) one or more
classes of its outstanding Common Stock into a smaller number of shares or (c)
pay any extraordinary cash dividend on one or more classes of its outstanding
Common Stock; then the number of shares to be issued pursuant to Sections 1.9
and 2.4 hereof and the target prices shall be proportionately adjusted.
3.5. Reallocation of Contingent Stock. Notwithstanding any other
provision of either Section 1.9 or Section 2.4, in the event in excess of (i)
675,000 shares of Tranche 1 Contingent Stock in aggregate would otherwise be
issued pursuant to Section 2.4(a) or (ii) 675,000 shares of Tranche 2 Contingent
Stock in aggregate would otherwise be issued pursuant to Section 2.4(b); then
the entire number of excess shares shall be issued to AT.
<PAGE>
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4. REPRESENTATIONS AND WARRANTIES OF WCI. WCI hereby
represents and warrants to the Company that:
4.1.1 Capitalization of WPI. The total authorized number of shares
of WPI is 1,000, of which 100 shares are issued and outstanding. All of the
issued and outstanding shares are validly issued, fully paid and nonassessable;
there are no other outstanding shares, warrants, scrip, rights, options, calls
or any obligations or instruments evidencing the right to purchase or effect a
conversion into any shares thereof, nor any agreement, instrument, arrangement,
contract, obligation, commitment or understanding relating to the issuance or
transfer of any thereof, whether or not such may be authorized, issued or
outstanding pertaining to WPI. WCI is the record and beneficial owner of all
issued and outstanding shares of capital stock of WPI.
4.1.2. USEP. As of the Closing Date, USEP Delaware and USEP Offshore
are limited partnerships validly existing and in good standing under the laws of
the State of Delaware and the Cayman Islands, respectively. All of the
outstanding units of the sole general partner of USEP are owned directly or
indirectly through a wholly owned subsidiary by WCI.
4.2. Organization of WPI. WPI is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
4.3. Assets and Liabilities of WPI. As of the Closing Date, WPI will
own directly or indirectly 60 units of RA (the "WPI Units"). As of the Closing
Date WPI will have good and valid title to the WPI Units, free and clear of any
liens, claims or encumbrances and WPI will have no liabilities, contingent or
otherwise.
4.4. Contracts and Commitments. Except as set forth on
Schedule 4.4, WPI is not party to any written agreements, instruments,
arrangements, oral or written contracts, obligations or commitments.
4.5. Taxes. (a) All federal, state, local and foreign Tax Returns
required to be filed for taxable periods ending on or prior to the Closing Date
for, or with respect to the activities of, both WPI and RA have been or will be
filed with the appropriate Taxing authority. All such Tax Returns were (and, as
to Tax Returns not filed as of the date hereof, will be) in all material
respects true, complete and correct, and
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filed on a timely basis (taking into account proper extensions).
(b) Both WPI and RA have paid (and, until the Closing Date, will
pay), within the time and in the manner prescribed by law and prior to the date
on which any fine, penalty, interest or late charge may be added thereto for
nonpayment thereof, all Taxes that are due and payable relating to Taxable
periods ending on or prior to the Closing Date or with respect to which payment
is due on or prior to the Closing Date.
(c) There are no Tax liens upon the assets of either WPI or RA.
(d) Both WPI and RA have complied (and, until the Closing Date, will
comply) in all material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including withholding and
reporting requirements under Code sections 1441 through 1464, 3401 through 3406,
6041 and 6049 and similar provisions under any other laws) and have, within the
time and in the manner prescribed by law, withheld from employee wages and paid
over to the proper Taxing authorities all amounts required to be so paid.
Neither WPI nor RA is liable for any penalties with respect to such withholding
and reporting requirements, nor is either liable for any backup withholding.
(e) Neither WPI nor RA has executed any waivers or comparable
consents regarding the application of the statute of limitations with respect to
any Taxes or Tax Returns.
(f) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax Returns of
either WPI or RA, it being understood that, although the affiliated group of
corporations of which Wasserstein Perella Group, Inc. ("WP Parent") is the
common parent currently is under audit by the Internal Revenue Service, none of
the issues pending or raised in that audit relate specifically to the business
or assets of WPI or RA.
(g) No power of attorney currently in force has been granted by
either WPI or RA concerning any Tax matter.
(h) Neither WPI nor RA has received a Tax Ruling (as defined below)
or entered into a Closing Agreement (as defined below) with any Taxing authority
that would have a continuing
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effect after the Closing Date. "Tax Ruling" shall mean a written ruling of
a Taxing authority relating to Taxes. "Closing Agreement" shall mean a
written and legally binding agreement with a Taxing authority relating to
Taxes.
(i) Any existing agreement relating to the allocation or sharing of
Taxes other than pursuant to this Agreement between any affiliate of WCI and RA,
on the one hand, and WP Parent and any of its affiliates, on the other hand,
will be terminated no later than the Closing Date, with no continuing liability
on the part of WPI or RA.
(j) No property of either WPI or RA is property that it or any party
to this transaction is or will be required to treat as being owned by another
person pursuant to the provisions of Code section 168(f)(8) (as in effect prior
to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Code section 168.
(k) Neither WPI nor RA is required to include in income any
adjustment pursuant to Code section 481(a) by reason of a voluntary change in
accounting method initiated by it, and the Internal Revenue Service has not
proposed any such adjustment or change in accounting method.
(l) Neither WPI nor RA has filed (and will not file prior to the
Closing Date) a consent pursuant to Code section 341(f), and neither has agreed
to have Code section 341(f)(2) apply to any disposition of a subsection (f)
asset (as that term is defined in Code section 341(f)(4)) owned by it.
(m) As of the Closing Date, neither WPI nor RA will be a party to
any agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Code section 280G, and no part of any service fee received by WCI or any of
its affiliates from WPI or RA on or after the Closing Date will be considered to
be an "excess parachute payment" by reason of the application of Code sections
269A and 280G.
(n) Neither WPI nor RA has engaged in any transaction with WCI, AT
or any affiliate of WCI or AT that would result in the recognition of income by
it with respect to such transaction for any period ending on or after the
Closing Date.
(o) WPI has never been a member of any affiliated group of
corporations within the meaning of Code section
<PAGE>
-12-
1504(a), other than the group of which WP Parent is the common parent, or any
similar group for purposes of any analogous state or local combined or
consolidated return.
(p) WPI has never been a member of an affiliated group of
corporations with respect to which an election was made pursuant to Rev.
Proc. 95-39, 1995-35 I.R.B. 17, or Rev. Proc. 95-11, 1995-4 I.R.B. 48, to
discontinue filing consolidated returns.
(q) As of the Closing Date, neither WPI nor RA will be a partner in
any partnership, except for WPI's interest in RA.
(r) The Company will not be required to withhold any taxes upon
payment of the Exchange Consideration under this Agreement.
(s) RA has at all times been classified as a partnership for federal
income tax purposes, and not a "publicly traded partnership" within the meaning
of Code section 7704(b) and the Treasury Regulations thereunder.
4.6. Representations True at the Closing Date. The representations
and warranties made in this Agreement by WCI with respect to itself, WPI and RA
will be true and correct on and as of the Closing Date in all material respects,
except that any such representations and warranties which expressly relate to a
specified date shall be true and correct in all material respects as of such
specified date.
5. REPRESENTATIONS AND WARRANTIES REGARDING RA. WCI hereby
represents and warrants to the Company that:
5.1. Capitalization of RA. The total authorized and outstanding
number of Units of RA is 100. All of the issued and outstanding Units are
validly issued, fully paid and nonassessable; there are no other outstanding
Units, warrants, scrip, rights, options, calls or any obligations or instruments
evidencing the right to purchase or effect a conversion into any Units thereof,
nor any agreement, instrument, arrangement, contract, obligation, commitment or
understanding relating to the issuance or transfer of any thereof, whether or
not such may be authorized, issued or outstanding pertaining to RA. As of the
Closing Date, WPI will be the record owner of 60 Units of RA and AT Sub will be
the record owner of the remaining 40 Units of RA.
<PAGE>
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5.2. Power and Authority of RA. RA is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware. RA has full power and authority to carry on its business and
to own or lease its properties as and in the places where such business is now
conducted and such properties are now owned, leased or operated.
5.3. No Conflict. The execution, delivery and performance of this
Agreement will not (i) violate any provisions of any federal, state, local or
foreign statute, law, ordinance, rule or regulation (herein collectively called
"Laws"), judgment, decree or order applicable to RA or (ii) conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute an event which with notice or the lapse of time or both would
constitute a default under, or violate or result in the breach of, or create any
right of termination or acceleration of any right under, the Limited Liability
Company Operating Agreement of RA or any agreement, lease, instrument,
arrangement, contract, obligation, commitment, or understanding to which RA is a
party or by which any of its properties are bound.
5.4. Financial Statements. AT and WCI have caused to be prepared and
delivered to the Company a balance sheet of RA as of the date of this Agreement
in the form of Schedule 5.4 hereto (collectively, the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be otherwise indicated in the Financial Statements or
the notes thereto) and fairly present in all material respects the financial
position of RA as of the dates thereof. There are no liabilities of RA,
contingent or otherwise, that are not reflected on the Financial Statements or
disclosed in Schedule 5.11.
5.5. No Subsidiaries. As of the Closing Date, RA shall have
no subsidiaries, except for Ant Enterprises, Inc. and will not own (or have
any commitment with respect to) any equity interest in any corporation,
partnership or other enterprise or business, except for Ant Enterprises,
Inc.
5.6. Certificates, etc. Complete and correct copies of the
Certificate of Formation of RA, as amended to the date hereof (certified by
the Secretary of State of the State of Delaware), and of the Limited
Liability Company Agreement of
<PAGE>
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RA, as amended to the date hereof, have been delivered to the Company by AT and
WCI. RA has no minute books or stock books.
5.7. Due Qualification. RA is not required to be qualified or
licensed as a limited liability company authorized to do business in any
jurisdictions in which it is not so qualified or licensed, except for those
jurisdictions in which the failure to obtain such qualification or licensing
would not have a material adverse effect on the financial condition, property or
operations of RA.
5.8. Properties. RA has good and valid title to all the
assets shown on the Financial Statements (except for those assets disposed
of since that date in the ordinary course of business), free and clear of
any material liens, claims and encumbrances.
5.9. Legal Proceedings, etc. There is no action, suit, claim,
proceeding or investigation (whether or not purportedly by or on behalf of RA)
pending or, to the best knowledge of WCI, threatened against RA or any of RA's
officers or members in connection with the business or affairs of RA (such
actions, suits, claims, proceedings or investigations are herein referred to as
"Legal Proceedings"), at law or in equity, or before any court or federal,
state, county, local or other governmental department, commission, board, agency
or administrative body (herein collectively referred to as "Governmental
Authorities") or in arbitration or mediation, in which the amount in dispute
exceeds or could reasonably be expected to exceed $10,000 or which in the
aggregate exceeds or could reasonably be expected to exceed $100,000. RA is not
a party in a Legal Proceeding in respect of any claim other than one seeking
monetary damages. RA is not subject to any order, writ, injunction or decree of
any Governmental Authority.
5.10. Compliance with Laws. RA has complied with all Laws
(including, without limitation, those with respect to wages, hours, equal
opportunity, nondiscrimination, immigration, fair credit, insurance, health,
safety, environmental protection, land use and quality criteria and standards
for air, water, land and hazardous materials, product labeling, warranties and
packaging) except to the extent that such failure to comply could not reasonably
be expected to have a material adverse effect on the business or prospects of
RA. No written notice, citation, summons or order has been received by RA which
remains outstanding. RA has not received written notice of any complaint that
has been filed, any penalty that
<PAGE>
-15-
has been assessed any investigation or review that is pending or threatened by
any Governmental Authority with respect to any alleged violation by RA of any
Law or order of any Governmental Authority in connection with the conduct of its
business or the operation or maintenance of the real properties leased by RA.
5.11. Contracts and Commitments. Except as set forth in Schedule
5.11 hereto, there are no written agreements, instruments, arrangements, oral or
written contracts, obligations or commitments involving payments by or to RA
aggregating more than $10,000 or which might, individually, be material to RA to
which RA is a party or by which the properties or assets of RA are bound (herein
collectively called "Contracts"). There is no material default by RA under any
Contract, and no event has occurred that, with the lapse of time or giving of
notice, or both, would constitute a material breach or material default thereof
by RA, would cause or permit acceleration of any obligation of RA thereunder,
would cause or permit the termination thereof or would materially and adversely
affect RA.
5.12. No Violation. The execution, delivery and performance of this
Agreement will not impair in any material respect any right, title or interest
of RA under or in respect of any properties, assets, licenses, trademarks,
copyrights, intangible assets or Contracts of RA. Except for filings under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the "HSR Act") as provided
in Section 9.9, no consent, approval or agreement of any person, party, court,
government or entity is required to be obtained by RA in connection with the
execution, delivery and performance of the transactions contemplated by this
Agreement.
5.13. Affiliate Transactions with AT, WCI. RA does not do business
directly or indirectly with AT or WCI or any entity controlling, controlled by
or in common control except as set forth in Schedule 5.13 hereto.
5.14. Representations True at the Closing Date. The representations
and warranties made in this Agreement by WCI will be true and correct on and as
of the Closing Date in all material respects, except that any such
representations and warranties which expressly relate to a specified date shall
be true and correct in all material respects as of such specified date.
5.15. Brokers. WCI represents and warrants that it has
employed no brokers, agents, or finders in carrying on the
<PAGE>
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negotiations relating to this Agreement or to the transactions herein
contemplated other than whose fees will have already been paid at the Closing.
5.16. Subsequent Contributions. (a) WCI and USEP shall contribute to
the capital of RA an aggregate amount of $12 million less the reasonable costs
of obtaining the letters of credit at the Closing and $5 million on the date
that is six months after the Closing Date and (b) WCI and USEP have caused to be
issued in favor of RA four standby irrevocable letters of credit issued by Bank
of America: (i) one from each of WCI and USEP in the aggregate amount of $12
million which can be drawn on or after the Closing Date and (ii) one from each
of WCI and USEP in the aggregate amount of $5 million drawable on or after the
date that is six months after the Closing Date, such letters of credit to be in
the form attached hereto as Exhibits A-1 and A-2.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to AT and WCI that:
6.1. Organizational Documents. The Company has delivered to both AT
and WCI an accurate and complete copy of (a) its Restated Certificate of
Incorporation and all amendments thereto, certified by the Secretary of State or
other comparable authority of the jurisdiction of its incorporation, and (b) its
By-laws and all amendments thereto, certified by its Secretary or Assistant
Secretary.
6.2. Existence and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction where failure to so qualify or be in
good standing as a foreign corporation could reasonably be expected to have a
material adverse effect on its business, operations, prospects, properties or
condition (financial or otherwise), or its ability to perform its obligations
hereunder.
6.3. Power and Authority. The Company has all corporate power
and authority necessary to own, operate or lease its properties and assets
and to conduct its business as now conducted by it. The Company has all
corporate power and authority necessary to perform its obligations under
this Agreement and the exhibits hereto, and all such agreements to
<PAGE>
-17-
which the Company is a party are valid and binding agreements of the Company
enforceable in accordance with their terms.
6.4. Corporate Action. The Company has taken all corporate
action required to authorize the performance of its obligations hereunder
and under all documents which are exhibits hereto.
6.5. Consents; Governmental Approvals. No consent or approval of any
person, firm or corporation, and no consent, license, approval or authorization
of, or registration, filing or declaration with, any Governmental Authority is
required to be obtained or made by or on behalf of the Company in connection
with the completion of the transactions contemplated by this Agreement and the
agreements referenced herein, except for filings under the HSR Act contemplated
by Section 9.9 hereof.
6.6. Absence of Conflicts. The execution, delivery and performance
of the obligations of the Company under this Agreement and the agreements
referenced herein do not and will not (a) conflict with or violate any provision
of the Restated Certificate of Incorporation or By-laws of the Company, (b)
conflict with or result in a violation, breach or default by the Company under
(i) any provision of any existing statute, law, rule or regulation binding on it
or any order, judgment, award, decree, license or authorization of any court or
governmental instrumentality, authority, bureau or agency binding on it, which
breach or default could reasonably be expected to have a material adverse effect
on the present or prospective business, operations, properties, assets or
condition (financial or otherwise) of the Company or (ii) any material provision
or any mortgage, indenture, lease or other contract, agreement, instrument or
undertaking to which it is a party or will be a party immediately after the
Closing Date, or by which or to which it or any of its property or assets is now
or immediately after the Closing will be bound or subject, or (c) result in the
creation or imposition of any lien, encumbrance or other charge on any of its
properties or assets.
6.7. No Defaults. None of the Company or its subsidiaries is, or
immediately after the Closing will be, in default under or in violation of (a)
its Restated Certificate of Incorporation or By-laws, (b) any agreement or
instrument to which it is a party relating to its indebtedness for borrowed
money, (c) any other agreement or instrument to which it is a party, (d) any
statute, rule, writ, injunction, judgment, decree, order or regulation of any
court or governmental
<PAGE>
-18-
authority, having jurisdiction over it, or (e) any license, permit,
certification or approval requirement of any customer, supplier, governmental
authority or other person, in the case of (c), (d) or (e) above, in any way that
could reasonably be expected to have a material adverse effect on the present or
prospective business, operations, properties, assets or condition (financial or
otherwise) of such corporation, or the Company's ability to perform its
obligations under this Agreement.
6.8. Capitalization. As of July 30, 1996, the authorized capital
stock of the Company consisted of: (i) 100,000,000 shares of Common Stock, of
which (A) 37,956,094 shares are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, (B) no shares are held in the treasury of the Company, (C)
8,825,277 shares are reserved for future issuance for the exercise of stock
options and (D) 1,670,733 shares are reserved for future issuance for the
exercise of warrants and (ii) 10,000,000 shares of preferred stock, of which
422,500 shares of Series A Convertible Preferred Stock (initially convertible
into 5,827,586 shares of Common Stock) are issued and outstanding. Except as
described in Schedule 6.8, no shares of the capital stock or other equity
securities of the Company are authorized, issued or outstanding, or reserved for
any other purpose, and there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any character
(including, without limitation, obligations to issue shares as the deferred
purchase price for acquisitions of stock or assets of third parties) to which
the Company or any of its subsidiaries is a party relating to the issued or
unissued capital stock or other equity securities or ownership interests of the
Company or any of its subsidiaries or obligating the Company or any of its
subsidiaries to grant, issue or sell any shares of capital stock or other equity
securities or ownership interests of the Company or any of its subsidiaries, by
sale, lease, license or otherwise. The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote or which are convertible into or exercisable for securities having the
right to vote with the stockholders of the Company on any matter. There are no
outstanding contractual obligations, commitments, understandings or arrangements
of the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire or make any payment in respect of any shares of capital stock or other
equity securities or ownership interests of the Company or any of its
subsidiaries. There are no preemptive or similar rights to
<PAGE>
-19-
purchase or otherwise acquire shares of capital stock of the Company. Except as
contemplated herein the capitalization of the Company will not change as a
result of the transactions contemplated by this Agreement.
6.9. SEC Documents. (1) The Common Stock of the Company is
registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission ("SEC") pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC. The Company has
delivered or made available to AT and WP Parent true and complete copies of (i)
its annual reports on Form 10-K and quarterly reports on Form 10-Q for its 1994
and 1995 fiscal years, (ii) proxy statements, information and solicitation
materials filed by the Company with the SEC since January 1, 1994, and (iii)
each other report, registration statement, proxy statement and other document
filed with the SEC since the filing of its most recent Form 10-K (all of the
foregoing, collectively, the "SEC Documents").
(2) As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
6.10. Financial Statements. The financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed
<PAGE>
-20-
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
6.11. No Material Adverse Change. Since June 30, 1996, the date
through which the most recent quarterly report of the Company on Form 10-Q has
been prepared and filed with the SEC, a copy of which is included in the SEC
Documents, and until the date hereof, there has been no material adverse change
in the businesses, properties, prospects, operations or financial condition of
the Company and its Subsidiaries, except as otherwise disclosed or reflected in
other SEC Documents, or otherwise disclosed to AT and WCI on or before the date
hereof.
6.12. No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
Subsidiaries, or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company and which has not been
so publicly disclosed or announced, or otherwise disclosed to AT and WCI on or
before the date hereof.
6.13. Brokers. The Company represents and warrants that it
has employed no brokers, agents or finders in carrying on the negotiations
relating to this Agreement or to the transactions herein contemplated,
except as noted on Schedule 6.13 hereof.
6.14. No General Solicitation. Neither the Company, nor any of its
affiliates, nor, to its knowledge, any person acting on its or their behalf has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of the Common Stock to be issued pursuant to this Agreement.
6.15. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Common Stock to be issued pursuant to this Agreement under the Securities Act of
1933, as amended (the "Securities Act").
<PAGE>
-21-
6.16. Certain Agreements. (a) Except as set forth on Schedule 6.16
attached hereto, the Company is not a party to any agreement of any nature
whatsoever which in any way restricts, encumbers, impedes or prevents the
Company or any affiliate from exploiting or otherwise dealing in any material
respect in Properties (as defined below) owned or controlled by the Company or
such affiliates.
(b) No affiliate of the Company is a party to any agreement of any
nature whatsoever which in any way restricts, encumbers, impedes or prevents the
Company or any other affiliate from exploiting or otherwise dealing in
Properties owned or controlled by the Company or such other affiliate.
As used in this Section 6.16, the term "Properties" shall mean all audio
recordings, audiovisual recordings, musical compositions and other works of
authorship, all performances contained therein and all copyright and other
rights in connection therewith.
6.17. Acquisition Sub. Acquisition Sub is a first tier
wholly-owned subsidiary of the Company having no material assets or
liabilities.
6.18. Preservation of Corporate Structure. As of the Closing Date,
the Company will have no plan or intention to, following the Closing, (a)
liquidate, dissolve or otherwise discontinue the existence of AT Sub, WPI or RA,
(b) discontinue the business operations of AT Sub, WPI or RA in any significant
respect, (c) cause AT Sub, WPI or RA to sell, transfer or otherwise dispose of a
significant portion of its assets, except for dispositions made in the ordinary
course of business, (d) merge AT Sub, WPI or RA with or into another
corporation, including the Company or any of its affiliates, (e) sell,
distribute or otherwise dispose of the capital stock or interests in AT Sub, WPI
or RA, except for transfers described in section 368(a)(2)(C) of the Code, or
(f) issue additional shares of stock (or rights to acquire shares of stock) of
AT Sub or WPI that would result in the Company losing control of AT Sub or WPI
within the meaning of section 368(c) of the Code.
6.19. Representations True at the Closing Date. The
representations and warranties made in this Agreement by the Company will
be true and correct on and as of the Closing Date in all material respects,
except that any such representations and warranties which expressly relate
to a specified date shall
<PAGE>
-22-
be true and correct in all material respects of such specified date.
7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company under this Agreement to consummate the Merger and the Acquisition
are subject to the satisfaction or waiver of each of the conditions in this
Section 7 prior to or on the Closing Date.
7.1. Legal Proceedings. There shall not be any investigation (formal
or informal) or any action or proceeding by, or any order issued by, any
Governmental Authority which seeks to restrain, prohibit or invalidate, or which
is reasonably likely to result in the payment of substantial damages in respect
of, any of the transactions contemplated hereby.
7.2. HSR Act. The waiting period applicable to the consummation of
the Merger and the Acquisition under the HSR Act shall have expired or been
terminated.
7.3. AT Employment Agreement. AT shall have executed and
delivered the Employment Agreement substantially in the form of Exhibit C
hereto (the "AT Employment Agreement").
7.4. Stock Purchase. WCI and USEP shall have executed stock purchase
agreements for an aggregate of 1,850,000 shares of Common Stock for a
consideration of $6.00 per share in the form of the Stock Purchase Agreements in
the form of Exhibits D-1 and D-2 hereto.
7.5. Release by Holders of Units. Each of the holders of
Units in RA shall have delivered to RA releases of all claims against RA.
7.6. Termination of Employment Arrangements. All employment
arrangements between RA and AT shall have been terminated.
7.7. Voting Agreement. The Voting Agreement dated as of the
date hereof in the form of Exhibit E hereto (the "Voting Agreement") shall
have been executed and delivered by the parties thereto.
7.8. Revised and Restated Employment Agreements. The Revised
and Restated Employment Agreements between the Company and Joseph Bianco,
Anil Narang and Elliot Newman in the
<PAGE>
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forms attached hereto as Exhibits F-1, F-2 and F-3 shall have been executed and
delivered.
7.9. Restated By-laws. The By-laws of the Company shall have
been amended to read as set forth in Exhibit G hereto.
8. CONDITIONS TO THE OBLIGATIONS OF AT AND WCI. The obligations of
AT and WCI under this Agreement to consummate the Merger and the Acquisition are
subject to the satisfaction or waiver of each of the following conditions prior
to or on the Closing Date:
8.1. Legal Proceedings. There shall not be any investigation (formal
or informal) or any action or proceeding by or any order issued by any
Governmental Authority which seeks to restrain, prohibit or invalidate, or which
is reasonably likely to result in the payment of substantial damages in respect
of, any of the transactions contemplated hereby.
8.2. AT Employment Agreement. The Company shall have executed
and delivered the AT Employment Agreement.
8.3. Voting Agreement. The Voting Agreement dated as of the
date hereof in the form of Exhibit E hereto shall have been executed and
delivered by all the parties thereto.
8.4. HSR Act. The waiting period applicable to the consummation of
the Merger and the Acquisition under the HSR Act shall have expired or been
terminated.
8.5. Board of Directors. The persons listed on Schedule 8.5(a) shall
have resigned from the Company's Board of Directors and the persons listed on
Schedule 8.5(b) shall have been appointed members of the Board of Directors of
the Company.
8.6. Restated By-laws. The By-laws of the Company shall have
been amended to read as set forth in Exhibit G hereto.
8.7. Revised and Restated Employment Agreements. The Revised
and Restated Employment Agreements between the Company and Joseph Bianco,
Anil Narang and Elliot Newman in the forms attached hereto as Exhibits F-1,
F-2 and F-3 shall have been executed and delivered.
<PAGE>
-24-
8.8. Engagement Letter. The Engagement Letter dated the date
hereof in the form of Exhibit J shall have been executed and delivered by
the Company.
9. OTHER AGREEMENTS.
9.1. Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance of Contingent Stock such number of
shares of Common Stock issuable upon the contingencies described in Section 1.9
and Section 2.4 hereof. All shares of Common Stock which are so issuable shall,
when issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions as
may be necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation. The Company
shall not authorize or issue any class of its common stock other than the Common
Stock.
9.2. Board Seats. (a) So long as WCI or any direct or indirect
wholly owned subsidiary of WCI or any limited partnership of which any such
subsidiary is the general partner ("WCI Entity") hold an aggregate of 3,900,000
shares of Common Stock (subject to adjustment for stock splits, combinations and
recapitalizations), WCI shall have the right to (i) select two representatives
to be elected to the Company's Board of Directors and the Company shall nominate
such representatives for election to the Board of Directors and (ii) designate
one such representative as the Deputy Chairman. So long as WCI Entities hold an
aggregate of 780,000 shares of Common Stock, WCI shall have the right to select
one representative to be elected to the Company's Board of Directors and the
Company shall nominate such representative for election to the Board of
Directors.
(b) So long as AT is the beneficial owner (as defined in the
Exchange Act) of 380,400 shares of Common Stock (subject to adjustment for stock
splits, combinations, and recapitalizations), AT shall have the right to select
one representative to be elected to the Company's Board of Directors and the
Company shall nominate such representative for election to the Board of
Directors. In addition, so long as AT is chief executive officer of the Company,
AT shall have the right to select an additional representative for election to
the Board of Directors commencing with the filling of the first vacancy to occur
on the Board of Directors after the Closing Date.
<PAGE>
-25-
(c) The Company shall use its best efforts to cause the
representatives of WCI and AT to be elected to the Board of Directors and shall
not take any action which would diminish the prospects of such representatives
being elected to the Board of Directors. All out-of-pocket expenses of such
board members incurred in connection with attending regular and special board
meetings and any meeting of any board committee shall be paid by the Company,
and such board members shall receive the same compensation for serving as a
director as is given to the other board members who are not officers of the
Company.
9.3. Furnishing of Information. So long as either of AT or WCI has
the right to select a director of the Company pursuant to Section 9.2 hereof,
the Company shall furnish to such party promptly upon becoming available one
copy of each financial statement, report, notice or proxy statement sent by the
Company to its creditors or stockholders and one copy of each regular or
periodic report (including any report on Form 8-K), and any registration
statement or prospectus, together with any amendments required to be made with
respect thereto, filed by the Company with the SEC, or any successor thereto, or
with any securities exchange.
9.4. Registration Rights. The Company agrees to use its best efforts
to maintain with respect to the Common Stock to be received by AT, USEP and WCI
pursuant to the terms of this Agreement an effective registration statement
under the Securities Act and a current prospectus relating thereto, and
effective registration statements or qualifications under the securities laws of
AT's, USEP's and WCI's state of residence for a period equal to the longer of
(a) five (5) years after the date hereof or (b) as long as either AT, USEP or
WCI is an affiliate of the Company within the meaning of Rule 144 of the
Securities Act. The Company hereby grants to WCI, USEP and AT the registration
rights set forth in Exhibit I hereto. The rights of WCI, USEP and AT pursuant to
this Section 9.4 are assignable to any pledgee or transferee of the shares of
Common Stock held by USEP, WCI or AT.
9.5. Inspection of Records. (a) From the date of this Agreement
until the Closing Date, AT, WCI and the Company will give each other and their
authorized representatives (including counsel, environmental and other
consultants, accountants and auditors, and lenders and prospective lenders and
their counsel) full access during normal business hours to all facilities,
personnel and operations and to all books and
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records of RA, AT Sub, WPI and the Company, as the case may be, will permit AT,
WCI and the Company to make such inspections as it may reasonably require and
will cause their respective officers or representatives to furnish such parties
with such financial and operating data and other information with respect to the
business and properties of RA, AT Sub, WPI or the Company as such party may from
time to time reasonably request.
(b) The Company, AT and WCI will hold and will cause their
respective officers, directors, consultants and advisors to hold in strict
confidence pursuant to the Confidentiality Agreement dated July 26, 1996 among
the Company, WPI, RA and AT (the "Confidentiality Agreement") all documents and
information concerning RA and the Company furnished to such parties in
connection with the transactions contemplated by this Agreement. With respect to
any information (whether oral or written) conveyed to AT, WCI or their agents by
the Company or its agents, or conveyed to the Company or its agents by AT, WCI
or their agents, such information shall be held confidential in the manner and
to the extent provided in the Confidentiality Agreement.
9.6. Preservation of Business Organization. (a) RA. Except
as otherwise contemplated by this Agreement, at all times prior to and
including the Closing Date, (A) RA shall (i) preserve its business
organization substantially intact, (ii) cause its business to be managed in
accordance with the best interest of such business and substantially as
heretofore managed and conducted, and (iii) use its best efforts, to the
extent that it is in the best interest of the business, to keep available
to the Company the services of the present officers and employees of RA and
to preserve the present relationships and goodwill of the suppliers and
others having business relationships with RA; and (B) without limiting the
generality of the foregoing, RA shall not, without the prior written
consent of the Company, and except as otherwise contemplated by this
Agreement, (i) dispose of any of its assets or properties or incur any
obligation or liability other than as required in connection with this
Agreement, or in arm's-length transactions in the usual and ordinary course
of business consistent with the business practices heretofore followed by
RA; (ii) take or suffer any action which may adversely affect the goodwill
or the normal conduct of its business; (iii) make any change in the
certificate of formation or Limited Liability Company Agreement of RA; (iv)
make any distribution in respect of, or any direct or indirect retirement,
redemption, purchase or other acquisition of, any Units of RA; (v) enter
into any
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contract involving payments aggregating more than $1,000,000, other than
contracts for artists in the usual and ordinary course of business consistent
with the business practices heretofore followed by RA; (vi) increase salaries of
officers and executive personnel of RA; (vii) change any accounting policy now
in effect for Tax and financial accounting purposes, except as required by
generally accepted accounting principles; (viii) provide for any new pension,
welfare, retirement, or other similar retirement benefits for any employee of RA
or provide for any increase in any such existing benefits, except in the usual
and ordinary course of business consistent with the business practices
heretofore followed by RA; (ix) amend or modify any Tax Return; or (x) settle or
cancel any debts or claims arising from the conduct of the business and
involving an amount exceeding $100,000.
RA shall notify the Company of any emergency or unanticipated change
in the normal course of RA's business which is or may be material thereto and
shall keep the Company fully informed of such events and permit their
representative to participate in all discussions relating thereto.
(b) The Company. Except as otherwise contemplated by this Agreement,
at all times prior to and including the Closing Date, (A) the Company shall (i)
preserve its business organization substantially intact and (ii) cause its
business to be managed in accordance with the best interest of such business and
substantially as heretofore managed and conducted; and (B) without limiting the
generality of the foregoing, the Company shall not, without the prior written
consent of AT or WP Parent, and except as otherwise contemplated by this
Agreement, (i) dispose of any of its assets or properties or incur any
obligation or liability other than as required in connection with this
Agreement, or in arm's-length transactions in the usual and ordinary course of
business consistent with the business practices heretofore followed by the
Company; (ii) take or suffer any action which may adversely affect the goodwill
or the normal conduct of its business; (iii) make any change in its certificate
of incorporation or bylaws; (iv) pay any dividend or make any other distribution
in respect of, or any direct or indirect retirement, redemption, purchase or
other acquisition of, any shares of the Company; (v) enter into any contract
involving payments aggregating more than $500,000 (except as set forth in
Schedule 9.6) other than contracts for the purchase of product in the usual and
ordinary course of business consistent with the business practices heretofore
followed by the Company; (vi) increase salaries of officers and
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executive personnel of the Company; (vii) change any accounting policy now in
effect, except as required by generally accepted accounting principles; (viii)
provide for any new pension, welfare, retirement, or other similar retirement
benefits for any employee of the Company or provide for any increase in any such
existing benefits, except in the usual and ordinary course of business
consistent with the business practices heretofore followed by the Company; or
(ix) settle or cancel any debts or claims arising from the conduct of the
business and involving an amount exceeding $500,000, except for claims arising
from contracts for purchase of merchandise, inventory in the usual and ordinary
course of business consistent with the business practice heretofore followed by
the Company; or (x) take any action which would cause the representations and
warranties contained in Section 6 to not be true and correct in all respects.
The Company shall notify AT and WCI of any emergency or
unanticipated change in the normal course of the Company's business which is or
may be material thereto and shall keep AT and WCI fully informed of such events
and permit their representative to participate in all discussions relating
thereto.
9.7. Maintenance of Authorizations. At all times prior to and
including the Closing Date, AT and WCI shall use their best efforts with respect
to RA, and the Company shall use its best efforts with respect to itself to
maintain in full force and effect (and to renew, when required) all licenses,
permits, consents and authorizations which are material to the business of RA or
the Company, as the case may be, as a whole or the maintenance and operation of
its properties and to prosecute diligently any pending applications with respect
thereto, to perform all obligations imposed upon RA or the Company, as the case
may be, by law and to retain and maintain, consistent with its existing policies
and practices, substantially in accordance with generally accepted industry
practices, all the property used in the operation of RA's or the Company's
business.
9.8. No Publicity. AT, WCI and the Company covenant and agree not to
disclose this Agreement and schedules or exhibits hereto or the transactions
contemplated hereby and thereby to third parties without the consent of the
other parties hereto, except as (i) may be required by law; or (ii) may be
required by disclosure requirements as determined by the Company in good faith
from time to time, following consultation with AT and WCI.
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9.9. HSR Approval. The parties hereto shall each use all reasonable
efforts to furnish information and file such documents as may be required to
comply with the HSR Act. The parties will use all reasonable efforts to file
their respective notification forms under the HSR Act (if the same has not been
filed prior to the date hereof as soon as possible) of this Agreement, and to
promptly comply with all requests, if any, of the Federal Trade Commission
("FTC") and the Director of Operations of the Antitrust Division of the
Department of Justice ("Justice") for additional information and documentation
and to furnish such additional information and documentation in accordance with
requirements and requests applicable thereto unless in the opinion of counsel
for AT, WCI or the Company such information and documentation are not required
to be produced.
9.10. Contingent Stock/Stockholder Vote. The Company agrees to use
its best efforts to obtain the approval of this Agreement and the transactions
contemplated hereby by the stockholders of the Company as soon as practicable
for purposes of compliance with the rules and regulations of the New York Stock
Exchange so as to permit AT, USEP or WCI to receive Contingent Stock pursuant to
the terms of Section 1.9 or 2.4 of this Agreement. The Company will not, prior
to the record date for such stockholder approval, issue any voting equity
securities other than pursuant to commitments existing on the date hereof and
referred to in Section 6.8. Such record date shall be the Closing Date or as
soon thereafter as practicable.
9.11. Restrictions on Corporate Action. In addition to any
other approvals or consents required by law, the Company shall not take any
of the following actions without the prior written consent of WCI and AT:
(a) the amendment or restatement of the Certificate of
Incorporation of the Company;
(b) (i) the dissolution, liquidation or winding up of the Company or
(ii) the commencement of a voluntary proceeding seeking reorganization or
other relief with respect to the Company under any bankruptcy or other
similar law or seeking the appointment of a trustee, receiver, custodian
or other similar official of the Company or any substantial part of their
property, or the making by the Company of a general assignment for the
benefit of creditors; and
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(c) (i) any merger, consolidation or combination involving the
Company, or (ii) the sale, transfer, lease, sublease, license,
contribution to a joint venture, partnership or similar arrangements or
(iii) other disposition by the Company to a third party of, in the case of
clauses (i), (ii) and (iii), substantially all of its property or assets,
real, personal or mixed (including leasehold interests and intangible
assets).
provided, however, that in the event that (a) WCI Entities shall hold in the
aggregate (i) less than 3,900,000 shares (subject to adjustment for stock
splits, combinations and recapitalization) of Common Stock or (ii) WCI Entities
shall in the aggregate hold less than 5,800,000 shares (subject to adjustment
for stock splits, combinations and recapitalization) and such amount is less
than 4.1% of the fully diluted shares of Common Stock of the Company (treating
all outstanding options, warrants or convertible securities as being exercised
or converted, but not taking into account the Contingent Shares), then WCI's
consent shall no longer be required hereunder, or (b) AT shall beneficially own
less than 380,400 shares (subject to adjustment for stock splits, combinations
and recapitalizations) of Common Stock, then AT's consent shall no longer be
required hereunder.
9.12. Life Insurance. AT and WCI agree to use reasonable
efforts to obtain a key man life insurance policy on the life of AT with a
death benefit of at least $25 million payable to the Company, the premium
of which will be paid for by RA.
9.13. New Board of Directors. The Company shall use its best efforts
to cause, prior to the Closing Date, the composition of the Board of Directors
as listed on Schedule 8.5 (a) to be changed to consist of the Persons set forth
on Schedule 8.5(b) appointed to the Board of Directors of the Company.
9.14. General. Each of the parties will use its reasonable efforts
to take all action and to do all things necessary, proper or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Sections 7 and 8 hereof).
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10. INVESTMENT REPRESENTATION.
10.1. Securities Act. Each of AT, USEP and WCI acknowledges that (a)
the securities being acquired by it pursuant to this Agreement ("Acquisition
Securities") are not being registered under the Securities Act on the ground
that the issuance thereof is exempt from registration under Section 4(2) of the
Securities Act as not involving any public offering, and (b) the Company's
reliance on such exemption is predicated in part on the representation hereby
made to it by (i) AT that he is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act and (ii) each of USEP and WCI
that it is sophisticated in financial affairs and is able to evaluate the risks
inherent in investing in Company securities and is capable of bearing the
economic loss of its entire investment, and (iii) AT, USEP and WCI that each is
acquiring the Acquisition Securities for investment for its own account, with no
present intention of dividing its participation with others or reselling or
otherwise distributing the same.
10.2. Resales. Neither AT nor WCI nor USEP will sell or transfer all
or any part of the shares of Common Stock received by them pursuant to this
Agreement unless and until it shall first have given notice to the Company
describing such sale or transfer and furnished to the Company either (i) an
opinion, reasonably satisfactory to counsel skilled in securities matters
(selected by AT or WCI and reasonably satisfactory to the Company) to the effect
that the proposed sale or transfer may be made without registration under the
Securities Act, or (ii) an interpretive letter from the staff of the SEC to the
effect that no enforcement action will be recommended if the proposed sale or
transfer is made without registration under the Securities Act, in either case
accompanied by evidence that such transfer will be in compliance with applicable
requirements; provided, however, that the foregoing shall not apply with respect
to (1) any transfer pursuant to an effective registration statement under the
Securities Act, or pursuant to Rule 144 thereunder, or (2) any transfers between
AT and WCI and USEP and any affiliate of any of them, who agrees to be bound by
the terms of this Section 10.2.
10.3. Legends. The Company may place appropriate legends on
the certificates for the Common Stock acquired by AT, USEP and WCI hereby
concerning the restrictions set forth in this Section 10 and may refuse to
transfer any of such Common Stock on its books should the holder thereof
attempt to
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transfer any of them otherwise than in compliance herewith and therewith.
11. FURTHER ASSURANCES. Each of the parties shall promptly and duly
execute and deliver such documents, instruments and other assurances as may be
from time to time reasonably necessary or desirable to carry out more
effectively the provisions of this Agreement and the transactions contemplated
hereby, and to establish and protect the rights created or intended to be
created in favor of the parties hereunder.
12. SURVIVAL OF REPRESENTATIONS. All representations and warranties
of the parties contained in this Agreement (i) shall survive the Closing Date
until two years from the date hereof (except for the representations contained
in Section 4.5 hereof, which shall survive and remain in full force and effect
until 60 days following the expiration of the applicable statute of limitations)
and (ii) shall be fully applicable and effective whether or not a party relies
in fact thereon or has knowledge, acquired either before or after the date
hereof and whether from the other party or from its own investigation, of any
fact at variance with, or of any breach of, any such representation or warranty.
13. INDEMNIFICATION.
13.1. Damages Defined. "Damages" shall mean the full excess of the
amount of all liability, loss, damage, injury, reasonable costs and expenses
(including legal and accounting fees and expenses), fines and penalties incurred
by reason of the events described in Section 13.2 or 13.3, as the case may be,
over the dollar amount of any title, casualty or other insurance proceeds
actually received by the indemnified party less the dollar amount of any net tax
benefit to the indemnified party on a present value basis (with any tax benefit
in future years to be discounted based on the rate of seven percent per annum).
13.2. Indemnification of the Company. (a) Subject to Sections 13.4
and 13.5, WCI agrees to indemnify, defend and hold harmless the Company to the
extent of its Damages arising out of, attributable to, or based upon any breach
of any representation, warranty, covenant or agreement of WCI set forth herein;
provided, however, that with respect to breaches of representations and
warranties set forth in Section 5 and representations and warranties set forth
in Section 4.5 hereof to
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the extent relating to Taxes of RA, WCI shall only be liable for 60% of the
amount of Damages arising therefrom.
(b) In the event of any claim against WCI for indemnification
hereunder, the Company shall be entitled to pursue any remedies permitted by
applicable law and this Agreement with respect to the balance of its Damages, if
any, as limited by Section 13.4. At the option of WCI, any payment due under
this indemnity may be paid by reassigning to the Company such number of shares
of Common Stock with an aggregate fair market value, at the time of the final
determination of the liability of WCI, equal to the amount of the payment that
otherwise would have been due.
13.3. Indemnification of WCI and AT. Subject to Sections 13.4 and
13.5, the Company agrees to indemnify, defend and hold harmless WCI and AT to
the extent of its Damages arising out of, attributable to, or based upon any
breach of any representation, warranty, covenant or agreement of the Company set
forth herein. In the event that the Company is required to make any payment
pursuant to this Section 13.3, the Company shall, to the extent practicable,
make such payment by transferring to WCI and AT, as the case may be, a number of
shares of the Company's stock with an aggregate fair market value, at the time
of the final determination of the Company's liability, equal to the amount of
the payment that otherwise would have been due.
13.4. Extent of Liability. (a) Notwithstanding anything to the
contrary contained in this Agreement, no party shall have any liability for
indemnification in respect of any misrepresentation or breach of any warranty
contained herein or in any document delivered pursuant hereto unless a notice of
claim thereof setting forth the basis of the claim in reasonable detail shall
have been given by the indemnified party not later than the date which is two
years after the Closing Date with respect to all matters except liabilities
under Federal or state securities laws or any law relating to taxes which may be
claimed up to applicable statute of limitations.
(b) Anything herein contained to the contrary notwithstanding, WCI
shall have no liability under this indemnity unless the aggregate amount of
Damages of the Company exceeds $150,000 (in which case its liability shall be
the amount of the excess over $150,000). In no event shall the liability of WCI
exceed $33,000,000.
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(c) Anything herein contained to the contrary notwithstanding, the
Company shall have no liability under this indemnity unless the aggregate amount
of Damages of WCI and AT exceed $150,000 (in which case its liability shall be
the amount of the excess over $150,000). In no event shall the liability of the
Company exceed $38,000,000.
13.5. Notice, Defense, etc. If any action, suit or proceeding shall
be commenced against, or any written claim or demand be asserted against, an
indemnified party in respect of which it proposes to demand indemnification
hereunder, the indemnified party shall promptly in writing notify the
indemnifying party to that effect and shall consult in good faith with the
indemnifying party with respect thereto, but the failure so to notify and
consult shall not discharge the indemnifying party of its obligations hereunder
except to the extent such failure results in additional liability to the
indemnifying party or adversely affects its rights. If the indemnifying party
shall agree in writing to undertake the good faith defense of such action, suit
or proceeding, then, subject to the indemnified party's right to participate at
its own expense, the defense and settlement of any such action, suit or
proceeding shall be under the sole direction and control of the indemnifying
party, which shall proceed in good faith at all times; provided that the
indemnifying party shall not consent to the entry of any judgment or enter into
any settlement which includes any term which (a) shall require any act or
forbearance on the part of the indemnified party and which does not
unconditionally release the indemnified party from all liability in respect of
such claim, action or proceeding, or (b) in the case of any action, claim, suit
or proceeding relating to Taxes, reasonably could be expected to affect
materially any liability of the Company or any affiliate for Taxes after the
Closing Date, without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld. In the event that the indemnifying
party refuses to undertake the good faith defense of any such action, then,
subject to the indemnifying party's right to participate at its own expense, the
defense and settlement of any such action, suit or proceeding shall be under the
sole direction and control of the indemnified party, which shall proceed in good
faith at all times.
14. TAX MATTERS
14.1. Tax Indemnities. (a) WCI shall indemnify, defend and
hold harmless the Company (and its affiliates,
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officers and directors), WPI and RA from and against any and all Damages (as
defined in Section 13.1) with respect to (i) all Taxes imposed on WCI or on any
member (other than WPI and RA) of any affiliated group with which WCI joins in
filing a consolidated or combined income Tax Return (including any liability
arising by reason of WPI being severally liable for any Tax of the affiliated
group of corporations of which WCI is the common parent pursuant to Treasury
Regulation section 1.1502-6 or any analogous state, local or foreign Tax
provision), (ii) all Taxes imposed on WPI, and 60% of any Taxes imposed on RA,
with respect to any taxable period that ends on or before the Closing Date (or
is allocable to any period ending on the Closing Date pursuant to paragraph (c)
of this Section 14) or (iii) any Tax that is occasioned by the transfer of the
Exchange Consideration to WCI; provided, however, that the Company shall
indemnify, defend and hold harmless WCI with respect to any Taxes described in
clause (i) or clause (ii), without regard to the 60% limitation on Taxes of RA
attributable to any action out of the ordinary course of business taken by the
Company on the Closing Date after the Closing.
(b) Payment by WCI of any amount due under this Section 14 shall be
made within 10 days following written notice by the Company that payment of such
amount to the appropriate Taxing authority is due or has been paid; provided,
however, that payment shall not be required to be made earlier than two days
before payment of such amount is due to the appropriate Taxing authority.
(c) For purposes of this Agreement, in the case of any Tax that is
imposed on a periodic basis and is payable for a period that begins on or before
the Closing Date and ends after the Closing Date, the portion of such Tax
allocable to the period ending on the Closing Date shall be (i) in the case of
any Tax other than a Tax based upon or measured by income, the amount of such
Tax for the entire period multiplied by a fraction, the numerator of which is
the number of days in the period ending on the Closing Date and the denominator
of which is the number of days in the entire period and (ii) in the case of any
Tax based upon or measured by income, the amount which would be payable if the
taxable year ended on the Closing Date. Any credit (other than a credit for
payment of estimated tax or a foreign tax credit) shall be prorated based upon
the fraction employed in clause (i) of the preceding sentence.
14.2. Preparation of Tax Returns. WCI shall prepare and file
any Tax Returns relating to WPI that are due (taking
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into account proper extensions) on or before the Closing Date, and AT shall
cause AT Sub to prepare and file any Tax Returns relating to AT Sub that are due
(taking into account proper extensions) on or before the Closing Date. WCI shall
cause WPI to be included in any consolidated or combined Tax Return filed with
respect to the affiliated group of corporations that includes WPI for periods
ending on or before the Closing Date. Such Tax Returns (or, in the case of
consolidated or combined Tax Returns, the portions thereof relating to WPI)
shall be prepared on a basis consistent with those prepared for prior Tax years,
if any. WPI and AT Sub shall jointly cause RA to file any Tax Return relating to
RA or Ant Enterprises, Inc. that is due on or before the Closing Date. The
Company shall prepare or cause WPI or AT Sub to prepare any Tax Returns relating
to WPI or AT Sub that are due (taking into account proper extensions) after the
Closing Date, and the Company shall cause WPI or AT Sub to be included in any
consolidated or combined Tax Return filed with respect to the affiliated group
of corporations that includes such companies for periods ending after the
Closing Date. With respect to any Tax Returns of WPI or AT Sub that are due
after the date of this Agreement but on or prior to the Closing Date, WCI or AT
(as appropriate) shall provide the Company with a reasonable opportunity to
review and comment on such Tax Returns (or, in the case of WPI, the financial
information and schedules relating to WPI that are included in any consolidated
or combined Tax Return) prior to their filing. WCI or AT (as appropriate) and
the Company agree to consult and attempt to resolve in good faith any issues
arising as a result of the Company's review of such Tax Returns. With respect to
any Tax Returns of WPI or AT Sub that are due after the Closing Date but relate
to a Taxable period ending on or prior to, or that include, the Closing Date and
that are filed by the Company pursuant to this Section 14.2, the Company shall
provide WCI and AT with a reasonable opportunity to review and comment on such
Tax Returns prior to their filing, and shall not file any such Tax Return
without the written consent of WCI or AT (as appropriate), such consent not to
be unreasonably withheld or delayed. Notwithstanding anything to the contrary
contained in this Section 14.2, AT shall (i) prepare and file any Tax Returns of
AT Sub for the Taxable period or periods ending on or prior to the day prior to
the Closing Date, (ii) provide the Company with a reasonable opportunity to
review and comment on any such Tax Returns prior to their filing, (iii) attempt
to resolve in good faith any issues arising as a result of the Company's review
of such Tax Returns, and (iv) not amend any such Tax Returns without the
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written consent of the Company, such consent not to be unreasonably
withheld or delayed.
14.3. Cooperation and Exchange of Information. WPI, AT and the
Company will provide each other with such cooperation and information as either
of them reasonably may request of the other in filing any Tax Return, amended
Tax Return or claim for refund, determining a liability for Taxes or a right to
a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to rulings
or other determinations by Taxing authorities. Each party shall make its
employees available on a mutually convenient basis to provide explanations of
any documents or information provided hereunder. Each party will retain all Tax
Returns, schedules and work papers and all material records or other documents
relating to Tax matters of WPI, AT Sub or RA for the taxable period first ending
after the Closing Date and for all prior taxable periods until the later of (i)
the expiration of the statute of limitations of the taxable periods to which
such Tax Returns and other documents relate, without regard to extensions except
to the extent notified by the other party in writing of such extensions for the
respective Tax periods, or (ii) eight years following the due date (without
extension) for such Tax Returns. Any information obtained under this Section 14
shall be kept confidential, except as may be otherwise necessary in connection
with the filing of Tax Returns or claims for refund or in conducting an audit or
other proceeding.
14.4. Conveyance Taxes. WCI agrees to assume its liability for and
to pay all sales, transfer, stamp, stock transfer, real property transfer or
gains and similar Taxes incurred as a result of the Acquisition. AT agrees to
assume his liability for, and to pay all, sales, transfer, stamp, stock
transfer, real property transfer or gains and similar taxes incurred as a result
of the Merger.
14.5. Amendment of Tax Returns. The Company shall not amend or
modify (i) the Tax Return of AT Sub for its Taxable period or periods ending on
the day prior to the Closing Date, or (ii) any Tax Return of WPI or AT Sub that
is due after the Closing Date but relates to a Taxable period ending on or prior
to, or that includes, the Closing Date or (iii) any Tax Return of RA for any
Taxable period or periods on or prior to,
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or that includes, the Closing Date, without the written consent of WCI and/or AT
(as appropriate), such consent not to be unreasonably withheld or delayed.
14.6. Tax-Free Reorganization. None of AT (as to AT Sub), WCI (as to
WPI) or the Company knows of any reason that the Merger and Acquisition,
respectively, would fail to qualify as a tax-free reorganization within the
meaning of Code section 368(a). The parties hereto shall take no position for
federal, state or local tax purposes that is inconsistent with such
characterization unless required to do so by a "determination" (within the
meaning of Code section 1313(a) or any analogous state or local statute).
14.7. Miscellaneous. (a) For purposes of this Section 14, (i) all
references to WCI, USEP, AT, AT Sub, RA and the Company shall include
successors, (ii) all references to AT Sub shall include AT Sub as the corporate
successor to the assets and liabilities of Ant Box L.L.C. and (iii) all
references to WPI shall include WPI as corporate successor to the assets and
liabilities of Cypress Entertainment L.L.C.
(b) The representations, covenants and agreements of the parties
hereto contained in this Section 14 shall survive the Closing and shall remain
in full force and effect until 60 days following the expiration of the
applicable statute of limitations with respect to any Taxes that would be
indemnifiable by WCI or AT under Section 13 or 14 of this Agreement.
(c) The principles of Sections 13.2(b), 13.3, 13.4 and 13.5 hereof
shall apply to amounts otherwise determined to be due under Section 14.1 hereof.
14.8. Definitions. For purposes of this Agreement:
(a) "Tax" or "Taxes" means (i) any federal, state, county, local or
foreign taxes, charges, fees, levies or other assessments, including all
net income, gross income, gross receipts, sales, use, employment and
payroll, disability, license, ad valorem, franchise, transfer, gains,
profits, excise, real and personal property, capital stock, production,
business, occupation, alternative or add-on minimum, environmental or
windfall profits, estimated, severance or other taxes, fees, stamp taxes
and duties or assessments or charges of any kind whatsoever (whether
payable directly or by withholding, and whether attributable to statutory
or nonstatutory rules) imposed
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by any taxing authority responsible for the imposition of any such tax,
including any interest and penalties (civil or criminal), additions to
tax, interest on penalties or additions to tax, or additional amounts
imposed by any taxing authority with respect thereto, and (ii) any
obligation under any agreement or arrangement with respect to any taxes
described in clause (i);
(b) "Tax Return" means any report, return or other information,
including any supporting schedules, required to be supplied to a
governmental entity with respect to Taxes including, where required or
actually filed, a consolidated U.S. federal income tax return and any
consolidated, combined or unitary tax return for state or local tax
purposes; and
(c) "Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute.
15. CONTROVERSIES. Any dispute under this Agreement or
pertaining to any claim or breach of, or any default under, any provision
of this Agreement shall be resolved by arbitration in New York, New York.
The arbitration shall be accomplished in the following manner:
(a) Any party may serve upon the other parties a written demand that
the dispute, specifying the nature thereof, shall be submitted to
arbitration.
(b) Within 10 days after the service of such demand, the demanding
party and the other party shall designate an arbitrator and serve written
notice of such appointment upon the other party. If either of such parties
fails within the specified time to appoint such arbitrator, the other
party shall be entitled to appoint both arbitrators. The two arbitrators
so appointed shall appoint a third arbitrator. If the two arbitrators
appointed fail to agree upon a third arbitrator within 10 days after their
appointment, then an application may be made by any party, upon notice to
the other party, to the American Arbitration Association ("AAA"), or any
successor thereto, or if the AAA or its successor shall fail to appoint a
third arbitrator within 10 days after such request, then any party may
apply (with notice to the other) to any court of competent jurisdiction
for the appointment of a third arbitrator, and any such appointment so
made shall be binding upon all parties hereto.
<PAGE>
-40-
(c) The arbitration shall be conducted, to the extent consistent
with this Section 15 and Section 17.7, in accordance with the then
prevailing rules of the AAA or its successor. The arbitrators shall have
the right to retain and consult experts and competent authorities skilled
in the matters under arbitration, but all consultations shall be made in
the presence of all parties to the dispute, who shall have the full right
to cross-examine the experts and authorities. All demands and notices
under this Section 15 shall be served or given in the manner specified in
Section 17.5 and shall be deemed served or given when received.
(d) The arbitrators shall render their award, upon the concurrence
of at least two of their number, not later than 30 days after the
appointment of the third arbitrator. The arbitrators shall have the right
and power to award such relief at law or in equity, including specific
performance, as they shall deem proper; provided, however, that in
rendering their award, the arbitrators shall have no power to modify any
of the provisions of this Agreement or the document executed in connection
herewith and the jurisdiction of the arbitrators is hereby expressly
limited accordingly. Their decision and award shall be in writing, and
counterpart copies shall be delivered to each of the parties. The decision
of the three arbitrators made in writing shall be final and binding upon
the parties. Judgment may be entered on the award of the arbitrators and
may be enforced in any court having jurisdiction. The parties to the
arbitration shall be entitled to conduct discovery in accordance with the
provisions of the New York Civil Practice Law and Rules. Should any party
seek to enforce the terms of this Agreement by arbitration or judicial
process, then the prevailing party shall be entitled to recover reasonable
attorney fees and costs.
16. TERMINATION.
16.1. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(i) the parties may terminate this Agreement by mutual
written consent at any time prior to the Closing Date;
(ii) the Company may terminate this Agreement by giving
written notice to AT and WCI if the Closing shall not
<PAGE>
-41-
have occurred on or before September 20, 1996 by reason of the failure of
any condition precedent under Section 7 hereof (unless the failure results
primarily from the Company itself breaching any representation, warranty,
or covenant contained in this Agreement); and
(iii) either AT or WCI may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or before
September 20, 1996 by reason of the failure of any condition precedent
under Section 8 hereof (unless the failure results primarily from AT's or
WP Sub's breaching any representation, warranty, or covenant contained in
this Agreement).
16.2. Effect of Termination. If any party terminates this Agreement
pursuant to Section 16.1 above, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other party
(except for any liability of any party then in breach).
17. MISCELLANEOUS.
17.1. Entire Agreement. This Agreement (which includes the Exhibits
hereto) and the other documents and agreements delivered in connection with this
Agreement contain the entire agreement among the parties hereto with respect to
the transactions contemplated herein and supersede all other prior arrangements
made by any of them with respect thereto. No representation or warranty is made
by any party hereto with respect to the subject matter hereof other than as
expressly set forth in any of the aforementioned documents.
17.2. Modification and Amendment. This Agreement cannot be orally
changed, amended or terminated, and no provision or requirement hereof may be
orally waived. Any change, amendment, termination or waiver hereof shall only be
by agreement in writing signed by the party against whom enforcement of any
change, amendment, termination or waiver is sought.
17.3. Expenses. The parties to this Agreement shall, except as
otherwise specifically provided herein, bear their respective expenses incurred
in connection with the preparation, execution and performance of this Agreement
and the transactions contemplated hereby, including, without limitation, all
fees and expenses of their respective agents.
<PAGE>
-42-
17.4. Binding upon Successors. This Agreement shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
heirs, legal representatives, successors and assigns. Except as otherwise
expressly provided herein, this Agreement shall not be assignable by any party.
Nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies under or by reason of this Agreement.
17.5. Notices. All notices, consents, requests, instruments,
approvals and other communications provided for herein shall be in writing and
shall be deemed validly given when delivered personally or sent by certified
mail, return receipt requested, postage prepaid, to the following:
If to the Company:
110 E. 59th Street
New York, New York 10022
Attn: Chairman
With a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attn: Stephen A. Greene, Esq.
Facsimile: (212) 269-5420
If to AT:
Alvin N. Teller
900 Stradella Road
Los Angeles, California 90067
With a copy to:
Grubman Indursky Schindler & Goldstein P.C.
152 W. 57th Street
New York, New York 10019
Attn: Paul D. Schindler, Esq.
Facsimile: (212) 554-0477
and
<PAGE>
-43-
Lenard & Gonzalez
2121 Avenue of the Stars
22nd Floor
Los Angeles, California 90067
Attn: Allen D. Lenard, Esq.
Facsimile: (310) 552-0740
If to WCI, USEP Delaware or USEP Offshore:
31 West 52nd Street
New York, New York 10019
Attn: W. Townsend Ziebold, Jr.
Facsimile: (212) 969-7879
With a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn: Peter Lyons, Esq.
Facsimile: (212) 848-7179
or at such other address as the parties shall provide by notice as herein
provided. Notice of change of address shall be effective only upon receipt.
17.6. Counterparts. This Agreement may be executed by one or
more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
17.7. Governing Law; Section Headings. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, applicable to contracts to be performed entirely in that state. The
section headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
<PAGE>
-44-
IN WITNESS WHEREOF, each of the parties have caused this Agreement
to be duly executed all as of the day and year first above written.
ALLIANCE ENTERTAINMENT CORP.
By: /s/ Anil K. Narang
-----------------------------
Name: Anil K. Narang
Title: President
ALLIANCE ACQUISITION CO. INC.
By: /s/ Anil K. Narang
-----------------------------
Name: Anil K. Narang
Title: President
RED ANT BOX, INC.
By: /s/ Alvin N. Teller
-----------------------------
Name: Alvin N. Teller
Title: President
WASSERSTEIN & CO. INC.
By: /s/ W. Townsend Ziebold, Jr.
-----------------------------
Name: W. Townsend Ziebold, Jr.
Title: Managing Director
/s/ Alvin N. Teller
-----------------------------
Alvin N. Teller
<PAGE>
-45-
U.S. EQUITY PARTNERS, L.P.
by its general partner
W.P. Management Partners, L.L.C.
By:/s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
U.S. EQUITY PARTNERS (Offshore), L.P.
by its general partner
W.P. Management Partners, L.L.C.
By:/s/ Vincent J. Capurso
----------------------------------
Name: Vincent J. Capurso
Title: Vice President
<PAGE>
EXHIBIT 2
STOCK PURCHASE AGREEMENT DATED AS OF AUGUST 15, 1996 AMONG WASSERSTEIN & CO.,
INC., U.S. EQUITY PARTNERS, L.P., U.S. EQUITY PARTNERS (OFFSHORE), L.P. AND
MR. JOSEPH J. BIANCO
STOCK PURCHASE AGREEMENT
AGREEMENT, dated August 15, 1996, by and between WASSERSTEIN & CO.,
INC., a Delaware corporation ("WCI") and U.S. EQUITY PARTNERS, L.P., a Delaware
limited partnership ("USEP Delaware"), U.S. EQUITY PARTNERS (OFFSHORE), L.P., a
Cayman Islands limited partnership ("USEP Offshore" and together with USEP
Delaware, "USEP," and USEP and WCI are collectively referred to herein as the
"Buyers"), and JOSEPH J. BIANCO (the "Seller").
The Seller is the record and beneficial owner of 1,350,000 shares of
common stock, par value $.0001 per share (the "Common Stock"), of Alliance
Entertainment Corp., a Delaware corporation ("Company") (the "Shares"). The
Seller wishes to sell the Shares and the Buyers wish to purchase the Shares upon
the terms and subject to the conditions of this Agreement. Capitalized terms
used herein but not otherwise defined shall have the meanings given them in
Section 7.1 hereof.
Accordingly, the parties agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale and Purchase of Shares. At the Closing (as
hereinafter defined), (i) the Seller shall sell, and the Buyers shall purchase,
all of the Shares, free of any Liens, (ii) the Seller shall deliver or cause to
be delivered to the WCI and USEP certificates representing 499,500 and
<PAGE>
-2-
850,500, respectively, of the Shares accompanied by stock powers duly executed
in blank, in proper form for transfer, and with all appropriate stock transfer
tax stamps affixed, and (iii) the Buyers shall deliver the Purchase Price (as
hereinafter defined) to the Seller.
1.2 Purchase Price. The aggregate purchase price for the
Shares (the "Purchase Price") shall be $6.00 per share (the "Closing Payment").
The Buyers shall pay the Closing Payment to the Seller, against receipt of the
Shares at the Closing, by a certified or official bank check, or cash by wire
transfer of immediately available funds.
2. Closing; Closing Date. The closing of the purchase and sale of
the Shares (the "Closing") shall take place simultaneously with the closing of
the transactions (the "Acquisition") contemplated by the Stock Acquisition and
Merger Agreement dated as of the date hereof (the "Acquisition Agreement") among
Company, Acquisition Sub, USEP, WCI, AT and AT Sub at the offices of Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005 or at such other
place and time as the parties may agree in writing (such time and date being
referred to herein as the "Closing Date"). The Closing shall be effective as of
the close of business on that date.
<PAGE>
-3-
3. Representations and Warranties of Seller. The Seller
represents and warrants to the Buyers as follows:
3.1 Title to the Shares. As of the Closing Date, the Seller
shall own of record, free and clear of any Lien, the Shares, and, upon delivery
of and payment for such Shares as herein provided, the Seller will convey to the
Buyers good and valid title thereto, free and clear of any Lien.
3.2 Authority to Execute and Perform Agreement. The Seller has
the full legal right, power and all authority required to enter into, execute
and deliver this Agreement and to perform fully the Seller's obligations
hereunder. This Agreement has been duly executed and delivered by the Seller and
(assuming the due authorization, execution and delivery hereof by the Buyers) is
a legal, valid and binding obligation of Seller enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditors' rights
and to general equity principles (regardless of whether enforcement is sought in
a proceeding at law or in equity).
3.3 Representations and Warranties on Closing Date. The
representations and warranties contained in this Section 3 shall be true on
and as of the Closing Date with the
<PAGE>
-4-
same force and effect as though such representations and warranties had been
made on and as of the Closing Date.
4. Conditions Precedent to the Obligation of the Buyers to Close.
The obligation of the Buyers to enter into and complete the Closing is subject,
at the option of the Buyers, to the fulfillment on or prior to the Closing Date
of the following conditions, any one or more of which may be waived by it:
4.1 Representations and Warranties. The representations and
warranties of the Seller contained in this Agreement shall be true on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date.
4.2 No Orders. There shall be no Order of any nature in
effect that prevents the consummation of the transactions contemplated
hereby.
4.3 Tag-Along Rights. All tag-along or similar rights relating
to the Shares shall have been waived, expired or lapsed, and to the knowledge of
the Buyers and the Seller, no claim of tag-along or similar rights relating to
the Shares shall have been made.
<PAGE>
-5-
4.4 Acquisition. The Acquisition shall be consummated
at the same time as the Closing.
5. Conditions Precedent to the Obligation of the Seller to Close.
The obligation of the Seller to enter into and complete the Closing is subject,
at the option of the Seller, to the fulfillment on or prior to the Closing Date
of the condition, which may be waived by the Seller, that the Acquisition shall
be consummated at the same time as the Closing.
6. Termination of Agreement.
This Agreement shall terminate prior to the Closing as
follows:
(i) upon the termination of the Acquisition
Agreement; or
(ii) at any time on or prior to the Closing Date,
by mutual written consent of the Seller and the Buyers.
7. Miscellaneous.
7.1 Certain Definitions. (a) As used in this
Agreement, the following terms have the following meanings:
<PAGE>
-6-
(i) "Lien" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
(ii) "Order" means any order, judgment,
injunction, award, decision, determination, decree or writ.
(iii) "Person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.
7.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails, as follows:
<PAGE>
-7-
(i) if to any of the Buyers, to:
31 West 52nd Street
New York, New York 10019
Attention: W. Townsend Ziebold
Facsimile: (212) 969-7879
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Peter Lyons, Esq.
Facsimile: (212) 848-7179
(ii) if to the Seller, to:
Joseph J. Bianco
Alliance Entertainment Corp.
110 East 59th Street
New York, New York 10022
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Stephen A. Greene, Esq.
Facsimile: (212) 269-5420
Any party may by notice given in accordance with this Section to the other
parties designate another address or Person for receipt of notices hereunder.
7.3 Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the purchase of the Shares and
supersede all prior agreements, written or oral, with respect thereto.
<PAGE>
-8-
7.4 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the Buyers and the Seller or, in the case
of a waiver, by the party waiving compliance. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
7.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
7.6 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable, except
that the Buyers may assign its rights hereunder to any of its affiliates.
<PAGE>
-9-
7.7 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
7.8 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
7.9 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
7.10 Severability of Provisions. If any provision or any
portion of any provision of this Agreement, or the application of any such
provision or any portion thereof to any Person or circumstance, shall be held
invalid or unenforceable, the remaining portion of such provision and the
remaining provisions of this Agreement, and the application of such provision or
portion of such provision as is held invalid or unenforceable to Persons or
circumstances other than those as to
<PAGE>
-10-
which it is held invalid or unenforceable, shall not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
WASSERSTEIN & CO., INC.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
U.S. EQUITY PARTNERS, L.P.
by its general partner,
W.P. Management Partners, L.L.C.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
U.S. EQUITY PARTNERS (OFFSHORE), L.P.
by its general partner,
W.P. Management Partners, L.L.C.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
/s/ Joseph J. Bianco
--------------------
Joseph J. Bianco
<PAGE>
EXHIBIT 3
STOCK PURCHASE AGREEMENT DATED AS OF AUGUST 15, 1996 AMONG WASSERSTEIN & CO.,
INC., U.S. EQUITY PARTNERS, L.P., U.S. EQUITY PARTNERS (OFFSHORE), L.P.
AND MR. ANIL V. NARANG
STOCK PURCHASE AGREEMENT
AGREEMENT, dated August 15, 1996, by and between WASSERSTEIN &
CO., INC., a Delaware corporation ("WCI"), and U.S. EQUITY PARTNERS, L.P., a
Delaware limited partnership ("USEP Delaware"), U.S. EQUITY PARTNERS
(OFFSHORE), L.P., a Cayman Islands limited partnership ("USEP Offshore" and
together with USEP Delaware, "USEP," and USEP and WCI are collectively
referred to herein as the "Buyers"), and ANIL K. NARANG (the "Seller").
The Seller is the record and beneficial owner of 1,350,000
shares of common stock, par value $.0001 per share (the "Common Stock"), of
Alliance Entertainment Corp., a Delaware corporation ("Company") (the
"Shares"). The Seller wishes to sell the Shares and the Buyers wish to
purchase the Shares upon the terms and subject to the conditions of this
Agreement. Capitalized terms used herein but not otherwise defined shall
have the meanings given them in Section 7.1 hereof.
Accordingly, the parties agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale and Purchase of Shares. At the Closing (as
hereinafter defined), (i) the Seller shall sell, and the Buyers shall
purchase, all of the Shares, free of any Liens, (ii) the Seller shall
deliver or cause to be delivered to WCI and USEP certificates representing
185,000 and 315,000,
<PAGE>
-2-
respectively, of the Shares accompanied by stock powers duly executed in
blank, in proper form for transfer, and with all appropriate stock transfer
tax stamps affixed, and (iii) the Buyers shall deliver the Purchase Price
(as hereinafter defined) to the Seller.
1.2 Purchase Price. The aggregate purchase price for the
Shares (the "Purchase Price") shall be $6.00 per share (the "Closing
Payment"). The Buyers shall pay the Closing Payment to the Seller, against
receipt of the Shares at the Closing, by a certified or official bank check,
or cash by wire transfer of immediately available funds.
2. Closing; Closing Date. The closing of the purchase and sale
of the Shares (the "Closing") shall take place simultaneously with the
closing of the transactions (the "Acquisition") contemplated by the Stock
Acquisition and Merger Agreement dated as of the date hereof (the
"Acquisition Agreement") among Company, Acquisition Sub, USEP, WCI, AT and
AT Sub at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York,
New York 10005 or at such other place and time as the parties may agree in
writing (such time and date being referred to herein as the "Closing Date").
The Closing shall be effective as of the close of business on that date.
<PAGE>
-3-
3. Representations and Warranties of Seller. The Seller
represents and warrants to the Buyers as follows:
3.1 Title to the Shares. As of the Closing Date, the
Seller shall own of record, free and clear of any Lien, the Shares, and,
upon delivery of and payment for such Shares as herein provided, the Seller
will convey to the Buyers good and valid title thereto, free and clear of
any Lien.
3.2 Authority to Execute and Perform Agreement. The Seller
has the full legal right, power and all authority required to enter into,
execute and deliver this Agreement and to perform fully the Seller's
obligations hereunder. This Agreement has been duly executed and delivered
by the Seller and (assuming the due authorization, execution and delivery
hereof by the Buyers) is a legal, valid and binding obligation of Seller
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting creditors' rights and to general equity principles (regardless of
whether enforcement is sought in a proceeding at law or in equity).
3.3 Representations and Warranties on Closing Date. The
representations and warranties contained in this Section 3 shall be true on
and as of the Closing Date with the
<PAGE>
-4-
same force and effect as though such representations and warranties had been
made on and as of the Closing Date.
4. Conditions Precedent to the Obligation of the Buyers to
Close. The obligation of the Buyers to enter into and complete the Closing
is subject, at the option of the Buyers, to the fulfillment on or prior to
the Closing Date of the following conditions, any one or more of which may
be waived by it:
4.1 Representations and Warranties. The representations
and warranties of the Seller contained in this Agreement shall be true on
and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date.
4.2 No Orders. There shall be no Order of any nature in
effect that prevents the consummation of the transactions contemplated
hereby.
4.3 Tag-Along Rights. All tag-along or similar rights
relating to the Shares shall have been waived, expired or lapsed, and to the
knowledge of the Buyers and the Seller, no claim of tag-along or similar
rights relating to the Shares shall have been made.
<PAGE>
-5-
4.4 Acquisition. The Acquisition shall be consummated
at the same time as the Closing.
5. Conditions Precedent to the Obligation of the Seller to
Close. The obligation of the Seller to enter into and complete the Closing
is subject, at the option of the Seller, to the fulfillment on or prior to
the Closing Date of the condition, which may be waived by the Seller, that
the Acquisition shall be consummated at the same time as the Closing.
6. Termination of Agreement.
This Agreement shall terminate prior to the Closing as
follows:
(i) upon the termination of the Acquisition
Agreement; or
(ii) at any time on or prior to the Closing Date,
by mutual written consent of the Seller and the Buyers.
7. Miscellaneous.
7.1 Certain Definitions. (a) As used in this
Agreement, the following terms have the following meanings:
<PAGE>
-6-
(i) "Lien" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
(ii) "Order" means any order, judgment,
injunction, award, decision, determination, decree or writ.
(iii) "Person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.
7.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission or, if mailed, five days after the date of deposit in
the United States mails, as follows:
<PAGE>
-7-
(i) if to any of the Buyers, to:
31 West 52nd Street
New York, New York 10019
Attention: W. Townsend Ziebold
Facsimile: (212) 969-7879
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Peter Lyons, Esq.
Facsimile: (212) 848-7179
(ii) if to the Seller, to:
Anil K. Narang
Alliance Entertainment Corp.
110 East 59th Street
New York, New York 10022
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Stephen A. Greene, Esq.
Facsimile: (212) 269-5420
Any party may by notice given in accordance with this Section to the other
parties designate another address or Person for receipt of notices
hereunder.
7.3 Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the purchase of the Shares and
supersede all prior agreements, written or oral, with respect thereto.
<PAGE>
-8-
7.4 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the Buyers and the Seller or,
in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
party of any such right, power or privilege, nor any single or partial
exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or
privilege.
7.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
7.6 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable,
except that the Buyers may assign its rights hereunder to any of its
affiliates.
<PAGE>
-9-
7.7 Variations in Pronouns. All pronouns and any
variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the context may require.
7.8 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all of the parties hereto.
7.9 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
7.10 Severability of Provisions. If any provision or any
portion of any provision of this Agreement, or the application of any such
provision or any portion thereof to any Person or circumstance, shall be
held invalid or unenforceable, the remaining portion of such provision and
the remaining provisions of this Agreement, and the application of such
provision or portion of such provision as is held invalid or unenforceable
to Persons or circumstances other than those as to
<PAGE>
-10-
which it is held invalid or unenforceable, shall not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first above written.
WASSERSTEIN & CO., INC.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
U.S. EQUITY PARTNERS, L.P.
by its general partner,
W.P. Management Partners, L.L.C.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
U.S. EQUITY PARTNERS (OFFSHORE),
L.P. by its general partner,
W.P. Management Partners, L.L.C.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
/s/ Anil K. Narang
------------------
Anil K. Narang
<PAGE>
EXHIBIT 4
VOTING AGREEMENT DATED AS OF AUGUST 15, 1996 AMONG JOSEPH BIANCO,
JOHN FRIEDMAN, PETER KAUFMAN, ELLIOT NEWMAN, ROBERT MARX,
ALVIN TELLER, BAIN CAPITAL, INC., BT CAPITAL PARTNERS, INC.,
U.S. EQUITY PARTNERS (OFFSHORE), L.P. AND WASSERSTEIN & CO., INC.
VOTING AGREEMENT
Voting Agreement, dated as of August 15, 1996 (this "Agreement") among
Joseph Bianco, John Friedman, Peter Kaufmann, Elliot Newman, Robert Marx, Alvin
Teller, Bain Capital, Inc., BT Capital Partners, Inc., U.S. Equity Partners,
L.P., U.S. Equity Partners (Offshore), L.P., and Wasserstein & Co. Inc.
(individually a "Party", and collectively "Parties") which are or will become
record or beneficial owners of Common Stock, par value $.0001 per share ("Common
Stock") of Alliance Entertainment Corp., a Delaware corporation (the "Company").
WHEREAS, pursuant to a Stock Acquisition and Merger
Agreement dated as of August 15, 1996, among Alvin Teller
("AT"), Wasserstein & Co., Inc., ("WCI"), U.S. Equity Partners,
L.P. ("USEP Delaware"), U.S. Equity Partners (Offshore), L.P.
("USEP Offshore" and, together with USEP Delaware, "USEP"), the
Company and the parties thereto (the "Acquisition Agreement"),
AT, USEP, and WCI will receive shares of Common Stock of the
Company, and
WHEREAS, pursuant to Stock Purchase Agreements dated as of August 15,
1996, WCI and USEP will purchase from certain officers of the Company an
aggregate of 1,850,000 shares of Common Stock, and
<PAGE>
-2-
WHEREAS, the Parties are the owners of, or by proxy or otherwise
exercise irrevocable voting control over shares of Common Stock of the Company
as set forth in Exhibit A hereto,
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the Parties hereby agree
as follows:
1. Voting of Shares by Parties. Each Party agrees to vote all of the
shares of Common Stock which are now or hereafter owned by such Party,
beneficially or of record, or which he or it is entitled to vote by proxy or
otherwise, including without limitation those shares identified on Exhibit A
attached hereto, at any special or annual meeting of the stockholders of the
Company, or by any written consent, whereat or whereby the same are considered
for approval by the stockholders of the Company, for (a) the approval of the
conversion rights of the Series A Convertible Preferred Stock issued to BT
Capital Partners, Inc. and BCI Growth IV, L.P. (the "Purchasers") pursuant to a
Preferred Stock Purchase Agreement dated July 16, 1996, as set forth in the
Certificate of Designations attached thereto, (b) the approval of the Company's
issuance of Common Stock pursuant to any Party's exercise of any such conversion
rights, (c) the approval of the
<PAGE>
-3-
Purchase Agreement and the transactions contemplated thereby, including the
issuance of the contingent shares of Common Stock as contemplated by Sections
1.9 and 2.4 thereof, and (d) the election of directors of the Company designated
by WCI and AT pursuant to Section 9.2 of the Acquisition Agreement, two (2)
directors designated by BT Capital Partners, Inc., one (1) director designated
by Bain Capital Inc. and the remainder of the directors designated by Joseph
Bianco.
2. Changes in Common Stock. In the event that subsequent to the date
of this Agreement any shares or other securities (other than any shares or
securities of another corporation issued to the stockholders of the Company
pursuant to a plan of merger) are issued on, or in exchange for, any of the
shares of the Common Stock or Preferred Stock held by the Parties by reason of
any stock divided, stock split, consolidation of shares, reclassification, or
consolidation involving the Company, such shares or securities shall be deemed
to be Common Stock for purposes of this Agreement.
3. Representations of Parties. Each Party hereby represents
and warrants that (i) such Party owns and/or has the right to vote the
number of shares of the Common Stock set forth opposite his or its name on
Exhibit A attached hereto,
<PAGE>
-4-
(ii) such Party has full power to enter into this Agreement and has not, prior
to the date of this Agreement, executed or delivered any proxy or entered into
any other voting agreement or similar arrangement that would conflict with the
purposes or provisions of this Agreement, (iii) such Party will not take any
action inconsistent with the purposes and provisions of this Agreement and (iv)
this Agreement is a valid, binding and enforceable obligation of such Party.
4. Proxy. Joseph Bianco agrees to use his best efforts to
cause each of the signatories to the Restated and Amended Stockholders'
Agreement dated as of November 30, 1993, as amended on May 18, 1995 (the
"Stockholders' Agreement"), who granted an irrevocable proxy to Joseph
Bianco with respect to the shares of stock of the Company which they own,
to grant an irrevocable proxy to Al Teller with respect to the shares of
stock of the Company which they own to the same extent as set forth in the
Stockholders' Agreement; provided, that such proxy shall be effective only
upon the death of Mr. Bianco. Mr. Bianco shall also use his best efforts
to cause such persons to agree that they shall not grant any other proxy
with respect to their shares of stock.
<PAGE>
-5-
5. Enforceability. Each Party expressly agrees that this
Agreement shall be specifically enforceable in any court of competent
jurisdiction in accordance with its terms against each of the parties
hereto.
6. Benefit. This Agreement shall be binding upon and inure
to the benefit of the respective parties hereto and their successors.
7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within the State
of New York.
8. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
<PAGE>
-6-
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date first above written.
Joseph Bianco
John Friedman
Peter Kaufmann
Robert Marx
Elliot Newman
Alvin Teller
BAIN CAPITAL, INC.
By:
-----------------------------
Title:
BT CAPITAL PARTNERS, INC.
By:
-----------------------------
Title:
<PAGE>
-7-
U.S. EQUITY PARTNERS, L.P.
by its general partner,
W.P. Management Partners, L.L.C.
By:
-----------------------------
Title:
U.S. EQUITY PARTNERS (OFFSHORE),
L.P. by its general partner,
W.P. Management Partners, L.L.C.
By:
-----------------------------
Title:
WASSERSTEIN & CO., INC.
By:
-----------------------------
Title
<PAGE>
Exhibit A
Common Stock
Joseph Bianco 7,604,250
John Friedman 101,000
Peter Kaufmann 315,000
Robert Marx 60,000
Elliot Newman 112,000
Alvin Teller 760,823*
Bain Capital, Inc. 3,306,972
BT Capital Partners, Inc. 3,974,937
U.S. Equity Partners, L.P. 4,903,162*
Wasserstein & Co., Inc. 2,904,766*
- -------------------
* Shares to be acquired upon the closing of the Acquisition
Agreement.
<PAGE>
EXHIBIT 5
STOCK OPTION AGREEMENT DATED AS OF AUGUST 15, 1996 BETWEEN
ALVIN N. TELLER AND ALLIANCE ENTERTAINMENT CORP.
ALLIANCE ENTERTAINMENT CORP.
Stock Option Agreement
No. of shares subject to option: 5,000,000
THIS AGREEMENT, dated as of the fifteenth day of August, 1996,
between Alliance Entertainment Corp., a Delaware corporation (the "Company")
and Alvin N. Teller ("Optionee");
1. Grant of Option. The Company, as of the date written above
(the "Date of Grant"), hereby grants to Optionee, subject to the terms and
conditions herein set forth, the right and option (the "Option") to purchase
from the Company all or any part of an aggregate of 5,000,000 shares of Common
Stock (the "Option Shares") at the option price of $6 per share. This Option is
to be exercisable as hereinafter provided. This Option shall not be treated as
an incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended.
2. Terms and Conditions. This Option is subject to the
following terms and conditions:
(a) Exercise of Option. Except as otherwise
provided herein, this Option is exercisable as follows: This Option shall be
exercisable for one-fifth (1/5) of the Option Shares on the Date of Grant and
shall be exercisable for an additional one-fifth (1/5) of the shares of each of
August 15, 1997, August 15, 1998, August 15, 1999 and August 15, 2000. After the
Option becomes exercisable, this Option shall continue to be exercisable until
the earlier of the termination of Optionee's rights hereunder or until the
Expiration Date
<PAGE>
2
(as defined below). This Option may be exercised with respect to any number of
whole shares less than the full number for which this Option could be exercised.
A partial exercise of this Option shall not affect Optionee's right to exercise
this Option again for the balance thereof, subject to the conditions of this
Agreement.
(b) Expiration Date. The portion of the Option
exercisable on the date hereof shall expire six (6) years from the date hereof.
The portion of the Option exercisable on the first anniversary hereof shall
expire seven (7) years from the date hereof. The portion of the Option
exercisable on the second, third and fourth anniversaries hereof shall expire
seven (7), eight (8), nine (9) and ten (10) years, respectively, from the date
hereof.
(c) Method of Exercising and Payment for Shares.
This Option is exercisable by written notice, accompanied by payment of the
Option Price, delivered to the attention of the Company's Secretary at either
the Company's office in Coral Springs, Florida or the Company's office in New
York City. The Date of Exercise shall be the date the payment of the option
price is received by the Company. The option price may be paid in cash,
certified or bank cashiers check or other consideration acceptable to the
Compensation Committee of the Board of Directors (provided that such other
consideration has an aggregate Fair Market Value which is not less than the
option price).
(d) Nontransferability. This Option is
non-transferable, except by will or by the laws of descent and distribution.
In the event of any such transfer, this Option
<PAGE>
3
is to be exercised only by such transferee. During Optionee's lifetime, this
Option is to be exercised only by Optionee.
(e) No Additional Right. This Option does not
confer upon Optionee any right with respect to continuance of employment by the
Company or any Affiliate.
3. Fractional Share. A fractional share of Common Stock
is not to be issuable hereunder, and when any provision hereof may entitle
Optionee to a fractional share, such fraction is to be disregarded.
4. Exercise Rights Upon Certain Events.
(a) Termination by Death or Disability.
If the Optionee's employment is terminated by death or Disability (as defined
in the Optionee's Employment Agreement with the Company dated August 15, 1996
(the "Employment Agreement")) 50% of the not yet exercisable Option shall become
exercisable by the Optionee or the persons to whom the Optionee's rights
hereunder shall pass by will or the laws of descent and distribution and shall
be exercisable until the Option expires by its terms hereunder.
(b) Termination for Cause or Other than Good
Reason. If the Optionee's employment is terminated by the Company for Cause or
voluntarily by the Optionee other than for Good Reason (as defined in the
Employment Agreement) any portion of the Option not exercisable at the time of
such termination shall be cancelled.
(c) Good Reason or Other Than Cause. If the
Optionee's employment is terminated by the Optionee for Good Reason or by the
Company for other
<PAGE>
4
than Cause (as defined in the Optionee's Employment Agreement), the entire
Option shall become immediately exercisable and shall be exercisable until the
Option expires by its terms hereunder.
(d) Additional Events. In the event that there
shall occur (i) any sale, lease, exchange or other transfer of all, or
substantially all, of the assets of the Company, or (ii) the acquisition by any
party (or group, as such term is defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) not currently a holder of more than 5% of the
Common Stock of the Company of more than 50% of the Common Stock of the Company,
or (iii) any merger, sale of capital stock, exchange, combination, consolidation
or other transaction involving the Company following which the holders of Common
Stock of the Company immediately prior to such transaction will not own more
than 50% of the Common Stock of the Company, then the Option shall become
exercisable in full immediately prior to the consummation of any of the
foregoing events. In connection therewith, the Company shall notify the Optionee
not less than fifteen days prior to the intended consummation date of any such
transaction, and the Optionee may exercise the Option contingent upon the
occurrence of such transaction and at any time after the occurrence of such
transaction. In the event that any such proposed transaction does not occur, the
Option shall no longer be deemed currently exercisable pursuant to this clause
(d) and the exercisability of the Option shall be governed by the other terms
of this Agreement.
<PAGE>
5
5. Adjustments Based on Change in Capital Structure. The terms
of this Option are to be adjusted by way of increase or decrease, as the
Compensation Committee of the Board of Directors determines in the exercise of
its reasonable judgment to be equitably appropriate, in the event that the
Company (a) effects one or more stock dividends, stock splits, reverse stock
splits, subdivisions, consolidations or other similar events, (b) engages in a
transaction to which Section 424 of the Code applies, or (c) there occurs any
other events which, in the exercise of its reasonable judgment, the Compensation
Committee believes necessitates such action. In the event of a merger in which
the Company is not the surviving corporation, upon becoming exercisable this
Option shall be exercisable for the amount of Common Stock or other property as
would have been received had this Option been fully exercised prior to the
effective date of such merger. The aggregate exercise price to the Option shall
not change.
6. Governing Law. This Agreement is to be governed by
the laws of the State of Delaware.
7. Binding Effect. This Agreement is to be binding upon
and inure to the benefit of the legatees, distributees and personal
representatives of Optionee and the successors of the Company.
8. Registration Rights. The Company agrees to use its
best efforts to maintain with respect to the Option Shares an effective
registration statement under the Securities Act and a current prospectus
relating thereto for a period of five years after the expiration date of the
Option.
<PAGE>
6
IN WITNESS WHEREOF, the Company has caused this Agreement to
be signed by a duly authorized officer, and Optionee has affixed his signature
hereto.
ALLIANCE ENTERTAINMENT CORP.
By: /s/ Alvin N. Teller
-----------------------------
Name: Alvin Teller
Title: President
<PAGE>
EXHIBIT 6
AGREEMENT WITH RESPECT TO THE JOINT FILING OF SCHEDULE 13D
The undersigned agree, in accordance with the provisions of Regulation
Section 240.13d-1 (f) (1) of the Securities Exchange Act of 1934, as amended
(the "Act") to the joint filing of Schedule 13D of the Act pertaining to their
ownership of securities of Alliance Entertainment Corp., a Delaware corporation.
The undersigned further agree, each person or entity on whose behalf such
statement is filed is responsible for its timely filing and for the timely
filing of any amendment thereto and for the completeness and accuracy of the
information concerning each person or entity contained therein.
This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the undersigned executed this Agreement this
27th day of August, 1996.
WASSERSTEIN PERELLA GROUP, INC.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
WASSERSTEIN & CO., INC.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
WP MANAGEMENT PARTNERS, L.L.C.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
<PAGE>
ALVIN N. TELLER
/s/ Alvin N. Teller
-------------------
U.S. EQUITY PARTNERS, L.P.
By: WP MANAGEMENT PARTNERS, L.L.C.
Its Sole General Partner
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
U.S. EQUITY PARTNERS (OFFSHORE),
L.P.
By: WP MANAGEMENT PARTNERS, L.L.C.
Its Sole General Partner
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
<PAGE>
EXHIBIT 7
INSTRUCTION LETTER DATED AS OF AUGUST 27, 1996 FROM WP MANAGEMENT PARTNERS,
L.L.C., U.S. EQUITY PARTNERS, L.P. AND U.S. EQUITY PARTNERS (OFFSHORE), L.P.
TO ALLIANCE ENTERTAINMENT CORP. AND JOSEPH J. BIANCO AND ANIL K. NARANG
Dear Sirs:
Reference is made to the Stock Acquisition and Merger
Agreement, dated as of August 15, 1996, among Wasserstein & Co., Inc. ("WCI"),
Mr. Alvin N. Teller, Red Ant Box Inc., a Delaware corporation, U.S. Equity
Partners, L.P., a Delaware limited partnership ("USEP Delaware"), U.S. Equity
Partners (Offshore), L.P., a Cayman Islands limited partnership ("USEP Offshore"
and, together with USEP Delaware, "USEP"), Alliance Entertainment Corp., a
Delaware corporation ("Alliance") and Alliance Acquisition Co., Inc., a Delaware
corporation (the "Acquisition and Merger Agreement"), the Stock Purchase
Agreement dated as of August 15, 1996, among Mr. Bianco, WCI and USEP (the
"Bianco Purchase Agreement") and the Stock Purchase Agreement, dated as of
August 15, 1996, among Mr. Narang, WCI and USEP (the "Narang Purchase
Agreement", and together with the Bianco Purchase Agreement, the "Purchase
Agreements").
This letter is to confirm that all shares of common stock of
Alliance to be issued to USEP Delaware and USEP Offshore pursuant to the
Acquisition and Merger Agreement and the Purchase Agreements shall be issued to,
and in the name of, WP Management Partners, L.L.C. ("WPMP"), a Delaware limited
liability company who shall hold such shares of Common Stock on behalf of USEP
Delaware and USEP Offshore. WPMP is the sole general partner of U.S Equity
Partners, L.P. ("USEP Delaware") and U.S. Equity Partners (Offshore), L.P.
("USEP Offshore"). WPMP owns, on behalf of USEP Delaware and USEP Offshore, 170
shares of the 270 shares of common stock of Red Ant Holdings, Inc. WCI owns the
100 other shares of Common Stock of Red Ant Holdings, Inc.
Please acknowledge your agreement with the foregoing by
executing this letter below.
Very truly yours,
WP MANAGEMENT PARTNERS, L.L.C.
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
<PAGE>
U.S. EQUITY PARTNERS, L.P.
By: WP Management Partners, L.L.C.
Its sole general partner
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
U.S. EQUITY PARTNERS (OFFSHORE), L.P.
By: WP Management Partners, L.L.C.
Its sole general partner
By: /s/ Vincent J. Capurso
-----------------------------
Name: Vincent J. Capurso
Title: Vice President
<PAGE>
Acknowledged and accepted as of the date first written above:
By: /s/ Joseph J. Bianco
-----------------------------
Name: Joseph J. Bianco
By: /s/ Anil K. Narang
-----------------------------
Name: Anil K. Narang
ALLIANCE ENTERTAINMENT CORP.
By: /s/ Anil K. Narang
-----------------------------
Name: Anil K. Narang
Title: Vice Chairman and President
<PAGE>
EXHIBIT 8
ALLIANCE ENTERTAINMENT CORP.
1996 RESTRICTED STOCK PLAN
AWARD TO ALVIN N. TELLER
1. Purpose. The purpose of the Alliance Entertainment Corp.
(the "Company") 1996 Restricted Stock Plan (the "Plan") is to provide
incentive to certain employees of the Company to remain in the employ or
service of the Company and its present and future subsidiary corporations
and affiliates ("Subsidiaries"), to encourage ownership of shares in the
Company by such employees and to provide additional incentive for such
employees to promote the success of the Company's business.
2. Effective Date of the Plan. The Plan shall become
effective on the earlier to occur of: (i) the date of approval of the Plan
by the Board of Directors of the Company (the "Board"); and (ii) the date
of commencement of employment as Chief Executive Officer ("CEO") of Alvin
N. Teller (the "Effective Date").
3. Stock Subject to Plan. 500,000 of the authorized but unissued
shares of common stock, $.0001 par value (the "Common Stock"), of the Company
are hereby reserved for issuance under the Plan; provided, however, that the
number of shares so reserved may be reduced to the extent that the total of the
Tranche 1 Shares and the Tranche 2 Shares (as hereinafter defined) available for
distribution is less than 500,000. The shares available for distribution by the
Plan are hereinafter referred to as "Restricted Shares."
(a) Tranche 1. If, at any time during the period from the
Effective Date to the second anniversary of the Effective Date, the price of the
Common Stock remains at or above the Target Prices indicated on the schedule
below for any 25 trading days out of a period of 30 consecutive days, then the
corresponding percentage of 250,000 shares of Common Stock shall become
available for distribution (the "Tranche 1 Shares") by the Plan.
Target Price % of Tranche 1 Stock
$ 9.00 25.00%
$ 9.25 31.25%
$ 9.50 37.50%
$ 9.75 43.75%
<PAGE>
-2-
$ 10.00 50.00%
$ 10.25 56.25%
$ 10.50 63.50%
$ 10.75 69.75%
$ 11.00 75.00%
$ 11.25 81.25%
$ 11.50 87.50%
$ 11.75 93.75%
$ 12.00 100.00%
(b) Tranche 2. If, at any time during the period from the
Effective Date to the fourth anniversary of the Effective Date, the price of the
Common Stock remains at or above the Target Prices indicated on the schedule
below for any 85 trading days out of a period of 90 consecutive trading days,
then the corresponding percentage of 250,000 shares of Common Stock shall become
available for distribution (the "Tranche 2 Shares") by the Plan.
Target Price % of Tranche 2 Stock
$ 13.00 50.00%
$ 13.50 56.50%
$ 14.00 62.50%
$ 14.50 68.75%
$ 15.00 75.00%
$ 15.50 81.25%
$ 16.00 87.50%
$ 16.50 93.75%
$ 17.00 100.00%
(c) Change of Control. In the event of a Change of control of
the Company, all of the Tranche 1 Shares and the Tranche 2 Shares not previously
available for distribution shall become immediately available for distribution
by the Plan. As used herein, "Change of Control" shall mean (i) the acquisition
of all or substantially all of the assets of the Company, (ii) the acquisition
by any party (or group, as such term is defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) not currently a holder of more than
5% of the outstanding Common Stock of the Company of more than 50% of the
outstanding Common Stock of the Company, (iii) any merger, combination,
consolidation or similar transaction involving the Company following which the
holders of Common Stock of the Company immediately prior to such transaction
will not own more than 50% of the Common Stock of the Company.
<PAGE>
-3-
(d) Adjustments. In the event that the Company shall at any
time (i) subdivide (by any stock split, stock dividend or otherwise) one or more
classes of its outstanding Common Stock into a greater number of shares of
Common Stock, (ii) combine (by reverse stock split or otherwise) one or more
classes of its outstanding Common Stock into a smaller number of shares or (iii)
pay any extraordinary cash dividend on one or more classes of its outstanding
Common Stock; then the number of shares subject to the Plan and the target
prices shall be proportionately adjusted.
4. Administration and Eligibility. The CEO shall allocate, in his
sole and absolute discretion, the Restricted Shares subject to the Plan to any
employee or employees of the Company, including himself, on the terms and
conditions set forth herein; provided, however, that no Restricted Shares shall
be delivered until such shares become available for distribution by the Plan
pursuant to the terms hereof. The CEO shall also have authority to interpret the
Plan and to prescribe, amend and rescind rules and regulations relating to it.
Any determination by the CEO in carrying out, administering or construing the
Plan shall be final and binding for all purposes and upon all interested persons
and their respective heirs, successors and personal representatives.
5. Registration. The issuance by the Company of the Shares shall be
registered by the Company under the Securities Act of 1933 on an effective
registration statement as promptly as reasonably practicable following the
adoption of the Plan, which registration statement shall be maintained in effect
for not less than 5 years after the Effective Date.
6. Restrictions. (a) The Restricted Shares shall be
subject to such restrictions, if any, as the CEO shall determine in his
sole discretion, including but not limited to, vesting schedules and
provisions relating to forfeiture.
(b) The employee receiving Restricted Shares shall (i) agree that
such employee's Restricted Shares shall be subject to, and shall be held by him
or her in accordance with all of the applicable terms and provisions of, the
Plan, and (ii) agree that the Company may place on the certificates representing
the Restricted Shares or new or additional or different shares or securities
distributed with respect to the Restricted Shares such legend or legends as the
Company may deem appropriate and that the Company may place a stop transfer
<PAGE>
-4-
order with respect to such Restricted Shares with the Transfer Agent(s) for the
Common Stock.
(c) Any Restricted Shares that are forfeited by the Participant
shall become immediately available for reallocation and redistribution under the
Plan.
(d) Restricted Shares issued under the Plan must be held for not
less than six months from the date of issue unless the allocation and
distribution of such shares has been approved by the Board or a Committee of the
Board consisting solely of two (2) or more non-employee members of the Board.
7. Expenses of Administration. All costs and expenses
incurred in the operation and administration of the Plan shall be borne by
the Company.
8. No Employment Right. Neither the existence of the Plan
nor the allocation of any Restricted Shares hereunder shall require the
Company to continue any Participant in the employ of the Company or any
Subsidiary.
9. Amendment of Plan. The Company shall, at any time and from time
to time, at the request of the CEO, make such modifications of the Plan as it
shall deem advisable. No amendment of the Plan may, without the consent of the
Participants to whom any Restricted Shares shall theretofore have been
allocated, adversely affect the rights or obligations of such Participants with
respect to such Restricted Shares. The CEO may, in his discretion, cause the
restrictions imposed in accordance with the provisions of Section 6 hereof with
respect to any Restricted Shares to terminate, in whole or in part, prior to the
time when they would otherwise terminate.
10. Expiration and Termination of the Plan. The Plan shall terminate
the day after the fourth anniversary of the Effective Date; provided, however,
that such termination shall not, without the consent of the Participants to whom
any Restricted Shares shall theretofore have been allocated, adversely affect
the rights or obligations of such Participants with respect to such Restricted
Shares.
11. Governing Law. The Plan shall be governed by the laws of
the State of New York applicable to agreements made and to be performed
wholly therein.
