SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G)
OF THE SECURITIES EXCHANGE ACT OF 1934
ALLIANCE ENTERTAINMENT CORP.
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(Exact name of registrant as specified in its charter)
Delaware 13-3645913
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(State of Incorporation or Organization) (I.R.S. Employer Identification No.)
110 East 59th Street, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
If this Form relates to the If this Form relates to the
registration of a class of registration of a class of
debt securities and is effective debt securities and is to
upon filing pursuant to General become effective simultaneously
Instruction A(c) (1) please with the effectiveness of a
check the following box. [ ] concurrent registration
statement under the Securities
Act of 1933 pursuant to General
Instructions A(c) (2) please
check the following box. [ ]
Securities to be registered pursuant to Section 12(b) of the Act:
Name of Exchange on which Each
Title of each class to be so registered Class is to be Registered
- --------------------------------------------- --------------------------------
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
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(Title of class)
<PAGE>
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
This registration statement relates to the common stock, par value $.0001
per share ("Common Stock") of the Registrant, which is to be registered pursuant
to Section 12(g) of the Securities Exchange Act of 1934, as amended ("Exchange
Act").
Common Stock
The Registrant is authorized to issue 100,000,000 shares of Common Stock,
of which 44,995,205 shares were outstanding as of July 30, 1997. Holders of
Common Stock do not have cumulative voting rights in the election of directors
and are entitled to one vote for each share held of record on all matters to be
voted on by the stockholders. Holders of Common Stock do not have any preemptive
rights for the purchase of additional shares of any class of stock of the
Registrant, and are not subject to liability for further calls or assessments.
All of the outstanding shares of Common Stock are fully paid and non-assessable.
The holders of Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds legally available therefor,
after distribution of all preferential amounts due to the holders of the
Registrant's preferred stock. The payment of dividends is restricted by the
Registrant's indenture relating to its 11.25% Senior Subordinated Notes, its
Credit Agreement and by the Certificates of Designation of the Registrant's
outstanding convertible preferred stock.
In the event of liquidation, dissolution or winding up holders of the
Common Stock will be entitled to receive, pro rata, all assets remaining
available for distribution after the payment of all obligations of the
Registrant, including any debt obligations of the Registrant and the
distribution of all preferential amounts due to the holders of preferred stock.
Preferred Stock
The Registrant's Certificate of Incorporation authorizes the issuance of
ten million shares of "blank check" preferred stock, par value $.01 per share
("Preferred Stock"), with such designation, rights and preferences as may be
determined from time to by the Registrant's Board. Under the Registrant's
Certificate of Incorporation, the Board of Directors has the sole authority to
divide the Preferred Stock into and cause the Preferred Stock to be issued in
series and to fix the rights and preferences of any series so established.
Variations between different series may be created by the Board of Directors
with respect to such matters as voting rights, if any, the rate of dividends,
the priority of payment thereof, and the right to cumulation thereof, if any,
redemption terms and conditions, and the right of conversion, if any. The
Preferred Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Registrant.
As of July 30, 1997, the Registrant has issued 422,500 shares of Series A
Convertible Preferred Stock and 57,500 shares of Series B Convertible Preferred
Stock.
<PAGE>
Holders of Series A Preferred Stock generally have no voting rights.
However, so long as the shares of Common Stock receivable upon conversion of the
Series A Preferred Stock outstanding represent at least five percent (5%) of the
Common Stock outstanding, determined on a fully diluted basis, without the prior
affirmative vote or written consent of the holders of at least a majority of all
shares of the Series A Preferred Stock outstanding at the time, the Company
shall not (i) increase the number of shares of Preferred Stock which the Company
is authorized to issue, or issue additional shares of Preferred Stock except in
connection with the payment of dividends on the Series A Preferred Stock; (ii)
declare or pay any dividend or make any other distribution on any securities
junior to the Series A Preferred Stock other than dividends or distributions
payable solely in securities junior to the Series A Preferred Stock, or
purchase, redeem, or otherwise acquire for any consideration, or set aside as a
sinking fund or other fund for the redemption or repurchase of any securities
junior to the Series A Preferred Stock or any warrants, rights or options to
purchase the same, unless the dividend payment and redemption obligations of the
Company with respect to the Series A Preferred Stock have been fully satisfied;
or (iii) cause or permit a Corporate Change (as defined in the Series A
Certificate of Designation) to occur.
Holders of Series B Preferred Stock generally have no voting rights.
However, as long as any shares of the Series B Preferred Stock remain
outstanding, without the prior affirmative vote or written consent of the
holders of at least a majority of all shares of the Series B Preferred Stock
outstanding at the time, the Company shall not (i) increase the number of shares
of Preferred Stock which the Company is authorized to issue, or issue additional
shares of Preferred Stock except in connection with the payment of dividends on
the Series B Preferred Stock; (ii) declare or pay any dividend or make any other
distribution on any securities junior to the Series B Preferred Stock other than
dividends or distributions payable solely in securities junior to the Series B
Preferred Stock, or purchase, redeem, or otherwise acquire for any
consideration, or set aside as a sinking fund or other fund for the redemption
or repurchase of any securities junior to the Series B Preferred Stock or any
warrants, rights or options to purchase the same, unless the dividend payment
and redemption obligations of the Company with respect to the Series B Preferred
Stock have been fully satisfied.
The holders of Series A and B Preferred Stock also have certain rights to
require the Company to register under the Securities Act of 1933 shares of
Common Stock issued upon conversion of Series A and B Preferred Stock.
Certain Antitakeover Provisions of the Registrant's Certificate of
Incorporation and Bylaws
The Certificate of Incorporation and Bylaws of the Registrant contain
provisions that may have the effect of discouraging a change in control that is
not supported by the Registrant's Board of Directors or of making such a
transaction more difficult to accomplish, even if such a transaction is desired
by a simple majority of the Registrant's stockholders. This section sets forth a
brief discussion of the reasons for, and the operation and effects of, these
provisions.
Amendment of Certificate of Incorporation.
Certain provisions of the Registrant's Certificate of Incorporation,
including removal of directors and filling of director vacancies, may not be
repealed or amended unless approved by the affirmative vote of holders of 80% of
the outstanding voting stock thereof, unless such amendment, repeal or adoption
was approved by an affirmative vote of 75% of the entire Board of Directors in
which case an affirmative vote of the holders of a majority of the outstanding
voting stock entitled to vote thereon is required.
<PAGE>
Classified Board.
The Board of Directors of the Registrant is divided into three classes,
with each class being as nearly equal in number as possible. Each director holds
office for a term of three year following his or her election.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of the outstanding shares, to
force an immediate change in the composition of a majority of the Board. Because
the terms of approximately one-third of the incumbent directors expire each
year, at least two annual elections are necessary for the stockholders to
replace a majority of the Board, whereas a majority of a non-classified board
may be replaced in one year.
The Registrant's management believes that the staggered election of
directors helps to promote the continuity of management because approximately
one-third of the Board is subject to election each year. Staggered terms help to
assure that in the ordinary course of business approximately two-thirds of the
directors, or more, at any one time have a least one year's experience as
directors, and moderate the pace of changes in the Board by extending the
minimum time required to elect a majority of directors from one to two years.
Removal of Directors.
The Registrant's Certificate of Incorporation requires the vote of 80% of
the outstanding voting stock to remove directors for cause subject to the rights
of the Holders of any of Preferred Stock to elect additional Directors under
specific circumstances.
ITEM 2. EXHIBITS.
Exhibit Number
Exhibit Description
1. Articles of Incorporation, as amended of the Registrant (Incorporated by
reference from Exhibit 3.1 filed in the Registrant's Amendment No. 1 to
Registration Statement on Form S-4 filed on September 22, 1995 - File No.
33-95386.)
2. Revised and Restated By-Laws of the Registrant (Incorporated by reference
from Exhibit 3.2 filed in the Registrant's Form 10-Q for the period ended
September 30, 1996 - File No. 1-13054.)
3. Certificate of Designations (Incorporated by reference from Exhibit 4.11(A)
filed in the Registrant's Form 8-K dated July 16, 1996 - File No. 1-13054.)
4. Certificate of Designations (Incorporated by reference from Exhibit 3.4
filed in the Registrant's Form 10-Q for the period ended March 31, 1997
- File No. 1-13054.)
<PAGE>
5. Restated Stockholders' Agreement dated as of November 30, 1993.
(Incorporated by reference from Exhibit 4.1 filed in the
Registrant's Registration Statement on Form S-3 filed September 22, 1995 -
Registration No.33-97280.)
6. Indenture dated July 25, 1995, among the Company, the
Subsidiary Guarantors and Bankers Trust Company, as trustee.
(Incorporated by reference from Exhibit 4.1filed in the Registrant's
Registration Statement on Form S-4 filed August 3, 1995 - Registration No.
33-95386.)
7. Preferred Stock Purchase Agreement dated July 16, 1996, between the Company,
BT Capital Partners, Inc. and BCI Growth IV, L.P. (Incorporated by reference
from Exhibit 4.11 filed in the Registrant's Form 8-K dated July 16, 1996 -
File No. 1-13054.)
8. Third Amended and Restated Credit Agreement and Guaranty dated as of July
25, 1995, among the Company, the Guarantors, the Banks and The Chase
Manhattan Bank, N.A., as agent. (Incorporated by reference from Exhibit
10.50 filed in the Registrant's Registration Statement on Form S-4 filed
August 3, 1995, (Registration No. 33-95386.))
9. Voting Agreement dated as of August 15,1996, 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. (Incorporated
by reference from Exhibit I (E) filed in the Registrant's Form 8-K dated
August 15, 1996 - File No. 1-13054.)
10. Purchase Agreement among Wasserstein & Co. Inc., Cypress Ventures, Inc.,
and BT Capital Partners, Inc. dated December 20, 1996. (Incorporated by
reference from Exhibit 10.47 filed in the Registrant's Form 8-K dated
December 20, 1996. (File No. 1-13054.))
11. Purchase Agreement between the Company and Cypress Ventures, Inc. dated as
of August 19, 1997.
12. Specimen Certificate for Common Stock.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
ALLIANCE ENTERTAINMENT CORP.
/s/ Christopher J. Joyce
By:------------------------------------------------
Christopher J. Joyce,
Executive Vice President, General Counsel &
Assistant Secretary
Date: August 28, 1997
PURCHASE AGREEMENT
Among
Alliance Entertainment Corp.,
and
Cypress Ventures, Inc., on behalf of itself and
an affiliate of Wasserstein Perella Group, Inc.
to be designated at a future date.
Dated as of August 19, 1997
<PAGE>
Section Page
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms........................................... 1
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale of the Interests ............................. 6
2.02. Purchase Price.................................................. 6
2.03. Closing......................................................... 6
2.04. Closing Deliveries by the Seller................................ 7
2.05. Closing Deliveries by the Purchaser............................. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.01. Organization, Authority and Qualification of the Company......... 8
3.02. Organization, Authority and Qualification of the Seller.......... 8
3.03. Interests........................................................ 8
3.04. No Conflict...................................................... 9
3.05. Governmental Consents and Approvals.............................. 9
3.06. Financial Information, Books and Records......................... 9
3.07. No Undisclosed Liabilities....................................... 10
3.08. Receivables...................................................... 10
3.09. Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions................................................ 10
3.10. Litigation....................................................... 12
3.11. Compliance with Laws............................................. 12
3.12. Material Contracts............................................... 13
3.13. Intellectual Property............................................ 14
3.14. Assets .......................................................... 14
3.15. Employee Benefit Plans; Labor Matters............................ 15
3.16. Taxes .......................................................... 16
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<PAGE>
Section Page
3.17. Insurance........................................................ 16
3.18. Full Disclosure.................................................. 16
3.19. Brokers.......................................................... 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Organization and Authority of the Purchaser..... ................ 17
4.02. No Conflict...................................................... 17
4.03. Governmental Consents and Approvals.............................. 17
4.04. Brokers.......................................................... 18
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing......................... 18
5.02. Access to Information............................................ 18
5.03. Confidentiality.................................................. 19
5.04. Regulatory and Other Authorizations; Notices and Consents........ 20
5.05. Notice of Developments........................................... 20
5.06. Use of Intellectual Property..................................... 20
5.07. No Solicitation.................................................. 20
5.08. Obtaining the Order.............................................. 21
5.09. Distribution Arrangements........................................ 21
5.10. Tax Matters...................................................... 21
5.11. Section 754 Elections............................................ 22
5.12. Record Purchase.................................................. 22
5.13. Funding.......................................................... 23
5.14. Alternative Transactions......................................... 23
5.15. Support Services................................................. 23
5.16. Intercompany Accounts............................................ 23
5.17. Certain Consents................................................. 23
5.18. Seller Board of Directors........................................ 24
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<PAGE>
ARTICLE VI
CONDITIONS TO CLOSING
6.01. Conditions to Obligations of the Seller.......................... 24
Section Page
6.02. Conditions to Obligations of the Purchaser....................... 25
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.01. Survival of Representations and Warranties....................... 27
ARTICLE VIII
TERMINATION AND WAIVER
8.01. Termination...................................................... 27
8.02. Effect of Termination............................................ 28
8.03. Waiver .......................................................... 28
ARTICLE IX
GENERAL PROVISIONS
9.01. Expenses......................................................... 28
9.02. Notices.......................................................... 29
9.03. Public Announcements............................................. 30
9.04. Headings......................................................... 30
9.05. Severability..................................................... 30
9.06. Entire Agreement................................................. 30
9.07. Assignment....................................................... 30
9.08. No Third Party Beneficiaries..................................... 31
9.09. Amendment........................................................ 31
9.10. Governing Law.................................................... 31
9.11. Counterparts..................................................... 31
9.12. Specific Performance............................................. 31
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<PAGE>
PURCHASE AGREEMENT
AGREEMENT made as of this 19th day of August, 1997 by and among ALLIANCE
ENTERTAINMENT CORP., a Delaware corporation (the "Seller"), and Cypress
Ventures, Inc., a Delaware corporation on behalf of itself and an Affiliate of
Wasserstein Perella Group, Inc. to be designated at a future date (the
"Purchaser").
WHEREAS, Red Ant Box, Inc. has previously contributed all of its assets and
liabilities to Red Ant, L.L.C., a Delaware limited liability company (the
"Company"), and Red Ant Holdings, Inc. has previously contributed substantially
all of its assets and liabilities to the Company;
WHEREAS, Red Ant Box, Inc. and Red Ant Holdings, Inc., both wholly owned
subsidiaries of the Seller, intend, prior to Closing, to distribute all of the
membership interests (the "Interests") in the Company to the Seller in
connection with the merger of Red Ant Box, Inc. and Red Ant Holdings, Inc. into
Seller pursuant to Section 253 of the DGCL and Sections 332 and 337 of the Code;
WHEREAS, the Interests are represented by 100 authorized and outstanding
units (the "Units"), all of which will be owned by the Seller immediately prior
to the Closing;
WHEREAS, based on the representations, warranties and covenants herein
contained, the Seller wishes to sell and the Purchaser desires to purchase 90 of
the Units;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Purchaser and the Seller hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"Agreement" or "this Agreement" means this Purchase Agreement between the
Seller and the Purchaser (including the Exhibits hereto and the Disclosure
Schedule) and all amendments hereto made in accordance with the provisions of
Section 9.09.
"Alternative Transaction" has the meaning specified in Section 8.01(c).
"Artist Agreement" means any agreement, including all amendments thereto,
between the Company and artists (or third party furnishing companies) providing
the Company the right to the recording services of one or more artists and/or
the rights to the results and proceeds of such services, and the right to
Masters embodying the performance of such artist(s), whether under a so-called
exclusive recording agreement, production agreement, multi-artist production
agreement, license agreement, label agreement, joint venture agreement or
otherwise.
<PAGE>
"Artwork" means all photographs, negatives, photographic plates, covers,
liner notes, text, advertising, point of purchase and promotional materials
related to, and the art and designs contained in, the package containing the
embodiment of Masters and Music Videos.
"Assets" has the meaning specified in Section 3.14(a).
"Balance Sheet" has the meaning specified in Section 3.06.
"Bankruptcy Court" means the U.S. Bankruptcy Court for the Southern
District of New York.
"Business" means the business of and all other business which prior to the
date hereof has been conducted by the Company.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in The City of
New York.
"Closing" has the meaning specified in Section 2.03.
"Closing Date" has the meaning specified in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company" has the meaning specified in the recitals to this Agreement.
"Company Benefit Plans" has the meaning specified in Section 3.15.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Disclosure Schedule" means the Disclosure Schedule attached hereto, dated
as of the date hereof, and forming a part of this Agreement.
"DLJ" has the meaning specified in Section 3.19.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"Financial Statements" has the meaning specified in Section 3.06(a).
<PAGE>
"Governmental Authority" means any United States federal, state or local or
any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Indebtedness" means, with respect to any Person, (a) all indebtedness of
such Person, whether or not contingent, for borrowed money, (b) all obligations
of such Person evidenced by notes, bonds, debentures or other similar
instruments, (c) all obligations of such Person as lessee under leases that have
been or should be, in accordance with U.S. GAAP, recorded as capital leases,
(d) all obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities, (e) all obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any capital
stock of such Person or any warrants, rights or options to acquire such capital
stock and (f) all Indebtedness of others referred to in clauses (a) through (d)
above guaranteed or supported directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person, and all
Indebtedness referred to in clauses (a) through (d) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"Intellectual Property" means (a) trademarks, service marks, trade dress,
logos, trade names and corporate names, whether or not registered, including all
common law rights, and registrations and applications for registration thereof,
including, but not limited to, all marks registered in the United States Patent
and Trademark Office, the Trademark Offices of the States and Territories of the
United States of America, and the Trademark Offices of other nations throughout
the world, and all rights therein provided by international treaties or
conventions, (b) copyrights (registered or otherwise) and registrations and
applications for registration thereof, and all rights therein provided by
international treaties or conventions, (c) trade secrets and confidential,
technical and business information, (d) whether or not confidential, plans,
proposals, technical data, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information, (e) Masters, (f) Music Videos,
(g) Artwork, (h) copies and tangible embodiments of all the foregoing, in
whatever form or medium, (i) all rights to obtain and rights to register
trademarks and copyrights, and (j) all rights to sue or recover and retain
damages and costs and attorneys' fees for present and past infringement of any
of the foregoing.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law.
<PAGE>
"Liabilities" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable, including, without limitation, those arising under any Law, Action
or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Masters" means all master sound recordings from the inception of
recording, whether or not coupled with a visual image, which are intended for
the reproduction of Records and/or for any other form of exploitation, as well
as outtakes, demos, alternative versions of masters and alternative mixes.
"Material Adverse Effect" means any circumstance, change in, or effect on
the Business or the Company that, individually or in the aggregate with any
other circumstances, changes in, or effects on, the Business or the Company is,
or could reasonably be expected to be, materially adverse to the business,
operations, assets or Liabilities, prospects, results of operations or the
financial condition of the Company.
"Material Contracts" has the meaning specified in Section 3.12(a).
"Music Videos" means all audiovisual materials, including without
limitation so-called "long form" videos, embodying any Masters, including those
audiovisual materials which were produced primarily for the purpose of
advertising, promoting or otherwise exploiting any Masters.
"Order" means the order of the Bankruptcy Court relating to the Seller and
the Company, pursuant to Section 363 of the Bankruptcy Code, upon appropriate
notice to such parties in interest, in the form attached hereto as Exhibit A.
"Person" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity, as well as any syndicate or
group that would be deemed to be a person under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.
"Promissory Note" has the meaning specified in Section 2.05(a).
"Purchase Price" has the meaning specified in Section 2.02.
"Purchaser" has the meaning specified in the recitals to this Agreement.
"Purchaser Expenses" has the meaning specified in Section 8.01(c).
"Receivables" means any and all accounts receivable, notes and other
amounts receivable by the Company from the Seller, its Affiliates and third
parties, including, without limitation, customers, arising from the conduct of
the Business or otherwise before the Closing Date, whether or not in the
ordinary course, together with all unpaid financing charges accrued thereon.
<PAGE>
"Records" means and includes all forms of sound and audio visual recordings
and reproductions thereof of any kind, nature or description, now or hereafter
known, manufactured by any means or method, now or hereafter known, for
reproduction or recreation on any mediums or devices, now or hereafter known,
including but not limited to, phonograph records, audio tapes, video cassettes,
video discs, compact disc recordings and digital transmission, and which are
intended primarily for personal use.
"Regulations" means Treasury Regulations (including Temporary Regulations)
promulgated by the United States Department of Treasury with respect to the code
or other federal tax statutes.
"Restated LLC Agreement" has the meaning specified in Section 2.04(d).
"Returns" has the meaning specified in Section 5.10(a).
"Seller" has the meaning specified in the recitals to this Agreement.
"Subsidiaries" of a Person means any and all corporations, partnerships,
limited liability companies, joint ventures, associations and other entities
controlled by such person directly or indirectly through one or more
intermediaries.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently throughout
the periods involved.
"Units" has the meaning specified in the recitals to this Agreement.
<PAGE>
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Interests . Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Seller shall
sell to the Purchaser, and the Purchaser shall purchase from the Seller, 90 of
the Units.
SECTION 2.02. Purchase Price. The aggregate purchase price for 90 of the
Units shall be $1,050,000 (the "Purchase Price").
SECTION 2.03. Closing. Upon the terms and subject to the conditions of this
Agreement, the sale and purchase of the Interests contemplated by this Agreement
shall take place at a closing (the "Closing") to be held at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York at 10:00 A.M.
New York time on the Business Day following the satisfaction or waiver of all
other conditions to the obligations of the parties set forth in Article VI
(other than obligations to deliver opinions, certificates or documents at the
Closing or conditions to be satisfied as of the Closing), or at such other place
or at such other time or on such other date as the Seller and the Purchaser may
mutually agree upon in writing (the day on which the Closing takes place being
the "Closing Date").
SECTION 2.04. Closing Deliveries by the Seller. At the Closing, the Seller
shall deliver or cause to be delivered to the Purchaser:
(a) instruments evidencing transfer of the 90 Units;
(b) a receipt for the Purchase Price;
(c) the certificates and other documents required to be delivered pursuant
to Section 6.02; and
(d) an executed Second Amended and Restated Limited Liability Company
Agreement of Red Ant, L.L.C. in the form of Exhibit B annexed hereto (the
"Restated LLC Agreement").
SECTION 2.05. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller:
(a) the Purchase Price as follows: (i) $625,000 in cash and (ii) a
promissory note made by the Purchaser in the principal amount of $425,000
payable to the Seller which will accrue interest at 8% per annum and be payable
on the first anniversary of the Closing (the "Promissory Note");
(b) a guaranty made by Wasserstein & Co. Inc., the parent of the Purchaser,
in favor of the Seller, guaranteeing the Purchaser's obligations under the
Promissory Note;
(c) the certificates and other documents required to be delivered pursuant
to Section 6.01;
(d) an acknowledgement of the settlement set forth in Section 5.16 executed
by the Company; and
(e) an executed Restated LLC Agreement.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the Seller
hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification of the Company. The
Company is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not have a Material Adverse Effect.
A true and correct copy of the Limited Liability Company Agreement, as in effect
on the date hereof, has been delivered by the Company to the Purchaser. The
Company has no Subsidiaries.
SECTION 3.02. Organization, Authority and Qualification of the Seller. The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all necessary power and
authority to enter into this Agreement and the Restated LLC Agreement, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its businesses makes such licensing or
qualification necessary, except to the extent that the failure to be so licensed
or qualified would not prevent or delay the consummation of the transactions
contemplated hereby or the performance by the Seller of its obligations
hereunder or materially and adversely affect the ability of the Company to
conduct the Business. The execution and delivery of this Agreement and the
Restated LLC Agreement by the Seller, the performance by the Seller of its
obligations hereunder and thereunder and the consummation by the Seller of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of the Seller. This Agreement and the Restated LLC
Agreement have been duly executed and delivered by the Seller, and (assuming due
authorization, execution and delivery by the Purchaser) this Agreement and the
Restated LLC Agreement constitute a legal, valid and binding obligation of the
Seller.
SECTION 3.03. Interests. As of the Closing all of the Interests will be
owned, beneficially and of record, by the Seller. The Company has 100 issued and
outstanding Units.
None of the Interests were issued in violation of any preemptive rights.
There are no options, warrants, convertible securities or other rights,
agreements, arrangements or commitments of any character relating to the
Interests or obligating the Seller or the Company to issue or sell any
Interests, or any other interest in the Company. There are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any equity interests of or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any other Person.
The Interests constitute all the issued and outstanding equity interests in the
Company and are owned of record and beneficially solely by Red Ant Box and Red
Ant Holdings free and clear of all Encumbrances. Upon consummation of all the
transactions contemplated by Article II, the Purchaser will own 90 Units of the
100 issued and outstanding Units of the Company, free and clear of all
Encumbrances. There are no voting trusts, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of the
currently outstanding Interests.
<PAGE>
SECTION 3.04. No Conflict. The execution, delivery and performance of this
Agreement and the Restated LLC Agreement by the Seller does not and will not
(a) violate, conflict with or result in the breach of any provision of the
limited liability company agreement or certificate of formation (or similar
organizational documents) of the Company, (b) conflict with or violate (or cause
an event which could have a Material Adverse Effect as a result of) any Law or
Governmental Order applicable to the Company or any of its assets, properties or
businesses, including, without limitation, the Business, or (c) except as set
forth in Section 3.04(c) of the Disclosure Schedule, conflict with, result in
any breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the Interests or on any of the assets or properties of the
Company pursuant to, any note, bond, mortgage or indenture, or material
contract, joint venture agreement, agreement, lease, sublease, license,
sublicense, permit, franchise or other instrument or arrangement to which the
Company is a party or by which any of the Interests or any of such assets or
properties is bound or affected.
SECTION 3.05. Governmental Consents and Approvals. The execution, delivery
and performance of this Agreement and the Restated LLC Agreement by the Seller
does not and will not require any consent, approval, authorization or other
order of, action by, filing with or notification to any Governmental Authority
other than the issuance of the Order.
SECTION 3.06. Financial Information, Books and Records. (a) Copies of
(i)the unaudited balance sheet of the Company for the fiscal year ended as of
December 31, 1996, and the related unaudited statements of income, and cash
flows of the Company, together with all related notes and schedules thereto,
accompanied by the reports thereon of the Seller's Accountants and (ii) the
unaudited balance sheet of the Company as of June 30, 1997 (the "Balance
Sheet"), and the related statements of income, and cash flows of the Company for
the five months ended June 30, 1997, together with all related notes and
schedules thereto (collectively referred to herein as the "Financial
Statements") have been delivered by the Seller to the Purchaser. The Financial
Statements (i) were prepared in accordance with the books of account and other
financial records of the Company, (ii) present fairly the financial condition
and results of operations of the Company as of the dates thereof or for the
periods covered thereby subject to normal recurring adjustments that are not in
the aggregate expected to have a Material Adverse Effect on the Company and
(iii) have been prepared in accordance with U.S. GAAP applied on a basis
consistent with the past practices of the Seller and the Company.
(b) The books of account and other financial records of the Company: (i)
reflect all items of income and expense and all assets and Liabilities required
to be reflected therein in accordance with U.S. GAAP applied on a basis
consistent with the past practices of the Company; (ii) are in all material
respects complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies; and (iii) have been maintained in accordance with
good business and accounting practices.
SECTION 3.07. No Undisclosed Liabilities. There are no Liabilities of the
Company, other than Liabilities (i) reflected or reserved against on the Balance
Sheet, (ii) disclosed in Section 3.07 of the Disclosure Schedule or
(iii) incurred since the date of this Agreement in the ordinary course of the
business, consistent with the past practice, of the Company and which do not and
could not have a Material Adverse Effect. Reserves are reflected on the Balance
Sheet against all Liabilities of the Company in amounts that have been
established on a basis consistent with the past practices of the Company and in
accordance with U.S. GAAP.
<PAGE>
SECTION 3.08. Receivables. Except to the extent, if any, reserved for on
the Balance Sheet or set forth in Section 3.08 of the Disclosure Schedule, all
Receivables reflected on the Balance Sheet arose from, and the Receivables
existing on the Closing Date have arisen from, the sale of inventory or services
in the ordinary course of the Business consistent with past practice and, except
as reserved against or as noted on the Balance Sheet, constitute only valid,
undisputed claims of the Company not subject to valid claims of set-off or other
defenses or counterclaims other than normal cash discounts accrued in the
ordinary course of the Business consistent with past practice. All Receivables
reflected on the Balance Sheet or arising from the date thereof (subject to the
reserve for bad debts, if any, reflected on the Balance Sheet) arose from bona
fide transactions in the ordinary course of the business of the Company and
represent credit extended in a manner consistent with past trade and credit
practices of the Company.
SECTION 3.09. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions. Since the date of the Balance Sheet, except as disclosed
in Section 3.09 of the Disclosure Schedule, the business of the Company has been
conducted in the ordinary course and consistent with past practice. As
amplification and not limitation of the foregoing, except as disclosed in
Section 3.09 of the Disclosure Schedule, since the date of the Balance Sheet,
the Company has not:
(i) permitted or allowed any of the assets or properties (whether tangible
or intangible) of the Company to be subjected to any Encumbrance, other than
Encumbrances that will be released at or prior to the Closing;
(ii) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance or
paid or otherwise discharged any Liability, other than current liabilities
reflected on the Balance Sheet and current liabilities incurred in the ordinary
course of business consistent with past practice since the date of the Balance
Sheet;
(iii) incurred any Indebtedness or made any loan to, guaranteed any
Indebtedness of, or otherwise incurred any Indebtedness on behalf of any Person;
(iv) redeemed any of the Interests (or any other equity security) or
declared or made distributions or dividends (whether in cash, securities or
other property) to the holders of the Interests (or any other equity security)
of the Company or otherwise;
(v) merged with, entered into a consolidation with or acquired an interest
in any Person or acquired any portion of the assets or business of any Person or
any division or line of business thereof, or otherwise acquired any material
assets other than in the ordinary course of business consistent with past
practice;
(vi) made any capital expenditure or advance or commitment for any capital
expenditure or advance in excess of $50,000 individually or $500,000 in the
aggregate;
(vii) sold, transferred, leased, subleased, licensed or otherwise disposed
of any properties or assets, real, personal or mixed (including, without
limitation, leasehold interests and intangible assets), other than the sale of
inventories in the ordinary course of business consistent with past practice;
<PAGE>
(viii) issued or sold any interests, capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of, or
any other interest in, the Company;
(ix) entered into any agreement, arrangement or transaction with any of its
directors, officers, employees or shareholders (or with any relative,
beneficiary, spouse or Affiliate of any such Person);
(x) granted any increase, or announced any increase, in the wages,
salaries, compensation, bonuses, incentives, pension or other benefits payable
by the Company to any of its employees;
(xi) amended, terminated, cancelled or compromised any material claims of
the Company or waived any other rights of substantial value to the Company;
(xii) made any change in any method of accounting or accounting practice or
policy used by the Company, other than such changes required by U.S. GAAP;
(xiii) amended, modified or consented to the termination of any Material
Contract or the Company's rights thereunder;
(xiv) amended or restated the Certificate of Formation or the Limited
Liability Company Agreement (or other organizational documents) of the Company;
(xv) made any express or deemed election or settled or compromised any
liability, with respect to (A) Taxes of the Company or (B) Taxes, insofar as
Company Items are involved, of the partners of the Company; or
(xvi) agreed, whether in writing or otherwise, to take any of the actions
specified in clauses (i) through (xv) above or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights or
commitments with respect to any of the actions specified in clauses (i) through
(xv) above, except as expressly contemplated by this Agreement.
SECTION 3.10. Litigation. Except as set forth in Section 3.10 of the
Disclosure Schedule (which, with respect to each Action disclosed therein, sets
forth: the parties, nature of the proceeding, date and method commenced, amount
of damages or other relief sought and, if applicable, paid or granted), there
are no Actions, or to the best knowledge of the Company and the Seller
threatened Actions, by or against the Company or affecting any of the Assets,
pending before any Governmental Authority (or threatened to be brought by or
before any Governmental Authority). Except as set forth in Section 3.10 of the
Disclosure Schedule, neither the Company nor any of the Assets is subject to any
Governmental Order (nor are there any such Governmental Orders threatened to be
imposed by any Governmental Authority).
SECTION 3.11. Compliance with Laws. (a) Except as set forth in
Section 3.11(a) of the Disclosure Schedule, the Company has conducted and
continues to conduct the Business in accordance with all Laws and Governmental
Orders applicable to the Company or any of the Assets or the Business, and the
Company is not in violation of any such Law or Governmental Order.
(b) Other than the Order, there is not any Governmental Order applicable to
the Company or any of the Assets or the Business.
SECTION 3.12. Material Contracts. (a) Section 3.12(a) of the Disclosure
Schedule lists each of the following contracts and agreements (including,
without limitation, oral contracts and agreements) of the Company (such
contracts and agreements being "Material Contracts"):
(i) all Artist Agreements;
(ii) all joint venture agreements (other than Artist Agreements);
<PAGE>
(iii) all executory contracts and agreements relating to Indebtedness of
the Company, including, without limitation, any guarantee of any Indebtedness;
(iv) all contracts and agreements that limit or purport to limit the
ability of the Company to compete in any line of business or with any Person or
in any geographic area or during any period of time;
(v) all leases whether relating to real or personal property;
(vi) all agreements containing provisions giving any party thereto (other
than the Company) the right to terminate or modify such agreement pursuant to a
"key man" clause;
(vii) all contracts and agreements between or among the Company and the
Seller or any Affiliate of the Company which have terms in excess of one year or
involve payments in excess of $50,000;
(viii) all contracts and agreements granting any Person any preferential
right to purchase, other than in the ordinary course of business consistent with
past practice, any of the properties or assets of the Company;
(ix) all in-house or staff producer arrangements (as such terms are
customarily used in the record industry); and
(x) all distribution agreements, manufacturing agreements and license or
sublicense agreements to which the Company is a party.
(b) Except as disclosed in Section 3.12(b) or 3.13 of the Disclosure
Schedule, each Material Contract: (i) is valid and binding, in accordance with
its terms, on the Company, (ii) to the best knowledge of the Company and the
Seller, has not been breached by any other party thereto in any material manner
and (iii) the consummation of the transactions contemplated by this Agreement
shall not cause such Material Contract not to continue in full force and effect
without penalty. Neither the Company, nor to the best knowledge of the Company
and the Seller, any other party to any Material Contract, is in material breach
of, or default under, any Material Contract.
SECTION 3.13. Intellectual Property. (a) Section 3.13(a) of the Disclosure
Schedule sets forth a true and complete list and a brief description of each
Trademark owned by or licensed to the Company. Except as otherwise described in
Section 3.13(b) of the Disclosure Schedule, in each case where a U.S. Federal
Trademark registration or application for registration listed in Section 3.13(a)
of the Disclosure Schedule is held by assignment, the assignment has been duly
recorded with the national trademark office from which the original registration
issued or before which the application for registration is pending.
(b) Except as disclosed in Section 3.13(b) of the Disclosure Schedule:
(i) all the Intellectual Property used by the Company is owned by the Company
free and clear of any Encumbrance or intellectual property rights of third
parties to acquire or reacquire any interest therein and (ii) no Actions have
been made or asserted or are pending (nor, to the best knowledge of the Company
or the Seller, has any such Action been threatened) against the Company either
(A) based upon or challenging or seeking to deny or restrict the use by the
Company of any of such Intellectual Property or (B) alleging that any products
manufactured or sold by the Company are being manufactured or sold in violation
of any copyrights or trademarks, or any other intellectual property rights of
any Person. To the best knowledge of the Company and the Seller, and except as
set forth in Section 3.13(b) of the Disclosure Schedule, no Person is using any
trademarks, service marks, trade names or trade secrets that are confusingly
similar to, or copyrights that infringe upon, such Owned Intellectual Property.
The consummation of the transactions contemplated by this Agreement will not
result in the termination or impairment of any of the Intellectual Property
related to Trademarks or to the Artist Agreements listed in Section 3.12(a)(i)
of the Disclosure Schedule.
<PAGE>
SECTION 3.14. Assets. (a) Except as disclosed in Sections 3.13 and 3.14(a)
of the Disclosure Schedule, the Company owns, leases or has the legal right to
use all the properties and assets used or intended to be used in the conduct of
the Business or otherwise owned, leased or used by the Company and, with respect
to contract rights, is a party to and enjoys the right to the benefits of all
contracts, agreements and other arrangements used or intended to be used by the
Company or relating to the conduct of the Business (all such properties, assets
and contract rights being the "Assets"). The Company has good and marketable
title to, or, in the case of leased or subleased Assets, valid and subsisting
leasehold interests in, all the Assets, free and clear of all Encumbrances,
except (i) as disclosed in Section 3.14(a) of the Disclosure Schedule and
(ii)as disclosed in the Financial Statements.
(b) Except as set forth in Section 3.14(b) of the Disclosure Schedule,
following the consummation of the transactions contemplated by this Agreement,
the Company will continue to own, pursuant to good and marketable title, or
lease, under valid and subsisting leases, or otherwise retain its respective
interest in the Assets without incurring any Material Adverse Effect or any
increase in rentals, royalties or licenses or other fees imposed as a result of,
or arising from, the consummation of the transactions contemplated by this
Agreement. Immediately following the Closing, the Company shall own and possess
all documents, books, records, agreements and financial data of any sort used by
the Company in the conduct of the Business or otherwise.
SECTION 3.15. Employee Benefit Plans; Labor Matters. (a) Section 3.15(a)
of the Disclosure Schedule sets forth a true and complete list of each material
employee benefit plan, program, arrangement and contract maintained, sponsored
or contributed to by the Company for the benefit of any current or former
employee, officer or director of the Company (the "Company Benefit Plans"). The
Company has delivered to the Purchaser a true, complete and correct copy of each
Company Benefit Plan and each material document prepared in connection with each
Company Benefit Plan.
(b) With respect to the Company Benefit Plans, no event has occurred and
there exists no condition or set of circumstances in connection with which the
Company could be subject to any liability under the terms of such Company
Benefit Plans or any applicable Law.
(c) The Company is not a party to any collective bargaining nor other labor
union contract applicable to persons employed by the Company and no collective
bargaining agreement or other labor union contract is being negotiated by the
Company. There is no labor dispute, strike or work stoppage against the Company
pending or, to the knowledge of the Company, threatened that may interfere with
the respective business activities of the Company. Neither the Company nor any
of its respective representatives or employees has committed any unfair labor
practices in connection with the operation of the respective businesses of the
Company, and there is no charge or complaint against the Company by the National
Labor Relations Board or any comparable state or foreign agency pending or
threatened.
(d) Except as otherwise required by Law, no Company Benefit Plan provides
retiree medical or retiree life insurance benefits to any person. In addition,
the Company does not presently sponsor, maintain or contribute to, nor has the
Company ever sponsored, maintained or contributed to, any retirement plan,
pension plan, deferred compensation plan or severance plan.
SECTION 3.16. Taxes. (a) The Company has duly filed, on or before the due
date therefor or the expiration of any extended period for filing, all federal,
state, local and foreign Returns required to be filed for the tax periods ending
on or prior to the Closing Date by the Company, which returns or reports are in
all material respects true, correct and complete and disclose as having become
due and payable all Taxes due and payable for the periods covered therein and
has properly in all material respects reported each item required to be reported
on such Return. The Company has paid all Taxes reflected in such Returns and all
other Taxes currently due to any Governmental Entity for the tax periods ending
on or prior to the Closing Date, whether payable pursuant to a return or as a
result of an audit. There are no Tax liens on any assets of the Company.
<PAGE>
(b) The Company has been classified (and has been classified since the date
of the Seller's acquisition of the Company) as a partnership for federal income
tax purposes and for state and local tax purposes in all state and local
jurisdictions in which such treatment is relevant, and none of the Company, any
of the partners of the Company or any taxing authority has taken a position
inconsistent with such treatment. The Company does not have in effect an
election pursuant to Section 754 of the Code.
SECTION 3.17. Insurance. Section 3.17 of the Disclosure Schedule sets forth
a complete list of all policies of insurance (including, without limitation,
errors and omissions insurance) that the Company has or has had in effect during
the last three years. At the time of the Closing, all insurance policies
currently in effect will be outstanding and duly in force.
SECTION 3.18. Full Disclosure. (a) The Seller is not aware of any facts
pertaining to the Company or the Business which affect adversely the Company or
the Business or which are likely in the future to affect adversely the Company
or the Business and which have not been disclosed in this Agreement, the
Disclosure Schedule or the Financial Statements.
(b) No representation or warranty of the Seller in this Agreement, nor any
statement or certificate furnished or to be furnished to the Purchaser pursuant
to this Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
SECTION 3.19. Brokers. Other than Donaldson, Lufkin & Jenrette ("DLJ"), no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the Purchaser
hereby represents and warrants to the Seller as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary power and authority to enter
into this Agreement and the Restated LLC Agreement, to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Restated LLC
Agreement by the Purchaser, the performance by the Purchaser of its obligations
hereunder and thereunder and the consummation by the Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of the Purchaser. This Agreement and the Restated
LLC Agreement have been duly executed and delivered by the Purchaser, and
(assuming due authorization, execution and delivery by the Seller) this
Agreement and the Restated LLC Agreement constitute a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
their terms.
<PAGE>
SECTION 4.02. No Conflict. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03, except as may result from any facts or
circumstances relating solely to the Seller, the execution, delivery and
performance of this Agreement and the Restated LLC Agreement by the Purchaser
does not and will not (a) violate, conflict with or result in the breach of any
provision of the charter, by-laws, limited liability company agreement,
certificate of formation, partnership agreement or similar organizational
documents of Holding or Investor, (b) conflict with or violate any Law or
Governmental Order applicable to the Purchaser or (c) except as would not
materially delay or prevent the performance by the Purchaser of any of its
obligations pursuant to this Agreement, conflict with, or result in any breach
of, constitute a default (or event which with the giving of notice or lapse or
time, or both, would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration, suspension,
revocation, or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of the Purchaser pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which either of the Purchaser is
a party or by which any of such assets or properties are bound or affected.
SECTION 4.03. Governmental Consents and Approvals. The execution, delivery
and performance of this Agreement and the Restated LLC Agreement by the
Purchaser does not and will not require any consent, approval, authorization or
other order of, action by, filing with, or notification to, any Governmental
Authority.
SECTION 4.04. Brokers. Except for the monitoring fee in the amount of
$100,000 per year payable by the Company to Wasserstein & Co., Inc., no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. The Seller
covenants and agrees that, except as described in Section 5.01 of the Disclosure
Schedule, between the date hereof and the time of the Closing, the Company shall
conduct its business in the ordinary course and consistent with the Company's
prior practice.
(b) Except as described in Section 5.01(b) of the Disclosure Schedule, the
Seller covenants and agrees that, prior to the Closing, without the prior
written consent of the Purchaser, the Company will not do any of the things
enumerated in the second sentence of Section 3.09 (including, without
limitation, clauses (i) through (xvi) thereof).
SECTION 5.02. Access to Information. (a) From the date hereof until the
Closing, upon reasonable notice, the Seller shall cause the Company's officers,
directors, employees, agents, representatives, accountants and counsel to:
(i) afford the officers, employees and authorized agents, accountants, counsel,
financing sources and representatives of the Purchaser reasonable access, during
normal business hours, to the offices, properties, plants, other facilities,
books and records of the Company and to those officers, directors, employees,
agents, accountants and counsel of the Company who have any knowledge relating
to the Company or the Business; and (ii) furnish to the officers, employees and
authorized agents, accountants, counsel, financing sources and representatives
of the Purchaser such additional financial and operating data and other
information regarding the assets, properties and goodwill of the Company and the
Business as the Purchaser may from time to time reasonably request.
<PAGE>
(b) In order to facilitate the resolution of any claims made against or
incurred by the Seller prior to the Closing, for a period of seven years after
the Closing, the Purchaser shall (i) retain the books and records of the Company
relating to periods prior to the Closing in a manner reasonably consistent with
the prior practice of the Company and (ii) upon reasonable notice, afford the
officers, employees and authorized agents and representatives of the Seller
reasonable access (including the right to make, at the Seller's expense,
photocopies), during normal business hours, to such books and records.
(c) In order to facilitate the resolution of any claims made by or against
or incurred by the Purchaser or the Company after the Closing or for any other
reasonable purpose, for a period of seven years following the Closing, the
Seller shall (i) retain the books and records of the Seller which relate to the
Company and its operations for periods prior to the Closing and which shall not
otherwise have been delivered to the Purchaser or the Company and (ii) upon
reasonable notice, afford the officers, employees and authorized agents and
representatives of the Purchaser or the Company reasonable access (including the
right to make photocopies, at the expense of the Purchaser or the Company),
during normal business hours, to such books and records.
SECTION 5.03. Confidentiality. The Seller agrees to, and shall cause its
agents, representatives, Affiliates, employees, officers and directors to:
(i) treat and hold as confidential (and not disclose or provide access to any
Person to) all information relating to the Artists Agreements, the Intellectual
Property, trademark applications, product development, price, customer and
supplier lists, pricing and marketing plans, policies and strategies, details of
client and consultant contracts, operations methods, product development
techniques, business acquisition plans, new personnel acquisition plans and all
other confidential information with respect to the Business and the Company,
(ii) in the event that the Seller or any such agent, representative, Affiliate,
employee, officer or director becomes legally compelled to disclose any such
information, provide the Purchaser with prompt written notice of such
requirement so that the Purchaser or the Company may seek a protective order or
other remedy or waive compliance with this Section 5.03, (iii) in the event that
such protective order or other remedy is not obtained, or the Purchaser waive
compliance with this Section 5.03, furnish only that portion of such
confidential information which is legally required to be provided and exercise
its best efforts to obtain assurances that confidential treatment will be
accorded such information, (iv) promptly furnish (prior to, at, or as soon as
practicable following, the Closing) to the Company or the Purchaser any and all
copies (in whatever form or medium) of all such confidential information then in
the possession of the Seller or any of its agents, representatives, Affiliates,
employees, officers and directors and, except as otherwise required by Section
5.02(c), destroy any and all additional copies then in the possession of the
Seller or any of its agents, representatives, Affiliates, employees, officers
and directors of such information and of any analyses, compilations, studies or
other documents prepared, in whole or in part, on the basis thereof; provided,
however, that this sentence shall not apply to any information that, at the time
of disclosure, is available publicly and was not disclosed in breach of this
Agreement by the Seller, its agents, representatives, Affiliates, employees,
officers or directors; provided further that, with respect to Intellectual
Property, specific information shall not be deemed to be within the foregoing
exception merely because it is embraced in general disclosures in the public
domain. In addition, with respect to Intellectual Property, any combination of
features shall not be deemed to be within the foregoing exception merely because
the individual features are in the public domain unless the combination itself
and its principle of operation are in the public domain. The Seller agrees and
acknowledges that remedies at law for any breach of its obligations under this
Section 5.03 are inadequate and that in addition thereto the Purchaser shall be
entitled to seek equitable relief, including injunction and specific
performance, in the event of any such breach.
<PAGE>
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.
(a) Each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all appropriate action, do or cause to be done all things
necessary, proper or advisable under applicable Law, and execute and deliver
such documents and other papers, as may be required to carry out the provisions
of this Agreement and consummate and make effective the transactions
contemplated by this Agreement.
(b) The Seller and the Purchaser agree that, in the event any consent,
approval or authorization necessary or desirable to preserve for the Business or
the Company any right or benefit under any lease, license, contract, commitment
or other agreement or arrangement to which the Seller or the Company is a party
is not obtained prior to the Closing, the Seller will, subsequent to the
Closing, cooperate with the Purchaser and the Company in attempting to obtain
such consent, approval or authorization as promptly thereafter as practicable.
SECTION 5.05. Notice of Developments. Prior to the Closing, the Seller
shall promptly notify the Purchaser in writing of (i) all events, circumstances,
facts and occurrences arising subsequent to the date of this Agreement which
could result in any breach of a representation or warranty or covenant of the
Seller in this Agreement or which could have the effect of making any
representation or warranty of the Seller in this Agreement untrue or incorrect
in any respect and (ii) all other material developments affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
customer or supplier relations, employee relations, projections or prospects of
the Company or the Business.
SECTION 5.06. Use of Intellectual Property. The Seller acknowledges that
from and after the Closing, all Intellectual Property shall be owned by the
Company, that neither the Seller nor any of its Affiliates shall have any rights
in the Intellectual Property and that neither the Seller nor any of its
Affiliates will contest the ownership or validity of any rights of the Purchaser
or the Company in or to the Intellectual Property.
SECTION 5.07. No Solicitation. As a separate and independent covenant, the
Seller agrees with the Purchaser that, for a period of three (3) years following
the Closing, the Seller will not in any way, directly or indirectly, for the
purpose of conducting or engaging in any business that manufactures, produces or
supplies products or services of the kind manufactured, produced or supplied by
the Business or the Company as of the Closing, interfere with or attempt to
interfere with, call upon, solicit or otherwise do, or attempt to do business
with any artists party to any Artist Agreement existing on the Closing Date or
disclosed in Section 3.12(a) of the Disclosure Schedule, or interfere with or
attempt to interfere with any officers, employees, representatives or agents of
the Business or the Company, or induce or attempt to induce any of them to leave
the employ of the Company or violate the terms of their contracts, or any
employment arrangements, with the Company. The Restricted Period shall be
extended by the length of any period during which the Seller is in breach of the
terms of this Section 5.07.
SECTION 5.08. Obtaining the Order. The Seller shall, and shall cause the
Company to, use its best efforts to obtain an Order from the Bankruptcy Court
substantially in the form attached hereto as Exhibit A as soon as practicable.
<PAGE>
SECTION 5.09. Distribution Arrangements. Until December 31, 1997, to the
extent it is able, the Seller will cause its Affiliate, INDI Records, to
distribute Records on behalf of the Company, if so requested by the Purchasers,
upon substantially the same terms (including an all-in distribution fee (i.e.
inclusive of all changes for warehousing returns and refurbishing) of 13% of net
billings) as INDI Records has done so in the past except that all such Records
shall be delivered only on cash-on-delivery payment terms, the Company shall
approve the price category in which each such Record is offered and the
manufactured quantities in each instance, and on other terms no less favorable
than the terms on which INDI Records distributes records for other labels;
provided, however, that nothing in this Section 5.09 shall prevent the Seller
from selling or implementing a restructuring plan that affects INDI Records
(other than Consigned Inventory as defined below) or any assets or stock owned
by the Seller. All inventory delivered by the Company to INDI after the date
hereof shall be treated as being delivered on consignment ("Consigned
Inventory") and the Seller shall cause its Affiliates to execute such further
instruments and agreements as the Purchaser reasonably requests in order to
effect such treatment. The arrangements set forth in this paragraph may be
terminated by Purchaser, in its sole discretion, at any time.
SECTION 5.10. Tax Matters. (a) From the date of this Agreement through and
after the Closing Date, the Seller shall prepare and file or otherwise furnish
in proper form to the appropriate Governmental Authority having jurisdiction
over Taxes (or cause to be prepared and filed or so furnished) in a timely
manner all Tax returns, reports and forms ("Returns") relating to the Company
that are due on or before or relate to any taxable period ending on or before
the Closing Date (and the Purchaser shall do the same with respect to any
taxable period ending after the Closing Date). For Federal income tax purposes,
Seller and Purchaser shall treat the purchase of the Units in the Company
pursuant to this Agreement as a purchase of a proportionate share of the assets
of the Company followed by a contribution of such assets to a newly-formed
entity. Returns of the Company not yet filed for any taxable period that ends on
or before the Closing Date shall be prepared in a manner consistent with past
practices employed with respect to the Company (except to the extent counsel for
the Seller or the Company renders a legal opinion that there is no reasonable
basis in law therefor or determines that a Return cannot be so prepared and
filed without being subject to penalties). The Seller shall pay or cause to be
paid when due and payable all Taxes with respect to the tax returns of the
Company for any taxable period ending on or before the Closing Date (including
any Taxes payable as a result of an audit or other examination of the tax
returns by a taxing authority or a judicial decision) and the Purchaser shall so
pay or cause to be paid Taxes for any taxable period after the Closing Date;
(b) for purposes of Section 5.10, Taxes relating to the period before the
Closing Date shall include: (i) Taxes imposed on the Company with respect to
taxable periods of such person ending on or before the Closing Date, and (ii)
with respect to taxable periods beginning before the Closing Date and ending
after the Closing Date, Taxes imposed on the Company or which are allocable,
pursuant to Section 5.10(c), to the portion of such period ending on the Closing
Date;
(c) in the case of Taxes that are payable with respect to a taxable period
that begins before the Closing Date and ends after the Closing Date, the portion
of any such Tax that is allocable to the portion of the period ending on the
Closing Date shall be:
<PAGE>
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts, or (y) imposed in connection with any sale or other transfer
or assignment of property (real or personal, tangible or intangible), deemed
equal to the amount which would be payable if the taxable year ended one day
before the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with respect to the
assets of the Company, or otherwise measured by the level of any item, deemed to
be the amount of such Taxes for entire period (or, in the case of such Taxes
determined on an arrears basis, the amount of such Taxes for the immediately
preceding period) multiplied by a fraction the numerator of which is the number
of calendar days in the period ending on the Closing Date and the denominator of
which is the number of calendar days in the entire period.
SECTION 5.11. Section 754 Elections. If not detrimental to the Seller, the
Seller shall cause the Company to make the election described in Section 754 of
the Code for such Company's taxable year which ends on or includes the Closing
Date, at, and only at, the Purchaser's request.
SECTION 5.12. Record Purchase. Purchaser shall have the right to cause the
Company at any time to purchase all or any portion of the Records manufactured
from Masters owned, produced or recorded by the Company that are in the
possession of, or at facilities owned by, the Seller at a price equal to the
out-of-pocket costs incurred by the Company and the Seller in manufacturing and
shipping the Records as determined in good faith by the Seller and the Company;
provided, however, that nothing in this paragraph shall release, or prejudice,
any claim the Company has against the Seller or its Affiliates in respect of
Records not so repurchased.
SECTION 5.13. Funding. Purchaser shall contribute to the capital of the
Company (i) $3,000,000 on the date of the Closing; (ii) an additional $7,950,000
in accordance with Company budgets; and (iii) an additional $8,000,000 in the
event the Company secures the assignment of the recording contract among Cheryl
James and Sandra Denton (a/k/a "Salt -n- Pepa") from MCA Records Inc. and Jireh
Records, Inc.; all subject to, and in accordance with, the terms of the limited
liability company agreement of the Company, including the condition that the
Company not have suffered any Material Adverse Effect after the Closing but
prior to the making of any such capital contribution.
SECTION 5.14. Alternative Transactions. Sellers shall use all reasonable
efforts to obtain the approval of the Bankruptcy Court, on or before August 13,
of the provisions in Section 8.01(c)(iii).
SECTION 5.15. Support Services. Seller hereby agrees to provide the Company
access to and use of all computer servers and networks and related support
services consistent with past use by, and the needs of, the Company at no cost
(other than out-of-pocket expenses paid to third parties) for a period of 60
days after the date hereof, and thereafter, at the sole discretion of the
Company, until a date not later than December 31, 1997 on arms's length terms.
SECTION 5.16. Intercompany Accounts. As soon as possible after the Closing,
the Seller shall seek Bankruptcy Court approval of the settlement between the
Company and the Seller pursuant to which all receivables, payables, and other
accounts between the Company and the Seller shall be cancelled with no payment
therefor.
SECTION 5.17. Certain Consents. Purchaser shall use all reasonable efforts
to obtain the consent of Delicious Vinyl, Inc. to the contribution of the
membership interests of Delicious Vinyl, L.L.C. (the "Delicious Vinyl
Interests") to the Company from a wholly owned subsidiary of the Seller, Red Ant
Holdings, Inc. (the "Seller Sub"), and the subsequent distribution, by way of
dividend, merger or liquidation, by the Seller Sub to the Seller of the Units
owned by Seller Sub. In the event that such consent is not obtained to the
contribution of the Delicious Vinyl Interests to the Company, the Purchaser
shall purchase the stock of the Seller Subs, or enter into such other
arrangement as is reasonably acceptable to the Seller and the Purchaser. Prior
to Closing, Purchaser shall obtain from Delicious Vinyl, Inc. a release of all
claims that Delicious Vinyl, Inc. has or may have against Seller, its
Affiliates, directors, officers and employees relating to matters occurring
prior to Closing.
<PAGE>
SECTION 5.18. Seller Board of Directors. The Purchaser has the right to
designate the persons who would fill two currently vacant director's seats on
the Seller's board of directors. The Purchaser grants such right to the Seller
and the Seller agrees to designate persons who would be independent directors,
unaffiliated with the Seller, the Purchaser, or any of their respective
Affiliates. The Purchaser and its Affiliates agree to support the increase in
the number of the Seller's directors from nine to ten, so long as the tenth
director is an independent director unaffiliated with the Seller, the Purchaser
or any of their Affiliates.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Seller. The obligations of
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall have been true and
correct when made and shall be true and correct in all material respects as of
the Closing, with the same force and effect as if made as of the Closing Date,
other than such representations and warranties as are made as of another date,
which shall be true and correct as of such date (provided, however, that if any
portion of any representation or warranty is already qualified by materiality,
for purposes of determining whether this Section 6.01(a) has been satisfied with
respect to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects), and the covenants and agreements contained in this Agreement to be
complied with by the Purchaser on or before the Closing shall have been complied
with in all material respects, and the Seller shall have received a certificate
from the Purchaser to such effect signed by duly authorized officers thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced by or
before any Governmental Authority against the Purchaser, seeking to restrain or
materially and adversely alter the transactions contemplated by this Agreement
which, in the reasonable, good faith determination of the Seller, is likely to
render it impossible or unlawful to consummate such transactions; provided,
however, that the provisions of this Section 6.01(b) shall not apply if the
Seller has directly or indirectly solicited or encouraged any such Action;
(c) Resolutions. The Seller shall have received from the Purchaser
instruments evidencing their authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby;
(d) Incumbency Certificate. The Seller shall have received certificates of
a Secretary or an Assistant Secretary of the Purchaser certifying the names and
signatures of the officers of the Purchaser authorized to sign this Agreement
and the other documents to be delivered hereunder;
(e) Order. (i) (A) The Order shall have been entered with respect to the
Seller and the Company and (B) no order staying the transactions contemplated by
this Agreement shall then be in effect; (ii) all conditions and directions
contained in the Order shall have been complied with to the extent necessary
such that the Order is, and will remain, effective without any material
modification thereto assuming continued compliance with the provisions thereof.
<PAGE>
SECTION 6.02. Conditions to Obligations of the Purchaser. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Seller contained in this Agreement shall have been true and
correct when made and shall be true and correct in all material respects as of
the Closing with the same force and effect as if made as of the Closing, other
than such representations and warranties as are made as of another date, which
shall be true and correct as of such date (provided, however, that if any
portion of any representation or warranty is already qualified by materiality,
for purposes of determining whether this Section 6.02(a) has been satisfied with
respect to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects), and the covenants and agreements contained in this Agreement to be
complied with by the Seller on or before the
Closing shall have been complied with in all material respects, and the
Purchaser shall have received a certificate of the Seller to such effect signed
by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced or
threatened by or before any Governmental Authority against the Purchaser,
seeking to restrain or materially and adversely alter the transactions
contemplated hereby which the Purchaser believes, in its sole and absolute
discretion, is likely to render it impossible or unlawful to consummate the
transactions contemplated by this Agreement or which could have a Material
Adverse Effect; provided, however, that the provisions of this Section 6.02(b)
shall not apply if the Purchaser has solicited or encouraged any such Action;
(c) Resolutions. The Purchaser shall have received true and complete
copies, certified by a Secretary or an Assistant Secretary of the Seller, of the
resolutions duly and validly adopted by the Board of Directors of the Seller and
the shareholders of the Seller evidencing their authorization of the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(d) Incumbency Certificate. The Purchaser shall have received a certificate
of the Secretary or the Assistant Secretary of the Seller certifying the names
and signatures of the officers of the Seller authorized to sign this Agreement
and the other documents to be delivered hereunder;
(e) Order. (i) (A) The Order shall have been entered with respect to the
Seller and the Company, and (B) no order staying the transactions contemplated
by this Agreement shall then be in effect; (ii) all conditions and directions
contained in the Order shall have been complied with to the extent necessary
such that the Order is, and will remain, effective without any material
modification thereto assuming continued compliance with the provisions thereof;
provided, however, that the Purchaser shall be under no obligation to comply
with any such condition or direction which it deems, in the exercise of its good
faith judgment, to be material if such condition or direction is not contained
in the form of the Order attached hereto as Exhibit A and in such event, may
instead elect in its sole and absolute discretion to terminate this Agreement
pursuant to Section 7.01(e); and (iii) the Order shall not modify in any respect
materially adverse to the Purchaser the terms and conditions of this Agreement
or the transactions contemplated hereby;
(f) Material Adverse Effect. Since July 14, 1997, no Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance which
would reasonably be expected to have a Material Adverse Effect; provided,
however, that for purposes of this provision no fact or circumstance of which
any of Wasserstein Perella Group, Inc. or its affiliates the Purchaser has
actual knowledge as of the date hereof shall be considered a Material Adverse
Effect; and
(g) Release of DIP Security Agreements. All security arrangements between
the Company, the Seller and The Chase Manhattan Bank ("Chase") entered into in
connection with the provision by Chase of debtor-in-possession ("DIP") financing
to the Company and affecting any assets of the Company shall have been released
in full, and through the Closing Date the Seller shall have provided financing
to the Company, made available to the Seller by Chase from such DIP financing
for provision to the Company, in an amount of at least $1,050,000. The parties
acknowledge that the Company shall have no obligation to repay such amount.
<PAGE>
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 7.01. Survival of Representations and Warranties. The
representations and warranties of the Seller contained in this Agreement, and
all statements contained in this Agreement and in any certificate or other
document delivered by the Seller in connection with the transaction contemplated
hereby shall not survive the Closing.
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the Seller and the Purchaser;
(b) by the Purchaser if (i) any material representation or warranty of the
Seller contained in this Agreement shall not have been true and correct when
made; (ii) the Seller shall not have complied with any material covenant or
agreement to be complied with by it and contained in this Agreement; (iii) if
any of the terms and conditions contained in the Order shall not have been
complied with to the extent necessary such that the Order is and shall remain
effective without any modification thereto; (iv) if the Order (or any other
order of the Bankruptcy Court applicable to the transactions contemplated
hereby) shall contain any term or condition that is not contained in the form of
Order attached hereto as Exhibit A and that is materially adverse to the
Purchaser; (v) the Closing shall not have occurred on or before August 19, 1997;
provided, however, the Purchaser is not the party whose failure to fulfill any
obligation under this Agreement shall have been the cause of the Closing not
occurring on or before such date; or (vii) in the event that any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable; or
(c) by the Seller if the following conditions are met: (i)a Person makes a
proposal or offer for the Company (including, without limitation, any proposal
or offer to its members) that constitutes, or may reasonably be expected to lead
to, an Alternative Transaction (as defined below) or the Company agrees to, or
endorses an Alternative Transaction; (ii) subject to the approval of the
Bankruptcy Court, the Purchaser shall have received $100,000 in cash from the
Seller, it being understood that in the event the Bankruptcy Court does not
approve such payment, Purchaser shall have not claim against Seller with respect
thereto and (iii) subject to the approval of the Bankruptcy Court, the Purchaser
shall have been reimbursed for up to $250,000 of its costs and expenses,
including, without limitation, fees and disbursements of counsel, financial
advisors, financing sources and accountants, incurred by the Purchaser in
connection with the preparation, negotiation and performance of this Agreement
and the transactions contemplated hereby (the "Purchaser Expenses") by the
Seller, it being understood that in the event the Bankruptcy Court does not
approve such payment, Purchaser shall have no claim against Seller with respect
thereto. An "Alternative Transaction" means (A) an acquisition or purchase of
all or any portion of the Interests of the Company, (B) a merger, consolidation,
share or interest exchange, business combination or other similar transaction
with the Company or (C)any sale, lease, exchange, transfer or other disposition
of any assets of the Company.
<PAGE>
SECTION 8.02. Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 8.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except (i) as set forth in Sections 5.03, 8.02(c) and 9.01 and (ii) that nothing
herein shall relieve either party from liability for any breach of this
Agreement.
(b) Notwithstanding the foregoing, if the Closing does not occur because of
the failure to satisfy the conditions to the Purchaser's obligation to effect
the Closing contained in Section 6.02 as a result of the breach of this
Agreement by the Seller, then the Seller shall reimburse the Purchaser in the
amount of the Purchaser Expenses.
SECTION 8.03. Waiver. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this
Section 9.02):
(a) if to the Seller:
Alliance Entertainment Corp. 110 East 59th Street New York, NY 10022
Telecopy: (212) 750-8045 Attention: Christopher Joyce, Esq.
with a copy to:
Cahill, Gordon & Reindel 80 Pine Street New York, NY 10005 Telecopy: (212)
269-5420 Attention: Stephen A. Greene, Esq.
<PAGE>
(b) if to the Purchaser:
Cypress Ventures, Inc. 31 West 52nd Street New York, NY 10019 Telecopy:
(212) 969-7879 Attention: W. Townsend Ziebold, Jr.
with a copy to:
Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Telecopy:
(212) 848-7179 Attention: Peter D. Lyons, Esq.
SECTION 9.03. Public Announcements. Except as may be required by law, no
party to this Agreement shall make, or cause to be made, any press release or
public announcement in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media without the
prior written consent of the other party, and the parties shall cooperate as to
the timing and contents of any such press release or public announcement.
SECTION 9.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 9.06. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, between the Seller and the Purchaser with respect to the subject matter
hereof and thereof.
SECTION 9.07. Assignment. This Agreement may not be assigned by operation
of law or otherwise without the express written consent of the Seller and the
Purchaser (which consent may be granted or withheld in the sole discretion of
the Seller or the Purchaser); provided, however, that the Purchaser may assign
this Agreement to an Affiliate without the consent of the Seller.
SECTION 9.08. No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
<PAGE>
SECTION 9.09. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the Seller
and the Purchaser or (b) by a waiver in accordance with Section 8.03.
SECTION 9.10. Governing Law. This Agreement shall be governed by the laws
of the State of New York, excluding (to the greatest extent permissible by law)
any rule of law that would cause the application of the laws of any jurisdiction
other than the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in the City of New York.
SECTION 9.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
ALLIANCE ENTERTAINMENT CORP.
By:
------------------------------------------
Name:
Title:
CYPRESS VENTURES, INC.,
on behalf of itself and an affiliate of Wasserstein
Perella Group, Inc. to be designated at a future date
By:
-------------------------------------------
Name: W. Townsend Ziebold, Jr.
Title: President
COMMON STOCK
ALLIANCE ENTERTAINMENT CORP.
NUMBER SHARES
AE INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 018593 10 3
SEE REVERSE FOR CERTAIN DEFINITIONS
This
certifies
that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.0001 PER
SHARE, OF
Alliance Entertainment Corp. (hereinafter called the "Corporation"),
transferable upon the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued under
and shall be subject to all the provisions of the Certificate of Incorporation
and By-Laws of the Corporation (copies of which are on file at the office of the
Transfer Agent and Registrar of the Corporation), to all of which the holder by
acceptance hereof assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and
the facsimile signatures of its duly authorized officers. Dated:
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT
AND REGISTRAR
By Christopher J. Joyce Alvin Teller
Authorized Officer Assistant Secretary Chairman Of The Board
<PAGE>
ALLIANCE ENTERTAINMENT CORP.
The Corporation will furnish without charge to each stockholder who so
requests, a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-as tenants in common UNIF GIFT MIN ACT-.......Custodian.........
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN-as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act......................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________________ hereby sell, assign and
transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
------------------------
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(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
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__________________________________________________________ shares of
the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _________________________________
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated_____________________________
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NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPONDE WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
