<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 31, 1997
Date of Report
(Date of earliest event reported)
NASHVILLE COUNTRY CLUB, INC.
(Exact name of registrant as specified in its charter)
Tennessee 0-22582 62-1535897
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
402 Heritage Plantation Way
Hickory Valley, Tennessee
(Address of principal executive offices)
38042
(Zip Code)
(901) 764-2300
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 31, 1997, Nashville Country Club, Inc. (the "Company")
acquired a fifty-one percent interest in a group of affiliated entertainment
companies (collectively, the "Avalon West Coast Companies"). The Avalon West
Coast Companies include New Avalon, Inc., a California corporation, TBA Media,
Inc., a California corporation, Eric/Chandler, Ltd., Inc., a Texas
corporation, Eric Chandler Merchandising, Inc., a California corporation, West
Coast Amphitheater Corp., a California corporation, and Irvine Meadows
Amphitheater, a California general partnership ("IMA Partners"). The
acquisition of the interests in the Avalon West Coast Companies was
consummated pursuant to a Purchase Agreement among the Company, AWC
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the
Company, the Robert E. Geddes Family Trust (the "Geddes Trust"), the
Miserendino Family Trust (the "Miserendino Trust"), Brian F. Murphy ("Murphy")
and Audrey & Jane, Inc., a California corporation ("A&J" and collectively with
the Geddes Trust, the Miserendino Trust and Murphy, the "Sellers").
Pursuant to the Purchase Agreement, the Company delivered to the
Sellers a total of $7,000,000 in cash. The source of the cash consideration was
a portion of the proceeds from the Company's contemporaneous registered
direct offering of common stock (the "Offering"). The Purchase Agreement also
provides for the potential issuance of a number of shares of the Company's
common stock to be determined by the financial performance of the Avalon West
Coast Companies for the years 1996, 1997 and 1998.
Pursuant to the Offering, the Company issued 2,600,000 shares of its
common stock, no par value. Proceeds from the offering were approximately
$9,100,000.
Prior to the acquisition, Robert E. Geddes ("Geddes") and Thomas
Miserendino ("Miserendino") were appointed to the Board of Directors of the
Company in connection with the acquisition of Avalon Entertainment Group,
Inc. in April 1997. In connection with the Purchase Agreement, Geddes and
Miserendino terminated consulting agreements with the Company and entered
into employment agreements with the Company.
The Avalon West Coast Companies generally hold and produce concerts,
coordinate advertising and sponsorships for concerts, and manage merchandising
for concerts and sporting events. IMA Partners owns and, through
a joint venture, operates the Irvine Meadows Amphitheater in Orange County,
California.
The foregoing description of the terms of the acquisition does not
purport to be complete and is qualified in its entirety by reference to the
Purchase Agreement relating to the acquisition, a copy of which is attached
hereto and incorporated herein by reference.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Filed herewith as a part of this report are the audited combined
financial statements and related notes of the Avalon West Coast
Companies, and the separate financial statements of IMA Partners, for
the years ended December 31, 1995 and December 31, 1996, and as of
December 31, 1996, and unaudited combined financial statements of the
Avalon West Coast Companies for the three month periods ended March 31,
1996 and 1997, and as of March 31, 1997.
(b) RESTATED AND PRO FORMA FINANCIAL INFORMATION.
Filed herewith as a part of this report is the pro forma financial
information required by Article 11 of Regulation S-X including:
Unaudited Pro Forma Consolidated Balance Sheet of the Company
as of March 31, 1997 and related Notes.
Unaudited Pro Forma Consolidated Statement of Operations of
the Company for the year ended December 31, 1996 and related
Notes.
Unaudited Pro Forma Consolidated Statement of Operations of
the Company for the three months ended March 31, 1997 and
related Notes.
(c) EXHIBITS.
2.1 Purchase Agreement, dated as of July 31, 1997, among Nashville
Country Club, Inc., AWC Acquisition Corp., Inc., the Robert E.
Geddes Family Trust, the Miserendino Family Trust, Brian F.
Murphy and Audrey & Jane, Inc.
-2-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
NASHVILLE COUNTRY CLUB, INC.
Date: August 12, 1997 By: /s/ Thomas J. Weaver III
--------------------------------
Thomas J. Weaver III
Chief Executive Officer
-3-
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Avalon West Coast:
We have audited the accompanying combined balance sheet of Avalon West
Coast (an affiliated group of one Texas and three California corporations) as of
December 31, 1996, and the related combined statements of operations,
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
Avalon West Coast's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Avalon West Coast as
of December 31, 1996, and the results of their operations and their cash flows
for each of the two years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
May 9, 1997
F-1
<PAGE> 6
AVALON WEST COAST
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................. $ 478,197 $ 500,177
Accounts receivable.............................................. 368,060 244,275
Prepaid expenses................................................. 135,454 92,495
Notes receivable................................................. 52,500 14,400
Loans to related parties......................................... 5,088 --
------------ -----------
Total current assets..................................... 1,039,299 851,347
------------ -----------
PROPERTY AND EQUIPMENT, at cost:
Furniture and fixtures........................................... 228,831 229,368
Computer and other equipment..................................... 94,618 94,618
Leasehold improvements........................................... 16,548 16,548
------------ -----------
339,997 340,534
Less -- accumulated depreciation and amortization................ (81,353) (98,352)
------------ -----------
258,644 242,182
------------ -----------
INVESTMENT IN IRVINE MEADOWS AMPHITHEATER.......................... 1,030,845 909,220
------------ -----------
DEPOSITS AND OTHER ASSETS.......................................... 126,063 126,063
------------ -----------
Total assets............................................. $2,454,851 $ 2,128,812
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit................................................... $ 175,000 $ 275,000
Accounts payable................................................. 614,445 193,835
Accrued expenses and other....................................... 477,767 324,593
Advance ticket receipts.......................................... 169,306 570,228
Current portion of loans from stockholders....................... 240,000 240,000
Loans from related parties....................................... -- 92,876
------------ -----------
Total current liabilities................................ 1,676,518 1,696,532
LOANS FROM STOCKHOLDERS, net of current portion.................... 134,000 74,000
------------ -----------
Total liabilities........................................ 1,810,518 1,770,532
------------ -----------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock..................................................... 18,500 18,500
Retained earnings................................................ 625,833 339,780
------------ -----------
Total stockholders' equity............................... 644,333 358,280
------------ -----------
Total liabilities and stockholders' equity............... $2,454,851 $ 2,128,812
========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-2
<PAGE> 7
AVALON WEST COAST
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------------- -----------------------
1995 1996 1996 1997
----------- ----------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES................................... $16,470,709 $18,011,481 $1,869,307 $ 598,957
COSTS OF REVENUES.......................... 14,525,673 15,665,720 1,568,185 362,721
----------- ----------- ---------- ---------
1,945,036 2,345,761 301,122 236,236
OPERATING EXPENSES:
General and administrative expenses...... 2,394,916 2,065,631 428,136 382,573
Selling and marketing expenses........... 44,599 56,810 14,873 21,159
----------- ----------- ---------- ---------
(Loss) income from operations............ (494,479) 223,320 (141,887) (167,496)
OTHER INCOME (EXPENSE):
Equity income (loss) from investments.... 38,699 11,912 (101,883) (121,625)
Interest expense, net.................... (109,266) (111,491) (28,792) (11,943)
Consulting income........................ 14,543 67,641 5,479 15,811
Fire insurance gain, net of expenses..... 429,342 -- -- --
----------- ----------- ---------- ---------
(Loss) income before provision for income
taxes................................. (121,161) 191,382 (267,083) (285,253)
(BENEFIT) PROVISION FOR TAXES.............. (3,846) 10,725 800 800
----------- ----------- ---------- ---------
NET (LOSS) INCOME.......................... $ (117,315) $ 180,657 $ (267,883) $(286,053)
========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-3
<PAGE> 8
AVALON WEST COAST
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE THREE MONTH PERIOD ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK (NOTES 1 AND 3) TOTAL
---------------------------------------------- RETAINED STOCKHOLDERS'
AVA ECL TBA ECM TOTAL EARNINGS EQUITY
------- ------ ------ ---- ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December 31,
1994................... $12,500 $1,000 $5,000 $ -- $18,500 $ 562,491 $ 580,991
Net loss............... -- -- -- -- -- (117,315) (117,315)
------- ------ ------ ---- ------- --------- -------------
BALANCES, December 31,
1995................... 12,500 1,000 5,000 -- 18,500 445,176 463,676
Net income............. -- -- -- -- -- 180,657 180,657
------- ------ ------ ---- ------- --------- -------------
BALANCES, December 31,
1996................... 12,500 1,000 5,000 -- 18,500 625,833 644,333
Net loss (unaudited)... -- -- -- -- -- (286,053) (286,053)
------- ------ ------ ---- ------- --------- -------------
BALANCES, March 31, 1997
(unaudited)............ $12,500 $1,000 $5,000 $ -- $18,500 $ 339,780 $ 358,280
======= ====== ====== ===== ======= ========= ==========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-4
<PAGE> 9
AVALON WEST COAST
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------- ----------------------
1995 1996 1996 1997
--------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income............................ $(117,315) $ 180,657 $(267,883) $(286,053)
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating
activities --
Depreciation and amortization............. 17,649 65,451 16,362 16,999
Fire insurance gain....................... (591,422) -- -- --
Provision for doubtful accounts........... 217,080 195,082 42,616 --
Equity in loss (income) from IMA
Partners................................ 21,967 (36,025) 80,624 121,625
Equity in (income) loss from other
investments............................. (60,666) 24,113 -- --
Changes in assets and liabilities --
(Increase) decrease in assets --
Accounts receivable..................... 398,434 379,314 372,527 123,785
Prepaid expenses........................ 277,316 (31,726) (56,070) 42,959
Deposits and other assets............... (335,381) 316,573 16,950 --
Loans to related parties................ 247,824 26,833 14,421 5,088
Increase (decrease) in liabilities --
Accounts payable........................ 239,545 22,108 (299,510) (420,610)
Accrued expenses and other.............. (24,313) (40,575) 152,927 (153,174)
Advance ticket receipts................. (241,401) (54,566) (149,383) 400,922
Loans from related parties.............. -- -- 55,232 92,876
--------- ---------- --------- ---------
Net cash provided by (used in) operating
activities................................ 49,317 1,047,239 (21,187) (55,583)
--------- ---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchases of) proceeds from investments..... 302,255 (293,005) -- --
Advances made on notes receivable............ -- (52,500) -- --
Payments received on notes receivable........ -- -- -- 38,100
Expenditures for property and equipment...... (219,900) (124,496) (87,867) (537)
Insurance proceeds from fire gain............ 635,287 -- -- --
--------- ---------- --------- ---------
Net cash provided by (used in) investing
activities.............................. 717,642 (470,001) (87,867) 37,563
--------- ---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt................... (204,000) (487,000) (34,000) (60,000)
Proceeds from line of credit................. -- 310,000 310,000 100,000
Payments on line of credit................... (350,000) (135,000) -- --
--------- ---------- --------- ---------
Net cash (used in) provided by financing
activities.............................. (554,000) (312,000) 276,000 40,000
--------- ---------- --------- ---------
NET INCREASE IN CASH........................... 212,959 265,238 166,946 21,980
CASH, beginning of period...................... -- 212,959 212,959 478,197
--------- ---------- --------- ---------
CASH, end of period............................ $ 212,959 $ 478,197 $ 379,905 $ 500,177
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-5
<PAGE> 10
AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INCLUDING INFORMATION AS OF MARCH 31, 1997, AND FOR THE
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND MARCH 31, 1997, WHICH IS UNAUDITED)
1. NATURE OF BUSINESS
Avalon West Coast consists of the combined accounts of New Avalon, Inc.
("Avalon Attractions"), Eric/Chandler Ltd., Inc. ("ECL"), Eric Chandler
Merchandising, Inc. ("ECM") and TBA Media, Inc. ("TBA") (collectively, "AWC")
and the minority equity investment in Irvine Meadows Amphitheater, a California
general partnership ("IMA Partners").
Ownership and incorporation
Avalon Attractions, a California corporation, was incorporated on October
21, 1982 and is owned by Robert Geddes, Brian Murphy, and Thomas Miserendino.
ECL, a Texas corporation, was incorporated on August 16, 1982 and is owned by
Robert Geddes and Thomas Miserendino. ECM, an S corporation, was incorporated on
June 5, 1995 and is owned by Robert Geddes and Thomas Miserendino. TBA, a
California corporation, was incorporated on March 4, 1983 and is owned by Robert
Geddes, Brian Murphy and Thomas Miserendino. Robert Geddes, through Audrey &
Jane, Inc., owns a 25% interest in IMA Partners.
Business operations
Avalon Attractions signs contracts with talent, venues and advertising
organizations relating to concert events held in Southern California. ECL and
ECM provide "merchandising operations" consulting services and authors
sponsorship contracts with companies interested in promoting their products
and/or services at concert events held in Southern California. ECL,
historically, has also managed the manufacture and sale of merchandise at
stadium concerts and occasionally at other events. TBA primarily advertises
concert events promoted by Avalon Attractions. Concert events occur year round
with the majority occurring between March and November.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of combination
The accompanying combined financial statements include the combined
accounts of AVA, ECL, ECM, and TBA. The companies are combined because of common
ownership. All significant intercompany accounts and transactions have been
eliminated. AWC's investment in IMA Partners is accounted for under the equity
method. (Note 7)
Revenue recognition
AWC recognizes revenues as concert events occur. Expenses are properly
matched to the period in which related revenues are recognized.
Property and Equipment
Property and equipment are stated at cost and related depreciation and
amortization is provided using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Furniture and fixtures................................... 5 years
Computer and other equipment............................. 3-5 years
Leasehold improvements................................... The lesser of 15 years or the
remaining term of the lease
</TABLE>
F-6
<PAGE> 11
AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
AWC follows the policy of capitalizing expenditures that materially
increase asset lives and charges ordinary maintenance and repairs to operations
as incurred.
Income taxes
AVA and TBA are taxed as C corporations.
ECL and ECM have elected to be taxed as S corporations under provisions of
the Internal Revenue Code. As long as ECL continues to qualify for S corporation
tax treatment, no federal income taxes are payable. Accordingly, there is no
provision for federal income taxes reflected in the accompanying combined
financial statements. California has conformed to the federal provisions
recognizing S corporations and requires a tax of 1.5 percent of income for an S
corporation at the entity level. The proposed sale of the majority interest in
the combined companies discussed in Note 9 will automatically terminate the S
corporation elections.
Deferred income taxes are provided for the tax effect of temporary
differences in the recognition of income and expenses for financial reporting
and tax purposes.
Statements of cash flows
AWC prepares its statements of cash flows using the indirect method as
defined under Statement of Financial Accounting Standards No. 95. Supplemental
cash flow disclosures are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1995 1996 1997
-------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash paid during the period for:
Income taxes....................................... $ 10,678 $ 2,400 $ --
======== ======= =========
Interest........................................... $151,907 $95,267 $13,653
======== ======= =========
</TABLE>
Payments to stockholders
AWC has made payments to its stockholders, who are all employees of AWC,
based in part on the profitability of AWC and availability of cash. These
payments can cause significant variations in the results as they are included in
cost of revenues and general and administrative expenses in the period paid.
These payments totaled $320,000 and $1,233,000 for the years ended December 31,
1995 and 1996, respectively, and $30,000 and $30,000 for the three month periods
ended March 31, 1996 and 1997, respectively.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Unaudited quarterly information
Information with respect to the three month periods ended March 31, 1996
and 1997, and as of March 31, 1997 included in these combined financial
statements and notes thereto, is unaudited; however, in the opinion of AWC's
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the combined financial position and results
of operations of AWC for such period have been included.
F-7
<PAGE> 12
AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. COMMON STOCK
The combined entities have one class of voting common stock. The number of
shares issued and outstanding summarized in the following table remained
consistent between 1995 and 1996.
<TABLE>
<CAPTION>
ISSUED AND
ENTITY AUTHORIZED OUTSTANDING PAR VALUE
------------------------------------- ---------- ----------- ---------
<S> <C> <C> <C>
AVA.................................. 100,000 12,500 No par
ECL.................................. 100,000 1,000 $ .01
ECM.................................. 100,000 3,000 No par
TBA.................................. 50,000 12,500 No par
---------- -----------
Total...................... 350,000 29,000
======== =========
</TABLE>
4. COMMITMENTS
AWC leases one facility under an 80 month lease agreement ending June 30,
2002. Rent expense under operating leases was $109,000 and $151,000 for the
years ended December 31, 1995 and 1996, respectively. The minimum lease
commitments as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997...................................................... $164,000
1998...................................................... 165,000
1999...................................................... 165,000
2000...................................................... 165,000
2001...................................................... 165,000
Thereafter................................................ 83,000
--------
$907,000
========
</TABLE>
5. RELATED PARTIES
AWC is affiliated, through common ownership, with several companies
involved in the music and entertainment industries. The following represents a
summary of activity with these affiliates.
As of December 31, 1995 and 1996, AWC had loans from stockholders of
$861,000 and $374,000, bearing interest at 11.5% and 11.25%, and loans to
related parties of $14,421 and $5,088, respectively. AWC also had a $52,500 note
receivable from a stockholder at December 31, 1996. In 1995 and 1996, Audrey &
Jane, Inc., received management fees of $140,000 and $143,100 from IMA Partners.
Eric Chandler Merchandising Partners ("ECMP"), an affiliate established in 1996
to coordinate merchandising at the 1996 Atlanta Summer Olympics, utilized the
services of AWC beginning in 1996. ECMP paid $531,000 to AWC in connection with
the services provided. AWC, also a 40% owner of ECMP, reported a loss in 1995
and income in 1996 of approximately $316,000 and $830,000, respectively.
AWC received from Avalon Entertainment Group, Inc. ("AEG"), an affiliate
involved in the entertainment and music industries, $60,000 and $93,000 in 1995
and 1996, respectively, for financial and accounting services and $104,000 in
1996 for assistance with business development. Accounts receivable from AEG for
payroll paid on behalf of AEG was approximately $21,000 and $32,000 in 1995 and
1996, respectively. In 1995, AWC received interest income of $15,908 from AEG
for interest on a loan with a principal amount of $253,390. All interest and
principal payments were received in June 1995.
In 1995, AWC invested $50,000 in Avalon Entertainment Partners, a
California limited liability company. The purpose of the entity was to promote
concerts in the San Diego market. AWC, a 50% owner, reported income in 1995 and
a loss in 1996 of $60,666 and $24,113, respectively. The entity ceased
operations in April 1996.
F-8
<PAGE> 13
AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. SIGNIFICANT CONCENTRATIONS
AVA generated 55% of revenues in 1996 through concert events held at one
venue and contracted artists through one major agency, which accounted for 10%
of total cost of revenues. In 1995, 30%, 25%, 19% and 11% of AVA's revenues were
generated at four venues. A single customer accounted for 34% and 51% of ECL's
revenues in 1995 and 1996, respectively. TBA generated 50% and 58% of revenues
from AVA in 1995 and 1996, respectively. Two vendors accounted for 23% and 11%
of cost of revenues in 1995, and the same two vendors accounted for 22% and 16%
of cost of revenues in 1996. All revenues and expenses generated and incurred by
ECM in 1996 related to the operations of ECMP.
7. INVESTMENT IN IMA PARTNERS
IMA Partners owns the Irvine Meadows Amphitheater, a 15,000 seat outdoor
facility in Southern California. IMA Partners generates revenue through ticket
sales, concessions, parking and service fees and merchandise sales. AWC promotes
all concert events held at the facility for a fee specified in contracts signed
with the artists and pays IMA Partners a percentage of sponsorship income
generated as the facility is used by AWC to perform sponsor related obligations.
IMA Partners primarily utilizes Ticketmaster to sell tickets, Service America
Corporation to manage concessions and parking, and Events Merchandising to
manage merchandise sales. Ticketmaster, Service America Corporation and Events
Merchandising are not related parties.
The investment in IMA Partners is accounted for using the equity method of
accounting. Audrey & Jane, Inc.'s share of the IMA Partners' loss in 1995 and
income in 1996 was $21,967 and $36,025, respectively. Condensed financial
information of IMA Partners is summarized below:
Condensed Financial Information:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current assets....................................... $ 217,970 $ 487,876
Non-current assets................................... 5,220,677 5,463,577
Current liabilities.................................. 898,303 1,930,940
Non-current liabilities.............................. 416,963 383,631
Partners' capital.................................... 4,123,381 3,636,882
Income for the year -- 1996.......................... 144,101
Loss for the year -- 1995............................ (87,867)
Loss for the three months ended March 31, 1997....... (486,499)
</TABLE>
In April 1997, IMA Partners entered into a joint venture, Western
Amphitheater Partners ("WAP"), with Pavilion Partners, a Delaware general
partnership. Each partner owns a 50% interest in the revenues and direct show
related expenses of WAP, and contributed an irrevocable, exclusive right to use
and operate their respective amphitheaters and related assets. Certain facility
expenses, as defined in the joint venture agreement, will be recorded separately
on each partners' respective books. Pavilion Partners is the sole owner of the
Glen Helen Amphitheater, which seats 65,000, located in Devore, California. The
purpose of WAP is to improve operational efficiencies at the two amphitheaters.
In connection with the venture, Avalon Attractions, for a fee, will carry out
booking and logistical production of all events until November 2016, when the
venture agreement ends.
8. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT
In April 1997, Audrey & Jane, Inc. signed a letter of intent to purchase an
additional 50% interest in IMA Partners. In June 1997, Audrey & Jane, Inc. then
agreed in principle to sell a 51% interest in IMA Partners to Nashville Country
Club, Inc. ("NCCI").
F-9
<PAGE> 14
AVALON WEST COAST
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, the stockholders of AWC entered into an agreement to sell a
51% controlling interest in all entities to NCCI, a public company involved in
the development, ownership and operations of restaurants, hotels and other
entertainment related business assets.
F-10
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Irvine Meadows Amphitheater:
We have audited the accompanying balance sheet of Irvine Meadows
Amphitheater (a California general partnership) as of December 31, 1996, and the
related statements of operations, partners' capital and cash flows for each of
the two years in the period ended December 31, 1996. These financial statements
are the responsibility of Irvine Meadows Amphitheater's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Irvine Meadows Amphitheater
as of December 31, 1996, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
May 9, 1997
F-11
<PAGE> 16
IRVINE MEADOWS AMPHITHEATER
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 180,237
Accounts receivable........................................................... 13,214
Prepaid expenses.............................................................. 24,519
-----------
Total current assets.................................................. 217,970
-----------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements........................................................ 10,396,874
Capitalized lease equipment................................................... 458,941
-----------
10,855,815
Less -- accumulated depreciation and amortization............................. (5,635,138)
-----------
5,220,677
-----------
Total assets.......................................................... $ 5,438,647
==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 254,790
Accrued expenses and other.................................................... 230,479
Season tickets and deferred income............................................ 107,950
Loans from related parties.................................................... 5,088
Loan from partners............................................................ 200,000
Current portion of capital lease obligation................................... 99,996
-----------
Total current liabilities............................................. 898,303
CAPITAL LEASE OBLIGATION, net of current portion................................ 416,963
-----------
Total liabilities..................................................... 1,315,266
COMMITMENTS
PARTNERS' CAPITAL............................................................... 4,123,381
-----------
Total liabilities and partners' capital............................... $ 5,438,647
==========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-12
<PAGE> 17
IRVINE MEADOWS AMPHITHEATER
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996
---------- -----------
<S> <C> <C>
REVENUES........................................................... $9,722,368 $10,306,418
COST OF REVENUES................................................... 7,270,122 7,603,947
OPERATING EXPENSES:
General and administrative expenses.............................. 2,142,713 2,153,556
Selling and marketing expenses................................... 27,677 61,437
Depreciation and amortization.................................... 301,623 305,648
---------- -----------
(Loss) income from operations................................. (19,767) 181,830
INTEREST EXPENSE, net.............................................. 68,100 37,729
---------- -----------
NET (LOSS) INCOME.................................................. $ (87,867) $ 144,101
========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-13
<PAGE> 18
IRVINE MEADOWS AMPHITHEATER
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
PARTNERS (NOTE 1)
-------------------------------------------
IMA TOTAL
AUDREY & SHELLI INVESTMENT PARTNERS'
JANE, INC. MEADOWS, INC. CORP. CAPITAL
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCES, December 31, 1994.............. $1,016,787 $ 1,016,787 $2,033,573 $4,067,147
Net loss............................... (21,967) (21,967) (43,933) (87,867)
---------- ------------- ---------- ----------
BALANCES, December 31, 1995.............. 994,820 994,820 1,989,640 3,979,280
Net income............................. 36,025 36,025 72,051 144,101
---------- ------------- ---------- ----------
BALANCES, December 31, 1996.............. $1,030,845 $ 1,030,845 $2,061,691 $4,123,381
========= ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-14
<PAGE> 19
IRVINE MEADOWS AMPHITHEATER
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1995 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income................................................ $ (87,867) $ 144,101
Adjustments to reconcile net (loss) income to net cash provided
by operating activities --
Depreciation and amortization................................. 301,623 305,648
Changes in assets and liabilities --
(Increase) decrease in assets --
Accounts receivable...................................... (101,912) 54,579
Prepaid expenses......................................... 22,407 (9,456)
Deposits and other assets................................ 1,312 --
Increase (decrease) in liabilities --
Accounts payable......................................... 108,999 97,112
Accrued expenses and other............................... 92,333 (175,394)
Season tickets and deferred income....................... (43,175) (98,935)
Loans from related parties............................... (265,324) (9,333)
--------- ---------
Net cash provided by operating activities.............. 28,396 308,322
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES;
Expenditures for property and equipment.......................... (10,037) (65,654)
--------- ---------
Net cash used in investing activities.................. (10,037) (65,654)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligation............................. (99,996) (99,996)
Proceeds from debt............................................... -- 200,000
Proceeds from line of credit..................................... 990,000 170,000
Payments on line of credit....................................... (925,000) (360,000)
--------- ---------
Net cash used in financing activities.................. (34,996) (89,996)
--------- ---------
NET DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS............... (16,637) 152,672
CASH AND CASH EQUIVALENTS, beginning of year....................... 44,202 27,565
--------- ---------
CASH AND CASH EQUIVALENTS, end of year............................. $ 27,565 $ 180,237
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-15
<PAGE> 20
IRVINE MEADOWS AMPHITHEATER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF BUSINESS
Irvine Meadows Amphitheater, a California general partnership ("IMA
Partners"), was formed on January 1, 1981. IMA Partners is owned 50% by IMA
Investment Corp., 25% by Shelli Meadows, Inc., and 25% by Audrey & Jane, Inc.
IMA Partners owns the Irvine Meadows Amphitheater (the "IMA"), a 15,000
seat outdoor facility in Irvine, California. IMA Partners generates revenue
through ticket sales, concessions, parking and service fees and merchandise
sales. Affiliates of IMA Partners promote all concert events held at the
facility for a fee specified in contracts signed with the artists and also pay
IMA Partners a percentage of sponsorship income generated as the facility is
used by the affiliated companies to fulfill sponsor related obligations.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
IMA Partners recognizes revenues as concert events occur. Expenses are
properly matched to the period in which related revenues are recognized.
Property and equipment
Property and equipment are recorded at cost and related depreciation and
amortization is provided using the straight-line method over the following
useful lives:
<TABLE>
<S> <C>
Leasehold improvements.................................. The lesser of 5-35 years or
the remaining term of the lease
Capitalized lease equipment............................. 15 years
</TABLE>
IMA Partners follows the policy of capitalizing expenditures that
materially increase asset lives and charges ordinary maintenance and repairs to
operations as incurred.
Statements of cash flows
IMA Partners has a cash management program that invests excess cash in
money market funds. Cash balances not required to meet daily checks clearing the
banks are temporarily invested. For purposes of the statements of cash flows,
IMA Partners considers all highly liquid investments with original maturities of
less than three months to be cash equivalents.
IMA Partners prepares its statements of cash flows using the indirect
method as defined under Statement of Financial Accounting Standards No. 95.
Supplemental cash flow disclosures are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Cash paid during the year for:
Interest....................................................... $81,389 $60,001
======= =======
</TABLE>
Payments to partners
IMA Partners has made payments to its partners, one of whom is an employee
of IMA Partners, based in part on the profitability of IMA Partners and the
availability of cash. These payments can cause significant variations in IMA
Partners results of operations as they are included in general and
administrative expenses in the period paid. These payments totaled $280,000 and
$286,000 for the years ended December 31, 1995 and
F-16
<PAGE> 21
IRVINE MEADOWS AMPHITHEATER
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1996, respectively, and $37,500 and $50,000 for the three month period ended
March 31, 1996 and 1997, respectively.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income taxes
In accordance with Internal Revenue Service regulations, IMA Partners is
not an income tax paying entity. Its income or losses are reported in the tax
returns of its partners.
Impairment of property and equipment
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of," which requires IMA Partners to review for impairment
of long-lived assets, certain identifiable intangibles, and goodwill related to
those assets whenever events or changes in circumstances indicate the carrying
amount of an asset might not be recoverable. In certain situations, an
impairment loss would be recognized. IMA Partners has reviewed property and
equipment and does not believe they have been impaired as of December 31, 1996.
3. FINANCING ARRANGEMENTS
IMA Partners utilizes various forms of short-term debt to finance
operations. At December 31, 1996 IMA Partners had a $200,000 non-interest
bearing note payable to the partners, due in 1997, and a line of credit with a
maximum borrowing limit of $500,000 at 9.25% with no outstanding balance, which
expires in December 1997. At December 31, 1995, IMA Partners had a line of
credit with a maximum borrowing limit of $500,000 and $190,000 outstanding
bearing 9.75% interest.
4. COMMITMENTS
IMA Partners leases the land on which the amphitheater is located and in
February 1997, entered into a new 20 year lease agreement ending February 28,
2017. The new lease agreement specifies annual payments of the greater of
$700,000, 5% of gross amphitheater sales, or 25% of net cash flow from
operations. Rent expense under operating leases was approximately $544,000 and
$507,000 for the years ended December 31, 1995 and 1996, respectively. The
minimum lease commitments as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997.................................................... $ 608,000
1998.................................................... 700,000
1999.................................................... 700,000
2000.................................................... 700,000
2001.................................................... 700,000
Thereafter.............................................. 10,617,000
-----------
$14,025,000
==========
</TABLE>
F-17
<PAGE> 22
IRVINE MEADOWS AMPHITHEATER
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. RELATED PARTIES
IMA Partners is affiliated, through common ownership with Robert Geddes,
with several companies involved in the music and entertainment industries. The
following represents a summary of activity with these affiliates.
As of December 31, 1995 and 1996, IMA Partners had loans from related
parties, consisting mainly of short-term payables, of $14,421 and $5,088,
respectively. In 1995 and 1996, Audrey & Jane, Inc., received management fees of
$140,000 and $143,100 from IMA Partners. IMA Partners received $257,000 and
$325,000 in sponsorship income from Eric/Chandler Ltd., Inc. in 1995 and 1996,
respectively.
6. SIGNIFICANT CONCENTRATIONS
IMA Partners primarily utilizes Ticketmaster to sell tickets, Service
America Corporation to manage concessions and parking, and Events Merchandising
to manage merchandise sales. Ticketmaster, Service America Corporation and
Events Merchandising are not related parties. IMA Partners has multi-year
contracts with these companies to provide services at Irvine Meadows
Amphitheater.
7. WESTERN AMPHITHEATER PARTNERS
In April 1997, IMA Partners entered into a joint venture, Western
Amphitheater Partners ("WAP"), with Pavilion Partners, a Delaware general
partnership. Each partner owns a 50% interest in the revenues and direct show
related expenses of WAP and contributed an irrevocable, exclusive right to use
and operate their respective amphitheaters and related assets. Certain facility
expenses, as defined in the joint venture agreement, will be recorded separately
on each partners' respective books. Pavilion Partners is the sole owner of the
Glen Helen Amphitheater, which seats 65,000, located in Devore, California. The
purpose of WAP is to improve operational efficiencies at the two amphitheaters.
In connection with the venture, an affiliate, for a fee, will carry out booking
and logistical production of all events until November 2016, when the venture
agreement ends.
8. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT
In April 1997, Audrey & Jane, Inc. signed a letter of intent to purchase
IMA Investment Corp.'s 50-percent interest in IMA Partners. In June 1997, Audrey
& Jane, Inc. then agreed in principle to sell a 51-percent interest in IMA
Partners to Nashville Country Club, Inc. ("NCCI") in conjunction with NCCI's
acquisition of certain other affiliated companies. NCCI is a public company
involved in the development, ownership and operations of restaurants, hotels and
other entertainment related business assets.
F-18
<PAGE> 23
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data (the "Pro
Forma Financial Data") of the Company has been prepared utilizing the historical
Financial Statements and related notes thereto of each of the Company and AEG
not included herein, AWC and IMA Partners appearing elsewhere herein and the
unaudited financial statements of the Village at Breckenridge Resort (the
"Breckenridge Resort") for the period from January 1, 1996 to April 29, 1996 not
included herein. The Pro Forma Financial Data gives pro forma effect to the
consummation of the Offering, the acquisition of AEG and the acquisition of a
fifty one percent (51%) interest in AWC (the "Acquisitions") as if they had
occurred on March 31, 1997 for balance sheet purposes and as of January 1, 1996
and January 1, 1997 for purposes of the pro forma statements of operations and
to the consummation of the Breckenridge Resort acquisition (the "Breckenridge
Resort Acquisition") as though such transaction had occurred as of April 29,
1996 for balance sheet purposes and as of January 1, 1996 for statement of
operations purposes. As a result of the Acquisitions, the Company has
reconfigured its financial reporting segments into Entertainment and Resort to
separate the operations of its two primary business divisions.
The Breckenridge Resort Acquisition has been accounted for, and the
Acquisitions are being accounted for, under the purchase method of accounting
and the Pro Forma Financial Data has been prepared on such basis of accounting
utilizing estimates and assumptions as set forth below and in the notes thereto.
The Pro Forma Financial Data is presented for informational purposes and is not
necessarily indicative of the future financial position or results of operations
of the combined businesses that would have resulted had the Breckenridge Resort
Acquisition and the Acquisitions been consummated on the dates or as of the
periods described above. The purchase price allocations reflected in the Pro
Forma Financial Data have been based on preliminary estimates of the respective
fair value of assets and liabilities, which may differ from the actual
allocations, and are subject to revision. The Pro Forma Financial Data should be
read in conjunction with the Financial Statements and the related notes thereto
of each of the Company, AEG, AWC and IMA Partners.
F-19
<PAGE> 24
NASHVILLE COUNTRY CLUB, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA
AS OF MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- ACQUISITION OFFERING PRO FORMA
COMPANY AEG AWC ADJUSTMENTS ADJUSTMENTS CONSOLIDATED
------- ----- ------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.................. $ 2,620 $ 194 $ 500 $ (700)(a) $ 8,000(e)
(7,300)(b)
285(c) $ 3,599
Accounts receivable........................ 1,235 103 244 (92)(d) 1,490
Inventories................................ 431 -- -- 431
Prepaid expenses and other current
assets................................... 135 293 107 203(c) 738
------- ----- ------ ------------
Total current assets............. 4,421 590 851 6,258
Property and equipment, net................ 33,870 59 242 5,464(c) 39,635
Intangible and other assets................ 357 (84) 1,036 7,728(a)
5,726(b)
(909)(d) 13,854
------- ----- ------ ------------
Total assets..................... $38,648 $ 565 $2,129 $ 59,747
======= ===== ====== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt and current portion of
long-term debt........................... $ 2,683 -- $ 515 $ 400(c)
2,480(a) $ 6,078
Accounts payable and accrued liabilities... 3,681 $ 793 1,182 1,531(c)
(92)(d) 7,095
------- ----- ------ ------------
Total current liabilities........ 6,364 793 1,697 13,173
Long-term debt:
Capital lease obligation, net of current
portion............................... 733 -- -- 384(c) 1,117
Long-term debt, net of current portion... 17,559 -- 74 17,633
------- ----- ------ ------------
Total liabilities................ 24,656 793 1,771 31,923
Minority interest.......................... -- -- -- (270)(b)
1,782(c) 1,512
Stockholders' equity:
Preferred stock.......................... 10 -- -- 10
Stockholders' and partners' capital...... 16,770 19 18 (19)(a)
(18)(b)
4,320(a) 8,000(e) 29,090
Accumulated (deficit) earnings........... (2,788) (247) 340 247(a)
(340)(b) (2,788)
------- ----- ------ ------------
Total stockholders' equity....... 13,992 (228) 358 26,312
------- ----- ------ ------------
Total liabilities and
stockholders' equity........... $38,648 $ 565 $2,129 $ 59,747
======= ===== ====== =========
</TABLE>
See notes to unaudited pro forma consolidated financial data.
F-20
<PAGE> 25
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(a) This entry reflects the acquisition (the "AEG Acquisition") of Avalon
Entertainment Group Inc. ("AEG") and the related elimination of AEG's
historical stockholders' deficit. The AEG Acquisition will result in the net
liabilities of AEG being revalued to reflect the purchase price of the
transaction. The purchase price of AEG will be calculated as the sum of (i)
the fair value of the Company's Common Stock that was issued to the former
owners of AEG, (ii) the fair value of notes payable issued by the Company to
the former owners of AEG, (iii) the cash payment made to the former owners
of AEG, (iv) AEG's net liabilities as of March 31, 1997 and (v) transaction
costs. Under the purchase accounting method, the acquisition cost is
allocated to the assets and liabilities acquired based on their relative
fair values. The Company has not completed any appraisals or other valuation
studies, nor has it made a final determination of the useful lives of the
assets acquired. Based on the foregoing, the Company has established a
purchase price for AEG of approximately $7,728,000. For purposes of the pro
forma consolidated financial data, the entire purchase price amount has been
allocated to goodwill. Amortization expense in the pro forma consolidated
financial data has been calculated assuming an amortization period of 20
years. The Company believes the final allocation of the purchase price (and
related amortization period) will not differ materially from the pro forma
amounts included herein. The Company expects the final allocation to be
completed no later than March 31, 1998.
The following table summarizes the components of the purchase price:
<TABLE>
<S> <C>
Fair value of Common Stock issued................................ $4,320,000
Fair value of notes payable issued............................... 2,480,000
Cash payments.................................................... 400,000
Transaction costs................................................ 300,000
AEG's net liabilities at March 31, 1997.......................... 228,000
----------
Purchase price................................................... $7,728,000
=========
</TABLE>
The Merger Agreement relating to the AEG Acquisition (the "Merger
Agreement") provides for an adjustment to the purchase price based on AEG's
net income before taxes for the year ending December 31, 1997 (the "1997
Pre-Tax Net Income"). In the event AEG's 1997 Pre-Tax Net Income equals or
exceeds $1.2 million, the purchase price is not adjusted. In the event that
AEG's 1997 Pre-Tax Net Income is less than $1.2 million, the purchase price
is adjusted downward in an amount equal to six times the difference between
the 1997 Pre-Tax Net Income and $1.2 million. The former owners of AEG may
satisfy the adjusted purchase price, if any, by delivering to the Company
either cash or shares of Common Stock valued based on the average closing
prices of the Common Stock for the 30 trading days ending 5 days prior to
the calculation of the 1997 Pre-Tax Net Income. Management does not
anticipate that the purchase price will be adjusted materially.
(b) This entry reflects the acquisition of a fifty one percent (51%) interest
in AWC ("AWC Acquisition") and the related elimination of AWC's historical
stockholders' equity. The AWC Acquisition will result in the net assets of
AWC being revalued to reflect the purchase price of the transaction. The
purchase price of AWC will be calculated as the sum of (i) the cash payment
made to the former owners of AWC and (ii) transaction costs. Under the
purchase accounting method, the acquisition cost is allocated to the assets
and liabilities acquired based on their relative fair values. In addition,
the Company will record a minority interest equal to the 49% of AWC's net
assets not acquired by the Company. The Company has not completed any
appraisals or other valuation studies, nor has it made a final determination
of the useful lives of the assets acquired. The Company's preliminary
allocation of the acquisition cost resulted in an excess purchase price over
the fair value of the net tangible assets acquired of approximately
$5,726,000. For purposes of the pro forma consolidated financial data, this
excess has been allocated to goodwill. Amortization expense in the pro forma
consolidated financial data has been calculated assuming an amortization
period of 20 years. In consideration for the 51% interest in AWC, the
Company has agreed to pay an aggregate purchase price
F-21
<PAGE> 26
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET -- (CONTINUED)
AS OF MARCH 31, 1997
equal to the greater of (i) $7,000,000 or (ii) 51% of the sum of (a) six
times the average of EBITDA (as defined elsewhere herein) from the
operations of the AWC entities which will own and operate amphitheaters
("AWC's Amphitheater Operations") for the years 1996, 1997 and 1998 (the
"Computation Period") and (b) six times the average of the net income before
taxes of the remaining business entities constituting AWC ("AWC's
Non-amphitheater Operations") for the Computation Period. The Company
believes the final allocation of the purchase price (and related
amortization period) will not differ materially from the pro forma amounts
included herein. The Company expects the final allocation to be completed no
later than June 30, 1998.
The following table summarizes the purchase price in excess of fair value
basis:
<TABLE>
<S> <C>
Cash payments.................................................... $7,000,000
Transaction costs................................................ 300,000
----------
Purchase price................................................... 7,300,000
51% of AWC's net assets at March 31, 1997 after giving effect to
the consolidation of IMA Partners.............................. 1,574,000
----------
Purchase price in excess of fair value basis..................... $5,726,000
=========
</TABLE>
The Purchase Agreement (the "Purchase Agreement") relating to the AWC
Acquisition provides for an aggregate purchase price equal to the greater of
(i) $7,00,000 or (ii) 51% of the sum of (a) six times the average of EBITDA
for AWC's Amphitheater Operations for the Computation Period and (b) six
times the average of the net income before taxes of AWC's Non-amphitheater
Operations for the Computation Period. To the extent the aggregate purchase
price exceeds $7,000,000, the difference will be payable by the Company in
shares of Common Stock valued at the average closing price of the Common
Stock for each day in the Computation Period. Management does not anticipate
that any adjustment in the purchase price would result in the issuance of a
material amount of Common Stock.
(c) At March 31, 1997, AWC held a 25% interest in IMA Partners which results in
the use of the equity method of accounting for AWC's investment in IMA
Partners. Upon completion of the AWC Acquisition, the Company will hold a
51% interest in IMA Partners. As a result, the operations of IMA Partners
will be presented using the consolidated method of accounting. This
adjustment is presented to show the impact of including all assets,
liabilities, partners' capital and minority interest of IMA Partners as if
IMA Partners were consolidated.
The following table provides summary balance sheet data for IMA Partners as
of March 31, 1997:
<TABLE>
<S> <C>
Current assets................................................... $ 488,000
Property and equipment........................................... 5,464,000
Current portion of capital lease obligation...................... 400,000
Other current liabilities........................................ 1,531,000
Capital lease obligation, net of current portion................. 384,000
Partners' capital................................................ 3,637,000
</TABLE>
(d) As a result of the consolidation of IMA Partners as discussed in (c) above,
the investment in IMA Partners and all related intercompany accounts are
eliminated in consolidation.
(e) Reflects the application of the net proceeds of the Company's registered
direct offering of common stock (the "Offering").
F-22
<PAGE> 27
NASHVILLE COUNTRY CLUB, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
BRECKENRIDGE
HISTORICAL RESORT
-------------------------- ACQUISITION ACQUISITION OFFERING PRO FORMA
COMPANY AEG AWC ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS(1) CONSOLIDATED
------- ------ ------- ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Entertainment......................... $ -- $5,570 $18,011 $10,306(f) $ 33,887
Resort................................ 10,809 -- -- $9,915(a) 20,724
------- ------ ------- ------------
Total revenues................ 10,809 5,570 18,011 54,611
Operating expenses:
Entertainment......................... -- 6,013 17,723 (635)(e)
9,818(f)
(304)(c)
(150)(e) 32,465
Resort................................ 11,823 -- -- 7,368(a) 19,191
Depreciation and amortization......... 599 25 65 225(a) 386(b)
286(d)
306(f) 1,892
Corporate expenses.................... 347 -- -- 347
------- ------ ------- ------------
Total operating expenses...... 12,769 6,038 17,788 53,895
(Loss) income from operations........... (1,960) (468) 223 716
Interest (expense) income, net.......... (1,167) 5 (111) (595)(a) (38)(f)
(248)(j) (2,154)
Other income, net....................... -- 452 80 (36)(g) 496
Minority interest....................... -- -- -- (479)(i)
(71)(f) (550)
------- ------ ------- ------------
(Loss) income before taxes.............. (3,127) (11) 192 (1,492)
Provision for taxes..................... -- 1 11 (12)(h) --
------- ------ ------- ------------
Net (loss) income....................... $(3,127) $ (12) $ 181 $ (1,492)
======= ====== ======= =========
Net (loss) per share.................... $ (.19)
=========
Weighted average shares outstanding..... 8,000
=========
</TABLE>
- ---------------
(1) There were no pro forma offering adjustments to the Statement of Operations
Data other than the inclusion of the 2,600,000 shares of Common Stock being
offered pursuant to the Offering in the weighted average number of shares
outstanding for the year ended December 31, 1996.
See notes to unaudited pro forma consolidated financial data.
F-23
<PAGE> 28
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(a) The Breckenridge Resort was acquired on April 29, 1996 and, accordingly, the
results of operations of the Breckenridge Resort for the period from January
1, 1996 to April 29, 1996 are not included in the historical consolidated
financial statements of the Company for the year ended December 31, 1996.
This adjustment is presented to show the impact of including the revenues
and expenses of the Breckenridge Resort as if the Breckenridge Resort
Acquisition had occurred on January 1, 1996.
(b) The AEG Acquisition results in recording goodwill of approximately
$7,728,000. The Company expects to amortize this amount over a period of 20
years. This results in annual amortization of approximately $386,000.
(c) In 1996, AEG paid salaries and made ownership distributions based primarily
on the profitability of AEG and the availability of cash to fund such
payments. These payments were charged to entertainment expenses. Under the
terms of the Merger Agreement, these individuals have been provided with
employment/consulting agreements which specifically define salaries,
consulting fees and bonuses. The adjustment results from the net change in
expense as if the employment/consulting agreements had been in effect in
1996.
(d) The AWC Acquisition results in recording goodwill of approximately
$5,726,000. The Company expects to amortize this amount over a period of 20
years. This results in annual amortization of approximately $286,000.
(e) In 1996, AWC paid salaries and made ownership distributions based primarily
on the profitability of AWC and the availability of cash to fund such
payments. These payments were charged to entertainment expenses. Under the
terms of the definitive agreement relating to the AWC Acquisition, these
individuals will be provided with employment/consulting agreements which
specifically define salaries, consulting fees and bonuses. The adjustment
results from the net change in expense as if the employment/consulting
agreements had been in effect in 1996.
(f) At March 31, 1997, AWC held a 25% interest in IMA Partners which results in
the use of the equity method of accounting for AWC's investment in IMA
Partners. Upon completion of the AWC Acquisition, the Company will hold a
51% interest in IMA Partners. As a result, the operations of IMA Partners
will be presented using the consolidated method of accounting. This
adjustment is presented to show the impact of including all revenues,
expenses and minority interest of IMA Partners as if IMA Partners were
consolidated.
In April 1997, IMA Partners entered into a joint venture with Pavilion
Partners known as Western Amphitheater Partners ("WAP") for the operation
of the IMA and the GHA. Pursuant to the WAP joint venture, IMA Partners
will participate in the net operations of WAP.
The following table provides summary statement of operations data of IMA
Partners for the year ended December 31, 1996:
<TABLE>
<S> <C>
Revenues................................ $10,306,000
Cost of revenues........................ 7,604,000
Operating expenses...................... 2,214,000
Depreciation and amortization........... 306,000
Interest expense........................ 38,000
Net income.............................. 144,000
</TABLE>
(g) As a result of the consolidation of IMA Partners as discussed in (f) above,
the equity income (loss) from IMA Partners is eliminated.
F-24
<PAGE> 29
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS -- (CONTINUED)
(h) As a result of the expected utilization of net operating loss carryforwards,
the tax provisions have been removed as a pro forma adjustment.
(i) Reflects the 49% minority interest in AWC, after considering the earnings
effect of pro forma adjustments discussed in (e) and (h) above.
(j) The Company anticipates repaying the promissory notes issued to the former
AEG shareholders (the "AEG Promissory Notes") with proceeds from a new $15
million credit facility (the "Concurrent Financing"). This adjustment
reflects pro forma interest expense assuming the AEG Promissory Notes were
outstanding as of January 1, 1996 and a 10% interest rate, the contractual
interest rate of the AEG Promissory Notes.
F-25
<PAGE> 30
NASHVILLE COUNTRY CLUB, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- ACQUISITION OFFERING PRO FORMA
COMPANY AEG AWC ADJUSTMENTS ADJUSTMENTS(1) CONSOLIDATED
------- ------ ----- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Entertainment............... $ -- $1,544 $ 599 $74(e) $ 2,217
Resort...................... 10,102 -- -- 10,102
------- ------ ----- ------------
Total revenues...... 10,102 1,544 599 12,319
Operating expenses:
Entertainment............... -- 1,555 749 470(e)
88(b)
120(d) 2,982
Resort...................... 7,523 -- -- 7,523
Depreciation and
amortization............. 256 6 17 97(a)
72(c)
77(e) 525
Corporate expense........... 133 -- -- 133
------- ------ ----- ------------
Total operating
expenses.......... 7,912 1,561 766 11,163
Income (loss) from
operations.................. 2,190 (17) (167) 1,156
Interest expense, net......... (411) -- (12) (13)(e)
(62)(h) (498)
Other income, net............. -- 8 (106) 121(f) 23
Minority interest............. -- -- -- 199(g)
238(e) 437
------- ------ ----- ------------
Income (loss) before taxes.... 1,779 (9) (285) 1,118
Provision for taxes........... -- -- 1 1
------- ------ ----- ------------
Net income (loss)............. $ 1,779 $ (9) $(286) $ 1,117
======= ====== ===== =========
Net income per share.......... $ .14
=========
Weighted average shares
outstanding................. 8,000
=========
</TABLE>
- ---------------
(1) There were no pro forma offering adjustments to the Statement of Operations
Data other than the inclusion of the 2,600,000 shares of Common Stock being
offered pursuant to the Offering in the weighted average number of shares
outstanding for the three months ended March 31, 1997.
See notes to unaudited pro forma consolidated financial data.
F-26
<PAGE> 31
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(a) The AEG Acquisition results in recording goodwill of approximately
$7,728,000. The Company expects to amortize this amount over a period of 20
years. This results in quarterly amortization of approximately $97,000.
(b) For the three months ended March 31, 1997, AEG paid salaries and made
ownership distributions based primarily on the profitability of AEG and the
availability of cash to fund such payments. These payments were charged to
entertainment expenses. Under the terms of the Merger Agreement, these
individuals have been provided with employment/consulting agreements which
specifically define salaries, consulting fees and bonuses. The adjustment
results from the net change in expense as if the employment/consulting
agreements had been in effect in the first quarter of 1997.
(c) The AWC Acquisition results in recording goodwill of approximately
$5,726,000. The Company expects to amortize this amount over a period of 20
years. This results in quarterly amortization of approximately $72,000.
(d) For the three months ended March 31, 1997, AWC paid salaries and made
ownership distributions based primarily on the profitability of AWC and the
availability of cash to fund such payments. These payments were charged to
entertainment expenses. Under the terms of the definitive agreement relating
to the AWC Acquisition, these individuals will be provided with
employment/consulting agreements which specifically define salaries,
consulting fees and bonuses. The adjustment results from the net change in
expense as if the employment/consulting agreements had been in effect in the
first quarter 1997.
(e) At March 31, 1997, AWC held a 25% interest in IMA Partners which results in
the use of the equity method of accounting for AWC's investment in IMA
Partners. Upon completion of the AWC Acquisition, the Company will hold a
51% interest in IMA Partners. As a result, the operations of IMA Partners
will be presented using the consolidated method of accounting. This
adjustment is presented to show the impact of including all revenues,
expenses and minority interest of IMA Partners as if IMA Partners were
consolidated.
In April 1997, IMA Partners entered into the WAP joint venture with
Pavilion Partners for the operation of the IMA and GHA. Pursuant to the WAP
joint venture, IMA Partners will participate in the net operations of WAP.
The following table provides summary statement of operations data of IMA
Partners for the three months ended March 31, 1997:
<TABLE>
<S> <C>
Revenue.......................................................... $ 74,000
Operating expenses............................................... 470,000
Depreciation and amortization.................................... 77,000
Interest expense................................................. 13,000
Net loss......................................................... (486,000)
</TABLE>
(f) As a result of the consolidation of IMA Partners as discussed in (e) above,
the equity in losses from IMA Partners is eliminated.
(g) Reflects the 49% minority interest in AWC, after considering the earnings
effect of pro forma adjustment discussed in (d) above.
(h) The Company anticipates repaying the AEG Promissory Notes with proceeds from
the Concurrent Financing. This adjustment reflects pro forma interest
expense assuming the AEG Promissory Notes were outstanding as of January 1,
1997 and a 10% interest rate, the contractual interest rate of the AEG
Promissory Notes.
F-27
<PAGE> 32
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description of Document Page
------- ----------------------- ------------
2.1 Purchase Agreement, dated as of July 31, 1997,
among Nashville Country Club, Inc., AWC
Acquisition Corp., Inc., the Robert E. Geddes
Family Trust, the Miserendino Family Trust, Brian F.
Murphy and Audrey & Jane, Inc.
<PAGE> 1
EXHIBIT 2.1
PURCHASE AGREEMENT
among
NASHVILLE COUNTRY CLUB, INC.,
AWC ACQUISITION CORP.,
ROBERT E. GEDDES FAMILY TRUST,
MISERENDINO FAMILY TRUST,
BRIAN F. MURPHY
and
AUDREY & JANE, INC.
July 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - Purchase and Sale of Shares and Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Purchase and Sale of Shares and Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2 - Representations and Warranties of NCCI and Acquisition Sub . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 NCCI Stock and NCCI SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Certain Corporate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3 - Representations and Warranties of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Organization, Qualification and Corporate or Partnership Power . . . . . . . . . . . . . . . . . . . 7
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 Events Subsequent to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Tax Returns and Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14 Suppliers and Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15 Notes; Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.16 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.19 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.22 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.23 Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.24 Certain Business Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.25 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.26 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.28 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 4 - Conduct of Business Pending The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Conduct of Business Pending the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 No Other Bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Lines of Business and Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4 Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.6 Conduct of Business by Acquisition Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 5 - Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4 Taking of Necessary Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Notice of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.7 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 6 - Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Conditions to Obligations of Each Party to Effect the Closing . . . . . . . . . . . . . . . . . . . 25
6.2 Additional Conditions to NCCI's and Acquisition Sub's Obligations . . . . . . . . . . . . . . . . . 25
6.3 Additional Conditions to the Sellers' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 7 - Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 8 - Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 By NCCI, Acquisition Sub and the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Claims for Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.3 Defense by Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Payment of Indemnification Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 9 - General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Effect of Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9.3 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.8 Material Adverse Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.9 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
SCHEDULE 1 Disclosure Schedule
ANNEX I List of Shareholders of New Avalon, Inc., TBA Media, Inc.,
Eric/Chandler Ltd., Inc. and Eric Chandler Merchandising, Inc. and
Partners of Irvine Meadows Amphitheater
ANNEX II List of NCCI SEC Documents
EXHIBIT A Form of Assignment of Partnership Interests
EXHIBIT B Form of Assignment of Booking, Management and Related Fee Interests
EXHIBIT C Form of Registration Rights Agreement
EXHIBIT D Form of Shareholders Agreement
EXHIBIT E Form of Employment Agreements
EXHIBIT F Form of Partners Agreement
EXHIBIT G Form of Opinion of Counsel to the Sellers
-iii-
<PAGE> 5
PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of July 31, 1997 (this "Agreement"),
is by and among Nashville Country Club, Inc., a Tennessee corporation ("NCCI"),
AWC Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
NCCI ("Acquisition Sub"), the Robert E. Geddes Family Trust ("Geddes Family
Trust"), the Miserendino Family Trust ("Miserendino Family Trust") and Brian F.
Murphy ("Murphy;" Geddes Family Trust, Miserendino Family Trust and Murphy are
individually referred to herein as a "Selling Shareholder" and are collectively
referred to herein as the "Selling Shareholders"), and Audrey & Jane, Inc., a
California corporation ("A&J;" the Selling Shareholders and A&J are
collectively referred to herein as the "Sellers").
RECITALS
WHEREAS, the Selling Shareholders own all of the issued and
outstanding capital stock (the "Capital Stock") of West Coast Amphitheater
Corp., a California corporation ("WCAC"), New Avalon, Inc., a California
corporation ("New Avalon"), TBA Media, Inc., a California corporation ("TBA"),
Eric/Chandler Ltd., Inc., a Texas corporation ("ECL"), and Eric Chandler
Merchandising, Inc., a California corporation ("ECM;" WCAC, ECM, New Avalon,
TBA and ECL are individually referred to herein as a "Company" and are
collectively referred to herein as the "Companies"); and
WHEREAS, the Selling Shareholders desire to sell fifty-one percent
(51%) of the Capital Stock (the "Shares") to NCCI, and NCCI desires to purchase
the Shares from the Selling Shareholders, on the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, A&J is a general partner of Irvine Meadows Amphitheater, a
California general partnership (the "Partnership"), and owns a twenty-five
percent (25%) interest (the "A&J Partnership Interest") in the capital and
profits of the Partnership as described in that certain Second Amended and
Completely Restated Agreement of General Partnership of Irvine Meadows
Amphitheater, dated April 1, 1991, between A&J, IMA Investment Corp. ("IMA
Corp."), Shelli Meadows, Inc. ("SMI") and Paul C. Hegness, as amended (the
"Partnership Agreement"); and
WHEREAS, IMA Corp. is a general partner of the Partnership and owns a
forty-five percent (45%) interest in the Partnership as described in the
Partnership Agreement (the "IMA Corp. Partnership Interest"); and
WHEREAS, Peach Street Partners, Ltd. ("Peach Street") is a general
partner of the Partnership and owns a five percent (5%) interest in the
Partnership as described in the Partnership Agreement (the "Peach Street
Partnership Interest"); and
WHEREAS, immediately prior to the closing of the transactions
contemplated by this Agreement, A&J will acquire one hundred percent (100%) of
the IMA Corp. Partnership Interest from IMA Corp. and eighty percent (80%) of
the Peach Street Partnership Interest (the "Assigned Peach Street Partnership
Interest") from Peach Street; and
<PAGE> 6
WHEREAS, A&J desires to sell eight percent (8%) of the A&J Partnership
Interest (the "Assigned A&J Partnership Interest"), one hundred percent (100%)
of the IMA Corp. Partnership Interest and the Assigned Peach Street Partnership
Interest to NCCI, which together shall constitute fifty-one percent (51%) of
the partnership interests in the Partnership (collectively, the "Partnership
Interests"), and NCCI desires to purchase the Partnership Interests from A&J on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties
hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES AND PARTNERSHIP INTERESTS
1.1 Purchase and Sale of Shares and Partnership Interests. Subject
to the terms and conditions of and in reliance upon the representations and
warranties set forth in this Agreement, (a) the Selling Shareholders agree to
sell, assign, transfer and deliver to NCCI and NCCI agrees to purchase from
each of the Selling Shareholders the number of Shares of Capital Stock of each
of the Companies set forth opposite the name of each such Selling Shareholder
on Annex I attached hereto under the column entitled "Number of Shares Being
Sold," and (b) A&J agrees to sell, assign, transfer and deliver to NCCI and
NCCI agrees to purchase from A&J the Partnership Interests, in each case free
and clear of all security interests, liens and other encumbrances and claims,
except as set forth in the Disclosure Schedule (as hereinafter defined). The
sale of the Shares and the Partnership Interests to NCCI shall be referred to
as the "Acquisition."
1.2 Purchase Price. The aggregate purchase price (the "Purchase
Price") payable to the Sellers for the Shares and the Partnership Interests
will be equal to the greater of (1) $7,000,000 and (2) fifty-one percent (51%)
of the sum of (i) six times the average of EBITDA (as defined below), as
calculated in accordance with generally accepted accounting principles ("GAAP")
consistently applied, for the Partnership and WCAC for the years 1996, 1997 and
1998 (the "Computation Period") and (ii) six times the average of the net
income before taxes, as calculated in accordance with GAAP, of the Companies
other than WCAC for the Computation Period. For purposes of this Agreement,
"EBITDA" shall mean earnings before interest income and expense, income taxes,
depreciation and amortization. NCCI and the Sellers acknowledge and agree that
WCAC is a newly-formed entity through which NCCI is anticipated to develop
certain amphitheaters proposed to be constructed in Camarillo, California and
Portland, Oregon (the "Amphitheaters"). NCCI, Acquisition Sub and the Sellers
acknowledge and agree that if NCCI's development of the Amphitheaters is
delayed solely and exclusively due to NCCI's inability to adequately finance
such development for reasons other than the financial performance of
Acquisition Sub, the Computation Period for purposes of determining the average
of EBITDA for WCAC shall be extended by the period of such delay. NCCI,
Acquisition Sub and the Sellers further acknowledge and agree that in the event
the Computation Period is extended for purposes of determining the average of
EBITDA for WCAC, the parties shall proceed to a closing on the payment of any
additional consideration payable to the Sellers in respect of the Companies
other
PURCHASE AGREEMENT - PAGE 7
<PAGE> 7
than WCAC, as set forth in this Section 1.2, without regard to the extension of
such Computation Period for purposes of determining whether any additional
consideration may be payable to the Sellers in respect of the Partnership and
WCAC. The Purchase Price shall be paid or delivered to the Sellers as follows:
(a) At the Closing, NCCI shall deliver to the Sellers by
wire transfer to one or more accounts designated in writing by the
Sellers to NCCI cash in an amount equal to Seven Million Dollars
($7,000,000) (the "Initial Purchase Price"). The Initial Purchase
Price shall be allocated among the Sellers as specified in Annex I.
(b) Within thirty (30) days following its receipt of the
audited financial statements for the Companies and the Partnership for
the Computation Period, NCCI will prepare a statement (the "Purchase
Price Statement") calculating the final Purchase Price for the
Acquisition and setting forth the amount, if any, of additional
consideration payable to the Sellers in respect of the Acquisition and
deliver such Purchase Price Statement to the Sellers. In the event the
Purchase Price set forth on the Purchase Price Statement is greater
than the Initial Purchase Price, NCCI shall issue and deliver to the
Sellers within thirty (30) days of its delivery of the Purchase Price
Statement a number of shares of NCCI's common stock (the "Common
Stock") valued in an amount equal to the difference between such
greater purchase price and the Initial Purchase Price. In the event
that the Purchase Price set forth on the Purchase Price Statement is
equal to or less than the Initial Purchase Price, the Initial Purchase
Price shall constitute the final Purchase Price and no additional
consideration shall be payable by NCCI to the Sellers in respect of
the Acquisition. For purposes of determining the number of shares of
Common Stock payable to the Sellers pursuant to this Section 1.2(b),
if any, the shares of Common Stock will be valued based on the average
closing price (the "Average Price") of the Common Stock as reported by
The Nasdaq Stock Market or other securities exchange on which the
Common Stock is traded for each trading day in the Computation Period.
No fraction of a share of NCCI Common Stock will be issued to the
Sellers but in lieu thereof each Seller who would otherwise be
entitled to receive fractional shares will be paid an amount in cash
equal to the product of (A) the number of fractional shares to which
such holder is otherwise entitled and (B) the Average Price. No
interest shall be paid on such amount. Any additional consideration
payable to the Sellers pursuant to this Section 1.2(b) shall be
allocated among the Sellers in accordance with the allocation of the
Initial Purchase Price among the Sellers as specified in Annex I
attached hereto. In the event there shall be any change in the number
of outstanding shares of Common Stock of the Company effected during
the Computation Period by reason of a stock split or stock dividend,
then the parties shall in good faith mutually determine whether such
change equitably requires an adjustment in the Average Price for
purposes of determining the number of shares of Common Stock payable
to the Sellers pursuant to this Section 1.2(b).
Within twenty (20) days of its receipt of the Purchase Price
Statement, the Sellers shall notify NCCI of their objections, if any,
to the Purchase Price Statement and to NCCI's calculation of the final
Purchase Price and the aggregate number of shares of NCCI Common
Stock, if any, payable to the Sellers in respect of the Acquisition.
The Sellers' failure to object to NCCI's calculation of the final
Purchase Price and the
PURCHASE AGREEMENT - PAGE 8
<PAGE> 8
additional consideration payable to the Sellers, if any, within such
twenty-day period shall constitute acceptance thereof. If the Sellers
object to the Purchase Price Statement and the Sellers and NCCI are
unable to resolve the disputed items and agree on the final Purchase
Price within fifteen (15) days of the Sellers' notification to NCCI of
its objections, such dispute shall be referred to Arthur Andersen LLP
or other independent accountants (the "Independent Accountants")
mutually acceptable to NCCI and the Sellers. The Independent
Accountants shall, within thirty (30) days following its selection,
deliver to NCCI and the Sellers a written report calculating the final
Purchase Price, which calculation shall be conclusive and binding on
NCCI and the Sellers. If the Sellers object to the Purchase Price
Statement, NCCI's obligation, if any, to deliver shares of NCCI Common
Stock to the Sellers shall be extended until thirty (30) days
following the final determination of the Purchase Price.
1.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Winstead Sechrest &
Minick P.C., 1201 Elm Street, 5400 Renaissance Tower, Dallas, Texas, on July
31, 1997 or as soon as reasonably practicable thereafter as the conditions set
forth in Article 6 have been satisfied or waived (the "Closing Date"). At the
Closing:
(a) NCCI and Acquisition Sub will (i) pay to the Sellers
the Initial Purchase Price by wire transfer of immediately available
funds and (ii) execute and deliver to the Sellers such other documents
and instruments required to be executed and delivered by NCCI and
Acquisition Sub under the terms of this Agreement;
(b) Each Selling Shareholder will deliver to NCCI (i)
certificates representing the Shares listed opposite such Selling
Shareholder's name on Annex I under the column labeled "Number of
Shares Being Sold" and (ii) such other documents and instruments
required to be delivered by the Selling Shareholders under the terms
of this Agreement or reasonably requested by NCCI. The certificates
representing the Shares shall be duly endorsed in blank or accompanied
by stock powers duly executed by such Selling Shareholder transferring
the same. Each Selling Shareholder agrees to cure any deficiencies
with respect to the endorsement and transfer of the certificates
representing the Shares being sold by such Selling Shareholder; and
(c) A&J will deliver to NCCI (i) an assignment of the
Partnership Interests substantially in the form of Exhibit A attached
hereto, (ii) an assignment of all of its rights to receive booking,
management and related fees under the Partnership Agreement and under
that certain Promotion Agreement, dated January 1997, among A&J, SMI
and Western Amphitheater Partners (the "Promotion Agreement")
substantially in the form of Exhibit B attached hereto and (iii) such
other documents and instruments required to be delivered by A&J under
the terms of this Agreement or reasonably requested by NCCI.
1.4 Registration Rights. Each Seller will execute a Registration
Rights Agreement in the form attached hereto as Exhibit C and shall have the
registration and other rights provided in such Registration Rights Agreement
with respect to any shares of NCCI Common Stock issued pursuant to Section
1.2(b) hereof, which Registration Rights Agreement is hereby incorporated
herein by this reference as if set forth in full in this Agreement. The parties
hereto stipulate and
PURCHASE AGREEMENT - PAGE 9
<PAGE> 9
agree that the execution and delivery of the Registration Rights Agreement is
intended to provide the Sellers with flexibility in disposing of any shares of
NCCI Common Stock that may be issued pursuant to Section 1.2(b) of this
Agreement and does not evidence any present intention to dispose of any such
shares upon their issuance.
1.5 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing Shares shall have been lost, stolen or destroyed, NCCI
shall pay the Purchase Price in exchange for such lost, stolen or destroyed
certificate(s), upon the making of an affidavit of that fact by the holder
thereof; provided, however, that NCCI may, in its discretion and as a condition
precedent to the payment thereof, require the owner of such lost, stolen or
destroyed certificate(s) to deliver a bond in such sum as NCCI may reasonably
direct as indemnity against any claim that may be made against NCCI with
respect to the certificate(s) alleged to have been lost, stolen or destroyed.
1.6 Further Action. If, at any time after the Closing Date, any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest NCCI with full right, title and possession and all rights,
privileges and immunities with respect to the Shares and the Partnership
Interests, the Selling Shareholders and A&J, as appropriate, shall take all
such action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF NCCI AND ACQUISITION SUB
NCCI and Acquisition Sub hereby represent and warrant to the Sellers
as follows as of the date hereof and as of the Closing Date:
2.1 Organization and Qualification. NCCI has been duly
incorporated and is validly existing as a corporation and is in good standing
under the laws of the State of Tennessee and has the requisite corporate power
to carry on its business as now conducted. Acquisition Sub has been duly
incorporated and is validly existing as a corporation and is in good standing
under the laws of the State of Delaware and has the requisite corporate power
to carry on its business as now conducted.
2.2 Authority Relative to this Agreement. Each of NCCI and
Acquisition Sub has the requisite corporate power and authority to enter into
this Agreement and to carry out its respective obligations hereunder. The
execution and delivery of this Agreement by NCCI and Acquisition Sub and the
consummation by NCCI and Acquisition Sub of the transactions contemplated
hereby have been duly authorized by the respective Boards of Directors of NCCI
and Acquisition Sub and no other corporate proceedings on the part of NCCI or
Acquisition Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
NCCI and Acquisition Sub and constitutes the valid and binding obligation of
each such company, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity. None of the execution and delivery of this Agreement by
NCCI or Acquisition Sub, the performance by NCCI or Acquisition Sub of its
obligations hereunder or the consummation of the transactions
PURCHASE AGREEMENT - PAGE 10
<PAGE> 10
contemplated hereby by NCCI or Acquisition Sub will require any consent,
approval or notice under, or violate, breach, be in conflict with or constitute
a default (or an event that, with notice or lapse of time or both, would
constitute a default) under, or permit the termination of, or result in the
creation or imposition of any lien upon any properties, assets or business of
NCCI or Acquisition Sub under any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract, instrument
or other agreement or commitment or any order, judgment or decree to which NCCI
or Acquisition Sub is a party or by which NCCI or Acquisition Sub or any of
their respective assets or properties is bound or encumbered, except those that
have already been given, obtained or filed. Other than in connection with
filings under the Securities Act of 1933, as amended (the "Securities Act"), if
any, necessary to perfect an exemption from registration under the Securities
Act and to effect the registrations contemplated by the Registration Rights
Agreement, filings made with the National Association of Securities Dealers,
Inc. to list the shares of NCCI Common Stock that may be issued in connection
with the Acquisition in the National Market System of The Nasdaq Stock Market
and filings to be made with state securities regulatory agencies, no
authorization, consent or approval of, or filing with, any public body, court
or authority is necessary on the part of NCCI or Acquisition Sub for the
consummation by NCCI and Acquisition Sub of the transactions contemplated by
this Agreement.
2.3 NCCI Stock and NCCI SEC Documents. NCCI has furnished the
Sellers with a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by NCCI with the Securities and
Exchange Commission ("SEC") since January 1, 1996 (the "NCCI SEC Documents"),
which are all the documents (other than preliminary materials) that NCCI was
required to file with the SEC since such date and all of which documents are
listed on Annex II attached hereto. As of its date, each NCCI SEC Document was
in compliance, in all material respects, with the requirements of its form. The
financial statements of NCCI included in the NCCI SEC Documents complied, at
the time of filing with the SEC, as to form, in all material respects, with
applicable accounting requirements and published rules and regulations of the
SEC with respect thereto, were prepared in accordance with generally accepted
accounting principles, applied on a consistent basis during the periods
involved, and fairly presented, in all material respects (subject, in the case
of unaudited statements, to normal, recurring year-end audit adjustments) the
financial position of NCCI as at the dates thereof and the results of its
operations and changes in financial position for the periods then ended.
2.4 Certain Corporate Matters. Each of NCCI and Acquisition Sub is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the ownership of its properties, the employment
of its personnel or the conduct of its business requires it to be so qualified.
NCCI has full corporate power and authority and all authorizations, licenses
and permits necessary to carry on the business in which it engages or in which
it proposes presently to engage and to own and use the properties owned and
used by it. NCCI and Acquisition Sub have each delivered to the Sellers true,
accurate and complete copies of their charter documents and bylaws which
reflect all amendments made thereto at any time prior to the date of this
Agreement. The minute books containing the records of meetings of the
shareholders and boards of directors of NCCI and Acquisition Sub are accurate
and complete in all material respects. All material corporate actions taken by
NCCI and Acquisition Sub since
PURCHASE AGREEMENT - PAGE 11
<PAGE> 11
their respective dates of incorporation have been duly authorized and/or
subsequently ratified, as necessary. Neither NCCI nor Acquisition Sub is in
default under, or in violation of, any provision of its charter or bylaws.
2.5 Broker's Fees. Neither NCCI nor anyone on its behalf has any
liability to any broker, finder, investment banker or agent, or has agreed to
pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the Acquisition or any similar transaction.
2.6 Disclosure. The representations and warranties and statements
of fact made by NCCI and Acquisition Sub in this Agreement and in certificates
and other written statements or agreements delivered or to be delivered
pursuant to this Agreement are accurate, correct and complete on the date of
this Agreement and will, except as contemplated hereby, be accurate, correct
and complete at the Closing and do not and will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements and information contained herein or therein not
misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as set forth in the correspondingly numbered section of the
disclosure schedule attached hereto as Schedule 1 and incorporated herein by
this reference (the "Disclosure Schedule"), each Seller hereby jointly and
severally represents and warrants to NCCI and Acquisition Sub as follows as of
the date hereof and as of the Closing Date. The representations and warranties
in this Article 3 are made by each Seller only with respect to the Shares or
Partnership Interests, as the case may be, being sold by such Seller hereunder.
3.1 Organization, Qualification and Corporate or Partnership
Power. Each Company is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Each Company is duly
qualified to do business as a foreign corporation and is in good standing in
the jurisdictions specified in Section 3.1 of the Disclosure Schedule, which
are the jurisdictions in which the ownership of its properties, the employment
of its personnel or the conduct of its business requires that it be so
qualified or where a failure to be so qualified or licensed would have a
material adverse effect on its financial condition, results of operation or
business. Each Company has full corporate power and authority and all
authorizations, licenses and permits necessary to carry on the business in
which it is engaged or in which it proposes presently to engage and to own and
use the properties owned and used by it. Each Company has delivered to NCCI
true, accurate and complete copies of its charter and bylaws which reflect all
amendments made thereto at any time prior to the date of this Agreement. The
minute books containing the records of meetings of the shareholders and boards
of directors of each Company, the stock certificate books and the stock record
books of each Company are complete and correct in all material respects. The
stock record books of each Company and the shareholder lists of each Company,
which each Company has previously furnished to NCCI, are complete and correct
in all respects and accurately reflect the record ownership and, to the
knowledge of the Shareholders, the beneficial ownership of all the outstanding
shares of each Company's capital stock and all other outstanding securities
issued by each Company. All material corporate actions
PURCHASE AGREEMENT - PAGE 12
<PAGE> 12
taken by each Company since incorporation have been duly authorized and/or
subsequently ratified as necessary. None of the Companies is in default under
or in violation of any provision of its charter or bylaws. None of the
Companies or the Partnership is in default or in violation of any restriction,
lien, encumbrance, indenture, contract, lease, sublease, loan agreement, note
or other obligation or liability by which it is bound or to which any of its
assets is subject. The Partnership is duly organized, validly existing and in
good standing under the laws of the State of California and it has all
requisite partnership power and authority to carry on its business as it is now
being conducted and to own, lease or operate its properties as and in the
places where such business is now conducted. The Partnership is not required to
be qualified, licensed or domesticated as a foreign partnership in any
jurisdiction. The Sellers have delivered to NCCI true, accurate and complete
copies of the Partnership Agreement which reflect all amendments made thereto
at any time prior to the date of this Agreement. The books of account of the
Partnership are complete and correct in all material respects and there have
been no material transactions involving the business of the Partnership which
properly should have been set forth in those books and which are not accurately
so set forth. No consent of any person or entity is or will be required for A&J
to sell the Partnership Interests to NCCI pursuant to this Agreement which
consent has not been obtained.
3.2 Capitalization. New Avalon's entire authorized capital stock
consists of 100,000 shares of Common Stock (the "New Avalon Common Shares"), of
which 12,500 shares are issued and outstanding and 12,500 shares will be issued
and outstanding immediately prior to the Closing. ECM's entire authorized
capital stock consists of 100,000 shares of Common Stock (the "ECM Common
Shares"), of which 3,000 shares are issued and outstanding and 3,000 shares
will be issued and outstanding immediately prior to the Closing. TBA's entire
authorized capital stock consists of 50,000 shares of Common Stock (the "TBA
Common Shares"), of which 5,000 shares are issued and outstanding and 5,000
shares will be issued and outstanding immediately prior to the Closing. ECL's
entire authorized capital stock consists of 100,000 shares of Common Stock (the
"ECL Common Shares"), of which 1,000 shares are issued and outstanding and
1,000 shares will be issued and outstanding immediately prior to the Closing.
WCAC's entire authorized capital stock consists of 100,000 shares of Common
Stock (the "WCAC Common Shares"), of which 1,000 shares are issued and
outstanding and 1,000 shares will be issued and outstanding immediately prior
to the Closing (the New Avalon Common Shares, the ECM Common Shares, the TBA
Common Shares, the WCAC Common Shares and the ECL Common Shares are
collectively referred to herein as the "Common Shares"). All of the issued and
outstanding Common Shares have been and, as of the Closing Date, will be duly
authorized and are and, as of the Closing Date, will be validly issued, fully
paid and nonassessable and have not been and, as of the Closing Date, will not
be issued in violation of any pre-emptive rights. There are no outstanding or
authorized options, rights, warrants, calls, convertible securities, rights to
subscribe, conversion rights or other agreements or commitments to which any
Company is a party or which are binding upon any Company providing for the
issuance or transfer by any Company of additional shares of its capital stock
and no Company has reserved any shares of its capital stock for issuance, nor
are there any outstanding stock option rights, phantom equity or similar
rights, contracts, arrangements or commitments based upon the book value,
income or other attribute of any Company. There are no voting trusts or any
other agreements or understandings with respect to the voting of any Company's
capital stock. Upon consummation of the Acquisition, NCCI will own fifty-one
percent (51%) of the equity interest in each Company and no Company will have
outstanding any stock or securities convertible or
PURCHASE AGREEMENT - PAGE 13
<PAGE> 13
exchangeable for any shares of its capital stock, nor have outstanding any
rights, options, agreements or arrangements to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
its capital stock. Annex I attached hereto sets forth a true accurate and
complete list of all holders of capital stock of each Company and the number of
shares of capital stock held by each such person. All capital stock, options,
warrants and other securities issued by the Companies were issued in
compliance, in all respects, with all applicable federal and state securities
laws. At the time of the Closing, each of the Selling Shareholders will own,
beneficially and of record, the Common Shares reflected opposite such Selling
Shareholder's name on Annex I hereto free and clear of any liens, claims,
security interests, pledges or encumbrances of any nature. Upon consummation of
the Acquisition in accordance with the terms of this Agreement, NCCI will
acquire the Shares free and clear of any liens, claims, security interests,
pledges or encumbrances of any nature. No Selling Shareholder owns,
beneficially or of record, any capital stock of any Company other than the
Common Shares reflected on Annex I. Annex I correctly sets forth the ownership
interests in the Partnership. The Partnership Interests are owned by A&J free
and clear of all liens, security interests, claims, charges or other
encumbrances. Except as contemplated by this Agreement, neither A&J nor the
Partnership has granted any rights of any kind to any person or entity to
acquire any interest in the Partnership.
3.3 Authorization of Transaction. Each of the Sellers has the
requisite power and authority to enter into this Agreement and perform its
obligations hereunder. The execution, delivery and performance of this
Agreement and the transactions contemplated by this Agreement have been duly
authorized by all requisite action of the Sellers. This Agreement has been duly
executed and delivered by each of the Sellers and constitutes the valid and
binding obligation of each of the Sellers, enforceable in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally or
by general principles of equity. None of the execution and delivery of this
Agreement by the Sellers, the performance by the Sellers of their obligations
hereunder or the consummation of the transactions contemplated hereby by the
Sellers will require any consent, approval or notice under, or violate, breach,
be in conflict with or constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination of, or result in the creation or imposition of any lien upon any
properties, assets or business of any Company or the Partnership under any
charter, bylaws, partnership agreement, note, bond, indenture, mortgage, deed
of trust, lease, franchise, permit, authorization, license, contract,
instrument or other agreement or commitment or any order, judgment or decree to
which any Company or the Partnership is a party or by which any Company or the
Partnership or any of their respective assets or properties is bound or
encumbered, except those that have already been given, obtained or filed, all
as set forth in Section 3.3 of the Disclosure Schedule. No notice to, filing
with or authorization, consent or approval of any public body or authority is
necessary for the consummation by the Sellers of the transactions contemplated
by this Agreement.
3.4 Subsidiaries. None of the Companies owns or is obligated to
purchase any equity interest in or any other interest convertible into or
exchangeable for an equity interest in any entity.
PURCHASE AGREEMENT - PAGE 14
<PAGE> 14
3.5 Financial Statements. The Sellers have delivered to NCCI (a)
audited balance sheets of each of the Companies (other than WCAC) and the
Partnership as of December 31, 1996, (b) audited statements of operations and
statements of cash flows of each of the Companies (other than WCAC) and the
Partnership for each of the years in the two-year period ended December 31,
1996, (c) unaudited balance sheets of each of the Companies and the Partnership
as of March 31, 1997, and (d) unaudited statements of operations and statements
of cash flows of each of the Companies and the Partnership for the three (3)
months ended March 31, 1997 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered
thereby and present fairly the financial condition of each of the Companies
(other than WCAC) and the Partnership as of such dates and the results of its
operations and changes in financial position for such periods.
3.6 Events Subsequent to Financial Statements. Except as disclosed
in the Financial Statements, since December 31, 1996, there has not been:
(a) any materially adverse change in the financial
condition, results of operations or business of any Company or the
Partnership;
(b) any sale, lease, transfer, license or assignment of
any material assets, tangible or intangible, of any Company or the
Partnership, other than in the ordinary course of business;
(c) any damage, destruction or property loss, whether or
not covered by insurance, affecting materially adversely the
properties or business of any Company or the Partnership;
(d) any declaration or setting aside or payment of any
dividend or distribution with respect to the shares of capital stock
of any Company or the ownership interests of the Partnership or any
redemption, purchase or other acquisition of any such shares or
interests;
(e) any mortgage or pledge of, or subjection to any
material lien, charge, security interest or encumbrance of any kind
on, any of the assets, tangible or intangible, of any Company or the
Partnership (other than liens arising by operation of law which secure
obligations which are not yet due and payable);
(f) any incurrence of indebtedness or liability or
assumption of obligations by any Company or the Partnership other than
(i) those incurred in the ordinary course of business, (ii) those
which do not exceed $100,000 in the aggregate, and (iii) those
incurred in the course of negotiating, documenting and consummating
the transactions contemplated by this Agreement;
(g) any cancellation or compromise by any Company or the
Partnership of any material debt or claim, except for adjustments made
in the ordinary course of business which, in the aggregate, are not
material;
PURCHASE AGREEMENT - PAGE 15
<PAGE> 15
(h) any waiver or release by any Company or the
Partnership of any right of any material value;
(i) any sale, assignment, transfer or grant by any
Company or the Partnership of any rights under any concessions,
leases, licenses, agreements, patents, inventions, trademarks, trade
names or copyrights or with respect to any know-how or other
intangible assets;
(j) any material arrangement, agreement or undertaking
entered into by any Company or the Partnership not terminable on 30
days or less notice without cost or liability (including, without
limitation, any payment of or promise to pay any bonus or special
compensation) with employees or any increase in compensation or
benefits to officers or directors of any Company or partners of the
Partnership, other than in the ordinary course of business;
(k) except for the formation of WCAC and the transactions
contemplated by this Agreement, any change made or authorized in the
charter or bylaws of any Company or the Partnership Agreement of the
Partnership;
(l) except for the formation of WCAC and the transactions
contemplated by this Agreement, any issuance, sale or other
disposition by any Company or the Partnership of any shares of its
capital stock or partnership interests or other equity securities or
interests, or any grant of any options, warrants or other rights to
purchase or obtain (including upon conversion or exercise) shares of
capital stock or partnership interests or other equity securities or
interests;
(m) any loan to or other transaction with any officer,
director, shareholder or partner of any Company or the Partnership
giving rise to any claim or right of any Company or the Partnership
against any such person or of such person against any Company or the
Partnership;
(n) any payment to or other transaction with any officer,
director or shareholder of any Company or any partner of the
Partnership involving an amount in excess of $20,000, individually or
in the aggregate, other than the payment of monthly compensation
consistent with customary practice;
(o) any acceleration, termination, modification or
cancellation or threat thereof by any party of any contract, lease or
other agreement or instrument to which any Company or the Partnership
is a party or by which it is bound so as to affect, materially and
adversely, the properties or business of any Company or the
Partnership; or
(p) except for the formation of WCAC, the assignment of
rights to develop the Amphitheaters to WCAC and the transactions
contemplated by this Agreement, any other material transaction or
commitment entered into other than in the ordinary course of business
by any Company or the Partnership.
PURCHASE AGREEMENT - PAGE 16
<PAGE> 16
3.7 Undisclosed Liabilities. None of the Companies or the
Partnership has any material liability or obligation whatsoever, known or
unknown, either accrued, absolute, contingent or otherwise, except to the
extent shown on the Financial Statements, incurred in the normal and ordinary
course of business of any Company since January 1, 1997 (provided that,
liabilities or obligations incurred in connection with the termination of
employees shall not be considered liabilities incurred in the ordinary course
of business), or incurred in the course of negotiating, documenting and
consummating the transactions contemplated by this Agreement. None of the
Companies or the Partnership is indebted, directly or indirectly, to any person
who is an officer, director or shareholder of any Company or any affiliate of
any such person in any amount whatsoever other than for salaries for services
rendered or reimbursable business expenses, and no such officer, director,
shareholder or affiliate is indebted to any Company, except for advances made
to employees of the Companies in the ordinary course of business to meet
reimbursable business expenses anticipated to be incurred by such obligor.
3.8 Tax Returns and Audits. The taxable year of each Company and
the Partnership ends December 31. Each Company and the Partnership has duly and
timely filed or caused to be filed all tax returns (the "Tax Returns") required
to be filed on behalf of itself and has paid in full or fully reserved against
in the Financial Statements all taxes, interest, penalties, assessments and
deficiencies due or claimed to be due on behalf of itself to foreign, federal,
state or local taxing authorities (including taxes on properties, income,
franchises, licenses, sales, use and payrolls). Such Tax Returns are correct in
all material respects, and no Company or the Partnership is required to pay any
other taxes for such periods except as shown in such Tax Returns. The income
tax returns filed by the Companies and the Partnership have not been, and are
not being, to the knowledge of the Sellers, examined by the Internal Revenue
Service or other applicable taxing authorities for any period. All taxes or
estimates thereof that are due, or are claimed or asserted by any taxing
authority to be due, have been timely and appropriately paid so as to avoid
penalties for underpayment. Except for amounts not yet due and payable, all tax
liabilities to which the properties of the Companies or the Partnership may be
subject have been paid and discharged. The provisions for income and other
taxes payable reflected in the Financial Statements make adequate provision for
all then accrued and unpaid taxes of the Companies and the Partnership. There
are no tax liens (other than liens for taxes which are not yet due and payable)
on any of the properties of the Companies or the Partnership, nor are there any
pending or threatened examinations or tax claims asserted. No Company has
granted any extensions of limitation periods applicable to tax claims or filed
a consent under Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code") relating to collapsible corporations. Except in jurisdictions in
which a Company voluntarily files tax returns, no claim has ever been made by a
taxing authority that either a Company is or may be subject to taxation by that
jurisdiction. True and correct copies of all federal, foreign, state and local
income and other tax returns, notices from foreign, federal, state and local
taxing authorities, tax examination reports and statements of deficiencies
assessed against or agreed to by any Company since January 1, 1994, have been
delivered to NCCI, and the same are listed in Section 3.8 of the Disclosure
Schedule. None of the Companies or the Partnership is a party to, or bound by,
any tax indemnity, tax sharing or tax allocation agreement. None of the
Companies is a party to any agreement that has resulted or would result in the
payment of any "excess parachute payments" within the meaning of Section 280G
of the Code. None of the Companies has ever been a member of an "affiliated
group," as defined in Section 1504(a) of the Code (other than a group of which
such Company is the common parent). All positions taken on federal Tax Returns
that
PURCHASE AGREEMENT - PAGE 17
<PAGE> 17
could give rise to a penalty for substantial understatement pursuant to Section
6662(d) of the Code have been disclosed on such Tax Returns. None of the
Companies or the Partnership is a United States real property holding
corporation as defined in Section 897 of the Code. None of the Sellers is a
foreign person within the meaning of Section 1445(b)(2) of the Code. None of
the Companies has made any tax elections under any section of the Code,
including, without limitation under any of Sections 108, 168, 338, 441, 463,
472, 1017, 1033 or 4977 of the Code (or any predecessor thereof). None of the
assets and properties of any Company or the Partnership is an asset or property
that NCCI or any of its affiliates is or will be required to treat as being (i)
owned by any other Person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended, and in effect immediately before
the enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use property
within the meaning of Section 168(h)(1) of the Code. No closing agreement
pursuant to Section 7121 of the Code (or any predecessor provision) or any
similar provision of any state, local, or foreign law has been entered into by
or with respect to any Company or any assets thereof. None of the Companies has
agreed to or is required to make any adjustment pursuant to Section 481(a) of
the Code (or any predecessor provision) by reason of any change in any
accounting method, none of the Companies has applications pending with any
taxing authority requesting permission for any changes in any accounting
method, and the Internal Revenue Service has not proposed any such adjustment
or change in accounting method therefor. None of the Companies has been or is
in violation (or with notice or lapse of time or both, would be in violation)
of any applicable law relating to the payment of withholding of taxes. Each
Company has duly and timely withheld from salaries, wages and other
compensation and paid over to the appropriate taxing authorities all amounts
required to be so withheld and paid over for all periods under all applicable
laws.
3.9 Books and Records. The general ledgers and books of account of
the Companies and the Partnership, all federal, state and local income,
franchise, property and other tax returns filed by the Companies and the
Partnership, with respect to their assets, and all other books and records of
the Companies and the Partnership are in all material respects complete and
correct and have been maintained in accordance with good business practice and
in accordance with all applicable procedures required by laws and regulations
in all material respects.
3.10 Real Property. Set forth in Section 3.10 of the Disclosure
Schedule is a complete and accurate list and a brief description of all real
property owned or leased by the Companies and the Partnership. With respect to
each lease so set forth, except as contemplated by this Agreement: (a) the
lease has been validly executed and delivered by the Companies and the
Partnership, as applicable, and, to the knowledge of the Sellers, by the other
party or parties thereto and is in full force and effect; (b) neither the
Companies or the Partnership, as applicable, and, to the knowledge of the
Sellers, any other party to the lease is in material breach or default, and no
event has occurred on the part of the Companies or the Partnership, as
applicable or, to the knowledge of the Sellers, on the part of any other party
which, with notice or lapse of time, would constitute such a breach or default
or permit termination, modification or acceleration under the lease; (c) the
lease will continue to be binding in accordance with its terms following the
consummation of the Acquisition; (d) none of the Companies or the Partnership
has repudiated and, to the knowledge of the Sellers, no other party to the
lease has repudiated any provision thereof; (e) there are no disputes, oral
agreements or delayed payment programs in
PURCHASE AGREEMENT - PAGE 18
<PAGE> 18
effect as to the lease; and (f) all facilities leased thereunder have been
approved by all necessary governmental authorities, have been maintained in
accordance with normal industry practice and are in good condition, working
order and repair.
3.11 Tangible Property. Each of the Companies and the Partnership
have good and marketable title to, or a valid leasehold interest in, each item
of tangible property, whether real, personal or mixed, reflected on their books
and records as owned or used by them, subject to no material encumbrances,
loans, security interests, mortgages or pledges.
3.12 Intellectual Property.
(a) Section 3.12(a) of the Disclosure Schedule sets
forth a list of intellectual property owned by each of the Companies
and the Partnership including all patents, patent applications,
trademarks, service marks, trade dress, trade names, trade secrets,
corporate names, customer lists, copyrights, mask works, technology or
intellectual property that are material to the business of the
Companies and the Partnership and registrations or applications to
register any of the foregoing and a list of all licenses or other
contracts related thereto (collectively, the "Intellectual Property").
With respect to each such item of Intellectual Property:
(i) a Company or the Partnership is the sole and
exclusive owner and has the sole and exclusive right to use
the item in the conduct of its business;
(ii) no proceedings have been instituted, are
pending or are threatened which challenge the validity,
enforceability, use or ownership thereof;
(iii) the item (A) does not infringe upon or
otherwise violate the rights of others, (B) to the knowledge
of the Sellers, is not being infringed upon by others and (C)
is not subject to any outstanding order, decree, judgment,
stipulation or charge;
(iv) no license, sublicense or agreement
pertaining to the item has been granted by any Company or the
Partnership;
(v) no Company or the Partnership has received
any charge of interference or infringement with respect to the
item;
(vi) except in the ordinary course of business, no
Company or the Partnership has agreed to indemnify any person
or entity for or against any infringement with respect to the
item;
(vii) the transactions contemplated by this
Agreement will have no material adverse effect on the right,
title and interest of any Company or the Partnership in the
item;
(viii) the Companies and the Partnership have taken
all steps which are commercially reasonable to protect the
rights set forth in Section 3.12(a) of the
PURCHASE AGREEMENT - PAGE 19
<PAGE> 19
Disclosure Schedule and will continue to use commercially
reasonable efforts to maintain those rights prior to the
Closing Date so as to not materially adversely affect the
validity or enforcement of such rights; and
(ix) the Sellers have supplied NCCI with true and
complete copies of all written documentation evidencing the
ownership of the item and of all licenses and other contracts
related thereto.
(b) Section 3.12(b) of the Disclosure Schedule sets
forth a list describing all patents, trademarks, trade names, service
marks, copyrights, trade secrets and mask works of others which any
Company or the Partnership practices or uses that are material to such
Company or the Partnership. With respect to each such item of
intellectual property:
(i) any license agreement covering the item is a
valid and binding agreement and is in full force and effect;
(ii) no event has occurred which constitutes a
breach of such license agreement, no Company or the
Partnership has repudiated and, to the knowledge of the
Sellers, no other party thereto has repudiated any provision
thereof and there are no disputes, oral arrangements or
delayed payment programs in effect as to any such license
agreement;
(iii) the Sellers have supplied NCCI with a true
and complete copy of the license agreement;
(iv) the transactions contemplated by this
Agreement will have no material adverse effect on the ability
of the Companies and the Partnership to continue using or
practicing each such item; and
(v) the Sellers are not aware of any claim that
the exercise of the rights granted to any Company or the
Partnership with respect to such item infringes upon the
intellectual property rights of any third party.
(c) No Company or the Partnership has infringed,
misappropriated or otherwise violated any intellectual property rights
of any third party. The Sellers are not aware of any infringement,
misappropriation or violation with respect to intellectual property
which will occur as a result of the continued operation of the
business of the Companies and the Partnership as now conducted or as
presently proposed to be conducted.
(d) The Companies and the Partnership have taken
commercially reasonable security measures to protect the security,
confidentiality and value of all the material intellectual property
owned by them.
3.13 Contracts. Section 3.13 of the Disclosure Schedule lists the
following contracts and written arrangements, true and complete copies of which
have been delivered to NCCI, to which a Company or the Partnership is a party:
PURCHASE AGREEMENT - PAGE 20
<PAGE> 20
(a) any contract for the lease of personal property from
or to third parties providing for lease payments in excess of
$10,000.00 per annum;
(b) any contract for the purchase or sale of supplies,
products manufactured by a Company or the Partnership or other
personal property or for the furnishing or receipt of services which
contract calls for performance over a period of more than one year or
which involves more than the sum of $10,000.00, except no license
agreement need be disclosed pursuant to this Section 3.13 unless it
calls for performance over a period of more than one year and involves
more than the sum of $15,000.00;
(c) any joint venture agreement;
(d) any agreement or instrument under which a Company or
the Partnership is or may become indebted for borrowed money;
(e) any noncompetition agreement;
(f) any other contract in which the consequences of a
default or termination would have a materially adverse effect on the
financial condition of any Company or the Partnership or on the
prospects or the conduct of the business of any Company or the
Partnership;
(g) any standard form of license agreement; and
(h) any other contract or arrangement not entered into in
the ordinary course of business.
All contracts and arrangements listed in Section 3.13 of the Disclosure
Schedule are valid and binding agreements. No Company or the Partnership is
and, to the knowledge of the Sellers, no other party is in breach or default,
and no event has occurred on the part of any Company or the Partnership or, to
the knowledge of the Sellers, on the part of any other party to any such
contract or arrangement which with notice or lapse of time would constitute a
breach or default or permit termination under any such contract or arrangement.
None of such contracts or arrangements will be terminated or modified by the
consummation of the Acquisition. The Sellers have previously made available to
NCCI all of the material service agreements of the Companies and the
Partnership with their customers. No Company or the Partnership is a party to
any verbal contract or arrangement which, if reduced to written form, would be
required to be listed in Section 3.13 of the Disclosure Schedule under the
terms of subsections (a)-(h) of this Section 3.13.
3.14 Suppliers and Customers. Section 3.14 of the Disclosure
Schedule is a true and correct list of all suppliers to whom any Company or the
Partnership made payments during the year ended December 31, 1996, in excess of
five percent of such paying entity's gross revenues as reflected in the
Financial Statements for such year and all customers of any Company or the
Partnership that paid, during the fiscal year ended December 31, 1996, more
than five percent of the gross revenues of such Company or the Partnership as
reflected in the Financial Statements for such year. Since December 31, 1996,
no material customer of any Company or the
PURCHASE AGREEMENT - PAGE 21
<PAGE> 21
Partnership has notified such Company or the Partnership that it will
substantially decrease or cease doing business with such Company or the
Partnership.
3.15 Notes; Accounts Receivable. As of the Closing Date, all notes
payable to and accounts receivable of the Companies and the Partnership will be
properly reflected on their books and records and will be valid receivables
subject to no setoffs or counterclaims.
3.16 Powers of Attorney. There are no outstanding material powers
of attorney or similar instruments executed by any Company or the Partnership.
3.17 Condition of Property. Each building, fixture, machine and
piece of equipment (having a net book value of $5,000.00 or more) owned or used
by any Company or the Partnership is in good operating condition and repair,
subject to normal wear and tear, and is in compliance with all zoning, building
and fire codes in all material respects. Each Company and the Partnership owns
or leases under valid lease all buildings, machinery, equipment and other
tangible assets used in the conduct of its business as presently conducted.
3.18 Insurance. The Companies and the Partnership are insured under
the policies listed in Section 3.18 of the Disclosure Schedule (the "Insurance
Policies"). The Insurance Policies are in full force and effect. All premiums
due on the Insurance Policies or renewals thereof have been paid and there is
no default under any of the Insurance Policies.
3.19 Litigation. Section 3.19 of the Disclosure Schedule sets forth
any instances in which (a) any Company or the Partnership is subject to any
judgment or order (other than orders of general applicability) of any court or
quasi-judicial or administrative agency of any jurisdiction, domestic or
foreign, or where there is any charge, complaint, lawsuit or governmental
investigation pending or threatened against any Company or the Partnership; or
(b) any Company or the Partnership is a plaintiff in any action, domestic or
foreign, judicial or administrative, or any such action exists in which a
counterclaim against any Company or the Partnership is pending or might be
brought. None of the actions, suits, proceedings or investigations set forth in
Section 3.19 of the Disclosure Schedule could result in any adverse change in
the condition, financial or otherwise, of the Companies and the Partnership,
the same being fully reserved against in the Financial Statements. There are no
unsatisfied judgments, orders (other than orders of general applicability),
decrees or stipulations affecting any Company or the Partnership or to which
any Company or the Partnership is a party and there is no reason to believe
that any such action, suit, proceeding or investigation may be brought or
threatened against any Company or the Partnership.
3.20 Employees. Section 3.20 of the Disclosure Schedule sets forth
and the Sellers have furnished to NCCI true and complete copies of: (a) any
written employment agreements with officers and directors of the Companies; and
(b) any written employment agreements which by their terms may not be
terminated by a Company or the Partnership, as applicable, at will or which
grant severance payments. No Company or the Partnership has entered into any
similar oral employment agreements. To the Seller's knowledge, no key employee
or group of employees has any plans to terminate employment with any Company or
the Partnership. No Company or the Partnership is a party to or bound by any
collective bargaining agreement. There are no loans or other obligations
payable or owing by any Company to any shareholder,
PURCHASE AGREEMENT - PAGE 22
<PAGE> 22
officer, director or employee of a Company (except salaries and wages incurred
and accrued in the ordinary course of business), nor are there any loans or
debts payable or owing by any of such persons to any Company or any guarantees
by any Company of any loan or obligation of any nature to which any such person
is a party. The Companies have complied in all material respects with all laws
and regulations which relate to the employment of labor, employee civil rights
or equal employment opportunities.
3.21 Employee Benefit Plans. Section 3.21 of the Disclosure
Schedule sets forth and the Sellers have furnished to NCCI true and complete
copies of (a) any nonqualified deferred or incentive compensation or retirement
plans or arrangements, (b) any qualified retirement plans or arrangements, (c)
any other employee compensation, severance or termination pay or welfare
benefit plans, programs or arrangements and (d) any related trusts, insurance
contracts or other funding arrangements maintained, established or contributed
to by any Company or the Partnership or to which any Company or the Partnership
is a party or otherwise is bound ("Employee Benefit Plans"). None of the
Companies or the Partnership is a member of a "controlled group" or an
"affiliated service group" as both of such terms are defined in Section 414 of
the Code. Except as required by law, none of the Companies or the Partnership
maintains or contributes or has never maintained or contributed to any funded
or unfunded medical, health or life insurance plan or arrangement for retirees
or terminated employees. None of the Companies or the Partnership contributes
or has any obligation to make and has never contributed or had any obligation
to make any payment or contribution to a "multiemployer plan," as that term is
defined in Section 3(37) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and no Company or the Partnership has any actual or
potential liability under Section 4201 of ERISA for any complete or partial
withdrawal from a multiemployer plan. No Company or the Partnership maintains,
contributes to or has any liability with respect to any employee pension
benefit plan (as defined in Section 3(2) of ERISA) which is intended to meet
the requirements of a qualified plan under Section 401(a) of the Code. No
Company or the Partnership maintains, contributes to or has any liability with
respect to a plan which is subject to Title IV of ERISA or Section 412 of the
Code. With respect to the employee benefit plans listed in Section 3.21 of the
Disclosure Schedule, the Sellers have furnished to NCCI true and complete
copies of (i) any summary plan description or other employee communication
materials, (ii) the latest financial statements and annual reports and (iii)
all documents filed with the Internal Revenue Service or the Department of
Labor since December 31, 1994. All employee benefit plans and related trusts
listed in Section 3.21 of the Disclosure Schedule and maintained or contributed
to by any Company or the Partnership or with respect to which any Company or
the Partnership now has or has ever had any liability or potential liability
comply in form and in operation with all requirements of ERISA and the Code.
All required reports with respect to such plans required by applicable law have
been filed and all contributions or payments presently anticipated hereunder
have been made or properly accrued. No applications for rulings, determination
letters, advisory opinions or prohibited transaction exemptions are currently
pending before Internal Revenue Service, the Department of Labor or the Pension
Benefit Guaranty Corporation with respect to any such employee benefit plans or
arrangements or any related trusts. None of such employee benefit plans or
arrangements, any related trusts, the trustees of any related trusts or the
directors, officers and employees of any Company or the Partnership is the
subject of any lawsuit, arbitration or other proceeding concerning any benefit
claim or other benefit-related matter (other than routine claims in the
ordinary course of business), and there have been no prohibited transactions as
described
PURCHASE AGREEMENT - PAGE 23
<PAGE> 23
in Section 406 of ERISA or as defined in Section 4975 of the Code with respect
to any such plan. Neither the Companies, their directors, officers and
employees nor any other fiduciary, as such term is defined in Section 3 of
ERISA, has committed any breach of fiduciary responsibility imposed by ERISA or
any other applicable law which would subject a Company or its directors,
officers and employees to liability under ERISA or any applicable law.
3.22 Guarantees. No Company or the Partnership is a guarantor or
otherwise liable for any material indebtedness of any other person, firm or
corporation other than endorsements for collection in the ordinary course of
business.
3.23 Legal Compliance. The Companies and each of their directors,
officers and employees (the individuals only in their capacities as
representatives of any Company) and the Partnership have complied in all
material respects with all applicable laws and regulations of foreign, federal,
state and local governments and all agencies thereof, and no claim has been
filed against any Company or the Partnership alleging a violation of any such
laws or regulations. The Companies hold all of the material permits, licenses,
certificates or other authorizations of foreign, federal, state or local
governmental agencies required for the conduct of their business as presently
conducted or proposed to be conducted.
3.24 Certain Business Relationships. To the knowledge of the
Sellers, none of the present or former shareholders, directors, officers or
employees of any Company owns, directly or indirectly, any interest in any
business, corporation or other entity (other than investments in publicly held
companies) which, on the date hereof or within the past 12 months, has been
involved in any manner in any business arrangement or relationship with any
Company, and none of the foregoing persons owns any property or rights,
tangible or intangible, which are used in the business of any Company.
3.25 Broker's Fees. No Company or the Partnership nor anyone on
their behalf has any liability to any broker, finder, investment banker or
agent, or has agreed to pay any brokerage fees, finder's fees or commissions,
or to reimburse any expenses of any broker, finder, investment banker or agent
in connection with the Acquisition or any similar transaction.
3.26 Investment Representations.
(a) In the event that NCCI issues shares of Common Stock
to the Sellers pursuant to Section 1.2(b) of this Agreement, each
Seller will acquire NCCI Common Stock for his or its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intent of distributing or
selling such shares.
(b) Each Seller has reviewed the representations
concerning NCCI contained in this Agreement and has made or has had
the opportunity to make inquiry concerning NCCI. Each Seller has
sufficient knowledge and experience so as to be able to evaluate the
risks and merits of his or its investment in NCCI, and such Seller is
able financially to bear the risks thereof. Each Seller is entering
into the transactions contemplated herein based on such Seller's own
assessments of the merits and risks, upon such Seller's own experience
as an officer and shareholder of a Company and is not relying on any
business
PURCHASE AGREEMENT - PAGE 24
<PAGE> 24
plan, projections, valuations or other financial information provided
to such Seller by NCCI other than the NCCI SEC Documents. Each Seller
further acknowledges and agrees that NCCI and Acquisition Sub have
made no assurances of any nature whatsoever regarding the future
operations of NCCI and Acquisition Sub and have made no guarantees as
to the profitability of an investment therein. Each Seller further
acknowledges that he is an accredited investor as defined in Rule 501
of Regulation D of the Securities Act.
(c) Each Seller understands that any certificates of NCCI
Common Stock to be issued to him pursuant to this Agreement will bear
a restrictive legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to NCCI is
obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates, at the
request of the holder thereof, at such time as they become registered for
resale or eligible for resale pursuant to Rule 144(k) under the Securities Act.
3.27 Disclosure. The representations and warranties and statements
of fact made by the Sellers in this Agreement, in the Disclosure Schedule and
in certificates and other written statements or agreements delivered or to be
delivered pursuant to this Agreement are accurate, correct and complete in all
material respects on the date of this Agreement and will, except as
contemplated hereby, be accurate, correct and complete in all material respects
at the Closing Date and do not and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein or therein not misleading.
3.28 Knowledge. Where the foregoing representations and warranties
are qualified "to the knowledge of the Sellers" or words of similar import,
such terms shall (i) as to the Companies, mean matters of which either Robert
E. Geddes, Thomas Miserendino or Brian F. Murphy has actual knowledge and (ii)
as to the Partnership, matters of which Robert E. Geddes has actual knowledge.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE CLOSING
4.1 Conduct of Business Pending the Closing. The Sellers covenant
and agree that, prior to the Closing, unless NCCI shall otherwise agree in
writing or as otherwise expressly contemplated or permitted by this Agreement:
(a) Each Company and the Partnership shall conduct its
business and operations, including its cash management practices, the
collection of receivables,
PURCHASE AGREEMENT - PAGE 25
<PAGE> 25
maintenance of facilities and payment of payables, only in the usual
and ordinary course of business and consistent with past custom and
practice in all material respects;
(b) No Company or the Partnership shall directly or
indirectly do any of the following: (i) sell, pledge, dispose of or
encumber any material portion of its assets, except in the ordinary
course of business; (ii) amend or propose to amend its charter or
bylaws or Partnership Agreement; (iii) split, combine or reclassify
any outstanding shares of its capital stock, or declare, set aside or
pay any dividend or other distribution payable in cash, stock,
property or otherwise with respect to shares of its capital stock;
(iv) redeem, purchase or acquire or offer to acquire any shares of its
capital stock or other securities; (v) create any subsidiaries; or
(vi) enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this
Section 4.1(b);
(c) No Company or the Partnership shall (i) issue, sell,
pledge or dispose of, or agree to issue, sell, pledge or dispose of,
any additional shares of, or any options, warrants, conversion
privileges or rights of any kind to acquire any shares of, its
capital; (ii) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise) any corporation, partnership or other business
organization or division or material assets thereof; (iii) incur any
material indebtedness for borrowed money, issue any debt securities or
guarantee any indebtedness to others; or (iv) enter into or modify any
contract, agreement, commitment or arrangement with respect to any of
the foregoing;
(d) No Company or the Partnership shall (i) enter into or
modify any employment, severance or similar agreements or arrangements
with, or grant any bonus, salary increase, severance or termination
pay to, any officers or directors; or (ii) in the case of employees
who are not officers or directors, take any action other than in the
ordinary course of business and consistent in all material respects
with past practice (none of which shall be unreasonable or unusual)
with respect to the grant of any bonuses, salary increases, severance
or termination pay or with respect to any increase of benefits payable
in effect on January 1, 1997;
(e) No Company or the Partnership shall adopt or amend
any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or arrangement for the benefit or
welfare of any employee;
(f) Except as otherwise required by its charter or
bylaws, by this Agreement or by applicable law, no Company shall call
any meeting of its shareholders and, with respect to any meeting of
its shareholders called by any Company, the Selling Shareholders shall
provide to NCCI copies of all written materials and other information
given to the shareholders prior to the time such materials and
information are given to the shareholders;
(g) Each Company and the Partnership shall use
commercially reasonable efforts to cause its current insurance (or
reinsurance) policies not to be cancelled or terminated or any of the
coverage thereunder to lapse, unless simultaneously with such
PURCHASE AGREEMENT - PAGE 26
<PAGE> 26
termination, cancellation or lapse, replacement policies underwritten
by insurance and reinsurance companies of nationally recognized
standing providing coverage equal to or greater than the coverage
under the cancelled, terminated or lapsed policies for substantially
similar premiums are in full force and effect;
(h) Each Company and the Partnership shall (i) use
commercially reasonable efforts to preserve intact its business
organization and goodwill, keep in full force and effect all material
rights, licenses, permits and franchises relating to its business,
keep available the services of its officers and employees as a group
and maintain satisfactory relationships with suppliers, distributors,
customers and others having business relationships with it; (ii)
report on a regular and frequent basis, at reasonable times, to
representatives of NCCI regarding operational matters and the general
status of ongoing operations; (iii) use commercially reasonable
efforts not to take any action which would render, or which reasonably
may be expected to render, any representation or warranty made in this
Agreement untrue in any material respect at any time prior to the
Closing Date if then made; and (iv) notify NCCI of any emergency or
other change in the normal course of their respective business or in
the operation of its properties and of any tax audits, tax claims,
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, audit, claim, complaint, investigation or hearing
would be material, individually or in the aggregate, to the financial
condition, results of operations or business of any Company or the
Partnership, or to the ability the Sellers or NCCI to consummate the
transactions contemplated by this Agreement;
(i) The Sellers shall deliver to NCCI promptly (but in
any event within two business days) after the discovery or receipt of
notice of any default under any material agreement to which it is a
party or any other material adverse event or circumstance affecting
any Company or the Partnership (including the filing of any material
litigation against any Company or the Partnership or the existence of
any dispute with any person or entity which involves a reasonable
likelihood of such litigation being commenced), a certificate of the
President of the applicable Company specifying the nature and period
of the existence thereof and what actions such Company has taken and
proposes to take with respect thereto;
(j) Each Company and the Partnership shall use
commercially reasonable efforts to maintain its assets in customary
repair, order and condition, replace in accordance with past practice
its inoperable, worn out or obsolete assets with assets of quality at
least comparable to the original quality of the assets being replaced
and maintain in all material respects its books, accounts and records
in accordance with past custom and practice as used in the preparation
of the Financial Statements;
(k) Each Company and the Partnership shall use
commercially reasonable efforts to maintain in full force and effect
the existence of all material patents, inventions, trademarks, service
marks, trade dress, trade names, corporate names, copyrights, mask
works, trade secrets, licenses, computer software, data and
documentation and other proprietary rights, which it uses or owns; and
PURCHASE AGREEMENT - PAGE 27
<PAGE> 27
(l) Each Company and the Partnership shall comply in all
material respects with all legal requirements and contractual
obligations applicable to its operations and business and pay all
applicable taxes.
Notwithstanding any other provision of this Agreement, the amendment
or modification of the Disclosure Schedule by the Sellers after the time NCCI
has signed this Agreement shall have no effect with respect to the agreements,
covenants and obligations of the Sellers, NCCI and Acquisition Sub pursuant to
this Section 4.1 and Sections 6.2 and 6.3 of this Agreement.
4.2 No Other Bids. The Sellers covenant and agree that no Company
or the Partnership shall authorize or knowingly permit any officer, director,
shareholder or employee of, or any investment banker, attorney, accountant or
other representative retained by, any Company, the Partnership or any Seller
to, make, solicit, initiate, encourage or respond to a submission of a proposal
or offer from any person or entity (other than NCCI) relating to any
liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or a material portion of the assets of any
Company or the Partnership, or the Shares or the Partnership Interests or other
similar transaction or business combination involving any Company, the
Partnership or any Seller (hereinafter collectively referred to as a "Third
Party Offer"). No Seller will participate in any negotiations regarding, or
furnish to any person or entity (other than NCCI) any information with respect
to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any person or entity (other
than NCCI) to do or seek any of the foregoing. The Sellers will immediately
cease and cause to be terminated any contacts or negotiations currently pending
with respect to Third Party Offers, if any, and shall use their best efforts to
cause all reports, material, data and other written information heretofore
disseminated by them or on their behalf by any such officer, director or
employee or any investment banker, attorney, accountant or other representative
in connection with any such Third Party Offer or any inquiry or proposal
related thereto to be promptly returned to them. The Sellers shall promptly
notify NCCI of the receipt of any Third Party Offer or any inquiry or
communication which might reasonably be expected to lead to any Third Party
Offer and will provide NCCI with all information that NCCI may reasonably
request with respect thereto.
4.3 Lines of Business and Capital Expenditures. Unless approved in
writing by NCCI, the Sellers covenant that they will not permit the Companies
or the Partnership to (a) enter into any new material lines of business; (b)
change their investment, liability management and other material policies in
any material respect; or (c) incur or commit to any capital expenditures,
obligations or liabilities in connection therewith.
4.4 Accounting Methods. Unless approved in writing by NCCI, the
Sellers covenant that none of the Companies or the Partnership will change its
methods of accounting in effect at December 31, 1996, except as required by
changes in generally accepted accounting principles as concurred in by NCCI's
independent accountants.
4.5 Other Actions. Unless approved in writing by NCCI, the Sellers
covenant that none of the Companies or the Partnership will take any action
that would or might reasonably be expected to result in any of the
representations and warranties of the Sellers set forth in this
PURCHASE AGREEMENT - PAGE 28
<PAGE> 28
Agreement becoming untrue in any material respect after the date hereof or any
of the conditions to the Acquisition set forth in Article 6 of this Agreement
not being satisfied.
4.6 Conduct of Business by Acquisition Sub. Prior to the Closing
Date, NCCI covenants that Acquisition Sub will not conduct any business
activities and will not incur any material liabilities.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the other agreements
contemplated hereby and the transactions contemplated hereby and thereby shall
be paid by NCCI or the Seller incurring such expenses. The parties acknowledge
that the Sellers may charge expenses incurred by them to the Companies. All
costs and expenses incurred by NCCI and Acquisition Sub in connection with this
Agreement shall be borne by NCCI.
5.2 Notification of Certain Matters. Each party shall give prompt
notice to the others of (a) the occurrence or failure to occur of any event,
which occurrence or failure would result in any Material Adverse Breach (as
defined in Section 9.8 of this Agreement), and (b) any failure of such party,
or any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied
hereunder.
5.3 Access to Information. From the date hereof to the Closing
Date, each of the Sellers, Acquisition Sub and NCCI shall, and shall cause
their respective officers, directors, employees and agents to, afford the
officers, employees, agents and representatives of the other parties hereto
complete access at all reasonable times to such officers, employees and agents
and their properties, books and records (all such access to be arranged through
the respective officers of the parties hereto so as not to be unreasonably
disruptive to any of the parties), and shall furnish each of such parties all
financial, operating, personnel, compensation, tax and other data and
information as such parties, through their respective officers, employees,
agents or representatives, may request.
5.4 Taking of Necessary Action. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees, subject to
applicable laws, to use all reasonable efforts promptly to take or cause to be
taken all action and promptly to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement. Without
limiting the foregoing, the Sellers, Acquisition Sub and NCCI shall use their
best efforts to maintain and make all filings with and obtain all consents,
approvals, and/or assurances from third parties and appropriate governmental
agencies and authorities necessary or advisable for the consummation of the
transactions contemplated by this Agreement. Each party shall cooperate with
the other in good faith to help the other satisfy its obligations in this
Section 5.6.
5.5 Notice of Changes. The Sellers and NCCI shall each promptly
inform the other in writing if any change shall have occurred or shall have
been threatened (or any development
PURCHASE AGREEMENT - PAGE 29
<PAGE> 29
shall have occurred or shall have been threatened involving a prospective
change) in NCCI's or any Company's or the Partnership's financial condition,
results of operations or business that is or may reasonably be expected to have
a material adverse effect on any such entity's financial condition, results of
operations or business.
5.6 Press Releases. The Sellers and NCCI shall consult with each
other as to the form and substance of any press release or other public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby; provided, however, that nothing in this Section 5.6 shall
be deemed to prohibit any party hereto from making any disclosure that is
required to fulfill such party's disclosure obligations imposed by law,
including, without limitation, federal securities laws.
5.7 Employee Matters. NCCI and the Sellers agree that all
employees of any Company or the Partnership immediately prior to the Closing
shall be employed by such Company or the Partnership immediately after the
Closing at such level of pay which is mutually agreed upon between each
employee and NCCI, it being understood that NCCI shall not have any obligations
to continue employing such employees for any length of time or at any level of
pay for any length of time thereafter, except as set forth in binding
agreements of employment. In the event any Employee Benefit Plans are not
continued after the Closing, employees will be eligible to participate in
comparable NCCI's employee benefit plans, provided that employees of any
Company or the Partnership who remain employees following the Closing shall be
credited (for purposes of both participation and vesting) with their periods of
service with any Company or the Partnership prior to the Closing.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Each Party to Effect the Closing.
The respective obligations of each party to effect the Closing shall be subject
to the fulfillment at or prior to the Closing Date of the following condition:
(a) no order shall have been entered and remain in effect
in any action or proceeding before any foreign, federal or state court
or governmental agency or other foreign, federal or state regulatory
or administrative agency or commission that would prevent or make
illegal the consummation of the transactions contemplated hereby.
6.2 Additional Conditions to NCCI's and Acquisition Sub's
Obligations. The obligations of NCCI and Acquisition Sub to effect the
Acquisition are subject to the satisfaction of the following conditions on or
before the Closing Date:
(a) Except for breaches which do not constitute a
Material Adverse Breach (as defined in Section 9.8 of this Agreement)
by the Sellers, the representations and warranties set forth in
Article 3 of this Agreement (without regard to any amendments or
modifications of the Disclosure Schedule after the time NCCI has
signed this Agreement) will be true and correct as of the date hereof
and at and as of the Closing Date, as though then made and as though
the Closing Date were substituted for the date of this Agreement
PURCHASE AGREEMENT - PAGE 30
<PAGE> 30
throughout such representations and warranties and with appropriate
modifications of tense with respect to representations and warranties
made as of a specified date;
(b) The Sellers shall have performed, in all material
respects, each obligation and agreement and complied, in all material
respects, with each covenant to be performed and complied with by them
under this Agreement prior to the Closing Date, including, without
limitation, all of their agreements contained in Articles 4 and 5 of
this Agreement;
(c) Except as otherwise disclosed on the Disclosure
Schedule, all consents by governmental or regulatory agencies or
otherwise that are required for the consummation of the transactions
contemplated hereby or that are required for NCCI to own the Shares or
the Partnership Interests or to prevent a breach of or a default under
or a termination of any agreement material to any Company or the
Partnership to which any Company or the Partnership is a party or to
which any material portion of the assets of any Company or the
Partnership is subject, will have been obtained;
(d) No action or proceeding before any court or
governmental body will be pending or threatened wherein a judgment,
decree or order would prevent any of the transactions contemplated
hereby or cause such transactions to be declared unlawful or rescinded
or which might adversely affect the right of NCCI to own the Shares or
the Partnership Interests;
(e) On the Closing Date, the Selling Shareholders shall
have entered into a Shareholders Agreement with Acquisition Sub
substantially in the form of Exhibit D attached hereto dated as of the
Closing Date (the "Shareholders Agreement");
(f) On the Closing Date, Thomas Miserendino, Brian F.
Murphy and Robert E. Geddes shall have entered into Employment
Agreements with NCCI substantially in the form of Exhibit E attached
hereto dated as of the Closing Date (the "Employment Agreements");
(g) On the Closing Date, A&J shall have entered into a
Partners Agreement with Acquisition Sub substantially in the form of
Exhibit F attached hereto dated as of the Closing Date (the "Partners
Agreement");
(h) NCCI shall have received from Wyatt Tarrant & Combs,
counsel to the Sellers, an opinion addressed to NCCI, dated the
Closing Date and substantially in the form of Exhibit G attached
hereto;
(i) Messrs. Miserendino, Murphy and Geddes shall have
terminated any existing employment agreements with any of the
Companies or the Partnership;
(j) At the Closing Date, the Sellers shall have delivered
to NCCI and Acquisition Sub the following:
PURCHASE AGREEMENT - PAGE 31
<PAGE> 31
(i) a certificate executed by each Selling
Shareholder stating that the conditions set forth in Sections
6.2(a) through 6.2(d) of this Agreement have been satisfied;
(ii) good standing or comparable certificates for
each Company and the Partnership from the jurisdiction of its
incorporation or formation and from every jurisdiction where a
failure to be qualified or licensed would have a material
adverse effect on the consolidated financial condition,
results of operations or business of each Company and the
Partnership, dated not earlier than 10 days prior to the
Closing Date;
(iii) copies of all third party and governmental
consents (or other evidence satisfactory to NCCI) that the
Sellers are required to obtain in order to effect the
transactions contemplated by this Agreement;
(iv) a copy of each Company's charter certified by
the Secretary of State of the state of its incorporation;
(v) an assignment of the Partnership Interests
substantially in the form of Exhibit A executed by A&J;
(vi) an assignment of all of A&J's rights and
interests in booking, management and related fees under the
Partnership Agreement and under the Promotion Agreement
substantially in the form of Exhibit B executed by A&J;
(vii) certificates evidencing the Shares duly
endorsed for transfer;
(viii) affidavits of the trustees of the Geddes
Family Trust and the Miserendino Family Trust; and
(ix) such other documents as NCCI or Acquisition
Sub may reasonably request in connection with the transactions
contemplated hereby; and
(k) All proceedings to be taken by the Sellers in
connection with the consummation of the Acquisition at the Closing
Date and the other transactions contemplated hereby and all documents
required to be delivered by the Sellers in connection with the
Acquisition and the other transactions contemplated hereby will be
reasonably satisfactory in form and substance to NCCI and Acquisition
Sub.
6.3 Additional Conditions to the Sellers' Obligations. The
obligations of the Sellers to effect the Acquisition are subject to the
satisfaction of the following conditions on or before the Closing Date;
(a) Except for breaches which do not constitute a
Material Adverse Breach (as defined in Section 9.8 of this Agreement)
by NCCI, the representations and warranties set forth in Article 2 of
this Agreement will be true and correct as of the date hereof and at
and as of the Closing Date, as though then made and as though the
Closing Date were
PURCHASE AGREEMENT - PAGE 32
<PAGE> 32
substituted for the date of this Agreement throughout such
representations and warranties and with appropriate modifications of
tense with respect to representations and warranties made as of a
specified date;
(b) NCCI and Acquisition Sub shall have performed, in all
material respects, each obligation and agreement and complied, in all
material respects, with each covenant required to be performed and
complied with by them under this Agreement prior to the Closing Date;
(c) No action or proceeding before any court or
government body will be pending or threatened wherein a judgment,
decree or order would prevent any of the transactions contemplated
hereby or cause such transactions to be declared unlawful or
rescinded;
(d) On the Closing Date, NCCI and Acquisition Sub will
have delivered to the Sellers the following:
(i) a certificate executed on behalf of each of
NCCI and Acquisition Sub by their Presidents stating that the
conditions set forth in Sections 6.3(a) through (c) of this
Agreement have been satisfied;
(ii) certified copies of the resolutions duly
adopted by NCCI's and Acquisition Sub's respective boards of
directors approving the Acquisition and authorizing the
execution, delivery and performance of this Agreement;
(iii) good standing certificates for Acquisition
Sub and for NCCI from the Secretaries of State of the State of
Delaware and Tennessee, respectively, each dated not earlier
than five (5) days prior to the Closing Date;
(iv) copies of all third party and governmental or
regulatory consents (or other evidence satisfactory to the
Sellers) that NCCI and Acquisition Sub are required to obtain
in order to effect the transactions contemplated by this
Agreement;
(v) copies of Acquisition Sub's and NCCI's
charter certified by the Secretaries of State of the State of
Delaware and Tennessee, respectively; and
(vi) such other documents as the Sellers may
reasonably request in connection with the transactions
contemplated hereby;
(e) All proceedings to be taken by NCCI and Acquisition
Sub in connection with the consummation of the Acquisition and all
documents required to be delivered by NCCI and Acquisition Sub in
connection with the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Sellers;
PURCHASE AGREEMENT - PAGE 33
<PAGE> 33
(f) Except as otherwise disclosed to the Sellers, all
consents by governmental or regulatory agencies or otherwise that are
required to be obtained by NCCI for the consummation of the
transactions contemplated hereby will have been obtained; and
(g) The Shareholders Agreement, Partners Agreement,
Employment Agreements and Registration Rights Agreement will have been
executed and delivered on the Closing Date and there will not have
been any changes, amendments or modifications to, or terminations of,
such agreements.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date upon the occurrence of any of the following:
(a) by mutual consent of the Sellers and the Board of
Directors of NCCI;
(b) by either NCCI or the Sellers if the Closing shall
not have been consummated by August 31, 1997 and provided that the
party seeking termination is not then in material breach of any
representation, warranty or agreement in this Agreement;
(c) by NCCI if there has been a misrepresentation or
breach of a representation or warranty or a failure to perform a
covenant on the part of the Sellers with respect to their
representations, warranties and covenants set forth in this Agreement
and any such breach or failure constitutes a Material Adverse Breach;
and
(d) by the Sellers if there has been a misrepresentation
or a breach of a representation or warranty or a failure to perform a
covenant on the part of NCCI or Acquisition Sub with respect to their
representations, warranties and covenants set forth in this Agreement
and any such breach or failure constitutes a Material Adverse Breach.
7.2 Amendment. This Agreement may not be amended except by an
instrument signed by each of the parties hereto.
7.3 Waiver. At any time prior to the Closing Date, (a) NCCI may
(i) extend the time for the performance of any of the obligations or other acts
of the Sellers or (ii) waive compliance with any of the agreements of the
Sellers or with any conditions to its own obligations, and (b) the Sellers may
(i) extend the time for the performance of any of the obligations or other acts
of NCCI and/or Acquisition Sub or (ii) waive compliance with any of the
agreements of NCCI and/or Acquisition Sub or with any conditions to their own
obligations in each case only to the extent such obligations, agreements and
conditions are intended for their benefit.
7.4 Effect of Termination. If this Agreement is terminated as
provided in Section 7.1, this Agreement shall become void and there shall be no
liability or further obligation on the part of any party hereto or any of their
respective shareholders, officers or directors, except (a) that nothing herein
and no termination pursuant hereto will relieve any party from liability for
any
PURCHASE AGREEMENT - PAGE 34
<PAGE> 34
breach of this Agreement and (b) the provisions of Section 5.6 and any
confidentiality agreements by and between NCCI and the Sellers will survive
such termination.
ARTICLE 8
INDEMNIFICATION
8.1 By NCCI, Acquisition Sub and the Sellers. NCCI and Acquisition
Sub on the one hand and the Sellers on the other hand each hereby agree to
indemnify and hold harmless the other against all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement
costs and any legal, accounting or other expenses for defending any actions or
threatened actions) (collectively "Damages") reasonably incurred by NCCI,
Acquisition Sub and the Sellers in connection with each and all of the matters
set forth below to the extent they constitute a Material Adverse Breach.
(a) Any breach by the Indemnifying Party (as defined
below) of any representation or warranty made by such Indemnifying
Party in this Agreement;
(b) Any breach of any covenant, agreement or obligation
of the Indemnifying Party contained in this Agreement or any other
agreement, instrument or document contemplated by this Agreement; and
(c) Any misrepresentation contained in any statement,
certificate or schedule furnished by the Indemnifying Party pursuant
to this Agreement or in connection with the transactions contemplated
by this Agreement.
Each Seller severally, in proportion to its respective interest in the
Purchase Price, agrees to indemnify NCCI for any breaches of any representation
or warranty, covenant, agreement or obligation of such Seller made or
contained, respectively, in this Agreement or any other agreement, instrument
or document contemplated by this Agreement, or any misrepresentation by such
Seller, as described in (a) through (c) above to the extent they constitute a
Material Adverse Breach. The parties acknowledge that the Acquisition
represents the acquisition of fifty-one percent (51%) of the outstanding equity
interests in the Companies and the Partnership. Upon the realization of a loss
or claim to which this section applies, the parties shall consider the nature
and character of the los or claim to determine whether the indemnification
payable herein shall equitably equal fifty-one percent (51%) or one hundred
percent (100%) of such loss or claim.
8.2 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings
by a third party, the notice to the Indemnifying Party shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably
PURCHASE AGREEMENT - PAGE 35
<PAGE> 35
withheld, unless suit shall have been instituted against it and the
Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Section 8.3 of this Agreement in which case the
Indemnified Party may settle or compromise such claim without the prior consent
of the Indemnifying Party. If the Indemnified Party fails to give prompt notice
of any claim and such failure prejudices the Indemnifying Party's position or
its ability to defend the claim, the Indemnifying Party's liability to the
Indemnified Party shall be reduced by the amount, if any, demonstrated to be
directly attributable to the failure to give such notice in a timely manner.
8.3 Defense by Indemnifying Party. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any claim
or legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
it acknowledges to the Indemnified Party in writing its obligations to
indemnify the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made,
(a) the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of
any such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner.
8.4 Payment of Indemnification Obligation. All indemnification by
NCCI or a Seller hereunder shall be effected by payment by wire transfer or
delivery of a cashier's or certified check in the amount of the indemnification
liability. In no event shall any Seller be required to pay to NCCI in
accordance with this Article 8 an aggregate amount greater than the amount of
the cash received by such Seller hereunder from NCCI on the Closing Date.
ARTICLE 9
GENERAL PROVISIONS
9.1 Survival of Representations and Warranties. The
representations and warranties set forth in this Agreement shall survive the
Closing for a period of one (1) year. Notwithstanding the above, claims
resulting from any breach of any representation or warranty concerning tax or
Employee Benefit Plan matters shall expire one hundred twenty (120) days after
the expiration of any applicable statute of limitations. Any litigation arising
out of or attributable to a breach of any representation or warranty contained
herein must be commenced within the applicable period described above. If not
commenced within the applicable period, any such claim will thereafter
conclusively be deemed to be waived regardless of when such claim is or should
have been discovered.
PURCHASE AGREEMENT - PAGE 36
<PAGE> 36
9.2 Effect of Due Diligence. No investigation by NCCI or the
Sellers into the business, operations and condition of the other shall diminish
in any way the effect of any representations or warranties made by either party
in this Agreement or shall relieve such party of any of its obligations under
this Agreement.
9.3 Specific Performance. NCCI and the Sellers understand and
agree that the covenants and undertakings on each of their parts herein
contained are uniquely related to the desire of NCCI and the Sellers to
consummate the Acquisition, that the Acquisition is a unique business
opportunity for NCCI, Acquisition Sub and the Sellers and that, although
monetary damages may be available for the breach of such covenants and
undertakings, monetary damages would be an inadequate remedy therefor.
Accordingly, NCCI, Acquisition Sub and the Sellers agree that NCCI and
Acquisition Sub shall be entitled to obtain specific performance by the Sellers
of every such covenant and undertaking contained herein to be performed by the
Sellers and that the Sellers shall be entitled to obtain specific performance
from NCCI and Acquisition Sub of each and every covenant and undertaking herein
contained to be observed or performed by NCCI or Acquisition Sub.
9.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally, sent by telex, telecopy, facsimile or overnight courier, or mailed
by registered or certified mail (postage prepaid and return receipt requested),
to the party to whom the same is so delivered, sent or mailed at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to NCCI or Acquisition Sub:
Nashville Country Club, Inc.
402 Heritage Plantation Way
Hickory Valley, Tennessee 38042
Attention: Thomas J. Weaver III
Telecopy: (901) 764-6107
with a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attention: Randall E. Roberts, Esq.
Telecopy: (214) 745-5390
(b) if to the Sellers:
c/o Thomas Miserendino
New Avalon, Inc.
17835 Ventura Boulevard, Suite 300
Encino, California 91316
Telecopy: (818) 345-1829
PURCHASE AGREEMENT - PAGE 37
<PAGE> 37
with a copy to:
Wyatt Tarrant & Combs
500 W. Jefferson
28th Floor, Citizens Plaza
Louisville, Kentucky 40202
Attention: H. Alexander Campbell
Telecopy: (502) 589-0309
Notices delivered personally or by telex, telecopy or facsimile shall be deemed
delivered as of actual receipt, mailed notices shall be deemed delivered three
days after mailing and overnight courier notices shall be deemed delivered one
day after the date of sending.
9.5 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
9.6 Severability. If any term, provision, covenant or Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants, and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated and the parties shall negotiate in good faith
to modify the Agreement to preserve each party's anticipated benefits under the
Agreement.
9.7 Miscellaneous. This Agreement (together with all other
documents and instruments referred to herein): (a) except for any
confidentiality agreements executed in connection with the transactions
contemplated hereby, constitutes the entire agreement and supersedes all other
prior agreements and undertakings, both written and oral, among the parties
with respect to the subject matter hereof; (b) except as expressly set forth
herein, is not intended to confer upon any other person any rights or remedies
hereunder; (c) shall not be assigned by operation of law or otherwise, except
that NCCI and Acquisition Sub may assign all or any portion of their rights
under this Agreement to any wholly owned subsidiary but no such assignment
shall relieve NCCI and Acquisition Sub of their obligations hereunder, and
except that this Agreement may be assigned by operation of law to any
corporation with or into which NCCI may be merged; and (d) shall be governed in
all respects, including validity, interpretation and effect, by the internal
laws of the State of Tennessee, without giving effect to the principles of
conflict of laws thereof. Courts within the State of Tennessee will have
jurisdiction over any and all disputes between the parties hereto, whether in
law or equity, arising out of or relating to this Agreement. The parties
consent to and agree to submit to the jurisdiction of such courts. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement.
9.8 Material Adverse Breach. Breaches of representations,
warranties and covenants by either party hereto which (a) individually results
in damages to the other party in excess of $100,000 or (b) in the aggregate
result in damages to the other party in excess of $200,000, shall constitute,
for purposes of this Agreement, a "Material Adverse Breach."
PURCHASE AGREEMENT - PAGE 38
<PAGE> 38
9.9 Limitation of Liability. Neither NCCI, Acquisition Sub nor the
Sellers shall have any liability for breach of the representations, warranties
and covenants made by them and contained in this Agreement unless such breach
is a Material Adverse Breach.
9.10 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature to each such counterpart
were upon the same instrument.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
PURCHASE AGREEMENT - PAGE 39
<PAGE> 39
PURCHASE AGREEMENT
Signature Page
IN WITNESS WHEREOF, NCCI, Acquisition Sub, the Shareholders and A&J
have caused this Agreement to be executed on the date first written above by
their respective officers duly authorized.
NASHVILLE COUNTRY CLUB, INC.
/s/ Thomas Jackson Weaver III
-----------------------------------
By: Thomas Jackson Weaver III
Its: Chief Executive Officer
AWC ACQUISITION CORP.
/s/ Thomas Jackson Weaver III
-----------------------------------
By: Thomas Jackson Weaver III
Its: Chief Executive Officer
AUDREY & JANE, INC.
/s/ Robert E. Geddes
-----------------------------------
By: Robert E. Geddes
Its: President
ROBERT E. GEDDES FAMILY TRUST
/s/ Robert E. Geddes
-----------------------------------
By: Robert E. Geddes, Trustee
MISERENDINO FAMILY TRUST
/s/ Thomas Miserendino
-----------------------------------
By: Thomas Miserendino, Co-Trustee
/s/ Brian F. Murphy
-----------------------------------
BRIAN F. MURPHY
PURCHASE AGREEMENT - PAGE 40
