<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
JUNE 18, 1998
Date of Report
(Date of earliest event reported)
TBA ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-22582 62-1535897
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>
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 June 18, 1998, TBA Entertainment Corporation (the "Registrant")
directly or indirectly acquired 100% of the membership interests in Titley
Spalding & Associates, LLC ("Titley Spalding"). The acquisition of the
membership interests in Titley Spalding was consummated pursuant to a Purchase
Agreement among the Registrant, TBA Entertainment Holding Corporation, a
wholly-owned subsidiary of Registrant, Clarence Spalding ("Spalding") and Robert
R. Titley ("Titley" and with Spalding, the "Sellers").
Pursuant to the Purchase Agreement, the Registrant delivered to the
Sellers at closing cash in the amount of $1,000,000 and 175,000 shares of
common stock, $.001 par value per share, of the Registrant valued at
approximately $750,000. In addition, the Purchase Agreement grants to the
Sellers the right to receive up to an additional $5,755,000 based on the net
income of Titley Spalding over the five (5) year period following the Closing.
The source of the cash consideration was working capital of the Registrant.
Prior to the acquisition, there was no material relationship between (i)
the Registrant, any of its affiliates, any of its officers or directors or any
associate of such officers and directors, and (ii) either of the Sellers or any
affiliates of the Sellers. In connection with the Purchase Agreement, Titley and
Spalding entered into employment agreements with the Registrant.
Titley Spalding is an artist management firm based in Nashville,
Tennessee representing artists such as Brooks & Dunn, Kathy Mattea and Chely
Wright.
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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Filed herewith as a part of this report are the audited financial
statements and related notes of Titley Spalding for the years ended
December 31, 1996 and 1997, and as of December 31, 1996 and 1997, and
unaudited financial statements of Titley Spalding for the period ended
June 18, 1998 and as of June 18, 1998.
<PAGE> 3
(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 Statement of Operations of
Registrant for the year ended December 31, 1997 and related
Notes.
Unaudited Pro Forma Consolidated Statement of Operations of
Registrant for the six months ended June 30, 1998 and related
Notes.
(c) EXHIBITS.
2.1 Purchase Agreement, dated as of June 18, 1998, among TBA
Entertainment Corporation, Titley Spalding & Associates, LLC,
Clarence Spalding and Robert R. Titley.
-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.
TBA ENTERTAINMENT CORPORATION
Date: August 31, 1998 By: /s/ Thomas J. Weaver III
------------------------------------
Thomas J. Weaver III
Chief Executive Officer
-3-
<PAGE> 5
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data (the "Pro Forma
Financial Data") of TBA Entertainment Corporation (the "Company") has been
prepared utilizing the historical consolidated financial statements and related
notes thereto of each of the Company and Titley, Spalding & Associates, LLC
("Titley Spalding") and the unaudited financial statements of Avalon
Entertainment Group, Inc. ("AEG") for the period January 1, 1997 to April 21,
1997 (date of acquisition). The Pro Forma Financial Data gives pro forma effect
to the consummation of the acquisition of Titley Spalding as of January 1, 1997
and January 1, 1998 for purposes of the pro forma statements of operations and
the acquisition of AEG as though such acquisition had occurred as of January 1,
1997.
The Titley Spalding and AEG acquisitions have been 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 Titley Spalding acquisition and the AEG acquisition been
consummated on the dates 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 following presentation of the Pro Forma Financial Data for the year ended
December 31, 1997 and the six months ended June 30, 1998 should be read in
conjunction with the historical consolidated financial statements and notes
thereto of the Company included in the December 31, 1997 Form 10-KSB and the
June 30, 1998 Form 10-QSB.
<PAGE> 6
TBA ENTERTAINMENT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Historical AEG Titley Spalding
--------------------------------------------- Acquisition Acquisition Pro Forma
Company (1)Resort Titley Spalding Adjustments Adjustments Consolidated
------------ ------------ --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 30,228,900 $(23,791,800) $ 2,403,300 (2)1,922,500 $ 10,762,900
Cost related to revenue 21,318,700 (16,557,000) -- (2)1,496,700 6,258,400
------------ ------------ ------------ ------------
Gross profit 8,910,200 (7,234,800) 2,403,300 4,504,500
General and administrative 6,006,600 (4,174,100) 401,100 (2)421,700 (5)300,000 2,955,300
Depreciation and amortization 1,096,000 (947,107) 22,900 (2)7,000 (6)178,500
(3)50,200 407,500
Equity in income of Joint Venture (78,900) -- -- (2)(31,500) (110,400)
Interest expense , net 1,845,800 (1,692,800) -- (2)(700)
(4)37,900 190,200
------------ ----------- ----------- ------------
Income from continuing operations $ 40,700 $ (420,800) $ 1,979,300 $ 1,061,900
============ =========== =========== ============
Earnings per common share - basic:
Income from
continuing operations $ 0.01 $ 0.18
============ ============
Weighted average common
stock outstanding 5,680,300 5,855,300
============ ============
Earnings per common share
- diluted:
Income from
continuing operations $ 0.01 $ 0.16
=========== ============
Weighted average common
stock outstanding 6,324,500 6,635,000
============ ============
</TABLE>
See notes to unaudited pro forma consolidated financial data.
<PAGE> 7
TBA ENTERTAINMENT CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS DATA
FOR THE YEAR ENDED DECEMBER 31, 1997
(1) In 1997, the Company was engaged in the Resort business through the
operation of a restaurant in Nashville, Tennessee and the Village at
Breckenridge Resort. The Nashville restaurant opened in November 1994
and closed in November 1997. The Company has entered into an agreement
to sell the Nashville restaurant, which sale is expected to close in
the fourth quarter of 1998. The Village at Breckenridge Resort was
acquired on April 29, 1996. On August 12, 1998, the Company sold the
Village at Breckenridge Resort to a subsidiary of Vail Resorts, Inc.
Accordingly, the operations of the Nashville restaurant and the Village
at Breckenridge Resort have been reclassified to discontinued
operations for the year ended December 31, 1997. In addition, the
Company has reconfigured its statement of operations for the year ended
December 31, 1997 to reflect that the Company only operates in one
primary business segment.
(2) AEG was acquired on April 21, 1997 and, accordingly, the results of
operations of AEG for the period from January 1, 1997 to April 21, 1997
are not included in the historical consolidated financial statements of
the Company for the year ended December 31, 1997. This adjustment is
presented to show the impact of including the revenues and expenses of
AEG as if AEG had been acquired on January 1, 1997.
(3) The AEG acquisition resulted in recording goodwill of approximately
$3,400,000 as of April 21, 1997. The Company is amortizing this amount
over 20 years. This adjustment reflects pro forma amortization expense
for the period from January 1, 1997 to April 21, 1997.
(4) The Company financed a portion of the AEG acquisition with notes
payable to the sellers. This amount was refinanced with debt financing
from a bank at prime plus 0.25% (8.75% at December 31, 1997). This
adjustment reflects pro forma interest expense for the period from
January 1, 1997 to April 21, 1997, assuming the notes were outstanding
as of January 1, 1997.
(5) In 1997, payments to the two members of Titley Spalding were made as
distributions from members' equity, based on the profitability of
Titley Spalding and the availability of cash to fund such
distributions. Under the terms of the Purchase Agreement, these
individuals have entered into employment agreements with specifically
defined salaries. The adjustment results from the net change in expense
as if the employment agreements had been in effect in 1997.
(6) The Titley Spalding acquisition results in the recording of goodwill
of approximately $1,785,000 as of the June 18, 1998 acquisition date.
The Company expects to amortize this amount over 10 years. This results
in annual amortization of approximately $178,500.
(7) As of December 31, 1996 the Company had NOLs of approximately $4.5
million. Accordingly, no proforma income tax provision is provided.
<PAGE> 8
TBA ENTERTAINMENT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Historical Titley Spalding
-------------------------------- Acquisition Pro Forma
Company (1)Titley Spalding Adjustments Consolidated
----------- ------------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue $ 7,116,300 $ 856,500 $ 7,972,800
Cost related to revenue 4,830,500 -- 4,830,500
----------- ----------- -----------
Gross profit 2,285,800 856,500 3,142,300
General and administrative 2,225,000 202,000 (2)150,000 2,577,000
Depreciation and amortization 154,200 10,400 (3)89,300 253,900
Equity in income of Joint Venture (380,800) -- (380,800)
Minority interest (36,000) -- (36,000)
Interest expense , net 93,400 -- 93,400
----------- ----------- -----------
Income from continuing operations $ 230,000 $ 644,100 $ 634,800
=========== =========== ===========
Earnings per common share - basic:
Income from continuing operations $ 0.03 $ 0.08
=========== ===========
Weighted average common stock outstanding 7,317,700 7,481,100
=========== ===========
Earnings per common share - diluted:
Income from continuing operations $ 0.03 $ 0.08
=========== ===========
Weighted average common stock outstanding 7,981,700 8,145,100
=========== ===========
</TABLE>
See notes to unaudited pro forma consolidated financial data.
<PAGE> 9
TBA ENTERTAINMENT CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS DATA
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(1) The Titley Spalding acquisition was consummated on June 18, 1998. The
operations of Titley Spalding for the period from June 18, 1998 to
June 30, 1998 are included in the historical financial statements of
the Company. This column reflects the operations of Titley Spaulding
for the period from January 1, 1998 to June 18, 1998.
(2) In 1998, all payments to the two members of Titley Spalding were made
as distributions from members' equity, based on the profitability of
Titley Spalding and the availability of cash to fund such
distributions. Under the terms of the Purchase Agreement, these
individuals have entered into employment agreements with specifically
defined salaries. The adjustment results from the net change in expense
as if the employment agreements had been effect in 1998.
(3) The Titley Spalding acquisition results in the recording of goodwill
of approximately $1,785,000 as of the June 18, 1998 acquisition date.
The Company expects to amortize this amount over 10 years. This results
in semi-annual amortization of approximately $89,300.
(4) As of December 31, 1997, the Company had NOLs of approximately $4.5
million. Accordingly, no pro forma income tax provision is provided.
<PAGE> 10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of Titley,
Spalding & Associates, LLC:
We have audited the accompanying balance sheets of TITLEY, SPALDING &
ASSOCIATES, LLC (a Tennessee Limited Liability Company) as of December 31, 1996
and 1997, and the related statements of income, members' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company'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 Titley, Spalding & Associates,
LLC as of December 31, 1996 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
August 19, 1998
<PAGE> 11
TITLEY, SPALDING & ASSOCIATES, LLC
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31,
------------------------ June 18,
1996 1997 1998
-------- -------- ----------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $324,054 $187,796 $ 23,287
Accounts receivable 202,320 117,153 278,940
Prepaid expenses 29,400 -- --
-------- -------- --------
Total current assets 555,774 304,949 302,227
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation 12,853 10,446 --
-------- -------- --------
$568,627 $315,395 $302,227
======== ======== ========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 18,833 $ 2,383 $ 35,170
Deferred revenue 15,974 98,120 29,352
-------- -------- --------
Total current liabilities 34,807 100,503 64,522
-------- -------- --------
COMMITMENTS (Note 3)
MEMBERS' EQUITY 533,820 214,892 237,705
-------- -------- --------
$568,627 $315,395 $302,227
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 12
TITLEY, SPALDING & ASSOCIATES, LLC
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended
December 31, Period ended
--------------------------- June 18,
1996 1997 1998
---------- ---------- -------------
(unaudited)
<S> <C> <C> <C>
REVENUE $1,858,857 $2,403,295 $856,478
OPERATING EXPENSES 427,060 423,985 212,393
---------- ---------- --------
NET INCOME $1,431,797 $1,979,310 $644,085
========== ========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 13
TITLEY, SPALDING & ASSOCIATES, LLC
STATEMENTS OF MEMBERS' EQUITY
<TABLE>
<S> <C>
BALANCE, December 31, 1995 $ --
Net income 1,431,797
Member distributions, net (897,977)
-----------
BALANCE, December 31, 1996 533,820
Net income 1,979,310
Member distributions, net (2,298,238)
-----------
BALANCE, December 31, 1997 214,892
Net income (unaudited) 644,085
Member distributions, net (unaudited) (621,272)
-----------
BALANCE, June 18, 1998 (unaudited) $ 237,705
===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 14
TITLEY, SPALDING & ASSOCIATES, LLC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31, Period ended
----------------------------- June 18,
1996 1997 1998
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,431,797 $ 1,979,310 $ 644,085
Adjustment to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 12,552 22,939 10,446
Change in operating assets and
liabilities:
Accounts receivable (202,320) 85,167 (161,787)
Prepaid expenses (29,400) 29,400 --
Accounts payable and accrued liabilities 18,833 (16,450) 32,787
Deferred revenues 15,974 82,146 (68,768)
----------- ----------- -----------
Net cash provided by operating
activities 1,247,436 2,182,512 456,763
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (25,405) (20,532) --
----------- ----------- -----------
Net cash used in investing
activities (25,405) (20,532) --
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Member distributions (897,977) (2,298,238) (621,272)
----------- ----------- -----------
Net cash used in financing
activities (897,977) (2,298,238) (621,272)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH 324,054 (136,258) (164,509)
CASH, beginning of period -- 324,054 187,796
----------- ----------- -----------
CASH, end of period $ 324,054 $ 187,796 $ 23,287
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 15
TITLEY, SPALDING & ASSOCIATES, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(INFORMATION AS OF JUNE 18, 1998 IS UNAUDITED)
1. Formation and Line of Business
Titley, Spalding & Associates, LLC (the Company), a Tennessee Limited
Liability Company, was organized on January 1, 1996. The Company engages
in artist management and has facilities located in Nashville, Tennessee.
2. Summary of Significant Accounting Policies
Cash
Cash includes currency on hand and deposit accounts to which funds may be
deposited or withdrawn at any time without prior notice or penalty. At
times, cash balances in the Company's accounts may be in excess of
federally insured limits.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed
using the straight-line method over estimated lives of two years. The
Company capitalizes expenditures which materially increase asset lives and
charges ordinary repairs and maintenance to operations as incurred. When
assets are sold or otherwise disposed of, the cost and related reserves
are removed from the accounts and any resulting gain or loss is included
in operations.
Property and equipment is reported net of accumulated depreciation of
$12,552, $35,491 and $45,937 at December 31, 1996 and 1997 and June 18,
1998, respectively.
Income Taxes
The Company is a Limited Liability Company and all income is taxed to its
members. Accordingly, there is no provision for federal or state income
taxes reflected in the accompanying financial statements.
Revenue Recognition
The Company generates revenues based on the gross receipts received by the
artists under management. Sources of gross receipts and timing of revenue
recognition are set forth below:
Performance gross receipts - The artists generate gross receipts upon the
completion of a performance or appearance. The Company recognizes its
portion of the gross receipts as revenues upon completion of the
performance or appearance.
Royalty gross receipts - The artists generate gross receipts from record
labels based on past or future royalty earnings on records and videos
sold. The Company recognizes its portion of the gross receipts as revenues
upon the earning of the royalties. This may result in the
<PAGE> 16
Company recording accounts receivables when royalty earnings exceed cash
advances made to the artists or deferred revenues when cash advances made
to the artists exceed royalty earnings.
Concentration of Credit Risk and Major Sources of Revenues
Accounts receivable are unsecured and the Company is at risk to the extent
such amounts become uncollectible. At December 31, 1996 and 1997 and June
18, 1998, the Company did not have an allowance for doubtful accounts.
In 1996, 1997, and for the period ended June 18, 1998, two artists
represented 100 percent of total revenues.
Statement of Cash Flows
No cash was paid for income taxes or interest for the years ended December
31, 1996 and 1997 and for the period ended June 18, 1998.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires 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 revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Unaudited Financial Statements
The unaudited financial statements for the period ended June 18, 1998 have
been prepared in conformity with generally accepted accounting principles.
Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, although the Company
believes that the disclosures made are adequate to make the information
presented not misleading. These unaudited financial statements reflect, in
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to fairly present the results of
operations, changes in cash flows and financial position as of and for the
periods presented. The unaudited financial statements should be read in
conjunction with the audited financial statements and related notes
thereto. The results for the interim period presented are not necessarily
indicative of results to be expected for the full year.
3. Commitments
The Company leases the facilities used in its operations from a member on
a month-to-month basis. During both 1996 and 1997, the Company incurred
annual rent expense of approximately $49,000. For the period ended June
18, 1998 the Company incurred rent expense of approximately $22,960.
4. Member distributions
The members of the Company received distributions in lieu of salaries
during the years ended 1996 and 1997 and during the period ended June 18,
1998. Distributions were approximately $898,000, $2,298,000, and $621,000
during the years ended 1996 and 1997 and during the period ended
June 18, 1998.
5. Subsequent Events
On June 18, 1998, 100% of the ownership of the Company was sold to a
public company. The former members of the Company signed employment
agreements with the public company in connection with the sale.
Upon completion of the acquisition, the Company owed the former members
approximately $267,900.
-2-
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Document Page
- ------ ----------------------- ----
<S> <C> <C>
2.1 Purchase Agreement, dated as of June 18, 1998, among TBA
Entertainment Corporation, Titley Spalding & Associates, LLC,
Clarence Spalding and Robert R. Titley.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
PURCHASE AGREEMENT
among
TBA ENTERTAINMENT CORPORATION,
TBA ENTERTAINMENT HOLDING CORPORATION,
ROBERT R. TITLEY
AND
CLARENCE SPALDING
June __, 1998
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
----------------- ----
<S> <C> <C>
ARTICLE 1 - Purchase and Sale of Interests................................................. 1
1.1 Purchase and Sale of Interests.............................................. 1
1.2 Purchase Price.............................................................. 1
1.3 Closing...................................................................... 4
1.4 Registration Rights.......................................................... 4
1.5 Further Action............................................................... 4
ARTICLE 2 - Representations and Warranties of TBA and Subsidiary............................ 5
2.1 Organization and Qualification............................................... 5
2.2 Authority Relative to this Agreement......................................... 5
2.3 TBA Stock and TBA 10-KSB.................................................... 5
2.4 Certain Corporate Matters.................................................... 6
2.5 Broker's Fees................................................................ 6
2.6 Separate Subsidiary.......................................................... 6
2.7 Disclosure................................................................... 6
ARTICLE 3 - Representations and Warranties of the Sellers................................... 7
3.1 Organization, Qualification and Limited Liability Company Power.............. 7
3.2 Capitalization............................................................... 7
3.3 Authorization of Transaction................................................. 7
3.4 Subsidiaries................................................................. 8
3.5 Financial Statements......................................................... 8
3.6 Events Subsequent to Financial Statements.................................... 8
3.7 Undisclosed Liabilities..................................................... 9
3.8 Tax Returns and Audits...................................................... 10
3.9 Books and Records........................................................... 11
3.10 Real Property............................................................... 11
3.11 Tangible Property........................................................... 12
3.12 Intellectual Property....................................................... 12
3.13 Contracts................................................................... 13
3.14 Suppliers and Customers..................................................... 14
3.15 Notes; Accounts Receivable.................................................. 14
3.16 Powers of Attorney.......................................................... 15
3.17 Condition of Property....................................................... 15
3.18 Insurance................................................................... 15
3.19 Litigation.................................................................. 15
3.20 Employees................................................................... 15
3.21 Employee Benefit Plans...................................................... 15
3.22 Guarantees.................................................................. 16
3.23 Legal Compliance............................................................ 16
3.24 Certain Business Relationships.............................................. 17
3.25 Broker's Fees............................................................... 17
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
(Continued)
Page
----
<S> <C> <C>
3.26 Investment Representations.................................................. 17
3.27 Disclosure.................................................................. 18
ARTICLE 4 - Conduct of Business Pending The Closing........................................ 18
4.1 Conduct of Business Pending the Closing..................................... 18
4.2 No Other Bids............................................................... 20
4.3 Lines of Business and Capital Expenditures.................................. 21
4.4 Accounting Methods.......................................................... 21
4.5 Other Actions............................................................... 21
ARTICLE 5 - Additional Agreements.......................................................... 21
5.1 Expenses.................................................................... 21
5.2 Notification of Certain Matters............................................. 21
5.3 Access to Information....................................................... 21
5.4 Taking of Necessary Action.................................................. 22
5.5 Notice of Changes........................................................... 22
5.6 Press Releases.............................................................. 22
5.7 Employee Matters............................................................ 22
5.8 Tax Matters..................................................................22
5.9 Incremental Management Costs.................................................23
ARTICLE 6 - Conditions to Closing.......................................................... 23
6.1 Conditions to Obligations of Each Party to Effect the Closing............... 23
6.2 Additional Conditions to TBA's and Subsidiary's Obligations................. 23
6.3 Additional Conditions to the Sellers' Obligations........................... 25
ARTICLE 7 - Termination, Amendment and Waiver.............................................. 26
7.1 Termination................................................................. 26
7.2 Amendment................................................................... 27
7.3 Waiver...................................................................... 27
7.4 Effect of Termination....................................................... 27
ARTICLE 8 - Indemnification................................................................ 27
8.1 By TBA, Subsidiary and the Sellers.......................................... 27
8.2 Claims for Indemnification.................................................. 28
8.3 Defense by Indemnifying Party............................................... 28
8.4 Payment of Indemnification Obligation....................................... 29
ARTICLE 9 - Registration Rights.............................................................29
9.1 Incidental Registration......................................................29
9.2 Registration Expenses........................................................30
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
(Continued)
Page
----
<S> <C> <C>
9.3 Certain Registration-Related Obligations.....................................30
9.4 Rule 144.....................................................................31
9.5 Indemnification..............................................................31
ARTICLE 10 - General Provisions............................................................ 33
10.1 Survival of Representations and Warranties.................................. 33
10.2 Effect of Due Diligence..................................................... 33
10.3 Specific Performance........................................................ 33
10.4 Notices..................................................................... 34
10.5 Interpretation.............................................................. 35
10.6 Severability................................................................ 35
10.7 Miscellaneous............................................................... 35
10.8 Material Adverse Breach..................................................... 35
10.9 Limitation of Liability..................................................... 36
10.10 Counterparts................................................................ 36
10.11 Consent to Assignment....................................................... 36
</TABLE>
SCHEDULE 1 Disclosure Schedule
ANNEX I Consideration Allocation
EXHIBIT A Form of Promissory Notes
EXHIBIT B Form of Assignment of Membership Interests
EXHIBIT C Form of Employment Agreements
EXHIBIT D Form of Opinion of Counsel to the Sellers
EXHIBIT E Form of Opinion of Counsel to TBA
-iii-
<PAGE> 5
PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of June 18, 1998 (this "Agreement"),
is by and among TBA ENTERTAINMENT CORPORATION, a Delaware corporation ("TBA"),
TBA ENTERTAINMENT HOLDING CORPORATION, a Delaware corporation and wholly-owned
subsidiary of TBA ("Subsidiary"), ROBERT R. TITLEY ("Titley") and CLARENCE
SPALDING ("Spalding") (Titley and Spalding are individually referred to herein
as a "Seller" and are collectively referred to herein as the "Sellers").
RECITALS
WHEREAS, the Sellers own one hundred percent (100%) of the issued and
outstanding membership interests (the "Interests") of Titley Spalding &
Associates, LLC, a Tennessee limited liability company ("TSA");
WHEREAS, the Sellers desire to sell the Interests to TBA and Subsidiary,
and TBA and Subsidiary desire to purchase the Interests from the Sellers, 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 INTERESTS
1.1 Purchase and Sale of Interests. Subject to the terms and conditions
of and in reliance upon the representations and warranties set forth in this
Agreement, the Sellers agree to sell, assign, transfer and deliver to TBA and
Subsidiary and TBA and Subsidiary agree to purchase from each of the Sellers the
percentage of Interests set forth opposite the name of each such Seller on Annex
I attached hereto under the column entitled "Percentage of Membership Interest
Being Sold," 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 Interests to TBA and Subsidiary shall be
referred to as the "Acquisition."
1.2 Purchase Price. The maximum aggregate purchase price (the "Purchase
Price") payable to the Sellers for the Interests will be equal to $7,455,028,
subject to adjustment as provided hereinbelow, and shall be paid or delivered to
the Sellers as follows:
(a) At the Closing (as hereinafter defined), TBA shall deliver to
the Sellers (i) by wire transfer to one or more accounts designated in
writing by the Sellers to TBA cash in an
PURCHASE AGREEMENT - PAGE 1
<PAGE> 6
amount equal to One Million Dollars ($1,000,000) (the "Cash Portion")
and (ii) certificates registered in the Sellers' names representing One
Hundred Seventy-Five Thousand (175,000) fully-paid and nonassessable
shares of TBA common stock, $.001 par value per share ("TBA Common
Stock") valued for all purposes of this Agreement at Four Dollars
($4.00) per share, for a total value of Seven Hundred Thousand Dollars
($700,000) (the "Common Stock Portion") (the Cash Portion and the Common
Stock Portion shall collectively be referred to herein as the "Closing
Date Consideration"). The Closing Date Consideration shall be allocated
among the Sellers as specified in Annex I.
(b) Following the Closing, the Sellers shall be entitled to
receive additional consideration (the "Earnout Consideration"), payable
as set forth below, equal to (i) sixty-two percent (62%) of the pre-tax
net income of TSA (calculated as set forth in subparagraph (c) below)
for the period beginning on the Closing Date (as hereinafter defined)
and ending on December 31, 1998 (the "1998 Earnout Period"), and (ii)
sixty-two percent (62%) of the pre-tax net income of TSA for the years
1999, 2000, 2001, 2002 and that number of months of 2003 which, when
added to the number of whole months included in the 1998 Earnout Period,
equals twelve (12) (the "Post 1998 Earnout Period"); provided, however,
that the total amount of Earnout Consideration payable to the Sellers
pursuant to this subparagraph (b) shall not exceed $5,755,028. The
Earnout Consideration shall constitute a portion of the Purchase Price
for all purposes and has been calculated (along with the Closing Date
Consideration) to provide the Sellers with the agreed upon value of the
Interests. The portion of the Earnout Consideration payable to the
Sellers for the 1998 Earnout Period and for each year (or portion
thereof) of the Post 1998 Earnout Period shall be allocated among the
Sellers as specified in Annex I and shall be payable (i) one hundred
percent (100%) in cash by wire transfer to one or more accounts
designated in writing by the Sellers to TBA for the 1998 Earnout Period,
and (ii) sixty percent (60%) in cash by wire transfer to one or more
accounts designated in writing by the Sellers to TBA and by the issuance
and delivery by TBA to the Sellers of promissory notes (the "Notes"),
each Note substantially in the form of Exhibit A attached hereto (the
"Form of Note") and secured, pursuant to a Payment Assurance Agreement
(as such term is defined in the Form of Note), by a Certificate of
Deposit, Letter of Credit or such other form of cash equivalent as may
be mutually agreed upon by Sellers and TBA, in the principal sum of
forty percent (40%) of the dollar amount of the Earnout Consideration
payable with respect to each such calendar year (or portion thereof)
during the Post 1998 Earnout Period.
(c) On or before the ninetieth (90th) day following the end of
each year (or portion thereof) of the 1998 Earnout Period and the Post
1998 Earnout Period, TBA shall prepare and deliver to the Sellers an
income statement (the "TSA Income Statement"), prepared in accordance
with generally accepted accounting principles ("GAAP") consistently
applied, setting forth the net income before taxes of TSA (the "Pre-Tax
Net Income") for the previous fiscal year (or portion thereof, as
applicable). In determining the Pre-Tax Net Income of TSA for the 1998
Earnout Period and for each year (or portion thereof) of the Post 1998
Earnout Period, (i) all amortization of goodwill created by the
Acquisition shall not constitute a reduction to Pre-Tax Net Income, and
(ii) all allocations to TSA of general and administrative overhead
expenses of TBA and Subsidiary shall be consistent with overhead
allocations to other operating divisions and subsidiaries of TBA, shall
be fairly and not unreasonably applied, shall be on terms no less
favorable than could be obtained from
PURCHASE AGREEMENT - PAGE 2
<PAGE> 7
unaffiliated third parties, and shall be approved by the executive
committee of TBA, of which Titley will be a member. Within thirty (30)
days of its receipt of the TSA Income Statement, the Sellers shall
notify TBA of their objections, if any, to the TSA Income Statement and
to TBA's calculation of Pre-Tax Net Income for the 1998 Earnout Period
or fiscal year (or portion thereof) of the Post 1998 Earnout Period, as
applicable. The Sellers' failure to object to TBA's calculation of
Pre-Tax Net Income for the fiscal period to which such TSA Income
Statement relates within such thirty-day period shall constitute
acceptance thereof. If the Sellers and TBA are unable to resolve the
disputed items and agree upon the Pre-Tax Net Income of TSA for the
applicable period within fifteen (15) days of the Sellers' notification
to TBA of their objections, such dispute shall be referred to Arthur
Andersen LLP (the "Independent Accountants"). The Independent
Accountants shall, within thirty (30) days following the referral to the
Independent Accountants, deliver to TBA and the Sellers a written report
determining the Pre-Tax Net Income for TSA for the applicable period,
which determination will be conclusive and binding on TBA and the
Sellers for the purpose of any adjustment to the consideration payable
hereunder. Should the Pre-Tax Net Income as determined by the
Independent Accountants exceed by ten percent (10%) or more the Pre-Tax
Net Income as contained in the TSA Income Statement for such period (or
portion thereof), TBA shall pay the fees and expenses of the Independent
Accountants; otherwise, TBA and the Sellers shall each bear fifty
percent (50%) of the fees and expenses of the Independent Accountants.
Within five (5) days of the determination of the Pre-Tax Net Income for
TSA for the applicable period, TBA shall pay and deliver to the Sellers
the Earnout Consideration, if any, due for the fiscal year (or portion
thereof) of the 1998 Earnout Period or the Post 1998 Earnout Period, as
applicable, for which the Pre-Tax Net Income was determined.
(d) Notwithstanding the previous provisions of this Section 1.2
to the contrary, should Kix Brooks and Ronnie Dunn terminate the
provisions of the Management Agreement (as defined in Section 6.2(h)
hereof) during calendar year 1998, 1999 or 2000, Titley shall pay to TBA
with respect to each such year beginning in the year such Management
Agreement is terminated, the amount, if any, by which $1,250,000 exceeds
the gross revenues of the Company for each such year; provided, however,
the aggregate dollar amount payable by Titley to TBA pursuant to this
Section 1.2(d) shall not exceed (i) $900,000 if the Management Agreement
is terminated in 1998; (ii) $750,000 if the Management Agreement is
terminated in 1999; and (iii) $450,000 if the Management Agreement is
terminated in 2000. For purposes of this Section 1.2(d), (i) payments by
Titley to TBA may be made in cash and/or TBA Common Stock, (ii) such
payments shall be made on or before February 15 of the year following
the year to which such payment relates, (iii) the value of the TBA
Common Stock conveyed by Titley to TBA, if any, shall be equal to the
greater of (i) Four Dollars ($4.00) per share and (ii) the average price
of the closing sales price of TBA Common Stock reported by The Nasdaq
Stock Market for each of the fifteen (15) trading days ending on the
effective date of the termination of the Management Agreement, and (iv)
it shall be at the discretion of Titley as to the proportion of cash
and/or TBA Common Stock to be conveyed to TBA to satisfy his obligation
hereunder. For example, if the Management Agreement is terminated on
November 15, 1998 and the gross
PURCHASE AGREEMENT - PAGE 3
<PAGE> 8
revenues of the Company are $1,700,000 for 1998, $950,000 in 1999 and
$320,000 in 2000, Titley would have no payment obligation to TBA
hereunder on February 15, 1999, pay TBA $300,000 on or before February
15, 2000 ($1,250,000 - $950,000) and pay TBA $600,000 on or before
February 15, 2001 ($1,250,000 - $320,000, but not to exceed an aggregate
of $900,000 for the three years 1998, 1999 and 2000 as the Management
Agreement was terminated in 1998).
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 June 15,
1998 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) TBA and Subsidiary will (i) pay to the Sellers the Cash
Portion by wire transfer of immediately available funds, and (ii) issue
and deliver to the Sellers the Common Stock Portion, and (iii) execute
and deliver to the Sellers such other documents and instruments required
to be executed and delivered by TBA and Subsidiary under the terms of
this Agreement; and
(b) The Sellers will deliver to TBA and Subsidiary (i) an
assignment of the Interests substantially in the form of Exhibit B
attached hereto (pursuant to which the percentage of the Interest owned
by Titley will be assigned to TBA and the percentage of the Interest
owned by Spalding will be assigned to Subsidiary), and (ii) such other
documents and instruments required to be delivered by the Sellers under
the terms of this Agreement or reasonably requested by TBA and
Subsidiary.
1.4 Registration Rights. The Sellers shall be entitled to the
registration and other rights provided in Article 9 with respect to the shares
of TBA Common Stock issued pursuant to Section 1.2(a) hereof. The parties hereto
stipulate and agree that the granting of such registration rights is intended to
provide the Sellers with flexibility in disposing of any shares of TBA Common
Stock issued pursuant to Section 1.2(a) of this Agreement and does not evidence
any present intention to dispose of any such shares upon their issuance.
1.5 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 TBA and Subsidiary with full right, title and possession and all rights,
privileges and immunities with respect to the Interests, the Sellers shall take
all such action.
PURCHASE AGREEMENT - PAGE 4
<PAGE> 9
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TBA AND SUBSIDIARY
TBA and Subsidiary 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. TBA 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. Subsidiary 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 TBA and Subsidiary 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 TBA and Subsidiary and the consummation by TBA and Subsidiary
of the transactions contemplated hereby have been duly authorized by the
respective Boards of Directors of TBA and Subsidiary and no other corporate
proceedings on the part of TBA or Subsidiary are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by TBA and Subsidiary 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 TBA or Subsidiary, the performance by TBA or Subsidiary of its
obligations hereunder or the consummation of the transactions contemplated
hereby by TBA or Subsidiary 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 TBA or Subsidiary 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 TBA or Subsidiary is a party or by which
TBA or Subsidiary 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 Article 9 hereof, filings made with the National Association of
Securities Dealers, Inc. to list the shares of TBA Common Stock that shall 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 TBA or Subsidiary for the
consummation by TBA and Subsidiary of the transactions contemplated by this
Agreement.
2.3 TBA Stock and TBA 10-KSB. TBA has furnished the Sellers with a true
and complete copy of its Form 10-KSB for the year ended December 31, 1997 (the
"Form 10-KSB").
PURCHASE AGREEMENT - PAGE 5
<PAGE> 10
As of its date, such Form 10-KSB was in compliance, in all material respects,
with the requirements of its form. The financial statements of TBA included in
such Form 10-KSB 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 GAAP, applied on a consistent basis during the periods involved,
and fairly presented, in all material respects the financial position of TBA 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 TBA and Subsidiary 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,
other than in such jurisdictions where the failure to so qualify would not,
individually or in the aggregate, have a materially adverse effect on TBA and
its subsidiaries, taken as a whole. TBA 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. TBA and Subsidiary 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 TBA and Subsidiary are accurate and
complete in all material respects. All material corporate actions taken by TBA
and Subsidiary since their respective dates of incorporation have been duly
authorized and/or subsequently ratified, as necessary. Neither TBA nor
Subsidiary is in default under, or in violation of, any provision of its charter
or bylaws.
2.5 Broker's Fees. None of TBA, Subsidiary or 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.
2.6 Separate Subsidiary. TBA and Subsidiary shall operate TSA as a
separate subsidiary of TBA and Subsidiary for the period beginning on the
Closing Date and ending June 1, 2003. TBA and Subsidiary shall use reasonable
efforts to economically and managerially support and enhance the continued
development of the business of TSA and shall continue, to the extent possible,
the existing accounting operations of TSA.
2.7 Disclosure. The representations and warranties and statements of
fact made by TBA and Subsidiary 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.
PURCHASE AGREEMENT - PAGE 6
<PAGE> 11
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 severally
represents and warrants to TBA and Subsidiary as follows as of the date hereof
and as of the Closing Date.
3.1 Organization, Qualification and Limited Liability Company Power. TSA
is duly organized, validly existing and in good standing under the laws of the
State of Tennessee. TSA is duly qualified to do business as a foreign limited
liability company 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. TSA has full 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. TSA has delivered to TBA true,
accurate and complete copies of its Articles of Organization and Operating
Agreement which reflect all amendments made thereto at any time prior to the
date of this Agreement. All material actions taken by TSA since formation have
been duly authorized and/or subsequently ratified as necessary. TSA is not in
default under or in violation of any provision of its Articles of Organization
or Operating Agreement. TSA is not 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 books of account of TSA are complete and
correct in all material respects and there have been no material transactions
involving the business of TSA 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 the Sellers to sell the Interests to TBA and
Subsidiary pursuant to this Agreement which consent has not been obtained.
3.2 Capitalization. Annex I correctly sets forth the ownership interests
in TSA. The Interests are owned by the Sellers free and clear of all liens,
security interests, claims, charges or other encumbrances. Except as
contemplated by this Agreement, neither the Sellers nor TSA has granted any
rights of any kind to any person or entity to acquire any interest in TSA.
3.3 Authorization of Transaction. 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
PURCHASE AGREEMENT - PAGE 7
<PAGE> 12
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 TSA under any of its governing documents, 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 TSA is a party or by which TSA or any of its 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. TSA neither owns nor is obligated to purchase any
equity interest in or any other interest convertible into or exchangeable for an
equity interest in any entity.
3.5 Financial Statements. The Sellers have delivered to TBA (a)
unaudited balance sheets and unaudited statements of operations and statements
of cash flows of TSA for each of the years in the two-year period ended December
31, 1997, (b) an unaudited balance sheet of TSA as of March 31, 1998, and (c)
unaudited statements of operations and statements of cash flows of TSA for the
three (3) months ended March 31, 1998 (collectively, the "Financial
Statements"). The Financial Statements present fairly the financial condition of
TSA 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, 1997, there has not been:
(a) any material adverse change in the financial condition,
results of operations or business of TSA;
(b) any sale, lease, transfer, license or assignment of any
material assets, tangible or intangible, of TSA, other than in the
ordinary course of business;
(c) any material damage, destruction or property loss, whether or
not covered by insurance, affecting adversely the properties or business
of TSA;
(d) any declaration or setting aside or payment of any
distribution with respect to the 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 TSA (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 TSA other than (i) those incurred in the ordinary course
of business and (ii) those which do not exceed $20,000 in the aggregate;
PURCHASE AGREEMENT - PAGE 8
<PAGE> 13
(g) any cancellation or compromise by TSA of any material debt or
claim, except for adjustments made in the ordinary course of business
which, in the aggregate, are not material;
(h) any waiver or release by TSA of any right of any material
value;
(i) any sale, assignment, transfer or grant by TSA 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 TSA 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 the Sellers, other than in the ordinary
course of business;
(k) any change made or authorized in the Articles of Organization
or Operating Agreement of TSA;
(l) any issuance, sale or other disposition by TSA of any
membership 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) membership interests or other
equity securities or interests;
(m) any loan to or other transaction with any Seller, employee or
consultant of TSA giving rise to any claim or right of TSA against any
such person or of such person against TSA;
(n) any payment to or other transaction with any Seller, employee
or consultant of TSA involving an amount in excess of $5,000,
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 TSA is a party or by which it is bound so as to
affect, materially and adversely, the properties or business of TSA; or
(p) any other material transaction or commitment entered into
other than in the ordinary course of business by TSA.
3.7 Undisclosed Liabilities. TSA has no material liability or obligation
whatsoever, known or unknown, either accrued, absolute, contingent or otherwise,
except to the extent shown on the Financial Statements (to the extent required
to be disclosed pursuant to GAAP), incurred in the normal and ordinary course of
business since January 1, 1998 (provided that, liabilities or
PURCHASE AGREEMENT - PAGE 9
<PAGE> 14
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. TSA is not indebted, directly or
indirectly, to either Seller or any affiliate of either Seller in any amount
whatsoever other than for salaries for services rendered or reimbursable
business expenses, and no Seller or affiliate is indebted to TSA.
3.8 Tax Returns and Audits. The taxable year of TSA ends December 31.
TSA 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 TSA is not required to pay any
other taxes for such periods except as shown in such Tax Returns. The income tax
returns filed by TSA 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 TSA 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 TSA. There are no tax liens (other than
liens for taxes which are not yet due and payable) on any of the properties of
TSA, nor are there any pending or threatened examinations or tax claims
asserted. TSA has not granted any extensions of limitation periods applicable to
tax claims. Except in jurisdictions in which TSA voluntarily files tax returns,
no claim has ever been made by a taxing authority that TSA 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 TSA since January 1,
1992, have been delivered to TBA, and the same are listed in Section 3.8 of the
Disclosure Schedule. TSA is not a party to, or bound by, any tax indemnity, tax
sharing or tax allocation agreement. TSA is not 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 Internal Revenue Code of 1986, as
amended (the "Code"). All positions taken on federal Tax Returns that could give
rise to a penalty for substantial understatement pursuant to Section 6662(d) of
the Code have been disclosed on such Tax Returns. Neither of the Sellers is a
foreign person within the meaning of Section 1445(b)(2) of the Code. TSA has not
made any tax elections under any of Sections 108, 168, 338, 441, 463, 472, 1017,
1033 or 4977 of the Code (or any predecessor thereof), nor has TSA filed any
election with any taxing authority to be taxed other than as a partnership for
federal, state and local tax purposes. None of the assets and properties of TSA
is an asset or property that TBA, Subsidiary or any of their 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
PURCHASE AGREEMENT - PAGE 10
<PAGE> 15
state, local, or foreign law has been entered into by or with respect to TSA or
any assets thereof. TSA has not 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, TSA has no 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. TSA has not 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. TSA 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. The sale of the Interests shall
cause the taxable year of TSA to close on the Closing Date, and shall cause TSA
to terminate solely for U.S. federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code. Since January 1, 1997, there has not been any sale,
transfer, assignment or other disposition of any interest in TSA, nor has there
been any distribution by TSA of any assets other than cash. The Sellers shall
report, for U.S. federal, state and local income tax purposes, 100% of all
taxable income, gain, loss and deductions of TSA for the taxable year of TSA
ending on the Closing Date. TSA shall make a valid election under Sections 743
and 754 of the Code (and any corresponding provisions of state and local tax
law) on its income tax return for the taxable period ending on the Closing Date.
Section 3.8 of the Disclosure Schedule sets forth the adjusted tax basis of the
assets of TSA as of the most recent practicable date.
3.9 Books and Records. The general ledgers and books of account of TSA,
all federal, state and local income, franchise, property and other tax returns
filed by TSA with respect to its assets, and all other books and records of TSA
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 TSA. With respect to each lease so set forth: (a) the lease
has been validly executed and delivered by TSA and, to the knowledge of the
Sellers, by the other party or parties thereto and is in full force and effect;
(b) neither TSA 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
TSA 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) TSA has not 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 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.
PURCHASE AGREEMENT - PAGE 11
<PAGE> 16
3.11 Tangible Property. TSA has good and marketable title to, or a valid
leasehold interest in, each item of tangible property, whether real, personal or
mixed, reflected on its books and records as owned or used by it, subject to no
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 TSA 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
TSA 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) TSA 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 TSA;
(v) TSA has not received any charge of interference or
infringement with respect to the item;
(vi) except in the ordinary course of business, TSA has
not 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 adverse effect on the right, title and interest of TSA in
the item;
(viii) TSA has taken all steps which are commercially
reasonable to protect the rights set forth in Section 3.12(a) of
the 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
PURCHASE AGREEMENT - PAGE 12
<PAGE> 17
(ix) the Sellers have supplied TBA 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 TSA practices
or uses that are material to TSA. 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, TSA has not 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 TBA with a true and
complete copy of any such license agreement;
(iv) the transactions contemplated by this Agreement will
have no material adverse effect on the ability of TSA 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 TSA with respect to such item
infringes upon the intellectual property rights of any third
party.
(c) To the knowledge of Sellers, TSA has not 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 TSA as now conducted or as presently proposed to be conducted.
(d) TSA has 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 TBA, to which TSA is a party:
(a) any contract for the lease of personal property from or to
third parties providing for lease payments in excess of $5,000.00 per
annum;
PURCHASE AGREEMENT - PAGE 13
<PAGE> 18
(b) any contract for the purchase or sale of 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;
(c) any joint venture or partnership agreement;
(d) any agreement or instrument under which TSA 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 TSA or on the prospects or the conduct of the business of
TSA, including, but not limited to, all artist management contracts to
which TSA is a party;
(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. TSA is not and, to the knowledge of the
Sellers, no other party is in breach or default, and no event has occurred on
the part of TSA 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 TBA all of the material service agreements of TSA
with its customers. TSA is not 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 TSA made payments during the
year ended December 31, 1997, in excess of one percent of TSA's gross revenues
as reflected in the Financial Statements for such year and all customers of TSA
that paid, during the fiscal year ended December 31, 1997, more than five
percent of the gross revenues of TSA as reflected in the Financial Statements
for such year. Since December 31, 1997, no material customer of TSA has notified
TSA that it will substantially decrease or cease doing business with TSA.
3.15 Notes; Accounts Receivable. As of the Closing Date, all notes
payable to and accounts receivable of TSA will be properly reflected on their
books and records and will be valid receivables subject to no setoffs or
counterclaims.
PURCHASE AGREEMENT - PAGE 14
<PAGE> 19
3.16 Powers of Attorney. There are no outstanding powers of attorney or
similar instruments executed by TSA.
3.17 Condition of Property. Each building, fixture, machine and piece of
equipment (having a net book value of $2,000.00 or more) owned or used by TSA 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.
TSA 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. TSA is 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) TSA 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 TSA; or (b) TSA is a plaintiff in any action, domestic or
foreign, judicial or administrative, or any such action exists in which a
counterclaim against TSA 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 material adverse change in the condition, financial
or otherwise, of TSA, 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 TSA or to which TSA is
a party and there is no reason to believe that any such action, suit, proceeding
or investigation may be brought or threatened against TSA.
3.20 Employees. Section 3.20 of the Disclosure Schedule sets forth and
the Sellers have furnished to TBA true and complete copies of: (a) any written
employment agreements with either Seller or with other employees of TSA; and (b)
any written employment agreements which by their terms may not be terminated by
TSA at will or which grant severance payments. Except as set forth in Section
3.20 of the Disclosure Schedule, TSA has not entered into any similar oral
employment agreements. To the Sellers' knowledge, no key employee or group of
employees has any plans to terminate employment with TSA. TSA is not a party to
or bound by any collective bargaining agreement. There are no loans or other
obligations payable or owing by TSA to either Seller or other employee of TSA
(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 TSA or any guarantees by TSA of any loan or obligation of any nature
to which any such person is a party. TSA has 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 TBA true and complete copies of (a)
any nonqualified deferred or incentive
PURCHASE AGREEMENT - PAGE 15
<PAGE> 20
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 TSA or to which TSA is a party or otherwise is
bound ("Employee Benefit Plans"). TSA is not 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, TSA does not maintain or contribute or
has ever maintained or contributed to any funded or unfunded medical, health or
life insurance plan or arrangement for retirees or terminated employees. TSA
does not contribute or have 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 TSA has no actual or
potential liability under Section 4201 of ERISA for any complete or partial
withdrawal from a multiemployer plan. TSA does not maintain, contribute to or
have 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. TSA does not maintain,
contribute to or have 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 TBA 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 TSA or with respect to which TSA
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 the
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
Sellers or employees of TSA 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 in Section 406 of ERISA or as defined in
Section 4975 of the Code with respect to any such plan. Neither TSA, the Sellers
or other employees of TSA 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 TSA, the Sellers and
other employees of TSA to liability under ERISA or any applicable law.
3.22 Guarantees. TSA is not a guarantor or otherwise liable for any
material indebtedness of any other person, firm or corporation.
3.23 Legal Compliance. To the knowledge of Sellers, TSA, the Sellers and
the other employees of TSA (the individuals only in their capacities as
representatives of TSA) have complied
PURCHASE AGREEMENT - PAGE 16
<PAGE> 21
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 TSA alleging a violation of any such laws or regulations. To
the knowledge of Sellers, TSA holds all of the material permits, licenses,
certificates or other authorizations of foreign, federal, state or local
governmental agencies required for the conduct of its business as presently
conducted or proposed to be conducted.
3.24 Certain Business Relationships. Except as set forth in Section 3.24
of the Disclosure Schedule, to the knowledge of the Sellers, none of the Sellers
nor any of present or former employees of TSA 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
TSA, and none of the foregoing persons owns any property or rights, tangible or
intangible, which are used in the business of TSA.
3.25 Broker's Fees. Neither TSA 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.
3.26 Investment Representations.
(a) Each Seller will acquire the shares of TBA Common Stock
issued pursuant to this Agreement for his 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 TBA
contained in this Agreement and has made or has had the opportunity to
make inquiry concerning TBA. Each Seller has sufficient knowledge and
experience so as to be able to evaluate the risks and merits of his
investment in TBA, 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 and is not relying on any business
plan, projections, valuations or other financial information provided to
such Seller by TBA other than the Form 10-KSB. Each Seller further
acknowledges and agrees that TBA and Subsidiary have made no assurances
of any nature whatsoever regarding the future operations of TBA and
Subsidiary and have made no guarantees as to the profitability of an
investment in TBA. 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 TBA Common
Stock to be issued to him pursuant to this Agreement will bear a
restrictive legend in substantially the following form:
PURCHASE AGREEMENT - PAGE 17
<PAGE> 22
"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 TBA 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.
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 TBA shall otherwise agree in writing or
as otherwise expressly contemplated or permitted by this Agreement:
(a) TSA shall conduct its business and operations, including its
cash management practices, the collection of receivables, 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) TSA shall not 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 Articles of Organization or Operating Agreement; (iii)
declare, set aside or pay any dividend or other distribution payable in
cash, stock, property or otherwise with respect to its membership
interests provided, however, TSA shall be allowed to distribute cash
with respect to its membership interests in an amount equal to its net
income for the period beginning on January 1, 1998 and ending on the
Closing Date, provided further that no such cash distribution may create
or increase a deficit working capital of TSA as of the Closing Date;
(iv) redeem, purchase or acquire or offer to acquire any percentage of
its membership interests; (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);
PURCHASE AGREEMENT - PAGE 18
<PAGE> 23
(c) TSA shall not (i) issue or sell or agree to issue or sell,
any additional membership interests, or any options, warrants,
conversion privileges or rights of any kind to acquire any of its
membership interests; (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 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) TSA shall not (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 Seller; or
(ii) in the case of employees who are not a Seller, 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, 1998;
(e) TSA shall not 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) TSA 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 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;
(g) TSA shall (i) use commercially reasonable efforts to preserve
intact its business organization and goodwill, keep in full force and
effect all material rights, contracts, licenses, permits and franchises
relating to its business, keep available the services of its 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 TBA 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 TBA of any emergency or other
change in the normal course of 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 TSA, or to the ability of the Sellers,
Subsidiary or TBA to consummate the transactions contemplated by this
Agreement;
PURCHASE AGREEMENT - PAGE 19
<PAGE> 24
(h) The Sellers shall deliver to TBA 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 TSA is a party or any
other material adverse event or circumstance affecting TSA (including
the filing of any material litigation against TSA or the existence of
any dispute with any person or entity which involves a reasonable
likelihood of such litigation being commenced), and what actions TSA has
taken and proposes to take with respect thereto;
(i) TSA 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;
(j) TSA 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
(k) TSA 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 TBA has
signed this Agreement shall have no effect with respect to the agreements,
covenants and obligations of the Sellers, TBA and Subsidiary 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 TSA shall not
authorize or knowingly permit any employee of, or any investment banker,
attorney, accountant or other representative retained by, TSA or either Seller
to, make, solicit, initiate, encourage or respond to a submission of a proposal
or offer from any person or entity (other than TBA) relating to any liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or purchase
of all or a material portion of the assets of TSA, or the Interests or other
similar transaction or business combination involving TSA or either 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 TBA) 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 TBA) 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 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
PURCHASE AGREEMENT - PAGE 20
<PAGE> 25
notify TBA 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 TBA with all information that TBA may reasonably request
with respect thereto.
4.3 Lines of Business and Capital Expenditures. Unless approved in
writing by TBA, the Sellers covenant that they will not permit TSA 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 TBA, the Sellers
covenant that TSA will not change its methods of accounting in effect at
December 31, 1997, except as required by changes in generally accepted
accounting principles as concurred in by the Independent Accountants.
4.5 Other Actions. Unless approved in writing by TBA, the Sellers
covenant that TSA will not 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 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.
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 TBA or the Seller incurring such expenses.
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 10.8 of this Agreement), and (b) any failure of such party, or any
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, Subsidiary and TBA 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 themselves and to such officers, employees and agents and
their properties, books and records (all such access to be arranged through the
respective officers of corporate 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.
PURCHASE AGREEMENT - PAGE 21
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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, Subsidiary and TBA 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 5.4.
5.5 Notice of Changes. The Sellers and TBA shall each promptly inform
the other in writing if any change shall have occurred or shall have been
threatened (or any development shall have occurred or shall have been threatened
involving a prospective change) in TBA's or TSA'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 TBA shall approve 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. TBA and the Sellers agree that all employees of
TSA immediately prior to the Closing shall be employed by TSA immediately after
the Closing at such level of pay which is mutually agreed upon between each
employee and TBA, it being understood that TBA 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 TBA's employee
benefit plans.
5.8 Tax Matters.
(a) From and after the Closing, each of the Sellers, on the one
hand, and TBA, on the other hand, shall cooperate fully with each other
and make available or cause to be made available to each other for
consultation, inspection and copying (at such other party's expense) in
a timely fashion such personnel, tax data, tax returns and filings,
files, books, records, documents, financial, technical and operating
data, computer records and other information as may be reasonably
required (1) for the preparation by any of them of any tax returns,
elections, consents or certificates required to be prepared and filed by
such parties or by TSA or (2) in connection with any audit or proceeding
relating to taxes relating to the assets of TSA. TBA agrees to retain
all books and records with respect to tax matters pertinent to TSA
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations of the respective taxable
periods, and to abide by all
PURCHASE AGREEMENT - PAGE 22
<PAGE> 27
record retention agreements entered into with any taxing authority. None
of the parties hereto shall cause an election to be made, an accounting
for tax purposes to be adopted, or a position to be taken on any tax
return, or in any tax proceeding, other than an election under Sections
743 and 754 of the Code as described in Section 3.8 hereof, that is
inconsistent with the provisions of this Agreement. From and after the
Closing, the Sellers shall pay, and shall severally indemnify and hold
harmless TBA from and against, any and all taxes levied by any foreign,
federal, state or local taxing authority with respect to the ownership
or use of the assets of TSA on or prior to the Closing Date.
5.9 Incremental Management Costs. For each of (i) the period beginning
on the Closing Date and ending on December 31, 1998, and (ii) calendar year
1999, TSA may expend up to Seventy-Five Thousand Dollars ($75,000.00) from its
operating cash flow for the purpose of recruiting and training new managers. To
the extent actually expended, such recruiting and management costs shall not
reduce Pre-Tax Net Income of TSA for purposes of calculating the Earnout
Consideration payable pursuant to Section 1.2 hereof.
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 TBA's and Subsidiary's Obligations. The
obligations of TBA and Subsidiary 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 10.8 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 TBA 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 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
PURCHASE AGREEMENT - PAGE 23
<PAGE> 28
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 TBA and Subsidiary to own the Interests or to
prevent a breach of or a default under or a termination of any agreement
material to TSA to which TSA is a party or to which any material portion
of the assets of TSA 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 TBA and Subsidiary to own the Interests;
(e) On the Closing Date, each of the Sellers shall have entered
into Employment Agreements with TSA substantially in the form of Exhibit
C attached hereto dated as of the Closing Date (the "Employment
Agreements") and shall have terminated without payment or penalty any
other employment or similar agreements with TSA and waived all severance
or other benefits payable thereunder;
(f) TBA shall have received from Bass, Berry & Sims PLC, counsel
to the Sellers, an opinion addressed to TBA, dated the Closing Date and
substantially in the form of Exhibit D attached hereto;
(g) At the Closing Date, the Sellers shall have delivered to TBA
and Subsidiary the following:
(i) a certificate executed by each Seller stating that the
conditions set forth in Sections 6.2(a) through 6.2(d) of this
Agreement have been satisfied;
(ii) a good standing or comparable certificate for TSA
from the State of Tennessee and from every jurisdiction where a
failure to be qualified or licensed would have a material adverse
effect on the financial condition, results of operations or
business of TSA, dated not earlier than ten (10) days prior to
the Closing Date;
(iii) copies of all third party and governmental consents
(or other evidence satisfactory to TBA) that the Sellers are
required to obtain in order to effect the transactions
contemplated by this Agreement;
(iv) a copy of TSA's Articles of Organization certified by
the Secretary of State of Tennessee;
PURCHASE AGREEMENT - PAGE 24
<PAGE> 29
(v) an assignment of the Interests substantially in the
form of Exhibit B executed by each of the Sellers; and
(vi) such other documents as TBA or Subsidiary may
reasonably request in connection with the transactions
contemplated hereby;
(h) On the Closing Date, Sellers shall continue to negotiate in
good faith on behalf of TSA a management agreement among TSA, Kix Brooks
and Ronnie Dunn (the "Management Agreement"). Sellers shall use their
best efforts to finalize the Management Agreement and maintain said
Management Agreement throughout its term; and
(i) 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 TBA and Subsidiary.
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 10.8 of this Agreement) by TBA and
Subsidiary, 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 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) TBA and Subsidiary 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, including,
without limitation, all of their agreements contained in Article 5 of
this Agreement;
(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) Sellers shall have received from Winstead Sechrest & Minick
P.C., counsel to TBA, an opinion addressed to Sellers, dated the Closing
Date, and substantially in the form of Exhibit E attached hereto;
PURCHASE AGREEMENT - PAGE 25
<PAGE> 30
(e) On the Closing Date, TBA and Subsidiary will have delivered
to the Sellers the following:
(i) a certificate executed on behalf of each of TBA and
Subsidiary by their respective Presidents or Chief Executive
Officers 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
TBA's and Subsidiary's respective boards of directors approving
the Acquisition and authorizing the execution, delivery and
performance of this Agreement;
(iii) good standing certificates for TBA and for
Subsidiary from the Secretary of State of the State of Delaware,
each dated not earlier than ten (10) 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 TBA and Subsidiary are required to obtain in order
to effect the transactions contemplated by this Agreement;
(v) copies of TBA's and Subsidiary's Certificates of
Incorporation certified by the Secretary of State of the State of
Delaware; and
(vi) such other documents as the Sellers may reasonably
request in connection with the transactions contemplated hereby;
(f) All proceedings to be taken by TBA and Subsidiary in
connection with the consummation of the Acquisition and all documents
required to be delivered by TBA and Subsidiary in connection with the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers; and
(g) The (i) Employment Agreements, (ii) the Purchase Agreement
among TBA, the Sellers and Max Kittel of even date herewith relating to
the sale of all of the capital stock of TKS Marketing, Inc. ("TKS"), and
(iii) the Employment Agreement by and between TKS and Kittel as defined
in said Purchase 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:
PURCHASE AGREEMENT - PAGE 26
<PAGE> 31
(a) by mutual consent of the Sellers and the Boards of Directors
of TBA and Subsidiary;
(b) by either TBA and Subsidiary or the Sellers if the Closing
shall not have been consummated by August 1, 1998 and provided that the
party seeking termination is not then in material breach of any
representation, warranty or agreement in this Agreement;
(c) by TBA and Subsidiary 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 TBA or Subsidiary 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) TBA and
Subsidiary 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 TBA and/or Subsidiary or (ii) waive compliance with any of the
agreements of TBA and/or Subsidiary 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
members, shareholders, officers or directors, except (a) that nothing herein and
no termination pursuant hereto will relieve any party from liability for any
breach of this Agreement and (b) the provisions of Section 5.6 and any
confidentiality agreements by and between TBA and the Sellers will survive such
termination.
ARTICLE 8
INDEMNIFICATION
8.1 By TBA, Subsidiary and the Sellers. TBA and Subsidiary 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)
PURCHASE AGREEMENT - PAGE 27
<PAGE> 32
(collectively "Damages") reasonably incurred by TBA, Subsidiary 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 the ratio in which they own the Interests immediately
prior to the Closing, agrees to indemnify TBA and Subsidiary for any breaches of
any representation or warranty, covenant, agreement or obligation of the Sellers
made or contained, respectively, in this Agreement or in the Disclosure Schedule
or any certificate required by this Agreement, or any misrepresentation by the
Sellers, as described in (a) through (c) above to the extent they constitute a
Material Adverse Breach.
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 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
PURCHASE AGREEMENT - PAGE 28
<PAGE> 33
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 TBA,
Subsidiary or the Sellers 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.
ARTICLE 9
REGISTRATION RIGHTS
9.1 Incidental Registration. If at any time any shares of TBA Common
Stock to be issued by TBA are proposed to be sold or disposed of by TBA, either
for its own account or for the account of a security holder or holders, in an
offering of TBA Common Stock pursuant to an effective registration statement
(other than a registration statement on Form S-8 or S-4 or any successor or
similar forms) under the Securities Act (other than in connection with any
exchange offer or an offering of securities solely to TBA's existing security
holders) (a"Public Offering"), TBA shall (a) promptly give to each Seller notice
of such proposed offering, including a description of the securities to be
offered, a statement of the anticipated number and dollar amount of securities
to be offered, identifying any proposed underwriter or representative of the
underwriters, and describing the proposed method of distribution (including,
without limitation, a list of the jurisdictions in which TBA intends to attempt
to register or qualify such securities under applicable state securities law)
and the anticipated timing of the offering, and (b) include in the appropriate
registration statement pursuant to the Securities Act and the rules and
regulations promulgated thereunder (the "Registration Statement") covering such
TBA Common Stock, and in any underwriting relating thereto, all of the shares of
TBA Common Stock specified in a written request made by any Seller within thirty
(30) days after receipt of the notice of the proposed offering, except as set
forth below in this Section. If the registration pursuant to this Section
involves a Public Offering in which shares of TBA Common Stock are sold or to be
sold pursuant to a firm commitment underwriting by an investment banking concern
of recognized national or regional standing (an "Underwritten Public Offering"),
all of the Sellers proposing to distribute shares of TBA Common Stock through
such Underwritten Public Offering (the "Selling Holders") and TBA shall enter
into an underwriting agreement in customary form with the underwriter or
representative of the underwriters named in TBA's notice given pursuant to this
Section. Notwithstanding any other provision of this Section,
PURCHASE AGREEMENT - PAGE 29
<PAGE> 34
however, if the underwriter or representative advises TBA and the Selling
Holders in writing that market conditions require a limitation of the number of
shares of TBA Common Stock to be included in the Registration Statement, then
TBA may limit the number of shares of TBA Common Stock of the Selling Holders to
be included in the Registration Statement and underwriting. Upon such written
advice by the underwriter or representative, TBA shall give notice to all of the
Selling Holders of the number of shares of TBA Common Stock of the Selling
Holders that will be entitled to be included in the Registration Statement, and
the number of shares of TBA Common Stock of the Selling Holders that may be so
included shall be allocated among the Selling Holders in proportion, as nearly
as practicable, to the respective numbers of shares of TBA Common Stock that
such Selling Holders had requested to be included in the Registration Statement.
Any Selling Holder which disapproves of the terms of any such underwriting may
elect to withdraw therefrom by written notice to TBA and the underwriter or
representative of the underwriters. Any shares of TBA Common Stock so withdrawn
from such underwriting shall be withdrawn from the Registration Statement.
9.2 Registration Expenses. All costs and expenses incurred in connection
with any registration, qualification, or compliance effected pursuant to this
Article, including (without limitation) all registration, filing, and
qualification fees, printing expenses, fees and disbursements of counsel and
independent accountants (including, without limitation, the expenses of any
special audit or "cold comfort" letters required by or incident to such
registration, qualification or compliance) and other experts of TBA, as the case
may be, shall be borne by TBA to the extent permitted by applicable law;
provided, however, that TBA shall not be required to pay any underwriting
discounts or commissions relating to shares of TBA Common Stock owned by the
Selling Holders or the fees and disbursements of any counsel to the Selling
Holders.
9.3 Certain Registration-Related Obligations. In connection with any
registration, qualification, or compliance effected pursuant to this Article,
TBA shall keep each Selling Holder advised in writing as to the initiation of
each such registration, qualification, and compliance and as to the completion
thereof. TBA also shall, at its expense, (a) keep or maintain such registration,
qualification, or compliance effective for a period of one hundred-twenty (120)
days or until the Selling Holders have completed the distribution described in
the Registration Statement relating thereto, whichever first occurs, (b) furnish
to each Selling Holder such reasonable number of copies of the prospectus and
the preliminary prospectus as such Selling Holder may reasonably request in
order to facilitate the disposition of its shares of TBA Common Stock, (c) use
its best efforts to register or qualify the shares of TBA Common Stock owned by
the Selling Holder under the securities laws of each of such states or other
jurisdictions as the Selling Holder shall reasonably request and take all such
other actions as may reasonably be necessary or advisable to enable the Selling
Holders to consummate the sale or distribution in such states or other
jurisdictions (provided, that TBA will not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such state
or other jurisdiction), and (d) furnish to each Selling Holder such other
information or documents incident to the registration and underwriting as such
Selling Holder may reasonably request. The Selling Holders agree to provide all
such information and take all such other actions requested by TBA as may
reasonably be necessary or appropriate to permit TBA to
PURCHASE AGREEMENT - PAGE 30
<PAGE> 35
satisfy all of the requirements or conditions to the registration,
qualification, and compliance to be effected pursuant to this Article.
9.4 Rule 144. TBA covenants that it will file the reports required to be
filed by it under the Securities Act and the Securities Exchange Act of 1934
(the "Exchange Act") and the rules and regulations promulgated thereunder (or,
if TBA is not required to file such reports, it will, following consummation of
a Public Offering, make publicly available other information as long as
necessary under Rule 144 under the Securities Act), to the extent required from
time to time to enable the Sellers to sell their shares of TBA Common Stock
pursuant to Rule 144 under the Securities Act, as such rule may be amended from
time to time, or any similar rule or regulation hereafter promulgated by the
Securities and Exchange Commission.
9.5 Indemnification. The following indemnification provisions shall
apply to the matters described in this Article:
(a) With respect to each registration, qualification or
compliance effected pursuant to this Article, TBA shall indemnify and
hold harmless each Selling Holder from and against, and will reimburse
such Selling Holder with respect to, any and all losses, claims,
damages, liabilities and expenses (including, without limitation, the
costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which such
Selling Holder may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities and expenses arise
out of or are based upon (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, preliminary
prospectus, or Registration Statement, or any amendment or supplement
thereto, or (ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by TBA of the
Securities Act or any rule or regulation promulgated thereunder and
relating to action or inaction required of TBA in connection with any
such registration, qualification, or compliance; provided, however, that
TBA shall not be liable in any case to the extent that any such loss,
claim, damage, or liability (or action in respect thereto) arises out of
or is based upon any untrue statement or omission made in any
prospectus, preliminary prospectus, or Registration Statement, or any
amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to TBA by such Selling Holder specifically
for inclusion in such prospectus, preliminary prospectus, or
Registration Statement, or any amendment or supplement thereto.
(b) With respect to each registration, qualification, or
compliance effected pursuant to this Article for the benefit of a
Selling Holder, such Selling Holder shall indemnify TBA and each of its
affiliates from and against, and will reimburse TBA and each such
affiliate with respect to, any and all losses, claims, damages,
liabilities and expenses (including, without limitation, the costs and
expenses of investigating, preparing for and defending any legal
proceeding, including reasonable attorneys' fees) to which TBA or any
such affiliate may become subject under the Securities Act or otherwise,
insofar as such
PURCHASE AGREEMENT - PAGE 31
<PAGE> 36
losses, claims, damages, liabilities and expenses arise out of or are
based upon (i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, preliminary prospectus, or
Registration Statement, or any amendment or supplement thereto, or (ii)
any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading to the extent that any such loss, claim, damage,
or liability (or action in respect thereto) arises out of or is based
upon any untrue statement or omission made in any prospectus,
preliminary prospectus, or Registration Statement, or any amendment or
supplement thereto, in reliance upon and in conformity with written
information furnished to TBA by such Selling Holder specifically for
inclusion in such prospectus, preliminary prospectus, or Registration
Statement, or amendment or supplement thereto; provided, however, that a
Selling Holder shall not be liable for any amount in excess of the net
proceeds of any such registration, qualification or compliance which are
received by such Selling Holder.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving
a claim referred to in Sections 9.5(a) or (b), such indemnified party
will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the indemnifying party of the
commencement of such action; provided, that the failure of any
indemnified party to give notice as provided in this subsection shall
not relieve the indemnifying party of its obligations under Sections
9.5(a) or (b) unless the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party;
provided, however, if any indemnified party shall have reasonably
concluded that there may be legal defenses available to it which are
different from or additional to those available to the indemnifying
party, or if there is a conflict of interest that would prevent counsel
for the indemnifying party from also representing the indemnified party,
the indemnified party shall have the right to select separate counsel to
participate in the defense of such action on behalf of such indemnified
party. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party pursuant to the
provisions of Sections 5.5(a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless (i)
the indemnified party shall have employed counsel in connection with the
proviso of the immediately preceding sentence, (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified
party within a reasonable time after the notice of the commencement of
the action, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. No indemnifying party shall consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of
such claim or litigation.
PURCHASE AGREEMENT - PAGE 32
<PAGE> 37
(d) If the indemnification provided for in this Section from the
indemnifying party is unavailable to an indemnified party in respect of
any losses, claims, damages, liabilities or expenses referred to in this
Section, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions, statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether in the case of an untrue
statement of a material fact or the omission to state a material fact,
such statement or omission relates to information supplied by the
indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. For purposes of this Section,
the term "damages" includes any legal or other expenses reasonably
incurred by the indemnified party in connection with investigating or
defending against or appearing as a third party witness in any action or
claim that is the subject of the contribution provisions of this
Section. No Person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
ARTICLE 10
GENERAL PROVISIONS
10.1 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, except for the representation made in Section 2.6, which will
survive for five (5) years. 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.
10.2 Effect of Due Diligence. No investigation by TBA, Subsidiary 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.
10.3 Specific Performance. TBA, Subsidiary and the Sellers understand
and agree that the covenants and undertakings on each of their parts herein
contained are uniquely related to the desire
PURCHASE AGREEMENT - PAGE 33
<PAGE> 38
of TBA, Subsidiary and the Sellers to consummate the Acquisition, that the
Acquisition is a unique business opportunity for TBA, Subsidiary 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, TBA, Subsidiary and the Sellers agree that TBA and
Subsidiary 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 TBA and Subsidiary of each and every covenant and undertaking herein
contained to be observed or performed by TBA or Subsidiary.
10.4 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 TBA or Subsidiary:
TBA Entertainment Corporation
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:
Titley Spalding & Associates, LLC
900 Division Street
Nashville, Tennessee 37203
Telecopy: (615) 254-4267
PURCHASE AGREEMENT - PAGE 34
<PAGE> 39
with a copy to:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Attention: Leigh Walton, Esq.
Telecopy: (615) 742-2816
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.
10.5 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.
10.6 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.
10.7 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 TBA and Subsidiary may
assign all or any portion of their rights under this Agreement to one or more
wholly-owned subsidiaries but no such assignment shall relieve TBA and
Subsidiary of their obligations hereunder, and except that this Agreement may be
assigned by operation of law to any corporation with or into which TBA 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.
10.8 Material Adverse Breach. Breaches of representations, warranties
and covenants by either party hereto which (a) individually result in damages to
the other party in excess of $25,000 or (b) in the aggregate result in damages
to the other party in excess of $50,000, shall constitute, for purposes of this
Agreement, a "Material Adverse Breach."
PURCHASE AGREEMENT - PAGE 35
<PAGE> 40
10.9 Limitation of Liability. Neither TBA, Subsidiary 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.
10.10 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.
10.11 Consent to Assignment. By execution hereof, (i) Titley consents to
the assignment to Subsidiary of the membership interest in TSA held by Spalding,
and (ii) Spalding consents to the assignment to TBA of the membership interest
in TSA held by Titley.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
PURCHASE AGREEMENT - PAGE 36
<PAGE> 41
PURCHASE AGREEMENT
Signature Page
IN WITNESS WHEREOF, TBA, Subsidiary and the Sellers have caused this
Agreement to be executed on the date first written above.
TBA ENTERTAINMENT CORPORATION
/s/ Thomas Jackson Weaver III
----------------------------------------
By: Thomas Jackson Weaver III
Its: Chief Executive Officer
TBA ENTERTAINMENT HOLDING
CORPORATION
/s/ Thomas Jackson Weaver III
----------------------------------------
By: Thomas Jackson Weaver III
Its: Chief Executive Officer
/s/ Robert R. Titley
----------------------------------------
ROBERT R. TITLEY
/s/ Clarence Spalding
----------------------------------------
CLARENCE SPALDING
PURCHASE AGREEMENT - PAGE 37
<PAGE> 42
SCHEDULE 1
DISCLOSURE SCHEDULE
<PAGE> 43
ANNEX I
<TABLE>
<CAPTION>
Closing Date Consideration
--------------------------
Percentage of Percentage of
Membership Interest Common Stock Earnout
Seller Being Sold Cash Portion Portion Consideration
------ ------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Robert R. Titley 75% $ 750,000 75% 75%
of the shares
Clarence Spalding 25% $ 250,000 25% 25%
of the shares
------- ---------- ------------- -----------
100% $1,000,000 100% 100%
</TABLE>
ANNEX I - SOLO PAGE
