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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER
0-22582
TBA ENTERTAINMENT CORPORATION
(Name of Small Business Issuer in its Charter)
DELAWARE 62-1535897
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
16501 VENTURA BOULEVARD
ENCINO, CALIFORNIA 91436
(Address of principal executive offices) (Zip Code)
(818) 728-2600
(Issuer's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant (based on the closing sale price of such stock as reported on
March 17, 2000 on the Nasdaq National Market of the National Association of
Securities Dealers, Inc.) was approximately $27,452,000.
As of March 17, 2000, 8,101,800 shares of the registrant's Common Stock
were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive Proxy Statement, to be filed
pursuant to Section 14(a) of the Securities Exchange Act of 1934 in connection
with the registrant's 2000 annual meeting of stockholders, have been
incorporated by reference in Part III of this report.
PART I
ITEM 1. BUSINESS.
GENERAL
TBA Entertainment Corporation ("TBA" or the "Company") is a diversified
communications and entertainment services company providing a broad range of
integrated communications and entertainment services through its four core
business segments. TBA believes it has a strong presence in each of these very
fragmented industries and is building an industry-leading integrated services
company.
- Corporate Communications & Entertainment - Provides a broad range of
business communications, meeting production, entertainment and event
production services to corporate clients worldwide.
- Entertainment Marketing & Special Events - Creates and executes
innovative entertainment marketing and special event initiatives
including music tours, fairs and festivals, television broadcasts and
special events.
- Artist Management - Develops and implements career strategies for some
of the most successful artists in the entertainment industry.
- Event Merchandising - Creates and executes high-impact merchandising
programs for entertainment and sporting events, institutional
organizations and celebrity clients.
The integration of TBA's four business divisions creates competitive
advantages for the Company. TBA believes that while a variety of competitors
exist with each of the Company's divisions, none offer the complete scope of
entertainment services provided by TBA. This intra-company synergy provides
TBA's clients with an expanded range of comprehensive services while creating
additional sources of revenues and profits for the Company. For example, in
producing corporate meetings and entertainment marketing programs, the Company
creates opportunities to showcase artist management clients and to provide
unique merchandising programs. Providing entertainment marketing programs and
incentive merchandising programs for corporate clients conversely provides
opportunities to cross-sell client decision makers on other corporate
communication and entertainment events.
The Company's current operating structure is the result of strategic
acquisitions within each of the four business divisions. A brief description of
each of the acquisitions completed since January 1, 1998 is included below in
the detailed description of each of the four business divisions.
The Company was incorporated in Tennessee in June 1993 and
reincorporated in Delaware in September 1997.
CORPORATE COMMUNICATIONS & ENTERTAINMENT
The Corporate Communications & Entertainment division is an industry
leader in the production of innovative corporate meetings and events. This
division helps businesses effectively communicate their message via a broad
range of business communications, meeting production, entertainment and event
productions services. TBA utilizes award-winning creative capabilities and
state-of-the-art technology to help corporate clients worldwide deliver targeted
messages that educate, inspire and motivate. The Corporate Communications &
Entertainment division targets clients with recurring needs for business
communications and entertainment services. The Company's client list encompasses
a number of industry sectors including
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telecommunications, information technology, food service, insurance and
financial services. Representative clients include Bell South, Nortel, Motorola,
McDonald's Corporation, Pizza Hut, State Farm Insurance and Forstmann Little.
The Corporate Communications & Entertainment division specializes in the
creative development, design, production and staging of a wide range of events
including: sales conferences, corporate meetings and events, conventions and
trade shows, product launches, awards shows, shareholder meetings, live network
broadcasts, television commercials, videoconferencing and corporate
anniversaries. TBA believes that it has benefited from the decision by an
increasing number of major corporations to outsource their business
communications and entertainment needs. TBA produced approximately 600
communication and entertainment events in 1999. The recurring nature of this
large number of events serves as a source of more predictable revenues as they
occur on a more regular basis. The large number of events also provides
opportunities for the Company's other divisions, including corporate event
opportunities for TBA's artist management clients and merchandising activities.
The Corporate Communications & Entertainment division serves its clients
from a growing roster of offices nationwide, including Atlanta, Chicago, Dallas,
Nashville, New York, Phoenix, Salt Lake City and San Diego. These offices were
assembled via strategic acquisitions and internal growth over the past three
years.
The Company acquired its first corporate communications and
entertainment company in April 1997 with the acquisition of all of the
outstanding capital stock of TBA Entertainment Group Nashville, Inc., formerly
Avalon Entertainment Group, Inc. ("AEG"), with offices in Nashville and San
Diego. In 1998, the Company acquired all of the outstanding capital stock of TBA
Entertainment Group Chicago, Inc., formerly Corporate Productions, Inc. ("CPI"),
a Chicago-based company, TBA Entertainment Group Phoenix, Inc., formerly Image
Entertainment Productions, Inc. ("Image"), a Phoenix-based company and TBA
Entertainment Group Dallas, Inc., formerly Magnum Communications, Inc.
("Magnum"), with offices in Dallas and Salt Lake City. In 1999, the Company also
opened offices in Atlanta and New York to service its growing client list.
With the completion of the acquisitions and internal growth described
above, TBA delivers a full range of corporate communications and entertainment
services to its clients. The Corporate Communications & Entertainment division
emphasizes the coordination and allocation of resources and services between the
division's offices. TBA has long-standing relationships with freelance
contractors in various production, technical and creative disciplines, and
supplements its full-time staff with independent contractors where needed.
The Company believes, based on its experience, that the corporate
communications and entertainment industry is highly fragmented. Further, the
Company believes that many of its competitors consist of a number of small,
primarily regional companies that provide only a limited range of services.
However, the Company believes that there are other competitors who have been in
business longer and have larger staffs and whose business, like the Company's,
is full service in scope. The most important competitive factors include
creative and production capabilities, quality and price. The Company believes
that it can compete successfully in this market by utilizing the Company's
production capabilities and existing talent relationships to produce an
exceptional event. TBA's commitment to providing exceptional events has
developed a loyal client base. The Company also competes with in-house corporate
communications staffs of existing and potential clients and with staffs of hotel
and convention centers.
Because of the highly-fragmented nature of the corporate communications
and entertainment industry, the Company believes that there are a number of
acquisition opportunities available to the Company. The Company believes, based
on its experience with past acquisitions, that some portion of the small,
regional, limited-services companies would welcome the opportunity to provide a
full range of corporate communications and entertainment services that would
result from an association with the Company.
ENTERTAINMENT MARKETING & SPECIAL EVENTS
The Entertainment Marketing & Special Events division is an industry
leader in the creation, development and execution of highly integrated and
innovative entertainment marketing and special event programs. This division
continually forges new ways for clients to reach their audiences and realize
their business objectives. The Entertainment Marketing & Special Events division
specializes in the creative development, design, production and execution of a
broad range of marketing initiatives that may include: national music tours,
fairs and festivals, lifestyle events, nationally syndicated radio programs,
satellite media tours, network television broadcast specials, point of purchase
campaigns, premium/incentive programs, brand imaging campaigns, sponsorship
fulfillment, web casts, experiential branding initiatives and consumer/trade
promotions.
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TBA provides companies with the power to reach and engage their
customers in a fresh, contemporary manner utilizing relevant programming and
experiential branding techniques to integrate their company or brand into the
lifestyle of their consumers. The Entertainment Marketing & Special Events
division seeks to develop music-marketing programs that appeal to highly-focused
demographic segments. In addition, corporations are increasingly utilizing
entertainment personalities as advertising tools, having recognized the
effectiveness of concert/tour sponsorship as a cost-effective means to reach a
target audience. The Company has produced sponsored music-marketing tours for
clients that include Red Lobster, General Motors, Best Buy and Fruit of the
Loom. Under the banner TBA TV, the Company has produced major television
broadcast events and specials including Turner Sports 1998 Goodwill Games
Opening Celebration on CBS, NASCAR Rocks on TNN, Blockbuster RockFest on MTV, as
well as pay-per-view broadcasts for Viewer's Choice, DirecTV and Primestar. TBA
produced entertainment marketing special events including "The Show" at the NBA
All-Star Weekend, produced for TNT and the NBA, NFL on TNT Tailgate Party and
the Montreux Jazz Festival in New York City. In 1999, the Company produced the
proprietary event Rockfest in conjunction with Hard Rock Cafe. Rockfest counted
the Oldsmobile "Alero", Circuit City and the Discover Card, among others, as
corporate sponsors. The Entertainment Marketing & Special Events division also
provides unique opportunities for the Company to showcase artist management
clients and to develop high-impact merchandising programs to complement the
overall marketing program. In addition, relationships with corporate sponsors
also create opportunities to sell corporate communications and entertainment
services to an expanded client base.
The Company works with its clients to customize an entertainment
marketing and special event to the exact specifications of that particular
client. Over time, TBA believes existing clients will expand their programs,
both by increasing the scope of existing components of programs and by adding
new components to programs. The Company's Entertainment Marketing & Special
Events division is currently characterized by a relatively small number of
accounts with high revenues per account. As a result, the loss or addition of
any one account could have a material affect on the Company's revenues. Because
contracts for the Company's marketing programs are typically signed six months
to one year before the program takes place, management believes that, to a
reasonable degree, it can forecast and take appropriate action for changes in
its client portfolio. When possible, the Company also seeks to enter into
multi-year contracts with its clients. For example, in 1999, TBA entered into a
three-year agreement to produce Rockfest with Hard Rock Cafe as the corporate
sponsor. In addition, the Company believes that certain of its programs have
applications beyond one single client. For example, in 1998, the Company
developed the "For the Record" concept and marketing program for the country
music group Alabama. This program was developed to highlight the outstanding
career of Alabama and included a guest appearance on a nationally televised CBS
special, a double-CD release of all 41 of their number one hits, a worldwide
pay-per-view television special, a 13-city Christmas tour and a video of the
pay-per-view event. In 1999, the "For the Record" program showcased Merle
Haggard. TBA believes that there are other industry artists from all genres of
music, that would benefit from the "For the Record" marketing program.
Prior to the year 2000, the Company operated the Entertainment Marketing
& Special Events division both for its own account and through joint venture
arrangements, including Warner/TBA, a strategic joint venture between Time
Warner's Warner Custom Music Group ("Warner") and TBA. The Company's 50%
interest in Warner/TBA was acquired as part of the acquisition of AEG in April
1997. Although the formal joint venture arrangement reached the end of its term
in December 1999, TBA continues to execute programs developed by Warner/TBA.
TBA has made two strategic acquisitions in the past two years,
increasing the Company's competitive position in the entertainment marketing
industry. In December 1998, the Company acquired all of the outstanding capital
stock of TKS Marketing, Inc., which specializes in sponsorship fulfillment. In
January 2000, the Company acquired all of the outstanding common stock of Romeo
Entertainment Group, Inc. ("Romeo"), one of the largest producers of outdoor
fairs and festivals in the United States. The Company believes that the fairs
and festivals industry is in the midst of rapid change. Together with Romeo, the
Company believes that it will have a tremendous opportunity to help shape the
future of the fairs and festivals industry. The Company believes that there are
a number of other acquisition opportunities available to the Company to add
additional entertainment marketing and special events business.
ARTIST MANAGEMENT
The Artist Management division develops and implements career strategies
for music industry artists, including high-profile artists such as Brooks &
Dunn, Kathy Mattea, Chely Wright, Gary Chapman and Jaci Velasquez. The Company,
as a leader in the production of corporate communications and entertainment
programs, entertainment marketing initiatives, special events sponsorship
procurement and merchandising of entertainment and sporting events, is uniquely
positioned to create
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opportunities for artists. Management believes that the Company's familiarity
with all facets of the entertainment industry enables it to help artists create
and capitalize on opportunities. With its expertise in concert production and
corporate entertainment events and its relationships with venue managers,
outside concert promoters, broadcasting executives and other industry
professionals, management believes that the Company is uniquely positioned to
offer services which can significantly enhance the careers of its clients. The
Company develops long term career strategies and represents music industry
artists in the negotiation of recording, touring, merchandising and performance
contracts. Using these integrated resources, the Artist Management team is
unified around the strategy of creating long-term, sustained success for the
Company's artist management clients.
The Company has made two strategic acquisitions over the past two years
in assembling the Artist Management Division. In June 1998, the Company acquired
all of the equity interests in Titley Spalding & Associates LLC, which currently
manages Brooks & Dunn, Kathy Mattea and Chely Wright, among others. In December
1999, the Company acquired Mike Atkins Management, Inc. ("Atkins"), one of the
largest artist management companies serving contemporary Christian music. Atkins
manages Christian music artists including Point of Grace and Jaci Velasquez,
among others.
The Company believes that the artist management industry is
highly-fragmented and its competitors consist primarily of small independent
artist managers with a limited roster of clients, although there are several
participants in the industry that have capabilities and resources comparable to
and, in certain respects, greater than those of the Company. Because of the
highly-fragmented nature of the artist management industry, the Company believes
that there are a number of acquisition opportunities available to the Company,
both within the country music genre as well as in other music genres including
pop and rock. However, there can be no assurances that the Company will be
successful in acquiring any additional companies in the artist management
industry.
EVENT MERCHANDISING
The Event Merchandising division develops and executes merchandising
programs for entertainment and sporting events, institutional organizations and
celebrity clients. This division creates, designs, and executes merchandising
programs as well as promotional and for-sale items. As a leader and innovator in
the industry, TBA has created and executed exclusive merchandising programs for
a broad range of events. These events include the Olympic games, the world's
premier sporting event, the Association of Volleyball Professionals, the world's
premier men's beach volleyball tour, U.S. Women's Figure Skating Championship,
and the Ericsson Open Tennis Tournament, a world-class tennis championship.
In addition, through the Event Merchandising division, TBA can deliver
the added benefit of a merchandising program to any artist management client,
integrated entertainment marketing initiative, special event, corporate
communications program or business imaging campaign. This integrated strategy
serves TBA's clients by building positive public awareness while generating
additional profitability for the Company.
The Company has made three strategic acquisitions over the past three
years in assembling its Event Merchandising division. In July 1997, the Company
acquired 51% of Eric Chandler Merchandising, Inc. ("ECM"). ECM, a Los
Angeles-based company, specializes in executing merchandising for large-scale
entertainment and sporting events, such as the 1996 Summer Olympic Games in
Atlanta, Georgia. The remaining 49% of ECM was acquired by TBA in May 1998. In
August 1998, the Company acquired all of the outstanding stock of Corporate
Incentives, Inc. ("CII"), in connection with its acquisition of CPI. CII
implements corporate merchandising programs. In March 1999, the Company acquired
all of the outstanding stock of Karin Glass & Associates, Inc. and affiliated
companies ("KGA"). KGA, an Indianapolis-based company, is a full-service
merchandising company specializing in merchandise design, production and
fulfillment.
DISCONTINUED OPERATIONS
In 1998, the Company began to focus its growth in certain segments of
the entertainment sector and, in accordance with this strategy, divested itself
of businesses that were not a part of the future growth plans of the Company. In
May 1998, the Company sold its 51% interest in Avalon West Coast ("AWC"), a
group of affiliated entities engaged primarily in concert promotion and
amphitheater operations on the West coast, to New York-based SFX Entertainment,
Inc. In August 1998, the Company sold all of its interest in The Village at
Breckenridge Acquisition Corp., Inc. and Property Management Acquisition Corp.,
Inc., the wholly-owned subsidiaries of the Company that owned the Village at
Breckenridge Resort located in Breckenridge, Colorado, and the associated
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property management business operating in Breckenridge (the "Breckenridge
Resort"), to Vail Summit Resorts, Inc., an affiliate of Vail Resorts, Inc.
("Vail"). In December 1998, the Company completed the sale of its Nashville
Country Club Restaurant.
The Company utilized a portion of the $24 million of proceeds (before
applicable transaction costs) from the sale of these assets to fund its growth
strategy in 1998, 1999 and in January 2000. The remaining proceeds will be
utilized for operations and to fund the continued expansion of the Company's
core entertainment operations pursuant to its business strategy.
BUSINESS SEGMENT INFORMATION
The Company classifies its operations into the four major business
segments discussed above. See Note 11 to the consolidated financial statements
contained in Item 8 of this Annual Report on Form 10-K for summarized financial
information concerning the Company's reportable segments.
COMPETITION
In addition to the competitive factors outlined above for each of the
Company's four business divisions, the success of the Company's entertainment
operations are dependent upon numerous factors beyond the Company's control,
including economic conditions, amounts of available leisure time, transportation
costs, lifestyle trends and weather conditions.
SEASONALITY
The Company experiences quarterly fluctuations in revenue, operating
income and net income as a result of many factors, including the timing of
clients' meetings and events, timing of artists' tours and recording releases,
weather related issues, delays in or cancellation of clients' entertainment
marketing programs, as well as changes in the Company's mix among the various
services offered.
TRADEMARKS
The Company has filed Intent-To-Use Trademark Applications for the TBA
Entertainment Corporation mark for the various classes of goods and services in
which the Company's mark will be utilized. In addition, the Company has filed or
intends to file Intent-To-Use Trademark Applications for other proprietary
programs developed by the Company. There can be no assurance, however, that
these trademarks will proceed to registration, and if so registered, that the
trademarks, in any one or more classes, will not violate the proprietary rights
of others, that any registration of the trademarks or the Company's use thereof
will be upheld if challenged, or that the Company will not be prevented from
using the trademarks.
REGULATION AND LICENSES
The Company is subject to federal, state and local laws affecting its
business, including various health, sanitation and safety standards. The
Company's entertainment operations are subject to state and local government
regulation, including regulations relating to live music performances. Each live
concert performance must comply with regulations adopted by federal agencies and
with licensing and other regulations enforced by state and local health,
sanitation, safety, fire and other departments. Difficulties or failures in
obtaining the required licenses or approvals can delay and sometimes prevent the
promotion of live concerts. The failure to receive or retain, or delay in
obtaining, a license to serve alcohol and beer in a particular location could
adversely affect the Company's operations in that location and impair the
Company's ability to obtain licenses elsewhere. The failure or inability of the
Company to maintain insurance coverage could materially and adversely affect the
Company.
EMPLOYEES
As of December 31, 1999, the Company had approximately 168 full-time and
part-time employees. It is the Company's intention to manage its growth
consistent with its ability to attract and retain qualified employees to manage
its operations. Over the course of any given event or program, the Company
evaluates the production personnel requirements and determines the extent to
which it must supplement its available employee base with the use of freelance
contractors or part-time employees. The Company believes that its relationship
with its employees and freelance contractors is good.
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The Company has no full-time employees whose employment is covered by
collective bargaining or similar agreements with unions; however, the Company
does from time to time independently contract with or hire part-time union
personnel, especially during the production of a particular entertainment
marketing program and, accordingly, the Company is a party to certain agreements
with unions governing the hiring and terms of employment of such personnel.
ITEM 2. PROPERTIES.
The Company has offices located in Hickory Valley, Tennessee in a
building owned by a limited partnership, the general partner of which is a
corporation owned by Thomas J. Weaver III and Frank A. McKinnie Weaver, Sr.,
each an officer and director of the Company, and of which they also are limited
partners. The limited partnership does not charge the Company rent for its
Hickory Valley, Tennessee offices. The fair market rental value for this office
space is not material to the Company's consolidated results of operations.
The Company and/or its subsidiaries have entered into lease agreements
with respect to leased office space in numerous cities in which the Company
operates. These leases expire at various dates through September 2006. The
Company's wholly-owned subsidiary, TBA Entertainment Group Dallas, Inc., owns
the building in which its offices and production facilities are located, as well
as certain vacant land adjacent to such building. The building is encumbered
with an approximately $300,000 first lien mortgage indebtedness.
TBA believes that the properties and facilities it owns or leases are
suitable and adequate for the Company's current business and operations. The
Company anticipates that as it expands, it will require additional office space
to support such growth and believes that suitable space will be available as
needed on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS.
On July 31, 1997, the Company acquired a 51% partnership interest in the
Irvine Meadows Amphitheater Partnership, a California general partnership which
owned and managed the Irvine Meadows Amphitheater in Irvine, California. The
Company acquired such 51% partnership interest from a corporate affiliate of a
member of the Board of Directors of the Company (the "Seller"). In order to
effectuate such sale, the Seller affiliate acquired an aggregate 49% partnership
interest in the Irvine Meadows Amphitheater Partnership from two of its existing
partners. On October 23, 1998, the two partners that sold their partnership
interests to the Seller, along with their controlling shareholders
(collectively, the "Plaintiffs"), filed a complaint in the Los Angeles Superior
Court against the Company and the Seller. Certain other defendants were also
named in the complaint. In such complaint, the Plaintiffs allege that, in
connection with their sale, the Seller breached certain contractual obligations,
breached his fiduciary duty to them as partners, and fraudulently induced them
to sell their respective partnership interests. The Plaintiffs further allege
that the Company aided and abetted the alleged breach of fiduciary duty and the
fraud in the inducement. The Company denies all of the allegations and is
vigorously defending this action. A state court in California has ruled that
this litigation is to be settled by binding arbitration. An arbitrator has been
assigned to the case, but no discovery has taken place. Management does not
believe that the outcome of this litigation will have a material adverse effect
on the consolidated financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the Company's shareholders
during the fourth quarter of the fiscal year ended December 31, 1999.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) The Common Stock is quoted on the Nasdaq National Market under the
symbol TBAE. On March 17, 2000, the last reported sale price of the Common Stock
was $4 1/4 per share. The following table sets forth the range of high and low
bid prices of the Common Stock during each quarterly period within the two most
recent fiscal years, as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1999
First Quarter $5 5/16 $3 7/8
Second Quarter 4 15/16 3 7/8
Third Quarter 4 1/2 3 7/8
Fourth Quarter 5 1/2 3 15/16
1998
First Quarter 4 1/16 3 1/4
Second Quarter 5 3 5/8
Third Quarter 5 9/32 3 5/8
Fourth Quarter 4 7/8 3 7/16
</TABLE>
(b) The approximate number of holders of record of Common Stock on March
17, 2000 was 187.
(c) The Company has not paid or declared cash distributions or dividends
and does not intend to pay cash dividends on the Common Stock in the foreseeable
future. The Company currently intends to retain all earnings to finance the
development and expansion of its operations. The declaration of cash dividends
in the future will be determined by the Board of Directors based upon the
Company's earnings, financial condition, capital requirements and other relevant
factors.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS DATA (1): 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $48,163,900 $27,272,700 $ 6,437,100 $-- $--
Costs related to revenues 31,863,400 18,468,700 4,705,600 -- --
----------- ----------- ----------- ----------- ----------
Gross profit margin 16,300,500 8,804,000 1,731,500 -- --
Selling, general and administrative expenses 12,962,600 6,969,000 1,888,600 302,000 334,900
Depreciation and amortization 1,790,300 679,400 148,900 1,400 1,400
Minority interest -- (36,000) -- -- --
Equity in income of Joint Venture (173,000) (343,700) (78,900) -- --
Net interest (income) expense (266,200) (144,500) 153,000 700 2,800
----------- ----------- ----------- ----------- ----------
Income (loss) from continuing operations
before income taxes 1,986,800 1,679,800 (380,100) (304,100) (339,100)
Provision for income taxes (790,000) (189,700) -- -- --
----------- ----------- ----------- ----------- ----------
Income (loss) from continuing operations 1,196,800 1,490,100 (380,100) (304,100) (339,100)
Income (loss) from discontinued operations 329,200 1,180,900 782,400 (2,823,200) (454,800)
----------- ----------- ----------- ----------- ----------
Net income (loss) $ 1,526,000 $ 2,671,000 $ 402,300 $(3,127,300) $ (793,900)
=========== =========== =========== =========== ==========
EBITDA (2) $ 3,510,900 $ 2,214,700 $ (78,200) $ (302,000) $ (334,900)
=========== =========== =========== =========== ==========
Income (loss) from continuing operations - basic $ 0.14 $ 0.19 $ (0.07) $ (0.09) $ (0.23)
Income (loss) from continuing operations - diluted $ 0.14 $ 0.18 $ (0.06) $ (0.09) $ (0.23)
Weighted average common stock outstanding - basic 8,495,200 7,851,600 5,680,300 3,575,900 1,470,000
Weighted average common stock outstanding - diluted 8,540,000 8,243,500 6,324,600 3,575,900 1,470,000
BALANCE SHEET DATA (1):
Working capital (3) 7,838,600 12,381,900 1,122,000 -- --
Goodwill, net 19,383,700 16,008,600 3,494,100 -- --
Net assets of discontinued operations 54,100 2,552,000 20,273,000 11,797,662 1,795,000
Total assets 43,149,500 40,445,200 27,401,600 13,428,200 1,795,000
Long-term debt (4) 3,719,600 4,755,700 2,036,700 -- --
Treasury stock (2,062,100) (724,500) -- -- --
Stockholders' equity 27,858,800 28,515,700 20,720,400 12,213,300 1,795,000
</TABLE>
(1) Prior to 1998, the Company acquired and operated certain businesses that
were sold in 1998. The sale of these businesses has resulted in the
reclassification of the operating results and net assets and liabilities of
these businesses to discontinued operations for all periods presented.
(2) EBITDA is earnings from continuing operations before interest income and
expense, income taxes and depreciation and amortization. EBITDA is presented
supplementally because management believes it allows for a more complete
analysis of results of operations. This information should not be considered
as an alternative to any measure of performance or liquidity as promulgated
under generally accepted accounting principles (such as net income or cash
provided by or used in operating, investing or financing activities), nor
should it be considered as an indicator of the overall financial performance
of the Company. The Company's calculation of EBITDA may be different from
the calculation used by other companies and, therefore, comparability may be
limited.
(3) Working capital represents total current assets (excluding net short-term
assets of discontinued operations) less total current liabilities (excluding
net short-term liabilities of discontinued operations).
(4) Long-term debt excludes notes payable and current portion of long-term debt
totaling $3,328,000, $759,600 and $1,063,300 as of December 31, 1999, 1998
and 1997, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of the following discussion and analysis is to explain the major
factors and variances between periods of the Company's results of operations.
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the historical consolidated
financial statements and notes thereto included in Item 8, beginning on
page 15.
Introduction
The Company is a diversified communications and entertainment services company
that produces a broad range of business communications, meeting production and
entertainment services for corporate meetings, develops and produces integrated
music marketing programs and special events, manages music artists and develops
and executes merchandising programs for large-scale entertainment and sporting
events.
In April 1997, the Company acquired its first corporate communications and
entertainment company, TBA Entertainment Group Nashville, Inc., formerly Avalon
Entertainment Group, Inc. ("AEG"), including a 50% interest in the Warner/TBA
(formerly Warner/Avalon) joint venture. In 1998, the Company grew its operations
through the acquisition of several additional corporate communications and
entertainment services businesses, including Titley Spalding & Associates, LLC
("TSA"), TBA Entertainment Group Chicago, Inc., formerly Corporate Productions,
Inc. ("CPI"), Corporate Incentives, Inc. ("CII"), TBA Entertainment Group
Phoenix, Inc., formerly Image Entertainment Productions, Inc. ("Image"), TBA
Entertainment Group Dallas, Inc., formerly Magnum Communications, Inc.
("Magnum"), and TKS Marketing, Inc. ("TKS"), (collectively, the "1998
Acquisitions"). In 1999, the Company also completed the acquisition of Karin
Glass & Associates, Inc. and affiliated companies (collectively, "KGA") and Mike
Atkins Management, Inc. ("Atkins") (collectively, the "1999 Acquisitions"). In
January 2000, the Company also completed the acquisition of Romeo Entertainment
Group, Inc. ("Romeo").
General
The Company classifies its operations into four major business segments. See
Note 11 to the consolidated financial statements contained in Item 8 of this
Annual Report on Form 10-K for summarized financial information concerning the
Company's reportable segments.
The Company currently derives a majority of its revenues (71%, 86% and 98% for
the years ended December 31, 1999, 1998 and 1997, respectively) from the
production of business communications and entertainment events for corporate
clients. The Company works with its clients to develop creative programming to
deliver messages to the client's targeted audiences. The Company receives a fee
for providing these services, which may include developing creative content,
designing audio/visual presentations and arranging for live entertainment and
related production services, including lights and sound. Revenue is recognized
when the services are completed for each event. Costs of producing the events
are also deferred until the event occurs.
The remainder of the Company's revenues are generated from event merchandising
(20%, 5% and 0% of total revenues for the years ended December 31, 1999, 1998
and 1997, respectively), artist management (6%, 6% and 2% of total revenues for
the years ended December 31, 1999, 1998 and 1997, respectively) and
entertainment marketing (3%, 3% and 0% of total revenues for the years ended
December 31, 1999, 1998 and 1997, respectively). Event merchandising revenue
increased dramatically in 1999 as a result of the acquisition of KGA in March
1999. Event merchandising revenue is recognized when the merchandise is shipped
or sold to the customer. Cost of sales includes the direct cost of acquiring or
producing the merchandise. Artist management revenue, which generally consists
of commissions received from artists' earnings, is recognized in the period in
which the artist earns the revenue. There are generally only minimal direct
costs associated with generating artist management revenue. Entertainment
marketing revenues and cost of revenues are recognized when the services are
completed for each program or, for those programs with multiple events,
apportioned to each event and recognized as each event occurs.
Through December 31, 1999, the Company also developed and produced entertainment
marketing programs and special events through a 50% interest in Warner/TBA, a
joint venture with an affiliate of Time Warner. The Company accounted for these
activities using the equity method of accounting. The formal Warner/TBA joint
venture agreement reached the end of its term on December 31, 1999. Accordingly,
beginning in the year 2000, the Company will begin to recognize all revenue and
expenses associated with entertainment marketing programs that were previously
executed by the Warner/TBA joint venture. As a result, along with the
acquisition of Romeo in January 2000, the Company expects that entertainment
marketing revenue, as a percent of total Company revenue, will increase
significantly beginning in the year 2000.
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<PAGE> 11
Discontinued Operations
Prior to 1998, the Company acquired and operated certain businesses that were
sold in 1998. These businesses included the Nashville Country Club, the Village
at Breckenridge Resort and a 51% controlling interest in AWC. In accordance with
accounting principles generally accepted in the United States, the sale of these
businesses has resulted in the reclassification of the operating results of
these businesses to discontinued operations for all periods presented. Operating
results of these businesses and other information for discontinued operations
appear in the notes to consolidated financial statements captioned
"Dispositions" (Note 7).
Results of Operations ended December 31, 1999 and 1998
For the 1999 period, results of operations of KGA and Atkins are included from
their respective acquisition dates. For the 1998 period, results of operations
of each of the 1998 Acquisitions are included from the corresponding acquisition
dates in 1998.
Revenues increased $20,891,200, or 77%, to $48,163,900 for 1999 from $27,272,700
for 1998. $10,712,800 of the increase resulted from the production of 177
additional corporate entertainment and meeting production events, to 583 events
in 1999 compared to 406 events produced in 1998. The increase in the number of
shows is primarily attributable to an increase in the Company's sales force and
the inclusion of a full year of operations of CPI, Image and Magnum, which were
acquired in the third and fourth quarters of 1998. The average revenue per event
increased from $57,800 in 1998 to $58,600 in 1999. In 1999, the Company produced
28 events with revenues in excess of $250,000, versus 20 such events in 1998.
However, the impact of the increase in the number of larger events was offset by
the impact of a higher number of lower revenue events produced by one of the
1998 Acquisitions. In general, the Company is aggressively pursuing larger
corporate meeting and entertainment events with Fortune 1000 companies.
Event merchandising revenues increased $8,292,800 for the 1999 period from the
1998 period, due to the addition of merchandising activities through the
acquisition of KGA in March 1999. KGA produces and sells merchandise for a
number of large sporting events and corporate fulfillment programs. Revenue from
the artist management division increased $1,155,000 in 1999. The increase
results primarily from a full year of revenues from TSA, which was acquired in
June 1998. The remaining revenue increase of $730,600 results from a full year
of revenues from TKS, which was acquired in December 1998 and from revenues
generated by the For the Record program.
Cost of revenues increased $13,394,700, or 73%, to $31,863,400 for 1999 from
$18,468,700 for 1998. The increase resulted primarily from the production of
additional corporate entertainment and meeting planning events and the addition
of merchandising activities discussed above. Cost of revenues as a percentage of
revenues decreased to 66% for 1999 from 68% for 1998. The decrease was due to
improved profit margins related to corporate communications and entertainment
events for 1999 as compared to 1998, increased revenues from artist management,
which typically have minimal direct costs as a percentage of revenue, and
improved profit margins in event merchandising resulting from the acquisition of
KGA in March 1999.
Selling, general and administrative expenses increased $5,993,600, or 86%, to
$12,962,600 for 1999 from $6,969,000 for 1998. The increase results primarily
from increased personnel and related operating expenses associated with the
increased number of corporate entertainment and meeting planning events, as well
as general and administrative expenses associated with the 1999 acquisitions and
a full year of operations for the 1998 Acquisitions. Selling, general and
administrative expenses, as a percent of total revenues, increased to 27% for
1999 from 26% for 1998. The increase is primarily due to added sales personnel
and the opening of the Atlanta office in the fourth quarter of 1999.
Depreciation and amortization expense increased $1,110,900, or 164%, to
$1,790,300 for 1999 from $679,400 for 1998. The increase results primarily from
the amortization of goodwill associated with the 1999 and 1998 Acquisitions. The
Company expects that depreciation and amortization expense will continue to
increase in the year 2000 as a result of amortization expense associated with
the Atkins acquisition in December 1999 and the Romeo acquisition in January
2000.
Equity income from AEG's 50% joint venture interest in Warner/TBA decreased to
income of $173,000 for 1999 from of $343,700 for 1998. Revenues for Warner/TBA
decreased $673,900, or 8%, to $8,178,600 for 1999 from $8,852,500 for 1998.
Operating costs of Warner/TBA, including general and administrative expenses,
increased $167,600, or 2%, to $8,332,600 for 1999 from $8,165,000 for 1998. Net
income for Warner/TBA decreased to a loss of $154,000 in 1999 from a profit of
$687,500 in 1998, due to higher talent costs associated with a major client
tour, the cancellation of the NBA All-Star Game in 1999 and lower than expected
sales for the June 1999 Rockfest. Effective December 31, 1999, the formal joint
venture agreement with Warner reached the end of its term. Beginning in the year
11
<PAGE> 12
2000, the Company will recognize 100% of the revenues and expenses associated
with programs previously recorded by Warner/TBA. In addition, in 1999, the
Company recognized a gain of $250,000 related to the distribution of the net
assets of Warner/TBA.
Net interest income was $266,200 for 1999 versus $144,500 for 1998. The change
is attributable primarily to interest earned on increased cash balances
resulting from proceeds from the sale of certain businesses in 1998, offset by
increased outstanding debt associated with the 1998 Acquisitions. As a result of
acquisitions made by the Company in 1999 and in January 2000, the Company's
long-term debt has increased. Accordingly, the Company expects that net interest
income will decrease in the fiscal year 2000.
The provision for income taxes, as a percentage of income from continuing
operations before income taxes, is 40% for the 1999 period compared to 11% for
1998, and reflects statutory tax rates adjusted for estimated permanent book/tax
differences. The 1998 tax provision was positively impacted by the utilization
of net operating loss carrryforwards available to offset taxable income. The
Company has utilized substantially all its federal net operating loss
carryforwards as of December 31, 1999.
Discontinued Operations
In 1999, the Company received the final payment related to the sale of the
Village at Breckenridge Resort. Accordingly, the Company recognized a gain on
the sale of discontinued operations of $329,200 for 1999, net of additional
expenses related to the sale of discontinued operations and net of income taxes
of $399,600. Income from discontinued operations in 1998 included a gain on the
sale of AWC in May 1998 and the discontinued operations of the Village at
Breckenridge Resort through the August 1998 sale date. No gain was recorded on
the sale of the Village at Breckenridge Resort in 1998 due to certain contingent
payments that were not received until 1999.
Results of Operations ended December 31, 1998 and 1997
The 1997 period includes the results of operations for AEG from the April 21,
1997 acquisition date, to December 31, 1997, whereas the 1998 period includes
the results of operations for AEG from January 1, 1998 to December 31, 1998.
Results of operations of each of the 1998 Acquisitions are included from the
corresponding acquisition dates in 1998.
Revenues increased $20,835,600, or 324%, to $27,272,700 for 1998 from $6,437,100
for 1997. $17,198,700 of the increase resulted from the production of 298
additional corporate entertainment and meeting production events, to 406 events
in 1998 compared to 108 events produced in 1997. The increase in the number of
shows is primarily attributable to an increase in the Company's sales force, the
addition of corporate meeting event services in 1998 and the acquisitions of
CPI, Image and Magnum, in the third and fourth quarters of 1998. In 1997, the
Company produced primarily corporate entertainment events through the operations
of AEG. The average revenue per event remained relatively constant at
approximately $58,000 between years. In general, the Company is aggressively
pursuing larger corporate entertainment and meeting events with Fortune 1000
companies. In 1998, the Company produced 20 events with revenues in excess of
$250,000, versus two such events in 1997. However, the impact of the substantial
increase in the number of larger events was offset by a higher number of lower
revenue events produced by one of the 1998 Acquisitions.
Revenue from the artist management division increased $1,565,900 for the 1998
period from the 1997 period. The Company contracted with one well-known new
artist in 1997, which began producing significant revenue in 1998. Additionally,
in June 1998, the Company acquired TSA, an artist management company with three
artists currently under management. Revenue from the event merchandising
division increased $1,233,500 for the 1998 period from the 1997 period, due to
the addition of merchandising activities through the acquisition of Eric
Chandler Merchandising, Inc. and CII. The remaining revenue increase of $837,500
results from revenue associated with the For the Record program. In the 1997
period, all entertainment marketing programs were executed through the
Warner/TBA joint venture, which is accounted for using the equity method of
accounting.
Cost of revenues increased $13,763,100, or 292%, to $18,468,700 for 1998 from
$4,705,600 for 1997. The increase resulted primarily from the production of
additional corporate entertainment and meeting planning events and the addition
of merchandising activities discussed above. Cost of revenues as a percentage of
revenues decreased to 68% for 1998 from 73% for 1997. A portion of the decrease
was due to improved profit margins related to corporate entertainment and
meeting planning events for 1998 as compared to 1997. The remaining decrease
results from increased revenues for artist management, which typically have
minimal
12
<PAGE> 13
direct costs as a percentage of revenue. The decrease in cost of revenues is
offset by the increase in revenues in the event merchandising division, which
had a cost of revenues of 81% of event merchandising revenues for 1998.
Selling, general and administrative expenses increased $5,080,400, or 269%, to
$6,969,000 for 1998 from $1,888,600 for 1997. The increase results primarily
from increased personnel and related operating expenses associated with the
increased number of corporate entertainment and meeting planning events, as well
as general and administrative expenses associated with the 1998 Acquisitions.
The increase is further explained by increased personnel and related expenses
incurred to develop an administrative and accounting infrastructure to manage
the Company's growth during the past year. Selling, general and administrative
expenses, as a percent of revenue, decreased to 26% in 1998 from 29% in 1997.
Depreciation and amortization expense increased $530,500, or 356%, to $679,400
for 1998 from $148,900 for 1997. The increase results primarily from the
amortization of goodwill associated with the 1998 Acquisitions.
Equity income from AEG's 50% joint venture interest in Warner/TBA increased
$264,800, or 336%, to $343,700 for 1998 from $78,900 for 1997. Revenues for
Warner/Avalon decreased $1,979,200, or 18%, to $8,852,500 for 1998 from
$10,831,700 for 1997. Operating costs of Warner/TBA decreased $2,445,900, or
23%, to $8,165,000 for 1998 from $10,610,900 for 1997. The overall decrease in
revenues and operating expenses results primarily from a reduction in the size
of entertainment marketing programs produced in 1998 as compared to 1997.
Operating costs as a percentage of revenues decreased to 92% of revenues in 1998
as compared to 98% in 1997. The decrease results primarily from the elimination
of a music tour program that occurred in 1998 in which the Company incurred
operating losses of $666,000.
For 1998, net interest income was $144,500 versus net interest expense of
$153,000 for 1997. The change is attributable primarily to interest earned on
increased cash balances resulting from proceeds from the sale of discontinued
operations, offset by increased outstanding debt associated with the 1998
Acquisitions.
The provision for income taxes, as a percentage of income taxes from continuing
operations before income taxes, was 11% for 1998, which reflects statutory tax
rates adjusted for utilization of net operating loss carryforwards and book/tax
differences. There was no provision for income taxes for 1997 as the Company had
net operating loss carryforwards available to offset taxable income.
Discontinued Operations
The Company recognized a net gain on the disposition of AWC and the Nashville
Country Club restaurant in 1998 of $1,196,500. No gain was recognized on the
sale of the Breckenridge Resort in 1998, as a portion of the proceeds from the
sale of the Breckenridge Resort was held in escrow pending the consummation of
certain other transactions. Upon receipt of the funds held in escrow, which
occurred in 1999, the Company recognized a one-time gain from the sale of the
Village at Breckenridge Resort.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a strong financial position, funding
acquisitions and working capital needs from net cash proceeds received from the
sale of discontinued operations and out of operating cash flow. Cash and cash
equivalents were $12,847,600 at December 31, 1999 as compared to $15,583,800 at
December 31, 1998. Working capital was $7,892,700 at December 31, 1999, versus
$14,933,900 at December 31, 1998. The decrease is primarily attributable to the
use of cash reserves to acquire KGA in March 1999 and to fund the Company's
stock repurchase program, as well as the increase in current portion of
long-term debt due to the maturation of certain acquisition financing in the
year 2000.
Cash provided by continuing operations was $1,041,400 and $1,476,900 for 1999
and 1998, respectively, compared to cash used in continuing operations of
$620,400 for 1997. The increase from 1997 to 1998 is primarily the result of
improved operations. The fluctuation in cash provided by continuing operations
between 1998 and 1999 primarily reflects the timing of deferred revenue and
prepaid expenses associated with programs occurring in the following year.
Cash used in investing activities was $952,400 in 1999, versus cash provided by
investing activities of $15,283,100 and $76,400 in 1998 and 1997. In 1999, cash
was used to acquire KGA and property and equipment, offset by the remaining
payment of $3,000,000 of proceeds from the sale of the Village at Breckenridge
Resort. In 1998, the Company received proceeds from the sale of AWC, the Village
at Breckenridge Resort and the Nashville Country Club restaurant, offset by cash
used for the 1998 Acquisitions
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<PAGE> 14
and expenditures for property and equipment. Cash provided by investing
activities for 1997 was primarily from cash acquired in the acquisition of AEG.
Cash used in financing activities was $2,825,200 and $2,154,800 for 1999 and
1998, respectively, resulting primarily from the repayment of borrowings and the
purchase of treasury shares pursuant to the Company's stock repurchase program.
Cash provided by financing activities for 1997 was $8,874,800, resulting from an
offering of 2,600,000 shares of common stock of the Company for $9,100,000, less
offering costs of $971,000.
The Company has pursued an aggressive growth strategy since its formation in
1993. From the Company's inception through December 31, 1997, the Company
acquired and operated certain businesses that were sold in 1998. The Company
relied on external sources of funds, including public offerings of its common
stock and bank borrowings to finance the acquisition of these businesses and to
fund the general operations of the Company. In 1998, the Company realized net
proceeds of $19,393,800 from the sale of discontinued operations, after
repayment of borrowings associated with these operations and applicable
transaction costs. In 1999, the Company received the final $3,000,000 of net
proceeds from the sale of the Village at Breckenridge Resort.
The Company used a portion of the proceeds from the sale of these operations to
fund part of the purchase price of AEG in 1997, the 1998 Acquisitions and the
1999 Acquisitions. In addition, the Company used cash reserves to acquire Romeo
in January 2000. The remainder of the purchase price for these acquisitions was
funded through the issuance of common stock of the Company and the issuance of
acquisition notes payable. The acquisition notes are payable in various
installments of principal plus accrued interest at 8% through August 2004.
During 1998 and continuing through a portion of 2003 (the "Earn-out Period"),
the sellers of TSA and TKS will be paid additional sales price consideration
based on the earnings of TSA and TKS during each of the years in the Earn-out
Period, up to a maximum of $6,380,000 additional purchase price. Generally, the
additional purchase price for TSA and TKS will be paid 60% in cash and 40% in
notes payable which are payable in semi-annual installments with 8% interest
over a five-year period.
The Company's board of directors authorized the repurchase of up to 1,000,000
shares of the Company's common stock until December 31, 1999. As of December 31,
1999, the Company had repurchased 705,300 shares of common stock pursuant to the
stock repurchase program for total consideration of $3,023,600. The Company
utilized cash reserves to fund the repurchases of common stock.
The Company expects to continue its aggressive growth strategy in the
entertainment industry. The Company anticipates that future business
acquisitions made by the Company will be completed through a combination of
cash, notes payable issued to the sellers and the issuance of common stock of
the Company to the sellers.
The Company believes that cash flow from operations and current cash reserves
are more than adequate to meet its current working capital requirements. In
addition, to provide any additional funds necessary for the continued pursuit of
the Company's growth strategies, the Company may issue additional equity and
debt securities and may incur, from time to time, additional short- and
long-term bank indebtedness. The availability and attractiveness of any outside
sources of financing will depend on a number of factors, some of which relate to
the financial condition and performance of the Company, and some of which will
be beyond the Company's control, such as prevailing interest rates and general
economic conditions. There can be no assurance that such additional financing
will be available or, if available, will be on terms acceptable to the Company.
To the extent that the Company is able to finance its growth through internal
and external sources of capital, the Company intends to continue to grow its
operations through additional acquisitions. There can be no assurance that the
Company will be able to acquire any additional businesses, that any businesses
that are acquired will be or will become profitable or that the Company will be
able to integrate effectively any such businesses into its existing operations.
Forward Looking Statements
The foregoing discussion may contain certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are intended to be covered by
the safe harbors created by such provisions. These statements include the plans
and objectives of management for future growth of the Company, including plans
and objectives related to the acquisition of certain businesses and the
consummation of future private and public issuances of the Company's equity and
debt securities. The forward-looking statements included herein are based on
current expectations that involve numerous risks and uncertainties. Assumptions
relating to the foregoing involve judgements with respect
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<PAGE> 15
to, among other things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could be inaccurate and, therefore, there
can be no assurance that the forward-looking statements included in this Form
10-K will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives of the Company will be achieved.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements required by this item are filed
herewith:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants 15
Consolidated Balance Sheets as of December 31, 1999 and 1998 16
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997 17
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997 18
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 19
Notes to Consolidated Financial Statements 20
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TBA Entertainment Corporation:
We have audited the accompanying consolidated balance sheets of TBA
Entertainment Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TBA Entertainment
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Los Angeles, California
March 24, 2000
15
<PAGE> 16
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $12,847,600 $15,583,800
Accounts receivable, net of allowance
for doubtful accounts of $50,000 and $55,800, 3,593,400 2,355,100
respectively
Inventories 563,300 --
Deferred charges and other current assets 2,425,400 1,616,800
Net short-term assets from sale of
discontinued operations 54,100 2,552,000
----------- -----------
Total current assets 19,483,800 22,107,700
Property and equipment, net 2,937,500 1,853,600
Other assets, net:
Goodwill 19,383,700 16,008,600
Investment in Joint Venture 588,700 410,600
Other 755,800 64,700
----------- -----------
Total assets $43,149,500 $40,445,200
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,765,500 $ 4,299,400
Deferred revenue 4,497,600 2,114,800
Notes payable and current portion of long term-debt 3,328,000 759,600
----------- -----------
Total current liabilities 11,591,100 7,173,800
Long-term debt, net of current portion 3,719,600 4,755,700
----------- -----------
Total liabilities 15,310,700 11,929,500
----------- -----------
Stockholders' equity:
Preferred stock, $.001 par value; authorized
1,000,000 shares, 2,600 and 68,800, respectively,
of Series A convertible preferred stock issued and
outstanding, total liquidation preference $100 and
$2,100, respectively 100 2,100
Common stock, $.001 par value; authorized 20,000,000
shares, 8,714,300 and 8,831,500 shares issued,
respectively 8,700 8,800
Additional paid-in capital 29,859,900 30,723,100
Retained earnings (deficit) 32,200 (1,493,800)
Less treasury stock, at cost, 495,500 and 196,700
shares, respectively (2,062,100) (724,500)
----------- -----------
Total stockholders' equity 27,838,800 28,515,700
----------- -----------
Total liabilities and stockholders' equity $43,149,500 $40,445,200
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
16
<PAGE> 17
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Revenues $ 48,163,900 $ 27,272,700 $ 6,437,100
Costs related to revenues 31,863,400 18,468,700 4,705,600
------------ ------------ -----------
Gross profit margin 16,300,500 8,804,000 1,731,500
Selling, general and administrative expenses 12,962,600 6,969,000 1,888,600
Depreciation and amortization expense 1,790,300 679,400 148,900
Equity in income of Joint Venture (173,000) (343,700) (78,900)
Minority interest -- (36,000) --
Interest (income) expense, net (266,200) (144,500) 153,000
------------ ------------ -----------
Income (loss) from continuing operations
before income taxes 1,986,800 1,679,800 (380,100)
Provision for income taxes (790,000) (189,700) --
------------ ------------ -----------
Income (loss) from continuing operations 1,196,800 1,490,100 (380,100)
------------ ------------ -----------
Discontinued operations (Notes 2 and 7):
(Loss) income from operations, including income
tax benefit of ($189,900) and income tax
expense of $351,800 for 1998 and 1997,
respectively -- (15,600) 782,400
Gain on disposition of discontinued operations
net of income tax expense of $399,600 for 1999 329,200 1,196,500 --
------------ ------------ -----------
Income from discontinued operations 329,200 1,180,900 782,400
------------ ------------ -----------
Net income $ 1,526,000 $ 2,671,000 $ 402,300
============ ============ ===========
Earnings per common share - basic:
Income (loss) from continuing operations $ 0.14 $ 0.19 $ (0.07)
Income from discontinued operations 0.04 0.15 0.14
------------ ------------ -----------
Net income per common share - basic $ 0.18 $ 0.34 $ 0.07
------------ ------------ -----------
Earnings per common share - diluted:
Income (loss) from continuing operations $ 0.14 $ 0.18 $ (0.06)
Income from discontinued operations 0.04 0.14 0.12
------------ ------------ -----------
Net income per common share - diluted $ 0.18 $ 0.32 $ 0.06
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE> 18
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------- -------------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------- ------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCES, December 31, 1996 334,300 $10,000 4,590,400 $ 16,770,400 $ --
Issuance of shares of common
stock and warrants,
net of offering costs -- -- 2,600,000 8,129,000 --
Conversion to $.001 par
value stock upon
Reincorporation -- -- -- (24,892,200) 24,892,200
Repurchase of common stock -- -- -- -- --
Net income -- -- -- -- --
------- ------- --------- ------------ -----------
BALANCES, December 31, 1997 334,300 10,000 7,190,400 7,200 24,892,200
Issuance of common stock warrants -- -- -- -- 112,800
Issuance of common stock upon
Acquisitions -- -- 1,423,300 1,400 5,948,900
Repurchase of common stock -- -- -- -- --
Common stock cancelled -- -- (47,700) (100) (238,400)
Conversion of preferred
stock into common stock (265,500) (7,900) 265,500 300 7,600
Net income -- -- -- -- --
------- ------- --------- ------------ -----------
BALANCES, December 31, 1998 68,800 2,100 8,831,500 8,800 30,723,100
Issuance of common stock -- -- 7,200 -- 30,000
Issuance of common stock for
employee stock purchase plan -- -- -- -- (13,700)
Repurchase of common stock -- -- -- -- --
Common stock cancelled -- -- (190,600) (200) (881,500)
Conversion of preferred
stock into common stock (66,200) (2,000) 66,200 100 2,000
Net income -- -- -- -- --
------- ------- --------- ------------ -----------
BALANCES, December 31, 1999 2,600 $ 100 8,714,300 $ 8,700 $29,859,900
======= ======= ========= ============ ===========
</TABLE>
<TABLE>
<CAPTION>
RETAINED TREASURY STOCK TOTAL
EARNINGS ----------------------- STOCKHOLDERS'
(DEFICIT) SHARES AMOUNT EQUITY
----------- ------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCES, December 31, 1996 $(4,567,100) -- $ -- $12,213,300
Issuance of shares of common
stock and warrants,
net of offering costs -- -- -- 8,129,000
Conversion to $.001 par
value stock upon
Reincorporation -- -- --
Repurchase of common stock -- 4,800 (24,200) (24,200)
Net income 402,300 -- -- 402,300
----------- ------- ----------- -----------
BALANCES, December 31, 1997 (4,164,800) 4,800 (24,200) 20,720,400
Issuance of common stock warrants -- -- -- 112,800
Issuance of common stock upon
Acquisitions -- -- -- 5,950,300
Repurchase of common stock -- 239,600 (938,800) (938,800)
Common stock cancelled -- (47,700) 238,500 --
Conversion of preferred
stock into common stock -- -- -- --
Net income 2,671,000 -- -- 2,671,000
----------- ------- ----------- -----------
BALANCES, December 31, 1998 (1,493,800) 196,700 (724,500) 28,515,700
Issuance of common stock -- -- -- 30,000
Issuance of common stock for
employee stock purchase plan -- (19,200) 79,800 66,100
Repurchase of common stock -- 508,600 (2,299,100) (2,299,100)
Common stock cancelled -- (190,600) 881,700 --
Conversion of preferred
stock into common stock -- -- -- 100
Net income 1,526,000 -- -- 1,526,000
----------- ------- ----------- -----------
BALANCES, December 31, 1999 $ 32,200 495,500 $(2,062,100) $27,838,800
=========== ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 19
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,526,000 $ 2,671,000 $ 402,300
Adjustments to reconcile net income to net cash
provided by (used in) continuing operations:
Depreciation and amortization 1,790,300 679,400 148,900
Income from discontinued operations (329,200) (1,180,900) (782,400)
Undistributed earnings of Joint Venture (173,000) (343,700) (78,900)
Deferred tax provision (179,900) (547,300) --
Changes in operating assets and liabilities,
net of acquisitions:
Increase in accounts receivable (537,300) (853,600) (165,100)
Decrease in inventories 108,600 -- --
(Increase) decrease in deferred charges and (1,099,800) 348,300 186,800
other current assets
(Increase) decrease in other assets (58,200) 9,900 (33,800)
(Decrease) increase in accounts payable (2,397,900) 1,376,900 3,000
and accrued liabilities
Increase (decrease) in deferred revenue 2,382,800 (683,100) (301,200)
----------- ----------- -----------
Net cash provided by (used in) continuing
operations 1,041,400 1,476,900 (620,400)
----------- ----------- -----------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (3,237,700) (3,242,900) 124,800
Net proceeds from dispositions of businesses 3,337,100 19,393,800 --
Expenditures for property and equipment (1,051,800) (599,800) (48,400)
Increase in other current assets -- (268,000) --
----------- ----------- -----------
Net cash provided by (used in) investing
activities (952,400) 15,283,100 76,400
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock, net of
offering costs -- -- 8,129,000
Net borrowings on credit lines 152,700 -- --
Proceeds from long-term debt 73,000 -- 2,750,000
Repayments of long-term debt (817,900) (1,216,000) (1,980,000)
Repurchase of common stock (2,299,100) (938,800) (24,200)
Issuance of common stock for employee stock
purchase plan 66,100 -- --
----------- ----------- -----------
Net cash (used in) provided by financing
activities (2,825,200) (2,154,800) 8,874,800
----------- ----------- -----------
Net cash used in discontinued operations -- -- (7,534,400)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (2,736,200) 14,605,200 796,400
Cash and cash equivalents - beginning of year 15,583,800 978,600 182,200
----------- ----------- -----------
Cash and cash equivalents - end of year $12,847,600 $15,583,800 $ 978,600
=========== =========== ===========
Supplemental Cash Flow Information:
Cash paid during the year for interest $ 282,400 $ 347,300 $ 24,900
=========== =========== ===========
Cash paid during the year for income taxes $ 1,435,700 $ -- $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 20
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. The Company
TBA Entertainment Corporation and subsidiaries (the "Company") is a
diversified communications and entertainment company that produces a
broad range of business communications, meeting productions and
entertainment services for corporate meetings, develops and produces
integrated music marketing programs, manages music industry artists and
develops and executes merchandising programs for entertainment and
sporting events. The Company was incorporated in Tennessee in June 1993
and reincorporated in Delaware in September 1997.
2. Basis of Financial Presentation
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Discontinued Operations
Prior to 1998, the Company acquired and operated certain businesses that
were sold in 1998 (Note 7). These businesses included the Nashville
Country Club Restaurant (opened in November 1994 and sold in December
1998), the Village at Breckenridge Resort ("Breckenridge Resort")
(acquired in April 1996 and sold in August 1998) and a 51% controlling
interest in a group of entities (collectively referred to as "AWC")
(acquired in July 1997 and sold in May 1998). The sale of these
businesses has resulted in the reclassification of the operating results
of these businesses to discontinued operations for all periods
presented, in accordance with generally accepted accounting principles.
3. Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes revenue when services are completed for an event.
For those projects that provide for multiple events, the contract
revenue and costs are apportioned and revenue and profit are recognized
as each event occurs. Deferred income represents customer deposits on
future events. Deferred charges represent Company expenditures related
to future events. For merchandise operations, revenue is recognized when
the merchandise is shipped or sold to a customer.
Costs Related to Revenue
Costs related to revenue is comprised of all direct costs associated
with the production of an event, including talent fees, contracted
services, equipment rentals and costs associated with the production of
audio-visual effects. Such costs are deferred until the event occurs.
Cost of merchandise revenue is comprised of the direct costs of the
merchandise sold.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash in banks and highly
liquid investments purchased with an original maturity of three months
or less. Cash and cash equivalents' carrying amounts approximate fair
value. The Company holds its investments in highly qualified financial
institutions.
Inventories
Inventories consist primarily of finished merchandise product, and are
stated at the lower of cost or market, determined using the first-in,
first-out (FIFO) basis.
20
<PAGE> 21
Property and Equipment
Property and equipment consists of the following as of December 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Land ................................................. $ 388,000 $ 388,000
Buildings and leasehold improvements ................. 577,900 236,800
Furniture, fixtures and equipment .................... 2,806,100 1,424,300
---------- ----------
3,772,000 2,049,100
Less - accumulated depreciation and amortization ..... (834,500) (195,500)
---------- ----------
Property and equipment, net .......................... $2,937,500 $1,853,600
========== ==========
</TABLE>
Property and equipment are recorded at cost and are depreciated or amortized
using the straight-line method, over the following estimated useful lives:
<TABLE>
<S> <C>
Building and leasehold improvements ...... 3-25 years
Furniture, fixtures and equipment ........ 3-5 years
</TABLE>
The Company follows the policy of capitalizing expenditures that
materially increase asset lives and charges ordinary maintenance and
repairs to operations as incurred.
Goodwill
Goodwill represents the excess of purchase price and related costs over
the value assigned to the net tangible assets of businesses acquired.
Goodwill is being amortized on a straight-line basis over periods
ranging from 5 to 20 years. Periodically, the Company reviews the
recoverability of goodwill. The measurement of possible impairment is
based primarily on the ability to recover the balance of goodwill from
expected future operating cash flows on an undiscounted basis. In
management's opinion, no impairment exists at December 31, 1999.
Accumulated amortization expense was, $1,822,400, $629,200 and $124,800
as of December 31, 1999, 1998 and 1997, respectively.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consists of the following at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Accounts payable ........................ $ 1,511,500 $1,131,200
Accrued payroll and related taxes ....... 455,300 1,128,000
Due to sellers of acquired businesses ... 522,900 546,500
Income taxes payable .................... -- 590,500
Other accrued expenses .................. 1,275,800 903,200
----------- ----------
$ 3,765,500 $4,299,400
=========== ==========
</TABLE>
Income Taxes
Deferred income tax assets and liabilities are recognized based on
enacted tax laws for any temporary differences between financial
reporting and tax bases of assets, liabilities and carryforwards.
Deferred tax assets are reduced by a valuation allowance if it is more
likely than not that some or all of the deferred tax asset will be
realized.
21
<PAGE> 22
Earnings (Loss) per Common Share
The following table sets forth the computation of basic and diluted
earnings per common share for the years ended December 31, 1999, 1998
and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Basic Earnings Per Common Share:
Net income (loss) from continuing operations ..... $1,196,800 $1,490,100 $ (380,100)
Weighted average common stock outstanding ........ 8,495,200 7,851,600 5,680,300
---------- ---------- ----------
Basic earnings (loss) per common share ........... $ 0.14 $ 0.19 $ (0.07)
---------- ---------- ----------
Diluted Earnings Per Common Share:
Net income (loss) from continuing operations ..... $1,196,800 $1,490,100 $ (380,100)
---------- ---------- ----------
Weighted average common stock outstanding ........ 8,495,200 7,851,600 5,680,300
Additional common stock resulting from
dilutive securities:
Preferred Stock ................................ 2,600 224,200 334,300
Weighted average contingent common stock issued
in acquisition. .............................. -- 163,500 310,000
Stock options and warrants ..................... 42,200 4,200 --
---------- ---------- ----------
Weighted average common stock and dilutive
securities outstanding ......................... 8,540,000 8,243,500 6,324,600
---------- ---------- ----------
Diluted earnings (loss) per common share ......... $ 0.14 $ 0.18 $ (0.06)
========== ========== ==========
</TABLE>
Options and warrants to purchase 1,886,500, 2,519,000 and 2,264,000
shares of common stock in 1999, 1998 and 1997, respectively, were not
considered in calculating diluted earnings per share as their inclusion
would have been anti-dilutive.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 revenues and expenses during the reported period. Actual
results could differ from those estimates.
22
<PAGE> 23
4. Debt
Long-term debt of the Company consists of the following as of December 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Acquisition notes payable, interest at 8%, unsecured ............................... $ 4,580,600 $ 2,908,000
Note payable to a bank, interest at the bank's prime rate plus 0.25%
(8.5% at December 31, 1999), due in monthly installments with a balloon
payment in December 2000, secured by a pledge of the common stock of a subsidiary .. 1,516,700 2,080,000
Mortgage note payable to a bank, interest at 8.25%, due in monthly
installments through December 2011, secured by land and building ................... 311,500 324,900
Equipment notes payable, interest ranging from 7.57% to 11.58%, due in
monthly installments with various maturity dates through July 2003, secured by
equipment .......................................................................... 315,500 202,400
----------- -----------
6,724,300 5,515,300
Less-current portion ............................................................... (3,004,700) (759,600)
----------- -----------
$ 3,719,600 $ 4,755,700
=========== ===========
</TABLE>
Future annual maturities of long-term debt consists of the following as
of December 31, 1999:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
2000.......................... $3,004,700
2001.......................... 1,335,100
2002.......................... 1,047,500
2003.......................... 783,400
2004.......................... 266,800
Thereafter.................... 286,800
----------
$6,724,300
==========
</TABLE>
In October 1999, a subsidiary of the Company entered into a revolving
credit facility with a bank. The facility provides for maximum
borrowings of $500,000 to be used for working capital purposes of the
subsidiary. Borrowings on the facility accrue interest at the bank's
prime rate (8.5% at December 31, 1999) and are secured by all business
assets of the subsidiary. The line of credit terminates in May 2001. As
of December 31, 1999, $323,300 was outstanding under of the line of
credit, which amount is included in notes payable and current portion of
long-term debt in the accompanying consolidated balance sheets.
The Company recognized interest expense of $443,100, $307,700 and
$166,400 related to long-term debt for the years ended December 31,
1999, 1998 and 1997, respectively.
5. Investment in Warner/TBA Joint Venture
Through December 31, 1999, the Company owned a 50% interest in a joint
venture with Warner Custom Music Corp. ("Warner"). The joint venture,
Warner/TBA (formerly Warner/Avalon), developed and coordinated live,
sponsored music entertainment marketing tours and programs and related
projects and generated revenues primarily from third party corporate
sponsorships. Warner/TBA recognized revenue by amortizing the contract
sponsorship funds over the life of the related programs, which ranged
from single day events to tours lasting several months.
Effective December 31, 1999, the formal joint venture agreement with
Warner reached the end of its term. Pursuant to an agreement with
Warner, the net assets of Warner/TBA will be distributed to TBA. TBA
will continue to execute entertainment marketing programs previously
developed by Warner/TBA and will pay Warner a net profits interest for
certain of the 2000 programs. In 1999, the Company recognized a gain of
$250,000 related to the distribution of the net assets of Warner/TBA,
which amount is included in Equity in income of Joint Venture in the
accompanying consolidated statements of operations.
23
<PAGE> 24
Through December 31, 1999, the Company accounted for the investment in
Warner/TBA using the equity method of accounting. Summary unaudited
statements of operations data of Warner/TBA are as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
Revenues ................ $8,178,600 $ 8,852,500 $10,831,700
Net (loss) income ....... $ (154,000) $ 687,500 $ 220,800
</TABLE>
Summary unaudited balance sheet data of Warner/TBA consists of the
following as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
Current assets .......... $ 619,900 $ 981,800
Non-current assets ...... 155,900 304,500
Current liabilities ..... 211,500 568,000
Partners' capital ....... 564,300 718,300
</TABLE>
As of December 31, 1999, the Company had a receivable from Warner/TBA of
$56,900.
During 1999, the two largest customers accounted for 51% and 30% of
gross revenues of Warner/TBA. In 1998, affiliates of Warner accounted
for 60% of the gross revenues of Warner/TBA. The next two largest
customers accounted for 21% and 16% of gross revenues of Warner/TBA. In
1997, the two largest customers accounted for 68% and 29% of gross
revenues of Warner/TBA.
6. Acquisitions
During 1997, 1998 and 1999, the Company completed the following
acquisitions:
<TABLE>
<CAPTION>
Value of Number
Cash Acquisition Common Stock of Shares
Company Date Acquired Consideration Notes Payable Issued Issued
------- ------------- ------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
1997 Acquisition:
TBA Entertainment Group Nashville, Inc. April 1997 $ 400,000 $2,480,000 $1,781,600 445,400
(formerly Avalon Entertainment Group, Inc.)
1998 Acquisitions:
Titley Spalding & Associates, LLC ("TSA") June 1998 1,000,000 -- 754,700 175,000
TBA Entertainment Group Chicago, Inc. August 1998 1,450,000 1,550,000 2,000,000 414,000
(formerly Corporate Productions, Inc.)
TBA Entertainment Group Phoenix, Inc. September 1998 687,000 458,000 230,000 60,000
(formerly Image Entertainment
Productions, Inc.)
TBA Entertainment Group Dallas, Inc. October 1998 1,273,000 900,000 1,087,000 307,000
(formerly Magnum Communications, Inc.)
TKS Marketing, Inc. ("TKS") December 1998 625,000 -- -- --
1999 Acquisitions:
Karin Glass & Associates, Inc. and affiliated March 1999 2,300,000 -- -- --
Companies
Mike Atkins Management, Inc. December 1999 700,000 700,000 -- --
</TABLE>
During the remainder of 1998 and continuing through a portion of 2003
(the "Earnout Period"), the sellers of TSA and TKS will be paid
additional sales price consideration based on the earnings of TSA and
TKS during each of the years in the Earnout Period. The maximum
additional purchase price is $5,755,000 for TSA and $625,000 for TKS.
Subsequent to 1998, the additional purchase price will be paid 60% in
cash and 40% in notes payable which are payable in semi-annual
installments with 8% interest over a 5-year period. Additional
consideration paid during the Earnout Period will be recorded as
goodwill and amortized over the remaining period of the original 10-year
amortization period, which commenced on the respective acquisition date.
For 1998, additional purchase price payable to the sellers of TSA
totaled $546,500 and was paid entirely in cash in 1999. For 1999,
additional purchase price payable to the sellers of TSA and TKS totaled
$756,800 and $114,700, respectively, and are included in accrued
liabilities and long-term debt in the accompanying consolidated balance
sheets.
On March 17, 1999, the Company acquired 100% of the common stock of
Karin Glass & Associates, Inc. and affiliated companies (collectively,
"KGA"), for a maximum purchase price of approximately $3,200,000. The
purchase price paid at closing included a cash payment of $2,300,000 and
the issuance of 221,500 shares of common stock of the Company valued at
$900,000. The purchase price paid at closing was subject to reduction
based on the earnings of KGA during each of the years 1999 and 2000. The
sellers pledged their shares of common stock of the Company as
collateral during the earn-out period.
24
<PAGE> 25
Based on the earnings of KGA in 1999 and other factors, in December
1999, the sellers of KGA agreed to return the 221,500 shares of common
stock originally issued to them in March 1999. Accordingly, the final
purchase price for KGA totaled $2,300,000.
On December 6, 1999, the Company acquired 100% of the common stock of
Mike Atkins Management, Inc. ("Atkins") for a maximum purchase price of
$1,400,000. The purchase price paid at closing included a cash payment
of $1,000 and the issuance of $1,399,000 in aggregate amount of
promissory notes. One promissory note, totaling $699,000 was repaid in
January 2000. The remaining $700,000 promissory note is subject to
reduction based on the earnings of Atkins during each of the years 2000
through 2004. This promissory note accrues interest at 8% and is payable
in four equal annual installments of principal plus accrued interest,
commencing April 2001.
The accounting for the above-mentioned acquisitions is in accordance
with the purchase method of accounting. The operations of the acquired
businesses are included in the accompanying consolidated statements of
operations from their respective acquisition dates. The purchase price
for each acquisition has been allocated to the assets acquired and
liabilities assumed based on their estimated fair values on the
respective acquisition date.
Operating results of each of the KGA and Atkins acquisitions and the
1998 Acquisitions are included in the accompanying consolidated
statements of operations from their respective acquisition dates. The
following unaudited pro forma financial information represents the
consolidated results for the years ended December 31, 1999 and 1998, as
if the acquisitions had occurred as of the beginning of such year. The
pro forma results reflect certain adjustments, including amortization of
the excess purchase price over fair value of net assets acquired,
interest expense on the acquisition debt and adjustments to salaries and
ownership distributions to former owners.
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisitions had been completed as of the
beginning of each of the periods presented, nor are they necessarily
indicative of future consolidated results.
<TABLE>
<CAPTION>
Unaudited Pro Forma
For the Years Ended December 31,
--------------------------------
1999 1998
---------- -----------
<S> <C> <C>
Total revenues .................... $ 50,345,400 $ 49,296,200
Income from continuing operations . $ 1,196,800 $ 1,702,200
Earnings per common share:
Basic ........................... $ 0.14 $ 0.20
Diluted ......................... $ 0.14 $ 0.19
</TABLE>
The above calculations of pro forma basic and diluted earnings per
common share assumes that the following number of weighted average
shares were outstanding:
<TABLE>
<CAPTION>
1999 1998
---------- -----------
(Unaudited)
<S> <C> <C>
Basic ........................... 8,495,200 8,633,900
Diluted ......................... 8,540,000 8,861,900
</TABLE>
7. DISPOSITIONS
AWC
Effective July 31, 1997, the Company acquired a 51% controlling interest
in AWC. The remaining 49% of AWC was owned by a group of individuals who
became officers and stockholders of the Company. The purchase price
included a $7 million cash payment with proceeds from the Company's 1997
stock offering. Including acquisition costs, the total purchase price
for AWC was $7,862,900. The acquisition was accounted for using the
purchase method of accounting and, accordingly, the purchase price was
allocated to the assets acquired and the liabilities assumed based on
their estimated fair values on the date of acquisition.
On May 13, 1998, the Company sold its 51% controlling interest in
certain of the AWC businesses to an unaffiliated third party (the
"buyer") for $9,915,000 in cash before applicable transaction expenses.
The individuals that owned the remaining 49% of AWC also sold their
interest in these businesses to the buyer. The Company recognized a
one-time pre-tax gain of $1,445,000 as a result of the sale of its
interest in these businesses.
Net operations attributable to those business of AWC included in the
sale to the buyer from the July 31, 1997 acquisition date through the
May 13, 1998 sale date, are included in discontinued operations in the
accompanying consolidated statements of operations. The following is a
summary of the revenue and expenses related to these businesses for the
years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
Revenues .......................... $2,462,800 $13,204,000
Operating expenses ................ 3,579,000 10,830,700
Depreciation and amortization ..... 261,600 300,300
Interest expense, net ............. 36,600 40,200
Income tax (benefit) expense ...... (189,800) 351,800
Minority interest in net
(loss) income of AWC .............. (552,100) 1,319,400
---------- -----------
Net (loss) income from discontinued
operations attributable to the
Company ......................... $ (672,500) $ 361,600
========== ===========
</TABLE>
Breckenridge Resort
In July 1998, Village at Breckenridge Acquisition Corp. ("VABAC"), a
wholly owned subsidiary of the Company and owner and operator of the
Breckenridge Resort, entered into an agreement with an unaffiliated
third party developer (the "Development Agreement"). Pursuant to the
Development Agreement, VABAC agreed to sell a portion of the assets
comprising the Breckenridge Resort to the Developer for $10,000,000. The
sale was contingent upon the developer receiving approval of the
development plan. The sale of these assets was completed in April 1999.
In a simultaneous transaction, the Company entered into an agreement to
sell 100% of the common stock of VABAC to Vail Summit Resorts, Inc.
("Vail") for $34,000,000. Vail, by virtue of its acquisition of VABAC,
also acquired the rights and obligations of the Development Agreement.
The sale of the common stock of VABAC was consummated on August 12,
1998. The proceeds from the sale were distributed as follows:
$19,762,300 to repay indebtedness at the Breckenridge Resort,
25
<PAGE> 26
$3,000,000 to an escrow account, $11,013,170 to the Company and the
remainder to pay closing costs. The Company was entitled to the
$3,000,000 held in escrow upon the sale of the assets pursuant to the
Development Agreement, which occurred in April 1999. As of December 31,
1998, the Company recorded a receivable for a portion of the escrow
amount, totaling $2,121,200, which amount represented the Company's
remaining investment in VABAC after receipt of the August 12, 1998 sale
proceeds. This amount was reflected in "net short-term assets from the
sale of discontinued operations" in the accompanying consolidated
balance sheets. The Company received the entire $3,000,000 in April 1999
and, accordingly, recognized a gain of $329,200 related to the sale of
VABAC, net of expenses related to the sale of discontinued operations
and net of income taxes.
Nashville Restaurant
In December 1998, the Company sold substantially all of the assets of
the Nashville restaurant to an unaffiliated third party for $3,450,000.
The assets included the Company's leasehold interest in land on which
the Nashville restaurant was located, the building and equipment and an
adjacent parking structure. The Company recognized a loss on the sale of
the Nashville Restaurant of $248,500 in 1998.
As a result of the sale of the Breckenridge Resort and the Nashville
restaurant, together which previously comprised the Company's Resort
Division, the operations of the Resort Division have been reclassified
to discontinued operations for all periods presented. The following is a
summary of the revenues and expenses related to the Resort Division for
the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Revenues.............................. $16,350,400 $23,791,800
Operating expenses.................... 13,925,100 20,731,100
Depreciation and amortization......... 710,200 947,100
Interest expense, net................. 1,058,200 1,692,800
----------- -----------
Net income from discontinued operations $ 656,900 $ 420,800
=========== ===========
</TABLE>
8. Stockholders' Equity
Preferred Stock
The Company is authorized to issue 1,000,000 shares of $.001 par value
preferred stock. The Company has designated 557,100 shares of the
authorized preferred stock as Series A Convertible Preferred Stock
("Series A Preferred Stock"), of which 334,300 shares were previously
issued and are non-voting. The shares are convertible into common stock
on a one-for-one basis. In 1999 and 1998, 66,200 and 265,500 shares,
respectively, of Series A Preferred Stock were converted into shares of
common stock.
Common Stock and Common Stock Warrants
In April 1996, the Company completed an offering of 1,351,500 units,
each consisting of two shares of common stock and one redeemable common
stock purchase warrant. The redeemable warrants are detachable and
separately transferable. Each redeemable warrant entitles the holder to
purchase one share of common stock at a price of $6.25 per share until
April 2001, and is redeemable by the Company at $0.50 per warrant under
certain conditions. In connection with this offering, the underwriter
was also granted a warrant to acquire up to 120,000 units at $15.50 per
unit. The warrants issued in 1996 were outstanding at December 31, 1999.
In July 1997, the Company issued 2,600,000 shares of its common stock in
a public offering. In connection with this offering, the underwriter was
granted a warrant to acquire up to 130,000 shares of common stock at
$4.20 per share until July 2002. These warrants were outstanding as of
December 31, 1999.
At December 31, 1999, the Company also had other outstanding warrants to
purchase 75,000 shares of common stock at an exercise price of $4.38 per
share, expiring in September 2002.
In August 1998, the board of directors authorized the repurchase, at
management's discretion, of up to 1,000,000 shares of the Company's
common stock until August 1999. The board of directors extended the
stock repurchase program until December 31,
26
<PAGE> 27
1999. The Company's repurchases of shares of common stock are recorded
as treasury stock and result in a reduction of stockholders' equity. In
1998, the Company had repurchased 196,700 shares of common stock for
total consideration of $724,500, pursuant to the stock repurchase
program. In 1999, the Company repurchased an additional 508,600 shares
for total consideration of $2,299,100.
Stock Options
In 1995 and 1996, the Company granted 80,000 non-qualified options to
key employees and directors of which 30,000 have been cancelled as of
December 31, 1999. In 1997 and 1998, the Company established two stock
option plans that provide for the granting of either incentive stock
options or non-qualified stock options to key employees, officers and
directors of the Company. Under the two plans, the Company may grant a
total of 1,000,000 stock options at prices not less than the fair market
value on the date of grant, with expiration dates not exceeding ten
years. As of December 31, 1999, the Company has granted 785,750
incentive stock options pursuant to these plans.
Information relating to stock options is as follows:
<TABLE>
<CAPTION>
Shares Under Weighted-Average
Options Exercise Price
------------ ----------------
<S> <C> <C>
Options outstanding at December 31, 1996 ..... 80,000 $5.31
Cancelled .................................. (30,000) 5.00
Granted .................................... 300,000 5.28
--------
Options outstanding at December 31, 1997 ..... 350,000 5.31
Cancelled .................................. (298,000) 5.38
Granted .................................... 520,000 4.12
--------
Options outstanding at December 31, 1998 ..... 572,000 4.23
--------
Cancelled ................................. (2,000) 5.50
Granted ................................... 235,750 4.21
Options outstanding at December 31, 1999 ..... 805,750 4.22
========
Options exercisable at December 31, 1999 ..... 739,000 4.25
========
</TABLE>
As of December 31, 1999, the exercise price of options outstanding
ranged from $3.78 to $5.50 and the weighted average remaining
contractual life of the options was 6.4 years.
The Company applies APB Opinion No. 25 ("Accounting for Stock Issued to
Employees") and related interpretations in accounting for stock options;
accordingly, no compensation cost has been recognized in the
accompanying consolidated statements of operations for options issued.
Had compensation cost been determined based on the fair value of the
stock options at grant date consistent with the method of Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), the Company's net
income (loss) from continuing operations and net income (loss) per share
would have been the unaudited pro forma amounts indicated below:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------
1999 1998 1997
---------- ---------- -----------
Net income (loss) from continuing operations:
<S> <C> <C> <C>
As reported....................... $1,196,800 $1,490,100 $ (380,100)
Pro forma (unaudited)............. 929,000 1,250,600 (813,200)
Basic earnings per common share:
As reported....................... 0.14 0.19 (0.07)
Pro forma (unaudited)............. 0.11 0.16 (0.14)
Diluted earnings per common share:
As reported....................... 0.14 0.18 (0.06)
Pro forma (unaudited)............. 0.11 0.15 (0.13)
</TABLE>
As required by SFAS 123, the Company provides the following disclosure
of hypothetical values for these awards. The weighted-average grant-date
fair value of options granted during 1999, 1998 and 1997 was estimated
to be $1.83, $1.70 and $1.51, respectively.
The fair value of each option grant was estimated on the date of grant
using a Black-Scholes option-pricing model with the following weighted
average assumptions for 1999, 1998 and 1997, respectively; risk free
interest rates of 6.67, 5.67 and 6.70 percent; expected lives of 3
years; volatility of 55 percent, 64 percent and 40 percent and no
assumed dividends. Additional adjustments are made for assumed
cancellations and expectations that shares acquired through the exercise
of options are held during employment.
27
<PAGE> 28
9. Income Taxes
The provision for income taxes consists of the following for the years
ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Current
Federal ............... $ 816,800 $ 373,200
State ................. 149,100 363,700
Deferred
Federal ............... (145,300) (465,200)
State ................. (25,600) (82,000)
--------- ---------
Total .................... $ 790,000 $ 189,700
--------- ---------
</TABLE>
A reconciliation of the difference between the statutory federal tax
rate and the Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Income taxes at statutory federal rate .............. $ 675,500 $ 1,085,400
State income tax, net of federal tax benefit ........ 99,300 191,500
Non-deductible goodwill amortization ................ 250,900 189,400
Change in valuation allowance ....................... (174,900) (1,415,100)
Other ............................................... (60,800) 138,500
----------- -----------
Income tax provision ................................ $ 790,000 $ 189,700
=========== ===========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Realization of the future tax benefits related to the deferred
tax assets is dependent on many factors, including the Company's ability
to generate taxable income within the net operating loss carryforward
period. Management has considered these factors in reaching its
conclusion as to the valuation allowance for financial reporting
purposes. The income tax effect of temporary differences comprising the
deferred tax assets and liabilities as of December 31, 1999 and 1998 are
as follows:
28
<PAGE> 29
<TABLE>
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ........................ $ 249,300 $ 60,000
Deferred gain on sale of discontinued operations ........ -- 406,100
Accrued payroll related costs ........................... 62,100 242,400
Deferred costs .......................................... -- 19,400
Accrued professional fees ............................... 85,000 --
Other ................................................... 111,200 91,800
--------- ----------
507,600 819,700
Deferred tax liabilities:
Accelerated depreciation for tax ........................ (91,200) (57,500)
--------- ----------
Net deferred tax asset ........................................... 416,400 762,200
Valuation allowance .............................................. (40,000) (214,900)
--------- ----------
$ 376,400 $ 547,300
========= ==========
</TABLE>
During 1999 and 1998, the valuation allowance for net deferred tax
assets was reduced by $174,900 and $1,415,100 due to the use of
net operating loss carryforwards.
10. Commitments and Contingencies
Operating Leases
The Company leases office space under non-cancelable operating lease
agreements expiring in various years through 2006.
Commitments for operating leases:
<TABLE>
<S> <C>
2000................. $ 819,600
2001................. 786,200
2002................. 717,000
2003................. 649,300
2004................. 567,800
Thereafter........... 1,189,700
----------
$4,729,600
==========
</TABLE>
The Company incurred rent expense of approximately $680,200, $285,300
and $95,800 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Contingencies
The Company is a party to legal proceedings incidental to its business.
Certain claims, suits or complaints arising out of the normal course of
business have been filed or were pending against the Company. Although
it is not possible to predict the outcome of such litigation, based on
the facts known to the Company and after consultation with legal
counsel, management believes that such litigation will not have a
material adverse effect on its financial position or results of
operations.
11. Business Segment Information
The Company classifies its operations into four major business segments
within the entertainment services industry: corporate communications &
entertainment, entertainment marketing & special events, artist
management and event merchandising. The corporate communications &
entertainment division provides a broad range of business
communications, meeting production, entertainment and event production
services. The entertainment marketing & special events division creates
and executes innovative entertainment marketing and special event
initiatives including music tours, fairs and festivals, television
broadcasts and syndicated radio specials. The artist management division
manages the negotiation of recording, touring, merchandising and
performance contracts, and the development of long-term career
strategies for music industry artists. The event merchandising division
creates and executes high-impact merchandising programs for
entertainment and sporting events, institutional organizations and
celebrity clients.
Each of the business divisions is managed separately and offers
different products and services. The Company does not internally report
separate identifiable assets by division. The Company evaluates
performance of each division based on several factors, of which the
primary financial measure is EBITDA, including equity in earnings of
joint ventures. EBITDA is defined as earnings before interest, taxes and
depreciation and amortization. The accounting policies of the divisions
are the same as
29
<PAGE> 30
those described in the summary of significant accounting policies.
Summarized financial information concerning the Company's reportable
segments is shown in the following table (in thousands):
<TABLE>
<CAPTION>
Corporate Entertainment
Communications Marketing & Artist Event
& Entertainment Special Events Management Merchandising Corporate Total
--------------- -------------- ---------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1999:
Revenues $ 34,174 $ 1,568 $ 2,876 $ 9,545 $ -- $ 48,164
======== ======= ======= ======= ======= ========
EBITDA, including equity in
earnings of joint ventures $ 3,371 $ (48) $ 1,650 $ 301 $(1,763) $ 3,511
Depreciation and amortization (1,139) (63) (242) (255) (91) (1,790)
Net interest income 106 -- -- 4 156 266
-------- ------- ------- ------- ------- --------
Income from continuing
operations before
income taxes $ 2,338 $ (111) $1,408 $ 50 $(1,698) $ 1,987
======== ======= ======= ======= ======= ========
1998:
Revenues $ 23,462 $ 838 $ 1,721 $ 1,252 $ -- $ 27,273
======== ======= ======= ======= ======= ========
EBITDA, including equity in
earnings of joint ventures $ 2,596 $ (84) $ 1,069 $ (208) $(1,158) $ 2,215
Depreciation and amortization (429) (123) (94) (6) (27) (679)
Net interest income 77 -- -- 9 58 144
-------- ------- ------- ------- ------- --------
Income (loss) from continuing
operations before income taxes $ 2,244 $ (207) $ 975 $ (205) $(1,127) $ 1,680
======== ======= ======= ======= ======= ========
1997:
Revenues $ 6,263 $ -- $ 155 $ 19 $ -- $ 6,437
======== ======= ======= ======= ======= ========
EBITDA, including equity in
earnings of joint ventures $ 594 $ (90) $ 63 $ 9 $ (654) $ (78)
Depreciation and amortization (147) -- -- -- (2) (149)
Net interest income (expense) 13 -- -- -- (166) (153)
-------- ------- ------- ------- ------- --------
Income (loss) from continuing
operations before income taxes $ 460 $ (90) $ 63 $ 9 $ (822) $ (380)
======== ======= ======= ======= ======= ========
</TABLE>
12. Subsequent Events
2000 Acquisition
On January 3, 2000, the Company acquired 100% of the common stock of
Romeo Entertainment Group, Inc. ("Romeo"), for a maximum purchase price
of $6,750,000. The purchase price paid at closing included a cash
payment of $3,475,000, the issuance of 142,300 shares of common stock of
the Company valued at $750,000 and the issuance of two promissory notes
totaling $2,525,000. The principal amount of the promissory note for
$2,025,000 is subject to reduction based on the earnings of Romeo during
each of the years 2000 through 2004. The promissory notes accrue
interest at 8% and are payable in four equal annual installments of
principal plus accrued interest, commencing April 30, 2001.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item regarding the directors and executive
officers of the Company will be included in the Company's definitive Proxy
Statement to be filed pursuant to Regulation 14A in connection with the
Company's 2000 annual meeting of stockholders and is incorporated herein by
reference thereto.
30
<PAGE> 31
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item regarding the directors and
executive officers of the Company will be included in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A in connection with the
Company's 2000 annual meeting of stockholders and is incorporated herein by
reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item will be included in the Company's
definitive Proxy Statement to be filed pursuant to Regulation 14A in connection
with the Company's 2000 annual meeting of stockholders and is incorporated
herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item will be included in the Company's
definitive Proxy Statement to be filed pursuant to Regulation 14A in connection
with the Company's 2000 annual meeting of stockholders and is incorporated
herein by reference thereto.
31
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C> <C>
2.1(1) -- Merger Agreement between TBA Entertainment Corporation and Avalon Acquisition Corp., Inc. and Avalon
Entertainment Group, Inc.
2.2(2) -- Purchase Agreement between TBA Entertainment Corporation, Titley Spalding & Associates, LLC, Clarence
Spalding and Robert R. Titley dated June 18, 1998.
2.3(3) -- Purchase Agreement between TBA Entertainment Corporation and SFX Entertainment, Inc. and AWC
Acquisition Corp. dated May 13, 1998.
2.4(4) -- Stock Purchase Agreement between TBA Entertainment Corporation, Magnum Communications, Inc, William R.
Cox, Gary A. Larr, Charles A. Barry and Lon M. Hudman dated October 15, 1998.
2.5(5) -- Merger Agreement among TBA Entertainment Corporation, CPI Acquisition Corp., Inc., Richard S. Smith,
Richard W. Perry, Pamela J. Furmanek and Corporate Productions, Inc. dated August 11, 1998.
2.6(6) -- Stock Purchase Agreement among TBA Entertainment Corporation, Kenneth C. Koziol and Image Entertainment
Productions dated September 15, 1998.
2.7(7) Stock Purchase Agreement among TBA Entertainment Corporation, Karin Glass & Associates, Inc., Ink Up,
Inc., KGA, Inc., Karin Glass and Kenneth Glass dated March 18, 1999.
3.1(8) -- Certificate of Incorporation of the Company.
3.2(9) -- Bylaws of the Company.
4.1(10) -- Specimen Common Stock Certificate.
4.2(11) -- Article IX of the Certificate of Incorporation of the Company (included in Exhibit 3.1).
4.3(12) -- Certificate of Designation of Series A Convertible Preferred Stock of the Company.
4.4(13) -- Specimen Warrant Certificate.
10.1(14) -- Purchase and Sale Agreement between TBA Entertainment Corporation and Vail Summit Resorts, Inc. dated
July 10, 1998.
10.2(15) -- Employment Agreement dated as of January 1, 1994 between the Company and Thomas Jackson Weaver III.
10.3(16) -- Employment Agreement dated as of January 1, 1994 between the Company and Prab Nallamilli.
10.4(17) -- Stock Purchase Warrant dated February 24, 1994 between the Company and Yee, Desmond, Schroeder & Allen,
Inc.
10.5(18) -- Form of Indemnification Agreement between the Company and each of the directors and executive officers.
10.6(19) -- TBA Entertainment Corporation 1995 Stock Option Plan.
10.7(20) -- Form of Stock Option Agreement for options granted under the 1995 Stock Option Plan.
10.8(21) -- TBA Entertainment Corporation 1997 Stock Option Plan.
10.9(22) -- Form of Stock Option Agreement for options granted under the 1997 Stock Option Plan.
10.10(23) -- Representative's Warrant Agreement dated April 23, 1996 between the Company and H.J. Meyers & Co., Inc.
10.11(24) -- Warrant Agreement dated April 23, 1996 among the Company, H.J. Meyers & Co., Inc. and American Stock
Transfer & Trust Company.
10.12(25) -- Registration Rights Agreement between the Company, Robert E. Geddes, Greg M. Janese, Thomas
Miserendino, Brian K. Murphy and Marc W. Oswald.
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C> <C>
10.13(26) -- Consulting Agreement between Avalon Entertainment Group, Inc. and Robert E. Geddes.
10.14(27) -- Consulting Agreement between Avalon Entertainment Group Inc. and Thomas Miserendino.
10.15(28) -- Employment Agreement between Avalon Entertainment Group, Inc. and Marc W. Oswald.
10.16(29) -- Employment Agreement between Avalon Entertainment Group, Inc. and Greg M. Janese.
10.17(30) -- Placement Agent Warrant Agreement between the Company and Rauscher Pierce Refsnes, Inc.
10.18* -- Stock Purchase Agreement among TBA Entertainment Corporation, Robert Romeo and Romeo Entertainment
Group, Inc. dated November 26, 1999.
10.19* -- Stock Purchase Agreement among TBA Entertainment Corporation, Mike Atkins and Mike Atkins Management,
Inc. dated December 6, 1999.
21* -- Subsidiaries of the Company.
27* Financial Data Schedule.
</TABLE>
- ----------
* Filed herewith.
(1) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated on April 21, 1997.
(2) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated on June 18, 1998.
(3) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated May 13, 1998.
(4) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated October 18, 1998.
(5) Incorporated herein by reference to Exhibit 2.5 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(6) Incorporated herein by reference to Exhibit 2.6 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(7) Incorporated herein by reference to Exhibit 2.7 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(8) Incorporated herein by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(9) Incorporated herein by reference to Exhibit 3.2 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(10) Incorporated herein by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(11) Incorporated herein by reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(12) Incorporated herein by reference to Exhibit 4.3 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-97890) dated March
15, 1996.
(13) Incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended (June 30, 1998).
(14) Incorporated herein by reference to Exhibit 10.2 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
33
<PAGE> 34
(15) Incorporated herein by reference to Exhibit 10.3 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(16) Incorporated herein by reference to Exhibit 10.5 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(17) Incorporated herein by reference to Exhibit 10.6 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(18) Incorporated herein by reference to Exhibit 10.9 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(19) Incorporated herein by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(20) Incorporated herein by reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(21) Incorporated herein by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(22) Incorporated herein by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(23) Incorporated herein by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(24) Incorporated herein by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(25) Incorporated herein by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(26) Incorporated herein by reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(27) Incorporated herein by reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(28) Incorporated herein by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(29) Incorporated herein by reference to Exhibit 10.20 to the Company's Current
Report on Form 8-K dated June 20, 1997.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarterly period ended
December 31, 1999.
34
<PAGE> 35
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized in the city of Hickory Valley, Tennessee, on the 30th
day of March, 2000.
TBA ENTERTAINMENT CORPORATION
By: /s/ Thomas Jackson Weaver III
------------------------------------------
Thomas Jackson Weaver III
Chairman of the Board and
Chief Executive Officer
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas Jackson Weaver III Chairman of the Board, March 30, 2000
- --------------------------------------------- Chief Executive Officer and President
Thomas Jackson Weaver III (Principal Executive and Financial Officer)
/s/ Joseph C. Galante
- ---------------------------------------------
Joseph C. Galante Director March 30, 2000
/s/ Frank Bumstead
- ---------------------------------------------
Frank Bumstead Director March 30, 2000
/s/ Charles Flood
- ---------------------------------------------
Charles Flood Director March 30, 2000
/s/ Prab Nallamilli
- ---------------------------------------------
Prab Nallamilli Director March 30, 2000
/s/ Louis J. Risi, Jr.
- ---------------------------------------------
Louis J. Risi, Jr. Director March 30, 2000
/s/ Steven L. Risi
- ---------------------------------------------
Steven L. Risi Director March 30, 2000
/s/ Frank A. McKinnie Weaver, Sr.
- ---------------------------------------------
Frank A. McKinnie Weaver, Sr. Director March 30, 2000
/s/ Kyle Young
- ---------------------------------------------
Kyle Young Director March 30, 2000
/s/ Bryan J. Cusworth
- ---------------------------------------------
Bryan J. Cusworth Chief Financial Officer March 30, 2000
(Principal Accounting Officer)
</TABLE>
35
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.18 Stock Purchase Agreement among TBA Entertainment Corporation, Robert Romeo and Romeo Entertainment Group, Inc.
dated November 26, 1999
10.19 Stock Purchase Agreement among TBA Entertainment Corporation, Mike Atkins and Mike Atkins Management, Inc.
dated December 6, 1999
21 Subsidiaries of the Company
27 Financial Data Schedule
</TABLE>
36
<PAGE> 1
EXHIBIT 10.18
STOCK PURCHASE AGREEMENT
among
TBA ENTERTAINMENT CORPORATION,
ROBERT ROMEO
and
ROMEO ENTERTAINMENT GROUP, INC.
November 26, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 - Purchase And Sale of Shares......................................................1
1.1 Purchase and Sale.............................................................1
1.2 Purchase Price................................................................1
1.3 Registration Rights...........................................................2
1.4 Closing.......................................................................2
1.5 Further Action................................................................3
ARTICLE 2 - Representations And Warranties of TBA............................................3
2.1 Organization and Qualification................................................3
2.2 Authority Relative to this Agreement..........................................3
2.3 TBA Common Stock and TBA SEC Documents........................................4
2.4 Certain Corporate Matters.....................................................4
2.5 Broker's Fees.................................................................5
2.6 Disclosure....................................................................5
2.7 No Actions Pending............................................................5
2.8 Investment Intent.............................................................5
2.9 Information...................................................................5
2.10 Sophistication of TBA.........................................................5
2.11 Accredited Investor...........................................................5
2.12 Absence of Certain Changes....................................................6
2.13 No Reliance...................................................................6
2.14 No Knowledge of Breach........................................................6
ARTICLE 3 - Representations And Warranties of
Shareholder and Romeo Entertainment..........................................................6
3.1 Organization, Qualification and Corporate Power...............................6
3.2 Capitalization................................................................7
3.3 Authorization of Transaction..................................................8
3.4 Subsidiaries..................................................................8
3.5 Financial Statements..........................................................8
3.6 Events Subsequent to Financial Statements.....................................9
3.7 Undisclosed Liabilities......................................................10
3.8 Tax Returns and Audits.......................................................11
3.9 Books and Records............................................................12
3.10 Real Property................................................................12
3.11 Tangible Property............................................................12
3.12 Intellectual Property........................................................12
3.13 Contracts....................................................................14
3.14 Suppliers and Customers......................................................15
3.15 Accounts Payable; Accounts Receivable........................................15
3.16 Powers of Attorney...........................................................15
3.17 Condition of Property........................................................16
3.18 Insurance....................................................................16
3.19 Litigation...................................................................16
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.20 Employees....................................................................16
3.21 Employee Benefit Plans.......................................................17
3.22 Guarantees...................................................................17
3.23 Legal Compliance.............................................................18
3.24 Certain Business Relationships...............................................18
3.25 Broker's Fees................................................................18
3.26 Environment, Health and Safety...............................................18
3.27 Disclosure...................................................................18
3.28 Limitations of Representations...............................................19
ARTICLE 4 - Additional Representations and Warranties of Shareholder........................19
4.1 Representations Regarding Shares of Romeo Entertainment......................19
4.2 Investment Representations...................................................20
4.3 Authorization................................................................21
ARTICLE 5 - Conduct of Business Pending The Closing.........................................21
5.1 Conduct of Business by Romeo Entertainment Pending the Closing...............21
5.2 No Other Bids for Romeo Entertainment........................................24
5.3 Lines of Business and Capital Expenditures...................................24
5.4 Accounting Methods...........................................................25
5.5 Other Actions................................................................25
ARTICLE 6 - Additional Agreements...........................................................25
6.1 Expenses.....................................................................25
6.2 Notification of Certain Matters..............................................25
6.3 Access to Information........................................................25
6.4 Taking of Necessary Action...................................................25
6.5 Notice of Changes............................................................26
6.6 Press Releases...............................................................26
6.7 Employee Matters.............................................................26
6.8 Tax Matters..................................................................26
6.9 Real Estate Lease............................................................27
6.10 Adjustment to Purchase Price.................................................27
6.11 Tax Indemnification..........................................................27
6.12 Name.........................................................................27
6.13 No Deficit Working Capital...................................................28
6.14 Referral Commissions.........................................................28
ARTICLE 7 - Conditions to Closing...........................................................28
7.1 Conditions to Obligations of Each Party to Effect the Closing................28
7.2 Additional Conditions to TBA's Obligations...................................28
</TABLE>
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TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
7.3 Additional Conditions to the Obligations of Romeo
Entertainment and Shareholder................................................30
ARTICLE 8 - Termination, Amendment and Waiver...............................................32
8.1 Termination..................................................................32
8.2 Amendment....................................................................32
8.3 Waiver.......................................................................32
8.4 Effect of Termination........................................................32
ARTICLE 9 - Indemnification.................................................................33
9.1 By TBA, Romeo Entertainment and Shareholder..................................33
9.2 Claims for Indemnification...................................................33
9.3 Defense by Indemnifying Party................................................34
9.4 Payment of Indemnification Obligation........................................34
9.5 Limitations..................................................................34
ARTICLE 10 - General Provisions.............................................................34
10.1 Survival of Representations and Warranties...................................34
10.2 Effect of Due Diligence......................................................35
10.3 Specific Performance.........................................................35
10.4 Notices......................................................................35
10.5 Interpretation...............................................................36
10.6 Severability.................................................................36
10.7 Miscellaneous................................................................37
10.8 Material Adverse Breach......................................................37
10.9 Limitation of Liability......................................................37
</TABLE>
SCHEDULE 1 Disclosure Schedule
SCHEDULE 2 Mementoes of Shareholder
<TABLE>
<CAPTION>
ANNEX I List of TBA SEC Documents
<S> <C>
EXHIBIT A Form of Adjustable Promissory Note
EXHIBIT B Form of Non-Adjustable Note
EXHIBIT C Form of Pledge Agreement
EXHIBIT D Form of Registration Rights Agreement
EXHIBIT E Form of Lease
EXHIBIT F Form of Employment Agreement
</TABLE>
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<PAGE> 5
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of November 26, 1999 (this
"Agreement"), is by and among TBA Entertainment Corporation, a Delaware
corporation ("TBA"), Robert Romeo, an individual and sole shareholder of Romeo
Entertainment (as defined below) ("Romeo" or "Shareholder"), and Romeo
Entertainment Group, Inc., a Nebraska corporation ("Romeo Entertainment").
RECITALS
WHEREAS, Shareholder owns all of the issued and outstanding common stock
(the "Shares") of Romeo Entertainment and Romeo Entertainment owns all of the
issued and outstanding common stock of Romeo Agency Inc., a Colorado corporation
("Romeo Agency");
WHEREAS, TBA, Romeo Entertainment and Shareholder each desire for TBA to
acquire (the "Acquisition") all of the Shares pursuant to the terms and
conditions of this Agreement, as a result of which Romeo Entertainment will
become a wholly owned subsidiary of TBA;
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Shareholder agrees to sell, assign, transfer and deliver to TBA at
the Closing (as hereinafter defined), and TBA agrees to purchase from
Shareholder at the Closing, the Shares, free and clear of any and all charges,
claims, community property interests, equitable interests, mortgages, liens,
security interests, pledges, charges, rights of assignment, rights of purchase,
rights of first offer or refusal, options, warrants or encumbrances of any
nature (collectively, "Liens").
1.2 Purchase Price. The aggregate purchase price (the "Purchase Price")
for the Shares shall be equal to Six Million Seven Hundred Fifty Thousand
Dollars ($6,750,000), subject to possible adjustment as provided in the
Adjustable Note (hereinafter defined), and shall be paid or delivered to
Shareholder at the Closing as follows:
(a) TBA shall issue and deliver to Shareholder a certificate
registered in Shareholder's name representing the number of fully-paid
and nonassessable shares of TBA common stock, $.001 par value per share
("TBA Common Stock"), equal to Seven Hundred Fifty Thousand Dollars
($750,000) divided by the Average Price (as defined below) (the "Common
Stock Portion");
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(b) TBA shall deliver to Shareholder by wire transfer to one or
more accounts designated in writing by Shareholder to TBA prior to the
Closing cash in an amount equal to Three Million Four Hundred
Seventy-Five Thousand Dollars ($3,475,000) (the "Cash Portion"); and
(c) TBA shall deliver to Shareholder (i) an adjustable
promissory note (the "Adjustable Note") in the original principal amount
of Two Million Twenty-Five Thousand Dollars ($2,025,000) (the
"Adjustable Note Portion"), subject to possible adjustment as set forth
in the Adjustable Note, substantially in the form of Exhibit A attached
hereto (the "Form of Adjustable Note") and (ii) a non-adjustable
promissory note (the "Non-Adjustable Note") in the original principal
amount of Five Hundred Thousand Dollars ($500,000) (the "Non-Adjustable
Note Portion"), substantially in the form of Exhibit B attached hereto
(the "Form of Non-Adjustable Note"). Each of the Adjustable Note and the
Non-Adjustable Note shall be secured by a pledge of the Shares pursuant
to the terms of a Stock Pledge Agreement, substantially in the form of
Exhibit C attached hereto (the "Pledge Agreement"). Except as set forth
in Section 6.10 hereof, any adjustment to the Purchase Price hereunder
shall be accomplished only through adjustment to payments under the
Adjustable Note as set forth in the Adjustable Note, and none of the
Common Stock Portion, the Cash Portion or the Non-Adjustable Note
Portion of the Purchase Price shall be adjusted subsequent to Closing.
(d) The term "Average Price" shall mean the average of the
closing sale prices of TBA Common Stock reported by The Nasdaq Stock
Market for each of the five (5) consecutive trading days ending five (5)
trading days preceding the Closing Date.
(e) No fraction of a share of TBA Common Stock will be issued to
Shareholder but in lieu thereof Shareholder will be paid an amount in
cash equal to the product of (A) the number of fractional shares to
which Shareholder is otherwise entitled and (B) the Average Price. No
interest shall be paid on such amount.
1.3 Registration Rights. Shareholder and TBA shall execute a
Registration Rights Agreement (herein so called) in the form attached hereto as
Exhibit D with respect to the shares of TBA Common Stock issued to Shareholder
pursuant to Section 1.2(a) and Shareholder shall have the registration and other
rights provided in such Registration Rights Agreement, which Registration Rights
Agreement is hereby incorporated herein by this reference as if set forth in
full in this Agreement. The parties hereto stipulate and agree that the
execution and delivery of the Registration Rights Agreement is intended to
provide Shareholder with flexibility in liquidating his investment in TBA Common
Stock and does not evidence any present intention to dispose of such investment.
1.4 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 January
3, 2000, or as soon as reasonably practicable thereafter as the conditions set
forth in Article 7 have been satisfied or waived (the "Closing Date"). At the
Closing:
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(a) TBA will (i) pay to Shareholder the Cash Portion by wire
transfer of immediately available funds, (ii) issue and deliver to
Shareholder the Common Stock Portion, (iii) execute and deliver to
Shareholder the Adjustable Note and the Non-Adjustable Note, and (iv)
execute and deliver to Shareholder such other documents and instruments
required to be executed and delivered by TBA under the terms of this
Agreement; and
(b) Shareholder will deliver to TBA (i) certificates
representing the Shares, duly endorsed, and (ii) such other documents
and instruments required to be delivered by Shareholder under the terms
of this Agreement or reasonably requested by TBA.
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 with full right, title and possession and all rights, privileges and
immunities with respect to any or all of the Shares, Shareholder shall take all
such action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TBA
TBA hereby represents and warrants to Romeo Entertainment and
Shareholder as follows:
2.1 Organization and Qualification. TBA has been duly incorporated and
is validly existing as a corporation and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now conducted.
2.2 Authority Relative to this Agreement. TBA has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by TBA and the consummation by TBA of the transactions contemplated hereby have
been duly authorized by the Board of Directors of TBA, and no other corporate
proceedings on the part of TBA are necessary to authorize the execution and
delivery of this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by TBA and constitutes the valid
and binding obligation of TBA, 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, the performance by TBA of its obligations hereunder or the consummation of
the transactions contemplated hereby by TBA 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 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 is a party or by which TBA or any of
its assets or properties is bound or encumbered, except those that have already
been given, obtained or filed. Other than
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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, filings made with the National Association of Securities Dealers, Inc. to
list the shares of TBA Common Stock to 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 governmental or
regulatory authority is necessary on the part of TBA for the consummation by TBA
of the transactions contemplated by this Agreement.
2.3 TBA Common Stock and TBA SEC Documents. The TBA Common Stock is
listed for trading on the National Market System of The Nasdaq Stock Market. The
shares of TBA Common Stock to be issued by TBA to Shareholder at the Closing
have been duly authorized for such issuance and, when issued and delivered by
TBA in accordance with the provisions of this Agreement, shall be validly
issued, fully paid and nonassessable. The issuance of such shares under this
Agreement is not subject to any preemptive or similar rights. TBA has furnished
Romeo Entertainment and Shareholder with a true and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
TBA with the Securities and Exchange Commission ("SEC") since January 1, 1999
(the "TBA SEC Documents"), which are all the documents (other than preliminary
materials) that TBA was required to file with the SEC since such date and all of
which documents are listed on Annex I attached hereto. As of its date, each TBA
SEC Document was in compliance, in all material respects, with the requirements
of its form. None of the TBA SEC documents, including, without limitation, any
financial statements or schedules included therein, at the time filed, contained
any untrue statements of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. The financial statements of TBA included in the TBA SEC Documents
complied, at the time of filing with the SEC, as to form, in all material
respects, with applicable accounting requirements and published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles, applied on a consistent basis during
the periods involved, and fairly presented, in all material respects (subject,
in the case of unaudited statements, to normal, recurring year-end audit
adjustments) the financial position of TBA as and at the dates thereof and the
results of its operations and cash flows for the periods then ended.
2.4 Certain Corporate Matters. TBA 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 has delivered to Romeo Entertainment and Shareholder true, accurate and
complete copies of its 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 board of directors of
TBA are accurate and complete in all material respects. All material corporate
actions taken by TBA since its date of incorporation have been duly
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authorized and/or subsequently ratified, as necessary. TBA is not in default
under or in violation of any material provision of its charter or bylaws.
2.5 Broker's Fees. Neither TBA nor anyone on its behalf has any
liability to any broker, finder, investment banker or similar 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 similar agent in
connection with the Acquisition or any similar transaction.
2.6 Disclosure. The representations and warranties and statements of
fact made by TBA 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 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 such representations and warranties and statements
and information contained herein or therein not misleading.
2.7 No Actions Pending. There are no actions, claims, complaints,
grievances, suits, governmental inquiries, governmental investigations or
proceedings pending or, to the knowledge of TBA, threatened, and to the
knowledge of TBA, there are no investigations pending or threatened, which in
any manner challenge or seek to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement, by or before any court, arbitrator
or administrative or governmental body.
2.8 Investment Intent. TBA is acquiring the Shares for its own account
for the purpose of investment and not with a view to, or for sale in connection
with, any distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). TBA will not sell or otherwise dispose of any
Shares in a manner which would require registration under the Securities Act or
any applicable blue sky law unless such registrations are effected.
2.9 Information. TBA has had an opportunity to ask questions of, and
receive answers from, Shareholder concerning the Shares, and the operations,
financial condition and prospects of Romeo Entertainment.
2.10 Sophistication of TBA. TBA has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Shares.
2.11 Accredited Investor. TBA is an "accredited investor" as that term
is defined in regulations promulgated by the Securities and Exchange Commission.
2.12 Absence of Certain Changes. Since January 1, 1998, there has not
been any material adverse change in the business, assets, results of operations,
condition (financial or otherwise) or prospects of TBA and its subsidiaries
considered as a whole.
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<PAGE> 10
2.13 No Reliance. In determining to enter into this Agreement and
consummate the transaction contemplated herein, TBA has not relied on any
information or materials other than (a) the representations and warranties of
Shareholder and Romeo Entertainment set forth in Article 3 of this Agreement,
(b) the additional representations and warranties of Shareholder set forth in
Article 4 of this Agreement, (c) the information set forth in the Disclosure
Schedule (hereinafter defined), and (d) the responses of Shareholder and Romeo
Entertainment to the due diligence check list delivered by TBA to counsel for
Romeo Entertainment by letter dated September 1, 1999 (the "Due Diligence
Checklist").
2.14 No Knowledge of Breach. Neither TBA nor any of its employees,
agents or affiliates are aware of any breach by Shareholder of any of the
representations and warranties of Shareholder as set forth in Articles 3 and 4
of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDER AND ROMEO ENTERTAINMENT
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"), Shareholder and Romeo Entertainment,
jointly and severally, hereby represent and warrant to TBA as follows:
3.1 Organization, Qualification and Corporate Power. Each of Romeo
Entertainment and Romeo Agency is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its respective
incorporation. (Romeo Entertainment and Romeo Agency shall hereinafter be
collectively referred to as "Romeo Entertainment" and the representations and
warranties contained in this Article 3 shall apply and be read separately as to
each of Romeo Entertainment and Romeo Agency unless the context otherwise
requires.) Each of Romeo Entertainment and Romeo Agency is duly qualified to do
business as a foreign corporation and is in good standing in the jurisdictions
specified in Section 3.1 of the Disclosure Schedule, which are the jurisdictions
in which the ownership of its properties, the employment of its personnel or the
conduct of its business requires that it be so qualified or where a failure to
be so qualified or licensed would have a material adverse effect on its
financial condition, results of operation or business. Romeo Entertainment has
full corporate power and authority and all authorizations, licenses and permits
necessary to carry on the business in which it is engaged or in which it
proposes presently to engage and to own and use the properties owned and used by
it. Romeo Entertainment has delivered to TBA true, accurate and complete copies
of its charter and bylaws which reflect all amendments made thereto at any time
prior to the date of this Agreement. The minute books containing the records of
meetings of the shareholders and Board of Directors of Romeo Entertainment, the
stock certificate books and the stock record books of Romeo Entertainment are
complete and correct and have been delivered to TBA. The stock record books of
Romeo Entertainment and the shareholder lists of Romeo Entertainment which Romeo
Entertainment has
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previously furnished to TBA are complete and correct and accurately reflect the
record and beneficial ownership of all the outstanding shares of Romeo
Entertainment's capital stock and all other outstanding securities issued by
Romeo Entertainment. To the knowledge of Shareholder and Romeo Entertainment,
all material corporate actions taken by Romeo Entertainment since incorporation
have been duly authorized and/or subsequently ratified as necessary. To the
knowledge of Shareholder and Romeo Entertainment, Romeo Entertainment is not in
default under or in violation of any provision of its charter or bylaws. Romeo
Entertainment 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.
3.2 Capitalization. Romeo Entertainment's entire authorized capital
stock consists of 1,000 shares of common stock, $10.00 par value per share
("Romeo Entertainment Common Stock"), of which 35 shares are issued and
outstanding and 35 shares will be issued and outstanding immediately prior to
the Closing Date. Romeo Agency's entire authorized capital stock consists of
30,000 shares of common stock, no par value per share, of which 20,000 shares
are issued and outstanding and 20,000 shares will be issued and outstanding
immediately prior to the Closing Date. Romeo Entertainment owns all of the
issued and outstanding capital stock of Romeo Agency. All of the issued and
outstanding shares of Romeo Entertainment Common Stock have been and, as of the
Closing Date, will be duly authorized and are and, as of the Closing Date, will
be validly issued, fully paid and nonassessable and have not been and, as of the
Closing Date, will not be issued in violation of any pre-emptive rights. There
are no outstanding or authorized options, rights, warrants, calls, convertible
securities, rights to subscribe, conversion rights or other agreements or
commitments to which Romeo Entertainment is a party or which are binding upon
Romeo Entertainment providing for the issuance or transfer by Romeo
Entertainment of additional shares of its capital stock and Romeo Entertainment
has not reserved any shares of its capital stock for issuance, nor are there any
outstanding stock option rights, contracts, arrangements or commitments based
upon the book value, income or other attribute of Romeo Entertainment. There are
no voting trusts or any other agreements or understandings with respect to the
voting of Romeo Entertainment's capital stock. Upon consummation of the
Acquisition, TBA will own the entire equity interest (subject however to
Shareholder's interest in such stock pursuant to the Pledge Agreement) in Romeo
Entertainment and Romeo Entertainment will not have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock, nor
have outstanding any rights, options, agreements or arrangements to subscribe
for or to purchase its capital stock or any stock or securities convertible into
or exchangeable for its capital stock. Shareholder is the only holder of capital
stock of Romeo Entertainment. To the knowledge of Shareholder and Romeo
Entertainment, all capital stock, options, warrants and other securities issued
by Romeo Entertainment were issued in compliance, in all respects, with all
applicable federal and state securities laws.
3.3 Authorization of Transaction. Romeo Entertainment has the requisite
corporate power and authority to enter into this Agreement and perform its
obligations hereunder. The execution, delivery and performance of this Agreement
and the transactions contemplated by this Agreement have been duly authorized by
the Board of Directors of Romeo Entertainment. No other corporate approval on
the part of Romeo Entertainment (other than shareholder approval) will be
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necessary to authorize the execution, delivery and performance of this Agreement
and the trans actions contemplated hereby. This Agreement has been duly executed
and delivered by Romeo Entertainment and, upon approval hereof by the
shareholders of Romeo Entertainment, will constitute the valid and binding
obligation of Romeo Entertainment, 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 Romeo Entertainment, the performance by Romeo Entertainment of its
obligations hereunder or the consummation of the transactions contemplated
hereby by Romeo Entertainment 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 Romeo Entertainment 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 Romeo Entertainment is a party or by
which Romeo Entertainment 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 Romeo Entertainment of the transactions
contemplated by this Agreement.
3.4 Subsidiaries. Other than the ownership by Romeo Entertainment of all
of the outstanding capital stock of Romeo Agency, Romeo Entertainment does not
own and is not 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. Romeo Entertainment has delivered to TBA (a)
unaudited balance sheets as of December 31, 1998, 1997 and 1996, (b) unaudited
statements of operations and statements of cash flows for each of the years in
the three-year period ended December 31, 1998, (c) unaudited balance sheets as
of September 30, 1999, and (d) unaudited statements of operations and statements
of cash flows for the nine (9) months ended September 30, 1999, for Romeo
Entertainment (collectively, the "Financial Statements"). The Financial
Statements have been prepared on the cash basis of accounting, which basis of
accounting has been applied consistently for all periods and present fairly the
financial condition of Romeo Entertainment as of such dates and the results of
its operations and cash flows for such periods. Since December 31, 1995, there
have been no changes in Romeo Entertainment's method of accounting for tax
purposes.
3.6 Events Subsequent to Financial Statements. Except as disclosed in
the Financial Statements, or as disclosed on Schedule 1 herein or permitted in
this Agreement, since September 30, 1999, there has not been:
(a) any materially adverse change in the financial condition,
results of operations or business of Romeo Entertainment;
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(b) other than the distribution by Romeo Entertainment to
Shareholder of (i) the real property and improvements thereon which
constitute the principal office of Romeo Entertainment and (ii) the
personal mementoes of Shareholder listed on Schedule 2 hereof, any sale,
lease, transfer, license or assignment of any material assets, tangible
or intangible, of Romeo Entertainment, other than in the ordinary course
of business;
(c) any damage, destruction or property loss, whether or not
covered by insurance, affecting materially adversely the properties or
business of Romeo Entertainment;
(d) any declaration or setting aside or payment of any dividend
or distribution with respect to the shares of capital stock of Romeo
Entertainment or any redemption, purchase or other acquisition of any
such shares;
(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 Romeo Entertainment (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 Romeo Entertainment other than (i) those incurred in the
ordinary course of business, (ii) those which do not exceed $25,000 in
the aggregate, and (iii) those incurred in the course of negotiating,
documenting and consummating the transactions contemplated by this
Agreement;
(g) any cancellation or compromise by Romeo Entertainment 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 Romeo Entertainment of any right of
any material value;
(i) except licenses of software made in the ordinary course of
business, consistently with past practice, any sale, assignment,
transfer or grant by Romeo Entertainment 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 Romeo Entertainment not terminable on 30 days or less notice
without cost or liability (including, without limitation, any payment of
or promise to pay any bonus or special compensation) with employees or
any increase in compensation or benefits to officers or directors of
Romeo Entertainment, other than in the ordinary course of business;
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(k) any change made or authorized in the charter or bylaws of
Romeo Entertainment;
(l) any issuance, sale or other disposition by Romeo
Entertainment of any shares of its capital stock or other equity
securities, or any grant of any options, warrants or other rights to
purchase or obtain (including upon conversion or exercise) shares of its
capital stock or other equity securities;
(m) any loan to or other transaction with any officer, director
or shareholder of Romeo Entertainment giving rise to any claim or right
of Romeo Entertainment against any such person or of such person against
Romeo Entertainment;
(n) any payment to or other transaction with any officer,
director or shareholder of Romeo Entertainment 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 Romeo Entertainment is a party or by which it is
bound so as to affect, materially and adversely, the properties or
business of Romeo Entertainment; or
(p) any other material transaction or commitment entered into
other than in the ordinary course of business by Romeo Entertainment.
3.7 Undisclosed Liabilities. Romeo Entertainment 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,
incurred in the normal and ordinary course of business of Romeo Entertainment
since January 1, 1999 (provided that, liabilities or obligations incurred in
connection with the termination of employees shall not be considered liabilities
incurred in the ordinary course of business), or incurred in the course of
negotiating, documenting and consummating the transactions contemplated by this
Agreement. Romeo Entertainment is not indebted, directly or indirectly, to any
person who is an officer, director or shareholder of Romeo Entertainment or any
affiliate of any such person in any amount whatsoever other than for salaries
for services rendered or reimbursable business expenses, and no such officer,
director, shareholder or affiliate is indebted to Romeo Entertainment.
3.8 Tax Returns and Audits. The taxable year of Romeo Entertainment ends
December 31. Romeo Entertainment 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 Romeo
Entertainment is not required to pay any other taxes for
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such periods except as shown in such Tax Returns. The income tax returns filed
by Romeo Entertainment have not been, and are not being, to the knowledge of
Shareholder, 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 Romeo
Entertainment 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 Romeo Entertainment.
There are no tax liens (other than liens for taxes which are not yet due and
payable) on any of the property of Romeo Entertainment, nor are there any
pending or threatened examinations or tax claims asserted. Romeo Entertainment
has not granted any extensions of limita tion periods applicable to tax claims
or filed a consent under Section 341(f) of the Code relating to collapsible
corporations. Except in jurisdictions in which Romeo Entertainment voluntarily
files tax returns, no claim has ever been made by a taxing authority that Romeo
Entertainment 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 Romeo Entertainment since January 1, 1995, have been delivered to TBA, and
the same are listed in Section 3.8 of the Disclosure Schedule. Romeo
Entertainment is not a party to, or bound by, any tax indemnity, tax sharing or
tax allocation agreement. Romeo Entertainment 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 Code. Romeo Entertainment
has never been a member of an "affiliated group," as defined in Section 1504(a)
of 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. Romeo Entertainment is not a United
States real property holding corporation as defined in Section 897 of the Code.
No shareholder of Romeo Entertainment is a foreign person within the meaning of
Section 1445(b)(2) of the Code. Romeo Entertainment has not made any tax
elections under any section of the Code, including, without limitation under any
of Sections 108, 168, 338, 441, 463, 472, 1017, 1033 or 4977 of the Code (or any
predecessor thereof). None of the assets and properties of Romeo Entertainment
is an asset or property that TBA or any of its affiliates is or will be required
to treat as being (i) owned by any other Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954 as amended, and in effect
immediately before the enactment of the Tax Reform Act of 1986, or (ii)
tax-exempt use property within the meaning of Section 168(h)(1) of the Code. No
closing agreement pursuant to Section 7121 of the Code (or any predecessor
provision) or any similar provision of any state, local, or foreign law has been
entered into by or with respect to Romeo Entertainment or any assets thereof.
Romeo Entertainment has not agreed to or is not 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 of Romeo Entertainment, Romeo
Entertainment has no applications pending with any taxing authority requesting
permission for any changes in any accounting method of Romeo Entertainment, and
the I.R.S. has not proposed any such adjustment or change in accounting method
therefor. Romeo Entertainment has not been or is not 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. Romeo Entertainment has duly
and timely
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withheld from salaries, wages and other compensation and paid over to the
appropriate taxing authorities all amounts required to be so withheld and paid
over for all periods under all applicable laws.
3.9 Books and Records. The general ledgers and books of account of Romeo
Entertainment, all federal, state and local income, franchise, property and
other tax returns filed by Romeo Entertainment, with respect to its assets, and
all other books and records of Romeo Entertainment 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 Romeo Entertainment. With respect to each lease so set forth:
(a) the lease has been validly executed and delivered by Romeo Entertainment
and, to the knowledge of Romeo Entertainment, by the other party or parties
thereto and is in full force and effect; (b) neither Romeo Entertainment nor, to
the knowledge of Romeo Entertainment, any other party to the lease is in
material breach or default, and no event has occurred on the part of Romeo
Entertainment or, to the knowledge of Romeo Entertainment, 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) Romeo Entertainment has not repudiated
and, to the knowledge of Romeo Entertainment, 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.
3.11 Tangible Property. Romeo Entertainment 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 material encumbrances, loans, security interests,
mortgages or pledges.
3.12 Intellectual Property.
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list
of intellectual property owned by Romeo Entertainment including all
patents, patent applications, trade marks, 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 Romeo Entertainment 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) Romeo Entertainment is the sole and exclusive owner
and has the sole and exclusive right to use the item in the
conduct of its business;
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(ii) no proceedings have been instituted, are pending or
are threatened which challenge the validity, enforceability, use
or ownership thereof;
(iii) to the knowledge of Shareholder and Romeo
Entertainment, the item (A) does not infringe upon or otherwise
violate the rights of others, (B) 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 Romeo Entertainment;
(v) Romeo Entertainment has not received any charge of
interference or infringement with respect to the item;
(vi) except in the ordinary course of business, Romeo
Entertainment 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 material adverse effect on the right, title and
interest of Romeo Entertainment in the item;
(viii) Romeo Entertainment 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
(ix) Romeo Entertainment has supplied TBA with true and
complete copies of all written documentation evidencing its
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 Romeo
Entertainment practices or uses that are material to Romeo
Entertainment. With respect to each such item of intellectual property:
(i) any license agreement covering the item is a valid
and binding agreement, has been validly executed and delivered
by Romeo Entertainment and, to the knowledge of Romeo
Entertainment, by the other parties thereto and is in full force
and effect;
(ii) no event has occurred which constitutes a breach of
such license agreement, Romeo Entertainment has not repudiated
and, to the knowledge of
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Romeo Entertainment, 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) Romeo Entertainment has supplied TBA with a true
and complete copy of the license agreement;
(iv) the transactions contemplated by this Agreement
will have no material adverse effect on the ability of Romeo
Entertainment to continue using or practicing each such item;
and
(v) Romeo Entertainment is not aware of any claim that
the exercise of the rights granted to Romeo Entertainment with
respect to such item infringes upon the intellectual property
rights of any third party.
(c) To the knowledge of Shareholder and Romeo Entertainment,
Romeo Entertainment has not infringed, misappropriated or otherwise
violated any intellectual property rights of any third party. Romeo
Entertainment is 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 Romeo Entertainment
as now conducted or as presently proposed to be conducted.
(d) Romeo Entertainment has taken commercially reasonable
security measures to protect the security, confidentiality and value of
all the material intellectual property owned by it.
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 Romeo Entertainment is a party:
(a) any contract for the lease of personal property from or to
third parties providing for lease payments in excess of $10,000.00 per
annum;
(b) any contract for the purchase or sale of supplies, products
manufactured by Romeo Entertainment or other personal property or for
the furnishing or receipt of services which contract calls for
performance over a period of more than one year or which involves more
than the sum of $10,000.00;
(c) any joint venture or partnership agreement;
(d) any agreement or instrument under which Romeo Entertainment
is or may become indebted for borrowed money;
(e) any noncompetition agreement;
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<PAGE> 19
(f) any other contract in which the consequences of a default or
termination would have a materially adverse effect on the financial
condition of Romeo Entertainment or on the prospects or the conduct of
the business of Romeo Entertainment;
(g) any standard form of license agreement; and
(h) any other contract or arrangement not entered into in the
ordinary course of business.
To the knowledge of Shareholder and Romeo Entertainment, all contracts and
arrangements listed in Section 3.13 of the Disclosure Schedule are valid and
binding agreements of Romeo Entertainment. Neither Romeo Entertainment nor, to
the knowledge of Shareholder, any other party is in breach or default, and no
event has occurred on the part of Romeo Entertainment or, to the knowledge of
Shareholder, 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. Romeo Entertainment has previously made available to TBA all of
the material service agreements of Romeo Entertainment with its customers. Romeo
Entertainment 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 the ten (10) largest events (by dollar value of
contracts) under contract with Romeo Entertainment during the past twelve (12)
months and the ten (10) largest suppliers of talent (by dollar value of
contracts) utilized by Romeo Entertainment during the past twelve (12) months.
No representative of any such event or supplier of talent has notified Romeo
Entertainment that it will substantially decrease or cease doing business with
Romeo Entertainment.
3.15 Accounts Payable; Accounts Receivable. Romeo Entertainment shall
provide a schedule of all accounts payable to and accounts receivable of Romeo
Entertainment and such accounts receivable shall be subject to no setoffs or
counterclaims.
3.16 Powers of Attorney. There are no outstanding material powers of
attorney or similar instruments executed by Romeo Entertainment.
3.17 Condition of Property. Each building, fixture, machine and piece of
equipment (having a net book value of $10,000.00 or more) owned or used by Romeo
Entertainment is in good operating condition and repair, subject to normal wear
and tear, and is, to the knowledge of Shareholder and Romeo Entertainment, in
compliance with all zoning, building and fire codes in all material respects.
Romeo Entertainment owns or leases under valid lease all buildings (prior to
Closing, it is the intention of Romeo Entertainment to transfer ownership in the
building it currently occupies to Shareholder herein, and the transfer of such
building shall not be part of this transaction),
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machinery, equipment and other tangible assets used in the conduct of its
business as presently conducted.
3.18 Insurance. Romeo Entertainment 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 by
Romeo Entertainment under any of the Insurance Policies.
3.19 Litigation. Section 3.19 of the Disclosure Schedule sets forth any
instances in which (a) Romeo Entertainment 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 Romeo Entertainment; or (b) Romeo Entertainment is a
plaintiff in any action, domestic or foreign, judicial or administrative, or any
such action exists in which a counterclaim against Romeo Entertainment is
pending or might be brought. None of the actions, suits, proceedings or
investigations set forth in Section 3.19 of the Disclosure Schedule could result
in any adverse change in the condition, financial or otherwise, of Romeo
Entertainment, 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 Romeo Entertainment or
to which Romeo Entertainment is a party and there is no reason to believe that
any such action, suit, proceeding or investigation may be brought or threatened
against Romeo Entertainment.
3.20 Employees. Romeo Entertainment has listed in Section 3.20 of the
Disclosure Schedule and has furnished to TBA true and complete copies of: (a)
any written employment agreements with officers and directors of Romeo
Entertainment; and (b) any written employment agreements with its employees
which by their terms may not be terminated by Romeo Entertainment at will or
which grant severance payments. Romeo Entertainment has not entered into any
similar oral employment agreements. To the knowledge of Shareholder, no key
employee or group of employees has any plans to terminate employment with Romeo
Entertainment. Romeo Entertainment is not a party to or bound by any collective
bargaining agreement. There are no loans or other obligations payable or owing
by Romeo Entertainment to any shareholder, officer, director or employee of
Romeo Entertainment (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 Romeo Entertainment or any guarantees by Romeo
Entertainment of any loan or obligation of any nature to which any such person
is a party. To the knowledge of Shareholder and of Romeo Entertainment, Romeo
Entertainment 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. Romeo Entertainment has listed in Section
3.21 of the Disclosure Schedule and has furnished to TBA true and complete
copies of (a) any nonqualified deferred or incentive compensation or retirement
plans or arrangements, (b) any qualified retirement plans or arrangements, (c)
any other employee compensation, severance or termination pay or welfare benefit
plans, programs or arrangements and (d) any related trusts, insurance contracts
or
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other funding arrangements maintained, established or contributed to by Romeo
Entertainment or to which Romeo Entertainment is a party or otherwise is bound
("Romeo Entertainment Employee Benefit Plans"). Except as required by law, Romeo
Entertainment does not maintain or contribute nor has ever maintained or
contributed to any funded or unfunded medical, health or life insurance plan or
arrangement for retirees or terminated employees. With respect to the employee
benefit plans listed in Section 3.21 of the Disclosure Schedule, Romeo
Entertainment has 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. To
the knowledge of Shareholder and Romeo Entertainment, all employee benefit plans
and related trusts listed in Section 3.21 of the Disclosure Schedule and
maintained or contributed to by Romeo Entertainment or with respect to which
Romeo Entertainment 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. To
the knowledge of Shareholder and Romeo Entertainment, 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. To the knowledge of Shareholder and Romeo Entertainment, 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. To the knowledge of Shareholder and Romeo Entertainment, none of such
employee benefit plans or arrangements, any related trusts, the trustees of any
related trusts or the directors, officers and employees of Romeo Entertainment
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. To the knowledge of Shareholder and Romeo
Entertainment, neither Romeo Entertainment, its directors, officers and
employees nor any other fiduciary, as such term is defined in Section 3 of
ERISA, has committed any breach of fiduciary responsibility imposed by ERISA or
any other applicable law which would subject Romeo Entertainment or its
directors, officers and employees to liability under ERISA or any applicable
law.
3.22 Guarantees. Romeo Entertainment is not a guarantor or otherwise
liable for any material indebtedness of any other person, firm or corporation
other than endorsements for collection in the ordinary course of business.
3.23 Legal Compliance. To the knowledge of Shareholder and Romeo
Entertainment, Romeo Entertainment and each of its respective directors,
officers and employees (the individuals only in their capacities as
representatives of Romeo Entertainment) has complied in all material respects
with all applicable laws and regulations of foreign, federal, state and local
governments and all agencies thereof, and no claim has been filed against Romeo
Entertainment alleging a violation of any such laws or regulations. To the
knowledge of Shareholder and Romeo Entertainment, Romeo Entertainment 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. Neither
Romeo Entertainment, nor any director,
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officer, agent, partner or employee thereof or any other person associated with
or acting for or on behalf of Romeo Entertainment has directly or indirectly (a)
made or agreed to make any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment (whether in cash or otherwise) to any person,
private or public, regardless of form, whether in money, property, or services,
in violation of any applicable law, rule or regulation (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of Romeo Entertainment, or (iv) to pay for any
lobbying or similar services or (b) established or maintained any fund or asset
that has not been recorded in the books and records of Romeo Entertainment.
3.24 Certain Business Relationships. To the knowledge of Shareholder,
none of the present or former shareholders, directors, officers or employees of
Romeo Entertainment 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 in volved in
any manner in any business arrangement or relationship with Romeo Entertainment,
and none of the foregoing persons owns any property or rights, tangible or
intangible, which are used in the business of Romeo Entertainment.
3.25 Broker's Fees. Neither Romeo Entertainment nor anyone on its behalf
has any liability to any broker, finder, investment banker or similar 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 similar agent
in connection with the Acquisition or any similar transaction.
3.26 Environment, Health and Safety. To the knowledge of Shareholder and
Romeo Entertainment, Romeo Entertainment is in compliance with all
environmental, health and safety laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been held or
commenced against Romeo Entertainment alleging any failure so to comply. To the
knowledge of Shareholder and Romeo Entertainment, Romeo Entertainment has
obtained and been in compliance with all of the material terms and conditions of
all permits, licenses and other authorizations which are required under, and
have complied with all other material limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, laws, and
timetables which are contained in, all applicable environmental, health and
safety laws.
3.27 Disclosure. To the knowledge of Shareholder and Romeo
Entertainment, the representations and warranties and statements of fact made by
Romeo Entertainment in this Agreement, in the Disclosure Schedule, in the
responses to the Due Diligence Checklist 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 on 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.
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3.28 Limitations of Representations. Notwithstanding any other provision
of this Agreement or otherwise, Shareholder shall not be deemed to have made any
representation or warranty other than those expressly made in this Article 3,
Sections 3.1 through 3.27 hereof, and Article 4, Sections 4.1 through 4.3
hereof. Without limiting the generality of the foregoing, and notwithstanding
any otherwise express representation or warranty made by Shareholder in Articles
3 and 4 hereof, Shareholder makes no representation or warranty to TBA with
respect to:
(i) any oral or written projections, estimates, budgets or
statements heretofore delivered to or made available to TBA of future
revenues, expenses or expenditures, results or operations,
profitability, cash flows, budgets, prospects, financial condition,
market conditions or new developments of Romeo Entertainment; or
(ii) any other oral or written information or documents of any
kind made available by Romeo Entertainment or its counsel to TBA or its
counsel, accountants or advisors with respect to Romeo Entertainment
except as expressly covered by representations or warranties contained
in (a) Sections 3.1 through 3.27 hereof, (b) Sections 4.1 through 4.3
hereof, (c) the information set forth in the Disclosure Schedule, and
(d) the responses of Shareholder and Romeo Entertainment to the Due
Diligence Checklist.
ARTICLE 4
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Except as set forth in the correspondingly numbered section of the
Disclosure Schedule, Shareholder represents and warrants to TBA as follows:
4.1 Representations Regarding Shares of Romeo Entertainment.
(a) Shareholder is the record and beneficial owner of and has good title
to the Shares, free and clear of any and all Liens. The Shares are all of the
shares of capital stock of Romeo Entertainment owned by Shareholder, and the
Shares collectively represent all the issued and outstanding capital stock of
Romeo Entertainment.
(b) Shareholder has the full right, power and authority to enter into
this Agreement.
(c) Shareholder is not a party to, subject to or bound by any agreement
or any judgment, order, writ, prohibition, injunction or decree of any court or
other governmental body which would prevent the execution or delivery of this
Agreement by Shareholder.
(d) No broker or finder has acted for Shareholder in connection with
this agreement or the transactions contemplated hereby, and no broker or finder
is entitled to any brokerage or finder's fee or other commissions in respect of
such transactions based upon agreements, arrangements or understandings made by
or on behalf of Shareholder.
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(e) Shareholder holds the Shares as a capital asset and will have owned
the Shares for more than twelve (12) months as of the Closing Date. For federal
and state income tax purposes, Shareholder shall report the sale of the Shares
pursuant to this Agreement as the sale of a capital asset held for more than
twelve (12) months, and shall not take any position on any report, return or
filing with any tax jurisdiction that the substance of the transactions
contemplated by this Agreement is the sale of the assets of Romeo Entertainment.
Shareholder is a resident of the State of Nebraska and will report the gain on
the sale of the shares for state income tax purposes with the State of Nebraska.
4.2 Investment Representations.
(a) Shareholder 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 his
shares in violation of applicable federal and state securities laws, and
subject to the terms and provisions of the Registration Rights
Agreement.
(b) Shareholder has reviewed the representations concerning TBA
contained in this Agreement and has made or has had the opportunity to
make inquiry concerning TBA. Shareholder has sufficient knowledge and
experience so as to be able to evaluate the risks and merits of his
investment in TBA, and he is able financially to bear the risks thereof.
Shareholder is entering into the transactions contemplated herein based
on his own assessments of the merits and risks, upon his own experience
as an officer and/or shareholder of Romeo Entertainment and is not
relying on any business plan, projections, valuations or other financial
information provided to Shareholder by TBA (other than the TBA SEC
Documents). Shareholder further acknowledges and agrees that TBA has
made no assurances of any nature whatsoever regarding the future
operations of TBA and has made no guarantees as to the profitability of
an investment therein. Shareholder further acknowledges that he is an
accredited investor as defined in Rule 501 of Regulation D of the
Securities Act.
(c) Shareholder understands that the certificates of TBA Common
Stock to be issued to him pursuant to this Agreement will bear a
restrictive legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to 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.
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4.3 Authorization. This Agreement and all such other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which Shareholder is a party constitute the valid and
legally binding obligations of Shareholder, enforceable against Shareholder in
accordance with their respective terms, except as enforceability may be limited
or affected by applicable bankruptcy, insolvency, moratorium, reorganization or
other laws of general application relating to or affecting creditors' rights
generally.
To the knowledge of Shareholder, the execution, delivery and performance
by Shareholder of this Agreement and the agreements provided for herein, and the
consummation by Shareholder of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both,
(a) violate the provisions of any law, rule or regulation applicable to
Shareholder; (b) violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (c) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of Shareholder pursuant to, any indenture,
mortgage, deed of trust or other instrument or agreement to which Shareholder is
a party or by which Shareholder or any of his properties is or, to the knowledge
of Shareholder, may be bound, except for violations or conflicts which
individually or in the aggregate would not have a material adverse effect on
Romeo Entertainment's financial condition or results of operation.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE CLOSING
5.1 Conduct of Business by Romeo Entertainment Pending the Closing.
Romeo Entertainment covenants and agrees that, prior to the Closing Date, unless
TBA shall otherwise approve in writing (which approval will not be unreasonably
withheld) or as otherwise expressly contemplated or permitted by this Agreement:
(a) Romeo Entertainment 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) Except as disclosed on Schedule 1 herein, and as
contemplated by this Agreement, Romeo Entertainment 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 charter or
bylaws; (iii) split, combine or reclassify any outstanding shares of its
capital stock, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect
to shares of its capital stock; (iv) redeem, purchase or acquire or
offer to acquire any shares of its capital stock or other securities;
(v) create any subsidiaries; or (vi) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the matters
set forth in this Section 5.1(b);
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(c) Romeo Entertainment shall not (i) issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any
additional shares of, or any options, warrants, conversion privileges or
rights of any kind to acquire any shares of, its capital stock; (ii)
acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization
or division or material assets thereof; (iii) incur any material
indebtedness for borrowed money, issue any debt securities or guarantee
any indebtedness to others; or (iv) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(d) Except as disclosed on Schedule 1 herein, Romeo
Entertainment 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 officers or
directors; or (ii) in the case of employees who are not officers or
directors, take any action other than in the ordinary course of business
and consistent in all material respects with past practice (none of
which shall be unreasonable or unusual) with respect to the grant of any
bonuses, salary increases, severance or termination pay or with respect
to any increase of benefits payable in effect on January 1, 1999;
(e) Except as disclosed on Schedule 1 herein, Romeo
Entertainment 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) Except as otherwise required by its charter or bylaws, by
this Agreement or by applicable law, Romeo Entertainment shall not call
any meeting of its shareholders and, with respect to any meeting of its
shareholders called by Romeo Entertainment, shall provide to TBA copies
of all written materials and other information given to the shareholders
prior to the time such materials and information are given to the
shareholders;
(g) Romeo Entertainment shall use commercially reasonable
efforts to cause its current insurance (or reinsurance) policies not to
be canceled 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;
(h) Romeo Entertainment shall (i) use commercially reasonable
efforts to preserve intact its business organization and goodwill, keep
in full force and effect all material rights, licenses, permits and
franchises relating to its business, keep available the services of its
officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having
business relationships with it; (ii) report on a regular and frequent
basis, at reasonable times, to representatives of TBA regarding
operational matters and the general status of ongoing operations; (iii)
use commercially
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reasonable efforts not to take any action which would render, or which
reasonably may be expected to render, any representation or warranty
made by it 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 their respective
business or in the operation of their 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 Romeo Entertainment, or to the ability of Romeo Entertainment or TBA
to consummate the transactions contemplated by this Agreement;
(i) Romeo Entertainment 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 it is a
party or any other material adverse event or circumstance affecting
Romeo Entertainment (including the filing of any material litigation
against Romeo Entertainment or the existence of any dispute with any
person or entity which involves a reasonable likelihood of such
litigation being commenced), a certificate of the President of Romeo
Entertainment specifying the nature and period of the existence thereof
and what actions Romeo Entertainment has taken and proposes to take with
respect thereto;
(j) Romeo Entertainment shall use commercially reasonable
efforts to maintain its assets in customary repair, order and condition,
replace in accordance with past practice its inoperable, worn out or
obsolete assets with assets of quality at least comparable to the
original quality of the assets being replaced and maintain in all
material respects its books, accounts and records in accordance with
past custom and practice as used in the preparation of the Financial
Statements;
(k) Romeo Entertainment 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;
(l) Romeo Entertainment shall have positive working capital on
the Closing Date;
(m) Romeo Entertainment shall comply in all material respects
with all legal requirements and contractual obligations applicable to
its operations and business and pay all applicable taxes; and
(n) Romeo Entertainment shall not enter into any contract
(except for artist performances for which TBA shall receive a weekly
summary by facsimile) requiring payments in excess of $20,000 or for a
duration of more than one (1) year.
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For purposes of this Section 5.1, should TBA fail to approve in writing
any action for which its approval is required pursuant to this Section 5.1
within three (3) business days after its receipt of a written request for
approval in accordance with the notice requirements contained herein, the matter
shall be deemed approved by TBA. Unless agreed to in writing by Romeo
Entertainment, TBA and Shareholder, the amendment or modification of the
Disclosure Schedule by Romeo Entertainment after the time TBA has signed this
Agreement shall have no effect with respect to the agreements, covenants and
obligations of Romeo Entertainment and TBA pursuant to this Section 5.1 and
Sections 7.2 and 7.3 of this Agreement.
5.2 No Other Bids for Romeo Entertainment. Romeo Entertainment shall
not, nor either authorize or knowingly permit any officer, director, shareholder
or employee of, or any investment banker, attorney, accountant or other
representative retained by, Romeo Entertainment 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, or any equity interest in, Romeo
Entertainment or other similar transaction or business combination involving
Romeo Entertainment (hereinafter collectively referred to as a "Third Party
Offer"). Romeo Entertainment will not 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. Romeo Entertainment 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 its
best efforts to cause all reports, material, data and other written information
heretofore disseminated by it or on its behalf by any such officer, director or
employee or any investment banker, attorney, accountant or other representative
in connection with any such Third Party Offer or any inquiry or proposal related
thereto to be promptly returned to it. Romeo Entertainment shall promptly 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.
5.3 Lines of Business and Capital Expenditures. Unless approved in
writing by TBA, Romeo Entertainment covenants that it will not (a) enter into
any new material line of business; (b) change its 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.
5.4 Accounting Methods. Unless approved in writing by TBA, Romeo
Entertainment covenants that it will not change its methods of accounting in
effect at December 31, 1998. Notwithstanding the provisions of the preceding
sentence, Romeo Entertainment will, at Shareholder's expense, have its
accounting records in proper order and ready to be audited, at the expense of
TBA, in accordance with generally accepted accounting principles.
5.5 Other Actions. Unless approved in writing by TBA, Romeo
Entertainment covenants that it shall not take any action that would or might
reasonably be expected to result in any of the representations and warranties of
Romeo Entertainment set forth in this Agreement becoming untrue
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in any material respect after the date hereof or any of the conditions to the
Closing set forth in Article 7 of this Agreement not being satisfied.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 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 the party incurring such expenses.
6.2 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
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied hereunder.
6.3 Access to Information. From the date hereof to the Closing Date,
each of Romeo Entertainment and TBA shall, and shall cause its respective
officers, directors, employees and agents to, afford the officers, employees,
agents and representatives of the other parties hereto (including Shareholder)
complete access at all reasonable times to such officers, employees and agents
and its properties, books and records (all such access to be arranged through
the respective officers of the parties hereto so as not to be unreasonably
disruptive to any of the parties), and shall furnish each of such parties all
financial, operating, personnel, compensation, tax and other data and
information as such parties, through their respective officers, employees,
agents or representatives, may request.
6.4 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,
Romeo Entertainment 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, in the opinion of Romeo Entertainment or TBA, 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 6.4.
6.5 Notice of Changes. Each of Romeo Entertainment 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 its financial condition, results
of operations or business that is or may reasonably be expected to have a
material adverse effect on its financial condition, results of operations or
business.
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6.6 Press Releases. Romeo Entertainment and TBA shall consult with each
other as to the form and substance of any press release or other public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby; provided, however, that nothing in this Section 6.6 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.
6.7 Employee Matters. TBA and Romeo Entertainment agree that all
employees of Romeo Entertainment immediately prior to the Closing shall be
employed by Romeo Entertainment 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 cause Romeo Entertainment
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. Romeo Entertainment employees retained by Romeo Entertainment
subsequent to the Closing Date shall be entitled to participate in health
insurance plans and other benefits to the same extent that current TBA employees
participate in such benefits, subject to applicable period of service
requirements, if any. In addition, TBA will not unreasonably impose the
termination of the employment relationship between Romeo Entertainment and any
of its employees subsequent to the Closing Date.
6.8 Tax Matters. From and after the Closing, TBA, on the one hand, and
Shareholder, 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 either of them of any
Tax Returns, elections, consents or certificates required to be prepared and
filed by such parties or (2) in connection with any audit or proceeding relating
to taxes relating to the assets of Romeo Entertainment. TBA agrees to retain all
books and records with respect to tax matters pertinent to Romeo Entertainment
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 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, that is inconsistent with the provisions of
this Agreement. In addition, as custodian of the books and records of Romeo
Entertainment as of the Closing Date, TBA, or its authorized representatives,
shall be responsible for closing such books and records as of the Closing Date
for state and federal income tax and financial reporting purposes. TBA and
Shareholder shall cooperate fully with each other in connection with such
closing and TBA shall make available to Shareholder all financial and income tax
data, statements, reports and information relating to such closing of the books
and records as of the Closing Date.
6.9 Real Estate Lease. Prior to the Closing, Romeo Entertainment shall
distribute to Shareholder the real property and improvements thereon, subject to
all liabilities secured by such real estate and improvements, located at 15332
State Highway 988, Crescent, Iowa, and which are generally used as the corporate
offices of Romeo Entertainment. As a condition to the Closing,
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Shareholder and Romeo Entertainment, with the consent and approval of TBA, shall
negotiate and enter into a lease agreement granting Romeo Entertainment the use
and occupancy by Romeo Entertainment of said real estate and improvements, in
the form attached hereto as Exhibit E (the "Lease").
6.10 Adjustment to Purchase Price. Notwithstanding the provisions of
Section 1.2(c) hereof, (i) should Shareholder voluntarily terminate his
employment relationship with Romeo Entertainment prior to the end of the term of
his Employment Agreement (as defined in Section 7.2(e) hereof), other than for
Good Reason (as such term is defined in such Employment Agreement), or (ii)
should Romeo Entertainment terminate Shareholder's employment relationship
pursuant to Paragraph 5(b)(iii) or (iv) of Shareholder's Employment Agreement,
Shareholder shall be obligated to pay to TBA, within fifteen (15) days of the
date of such termination of employment, a dollar amount in cash equal to the
excess of (a) the aggregate portion of the Purchase Price theretofore paid to
Shareholder by TBA for the Shares over (b) the aggregate earnings before
interest, taxes, depreciation and amortization of Romeo Entertainment from the
Closing Date to the end of the calendar month in which such employment is
terminated.
6.11 Tax Indemnification. In reliance upon Shareholder's representation
set forth in Section 4.1(e) hereof, and subject to the limitation hereinafter
set forth, TBA hereby indemnifies and holds harmless Shareholder against income
tax liability in excess of a (i) 20% maximum federal income tax rate, and (ii)
7% maximum state income tax rate, on the taxable gain realized and recognized by
Shareholder upon the sale of the Shares to TBA pursuant to the terms of this
Agreement; provided, however, such indemnification shall not apply should
Shareholder be subject to the alternative minimum tax provisions contained in
Sections 55 through 59 of the Code. TBA, as the indemnifying party, shall have
all of the rights set forth in Section 9.3 of this Agreement. The provisions of
Sections 10.1 and 10.8 of this Agreement shall not limit the liability of TBA
pursuant to this Section 6.11.
6.12 Name. Romeo Entertainment shall be entitled to continue to operate
and conduct business under the name "Romeo Entertainment Group, Inc." for a
reasonable transition period subsequent to the Closing, as reasonably determined
by TBA in consultation with Shareholder.
6.13 No Deficit Working Capital. On the Closing Date, the dollar amount
of total assets of Romeo Entertainment, net of accumulated depreciation and
amortization, shall be equal to or greater than the dollar amount of total
liabilities of Romeo Entertainment. In addition, on the Closing Date, such total
liabilities shall include the anticipated cost of preparing the state and
federal income tax returns for Romeo Entertainment for calendar year 1999.
6.14 Referral Commissions. TBA shall negotiate in good faith the
referral commissions to be paid Romeo Entertainment for Romeo Entertainment's
business referrals to the other operating divisions of TBA on all material
projects, consistent with the referral commissions paid other operating
divisions of TBA for referrals made to the other operating divisions of TBA or
as otherwise mutually agreed upon by Romeo Entertainment and TBA.
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ARTICLE 7
CONDITIONS TO CLOSING
7.1 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 conditions:
(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; and
(b) Shareholder shall have provided TBA with a written agreement
not to sell, assign, convey, encumber or otherwise transfer shares of
TBA Common Stock acquired pursuant to this Agreement for a period of one
year following the Closing Date.
7.2 Additional Conditions to TBA's Obligations. The obligations of TBA
to effect the Closing 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 Romeo
Entertainment or Shareholder, the representations and warranties set
forth in Articles 3 and 4 of this Agreement (without regard to any
amendments or modifications (unless agreed to in writing by the parties
hereto) of the Disclosure Schedule by Romeo Entertainment 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) Unless waived in writing by TBA, Romeo Entertainment shall
have performed, in all material respects, each obligation and agreement
and complied, in all material respects, with each covenant to be
performed and complied with by it under this Agreement prior to the
Closing Date, including, without limitation, all of its agreements
contained in Article 6 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 to own, operate or control Romeo
Entertainment or any portion of the assets of Romeo Entertainment or to
prevent a breach of or a default under or a termination of any agreement
material to Romeo Entertainment to which Romeo Entertainment is a party
or to which any material portion of the assets of Romeo Entertainment is
subject, will have been obtained;
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(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 to own, operate or control Romeo
Entertainment or any material portion of the assets of Romeo
Entertainment or the value of the assets of Romeo Entertainment;
(e) On or prior to the Closing Date, Shareholder shall have
entered into an employment agreement with Romeo Entertainment
substantially in the form of Exhibit F attached hereto dated as of the
Closing Date (the "Employment Agreement") and Shareholder shall have
terminated any employment, compensation, consulting, fee, services or
other similar agreements payable to him, or to his affiliated entities,
if any;
(f) On or prior to the Closing Date, Shareholder shall have
entered into the Lease in his capacity as lessor and Romeo Entertainment
shall have entered into the Lease in its capacity as lessee;
(g) At the Closing, Romeo Entertainment will have delivered to
TBA the following:
(i) a certificate executed on behalf of Romeo
Entertainment by its President stating that the conditions set
forth in Sections 7.2(a) through 7.2(d) of this Agreement have
been satisfied or waived by TBA in writing;
(ii) certified copies of the resolutions duly adopted by
Romeo Entertainment's Board of Directors authorizing the
execution, delivery and performance of this Agreement and the
other agreements contemplated hereby and thereby;
(iii) good standing or comparable certificates for Romeo
Entertainment from the jurisdiction of its incorporation and
from every jurisdiction where a failure to be qualified or
licensed would have a material adverse effect on the
consolidated financial condition, results of operations or
business of Romeo Entertainment, dated not earlier than ten (10)
days prior to the Closing Date;
(iv) copies of all third party and governmental consents
(or other evidence satisfactory to TBA) that Romeo Entertainment
is required to obtain in order to effect the transactions
contemplated by this Agreement;
(v) a copy of Romeo Entertainment's charter certified by
the Secretary of State of the State of Nebraska;
(vi) certificates evidencing the Shares, duly endorsed;
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(vii) the schedule of accounts payable and accounts
receivable to be provided pursuant to Section 3.15 hereof; and
(viii) such other documents as TBA may reasonably
request in connection with the transactions contemplated hereby.
(h) All proceedings to be taken by Romeo Entertainment in
connection with the consummation of the Acquisition at the Closing and
the other transactions contemplated hereby and all documents required to
be delivered by Romeo Entertainment in connection with the Acquisition
and the other transactions contemplated hereby will be reasonably
satisfactory in form and substance to TBA.
7.3 Additional Conditions to the Obligations of Romeo Entertainment and
Shareholder. The obligations of Romeo Entertainment and Shareholder to effect
the Closing 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,
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 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 it under
this Agreement prior to the Closing Date;
(c) No action or proceeding before any court or government body
will be pending or threatened wherein a judgment, decree or order would
prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded;
(d) At the Closing, TBA will have delivered to Romeo
Entertainment and Shareholder the following:
(i) a certificate executed on behalf of TBA by its Chief
Executive Officer stating that the conditions set forth in
Sections 7.3(a) through (c) of this Agreement have been
satisfied;
(ii) certified copies of the resolutions duly adopted by
TBA's board of directors authorizing the execution, delivery and
performance of this Agreement;
(iii) good standing certificates for TBA from the
Secretary of State of the State of Delaware dated not earlier
than ten (10) days prior to the Closing Date;
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(iv) copies of all third party and governmental or
regulatory consents (or other evidence satisfactory to Romeo
Entertainment) that TBA are required to obtain in order to
effect the transactions contemplated by this Agreement;
(v) copies of TBA's charter certified by the Secretary
of State of the State of Delaware;
(vi) the Common Stock Portion, the Cash Portion, the
Adjustable Note and the Non-Adjustable Note; and
(vii) such other documents as Romeo Entertainment or
Shareholder may reasonably request in connection with the
transactions contemplated hereby;
(e) All proceedings to be taken by TBA in connection with the
consummation of the Acquisition at the Closing and all documents
required to be delivered by TBA in connection with the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to Romeo Entertainment and Shareholder;
(f) Except as otherwise disclosed in writing to Romeo
Entertainment and Shareholder, 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 to
own, operate or control Romeo Entertainment or any portion of the assets
of Romeo Entertainment or to prevent a breach of or a default under or a
termination of any agreement material to Romeo Entertainment to which
Romeo Entertainment is a party or to which any material portion of the
assets of Romeo Entertainment is subject, will have been obtained;
(g) The Employment Agreement will have been executed and
delivered as of the Closing Date and there will not have been any
changes, amendments or modifications to, or termination of, such
agreement; and
(h) The Registration Rights Agreement, the Pledge Agreement and
the Lease will have been executed and delivered as of the Closing Date.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by the unanimous written consent of Shareholder and the
Boards of Directors of TBA and Romeo Entertainment;
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(b) by either TBA or Romeo Entertainment if the Acquisition
shall not have been consummated by February 28, 2000;
(c) by TBA if there has been a misrepresentation or breach of a
representation or warranty or a failure to perform a covenant on the
part of Romeo Entertainment or Shareholder 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 Romeo Entertainment 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 with respect to their representations,
warranties and covenants set forth in this Agreement and any such breach
or failure constitutes a Material Adverse Breach.
8.2 Amendment. This Agreement may not be amended except by an instrument
signed by each of the parties hereto.
8.3 Waiver. At any time prior to the Closing Date, (a) TBA may in
writing (i) extend the time for the performance of any of the obligations or
other acts of Romeo Entertainment and/or Shareholder or (ii) waive compliance
with any of the agreements of Romeo Entertainment and/or Shareholder or with any
conditions to its own obligations, and (b) Romeo Entertainment and/or
Shareholder may in writing (i) extend the time for the performance of any of the
obligations or other acts of TBA or (ii) waive compliance with any of the
agreements of TBA 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.
8.4 Effect of Termination. If this Agreement is terminated as provided
in Section 8.1, this Agreement shall become void and there shall be no liability
or further obligation on the part of any party hereto or any of their respective
shareholders, officers or directors, except that nothing herein and no
termination pursuant hereto will relieve any party from liability for any breach
of this Agreement and the provisions of Section 6.6 and any confidentiality
agreements by and between TBA and Romeo Entertainment will survive such
termination.
ARTICLE 9
INDEMNIFICATION
9.1 By TBA, Romeo Entertainment and Shareholder. TBA on the one hand and
Romeo Entertainment and Shareholder on the other hand each hereby agree to
indemnify and hold harmless the other against all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement costs
and any legal, accounting or other expenses for defending any actions or
threatened actions) (collectively "Damages") reasonably incurred by TBA, Romeo
Entertainment and Shareholder in connection with each and all of the matters set
forth below to the extent they constitute a Material Adverse Breach.
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(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.
9.2 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 9.3 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.
9.3 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made,
(a) the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of
-33-
<PAGE> 38
the evidence that the Indemnified Party did not defend or settle such third
party claim in a reasonably prudent manner.
9.4 Payment of Indemnification Obligation. All indemnification by TBA,
Romeo Entertainment or Shareholder 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.
9.5 Limitations. EXCEPT IN CASES OF ACTIONABLE FRAUD, WHERE SPECIFIC
PERFORMANCE IS AVAILABLE AS A REMEDY OR AS PROVIDED IN SECTION 6.10 OF THIS
AGREEMENT, THE PARTIES AGREE AND ACKNOWLEDGE THAT THE INDEMNIFICATION RIGHTS
PROVIDED IN THIS ARTICLE 9 SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF SUCH
PARTIES TO THIS AGREEMENT. EXCEPT IN CASES OF ACTIONABLE FRAUD, WHERE SPECIFIC
PERFORMANCE IS AVAILABLE AS A REMEDY OR AS PROVIDED IN SECTION 6.10 OF THIS
AGREEMENT, THE AGGREGATE, MAXIMUM LIABILITY OF EACH OF SHAREHOLDER, ROMEO
ENTERTAINMENT AND TBA UNDER THIS ARTICLE 9 SHALL BE AN AMOUNT EQUAL TO THE
AGGREGATE PURCHASE PRICE PAID FOR THE SHARES.
ARTICLE 10
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations and
warranties set forth in Article 2, Article 3 and Article 4 of this Agreement
shall survive the Closing for a period of one (1) year. Notwithstanding the
above, claims resulting from any breach of any representation or warranty
concerning tax or Romeo Entertainment 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, warranty or covenant 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 or Romeo
Entertainment 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, Romeo Entertainment and Shareholder
understand and agree that the covenants and undertakings on each of their parts
herein contained are uniquely related to the desire of TBA, Romeo Entertainment
and Shareholder to consummate the Acquisition, that the Acquisition is a unique
business opportunity for Romeo Entertainment, TBA, and Shareholder 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, Romeo Entertainment, TBA and Shareholder agree that TBA shall be
entitled to obtain specific performance
-34-
<PAGE> 39
by Romeo Entertainment and Shareholder of every such covenant and undertaking
contained herein to be performed by Romeo Entertainment and Shareholder and that
Romeo Entertainment and Shareholder shall be entitled to obtain specific
performance from TBA of each and every covenant and undertaking herein contained
to be observed or performed by TBA.
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):
if to TBA:
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
if to Romeo Entertainment:
Romeo Entertainment Group, Inc.
15332 State Highway 988
Crescent, Iowa 51526
Attention: Robert Romeo
Telecopy:
-35-
<PAGE> 40
with a copy to:
James P. Waldron
Nelson, Morrow & Waldron
675 Commercial Federal Tower
2120 South 72nd Street
Omaha, Nebraska 68124
Telecopy: (402) 392-2130
(c) if to Shareholder:
Robert Romeo
15332 State Highway 988
Crescent, Iowa 51526
with a copy to:
James P. Waldron
Nelson, Morrow & Waldron
675 Commercial Federal Tower
2120 South 72nd Street
Omaha, Nebraska 68124
Telecopy: (402) 392-2130
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,
-36-
<PAGE> 41
except that TBA may assign all or any portion of their rights under this
Agreement to any wholly owned subsidiary but no such assignment shall relieve
TBA of its 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 Nebraska, without giving effect to
the principles of conflict of laws thereof. Courts within the State of Nebraska
will have jurisdiction over any and all disputes between the parties hereto,
whether in law or equity, arising out of or relating to this Agreement. The
parties consent to and agree to submit to the jurisdiction of such courts. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement.
10.8 Material Adverse Breach. Breaches of representations, warranties
and covenants by either party hereto which (a) individually results in damages
to the other party in excess of $20,000 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."
10.9 Limitation of Liability. Neither TBA, Romeo Entertainment, nor
Shareholder 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.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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<PAGE> 42
STOCK PURCHASE AGREEMENT
Signature Page
IN WITNESS WHEREOF, TBA, Shareholder and Romeo Entertainment have caused
this Agreement to be executed on the date first written above by their
respective officers duly authorized.
TBA ENTERTAINMENT CORPORATION
By: /s/ Thomas Jackson Weaver III
---------------------------------
Thomas Jackson Weaver III,
Chief Executive Officer
ROMEO ENTERTAINMENT GROUP, INC.
By: /s/ Robert Romeo
---------------------------------
Robert Romeo, President
/s/ Robert Romeo
------------------------------------
ROBERT ROMEO
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<PAGE> 43
SCHEDULE 1
DISCLOSURE SCHEDULE
<PAGE> 44
SCHEDULE 2
MEMENTOES OF SHAREHOLDER
<PAGE> 45
ANNEX I
LIST OF TBA SEC DOCUMENTS
1. Current Report on Form 8-K
2. Annual Report on Form 10-KSB
3. Proxy Statement
4. Quarterly Report on Form 10-Q (3/31/99)
5. Quarterly Report on Form 10-Q (6/30/99)
6. Quarterly Report on Form 10-Q (9/30/99)
<PAGE> 46
EXHIBIT A
FORM OF ADJUSTABLE PROMISSORY NOTE
<PAGE> 47
EXHIBIT B
FORM OF NON-ADJUSTABLE PROMISSORY NOTE
<PAGE> 48
EXHIBIT C
FORM OF PLEDGE AGREEMENT
<PAGE> 49
EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 50
EXHIBIT E
FORM OF LEASE
<PAGE> 51
EXHIBIT F
FORM OF EMPLOYMENT AGREEMENT
<PAGE> 1
EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
among
TBA ENTERTAINMENT CORPORATION,
MIKE ATKINS
and
MIKE ATKINS MANAGEMENT, INC.
December 6, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - PURCHASE AND SALE OF SHARES......................................................1
1.1 Purchase and Sale.............................................................1
1.2 Purchase Price................................................................1
1.3 Closing.......................................................................2
1.4 Further Action................................................................2
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF TBA............................................2
2.1 Organization and Qualification................................................2
2.2 Authority Relative to this Agreement..........................................3
2.3 Certain Corporate Matters.....................................................3
2.4 Broker's Fees.................................................................3
2.5 Disclosure....................................................................4
2.6 No Actions Pending............................................................4
2.7 Investment Intent.............................................................4
2.8 Information...................................................................4
2.9 Sophistication of TBA.........................................................4
2.10 Accredited Investor...........................................................4
2.11 TBA 10-KSB....................................................................4
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDER..............................................................................5
3.1 Organization, Qualification and Corporate Power...............................5
3.2 Capitalization................................................................5
3.3 Authorization of Transaction..................................................6
3.4 Subsidiaries..................................................................6
3.5 Financial Statements..........................................................7
3.6 Events Subsequent to Financial Statements.....................................7
3.7 Undisclosed Liabilities.......................................................9
3.8 Tax Returns and Audits........................................................9
3.9 Books and Records............................................................11
3.10 Real Property................................................................11
3.11 Tangible Property............................................................11
3.12 Intellectual Property........................................................11
3.13 Contracts....................................................................13
3.14 Suppliers and Customers......................................................14
3.15 Notes; Accounts Receivable...................................................14
3.16 Powers of Attorney...........................................................14
3.17 Condition of Property........................................................14
3.18 Insurance....................................................................14
3.19 Litigation...................................................................15
3.20 Employees....................................................................15
3.21 Employee Benefit Plans.......................................................15
3.22 Guarantees...................................................................16
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.23 Legal Compliance.............................................................16
3.24 Certain Business Relationships...............................................17
3.25 Broker's Fees................................................................17
3.26 Environment, Health and Safety...............................................17
3.27 Year 2000....................................................................17
3.28 Jaci Velasquez Management Agreement..........................................18
3.29 Disclosure...................................................................18
ARTICLE 4 - ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE SHAREHOLDER...............................................................18
4.1 Representations Regarding Shares of Atkins Management........................18
4.2 Authorization................................................................18
ARTICLE 5 - [INTENTIONALLY OMITTED].........................................................19
ARTICLE 6 - ADDITIONAL AGREEMENTS...........................................................19
6.1 Expenses.....................................................................19
6.2 Taking of Necessary Action...................................................19
6.3 Press Releases...............................................................20
6.4 Employee Matters.............................................................20
6.5 Tax Matters..................................................................20
6.6 Section 338(h)(10) Election..................................................21
6.7 Adjustment to Purchase Price.................................................21
6.8 Separate Subsidiary..........................................................22
6.9 Jaci Velasquez Management Agreement..........................................22
6.10 Investment Partnerships......................................................22
6.11 No Deficit Working Capital...................................................22
ARTICLE 7 - CONDITIONS TO CLOSING...........................................................22
7.1 Conditions to Obligations of Each Party to Effect the Closing................22
7.2 Additional Conditions to TBA's Obligations...................................22
7.3 Additional Conditions to the Obligations of Atkins
Management and the Shareholder...............................................24
ARTICLE 8 - TERMINATION, AMENDMENT AND WAIVER...............................................26
8.1 Termination..................................................................26
8.2 Amendment....................................................................26
8.3 Waiver.......................................................................26
8.4 Effect of Termination........................................................27
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 9 - INDEMNIFICATION.................................................................27
9.1 By TBA, Atkins Management and the Shareholder................................27
9.2 Claims for Indemnification...................................................27
9.3 Defense by Indemnifying Party................................................28
9.4 Payment of Indemnification Obligation........................................28
9.5 Limitations..................................................................28
ARTICLE 10 - GENERAL PROVISIONS.............................................................29
10.1 Survival of Representations and Warranties...................................29
10.2 Effect of Due Diligence......................................................29
10.3 Specific Performance.........................................................29
10.4 Notices......................................................................29
10.5 Interpretation...............................................................31
10.6 Severability.................................................................31
10.7 Miscellaneous................................................................31
10.8 Material Adverse Breach......................................................31
10.9 Limitation of Liability......................................................32
10.10 Waiver of Purchase Right.....................................................32
10.11 Effective Time...............................................................32
</TABLE>
SCHEDULE 1 Disclosure Schedule
EXHIBIT A Form of Adjustable Promissory Note
EXHIBIT B Form of Non-Adjustable Promissory Note
EXHIBIT C Form of Employment Agreement
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<PAGE> 5
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated December 6, 1999 (this
"Agreement"), is by and among TBA Entertainment Corporation, a Delaware
corporation ("TBA"), Mike Atkins, an individual and sole shareholder of Mike
Atkins Management, Inc. (the "Shareholder"), and Mike Atkins Management, Inc., a
Tennessee corporation ("Atkins Management").
RECITALS
WHEREAS, the Shareholder owns all of the issued and outstanding common
stock (the "Shares") of Atkins Management;
WHEREAS, TBA, Atkins Management and the Shareholder each desire for TBA
to acquire (the "Acquisition") all of the Shares pursuant to the terms and
conditions of this Agreement, as a result of which Atkins Management will become
a wholly owned subsidiary of TBA;
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, the Shareholder agrees to sell, assign, transfer and deliver to TBA
at the Closing (as hereinafter defined), and TBA agrees to purchase from the
Shareholder at the Closing, the Shares, free and clear of any and all charges,
claims, community property interests, equitable interests, mortgages, liens,
security interests, pledges, charges, rights of assignment, rights of purchase,
rights of first offer or refusal, options, warrants or encumbrances of any
nature (collectively, "Liens").
1.2 Purchase Price. The aggregate purchase price (the "Purchase Price")
for the Shares shall be equal to One Million Four Hundred Thousand Dollars
($1,400,000), subject to possible adjustment as provided in the Adjustable Note
(hereinafter defined), and shall be paid or delivered to the Shareholder at the
Closing as follows:
(a) TBA shall deliver to the Shareholder by wire transfer to one
or more accounts designated in writing by the Shareholder to TBA prior
to the Closing cash in an amount equal to One Thousand Dollars ($1,000)
(the "Cash Portion");
(b) TBA shall deliver to the Shareholder a promissory note (the
"Adjustable Note") in the initial principal amount of Seven Hundred
Thousand Dollars ($700,000) (the "Adjustable Note Portion"), subject to
possible adjustment as set forth in the Adjustable Note, in the form of
Exhibit A attached hereto (the "Form of Adjustable Note").
<PAGE> 6
(c) TBA shall deliver to the Shareholder a promissory note (the
"Non-Adjustable Note") in the principal amount of Six Hundred
Ninety-Nine Thousand Dollars ($699,000) (the "Non-Adjustable Note
Portion") in the form of Exhibit B attached hereto (the "Form of
Non-Adjustable Note").
Except as set forth in Section 6.7 hereof, any adjustment to the
Purchase Price hereunder shall be accomplished only through adjustment to
payments under the Adjustable Note as set forth in the Adjustable Note, and the
Cash Portion and the Non-Adjustable Note Portion of the Purchase Price shall not
be adjusted subsequent to Closing.
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 December
6, 1999, or as soon as reasonably practicable thereafter as the conditions set
forth in Article 7 have been satisfied or waived (the "Closing Date"). At the
Closing:
(a) TBA will (i) pay to the Shareholder the Cash Portion by wire
transfer of immediately available funds, (ii) execute and deliver to the
Shareholder the Adjustable Note and the Non-Adjustable Note, and (iii)
execute and deliver to the Shareholder such other documents and
instruments required to be executed and delivered by TBA under the terms
of this Agreement; and
(b) The Shareholder will deliver to TBA (i) a certificate
representing the Shares, duly endorsed, and (ii) such other documents
and instruments required to be delivered by the Shareholder under the
terms of this Agreement or reasonably requested by TBA.
1.4 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 with full right, title and possession and all rights, privileges and
immunities with respect to any or all of the Shares, the Shareholder shall take
all such action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TBA
TBA hereby represents and warrants to Atkins Management and the
Shareholder as follows:
2.1 Organization and Qualification. TBA has been duly organized and is
validly existing as a corporation and in good standing under the laws of the
State of Delaware and has full corporate power and authority to own and use the
properties owned and used by it and to carry on its business as now conducted.
-2-
<PAGE> 7
2.2 Authority Relative to this Agreement. TBA has the requisite
corporate power and authority to execute and deliver this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated on
its part hereby. The execution, delivery and performance of this Agreement by
TBA and the consummation by TBA of the transactions contemplated on its part
hereby have been duly authorized by the Board of Directors of TBA, and no other
corporate proceedings on the part of TBA are necessary to authorize the
execution and delivery of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by TBA and
constitutes the legal, valid and binding obligation of TBA, 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, the performance by TBA of its
obligations hereunder or the consummation of the transactions contemplated
hereby by TBA 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 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 is a party or by which TBA or any of its assets or properties is bound
or encumbered, except those that have already been given, obtained or filed. No
authorization, consent or approval of, or filing or registration with, any
public body, court or governmental or regulatory authority is necessary on the
part of TBA for the consummation by TBA of the transactions contemplated by this
Agreement.
2.3 Certain Corporate Matters. TBA 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 has delivered to Atkins Management and the Shareholder true, accurate
and complete copies of its 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 board of
directors of TBA are accurate and complete in all material respects. All
material corporate actions taken by TBA since its date of incorporation have
been duly authorized and/or subsequently ratified, as necessary. TBA is not in
default under or in violation of any material provision of its charter or
bylaws.
2.4 Broker's Fees. Neither TBA nor anyone on its behalf has any
liability to any broker, finder, investment banker or similar 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 similar agent in
connection with the Acquisition or any similar transaction.
-3-
<PAGE> 8
2.5 Disclosure. The representations and warranties and statements of
fact made by TBA 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 such representations and
warranties and statements and information contained herein or therein not
misleading.
2.6 No Actions Pending. There are no actions, claims, complaints,
grievances, suits, governmental inquiries, governmental investigations or
proceedings pending or, to the knowledge of TBA, threatened, and to the
knowledge of TBA, there are no investigations pending or threatened, which in
any manner challenge or seek to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement, by or before any court, arbitrator
or administrative or governmental body.
2.7 Investment Intent. TBA is acquiring the Shares for its own account
for the purpose of investment and not with a view to, or for sale in connection
with, any distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). TBA will not sell or otherwise dispose of any
Shares in a manner which would require registration under the Securities Act or
any applicable blue sky law unless such registrations are effected.
2.8 Information. TBA has had an opportunity to ask questions of, and
receive answers from, the Shareholder concerning the Shares, and the operations,
financial condition and prospects of Atkins Management.
2.9 Sophistication of TBA. TBA has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Shares.
2.10 Accredited Investor. TBA is an "accredited investor" as that term
is defined in regulations promulgated by the Securities and Exchange Commission.
2.11 TBA 10-KSB. TBA has furnished the Shareholder with a true and
complete copy of its Form 10-KSB for the year ended December 31, 1998 (the "Form
10-KSB"). 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 and at the dates thereof and the results of its operations and cash
flows for the period then ended.
-4-
<PAGE> 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDER
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"), the Shareholder hereby represents
and warrants to TBA as follows:
3.1 Organization, Qualification and Corporate Power. Atkins Management
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee. Atkins Management is duly qualified to do
business as a foreign corporation and is in good standing in 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. Atkins Management has
full corporate power and authority and all authorizations, licenses and permits
necessary to carry on the business in which it is engaged or in which it
proposes presently to engage and to own and use the properties owned and used by
it. Atkins Management has delivered to TBA true, accurate and complete copies of
its charter and bylaws which reflect all amendments made thereto at any time
prior to the date of this Agreement. The minute books containing the records of
meetings of the shareholders and Board of Directors of Atkins Management, the
stock certificate books and the stock record books of Atkins Management are
complete and correct in all material respects. The stock record books of Atkins
Management and the shareholder lists of Atkins Management which Atkins
Management has previously furnished to TBA are complete and correct in all
respects and accurately reflect the record and beneficial ownership of all the
outstanding shares of Atkins Management's capital stock and all other
outstanding securities issued by Atkins Management. All material corporate
actions taken by Atkins Management since incorporation have been duly authorized
and/or subsequently ratified as necessary. Atkins Management is not in default
under or in violation of any provision of its charter or bylaws. Atkins
Management 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.
3.2 Capitalization. Atkins Management's entire authorized capital stock
consists of 1,000 shares of common stock ("Atkins Management Common Stock"), of
which 100 shares are issued and outstanding and 100 shares will be issued and
outstanding immediately prior to the Closing Date. All of the issued and
outstanding shares of Atkins Management Common Stock have been and, as of the
Closing Date, will be duly authorized and are and, as of the Closing Date, will
be validly issued, fully paid and nonassessable and have not been and, as of the
Closing Date, will not be issued in violation of any pre-emptive rights. Other
than this Agreement, there are no outstanding or authorized options, rights,
warrants, calls, convertible securities, rights to subscribe, conversion rights
or other agreements or commitments to which Atkins Management is a party or
which are binding upon Atkins Management providing for the issuance or transfer
by Atkins Management of additional shares of its capital stock and Atkins
Management has not reserved any
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shares of its capital stock for issuance, nor are there any outstanding stock
option rights, contracts, arrangements or commitments based upon the book value,
income or other attribute of Atkins Management. There are no voting trusts or
any other agreements or understandings with respect to the voting of Atkins
Management's capital stock. Upon consummation of the Acquisition, TBA will own
the entire equity interest in Atkins Management and Atkins Management will not
have outstanding any stock or securities convertible or exchangeable for any
shares of its capital stock, nor have outstanding any rights, options,
agreements or arrangements to subscribe for or to purchase its capital stock or
any stock or securities convertible into or exchangeable for its capital stock.
The Shareholder is the only holder of capital stock of Atkins Management. All
capital stock, options, warrants and other securities issued by Atkins
Management were issued in compliance, in all respects, with all applicable
federal and state securities laws.
3.3 Authorization of Transaction. Atkins Management has the requisite
corporate power and authority to execute and deliver this Agreement, perform its
obligations hereunder and to consummate the transactions contemplated on its
part hereby. The execution, delivery and performance of this Agreement by Atkins
Management and the consummation by Atkins Management of the transactions
contemplated on its part hereby have been duly authorized by the Board of
Directors of Atkins Management. No other corporate approval on the part of
Atkins Management (other than shareholder approval) will be necessary to
authorize the execution and delivery of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Atkins Management and, upon approval hereof by the sole shareholder of Atkins
Management, will constitute the legal, valid and binding obligation of Atkins
Management, 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 Atkins Management, the
performance by Atkins Management of its obligations hereunder or the
consummation of the transactions contemplated hereby by Atkins Management 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 Atkins Management 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
Atkins Management is a party or by which Atkins Management 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 or registration with or authorization, consent or approval
of any public body or governmental or regulatory authority is necessary for the
consummation by Atkins Management of the transactions contemplated by this
Agreement.
3.4 Subsidiaries. Atkins Management does not own and is not obligated to
purchase any equity interest in or any other interest convertible into or
exchangeable for an equity interest in any entity.
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3.5 Financial Statements. Atkins Management has delivered to TBA (a)
unaudited balance sheets as of December 31, 1998 and 1997, (b) unaudited
statements of operations for each of the years in the two-year period ended
December 31, 1998, (c) unaudited balance sheets as of August 31, 1999, and (d)
unaudited statements of operations for the eight (8) months ended August 31,
1999, for Atkins Management (collectively, the "Financial Statements"). The
Financial Statements have been prepared on the accrual basis of accounting,
which basis of accounting has been applied consistently for all periods and
present fairly in all material respects the financial condition of Atkins
Management as of such dates and the results of its operations and cash flows for
such periods. Since December 31, 1997, there have been no changes in Atkins
Management's method of accounting for tax purposes.
3.6 Events Subsequent to Financial Statements. Except as disclosed in
the Financial Statements, permitted in this Agreement or specified in Section
3.6 of the Disclosure Schedule, since December 31, 1998, there has not been:
(a) any materially adverse change in the financial condition,
results of operations or business of Atkins Management;
(b) other than (i) the distribution by Atkins Management to the
Shareholder of an investment asset valued at approximately $100,000,
(ii) the payment by Atkins Management to the Shareholder of a cash bonus
not in excess of $40,000, and (iii) the distribution by Atkins
Management to the Shareholder its interests in the Investment
Partnerships (herein so called) established between the Shareholder and
artists under the Shareholder's management, any sale, lease, transfer,
license or assignment of any material assets, tangible or intangible, of
Atkins Management, other than in the ordinary course of business;
(c) any damage, destruction or property loss, whether or not
covered by insurance, affecting materially adversely the properties or
business of Atkins Management;
(d) any declaration or setting aside or payment of any dividend
or distribution with respect to the shares of capital stock of Atkins
Management or any redemption, purchase or other acquisition of any such
shares;
(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 Atkins Management (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 Atkins Management other than (i) those incurred in the
ordinary course of business, (ii) those which do not exceed $10,000 in
the aggregate, and (iii) those incurred in the course of negotiating,
documenting and consummating the transactions contemplated by this
Agreement;
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(g) any cancellation or compromise by Atkins Management 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 Atkins Management of any right of
any material value;
(i) except licenses of software made in the ordinary course of
business, consistently with past practice, any sale, assignment,
transfer or grant by Atkins Management 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 Atkins Management not terminable on 30 days or less notice
without cost or liability (including, without limitation, any payment of
or promise to pay any bonus or special compensation) with employees or
any increase in compensation or benefits to officers or directors of
Atkins Management, other than in the ordinary course of business;
(k) any change made or authorized in the charter or bylaws of
Atkins Management;
(l) any issuance, sale or other disposition by Atkins Management
of any shares of its capital stock or other equity securities, or any
grant of any options, warrants or other rights to purchase or obtain
(including upon conversion or exercise) shares of its capital stock or
other equity securities;
(m) any loan to or other transaction with any officer, director
or shareholder of Atkins Management giving rise to any claim or right of
Atkins Management against any such person or of such person against
Atkins Management;
(n) any payment to or other transaction with any officer,
director or shareholder of Atkins Management 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 Atkins Management is a party or by which it is
bound so as to affect, materially and adversely, the properties or
business of Atkins Management; or
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(p) any other material transaction or commitment entered into
other than in the ordinary course of business by Atkins Management.
3.7 Undisclosed Liabilities. Atkins Management 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, incurred
in the normal and ordinary course of business of Atkins Management since January
1, 1999 (provided that, liabilities or obligations incurred in connection with
the termination of employees shall not be considered liabilities incurred in the
ordinary course of business), or incurred in the course of negotiating,
documenting and consummating the transactions contemplated by this Agreement.
Except as specified in Section 3.7 of the Disclosure Schedule, Atkins Management
is not indebted, directly or indirectly, to any person who is an officer,
director or shareholder of Atkins Management or any affiliate of any such person
in any amount whatsoever other than for salaries for services rendered or
reimbursable business expenses, and no such officer, director, shareholder or
affiliate is indebted to Atkins Management, except for advances made to
employees of Atkins Management in the ordinary course of business to meet
reimbursable business expenses anticipated to be incurred by such obligor.
Atkins Management has no liability, known or unknown, either accrued, absolute,
contingent or otherwise, arising out of the management of the assets comprising
the Investment Partnerships.
3.8 Tax Returns and Audits.
(a) The taxable year of Atkins Management ends December 31.
Atkins Management 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 Atkins Management is not required
to pay any other taxes for such periods except as shown in such Tax
Returns. The income tax returns filed by Atkins Management have not
been, and are not being, to the knowledge of Atkins Management, 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 Atkins Management 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 Atkins Management. There are no tax liens (other
than liens for taxes which are not yet due and payable) on any of the
property of Atkins Management, nor are there any pending or threatened
examinations or tax claims asserted. Atkins Management has not granted
any extensions of limitation periods applicable to tax claims or filed a
consent under Section 341(f) of the Code relating to collapsible
corporations. Except in jurisdictions in which Atkins Management
voluntarily files tax returns, no claim has ever been made by a taxing
authority that Atkins Management is or may be subject to taxation by
that jurisdiction. True
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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 Atkins Management since January 1,
1995, have been delivered to TBA, and the same are listed in Section 3.8
of the Disclosure Schedule. Atkins Management is not a party to, or
bound by, any tax indemnity, tax sharing or tax allocation agreement.
Atkins Management 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 Code. Atkins Management has never
been a member of an "affiliated group," as defined in Section 1504(a) of
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. Atkins
Management is not is a United States real property holding corporation
as defined in Section 897 of the Code. No shareholder of Atkins
Management is a foreign person within the meaning of Section 1445(b)(2)
of the Code. Atkins Management has not made any tax elections under any
section of the Code (other than its election to be taxed as an "S"
corporation under Section 1362), including, without limitation under any
of Sections 108, 168, 338, 441, 463, 472, 1017, 1033 or 4977 of the Code
(or any predecessor thereof). None of the assets and properties of
Atkins Management is an asset or property that TBA or any of its
affiliates is or will be required to treat as being (i) owned by any
other Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954 as amended, and in effect immediately
before the enactment of the Tax Reform Act of 1986, or (ii) tax-exempt
use property within the meaning of Section 168(h)(1) of the Code. No
closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any state, local, or
foreign law has been entered into by or with respect to Atkins
Management or any assets thereof. Atkins Management has not agreed to or
is not 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 of Atkins Management, Atkins Management has no
applications pending with any taxing authority requesting permission for
any changes in any accounting method of Atkins Management, and the
Internal Revenue Service has not proposed any such adjustment or change
in accounting method therefor. Atkins Management has not been or is not
in violation (or with notice or lapse of time or both, would be in
violation) of any applicable law relating to the payment or withholding
of taxes. Atkins Management 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.
(b) Atkins Management has been a validly electing S corporation
within the meaning of Code Sections 1361 and 1362 since June 12, 1996,
and Atkins Management will be an S corporation up to and including the
day before the Closing Date. Except as set forth in Section 3.8 of the
Disclosure Schedule, Atkins Management would not be liable for any tax
under Code Section 1374 if its assets were sold for their fair market
value as of January 1, 1999.
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3.9 Books and Records. The general ledgers and books of account of
Atkins Management, all federal, state and local income, franchise, property and
other tax returns filed by Atkins Management, with respect to its assets, and
all other books and records of Atkins Management 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 Atkins Management. With respect to each lease so set forth:
(a) the lease has been validly executed and delivered by Atkins Management and,
to the knowledge of Atkins Management, by the other party or parties thereto and
is in full force and effect; (b) neither Atkins Management nor, to the knowledge
of Atkins Management, any other party to the lease is in material breach or
default, and no event has occurred on the part of Atkins Management or, to the
knowledge of Atkins Management, 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) Atkins Management
has not repudiated and, to the knowledge of Atkins Management, no other party to
the lease has repudiated any provision thereof; and (d) there are no disputes,
oral agreements or delayed payment programs in effect as to the lease.
3.11 Tangible Property. Except as specified in Section 3.11 of the
Disclosure Schedule, Atkins Management 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 material encumbrances, loans, security interests, mortgages or
pledges.
3.12 Intellectual Property.
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list
of intellectual property owned by Atkins Management 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 Atkins Management 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) Atkins Management 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 Atkins
Management is not being infringed upon by
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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 Atkins Management;
(v) Atkins Management has not received any charge of
interference or infringement with respect to the item;
(vi) except in the ordinary course of business, Atkins
Management 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 material adverse effect on the right, title and
interest of Atkins Management in the item;
(viii) Atkins Management 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
(ix) Atkins Management has supplied TBA with true and
complete copies of all written documentation evidencing its
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 Atkins
Management practices or uses that are material to Atkins Management.
With respect to each such item of intellectual property:
(i) any license agreement covering the item is a valid
and binding agreement and, to the knowledge of the Shareholder,
is in full force and effect;
(ii) no event has occurred which constitutes a breach of
such license agreement, Atkins Management has not repudiated
and, to the knowledge of Atkins the Shareholder, 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) Atkins Management has supplied TBA with a true and
complete copy of the license agreement;
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(iv) the transactions contemplated by this Agreement
will have no material adverse effect on the ability of Atkins
Management to continue using or practicing each such item; and
(v) Atkins Management is not aware of any claim that the
exercise of the rights granted to Atkins Management with respect
to such item infringes upon the intellectual property rights of
any third party.
(c) To the knowledge of the Shareholder, Atkins Management has
not infringed, misappropriated or otherwise violated any intellectual
property rights of any third party. The Shareholder is 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 Atkins Management as now conducted or as presently proposed
to be conducted.
(d) Atkins Management has taken commercially reasonable security
measures to protect the security, confidentiality and value of all the
material intellectual property owned by it.
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 Atkins Management is a party:
(a) all artist management contracts to which Atkins Management
is a party;
(b) 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;
(c) any contract for the purchase or sale of supplies or other
personal property or for the furnishing or receipt of services which
contract calls for performance over a period of more than one year or
which involves more than the sum of $5,000.00;
(d) any joint venture or partnership agreement;
(e) any agreement or instrument under which Atkins Management is
or may become indebted for borrowed money;
(f) any noncompetition agreement;
(g) any other contract in which the consequences of a default or
termination would have a materially adverse effect on the financial
condition of Atkins Management or on the prospects or the conduct of the
business of Atkins Management;
(h) any standard form of license agreement; and
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(i) 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 of Atkins Management. Neither Atkins Management
nor, to the knowledge of the Shareholder, any other party is in breach or
default, and no event has occurred on the part of Atkins Management or, to the
knowledge of the Shareholder, 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.
To the knowledge of the Shareholder, none of such contracts or arrangements will
be terminated or modified by the consummation of the Acquisition. Atkins
Management has previously made available to TBA all of the material service
agreements of Atkins Management with its customers. Except as specified in
Section 3.13 of the Disclosure Schedule, Atkins Management 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)-(i) 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 of Atkins Management to whom Atkins
Management made payments, during the fiscal year ended December 31, 1998, in
excess of one percent of Atkins Management's gross revenues as reflected in the
Financial Statements for such year and all customers or clients of Atkins
Management that paid Atkins Management, during the fiscal year ended December
31, 1998, more than two percent of the gross revenues of Atkins Management as
reflected in the Financial Statements for such year. Since December 31, 1998, no
material customer or client of Atkins Management has notified Atkins Management
that it will substantially decrease or cease doing business with Atkins
Management.
3.15 Notes; Accounts Receivable. As of the Closing Date, all notes
payable to and accounts receivable of Atkins Management will be properly
reflected on their respective books and records and will be valid receivables
subject to no setoffs or counterclaims (other than in the ordinary course of
business).
3.16 Powers of Attorney. There are no outstanding material powers of
attorney or similar instruments executed by Atkins Management in favor of any
third party.
3.17 Condition of Property. Each building, fixture, machine and piece of
equipment (having a net book value of $5,000.00 or more) owned or used by Atkins
Management is in good operating condition and repair, subject to normal wear and
tear, and, to the knowledge of the Shareholder, is in compliance with all
zoning, building and fire codes in all material respects. Atkins Management 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. Atkins Management 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
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effect. All premiums due on the Insurance Policies or renewals thereof have been
paid and there is no default by Atkins Management under any of the Insurance
Policies.
3.19 Litigation. Section 3.19 of the Disclosure Schedule sets forth any
instances in which (a) Atkins Management 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, to
the knowledge of the Shareholder, threatened against Atkins Management; or (b)
Atkins Management is a plaintiff in any action, domestic or foreign, judicial or
administrative, or any such action exists in which a counterclaim against Atkins
Management is pending or, to the knowledge of the Shareholder, might be brought.
None of the actions, suits, proceedings or investigations set forth in Section
3.19 of the Disclosure Schedule could result in any adverse change in the
condition, financial or otherwise, of Atkins Management, 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 Atkins Management or to which Atkins Management is a
party and there is no reason to believe that any such action, suit, proceeding
or investigation will be brought or threatened against Atkins Management.
3.20 Employees. Atkins Management has listed in Section 3.20 of the
Disclosure Schedule and has furnished to TBA true and complete copies of: (a)
any written employment agreements with officers and directors of Atkins
Management currently in effect; and (b) any written employment agreements with
its employees currently in effect which by their terms may not be terminated by
Atkins Management at will or which grant severance payments. Atkins Management
has not entered into any similar oral employment agreements that are currently
in effect. To the Shareholder's knowledge, no key employee or group of employees
has any plans to terminate employment with Atkins Management. Atkins Management
is not a party to or bound by any collective bargaining agreement. Except as
specified in Section 3.20 of the Disclosure Schedule, there are no loans or
other obligations payable or owing by Atkins Management to any shareholder,
officer, director or employee of Atkins Management (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 Atkins Management or
any guarantees by Atkins Management of any loan or obligation of any nature to
which any such person is a party. Atkins Management 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. Atkins Management has listed in Section
3.21 of the Disclosure Schedule and has furnished to TBA true and complete
copies of (a) any nonqualified deferred or incentive compensation or retirement
plans or arrangements, (b) any qualified retirement plans or arrangements, (c)
any other employee compensation, severance or termination pay or welfare benefit
plans, programs or arrangements and (d) any related trusts, insurance contracts
or other funding arrangements maintained, established or contributed to by
Atkins Management or to which Atkins Management is a party or otherwise is bound
("Atkins Management Employee Benefit Plans"). Except as required by law, Atkins
Management does not maintain or contribute or has ever maintained or contributed
to any funded or unfunded medical, health or life insurance plan or
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arrangement for retirees or terminated employees. Atkins Management 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 Atkins Management has no actual or
potential liability under Section 4201 of ERISA for any complete or partial
withdrawal from a multiemployer plan. Except as listed on Section 3.21 of the
Disclosure Schedule, Atkins Management neither maintains, contributes to or has
any liability with respect to any employee pension benefit plan (as defined in
Section 3(2) of ERISA) which is intended to meet the requirements of a qualified
plan under Section 401(a) of the Code. Atkins Management neither maintains,
contributes to or has any liability with respect to a plan which is subject to
Title IV of ERISA or Section 412 of the Code. With respect to the employee
benefit plans listed in Section 3.21 of the Disclosure Schedule, Atkins
Management has 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, 1995. All employee
benefit plans and related trusts listed in Section 3.21 of the Disclosure
Schedule and maintained or contributed to by Atkins Management or with respect
to which Atkins Management 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 directors, officers and employees of Atkins Management is
the subject of any lawsuit, arbitration or to the knowledge of the Shareholder
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
Atkins Management, its directors, officers and employees nor any other
fiduciary, as such term is defined in Section 3 of ERISA, has committed any
breach of fiduciary responsibility imposed by ERISA or any other applicable law
which would subject Atkins Management or its directors, officers and employees
to liability under ERISA or any applicable law.
3.22 Guarantees. Atkins Management is not a guarantor or otherwise
liable for any material indebtedness of any other person, firm or corporation
other than endorsements for collection in the ordinary course of business.
3.23 Legal Compliance. Atkins Management and, to the knowledge of the
Shareholder, each of its respective directors, officers and employees (the
individuals only in their capacities as representatives of Atkins Management)
has complied in all material respects with all applicable laws and regulations
of foreign, federal, state and local governments and all agencies thereof, and
no claim has been filed (with notice to Atkins Management) against Atkins
Management alleging a violation of any such laws or regulations. Atkins
Management holds all of the material permits,
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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. Neither Atkins Management, nor,
to the knowledge of the Shareholder, any director, officer, agent, partner or
employee thereof or any other person acting for or on behalf of Atkins
Management has directly or indirectly (a) made or agreed to make any
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment (whether in cash or otherwise) to any person, private or public,
regardless of form, whether in money, property, or services, in violation of any
applicable law, rule or regulation (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of Atkins Management, or (iv) to pay for any lobbying or similar
services or (b) except as specified in Section 3.23 of the Disclosure Schedule,
established or maintained any fund or asset that has not been recorded in the
books and records of Atkins Management.
3.24 Certain Business Relationships. Except as specified in Section 3.24
of the Disclosure Schedule, to the knowledge of the Shareholder, none of the
present or former shareholders, directors, officers or employees of Atkins
Management 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 Atkins Management, and
none of the foregoing persons owns any property or rights, tangible or
intangible, which are used in the business of Atkins Management.
3.25 Broker's Fees. Neither Atkins Management nor anyone on its behalf
has any liability to any broker, finder, investment banker or similar 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 similar agent
in connection with the Acquisition or any similar transaction.
3.26 Environment, Health and Safety. Atkins Management is in compliance
with all environmental, health and safety laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been held
or commenced against Atkins Management alleging any failure so to comply. Atkins
Management has obtained and been in compliance with all of the material terms
and conditions of all permits, licenses and other authorizations which are
required under, and have complied with all other material limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, laws, and timetables which are contained in, all applicable
environmental, health and safety laws.
3.27 Year 2000. The computer programs and technical systems of Atkins
Management used by Atkins Management are year 2000 compliant, will function and
operate prior to, during and after the calendar year 2000 in accordance with
their specifications and will provide the required output without experiencing
abnormal ending dates and/or invalid or incorrect years and shall incorporate
century recognition date data, calculations that use same century and
multi-century formulas and date values that reflect the current century in all
transactions. In addition, all such computer programs and technical systems will
process, manage and manipulate data involving dates, including single century
and multi-century formulas, and will not cause an abnormally ending scenario
within the application or generate incorrect values or invalid results involving
such dates.
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3.28 Jaci Velasquez Management Agreement. Except as specified in Section
3.28 of the Disclosure Schedule, no portion of the compensation, fees,
commissions, income or other consideration received by "Manager" pursuant to the
Jaci Velasquez Management Agreement (as such term and such agreement are further
defined in Section 6.9 hereof), is payable to any party other than "Manager"
including, without limitation, Pamela Muse or any entity controlled by or
affiliated with Pamela Muse.
3.29 Disclosure. The representations and warranties and statements of
fact made by the Shareholder 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 on 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
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE SHAREHOLDER
Except as set forth in the correspondingly numbered section of the
Disclosure Schedule, the Shareholder represents and warrants to TBA as follows:
4.1 Representations Regarding Shares of Atkins Management.
(a) The Shareholder is the record and beneficial owner of and has good
title to the Shares, free and clear of any and all Liens. The Shares are all of
the shares of capital stock of Atkins Management owned by the Shareholder, and
the Shares collectively represent all the issued and outstanding capital stock
of Atkins Management.
(b) The Shareholder has the full right, power and authority to enter
into this Agreement.
(c) The Shareholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of any
court or other governmental body which would prevent the execution or delivery
of this Agreement by the Shareholder.
(d) No broker or finder has acted for the Shareholder in connection with
this agreement or the transactions contemplated hereby, and no broker or finder
is entitled to any brokerage or finder's fee or other commissions in respect of
such transactions based upon agreements, arrangements or understandings made by
or on behalf of the Shareholder.
4.2 Authorization. This Agreement and all such other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which the
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Shareholder is a party constitute the valid and legally binding obligations of
the Shareholder, enforceable against the Shareholder in accordance with their
respective terms, except as enforceability may be limited or affected by
applicable bankruptcy, insolvency, moratorium, reorganization or other laws of
general application relating to or affecting creditors' rights generally.
Except as specified on Section 4.2 of the Disclosure Schedule, the
execution, delivery and performance by the Shareholder of this Agreement and the
agreements provided for herein, and the consummation by the Shareholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Shareholder; (b) violate any
judgment, decree, order or award of any court, governmental body or arbitrator;
or (c) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Shareholder pursuant to, any indenture, mortgage, deed of trust or
other instrument or agreement to which the Shareholder is a party or by which
the Shareholder or any of his properties is or, to the knowledge of the
Shareholder, may be bound, except for violations or conflicts which individually
or in the aggregate would not have a material adverse effect on Atkins
Management's financial condition or results of operation.
ARTICLE 5
[INTENTIONALLY OMITTED]
ARTICLE ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 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 the party incurring such expenses.
6.2 Taking of Necessary Action. Following the Closing Date, 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 evidence
or make effective the transactions contemplated by this Agreement. Without
limiting the foregoing, Atkins Management and TBA shall use commercially
reasonable 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, in the opinion of Atkins
Management or TBA, 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 6.2.
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<PAGE> 24
6.3 Press Releases. Atkins Management and TBA shall consult with each
other as to the form and substance of any press release or other public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby; provided, however, that nothing in this Section 6.3 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; provided further,
however, that neither this Agreement nor any other document or agreement
delivered in connection with this Agreement may be disclosed or made public
unless legal counsel to the disclosing party shall have first reasonably
determined that such disclosure is required by applicable law.
6.4 Employee Matters. TBA and Atkins Management agree that all employees
of Atkins Management immediately prior to the Closing shall be employed by
Atkins Management immediately after the Closing at such level of pay which is
mutually agreed upon between each employee and Atkins Management, it being
understood that Atkins Management 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. Each of the five (5) full-time employees of Atkins
Management shall be issued a "cardkey" granting such employee access to the
access-controlled surface parking lot immediately adjacent to the TBA office at
300 Tenth Avenue South, Nashville, Tennessee, and each such employee shall be
allowed to park their personal automobile in such lot while performing their
employment duties to Atkins Management. Atkins Management shall terminate the
Mike Atkins Management, Inc. 401(k) Profit Sharing Plan (the "Atkins Plan")
effective at 5:00 p.m. on the Closing Date. All employees of Atkins Management
covered by the Atkins Plan shall, for purposes of eligibility under the TBA
Entertainment Corporation 401(k) Profit Sharing Plan, be credited with their
period of service with Atkins Management. Upon Closing and thereafter, TBA shall
assume all responsibility with respect to the terminated Atkins Plan. Until
complete liquidation of the trust funding the Atkins Plan, TBA shall maintain
the Atkins Plan in compliance with the Code, ERISA, other applicable law, and
its terms. TBA, at its expense, shall apply to the Internal Revenue Service for
a determination that the termination of the Atkins Plan does not adversely
affect its qualification under Sections 401(a) and 501(a) of the Code and upon
receipt of such favorable determination shall distribute the assets of the trust
to the participants of the Atkins Plan in accordance with its terms. TBA shall
take all necessary steps to amend the Atkins Plan to conform to the General
Agreement on Tariffs and Trade, the Small Business Job Protection Act of 1996,
the Tax Reform Act of 1997, and other applicable laws and take other reasonable
steps as necessary to obtain such favorable determination from the Internal
Revenue Service.
6.5 Tax Matters. From and after the Closing, TBA, on the one hand, and
the Shareholder, 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 either of them of any
Tax Returns, elections, consents or certificates required to be prepared and
filed by such parties or (2) in connection with any audit or proceeding relating
to taxes relating to the assets of Atkins Management. TBA agrees to retain all
books and records with respect to tax matters pertinent to Atkins Management
relating to any taxable
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period beginning before the Closing Date until the expiration of the statute of
limitations of the respective taxable periods, and to abide by all 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,
that is inconsistent with the provisions of this Agreement. In addition, as
custodian of the books and records of Atkins Management as of the Closing Date,
TBA, or its authorized representatives, shall be responsible for closing such
books and records as of the Closing Date for state and federal income tax and
financial reporting purposes. TBA and the Shareholder shall cooperate fully with
each other in connection with such closing and TBA shall make available to the
Shareholder all financial and income tax data, statements, reports and
information relating to such closing of the books and records as of the Closing
Date.
6.6 Section 338(h)(10) Election. TBA and the Shareholder shall jointly
elect to treat the Acquisition as a "qualified stock purchase" within the
meaning of Section 338 of the Code and shall timely prepare and file with the
Internal Revenue Service a Section 338(h)(10) election on Form 8023. TBA
indemnifies the Shareholder for the amount by which the Shareholder's combined
state and federal income and excise tax liability arising as a result of the
sale of the Shares in accordance with the Section 338(h)(10) election exceeds
the combined state and federal income and excise tax liability the Shareholder
would have incurred had TBA and the Shareholder not filed the Section 338(h)(10)
election. Any payment due by TBA to the Shareholder hereunder shall be paid,
without right of offset, within thirty (30) days following the agreement of the
parties hereto as to the amount of indemnification payment payable hereunder.
Should the parties disagree with respect to such calculation, an office of
Arthur Andersen LLP other than the office normally used by TBA shall calculate
promptly the indemnification payment due hereunder, if any, and the parties
shall be bound by such determination. Sections 10.8 and 10.9 of this Agreement
shall not apply to the indemnification obligation of TBA under this Section 6.6.
6.7 Adjustment to Purchase Price. Notwithstanding the provisions of
Section 1.2(a) hereof, (i) should the Shareholder voluntarily terminate his
employment relationship with Atkins Management prior to the end of the five-year
term of his Employment Agreement (as defined in Section 7.2(e) hereof), other
than upon his death, for "Good Reason" or upon the Shareholder's "Disability"
(as such terms are defined in such Employment Agreement), or (ii) should Atkins
Management terminate the employment relationship of the Shareholder as a result
of the fraud, embezzlement or other criminal act by the Shareholder involving
TBA or Atkins Management, or upon termination of the Employment Agreement by
Atkins Management due to the conviction of, or a plea of nolo contendere to, a
felony crime involving moral turpitude by the Shareholder, the Shareholder shall
be obligated to pay to TBA, within fifteen (15) days of the date of such
termination of employment, a dollar amount in cash equal to the excess of (a)
the aggregate purchase price theretofore paid to the Shareholder by TBA for the
Shares over (b) the aggregate adjusted net income realized from the "book of
business" (as such term is generally understood in the artist management
business) of Atkins Management during the period in which the Shareholder was an
employee of Atkins Management pursuant to the Employment Agreement, or any
amendment thereto.
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6.8 Separate Subsidiary. TBA shall operate Atkins Management as a
separate, incorporated subsidiary of TBA for the period beginning on the Closing
Date and ending on the final payment made under the Adjustable Note. TBA shall
use reasonable efforts to economically and managerially support and enhance the
continued development of the business of Atkins Management.
6.9 Jaci Velasquez Management Agreement. TBA and Shareholder acknowledge
that the Management Agreement (herein so called) with Jaci Velasquez, executed
in January of 1997, is by and between Jaci Velasquez, as "Artist," and Mike
Atkins Management, Inc./Mike Atkins, jointly as "Manager." All compensation,
fees, commissions, income or other consideration of any kind earned by Manager
pursuant to the Management Agreement shall vest solely in Atkins Management, and
should Shareholder receive any compensation, fees, commissions, income or other
consideration as Manager pursuant to the Management Agreement, Shareholder shall
hold such compensation, fees, commissions, income or other consideration in
trust for and as agent of Atkins Management and shall promptly deliver, convey,
assign and pay over to Atkins Management any such compensation, fees,
commissions, income or other consideration received by Shareholder pursuant to
the Management Agreement.
6.10 Investment Partnerships. Atkins Management shall have no liability
or obligation to make any contribution, deposit or payment of any kind to any
Investment Partnership on or after the Closing Date.
6.11 No Deficit Working Capital. Notwithstanding any other provision of
this Agreement, on the Closing Date, the balance sheet of Atkins Management
shall reflect total net assets equal to or greater than total liabilities, and
it is expressly contemplated by the parties that, on or prior to Closing, Atkins
Management will distribute assets so that the net assets of Atkins Management
approximate the total liabilities of Atkins Management.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 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.
7.2 Additional Conditions to TBA's Obligations. The obligations of TBA
to effect the Closing are subject to the satisfaction of the following
conditions on or before the Closing Date:
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(a) Except for breaches which do not constitute a Material
Adverse Breach (as defined in Section 10.8 of this Agreement) by Atkins
Management or the Shareholder, the representations and warranties set
forth in Articles 3 and 4 of this Agreement (without regard to any
amendments or modifications of the Disclosure Schedule by Atkins
Management after the time TBA has signed this Agreement) will be true
and correct in all material respects 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) Atkins Management shall have performed, in all material
respects, each obligation and agreement and complied, in all material
respects, with each covenant to be performed and complied with by it
under this Agreement, including, without limitation, all of its
agreements contained in Article 6 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 to own, operate or control Atkins Management
or any portion of the assets of Atkins Management or to prevent a breach
of or a default under or a termination of any agreement material to
Atkins Management to which Atkins Management is a party or to which any
material portion of the assets of Atkins Management 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 would
adversely affect the right of TBA to own, operate or control Atkins
Management or any material portion of the assets of Atkins Management or
the value of the assets of Atkins Management;
(e) On or prior to the Closing Date, the Shareholder shall have
entered into an employment agreement with Atkins Management in the form
of Exhibit C attached hereto dated as of the Closing Date (the
"Employment Agreement") and, except as specified on Section 7.2(e) of
the Disclosure Schedule, the Shareholder shall have terminated any
employment, compensation, consulting, fee, services or other similar
agreements payable to him, or to his affiliated entities, if any;
(f) At the Closing, Atkins Management will have delivered to TBA
the following:
(i) a certificate executed on behalf of Atkins
Management by its President stating that the conditions set
forth in Sections 7.2(a) through 7.2(d) of this Agreement have
been satisfied;
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(ii) certified copies of the resolutions duly adopted by
Atkins Management's Board of Directors authorizing the
execution, delivery and performance of this Agreement and the
other agreements contemplated hereby and thereby;
(iii) good standing or comparable certificates for
Atkins Management from the jurisdiction of its incorporation and
from every jurisdiction where a failure to be qualified or
licensed would have a material adverse effect on the
consolidated financial condition, results of operations or
business of Atkins Management, dated not earlier than ten (10)
days prior to the Closing Date;
(iv) copies of all third party and governmental consents
(or other evidence satisfactory to TBA) that Atkins Management
is required to obtain in order to effect the transactions
contemplated by this Agreement;
(v) a copy of Atkins Management's charter certified by
the Secretary of State of the State of Tennessee;
(vi) certificates evidencing the Shares, duly endorsed;
(vii) a copy of the written correspondence from Atkins
Management to Pamela Muse and Muse & Associates, Inc.
terminating as of the Closing Date (i) the oral office lease
agreement by and between Atkins Management and Muse &
Associates, Inc., and (ii) the oral agreement of Atkins
Management to pay one-half of the salary and benefits of Cari
Norris and Billie Jo Jackson;
(viii) a certified copy of the resolution duly adopted
by Atkins Management's Board of Directors terminating the Mike
Atkins Management, Inc. 401(k) Profit Sharing Plan effective at
5 p.m. on the Closing Date; and
(ix) such other documents as TBA may reasonably request
in connection with the transactions contemplated hereby;
(g) All proceedings to be taken by Atkins Management in
connection with the consummation of the Acquisition at the Closing and
the other transactions contemplated hereby and all documents required to
be delivered by Atkins Management in connection with the Acquisition and
the other transactions contemplated hereby will be reasonably
satisfactory in form and substance to TBA.
7.3 Additional Conditions to the Obligations of Atkins Management and
the Shareholder. The obligations of Atkins Management and the Shareholder to
effect the Closing are subject to the satisfaction of the following conditions
on or before the Closing Date;
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(a) Except for breaches which do not constitute a Material
Adverse Breach (as defined in Section 10.8 of this Agreement) by TBA,
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 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 it under
this Agreement prior to the Closing Date;
(c) No action or proceeding before any court or government body
will be pending or threatened wherein a judgment, decree or order would
prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded;
(d) At the Closing, TBA will have delivered to Atkins Management
and the Shareholder the following:
(i) a certificate executed on behalf of TBA by its Chief
Executive Officer stating that the conditions set forth in
Sections 7.3(a) through (c) of this Agreement have been
satisfied;
(ii) certified copies of the resolutions duly adopted by
TBA's board of directors authorizing the execution, delivery and
performance of this Agreement;
(iii) good standing certificates for TBA from the
Secretary of State of the State of Delaware 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 Atkins
Management) that TBA are required to obtain in order to effect
the transactions contemplated by this Agreement;
(v) copies of TBA's charter certified by the Secretary
of State of the State of Delaware;
(vi) the Cash Portion, the Adjustable Note and the
Non-Adjustable Note; and
(vii) such other documents as Atkins Management or the
Shareholder may reasonably request in connection with the
transactions contemplated hereby;
(e) All proceedings to be taken by TBA in connection with the
consummation of the Acquisition at the Closing and all documents
required to be delivered by TBA in
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connection with the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Atkins Management and the
Shareholder;
(f) Except as otherwise disclosed to Atkins Management and the
Shareholder, 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 to own, operate or
control Atkins Management or any portion of the assets of Atkins
Management or to prevent a breach of or a default under or a termination
of any agreement material to Atkins Management to which Atkins
Management is a party or to which any material portion of the assets of
Atkins Management is subject, will have been obtained; and
(g) The Employment Agreement will have been executed and
delivered by the Closing Date and there will not have been any changes,
amendments or modifications to, or termination of, such agreement.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual written consent of the Shareholder and TBA;
(b) by TBA if there has been a misrepresentation or breach of a
representation or warranty or a failure to perform a covenant on the
part of Atkins Management or the Shareholder 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
(c) by Atkins Management 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 with respect to their representations,
warranties and covenants set forth in this Agreement and any such breach
or failure constitutes a Material Adverse Breach.
8.2 Amendment. This Agreement may not be amended except by an instrument
signed by each of the parties hereto.
8.3 Waiver. At any time prior to the Closing Date, (a) TBA may (i)
extend the time for the performance of any of the obligations or other acts of
Atkins Management and/or the Shareholder or (ii) waive compliance with any of
the agreements of Atkins Management and/or the Shareholder or with any
conditions to its own obligations, and (b) Atkins Management and/or the
Shareholder may (i) extend the time for the performance of any of the
obligations or other acts of TBA or (ii) waive compliance with any of the
agreements of TBA or with any conditions to their own
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obligations in each case only to the extent such obligations, agreements and
conditions are intended for their benefit.
8.4 Effect of Termination. If this Agreement is terminated as provided
in Section 8.1, this Agreement shall become void and there shall be no liability
or further obligation on the part of any party hereto or any of their respective
shareholders, officers or directors, except (a) that nothing herein and no
termination pursuant hereto will relieve any party from liability for any breach
of this Agreement and (b) the provisions of Section 6.6 and any confidentiality
agreements by and between TBA and Atkins Management will survive such
termination.
ARTICLE 9
INDEMNIFICATION
9.1 By TBA, Atkins Management and the Shareholder. TBA on the one hand
and Atkins Management and the Shareholder on the other hand each hereby agree to
indemnify and hold harmless the other against all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement costs
and any legal, accounting or other expenses for defending any actions or
threatened actions) (collectively "Damages") reasonably incurred by TBA, Atkins
Management and the Shareholder 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.
9.2 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
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such suit after notification thereof as provided in Section 9.3 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.
9.3 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made,
(a) the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner.
9.4 Payment of Indemnification Obligation. All indemnification by TBA,
Atkins Management or the Shareholder 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.
9.5 Limitations. EXCEPT IN CASES OF FRAUD, WHERE SPECIFIC PERFORMANCE IS
AVAILABLE AS A REMEDY OR AS PROVIDED IN SECTION 6.7 OF THIS AGREEMENT, THE
PARTIES AGREE AND ACKNOWLEDGE THAT THE INDEMNIFICATION RIGHTS PROVIDED IN THIS
ARTICLE 9 SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF SUCH PARTIES TO THIS
AGREEMENT FOR CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ALL
DISPUTES ARISING OUT OF OR RELATING TO ANY OTHER AGREEMENTS OR DOCUMENTS SIGNED
OR EXECUTED IN RELATION TO THE CLOSING (EXCEPT FOR THE EMPLOYMENT AGREEMENT,
NON-ADJUSTABLE NOTE AND ADJUSTABLE NOTE, THE TERMS OF WHICH SHALL CONTROL CLAIMS
ARISING OUT OF SUCH RESPECTIVE AGREEMENTS). EXCEPT IN CASES OF FRAUD, WHERE
SPECIFIC PERFORMANCE IS AVAILABLE AS A REMEDY OR AS PROVIDED IN SECTION 6.7 OF
THIS AGREEMENT, THE AGGREGATE, MAXIMUM LIABILITY OF EACH OF THE SHAREHOLDER AND
TBA UNDER THIS ARTICLE 9 SHALL BE AN AMOUNT EQUAL TO $700,000.
-28-
<PAGE> 33
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. Notwithstanding the above, claims resulting from any breach of any
representation or warranty concerning tax or Atkins Management Employee Benefit
Plan matters shall expire one hundred twenty (120) days after the expiration of
any applicable statute of limitations. Any litigation between the parties hereto
arising out of or attributable to a breach of any representation, warranty or
covenant 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 or Atkins
Management 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, Atkins Management and the Shareholder
understand and agree that the covenants and undertakings on each of their parts
herein contained are uniquely related to the desire of TBA, Atkins Management
and the Shareholder to consummate the Acquisition, that the Acquisition is a
unique business opportunity for Atkins Management, TBA, and the Shareholder 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, Atkins Management, TBA and the Shareholder agree that TBA
shall be entitled to obtain specific performance by Atkins Management and the
Shareholder of every such covenant and undertaking contained herein to be
performed by Atkins Management and the Shareholder and that Atkins Management
and the Shareholder shall be entitled to obtain specific performance from TBA of
each and every covenant and undertaking herein contained to be observed or
performed by TBA.
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):
-29-
<PAGE> 34
(a) if to TBA:
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 Atkins Management:
Mike Atkins Management, Inc.
1202 Choctaw Trail
Brentwood, Tennessee 37027
Attention: Mike Atkins
Telecopy: (615) 377-3960
with a copy to:
Waller Lansden Dortch and Davis
A Professional Limited Liability Company
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Attention: Paul D. Gilbert, Esq.
Telecopy: (615) 244-6804
(c) if to the Shareholder:
Mike Atkins
1202 Choctaw Trail
Brentwood, Tennessee 37027
-30-
<PAGE> 35
with a copy to:
Waller Lansden Dortch and Davis
A Professional Limited Liability Company
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Attention: Paul D. Gilbert, Esq.
Telecopy: (615) 244-6804
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 person not party to this Agreement any rights or remedies
hereunder; (c) shall not be assigned by operation of law or otherwise, except
that TBA may assign all or any portion of their rights under this Agreement to
any wholly owned subsidiary but no such assignment shall relieve TBA of its
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. The parties consent to and agree to
submit to the jurisdiction of such courts. This Agreement may be executed in two
or more counterparts which together shall constitute a single agreement.
10.8 Material Adverse Breach. Breaches of representations, warranties
and covenants by either party hereto which (a) individually results in damages
to the other party in excess of $20,000 or (b) in the aggregate result in
damages to the other party in excess of $75,000, shall constitute, for purposes
of this Agreement, a "Material Adverse Breach."
-31-
<PAGE> 36
10.9 Limitation of Liability. Neither TBA, Atkins Management, nor the
Shareholder 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 Waiver of Purchase Right. Atkins Management hereby waives the
right of first refusal in its favor with respect to the transfer of the Shares
contemplated in this Agreement.
10.11 Effective Time. The transactions contemplated hereby shall be
effective for all purposes at 12:01 a.m. on December 7, 1999.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
-32-
<PAGE> 37
STOCK PURCHASE AGREEMENT
Signature Page
IN WITNESS WHEREOF, TBA, the Shareholder and Atkins Management have
caused this Agreement to be executed on the date first written above by their
respective officers duly authorized.
TBA ENTERTAINMENT CORPORATION
By: /s/ Thomas Jackson Weaver III
------------------------------------------
Thomas Jackson Weaver III,
Chief Executive Officer
MIKE ATKINS MANAGEMENT, INC.
By: /s/ Mike Atkins
------------------------------------------
Mike Atkins, President
/s/ Mike Atkins
---------------------------------------------
MIKE ATKINS
-33-
<PAGE> 38
SCHEDULE 1
DISCLOSURE SCHEDULE
<PAGE> 39
EXHIBIT A
FORM OF ADJUSTABLE PROMISSORY NOTE
<PAGE> 40
EXHIBIT B
FORM OF NON-ADJUSTABLE PROMISSORY NOTE
<PAGE> 41
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
Name Jurisdiction of Organization
---- ----------------------------
<S> <C>
TBA Entertainment Group Nashville, Inc. Tennessee
(formerly known as Avalon Entertainment
Group, Inc.)
AWC Acquisition Group Delaware
TBA Entertainment Holding Corporation Delaware
Eric Chandler Merchandising, Inc. California
TBA Entertainment Group Chicago, Inc. Delaware
(formerly known as Corporate Productions, Inc.)
Corporate Incentives, Inc. Illinois
TBA Entertainment Group Dallas, Inc. Texas
(formerly known as Magnum
Communications, Inc.)
TBA Entertainment Group Phoenix, Inc. Arizona
(formerly known as Image Entertainment
Productions, Inc.)
Karin Glass & Associates, Inc. Indiana
Ink Up, Inc. Indiana
KGA, Inc. Indiana
Titley Spalding & Associates, LLC Tennessee
TKS Marketing, Inc. Tennessee
TBA Resort Holding Corporation Delaware
Romeo Entertainment Group, Inc. Nebraska
Mike Atkins Management Group, Inc. Tennessee
TBA/Frank Joint Venture Not applicable
Warner/TBA Joint Venture Not applicable
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TBA
ENTERTAINMENT CORP. FORM 10-K FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,847,600
<SECURITIES> 0
<RECEIVABLES> 3,643,400
<ALLOWANCES> 50,000
<INVENTORY> 563,300
<CURRENT-ASSETS> 19,483,800
<PP&E> 3,772,000
<DEPRECIATION> 834,500
<TOTAL-ASSETS> 43,149,500
<CURRENT-LIABILITIES> 11,591,100
<BONDS> 3,719,600
0
100
<COMMON> 8,700
<OTHER-SE> 27,830,000
<TOTAL-LIABILITY-AND-EQUITY> 43,149,500
<SALES> 0
<TOTAL-REVENUES> 48,163,900
<CGS> 0
<TOTAL-COSTS> 31,863,400
<OTHER-EXPENSES> 14,685,800
<LOSS-PROVISION> 67,100
<INTEREST-EXPENSE> 448,800
<INCOME-PRETAX> 1,986,800
<INCOME-TAX> 790,000
<INCOME-CONTINUING> 1,196,800
<DISCONTINUED> 329,200
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,526,000
<EPS-BASIC> .18
<EPS-DILUTED> .18
</TABLE>
