SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT
FOR
AMPHITHEATER ENTERTAINMENT PARTNERSHIP
THIS SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT is
made as of April 1, 1994, by and between The Westside Amphitheatre Corporation,
an Arizona corporation ("WAC"), San Bernardino Amphitheater Corporation, a
Delaware corporation ("SBAC"), Charlotte Amphitheater Corporation, a Delaware
corporation ("CAC," and, together with SBAC and WAC, "Blockbuster"), and YM
Corp., a Delaware corporation ("Sony") . Certain capitalized terms used herein
are defined in Section 1 hereof. Unless otherwise specifically provided herein,
all obligations of Blockbuster hereunder shall be joint and several obligations
of SBAC, CAC and WAC.
RECITALS
WHEREAS, Blockbuster and Sony desire to pool certain
expertise in the ownership and operation of outdoor amphitheater entertainment
facilities.
WHEREAS, Sony, WAC and CAC formed a general partnership for
the above-referenced purposes on September 29, 1993, pursuant to that certain
Partnership Agreement for Amphitheater Entertainment Partnership Agreement for
Amphitheater Entertainment Partnership, which Partnership Agreement was amended
and restated as of February 18, 1994 (the "Old Partnership Agreement").
WHEREAS, the Old Partnership Agreement contemplated that the
San Bernardino Asset, currently owned by SBAC (which is, like CAC, an indirect
wholly owned subsidiary of Blockbuster Entertainment Corporation), would be
contributed by WAC to the Partnership. SBAC now desires to become a partner of
the Partnership so that it may transfer the San Bernardino Asset to the
Partnership directly, rather than through WAC.
WHEREAS, in order to promote efficiency of operation, achieve
high standards of performance and obtain a reasonable return upon the
investments of Sony and Blockbuster, each of Sony, WAC and CAC desire to admit
SBAC as a partner of the Partnership and to continue such Partnership subject
to the terms of this Agreement.
WHEREAS, following SBAC's Initial Capital Contribution, SBAC
will merge with and into Amphitheater Entertainment Corporation, a Delaware
corporation and the sole shareholder of SBAC ("AEC"), with AEC being the
surviving corporation, and then AEP will merge with and into CAC, a wholly
owned subsidiary of AEC, with CAC being the surviving corporation (such mergers
being referred to herein collectively as the ("SBAC Mergers") . Upon the
consummation of the SBAC Mergers, among other things, (i) SBAC will cease to be
a
Partner of the Partnership and (ii) CAC will succeed to all of the rights and
obligations of SBAC as a Partner of the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
Section 1.1 Definitions. Capitalized terms used in this
Agreement and not otherwise defined shall have the meaning given to such terms
in the SBPAP Agreement. When used in this Agreement the following terms shall
have the meanings set forth below:
"Act" means the Delaware Uniform Partnership Act, as in
effect from time to time.
"Acquiring Partner" means the Partner acquiring the
Partnership Interest of the other Partner(s) pursuant to Section 9.3 of this
Agreement.
"Additional Capital Contributions" means the Capital
Contributions made by the Partners pursuant to Sections 3-1(d), (e), (g), (i)
and (j).
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant fiscal year, after giving effect to the following
adjustments:
(i) credit to such Capital Account any amounts which
such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Sections 1.
704-2 (g) (1) and 1. 704-2 (i) (5) of the Regulations; and
(ii) debit to such Capital Account the items described
in Sections 1. 704-1(b) (2)(ii)(d)(4),
1.704-l(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted and applied in a manner consistent therewith.
"Admission Agreement" means the Agreement to Admit New
Partner And To Amend And Restate Partnership Agreement, dated as of October 29,
1993, by and among, Sony, WAC, CAC, Pace, Sony Music/Pace Partnership and the
Partnership.
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"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with, such Person; for purposes of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or otherwise; provided,
however, that for purposes of this Agreement, neither H. Wayne Huizenga nor any
Person directly or indirectly controlled by Mr. Huizenga (other than
Blockbuster Entertainment Corporation ("BEC") and any Person directly or
indirectly controlled by BEC) shall be deemed to be an "Affiliate" of or
"affiliated" with SBAC, WAC, CAC or any Sony/Block Related Party.
"Agreement" means this Amended and Restated Partnership
Agreement, as from time to time amended.
"Allocation Percentage" means each Partner's allocation
percentage, which shall initially be equal to 70% less the Initial Sony
Percentage for CAC, 25% for SBAC, 5% for WAC and the Initial Sony Percentage
for Sony. After the SBAC Mergers, the Allocation Percentages shall be equal to
95% less the Initial Sony Percentage for CAC, 5% for WAC and the Initial Sony
Percentage for Sony. After Sony's Additional Capital Contribution pursuant to
Section 3.1(d), the Allocation Percentages shall be equal to 47.5% for CAC,
2.5% for WAC and 50% for Sony.
"Amphitheater Liabilities" means, with respect to any
Amphitheater, the liabilities and obligations of the owner of a Controlling
Interest in such Amphitheater which, as of the Existing Facility Closing Date,
are (x) related to the ownership or operation of such Amphitheater and (y) to
be. contributed to and assumed by SBPAP pursuant to the Executory Contract,
including, without limitation, the Amphitheater Loan to which such Amphitheater
is subject.
"Assignee" means a person to whom an interest in the
Partnership has been transferred in accordance with the provisions of this
Agreement but who has not been admitted as a substitute or additional Partner.
"Benefitting Partner" means (A) Sony if the Sony/Block Net
Benefit Amount is a negative number and (B) CAC if the Sony/Block Net Benefit
Amount is a positive number.
"Blockbuster" shall have the meaning given to such term in
the opening paragraph of this Agreement.
"Blockbuster Amphitheaters" means the Phoenix Amphitheater,
the San Bernardino Amphitheater and the Charlotte Amphitheater.
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"Blockbuster Benefit Amount" means the aggregate amount
payable by Sony/Block to Pace pursuant to Sections 9.4(g) (2), 9.4(k) (4) and
9.4(k) (5) of the SBPAP Agreement (disregarding, for purposes of this
definition, the Netting Provisions).
"Blockbuster Note" shall have the meaning given to such term
in Section 3.1(b) (i) of this Agreement.
"Blockbuster Unwind Contribution Amount" means the positive
difference, if any, between:
(x) the sum of:
(A) the positive difference, if any, between:
(I) the product of (a) the aggregate Allocation
Percentage of WAC and CAC at the time of the Unwind
Closing, multiplied by (b) the sum of (i) the Pace
Separate Benefit Amount, plus (ii) the portion of the
MCA Amount which would have been payable to the
Partnership in cash at the Unwind Closing but for the
Netting Provisions, minus
(II) the sum of (1) the Clause G&K Sum, if any,
owed to the Partnership from Pace pursuant to Section
9.4(k) of the SBPAP Agreement, plus(2) the portion of
the MCA Amount paid to the Partnership in cash at the
Unwind Closing,plus
(B) the portion of the clause G&K Sum, if any, owed to
Pace at the Unwind Closing pursuant to Sections 9.4(k)
which is not offset against the principal amount of
the Pace Note pursuant to Section 5.4(b), minus
(y) the Blockbuster Unwind Contribution Reduction Amount;
provided that under no circumstances shall the Blockbuster Unwind
Contribution Amount exceed the Blockbuster Benefit Amount.
"Blockbuster Unwind Contribution Offset Amount" means the
portion of the Make-up Amount which does not exceed the Blockbuster Unwind
Contribution Amount.
"Blockbuster Unwind Contribution Reduction Amount" means the
sum of (x) the Sony/Pace Joint Benefit Amount,plus (y) if CAC is the
Non-Benefitting Partner, the Blockbuster Unwind Contribution Offset Amount.
"Buy Price" shall have the meaning given to such term in
Section 9.2 of this Agreement.
"Buy/Sell Notice" shall have the meaning given to such term
in Section 9.2 of this Agreement.
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"CAC" shall have the meaning given to such term in the
opening paragraph of this Agreement.
"Capital Account" of a Partner means the Capital Account
established for such Partner under Section 3.3.
"Capital Contribution" means, with respect to any Partner or
Assignee, the amount of cash and the initial Gross Asset Value of any property
other than cash contributed by the Partner or Assignee (or its predecessor in
interest) to the Partnership.
"Charlotte Distribution" shall have the meaning given to such
term in Section 5.3 of this Agreement.
"Closing" shall have the meaning given to such term in
Section 9.5 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications" shall have the meaning given to such term in
Section 13.9 of this Agreement.
"Compensable Damages" shall have the meaning given to such
term in Section 12.1 of this Agreement.
"Covered Capacities" shall have the meaning given to such
term in Section 6.5(a) of this Agreement.
"Deciding Partner" shall have the meaning given to such term
in Section 9.2 of this Agreement.
"Default Notice" shall have the meaning given to such term in
Section 11.1 of this Agreement.
"Defaulting Partner" shall have the meaning given to such
term in Section 11.1 of this Agreement.
"Delivering Partner" shall have the meaning given to such
term in Section 9.2 of this Agreement.
"Depreciation" means, for each fiscal year or other period,
an amount equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year or other period,
except that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such year or other
period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such
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year or other period bears to such beginning adjusted tax basis; provided,
however, that if the federal income tax depreciation, amortization, or other
cost recovery deduction for such year is zero, Depreciation shall be determined
with reference to such beginning Gross Asset Value using any reasonable method
selected by the Management Committee.
"Dissolution" of a Partner which is not a natural person
means that such Partner has terminated its existence, whether partnership or
corporate, wound up its affairs and dissolved.
"Distribution" means, with respect to any Partner, the amount
of cash and the Gross Asset Value of any property other than cash distributed
by the Partnership to the Partner.
"Division of Responsibility" means an allocation and division
of the Partnership's rights and responsibilities under the SBPAP Agreement
pursuant to Section 17.3 thereof.
"Event of Withdrawal" means the occurrence of any of the
following events in respect of a Partner: (i) the withdrawal by such Partner
from the Partnership in violation of Section 13.10, (ii) the granting of relief
against such Partner in an involuntary case under the Federal Bankruptcy Code
which is not removed or discharged within ninety (90) days, or in any such
involuntary case, the approval of the petition by such Partner as properly
filed, or the admission of such Partner of material allegations contained in
the petition, (iii) the execution by such Partner of a general assignment for
the benefit of creditors, (iv) the commencement of a voluntary case under the
Federal Bankruptcy Code by such Partner, or (v) the appointment of a receiver
for a Partner or for all or a substantial part of the assets of such Partner
and such receivership proceedings are not removed or discharged within ninety
(90) days after the receiver's appointment.
"Existing Facility Closing Date" means the date of the
Existing Facility Closing.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of each of the
Charlotte Asset, the Phoenix Asset, the San Bernardino Asset
and Sony's SBPAP Interest shall be the Net Value of each such
asset as determined pursuant to the Admission Agreement and
the Executory Contract. For purposes of the immediately
preceding sentence, the initial Gross Asset Value of Sony's
SBPAP Interest shall be the sum of 50% of the Net Value, as
determined pursuant to the Admission Agreement and the
Executory Contract, of each of the Camden Asset, the Tampa
Asset, the Raleigh Asset and the Pittsburgh Asset. The
initial Gross Asset Value of any other asset contributed by a
Partner to the Partnership shall be the gross fair market
value of such asset, as determined by the contributing
Partner and the Management Committee.
(ii) The Gross Asset values of all Partnership assets
shall be adjusted to equal their respective gross fair market
values, as determined by the Management
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Committee, as of the following times: (a) the acquisition of
an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis
Capital Contribution; (b) the distribution by the Partnership
to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c) the
liquidation of the Partnership within the meaning of Section
1.7041(b)(2)(ii)(y) of the Regulations; provided, however,
that adjustments pursuant to clauses (a) and (b) above shall
be made only if the Management Committee, by the agreement of
all of its members, reasonably determines that such
adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners;
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair market
value of such asset on the date of distribution; and
(iv) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Section
734(b) or Section 743(b) of the Code, but only to the extent
that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of
the Regulations; provided, however, that Gross Asset Values
shall not be adjusted pursuant to this clause (iv) to the
extent the Management Committee, by the agreement of all of
its members, determines that an adjustment pursuant to clause
(ii) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment
pursuant to this clause (iv)
If the Gross Asset Value of an asset has been determined or adjusted pursuant
to clauses (i), (ii) or (iv), above, such Gross Asset Value shall thereafter be
adjusted in the same manner as would the asset's basis for federal income tax
purposes except that in lieu of regular depreciation, the Partnership shall
take deductions for Depreciation.
"Indemnified Parties" shall have the meaning given to such
term in Section 12.1 of this Agreement.
"Indemnifying Party" shall have the meaning given to such
term in Section 12.1 of this Agreement.
"Initial Capital Contributions" means the Capital
Contributions made by the Partners pursuant to Sections 3.1(a), (b) and (c).
"Initial Sony Percentage" means the percentage equivalent of
a fraction, the numerator of which is the sum of (x) the amount credited to
Sony's Capital Account pursuant to Section 3.3(a)(iii) hereof, plus (y) the
principal amount of the Sony Note, and the denominator of which is the sum of
(I) the total amount credited to the Partners' Capital Accounts pursuant to
Section 3.3(a) hereof, plus (II) the principal amount of the Sony Note and the
Blockbuster Note.
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"Interim Development Costs Amount" shall have the meaning
given to such term in Section 3.1(b)(i) of this Agreement.
"Make-Up Amount" means the absolute value (expressed as a
positive number) of the Sony/Block Net Benefit Amount.
"MCA Amount" means the amount, if any, payable to the
Partnership from Pace at the Unwind Closing pursuant to Section 7.2(d) of the
SBPAP Agreement (whether in cash or by means of the Pace Note and disregarding,
for purposes of this definition, the Netting Provisions).
"Netting Provisions" means the provisions of Article IX of
the SBPAP Agreement relating to the netting of payments due from the
Partnership and Pace against one another.
"1933 Act" shall have the meaning given to such term in
Section 13.4 of this Agreement.
"1934 Act" shall have the meaning given to such term in
Section 13.4 of this Agreement.
"Non-Defaulting Partner" shall have the meaning given to such
term in Section 11.1 of this Agreement.
"Non-Receiving Partner" shall have the meaning given to such
term in Section 3.6(a) of this Agreement.
"Non-Benefitting Partner" means (A) Sony if the Benefitting
Partner is CAC, and (B) CAC if the Benefitting Partner is Sony.
"Non-Withdrawing Partner" shall have the meaning given to
such term in Section 10.1 of this Agreement.
"Pace" means SM/Pace, Inc., a Texas corporation.
"Pace Benefit Amount " means the sum of (x) the Sony/Pace
Joint Benefit Amount, plus (y) the Pace Separate Benefit Amount.
"Pace Note" shall have the meaning given to such term in
Section 5.4(b) of this Agreement.
"Pace Note Offset Amount" shall have the meaning given to
such term in Section 5.4(b) of this Agreement.
"Pace Note Payment" shall have the meaning given to such term
in Section 5.4(b) of this Agreement.
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"Pace Separate Benefit Amount" means the aggregate amount
payable by Pace to the Partnership pursuant to Sections 9.4(g)(1) and 9.4(k)(1)
of the SBPAP Agreement (disregarding, for purposes of this definition, the
Netting Provisions and excluding the MCA Amount).
"Partner Default" shall have the meaning given to such term
in Section 11.1 of this Agreement.
"Partners" means, as of any particular time, those Persons
who are at such time the partners of the Partnership.
"Partnership" means the partnership formed hereby.
"Partnership Books" shall have the meaning given to such term
in Section 8.2 of this Agreement.
"Partnership Interest" means the interest of a Partner in the
capital, Profit, Losses and distributions of the Partnership.
"Partnership Major Decision" shall have the meaning given to
such term in Section 6.3 of this Agreement.
"Person" means an individual, corporation, partnership,
association, trust, joint venture, unincorporated organization, other entity or
group.
"Profits" or "Losses" means, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be included
in taxable income or loss), with the following adjustments:
(i) any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall
be added to such taxable income or loss;
(ii) any expenditures of the Partnership described in
Code Section 705(a)(2)(B) or treated as Section 705(a)(2)(B)
expenditures pursuant to Section 1. 704-1 (b) (2) (iv) (i) of
the Regulations and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall
be subtracted from such taxable income or loss;
(iii) gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to
the Gross Asset Value of the property disposed of,
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notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value; and
(iv) in lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken
into account Depreciation for such fiscal year or other
period, computed in accordance with the definition of
Depreciation.
"Promissory Notes" means the Blockbuster Note and the Sony
Note.
"Receiving Partner" shall have the meaning given to such term
in Section 3.6(a) of this Agreement.
"SBAC" shall have the meaning given to such term in the
opening paragraph of this Agreement.
"SBPAP" means Pavilion Partners, a Delaware genera1
partnership (formerly known as Sony Music/Pace Partnership).
"SBPAP Agreement" means the Partnership Agreement to be made
and entered into on the Existing Facility Closing Date, by and between Pace and
the Partnership, in the form attached hereto as Exhibit A.
"Sell Price" shall have the meaning given to such term in
Section 9.2 of this Agreement.
"Selling Partner" shall have the meaning given to such term
in Section 9.4 of this Agreement.
"Sony" shall have the meaning given to such term in the
opening paragraph of this Agreement.
"Sony Note" shall have the meaning given to such term in
Section 3.1(c) of this Agreement.
"Sony Unwind Credit Amount" shall have the meaning given to
such term in Section 5.4(e) of this Agreement.
"Sony/Block Net Benefit Amount" means (x) the Blockbuster
Benefit Amount minus (y) the Sony/Pace Joint Benefit Amount.
"Sony/Pace Joint Benefit Amount" means the aggregate amount
payable by Pace to the Partnership pursuant to Sections 9.4(g) (3), 9.4(h),
9.4(k) (2) and 9.4(k) (3) of the SBPAP Agreement (disregarding, for purposes of
this definition, the Netting Provisions and excluding the MCA Amount).
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"Sony's SBPAP Interest" means Sony's interest in SBPAP
immediately following the Existing Facility Closing.
"Sony's SMP Interest" shall have the meaning given to such
term in Section 9.6 of this Agreement.
"Special Distribution" shall have the meaning given to such
term in Section 5.3 of this Agreement.
"Tax Matters Partner" shall have the meaning given to such
term in Section 8.5(a) of this Agreement.
"Unwind Closing" means the closing of the Unwind Procedure.
"Withdrawing Partner" shall have the meaning given to such
term in Section 10.1 of this Agreement.
"Woodlands Distribution" shall have the meaning given to such
term in Section 5.3 of this Agreement.
ARTICLE II
Section 2.1 Formation of Partnership. The Partnership was
formed as a partnership pursuant to the Act on September 29, 1993. The parties
hereby admit SBAC as a Partner in the Partnership and continue the Partnership
as a partnership pursuant to the Act, and the rights and liabilities of the
Partners shall be as provided in the Act, except as otherwise expressly
provided herein. The Partners shall promptly prepare and see to the execution,
filing and recording in the appropriate public offices of assumed or fictitious
business name statements and such other certificates, notices and statements as
may be required by law for the operation of the Partnership in all
jurisdictions where the Partnership may elect to do business. The parties agree
that, upon the SBAC Mergers, CAC will succeed to all of the rights and
privileges, and will assume all of the obligations, of SBAC hereunder. The
parties further agree that the Partnership shall continue following the SBAC
Mergers and that the SBAC Mergers are not intended to, and shall not, cause a
termination of the Partnership created by the Old Partnership Agreement and
continued pursuant to the terms and provisions contained in this Agreement, it
being the intent of the Partners to continue the Partnership in existence
without termination.
Section 2.2 Partnership Name. The business of the Partnership
shall be conducted under the name Amphitheater Entertainment Partnership or
under such other name as the Management Committee may from time to time
determine.
Section 2.3 Purposes of Partnership. The Partnership is
organized for the purposes of (i) being a partner in SBPAP, (ii) engaging in
any and all activities related or incidental to the activities described in
clause (i) above, and (iii) doing all things necessary or
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appropriate in connection therewith. In addition, the Partners and their
respective Affiliates may from time to time after the date hereof consider and
enter into additional entertainment ventures in the Restricted Portion of the
Earth in partnership with one another pursuant to separate partnership
agreements appropriate for such ventures.
Section 2.4 Title to Partnership Property. Title to
Partnership property shall be held in the name of the Partnership or its
nominee.
Section 2.5 Principal Place of Business. The principal place
of business of the Partnership shall be at One Blockbuster Plaza, 200 South
Andrews Avenue, Ft. Lauderdale, Florida. The Management Committee may change
the location of the Partnership's principal place of business or establish
additional places of business at such locations as the Management Committee may
from time to time determine.
Section 2.6 Term. Subject to the provisions of Article X, the
Partnership shall continue in effect until thirty-five (35) years after the
Existing Facility Closing Date, unless such term is extended for such further
period or periods as may be agreed in writing by all of the Partners.
ARTICLE III
Section 3.1 Capital Contributions and Loans of the Partners;
Certain Additional Obligations.
(a) Simultaneously herewith, CAC and Sony shall each
contribute $5.00 in cash to the capital of the Partnership.
(b) On the Existing Facility Closing Date, Blockbuster shall
make the following contributions to the capital of the Partnership:
(i) CAC shall contribute (A) an amount of cash (the
"Interim Development Costs Amount") sufficient to enable the
Partnership to make the capital contribution to SBPAP
required under Section 4.15(b) of the SBPAP Agreement, (B)
the Charlotte Asset in accordance with the terms of the
Executory Contract for such Asset and (C) at CAC's option,
either (I) a promissory note (the "Blockbuster Note") in the
principal amount of the Blockbuster Subsidiary Cash Amount
substantially in the form of Sony/Block Note #2 (in which
case CAC shall also cause the Blockbuster Guaranty to be
provided to SBPAP), or (II) the Blockbuster Subsidiary Cash
Amount;
(ii) SBAC shall contribute the San Bernardino Asset in
accordance with the terms of the Executory Contract for such
Asset; and
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(iii) WAC shall contribute the Phoenix Asset in
accordance with the terms of the Executory Contract for such
Asset.
(c) On the Existing Facility Closing Date, Sony shall
contribute to the capital of the Partnership at Sony's option, either (i) a
promissory note (the "Sony Note") in the principal amount of the Sony
Subsidiary Cash Amount substantially in the form of Sony/Block Note #1 (in
which case Sony shall also cause the Sony Guaranty to be provided to SBPAP), or
(ii) the Sony Subsidiary Cash Amount.
(d) Within seven days after the Existing Facility Closing
Date, but in no event before the next day after the Existing Facility Closing
Date, Sony shall contribute Sony's SBPAP Interest to the capital of the
Partnership.
(e) Not later than one business day prior to the date on
which the Partnership is required, under the SBPAP Agreement, to make an
additional capital contribution to SBPAP pursuant to Section 4.11, 5.1(b) or
6.2(b) of the SBPAP Agreement, each Partner shall contribute funds to the
capital of the Partnership in an amount equal to its Allocation Percentage of
such additional capital contribution so as to enable the Partnership to make
such additional capital contribution to SBPAP in the amount and at the time
required under the SBPAP Agreement.
(f) Not later than one business day prior to the date on
which the Partnership is required, under the SBPAP Agreement, to make a loan to
SBPAP pursuant to Section 4.12, 4.13, 5.1(a), 5.4(a), 5.5(a) or 6.2(a) of the
SBPAP Agreement, each Partner shall make a loan to the Partnership in an amount
equal to its Allocation Percentage of such loan required to be made to SBPAP so
as to enable the Partnership to make a loan to SBPAP in the amount and at the
time required under the SBPAP Agreement. Such loans shall be repaid to the
respective Partners on such terms, at such times and in such amounts as SBPAP
shall repay to the Partnership the corresponding loans by the Partnership to
SBPAP pursuant to the SBPAP Agreement. All repayments of such loans shall be
made pro rata among the Partners in accordance with their respective Allocation
Percentages. Notwithstanding the foregoing, it is acknowledged that either
Partner shall have the right, in its sole discretion, to fulfill its
obligations to make any such loan required to be made by reason of the
operation of Section 5.1(a), 5.4(a), 5.5(a) or 6.2(a) of the SBPAP Agreement by
causing a third party lender to make such loan in accordance with the terms of,
and as contemplated by, the applicable provision of the SBPAP Agreement.
(g) If at any time the Partnership shall be entitled, under
the SBPAP Agreement, to exercise rights to purchase Pace's partnership interest
in SBPAP pursuant to Section 16.2 or 17.2(e) of the SBPAP Agreement and the
Management Committee shall have determined to exercise such rights, not later
than one business day prior to the date on which the Partnership is required,
under the SBPAP Agreement, to consummate such purchase pursuant to the SBPAP
Agreement, each Partner shall contribute funds to the capital of the
Partnership (or shall make available funds to the Partnership's designee) in an
amount equal to its Allocation Percentage of the purchase price therefore so as
to enable the Partnership (or such designee) to consummate such purchase for
the purchase price and at the time required under the SBPAP Agreement.
'
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(h) Sony agrees that it shall be solely responsible for, and
it shall pay or perform when and as required under the SBPAP Agreement, each of
the Sony Specific Obligations. WAC and CAC agree that they shall be solely
responsible for, and they shall pay or perform when and as required under the
SBPAP Agreement, each of the Blockbuster Specific Obligations. In furtherance
of the foregoing, not later than one business day prior to the date on which
the Partnership is required, under the SBPAP Agreement, to make payments of
principal and interest to SBPAP under (x) Sony/Block Note #1, Sony shall make
equivalent payments of principal and interest to the Partnership under the Sony
Note, and (y) Sony/Block Note #2, CAC shall make equivalent payments of
principal and interest to the Partnership under the Blockbuster Note. Each
Partner agrees that it shall not take or omit to take any action (or permit any
Sony/Block Related Party affiliated with it to take or omit to take any
action), which action or omission would constitute a breach of or default by
the Partnership under the SBPAP Agreement. Each Partner hereby indemnifies and
holds harmless the other from and against any and all loss, cost, damage or
expense (including, without limitation, reasonable attorneys' fees) arising out
of or relating to any breach by the Partnership of or default by the
Partnership under the SBPAP Agreement occasioned by the breach by such Partner
of its obligations under this Section 3.1(h).
(i) Simultaneously with the Unwind Closing, (x) the
Benefitting Partner shall contribute cash funds to the capital of the
Partnership in an amount equal to the Make-Up Amount, and (y) CAC shall
contribute cash funds to the capital of the Partnership equal to the
Blockbuster Unwind Contribution Amount.
(j) If at any time the Management Committee determines that
funds in excess of retained operating earnings and any Partnership borrowings
are required by the Partnership for the operation of its business or any of its
related obligations, expenses, costs, liabilities or expenditures, the Partners
shall contribute cash to the capital of the Partnership in the amounts and on
the dates as are established by unanimous vote of the Management Committee.
Each Partner shall contribute such amount in proportion to its Allocation
Percentage.
(k) Except as provided in Sections 3.1(a)-(j), the Partners
shall not be required to make any capital contributions, loans, or other
advances to the Partnership; provided, however, that a Partner may voluntarily
make a loan to the Partnership. Such loan to the Partnership shall only be made
on such terms as shall be approved by the Management Committee. Subject to
Section 3.4 hereof, the Partners shall have no personal liability to each other
for the repayment by the Partnership of their respective loans and capital
contributions made to the Partnership.
(l) Sony hereby acknowledges and agrees that each of SBAC,
WAC and CAC shall be permitted to make the Capital Contributions, loans and
other payments required to be made by the other Blockbuster entities pursuant
to this Section 3.1 and, in such event (provided that all applicable Capital
Contributions, loans and other payments to be made by SBAC, WAC and CAC are
made in full by one or more of the Blockbuster entities), the failure of SBAC,
WAC or CAC to comply with its obligations under this Section 3.1 shall not give
rise to any right, claim or cause of action against such Person by Sony under
this Agreement or otherwise.
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(m) The provisions of this Section 3.1 are not intended to be
for the benefit of any creditor or other person (other than a Partner in such
Partner's capacity as a Partner) to whom any debts, liabilities or obligations
are owed by, or who otherwise has any claim against, the Partnership or any of
the Partners. No such creditor or other person shall have any right to make any
claim in respect of any debt, liability or obligation against the Partnership
or any of the Partners under the provisions of this Agreement.
Section 3.2 Prohibition Against Withdrawals. No Partner shall
be entitled to withdraw all or any portion of its Capital Contribution, or to
receive any payment of interest on its Capital Contribution.
Section 3.3 Capital Accounts. The Partnership shall create
upon its books and records a capital account ("Capital Account") for each
Partner, which shall be maintained in accordance with the provisions of this
Section 3.3.
(a) Upon the making of the Initial Capital Contributions, the
Partner's Capital Accounts shall be credited as follows:
(i) there shall be credited to CAC's Capital Account
the sum of (w) $5.00 plus (x) the Interim Development Costs
Amount, plus (y) the Net Value of the Charlotte Asset and the
San Bernardino Asset (after taking into account the
Amphitheater Liabilities related to such assets) plus (z) if
CAC elected to contribute the Blockbuster Subsidiary Cash
Amount to the capital of the Partnership, the Blockbuster
Subsidiary Cash Amount; provided, however, that if CAC
elected to contribute the Blockbuster Note to the capital of
the Partnership, the Blockbuster Note shall be credited to
CAC's Capital Account in accordance with Section 3.5 hereof;
(ii) there shall be credited to SBAC's Capital Account
the Net Value of the San Bernardino Asset (after taking into
account the Amphitheater Liabilities related to the San
Bernardino Amphitheater);
(iii) there shall be credited to WAC's Capital Account
the Net Value of the Phoenix Asset (after taking into account
the Amphitheater Liabilities related to the Phoenix
Amphitheater); and
(iv) there shall be credited to Sony's Capital Account
the sum of (x) $5.00, plus (y) if Sony elected to contribute
the Sony Subsidiary Cash Amount to the capital of the
Partnership, the Sony Subsidiary Cash Amount; provided,
however, that if Sony elected to contribute the Sony Note to
the capital of the Partnership, the Sony Note shall be
credited to Sony's Capital Account in accordance with Section
3.5 hereof.
(b) Upon the making by Sony of the Additional Capital
Contribution contemplated by section 3. 1 (d) , there shall be credited to
Sony's Capital Account, the positive
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balance of Sony's capital account in SBPAP at such time, as determined pursuant
to Section 4.8 (b) of the SBPAP Agreement. Upon the making of any other
Additional Capital Contribution by a Partner, a credit shall be made to such
Partner's Capital Account in the amount of cash and the fair market value of
such Additional Capital Contribution (net of any liabilities of such Partner
which are assumed by the Partnership or which are secured by the property
contributed by such Partner).
(c) Upon the allocation to a Partner of a distributive share
of Profits or any items in the nature of income or gain which are specially
allocated pursuant to Section 4.2, a credit shall be made to such Partner's
Capital Account in the amount of such allocation.
(d) To each Partner's Capital Account there shall be debited
(i) the amount of cash and the Gross Asset Value of any property distributed to
such Partner pursuant to any provision of this Agreement (net of any
liabilities of the Partnership which are assumed by such Partner or which are
secured by the property distributed to such Partner by the Partnership) , and
(ii) such Partner's distributive share of Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 4.2.
(e) In the event all or a portion of an interest in the
Partnership is transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
it relates to the transferred interest.
(f) In determining the amount of any liability for purposes
of clauses (a) and (b), above, there shall be taken into account any applicable
provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Section
1.704-1(b) of the Regulations, and shall be interpreted and applied in a manner
consistent therewith.
Section 3.4 Capital Account Make-up Provision. If a Partner's
Capital Account has a deficit balance following liquidation (as defined in
Treasury Regulation section 1.704-1(b) (2) (ii) (g)) of the Partner's
Partnership Interest (after taking into account all Capital Account adjustments
for the taxable year of the Partnership in which liquidation occurs), the
Partner shall, by the end of such taxable year (or, if later, within 90 days
after the date of such liquidation), contribute to the Partnership an amount
necessary to increase the balance in its Capital Account to zero. Any amount so
contributed shall be used, first, to satisfy the Partnership's obligations, if
any, under Section 8.3 (h) of the SBPAP Agreement and the balance, if any,
shall be distributed in accordance with Section 10.5 hereof.
Section 3.5 Effect of Sony/Block Notes on Capital Accounts.
Pursuant to Section 1.704-1(b) (2) (iv) (d) (2) of the Regulations, the Capital
Accounts of Sony and CAC shall not be increased by the principal amount of the
Promissory Notes upon contribution of the Promissory Notes to the Partnership;
provided, however, that such Partner's Capital Account shall be increased upon
(i) a taxable disposition of its Promissory Note by the Partnership, or (ii)
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any principal payments made on its Promissory Note. Interest payments made on
the Promissory Notes shall not be treated as contributions to the capital of
the Partnership and therefore shall not be credited to the Capital Accounts of
Sony or CAC.
Section 3.6 Effect of Distributions In Kind on Capital
Accounts. If any asset of the Partnership is distributed to a Partner in kind,
then pursuant to Section 1.704-1(b) (2) (iv) (e) of the Regulations and
notwithstanding anything to the contrary in this Agreement, such asset shall be
treated as if it were sold in a taxable disposition for an amount equal to its
then fair market value (determined by taking into account the effect of Section
7701(g) of the Code, if applicable) immediately prior to its distribution and,
for purposes of adjusting the balances of the Capital Accounts of the Partners
(and only for such purpose), the resulting deemed gain or loss shall be
allocated pursuant to the following provisions:
(a) If such asset is being distributed pursuant to or in
connection with the Unwind Procedure, then (i) the deemed gain from such asset
shall be allocated first to the Partner that does not receive and is not deemed
to receive such asset (the "Non-Receiving Partner") to the extent of the
depreciation deductions previously allocated to the Non-Receiving Partner with
respect to such asset and then to the Partner that receives or is deemed to
receive such asset (the "Receiving Partner"); and (ii) the deemed loss from
such asset shall be allocated to the Receiving Partner; and
(b) If such asset is being distributed for any other reason,
then the deemed gain or loss from such asset shall be allocated in the manner
described in Section 4.1 hereof.
ARTICLE IV
Section 4.1 Allocation of Profits and Losses. Except as
otherwise provided in this Article IV, Profits and Losses for any fiscal year
shall be allocated to the Partners in accordance with their Allocation
Percentages.
Section 4.2 Special Allocations. Prior to making the
allocations required by Section 4.1 above, the following special allocations
shall be made in the following order:
(a) Except as otherwise provided in Section 1.7042(f) of the
Regulations, notwithstanding any other provision of this Section 4.2, if there
is a net decrease in Partnership Minimum Gain during any Partnership fiscal
year, each Partner shall be specially allocated items of Partnership income and
gain for such fiscal year (and, if necessary subsequent fiscal years) in an
amount equal to such Partner's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Section 1.7042(g) of the Regulations.
Allocations pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance with
Sections 1.704-2 (f) (6) and 1. 7 04 -2 (j) (2) of the Regulations. This
Section 4. 2 (a) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
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(b) Nonrecourse Deductions. Nonrecourse Deductions for any
Partnership fiscal year or other period shall be specially allocated among the
Partners in proportion to their Allocation Percentages.
(c) Partner Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(i) (4) of the Regulations, notwithstanding any
other provision of this Section 4.2, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt during
any Partnership fiscal year, each Partner who has a share of the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Section 1.704-2(i) (5) of the Regulations, shall
be specially allocated items of Partnership income and gain for such fiscal
year (and, if necessary, subsequent fiscal years) in an amount equal to such
Partner's share of the net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(i) (4) of the Regulations. Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Sections 1.704-2(i) (4) and 1.704-2(j) (2) of
the Regulations. This Section 4.2(b) is intended to comply with the minimum
gain chargeback requirement in section 1.704-2(i) (4) of the Regulations and
shall be interpreted consistently therewith.
(d) Any Partner Nonrecourse Deductions for any Partnership
fiscal year shall be specially allocated to the Partner who bears the economic
risk of loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Sections 1.704-2(i)
(1) and (2) of the Regulations.
(e) All tax credits for amounts paid or incurred in any
taxable year shall be allocated to the Partners in the same proportions as the
related items of loss and deduction are allocated to the Partners in such
fiscal year.
(f) Any income or gain which is specially allocated to the
Partnership with respect to the Charlotte Asset pursuant to Sections 8.1(c) (2)
(i) or 8.1(h), respectively, of the SBPAP Agreement shall be allocated entirely
to CAC.
(g) Any SBPAP deductions or losses which are specially
allocated to the Partnership with respect to Previously Allocated Interim
Development Deductions pursuant to Section 4.15(b) of the SBPAP Agreement shall
be allocated entirely to CAC.
Section 4.3 Section 704(c) Allocations.
(a) In accordance with Section 704(c) of the Code and the
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall be allocated among
the Partners so as to take account of any variation between the adjusted basis
of such property to the Partnership for federal income tax purposes and its
initial Gross Asset Value.
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(b) In the event the Gross Asset Value of any asset is
adjusted pursuant to the provisions contained in the definition of "Gross Asset
Value," subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of basis of such asset for federal
income tax purposes and the value at which such asset is reflected in the
Capital Accounts of the Partners, to the extent such variation was not
previously taken into account pursuant to Section 4.3(a), in the same manner as
under Section 704(c) of the Code and the Regulations thereunder.
(c) Allocations pursuant to Sections 4.3(a) and (b) are
solely for purposes of federal, state, and local income taxes. Notwithstanding
any other provision of this Agreement, such allocations (x) shall be consistent
with any income, gain, loss or deduction allocated to the Partnership by SBPAP
pursuant to Section 704(c) of the Code and the Regulations thereunder, and (y)
shall not affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of Profits, Losses, other items, or
Distributions pursuant to any provision of this Agreement.
Section 4.4 Certain Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any
other items allocable to any period, Profits, Losses, and any such other items
shall be determined on a daily, monthly or other basis, as determined by the
Management Committee using any permissible method under Section 706 of the Code
and the Regulations thereunder.
(b) Except as otherwise provided in this Agreement, all items
of Partnership income, gain, loss, deduction for any fiscal year or other
period, and any other allocations not otherwise provided for shall be divided
among the Partners in the same proportions as they share Profits or Losses, as
the case may be, for such year or other period.
ARTICLE V
Section 5.1 Distributions. Subject to the other provisions of
this Article V, Distributions shall be declared and made at such time or times
and in such amounts as shall be determined by the Management Committee and
shall be made to the Partners in proportion to their Allocation Percentages at
the time of such Distribution.
Section 5.2 SBPAP Distributions. Notwithstanding the
provisions of Section 5.1, within ten (10) days after receipt by the
Partnership of any distributions of Free Cash from SBPAP pursuant to Section
8.4(b)(2)(ii) of the SBPAP Agreement, the Management Committee shall cause
Distributions to be made to each Partner in an amount equal to the product of
such Partner's Allocation Percentage (as determined after Sony's Additional
Capital Contribution pursuant to Section 3.1(d)) multiplied by the aggregate
amount so received by the Partnership from SBPAP.
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Section 5.3 Special Distributions. Notwithstanding the
provisions of Section 5.1, the Partners shall, within three days after receipt
by the Partnership of a Special Distribution, cause the Partnership to
distribute such Special Distribution to the Partners as follows:
(a) the entire amount of each Charlotte Distribution shall be
distributed to CAC; and
(b) the entire amount of any Woodlands Distribution shall be
distributed to the Partners in accordance with their respective Allocation
Percentages at the time of such Distribution.
For purposes of this Section 5.3, (x) a "Charlotte Distribution" means any
distribution received by the Partnership from SBPAP pursuant to Section
5.6(b)(1) or 5.6(c)(1) of the SBPAP Agreement, (y) a "Special Distribution"
means a Charlotte Distribution or a Woodlands Distribution, and (z) a
"Woodlands Distribution" means any distribution received by the Partnership
from SBPAP pursuant to Section 4.17(b)(2) of the SBPAP Agreement.
Section 5.4 Unwind Distributions. It is the intention of the
Partners that, by means of the operation of this Section 5.4, in conjunction
with the operation of Section 9.4 of the SBPAP Agreement, each of Sony and
Blockbuster, as part of the Unwind Procedure, shall repay in cash and receive
property and cash at the Unwind Closing such cash amounts and items of property
required in order to equalize the aggregate financial benefit received by each
such Person as a result of their respective interests in the Amphitheaters
distributed by SBPAP at the Unwind Closing. Accordingly, the Partners hereby
agree that irrespective of the operation of this Section 5.4, they shall do all
things necessary to cause Sony, on the one hand, and WAC and CAC, on the other
hand, to achieve such result. Examples of the intended operation this Section
5.4 and Section 3.1(i) are attached hereto as Annex A. Notwithstanding the
provisions of Section 5.1, all distributions of cash and property received by
the Partnership pursuant to Section 9.4 of the SBPAP Agreement shall be made to
the Partners within three (3) business days after receipt by the Partnership of
such distributions in accordance with this Section 5.4.
(a) Upon receipt of the Blockbuster Amphitheaters pursuant to
Section 9.4(d) of the SBPAP Agreement, the Partnership shall distribute (x) all
of SBPAP's right, title and interest in and to the Phoenix Amphitheater to WAC
or WAC's designee, and (y) all of SBPAP's right, title and interest in and to
the Charlotte Amphitheater and the San Bernardino Amphitheater to CAC or CAC's
designee; provided, however, that in the event of a distribution of the
Blockbuster Amphitheaters to the Partnership on and after the Closing
contemplated by Section 9.5 hereof, all of SBPAP's right, title and interest in
and to the Blockbuster Amphitheaters shall be distributed to the Acquiring
Partner, and each Partner hereby authorizes the Acquiring Partner to so notify
SBPAP upon a closing pursuant to such Section 9.5.
(b) All amounts received by the Partnership pursuant to
Section 9.4(f) of the SBPAP Agreement shall be distributed to Sony and CAC pro
rata in accordance with the respective principal balances of the Sony Note and
Blockbuster Note outstanding immediately prior to the Unwind Closing. All cash
received by the Partnership at the Unwind Closing
- 20 -
pursuant to Section 9.4(h) of the SBPAP Agreement (excluding any portion of the
MCA Amount deemed distributed pursuant to Section 9.4(h) of the SBPAP Agreement
in accordance with Section 7.2(d) (2) of the SBPAP Agreement) shall be
distributed to CAC. All cash received by the Partnership pursuant to Section
9.4(i) of the SBPAP Agreement at the Unwind Closing shall be distributed to
Sony and CAC pro rata in accordance with the respective differences between (i)
the Sony Subsidiary Cash Amount or the Blockbuster Subsidiary Cash Amount, as
applicable, and (ii) the principal balances of the Sony Note and Blockbuster
Note, as applicable, outstanding immediately prior to the Unwind Closing. If
Pace elects to deliver a promissory note (the "Pace Note") to the Partnership
at the Unwind Closing pursuant to Section 9.4(j) of the SBPAP Agreement in lieu
of delivering the cash amount then due to the Partnership pursuant to Sections
9.4(h) and (i) of the SBPAP Agreement (including any portion of the MCA Amount
deemed distributed pursuant to Section 9.4(h) of the SBPAP Agreement in
accordance with Section 7.2(d)(2) of the SBPAP Agreement), then the Partnership
shall distribute each Pace Note Payment to Sony and CAC within three business
days after receipt by the Partnership as follows:
(i) CAC shall receive a portion of each Pace Note
Payment determined by multiplying (x) the entire amount of
such Pace Note Payment by (y) a fraction, the numerator of
which shall be the cash amount owed to the Partnership by
Pace at the Unwind Closing pursuant to Section 9.4(h) of the
SBPAP Agreement (excluding any portion of the MCA Amount
deemed distributed pursuant to Section 9.4(h) of the SBPAP
Agreement in accordance with Section 7. 2 (d) (2) of the
SBPAP Agreement)and the denominator of which shall be
(ii) the remaining portion of each Pace Note Payment
shall be distributed to Sony and CAC pro rata in accordance
with the respective differences between (i) the Sony
subsidiary Cash Amount or the Blockbuster Subsidiary Cash
Amount, as applicable,. and (ii) the principal balances of
the Sony Note and Blockbuster Note, as applicable,
outstanding immediately prior to the Unwind Closing.
For purposes of this Section 5.4(b), a "Pace Note Payment" means all of the
following: (x) each payment received by the Partnership from Pace under the
Pace Note, (y) each receipt by the Partnership of proceeds from the sale or
other disposition of the collateral held by the Partnership in respect of Pace
Note, and (z) the offset by the Partnership of the Pace Note Offset Amount, in
which event the Pace Note Payment shall be the portion of the Blockbuster
Unwind Contribution Amount equal to the Pace Note Offset Amount. The Partners
hereby agree that if Pace delivers the Pace Note to the Partnership, then the
Clause G&K Sum, if any, owed to Pace at the Unwind Closing pursuant to Section
9.4(k) of the SBPAP Agreement shall be offset against the principal of the Pace
Note to the fullest extent possible (the amount so offset being hereinafter
referred to as the "Pace Note Offset Amount").
(c) The Partnership shall distribute cash in the amount of
the Make-Up Amount to the Non-Benefitting Partner; provided that if CAC is the
Non-Benefitting Partner, then such distribution shall be reduced by the
Blockbuster Unwind Contribution Offset Amount, if any.
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(d) The Partnership shall distribute all amounts received
from SBPAP pursuant to Section 9.4(1) (4) (ii) (A) to CAC and all amounts
received from SBPAP pursuant to Section 9.4(l) (4) (ii) (B) to Sony.
(e) All cash, if any, which was received by the Partnership
in connection with the Unwind Closing (including, without limitation, the
Blockbuster Unwind Contribution Amount) and remains after the distributions, if
any, required by Sections 5.4(b), (c) and (d) and the payment, if any, to Pace
required pursuant to Section 9.4 of the SBPAP Agreement, shall be distributed
as follows: (i) to Sony in an amount equal to the Sony Unwind Credit Amount,
and (ii) the balance to CAC. For purposes of this Section 5.4(e), "Sony Unwind
Credit Amount" means the product of (x) Sony's Allocation Percentage at the
time of the Unwind Closing, multiplied by (y) the sum of (A) the Pace Separate
Benefit Amount, plus (B) the portion of the MCA Amount which was paid to the
Partnership in cash at the Unwind Closing or which would have been paid to the
Partnership in cash at the Unwind Closing but for the Netting Provisions.
ARTICLE VI
Section 6.1 Management Committee. The overall management and
control of the business and affairs of the Partnership shall be vested in the
Management Committee. The Management Committee will consist of one (1) person
designated by CAC and one (1) person designated by Sony. Each Management
Committee member will serve at the pleasure of the Partner who designated such
member and such member may be replaced, with or without cause, at any time by
such designating Partner upon notice to the other Partners. No action shall be
taken by the Management Committee unless (i) approved by all of the members of
the Management Committee, or (ii) approved by unanimous ;written consent of all
the members of the Management Committee for action taken without a meeting.
Section 6.2 Meetings. The Management Committee shall meet
regularly at such times and places as it shall determine, provided that any
Partner may call a special meeting of the Management Committee on ten (10)
days' advance written notice to all members of the Committee. Notice may be
waived in writing, and attendance at a meeting shall be deemed to be waiver of
notice. The Management Committee may take action without a meeting by consent
in writing signed by all members of the Management Committee and setting forth
the action so taken. Meetings of the Management Committee may be held by means
of conference telephone or similar communications equipment which permits all
members participating in a meeting to hear and speak to each other. Written
minutes of each Management Committee meeting shall be kept by the Management
Committee and shall be provided to each Partner within fifteen (15) business
days following any such meeting.
Section 6.3 Partnership Major Decisions. No act shall be
taken or funds expended or obligation incurred by (i) the Partnership, (ii) any
Partner acting on behalf of the Partnership, or (iii) any members of the
Management Committee, with respect to a matter within the scope of any
"Partnership Major Decision," as defined in the following sentence, unless the
Partnership Major Decision is approved (x) unanimously by the members of the
Management
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Committee in advance, in writing, or (y) unanimously by recorded vote at a
meeting of the entire Management Committee. A "Partnership Major Decision"
shall mean any of the following:
(a) the adoption of any business plan or budget for any
fiscal period;
(b) the making of capital expenditures, except to the extent
provided for in any business plan previously adopted by the Management
Committee or in the SBPAP Agreement;
(c) the sale, lease or exchange of any assets of the
Partnership other than in the ordinary course of business or in accordance with
the terms of the SBPAP Agreement or the making of any Distributions by the
Partnership other than those required by the provisions of this Agreement or
the SBPAP Agreement;
(d) the merger or consolidation of the Partnership with or
into any other entity;
(e) entering into any license agreement;
(f) the admission of additional Partners or issuance of
additional interests in the Partnership;
(g) any transactions or payments between the Partnership and
any Partner, Affiliate or partner of a Partner or the Partnership except for
transactions and payments contemplated by (i) this Agreement or the SBPAP
Agreement or (ii) any budget or business plan approved pursuant to Section
6.3(a);
(h) entering into, amending or terminating any employee
benefit plan or contract of employment to which the Partnership is a party;
(i) making any investments other than in the ordinary course
of business or in accordance with the terms of the SBPAP Agreement;
(j) with regard to any federal, state or local tax matter,
except as otherwise provided in Section 8.5:
(i) extending of the statute of limitations on
behalf of the Partnership;
(ii) determining whether or not to appeal or
otherwise contest by administrative or judicial proceedings
by administrative or judicial determination, except as
otherwise provided in Section 8.5; or
(iii) entering into any settlement agreement with a
taxing authority;
(k) entering into any business other than ownership of the
partnership interest in SBPAP;
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(l) the leasing of property by the Partnership;
(m) except as provided by the provisions of the SBPAP
Agreement or as contemplated thereby:
(i) the borrowing or lending of money by the
Partnership (other than trade obligations incurred in the
ordinary course of business);
(ii) the mortgaging, pledging or hypothecation of any
assets of the Partnership; or
(iii) the assumption of any loan or obligation or the
guaranteeing of any loan or obligation of any party other
than the Partnership except as contemplated by the SBPAP
Agreement;
(n) the institution of legal proceedings by the Partnership,
other than routine proceedings for the collection of trade debt;
(o) the settlement of any legal proceedings against the
Partnership, other than routine collection matters brought by or against the
Partnership;
(p) the selection and replacement of attorneys and
accountants for the Partnership;
(q) making any political or charitable contributions;
(r) casting any vote by the members of SBPAP's Executive
Committee appointed by the Partnership (provided, however, that if the
Management Committee shall not approve any such vote relating to the annual
operating budget of SBPAP prior to the date that such vote is required to be
taken pursuant to the SBPAP Agreement, the respective members of SBPAP's
Executive Committee representing the Partnership shall each be entitled to vote
on such budget as he or she sees fit);
(s) subject to Section 6.3(r) and Section 6.4 hereof, taking
any action or making any decision required or permitted to be taken by the
Partnership in its capacity as a partner of SBPAP, whether pursuant to the
SBPAP Agreement or otherwise;
(t) amending, modifying, waiving or terminating any
(u) except as provided by Article X hereof, dissolving or
liquidating the Partnership, or filing any petition under any bankruptcy or
insolvency law with respect to the Partnership;
(v) causing or attempting to cause SBPAP to refinance the
Charlotte Loan with a Replacement Loan having a maturity date later than April
1, 2004; and
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(w) making any other decision or taking any other action
which either (i) effects a change in the business strategy of the Partnership
or (ii) by any provision of this Agreement is required to be approved by the
Management Committee or the Partnership, or which could reasonably be expected
to have a material effect on any other Partnership Major Decision.
Section 6.4 Appointment of Members of SBPAP Executive
Committee. Each of Sony and CAC shall be entitled, individually, to appoint
(and replace from time to time in accordance with the provisions of the SBPAP
Agreement) one of the Partnership's two (2) representatives to SBPAP's
Executive Committee.
Section 6.5 Indemnification.
(a) To the full extent permitted under the Act, the
Partnership shall indemnify any Person who was or is a party, or is threatened
to be made a party, to any threatened, pending or completed action, suit, or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Partnership) by reason of the fact
that he is or was a general partner, Management Committee member or officer of
the Partnership, or is or was serving at the request of the Management
Committee of the Partnership as a director, management committee member or
officer (or in any capacity equivalent to any of the foregoing) of another
corporation, partnership, joint venture, trust or other enterprise (all of the
foregoing being herein collectively referred to as "Covered Capacities"),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Partnership, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or plea
of nolo contendre or its equivalent, shall not of itself create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in and not opposed to the best interests of the Partnership, and
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) To the full extent permitted under the Act, the
Partnership shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending, or completed action or suit by
or in the right of the Partnership to procure a judgment in its favor by reason
of the fact that he is or was serving in any of the Covered Capacities, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Partnership and except that no indemnification shall be made in respect to
any claim, issue or matter as to which such action or suit alleges misconduct
in the performance of his duty to the Partnership unless and then only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, and in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to be indemnified for such expenses which the court shall deem proper.
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(c) Anything in Sections 6.5(a) or (b) to the contrary
notwithstanding, to the extent that any Person referred to therein has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to therein or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under Sections 6.5(a) or (b) (unless
ordered by a court) shall be made by the Partnership only as authorized in the
specific case upon a determination that indemnification is proper in the
circumstances because the indemnitee has met the applicable standard of conduct
set forth in Sections 6.5(a) or (b).
(e) Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Partnership in advance of the
final disposition of such action, suit or proceeding, as authorized by the
Management Committee in the specific case upon receipt of any, undertaking by
or on behalf of the indemnitee to repay such amount unless it shall ultimately
be determined that he is entitled to be indemnified by the Partnership.
(f) The indemnification provided by this Section 6.5 shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, agreement, or otherwise, and
shall continue as to a person who has ceased to serve in a Covered Capacity and
shall inure to the benefit of his successors in interest, including but not
limited to his heirs, executors, and administrators.
(g) The Partnership shall have power to purchase and maintain
insurance on behalf of any person who is or was serving in any of the Covered
Capacities and incurred by him in any such capacity or arising out of his
status as such, whether or not the Partnership would have the power to
indemnify him against such liability under the provisions of this Section 6.5.
(h) Each Person who is or was an employee or agent of the
Partnership or an employee or agent of a general partner, or who is or was
serving at the request of the Management Committee of the Partnership as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise may be indemnified (or covered by insurance), in the manner
and to the extent provided in this Section 6.5 for persons acting in Covered
Capacities, at the discretion of the Management Committee.
(i) The Partnership shall have the right to assume the
defense of any action, suit or proceeding in connection with which any Person
is entitled to indemnification under this Section 6.5 and to select counsel for
such purpose. No Person entitled to indemnification hereunder shall consent to
entry of any judgment or enter into any settlement in connection with any such
action, suit or proceeding without the consent of the Partnership, and the
Partnership shall not, without the consent of each such Person that is entitled
to indemnification, consent to entry of any judgment or enter into any
settlement in connection with such action, suit or proceeding which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Person of a release from all liability in respect to such
claim or litigation.
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(j) Indemnification under this Section 6.5 shall not be
available to any Person in the case of any action, suit or proceeding brought
(i) against the Partnership by such Person or (ii) against such Person by or on
behalf of the Partnership.
(k) The indemnification obligations set forth in this Section
6.5 shall be recourse to the assets of the Partnership only and no Partner
shall be personally liable in respect thereof.
Section 6.6 Partnership Professional Services. Subject to
Section 13.3 hereof, if the Partnership requires any legal, accounting or other
professional services during the term of the Partnership, the expenses of such
professional services will be borne by the Partnership.
ARTICLE VII
Section 7.1 Noncompetition.
(a) For so long as the Partnership is bound by Sections 12.1
and 12.3 of the SBPAP Agreement, each Partner agrees that it will, and will
cause each of the Sony/Block Related Parties affiliated with it to, comply with
the provisions thereof. At such time, if any, as the Partners or their
Affiliates determine to enter into any new business as contemplated by the last
sentence of Section 2.3 hereof, the Partners agree that such Persons shall be
obligated to discuss in good faith whether specific noncompetition or
exclusivity restrictions relating to such new businesses and binding the
Partners are appropriate and, if the Partners agree that such restrictions are
appropriate, they shall use their good faith best efforts to promptly negotiate
and agree upon the terms thereof and such restrictions, as so negotiated and
agreed upon, shall be reflected in an amendment to this Agreement.
(b) Upon breach of any provision of this Section 7.1, the
Partnership will be entitled to injunctive relief, since the remedy at law
would be inadequate and insufficient. In addition, the Partnership and
Non-Defaulting Partner will be entitled to the rights and remedies set forth in
Article XVI. If any provision of this Section 7.1, as applied to any party or
to any circumstances, is adjudged by a court to be invalid or unenforceable,
the same will in no way affect any other provision of this Section or any other
part of this Agreement, the application of such provision in any other
circumstances or the validity or enforceability of this Agreement. If any such
provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination will have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form such provision will then be enforceable and will be
enforced.
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ARTICLE VIII
Section 8.1 Fiscal Year. The fiscal year of the Partnership
for financial and book accounting purposes and for federal, state and local
income and other tax purposes shall begin on November 1 and end on October 31
of each year during the term of the Partnership, except that the Partnership's
initial fiscal year for all purposes shall begin on the Existing Facility
Closing Date.
Section 8.2 Books and Records. The Management Committee shall
establish, maintain and keep accurate, full and complete books of account and
records (the "Partnership Books") showing the assets and liabilities, revenues
and expenditures, and all other aspects of the operations, transactions and
financial condition of the Partnership including changes in the respective
Capital Accounts of the Partners. The Partnership Books shall be maintained at
the principal office of the Partnership or at such other place reasonably
designated by the Management Committee and each Partner shall have access to
the Partnership Books during ordinary business hours upon reasonable prior
notice.
Section 8.3 Financial Reports. The Management Committee shall
cause to be submitted to each Partner, within thirty (30) working days after
the end of each month and within one hundred twenty (120) days after the end of
each fiscal year, internal unaudited financial statements for that month or
fiscal year, respectively, showing the revenues and expenditures, and the
assets and liabilities, for that period of each of the entities in which the
Partnership holds an equity interest. At the request of a Partner and at such
Partner's expense, the Management Committee shall have any of such financial
statements for a full fiscal year audited by a qualified independent public
accounting firm which may be the accounting firm retained by either of the
Partners for its individual auditing needs, or the accounting firm retained by
either of the Partners' Affiliates.
Section 8.4 Bank Accounts. All receipts, funds and income of
the Partnership shall be deposited in an account or accounts in the name of the
Partnership.
Section 8.5 Tax Matters Partner.
(a) CAC is hereby appointed the initial "Tax Matters Partner"
of the Partnership for all purposes pursuant to Sections 6221 through 6231 of
the Code (the "Tax Matters Partner"). With respect to the Partnership's fifth
fiscal year, Sony shall serve as the Tax Matters Partner. Thereafter, CAC and
Sony shall rotate as the Tax Matters Partner every five years. The Tax Matters
Partner will (i) furnish to each Partner or Assignee affected by an audit of
the Partnership income tax returns a copy of each notice or other communication
received from the Internal Revenue service or applicable state authority, (ii)
keep each such Partner and Assignee informed of any administrative or judicial
proceeding, as required by Section 6623(g) of the Code, and (iii) allow each
such Partner and Assignee an opportunity to participate in all such
administrative and judicial proceedings.
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(b) The Tax Matters Partner has the authority to do all or
any of the following:
(i) file a petition as contemplated in Sections
6226(a) or 6228 of the
Code;
(ii) intervene in any action as contemplated in
Sections 6226(b) of the Code;
(iii) file any request contemplated in sections
6227(b) of the Code; and
(iv) enter into an agreement extending the period of
limitations as contemplated in Section 6229(b) (1) (B) of the
Code.
(c) The Partnership is not obligated to pay any fees or other
compensation to the Tax Matters Partner in its capacity as such. However, the
Partnership will reimburse the Tax Matters Partner for any and all
out-of-pocket costs and expenses (including reasonable attorneys' and other
professional fees, including any applicable tax preparation fees) incurred by
it in its capacity as Tax Matters Partner. Each Partner who elects to
participate in Partnership administrative tax proceedings will be responsible
for its own expenses incurred in connection with such participation. In
addition, the cost of any adjustments to a Partner and the cost of any
resulting audits or adjustments of a Partner's tax return will be borne solely
by the affected Partner.
(d) The Partnership will indemnify, defend and hold the Tax
Matters Partner harmless from and against any loss, liability, damage, cost or
expense (including reasonable attorneys' and other professional fees) sustained
or incurred as a result of any act or decision concerning Partnership tax
matters and within the scope of such Partner's responsibilities as Tax Matters
Partner, so long as such act or decision was not made fraudulently or in bad
faith and did not constitute willful or wanton misconduct or gross negligence.
The Partnership shall have the right to assume the defense of any action, suit
or proceeding in connection with which the Tax Matters Partner is entitled to
indemnification pursuant to this Section 8.5(d) and to select counsel for such
purpose. The Tax Matters Partner shall not consent to entry of any judgment or
enter into any settlement in connection with any such action, suit or
proceeding without the consent of the Partnership, and the Partnership shall
not, without the consent of the Tax Matters Partner, consent to entry of any
judgment or enter into any settlement in connection with such action, suit or
proceeding which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Person of a release from all liability in
respect to such claim or litigation.
ARTICLE IX
Section 9.1 Assignments by Partners and Assignees. Except as
permitted by and in compliance with Article XV of the SBPAP Agreement, during
the term of this Agreement no Partner may, directly or indirectly sell,
transfer, assign, give, pledge, encumber, alienate or otherwise dispose of
(voluntarily or involuntarily, by operation of law or otherwise) all or any
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part of its interest in the Partnership or any of its rights or obligations
under this Agreement, without the prior unanimous consent of the Management
Committee, except that any Partner may transfer all or any portion of its
interest in the Partnership to a corporation, partnership or other entity which
is directly or indirectly wholly owned by, or which directly or indirectly
wholly owns, such Partner, or which directly or indirectly acquires all of the
stock or substantially all of the assets and assumes substantially all of the
liabilities of such Partner's parent corporation (including the Partner's
obligations under this Agreement). Such transfer of a Partner's interest shall
be permitted only upon the condition that the transferor unconditionally and
irrevocably guarantees the payment and performance of the transferee's
obligations under this Agreement and complies with the applicable provisions of
the SBPAP Agreement. In the event of any such transfer, it is the Partner's
intention that this Partnership shall continue in existence without termination
following such transfer. Moreover, notwithstanding the foregoing, no transfer
otherwise permitted by this Section 9.1 shall be made if it would cause a
termination of the Partnership or SBPAP for Federal income tax purposes
pursuant to Section 708(b) of the Code and such termination would result in
materially adverse tax consequences to the other Partners or the Partnership
(or adverse tax consequences to Pace, to the extent indemnification for the
consequences of such a termination is required to be provided to Pace pursuant
to the SBPAP Agreement), for which such other Partners are not indemnified to
their reasonable satisfaction (or Pace is not indemnified to the extent
required by the SBPAP Agreement) by or on behalf of the transferring Partner.
Nothing herein contained shall be deemed to prohibit a public offering of
securities of any direct or indirect parent corporation of any Partner.
Section 9.2 Buy/Sell Notice. Subject to the provisions of
this Agreement, (i) Sony shall have the right to deliver a Buy/Sell Notice to
WAC and CAC, and (ii) WAC and CAC shall have the right to deliver a Buy/Sell
Notice to Sony. A Buy/Sell Notice may be given only after the second
anniversary of the Existing Facility Closing Date. For purposes of this Section
9.2, the following terms shall have the meanings set forth below:
"Buy/Sell Notice" shall mean a written notice delivered
pursuant to this Section 9.2 in which the Delivering Partner unconditionally
offers to (i) purchase all of the Deciding Partner's Partnership Interest at a
cash purchase price ("Buy Price") designated in such notice or (ii) sell all of
the Delivering Partner's Partnership Interest to the Deciding Partner at a cash
purchase price ("Sell Price") designated in such notice.
"Deciding Partner" means (x) Sony, if the Delivering Partner
is WAC or CAC, and (y) CAC, if the Delivering Partner is Sony.
"Delivering Partner" means the Person delivering the Buy/Sell
Notice pursuant to this Section 9.2.
Any Buy/Sell Notice delivered by Sony pursuant to this Section 9.2 shall offer
to purchase the Partnership Interests of WAC and CAC and allocate the Buy Price
between WAC and CAC based upon their respective Allocation Percentages. Any
Buy/Sell Notice delivered by CAC pursuant to this Section 9.2 shall offer to
sell the Partnership Interests of WAC and CAC and allocate the Sell Price
between WAC and CAC based upon their respective Allocation
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Percentages. In order for a Buy/Sell Notice to be validly given pursuant to
this Article IX, the Buy Price designated therein must be at least five percent
(5%) greater than the Sell Price designated therein. Notwithstanding the
foregoing provisions of this Section 9.2, a Partner shall not have the right to
give a Buy/Sell Notice (a) if such Partner is then a Defaulting Partner, or (b)
on more than one (1) occasion during any Fiscal Year. In the event of a
transfer pursuant to a Buy/Sell Notice, it is the intention of the Partners
that, so long as there is more than one Partner in the Partnership upon the
Closing described in Section 9.5 hereof, the Partnership shall continue in
existence without termination following such transfer.
Section 9.3 Deciding Partner Elects to Sell or Buy; Appraisal
by Deciding Partner. Within one hundred twenty (120) days after the date of
receipt of a Buy/Sell Notice, the Deciding Partner shall deliver written notice
to the Delivering Partner stating whether the Deciding Partner agrees to accept
(i) the Delivering Partner's offer to sell all of its Partnership Interest to
the Deciding Partner for the Sell Price or (ii) the Delivering Partner's offer
to purchase all of the Deciding Partner's Partnership Interest for the Buy
Price. If the Deciding Partner fails to deliver such notice within one hundred
twenty (120) days after receipt of the Buy/Sell Notice, then the Deciding
Partner shall be deemed to have accepted the Delivering Partner's offer to
purchase all of the Deciding Partner's Partnership Interest for the Buy Price.
Notwithstanding the foregoing, in the event that the Deciding Partner delivers
to the Delivering Partner within one hundred ten (110) days following the
Deciding Partner's receipt of the Buy/Sell Notice a written appraisal of an
appraiser selected by the Deciding Partner who is experienced in the appraisal
of entertainment related businesses (provided, however, that so long as the
Partnership continues to hold its interest in SBPAP, such appraiser shall also
be experienced in the appraisal of real estate), which appraisal states that
the fair market value of the Deciding Partner's Partnership Interest is an
amount equal to or greater than 110% of the Buy Price, then the Buy Price shall
be equal to the fair market value of the Deciding Partner's Partnership
Interest set forth in the appraisal; provided, however, that (i) in order to
exercise the right to obtain an appraisal the Deciding Partner shall notify the
Delivering Partner within forty-five (45) days after the giving of the Buy/Sell
Notice that the Deciding Partner desires to obtain an appraisal of the fair
market value of its Partnership Interest, and (ii) upon receipt of such
appraisal which provides for an increased Buy Price (ie., over 110%), the
Delivering Partner shall have the option, exercisable by giving notice to the
Deciding Partner within ten (10) days following its receipt of the appraisal to
rescind the Buy/Sell Notice. Upon the election by the Delivering Partner to
rescind the Buy/Sell Notice as provided in the preceding sentence, the
obligations of the Partners with respect to such Buy/Sell Notice shall
terminate.
Section 9.4 Release or Indemnification from SBPAP
Obligations. In the event that a Partner sells its Partnership Interest
pursuant to the provisions of Section 9.3, then the Acquiring Partner shall
cause the selling Partner (the "Selling Partner") and the Selling Partner's
Affiliates to be released from or be indemnified for any and all liability or
obligation (including, without limitation, in respect of existing guaranties of
SBPAP debt to third party lenders and the unpaid balance, if any, of the
Sony/Block Notes, and obligations to make new capital contributions, loans or
advances to SBPAP or guarantees for the benefit of SBPAP) pursuant to the SBPAP
Agreement. Any such indemnity shall be guaranteed in accordance with the
provisions of Section 13.17 hereof and shall be secured by a first priority
security interest in
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and to all of the Acquiring Partner's right, title and interest in the
Partnership, SBPAP and their respective assets. Such guaranty and security
agreement shall be in form and substance reasonably satisfactory to the Selling
Partner.
Section 9.5 Closing of the Sale. The sale of all of a
Partner's Partnership Interest required to be sold pursuant to an offer and an
acceptance made pursuant to this Article IX shall close on the date which is
one hundred eighty (180) days after the date on which the Buy/Sell Notice is
received by the Deciding Partner (the "Closing"). The Closing shall occur at
such place in Ft. Lauderdale, Florida or New York, New York as may be
designated by the Deciding Partner. At the Closing, the following obligations
shall apply:
(a) The Acquiring Partner shall deliver the Buy Price or the
Sell Price, as appropriate in immediately available funds to the Selling
Partner;
(b) The Selling Partner shall be obligated to execute such
instruments of assignment as may be reasonably required by the Acquiring
Partner containing warranties that such Partnership Interest is being conveyed
to the Acquiring Partner or its designee free and clear of all liens, claims,
charges and encumbrances; and
(c) The Acquiring Partner shall execute (and shall cause its
parent corporation named in Section 13.17 hereof to execute) such instruments
as may be reasonably required by the Selling Partner in which the Acquiring
Partner indemnifies and holds harmless the Selling Partner from all loss, cost
or claim associated with or arising out of any of the Partnership's then
existing liabilities and obligations, other than any liabilities and
obligations incurred by the Selling Partner on behalf of the Partnership in
violation of this Agreement.
Section 9.6 Interests in SMP Partnership. For purposes of
this Article IX, all references to Sony's Partnership Interest shall be deemed
to include all of Sony's and its Affiliates' right, title and interest in and
to the SMP Partnership, a general partnership formed under the laws of the
State of New York between Sony (or an Affiliate thereof) and SM/Pace, Inc. on
the Existing Facility Closing Date ("Sony's SMP Interest"). Sony shall not (I)
sell, assign or otherwise transfer Sony's SMP Interest (other than to an
Affiliate), or (II) mortgage, pledge or otherwise encumber Sony's SMP Interest,
in either case without the prior written consent of CAC. If Sony is the Selling
Partner and Sony is not the holder of Sony's SMP Interest, Sony shall cause its
Affiliate that is the holder thereof to take all such action and execute all
such instruments as may be reasonably required to transfer Sony's SMP Interest
to Blockbuster or its designees at the Closing in accordance with this Article
IX.
ARTICLE X
Section 10.1 Dissolution of the Partnership. The Partnership
shall be dissolved upon the happening of any of the following events or
otherwise as provided by the Act:
(a) expiration of the term of the Partnership set forth in
Section 2.6;
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(b) the unanimous action of the Management Committee to
terminate the Partnership;
(c) the occurrence of an Event of Withdrawal with respect to
a Partner and the failure by a designee of the Non-Withdrawing Partner to
purchase the Partnership Interest of the withdrawing Partner as provided in
Section 10.2 below; or
(d) as provided in item (i) of Section 11.2(e) below.
For purposes of this Article X, whenever an Event of Withdrawal shall occur
with respect to either WAC or CAC, WAC and CAC, jointly, shall be deemed to be
the "Withdrawing Partner" and Sony shall be deemed to be the "Non-Withdrawing
Partner."
Section 10.2 Option to Purchase Partnership Interest of
Withdrawing Partner. Upon the occurrence of an Event of Withdrawal with respect
to Sony or Blockbuster, the Non-Withdrawing Partner shall have the option of
nominating a designee of its choice to purchase the entire Partnership Interest
of the Withdrawing Partner, which option shall be exercisable by the giving of
written notice to the Withdrawing Partner or its legal representatives within
one hundred twenty (120) days after the Non-Withdrawing Partner first has
actual knowledge of the Event of Withdrawal. The purchase price for the
Partnership Interest of the Withdrawing Partner and the manner of payment
thereof, and the procedures for a closing of such purchase, shall be the same
as if the Withdrawing Partner were a Defaulting Partner and its Partnership
Interest was being purchased pursuant to the provisions of Section 11.2(d)
hereof (except that the closing shall occur on that date designated by the
designee of the Non-Withdrawing Partner which is within forty-five (45) days
from the exercise of such option). The option set forth in this Section 10.2 is
being provided in view of the fact that the prospects for the Partnership and
the Partnership Interest of the Non-Withdrawing Partner will be placed in
jeopardy upon the occurrence of an Event of withdrawal, all with potential
damages to the Non Withdrawing Partner and the Partnership which cannot be
foreseen. So long as, following the exercise of such option, there are at least
two Partners, it is the intention of the Partners that the Partnership shall
continue in existence without termination following such exercise.
Section 10.3 Dissolution in the Event Option is Not
Exercised. Upon the occurrence of an Event of Withdrawal and the failure by the
designee of the Non-Withdrawing Partner to exercise the option to purchase the
Partnership Interest of the Withdrawing Partner as provided in Section 10.2
above, the provisions of paragraphs (a) through (d) below shall control such
dissolution notwithstanding anything to the contrary contained herein,
including without limitation, in Section 10.5 below.
(a) The Withdrawing Partner shall thereafter be deemed to be
an assignee of a Partner's Interest (and accorded only the limited rights
provided pursuant to the Partnership Act to such an assignee) and shall have no
voting, consent or approval rights under Section 6.3 or any other provision of
this Agreement, and the Non-Withdrawing Partner may send such notice or other
advice of the dissolution to each such Person as the Non-Withdrawing Partner
may deem appropriate and necessary under the circumstances.
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(b) The Non-Withdrawing Partner shall settle the business of
the Partnership as expeditiously as the nature of such business will permit.
(c) The Non-Withdrawing Partner shall be entitled to, but
shall not be obligated to seek or obtain administration of the assets of the
Partnership by a receiver. referee trustee or court of bankruptcy.
(d) In the event of a liquidation and distribution pursuant
to this Article X as a result of the occurrence of an Event of Withdrawal, the
Withdrawing Partner shall have no power or authority to bind the Partnership or
the Partners but shall cooperate with and, to the extent requested, assist the
Non-Withdrawing Partner in the dissolution and winding up of the Partnership
and the distribution of the assets thereof.
Upon the occurrence of an Event of Withdrawal, whether or not
the option referred to in Section 10.2 hereof is exercised, if the Event of
Withdrawal shall result in indemnification of Pace being required pursuant to
Section 13.9 of the SBPAP Agreement, the Withdrawing Partner shall provide such
indemnity to Pace (and indemnify the Non-Withdrawing Partner on the same terms
as it so indemnifies Pace pursuant to said Section 13.9).
Section 10.4 Final Accounting. Upon dissolution of the
Partnership, an accounting shall be made of the accounts of each Partner and of
the Partnership's assets, liabilities and operations, from the date of the last
previous accounting to the date of dissolution.
Section 10.5 Liquidation; Distribution. In the event of the
dissolution of the Partnership, the affairs of the Partnership shall be wound
up in an orderly manner and the assets of the Partnership shall be distributed
in accordance with a liquidation plan, which shall provide for the distribution
of such assets in the following order of priority:
(a) first, to the repayment of the debts and liabilities of
the Partnership (other than loans or advances from Partners);
(b) second, to the establishment of any reserves for any
contingent or unforeseen liabilities or obligations of the Partnership, as
provided in the liquidation plan;
(c) third, to the repayment of the outstanding principal and
interest on any loans or advances that may have been made by any of the
Partners to the Partnership, but if the amount available for repayment of such
loans or advances shall be insufficient, then to the Partners on account
thereof in proportion to their respective advances; and
(d) fourth, to the Partners in accordance with and to the
extent of their positive Capital Account balances, after taking into account
all Capital Account adjustments for the taxable year during which the
liquidation occurs.
Section 10.6 Approval of Liquidation Plan. In instances in
which liquidation of the Partnership is the result of a dissolution pursuant to
Section 10.1(a) or (b) the liquidation
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plan shall require the approval of the Partners. In instances in which the
liquidation of the Partnership is the result of a dissolution pursuant to
Section 10.1(c), then the liquidation plan shall be approved by the
Non-Withdrawing Partner; provided that such plan conforms to the requirements
of Sections 10.5(a) - (d) above; and provided further that the appraised value,
as determined by a nationally recognized investment banking or appraisal firm,
of the assets other than cash distributed to each Partner shall bear
substantially the same proportion to the appraised value of all assets so
distributed to the Partners, as such Partner's positive Capital Account balance
bears to the aggregate of the positive Capital Account balances of all
Partners.
ARTICLE XI
Section 11.1 Default. If any Partner (the "Defaulting
Partner") fails to perform any of its material obligations contained in this
Agreement, or materially violates the terms of this Agreement, then the
Non-Defaulting Partner shall have the right to give the Defaulting Partner a
notice (the "Default Notice") specifically setting forth the nature of such
failure or violation and stating that such Defaulting Partner shall have a
period of ten (10) days to pay any sums of money specified therein as due and
owing to the Partnership or to any Partner or, if the failure or violation is a
nonmonetary default and is capable of being cured, thirty (30) days to cure
such default specified therein. If the monies specified in the Default Notice
are not paid within such ten (10) day period, or if such non-monetary failures
or violations are not capable of being cured or, if capable of being cured,
such Defaulting Partner has not cured such nonmonetary failures or violations
within such thirty (30) day period, then a "Partner Default" shall be deemed to
have occurred with respect to such Partner. If a Defaulting Partner cures in
all material respects all of its failures or violations which are capable of
being cured within the aforesaid notice and cure periods, then such defaults
shall be deemed no longer to exist and provided that no failure or violation
exists which is not capable of being cured, such Partner shall be deemed no
longer to constitute a Defaulting Partner. For purposes of this Article XI, WAC
shall be deemed to be a Defaulting Partner at such time as CAC is a Defaulting
Partner and CAC shall be deemed to be a Defaulting Partner at such time as WAC
is a Defaulting Partner. For purposes of this Agreement, "Non-Defaulting
Partner" means (x) Sony if the Defaulting Partner is either WAC or CAC, and (y)
CAC if the Defaulting Partner is Sony.
Section 11.2 Rights and Remedies. Upon the occurrence of a
Partner Default, the Non-Defaulting Partner and the Partnership shall each have
the following rights, options and remedies which shall be cumulative and may be
exercised concurrently or singly in the sole and absolute discretion of the
Non-Defaulting Partner:
(a) The right to bring an action at law by or on behalf of
Partnership or the Non-Defaulting Partner in order to recover the amounts owed,
if any, and any incidental or consequential damages arising from such default
(including, without limitation, reasonable attorneys fees and disbursements
incurred by the Partnership or the Non-Defaulting Partner, as the case may be,
in prosecuting any such action).
- 35 -
(b) The right to bring any proceeding in the nature of
injunction, specific performance or other equitable remedy, it being
acknowledged by each of the Partners that damages at law may be an inadequate
remedy for such default.
(c) If a sum of money is owed to the Partnership (whether a
capital contribution or a loan), the Non-Defaulting Partner may advance the sum
of money owed to the Partnership by the Defaulting Partner with the following
results:
(i) the sum thus advanced shall be deemed to be a loan
from the Non-Defaulting Partner to the Defaulting Partner;
(ii) the principal balance of such deemed loan shall
be due and payable in whole upon written demand from the
Non-Defaulting Partner to the Defaulting Partner;
(iii) the principal balance of such deemed loan shall
bear interest at an interest rate equal to the lesser of (1)
six percent (6%) per annum, over the prime rate of interest
per annum announced, from time to time, by major money center
banks in the United States and as published in The Wall
Street Journal, compounded monthly or (2) the maximum
nonusurious interest rate permitted by applicable law from
time to time in effect; and
(iv) all distributions from the Partnership that would
otherwise be made to the Defaulting Partner (whether before
or after dissolution of the Partnership) shall, instead, be
paid to the Non-Defaulting Partner until such loan and all
interest accrued thereon has been repaid in full.
(d) If, as a result of the nature of the default, failure,
breach or omission which gave rise to such Partner Default, the damages
suffered or incurred as a result thereof by the Non-Defaulting Partner are
difficult or impossible to ascertain, then the Non-Defaulting Partner shall
have, as liquidated damages and not as a penalty, the right and option to
purchase all, but not a portion of, the Partnership Interest of the Defaulting
Partner at a purchase price equal to seventy five (75%) percent of the then
balance in the Defaulting Partner's Capital Account, which shall be payable in
ten (10) equal annual installments of principal, together with interest at a
variable rate equal to the Short Term Rate, with the first installment due on
the first anniversary following the closing hereinafter referred to; provided
that where either WAC or CAC is the Defaulting Partner, Sony may only elect to
purchase the Partnership Interests of both such Persons. The option to purchase
the interest of the Defaulting Partner shall be exercisable on or before the
ninetieth (90) day following the expiration of the period of time in which the
Defaulting Partner could have cured such default (or if such default is not
capable of being cured, on or before the ninetieth (90) day following the
giving of the Default Notice) by the giving of written notice to the Defaulting
Partner. The closing of any such purchase shall take place on a date and at a
place designated by the Non-Defaulting Partner (but the date designated for
such closing shall in any event be a date which is not later than (30) days
from the exercise of such option). At the closing, the Non-Defaulting Partner
shall deliver to the Defaulting Partner the
- 36 -
required consideration in exchange for an instrument or instruments (and such
other documents as counsel to the Non-Defaulting Partner may reasonably
request) validly assigning the interest of the Defaulting Partner to the
Non-Defaulting Partner free and clear of all liens, claims and , encumbrances.
The obligation to pay the purchase price to the Defaulting Partner shall be an
obligation of the Non-Defaulting Partner alone and, in any event, shall not be
an obligation included within the provisions of Section 13.17 hereof. Any
Defaulting Partner whose Partnership Interest is purchased under the provisions
of this clause (d) shall remain liable for its Percentage Interest of the
Partnership's liabilities in existence at the time of closing of such purchase.
The Non-Defaulting Partner may, at its sole option, designate any third party
of its choosing to exercise the option granted to it in this clause (d).
(e) If, in connection with a Division of Responsibility,
indemnification of Pace shall be required pursuant to Section 13.9 of the SBPAP
Agreement, then at the option of the Non-Defaulting Partner, the Defaulting
Partner shall either (i) provide such indemnity to Pace (and indemnify the
Non-Defaulting Partner on the same terms as it so indemnifies Pace pursuant to
said Section 13.9), in which case the Partnership shall dissolve pursuant to
Article X hereof, or (ii) fully cooperate with Pace and the Non-Defaulting
Partner in order to restructure the Division of Responsibility so as to achieve
as nearly as possible the results contemplated by Section 17.3 of the SBPAP
Agreement without causing a termination of SBPAP under Section 708(b) of the
Code in which case the Partnership shall not dissolve pursuant to Article X
hereof. Each Partner hereby, irrevocably constitutes and appoints the other
Partners, and each officer of the other Partners, and their respective
successors, acting singly, as its true and lawful attorney-in-fact, with full
right of substitution, in its name, place and stead, to take all action, and to
make, execute, acknowledge, swear to and file any document, instrument,
agreement or amendment, in each case that may be required to effectuate the
restructuring referred to in the preceding sentence.
ARTICLE XII
Section 12.1 Indemnification.
(a) Each Partner (the "Indemnifying Party") agrees to
indemnify and hold harmless the other Partners and the Partnership (the
"Indemnified Parties") from and against any and all claims, demands, actions,
losses, damages, assessments, charges, costs, expenses (including, without
limitation, interest, penalties and reasonable attorneys' fees), or judgments
against the Indemnified Parties (hereafter, "Compensable Damage"), resulting
from or arising out of:
(i) any breach of the Indemnifying Party's
obligations under this Agreement;
(ii) any action or conduct by the Indemnifying Party
relating to the Partnership or this Agreement outside the
scope of the authority of such Indemnifying Party; and
- 37 -
(iii) any grossly negligent or intentional wrongful
action or omission of the Indemnifying Party or any employee,
agent or representative of the indemnifying Party relating to
the Partnership or this Agreement.
(b) If any claim relating to the matters indemnified pursuant
to this Section 12.1 is asserted against an Indemnified Party which may result
in any Compensable Damage, then the Indemnified Party shall give notice to the
Indemnifying Party as provided by this Agreement within thirty (30) days of the
Indemnified Party's knowledge of such claim. Upon receipt of such notice, the
Indemnifying Party shall have the right to undertake, by counsel or
representatives of its own choosing, the good faith defense, compromise or
settlement of the claim, such defense, compromise or settlement to be
undertaken on behalf of and for the account and risk of the Indemnified Party.
The Indemnified Party shall cooperate with the Indemnifying Party in such
defense at the Indemnifying Party's expense and provide the Indemnifying Party
with all information and assistance reasonably necessary to permit the
Indemnifying Party to settle and/or defend any such claim. No settlement of any
claim shall be effected without the consent of both the Indemnifying Party and
the Indemnified Party, which consent shall not be unreasonably withheld,
conditioned or delayed.
(c) Except as otherwise explicitly herein provided
(including, without limitation, pursuant to Sections 3.1, 3.4 and 12.1 hereof),
as among the Partners, no Partner shall be liable or bear responsibility for
more than its proportionate share (based on its Allocation Percentage) of each
and all of the liabilities and obligations of the Partnership. Except as
otherwise explicitly herein provided (including, without limitation, pursuant
to Sections 3.1, 3.4 and 12.1 hereof), in the event that (whether before or
following any dissolution of the Partnership) any Partner shall be required to
pay, discharge or otherwise bear responsibility for any amount of any liability
or obligation of the Partnership in excess of such Partner's proportionate
share thereof (determined as provided above), each other Partner hereby agrees
to indemnify, hold harmless and reimburse (directly or through the Partnership)
such Partner upon demand against and for such other Partner's proportionate
share of such excess. It is the intention of this contribution clause that,
except for any Partner's liability arising explicitly hereunder (including,
without limitation, pursuant to Sections 3.1, 3.4 and 12.1 hereof), following
the operation of this clause and without relieving any former Partner of any
responsibility or obligation it may have, each Partner will have borne exactly
its proportionate share of the liability or obligation of the Partnership at
issue determined with reference to such Partner's Allocation Percentage.
ARTICLE XIII
Section 13.1 Survival. In the event of any termination of
this Agreement, all provisions of Section 13.4 below and of Section 12.1 above
shall survive such termination and remain in full force and effect.
- 38 -
Section 13.2 Further Assurances. Each Partner agrees that it
will do any and all things and take any and all actions reasonably requested by
any other Partner to fulfill the purposes of this Agreement.
Section 13.3 Expenses. Each Partner will pay all of its
expenses incurred in connection with the negotiation of this Agreement and the
SBPAP Agreement, the performance of its obligations hereunder and thereunder
and the consummation of the transactions contemplated hereby and thereby.
Section 13.4 Confidentiality. The Partners acknowledge that
they and their respective Affiliates are now and may in the future be engaged
in a number of businesses related to and/or competitive with each others'
businesses and, accordingly, no Partner wishes to receive from any other
Partner any proprietary, confidential or nonpublic information relating to such
other Partner's or its Affiliates' businesses. Each Partner will, and will
cause its Affiliates to, use reasonable safeguards to prevent the disclosure to
the Partnership or the other Partners and their Affiliates of any of its
proprietary, confidential or non-public information. Each Partner agrees not to
disclose, or permit or suffer any of its Affiliates to disclose, any
proprietary, confidential or non-public information of the Partnership or the
other Partners except for disclosures to such Partner's or its Affiliate's
directors, officers, employees, agents and representatives who need to know
such information and who shall be under similar obligations not to use or
disclose the information. It is not anticipated that any of the information
covered by this Section 13.4 will constitute technical proprietary or
confidential information. Notwithstanding the foregoing, information shall not
be deemed proprietary, confidential or non-public if such information (a) was
or is publicly disclosed or otherwise made widely available other than through
the fault of the receiving Partner or its Affiliate, (b) was or is obtained by
such Partner from sources other than the Partnership or independently developed
by such Partner without the use of any information, property or personnel of
the Partnership or (c) was required by law to be disclosed; provided, that
prior to disclosing information pursuant to (c) above, a Partner shall, if
permitted by law, provide to the Partnership and each other Partner reasonable
notice and an opportunity to challenge the disclosure before appropriate
authorities; and further provided that to the extent that disclosure pursuant
to (c) above is required under the Securities Act of 1933, as amended, or any
rule or regulation thereunder ("1933 Act") , or the Securities Exchange Act of
1934, as amended, or any rule or regulation thereunder ("1934 Act"), the
Partner or Affiliate responsible for such disclosure, if requested by the other
Partner, shall use its best efforts to obtain confidential treatment thereof
pursuant to Rule 406 of the 1933 Act, or any successor rule, or Rule 24b-2 of
the 1934 Act, or any successor rule, as appropriate.
Section 13.5 Binding Effect. This Agreement constitutes a
valid and binding obligation of each Partner, enforceable in accordance with
its terms.
Section 13.6 Other Activities. Each of the Partners
acknowledges that it and each of its Affiliates is engaged and may in the
future be engaged in a number of businesses related to the business of the
Partnership and (i) except as specifically provided in Section 7.1 hereof,
nothing in this Agreement is intended to prohibit any Partner or any of its
Affiliates from owning, managing, operating, investing and participating in
their current businesses and
- 39 -
investment interests or from owning, managing, operating, investing and
participating in additional businesses and investment interests, whether or not
any such business or activity is competitive with the business of the
Partnership and (ii) neither the Partnership nor any other Partner shall have
any rights in or to any such businesses or investments of such Partner or its
Affiliates or any income or profits derived therefrom.
Section 13.7 Transactions with Partners. No contract,
agreement, license or other instrument or transaction between the Partnership
and a Partner, any officer, director, shareholder or partner of a Partner, or
any two or more such persons or entities, or between the Partnership and any
other corporation, partnership, association or other organization in which any
one or more of the aforementioned persons is a director or officer, or has a
financial interest, which is approved by the vote of the entire Management
Committee, shall be void or voidable solely because of said relationship.
Section 13.8 Inspection. Each Partner or its authorized
representative may examine the Partnership Books or other financial records of
the Partnership as provided in Section 8.2 of this Agreement, and may examine
or inspect any of the property or assets owned or used by the Partnership
during ordinary business hours upon prior reasonable notice.
Section 13.9 Notices. All notices, offers, approvals,
elections, consents, acceptances, waivers, reports, requests and other
communications required or permitted to be given hereunder (all of the
foregoing hereinafter collectively referred to as "Communications") shall be in
writing and shall be deemed to have been duly given if delivered personally
with receipt acknowledged or sent by registered or certified mail or
equivalent, if available, return receipt requested, or by facsimile, telex or
cablegram (which shall be confirmed by a writing sent by registered or
certified mail or equivalent on the same day that such facsimile, telex or
cablegram is sent) , or by recognized overnight courier for next day delivery,
addressed or sent to the parties at the following addresses and facsimile
numbers or to such other or additional address or facsimile number as any
Partner shall hereafter specify by Communication to the other Partner:
If to SBAC, WAC or CAC:
Blockbuster Entertainment Corporation
One Blockbuster Plaza
Fort Lauderdale, FL 33301-1860
Fax: (305) 833-3929
Attention: Thomas W. Hawkins, Esq.
- 40 -
If to Sony:
YM Corp.
% Sony Corporation of America
9 West 57th Street
New York, NY 10019
Fax: (212) 418-9434
Attention: Marinus N. Henny
Senior Vice President
with a copy to:
Sony Music Entertainment, Inc.
550 Madison Avenue
New York, New York 10022-3211
Fax: (212) 833-8083
Attention: David H. Johnson, Esq.
Senior Vice President, General Counsel
Notice of change of address shall be deemed given when actually received or
upon refusal to accept delivery thereof; all other Communications shall be
deemed to have been given, received and dated on the earlier of: (i) when
actually received or upon refusal to accept delivery thereof; or (ii) on the
date when delivered personally, one (1) day after being sent by facsimile,
cable, telex or overnight courier and four (4) business days after mailing, as
aforesaid.
Section 13.10 No Partition. The parties hereto expressly
waive any rights they may have to retire, withdraw or resign from the
Partnership, dissolve the Partnership, terminate the Partnership or seek
partition of Partnership's assets between the Partners by any court; provided,
however, that such waiver shall not affect the operation of Section 17.3 of the
SBPAP Agreement or Article IX or XI of this Agreement.
Section 13.11 Severability. If any part of any provision of
this Agreement or any other agreement, document or writing given pursuant to or
in connection with this Agreement shall be invalid or unenforceable under
applicable law, said part shall be ineffective to the extent of such invalidity
or unenforceability only, without in any way affecting the remaining provisions
of said agreement, but only if and to the extent that removal of such provision
and enforcement of the remainder of the Agreement or any other agreement would
not materially and adversely frustrate the parties' essential objectives.
Section 13.12 Waiver of Default. No delay or failure on the
part of any party to this Agreement in exercising any right, power or privilege
under this Agreement shall impair any such right, power or privilege or be
construed as a waiver of any default or acquiescence therein.
- 41 -
Section 13.13 Benefits and Obligations. The covenants and
agreements contained in this Agreement shall inure to the benefit of, and be
binding upon, the Partners and their respective legal successors. Any persons
succeeding to the interest of a Partner shall succeed to all of such Partner's
rights, interests and obligations under this Agreement, subject to and with the
benefit of all terms and conditions of this Agreement.
Section 13.14 Amendment. This Agreement shall not be amended,
altered, or modified except by an instrument in writing and signed by the
Partners.
Section 13.15 Entire Agreement. This Agreement constitutes
the entire agreement between the Partners with respect to the transactions
described in this Agreement and supersedes all prior oral or written
agreements, commitments or understandings with respect to the matters in this
Agreement.
Section 13.16 Governing Law. This Agreement, the rights and
obligations hereunder, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed therein.
Section 13.17 Joinder. On or before the Existing Facility
Closing Date, Sony shall cause Sony Music Entertainment Inc. to execute a
letter addressed to SBAC, WAC and CAC, in form reasonably acceptable to SBAC,
WAC and CAC, guarantying Sony's obligations hereunder. On or before the
Existing Facility Closing Date, SBAC, WAC and CAC shall cause Blockbuster
Entertainment Corporation to execute a letter addressed to Sony, in form
reasonably acceptable to Sony, guarantying SBAC's, WAC's and CAC's obligations
hereunder. Notwithstanding the foregoing, no such guaranty shall guaranty any
obligation hereunder (i) pursuant to Section 3.4 or (ii) arising out of an
obligation of the Partnership under the SBPAP Agreement which is excluded from
the guarantees provided for in Section 18.11 of the SBPAP Agreement.
Section 13.18 Press Releases; Names. All press releases which
are issued by the Partnership or any Partner or any Affiliate of any Partner
concerning the subject matter of this Agreement shall first be approved by both
Partners before the release thereof. Prior to the use by the Partnership of the
name "Sony," "Blockbuster" or any combination, abbreviation or other derivative
of such names for any reason, there shall have been obtained the written
approval of Sony or Blockbuster, as applicable, to the proposed use of such
name, which approval may be withheld for any reason or no reason. In the event
Sony or Blockbuster ceases for any reason to be a Partner in the Partnership,
the Partnership shall immediately cease to use such Partner's and its
Affiliates' name and any derivative thereof.
Section 13.19 No Third Party Beneficiaries. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
to any person or entity, other than the parties hereto and their respective
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.
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Section 13.20 Certain Representations. Each Partner
represents and warrants to the other that (i) it has taken or caused to be
taken all necessary action to authorized the execution, delivery and
performance of this Agreement and the transactions contemplated hereby, (ii)
this Agreement constitutes its legal, valid and binding obligation of such
Partner, enforceable against it in accordance with its terms and (iii) neither
the execution and delivery of this Agreement by it nor compliance by it with
any of the provisions hereof will violate any law or regulation, or any order,
writ or decree of any court or governmental instrumentality or its certificate
of incorporation or bylaws.
Section 13.21 Amendment of Amended and Restated Partnership
Agreement. This Agreement amends, restates and supersedes in its entirety the
Amended and Restated Partnership Agreement for Amphitheater Entertainment
Partnership dated as of February 18, 1994 among the Partners.
* * * * *
- 43 -
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
THE WESTSIDE AMPHITHEATRE
CORPORATION
By:
-----------------------------------
Its: President
CHARLOTTE AMPHITHEATER CORPORATION
By:
-----------------------------------
Its: Vice President
SAN BERNARDINO AMPHITHEATER
CORPORATION
By:
-----------------------------------
Its: Vice President
YM CORP.
By:
-----------------------------------
Its: Vice President
- 44 -
ANNEX A
(UNWIND EXAMPLES)
I. Example #1
A. Assumptions
Defined Term Amount
Sony/Pace Properties Benefit $60
Pace Properties Benefit 60
Blockbuster Properties Benefit 0
Sony/Pace Joint Benefit Amount $10
Pace Separate Benefit Amount 40
Blockbuster Benefit Amount $0
Pace Benefit Amount 50
(Sony is the Benefitting Partner)
(Pace owes Clause G&K Sum)
Sony/Block Net Benefit Amount ($10)
Blockbuster Unwind Contribution Amount 0
Blockbuster Unwind Credit Amount 30
Sony Unwind Credit Amount 20
Make-Up Amount 10
Clause G&K Sum 50
B. Capital Contributions to Sony/Block by Sony and Blockbuster
Sony contributes $10 to the Partnership pursuant to item (x) of Section 3.1(i)
of the Agreement.
C. Capital Contributions to Sony/Block/Pace by Sony/Block
None.
D. Payments to Sony/Block by Pace
Pace pays $50 to Sony/Block pursuant to Section 9.4 (k) of the SBPAP Agreement.
E Distributions from Sony/Block
Sony/Block distributes $10 to CAC pursuant to Section 5.5(c) of the Agreement.
Upon receipt of Clause G&K Sum from Pace, Sony/Block distributes $20 to Sony
and $30 to CAC pursuant to Section 5.5(d) of the Agreement.
F. Net Results (Benefit-Contributions/Pmts+Distributions)
Blockbuster - 0-0+40=40
Pace - 90-50+0=40
Sony - 30-10+20=40
II. Example #2
A. Assumptions
Defined Term Amount
Sony/Pace Properties Benefit $60
Pace Properties Benefit 0
Blockbuster Properties Benefit 90
Sony/Pace Joint Benefit Amount $10
Pace Separate Benefit Amount 0
Blockbuster Benefit Amount $30
Pace Benefit Amount 10
(Blockbuster is the Benefitting Partner)
(Sony/Block owes Clause G&K Sum)
Sony/Block Net Benefit Amount $20
Blockbuster Unwind Contribution Amount 20
Blockbuster Unwind credit Amount 0
Sony Unwind Credit Amount 0
Make-Up Amount 20
Clause G&K Sum 20
B. Capital Contributions to Sony/Block by Sony and Blockbuster
CAC contributes $20 to the Partnership pursuant to item (x) of Section 3.1(i)
of the Agreement.
CAC contributes $20 to the Partnership pursuant to item (y) of Section 3.1(i)
of the Agreement.
C. Capital Contributions to Sony/Block/Pace bv Sony/Block
Sony/Block contributes $20 to Sony/Block/Pace pursuant to Section 9.4(k) of the
SBPAP Agreement.
D. Payments to Sony/Block by Pace
None.
E. Distributions from Sony/Block
Sony/Block distributes $20 to Sony pursuant to Section 5.5(c) of the Agreement.
F. Net Results (Benefit-Contributions/Pmts+Distributions)
Blockbuster - 90-40+0=50
Pace - 30-0+20=50
Sony - 30-0+20=50
II. Example #2
A. Assumptions
Defined Term Amount
Sony/Pace Properties Benefit $60
Pace Properties Benefit 60
Blockbuster Properties Benefit 15
Sony/Pace Joint Benefit Amount $10
Pace Separate Benefit Amount 40
Blockbuster Benefit Amount $5
Pace Benefit Amount 50
(Sony is the Benefitting Partner)
(Pace owes Clause G&K Sum)
Sony/Block Net Benefit Amount ($5)
Blockbuster Unwind Contribution Amount 0
Blockbuster Unwind Credit Amount 25
Sony Unwind Credit Amount 20
Make-Up Amount 5
Clause G&K Sum 5
B. Capital-Contributions to Sony/Block by Sony and Blockbuster
Sony contributes $5 to the Partnership pursuant to item (x) of Section 3.1(j)
of the Agreement.
C. Capital Contributions to Sony/Block/Pace by Sony/Block
None.
D. Payments to Sony/Block by Pace
Pace pays $45 to Sony/Block pursuant to Section 9.4(k) of the SBPAP Agreement.
E. Distributions from Sony/Block
Sony/Block distributes $5 to CAC pursuant to Section 5.5(c) of the Agreement.
Upon receipt of Clause G&K Sum from Pace, Sony/Block distributes $20 to Sony
and $25 to CAC pursuant to Section 5.5(d) of the Agreement.
F. Net Results (Benefit-Contributions/Pmts+Distributions)
Blockbuster - 15-0+30=45
Pace - 90-45+0=45
Sony - 30-5+20=45
Sony/Block distributes $12.50 to Sony pursuant to Section 5.5(d) of the
Agreement.
F. Net Results (Benefit-Contributions/Pmts+Distributions)
Blockbuster - 90-47.50+0+=42.50
Pace - 37.50-0+5=42.50
Sony - 0-0+42.50=42.50