EX-10.2



 





Exhibit 10.2




 





INVESTMENT AGREEMENT




by and between




FX Real Estate and Entertainment Inc.




and




Robert F.X. Sillerman




Dated as of January 9, 2008




 





 









 





TABLE OF CONTENTS




	 	 	 	 	 
	Section 1. Rights Offering and Backstop Purchases
	 	 	2	 
	1.1 Full Participation in Rights Offering
	 	 	2	 
	1.2 Investor Backstop Purchase
	 	 	2	 
	1.3 The Rights Offering
	 	 	3	 
	 
	 	 	 	 
	Section 2. Representations and Warranties of the Company
	 	 	4	 
	2.1 Organization
	 	 	4	 
	2.2 Due Authorization
	 	 	4	 
	2.3 Due Execution; Enforceability
	 	 	4	 
	2.4 Due Issuance and Authorization of Capital Stock
	 	 	5	 
	2.5 Capitalization
	 	 	5	 
	2.6 Consents
	 	 	6	 
	2.7 No Conflicts
	 	 	6	 
	2.8 Huff Investment Agreement
	 	 	6	 
	 
	 	 	 	 
	Section 3. Representations and Warranties of the Investor
	 	 	6	 
	3.1 Due Authorization
	 	 	6	 
	3.2 Due Execution; Enforceability
	 	 	6	 
	3.3 No Registration Under the Securities Act
	 	 	7	 
	3.4 Acquisition for Investment
	 	 	7	 
	3.5 Accredited Investor, Etc
	 	 	7	 
	 
	 	 	 	 
	Section 4. Additional Covenants
	 	 	7	 
	4.1 Listing
	 	 	7	 
	4.2 Restrictions on Transfer
	 	 	7	 
	4.3 Legends
	 	 	7	 
	4.4 Further Assurances
	 	 	8	 
	 
	 	 	 	 
	Section 5. Conditions to Closing
	 	 	8	 
	5.1 Conditions to the Investor’s Obligation to Purchase the Investor Rights Shares
	 	 	8	 
	5.2 Conditions to the Investor’s Obligations to Purchase the Investor Backstop Shares
	 	 	9	 
	5.3 Conditions to Company’s Obligations
	 	 	10	 
	 
	 	 	 	 
	Section 6. Termination
	 	 	11	 
	6.1 Termination
	 	 	11	 
	6.2 Effect of Termination
	 	 	12	 
	 
	 	 	 	 
	Section 7. Indemnification; Survival of Representations and Warranties
	 	 	12	 
	7.1 Indemnification
	 	 	12	 
	7.2 Survival of Representations and Warranties
	 	 	12	 
	 
	 	 	 	 
	Section 8. Definitions

	 	 	13	 






 i 




 









 





	 	 	 	 	 
	Section 9. Miscellaneous
	 	 	15	 
	9.1 Notices
	 	 	15	 
	9.2 Assignment
	 	 	16	 
	9.3 Entire Agreement
	 	 	16	 
	9.4 Waivers and Amendments
	 	 	16	 
	9.5 Governing Law; Jurisdiction; Venue; Process
	 	 	16	 
	9.6 Counterparts
	 	 	17	 
	9.7 Headings
	 	 	17	 
	9.8 Severability
	 	 	17	 






Exhibits




Exhibit A — Form of Huff Investment Agreement




 ii 




 









 





INVESTMENT AGREEMENT




Dated as of January 9, 2008




          THIS INVESTMENT AGREEMENT (this “Agreement”) is made by and between FX Real Estate and
Entertainment Inc., a Delaware corporation (the “Company”), and the investor named on
Schedule 1 attached hereto (the “Investor”).




          As promptly as practicable following the date of this Agreement, 19,743,349 shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”), are to be
distributed to the stockholders of CKX, Inc., a Delaware corporation, of record on December 31,
2007 (the “Distribution”). Pursuant to the Distribution, the Investor is to receive an
aggregate of 6,074,731 shares of Common Stock (the “Investor Distribution Shares”), which,
together with shares he currently owns, will represent approximately 30% of the number of shares of
Common Stock to be outstanding immediately after the Distribution. The shares of Common Stock to
be distributed pursuant to the Distribution have been registered with the Securities and Exchange
Commission (the “SEC”) on a registration statement on Form S-1, registration No. 333-145672
declared effective by the SEC on December 31, 2007 (as amended and supplemented through the date
hereof, including by means of the prospectus filed pursuant to SEC Rule 424(b) on January 3, 2008,
the “Distribution Registration Statement”).




          As promptly as practicable following the Distribution, the Company intends to conduct a rights
offering (the “Rights Offering”) pursuant to which each of the Company’s stockholders will
be offered the right to purchase one additional share of Common Stock for each two shares of Common
Stock owned as of the record date established for the Rights Offering (each, a “Right” and
collectively, the “Rights”) at a price currently expected to be ten Dollars ($10.00) per
share. The holders of 20,046,898 shares of Common Stock have agreed with the Company that they
will not participate in the Rights Offering.




          The Company and the Investor wish to set forth herein certain agreements with respect to the
Rights Offering and the purchase of certain shares of Common Stock that are not otherwise purchased
in the Rights Offering.




          Certain terms used in this Agreement have the meanings ascribed thereto in Section 8
hereof.




          NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:




 









 





          Section 1. Rights Offering and Investor Backstop Purchases.




          1.1 Full Participation in Rights Offering. Upon and subject to the terms, provisions
and conditions of this Agreement, during the pendency of, and in no event later than the last day
of, the Rights Offering, the Investor shall purchase from the Company all of the shares of Common
Stock underlying the Rights that the Investor receives in the Rights Offering, such purchase to be
made with immediately available funds for a per-share purchase price equal to the Subscription
Price, and on such other terms and conditions as shall be applicable to the Rights Offering
generally. The number of shares of Common Stock to be so purchased by the Investor and the
purchase price of such shares are set forth opposite the Investor’s name on Schedule 1
hereto (collectively, the “Investor Rights Shares”).




          1.2 Investor Backstop Purchase.




          (a) Upon and subject to the terms, provisions and conditions of this Agreement, at the
Investor Backstop Closing, the Investor shall purchase the Maximum Number of Backstop Shares, such
purchase to be made with immediately available funds for a per-share purchase price equal to the
Subscription Price, and on such other terms and conditions as shall be applicable to the Rights
Offering as set forth in the Rights Offering Registration Statement in the form delivered to the
Investor pursuant to Section 1.3(a) hereof, subject to the terms of this Agreement which
shall control in the event of any conflict.




          (b) The “Maximum Number of Backstop Shares” shall mean the number (which in any case
shall be subject to the limitation set forth in the proviso set forth at the end of
Section 1.2(a) hereof) of shares of Common Stock equal to one-half of the excess, if any,
of:





          (i) the number of shares of Common Stock that are not otherwise
purchased in the Rights Offering; over




          (ii) the number equal to the “$15 Million Tranche Number” (as such
term is defined in the Huff Investment Agreement);


provided, however, that, without duplication of any other conditions set forth in
Section 5.1(h) hereof, the Investor shall not be obligated to purchase any shares at the
Investor Backstop Closing unless the Huff Investors shall purchase in the aggregate (i) a like
number of shares as the Investor is purchasing pursuant to this Section 1.2 plus (ii) a
number of shares equal to the $15 Million Tranche Number, simultaneously with the Investor Backstop
Closing in accordance with the Huff Investment Agreement.




          (c) Within two (2) Business Days after the closing of the Rights Offering, and in any event
not later than the giving of notice to “Investors” under and pursuant to Section 1.2(c) of
the Huff Investment Agreement, the Company shall deliver to the Investor a written notice setting
forth the number of shares to be purchased pursuant to




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Section 1.2(a) hereof (the “Investor Backstop Shares” and, collectively with
the Investor Distribution Shares and the Investor Rights Shares, the “Investor Shares”) and
the total purchase price for such shares (which shall be determined based on the Subscription
Price), together with a calculation thereof in reasonable detail.




          (d) The Company and the Investor shall consummate the purchase and sale of the Investor
Backstop Shares at the offices of the Company or its counsel in New York, New York by no later
than the close of business on the fifteenth (15th) Business Day after the date the notice pursuant
to Section 1.2(c) hereof is received by the Investor (such closing, the “Investor
Backstop Closing”). The date of the Investor Backstop Closing is sometimes referred to
hereinafter as the “Investor Backstop Closing Date.”




          1.3 The Rights Offering.




          (a) The Company is preparing a registration statement (including each amendment and supplement
thereto, the “Rights Offering Registration Statement”) on Form S-1 covering the issuance of
the Rights and the shares of Common Stock to be issued pursuant to the Rights Offering. The Company
has furnished the latest draft of the Rights Offering Registration Statement to the Investor. The
Company intends to use its commercially reasonable efforts to (i) cause the Rights Offering
Registration Statement to be filed with the SEC as promptly as practicable after the execution and
delivery of this Agreement; (ii) cause the Rights Offering Registration Statement to be declared
effective by the SEC as promptly as practicable; and (iii) commence the Rights Offering as promptly
as practicable following the effective date of the Rights Offering Registration Statement. The
Company shall have the sole and absolute right to terminate the Rights Offering without closing on
the purchase and sale of any shares of Common Stock thereunder and hereunder. Upon any such
termination, the obligations of the Investor under this Agreement shall terminate without any
obligation to purchase shares of Common Stock pursuant to Section 1.2 hereof, and the
provisions of Section 7 hereof shall remain in effect.




          (b) The Company shall (i) not permit any securities other than the Rights and the shares of
Common Stock underlying the Rights to be included in the Rights Offering Registration Statement;
(ii) furnish to the Investor each amendment or supplement to the Rights Offering Registration
Statement prior to its filing with or other submission to the SEC and shall afford the Investor a
reasonable opportunity (but in any event not less than 48 hours after receipt by the Investor) to
review and comment upon such amendment or supplement in each instance before it is filed with the
SEC; (iii) provide the Investor with any written comments or other written communications that the
Company or its counsel receives from time to time from the SEC with respect to the Rights Offering
Registration Statement promptly after the receipt of such comments or other communications; and
(iv) correct any information in the Rights Offering Registration Statement if, and to the extent,
that such information becomes false or misleading in any material respect, and take all steps
necessary to cause the Rights Offering Registration Statement, as so corrected, to be filed with
the SEC and, upon its




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effectiveness, to be disseminated to the distributees of the Rights, in each case as and to
the extent required by applicable federal securities laws.




          (c) The Investor shall use his reasonable and good faith efforts to cooperate with the Company
in its efforts to file the Rights Offering Registration Statement and to cause it to be declared
effective by the SEC as promptly as practicable. In that connection, and without limiting the
foregoing, the Investor shall furnish to the Company such information regarding himself as the
Company or its counsel may reasonably request for disclosure in the Rights Offering Registration
Statement, and the Investor hereby represents and warrants that such information will be true,
correct and complete, and covenants to promptly provide the Company with any information that may
be necessary in order to correct such information to the extent it ceases for any reason to
continue to be true, correct and complete; and the Company shall have the right to include in the
Rights Offering Registration Statement all such information so furnished, as well as a description
of this Agreement and a copy hereof as an Exhibit to the Rights Offering Registration Statement.




          Section 2. Representations and Warranties of the Company.




          The Company hereby represents and warrants to the Investor as follows:




          2.1 Organization. The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware, and is duly qualified or licensed to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction where the nature
of the property owned or leased by it or the nature of the business conducted by it makes such
qualification or license necessary, except where the failure to be so qualified or licensed would
not reasonably be expected to either prevent or materially delay its ability to perform its
obligations hereunder. The Company has all corporate power and authority to own and operate its
properties, to lease the property it operates under lease and to conduct its business as now or
currently proposed to be conducted.




          2.2 Due Authorization. The Company has the requisite corporate power and authority
to enter into, execute and deliver this Agreement and to perform its obligations hereunder,
including the issuance of the shares of Common Stock to be issued hereunder, and has taken all
necessary corporate action required for the due authorization, execution, delivery and performance
by it of this Agreement, including the issuance of the shares of Common Stock to be issued
hereunder.




          2.3 Due Execution; Enforceability. This Agreement has been duly and validly executed
and delivered by the Company and constitutes its valid and binding obligation, enforceable against
it in accordance with its terms, except as limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).




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          2.4 Due Issuance and Authorization of Capital Stock. The shares of Common Stock
issued and delivered to the Investor pursuant to the terms hereof will be, upon issuance, duly
authorized, validly issued, fully paid and non-assessable.




          2.5 Capitalization.




          (a) The authorized capital stock of the Company consists solely of (i) 300,000,000 shares
of Common Stock, par value $0.01 per share, of which 39,790,247 shares are issued and
outstanding, and (ii) 75,000,000 shares of Preferred Stock, par value $0.01 per share, none of
which are outstanding as of the date hereof. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid and non-assessable,
are not subject to any preemptive rights and were not issued in violation of the Securities Act
or any other applicable laws (including state “blue sky” laws).




          (b) The authorized, issued and outstanding capital stock of the Company immediately after the
Investor Backstop Closing will be as set forth in Schedule 2.5(b) hereto. All shares of
capital stock of the Company outstanding immediately after the Investor Backstop Closing will be
duly authorized, validly issued, fully paid and non-assessable.




          (c) Other than as set forth on Schedule 2.5(c) hereto, the Company does not have
outstanding any securities convertible into or exercisable or exchangeable for any shares of its
capital stock nor does it have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to, any of its
capital stock or securities convertible into or exercisable or exchangeable for any of its capital
stock. Other than as set forth on Schedule 2.5(c) hereto, no shares of the Company’s
outstanding capital stock, or stock issuable upon exercise or exchange of any outstanding options,
warrants or rights, or other stock issuable by the Company, are subject to any rights of first
refusal or other rights to purchase such stock (whether in favor of the Company or any other
Person), pursuant to any agreement or commitment of the Company. Except as set forth on
Schedule 2.5(c) hereto, the Company has no obligation to pay any dividend on or make any
distribution in respect of any capital stock.




          (d) Except as set forth on Schedule 2.5(d) hereto, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements, evidences of indebtedness or commitments of
any character, written or oral, under which the Company is or may become obligated to issue or
sell, or giving any Person a right to subscribe for or acquire, or in any way dispose of, any
shares of the capital stock or other equity interests, or any securities or obligations
exercisable or exchangeable for or convertible into any shares of the capital stock or other
equity interests of the Company, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. Except as set forth on Schedule 2.5(d) hereto, the
outstanding capital stock of the Company is not subject to any voting trust agreement or other




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agreement or commitment restricting or otherwise relating to the voting, dividend rights or
disposition of such capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights providing economic benefits based, directly or indirectly, on the
value or price of the stock or other equity interests of the Company.




          2.6 Consents. Except for such filings and approvals as may be required under, and
other applicable requirements of, federal securities laws and applicable state securities or “blue
sky” laws, to the best knowledge of the Company, the execution, delivery and performance of this
Agreement does not require any consent of, authorization by, exemption from, filing with, or
notice to any Governmental Entity or any other Person.




          2.7 No Conflicts. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereunder, will not (a) conflict with or result in
any breach of any provision of the Company’s certificate of incorporation or by-laws, (b) conflict
with or result in the breach of the terms, conditions or provisions of or constitute a default (or
an event which with notice or lapse of time or both would become a default) under, or give rise to
any right of termination, acceleration or cancellation under, any material agreement, lease,
mortgage, license, indenture, instrument or other contract to which the Company is a party or by
which any of its respective properties or assets are bound, or (c) result in a violation of any
law, rule, regulation, order, judgment or decree (including, without limitation, federal and state
securities laws and regulations) applicable thereto or by which any of its properties or assets
are bound or affected, except (i) which violation would not, individually or in the aggregate,
have a Material Adverse Effect and (ii) in the case of clauses (b) or (c), where such conflicts or
violations would not prevent or materially delay its ability to consummate the transactions
contemplated by this Agreement.




          2.8 Huff Investment Agreement. Simultaneously with the execution and delivery of
this Agreement, the Company and the Huff Alternative Fund, L.P., and the Huff Alternative Parallel
Fund, L.P., are executing and delivering an Investment Agreement in the form of Exhibit A
hereto (the “Huff Investment Agreement”).




          Section 3. Representations and Warranties of the Investor.




          The Investor hereby represents and warrants to the Company as follows:




          3.1 Due Authorization. The Investor has the requisite power, authority, and capacity
to enter into, execute and deliver this Agreement and to perform his obligations hereunder and has
taken all necessary action required for the due authorization, execution, delivery and performance
by him of this Agreement.




          3.2 Due Execution; Enforceability. This Agreement has been duly and validly executed
and delivered by the Investor and constitutes his valid and binding obligation, enforceable
against him in accordance with its terms, subject to applicable




-6-









 




bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).




          3.3 No Registration Under the Securities Act. The Investor understands that the
shares of Common Stock to be purchased by him pursuant to the terms of this Agreement will be
considered “restricted securities” as such term is defined in Rule 144 under the Securities Act,
that such shares have not been registered and the Company will not be required to effect any
registration under the Securities Act or any state securities law with respect to such shares,
that such shares will be issued in reliance upon exemptions contained in the Securities Act or
interpretations thereof and in the applicable state securities laws, and that the Investor may not
sell, offer for sale or otherwise Transfer such shares unless pursuant to a registration statement
or in a transaction exempt from or not subject to registration under the Securities Act.




          3.4 Acquisition for Investment. The shares of Common stock to be acquired under this
Agreement are being acquired by the Investor in good faith solely for his own account, for
investment and not with a view toward resale or other distribution within the meaning of the
Securities Act; provided, however, that the disposition of the Investor’s property
shall at all times be under his control.




          3.5 Accredited Investor, Etc. The Investor is an “accredited investor” within the
meaning of Rule 501(a) under the Securities Act. The Investor is able to bear any economic risks
associated with such investment (including, without limitation, the necessity of holding the
shares for an indefinite period of time, inasmuch as the shares have not been registered under the
Securities Act). The Investor certifies that he is a United States citizen living in the United
States.




          Section 4. Additional Covenants.




          4.1 Listing. The Company shall, consistent with the fiduciary duties of its board of
directors, use its reasonable efforts to maintain the listing of the Common Stock on The Nasdaq
Global Market stock exchange.




          4.2 Restrictions on Transfer. The Investor shall not, without the prior written
consent of the Company, make or permit any Transfer of any of the Investor Rights Shares and any
of the Investor Backstop Shares until the second anniversary of the date of this Agreement.




          4.3 Legends. The Investor agrees with the Company that the certificates evidencing
the Investor Rights Shares and the Investor Backstop Shares will bear the following legends:





THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF



-7-









 






1933 AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE
SECURITIES ARE SOLD AND TRANSFERRED IN A TRANSACTION THAT IS EXEMPT FROM
OR NOT SUBJECT TO THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SUCH ACT.




THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF AN INVESTMENT AGREEMENT DATED AS OF JANUARY 9, 2008 (A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY) AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE PROVISIONS OF SUCH INVESTMENT AGREEMENT.



          4.4 Further Assurances. From time to time after the date of this Agreement, the
parties hereto shall execute, acknowledge and deliver to the other parties such other instruments,
documents, and certificates and shall take such other actions as the other parties may reasonably
request in order to consummate the transactions contemplated by this Agreement.




          Section 5. Conditions to Closing.




          5.1 Conditions to the Investor’s Obligation to Purchase the Investor Rights Shares.
The obligation of the Investor to consummate the purchase of the Investor Rights Shares shall be
subject to the satisfaction of each of the following conditions on the date of the closing of the
Rights Offering, each of which conditions may be waived in writing in the sole discretion of the
Investor; provided, however, that, anything to the contrary notwithstanding,
inasmuch as the Investor is a principal executive officer of the Company, if any condition set
forth in this Section 5.1 is not satisfied due in substantial part to an act or omission
by the Investor (whether or not such act or omission constituted a breach of this Agreement), then
such condition shall be deemed to have been satisfied:




          (a) Stock Certificates. The Company shall have delivered to the Investor a
certificate or certificates representing the shares of Common Stock purchased by the Investor at
such closing.




          (b) Huff Investment Agreement. The Huff Investment Agreement shall be in full force
and effect and no material default shall have occurred thereunder.




          (c) Litigation. There shall be no action, suit or proceeding pending or, to the
knowledge of the Company, threatened in writing, against the Company or any of the assets of the
Company in any court or before any arbitrator of any kind or before or by any Governmental Entity
that, individually or in the aggregate, could reasonably be





-8-











 




expected to prevent the Company from consummating the transactions contemplated hereby.




          (d) Rights Offering. The Company shall have consummated the Rights Offering;
provided, however, that the parties hereto acknowledge, understand and agree that
the Company shall have the sole right to consummate the Rights Offering or to terminate the Rights
Offering.




          5.2 Conditions to the Investor’s Obligations to Purchase the Investor Backstop
Shares. The obligation of the Investor to consummate the purchase of the Investor Backstop
Shares shall be subject to the satisfaction of each of the following conditions on the date of the
Investor Backstop Closing, each of which conditions may be waived in writing at the sole
discretion of the Investor; provided, however, that, anything to the contrary
notwithstanding, inasmuch as the Investor is a principal executive officer of the Company, if any
condition set forth in this Section 5.2 is not satisfied due in substantial part to an act
or omission by the Investor (whether or not such act or omission constituted a breach of this
Agreement), then such condition shall be deemed to have been satisfied:




          (a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as of the date when
made and as of such closing as though made on and as of such date.




          (b) Performance. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by it at or prior to such closing.




          (c) Officer’s Certificate. The Company shall have delivered to the Investor an
officer’s certificate dated as of the date of such closing certifying that (i) the resolutions duly
adopted by the Board of Directors of the Company, authorizing and approving its performance of the
transactions contemplated hereby and the execution and delivery of this Agreement remain in full
force and effect, and (ii) the conditions set forth in Sections 5.1(a) and Section
5.1(b) hereof have been satisfied.




          (d) Good Standing Certificate. The Company shall have delivered to the Investor a
certificate evidencing the formation and good standing of the Company issued by the Secretary of
State (or comparable office) of the Company’s jurisdiction of formation, as of a date within 10
days of the closing.




          (e) Stock Certificates. The Company shall have delivered to the Investor a
certificate or certificates representing the shares of Common Stock purchased by the Investor at
such closing.




          (f) No Material Adverse Effect. No event, development, change or circumstance shall
have occurred that, individually or in the aggregate, shall have had,



-9-









 






or that, individually or in the aggregate, would reasonably be expected to have, a Material
Adverse Effect.




          (g) Governmental Entities. All authorizations, approvals or permits, if any, of any
Governmental Entity or regulatory body required in connection with the transactions contemplated by
this Agreement shall have been duly obtained and shall be in full force and effect.




          (h) Huff Investment Agreement. The Huff Investment Agreement shall be in full force
and effect, the Huff Investors shall have consummated (or shall simultaneously consummate) the
closing of the purchase of the “Investor Backstop Shares” (as such term is used in and defined in
the Huff Investment Agreement) pursuant to Section 1.2 of the Huff Investment Agreement,
and the Huff Investors shall have otherwise performed thereunder and no material default shall have
occurred thereunder.




          (i) Litigation. There shall be no action, suit or proceeding pending or, to the
knowledge of the Company, threatened in writing, against the Company or any of the assets of the
Company in any court or before any arbitrator of any kind or before or by any Governmental Entity
that, individually or in the aggregate, could reasonably be expected to prevent the Company from
consummating the transactions contemplated hereby.




          (j) Rights Offering. The Company shall have consummated the Rights Offering;
provided, however, that the parties hereto acknowledge, understand and agree that
the Company shall have the sole right to consummate the Rights Offering or to terminate the Rights
Offering.




          5.3 Conditions to Company’s Obligations. The obligation of the Company to issue the
Investor Backstop Shares shall be subject to the satisfaction of each of the following conditions,
in each case, on the date of such closing, each of which conditions may be waived in writing in
the sole discretion of the Company (it being understood that, for purposes of this Section
5.3, the Company shall not waive any such condition without the approval of a majority of the
independent members of the Company’s board of directors):




          (a) Representations and Warranties. The representations and warranties of the
Investor contained herein shall be true and correct in all material respects as of the date when
made and as of such closing as though made on and as of such date.




          (b) Performance. The Investor shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by it at or prior to such closing.




-10-









 








          (c) Certificate. The Investor shall have delivered to the Company a certificate
dated as of the date of the closing certifying that the conditions set forth in Section
5.3(a) and Section 5.3(b) hereof have been satisfied.




          (d) Governmental Entities. All authorizations, approvals or permits, if any, of any
Governmental Entity or regulatory body required in connection with the transactions contemplated by
this Agreement, including, without limitation, lawful issuance and sale of the shares of Common
Stock pursuant to this Agreement shall have been duly obtained and shall be in full force and
effect on and as of the Investor Backstop Closing Date.




          (e) Rights Offering. The Company shall have consummated the Rights Offering;
provided, however, that the parties hereto acknowledge, understand and agree that
the Company shall have the sole right to consummate the Rights Offering or to terminate the Rights
Offering.




          (f) Purchase Price. The Investor shall have paid to the Company the purchase price
for the shares being purchased.




          Section 6. Termination




          6.1 Termination. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Investor Backstop Closing:




          (a) by the mutual written consent of the Investor and the Company (it being understood that,
for purposes of this Section 6.1(a), the consent of the Company shall not be given without
the approval of a majority of the independent members of the Company’s board of directors);




          (b) by either the Company or the Investor, if the closing of the Rights Offering shall not
have occurred on or before May 15, 2008;




          (c) by the Company if any court or Governmental Entity shall have issued, enacted, entered,
promulgated or enforced any law, order, judgment, decree, injunction or ruling or taken any other
action (that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such law, order, judgment, decree, injunction,
ruling or other action shall have become final and non-appealable;




          (d) by the Company, (i) if there shall have occurred, on the part of the Investor, a breach
of any material representation, warranty, covenant or agreement contained in this Agreement that is
not curable or, if curable, is not cured within ten (10) calendar days after written notice of such
breach is given by the Company to the Investor or (ii) upon the failure of a closing condition set
forth in Section 5.3 hereof that is not curable;




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          (e) by the Investor, (i) if there shall have occurred, on the part of the Company, a material
breach of any representation, warranty, covenant or agreement contained in the this Agreement that
is not curable or, if curable, is not cured on or prior to the earlier of (x) ten (10) calendar
days after written notice of such breach is given by the Investor to the Company and (y) the date
on which all conditions to the consummation of the transactions contemplated hereby not related to
such breach have been satisfied or (ii) upon the failure of a closing condition set forth in
Section 5.1 or 5.2 hereof that is not curable; provided, however,
that, anything to the contrary notwithstanding, inasmuch as the Investor is a principal executive
officer of the Company, if any breach or failure of condition occurs or exists as contemplated
above due in substantial part to an act or omission by the Investor (whether or not such act or
omission constituted a breach of this Agreement), then, for purposes of this Section
6.1(e), such breach shall be deemed not to exist and such condition shall be deemed to have
been satisfied; and




          (f) by the Company in its sole discretion and without cause.




          6.2 Effect of Termination. In the event of the termination of this Agreement
pursuant to Section 6.1 hereof, this Agreement shall forthwith become void and have no
effect, without any liability on the part of any party or its directors, officers, members or
stockholders, other than pursuant to the provisions of this Section 6.2 and other than any
liability from any breach of any provision of this Agreement prior to such termination, all of
which shall survive any such termination.




          Section 7. Indemnification; Survival of Representations and Warranties.




          7.1 Indemnification. The Company shall indemnify, save and hold harmless the
Investor, and all of his representatives, Affiliates, attorneys and agents and all of his heirs,
successors, legal administrators and permitted assigns (the “Indemnitees”), from and
against all losses, claims, damages, liabilities, costs (including, without limitation, the costs
of investigation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as
incurred by any or all of the Indemnitees in connection with or arising from the untruth,
inaccuracy or breach of any the Company’s representations, warranties or agreements made herein,
except to the extent of any willful misconduct or gross negligence of an Indemnitee. This
indemnification provision will be in addition to the rights of each and all of the Indemnitees to
bring an action against the Company for breach of any term of this Agreement.




          7.2 Survival of Representations and Warranties. All representations and warranties
made pursuant to or in connection with this Agreement shall survive the execution and delivery of
this Agreement indefinitely; and all statements contained in any certificate, instrument or other
writing delivered by or on behalf of any party hereto required to be made pursuant to the terms of
this Agreement or required to be made in connection with or in contemplation of the transactions
contemplated by this Agreement will constitute representations and warranties by such party
pursuant to this Agreement.




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          Section 8. Definitions.




          For purposes of this Agreement, the following terms will have the meaning set forth below:




          “Affiliate” as applied to any Person, means any other Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with, such Person. For
purposes of this definition, “control” (including, with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”), as applied to any Person, means
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, by
contract or otherwise, and, in addition to the foregoing, a Person shall be deemed to control
another Person if the controlling Person owns fifteen (15%) or more of any class of voting
securities (or other ownership interest) of the controlled Person.




          “Agreement” has the meaning assigned to it in the preamble hereof.




          “Investor Backstop Closing” has the meaning assigned to it in Section 1.2(c)
hereof.




          “Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to close.




          “Common Stock” has the meaning assigned to it in the preamble hereof.




          “Company” has the meaning assigned to it in the preamble hereof.




          “Distribution” has the meaning assigned to it in the preamble hereof.




          “Distribution Registration Statement” has the meaning assigned to it in the Preamble.




          “Dollars” and “$” mean dollars in lawful currency of the United States of
America.




          “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.




          “$15 Million Tranche Number” has the meaning assigned to it in the Huff Investment
Agreement.




          “Governmental Entity” shall mean any: (a) state, commonwealth, county, municipality,
district or other domestic jurisdiction of any nature; (b) federal, state, local, municipal or
other government; or (c) governmental or quasi governmental authority of any nature (including, but
not limited to, any governmental division,



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subdivision, department, agency, registering authority, bureau, branch, office, commission,
council, self-regulatory organization, board, instrumentality, officer, official, representative,
organization, unit, body or Person and any court or other tribunal).




          “Huff Investment Agreement” has the meaning assigned to it in Section 2.8
hereof.




          “Indemnitees” has the meaning assigned to it in the Section 7.1 hereof.




          “Investor” has the meaning assigned to it in the preamble hereof.




          “Investor Backstop Shares” has the meaning assigned to it in Section 1.2(c)
hereof.




          “Investor Distribution Shares” has the meaning assigned to it in the preamble hereof.




          “Investor Rights Shares” has the meaning assigned to it in Section 1.1 hereof.




          “Losses” has the meaning assigned to it in Section 7.1 hereof.




          “Material Adverse Effect” means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company taken as a whole,
whether or not arising from transactions in the ordinary course of business, except for (i) any
change or effect resulting from general economic, financial or market conditions or (ii) any change
or effect resulting from conditions or circumstances generally affecting the real estate
development industry other than any such change that has an effect on the Company that is
substantially and disproportionately larger than on the industry generally; (b) the ability of the
Company to perform its obligations under this Agreement; or (c) the validity or enforceability of
this Agreement.




          “New York Court” has the meaning assigned to it in Section 9.5 hereof.




          “Person” includes all natural persons, corporations, business trusts, limited
liability companies, associations, companies, partnerships, joint ventures and other entities, as
well as governments and their respective agencies and political subdivisions.




          “Right” or “Rights” has the meaning assigned to it in the preamble hereof.




          “Rights Offering” has the meaning assigned to it in the preamble hereof.




          “Rights Offering Registration Statement” has the meaning assigned to it in Section
1.3(a) hereof.




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          “Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, all as the same shall be in effect from time to time.




          “SEC” has the meaning assigned to it in the preamble hereof.




          “Subscription Price” shall mean the lesser of (i) $10.00 per share (after giving
effect to the 10 for 1 reverse stock split contemplated in connection with the Distribution), and
(ii) the cash price per share of Common Stock being paid pursuant to the Rights Offering; subject
to appropriate adjustments to give effect to stock splits, stock dividends, recapitalizations and
similar transactions affecting the Company’s capital.




          “Transfer” means, with respect to any securities or property (as applicable), any
direct or indirect sale, pledge, hypothecation, security interest, transfer, assignment, or other
disposition of such securities or property or any interest therein, whether with or without
consideration and whether voluntarily or involuntarily or by operation of law and whether in a
private transaction or by means of a securities or other market.




          Section 9. Miscellaneous.




          9.1 Notices. Any notice or other communication required or which may be given
pursuant to this Agreement will be in writing and either delivered personally to the addressee,
telecopied to the addressee, sent via electronic mail or mailed, certified or registered mail,
postage prepaid, and will be deemed given and received when so delivered personally, telecopied,
or sent via electronic mail, or, if mailed, five (5) days after the date of mailing, as follows:





	 	(i)	 	if to the Investor, to the address set forth on Schedule 1 hereto.
	 
	 	(ii)	 	if to the Company, to:




FX Real Estate and Entertainment Inc.

650 Madison Avenue

New York, New York 10022

Facsimile: (212) 980-4455

Email: mitchell.nelson@flagluxury.com

Attn: Mitchell J. Nelson, Esq.



With a copy to:



Troutman Sanders LLP

The Chrysler Building

405 Lexington Avenue

New York, New York 10174

Facsimile: (212) 704-6288

Email: timothy.kahler@troutmansanders.com




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Attn: Timothy I. Kahler, Esq.

               and Richard G. Cushing, Esq.




          9.2 Assignment. This Agreement will be binding upon and inure to the benefit of
each and all of the parties to this Agreement, and neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any of the parties to this Agreement
without the prior written consent of the other parties.




          9.3 Entire Agreement. This Agreement contains the entire agreement by and between
the Company and the Investor with respect to the transactions contemplated by this Agreement and
supersedes all prior agreements and representations, written or oral, with respect thereto.




          9.4 Waivers and Amendments. This Agreement may be amended, modified, superseded,
cancelled, renewed or extended, and the terms, provisions and conditions of this Agreement may be
waived, only by a written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any right, power or
privilege pursuant to this Agreement will operate as a waiver thereof, nor will any waiver on the
part of any party of any right, power or privilege pursuant to this Agreement, nor will any single
or partial exercise of any right, power or privilege pursuant to this Agreement, preclude any
other or further exercise thereof or the exercise of any other right, power or privilege pursuant
to this Agreement. The rights and remedies provided pursuant to this Agreement are cumulative and
are not exclusive of any rights or remedies which any party otherwise may have at law or in
equity.




          9.5 Governing Law; Jurisdiction; Venue; Process. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CHOICE
OF LAW OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Each party hereby irrevocably submits, for itself
and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York
located in New York, New York or the United States District Court for the Southern District of New
York, and any appellate court from any such court (as applicable, a “New York Court”), in
any suit, action or proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment resulting from any such suit, action or proceeding, and each party
hereby irrevocably and unconditionally agrees that all claims in respect of any such suit, action
or proceeding may be heard and determined in the New York Court. Each party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do so, (i) any
objection which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in the New York Court, (ii) the defense of
an inconvenient forum to the maintenance of such suit, action or proceeding in any such court, and
(iii) the right to object, with respect to such suit,



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action or proceeding, that such court does not have jurisdiction over such party. Each party
irrevocably consents to service of process in any manner permitted by law.




          9.6 Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute one and the same
instrument. All such counterparts shall be deemed an original, will be construed together and
shall constitute one and the same instrument.




          9.7 Headings. The headings in this Agreement are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.




          9.8 Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.




[The remainder of this page is intentionally blank.]




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          IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
above written.




	 	 	 	 	 
	 	FX REAL ESTATE AND ENTERTAINMENT INC.

 	 
	 	By:  	/s/ Mitchell J. Nelson
 	 
	 	 	Name:  	Mitchell J. Nelson 	 
	 	 	Title:  	Executive Vice President 	 
	 



	 	 	 	 	 
	 	 	 
	 	                                  /s/ Robert F.X. Sillerman
 	 
	 	Robert F.X. Sillerman 	 
	 	 	 



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SCHEDULE 1




	 	 	 	 	 
	Name

	 	Address
	 	(1) Number of Investor
	 

	 	 	 	Rights Shares
	 

	 	 	 	(2) Investor Rights
	 

	 	 	 	Shares Purchase Price
	Robert F.X. Sillerman

	 	650 Madison Avenue	 	 
	 

	 	New York, New York 10022
	 	(1) 3,037,365
	 

	 	Email:	 	 
	 

	 	Facsimile: (212) 980-4455
	 	(2) $30,373,650