EX-10.36



 





Exhibit
10.36




 





CALL AGREEMENT




by and between




19X, INC.




and




FX REAL ESTATE AND ENTERTAINMENT INC.




 






Dated as of March 3, 2008




 






 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	Article I. CALL RIGHT
	 	 	1	 
	1.1 Call Right
	 	 	1	 
	1.2 Annual Option Payments
	 	 	3	 
	1.3 Purchase Price
	 	 	5	 
	1.4 Closing
	 	 	7	 
	1.5 Section 338 Election
	 	 	8	 
	1.6 Closing Deliveries by Seller
	 	 	9	 
	1.7 Closing Deliveries by Buyer
	 	 	10	 
	Article II. REPRESENTATIONS AND WARRANTIES OF SELLER
	 	 	10	 
	Article III. REPRESENTATIONS AND WARRANTIES OF BUYER
	 	 	25	 
	Article IV. CERTAIN COVENANTS
	 	 	26	 
	4.1 Information Rights; Access
	 	 	26	 
	4.2 Ordinary Course
	 	 	29	 
	4.3 Intellectual Property
	 	 	30	 
	4.4 Real Property
	 	 	30	 
	4.5 Master Plan
	 	 	30	 
	4.6 Tag-Along Rights
	 	 	31	 
	4.7 Cirque Partnership
	 	 	31	 
	4.8 Creations Meandres Letter Agreement
	 	 	32	 
	4.9 Seller Representations and Warranties Bring-Down
	 	 	32	 
	4.10 Buyer Representations and Warranties Bring-Down
	 	 	33	 
	4.11 Lenders’ Consent
	 	 	33	 
	4.12 Cooperation; Call Option Discretion
	 	 	33	 
	4.13 Financing Assistance
	 	 	34	 
	4.14 Confidentiality
	 	 	34	 
	4.15 Tax Matters
	 	 	35	 
	4.16 Related Party Transactions
	 	 	39	 
	4.17 Seller’s Actions
	 	 	40	 
	Article V. TERMINATION
	 	 	40	 






 i 




 









 








TABLE OF CONTENTS

(continued)




	 	 	 	 	 
	 	 	Page	 
	5.1 Expiry Date
	 	 	40	 
	5.2 Termination
	 	 	40	 
	5.3 Effect of Termination
	 	 	41	 
	Article VI. CLOSING CONDITIONS
	 	 	41	 
	6.1 Conditions to Each Party’s Obligations Upon Exercise of the Call Right
	 	 	41	 
	6.2 Conditions to Buyer’s Obligations Upon Exercise of the Call Right
	 	 	41	 
	6.3 Conditions to Seller’s Obligations Upon Exercise of the Call Right
	 	 	42	 
	Article VII. INDEMNIFICATION
	 	 	43	 
	7.1 Survival
	 	 	43	 
	7.2 Indemnification of Buyer
	 	 	43	 
	7.3 Indemnification of Seller
	 	 	44	 
	7.4 Procedures for Indemnification
	 	 	44	 
	7.5 Limitations on Indemnification
	 	 	45	 
	Article VIII. MISCELLANEOUS
	 	 	46	 
	8.1 Press Releases; Confidentiality
	 	 	46	 
	8.2 Amendments and Waivers
	 	 	47	 
	8.3 Assignability
	 	 	47	 
	8.4 Entire Agreement
	 	 	47	 
	8.5 Notices
	 	 	47	 
	8.6 Specific Performance
	 	 	48	 
	8.7 Governing Law; Submission to Jurisdiction
	 	 	48	 
	8.8 Waiver of Jury Trial
	 	 	48	 
	8.9 Severability
	 	 	49	 
	8.10 Construction
	 	 	49	 
	8.11 Third Party Beneficiaries
	 	 	49	 
	8.12 Counterparts; Execution and Delivery by Facsimile
	 	 	49	 
	8.13 Disclosure Schedules
	 	 	49	 
	8.14 Expenses
	 	 	50	 






 ii 




 









 





TABLE OF CONTENTS

(continued)




	 	 	 	 	 
	 	 	Page	 
	EXHIBIT A            DEFINITIONS
	 	 	A-1	 
	EXHIBIT B            PRELIMINARY MASTER PLAN
	 	 	B-1	 






 iii 




 









 





CALL AGREEMENT




          This CALL AGREEMENT (this “Agreement”), dated as of March 3, 2008, is entered into by
and between FX Real Estate and Entertainment Inc., a Delaware corporation (the “Buyer”),
and 19X, Inc., a Delaware corporation (the “Seller”). Certain capitalized terms used in
this Agreement are defined in Exhibit A.




          WHEREAS, Seller is party to that certain Agreement and Plan of Merger, dated as of June 1,
2007, and amended as of August 1, 2007 and September 27, 2007 (as amended to date and as hereafter
may be amended, the “Merger Agreement”), by and among Seller, 19X Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Seller (“Merger Sub”) and CKX, Inc.,
a Delaware corporation (“CKX”); and




          WHEREAS, the Merger Agreement provides for the merger of Merger Sub with and into CKX, with
CKX being the surviving corporation, subject to the terms and conditions set forth in the Merger
Agreement (the “Merger”); and




          WHEREAS, if the Merger is consummated, CKX will become a wholly-owned subsidiary of Seller;
and




          WHEREAS, CKX is the owner of all of the issued and outstanding shares of common stock (the
“Presley Interests”) of EPE Holding Corporation, a Delaware corporation (“EPE
Holdco”), and EPE Holdco is the owner of (i) eighty-five percent (85%) of the issued and
outstanding common shares and eighty-five percent (85%) of the issued and outstanding Series A
Preferred Shares (the “EPE Shares”) of Elvis Presley Enterprises, Inc., a Tennessee
corporation (“EPE Inc.”), and (ii) eighty-five percent (85%) of the Class A membership
interests (the “EPE Membership Interests” and, together with the EPE Shares, the “EPE
Equity Interests”) of Elvis Presley Enterprises, LLC, a Delaware limited liability company
(“EPE LLC”); and




          WHEREAS, the EPE Entities are the direct or indirect owners of, and are engaged in the
development, management and exploitation of, certain intellectual property rights, real estate and
other assets relating to Elvis Presley (the “EP Business”).




          NOW, THEREFORE, in consideration of these premises and the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the parties hereto agree as follows:




ARTICLE I.

CALL RIGHT




          1.1 Call Right.




               (a) Upon the terms and subject to the conditions set forth herein and subject to the
consummation of the Merger, Seller hereby grants to Buyer an option to purchase on the terms set
forth hereunder all, but not less than all, of the Presley Interests (the “Call Right”) and
Seller agrees that, upon receipt of a valid Call Notice (as defined below) from Buyer,
Seller shall transfer and sell or cause to be transferred and sold to Buyer the Presley
Interests for the applicable Purchase Price (as specified below).



 









 





               (b) Buyer may exercise the Call Right at any time after the Effective Time (as defined in the
Merger Agreement) and on or prior to the thirtieth (30th) day following the Sixth Anniversary
Financial Statement Delivery Date by delivering to Seller a written notice of exercise (the
“Call Notice”), which notice shall be binding and irrevocable. The purchase and sale of
the Presley Interests in connection with the exercise of the Call Right (the “Call
Closing”) shall take place within sixty (60) days following the delivery of the Call Notice;
provided, however, that if any notification or approval is required to be obtained
from any Governmental Entity in connection with the consummation of the transactions contemplated
hereby, the Call Closing shall take place as soon as practicable following receipt of such approval
or the expiration of any applicable waiting period. Subject to extension as provided in (c) below,
if the Call Right is not validly exercised on or prior to the thirtieth (30th) day following the
Sixth Anniversary Financial Statement Delivery Date, then the Call Right shall automatically
terminate.



               (c) (i) If, as of the calendar month immediately preceding the sixth anniversary of the
Effective Time, the EPE Entities have not achieved the Threshold OIBDAN (based on the applicable
OIBDAN Certifcate or OIBDAN Notice provided in Section 4.1(b) and (c), as the case may be), Buyer
shall have the right (exercisable by written notice to Seller on or before the ninetieth day
following Buyer’s receipt of the OIBDAN Ceritifcate or the tenth day following Buyer’s receipt of
the OIBDAN Notice, as the case may be) to extend the deadline to exercise Call Right (without
further payment or obligation to Seller) to the Seventh Anniversary Financial Statement Delivery
Date (the “First Extended Deadline”).




     (ii) If, as of the calendar month immediately preceding the seventh
anniversary of the Effective Time, the EPE Entities have not achieved the
Threshold OIBDAN (based on the applicable OIBDAN Certifcate or OIBDAN Notice
provided in Section 4.1(b) and (c), as the case may be), Buyer shall have
the right (exercisable by written notice to Seller on or before the
ninetieth day following Buyer’s receipt of the OIBDAN Ceritifcate or the
tenth day following Buyer’s receipt of the OIBDAN Notice, as the case may
be) to extend the deadline to exercise the Call Right (without further
payment or obligation to Seller) to the Final Financial Statement Delivery
Date.




     (iii) If, as of the calendar month immediately preceding the date that
is six months following the seventh anniversary of the Effective Time, the
EPE Entities have not achieved the Threshold OIBDAN (based on the applicable
OIBDAN Certifcate or OIBDAN Notice provided in Section 4.1(b) and (c), as
the case may be), Buyer shall have the right (exercisable by written notice
to Seller within 30 days following the Final Financial Statement Delivery
Date (the “Second Extended Deadline”)) to deliver a Call Notice and
consummate the Closing within sixty (60) days following delivery of such
Call Notice with the then applicable Purchase Price (as adjusted hereunder)
reduced by $50,000,000 (fifty million dollars). If
Buyer does not validly deliver a Call Notice within 30 days following the
Final Financial Statement Delivery Date in accordance with this Section 1.1(c),
the Call Right shall expire and this Agreement shall automatically
terminate.




2









 








     (iv) Buyer’s rights set forth in this Section 1.1(c) are conditioned
upon and subject to (A) Buyer’s compliance in all material respects, as of
the date any of the foregoing rights are exercised, with all material terms
applicable to Buyer under the EP License (other than Sections 6.01 or 6.03
of the EP License and provided that Buyer has been provided an opportunity
to cure any non-compliance in accordance with the terms of the EP License),
and (B) if Buyer has exercised its options under Sections 6.01 and/or 6.03
of the EP License with respect to the construction of hotels contemplated by
a definitive Master Plan then in effect or has otherwise agreed to proceed
with the construction of such hotels contemplated by such definitive Master
Plan, Buyer using commercially reasonable efforts to proceed with the
development and construction of such hotels in accordance with and as
contemplated by such definitive Master Plan and in the time periods
contemplated by such definitive Master Plan then in effect, provided
that Seller has used commercially reasonably efforts to develop the
non-hotel portion of such definitive Master Plan then in effect in the time
periods contemplated by such definitive Master Plan, and provided
further that if there is no definitive Master Plan in effect at such
time or if there is a definitive Master Plan in effect at such time but
Buyer has not exercised its option with respect to the hotels contemplated
by such definitive Master Plan pursuant to Sections 6.01 and 6.03 of the EP
License, the condition set forth in this Section 1.1(c)(iii)(B) shall not
apply.



               (d) The Call Right may only be exercised by Buyer if unanimously approved by the independent
directors of the Board of Directors of Buyer upon the recommendation of a special committee of
independent directors empowered to evaluate and oversee the exercise of the Call Right (the
“Special Committee”), if such a recommendation of a special committee of independent
directors and such approval by the independent directors of the Board of Directors is advisable
under applicable law based upon the advice of counsel to Buyer. Notwithstanding the foregoing,
Seller shall be entitled to rely on Buyer’s delivery of a Call Notice as conclusive evidence of the
foregoing and once delivered, a Call Notice shall be binding on Seller, subject to the terms and
conditions hereof.



          1.2 Annual Option Payments.




               (a) In consideration for the grant of the Call Right, subject to paragraph (b) below, Buyer
shall pay to Seller, from and after the Effective Time and until the earlier of the delivery of the
Call Notice (provided that the Call Closing occurs as contemplated by Section 1.4) or the
termination of this Agreement (subject to and in accordance with Section
5.3), an option right payment aggregating $105 million, payable as follows (together with
reference to each installment of an option payment described below, the “Annual Option
Payments”):




3












 





	 	 	 
	 	 	Annual 
	 	 	Payment
	Applicable Periods:	 	Amount
	The period commencing on the First Installment Date and
ending prior to the 1st anniversary date of the First
Installment Date

	 	$15 million
	The period commencing on the 1st anniversary of the First
Installment Date and ending prior to the 2nd anniversary
date of the First Installment Date

	 	$15 million
	The period commencing on the 2nd anniversary of the First
Installment Date and ending prior to the 3rd anniversary
date of the First Installment Date

	 	$20 million
	The period commencing on the 3rd anniversary of the First
Installment Date and ending prior to the 4th anniversary
date of the First Installment Date

	 	$25 million
	The period commencing on the 4th anniversary of the First
Installment Date and ending prior to the 60th day following
the 5th anniversary date of the First
Installment Date

	 	$30 million





Buyer shall not be required to make any payments for the grant of the Call Right or the rights
associated therewith or any other option payments with respect to the EPE Entities other than the
option payments specified above in this Section 1.2.




          (b) Each “Annual Payment Amount” set forth in the table above shall be paid in four
installments, each in an amount equal to 25% of the applicable Annual Payment Amount for the
relevant period. The first such installment payment for the first Annual Payment Amount set forth
in the table above shall be made by Buyer on the First Installment Date, and the first installment
of each subsequent Annual Payment Amount shall be made on the applicable anniversary date of the
First Installment Date with respect to such Annual Payment Amount as set forth in the table above,
and the second, third and fourth installments for each Annual Payment Amount shall be made on the
90th day, 180th day and the 270th day, respectively, after the
first installment for such Annual Payment Amount is due (each such installment payment date, an
“Annual Option Payment Date”); provided that at Buyer’s election during each of the
first two years of Annual Option Payments, up to two Annual Option Payment installments (including,
for the avoidance of doubt, the first Annual Option Payment installment for the first Annual
Payment Amount set forth in the table above) in any twelve month period may be paid by delivery by
Buyer to Seller of an unsecured promissory note, in form and substance reasonably satisfactory to
Seller (the “Promissory Note”), having a principal amount equal to the applicable Annual
Option Payment installment, bearing ten and one half percent (10.5%) interest per annum, and shall
mature and become due and payable on the earlier of the Call Closing or the termination of this
Agreement if the Annual Option Payment installment applicable to such note would be payable in
connection with the termination, in accordance with and subject to




4









 







Section 5.3 (and in any case may be prepaid without premium or penalty). Annual Option
Payments shall not be credited to the Purchase Price described below. For the avoidance of
doubt, Buyer shall not be required to pay any Annual Option Payment installment for any period
occurring after the delivery of the Call Notice, provided, however, that Buyer’s
obligation to make Annual Option Payments shall not terminate if the Call Closing does not occur as
contemplated by Section 1.4.




     1.3 Purchase Price.



          (a) In consideration for the purchase and sale of the Presley Interests free and clear of all
Encumbrances as contemplated hereby, at the Call Closing Buyer shall pay to Seller the following
amounts, subject to adjustment, if any, to the cash component pursuant to Section 1.3(c) below and
subject to adjustment, if any, of the aggregate amount pursuant to Section 1.3(d) below:




               (i) If the Call Notice is validly delivered following the Effective Time and at any point
during the ensuing 48 months following the Effective Time, Buyer may exercise its Call Right for
the purchase price of $650,000,000 (the “First Call Purchase Price”);



               (ii) Beginning after the 48 month period following the Effective Time has elapsed, if Buyer
validly delivers the Call Notice at any point during the ensuing six month period, Buyer may
exercise its Call Right for the purchase price of $700,000,000 (the “Second Call Purchase
Price”);



               (iii) Beginning after the 54 month period following the Effective Time has elapsed, if Buyer
validly delivers the Call Notice at any point during the ensuing six month period, Buyer may
exercise its Call Right for the purchase price of $750,000,000 (the “Third Call Purchase
Price”);



               (iv) Beginning after the 60 month period following the Effective Time has elapsed, if Buyer
validly delivers the Call Notice at any point during the ensuing six month period, Buyer may
exercise its Call Right for the purchase price of $800,000,000 (the “Fourth Call Purchase
Price”);



               (v) Beginning after the 66 month period following the Effective Time has elapsed, if Buyer
validly delivers the Call Notice at any point during the ensuing six month period, Buyer may
exercise its Call Right for the purchase price of $850,000,000 (the “Final Call Purchase
Price” and, together with the First Call Purchase Price, the Second Call Purchase Price, the
Third Call Purchase Price and the Fourth Call Purchase Price, sometimes referred to herein
collectively as the “Purchase Price”).



          (b) If at any time prior to the Call Closing Seller acquires, directly or indirectly, more
than eighty-five percent (85%) of the ownership interests in EPE Inc. and/or more than eighty-five
percent (85%) of the ownership interests of EPE LLC, Buyer shall acquire, directly or indirectly
through its acquisition of EPE Holdco, such additional ownership interests at the Call Closing (if
any) and the applicable Purchase Price shall be increased in an amount equal to the purchase price
actually paid by Seller, directly or indirectly through subsidiary




5









 







entities, for such additional interests, to the extent such price was determined in accordance
with Section 10.2 of the EPE LLC Operating Agreement or Section 5.2 of the EPE Inc. Shareholders
Agreement to reflect the sale of such additional ownership interests in EPE Inc. and/or EPE LLC, as
the case may be.




          (c) To the extent any of the EPE Entities have outstanding Indebtedness as of the Closing Date
and Seller has determined not to utilize its own funds or proceeds from the Purchase Price to repay
such Indebtedness, the amount of any such Indebtedness shall be credited toward and deducted from
the applicable Purchase Price.




          (d) Working Capital Purchase Price Adjustment.




               (i) Within 5 days prior to the Call Closing, Seller shall deliver to Buyer a preliminary
statement (the “Estimated Statement”) setting forth, as of the month end prior to the
anticipated Closing Date, the estimated Closing Date Net Working Capital Amount of the EPE
Entities. The Estimated Statement shall be prepared in accordance with GAAP applied consistently
with past practice but subject to normal audit adjustments.



               (ii) If the estimated Closing Date Net Working Capital Amount as stated on the Estimated
Statement is greater than zero Dollars ($0.00) (the “Targeted Closing Date Net Working Capital
Amount”), then the applicable Purchase Price payable by Buyer at the Call Closing shall be
increased by an amount equal to such excess. If the estimated Closing Date Net Working Capital
Amount as stated on Estimated Statement is less than the Targeted Closing Date Net Working Capital
Amount, then the applicable Purchase Price payable by Buyer at the Call Closing shall be decreased
by an amount equal to such shortfall.



               (iii) Within 20 days after the Call Closing, Seller shall deliver to Buyer a preliminary
statement (the “Preliminary Statement”) setting forth the Closing Date Net Working Capital
Amount as of the Closing Date. The Preliminary Statement shall be prepared in accordance with
GAAP, applied consistently with past practice but subject to normal audit adjustments.



               (iv) Buyer shall have 60 days to review the Preliminary Statement from the date of its receipt
thereof (the “Review Period”). If Buyer objects to any aspect of the Preliminary
Statement, then Buyer shall deliver a written notice of objection (the “Objection Notice”)
to Seller on or prior to the expiration of the Review Period. The Objection Notice shall identify
in reasonable detail adjustments to the Preliminary Statement proposed by Buyer and the basis
therefor. If Buyer delivers an Objection Notice to Seller prior to the expiration of the Review
Period in accordance with this Section 1.3(d), Buyer and Seller shall, for a period of 30 days
thereafter (the “Resolution Period”), attempt in good faith to resolve the matters properly
contained therein, and any written resolution, signed by each of Buyer and Seller, as to any such
matter shall be final, binding, conclusive and non-appealable for all purposes hereunder.



               (v) If, at the conclusion of the Resolution Period, the Buyer and Seller have not reached an
agreement with respect to all disputed matters related to the Preliminary Statement, then within 10
business days thereafter, the Buyer and Seller shall submit



6









 




for resolution those of such matters remaining in dispute to a mutually acceptable nationally
recognized independent accounting firm (the “Neutral Auditor”). The Neutral Auditor shall
act as an arbitrator to resolve (based solely on the written presentations of Buyer and Seller and
not by independent review) only those matters still in dispute at the end of the Resolution Period.
The resolution of any such disputed matter by the Neutral Auditor shall be limited (A) to whether
the Preliminary Statement was prepared with respect to such matter in accordance with the standard
set forth in Section 1.3(d)(i), and, (B) if the Preliminary Statement has not been so prepared, to
modifying the Preliminary Statement to reflect the recalculation of such matter in accordance with
such standard. Buyer and Seller shall direct the Neutral Auditor to render a resolution of all
such disputed matters within 30 days after its engagement or such other period agreed upon by Buyer
and Seller. The resolution of such disputed matters by the Neutral Auditor shall be set forth in a
written statement delivered to Buyer and Seller and shall be final, binding, conclusive and
non-appealable for all purposes hereunder. The Preliminary Statement, once modified and/or agreed
to in accordance with Section 1.3(d)(iv) or this Section 1.3(d)(v), shall become the “Final
Statement”.




               (vi) All fees and expenses relating to the work performed by the Neutral Auditor shall be
borne one half by Buyer and one half by Seller. Except as provided in the preceding sentence, all
other costs and expenses incurred by the parties in connection with resolving any dispute hereunder
before the Neutral Auditor shall be borne by the party incurring such cost and expense.



               (vii) (A) If the Closing Date Net Working Capital Amount as stated on the Final Statement is
greater than the Closing Date Net Working Capital Amount as stated on the Estimated Statement and
reflected in the Purchase Price in accordance with Section 1.3(d)(ii), then Buyer shall pay an
amount equal to such excess by wire transfer of immediately available funds to Seller to such
account as shall be designated by Seller, such payment to be made within five Business Days after
the date on which the Preliminary Statement becomes the Final Statement. (B) If the Closing Date
Net Working Capital Amount as stated on Final Statement is less than the Closing Date Net Working
Capital Amount as stated on the Estimated Statement and reflected in the Purchase Price in
accordance with Section 1.3(d)(ii), then Seller shall pay an amount equal to the amount of such
shortfall to Buyer to such account as shall be designated by Buyer, such payment to be made within
five Business Days after the date on which the Preliminary Statement becomes the Final Statement.



     1.4 Closing.



          (a) Unless otherwise mutually agreed in writing by Buyer and Seller, the Call Closing shall
take place at the offices of Paul, Hastings, Janofsky & Walker LLP, 75 East 55th Street, New York,
New York, at 11:00 a.m. (New York time) on the second Business Day following the day on which the
last to be satisfied or waived of the conditions set forth in Article VI (other than those
conditions that by their nature are to be satisfied at the Call Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or waived in accordance with this
Agreement. The actual date of the Call Closing is herein referred to as the “Closing
Date”. The parties shall use commercially reasonable efforts to cause the Closing to occur no
later than the sixtieth (60th) day following Buyer’s delivery of the Call Notice. If the Call
Closing does not occur on or prior to the 60th day following Buyer’s delivery of the Call




7









 







Notice and provided that Seller is not in material breach of this Agreement, the Call Notice
shall no longer be in full force and effect and, to the extent Buyer desires to exercise the Call
Right, Buyer shall be required to validly deliver a new Call Notice in order to so exercise the
Call Right.




          (b) At the Call Closing, Buyer shall deliver to Seller the Purchase Price (less the aggregate
amount of any Indebtedness credited toward the Purchase Price pursuant to Section 1.3(c), if any,
and as adjusted on an estimated basis pursuant to Section 1.3(d) above, if any) by wire transfer of
immediately available funds to an account specified by Seller at least two Business Days prior to
the Closing Date.




     1.5 Section 338 Election.



          (a) Buyer may, at its sole discretion, make an election under Section 338(h)(10) of the Code
(and any corresponding elections under state or local law) (collectively, the “Elections”)
with respect to its purchase of the Presley Interests pursuant to this Agreement, and Seller and
its Affiliates shall cooperate with Buyer in making the Elections; provided, however, that in
connection with any Election, Buyer shall indemnify Seller pursuant to Section 4.15(d)(i) and,
unless a determination of the Estimated Excess Taxes (as defined below) was made within 12 months
of Call Closing, Buyer shall have delivered to Seller at least 10 days prior to the Call Closing a
written notice (“Election Notice”) of its intent to make the specified Elections. The
parties agree that the Purchase Price and the liabilities (and other relevant items) will be
allocated among the assets of EPE Holdco and its Subsidiaries for all purposes in a manner
consistent with Sections 338 and 1060 of the Code and the Treasury Regulations thereunder (and any
corresponding provisions under state or local law) as agreed upon by Seller and Buyer pursuant to
Section 4.15(d)(i)(B) (“Price Allocation”). The parties hereto agree to file all Tax
Returns in a manner consistent with such Price Allocation. The Price Allocation (as such may have
been adjusted) shall be binding on the parties hereto, and Seller and Buyer agree to act (and cause
their respective Affiliates to act) in accordance with the Price Allocation in the preparation,
filing and audit of any Tax Return, including IRS Form 8883 or any equivalent statement, and not to
take (or permit any of their Affiliates to take) any tax, accounting or financial reporting
position that is inconsistent with such Price Allocation. Seller and Buyer shall, on or before the
date that is 120 days following the Closing, exchange completed and executed copies of IRS Form
8023, required schedules thereto, and any similar state, local or foreign forms. If any changes
are required in those forms as a result of information that is available after the date the
Elections are made, Seller and Buyer will promptly agree on such changes.




          (b) At any time prior to Call Closing, Buyer may request Seller to prepare and deliver, at
Buyer’s expense, a preliminary set of Tax Calculations and a preliminary Excess Taxes amount (as
such terms are defined in Section 4.15(d)(i) below) based on the Purchase Price in effect on the
date of the request (“Estimated Excess Taxes”). If requested by Buyer, the Estimated
Excess Taxes shall be based on a valuation of the assets by a mutually agreed upon third party
and/or based on a price allocation prepared by a nationally recognized independent accounting firm.
Seller may (but is not obligated to) make a determination of the Estimated Excess Taxes at any time
at its own expense, using any reasonable method exercised in good faith (unless Buyer has requested
a valuation of the assets by a mutually agreed upon




8









 







third party or a price allocation prepared by a nationally recognized independent accounting
firm, which shall be at Buyer’s expense).




          (c) Upon written notice delivered to Seller at least 15 days prior to the earlier of (i) the
due date for filing Form 8023 and (ii) the due date (without extensions) for filing Seller’s
federal income tax return for the period during which the Call Closing takes place, Buyer may
revoke its Election Notice. If Buyer revokes its Election Notice, (i) all costs and expenses in
connection with determining the Price Allocation, any Estimated Excess Taxes or the Excess Taxes
shall be borne by Buyer, whether or not such determinations were requested by Buyer, and (ii) any
Estimated Excess Taxes and Excess Taxes paid to Seller (less costs and expenses properly borne by
Buyer) shall be returned to Buyer as soon as practicable (taking into account that Seller may be
required to apply for a refund of estimated tax payments associated with the Elections).




     1.6 Closing Deliveries by Seller. At the Call Closing, Seller shall deliver or cause
to be delivered to Buyer:



          (a) the certificate or certificates evidencing the Presley Interests, duly endorsed in blank
or accompanied by a duly executed stock or other transfer power, which Presley Interests shall be
delivered free and clear of all Encumbrances;




          (b) a receipt for the Purchase Price;




          (c) a true and complete copy, certified by the Secretary or an Assistant Secretary of Seller,
of the resolutions duly and validly adopted by the Board of Directors of Seller and the
stockholders of Seller evidencing their authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby;




          (d) a certificate of a duly authorized officer of Seller certifying as to the matters set
forth in Section 6.2(f);




          (e) the resignations, effective as of the Call Closing, of all of the directors of EPE Holdco,
except for such persons as shall have been designated in writing prior to the Call Closing by Buyer
to Seller;




          (f) a copy of (i) the Certificates of Incorporation, as amended (or similar organizational
documents), of the EPE Entities, certified by the Secretary of State of the jurisdiction in which
each such entity is incorporated or organized, as of a date not earlier than five Business Days
prior to the Call Closing and accompanied by a certificate of the Secretary or Assistant Secretary
of each such entity, dated as of the Closing Date, stating that no amendments have been made to
such Certificate of Incorporation (or similar organizational documents) since such date, and (ii)
the By-laws (or similar organizational documents) of the EPE Entities, certified by the Secretary
or Assistant Secretary of each such entity;




          (g) a certificate as to the non-foreign status of Seller (in a form reasonably acceptable to
Buyer) pursuant to Section 1.1445-2(b)(2) of the Code;




9









 








          (h) good standing certificates for the EPE Entities from the Secretary of State of the
jurisdiction in which case such entity is incorporated or organized, in each case dated as of a
date not earlier than five Business Days prior to the Call Closing;




          (i) for the benefit of the EPE Entities, a general release and discharge, in form and
substance reasonably satisfactory to Buyer, releasing and discharging the EPE Entities from any and
all liabilities to Seller and its Affiliates;




          (j) in the event Seller has elected to utilize its own funds or proceeds from the Purchase
Price to repay any outstanding Indebtedness of any of the EPE Entities pursuant to Section
1.3(c), evidence reasonably satisfactory to Buyer of the full satisfaction and release of such
Indebtedness as of the Closing Date;




          (k) no later than three Business Days prior to the Call Closing, a true, correct and complete
updated Seller Disclosure Schedule, pursuant to Section 4.9;




          (l) written undertakings, documents and instruments as may be reasonably required to make
effective the agreements of Seller set forth in Section 4.7 hereof; and




          (m) such other documents and instruments reasonably requested by Buyer in order to effect the
transactions contemplated hereby.




     1.7 Closing Deliveries by Buyer. At the Call Closing, Buyer shall deliver to Seller:



          (a) the Purchase Price in accordance with Section 1.4(b);




          (b) a true and complete copy, certified by the Secretary or an Assistant Secretary of Buyer,
of the resolutions duly and validly adopted by the independent members of the Board of Directors of
Buyer upon the recommendation of the Special Committee of the Board of Directors evidencing the
authorization of the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;




          (c) a certificate of a duly authorized officer of Buyer certifying as to the matters set forth
in Section 6.3(e); and.




          (d) such other documents and instruments reasonably requested by Seller in order to effect the
transactions contemplated hereby.




ARTICLE II.

REPRESENTATIONS AND WARRANTIES

OF SELLER




     2.1 As of the date hereof, the Effective Time, each Annual Bring-Down Date and the Call
Closing, or, if a representation or warranty is made as of a specified date, as of such date,
Seller hereby represents and warrants to Buyer that:



10









 





          (a) Organization, Good Standing and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its jurisdiction of
incorporation. Seller has the requisite power and authority required to own, lease and operate its
properties and to carry on its business as now conducted, except as would not materially and
adversely affect the EP Business, taken as a whole, or the ability of the EPE Entities to develop
the Preliminary Master Plan, or if the Master Plan has been completed in accordance with Section
4.5, the Master Plan as in effect as of the applicable Bring-Down Date or the ability of Seller to
perform its obligations hereunder or consummate the Call Closing. Seller has the requisite
corporate power and authority to execute and deliver this Agreement, and to carry out the
transactions contemplated hereby and to perform each of its obligations hereunder. Seller is duly
qualified or licensed and in good standing to do business in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes such qualification or
licensing necessary, except as would not materially and adversely affect the EP Business, taken as
a whole, or the ability of the EPE Entities to develop the Preliminary Master Plan, or if the
Master Plan has been completed in accordance with Section 4.5, the Master Plan as in effect as of
the applicable Bring-Down Date or the ability of Seller to perform its obligations hereunder or
consummate the Call Closing. Seller has made available to Buyer true and complete copies of its
certificate of incorporation and bylaws, each as amended to date and presently in effect. Seller
is not in violation of any material provision of its organizational documents.




          (b) Corporate Authorization. The execution, delivery and performance by Seller of
this Agreement and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Seller and by a majority of the holders of Seller’s
capital stock, and no other corporate proceeding on the part of Seller is necessary for the
consummation by Seller of the transactions contemplated hereby.




          (c) Enforceability. This Agreement has been duly and validly executed and delivered
by Seller and, assuming the due and valid execution and delivery by Buyer, constitutes a legal,
valid and binding obligation of Seller enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the enforcement of creditors’ rights generally.




          (d) Non-Contravention. The execution, delivery and performance by Seller of this
Agreement and the consummation by Seller of the transactions contemplated hereby do not and will
not (i) contravene or conflict with the organizational or governing documents of Seller, (ii)
conflict with or constitute a violation of any provision of any material Law binding upon or
applicable to Seller or any of its properties or assets, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both would become a
default) or, except as set forth in Schedule 2.1(d)(iii) of the Seller Disclosure Schedule,
require a consent under, result in the loss of a material benefit under or give others any right of
termination, amendment, acceleration, payment or cancellation of, or result in the creation of a
lien or other encumbrance on any property or under any material contract, lease, license, permit,
franchise or other instrument or obligation to which Seller is a party or by which Seller or any of
its properties or assets is bound or affected, except with respect to clauses (ii) and (iii) as
would not materially and adversely affect the EP Business, taken as a whole, or the ability of the
EPE




11









 







Entities to develop the Preliminary Master Plan, or if the Master Plan has been completed in
accordance with Section 4.5, the Master Plan as in effect as of the applicable Bring-Down Date or
the ability of Seller to perform its obligations hereunder or consummate the Call Closing.




     2.2 As of the Effective Time, each Annual Bring-Down Date and the Call Closing, or, if a
representation or warranty is made as of a specified date, as of such date, Seller hereby
represents and warrants to Buyer that:



          (a) Title to Presley Interests. Seller is the direct or indirect record and
beneficial owner of the Presley Interests free and clear of all Encumbrances except as set forth in
Schedule 2.2(a) of the Seller Disclosure Schedule, and there is no stockholder agreement,
voting trust or other agreement or understanding to which Seller is a party or by which it is bound
relating to the voting or registration of any of the Presley Interests. The delivery to Buyer of
the Presley Interests at the Call Closing pursuant to the provisions of this Agreement will
transfer to Buyer good and valid title thereto, free and clear of all Encumbrances.




          (b) Organization, Qualification, Good Standing; Non-Contravention; Capitalization;
Subsidiaries.




               (i) Each of the EPE Entities is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of its organization. Each
of the EPE Entities has the requisite power and authority required to own, lease and operate its
properties and to carry on its business as now conducted, except as would not materially and
adversely affect the EP Business, taken as a whole, or the ability of the EPE Entities to develop
the Preliminary Master Plan, or if the Master Plan has been completed in accordance with Section
4.5, the Master Plan as in effect as of the applicable Bring-Down Date or the ability of Seller to
perform its obligations hereunder or consummate the Call Closing. Each of the EPE Entities is duly
qualified or licensed and in good standing to do business in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes such qualification or
licensing necessary, except as would not materially and adversely affect the EP Business, taken as
a whole, or the ability of the EPE Entities to develop the Preliminary Master Plan, or if the
Master Plan has been completed in accordance with Section 4.5, the Master Plan as in effect as of
the applicable Bring-Down Date or the ability of Seller to perform its obligations hereunder or
consummate the Call Closing. Seller has made available to Buyer true and complete copies of the
certificate of incorporation and bylaws or other organizational documents, of each of the EPE
Entities, each as amended to date and presently in effect. None of the EPE Entities is in
violation of any material provision of its organizational documents.



               (ii) Except as set forth in Schedule 2.2(b)(ii) of the Seller Disclosure Schedule, the
execution, delivery and performance by Seller of this Agreement and the consummation by Seller of
the transactions contemplated hereby do not and will not (A) contravene or conflict with the
organizational or governing documents of the EPE Entities, (B) conflict with or constitute a
violation of any provision of any Law binding upon or applicable to any of the EPE Entities or any
of their respective properties or assets, or (C) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default) or of the Seller
Disclosure Schedule, require a consent under, result in the loss of a





12












 




material benefit under or give others any right of termination, amendment, acceleration,
payment or cancellation of, or result in the creation of a lien or other encumbrance on any
property or under any contract, lease, license, permit, franchise or other instrument or obligation
to which any of the EPE Entities is a party or by which any of the EPE Entities or any of their
respective properties or assets is bound or affected, except, in the cases of clauses (B) and (C),
as would not materially and adversely affect the EP Business, taken as a whole, or the ability of
the EPE Entities to develop the Preliminary Master Plan, or if the Master Plan has been completed
in accordance with Section 4.5, the Master Plan as in effect as of the applicable Bring-Down Date
or the ability of Seller to perform its obligations hereunder or consummate the Call Closing.




               (iii) Schedule 2.2(b)(iii) of the Seller Disclosure Schedule correctly specifies as to
each of EPE Holdco, EPE Inc. and EPE LLC (A) the number and type of its authorized capital stock or
membership interests and the number of capital stock or membership interests outstanding and
(B) the name of each holder of such capital stock or membership interests, together with the number
(and percentage) of capital stock and membership interests held by such holder. All of the
outstanding capital stock or membership interests of each of the EPE Holdco, EPE Inc. and EPE LLC
set forth on Schedule 2.2(b)(iii) of the Seller Disclosure Schedule were duly authorized
and validly issued and are fully paid and non-assessable.



               (iv) Except as set forth in Schedule 2.2(b)(iv) of the Seller Disclosure Schedule, (A)
neither Seller nor any of the EPE Entities have any obligation to issue any shares or membership
interests or any subscriptions, options, warrants, preemptive rights or other rights (contingent or
otherwise) to purchase shares or membership interests in any of the EPE Entities, and (B) neither
Seller nor any of the EPE Entities have any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of the shares of capital stock or membership interests in any of
the EPE Entities or to pay any dividend or make any other distribution in respect thereof.



               (v) Schedule 2.2(b)(v) of the Seller Disclosure Schedule correctly specifies each
direct or indirect Subsidiary of each EPE Entity and the jurisdiction of incorporation or
organization of each such Entity and (A) the number and type of its authorized capital stock or
membership interests and the number of capital stock or membership interests outstanding and
(B) the name of each holder of such capital stock or membership interests, together with the number
(and percentage) of capital stock and membership interests held by such holder. Except as
indicated in Schedule 2.2(b)(v) of the Seller Disclosure, no other Person holds any equity
interest (contingent or otherwise) in such Entities.



          (c) Cirque du Soleil Agreements.




               (i) The Cirque Partnership Transaction Documents are each a valid and binding obligation of
Seller and/or its direct and indirect Subsidiaries, as the case may, and to the Knowledge of
Seller, the other parties thereto, enforceable against Seller and to the Knowledge of Seller, the
other parties thereto, in accordance with each of their terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
enforcement of creditors’ rights generally. Seller and/or its direct and indirect Subsidiaries, as
the case may, and to the Knowledge of Seller, the other parties thereto,



13









 




are each not in material breach of any of their respective obligations under the Cirque
Partnership Transaction Documents.




               (ii) As of the date hereof and as of the Effective Date, neither Seller nor its Subsidiaries
nor to Seller’s Knowledge, CKX or any of its Affiliates, nor any Person on any of their behalves,
has given termination notice to Velsi, L.L.C. or any of its Affiliates under any of the Cirque
Partnership Transaction Documents nor is such notice currently planned to be given or under
consideration by management, the stockholders or the boards of directors of Seller, its
Subsidiaries, or to Seller’s Knowledge, CKX or any of its Affiliates, or any Person on any of their
behalves.



               (iii) As of the date hereof and as of the Effective Date, neither Seller nor its Subsidiaries,
nor to Seller’s Knowledge, CKX or any of its Affiliates, nor any Person on any of their behalves,
have been given notice of termination by or on behalf of Velsi, L.L.C. or any of its Affiliates
under any of the Cirque Partnership Transaction Documents.



               (iv) As of the date hereof and as of the Effective Date, neither Seller nor its Subsidiaries,
nor to Seller’s Knowledge, CKX or any of its Affiliates, nor any Person on any of their behalves,
have been given notice by or on behalf of Creations Meandres, Inc. or any of its Affiliates that,
and there have been no meaningful discussions between any senior executive officer of Seller or any
senior executive officer of CKX with any senior executive officer of Creations Meandres, Inc. or
any of its Affiliates to the effect that, Creations Meandres, Inc. or any of its Affiliates do not
intend to develop and present to the general public at least two additional Shows (for purposes of
this Section 2.2(c), as defined in the Cirque Letter Agreement).



          (d) Preliminary Master Plan. As of the Effective Date, (i) none of Seller or the EPE
Entities is a party to any contract that would materially restrict the ability of the EPE Entities
to develop the Graceland site substantially in accordance with the preliminary master development
plan attached hereto as Exhibit B (the “Preliminary Master Plan”), and (ii) except
as set forth on Schedule 2.2(d) to the Seller Disclosure Schedule, to Seller’s Knowledge no
event or circumstance exists which would materially and adversely affect the ability of the EPE
Entities to develop the Preliminary Master Plan.




          (e) Consents and Approvals. Except (a) for any filings and or notices required
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
Act”) or other competition laws or (b) as set forth on Schedule 2.2(e) to the Seller
Disclosure Schedule, no consent, approval, waiver or authorization is required to be obtained by
Seller from, and no notice or filing is required to be given by Seller, to or made by Seller with,
any Governmental Entity, similar regulatory authority or court in connection with the execution,
delivery and performance by Seller of this Agreement, other than in all cases where the failure to
obtain such consent, approval, waiver or authorization, or to give or make such notice of filing is
not, individually or in the aggregate, reasonably likely to materially and adversely affect the EP
Business or the ability of the EPE Entities to develop the Preliminary Master Plan, or if the
Master Plan has been completed in accordance with Section 4.5, the Master Plan as in effect as of
the applicable Bring-Down Date that this representation is given, or the ability of Seller to
perform its obligations hereunder or consummate the Call Closing.




14









 





          (f) Intellectual Property.




               (i) The EPE Entities have sufficient, direct or indirect, ownership rights of all assets owned
by or licensed to Seller and its Affiliates as is necessary for the conduct of the EP Business as
conducted as of the Effective Date and as contemplated to be conducted in accordance with the
Preliminary Master Plan, or if the Master Plan has been completed in accordance with Section 4.5,
the Master Plan as in effect as of the applicable Bring-Down Date, including the Owned Intellectual
Property (as defined herein), except as would not be material to the EP Business, taken as a whole,
or the ability of the EPE Entities to develop the Preliminary Master Plan, or if the Master Plan
has been completed in accordance with Section 4.5, the Master Plan as in effect as of the
applicable Bring-Down Date.



               (ii) The EPE Entities are the owners of or have the right to use intellectual property or
other proprietary rights, including such rights related to Elvis Presley, including, Elvis
Identification Elements, trademarks and/or service marks, domain names, photographs, musical
compositions, and audiovisual works, sufficient to conduct the EP Business as conducted as of the
Effective Date and as contemplated to be conducted in accordance with the Preliminary Master Plan,
or if the Master Plan has been completed in accordance with Section 4.5, the Master Plan as in
effect as of the applicable Bring-Down Date, as used in the Ordinary Course of Business, except as
would not be material to the EP Business, taken as a whole, or the ability of the EPE Entities to
develop the Preliminary Master Plan, or if the Master Plan has been completed in accordance with
Section 4.5, the Master Plan as in effect as of the applicable Bring-Down Date.



               (iii) Schedule 2.1(f)(iii) of the Seller Disclosure Schedule sets forth a true and
complete list of all material (A) registered trademarks and trademark applications and (B)
registered copyrights and copyright applications.



               (iv) There are no pending or existing adverse orders, judgments, legal proceedings, formal
investigations, or written claims, or, to the Knowledge of Seller, restrictions or encumbrances
regarding or relating to the use of the Owned Intellectual Property, that would or are reasonably
likely to materially and adversely affect the EP Business, or the ability of the EPE Entities to
develop the Preliminary Master Plan, or if the Master Plan has been completed in accordance with
Section 4.5, the Master Plan as in effect as of the applicable Bring-Down Date.



          (g) Real Estate.




               (i) Schedule 2.2(g)(i) of the Seller Disclosure Schedule sets forth:



                    (1) a list of all material leases, subleases, occupancy agreements or other agreements,
written and oral, together with any amendments or modifications thereto (each a “Lease”
and, collectively, the “Leases”) with respect to all material real property leased by each
of the EPE Entities (whether as lessor or lessee) (“Leased Real Property”); and



15









 





                    (2) list of all real property owned by the respective EPE Entities (the “Owned Real
Property”).



               (ii) The EPE Entities’ have, good and marketable title to, or, with respect to leasehold
interests, a valid leasehold interest in, their respective Owned Real Property and the Leased Real
Property, as the case may be, free and clear of all encumbrances (other than Permitted
Encumbrances), except for title exceptions described in the applicable title insurance policies
made available to Buyer and as set forth in Schedule 2.2(g)(ii) of the Seller Disclosure
Schedule and such imperfections of title and easements as do not and are not reasonably likely,
individually or in the aggregate, to materially impair the conduct of the EP Business, or the
ability of the EPE Entities to develop the Preliminary Master Plan, or if the Master Plan has been
completed in accordance with Section 4.5, the Master Plan as in effect as of the applicable
Bring-Down Date. Each parcel of real property included in the Preliminary Master Plan is included
in the Owned Real Property of the EPE Entities, except as set forth on Schedule 2.2(g)(ii)
of the Seller Disclosure Schedule.



               (iii) None of Seller or the EPE Entities has received written notice of any material pending
or, to Seller’s Knowledge, threatened appropriation, condemnation, eminent domain or like
proceedings relating to the Owned Real Property and the Owned Real Property and the Leased Real
Property have not suffered any material damage by fire or casualty which has not heretofore been
repaired and restored in all material respects, except in any such cases as do not and are not
reasonably likely, individually or in the aggregate, to materially impair the conduct of the EP
Business, or the ability of the EPE Entities to develop the Preliminary Master Plan, or if the
Master Plan has been completed in accordance with Section 4.5, the Master Plan as in effect as of
the applicable Bring-Down Date.



               (iv) Except as set forth in Schedule 2.2(g)(iv) of the Seller Disclosure Schedule:



                    (1) there is no material default (or event that, with or without the giving of notice or the
lapse of time or both, could constitute a default) that exists on the part of any EPE Entity or, to
Seller’s Knowledge, on the part of any other Entity party to such Lease, under any Lease;



                    (2) to Seller’s Knowledge there are no material adverse or other parties in possession of the
Leased Real Property or Owned Real Property, or of any part thereof and no third party has been
granted any material license, lease, or other right relating to the use or possession of the Leased
Real Property or Owned Real Property, or any part thereof, except tenants under written leases;



                    (3) none of Seller or the EPE Entities has received written notice that there are any material
building code or other code enforcement violations with respect to any portion of the Leased Real
Property or Owned Real Property; and



                    (4) none of Seller or the EPE Entities has received written notice that there are any material
unpaid impact fees, special assessments and permit fees with respect to the Leased Real Property or
Owned Real Property, if applicable.



16









 





               (v) Except for the Leases and Permitted Encumbrances, none of Seller or the EPE Entities has
granted any rights, options, rights of first refusal, or any other agreements of any kind, which
are currently in effect, to purchase or to otherwise acquire the Leased Real Property or Owned Real
Property or any part thereof or any interest therein, except the rights of Buyer under this
Agreement.



          (h) Taxes.




               (i) For purposes of this Section 2.2(h), any reference to EPE Holdco or any of its
Subsidiaries shall include (i) any entity which merged or was liquidated with and into EPE Holdco
or any of its Subsidiaries, and (ii) any predecessor to EPE Holdco or any of its Subsidiaries, but
shall not include any entity formed on or after the date of this Agreement by Buyer or Seller or
their respective Affiliates with respect to any period during which Buyer has a direct or indirect
ownership or beneficial interest of fifty percent (50%) or more in such entity prior to the Call
Closing.



               (ii) For purposes of this Agreement, capitalized terms used but otherwise not defined in this
Agreement shall have the following meanings:



                    (1) “IRS” shall mean the Internal Revenue Service;



                    (2) “Tax” shall mean any tax (including any income tax, franchise tax, capital gains
tax, estimated tax, gross receipts tax, value added tax, surtax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax, occupation tax, inventory
tax, occupancy tax, withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), that is, has been or may in the future be (a) imposed,
assessed or collected by or under the authority of any governmental entity, or (b) payable pursuant
to any tax sharing agreement or similar contract;



                    (3) “Tax Law” shall mean any federal, state, foreign or local law, statute, ordinance,
rule, regulation, order, judgment or decree, administrative order, decree, administrative or
judicial decision and any other executive, legislative, regulatory or administrative proclamation
related to Tax;



                    (4) “Tax Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form, election, certificate or
other document or information that is, has been or may in the future be filed with or submitted to,
or required to be filed with or submitted to, any governmental entity in connection with the
determination, assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any applicable Tax Law relating
to any Tax; and



                    (5) “Tax Proceeding” shall mean any audit, examination, contest, litigation or other
proceeding in writing with respect to Taxes.



               (iii) Except as disclosed in Schedule 2.2(h)(iii) of the Seller Disclosure Schedule:



17









 





                    (1) All Tax Returns required to be filed under any applicable Tax Law by or with respect to
EPE Holdco and any of its Subsidiaries have been timely filed and all such Tax Returns were correct
and complete in all material respects. All Taxes reflected on such Tax Returns with respect to EPE
Inc. and EPE LLC due prior to February 7, 2005, and all Taxes due after February 7, 2005, whether
or not reflected on such Tax Returns, with respect to EPE Holdco and its Subsidiaries, have been
timely paid through the Closing Date. No written claim has ever been made by any governmental
entity in a jurisdiction where Tax Returns are not filed that EPE Holdco or any of its Subsidiaries
is or may be subject to taxation in that jurisdiction.



                    (2) All Taxes that EPE Holdco and its Subsidiaries are or were required by Tax Law to withhold
or collect in connection with any amounts paid or owing to any employee, independent contractor, or
nonresident have been duly withheld or collected and, to the extent required, have been paid to the
proper governmental entity.



                    (3) Schedule 2.2(h)(iii)(3) of the Seller Disclosure Schedule lists all the foreign
countries where EPE Holdco and any of its Subsidiaries has a “permanent establishment” within the
meaning of any applicable Tax Law in any foreign country.



                    (4) None of EPE Holdco or any of its Subsidiaries is subject to an IRS private letter ruling
or a comparable ruling of any taxing authorities, and no request for such a ruling is currently
pending.



                    (5) Neither EPE Holdco nor any of its Subsidiaries will be required to include any amount in,
or exclude any item of deduction from, taxable income for any taxable period or portion thereof
ending after the Closing Date as a result of (i) any installment sale or open transaction; (ii) any
prepaid amount received on or prior to the Closing Date; (iii) change in method of accounting for a
taxable period ending on or prior to the Closing Date; or (iv) any closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar provision of any state,
local or foreign Tax Law.



                    (6) No written claim or Tax Proceeding is pending, currently being conducted or has been
threatened against or with respect to EPE Holdco or any of its Subsidiaries in respect of any Tax.
There are no liens for Taxes upon EPE Holdco or any of its Subsidiaries, except liens for current
Taxes not yet due and payable. Since February 7, 2005, neither EPE Holdco nor any of its
Subsidiaries has received written notice or has any Knowledge of any threatened or proposed Tax
audit, examination, refund litigation, investigation, claim, administrative proceeding or
adjustment in controversy with respect to EPE Holdco or any of its Subsidiaries.



                    (7) There are no outstanding agreements, waivers or arrangements extending the statutory
period of limitation applicable to any claim for, or the period for the collection or assessment
of, Taxes due from or with respect to EPE Holdco or any of its Subsidiaries for any taxable period
and no such extension or waiver has been requested (formally or informally) from EPE Holdco or any
of its Subsidiaries. Since February 7, 2005, no



18









 




deficiency for any material Taxes has been proposed, asserted or assessed against EPE Holdco
or any of its Subsidiaries in writing that has not been resolved and paid in full.




                    (8) Neither EPE Holdco nor any Subsidiary is party to or bound by or obligated under any Tax
sharing, indemnification or similar agreement.



                    (9) No power of attorney is currently in force with respect to any matter relating to Taxes
that could affect EPE Holdco or any of its Subsidiaries.



                    (10) None of the assets of EPE LLC: (a) is “tax-exempt use property” within the meaning of
Section 168(h)(1) of the Code, (b) is “tax-exempt bond financed property” within the meaning of
Section 168(g) of the Code, (c) is subject to Section 168(g)(1)(A) of the Code, or (d) is “limited
use property” (as the term is used in Rev. Proc. 2001-28). None of the assets of EPE Inc. or its
Subsidiaries (i) is tax-exempt use property within the meaning of Section 168(h) of the Code or
(ii) directly or indirectly secures any debt, the interest on which is exempt under Section 103(a)
of the Code.



                    (11) Neither Seller nor CKX is a foreign person within the meaning of Section 1445 of the
Code.



                    (12) Neither EPE Holdco nor any of its Subsidiaries has any Liability for the Taxes of any
Person (other than EPE Holdco or any of its Subsidiaries) under Treasury Regulation 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or successor, by contract,
or otherwise.



                    (13) EPE Holdco has not distributed the stock of another Person, or has had its stock
distributed by another Person, in a transaction that was purported or intended to be governed in
whole or in part by Section 355 or Section 361 of the Code.



                    (14) Since February 7, 2005, none of EPE Holdco and any of its Subsidiaries has participated
in a “listed transaction” within the meaning of Treasury Regulation 1.6011-4(b)(2). Each of EPE
Holdco, and its Subsidiaries since they were acquired by EPE Holdco, has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662 of the Code.



                    (15) Schedule 2.2(h)(iii)(15) of the Seller Disclosure Schedule sets forth the
following information with respect to EPE Holdco and its Subsidiaries: list of (i) the federal and
state income, franchise and occupation Tax Returns filed by or on behalf of EPE Holdco and its
Subsidiaries for any taxable periods ended on or after December 31, 2005, (ii) those federal and
state income, franchise and occupation Tax Returns that have been audited, and (iii) those federal
and state income, franchise and occupation Tax Returns that currently are the subject of an audit.
Seller has made available to Buyer copies of all such Tax Returns and related examination reports,
and related statements of deficiencies assessed against or agreed to by EPE Holdco.



               (i) Financial Statements; No Contingent Liabilities. Seller has made available to
Buyer complete and correct copies of (i) the audited combined financial statements



19









 







for the EPE Entities as of December 31, 2006 and for the twelve-month period then ended,
including the notes thereto and (ii) the unaudited combined financial statements for the EPE
Entities as of September 30, 2007 and for the nine-month period then ended, including the notes
thereto (all of the foregoing financial statements being collectively referred to herein as the
“Financial Statements”). The Financial Statements fairly present, in all material respects,
the consolidated financial position of the EPE Entities as of the respective dates thereof, and the
results of operations and cash flows for the periods set forth therein, and in each case were
prepared in accordance with United States generally accepted accounting principals
(“GAAP”), consistently applied during the periods involved (in each case, except as
otherwise noted therein and subject, where appropriate, to normal audit adjustments). Except as set
forth in the Financial Statements or the most recent financial statements delivered to Buyer
pursuant to Section 4.1 since the date of the most recent consolidated balance sheet of the EPE
Entities included in the Financial Statements or delivered to Buyer pursuant to Section 4.1, the
EPE Entities and their subsidiaries do not have any liabilities or obligations of any nature
(absolute, accrued, fixed, contingent or otherwise) required by GAAP to be set forth on a balance
sheet of any of the EPE Entities or their subsidiaries, other than (i) as incurred in the Ordinary
Course of Business or (ii) that are not material to the EPE Entities, taken as a whole, or the
ability of the EPE Entities to develop the Preliminary Master Plan, or if the Master Plan has been
completed in accordance with Section 4.5, the Master Plan as in effect as of the applicable
Bring-Down Date.



          (j) Absence of Material Adverse Effect; Ordinary Course of Operations. Since the date
of the most recent consolidated balance sheet included in the Financial Statements or delivered to
Buyer pursuant to Section 4.1:




               (i) Seller and the EPE Entities have conducted the EP Business substantially in the Ordinary
Course of Business, except as otherwise expressly permitted by this Agreement and except as would
not materially and adversely affect the EP Business or the ability of Seller to perform its
obligations hereunder or consummate the Call Closing;



               (ii) the EP Business has not experienced any event, change or condition that has had or is
reasonably likely to have a Seller Material Adverse Effect, provided that clause (i)(B) of the
definition of Seller Material Adverse Effect shall not apply with respect to this Section
2.2(j)(ii); and



               (iii) Seller has not taken, or permitted the EPE Entities to take, any of the actions or
permitted to occur any of the events that would be prohibited by Article IV, except as
would not materially and adversely affect the EP Business or the ability of Seller to perform its
obligations hereunder or consummate the Call Closing.



          (k) Sufficiency of Assets. Except as set forth on Schedule 2.2(k) of the
Seller Disclosure Schedule, the assets, properties and rights of the EPE Entities comprise in all
material respects all of the assets used by CKX, Seller or the EPE Entities or necessary to operate
the EP Business as operated as of the date hereof by the foregoing persons other than any
immaterial dispositions of assets or rights in the Ordinary Course of Business.




20









 








          (l) Environmental Matters. To Seller’s Knowledge, there are no material Environmental
Liabilities at or on the Leased Real Property or Owned Real Property or to which the EP Business or
the EPE Entities are subject, except as set forth in the reports and surveys listed on Schedule
2.2(l) of the Seller Disclosure Schedule, and Seller has not received any written notice of a
material violation by any of the EPE Entities of any material environmental Laws to which any of
the EPE Entities is subject.




     2.3 As of the Effective Time, each Annual Bring-Down Date and the Call Closing, or, if a
representation or warranty is made as of a specified date, as of such date, Seller hereby
represents and warrants to Buyer that, except as would not have a Seller Material Adverse Effect:



          (a) Employee Benefits.




               (i) Schedule 2.3(a) of the Seller Disclosure Schedule sets forth a list of each of the
following, if any, which is sponsored, maintained or contributed to by Seller or its Affiliates for
the benefit of the current or former employees of the EPE Entities (collectively, the
“Employees”) or agents, or current or former directors of Seller or the EPE Entities or
with respect to which Seller or its Affiliates has or could reasonably be expected to have any
actual or contingent liability or obligation: each “employee benefit plan,” as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”),
and any trust created thereunder; and each stock option plan, stock purchase plan, stock
appreciation rights plan, phantom stock plan, collective bargaining agreement, bonus plan or
arrangement, incentive award plan or arrangement, workers’ compensation, vacation and sick leave
policy, fringe benefit plan, life, health, dental, vision, hospitalization, disability or other
insurance plan, severance or other termination pay policy or agreement, deferred compensation
agreement or arrangement, employment or consulting agreement and change in control arrangement (the
“Benefit Plans”).



               (ii) True, correct and complete copies of each of the Benefit Plans (if any), and related
trusts, if applicable, including all amendments thereto, summary plan descriptions, the three most
recent reports on Form 5500, accompanying schedules, nondiscrimination tests and actuarial reports,
to the extent applicable, insurance or annuity contracts, Internal Revenue Service determination
letter or opinion letter, if applicable, and the most recent investment management agreements, and
recordkeeping agreements related thereto, have been furnished or made available to Buyer.



               (iii) Except as otherwise set forth in Schedule 2.3(a)(iii) of the Seller Disclosure
Schedule,



                    (1) Neither Seller nor any of its Affiliates contributes to or has an obligation to contribute
to, or has at any time within the last six calendar years had an obligation to contribute to a
multiemployer plan within the meaning of Section 3(37) of ERISA (“Multiemployer Plan”), a
multiple employer plan within the meaning of Section 413(b) and (c) of the Code, a “single-employer
plan,” within the meaning of Section 4001(a)(15) of ERISA or any voluntary employees’ beneficiary
association described under Section 501(c)(9) of the Code or any other welfare benefit fund
described under Section 419 or 419A of the Code.




21












 





                    (2) Each of the Benefit Plans has been operated in accordance with its terms and conditions
and each of the Benefit Plans intended to be qualified under Section 401 of the Code has received a
favorable determination letter from the Internal Revenue Service regarding such qualified status,
the IRS has not revoked or threatened to revoke
such status and, to Seller’s Knowledge, nothing has occurred that would reasonably be expected
to result in the revocation of such qualified status;



                    (3) There are no actions, suits or claims pending (other than routine claims for benefits) or,
to the Knowledge of Seller, threatened against, or with respect to, any of the Benefit Plans, the
plan administrator or trustee of any Benefit Plan, or their assets;



                    (4) None of the Benefit Plans or any trust created thereunder or with respect thereto has
engaged in any “prohibited transaction” as such term is defined in Section 4975 of the Code and
Section 406 of ERISA, and, to the Knowledge of the Seller, there have been no acts or omissions by
Seller or the EPE Entities which have given rise to or could reasonably be expected to give rise to
material fines, penalties, taxes or related charges under Section 502 of ERISA or Chapters 43, 47,
68 of 100 of the Code;



                    (5) There is no matter pending, (other than routine qualification determination filings) or,
to the Knowledge of Seller, threatened with respect to any of the Benefit Plans before the Internal
Revenue Service, the Department of Labor, the PBGC or any other Governmental Entity;



                    (6) None of Seller or its Affiliates has any obligation to provide health benefits, death
benefits or other welfare benefits to former Employees, or to present Employees after termination
of their employment, except as specifically required by Law or to the extent the sole cost of which
is borne by such employee or former employee. Seller and its Affiliates have each complied in all
material respects with the notice and continuation coverage requirements, and all other
requirements, of Section 4980B of the Code and Parts 6 and 7 of Title I of ERISA, and the
regulations thereunder, the Health Insurance Portability and Accountability Act (HIPAA), and the
regulations thereunder, and any other applicable Law with respect to each welfare plan of Seller or
its Affiliates; and



                    (7) Neither the execution and delivery of this Agreement nor the consummation of any or all of
the transactions contemplated hereby will: (x) entitle any current or former employee, consultant,
contractor or director of Seller or EPE Entities to severance pay, unemployment compensation or any
similar payment, (y) accelerate the time of payment or vesting or increase the amount of any
compensation due to any such employee or former employee, or (z) directly or indirectly result in
any payment made to or on behalf of any person to constituting a “parachute payment” within the
meaning of Section 280G of the Code.



                    (8) All Benefit Plans providing “deferred compensation” as defined under Section 409A of the
Code (and any regulations or other guidance issued by the IRS with respect to Section 409A of the
Code): (i) have been maintained in good faith compliance with Section 409A of the Code (and IRS
Notice 2005-1); or (ii) are


22









 





grandfathered from, have not been materially modified and are not
subject to Section 409A of the Code. No employee of the EPE Entities constitutes or will
constitute a “specified employee” under Section 409A of the Code on or after the Call Closing.


          (b) Labor Matters.



               (i) Except as set forth in Schedule 2.3(b)(i) of the Seller Disclosure Schedule:



                    (1) there are no material and adverse claims, controversies or litigation, pending or, to the
Knowledge of Seller, threatened in writing between the EPE Entities and any of their respective
Employees;



                    (2) none of the EPE Entities is a party to or bound by any collective bargaining agreement or
other labor union contract applicable to Employees employed by the EPE Entities, nor, to the
Knowledge of Seller, are there any material activities or proceedings of any labor union to
organize any such Employees;



                    (3) there is no strike, slowdown, work stoppage or lockout, or, to the Knowledge of Seller,
threat thereof, by or with respect to any Employees of any of the EPE Entities;



                    (4) none of the EPE Entities has received written notice of any material claim or proceeding
pending before any federal, state, local or foreign agency responsible for the enforcement of labor
or employment laws, and, to Seller’s Knowledge, no investigation relating to any such material
claim is in progress; and



                    (5) none of the EPE Entities is a party to or bound by any material labor, employment or
severance agreement with any Employee or former Employee concerning terms and conditions of
employment that is not set forth on Schedule 2.3(b)(i)(5) of the Seller Disclosure
Schedule.



               (ii) Schedule 2.3(b)(ii) sets forth a list of all Employees of the EPE Entities as of
the date hereof with an annual salary, as of the date hereof, over $300,000 inclusive of any
bonuses, and each such person’s date of hire, accrued vacation and accrued sick leave. The EPE
Entities are in material compliance with all applicable laws and contracts relating to the
employment of employees, including those related to wages, hours, eligibility for employment,
collective bargaining and the payment and withholding of taxes and other sums as required by the
appropriate Governmental Entity. None of the EPE Entities is a party to, or otherwise bound by,
any material consent decree with, or citation by, any Governmental Entity relating to employees or
employment practices.



          (c) No Default; Compliance with Laws. Except as set forth on Schedule 2.3(c) of the Seller Disclosure Schedule:



               (i) Each of Seller and the EPE Entities is in compliance with applicable material Laws,
Orders, and enforceable arbitration awards, concessions and grants.



23









 





               (ii) Neither Seller nor any EPE Entity, has received any written communication from a
Governmental Entity that alleges that the EP Business is not being conducted in compliance in all
material respects with all applicable material Laws..



          (d) Material Contracts. Except for the Cirque Partnership Transaction Documents, no EPE Entity is party to any
contract, agreement or legally enforceable arrangement, the termination or loss of which would be
material the conduct of the EPE Business or the ability of the EPE Entities to develop the
Preliminary Master Plan, or if the Master Plan has been completed in accordance with Section 4.5,
the Master Plan as in effect as of the applicable Bring-Down Date.



          (e) Title to Tangible Personal Property. The EPE Entities have good and valid title to, or a valid leasehold interest in or right to
use, all material Tangible Personal Property, other than property that is obsolete or has been
retired or disposed of in the Ordinary Course of Business, free and clear of any Encumbrances,
other than Permitted Encumbrances.



          (f) Permits. As of the Effective Date, (i) Seller and the EPE Entities possess all material Permits,
(ii) each such material Permit is valid and in full force and effect and will not be invalidated or
otherwise negatively affected by consummation of the transactions contemplated by this Agreement,
and (iii) to Seller’s Knowledge, no violations are or have been recorded in respect of any Permit,
no event has occurred that is reasonably likely to allow revocation or termination or the
impairment in any material respect of Seller’s or the EPE Entities’ rights with respect to any such
Permit, and no proceeding is pending or, to Seller’s Knowledge, threatened, to revoke, limit or
impair any such Permit.



          (g) Insurance. All material assets (including intellectual property), properties and risks of the EPE
Entities are, and since January 1, 2006 have been, covered by valid and, except for insurance
policies that have expired under their terms in the ordinary course, currently effective insurance
policies or binders of insurance (including general liability insurance, property insurance and
workers’ compensation insurance) issued in favor of the EPE Entities, in each case with nationally
recognized insurance companies, in such types and amounts and covering such risks as are consistent
with customary practices and standards of companies engaged in businesses and operations similar to
those of the EPE Entities, as the case may be.



          (h) Litigation. There are no material legal, administrative, arbitration or other formal proceedings or
governmental investigations (each, a “Legal Proceeding”) pending or, to the Knowledge of
Seller, threatened in writing against any of the EPE Entities. There are no material legal,
administrative, arbitration or other formal proceedings or governmental investigations pending that
challenge the validity of this Agreement or any of the transactions contemplated by this Agreement.



          (i) No Other Representations. Except as expressly set forth in this Article II, Seller makes no representation or
warranty of any kind whatsoever, express or implied in connection with or with respect to Seller,
the EPE Entities, the business conducted or to be conducted by any of them, the transactions
contemplated by this Agreement, or with respect to any financial information, projections or other
information provided to Buyer or any other Person, whether on behalf of Seller, the EPE Entities or
any of their Affiliates or any other



24









 







Person, including as to the probable success or profitability
of the ownership, or use or operation of the EPE Entities or their respective businesses. All
other representations and warranties are hereby disclaimed.



ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF BUYER




     3.1 Buyer hereby represents and warrants to Seller, as of the date of this Agreement and as of
each Bring-Down Date, or, if a representation or warranty is made as of a specified date, as of
such date, that:



          (a) Organization, Good Standing and Qualification. Buyer is a corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Buyer has the requisite power and authority required to own,
lease and operate its properties and to carry on its business as now conducted, except as would not
materially and adversely affect the ability of Buyer to perform its obligations hereunder or
consummate the Call Closing. Buyer has the requisite corporate power and authority to execute and
deliver this Agreement, and to carry out the transactions contemplated hereby and to perform each
of its obligations hereunder. Buyer is duly qualified or licensed and in good standing to do
business in each jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification or licensing necessary, except as would not
materially and adversely affect the ability of Buyer to perform its obligations hereunder. Buyer
has made available to Seller true and complete copies of its certificate of incorporation and
bylaws or similar organizational and governing documents, each as amended to date and presently in
effect. Buyer is not in violation of any material provision of its organizational or governing
documents.



          (b) Corporate Authorization. The execution, delivery and performance by Buyer of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by the independent
directors of the Board of Directors of Buyer upon the recommendation of the Special Committee, and
no other corporate proceeding on the part of Buyer is necessary for the consummation by Buyer of
the transactions contemplated hereby.



          (c) Enforceability. This Agreement has been duly and validly executed and delivered by Buyer and, assuming the
due and valid execution and delivery by Seller, constitutes a legal, valid and binding obligation
of Buyer enforceable against Buyer in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the enforcement of creditors’ rights generally.



          (d) Non-Contravention. The execution, delivery and performance by Buyer of this Agreement and the consummation by
Buyer of the transactions contemplated hereby do not and will not (i) contravene or conflict with
the organizational or governing documents of Buyer, (ii) conflict with or constitute a violation of
any provision of any material Law binding upon or applicable to Buyer or any of its properties or
assets, or (iii) result in any breach of or constitute a default (or an event which with notice or
lapse of time or both would



25









 







become a default) or require a consent under, result in the loss of a
material benefit under or give others any right of termination, amendment, acceleration, payment or
cancellation of, or result in the creation of a lien or other encumbrance on any property or under
any material contract, lease, license, permit, franchise or other instrument or obligation to which
Buyer is a party or by which Buyer or any of its properties or assets is bound or affected, except
with respect to clauses (ii) and (iii) as would not materially and adversely affect the ability of
Buyer to perform its obligations hereunder.



          (e) Buyer Actions. Seller shall not be deemed to have breached any representation or warranty of Seller
contained in this Agreement to the extent that any action taken by or at the request of Buyer (or
by any EPE Entity at the request of Buyer) pursuant to, or in furtherance of, the EP License, the
Preliminary Master Plan or the Master Plan has proximately caused such breach.



ARTICLE IV.

CERTAIN COVENANTS




     4.1 Information Rights; Access.



          (a) Without limiting the generality of Section 4.1(d) below, Seller covenants and agrees that
between the Effective Time and the earlier of the Call Closing or the termination of this
Agreement, Seller shall deliver to Buyer (i) as soon as reasonably practicable, but in no event
later than 45 days, following the end of each fiscal quarter after the Effective Time, unaudited
consolidated financial statements for the EPE Entities for such quarter, (ii) as soon as reasonably
practicable, but in no event later than 90 days, following the end of each fiscal year after the
Effective Time, audited consolidated financial statements for the EPE Entities, each of which shall
be prepared in accordance with GAAP, consistently applied during the periods involved (in each
case, except as otherwise noted therein and subject in the case of unaudited financial statements,
where appropriate, to normal year-end audit adjustments) and shall fairly present in all material
respects, the consolidated financial position of the EPE Entities as of the respective dates
thereof, and the results of operations and cash flows for the periods set forth therein; and (iii)
subject to applicable Law, any budgets or business plans presented to or approved by the Board of
Directors of Seller or the EPE Entities. All information hereunder shall be provided to Buyer at
the Seller’s sole expense.



          (b) Seller covenants and agrees that: (a) as soon as reasonably practicable but in no event
later than 45 days following the end of the calendar month immediately preceding the sixth
anniversary date of the Effective Time, Seller shall deliver to Buyer (the date of such delivery
referred to herein as the “Sixth Anniversary Financial Statement Delivery Date”), at
Seller’s cost and expense, (i) audited consolidated financial statements for the EPE Entities for
the trailing twelve month period as of the end of the calendar month immediately preceding the
sixth anniversary date of the Effective Time (the “Sixth Anniversary Financial
Statements”), which financial statements shall be prepared in accordance with GAAP,
consistently applied during the periods involved (except as otherwise noted therein) and shall
fairly present in all material respects, the consolidated financial position of the EPE Entities as
of the dates thereof, and the results of operations and cash flows for the periods set forth
therein, and (ii) a certificate setting forth the OIBDAN of the EPE Entities for the trailing
twelve month



26









 







period ending as of the date of such financial statements, certified by the accounting
firm that has audited such financial statements, including a reasonably detailed calculation
thereof (an “OIBDAN Certificate”);




     (i) to the extent that Buyer has validly exercised its right to extend
the deadline to exercise the Call Right until the First Extended Deadline
pursuant to Section 1.1(c)(i), as soon as reasonably practicable but in no
event later than 45 days following the end of the calendar month immediately
preceding the seventh anniversary date of the Effective Time, Seller shall
deliver to Buyer (the date of such delivery referred to herein as the
“Seventh Anniversary Financial Statement Delivery Date”), at
Seller’s cost and expense, (x) audited consolidated financial statements for
the EPE Entities for the trailing twelve month period as of the end of the
calendar month immediately preceding the seventh anniversary date of the
Effective Time (the “Seventh Anniversary Financial Statements”),
which financial statements shall be prepared in accordance with GAAP,
consistently applied during the periods involved (except as otherwise noted
therein) and shall fairly present in all material respects, the consolidated
financial position of the EPE Entities as of the dates thereof, and the
results of operations and cash flows for the periods set forth therein, and
(y) an OIBDAN Certificate for the applicable period;




     (ii) to the extent that Buyer has validly exercised its right to extend
the deadline to exercise the Call Right until the Second Extended Deadline
pursuant to Section 1.1(c)(ii), as soon as reasonably practicable but in no
event later than 45 days following the end of the calendar month immediately
preceding the date that is six months following the seventh anniversary date
of the Effective Time, Seller shall deliver to Buyer (the date of such
delivery referred to herein as the “Final Financial Statement Delivery
Date”), at Seller’s cost and expense, (x) audited consolidated financial
statements for the EPE Entities for the trailing twelve month period as of
the month end immediately prior to the date that is six months following the
seventh anniversary date of the Effective Time (the “Final Financial
Statements”), which financial statements shall be prepared in accordance
with GAAP, consistently applied during the periods involved
(except as otherwise noted therein) and shall fairly present in all
material respects, the consolidated financial position of the EPE Entities
as of the dates thereof, and the results of operations and cash flows for
the periods set forth therein, and (y) and OIBDAN Certificate for the
applicable period.



          (c) Notwithstanding the foregoing, if Seller believes, in good faith, that the EPE Entities
have not achieved the Threshold OIBDAN for any applicable period set forth in Section 4.1(b) above,
then Seller shall not be obligated to provide to Buyer the applicable financial statements
contemplated by Section 4.1(b,) and in lieu thereof, Seller shall deliver to Buyer (no later than
10 days following the end of the applicable calendar month as of which audited financial statements
would have otherwise been prepared pursuant to Section



27









 







4.1(b)) a written notice (an “OIBDAN
Notice”) stating that the EPE Entities have not achieved the Threshold OIBDAN for the
applicable period.



          (d) From the Effective Date until the earlier of the Call Closing or termination of this
Agreement, upon reasonable notice, Seller shall cause its officers, directors, employees, agents,
representatives, accountants and counsel and shall cause the EPE Entities and each of the EPE
Entities’ officers, directors, employees, agents, representatives, accountants and counsel to:
afford the officers, employees, agents, accountants, counsel, financing sources and representatives
of Buyer reasonable access, during normal business hours, to the offices, properties, plants, other
facilities, books and records of the EPE Entities, including access to enter upon such properties,
plants and facilities to investigate and collect air, surface water, groundwater and soil samples
or to conduct any other type of environmental assessment, and to those officers, directors,
employees, agents, accountants and counsel of Seller and the EPE Entities who have any knowledge
relating to the EPE Entities or the EP Business; provided, however, that such
access and inspections shall not unreasonably disrupt the normal operations of (x) the EP Business
and (y) only one such inspection shall be permitted per calendar quarter and (z) in no event shall
any Person be granted access to the second floor of the Mansion at Graceland. Without limiting the
generality of the foregoing, Seller shall keep Buyer reasonably updated and informed regarding the
status of the transactions contemplated by the Cirque Partnership Transaction Documents and any
material developments in respect thereof, including any discussions among the parties thereto of
the possible termination of any of such documents. In contemplation of Buyer’s exercise of the
Call Option, Seller shall permit Buyer reasonable access to its officers and employees for the
purposes of negotiating employment agreements with an EPE Entity with effect as of the Call
Closing.



          (e) From the Call Closing until completion of the audit of Buyer’s consolidated financial
statements for the full three fiscal years immediately following the fiscal year in which the Call
Closing occurs, Seller, upon Buyer’s written request, shall as soon as is reasonably practicable
following Buyer’s written request (x) provide Buyer with any information (financial or otherwise)
relating to the EPE Entities and/or the EP Business reasonably available to Seller, (y) provide
Buyer access to any books and records, personnel, work papers, historical financial information or
other items relating to the EPE Entities and/or the EP Business available to Seller and (z) have
Seller’s independent auditors prepare for Buyer’s exclusive use financial statements and other
financial information based on the documents referenced in foregoing clauses (x) and (y), in each
case, as is reasonably necessary to enable Buyer to satisfy its
reporting and other obligations under Federal and State securities laws, including the
Sarbanes-Oxley Act, and the rules of the NASDAQ Global Market (or any other national securities
exchange or automated quotation system on which Buyer’s securities are listed and traded). By way
of example without limitation, at Buyer’s request, at Buyer’s written request Seller shall cause
its independent auditors to prepare in a timely fashion and in conformity with applicable United
States generally accepted accounting principles and rules and regulations promulgated under Federal
and State securities laws any and all audited and unaudited financial statements and other
financial information with respect to the EPE Entities and the EP Business for financial reporting
periods that preceded the Call Closing for Buyer’s exclusive use in its public filings with the
Securities and Exchange Commission. Buyer shall reimburse Seller for all of its reasonable costs
and expenses incurred in connection with Seller’s performance of its obligations under this
paragraph (c).



28









 





     4.2 Ordinary Course. Seller covenants and agrees that between the Effective Time and the earlier of the Call
Closing or the termination of this Agreement, except as required by any applicable Law,
contemplated by the Preliminary Master Plan or the Master Plan, or unless Buyer shall otherwise
agree in writing, Seller shall, and shall cause the EPE Entities to:



          (a) conduct the EP Business substantially in the Ordinary Course of Business;



          (b) not subject any of the assets, properties or rights of the EPE Entities to any material
Encumbrance, other than Permitted Encumbrances and any liens or security interests (i) reasonably
required in connection with the financing of the Master Plan, or (ii) that can be fully and
unconditionally released at the Call Closing by the payment of an aggregate amount, including all
out of pocket costs and expenses, not to exceed the Purchase Price;



          (c) not permit the EPE Entities to incur any Indebtedness in excess of the Purchase Price in
effect at the relevant time except in connection with the financing of the Master Plan,
provided that any Indebtedness of the EPE Entities is incurred by an EPE Entity for the
direct benefit of an EPE Entity;



          (d) not knowingly permit any of the material insurance policies of the EP Business to be
canceled or terminated or any of the coverage thereunder to lapse, without simultaneously securing
substantially similar replacement insurance policies;



          (e) not extend the term of, or otherwise amend in any material respect, the IGT Agreement,
unless Seller shall have provided Buyer with at least 30 days prior written notice of its intention
to do so;



          (f) not issue, sell, transfer or dispose of any shares of the EPE Entities’ capital stock or
limited liability company interests or securities or instruments convertible into or exchangeable
for any such shares or limited liability company interests, or any rights, warrants, options, calls
or commitments to acquire any such shares or limited liability
company interests or other convertible securities or instruments, except as set forth on
Schedule 4.2(f) of the Seller Disclosure Schedule;



          (g) not cancel or compromise any material debt or claim or waive or dispose of any rights or
assets of material value to the EP Business without the EP Business receiving a benefit of similar
or greater value, or voluntarily suffer any extraordinary loss;



          (h) perform its material obligations as landlord in connection with any real property leased
to third parties in all material respects, and not terminate, cause the termination or enter into,
alter, amend, or otherwise modify or supplement any material terms to any lease except in the
Ordinary Course of Business;



          (i) keep, maintain, and repair all Owned Real Property and Leased Real Property in a good and
presentable condition consistent with past practice and the reasonable requirements of the
appreciation and growth of the EP Business, ordinary wear and tear excepted, and comply in all
material respects with all Laws affecting such real property;



29









 





          (j) not terminate any of the Cirque Partnership Transactions Agreements, or give notice
thereunder of an intention to do so, except in the case of a termination due to a good faith belief
that there has been a material breach by any party to any such agreement other than Seller or its
Affiliates;



          (k) not authorize or enter into an agreement, contract, commitment or arrangement to do any of
the foregoing; and



          (l) not amend in any material respect or fail to comply with the material terms of the EPE LLC
Operating Agreement and the EPE Inc. Shareholders Agreement, each as defined herein.



     4.3 Intellectual Property. Seller covenants and agrees that between the Effective Time and the earlier of the Call
Closing or the termination of this Agreement, except as required by any applicable Law or unless
Buyer shall otherwise agree in writing, Seller shall not, and shall cause the EPE Entities not to,
take or fail to take any action, the intent or effect of which is to defease or impair Seller’s
title in and to any material Owned Intellectual Property in any material respect or as would
reasonably be expected to be material to the EP Business or the ability of the EPE Entities to
develop the Preliminary Master Plan, or if the Master Plan has been completed in accordance with
Section 4.5, the Master Plan, or the transactions contemplated thereby.



     4.4 Real Property. Seller covenants and agrees that between the Effective Time and the earlier of the Call
Closing or the termination of this Agreement, except as required by any applicable Law or unless
Buyer shall otherwise agree in writing, Seller shall not, and shall cause the EPE Entities not to,
take or fail to take any action, the intent or effect of which is to transfer, sell or otherwise
defease or impair Seller’s title or leasehold interest in any Owned Real Property or any Leased
Real Property in any material respect or as would reasonably be expected to be material to the
EP Business or the ability of the EPE Entities to develop the Preliminary Master Plan, or if
the Master Plan has been completed in accordance with Section 4.5, the Master Plan, or the
transactions contemplated thereby.



     4.5 Master Plan.



          (a) Buyer and Seller each mutually covenant and agree that between the Effective Time and the
earlier of the Call Closing or the termination of this Agreement, except as required by any
applicable Law and subject to the terms and conditions set forth in this Agreement, Buyer and
Seller shall reasonably cooperate with one another in good faith to prepare a master plan for the
development of the Graceland site (the “Master Plan”), with each party initially paying 50%
of the cost thereof. At the earlier to occur of the Call Closing or the termination of this
Agreement pursuant to Section 5.2(b) or 5.2(e), Buyer shall reimburse Seller on such date for all
amounts paid by Seller pursuant to the foregoing sentence in excess of $2.5 million.
Notwithstanding the foregoing, if Buyer notifies Seller in writing that Buyer irrevocably and
unconditionally forfeits its rights under the EP License to develop hotels at the Graceland site
(or otherwise notifies Seller in writing of Buyer’s irrevocable and unconditional intention not to
proceed with the development of hotels under the EP License) (a “Forfeiture Event”), then
on the effective date of such Forfeiture Event, Buyer shall reimburse Seller for only those amounts




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paid by Seller, as of the date of such Forfeiture Event, in excess of $2.5 million; provided,
however, that the foregoing limitation shall not apply if, following a Forfeiture Event, Buyer
exercises the Call Right and consummates the Call Closing, in which case, Buyer shall reimburse
Seller on the Closing Date for any and all amounts paid by Seller in excess of $2.5 million
regardless of whether such costs were incurred on or prior to the date of the Forfeiture Event
(excluding any amounts that previously were reimbursed by Buyer to Seller at the time of the
Forfeiture Event).




          (b) In the event Seller and Buyer cannot agree on the Master Plan, then Seller shall have the
right to complete the Master Plan in its sole discretion, subject to Buyer’s rights under the EP
License and, provided, however, that Buyer shall have the right to provide input into the Master
Plan and be reasonably informed as to the status thereof, although all final decisions in respect
thereof shall be made by Seller in its sole discretion. If the Master Plan is completed and Buyer
has not exercised the Call Right, Seller shall have the right (but not the obligation) to commence
development of the Master Plan and, at the Call Closing (if any), Buyer shall reimburse Seller or
its Affiliates for any and all Indebtedness and expenses and costs incurred by Seller or any
Affiliate thereof in connection with such development (excluding any amounts paid by Seller in
connection with the development of the Master Plan up to a maximum of $2.5 million and any amounts
previously reimbursed to Seller by Buyer pursuant to Section 4.5(a)). The foregoing reimbursement
shall be in addition to the applicable Purchase Price payable by Buyer to Seller.




     4.6 Tag-Along Rights. Buyer covenants and agrees that between the Effective Time and
the earlier of the Call Closing or the termination of this Agreement, Buyer shall acknowledge and
comply with the tag-along rights set forth in Section 9.2 of the Amended and Restated Operating
Agreement of EPE LLC, dated February 7, 2005 (the “EPE LLC Operating Agreement”) and
Section 4.1 of the Shareholders Agreement, dated February 7, 2005, between EPE, Inc., the Promenade
Trust, EPE Holdco and Sports Entertainment Enterprises, Inc. (the “EPE Inc. Shareholders
Agreement”) to the extent applicable to the exercise of the Call Right hereunder or the
consummation of the transactions contemplated hereby. Nothing contained herein shall prohibit,
preclude or otherwise limit Seller from complying with its obligations under the EPE LLC Operating
Agreement and the EPE Inc. Shareholders Agreement.



     4.7 Cirque Partnership.



          (i) Effective at Closing, Buyer agrees to comply with obligations applicable to the direct and
indirect parent companies of EPE LV, LLC under the Cirque Partnership Transaction Documents
(including those applicable as of the date hereof to CKX), and to cause Buyer’s direct and indirect
subsidiaries to comply with their respective obligations under the Cirque Partnership Transaction
Documents, as the case may be; provided that Seller has made all necessary assignments,
transfers and obtained all consents, if any, as may be required in respect of the transfer of
rights and obligations under such documents. Without limiting the generality of the foregoing,
effective at Closing, Buyer agrees to or to cause its direct and indirect subsidiaries to comply
with the obligations applicable to CKX and the direct and indirect parent entities of EPE LV, LLC
under Section 8.07 of the Cirque Partnership Agreement.




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          (b) Effective at Closing, Seller agrees to take or cause its direct and indirect subsidiaries
to take such actions or enter into such arrangements under or in respect of the Cirque Partnership
Transaction Documents as reasonably required to make effective the complete transfer to Buyer and
its direct and indirect subsidiaries, of all rights and obligations of CKX, Seller and their direct
and indirect subsidiaries under the Cirque Partnership Transaction Documents or pertaining to the
rights and obligations of the general partnership contemplated by the Cirque Partnership Agreement.
Without limiting the generality of the foregoing, effective at Closing, Seller agrees to or to
cause its direct and indirect subsidiaries to:




               (i) Cause the effective transfer and entry into arrangements under which Buyer is entitled to
exercise CKX’s rights under Section 10.9 of the Cirque Partnership Agreement, Section 9.05 of the
CELLC Agreement (as defined in the Cirque Partnership Agreement) and Section 10 of Schedule 1 to
the Show Production Agreement (as defined in the Cirque Partnership Agreement);



               (ii) Cause the effective transfer and entry into arrangements providing for the assignment of
all rights and benefits under and, of all of CKX’s right, title and interest in and to, the
Corporate Services Agreement; and



               (iii) Cause Buyer to be deemed the corporate designee and substitute corporate entity for CKX
for purposes of legal notices and credit under Section 7.12 of the Cirque Partnership Agreement.



     4.8 Creations Meandres Letter Agreement. Seller and the EPE Entities shall make a
good faith, commercially reasonable effort to develop and present to the general public at least
two additional Shows (for purposes of this Section 4.8, as defined in the Cirque Letter Agreement)
jointly or in association with Creations Meandres, Inc. or its Affiliates, another third party or
on their own behalf and not in conjunction with any third party.



     4.9 Seller Representations and Warranties Bring-Down. Seller covenants and agrees
that between the Effective Time and the earlier of the Call Closing or the termination of this
Agreement, Seller shall (i) reaffirm, in writing, each of its representations and warranties
contained in Sections 2.1, 2.2 and 2.3 hereof (A) as of the Effective Time; (B) as of the date that
is fifteen (15) Business Days’ following Seller’s receipt from Buyer of a written bring-down
request, provided that Buyer may not make more than one such request in any twelve month period
(the “Annual Bring-Down Date”), and (D) as of the Call Closing (each, a “Bring-Down
Date”) and (ii) update the Seller Disclosure Schedule as applicable to Seller’s representations
and warranties hereunder as of each Bring-Down Date. Any amendments to, or disclosure added to,
the Seller Disclosure Schedule in connection with the updating thereof as required by this Section
4.9(ii) (“Bring-Down Disclosure”) shall be disclosed for purposes of any representation or
warranty made by Seller as of each Bring-Down Date and, from and after the Call Closing, shall be
deemed disclosed for purpose of any representation or warranty made by Seller as of any date
previous to the date such Bring-Down Disclosure was provided to Buyer, other than any
representation or warranty that was first given as of the date of this Agreement or as of the
Effective Date, unless Buyer validly terminates this Agreement pursuant to Section 5.2(c) in
respect of any such Bring-Down Disclosure.



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     4.10 Buyer Representations and Warranties Bring-Down. Buyer covenants and agrees that
between the Effective Time and the earlier of the Call Closing or the termination of this
Agreement, Buyer shall reaffirm, in writing, each of its representations and warranties contained
in Section 3.1 hereof as of each Bring-Down Date.



     4.11 Lenders’ Consent.



          (a) Seller shall use commercially reasonable efforts to deliver to Buyer at the Effective Time
an agreement in favor of Buyer from any lenders to Seller or its Affiliates who shall have a lien
on Seller’s assets, providing, for the approval of Seller’s entry into this Agreement and an
agreement by such lenders that whether or not such lenders foreclose on any loans to Seller, or
otherwise, that each of the lenders agree to and agree to cause Seller to comply with Seller’s
obligation to sell and transfer to Buyer at the Closing on the terms hereof, subject to any
defenses to enforcement of this Agreement that would be available to Seller as against Buyer
hereunder, good and valid title to the Presley Interests free and clear of all Encumbrances (the
“Lenders’ Consent”).




          (b) Except a contemplated by Section 4.11(a) above, Seller shall not grant any security
interest in the Presley Interests or the equity interests of any of the EPE Entities to third
parties (whether before or after the Effective Time) without simultaneously delivering a consent
and agreement by such third parties in favor of Buyer as provided in the preceding sentence.




     4.12 Cooperation; Call Option Discretion. Subject to the terms and conditions set
forth in this Agreement and subject to Buyer’s right not to exercise the Call Option in its sole
discretion for any reason or no reason, Buyer and Seller shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) their respective reasonable best efforts to
take or cause to be taken all actions, and do or cause to be done all things reasonably necessary,
proper or advisable on its part under this Agreement and applicable Laws to consummate the
transactions contemplated by this Agreement as soon as practicable, including, but not limited to,
filing or jointly filing, if applicable, or causing to be filed, promptly after valid delivery by
Buyer of a Call Notice, any notifications, approval applications or the like required to be filed
under the HSR Act, and any other applicable competition or merger control laws with respect to the
transactions contemplated hereby and Buyer and Seller shall share equally all filing and similar
fees payable in connection therewith. Seller will request early termination of the waiting period
with respect to the consummation of the transactions contemplated hereby under the HSR Act if
requested by Buyer. Subject to applicable Laws relating to the exchange of information, Buyer and
Seller shall have the right to review in advance, and to the extent practicable each will consult
with the other on and consider in good faith the views of the other in connection with, all of the
information relating to Buyer or Seller, as the case may be, and any of their respective
Subsidiaries, that appears in any filing made with, or written materials submitted to, any third
party and/or any Governmental Entity in connection with the consummation of the transactions
contemplated by this Agreement. To the extent permitted under applicable Law, at Buyer’s election,
Buyer and Seller shall make any required filings under the HSR Act prior to delivery of a Call
Notice, but in such case Buyer shall pay all HSR Act filings fees in respect of such early filing.
Each party shall keep the others reasonably apprised of the content and status of any material
communications with, and material communications from any Governmental Entity



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with respect to the consummation of the transactions contemplated hereby. Notwithstanding the
foregoing, Buyer shall not be required to divest or hold separate, or offer to divest or hold
separate, any material assets or rights of Buyer or its affiliates as a condition to the approval
of any Governmental Entity of the transactions contemplated hereby, nor shall Buyer be required to
engage in litigation against or challenging any Governmental Entity in respect thereof.
Notwithstanding anything to the contrary, Seller confirms to Buyer that Seller is not relying on
Buyer exercising the Call Option or negotiating in good faith to do so, and confirms that Seller
recognizes that Buyer may elect in its sole discretion not to exercise the Call Option for any
reason or for no reason.



     4.13 Financing Assistance.



          (a) Prior to the Closing, Seller shall use its commercially reasonable efforts to, and shall
cause its Subsidiaries and its and their respective officers, employees and representatives to use
their commercially reasonable efforts to, assist Buyer in connection with the arrangement of any
financing to be consummated prior to or contemporaneously with the Call Closing in respect of the
transactions contemplated by this Agreement or development of the Master Plan, including any
refinancing or replacement of any existing, or the arrangement of any new, facility for
indebtedness of Buyer or its Subsidiaries; provided that such assistance does not (i)
unreasonably interfere with the ongoing operations of the Seller or the EPE Entities or (ii)
involve any binding commitment by or cost to Seller or any of its Subsidiaries which commitment or
cost is not conditioned on the Call Closing and does not terminate without liability to Seller or
any of its Subsidiaries upon the termination of this Agreement.




          (b) Further to the foregoing, prior to the Closing and at Buyer’s cost and expense, Seller
shall, and shall cause its Subsidiaries to and shall use commercially reasonable efforts to cause
its and their respective officers, employees and representatives to, to the extent applicable, (i)
participate in meetings, due diligence sessions and road shows, (ii) assist in preparing offering
memoranda, rating agency presentations, private placement memoranda, prospectuses and similar
documents, (iii) use commercially reasonable efforts to obtain comfort letters of accountants and
legal opinions, and (iv) otherwise make available documents and information relating to the Seller
and its Subsidiaries, in the case of each of (i) through (iii), as may be reasonably requested by
Buyer; provided that the foregoing clauses (i) through (iv) do not (A) unreasonably
interfere with the ongoing operations of Seller or any of its Subsidiaries or (B) involve any
binding commitment by or cost to Seller or any of its Subsidiaries which commitment or cost is not
conditioned on the Call Closing and does not terminate without liability to Seller or any of its
Subsidiaries upon the termination of this Agreement.




     4.14 Confidentiality. From and after the Call Closing Seller agrees to, and shall
cause its agents, representatives, Affiliates, employees, officers and directors to treat and hold
as confidential (and not disclose or provide access to any Person to) all material confidential or
proprietary information with respect to the EPE Business and each EPE Entity, except as required by
applicable Law, provided, however, that this Section 4.14 shall not apply to any information that,
at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement
by Seller, its agents, representatives, Affiliates, employees, officers or directors.



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     4.15 Tax Matters.



          (a) Taxes. Seller shall pay, or shall cause to be paid, when due, and shall hold
Buyer and EPE Holdco harmless against, all Taxes imposed on or assessed against EPE Holdco or its
Subsidiaries with respect to any taxable period ending on or prior to the Closing Date
(“Pre-Closing Period”). In the case of any Taxes imposed on or assessed against EPE Holdco
or its Subsidiaries with respect to a period that begins before and ends after the Closing Date (a
“Straddle Period”), the amount of any Taxes based on or measured by income or receipts of
EPE Holdco or its Subsidiaries, as applicable, for the Pre-Closing Period shall be determined based
on an interim closing of the books as of the close of business on the Closing Date, and any other
Taxes for a Straddle Period that relates to the Pre-Closing Period shall be deemed to be the amount
of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the
number of days in the taxable period ending on the Closing Date and the denominator of which is the
number of days in such Straddle Period.




          (b) Transfer Taxes. EPE Holdco shall prepare or cause to be prepared, and shall file
or shall cause to be filed, all necessary Tax Returns and other documentation with respect to all
sales, use, transfer, real property transfer, recording, gains, stock transfer, and other similar
Taxes and fees including any filing and recording fees (“Transfer Taxes”) arising from the
transactions contemplated in this Agreement. If required by applicable Tax Law or requested by
Buyer, Seller shall join in the execution of any such Tax Returns and other documentation so long
as they are reasonably acceptable to Seller. Seller and Buyer shall equally pay all Transfer Taxes
resulting solely from Buyer’s purchase of the Presley Interests pursuant to this Agreement;
provided, however, that in the event an Election is made, any increase in Transfer
Taxes shall be computed under Section 4.15(d).




          (c) Cooperation on Tax Matters.




               (i) EPE Holdco shall control any contest of Taxes relating to EPE Holdco or its Subsidiaries
after the Closing Date, whether such contest relates to Taxes attributable to Pre-Closing Periods;
provided that Seller shall be permitted to (and, upon Seller’s request at its sole discretion, The
Promenade Trust, a grantor trust created under the laws of Tennessee (the “Trust”), shall
also be permitted to jointly) contest the validity, applicability and amount of the imposition of
any Tax or proposed adjustment to Taxes with respect to any Pre-Closing Period with respect to
which Seller would be obligated to indemnify; provided , however, that Seller (and the Trust, if
applicable) shall have no right to direct EPE Holdco in connection with, or to control any contest,
if EPE Holdco waives in writing its right to indemnification hereunder or with respect to issues
with respect to which Seller is not obligated to indemnify. Seller shall be permitted to (and,
upon Seller’s request at its sole discretion, the Trust shall also be permitted to jointly) control
any audit or proceeding that is solely with respect to any Pre-Closing Periods; provided that
Seller (and the Trust, if applicable) shall permit EPE Holdco to participate fully in all
negotiations, consultations and other meetings with the applicable tax authorities and shall
provide EPE Holdco with all correspondence relating to such contest, and will otherwise consult in
good faith during the course of such contest and Seller (and the Trust, if applicable) shall not
agree to any resolution or settlement of a contest that would result in an increase of EPE Holdco’s
liability for Taxes with respect to which Seller is not indemnifying EPE Holdco without EPE
Holdco’s consent, not to be unreasonably withheld,



35









 







conditioned or delayed. Seller may agree to a resolution or settlement of a contest, without
EPE Holdco’s consent, if such resolution does not result in an increase of EPE Holdco’s liability
for Taxes with respect to which Seller is not indemnifying EPE Holdco. Either party can settle its
years without the consent of the other party, unless such settlement results in an increase in
Taxes for the years not subject to indemnification. In the event of an audit or proceeding which
covers both a Pre-Closing Period and a taxable period ending after the Closing Date, the Parties
shall use good faith efforts to have the audit or proceeding bifurcated. If the audit or
proceeding cannot be bifurcated into two separate audits or proceedings, EPE Holdco will control
the contest but will upon receipt of a written request of Seller (or the Trust, if applicable),
retain an independent accounting firm (not regularly retained by EPE Holdco) to coordinate the
pursuit of such contest under the direction of EPE Holdco’s Board of Directors and officers. EPE
Holdco will direct such independent accounting firm to cooperate with Seller (and the Trust, if
applicable) and provide Seller (and the Trust, if applicable) with the same access to personnel
participating in the audit as EPE Holdco. EPE Holdco will permit Seller (and the Trust, if
applicable) to participate fully in all negotiations, consultations and other meetings with the
applicable tax authorities. EPE Holdco will, and will request independent accounting firm to, act
reasonably and in good faith in connection with the pursuit of such contest and the negotiation of
any settlement or compromise, taking into account the interests of Seller in the years in which
Seller may ultimately be liable to indemnify for the Taxes that are the subject of such contest as
well as the interests of EPE Holdco for the years in which EPE Holdco will ultimately be liable to
indemnify for the Taxes that are the subject of such contest. In the event EPE Holdco reaches a
settlement with the taxing authority or receives a notice of determination (or other similar
notice) which it does not wish to contest for any year for which Seller would have an obligation to
indemnify EPE Holdco, Seller (and the Trust, if applicable) shall have the opportunity to reject
such settlement or contest such notice and take control of the contest, provided that Seller (and
the Trust, if applicable) will assume all costs of the contest including the payment of Taxes for
years in which Seller would not otherwise be obligated to indemnify EPE Holdco to the extent such
Taxes exceed the amount of Taxes for such periods under the proposed settlement agreement or
notice. In the event a notice of determination (or other similar notice) is received, and Seller
does not wish to contest the deficiency for the Pre-Closing Periods, then if EPE Holdco contests
such determination, EPE Holdco shall indemnify Seller for any increase in Taxes for the Pre-Closing
Periods above the amount of Taxes set forth in the notice.



               (ii) Both parties agree to provide the other Parties hereto with notice of any audit or
proceeding with respect to Taxes which are the responsibility of such other Parties hereunder.
After receiving notice, the Indemnifying Party shall provide the notification required pursuant to
Section 7.4(a). Such cooperation shall be at the expense of the Party requesting such cooperation.
Such cooperation shall include (x) the retention of all books and records with respect to Tax
matters pertinent to EPE Holdco and its Subsidiaries in their possession until the expiration of
the statute of limitations including extensions thereof, and compliance with all record retention
agreements entered into with any taxing authority, (y) the provision (upon the other Party’s
request) of records and information that are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder and the taking of such
actions as Seller reasonably requests to contest, and (z) the provision to the other party
reasonable written notice prior to transferring, destroying or discarding any such books and
records and, if such other party so request, Buyer, EPE Holdco



36









 




and its Subsidiaries, or Seller, as the case may be, shall allow such other party to take
possession of such books and records.




               (iii) If Buyer, EPE Holdco or any of its Subsidiaries receive a refund of any Taxes for any
Pre-Closing Period, it shall make a payment in such amount to Seller within thirty (30) days
following receipt of such refund; provided that Seller, upon the request of such Buyer, EPE Holdco
or Subsidiary, agrees to repay the amount paid over to Seller (plus any penalties, interest or
other charges imposed by the relevant Governmental Entity) to such Buyer, EPE Holdco or Subsidiary
in the event such Buyer, EPE Holdco or Subsidiary is required to repay such refund to such
Governmental Entity. Seller shall bear any costs actually incurred and associated with returning
any such refund to a Governmental Entity. Neither EPE Holdco nor any of its Subsidiaries is
obligated to file a refund claim after the Closing on behalf of Seller.



          (d) Certain Tax Indemnity Provisions.




               (i) Additional Taxes Arising From Elections.



                    (A) If Buyer makes any Election pursuant to Section 1.5, then, in order that the aggregate
liability for Taxes to be incurred by Seller with respect to the transactions contemplated hereby
not exceed by $10,000,000 the aggregate liability for Taxes that would be incurred by Seller if
Buyer did not make any Elections, Buyer shall indemnify and hold harmless Seller against
“Additional Seller Taxes” and “Additional Company Taxes” (each as defined below) in excess of, in
the aggregate, $10,000,000 and Seller shall be responsible for the first $10,000,000 of aggregate
Additional Seller Taxes and Additional Company Taxes; provided that Buyer shall not be responsible
for any Taxes resulting from the recognition by Seller of any deferred intercompany gain under
Treasury Regulations Section 1.1502-13(d) unless EPE Holdco or any of its Subsidiaries has
obtained, and has not transferred to Seller or any of its Affiliates other than EPE Holdco and its
Subsidiaries, the economic benefits that gave rise to such deferred intercompany gain incurred in
the ordinary course of business. Seller and Buyer shall make every effort to reach a final
determination of the Additional Seller Taxes and Additional Company Taxes prior to the Call
Closing. If the aggregate Additional Seller Taxes and Additional Company Taxes exceed $10,000,000,
the excess amount (the “Excess Taxes”) shall be payable by Buyer to Seller at Call Closing,
subject to the provisions contained in Section 4.15(d)(i)(C). Buyer shall indemnify Seller on an
after-tax basis for all additional expenses incurred by Seller as a result of the Elections
(including, but not limited to, Tax Return preparation fees and the filing of amended Tax Returns).
For purposes of this Agreement, “Additional Seller Taxes” shall mean the sum of (I) the
excess of (w) the Taxes that are actually payable by Seller as a result of the transactions
contemplated hereby over (x) the Taxes that would be payable by Seller if there were no Elections
(taking into account the allocation of Transfer Tax risk under Section 4.15(b)) and (II) any Tax
liability incurred by Seller as a result of the receipt of (or entitlement to receive) a payment
pursuant to this Section 4.15(d)(i), and “Additional Company Taxes” shall mean the sum of
(I) the excess of (w) the Taxes that are actually payable by EPE Holdco and its Subsidiaries as a
result of the transactions contemplated hereby over (x) the Taxes that would be payable by EPE
Holdco and its Subsidiaries if there were no Elections, and (II) any Tax liability incurred by EPE
Holdco and its Subsidiaries as a result of the receipt (or entitlement to receive) a payment
pursuant to this Section 4.15(d)(i), to the extent not included in Additional Seller Taxes.



37









 





                    (B) Promptly after the earlier of the delivery of the Election Notice or Call Closing, Seller
and Buyer shall mutually select an acceptable nationally recognized independent accounting firm to
determine the Price Allocation. Within 10 Business Days of the completion and delivery to Buyer
and Seller of the Price Allocation, Seller shall provide to Buyer for its review Seller’s
determination of the Additional Seller Taxes and Additional Company Taxes, together with reasonable
detailed supporting calculations (collectively, the “Tax Calculations”). If Buyer has any
objections to the Tax Calculations, it shall deliver to Seller a reasonably detailed statement
describing its objections and the reasons and support therefor within 10 Business Days after
receipt of the Tax Calculations. If and to the extent Buyer fails to deliver its statement of
objections to Seller within such 10-day period, Buyer shall be deemed to have accepted the Tax
Calculations (in their entirety or to such extent, as applicable). Buyer and Seller shall use
reasonable good faith efforts to resolve any written objections raised by Buyer. If Seller and
Buyer are unable to resolve all disputed matters within 10 Business Days after Seller’s receipt of
Buyer’s statement of objections, Seller and Buyer shall mutually select an acceptable nationally
recognized independent accounting firm to resolve any remaining objections. Buyer and Seller shall
direct the independent accounting firm to render a resolution of all such disputed matters within
30 days after its engagement or such other period agreed upon by Buyer and Seller. Subject to the
adjustment as provided in Section 4.15(d)(i)(D), the resolution of such disputed matters by the
independent accounting firm shall be set forth in a written statement delivered to Buyer and Seller
and shall be final, binding, conclusive and non-appealable for all purposes hereunder. All of the
costs and expenses in connection with the determination pursuant to this Section 4.15(d)(i)(B)
shall be borne by Buyer.



                    (C) If at Call Closing the Excess Taxes have not been finally determined in accordance with
this Section 4.15(d)(i), the payment at Call Closing will be based upon the most recent Estimated
Excess Taxes calculation prepared by Seller pursuant to Section 1.5; provided that,
if the Price Allocation has been completed and delivered to Buyer and Seller pursuant to Section
4.15(d)(i)(B) prior to the Call Closing date, the Estimated Excess Taxes payable at Call Closing
shall be determined based on such Price Allocation. Any difference between the final Excess Taxes
and such Estimated Excess Taxes shall be paid to the appropriate party no later than 10 Business
Days after either (i) the expiration of the 10-day period within which Buyer must deliver to Seller
its statement of objections, if Buyer fails to deliver such statement within such period, or (ii)
Buyer’s receipt of the independent accounting firm’s determination of the Additional Seller Taxes
and Additional Company Taxes.



                    (D) In the event that the amount of Taxes determined by a taxing authority to be payable by
Seller or EPE Holdco or its Subsidiaries as a result of the transactions contemplated hereby
exceeds the amount of Taxes determined by Seller or the independent accounting firm with respect to
the jurisdiction of such taxing authority in computing Additional Seller Taxes or Additional
Company Taxes, the Tax Calculations shall be adjusted by taking into account such amount of Taxes
determined by the taxing authority provided that Seller shall give Buyer a written notice together
with a copy of such determination of the taxing authority within 20 Business Days of the receipt by
Seller of such determination of the taxing authority, and Buyer shall pay any additional amount to
Seller as a result of such adjustment within 20 Business Days of its receipt of such written notice
from Seller.



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               (ii) Tax Benefit Offsets. If (w) Seller is required to indemnify Buyer, EPE Holdco or
its Subsidiaries with respect to a claim for Taxes, (x) Seller is itself indemnified for such claim
in connection with Seller’s acquisition of EPE Inc. and EPE LLC, (y) the indemnity to which Seller
is entitled is determined after taking into account any tax benefits realized by Seller in
connection with receipt of such indemnity, and (z) Buyer, EPE Holdco or its Subsidiaries realize a
tax benefit in connection with the receipt of such indemnity, then Seller’s indemnity shall be
reduced by the lesser of (i) the reduction in the indemnity payment received by Seller as a result
of such tax benefit, or (ii) the net tax benefit realized by Buyer, EPE Holdco or its Subsidiaries
in connection with the receipt of the indemnity from Seller.



               (iii) Treatment of Indemnity Payments. For all Tax purposes, Seller and Buyer agree
to treat, except as required by applicable Law, any indemnity payment made pursuant to this Section
4.15(d) or Article VII as an adjustment to the Purchase Price.



          (e) Tax Returns.




               (i) To the extent allowable by law, Seller shall prepare, file and include the income of EPE
Holdco and its Subsidiaries (including any deferred items includible in income pursuant to Treasury
Regulation Section 1.1502-13 and any excess loss account includible in income pursuant to
Regulation Section 1.1502-19) on Seller’s consolidated federal income Tax Return, any combined or
unitary state and local Tax Returns, for all periods through the end of the Closing Date.



               (ii) Seller shall prepare, file (or, if necessary, submit to Buyer for filing) and include the
income of EPE Holdco and its Subsidiaries on all Tax Returns of EPE Holdco and its Subsidiaries not
described in subsection (i) for all periods ended on or prior to the Closing Date.



               (iii) Buyer shall prepare, file and include the income of EPE Holdco and its Subsidiaries on
all Tax Returns of EPE Holdco and its Subsidiaries for all periods ending after the Closing Date,
including Straddle Returns; provided that, subject to the cooperation requirements set
forth in Section 4.15(c), Buyer shall (I) provide Seller with a copy of any Straddle Returns at
least ten days prior to the filing thereof and shall permit Seller to review and comment on such
Tax Returns and (II) shall have good faith discussions with Seller (and, if requested, Buyer’s
independent public accountants) with respect to any such comments. Buyer shall pay any Taxes
reflected on such Tax Returns, except to the extent that such Taxes are the responsibility of
Seller pursuant to the Straddle Return provisions.



               (iv) Buyer shall not file any amended Tax Returns for EPE Holdco or any of its Subsidiaries
for any Pre-Closing Period without the reasonable consent of Seller, unless required to by
applicable Law.



     4.16 Related Party Transactions. Seller and it subsidiaries shall not enter into any
agreements or arrangements with their Affiliates which agreements or arrangements either comprise
part of the EP Business or to which any EPE Entities are party, unless entered into on arms’ length
terms and for commercially reasonable purposes of the EPE Entities.



39









 





     4.17 Seller’s Actions. Buyer acknowledges that an action or failure to act on the
part of Seller shall not be deemed to have breached any representation or warranty of Seller
contained in this Agreement to the extent expressly and specifically required by a covenant of
Seller hereunder.



ARTICLE V.

TERMINATION




     5.1 Expiry Date. Subject to extension as provided in Section 1.1(c), the Call Right
granted under this Agreement, if not validly exercised, shall expire on the sixtieth (60th) day
following the sixth anniversary date of the Effective Time.



     5.2 Termination. This Agreement may be terminated at any point prior to the earlier
of the Expiry Date and the Closing Date (if any):



          (a) by mutual written consent of Buyer and Seller;




          (b) by Seller (if it is not in material breach of its representations, warranties, covenants
and obligations under this Agreement so as to cause any of the conditions set forth in Section
6.2(a) or 6.2(b) not to be satisfied) if Buyer fails to make any Annual Option Payment to Seller
when due and such failure has not been cured by Buyer within thirty (30) days after its receipt of
written notice thereof and remains uncured at the time notice of termination is given subject to
Section 1.2(b); or




          (c) by Buyer (if it is not in material breach of its representations, warranties, covenants
and obligations under this Agreement so as to cause any of the conditions set forth in Section
6.3(a) or 6.3(b) not to be satisfied) if: (i) (A) any of Seller’s representations and warranties
set forth in Sections 2.1, 2.2 or 2.3 shall have been inaccurate as of any applicable Bring-Down
Date other than the Effective Date (not taking into account any Bring-Down Disclosure that would
cure such inaccuracy, provided that Buyer has delivered notice of breach of such
representation or warranty within 10 days after delivery of such Bring-Down Disclosure to Buyer)
such that, if the Call Closing were to occur on the date Buyer delivers notice of such breach to
Seller, the condition set forth in Section 6.2(a) would not be satisfied and such breach has not
been cured by Seller within sixty (60) days after its receipt of written notice thereof and remains
uncured at the time notice of termination is given or (B) any of Seller’s representations and
warranties set forth in Sections 2.1 shall have been inaccurate as of the date hereof, or (C) any
of Seller’s representations and warranties set forth in Sections 2.2 or 2.3 shall have been
inaccurate as of the Effective Date or, solely with respect to the representations and warranties
in Section 2.2(c)(ii), 2.2(c)(iii) or 2.2(c)(iv), as of the date hereof; (ii) any of Seller’s
covenants contained in this Agreement shall have been breached, such that, if the Call Closing were
to occur on the date Buyer delivers notice of such breach to Seller, the condition set forth in
Section 6.2(b) would not be satisfied, and such breach has not been cured by Seller within sixty
(60) days after its receipt of written notice thereof and remains uncured at the time notice of
termination is given; (iii) any event or events have occurred which, individually or in the
aggregate, have, or would reasonably be expected to have, a Seller Material Adverse Effect; or (iv)
the Merger Agreement is terminated. Notwithstanding anything to the contrary set forth herein,
Buyer shall not have the right to terminate this Agreement under clause (i)(A) of this



40









 






subsection (c) by virtue of Seller’s breach of any representation and warranty set forth in
Section 2.2(l)(Environmental Matters) unless any such environmental liability or condition that
resulted in any such breach was caused by Seller or its Affiliates on or after the date of this
Agreement.




          (d) by Buyer, if the Lenders’ Consent has not been obtained prior to the Effective Time.




          (e) by Seller, if at any time the Buyer is Bankrupt.




          (f) by Buyer, if at any time the Seller is Bankrupt.




     5.3 Effect of Termination.



          (a) In the event of the termination of this Agreement, this Agreement shall be of no further
force and effect; provided, however, this Section 5.3 and Article VIII shall
survive the termination of this Agreement and shall remain in full force and effect.




          (b) (i) If this Agreement is validly terminated by Buyer pursuant to Section 5.2(c)(i)(B) or
(C) or Section 5.2(c)(ii), then Buyer’s obligation to make Annual Option Payments shall terminate
and Seller shall refund to Buyer all Annual Option Payments previously made to Seller, and (ii) if
this Agreement is validly terminated by Buyer pursuant to Section 5.2(c)(i)(A) or Section
5.2(c)(iii) or Section 5.2(f), then Buyer’s obligation to make Annual Option Payments shall
terminate and Seller shall refund to Buyer all Annual Option Payments to Seller made after the date
of such occurrence, change or event that constituted such breach or such Seller Material Adverse
Effect.




          (c) If this Agreement is validly terminated by Seller pursuant to Section 5.2(b) or 5.2(e),
then Buyer shall promptly pay to Seller an amount equal to $105 million less any Annual Option
Payments previously made by Buyer to Seller.




ARTICLE VI.

CLOSING CONDITIONS




     6.1 Conditions to Each Party’s Obligations Upon Exercise of the Call Right. The
obligation of Buyer to pay the Purchase Price to acquire the Presley Interests and otherwise
consummate the transactions contemplated hereby in connection with the exercise of the Call Right,
and the obligation of Seller to transfer the Presley Interests to Buyer and otherwise consummate
the transactions contemplated hereby in connection with the exercise of the Call Right, shall be
subject to the satisfaction of the following conditions precedent on and as of the Closing Date:



          (a) No Restraints. No preliminary or permanent injunction or other Order shall have
been issued that would make unlawful the consummation of the transactions contemplated by this
Agreement, and the consummation of the transactions contemplated by this Agreement shall not be
prohibited or made illegal by any Law.




     6.2 Conditions to Buyer’s Obligations Upon Exercise of the Call Right. The obligation
of Buyer to pay the Purchase Price to acquire the Presley Interests and otherwise



41









 







consummate the transactions contemplated hereby in connection with the exercise of the Call
Right shall be subject to the satisfaction or waiver by Buyer of the following conditions precedent
on and as of the Closing Date:



          (a) Representations and Warranties of Seller. Each of the representations and
warranties of Seller contained this Agreement that is qualified as to materiality or by Seller
Material Adverse Effect or words of similar meaning, shall be true and correct, and those not so
qualified shall be true and correct in all material respects, as of each date when made and as of
the Closing Date, except to the extent such representations and warranties expressly relate to a
specified date, in which case such representations and warranties qualified as to materiality or by
Seller Material Adverse Effect or words of similar meaning shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on and as of such specified date.




          (b) Obligations and Covenants of Seller. Seller shall have performed in all material
respects all obligations and agreements and complied in all material respects with all covenants
and conditions required by this Agreement to be performed by or complied with by it prior to or at
the Call Closing.




          (c) Consents. All material consents and approvals of, and all filings and
registrations with, governmental authorities and other third parties required in connection with
the consummation of the transactions contemplated by this Agreement shall have been obtained or
made by or on behalf of Seller.




          (d) Absence of Indebtedness. None of the EPE Entities shall have any outstanding
Indebtedness as of the Closing Date or, alternatively, to the extent the EPE Entities do have
outstanding Indebtedness as of the Closing Date, the applicable Purchase Price shall have been
reduced by the amount of any such Indebtedness in accordance with Section 1.3(c) hereof.




          (e) No Seller Material Adverse Effect. No event or events shall have occurred, or be
reasonably likely to occur, since the date of the most recent consolidated balance sheet included
in the Financial Statements or delivered to Buyer pursuant to Section 4.1 which, individually or in
the aggregate, have, or would reasonably be expected to have, a Seller Material Adverse Effect.




          (f) Certificate. Buyer shall have received a certificate, dated as of the Closing
Date, executed by an executive officer of Seller confirming that the conditions set forth in
Sections 6.2(a) and (b) shall have been duly satisfied.




     6.3 Conditions to Seller’s Obligations Upon Exercise of the Call Right. The
obligation of Seller to transfer the Presley Interests to Buyer and otherwise consummate the
transactions contemplated hereby in connection with the exercise of the Call Right shall be subject
to the satisfaction or waiver by Seller of the following conditions precedent on and as of the
Closing Date:



          (a) Representations and Warranties of Buyer. Each of the representations and
warranties of Buyer contained this Agreement that is qualified as to





42












 




materiality, shall be true and correct, and those not so qualified shall be true and correct
in all material respects, as of each date when made and as of the Closing Date, except to the
extent such representations and warranties expressly relate to a specified date, in which case such
representations and warranties qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on and as of such specified date.




          (b) Obligations and Covenants of Buyer. Buyer shall have performed in all material
respects all obligations and agreements and complied in all material respects with all covenants
and conditions required by this Agreement to be performed by or complied with by it prior to or at
the Call Closing.




          (c) Consents. All material consents and approvals of, and all filings and
registrations with, governmental authorities and other third parties required in connection with
the consummation of the transactions contemplated by this Agreement shall have been obtained or
made by or on behalf of Buyer.




          (d) Compliance with Contribution and Exchange Agreement. Buyer shall have
acknowledged in writing its agreement to comply with Sections 6.3(d), 6.4, 6.9 and 6.16 of the
Contribution and Exchange Agreement, dated December 15, 2004, between the Promenade Trust, RFX
Acquisition LLC and Sports Entertainment Enterprises, Inc.




          (e) Certificate. Seller shall have received a certificate, dated as of the Closing
Date, executed by an executive officer of Buyer confirming that the conditions set forth in
Sections 6.3(a) and (b) shall have been duly satisfied.




ARTICLE VII.

INDEMNIFICATION




     7.1 Survival. The representations and warranties of the parties contained in this
Agreement shall survive until the earlier to occur of (x) 90 days following the completion of the
audit of Buyer’s consolidated financial statements for the fiscal year in which the Call Closing
occurs and (y) 24 months following the Call Closing (the “Indemnification Period”), except
for the representations and warranties contained in (i) Sections 2.2(a), 2.2(b)(iii), 2.2(b)(iv)
and 2.2(b)(v), which shall survive the Call Closing indefinitely, and (ii) Sections 2.2(h) and
2.3(a) which shall survive the Call Closing to the end of the applicable statute of limitations
(including any extension thereof), except that with respect to representations and warranties
relating to EPE Inc. or its Subsidiaries or EPE LLC for any period prior to February 7, 2005,
Section 2.2(h) shall survive the Call Closing only to the end of the applicable statute of
limitations (or voluntary extension thereof) (such representations and warranties identified in
clauses (i) and (ii) of this Section 7.1, the “Fundamental Representations”).



     7.2 Indemnification of Buyer. Subject to the terms and conditions of this Article
VII, from and after the Call Closing, provided that Buyer delivers a Claim Notice (as defined
below) to Seller prior to the expiration of the applicable Indemnification Period, Seller will
indemnify, defend and hold harmless Buyer, its Affiliates and their respective directors, officers,
representatives and employees (collectively, the “Buyer Indemnified Parties”) from and
against any and all Losses (as defined herein) incurred or suffered by the Buyer Indemnified



43









 




Parties that result from, or that exist or arise due to (i) any inaccuracy in, breach or
alleged breach of any representation or warranty of Seller set forth in Article II of this
Agreement, the Seller Disclosure Schedule, or any other document, certificate, schedule or
instrument delivered or executed in connection herewith and (ii) any breach by Seller of any
covenant or obligation contained herein (collectively, “Buyer Claims”).




     7.3 Indemnification of Seller. Subject to the terms and conditions of this Article
VII, from and after the Call Closing, provided that Seller delivers a Claim Notice (as defined
below) to Buyer prior to the expiration of the Indemnification Period, Buyer will indemnify, defend
and hold harmless Seller, its Affiliates and their respective directors, officers, representatives
and employees (collectively, the “Seller Indemnified Parties”) from and against any and all
Losses incurred or suffered by the Seller Indemnified Parties that result from, or that exist or
arise due to (i) any inaccuracy in, breach or alleged breach of any representation or warranty of
Buyer set forth in Article III of this Agreement or any other document, certificate, schedule or
instrument delivered or executed in connection herewith and (ii) any breach by Buyer of any
covenant or obligation contained herein (collectively, “Seller Claims”).



     7.4 Procedures for Indemnification.



          (a) Promptly following receipt by a Buyer Indemnified Party or a Seller Indemnified Party, as
the case may be (each, an “Indemnified Party”), of notice by a third party (including any
Governmental Entity) of any complaint, dispute or claim or the commencement of any audit,
investigation, action or proceeding with respect to which such Indemnified Party may be entitled to
indemnification pursuant hereto, such Indemnified Party shall provide written notice thereof to the
party obligated to indemnify under this Agreement (the “Indemnifying Party”);
provided, however, that the failure to so notify the Indemnifying Party shall
relieve the Indemnifying Party from liability hereunder with respect to such claim only if, and
only to the extent that, such failure to so notify the Indemnifying Party results in the forfeiture
by the Indemnifying Party of rights and defenses otherwise available to the Indemnifying Party with
respect to such claim. The Indemnifying Party shall have the right, upon written notice delivered
to the Indemnified Party within twenty (20) days thereafter assuming full responsibility for any
Buyer Claims or Seller Claims (as the case may be) resulting from such audit, investigation, action
or proceeding, to assume the defense of such audit, investigation, action or proceeding, including
the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of
reasonable and documented fees and disbursements of such counsel. In the event, however, that the
Indemnifying Party declines or fails to assume the defense of the audit, investigation, action or
proceeding on the terms provided above or to employ counsel reasonably satisfactory to the
Indemnified Party, in either case within such 20 day period, then any Buyer Claims or Seller Claims
(as the case may be), shall include the reasonable fees and disbursements of counsel for the
Indemnified Party as incurred. In any audit, investigation, action or proceeding for which
indemnification is being sought hereunder the Indemnified Party or the Indemnifying Party,
whichever is not assuming the defense of such action, shall have the right to participate in such
matter and to retain its own counsel at such party’s own expense. The Indemnifying Party or the
Indemnified Party (as the case may be) shall at all times use reasonable efforts to keep the
Indemnifying Party or Indemnified Party (as the case may be) reasonably apprised of the status of
the defense of any matter the defense of



44









 






which it is maintaining and to cooperate in good faith with each other with respect to the
defense of any such matter.




          (b) No Indemnified Party may settle or compromise any claim or consent to the entry of any
judgment with respect to which indemnification is being sought hereunder without the prior written
consent of the Indemnifying Party (which may not be unreasonably withheld or delayed), unless (i)
the Indemnifying Party fails to assume and maintain the defense of such claim pursuant to Section
7.4(a) or (ii) such settlement, compromise or consent includes an unconditional release of the
Indemnifying Party and its officers, directors, employees and Affiliates from all liability arising
out of, or related to, such claim. An Indemnifying Party may not, without the prior written
consent of the Indemnified Party, settle or compromise any claim or consent to the entry of any
judgment with respect to which indemnification is being sought hereunder unless such settlement,
compromise or consent (x) includes an unconditional release of the Indemnified Party and its
officers, directors, employees and Affiliates from all liability arising out of, or related to,
such claim, (y) does not contain any admission or statement suggesting any wrongdoing or liability
on behalf of the Indemnified Party and (z) does not contain any equitable order, judgment or term
that in any manner affects, restrains or interferes with the business of the Indemnified Party or
any of the Indemnified Party’s Affiliates.




          (c) In the event an Indemnified Party claims a right to payment pursuant hereto with respect
to any matter not involving a third party complaint, dispute or claim, such Indemnified Party shall
send written notice of such claim to the appropriate Indemnifying Party (a “Claim Notice”).
Such Claim Notice shall specify the basis for such claim. The failure by any Indemnified Party so
to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability that
it may have to such Indemnified Party with respect to any claim made pursuant to this Section
7.4(c).




     7.5 Limitations on Indemnification.



          (a) The total aggregate amount of any Seller indemnification obligations under Section 7.2(i)
may not exceed 25% of the sum of the applicable Purchase Price paid by Buyer at the Call Closing
plus the aggregate amount of all Annual Option Payments paid by Buyer in cash hereunder (including
any payments of principal under any Promissory Note). The limitations set forth in this Section
7.5(a) shall not apply to breaches of the Fundamental Representations and the representations
contained in the second and third sentences of Sections 2.1(a) and the second sentence of
2.2(b)(i), in each case, subject to the limitations on survival, if any, set forth in Section 7.1.




          (b) The amount of damages required to be paid by any party to indemnify any other party
pursuant to this Article VII pursuant to any Buyer Claims or Seller Claims hereunder shall be
reduced (i) to the extent of any amounts actually received by such other party pursuant to the
terms of any insurance policies covering such Buyer Claim or Seller Claim, as the case may be, and
(ii) by the amount of any net tax benefit actually realized by the Indemnified Party arising from
the occurrence or payment of any such damages in the taxable year in which such damages are
incurred.




45









 








          (c) Seller makes no other representations or warranties to Buyer Indemnified Parties in
respect of the transactions contemplated hereby, including by the prior delivery of any
information, documents, projections, forecasts, business plans or other material provided or made
available in any “data room,” any confidential information memoranda or any management
presentations in expectation of the transactions contemplated by this Agreement, except as
expressly set forth in a representation or warranty contained in Article II.




          (d) If this Agreement is terminated by either party as a result of the willful failure of the
other party to fulfill a condition to the performance of the obligations of another party set forth
in Article VI hereto, or to perform a covenant or agreement of this Agreement, or from a willful
breach of any representation or warranty set forth in Article II and Article III hereto, such party
shall be fully liable for any and all Buyer Claims or Seller Claims, as the case may be, incurred
or suffered by the other party as a result of such breach.




          (e) Each of Buyer and Seller acknowledge that, except for Buyer Claims and Seller Claims based
on fraud or otherwise seeking an equitable remedy, the remedies provided in this Article VII shall
be the exclusive remedy for damages (whether at law or in equity) as a result of or relating to
Buyer Claims and Seller Claims.




          (f) Notwithstanding anything in this Article VII to the contrary, with respect to any claim of
or involving fraud or intentional misrepresentation, neither a party’s good faith judgment as to
whether a matter meets a “materiality” or Seller Material Adverse Effect threshold, as the case may
be, under a representation or warranty qualified by materiality, Seller Material Adverse Effect,
nor a party’s good faith estimates and assumptions used in preparation of financial statements
shall be considered fraud or intentional misrepresentation for purposes of this Agreement unless
manifestly and materially unreasonable. Also, for purposes of this Agreement, no party shall make
a claim for fraud or intentional misrepresentation unless such party, at the time the claim is
made, can demonstrate by citing specific facts that the party making the representation or warranty
in question had actual knowledge that the representation or warranty was false at the time it was
made; claims for fraud or intentional misrepresentation based on general allegations that are not
supported by specific facts cited by the claiming party when the claim is made shall not be
permitted.




ARTICLE VIII.

MISCELLANEOUS




     8.1 Press Releases; Confidentiality. Except to the extent required by applicable law
or legal process or applicable rules of a stock exchange or national market system, each of Buyer
and Seller agree that it will not issue any press release, advertisement or other public
announcement with respect to this Agreement or the transactions contemplated hereby without the
prior written consent of the parties hereto, which consent may be granted or withheld in the sole
discretion of the other party. The parties agree that this Agreement and the terms contained
herein shall be kept confidential by the parties and their Affiliates and agents except to the
extent disclosure is required by applicable law or legal process or applicable rules of a stock
exchange or national market system, in which event the disclosing party shall promptly notify the
other party of the requirement and the terms thereof prior to submission and the disclosing




46












 




party shall cooperate to the maximum extent reasonably practicable to prevent or minimize the
disclosure of such confidential information.




          8.2
Amendments and Waivers. No amendment or waiver of any provision of this Agreement
shall be effective with respect to any party unless made in writing and signed by such party.
Waiver by any party of any breach or failure to comply with any provision of this Agreement by any
other party shall not be construed as, or constitute, a continuing waiver of such provision, or a
waiver of any other breach of or failure to comply with any other provisions of this Agreement.




          8.3
Assignability. Neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by Seller. Buyer may assign its rights,
interests and obligations hereunder, provided that in any event Buyer shall remain liable for all
of its obligations hereunder.




          8.4
Entire Agreement. This Agreement, the Exhibits and Schedules hereto constitute the
entire agreement among the parties relating to the subject matter hereof and supersede any and all
prior agreements or understandings with respect to the subject matter hereof.




          8.5
Notices. All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered in person, by
overnight courier or facsimile to the respective parties as follows:



If to Buyer:



FX Real Estate and Entertainment, Inc.

650 Madison Avenue

16th Floor

New York, New York 10022

Facsimile:       212-750-3034



Attention:      Mitchell Nelson, Esq.



If to Seller:



19X, Inc.

650 Madison Avenue

15th Floor

New York, New York 10022

Facsimile:      212-832-5121



Attention:       Robert F.X. Sillerman




47









 





With a copy to:



Paul, Hasting, Janofsky & Walker LLP

75 East 55th Street

New York, New York 10022

Facsimile:      212-319-4090



Attention:      William F. Schwitter, Esq.



Luke P. Iovine, III, Esq.



or to such other address or facsimile number as such party shall have specified in a written notice
given to the other party hereto in the manner set forth above.




          8.6
Specific Performance. Each party hereto acknowledges and agrees that the other party
may be irreparably damaged if any provision of this Agreement is not performed in accordance with
its terms or otherwise is breached. Accordingly, each party agrees that the other party shall be
entitled to obtain injunctive relief, subject to a determination by a court of competent
jurisdiction, to prevent any such failure of performance or breach and to enforce specifically this
Agreement and any of the terms and provisions hereof.




          8.7
Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard for principles of
conflict of laws. Buyer and Seller irrevocably consent to the exclusive jurisdiction of the
Federal and state courts, located in New York County, New York, in any suit or proceeding based on
or arising under this Agreement and irrevocably agree that all claims in respect of such suit or
proceeding shall be determined in such courts. Buyer and Seller irrevocably waive the defense of
an inconvenient forum to the maintenance of such suit or proceeding. Service of process on Buyer
or Seller mailed by first class mail shall be deemed in every respect effective service of process
upon Buyer or Seller, as the case may be, in any such suit or proceeding. Nothing herein shall
affect the right of Buyer or Seller to serve process in any manner permitted by law.




          8.8
Waiver of Jury Trial. BUYER AND SELLER ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY OR
DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES
AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS
OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.8.




48









 








          8.9
Severability. If one or more of the provisions contained in this Agreement shall, for
any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision hereof.




          8.10
Construction.




               (a) For purposes of this Agreement, whenever the context requires the singular number shall
include the plural, and vice versa; the masculine gender shall include the feminine and neuter
genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.



               (b) The parties hereto agree that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not be applied in the construction or
interpretation of this Agreement.



               (c) As used in this Agreement, the words “include” and “including,” and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the
words “without limitation.”



               (d) Except as otherwise indicated, all references in this Agreement to “Sections” and
“Exhibits” are intended to refer to Sections of this Agreement and Exhibits to this Agreement, and
all references in this Agreement to “Parts” are intended to refer to Parts in the Seller Disclosure
Schedule. The table of contents and headings contained in this Agreement are for convenience of
reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement.



          8.11
Third Party Beneficiaries. Except as set forth in Section 8.3 and Article VII, this
Agreement is intended for the benefit of the parties hereto and their respective successors and
assigns, and is not for the benefit of, and no provision hereof may be enforced by, any other
person or entity.




          8.12
Counterparts; Execution and Delivery by Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement. This Agreement may be executed and delivered by facsimile,
with such delivery to be as effective as delivery of an originally executed counterpart hereof,
followed promptly by delivery of an originally executed counterpart.




          8.13
Disclosure Schedules. Subject to Sections 4.9 and 5.2, the representations and
warranties of Seller set forth in this Agreement are made and given subject to the disclosures
contained in the Seller Disclosure Schedule and Seller shall not be, nor shall it be deemed to be,
in breach of any such representations and warranties in connection with any such matter so
disclosed in the Seller Disclosure Schedule. The parties hereto agree that any reference in a
particular section of the Seller Disclosure Schedule shall only be deemed to be an exception to
(or, as applicable, a disclosure for purposes of) (i) the representations and warranties (or
covenants, as applicable) of Seller that are contained in the corresponding section of this
Agreement, and (ii) any other representations and warranties (or covenants, as applicable) of
Seller that are contained in this Agreement, but only if the relevance of that reference as an
exception to (or a disclosure for purposes of) such representations and warranties (or covenants,




49









 




as applicable) would be readily apparent to a reasonable person who has read that reference
and such representations and warranties (or covenants, as applicable), without any independent
knowledge on the part of the reader regarding the matter(s) so disclosed. Inclusion of information
in the Seller Disclosure Schedule will not be construed as an admission that such information is
material to the business, operations or condition (financial or otherwise) of Seller or any of the
EPE Entities, or as an admission of liability or obligation of Seller to any third party.




          8.14
Expenses. Except as expressly provided in this Agreement, each of the parties hereto
shall bear its own costs and expenses (including legal, accounting and investment banking fees and
expenses) incurred in connection with this Agreement and the transactions contemplated hereby.




[signature page follows]




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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused this Agreement
to be executed effective as of the date and year first above written.



	 	 	 	 	 
	 	19X, INC.

 	 
	 	By:  	/s/ Robert F.X. Sillerman 	 
	 	 	Name:   	Robert F.X. Sillerman	 
	 	 	Title:  	President 	 
	 
	 	FX REAL ESTATE AND ENTERTAINMENT, INC.

 	 
	 	By:  	/s/ Paul C. Kanavos 	 
	 	 	Name:  	Paul C. Kanavos	 
	 	 	Title:  	President