EXHIBIT 99.1
FIRST AMENDMENT
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TO THE ASSET PURCHASE AGREEMENT
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This First Amendment to the Asset Purchase Agreement ("First Amendment") is
made and entered into as of the 31st day of May, 2000, by and among MOVIE
TRADER, INC. ("MOVIE"), a California corporation, with its principal office
located at 0000 Xxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 ; XXXXXXX X. XXXXX ("X.
XXXXX"), an individual and 50% stockholder of MOVIE, with his principal address
at 0000 Xxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000; XXXXX XxXXXX-XXXXX ("X.
XXXXX"), an individual and 50% stockholder of MOVIE, with her principal address
at 0000 Xxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 (X. XXXXX AND X. XXXXX are
collectively referred to herein as "XXXXX"); COMPACT DISC MANAGEMENT, INC.
("CDMI"), a Delaware corporation, and CD WAREHOUSE, INC. ("CDWI"), a Delaware
corporation, with their principal offices located at 0000 Xxxxxxxxx Xxx,
Xxxxxxxx Xxxx, Xxxxxxxx 00000 (CDMI and CDWI are collectively referred to herein
as "CD"), with respect to the following facts:
A. CD, MOVIE and XXXXX are parties to an Asset Purchase Agreement dated
February 22, 1999 ("the Asset Purchase Agreement")
B. The parties hereto desire to change certain of the terms of the Asset
Purchase Agreement and other agreements among them, which are described in the
Asset Purchase Agreement and documents which are exhibits or schedules to the
Asset Purchase Agreement.
C. MOVIE and XXXXX desire to re-enter the retail used compact discs
business, terminate the current Employment Agreement between CD and X. XXXXX,
and compete with CD, subject to the certain and strict limitations described
herein.
D. CD desires to sever its relationship with MOVIE and XXXXX, terminate
its obligations with respect to X. XXXXX'x Employment Agreement, and allow XXXXX
and MOVIE to compete, subject to the certain and strict limitations described
herein.
E. In order to accomplish their desired goals, the parties have agreed to
the terms and conditions set forth in the First Amendment.
THEREFORE, incorporating the facts set forth above, the parties agree as
follows:
1. The following Agreements among the parties are, except as set forth
herein, terminated effective on the date hereof and all obligations of any party
thereunder, except with respect to obligations relating to the time up to the
date hereof and remaining obligations described herein shall cease:
(a) Employment Agreement by and between CDWI and X. Xxxxx, dated
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February 22, 1999, except as follows:
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(i) Section 4.1 shall remain in full force and effect with
respect to claims relating to events which occurred during the Employment
Period;
(ii) Section 6.4 shall remain in full force, except for
knowledge XXXXX possessed before and/or without regard to his relationship with
CD;
(iii) Section 6.5 shall remain in full force;
(iv) Section 6.6 shall remain in effect, except with respect to
employees (a) who voluntarily leave employment with CD and (b) for whom five (5)
days written consent of CD is received;
(v) Section 6.7 shall remain in effect until February 22, 2004,
only with respect to: San Diego County; a two (2) mile radius around the current
location of CD facilities located at 000 Xxxx Xxxxxx, #000, Xxxxxxxxxx Xxxxx,
Xxxxxxxxxx 00000; 0000-X, Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000; and a fifteen
(15) mile radius around 00-000 Xxxxxxx 000, Xxxxx X-0, Xxxx Xxxxxx, Xxxxxxxxxx
00000;
(vi) Section 6.8 shall remain in full force; and,
(vii) Article 8 shall remain in full force and effect only with
respect to Sections 8.2, 8.3., 8.7, 8.8 and 8.15.
(b) Indemnification Pledge Agreement. Effective on the execution of
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the First Amendment, all stock held pursuant to the Indemnification Pledge
Agreement shall be released to MOVIE and any restrictions on transferability
relating to the Indemnification Pledge Agreement shall be removed.
(c) Computer Software License Agreement by and between Compact Discs
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Management, Inc., and Movie Trader, Inc. dated February 22, 1999 including the
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right of first refusal described in Section 1.5(b) of the Asset Purchase
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Agreement.
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(d) Operating Agreement.
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(e) Supply Agreement.
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2. The Asset Purchase Agreement shall remain in full force except to the
extent it is revised as follows:
(a) Section 1.2(d) is revised to read as follows:
"(d) Assets Relating to Movie Trader Store. All of the Seller's
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assets relating to the retail business conducted at the "Movie
Trader" store located at 0000 Xxxxxx Xxxxxx, Xxx Xxxxx,
Xxxxxxxxxx (the "Movie Trader Store"), including (i) inventories
of movies, laser discs, DVDs, video
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games and cassettes; (ii) all equipment and tangible personal
property of the Movie Trader Store, including, without
limitation, furniture and leasehold improvements, rights under
the lease underlying the Movie Trader Store, and rights under any
other contracts relating to the Movie Trader Store; and (iii) all
of Seller's right, title and interest in and to the name "Movie
Trader," trademarks, patents, trade names, service marks,
copyrights, processes, trade secrets, proprietary and technical
information, know-how, other trade rights and other intangible
assets, together with all right to, and applications and licenses
for, any of the foregoing relating to such name; provided,
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however, Seller agrees that the business conducted by the Movie
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Trader Stores in the following areas shall not include the retail
purchase or sale of audio compact discs for the period ending
February 21, 2004: San Diego County; a two (2) mile radius around
the current location of CD facilities located at 000 Xxxx Xxxxxx,
#000, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000; 0000-X Xxxxx Xxxxxxx,
Xxxxxx, Xxxxxxxxxx 00000; and a fifteen (15) mile radius around
00-000 Xxxxxxx 000, Xxxxx X-0, Xxxx Xxxxxx, Xxxxxxxxxx."
(b) Section 1.2(e) is amended to read as follows:
"(e) Other Leased Space. Seller's rights under the leases
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underlying the rental space at Xxxxx'x Swap Meet, the Sport
Arena, San Diego, California, at Kobey's Market Place, Chula
Vista, California (collectively, the "Xxxxx Leases"), and any
other San Diego County Swap Meet or special event; the business
conducted by Seller at such locations may include the retail
purchase or sale of audio compact discs. X. Xxxxx shall be
permitted to perform in store promotions with artist
presentations at such locations, and such conduct or activity
shall be permitted even if it relates to the retail sale of audio
compact discs."
(c) Section 1.2(f) is revised to read as follows:
"(f) Assets Relating to the "Huge Secret" Record Label. All of
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the Seller's assets relating to the business conducted by XXXXX
under the "Huge Secret" record label (the "Record Label"),
including (i) all musical and recording equipment and other
tangible personal property relating to recordings of X. XXXXX
under such label; (ii) all of XXXXX'x and/or the Record Label's
right, title and interest in and to the name "Huge Secret,"
trademarks, patents, trade names, service marks, copyrights,
processes, trade secrets, proprietary and technical information,
know-how, other trade rights and other intangible assets,
together with all right to, and applications and licenses for,
any of the foregoing relating to such name; including XXXXX'x
and/or the Record Label's right, title and interest in audio
recordings made or to be made by X. XXXXX; provided, however,
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Seller and XXXXX agree that except for sale of compact discs and
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memorabilia at live band performances in which X. XXXXX performs,
the business conducted by the Record Label after the Closing of
the First Amendment shall not include the retail purchase or sale
of audio compact discs or be, in any way, except as specifically
permitted by the First Amendment, competitive with the business
conducted by Buyer in San Diego County or within a two (2) mile
radius of around the current location of CD facilities located at
000 Xxxx Xxxxxx, #000, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000; 0000-X
Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000; and a fifteen (15) mile
radius around 00-000 Xxxxxxx 000, Xxxxx X-0, Xxxx Xxxxxx,
Xxxxxxxxxx 00000. Seller and XXXXX agree that, with respect to
any business conducted by them under the Record Label pursuant to
this Section 1.2(f), each of them shall be bound by the
provisions hereof until February 21, 2004."
(d) The geographical limitations of Section 5.7 are limited to San
Diego County, California and a 2 mile radius around the current location of CD
facilities located at 000 Xxxx Xxxxxx, #000, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000;
0000-X Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000; and a fifteen (15) mile radius
around 00-000 Xxxxxxx 000, Xxxxx X-0, Xxxx Xxxxxx, Xxxxxxxxxx 00000; and Section
5.7 shall terminate on February 21, 2004.
3. CD agrees to grant MOVIE and XXXXX a license to use the name CD
Exchange upon request by XXXXX or MOVIE. Such license, if requested, will be
issued free of any cost, charge or expense to MOVIE and/or XXXXX and will not be
assignable .
4. CD shall have no interest in the Norwalk Distributors, Inc.
("Norwalk") transaction currently pending between XXXXX, MOVIE and NORWALK.
5. MOVIE and XXXXX shall be entitled to compete with CD freely and
without any limitations, except for retail stores in San Diego County,
California, and retail stores within a 2 mile radius around the current location
of CD facilities located at 000 Xxxx Xxxxxx, #000, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx
00000; 0000-X Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000; and a fifteen (15) mile
radius around 00-000 Xxxxxxx 000, Xxxxx X-0, Xxxx Xxxxxx, Xxxxxxxxxx 00000. All
limitations on competition by MOVIE or XXXXX shall terminate February 21, 2004.
6. The consideration for the First Amendment is as follows:
(a) CD shall be relieved of its obligations to make payments to X.
XXXXX under his Employment Agreement for all periods commencing
after the date the First Amendment is signed by all parties
hereto. This provision shall also apply to any bonus due to XXXXX
under the Employment Agreement.
(b) The stock referenced in Section 1(b) of this First Amendment
shall be released.
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7. Except for the limitations on certain competition and the obligations
which remain to be performed by the parties as set forth herein, each of the
parties hereto, in every possible capacity including, but not limited to, their
capacity as individuals, trustees, Directors, Officers, Shareholders, owners,
agents and employees, jointly, severally and collectively, for themselves, their
heirs, executors, administrators, successors, Shareholders, Officers, Directors,
assigns, agents, servants, and representatives, do hereby fully release and
discharge each other, their heirs, executors, administrators, successors,
assigns, agents, servants, representatives, Shareholders, Directors, Officers,
and attorneys from any and all claims, demands, liabilities, actions, and causes
of action of any nature or sort, liquidated or unliquidated, past, present and
future arising out of or relating to the Policy and all matters connected with
the issuance and administration thereof from the beginning of time to the
present.
8. Each of the parties hereto expressly waives the benefits and
provisions of Section 1542 of the Civil Code of the State of California, which
section provides as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which, if known by him, must have materially affected his settlement with
the debtor."
This release provision may be pleaded as a full and complete defense to and
may be used as the basis for an injunction against any action, suit, claim, or
other proceeding which may be prosecuted, initiated or attempted in violation of
the terms hereof. The prevailing party in such action shall be entitled to
receive reasonable attorneys' fees and other related legal expenses incurred in
prosecuting and/or in defending against any suit, action or claim brought or
attempted in violation of the terms of the First Amendment or incurred in
prosecuting any suit to specifically enforce any of the executory terms of the
First Amendment.
9. The parties represent and warrant that they have the right to execute
the First Amendment in the capacities stated herein and that they have not sold,
assigned, transferred, or otherwise disposed of any claim or demand against the
other party.
10. The First Amendment is binding upon and shall inure to the benefit of
all heirs, successors and assigns of the parties hereto, including successors by
operation of law.
11. The provisions of the First Amendment are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable in
whole or in part the remaining provisions and any partially enforceable
provisions to the extent enforceable shall nevertheless be binding and
enforceable.
12. No modifications or revisions hereof shall have any force and effect
unless the same shall be in writing and accepted by the parties and executed by
the parties.
13. Each party hereto acknowledges that he/she or it has thoroughly read
the First Amendment, fully understands the same, and has had an opportunity to
consult with an attorney
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concerning same. Each of the parties hereto is satisfied with the First
Amendment and has signed same voluntarily.
14. The First Amendment shall be effective upon execution by all parties
hereto and any party may thereafter seek specific performance of any of the
executory terms of the First Amendment.
15. In the event there is a conflict between the First Amendment and any
of the existing Agreements among the parties, including without limitation the
Asset Purchase Agreement and any Agreements referenced therein, the terms of the
First Amendment shall prevail.
16. The First Amendment may be signed in separate counterparts or
duplicate copies and any signed counterpart or duplicate copy shall be deemed to
be an original for all purposes.
IN WITNESS WHEREOF, each of the parties hereto has caused the First
Amendment to be signed in counterparts all as of the date first above written.
MOVIE TRADER, INC.
By:
XXXXXXX X. XXXXX, President
XXXXXXX X. XXXXX
XXXXX XxXXXX-XXXXX
COMPACT DISCS MANAGEMENT, INC.
By:
CD WAREHOUSE, INC.
By:
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