AMENDMENT TO AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VIDEO UPDATE, INC. ("BUYER")
VUI MERGER CORP.
AND
MOOVIES, INC.
Dated as of October 27, 1997
This Amendment to the Agreement and Plan of Merger entered into as of
July 9, 1997 (the "Agreement") by and between Video Update, Inc., a Delaware
corporation ("BUYER"), VUI Merger Corp., a Delaware corporation ("SUB") and
Moovies, Inc., a Delaware corporation ("COMPANY"), is dated as of October 27,
1997. BUYER and COMPANY are referred to individually herein as a "PARTY" and
collectively herein as the "PARTIES."
WHEREAS, the Agreement contemplates a merger of SUB, a wholly owned
first tier subsidiary of BUYER with and into COMPANY in a reorganization
pursuant to Code Sections 368(a)(1)(A) and 368(a)(2)(E) whereby the COMPANY
Stockholders will receive voting common stock of BUYER in exchange for all of
their capital stock in COMPANY, all pursuant to the plan of reorganization set
forth herein; and
WHEREAS, the Parties wish to amend and modify certain provisions of the
Agreement.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
The definition of "REQUISITE BUYER STOCKHOLDER APPROVAL" is hereby
deleted and replaced in its entirety with the following:
"REQUISITE BUYER STOCKHOLDER APPROVAL" with respect to the BUYER means
the affirmative vote of the holders of the outstanding shares of BUYER (voting
together as a single class) representing a majority of the votes cast on the
proposal in favor of the issuance of BUYER shares in connection with this
Agreement, and with respect to SUB means (i) the affirmative vote or consent of
the holders of a majority of the outstanding shares of SUB in favor of this
Agreement and the Merger.
Section 2.5 of the Agreement is hereby deleted and replaced in its
entirety with the following:
2.5 CONVERSION. At and as of the Effective Time, each COMPANY Share
shall no longer be outstanding and shall be cancelled and retired and shall be
converted into the right to receive .75 of one BUYER Share (the ratio of .75 of
one BUYER Share to one COMPANY Share is referred to herein as the "CONVERSION
RATIO" and the BUYER Shares so received are referred to as the "MERGER
CONSIDERATION"). The Conversion Ratio shall be subject to equitable adjustment
in the event of any
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stock split, stock dividend, reverse stock split or other recapitalization of
the BUYER's Shares after the date hereof. No COMPANY Share shall be deemed to be
outstanding or to have any rights other than those set forth above in this
Section 2.5 after the Effective Time. From the date of this Agreement to the
Closing Date, COMPANY's Board of Directors shall not adopt any new "poison
pill," stockholder rights plan or other similar plan applicable to the
transactions contemplated by this Agreement. In addition, the COMPANY's Board of
Directors shall take all actions required to ensure that the Rights (as defined
in the Rights Agreement, dated as of December 20, 1996, by and between COMPANY
and First Union National Bank of North Carolina) and the Rights Agreement shall
be inapplicable to the Merger and the transactions contemplated by this
Agreement.
Section 3.6 is hereby deleted and replaced in its entirety with the
following:
3.6 FINANCIAL STATEMENTS. COMPANY has filed a Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1997 (the "MOST RECENT FISCAL QUARTER
END"), and an Annual Report on Form 10-K for the fiscal year ended December 31,
1996. The financial statements included in or incorporated by reference into
these Public Reports (including the related notes and schedules) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
period covered thereby, present fairly the financial condition of COMPANY and
its Subsidiaries as of the indicated dates and the results of operations of
COMPANY and its Subsidiaries for the indicated periods, and are consistent with
the books and records of COMPANY and its Subsidiaries; PROVIDED, HOWEVER, that
the interim statements are subject to normal year-end adjustments that are not
expected to be material in amount.
Section 4.6 is hereby deleted and replaced in its entirety with the
following:
4.6 FINANCIAL STATEMENTS. BUYER has filed a Quarterly Report on Form
10-Q for the fiscal quarter ended July 31, 1997 and an Annual Report on Form
10-K (as amended) for the fiscal year ended April 30, 1997 (the "MOST RECENT
FISCAL YEAR END"). The financial statements included in or incorporated by
reference into these Public Reports (including the related notes and schedules)
have been prepared in accordance with GAAP applied on a consistent basis
throughout the period covered thereby, present fairly the financial condition of
BUYER and its Subsidiaries as of the indicated dates and the results of
operations of BUYER and its Subsidiaries for the indicated periods, and are
consistent with the books and records of BUYER and its Subsidiaries; PROVIDED
HOWEVER, that the interim statements are subject to normal year-end adjustments
that are not expected to be material in amount.
ACKNOWLEDGEMENT. The parties hereby expressly waive any and all claims,
demands or expenses that they may respectively have against the other based on
any breach of any warranty, representation or covenant contained in or made
pursuant to the Agreement prior to the date hereof.
BUYER REPRESENTATIONS. The BUYER and SUB represent and warrant that
except for changes contemplated by this Agreement or as set forth on Schedule 4
annexed hereto, the representations and warranties set forth in Article 4 of the
Agreement are true and correct as qualified as of the date hereof, except for
such failures to be true and correct as do not have a Material Adverse Effect on
the BUYER and its Subsidiaries, taken as a whole.
COMPANY REPRESENTATIONS. The COMPANY represents and warrants that
except for changes contemplated by the Agreement or set forth on Schedule 3
annexed hereto, the representations and warranties of the COMPANY set forth in
Article 3 of the Agreement are true and correct as qualified as
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of the date hereof, except for such failures to be true and correct as do not
have a Material Adverse Effect on the COMPANY and its Subsidiaries, taken as a
whole.
Section 4.8 of the Agreement is hereby deleted and replaced in its
entirety with the following:
CERTAIN FEES. With the exception of the engagement of Xxxxx Xxxxxxx
Inc. and Asensio & Company, Inc. by BUYER, none of BUYER and its Subsidiaries
has any liability or obligation to pay any fees or commissions to any financial
advisors, broker, finder, or agent with respect to the transactions contemplated
by this Agreement. Subject to Section 7, the BUYER hereby indemnifies the
COMPANY against and from any claim, liabilities or actions in respect of fees or
expenses of the BUYER's advisors.
Section 5.6(a) of the Agreement is hereby deleted and replaced in its
entirety with the following:
5.6 INDEMNIFICATION AND INSURANCE. (a) From and after the Effective
Time, in the event of any claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any of the
present or former officers or directors (the "Managers") of the COMPANY or any
of the COMPANY's Subsidiaries is, or is threatened to be, made a party by reason
of the fact that he or she served as a Manager of the COMPANY or any of the
COMPANY's Subsidiaries, or is or was serving at the request of the COMPANY or
any of the COMPANY's Subsidiaries as a director, officer, employee or agent of
another corporation (including without limitation, BUYER), partnership, joint
venture, trust or other enterprise, whether before or after the Effective Time,
each of the Surviving Corporation and the BUYER shall indemnify and hold
harmless, as and to the fullest extent that COMPANY would have been permitted
under Delaware law and its certificate of incorporation and bylaws in effect on
the date hereof, each such Manager against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys' fees), judgments,
fines and amounts paid in settlement in connection with any such claim, action,
suit, proceeding or investigation, and in the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), and (i) if the BUYER or the Surviving Corporation (after the Effective
Time) have not promptly assumed the defense of such matter, the Managers may
retain counsel satisfactory to them, and the Surviving Corporation and the BUYER
after the Effective Time, shall advance all reasonable fees and expenses
(including attorneys' fees) for the Managers promptly, as Manager incurs the
same and as statements therefor are received, and (ii) the Surviving Corporation
and the BUYER after the Effective Time, will use their respective best efforts
to assist in the vigorous defense of any such matter; provided that neither the
Surviving Corporation nor the BUYER shall be liable for any settlement effected
without its prior written consent; provided further that the Surviving
Corporation and the BUYER shall have no obligation under the foregoing
provisions of this Section 5.6(a) to any Manager when and if (i) a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and non-appealable, that indemnification of such Manager in
the manner contemplated hereby is prohibited by applicable law or (ii) the loss,
claim, damage, liability, cost, expense, judgment or fine is based on or arises
from a final non-appealable order of a court of competent jurisdiction or in
connection with a settlement, consent, decree, order or injunction with any
governmental agency or authority finding that the Manager violated Section 16(b)
of the Exchange Act, Section 10(b) of the Exchange Act or Rule 10b-5 promulgated
thereunder or any federal or state securities law relating to or governing
"insider" trading of securities. At the Effective Time, each Manager shall
confirm in writing that upon the finality of any such determination that the
Surviving Corporation or the BUYER is not liable for any such indemnification
claims, the Manager will immediately reimburse the BUYER and the Surviving
Corporation in full for any fees, expenses and costs incurred by the BUYER or
the Surviving Corporation in connection with the defense of such claims. Any
Manager wishing to claim indemnification under this Section 5.6, upon learning
of any such claim, action, suit, proceeding or
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investigation, shall immediately notify the BUYER, thereof (provided that the
failure to give such notice shall not affect any obligations hereunder, except
to the extent that the indemnifying party is actually and materially prejudiced
thereby). The BUYER further covenants not to amend or repeal any provisions of
the Certificate of Incorporation or Bylaws of the BUYER or Surviving Corporation
in any manner that would adversely affect the indemnification or exculpatory
provisions contained herein, except to the extent otherwise required by Delaware
law. The provisions of this Section 5.6 are intended to be for the benefit of,
and shall be enforceable by, each indemnified party and his or her heirs and
representatives, and shall survive the Closing for a period expiring six years
from the Effective Time.
Section 5.13 of the Agreement is hereby deleted and replaced in its
entirety with the following:
CERTAIN COVENANTS.
(a) SOLICITATION. The COMPANY may, but shall not be obligated to,
directly or indirectly, through any officer, director, employee, financial
advisor, representative or agent of such party (i) solicit, initiate, or
encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale or transfer of substantial assets, sale of any shares of
capital stock (including without limitation by way of a tender offer) or similar
transaction involving it or any of its Subsidiaries, other than the transactions
contemplated by this Agreement (any of the foregoing inquiries or proposals
being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage
in negotiations or discussions concerning, or provide any non-public information
to any person or entity relating to, any Acquisition Proposal, or (iii) agree to
or recommend any Acquisition Proposal.
(b) The COMPANY shall notify BUYER immediately after initiation of or
receipt by the COMPANY (or its advisors) of any Acquisition Proposal or any
request for nonpublic information in connection with an Acquisition Proposal or
for access to the properties, books or records of such party by any person or
entity that informs such party that it is considering making, or has made, an
Acquisition Proposal. Such notice shall be made orally and in writing and shall
indicate in reasonable detail the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact. The COMPANY shall continue to
keep BUYER informed, on a current basis, of the status of any such discussions
or negotiations and the terms being discussed or negotiated. Under no
circumstances shall COMPANY provide to any party any non-public or confidential
information of or about the BUYER.
(c) CERTAIN ACTIONS. BUYER and COMPANY shall not, nor shall either
permit any of its Subsidiaries to, take or consent to be taken any action,
whether before or after the Effective Date, that would disqualify the Merger as
"reorganization" within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
(d) TAX RETURNS. BUYER and COMPANY shall jointly prepare and file on a
timely basis any Tax Return required to be filed by virtue of the transactions
contemplated by this Agreement and BUYER shall pay any Tax due in connection
therewith on behalf of COMPANY and its shareholders.
Section 5.14 of the Agreement is hereby deleted and replaced in its
entirety with the following:
5.14 BUYER BOARD OF DIRECTORS. The Board of Directors of BUYER shall
cause the BUYER's Board of Directors to continue to consist of seven persons and
cause two designees of COMPANY ("COMPANY Designees") to be elected to BUYER's
Board of Directors as soon as practicable after the Effective Time and BUYER
shall nominate such designees for election at the next
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subsequent Annual Meeting of BUYER shareholders and shall use its best efforts
to cause such COMPANY Designees to be elected at such meeting. The COMPANY
Designees shall be elected to the Nominating Committee of the Board of Directors
so long as they remain Directors of the BUYER. Following the Effective Time,
such nominating committee shall be comprised solely of the two Company Designees
and one designee of the BUYER. The Nominating Committee shall have the right to
nominate two additional members of the Board, which, if necessary, shall be
expanded by the full Board to nine members to include such two additional
members.
Section 7.1(b) of the Agreement is hereby deleted and replaced in its
entirety with the following:
(b) by either BUYER or the COMPANY if the Merger shall not have been
consummated by January 31, 1998 (provided that (i) either BUYER or the COMPANY
may extend such date to March 31, 1998 by providing written notice thereof to
the other party on or prior to January 31, 1998 (January 31, 1998, as it may be
so extended to March 31, 1998, shall be referred to herein as the "Outside
Date") and (ii) the right to terminate or extend this Agreement under this
Section 7.1(b) shall not be available to any party whose failure to fulfill any
covenant under this Agreement has been the cause of or resulted in the failure
of the Merger to occur on or before such date); or
Section 7.1(e) of the Agreement is hereby deleted and replaced in its
entirety with the following:
(e) by COMPANY, if (i) at the Special BUYER Meeting (including any
adjournment or postponement) the Requisite BUYER Proposal Approval shall not
have been obtained; (ii) at the Special BUYER Meeting (including any adjournment
or postponement), the Requisite BUYER Stockholder Approval shall not have been
obtained; (iii) after receipt by the Board of Directors of the BUYER of a
proposal or offer for a merger, consolidation, business combination, sale or
transfer of substantial assets or shares of capital stock (including without
limitation by way of a tender offer) or similar transaction involving BUYER or
its subsidiaries (a "BUYER Acquisition Proposal") the Board of Directors of the
BUYER shall have withdrawn or modified its recommendation with respect to this
Agreement or the Merger; (iv) after the receipt by the BUYER of a BUYER
Acquisition Proposal, COMPANY requests in writing that the Board of Directors of
the BUYER reconfirm its recommendation with respect to this Agreement or the
Merger and the Board of Directors of the BUYER fails to do so within 10 business
days after its receipt of BUYER's request; (v) the Board of Directors of the
BUYER shall have recommended to the Stockholders of the BUYER an Alternative
Transaction (as defined in Section 7.3(f)); (vi) a tender offer or exchange
offer for 20% or more of the outstanding shares of the BUYER Shares is commenced
(other than by COMPANY or an Affiliate of COMPANY) and the Board of Directors of
the BUYER recommends that the stockholders of the BUYER tender their shares in
such tender or exchange offer; (vii) for any reason fails to call and hold the
Special BUYER Meeting at least two business days prior to the Outside Date;
(viii) after receipt by the Board of Directors of the COMPANY of an Acquisition
Proposal, the Board of Directors of the COMPANY shall have withdrawn or modified
its recommendation of this Agreement or the Merger; (ix) the Board of Directors
of the COMPANY shall have recommended to the stockholders of the COMPANY an
Alternative Transaction (as defined in Section 7.3(f)); (x) a tender offer or
exchange offer for 20% or more of the outstanding shares of the COMPANY Shares
is commenced (other than by BUYER or an Affiliate of BUYER) and the Board of
Directors of the COMPANY recommends that the stockholders of the COMPANY tender
their shares in such tender or exchange offer; or (xi) the BUYER has not
obtained financing sufficient to obtain the consent of COMPANY's lender to the
consummation of the Merger and otherwise satisfactory to the COMPANY in its sole
good faith discretion.
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The introductory sentence to Section 7.3(b) of the Agreement is hereby
deleted and replaced in its entirety with the following:
(b) The COMPANY shall pay BUYER a termination fee of $800,000 upon the
earliest to occur of the following events;
Section 7.3(b)(i) is hereby deleted and replaced in its entirety with
the following:
(i) the termination of the Agreement by BUYER pursuant to Section
7.1(d)(ii) through (vi) or by COMPANY pursuant to Section 7.1(e)(viii) through
(x); or
The introductory sentence to Section 7.3(c) of the Agreement is hereby
deleted and replaced in its entirety with the following:
(c) The BUYER shall pay COMPANY a termination fee of $800,000 upon the
earliest to occur of the following events;
Section 7.3(d) of the Agreement is hereby deleted and replaced in its
entirety with the following:
(d) The BUYER shall pay COMPANY a termination fee of $400,000 upon
termination of this Agreement by COMPANY pursuant to Section 7.1(e)(i). In no
event shall COMPANY receive a termination fee under both 7.3(c) and this Section
7.3(d)
Except as otherwise set forth above, the Agreement is otherwise
ratified and confirmed in all respects.
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IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the date first above written.
MOOVIES, INC.
("COMPANY")
/s/
-------------------------------
By:-------------------------------
Authorized Officer
VIDEO UPDATE, INC. ("BUYER")
/s/
-------------------------------
By:-------------------------------
Xxxxxx X. Xxxxxx
Chief Executive Officer
VUI MERGER CORP. ("SUB")
/s/
-------------------------------
By:-------------------------------
Title: President
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Schedule Description
-------- -----------
3 Changes in representations and
warranties of the Company
4 Changes in representations and
warranties of the Buyer and Sub
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EXHIBIT 99.1
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