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ASSET PURCHASE AGREEMENT
By and Among
West Coast Entertainment Corporation,
Ohio Entertainment Corp.
and Xxxxxx X. Xxxxx
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TABLE OF CONTENTS
Section Page
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1. Sale and Delivery of the Assets 1
1.1 Delivery of the Assets 1
1.2 Further Assurances 3
1.3 Base Purchase Price 3
1.4 Assumption of Liabilities; Etc. 4
1.5 Allocation of Base Purchase Price and
Assumed Liabilities 4
1.6 The Closing 4
1.7 Apportionment 5
1.8 No New Stores 7
2. Representations of the Seller and the Principal 7
2.1 Organization 7
2.2 Capitalization of the Seller 7
2.3 Authorization 7
2.4 Ownership of the Assets 8
2.5 Financial Statements 8
2.6 Absence of Undisclosed Liabilities 9
2.7 Litigation 10
2.8 Insurance 10
2.9 Inventory 10
2.10 Fixed Assets 10
2.11 Leases 11
2.12 Change in Financial Condition and Assets 11
2.13 Tax Matters 12
2.14 Assets Complete 13
2.15 Books and Records 13
2.16 Contracts and Commitments 13
2.17 Compliance with Agreements and Laws 15
2.18 Employee Relations 16
2.19 Absence of Certain Changes or Events 17
2.20 Suppliers 18
2.21 Prepayments and Deposits 18
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2.22 Trade Names and Other Intangible Property 18
2.23 Employee Benefit Plans 19
2.24 Regulatory Approvals 19
2.25 Indebtedness to and from Officers, Directors and
Shareholders 19
2.26 Powers of Attorney and Suretyships 20
2.27 Cash Flow 20
2.28 Disclosure 20
3. Representations of the Buyer 20
3.1 Organization and Authority 20
3.2 Capitalization of the Buyer 20
3.3 Authorization 21
3.4 Regulatory Approvals 21
3.5 Disclosure 21
3.6 Issuance of Shares 22
4. Access to Information; Public Announcements 22
4.1 Access to Management, Properties and Records 22
4.2 Confidentiality 23
4.3 Public Announcements 23
5. Pre-Closing Covenants of the Seller 23
5.1 Conduct of Business 23
5.2 Absence of Material Changes 24
5.3 Taxes 25
5.4 Delivery of Interim Financial Statements 25
5.5 Compliance with Laws 25
5.6 Continued Truth of Representations
and Warranties of the Seller 26
5.7 Continuing Obligation to Inform 26
5.8 Exclusive Dealing 26
5.9 No Publicity 26
6. Satisfaction of Conditions; Liquidated Damages 26
6.1 Satisfaction of Conditions 26
6.2 Covenants of Buyer 26
7. Conditions to Obligations of the Buyer 27
7.1 Continued Truth of Representations
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and Warranties of the Seller; Compliance with
Covenants and Obligations 27
7.2 Corporate Proceedings 27
7.3 Governmental Approvals 27
7.4 Consents of Lenders, Lessors and Other
Third Parties 27
7.5 Adverse Proceedings 28
7.6 Opinion of Counsel 28
7.7 Board of Directors and Shareholder Approval 28
7.8 The Assets 28
7.9 Update 28
7.10 Cash Available for Working Capital Purposes 28
7.11 Payables 29
7.12 Tax Lien Waivers 29
7.13 Closing Deliveries 29
8. Conditions to Obligations of the Seller 30
8.1 Continued Truth of Representations and
Warranties of the Buyer; Compliance
with Covenants and Obligations 30
8.2 Corporate Proceedings 30
8.3 Governmental Approvals 30
8.4 Consents of Lenders, Lessors and Other
Third Parties 31
8.5 Adverse Proceedings 31
8.6 Opinion of Counsel 31
8.7 Closing Deliveries 31
9. Indemnification 32
9.1 By the Buyer and the Seller and the Principal 32
9.2A By the Seller and the Principal 32
9.2B By the Buyer 33
9.3 Claims for Indemnification 33
9.4 Defense by Indemnifying Party 34
9.5 Payment of Indemnification Obligation 34
9.6 Survival of Representations; Claims for
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Indemnification 34
9.7 Limitation 35
10. Post-Closing Agreements 35
10.1 Proprietary Information 35
10.2 No Solicitation or Hiring of Former Employees 35
10.3 Non-Competition Agreement 35
10.4 Sharing of Data 36
10.5 Use of Name 37
10.6 Cooperation in Litigation 37
11. Termination of Agreement 37
11.1 Termination by Lapse of Time 37
11.2 Termination by Agreement of the Parties 37
11.3 Termination by Reason of Breach 38
12. Transfer and Sales Tax 38
13. Brokers 38
13.1 For the Seller 38
13.2 For the Buyer 38
14. Notices 38
15. Arbitration 39
16. Successors and Assigns 40
17. Entire Agreement; Amendments; Attachments 40
18. Expenses 40
19. Legal Fees 41
20. Governing Law 41
21. Section Headings 41
22. Severability 41
23. Counterparts 41
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Exhibits
A - Stores
B - Lockup Agreement
C - Instrument of Assumption of Liabilities
D - Opinion of Counsel to Seller
E - Xxxx of Sale
F - Opinion of Xxxx and Xxxx
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ASSET PURCHASE AGREEMENT
Agreement made as of November 15, 1996 among West Coast Entertainment
Corporation, a Delaware corporation with its principal office at 0000 Xxxxxx
Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 (the "Buyer"), Ohio Entertainment
Corp., an Ohio corporation with its principal office at 0000 Xxxxxxxxxx Xxxxx,
Xxxxxx, Xxxx 00000 (the "Seller"), and Xxxxxx X. Xxxxx, a resident of the
State of Ohio (the "Principal").
Preliminary Statement
The Buyer desires to purchase, and the Seller desires to sell,
substantially all of the assets and business of the Seller, all of which relate
to the five retail video stores which are identified on Exhibit A
(individually, a "Store," and collectively, the "Stores"), for the
consideration set forth below and the assumption of certain of the Seller's
liabilities set forth below, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets
1.1 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of this Agreement, at the
closing of the transactions contemplated by this Agreement (the "Closing"), the
Seller shall sell, transfer, convey, assign and deliver to the Buyer, and the
Buyer shall purchase from the Seller, the following properties, assets and
other claims, rights and interests (but not including the Excluded Assets, as
defined below):
(i) all inventories, videotapes, videogames, finished goods, office
supplies, maintenance supplies, packaging materials, spare parts and similar
items of the Seller (collectively, the "Inventory") which are located at, or
relate to, the Stores, and exist on the Closing Date (as defined below);
(ii) all accounts, accounts receivable, notes and notes receivable arising
out of the conduct of the business of the Stores and exist on the Closing Date
which are
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payable to the Seller, including any security held by the Seller for
the payment thereof (the "Accounts Receivable");
(iii) opening cash for each Store in the amounts set forth on Schedule
1.1(a)(iii), and prepaid expenses and deposits relating to the Stores
(including the deposits described on Schedule 2.21), existing on the Closing
Date;
(iv) all rights of the Seller under the contracts, agreements, leases,
licenses and other instruments set forth on Schedule 1.4 attached hereto other
than such rights under contracts, agreements, leases, licenses and other
instruments included on Schedule 1.1(b) (collectively, the "Contract Rights");
(v) copies of all books, records and accounts, correspondence, manuals,
customer lists, employment records, studies, reports or summaries relating in
whole or in part to or arising in whole or in part out of the business of the
Seller;
(vi) all rights of the Seller under express or implied warranties from the
suppliers of the Seller to the extent relating or applicable to the items
described in this Section 1.1(a);
(vii) all of the machinery, equipment, furniture, leasehold improvements
and construction in progress located at or related to the Stores and owned by
the Seller on the Closing Date whether or not reflected as capital assets in
the accounting records of the Seller (collectively, the "Fixed Assets");
(viii) a non-exclusive, royalty free, non-transferable license to use,
solely with respect to the business of the Stores, the name "Video Showcase",
or any derivation thereof used by the Seller in its business, for a period of
two years after the Closing Date (collectively, the "Intangible Property");
(ix) except as specifically provided in Subsection 1.1(b) hereof, all
other assets, properties, claims, rights and interests of the Seller which
exist on the Closing Date, of every kind and nature and description, whether
tangible or intangible, real, personal or mixed, which relate to the Stores.
(b) Notwithstanding the provisions of paragraph (a) above, the properties,
assets and business to be transferred to the Buyer under this Agreement shall
not include those assets listed on Schedule 1.1(b) attached hereto (the
"Excluded Assets").
(c) The Inventory, Accounts Receivable, Contract Rights, Fixed Assets,
Intangible Property and other properties, assets and business of the Seller
described in paragraph (a) above, other than the Excluded Assets, shall be
referred to collectively as the "Assets."
1.2 Further Assurances. At any time and from time to time after the
Closing, at the request of any party and without further consideration, each
party promptly shall execute and deliver such instruments of sale, transfer,
conveyance,
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assignment, assumption and confirmation, and take such other action, as may be
reasonably requested to more effectively carry out the purpose and intent of
this Agreement.
1.3 Base Purchase Price.
(a) The purchase price for all of the Assets of the Seller shall be
$4,850,000 subject to the adjustment provided in Subsection 1.7 hereof (the
"Base Purchase Price").
(b) At the Closing, the Buyer shall deliver to the Seller (i) that number
of shares of Common Stock, $.01 par value per share, of the Buyer ("Common
Stock") as is determined by dividing $2,245,000 by the Market Value of a share
of Common Stock and (ii) the balance of the Base Purchase Price (as adjusted
pursuant to Section 1.7) in cash, by cashiers or certified check or by wire
transfer of immediately available funds to an account designated by the Seller.
The "Market Value" of a share of Common Stock shall equal the average of the
bid and asked prices per share of Buyer's Common Stock as reported on the
Nasdaq Stock Exchange for each of the fifteen trading days ending on the
business day preceding the Closing Date. Shares of Buyer Common Stock issued
pursuant to this Agreement shall be registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
(the "Registration Statement") filed with the Securities and Exchange
Commission (the "SEC").
At the Closing, the Seller shall enter into a Lockup Agreement
(substantially in the form and on the terms of Exhibit B hereto), pursuant to
which the Seller shall agree that it shall not: (i) sell any of the shares
issued to it at the Closing during the six-month period commencing on the
Closing Date; (ii) sell more than one-third of the total number of shares
issued to it at the Closing during the 12-month period after the Closing; and
(iii) sell more than two-thirds of the total number of shares issued to it at
the Closing during the 18-month period after the Closing (the "Lockup
Agreement").
1.4 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and deliver an Instrument of
Assumption of Liabilities (the "Instrument of Assumption") substantially in the
form attached hereto as Exhibit C, pursuant to which it shall assume and agree
to timely perform, pay and discharge the following liabilities, obligations and
commitments of the Seller, to the extent such liabilities, obligations and
commitments relate exclusively to the Stores or the Assets, and not to the
Excluded Assets (the "Assumed Liabilities"):
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(i) All obligations of the Seller accruing or continuing after the Closing
under the leases set forth on Schedule 1.4 attached hereto (which includes a
lease for 6,400 square feet of space in Middletown, Ohio, on which Buyer
intends to develop a new retail video store (the "Middletown Location")) which
become due and payable after the Closing Date; and
(ii) Accounts payable incurred in the ordinary course of business by
Seller for purchase of videotapes, to the extent such videotapes were received
during the 60-day period prior to the Closing;
(iii) All other liabilities and obligations of the Seller specifically set
forth in Schedule 1.4 attached hereto.
(b) The Buyer shall not at the Closing assume or agree to perform, pay or
discharge, and the Seller shall remain unconditionally liable for, all
obligations, liabilities and commitments, fixed or contingent, of the Seller
other than the Assumed Liabilities.
1.5 Allocation of Base Purchase Price and Assumed Liabilities. The
aggregate amount of the Base Purchase Price and the Assumed Liabilities shall
be allocated among the Assets as set forth on Schedule 1.5 attached hereto.
Such allocation shall be subject to adjustment to the extent that the Base
Purchase Price is adjusted pursuant to Section 1.7 hereof in the manner
specified in such Section.
1.6 The Closing. The Closing shall take place on or before or before
November 15, 1996, at the offices of Xxxx and Xxxx, 00 Xxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx, at such time or date as may be selected by Buyer, or at such
other time and date as may be mutually agreed upon in writing by the parties
hereto. The transfer of the Assets by the Seller to the Buyer shall be deemed
to occur at 9:00 a.m., Boston time, on the date of the Closing (the "Closing
Date").
1.7 Apportionment. The purchase price of the assets shall not be subject
to any adjustment for any prepaid expenses of the Seller, including without
limitation: (i) prepaid premiums on insurance, (ii) water and sewer use
charges, (iii) transfer taxes and recording fees, if any, incurred in
connection with the transfer of the Assets contemplated hereby, or (iv) real
property taxes or other taxes for the then current tax period, and such prepaid
amounts, if any, shall not be added to or deducted from the Base Purchase
Price. Notwithstanding the foregoing, the Seller shall be entitled to
additional consideration in respect of prepaid rent as of the Closing Date,
which amount shall be added to the cash portion of the purchase price
deliverable at closing.
1.8 No New Stores. The Seller shall not be entitled to open additional
video retail stores prior to the Closing without the prior written approval of
the Buyer, and then only if Buyer approves the site, and, if the Buyer so
elects, the Buyer and the Seller enter into an agreement pursuant to which the
Buyer shall have the option to purchase any such new store. Notwithstanding
the foregoing, prior to the Closing, the Seller shall be entitled to continue
retail video store development activities with respect to the
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Middletown Location, provided that such Location (and all of Seller's rights
therein or related thereto) shall be transferred to the Buyer at the Closing.
2. Representations of the Seller and the Principal
The Seller and the Principal, jointly and severally, represent and warrant
to the Buyer as follows:
2.1 Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and has all requisite power and authority (corporate and other) to own its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to
consummate the transactions contemplated hereby. The Seller is duly qualified
to do business and in good standing in all jurisdictions in which its ownership
of property or the character of its business requires such qualification.
Certified copies of the Articles of Incorporation and Regulations of the
Seller, each as amended to date, have been previously delivered to the Buyer,
are complete and correct, and no amendments have been made thereto or have been
authorized since the date thereof. The Seller does not own any capital stock
of or other equity interest in any corporation, partnership or other entity.
Exhibit A sets forth a list of each retail video rental store (including the
location of each such store owned, operated or licensed directly or indirectly
by the Seller.
2.2 Capitalization of the Seller. The Seller's authorized capital stock
consists of 750 shares of Common Stock, no par value, of which 100 shares are
issued and outstanding. All of such shares are owned by the Principal. All of
such shares have been duly and validly issued and are fully paid and
nonassessable.
2.3 Authorization. The execution and delivery of this Agreement by the
Seller, and the agreements provided for herein, and the consummation by the
Seller of all transactions contemplated hereby, have been duly authorized by
all requisite corporate and shareholder action. This Agreement and all such
other agreements and obligations entered into and undertaken in connection with
the transactions contemplated hereby to which the Seller is a party constitute
the valid and legally binding obligations of the Seller, enforceable against
the Seller in accordance with their respective terms. The execution, delivery
and performance by the Seller of this Agreement and the agreements provided for
herein, and the consummation by the Seller of the transactions contemplated
hereby and thereby, will not, with or without the giving of notice or the
passage of time or both, (a) violate in any material respect the provisions
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of any law, rule or regulation applicable to the Seller; (b) violate the
provisions of the Articles of Incorporation or Regulations of the Seller; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator binding on Seller; or (d) subject to obtaining the consents and
approvals described in Schedule 2.3, conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or
cause any acceleration under, or cause the creation of any lien, charge or
encumbrance upon the properties or assets of the Seller pursuant to, any
indenture, mortgage, deed of trust or other instrument or agreement to which
the Seller is a party or by which the Seller or any of its properties are
bound. Schedule 2.3 attached hereto sets forth a true, correct and complete
list of all consents and approvals of third parties that are required in
connection with the consummation by the Seller of the transactions contemplated
by this Agreement.
2.4 Ownership of the Assets. Schedule 2.4(i) attached hereto sets forth a
true, correct and complete list of all claims, liabilities, liens, pledges,
charges, encumbrances and equities of any kind affecting the Assets
(collectively, the "Encumbrances"). The Seller, at the Closing, will, subject
to obtaining the consents and approvals described in Schedule 2.3, have the
right to (and will, upon delivery of the Xxxx of Sale, Instrument of Assignment
and instruments of transfer of ownership contemplated hereby), sell and
transfer to the Buyer good, clear, record and marketable title to the Assets,
free and clear of all Encumbrances of any kind, except as set forth on Schedule
2.4(ii) attached hereto (the "Permitted Encumbrances").
2.5 Financial Statements.
(a) The Seller has previously delivered to the Buyer its audited balance
sheets as of May 31, 1994, 1995 and 1996 (the "Audited Balance Sheets") and the
related statements of income, shareholders' equity, retained earnings and
statements of cash flow of the Seller for the fiscal years then ended
(collectively, including the Audited Balance Sheet, the "Audited Financial
Statements"). The Seller has also previously delivered to the Buyer its
comparative Balance Sheet (the "Current Balance Sheet") as of June 30, 1996
(the "Balance Sheet Date") and as of June 30, 1995, and the related comparative
statements of income, shareholders' equity, retained earnings and statements of
cash flow of the Seller for the six-month periods then ended (collectively, the
"Current Financial Statements"). The Seller has also previously delivered to
the Buyer its monthly Balance Sheets (the "Monthly Balance Sheets") for each of
the whole calendar months between June 30, 1996 and the date of this Agreement,
and the related comparative statements of income, shareholders' equity,
retained earnings and statements of cash flow of the Seller for the one-month
periods then ended (collectively, the "Monthly Financial Statements"). The
Seller has included in the footnotes to the Audited Financial Statements and
the Current Financial Statements statements of its quarterly earnings. The
Audited Financial Statements, the Current Financial Statements, the Monthly
Financial Statements and the interim financial statements (the "Interim
Financial Statements") to be delivered pursuant to Subsection 5.4 hereof
(collectively, the "Financial Statements") have been (or will be) prepared in
accordance with generally accepted accounting principles applied consistently
with past practice and certified without qualification by the Seller's
independent public accountants, in the case of the
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Audited Financial Statements, and have been (or will be) certified by the
Seller's chief financial officer, in the case of the Current Financial
Statements, the Monthly Financial Statements, and the Interim Financial
Statements.
(b) The Financial Statements fairly present, as of their respective dates,
the financial condition, retained earnings, assets and liabilities of the
Seller and the results of operations of the Seller's business for the periods
indicated. With respect to the contracts and commitments for the sale of goods
or the provision of services by the Seller, the Audited Financial Statements
and the Seller's comparative Balance Sheets dated June 30, 1995 and June 30,
1996 (the "June Balance Sheets") contain and reflect adequate reserves, which
are consistent with previous reserves taken, for all reasonably anticipated
material losses and costs and expenses; and the amounts shown as accrued for
current and deferred income and other taxes in the Audited Financial Statements
and the June Balance Sheets are sufficient for the payment of all accrued and
unpaid federal, state and local income taxes, interest, penalties, assessments
or deficiencies applicable to the Seller, whether disputed or not, for the
applicable period then ended and periods prior thereto.
2.6 Absence of Undisclosed Liabilities. Except as and to the extent (a)
reflected and reserved against in the Current Balance Sheet, (b) set forth on
Schedule 2.6 attached hereto or (c) incurred in the ordinary course of business
after the date of the Current Balance Sheet and not material in amount, either
individually or in the aggregate, the Seller, to its best knowledge, does not
have any liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. For
purposes of this Subsection 2.6, "material" means any amount in excess of
$10,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached hereto, the
Seller is not a party to, or to the Seller's best knowledge threatened with,
and none of the Assets are subject to, any pending or, to Seller's best
knowledge threatened, litigation, suit, action, investigation, proceeding or
controversy before any court, administrative agency or other governmental
authority relating to or affecting the Assets or the business or condition
(financial or otherwise) of the Seller. The Seller is not in violation of or
in default with respect to any judgment, order, writ, injunction, decree or
rule of any court, administrative agency or governmental authority or any
regulation of any administrative agency or governmental authority.
2.8 Insurance. Schedule 2.8 attached hereto sets forth a true, correct
and complete copy of a certificate provided by Seller's insurer with respect to
all fire, theft,
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casualty, general liability, workers compensation, business interruption,
environmental impairment, product liability, automobile and other insurance
policies insuring the Assets or business of the Seller, specifying the type of
coverage, the amount of coverage, the insurer and the expiration date of each
such policy (collectively, the "Insurance Policies"). Schedule 2.8 lists all
claims made under such Insurance Policies since January 1, 1994. True, correct
and complete copies of all of the Insurance Policies have been previously
delivered by the Seller to the Buyer. The Insurance Policies are in full force
and effect. All premiums due on the Insurance Policies or renewals thereof
have been paid and there is no default under any of the Insurance Policies.
2.9 Inventory. On the Closing Date, the Inventory shall include not less
than 7,000 videotapes held for rental or sale per Store (except for Store #2,
as to which such Inventory shall include not less than 5,000 videotapes held
for rental or sale), and such Inventory shall consist of items of a quality and
quantity which are usable or saleable without discount in the ordinary course
of the business conducted by the Seller.
2.10 Fixed Assets. Schedule 2.10 attached hereto sets forth a true,
correct and complete list of all Fixed Assets as of the date hereof, including
a description and the book value thereof. Schedule 2.10, as updated pursuant
to Subsection 7.9 hereof, shall set forth a true, correct and complete list of
all Fixed Assets as of the Closing Date (regardless of whether such Fixed
Assets are reflected in the Seller's books and records, and including those
Fixed Assets as to which the book value is zero), including a description and
the book value thereof, and a complete list of all maintenance contracts with
respect to such Fixed Assets to which the Seller is a party. Except as
disclosed on Schedule 2.10 hereto, all of the Fixed Assets are in good
operating condition and repair, normal wear and tear excepted, are currently
used by the Seller in the ordinary course of business of the Stores, and, to
the extent provided in the maintenance contracts listed on Schedule 2.10,
normal maintenance has been consistently performed with respect to such Fixed
Assets.
2.11 Leases. Schedule 2.11 attached hereto sets forth a true, correct and
complete list as of the date hereof of all leases of real property, identifying
separately each ground lease, pursuant to which any Store occupies its premises
(the "Leases"). True, correct and complete copies of the Leases, and all
amendments, modifications and supplemental agreements thereto, have previously
been delivered by the Seller to the Buyer. The Leases are binding and
enforceable against Seller and, to Seller's knowledge, each of the other
parties thereto in accordance with their respective terms and, except as set
forth on Schedule 2.11, have not been modified or amended since the date of
delivery to the Buyer. Seller has not received or sent written notice claiming
that any party is in default thereunder, which default remains uncured, or that
there has occurred any event which would constitute a breach of or default in
the performance of any material covenant, agreement or condition contained in
any Lease, nor, to Seller's knowledge, has there occurred any event which with
the passage of time or the giving of notice or both would constitute such a
breach or material default. The Seller is not obligated to pay any leasing or
brokerage commission relating to any Lease and, except as set forth on Schedule
2.11 attached hereto, will not have any enforceable obligation to pay any
leasing or brokerage commission upon the renewal of any Lease. Except as set
forth on
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Schedule 2.11, no material construction, alteration or other leasehold
improvement work with respect to any of the Leases remains to be paid for or to
be performed by the Seller. Except as set forth on Schedule 2.11, the
Financial Statements contain adequate reserves to provide for the restoration
of the properties subject to the Leases at the end of the respective Lease
terms, to the extent required by the Leases.
2.12 Change in Financial Condition and Assets. Except as set forth on
Schedule 2.12 attached hereto, since May 31, 1996, there has been no change
which materially and adversely affects the business, properties, assets,
condition (financial or otherwise) or prospects of the Seller. Except for
competitive forces and the possible entry into Seller's market of video store
chains, or as set forth on Schedule 2.12, the Seller has no knowledge of any
existing occurrence, event or development which, as far as can be reasonably
foreseen, will have a material adverse effect on the Seller or its business,
properties, assets, condition (financial or otherwise) or prospects.
2.13 Tax Matters.
(a) Except as set forth on Schedule 2.13 to this Agreement and insofar as
material to the ownership and operation of the Assets and the Stores by the
Buyer after the Closing Date:
(i) Within the times and in the manner prescribed by law, the Seller has
filed all Returns which are required to be filed;
(ii) With respect to all amounts in respect of Taxes imposed upon the
Seller for which it could be liable, whether to Taxing Authorities (as, for
example, under law) or to other persons or entities (as, for example, under Tax
allocation agreements), with respect to all taxable periods or portions of
taxable periods ending on or before the Closing Date, all applicable tax laws
and agreements have been fully complied with, and all such amounts required to
be paid by the Seller to Taxing Authorities or others on or before the date
hereof have been paid.
(iii) All Returns filed by the Seller constitute complete and accurate
representations of the respective Tax liabilities of, or attributable to, the
Seller for such years;
(iv) No examination of the Returns of the Seller is currently in progress
nor, to the best knowledge of the Seller, threatened and no unresolved
deficiencies have been asserted or assessed against the Seller as a result of
any audit by any Taxing Authority
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and no such deficiency has been proposed or threatened;
(v) There are no liens for Taxes (other than for current Taxes not yet due
and payable) upon the Assets of the Seller;
(vi) The Seller is not a person other than a United States person within
the meaning of the Code;
(b) For purposes of this Section 2.13: "Return" means any return,
declaration, report, statement or other document required to be filed in
respect of any Tax. "Tax" or "Taxes" means any federal, state, local, foreign
and other governmental net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs duty or other tax, fee, assessment
or charge of any kind whatever, together with interest and any penalty,
addition to tax or additional amount with respect thereto. "Taxing Authority"
means any governmental authority responsible for the imposition of Taxes.
2.14 Assets Complete. Except as disclosed on Schedule 2.14, the Assets
(together with the license granted by Seller to Buyer, as described in Section
1.1(a) above) constitute all of the material rights, interests, assets or
property (tangible or intangible) owned or licensed by the Seller (or in which
the Seller otherwise has rights or any interest) which are currently used in
the conduct of the business as such business is currently conducted by the
Seller.
2.15 Books and Records. The general ledgers and books of account of the
Seller, all federal, state and local income, franchise, property and other tax
returns filed by the Seller, with respect to the Assets, and all other books
and records of the Seller are in all material respects complete and correct and
have been maintained in accordance with good business practice and in
accordance with all applicable procedures required by laws and regulations.
2.16 Contracts and Commitments.
(a) Schedule 2.16 attached hereto contains a true, complete and correct
list (if written) and description (if oral) of all contracts and agreements,
whether written or oral to which the Seller is a party, necessary or useful to
the conduct of the business of the Stores, as conducted by Seller, but
excluding general support, management and supervision provided by Seller's
headquarters office (collectively, the "Contracts"), including without
limitation, the following types of Contracts:
(i) all loan agreements, indentures, mortgages and guaranties to which the
Seller is a party or by which the Seller or any of its property is bound;
(ii) all pledges, conditional sale or title retention agreements, security
agreements, equipment obligations, personal property leases and lease purchase
agreements relating to any of the Assets to which the Seller is a party or by
which the
17
Seller or any of its property is bound;
(iii) all contracts, agreements, commitments, purchase orders or other
understandings or arrangements to which the Seller is a party or by which the
Seller or any of its property is bound which (A) involve payments or receipts
by the Seller of more than $2,000 in the case of any single contract,
agreement, commitment, understanding or arrangement under which full
performance (including payment) has not been rendered by all parties thereto or
(B) which may materially adversely affect the condition (financial or
otherwise) or the properties, assets, business or prospects of the Seller;
(iv) all collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, deferred compensation
agreements, pension plans, retirement plans, employee stock option or stock
purchase plans and group life, health and accident insurance and other employee
benefit plans, agreements, arrangements or commitments to which the Seller is a
party or by which the Seller or any of its property is bound;
(v) all agency, distributor, sales representative and similar agreements
to which the Seller is a party;
(vi) all contracts, agreements or other understandings or arrangements
between the Seller any stockholder or Affiliate of the Seller;
(vii) all leases, whether operating, capital or otherwise, under which the
Seller is lessor or lessee; and
(viii) any other material agreement or contract entered into by the
Seller.
(b) Except as set forth on Schedule 2.16 attached hereto:
(i) each Contract which is to be assumed by Buyer as an Assumed Liability
(an "Assumed Contract") is a valid and binding agreement of the Seller,
enforceable against the Seller in accordance with its terms, and the Seller
does not have any knowledge that any Assumed Contract is not a valid and
binding agreement of the other parties thereto;
(ii) the Seller has fulfilled all material obligations required pursuant
to the Assumed Contracts to have been performed by the Seller on its part prior
to the date
18
hereof, and the Seller has no reason to believe that it will not be able to
fulfill, when due, all of its obligations under the Assumed Contracts which
remain to be performed after the date hereof;
(iii) the Seller is not in breach of or default under any Assumed Contract
in any material respect, and there has occurred no violation by Seller of any
provision of any Assumed Contract which with the passage of time (such as a
grace period) or giving of notice or both would constitute such a default by
Seller, result in a loss of rights or result in the creation of any lien,
charge or encumbrance on Seller's assets, thereunder or pursuant thereto;
(iv) to the best knowledge of the Seller, there is no existing breach or
default by any other party to any Assumed Contract, and there has occurred no
violation of any provision of any Assumed Contract which with the passage of
time (such as a grace period) or giving of notice or both would constitute such
a default by such other party, result in a loss of rights by Seller or result
in the creation of any lien, charge or encumbrance on Seller's assets
thereunder or pursuant thereto;
(v) the Seller is not restricted by any Assumed Contract from carrying on
its business anywhere in the world; and
(vi) the Seller has no written or oral Assumed Contracts to sell products
or perform services which are expected to be performed at, or to result in, a
loss.
(c) Except as set forth on Schedule 2.3 or Schedule 2.16, the
continuation, validity and effectiveness of each Assumed Contract will not be
affected by the transfer thereof to Buyer under this Agreement and all such
Assumed Contracts are assignable to Buyer without a consent.
(d) True, correct and complete copies of all written Contracts have
previously been delivered by the Seller to the Buyer.
2.17 Compliance with Agreements and Laws. Except as set forth on Schedule
2.17, the Seller has all requisite licenses, permits and certificates,
including environmental, health and safety permits, from federal, state and
local authorities necessary to conduct its business and own and operate its
assets (collectively, the "Permits"). Schedule 2.17 attached hereto sets forth
a true, correct and complete list of all such Permits, copies of which have
previously been delivered by the Seller to the Buyer. Except as set forth on
Schedule 2.17, the Seller is not in violation in any material respect of any
law, regulation or ordinance (including, without limitation, laws, regulations
or ordinances relating to building, zoning, environmental, disposal of
hazardous substances, land use or similar matters) relating to its properties,
the violation of which could have a material adverse effect on the Seller or
its properties. Except as set forth on Schedule 2.17, the business of the
Seller does not violate, in any material respect, any federal, state, local or
foreign laws, regulations or orders (including, but not limited to, any of the
foregoing relating to employment discrimination, occupational safety,
environmental protection, hazardous waste (as defined in the Resource
19
Conservation and Recovery Act, as amended, and the regulations adopted pursuant
thereto), conservation, or corrupt practices, the enforcement of which would
have a material and adverse effect on the results of operations, condition
(financial or otherwise), assets, properties, business or prospects of the
Seller. Except as set forth on Schedule 2.17 attached hereto, the Seller has
not since January 1, 1993 received any notice or communication from any
federal, state or local governmental or regulatory authority or otherwise of
any such violation or noncompliance.
2.18 Employee Relations.
(a) The Seller is in compliance in all material respects with all federal,
state and municipal laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, and is not engaged in any
unfair labor practice, and there are no arrears in the payment of wages or
social security taxes.
(b) Except as set forth on Schedule 2.18 attached hereto:
(i) none of the employees of the Seller is represented by any labor union;
(ii) there is no unfair labor practice complaint against the Seller
pending before the National Labor Relations Board or any state or local agency;
(iii) there is no pending labor strike or other labor trouble affecting
the Seller (including, without limitation, any organizational drive);
(iv) there is no labor grievance pending against the Seller;
(v) there is no pending representation question respecting the employees
of the Seller; and
(vi) there are no pending arbitration proceedings arising out of or under
any collective bargaining agreement to which the Seller is a party, or to the
best knowledge of the Seller, any basis for which a claim may be made under any
collective bargaining agreement to which the Seller is a party.
(c) Schedule 2.18 attached hereto sets forth a true, correct and complete
list of (a) the employee benefits provided by the Seller to its employees who
are employed at or render services to the Stores, and all contracts or
agreements between
20
the Seller and such employees, and (b) the Seller's current payroll, including
the job descriptions and salary or wage rates of each of such employees,
showing separately for each such person who received an annual salary in excess
of $20,000 the amounts paid or payable as salary and bonus payments for the
years ending May 31, 1995 and May 31, 1996.
(d) For purposes of this Subsection 2.18, the term "employee" shall be
construed to include sales agents and other independent contractors who spend a
majority of their working time on the Seller's business at or with respect to
the Stores, but shall exclude the Principal.
2.19 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.19 attached hereto, since May 31, 1996, the Seller has not entered
into any transaction which is not in the usual and ordinary course of business,
and, without limiting the generality of the foregoing, the Seller has not,
except in the usual and ordinary course of its business or as set forth on
Schedule 2.19:
(a) Incurred any material obligation or liability for borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge or other encumbrance
any of the Assets;
(c) Sold or purchased, assigned or transferred any of its tangible assets
or cancelled any debts or claims;
(d) Made any material amendment to or termination of any Contract or done
any act or omitted to do any act which would cause the breach of any Contract;
(e) Suffered any losses, whether insured or uninsured, and whether or not
in the control of the Seller, in excess of $5,000 in the aggregate, or waived
any rights of any value;
(f) Made any changes in compensation of its officers, directors or
employees;
(g) Received notice of any litigation, warranty claim or products
liability claims; or
(h) Made any material change in the terms, status or funding condition of
any Employee Plan, as defined in Subsection 2.23 hereof.
2.20 Suppliers. Schedule 2.20 attached hereto sets forth a true, correct
and complete list of the names and addresses of the ten suppliers of the Seller
which accounted for the largest dollar volume of purchases by the Seller for
the fiscal year ending May 31, 1996. None of such suppliers has notified the
Seller that it intends to discontinue its relationship with the Seller.
21
2.21 Prepayments and Deposits. Schedule 2.21 attached hereto sets forth
all prepayments or deposits from customers for products to be shipped, or
services to be performed, after the Closing Date which have been received by
the Seller as of the date hereof.
2.22 Trade Names and Other Intangible Property.
(a) Schedule 2.22 attached hereto sets forth a true, correct and complete
list and, where appropriate, a description of, all Intangible Property. True,
correct and complete copies of all licenses and other agreements relating to
the Intangible Property have been previously delivered by the Seller to the
Buyer.
(b) Except as otherwise disclosed in Schedule 2.22 attached hereto, the
Seller has, to its knowledge, the sole and exclusive right to use all
Intangible Property used in connection with the operation of the Stores. The
Intangible Property rights of the Seller are sufficient to conduct the Seller's
business as currently conducted and, when licensed to the Buyer pursuant to
this Agreement, will be sufficient to permit the Buyer to conduct the business
of the Stores as currently conducted by the Seller. The Seller has received no
notice of, and has no knowledge of any basis for, a claim against it that any
of its operations, activities, products or publications infringes on any
patent, trademark, trade name, copyright or other intellectual property right
of a third party, or that it is illegally or otherwise using the trade secrets,
formulae or any intellectual property rights of others. The Seller has no
disputes with or claims against any third party for infringement by such third
party of any trade name or other Intangible Property of the Seller. The Seller
has taken no steps to protect its right, title and interest in and to the
Intangible Property.
2.23 Employee Benefit Plans.
(a) The Seller does not now have or otherwise contribute to or participate
in, and has not in the past had or otherwise contributed to, any employee
benefit plan subject to the Employee Retirement Income Security Act of 1974.
(b) Except as expressly provided in this Agreement, the Buyer assumes no
liabilities with respect to any employee benefit plan which liability relates
to any period prior to the Closing Date, including, without limitation, any
taxes, accrued vacation or sick pay (whether or not vested), accrued vacation,
sick and personal leaves, employee policies, employee benefit claims or
liability to the Pension Benefit Guaranty Corporation. From and after the
Closing Date, Buyer is hereby assuming liabilities
22
relating to Seller's employee benefit plans only to the extent such liabilities
are allocable or attributable to the Stores and such liabilities accrue after
the Closing Date.
(c) Schedule 2.23 attached hereto contains a true, correct and complete
list of all pension, benefit, profit sharing, retirement, deferred
compensation, welfare, insurance, disability, bonus, vacation pay, severance
pay and other similar plans, programs and agreements, whether reduced to
writing or not, relating to the Seller's employees, or maintained at any time
since January 1, 1991 by the Seller or by any other member of any controlled
group of corporations, group of trades or businesses under common control, or
affiliated service group (as defined for purposes of Section 414(b), (c) and
(m), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code")) (the "Employee Plans") and, except as set forth on Schedule 2.23
attached hereto, the Seller has no obligations, contingent or otherwise, past
or present, under applicable law or the terms of any Employee Plan.
2.24 Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Seller and which are necessary for the execution
and delivery by the Seller of this Agreement and the documents to be executed
and delivered by the Seller in connection herewith have been, or will be prior
to the Closing Date, obtained and satisfied.
2.25 Indebtedness to and from Officers, Directors and Shareholders.
Except as set forth on Schedule 2.25 attached hereto, the Seller is not
indebted, directly or indirectly, to any person who is an officer, director or
shareholder of the Seller or any affiliate of any such person in any amount
whatsoever other than for salaries for services rendered or reimbursable
business expenses, and no such officer, director, shareholder or affiliate is
indebted to the Seller, except for advances made to employees of the Seller in
the ordinary course of business to meet reimbursable business expenses
anticipated to be incurred by such obligor.
2.26 Powers of Attorney and Suretyships. Except as set forth on Schedule
2.26 attached hereto, the Seller has no general or special powers of attorney
outstanding (whether as grantor or grantee thereof) and has no obligation or
liability (whether actual, accrued, accruing, contingent or otherwise) as
guarantor, surety, co-xxxxxx, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity, except as endorser or maker
of checks or letters of credit, respectively, endorsed or made in the ordinary
course of business.
2.27 Cash Flow. The information reflected on Schedule 2.27 attached
hereto is complete and accurate.
2.28 Disclosure. No representation or warranty by the Seller in this
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or
23
will omit any material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances under which they were
made.
3. Representations of the Buyer
The Buyer represents and warrants to the Seller as follows:
3.1 Organization and Authority. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and has requisite power and authority (corporate and other) to own
its properties and to carry on its business as now being conducted. The Buyer
has full power to execute and deliver this Agreement and the Instrument of
Assumption of Liabilities and to issue the shares of Common Stock and
consummate the transactions contemplated hereby and thereby. Certified copies
of the Certificate of Incorporation and the Bylaws of the Buyer, as amended to
date, have been previously delivered to the Seller, are complete and correct,
and no amendments have been made thereto or have been authorized since the date
thereof.
3.2 Capitalization of the Buyer. On the date hereof, the Buyer's
authorized capital stock consists of 25,000,000 shares of Common Stock, $.01
par value ("Common Stock"), and 2,000,000 shares of Preferred Stock, $.01 par
value per share. The shares of Buyer Common Stock to be issued to the Seller
pursuant to the terms of this Agreement, when issued in accordance with the
terms hereof, will be duly authorized, validly issued, fully paid and
non-assessable, and will be registered under the Securities Act of 1933, as
amended.
3.3 Authorization. The execution and delivery of this Agreement by the
Buyer, and the agreements provided for herein, and the consummation by the
Buyer of all transactions contemplated hereby, have been duly authorized by all
requisite corporate action. This Agreement and all such other agreements and
written obligations entered into and undertaken in connection with the
transactions contemplated hereby constitute the valid and legally binding
obligations of the Buyer, enforceable against the Buyer in accordance with
their respective terms. The execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Buyer; (b) violate
the provisions of the Buyer's Certificate of Incorporation or Bylaws; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) conflict with
24
or result in the breach or termination of any term or provision of, or
constitute a default under, or cause any acceleration under, or cause the
creation of any lien, charge or encumbrance upon the properties or assets of
the Buyer pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which it or its properties is a party or by which
the Buyer is or may be bound. Schedule 3.3 attached hereto sets forth a true,
correct and complete list of all consents and approvals of third parties that
are required in connection with the consummation by the Buyer of the
transactions contemplated by this Agreement.
3.4 Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the transactions contemplated by this Agreement have been, or will be prior
to the Closing Date, obtained and satisfied.
3.5 Disclosure. No representation or warranty by the Buyer in this
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant hereto, contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary in order to
make the statements contained therein not misleading.
3.6 Issuance of Shares. The issuance and delivery of the shares of Common
Stock in accordance with this Agreement have been, or prior to the Closing,
will be, duly authorized by all necessary corporate action on the part of the
Buyer, and all the shares of Common Stock have been duly reserved for issuance.
The shares of Common Stock, when issued and delivered in accordance with the
provisions of this Agreement will be duly and validly issued, fully paid and
non-assessable.
4. Access to Information; Public Announcements
4.1 Access to Management, Properties and Records.
(a) From the date of this Agreement until the Closing Date, the Seller
shall afford the officers, attorneys, accountants and other authorized
representatives of the Buyer free and full access upon reasonable notice and
during normal business hours to all management personnel, offices, properties,
books and records of the Seller, so that the Buyer may have full opportunity to
make such investigation as it shall desire to make of the management, business,
properties and affairs of the Seller, and the Buyer shall be permitted to make
abstracts from, or copies of, all such books and records. The Seller shall
furnish to the Buyer such financial and operating data and other information as
to the Assets and the business of the Seller as the Buyer shall reasonably
request.
From the date of this Agreement until the Closing Date, the Buyer shall
provide to the Seller: (i) reasonable access, at reasonable times and upon
reasonable notice, to Seller's senior management personnel; and (ii) copies of
all periodic filings (Reports on Form 00-X, 0-X) made by the Buyer with the
Securities and Exchange Commission.
25
(b) If the Buyer, at its option and expense, prior to the Closing Date,
elects to have a report or reports prepared by an engineer or other
professional selected by the Buyer, certifying that the real property
associated with the Assets (i) complies with all applicable federal, state and
local environmental and wetlands laws, rules and regulations and that there is
not now, and never has been, manufacture, storage, or disposal of hazardous
wastes at the real estate in violation of said laws, rules and regulations,
(ii) complies with all applicable building, health and fire codes, and
subdivision control laws, rules and regulations, the Seller shall cooperate
with such engineer or professional to the extent necessary to prepare such
reports, including, without limitation, providing such engineer or professional
access to such real property and necessary records, and arranging interviews
with employees of the Seller. The Buyer does not anticipate that it will elect
to cause any such reports to be prepared.
4.2 Confidentiality. All information not previously disclosed to the
public or generally known to persons engaged in the respective businesses of
the Seller or the Buyer which shall have been furnished by the Buyer or the
Seller to the other party in connection with the transactions contemplated
hereby or as provided pursuant to this Section 4 shall not be disclosed to any
person other than their respective employees (who have a reasonable need for
access to such information), directors, attorneys, accountants or financial
advisors or other than as contemplated herein. In the event that the
transactions contemplated by this Agreement shall not be consummated, all such
information which shall be in writing shall be returned to the party furnishing
the same, including, to the extent reasonably practicable, all copies or
reproductions thereof which may have been prepared, and neither party shall at
any time thereafter disclose to third parties, or use, directly or indirectly,
for its own benefit, any such information, written or oral, about the business
of the other party hereto. Notwithstanding the above, the Buyer (i) may
include in any Registration Statement, prospectus, prospectus supplement, or
periodic report filed by it with the Securities and Exchange Commission or any
state securities commission or with any stock market, and (ii) may disclose in
order to comply with applicable law or upon advice of Buyer's counsel, any
information regarding the Seller, the business of the Seller, the financial
condition of the Seller and the terms of this Agreement.
4.3 Public Announcements. The parties agree that prior to the Closing
Date, except as otherwise required by law, any and all public announcements or
other public communications concerning this Agreement and the purchase of the
Assets by the Buyer shall be subject to the approval of the Buyer. The Buyer
will not make disparaging remarks regarding the Sellers or the Principal,
provided that nothing herein shall prohibit the Buyer from disclosing or
characterizing any information about the
26
Sellers, the Principal or the transactions contemplated hereby to the extent
necessary or appropriate to comply with applicable laws, including state and
federal securities law.
5. Pre-Closing Covenants of the Seller
From and after the date hereof and until the Closing Date:
5.1 Conduct of Business. The Seller shall carry on its business
diligently and substantially in the same manner as heretofore and shall not
make or institute any unusual or new methods of purchase, sale, shipment or
delivery, lease, management, accounting or operation, except as agreed to in
writing by the Buyer. All of the property of the Seller shall be used,
operated, repaired and maintained in a normal business manner consistent with
past practice.
5.2 Absence of Material Changes. Without the prior written consent of the
Buyer, the Seller shall not:
(a) Incur any obligation or liability (absolute or contingent) that will
become the obligation or liability of Buyer after the Closing, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(b) Mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of the Assets;
(c) Sell, assign, or transfer any of the Assets, except for inventory sold
in the ordinary course of business;
(d) Cancel any debts or claims, except in the ordinary course of business;
(e) Merge or consolidate with or into any corporation or other entity;
(f) Make, accrue or become liable for any bonus, profit sharing or
incentive payment payable to or for the benefit of any employees employed at or
rendering services to the Stores, except for accruals under existing plans, if
any, or increase the rate of compensation payable or to become payable by it to
any of its employees, other than increases in the ordinary course of business
consistent with past practice;
(g) Modify, amend, alter or terminate any of its executory contracts of a
material value or which are material in amount, and which are listed on
Schedule 2.16;
(h) Take or permit any act or omission constituting a breach or default
under any Contract listed on Schedule 2.16;
27
(i) Fail to (i) preserve the possession and control of its assets and
business, (ii) use reasonable efforts (not requiring expenditure of money) to
keep in faithful service its present officers and key employees who render
services at or with respect to the Stores, (iii) use reasonable efforts to
preserve the goodwill of its customers, suppliers, agents, brokers and others
having business relations with it, and (iv) use reasonable efforts to keep and
preserve its business existing on the date hereof until the Closing Date;
(j) Fail to operate its business and maintain its books, accounts and
records in the customary manner and in the ordinary or regular course of
business and maintain in a manner consistent with past practices its business
premises, fixtures, furniture and equipment;
(k) Enter into any leases, contracts, agreements or understandings
relating to the Assets or the Stores other than those entered into in the
ordinary course of business calling for payments which in the aggregate do not
exceed $10,000 for each such lease, contract, agreement or understanding;
(l) Engage any employee to be employed at or render services with respect
to the Stores, for a salary in excess of $20,000 per annum;
(m) Materially alter the terms, status or funding condition of any
Employee Plan;
(n) Commit or agree to do any of the foregoing in the future.
5.3 Taxes. The Seller will, on a timely basis, file all tax returns for
and pay any and all taxes which shall become due or shall have accrued (a) on
account of the operation of the business of the Seller or the ownership of the
Assets on or prior to the Closing Date or (b) on account of the sale of the
Assets (including a pro-rata portion of all personal property and excise taxes
payable with respect to the Assets by the Seller).
5.4 Delivery of Interim Financial Statements. As promptly as possible
following the last day of each month after the date hereof, and in any event
within 15 days after the end of each such month, the Seller shall deliver to
the Buyer its balance sheet and related statements of income, shareholders'
equity, retained earnings and statement of cash flows for the one-month period
then ended, all certified by the Seller's Accountants or Seller's chief
financial officer (collectively, the "Interim Financial
28
Statements").
5.5 Compliance with Laws. Except to the extent reflected on Schedule
2.17, the Seller will comply with all laws and regulations which are applicable
to it, its ownership of the Assets or to the conduct of its business at the
Stores, and will perform and comply with all contracts, commitments and
obligations by which it is bound to the extent relating to the Stores.
5.6 Continued Truth of Representations and Warranties of the Seller. The
Seller will not take any actions which would result in any of the
representations or warranties set forth in Section 2 hereof being untrue.
5.7 Continuing Obligation to Inform. From time to time prior to the
Closing, the Seller will deliver or cause to be delivered to the Buyer
supplemental information concerning events subsequent to the date hereof which
would render any statement, representation or warranty in this Agreement or any
information contained in any Schedule inaccurate or incomplete in any material
respect at any time after the date hereof until the Closing Date.
5.8 Exclusive Dealing. The Seller will not, directly or indirectly,
through any officer, director, agent or otherwise, (a) solicit, initiate or
encourage submission of proposals or offers from any person relating to any
acquisition or purchase of all or a material portion of the Assets and business
of the Stores, or any equity interest in, the Seller or any equity investment,
merger, consolidation or business combination with the Seller, or (b)
participate in any discussions or negotiations regarding, or furnish to any
other person, any non-public information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing. The Seller shall promptly notify the Buyer if any such proposal or
offer, or any inquiry or contact with any person with respect thereto, is made.
5.9 No Publicity. The Seller shall make no public announcement with
respect to this Agreement or the transactions contemplated hereby without the
express prior written consent of the Buyer. The Seller shall hold in
confidence, and use its best efforts to have all of its officers, directors and
personnel hold in confidence, the terms of this Agreement and the transactions
contemplated hereby.
6. Satisfaction of Conditions; Covenant of Buyer.
6.1 Satisfaction of Conditions. The Seller and the Buyer covenant and
agree to use their commercially reasonable efforts to obtain the satisfaction
of the conditions specified in this Agreement.
6.2 Covenants of Buyer. From and after the date hereof, until the Closing
Date, the Buyer will not take any actions which would result in any of the
representations or warranties of the Buyer set forth in Section 3 hereof
becoming untrue (except for the representation and warranty contained in the
first sentence of Section 3.2
29
(and to the extent related to Buyer's authorized capital, the last sentence of
Section 3.1), to which this covenant shall not apply).
7. Conditions to Obligations of the Buyer
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of the Buyer:
7.1 Continued Truth of Representations and Warranties of the Seller;
Compliance with Covenants and Obligations. The representations and warranties
of the Seller shall be true in all material respects (other than
representations and warranties which are qualified as to materiality, which
shall be true in all respects) on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes permitted by the terms hereof or consented to in writing by the Buyer.
The Seller shall have performed and complied in all material respects with all
terms, conditions, covenants, obligations, agreements and restrictions required
by this Agreement to be performed or complied with by it prior to or at the
Closing Date.
7.2 Corporate Proceedings. All corporate and other proceedings required
to be taken on the part of the Seller to authorize or carry out this Agreement
and to convey, assign, transfer and deliver the Assets shall have been taken.
7.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Seller of the transactions contemplated by this
Agreement and the operation of the Seller's business by the Buyer shall have
consented to, authorized, permitted or approved such transactions.
7.4 Consents of Lenders, Lessors and Other Third Parties. The Seller
shall have received all requisite consents and approvals of all lenders,
lessors and other third parties whose consent or approval is required in order
for the Seller to consummate the transactions contemplated by this Agreement,
including, without limitation, those set forth on Schedule 2.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before any court
or other governmental body shall have been instituted or threatened by any
30
governmental body or person whatsoever which shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or which might
affect the right of the Buyer to own or use the Assets after the Closing.
7.6 Opinion of Counsel. The Buyer shall have received an opinion of Xxxx,
Xxxxxxxxxx & Xxxxxxxxx, counsel to the Seller, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit D, and as to such other
matters as may be reasonably requested by the Buyer or its counsel.
7.7 Board of Directors and Shareholder Approval. The shareholders of the
Seller shall have duly authorized the transactions contemplated by this
Agreement (which authorization shall be made only after delivery to the Seller
by the Buyer of a current Prospectus with respect to the shares of Buyer Common
Stock issuable to the Seller in connection with the consummation of the
transactions contemplated hereby).
7.8 The Assets. Except for the Permitted Encumbrances, at the Closing the
Buyer shall receive good, clear, record and marketable title to the Assets,
free and clear of all liens, liabilities, security interests and encumbrances
of any nature whatsoever (other than the Assumed Liabilities).
7.9 Update. The Seller shall have provided the Buyer with a true, correct
and complete list and amount, as of the Closing Date, of:
(a) videotapes held for sale or rental included in the
Inventory (provided Buyer acknowledges that such list will be
generated from Seller's computer database and may include
videotapes that were lost, stolen or damaged since the most
recent physical inventory);
(b) the Fixed Assets; and
(c) the trade accounts payable and accrued liabilities
assumed pursuant to Subsection 1.4(a)(i) hereof.
7.10 Cash Available for Working Capital Purposes. On the Closing Date,
the Seller will have available at each Store cash in the amounts set forth on
Schedule 1.1(a)(iii) hereof, which cash will be transferred to the Buyer
pursuant to the terms of this Agreement.
7.11 Payables. On the Closing Date, the Seller will have no obligations
to suppliers and vendors of goods and services and other trade creditors in
respect of the Stores which are past due in accordance with their terms and in
no event shall the Seller have any of such obligations outstanding for more
than 60 days as of the Closing (regardless of whether past due).
7.12 Tax Lien Waivers. On or prior to the Closing Date, the Seller shall
have obtained and delivered to the Buyer tax lien waivers or certification that
taxes are current from all jurisdictions in which Assets are located and which
provide such tax
31
lien waivers.
7.13 Closing Deliveries. The Buyer shall have received at or prior to the
Closing each of the following documents:
(a) the Instrument of Assumption, the Lockup Agreement and a Xxxx of Sale
substantially in the form attached hereto as Exhibit E;
(b) such instruments of conveyance, assignment and transfer, in form and
substance consistent with this Agreement and satisfactory to the Buyer, as
shall be appropriate to convey, transfer and assign to, and to vest in, the
Buyer, good, clear, record and marketable title to the Assets (subject to the
Permitted Encumbrances);
(c) such certificates of the Seller's officers and such other documents
evidencing satisfaction of the conditions specified in Section 7 as the Buyer
shall reasonably request;
(d) a certificate of the Secretary of State of the
State of Ohio as to the legal existence and good standing (including tax) of
the Seller in Ohio;
(e) certificates of the President of the Seller attesting to the
incumbency of the Seller's officers, respectively, the authenticity of the
resolutions authorizing the transactions contemplated by the Agreement, and the
authenticity and continuing validity of the charter documents delivered
pursuant to Subsection 2.1;
(f) estoppel certificates from each lessor from whom the Seller leases
real or personal property consenting to the assumption of such lease by the
Buyer and representing that, to such lessor's knowledge, there are no
outstanding claims against the Seller under any such lease;
(g) the schedules listed in Subsection 7.9;
(h) cross receipt executed by the Buyer and the Seller;
(i) such other documents, instruments or certificates as the Buyer may
reasonably request.
On or before the Closing, the Seller shall have caused to be delivered to
such
32
location as Buyer may reasonably request (which location may be Buyer's
principal place of business in Philadelphia, Pennsylvania), the following
items:
(j) such contracts, files and other data and documents (or copies thereof)
pertaining to the Assets or the Seller's business at the Stores as the Buyer
may reasonably request; and
(k) copies of the general ledgers and books of account of the Seller, and
all federal, state and local income, franchise, property and other tax returns
filed by the Seller with respect to the Assets since January 1, 1991.
8. Conditions to Obligations of the Seller
The obligations of the Seller under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing at the sole discretion of the Seller:
8.1 Continued Truth of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations. The representations and warranties
of the Buyer in this Agreement shall be true in all material respects (other
than representations and warranties which are qualified as to materiality,
which shall be true in all respects) on and as of the Closing Date as though
such representations and warranties were made on and as of such date, except
for any changes consented to in writing by the Seller. The Buyer shall have
performed and complied with all terms, conditions, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
8.2 Corporate Proceedings. All corporate and other proceedings required
to be taken on the part of the Buyer to authorize or carry out this Agreement
shall have been taken.
8.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this
Agreement shall have consented to, authorized, permitted or approved such
transactions.
8.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer shall
have received all requisite consents and approvals of all lenders, lessors and
other third parties whose consent or approval is required in order for the
Buyer to consummate the transactions contemplated by this Agreement, including,
without limitation, those set forth on Schedule 3.3 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before any court
or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or which might
affect the
33
right of the Seller to transfer the Assets.
8.6 Opinion of Counsel. The Seller shall have received an opinion of Xxxx
and Xxxx, counsel to the Buyer, dated as of the Closing Date, in substantially
the form attached hereto as Exhibit F, and as to such other matters as may be
reasonably requested by the Seller or its counsel.
8.7 Closing Deliveries. The Seller shall have received at or prior to the
Closing each of the following documents:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 8 as the
Seller shall reasonably request;
(b) a certificate of the Secretary of State of the State of Delaware as to
the legal existence and good standing (including tax) of the Buyer in Delaware,
and a certificate of the Secretary of State of Ohio, as to the qualification to
transact business and good standing of the Buyer in Ohio;
(c) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered
pursuant to Subsection 3.1;
(d) Instrument of Assumption of Liabilities executed by the Buyer and in
form and substance consistent with this Agreement and satisfactory to the
Seller;
(e) payment of the Base Purchase Price by delivery of cash and
certificates for the Buyer Common Stock issuable in respect thereof;
(f) cross receipt executed by the Buyer and the Seller; and
(g) such other documents, instruments or certificates as the Seller may
reasonably request.
9. Indemnification
9.1 By the Buyer and the Seller and the Principal. The Buyer on the one
hand and the Seller and the Principal, jointly and severally, on the other
hand, each
34
hereby indemnifies and holds harmless the other against all claims, damages,
losses, liabilities, costs and expenses (including, without limitation,
settlement costs and any legal, accounting or other expenses for investigating
or defending any actions or threatened actions) reasonably incurred by the
Buyer or the Seller in connection with each and all of the following:
(a) Any breach by the indemnifying party of any representation or warranty
in this Agreement;
(b) Any breach of any covenant, agreement or obligation of the
indemnifying party contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement; and
(c) Any misrepresentation contained in any certificate furnished by the
indemnifying party pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement.
9.2A By the Seller and the Principal. The Seller and the Principal, on a
joint and several basis, further agree to indemnify and hold harmless the Buyer
from any and all claims, damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any legal, accounting or
other expenses for investigating or defending any actions or threatened
actions) reasonably incurred by the Buyer, in connection with each and all of
the following:
(a) Any claims against, or liabilities or obligations of, the Seller or
against the Assets not specifically assumed by the Buyer pursuant this
Agreement;
(b) The failure of the Buyer to obtain the protections afforded by
compliance with the notification and other requirements of the bulk sales laws,
if any, in force in the jurisdictions in which such laws may be applicable to
either the Seller or the transactions contemplated by this Agreement;
(c) Any warranty claim or product liability claim relating to the Seller's
business or operation prior to the Closing Date;
(d) Any tax liabilities or obligations of the Seller; and
(e) Any claims against, or liabilities or obligations of, the Seller with
respect to obligations under Employee Plans (i) not specifically assumed by the
Buyer pursuant to this Agreement or (ii) which are assumed by the Buyer but
relate to periods prior to the Closing Date.
9.2B By the Buyer. The Buyer further agrees to indemnify and hold
harmless the Seller and the Principal from any and all claims, damages, losses,
liabilities, costs and expenses (including, without limitation, settlement
costs and any legal, accounting or other expenses for investigating or
defending any actions or threatened actions) reasonably incurred by the Seller
and the Principal, in connection with each and
35
all of the following:
(a) The Assumed Liabilities;
(b) Any claim or liability relating to or arising out of the conduct of
the Stores after the Closing Date; and
(c) Any tax liabilities or obligations of the Buyer.
9.3 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder the party seeking indemnification (the "Indemnified
Party"), shall promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings
by a third-party, the notice to the Indemnifying Party shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom.
The Indemnified Party shall not settle or compromise any claim by a third party
for which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as
provided in Subsection 9.4 of this Agreement.
9.4 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within 30 days after the date such claim is made, (a) the
Indemnified Party may defend against such claim or litigation, in such manner
as it may deem appropriate, including, but not limited to, settling such claim
or litigation, after giving notice of the same to the Indemnifying Party, on
such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified
36
Party defended such third party claim or the amount or nature of any such
settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner.
9.5 Payment of Indemnification Obligation. All indemnification by the
Buyer, the Seller or the Principal hereunder shall be effected by payment of
cash or delivery of a cashier's or certified check in the amount of the
indemnification liability.
9.6 Survival of Representations; Claims for Indemnification. All
representations and warranties made by the parties herein or in any instrument
or document furnished in connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of the parties hereto. All such
representations and warranties shall expire on the date which is 18 months
after the Closing Date, except for claims, if any, asserted in writing prior to
such date, which shall survive until finally resolved and satisfied in full.
All claims and actions for indemnity pursuant to this Section 9 for breach of
any representation or warranty shall be asserted or maintained in writing by a
party hereto on or prior to the expiration of such 18-month period.
Notwithstanding the above claims resulting from the failure by the Seller to
pay any tax when due shall expire one year after any applicable statute of
limitations.
9.7 Limitation. Notwithstanding anything in this Agreement to the
contrary, the aggregate liability of the Seller and the Principal to the Buyer
under this Agreement shall not exceed the amount of the Base Purchase Price.
10. Post-Closing Agreements
The parties agree that from and after the Closing Date:
10.1 Proprietary Information.
(a) The Seller shall hold in confidence, and use its best efforts to have
all of its officers, directors and personnel hold in confidence, all knowledge
and information of a secret or confidential nature with respect to the business
of the Seller and shall not disclose, publish or make use of the same without
the consent of the Buyer, except to the extent that such information shall have
become public knowledge other than by breach of this Agreement by the Seller.
(b) The Seller agrees that the remedy at law for any breach of this
Subsection 10.1 would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of
any provision of this Subsection 10.1.
10.2 No Solicitation or Hiring of Former Employees. Except as provided by
law, for a period of five years after the Closing Date, neither the Seller nor
any Affiliate thereof shall solicit any person who was an employee of the
Seller on the Closing Date to terminate his employment with the Buyer or to
become an employee of
37
the Seller or an Affiliate or hire any person who was such an employee of the
Seller on the date hereof or on the Closing Date. Notwithstanding the above,
if employment with Buyer of any family member of any Principal is terminated by
Buyer, Seller and its Affiliates shall be free to hire such terminated
employee.
10.3 Non-Competition Agreement.
(a) For a period of five years after the Closing Date, neither the Seller
nor any Affiliate (including the Principal) thereof shall (i) market, rent or
sell any product which has the same or substantially the same form, function
and primary application as any existing or proposed product marketed, rented or
sold by the Seller on or prior to the Closing Date or (ii) engage in any
business competitive with the business of the Seller as conducted on the date
hereof or on the Closing Date, in the United States or any other country in
which the Seller conducted its business during the two years prior to the
Closing Date.
(b) The parties hereto agree that the duration and geographic scope of the
non-competition provision set forth in this Subsection 10.3 are reasonable. In
the event that any court determines that the duration or the geographic scope,
or both, are unreasonable and that such provision is to that extent
unenforceable, the parties hereto agree that the provision shall remain in full
force and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The parties intend that this
non-competition provision shall be deemed to be a series of separate covenants,
one for each and every county of each and every state of the United States of
America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be
effective. The Seller agrees that damages are an inadequate remedy for any
breach of this provision and that the Buyer shall, whether or not it is
pursuing any potential remedies at law, be entitled to equitable relief in the
form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision.
10.4 Sharing of Data.
(a) The Seller shall have the right for a period of three years following
the Closing Date to have reasonable access to such books, records and accounts,
including financial and tax information, correspondence, production records,
employment records and other similar information as are transferred to the
Buyer pursuant to the terms of this Agreement for the limited purposes of
concluding its
38
involvement in the business of the Seller prior to the Closing Date and for
complying with its obligations under applicable securities, tax, environmental,
employment or other laws and regulations. The Buyer shall have the right for a
period of three years following the Closing Date to have reasonable access to
those books, records and accounts, including financial and tax information,
correspondence, employment records and other records which are retained by the
Seller pursuant to the terms of this Agreement to the extent that any of the
foregoing relates to the business of the Seller transferred to the Buyer
hereunder or is otherwise needed by the Buyer in order to comply with its
obligations under applicable securities, tax, environmental, employment or
other laws and regulations.
(b) The Seller and the Buyer agree that from and after the Closing Date
they shall cooperate fully with each other to facilitate the transfer of the
Assets from the Seller to the Buyer and the operation thereof by the Buyer.
10.5 Use of Name. Without Buyer's prior written consent, the Seller and
the Principal each agrees not to use the name "Showcase Video", or any
derivation thereof after the Closing Date in connection with any business
related to, competitive with, or an outgrowth of, the business conducted by the
Seller on the date hereof.
10.6 Cooperation in Litigation. Each party hereto will fully cooperate
with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such
party relating to or arising out of the conduct of the business of the Seller
prior to or after the Closing Date (other than litigation arising out the
transactions contemplated by this Agreement). The party requesting such
cooperation shall pay the out-of-pocket expenses (including legal fees and
disbursements) of the party providing such cooperation and of its officers,
directors, employees and agents reasonably incurred in connection with
providing such cooperation, but shall not be responsible to reimburse the party
providing such cooperation for such party's time spent in such cooperation or
the salaries or costs of fringe benefits or similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate at 5:00
p.m., Boston time, on November 15, 1996, if the transactions contemplated
hereby have not been consummated, unless such date is extended by the written
consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement may be
terminated by the mutual written agreement of the parties hereto. In the event
of such termination by agreement, the Buyer shall have no further obligation or
liability to the Seller under this Agreement, and the Seller shall have no
further obligation or liability to the Buyer under this Agreement.
39
11.3 Termination by Reason of Breach. This Agreement may be terminated by
the Seller, if at any time prior to the Closing there shall occur a breach of
any of the representations, warranties or covenants of the Buyer or the failure
by the Buyer to perform any condition or obligation hereunder, and may be
terminated by the Buyer, if at any time prior to the Closing there shall occur
a breach of any of the representations, warranties or covenants of the Seller
or the failure of the Seller to perform any condition or obligation hereunder.
12. Transfer and Sales Tax
Notwithstanding any provisions of law imposing the burden of such taxes on
the Seller or the Buyer, as the case may be, the Seller shall be responsible
for and shall pay (a) all sales, use and transfer taxes, and (b) all
governmental charges, if any, upon the sale or transfer of any of the Assets
hereunder. If the Seller shall fail to pay such amounts on a timely basis, the
Buyer may pay such amounts to the appropriate governmental authority or
authorities, and the Seller shall promptly reimburse the Buyer for any amounts
so paid by the Buyer.
13. Brokers
13.1 For the Seller. The Seller represents and warrants that it has not
engaged any broker or finder or incurred any liability for brokerage fees,
commissions or finder's fees in connection with the transactions contemplated
by this Agreement. The Seller agrees to indemnify and hold harmless the Buyer
against any claims or liabilities asserted against it by any person acting or
claiming to act as a broker or finder on behalf of the Seller.
13.2 For the Buyer. The Buyer agrees to pay all fees, expenses and
compensation owed to any person, firm or corporation who has acted in the
capacity of broker or finder on its behalf in connection with the transactions
contemplated by this Agreement. The Buyer agrees to indemnify and hold
harmless the Seller against any claims or liabilities asserted against it by
any person acting or claiming to act as a broker or finder on behalf of the
Buyer.
14. Notices
Any notices or other communications required or permitted hereunder shall
be sufficiently given if delivered personally or sent by telex, federal express
or other nationally recognized overnight courier, registered or certified mail,
postage prepaid,
40
addressed as follows or to such other address of which the parties may have
given notice:
To the Seller: Xx. Xxxxxx X. Xxxxx
c/o Ohio Entertainment Corp.
0000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
With a copy to: Xxxxxx Xxxxxxx, Esq.
Xxxx, Xxxxxxxxxx & Xxxxxxxxx
1800 Star Bank Center
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
To the Buyer: West Coast Entertainment Corporation
0000 Xxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Chief Operating Officer
With a copy to: Xxxx and Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Esq.
Unless otherwise specified herein, such notices or other communications shall
be deemed received (a) on the date delivered (or on which delivery is refused),
if delivered personally; (b) the business day following delivery to an
overnight courier, if sent by overnight courier; (c) three business days after
being sent, if sent by registered or certified mail or (d) the date of actual
receipt, if sent by any other method.
15. Arbitration
(a) Any dispute, controversy or claim between the parties arising out of
or relating to this Agreement, a breach hereof or the transactions contemplated
hereby, shall be settled by arbitration in accordance with the provisions of
this Section 15. Any arbitration pursuant to this Section 15 shall be
conducted by a single arbitrator appointed by the Philadelphia, Pennsylvania
office of the American Arbitration Association upon the request of either
party. The arbitrator shall have a minimum of five years of experience in the
area of business relevant to the particular dispute. Each party shall be
permitted to submit only one proposal to the arbitrator, and the arbitrator
shall be required to choose one of such two proposals as the resolution of the
dispute. The arbitrator may proceed to a resolution notwithstanding the
failure of a party to participate in the proceedings. Each of the parties
shall pay its own costs and expenses in connection with any such arbitration,
and the parties shall share equally in the fees and expenses of the arbitrator.
(b) The parties agree that any such arbitration will occur in
Philadelphia,
41
Pennsylvania, any such arbitration award shall be final and binding upon the
parties, may be entered in any court having jurisdiction and shall not be
appealable by either party in any court.
16. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer and the Seller may not assign their respective rights or obligations
hereunder without the prior written consent of the other party; provided,
however, that the Buyer may assign this Agreement, and its rights and
obligations hereunder, to a subsidiary or affiliate. Any assignment in
contravention of this provision shall be void. No assignment shall release the
Buyer from any obligation or liability under this Agreement.
17. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits hereto, and all agreements
and instruments to be delivered by the parties pursuant hereto represent the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof and supersede all prior oral and written and all
contemporaneous oral negotiations, commitments and understandings between such
parties. The Buyer, the Seller and the Principal may amend or modify this
Agreement, in such manner as may be agreed upon, by a written instrument
executed by the Buyer, the Seller and the Principal.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provision of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
18. Expenses
Except as otherwise expressly provided herein, the Buyer and the Seller
shall each pay their own expenses in connection with this Agreement and the
transactions contemplated hereby. Buyer shall pay the costs and expenses of
any audit conducted by, or at the request of, the Buyer, and Seller shall pay
the costs and expenses of any accounting services provided to the Seller in
connection with the transactions contemplated hereby. Notwithstanding the
above, the Buyer shall reimburse Seller for reasonable travel and related
expenses (approved by the Buyer in advance) which are
42
incurred in connection with attendance by Seller at meetings requested by the
Buyer.
19. Legal Fees
In the event that legal proceedings are commenced by the Buyer against the
Seller, or by the Seller against the Buyer, in connection with this Agreement
or the transactions contemplated hereby, the party or parties which do not
prevail in such proceedings shall pay the reasonable attorneys' fees and other
costs and expenses, including investigation costs, incurred by the prevailing
party in such proceedings.
20. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware.
21. Section Headings
The section headings are for the convenience of the parties and in no way
alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
22. Severability
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
23. Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be one and the same
document.
(end of page)
43
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
(Corporate Seal) OHIO ENTERTAINMENT CORP.
ATTEST:
/s/ Xxxx Xxxxx, Secretary By: /s/ Xxxxxx X. Xxxxx
------------------------- ---------------------------------
Title: President
---------------------------
PRINCIPAL:
/s/ Xxxxxx X. Xxxxx
---------------------------------
Xxxxxx X. Xxxxx
(Corporate Seal) WEST COAST ENTERTAINMENT CORPORATION
ATTEST:
By: /s/ Xxxxxxx Xxxxx
---------------------------------
/s/ Xxxxx Xxxxxxxxx Title: Chief Financial Officer
---------------------------- ------------------------------
44
Exhibit A
Video Stores
Store #1
0000 Xxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
Store #2
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Store #3
0000 Xxx Xxxx Xxxx
Xxxxx Xxxxxxx, Xxxx 00000
Store #4
0000 Xxx Xxxxx Xxxxxx
Xxxxxx, Xxxx 00000
Store #5
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxx 00000
