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ASSET PURCHASE AGREEMENT
By and Among
West Coast Entertainment Corporation,
the Entities Named on SCHEDULE A Attached Hereto
and
Xxxxxx Xxxxxxxx, Xxx Xxxxxx and Xxxxx Xxxxxx
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TABLE OF CONTENTS
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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.................. 5
1.5 Allocation of Base Purchase Price and
Assumed Liabilities............................. 7
1.6 The Closing..................................... 7
1.7 No Apportionment................................ 7
1.8 Deposit ........................................ 7
1.9 New Stores...................................... 8
2. Representations of the Sellers and the Principals..... 8
2.1 Organization.................................... 8
2.2 Capitalization of the Sellers .................. 8
2.3 Authorization................................... 9
2.4 Ownership of the Assets......................... 9
2.5 Financial Statements............................ 10
2.6 Absence of Undisclosed Liabilities.............. 12
2.7 Litigation...................................... 12
2.8 Insurance....................................... 12
2.9 Inventory....................................... 12
2.10 Fixed Assets.................................... 13
2.11 Leases.......................................... 13
2.12 Change in Financial Condition and Assets........ 14
2.13 Tax Matters..................................... 14
2.14 Accounts Receivable............................. 15
2.15 Books and Records............................... 15
2.16 Contracts and Commitments....................... 16
2.17 Compliance with Agreements and Laws............. 17
2.18 Employee Relations.............................. 18
2.19 Absence of Certain Changes or Events............ 19
2.20 Suppliers....................................... 20
2.21 Prepayments and Deposits........................ 20
2.22 Trade Names and Other Intangible Property....... 20
2.23 Employee Benefit Plans.......................... 21
2.24 Regulatory Approvals............................ 22
2.25 Indebtedness to and from Officers, Directors
and Shareholders................................ 22
2.26 Powers of Attorney and Suretyships.............. 22
2.27 Disclosure...................................... 22
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3. Representations of the Buyer.......................... 23
3.1 Organization and Authority...................... 23
3.2 Capitalization of the Buyer..................... 23
3.3 Authorization................................... 23
3.4 Regulatory Approvals............................ 24
3.5 Disclosure...................................... 24
3.6 Issuance of Shares.............................. 24
4. Access to Information; Public Announcements........... 24
4.1 Access to Management, Properties and Records.... 24
4.2 Confidentiality................................. 25
4.3 Public Announcements............................ 26
4.4 Registration Statement.......................... 26
5. Pre-Closing Covenants of the Seller................... 26
5.1 Conduct of Business............................. 27
5.2 Absence of Material Changes..................... 27
5.3 Taxes........................................... 28
5.4 Delivery of Interim Financial Statements ....... 29
5.5 Compliance with Laws............................ 29
5.6 Continued Truth of Representations
and Warranties of the Sellers................... 29
5.7 Continuing Obligation to Inform................. 29
5.8 Exclusive Dealing............................... 29
5.9 No Publicity.................................... 30
6. Satisfaction of Conditions, Liquidated Damages........ 30
6.1 Satisfaction of Conditions...................... 30
6.2 Liquidated Damages.............................. 30
7. Conditions to Obligations of the Buyer................ 31
7.1 Continued Truth of Representations
and Warranties of the Seller; Compliance with
Covenants and Obligations ...................... 31
7.2 Corporate Proceedings........................... 31
7.3 Governmental Approvals.......................... 31
7.4 Consents of Lenders, Lessors and Other
Third Parties................................... 32
7.5 Adverse Proceedings............................. 32
7.6 Opinion of Counsel.............................. 32
7.7 Board of Directors and Shareholder and Member and
Manager Approval................................ 32
7.8 The Assets...................................... 32
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7.9 Update.......................................... 32
7.10 Cash Available.................................. 33
7.11 Payables........................................ 33
7.12 Tax Holdback Agreement.......................... 33
7.13 Closing Deliveries.............................. 33
8. Conditions to Obligations of the Sellers.............. 34
8.1 Continued Truth of Representations and
Warranties of the Buyer; Compliance
with Covenants and Obligations.................. 34
8.2 Corporate Proceedings........................... 35
8.3 Governmental Approvals.......................... 35
8.4 Consents of Lenders, Lessors and Other
Third Parties................................... 35
8.5 Adverse Proceedings............................. 35
8.6 Opinion of Counsel.............................. 35
8.7 Closing Deliveries.............................. 35
9. Indemnification....................................... 36
9.1 By the Buyer and the Sellers
and the Principals.............................. 36
9.2A By the Sellers and the Principals............... 36
9.2B By the Buyer.................................... 37
9.3 Claims for Indemnification...................... 38
9.4 Defense by Indemnifying Party.................. 39
9.5 Payment of Indemnification Obligation........... 39
9.6 Survival of Representations; Claims for
Indemnification................................. 39
9.7 Indemnification Limitations..................... 40
10. Post-Closing Agreements............................... 40
10.1 Proprietary Information......................... 40
10.2 No Solicitation or Hiring of Former Employees... 40
10.3 Non-Competition Agreement....................... 40
10.4 Sharing of Data................................. 41
10.5 Use of Name.................................... 42
10.6 Cooperation in Litigation....................... 43
11. Termination of Agreement.............................. 43
11.1 Termination by Lapse of Time.................... 43
11.2 Termination by Agreement of the Parties........ 43
11.3 Termination by Reason of Breach................ 43
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12. Transfer and Sales Tax................................ 43
13. Brokers............................................... 44
13.1 For the Sellers................................. 44
13.2 For the Buyer................................... 44
14. Notices............................................... 44
15 Arbitration........................................... 45
16. Successors and Assigns................................ 46
17. Entire Agreement; Amendments; Attachments............. 46
18. Expenses.............................................. 47
19. Legal Fees............................................ 47
20. Governing Law......................................... 47
21. Section Headings...................................... 47
22. Severability.......................................... 47
23. Counterparts.......................................... 47
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ASSET PURCHASE AGREEMENT
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Agreement made as of September 30, 1996 by and among West
Coast Entertainment Corporation, a Delaware corporation with its
principal office at 0000 Xxxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000 (the "Buyer"), each of the entities named on Schedule A
attached hereto, each of whom has a principal office as indicated
on SCHEDULE A (collectively, the "Sellers" and individually, a
"Seller"), and Xxxxxx Xxxxxxxx, Xxx Xxxxxx and Xxxxx Xxxxxx
(collectively, the "Principals" and individually, a "Principal").
Preliminary Statement
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The Buyer desires to purchase, and the Sellers desire to
sell, substantially all of the assets and businesses of the
Sellers, each of which is engaged in the retail video rental and
sales business (the "Business"), for the consideration set forth
below and the assumption of certain of the Sellers' 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
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1.1 Delivery of the Assets.
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(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 Sellers shall sell,
transfer, convey, assign and deliver to the Buyer, and the Buyer
shall purchase from the Sellers, the following properties, assets
and other claims, rights and interests:
(i) all inventories, videotapes, finished
goods, office supplies, maintenance supplies, packaging materials,
spare parts and similar items of the Sellers (collectively, the
"Inventory") which exist on the Closing Date (as defined below);
(ii) all accounts, accounts receivable, notes
and notes receivable existing on the Closing Date which are
payable to the Sellers, including any security held by the Sellers
for the payment thereof (the "Accounts Receivable");
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(iii) all prepaid expenses, prepaid rent,
prepaid insurance, deposits, security deposits and other similar
assets of the Sellers existing on the Closing Date;
(iv) all rights of the Sellers under the
contracts, agreements, leases, licenses and other instruments set
forth on SCHEDULE 2.16 attached hereto (collectively, the
"Contract Rights");
(v) subject to the provisions of Section
10.4, copies of all books, records and accounts, correspondence,
studies, reports or summaries relating to or arising out of the
Business, and originals of all manuals and customer lists;
(vi) all rights of the Sellers under express
or implied warranties from the suppliers of the Sellers;
(vii) all of the machinery, equipment,
furniture, leasehold improvements and construction in progress
owned by the Sellers on the Closing Date, regardless of whether
reflected as "fixed assets" or "capital assets" in the accounting
records of the Sellers (collectively, the "Fixed Assets");
(viii) all of the Sellers' right, title and
interest in and to all intangible property rights, including but
not limited to inventions, discoveries, trade secrets, processes,
formulas, know-how, United States and foreign patents, patent
applications, trade names, including the name "Super Video Store",
and the service xxxx "More Movies, More Copies, More Fun!" or any
derivation of any of the foregoing, trademarks, trademark
registrations, applications for trademark registrations,
copyrights, copyright registrations, owned or, where not owned,
used by the Sellers (or any of them) in the Business and all
licenses and other agreements to which any Seller is a party (as
licensor or licensee) or by which any Seller is bound relating to
any of the foregoing kinds of property or rights to any "know-how"
or disclosure or use of ideas (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 Sellers which exist on the Closing
Date, of every kind and nature and description, whether tangible
or intangible, real, personal or mixed.
(b) Notwithstanding the provisions of
paragraph (a) above, the assets to be transferred to the Buyer
under this Agreement shall not include (i) cash of the Sellers,
other than (x) an aggregate of $14,000 of cash on hand at the
Stores (as defined below) and (y) deposits and prepayments from
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customers (which shall be transferred to the Buyer to be held as
such), (ii) any motor vehicles or other rolling stock owned by the
Sellers on the Closing Date, or (iii) the those assets listed on
SCHEDULE 1.1(ii) attached hereto (collectively, the items referred
to in clauses (i), (ii) and (iii) are hereinafter referred to as
the "Excluded Assets").
(c) The Inventory, Accounts Receivable, Contract
Rights, Fixed Assets, Intangible Property and other properties,
assets and business of the Sellers described in paragraph (a)
above, other than the Excluded Assets, shall be referred to
collectively as the "Assets." The Assets relate to the 14 retail
video stores identified on SCHEDULE B attached hereto, which
constitute all of the retail video stores in which each Seller has
an interest. All of such stores are sometimes hereinafter
referred to collectively as the "Stores."
1.2 FURTHER ASSURANCES. At any time and from time to
time after the Closing, at the Buyer's request and without further
consideration, the Sellers promptly shall execute and deliver such
instruments of sale, transfer, conveyance, assignment and
confirmation, and take such other action, as the Buyer may
reasonably request to more effectively transfer, convey and assign
to the Buyer, and to confirm the Buyer's title to, all of the
Assets, to put the Buyer in actual possession and operating
control thereof, to assist the Buyer in exercising all rights with
respect thereto and to carry out the purpose and intent of this
Agreement. If the Buyer requests the Sellers to take any such
action more than 180 days after the Closing Date, the Buyer shall
reimburse the Sellers for their reasonable, documented out-of-
pocket expenses associated therewith.
1.3 Base Purchase Price.
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(a) The purchase price for the Assets shall be an
amount equal to (i) $10,550,000 minus (ii) the amount of the
current accounts payable of the Sellers assumed by the Buyer on
the Closing Date pursuant to clauses (i) and (ii) of Section
1.4(a) below (the "Base Purchase Price"). The Base Purchase Price
shall be subject to adjustment as provided in Section 1.7 below.
Any such adjustment shall increase or reduce the portion of the
Base Purchase Price which is payable by delivery of cash, as
described in Section 1.3(b)(ii) below.
(b) The Base Purchase Price shall be paid as
follows. At the Closing, the Buyer shall deliver to the Sellers
(i) $3,919,000 by delivery of an instrument of evidence of
indebtedness pursuant to which the Buyer shall issue shares of its
Common Stock, $.01 par value per share ("Common Stock"), which
instrument shall be on the terms described below (the
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"Instrument"), and (ii) the balance by wire transfer of
immediately available federal funds, to an account designated by
the Sellers. The Base Purchase Price (as adjusted in the manner
provided in this Agreement) shall be allocated among each Seller
in the manner provided on SCHEDULE C attached hereto.
The Instrument shall provide for issuance to the Sellers of a
number of shares of Buyer Common Stock equal to (I) $3,919,000
divided by (II) 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 (the "Market Value"). The Instrument
shall provide for issuance of one-third (in number of shares) of
the total number of shares of Buyer Common Stock issuable pursuant
to the Instrument on the date which is 180 days following the
Closing Date (the "First Issue Date"); one-third (in number of
shares) of such shares on the date which is 365 days following the
Closing Date (the "Second Issue Date"); and the balance on the
date which is 545 days following the Closing Date (the "Third
Issue Date").
The Instrument shall further provide that:
(x) If, on the First Issue Date, the closing price of a
share of Buyer Common Stock as reported on The Nasdaq Stock
Market (the "First Issue Date Price"), is less than the
Market Value, the Buyer shall deliver, within three business
days following the First Issue Date, (1) cash or (2)
additional shares of registered Buyer Common Stock, valued at
the First Issue Date Price, which stock shall not be subject
to any restrictions whatsoever, or (3) some combination of
items (1) and (2), in any event, with an aggregate value
equal to (A) the number of shares of Buyer Common Stock
issued on the First Issue Date multiplied by (B) the excess
of the Market Value over the First Issue Date Price.
(y) If, on the Second Issue Date, the closing price of
a share of Buyer Common Stock as reported on the Nasdaq Stock
Market (the "Second Issue Date Price"), is less than the
Market Value, the Buyer shall deliver, within three business
days following the Second Issue Date, (1) cash or (2)
additional shares of registered Buyer Common Stock, valued at
the Second Issue Date Price, which stock shall not be subject
to any restrictions whatsoever, or (3) some combination of
items (1) and (2), in any event, with an aggregate value
equal to 50% of (A) the number of shares of Buyer Common
Stock issued on the Second Issue Date multiplied by (B) the
excess of the Market Value over the Second Issue Date Price.
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The Instrument shall permit set off, against amounts payable
thereunder, of amounts or obligations owed by the Principals or
the Sellers to the Buyer. All shares issued pursuant to the
Instrument shall be registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration
Statement filed with the Securities and Exchange Commission (the
"SEC"), which Registration Statement shall, at the time of each
issuance of such shares, be effective.
The Instrument shall provide that if the Buyer defaults in
the delivery of shares on any such date, the Sellers shall provide
notice thereof to the Buyer and an opportunity to cure such
default during a 30-day period thereafter. If the Buyer then
fails to deliver such shares, the Buyer's obligation to deliver
all unissued shares as provided in the Instrument shall
accelerate. The obligation to issue shares under the Instrument
shall also accelerate upon a Bankruptcy Event (as defined in the
Instrument) with respect to Buyer.
Following any acceleration of the Instrument, the Instrument
shall become, at the election of the Sellers, payable not in
shares of Buyer Common Stock, but in cash in a dollar amount equal
the number of Unissued Shares multiplied by the Market Value.
The Instrument shall provide that the consideration issuable
thereunder is allocable (for income tax purposes) solely to
goodwill to be acquired by the Buyer from the Sellers, and not to
any other assets of the Sellers.
The Instrument shall also provide that if, prior to the
issuance of all shares to the Sellers pursuant to the Instrument
(any such shares so unissued, the "Unissued Shares"), the Buyer
registers shares of Buyer Common Stock owned by Xxxxx X. Xxxxxxxx,
III or T. Xxxx Xxxxxxxx (the "Standleys") pursuant to a
Registration Statement, and the Standleys sell such shares, the
Buyer shall, at the written election of the Sellers, issue all
Unissued Shares pursuant to the Instrument within 30 days
following the date on which the Standleys sell such shares.
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 1, pursuant to which it shall assume and agree
to perform, pay and discharge the following liabilities,
obligations and commitments of the Sellers related to the Business
(the "Assumed Liabilities"):
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(i) All accounts payable incurred in the
ordinary course of business and reflected on the balance sheets of
the Sellers as of December 31, 1995 previously delivered to the
Buyer (the "Balance Sheet"), less (w) any payments made from
December 31, 1995 (the "Balance Sheet Date") to the Closing Date,
(x) any accounts payable of the Sellers to any Affiliate of any
Seller as such term is defined in the Securities Act, as amended,
and the rules and regulations promulgated thereunder, (y) any
accounts payable which are, as of the Closing Date, past due and
(z) any accounts payable which, as of the Closing Date, have been
outstanding for greater than 60 days (regardless of whether past
due), provided that, in no event shall the aggregate amount of the
liabilities assumed pursuant to this clause (i) and clause (ii)
below exceed $400,000, and the Sellers shall discharge any
liabilities to the extent necessary to reduce all such liabilities
to $400,000 or less;
(ii) All accounts payable and accrued
liabilities of the Sellers incurred in the ordinary course of
business of the Sellers from the Balance Sheet Date to the Closing
Date, other than (x) any liabilities of the Sellers to any
Affiliate of any Seller, (y) accounts payable which are by their
terms past due as of the Closing Date and (z) any accounts payable
which, as of the Closing Date, have been outstanding for greater
than 60 days (regardless of whether past due), provided that, in
no event shall the aggregate amount of the liabilities assumed
pursuant to this clause (ii) and clause (i) above exceed $400,000,
and the Sellers shall discharge any liabilities to the extent
necessary to reduce all such liabilities to $400,000 or less;
(iii) All obligations of the Sellers continuing
after the Closing under the leases and contracts (which shall not
and may not include liabilities under employee benefit plans) of
the Business and set forth on SCHEDULE 1.4 attached hereto which
become due and payable after the Closing Date; and
(iv) All other liabilities and obligations of
the Sellers 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 Sellers shall remain
unconditionally liable for, all obligations, liabilities and
commitments, fixed or contingent, of the Sellers other than the
Assumed Liabilities. Without limiting the foregoing, the Buyer
shall not assume any liabilities or obligations of the Sellers for
wages, severance pay, vacation pay or under any employee benefit
plan.
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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 in the
manner specified on SCHEDULE 1.5 attached hereto. As provided in
Section 1.3(b) above, the Base Purchase Price shall be allocated
among each Seller in the manner provided on SCHEDULE C attached
hereto.
1.6 THE CLOSING. The Closing shall take place on or
before September 30, 1996 (time being of the essence), at the
offices of Xxxx and Xxxx, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx,
at such time or date as may be selected by Buyer, on not less than
two days prior notice to any Principal (which notice may be given
orally), or at such other time and date as may be mutually agreed
upon in writing by the Buyer and the Principals. The transfer of
the Assets by the Sellers to the Buyer shall be deemed to occur at
9:00 a.m., Boston time, on the date of the Closing (the "Closing
Date").
In the event that the Closing does not occur on or before
September 30, 1996, the Buyer and the Sellers shall be released
from all of their obligations under this Agreement, and any other
agreements between the Buyer and the Sellers (except that the
Deposit, as defined below, shall be disposed of in accordance with
the Escrow Agreement described in Section 1.8 below).
1.7 NO APPORTIONMENT. Except as specifically provided
in this Section 1.7 below, the purchase price of the assets shall
not be subject to any adjustment for any prepaid expenses of the
Sellers, 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
amounts, if any, shall not be added to or deducted from the Base
Purchase Price. The Sellers 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 DEPOSIT. The Buyer has previously deposited with
Xxxxx & Xxxxxxx, as escrow agent (the "Escrow Agent") cash in the
amount of $200,000 as an xxxxxxx money deposit hereunder (the
"Deposit") in accordance with the terms of an Escrow Agreement
(the "Escrow Agreement"). The Deposit shall be delivered to the
Sellers or the Buyer, as applicable, in accordance with the terms
of the Escrow Agreement.
THE SELLERS AND THE PRINCIPALS, ON THE ONE HAND, AND THE
BUYER, ON THE OTHER HAND, HAVE BEEN REPRESENTED BY SEPARATE
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COUNSEL IN CONNECTION WITH THIS AGREEMENT. ONE OF SUCH COUNSEL
MAY SERVE AS THE ESCROW AGENT. TO THE EXTENT THAT SERVICE AS SUCH
ESCROW AGENT CONSTITUTES A CONFLICT OF INTEREST, EACH OF THE
SELLERS, PRINCIPALS AND THE BUYER HEREBY EXPRESSLY WAIVE ANY SUCH
CONFLICT OF INTEREST WITH RESPECT TO ANY REPRESENTATION OF THE
BUYER OR THE SELLERS OR THE PRINCIPALS IN THE FUTURE, INCLUDING
REPRESENTATION IN CONNECTION WITH RESOLUTION OF DISPUTES ARISING
UNDER THE ESCROW AGREEMENT.
1.9 NEW STORES. Neither the Sellers nor the Principals
(nor any of their respective Affiliates) shall be permitted or
entitled to open additional retail stores prior to the Closing,
unless the Buyer shall have previously consented thereto, which
consent may be granted or withheld by the Buyer in its sole and
absolute discretion.
2. Representations of the Sellers and the Principals
-------------------------------------------------
The Sellers and the Principals, jointly and severally,
represent and warrant to the Buyer as follows (it being understood
that all references in this Section 2 to the Sellers shall be
deemed to include all of the Sellers, unless the context otherwise
requires):
2.1 ORGANIZATION. Each Seller is a corporation or
limited liability company duly organized, validly existing and in
good standing under the laws of the state of its organization, as
specified on SCHEDULE D attached hereto, 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. No Seller
directly or indirectly owns or holds any legal or beneficial
equity interest, in any corporation, partnership, joint venture,
limited liability company or other entity. Each Seller is duly
qualified to do business and in good standing in each of the
jurisdictions listed on SCHEDULE 2.1(i) attached hereto, which
constitute all jurisdictions in which their ownership of property
or the character of their business requires such qualification.
Certified copies of the charter, bylaws and other governing
instruments of each of the Sellers, 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. SCHEDULE B sets forth a list of each
retail video rental store (including the location of each such
store and the name and address of all owners of each such store)
owned, operated or licensed directly or indirectly by each Seller.
2.2 CAPITALIZATION OF THE SELLERS. Each Seller's
authorized and issued capital stock or membership interests are as
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specified on SCHEDULE D. The Principals own (beneficially and of
record) all issued and outstanding shares of stock or constitute
all of the members and managers of each Seller, all as more fully
specified on SCHEDULE D. All of such shares or membership
interests have been duly and validly issued and are fully paid
and nonassessable.
2.3 AUTHORIZATION. The execution and delivery of this
Agreement by each Seller, and the agreements provided for herein,
and the consummation by each Seller of all transactions
contemplated hereby, have been duly authorized by all requisite
corporate and shareholder (or limited liability company member
and/or manager) action (as the case may be). This Agreement and
all such other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby
to which any Seller is a party constitute the valid and legally
binding obligations of such Seller, enforceable against such
Seller in accordance with their respective terms. The execution,
delivery and performance by each Seller of this Agreement and the
agreements provided for herein, and the consummation by each
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 the provisions of any law, rule or regulation
applicable to such Seller; (b) violate the provisions of the
charter or Bylaws or limited liability company agreement or
certificate of formation or organization of such Seller; (c)
violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (d) 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 such Seller pursuant to, any indenture,
mortgage, deed of trust or other instrument or agreement to which
such Seller is a party or by which such Seller or any of its
properties is or may be 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 each 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 Sellers are, and at the Closing will be, the true and lawful
owners of the Assets, and will have the right to 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"). The delivery to the Buyer of the instruments of
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transfer of ownership contemplated by this Agreement will vest
good and marketable title to the Assets in the Buyer, free and
clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, encumbrances and claims of any
kind or nature whatsoever, except for the Permitted Encumbrances.
2.5 Financial Statements.
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(a) The Sellers have previously delivered to the
Buyer their combined audited balance sheets as of December 31,
1993, 1994 and 1995 (the "Audited Balance Sheets") and the related
statements of income, shareholders' equity, retained earnings and
statements of cash flow of the Sellers for the fiscal years ending
December 31, 1993, 1994 and 1995 (collectively, including the
Audited Balance Sheet, the "Audited Financial Statements").
The Sellers have also delivered their combined unaudited
balance sheets as of December 31, 1991 and 1992 (the "Unaudited
Balance Sheets") and the related statements of income,
shareholders' equity, retained earnings and statements of cash
flow of the Sellers for the fiscal years then ended (collectively,
including the Unaudited Balance Sheets, the "Unaudited Financial
Statements").
The Sellers have delivered to the Buyer their internal
statements for each whole monthly period commencing after June 30,
1996 and ending prior to the date hereof (the "Internal
Statements"), which were prepared by Sellers in accordance with
their internal accounting policies, consistently applied.
The Sellers have also delivered a report prepared by Sellers'
management (which is attached as SCHEDULE 2.5 hereto, and entitled
"ADJUSTED CASH FLOW"), which Sellers hereby certify as a true and
correct statement of Sellers' aggregate net operating cash flow
for the year ended December 31, 1995.
The Sellers shall deliver to the Buyer, prior to the Closing,
their combined unaudited balance sheets as of June 30, 1996 and
the combined statements of operations and retained earnings and
statements of cash flows for the six months ended June 30, 1996
prepared in accordance with generally accepted accounting
principles ("GAAP") applied consistently with Sellers' past
practices, which shall be reviewed by Sellers' independent outside
accounting firm and accompanied by an unqualified report from such
accounting firm (the "June Statements"). In addition, the Sellers
have agreed to provide to the Buyer access to Sellers' books and
records, and the Sellers have directed Sellers' independent
outside accounting firm to assist Buyer, in connection with the
preparation of the Sellers' combined unaudited balance sheet as of
June 30, 1995, and the combined comparative statements of
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operations and retained earnings and statements of cash flow for
the six months ended June 30, 1996 and June 30, 1995, prepared in
accordance with GAAP applied consistently with Sellers' past
practices, which shall be reviewed by Sellers' independent outside
accounting firm. The expenses payable to Sellers' independent
outside accounting firm in connection with their review of the
June Statements shall be borne equally by the Buyer and the Seller
(regardless of whether the transactions contemplated by this
Agreement are consummated); provided that in no event shall the
Buyer be required to pay more than $12,500 of such expenses. The
expenses payable to Sellers' independent outside accounting firm
in connection with the preparation and review of the June 30, 1995
statements shall be borne by the Buyer (regardless of whether the
transactions contemplated by this Agreement are consummated).
The Audited Financial Statements have been prepared in
accordance with generally accepted accounting principles applied
consistently with past practice and are certified without
qualification by the Sellers' respective independent public
accountants. The Unaudited Financial Statements and the Internal
Statements (and the interim financial statements to be delivered
by Sellers pursuant to Section 5.4) have been or will be certified
by each Sellers' chief financial officer to have been prepared in
accordance with Seller's internal accounting policies, consistent
with past practice, provided that, the Sellers make no
representation or warranty herein as to the interim statements
delivered pursuant to Section 5.4 which are prepared in accordance
with GAAP. The Audited Financial Statements and the Unaudited
Financial Statements are hereinafter referred to collectively as
the "Financial Statements."
(b) Each Seller's Financial Statements and the Internal
Statements fairly present, and the June Statements will fairly
present, as of their respective dates, the financial condition,
retained earnings, assets and liabilities of each Seller and the
results of operations of such 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 such Seller, the
Financial Statements and the Internal Statements contain and
reflect and the June Statements will contain and reflect adequate
reserves, which are consistent with previous reserves taken, for
all reasonably anticipated material losses and costs and expenses
(except that the Internal Statements do not contain accruals for
current and deferred income taxes, tape amortization or
depreciation); and the amounts shown as accrued for current and
deferred income and other taxes in the Financial Statements, the
Internal Statements and the June Statements are (or will be)
sufficient for the payment of all unpaid federal, state and local
income taxes, interest, penalties, assessments or deficiencies
applicable to such Seller, whether disputed or not, for the
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applicable period then ended and periods prior thereto (except
that the Internal Statements do not contain accruals for current
and deferred income taxes, tape amortization or depreciation).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and
to the extent (a) reflected and reserved against in its most
recent Audited Balance Sheet, (b) set forth on SCHEDULE 2.6
attached hereto or (c) incurred in the ordinary course of business
after the date of its most recent Audited Balance Sheet and not
material in amount, either individually or in the aggregate, no
Seller (individually) has, nor do the Sellers (in the aggregate)
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 only, "material"
means any amount in excess of $10,000.
2.7 LITIGATION. Except as set forth on SCHEDULE 2.7
attached hereto, no Seller is a party to, or to the Sellers' best
knowledge threatened with, and none of the Assets are subject to,
any 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 any Seller. No
Seller is 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 list of all fire, theft, casualty,
general liability, workers compensation, business interruption,
environmental impairment, product liability, automobile and other
insurance policies insuring the Assets or business of each Seller
and of all life insurance policies maintained for any of its
employees, specifying the type of coverage, the amount of
coverage, the premium, the insurer and the expiration date of each
such policy (collectively, the "Insurance Policies") and all
claims made under such Insurance Policies since January 1, 1991.
True, correct and complete copies of all of the Insurance Policies
have been previously delivered by the Sellers to the Buyer. The
Insurance Policies are in full force and effect and are in amounts
and of a nature which are adequate and customary for the Sellers'
business. 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. SCHEDULE 2.9 attached hereto sets forth
a true, correct and complete list of the Sellers' inventory of
rental videotapes, rental video games and other products held for
rent by the Sellers, all as of a date not more than two days prior
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to the date hereof which inventory shall be prepared on a Seller-
by-Seller basis, including quantities and titles. SCHEDULE 2.9
also sets forth a true, correct and complete list of the inventory
of the Sellers' merchandise held for sale, all as of a date not
more than two days prior to the date hereof, which inventory shall
be prepared on a Seller-by-Seller basis, including a description,
quantity and cost of all such merchandise. SCHEDULE 2.9, as
updated pursuant to Subsection 7.9 hereof, shall set forth a true,
correct and complete list of such inventories as of a date not
more than two days prior to the Closing Date. Such inventories
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 Sellers.
2.10 FIXED ASSETS. SCHEDULE 2.10 attached hereto sets
forth a true, correct and complete list of all Fixed Assets (on a
Seller-by-Seller basis) 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,
including a description and valuation thereof. 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 and in the production of products of the
Sellers and 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 lease, to
which each Seller is a party (the "Leases"). True, correct and
complete copies of the Leases, and all amendments, modifications
and supplemental agreements thereto, have previously been
delivered by the Sellers to the Buyer. The Leases are in full
force and effect, are binding and enforceable against each of the
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. No party to any
Lease has sent written notice to the other claiming that such
party is in default thereunder, which remains uncured. Except as
set forth on SCHEDULE 2.11 attached hereto, there has not 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 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. No Seller is
obligated to pay any leasing or brokerage commission relating to
any Lease and, except as set forth on SCHEDULE 2.11 attached
hereto, no Seller will have any obligation to pay any leasing or
brokerage commission upon the renewal of any Lease. No material
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construction, alteration or other leasehold improvement work with
respect to any of the Leases remains to be paid for or to be
performed by any Seller. The Financial Statements and the
Internal Statements contain (and the June Statements will 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 June 30,
1996, there has been no change which materially and adversely
affects the business, properties, assets, store operating cash
flow, condition (financial or otherwise) or prospects of any
Seller, other than general economic conditions, and economic and
other conditions in and affecting the retail video rental industry
generally. No Seller has any knowledge of any existing or
threatened occurrence, event or development which, as far as can
be reasonably foreseen, could have a material and adverse effect
on such Seller or its business, properties, assets, store
operating cash flow, condition (financial or otherwise) or
prospects, other than general economic conditions, and economic
and other conditions in and affecting the retail video rental
industry generally.
2.13 Tax Matters.
-----------
(a) Except as set forth on SCHEDULE 2.13 to this
Agreement, the Sellers and the Principals represent and warrant,
as to each Seller:
(i) Within the times and in the manner
prescribed by law, such Seller has filed all Returns which are
required to be filed;
(ii) With respect to all amounts in respect of
Taxes imposed upon such 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 such Seller to Taxing
Authorities or others on or before the date hereof have been paid.
(iii) All Returns filed by such Seller
constitute materially complete and accurate representations of the
respective Tax liabilities of, or attributable to, such Seller for
such years;
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(iv) No examination of the Returns of such
Seller is currently in progress nor, to the best knowledge of the
Seller, threatened and no unresolved deficiencies have been
asserted or assessed against such Seller as a result of any audit
by any Taxing Authority 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 such
Seller;
(vi) Such Seller is not a person other than a
United States person within the meaning of the Internal Revenue
Code of 1986, as amended (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 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 ad-
ditional amount with respect thereto. "Taxing Authority" means
any governmental authority responsible for the imposition of
Taxes.
2.14 ACCOUNTS RECEIVABLE. SCHEDULE 2.14 attached hereto
sets forth a true, correct and complete list of the Sellers'
collection accounts, including an aging thereof as of the Balance
Sheet Date. SCHEDULE 2.14, as updated pursuant to Subsection 7.9
hereof, shall set forth a true, correct and complete list of the
Sellers collection accounts as of the Closing Date, including an
aging thereof. Except for such collection accounts, the Sellers
have no Accounts Receivable. The collection accounts arose out of
the sales or rentals of inventory or services in the ordinary
course of business, and the Sellers' have established a reserve
therefor in an amount equal to 100% of such collection accounts.
2.15 BOOKS AND RECORDS. The general ledgers and books
of account of each Seller, all federal, state and local income,
franchise, property and other tax returns filed by each Seller,
with respect to the Assets, and all other books and records of
each 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.
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2.16 Contracts and Commitments.
-------------------------
(a) SCHEDULE 2.16 attached hereto contains a true,
complete and correct list and description of the following
contracts and agreements, whether written or oral (collectively,
the "Contracts"):
(i) all loan agreements, indentures,
mortgages and guaranties to which any Seller is a party or by
which any 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 any Seller is a party or by which any
Seller or any of its property is bound;
(iii) all contracts, agreements, commitments,
purchase orders or other understandings or arrangements to which
any Seller is a party or by which any Seller or any of its
property is bound which (A) involve payments or receipts by any
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 any 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 any Seller is a party or by which any Seller or any of its
property is bound;
(v) all agency, distributor, sales
representative and similar agreements to which any Seller is a
party;
(vi) all contracts, agreements or other
understandings or arrangements between any Seller and any
stockholder, member or Affiliate of such Seller;
(vii) all leases, whether operating, capital or
otherwise, under which any Seller is lessor or lessee; and
(viii) any other material agreement or contract
entered into by any Seller.
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(b) Except as set forth on SCHEDULE 2.16 attached
hereto:
(i) each Contract is a valid and binding
agreement of the applicable Seller, enforceable against such
Seller in accordance with its terms, and such Seller does not have
any knowledge that any Contract is not a valid and binding
agreement of the other parties thereto;
(ii) each Seller has fulfilled all material
obligations required pursuant to the Contracts to have been
performed by such Seller on its part prior to the date hereof, and
each Seller has no reason to believe that it will not be able to
fulfill, when due, all of its obligations under the Contracts
which remain to be performed after the date hereof;
(iii) no Seller is in material breach of or
default under any Contract, and no event has occurred which with
the passage of time or giving of notice or both would constitute
such a default, result in a loss of rights or result in the
creation of any lien, charge or encumbrance, thereunder or
pursuant thereto;
(iv) to the best knowledge of the Sellers and
the Principals, there is no existing breach or default by any
other party to any Contract, and no event has occurred which with
the passage of time or giving of notice or both would constitute a
default by such other party, result in a loss of rights or result
in the creation of any lien, charge or encumbrance thereunder or
pursuant thereto;
(v) no Seller is restricted by any Contract
from carrying on its business anywhere in the world; and
(vi) no Seller has any written or oral
Contracts to sell products or perform services which are expected
to be performed at, or to result in, a material loss.
(c) Except as set forth on SCHEDULE 2.3 or
SCHEDULE 2.16, the continuation, validity and effectiveness of
each Contract will not be affected by the transfer thereof to
Buyer under this Agreement and all such Contracts are assignable
to Buyer without a consent.
(d) True, correct and complete copies of all
Contracts have previously been delivered by the Sellers to the
Buyer.
2.17 COMPLIANCE WITH AGREEMENTS AND LAWS. Each Seller
has all requisite licenses, permits and certificates, including
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environmental, health and safety permits, from federal, state and
local authorities necessary to conduct the Business and own and
operate the Assets, other than those the failure of which to
obtain could not have a material adverse effect on any Seller or
its properties (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 Sellers to the Buyer. No Seller is in violation 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 any Seller or its
properties. Except as set forth on SCHEDULE 2.7, the business of
each 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
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 such Seller. Except
as set forth on SCHEDULE 2.17 attached hereto, no Seller has 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) Each Seller is in material compliance with all
federal, state and municipal laws respecting employment and
employment practices, terms and conditions of employment, and
wages and hours, and no Seller is 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 any Seller is
represented by any labor union;
(ii) there is no unfair labor practice
complaint against any Seller pending before the National Labor
Relations Board or any state or local agency;
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(iii) there is no pending labor strike or other
material labor trouble affecting any Seller (including, without
limitation, any organizational drive);
(iv) there is no labor grievance pending
against any Seller;
(v) there is no pending representation
question respecting the employees of any Seller; and
(vi) there are no pending arbitration
proceedings arising out of or under any collective bargaining
agreement to which any Seller is a party, or to the best knowledge
of the Sellers, any basis for which a claim may be made under any
collective bargaining agreement to which any 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 each Seller to its employees and all contracts or
agreements between each Seller and its employees, and (b) each
Seller's current payroll, including the job descriptions and
salary or wage rates of each of its 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 December 31, 1995 and December 31, 1994.
(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 a Seller's business.
2.19 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
set forth on SCHEDULE 2.19 attached hereto, since December 31,
1995, the Sellers have 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 Sellers have not:
(a) Incurred any material obligation or liability
for borrowed money;
(b) Discharged or satisfied any lien or
encumbrance or paid any obligation or liability other than current
liabilities reflected in the Internal Statements;
(c) Mortgaged, pledged or subjected to lien,
charge or other encumbrance any of the Assets;
(d) Sold or purchased, assigned or transferred any
of its tangible assets or cancelled any debts or claims, except
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for inventory sold and raw materials purchased in the ordinary
course of business;
(e) 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;
(f) Suffered any losses, whether insured or
uninsured, and whether or not in the control of any Seller, in
excess of $5,000 in the aggregate, or waived any rights of any
value;
(g) Made any changes in compensation of its
officers, directors or employees except in the ordinary course of
their business and consistent with past practice;
(h) Except as set forth on SCHEDULE 2.7, received
notice of any litigation, warranty claim or products liability
claims; or
(i) 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 Sellers which accounted for the
largest dollar volume of purchases by the Sellers for the fiscal
years ending December 31, 1994 and December 31, 1995. None of
such suppliers has notified any Seller that it intends to
discontinue its relationship with the Sellers.
2.21 PREPAYMENTS AND DEPOSITS. Except for deposits from
customers to reserve videotapes which, in the aggregate, are less
than $1,500 (which deposits, as they exist on the Closing Date,
shall be transferred to the Buyer pursuant to this Agreement), the
Sellers have not received prepayments or deposits from customers
for products to be shipped, or services to be performed, at a
later date.
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
Sellers to the Buyer.
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(b) Except as otherwise disclosed in SCHEDULE 2.22
attached hereto, the Sellers are the sole and exclusive owners of
all Intangible Property and all designs, permits, labels and
packages used on or in connection therewith. The Intangible
Property owned by the Sellers is sufficient to conduct the
Sellers' business as currently conducted and, when transferred to
the Buyer pursuant to this Agreement, will be sufficient to permit
the Buyer to conduct the business of the Sellers as currently
conducted by the Sellers. The Sellers have received no notice of,
and have no knowledge of any basis for, a claim against any of
them that any of their operations, activities, products or
publications infringes on any patent, trademark, trade name,
copyright or other property right of a third party, or that any of
them is illegally or otherwise using the trade secrets, formulae
or any property rights of others. No Seller has any disputes with
or claims against any third party for infringement by such third
party of any trade name or other Intangible Property of any
Seller. Each Seller has taken all steps reasonably necessary to
protect its right, title and interest in and to the Intangible
Property.
2.23 Employee Benefit Plans.
----------------------
(a) Except as listed on SCHEDULE 2.23, none of the
Sellers now has or contributes to or participates in, and none of
the Sellers has in the past had or otherwise contributed to, any
employee benefit plan subject to the Employee Retirement Income
Security Act of 1974.
(b) The Buyer assumes no liabilities with respect
to any employee benefit plan which liability relates to any period
prior to or after 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.
(c) EMPLOYEE PLANS. 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 any Seller's employees, or
maintained at any time since January 1, 1991 by any 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, no Seller has any obligations,
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contingent or otherwise, past or present, under applicable law or
the terms of any Employee Plan.
2.24 REGULATORY APPROVALS. Except to the extent waived
by the Buyer in this Section 2.24, all consents, approvals,
authorizations and other requirements prescribed by any law, rule
or regulation which must be obtained or satisfied by the Sellers
and which are necessary for the execution and delivery by the
Sellers of this Agreement and the documents to be executed and
delivered by the Sellers in connection herewith are set forth on
SCHEDULE 2.24 attached hereto and have been, or will be prior to
the Closing Date, obtained and satisfied. The Sellers shall pay
all costs and expenses required to obtain such consents,
approvals, authorizations and other requirements.
The Buyer hereby waives compliance by the Sellers with the
bulk sales notice provisions under the Uniform Commercial Code as
enacted in New Jersey, and other comparable applicable laws and
regulations. Such waiver does not extend to the bulk sales notice
requirements to the State of New Jersey Department of the
Treasury.
2.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND
SHAREHOLDERS. Except as set forth on SCHEDULE 2.25 attached
hereto, no Seller is indebted, directly or indirectly, to any
person who is an officer, director or shareholder of any Seller or
any affiliate of any such person in any amount whatsoever other
than for salaries for services rendered or reimbursable business
expenses, all of which have been reflected on the Internal
Statements, and no such officer, director, shareholder or
affiliate is indebted to any Seller, except for advances made to
employees of the Sellers 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, no Seller has any 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 DISCLOSURE. To the best of the Sellers' and the
Principals' knowledge, no representation or warranty by any of the
Sellers or the Principals in this Agreement or in any Exhibit
hereto, or in any list, statement, document or information set
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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 will omit any material
fact necessary in order to make the statements contained therein
not misleading. The Sellers and the Principals have disclosed to
the Buyer the material facts arising from and after June 30, 1996
pertaining to the transactions contemplated by this Agreement.
3. Representations of the Buyer
----------------------------
The Buyer represents and warrants to the Sellers 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 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 Sellers,
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"), of which
12,070,239 shares are issued and outstanding as of the date
hereof, and 2,000,000 shares of Preferred Stock, $.01 par value
per share, none of which are issued or outstanding as of the date
hereof. As of the date hereof, all of the outstanding shares of
capital stock of the Buyer have been and on the Closing Date will
be duly and validly issued and are, or will be, fully paid and
nonassessable.
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;
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(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 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. On the date hereof, the Buyer has access to funds
in an amount sufficient to pay the cash portion of the purchase
price to the Sellers, as provided in 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. The Buyer shall pay all
costs and expenses required to obtain such consents, approvals,
authorizations and other requirements.
3.5 DISCLOSURE. To the best of the Buyer's knowledge,
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 such
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 Sellers shall afford the officers, attorneys,
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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 Sellers, 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
Sellers, and the Buyer shall be permitted to make abstracts from,
or copies of, all such books and records. The Sellers shall
furnish to the Buyer such financial and operating data and other
information as to the Assets and the business of the Sellers as
the Buyer shall reasonably request.
(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 Sellers 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
Sellers.
(c) If reasonably requested by the Buyer, the
Sellers shall authorize the release to the Buyer of all files
pertaining to the Sellers, the Assets or the business or
operations of the Sellers held by any federal, state, county or
local authorities, agencies or instrumentalities. If any such
files relate to tax matters of the Sellers and such files may be
obtained from the Sellers, the Buyer shall deliver notice to the
Sellers of their intention to obtain such files at least 15 days
prior to doing so. During such 15-day period the Sellers may
elect to provide all such information to the Buyer directly.
4.2 CONFIDENTIALITY. All information not previously
disclosed to the public or generally known to persons engaged in
the respective businesses of the Sellers or the Buyer which shall
have been furnished by the Buyer or the Sellers 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, 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
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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,
(a) the Buyer may include in any Registration Statement or
periodic report filed by it with the Securities and Exchange
Commission or any state securities commission or any stock market
and (b) otherwise disclose, to the extent reasonably advised to do
so by counsel, any information regarding the Seller, the business
of the Seller, the financial condition of the Seller and/or the
terms of this Agreement.
In the event that the transactions contemplated by this
Agreement shall not be consummated, for a period of 12 months
after the date of the termination of this Agreement, the Buyer
shall not solicit any person who was an employee of any Seller on
the date of such termination to terminate his employment with the
Sellers or to become an employee of the Buyer, or hire any person
who was such an employee on the date of such termination. In the
event that the transactions contemplated by this Agreement shall
not be consummated, the Buyer agrees that the remedy at law for
any breach of this Section 4.2 by the Buyer would be inadequate
and that the Sellers shall be entitled to injunctive relief in
addition to any other remedy they may have upon breach of the
Buyer's obligations in such sentence.
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.
4.4 REGISTRATION STATEMENT. The Buyer filed, on July
24, 1996, a registration statement with the Securities and
Exchange Commission and applicable state securities regulators,
with respect to the shares of Buyer Common Stock to be issued to
the Sellers pursuant to this Agreement and the Instrument. The
Buyer shall provide a copy of such registration statement to the
Principals. The Buyer shall pay to the Buyer's transfer agent any
fees or expenses in connection with the issuance of shares of
Buyer Common Stock to the Sellers as contemplated by this
Agreement.
5. Pre-Closing Covenants of the Seller
-----------------------------------
From and after the date hereof and until the Closing
Date:
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5.1 CONDUCT OF BUSINESS. Each 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 each 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, no Seller shall:
(a) Take any action to amend its charter,
operating agreement, certificate of formation or Bylaws;
(b) Issue any stock, bonds or other corporate
securities or grant any option or issue any warrant to purchase or
subscribe to any of such securities or issue any securities
convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent), except current liabilities incurred and obligations
under contracts entered into in the ordinary course of business;
(d) Except for customary (in amount and frequency
consistent with past practice) dividend and distribution payments
to the stockholders and members of the Sellers, declare or make
any payment or distribution to its shareholders with respect to
their stock or purchase or redeem any shares of its capital stock;
(e) Mortgage, pledge, or subject to any lien,
charge or any other encumbrance any of the Assets;
(f) Sell, assign, or transfer any of the Assets,
except for inventory sold in the ordinary course of business, at a
normal profit margin, and for not less than replacement cost;
(g) Cancel any debts or claims, except in the
ordinary course of business;
(h) Merge or consolidate with or into any
corporation or other entity;
(i) Make, accrue or become liable for any bonus,
profit sharing or incentive payment, 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 officers,
directors or employees, outside of the ordinary course of business
or inconsistent with past practice;
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(j) Make any election or give any consent under
the Code or the tax statutes of any state or other jurisdiction or
make any termination, revocation or cancellation of any such
election or any consent or compromise or settle any claim for past
or present Taxes, to the extent materially different from those
made in accordance with customary past practice;
(k) Modify, amend, alter or terminate any of its
executory contracts of a material value or which are material in
amount;
(l) Take or permit any act or omission
constituting a material breach or default under any contract,
indenture or agreement by which it or its properties are bound;
(m) Fail to (i) preserve the possession and
control of its assets and business, (ii) use its best efforts to
keep in faithful service its present officers and key employees,
(iii) use its best efforts to preserve the goodwill of its
customers, suppliers, agents, brokers and others having business
relations with it, and (iv) use its best efforts to keep and
preserve its business existing on the date hereof until after the
Closing Date;
(n) 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 good repair
its business premises, fixtures, furniture and equipment;
(o) Enter into any leases, contracts, agreements
or understandings other than those entered into in the ordinary
course of business calling for payments which in the aggregate do
not exceed $5,000 for each such lease, contract, agreement or
understanding;
(p) Engage any employee for a salary in excess of
$20,000 per annum;
(q) Materially alter the terms, status or funding
condition of any Employee Plan;
(r) Make any loans to any person or entity; or
(s) Commit or agree to do any of the foregoing in
the future.
5.3 TAXES. Each 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 such Seller or the ownership of the Assets on or prior
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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 such 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 30 days after the end of
each such month, the Sellers shall deliver to the Buyer their
combined comparative balance sheets and related statements of
income, shareholders' equity, retained earnings and statements of
cash flow for the one-month period then ended, and for the
comparable one-month period of the prior fiscal year, all prepared
in accordance with Sellers' internal accounting policies
consistent with past practice, and certified by the chief
financial officer (collectively, the "Interim Financial
Statements"). In addition, on each of such dates, the Sellers
shall deliver to the Buyer such combined comparative balance
sheets and related statements of income, shareholders' equity,
retained earnings and statements of cash flow for such periods,
prepared in accordance with Sellers internal accounting periods,
consistent with past practice.
5.5 COMPLIANCE WITH LAWS. Each 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 and will perform
and comply with all contracts, commitments and obligations by
which it is bound.
5.6 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES
OF THE SELLERS. No Seller will take any actions which would
result in any of the representations or warranties set forth in
Section 2 hereof being materially untrue, except for
representations which are qualified as to materiality, in which
case no Seller will take any actions which would result in any of
such representations or warranties being untrue in any respect.
5.7 CONTINUING OBLIGATION TO INFORM. From time to time
prior to the Closing, each Seller will deliver or cause to be
delivered to the Buyer supplemental information concerning
material 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. No such supplemental information shall modify the
obligations of the parties hereunder or constitute a waiver by the
Buyer of any claims or rights it may have for breach by any Seller
or Principal of this Agreement.
5.8 EXCLUSIVE DEALING. No Seller or Principal shall,
directly or indirectly, through any officer, director, agent or
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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, or any equity
interest in, any Seller or any equity investment, merger,
consolidation or business combination with any 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 Sellers
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. No Seller or Principal shall make
any public announcement with respect to this Agreement or the
transactions contemplated hereby without the express prior written
consent of the Buyer. Each Seller and Principal 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; Liquidated Damages.
----------------------------------------------
6.1 SATISFACTION OF CONDITIONS. The Sellers, the
Principals 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 Liquidated Damages.
------------------
(a) The parties hereto agree that the harm
suffered by the Buyer as a result of a Willful Breach (as defined
below) of this Agreement by any Seller or any Principal and the
failure by the Sellers or the Principals to consummate the
transactions contemplated hereby is difficult to accurately
estimate. The parties agree, based on all present circumstances,
that $1,000,000 represents a reasonable estimate of the damages,
including lost opportunity costs, which would be suffered by the
Buyer upon a failure to close due to a Willful Breach of the
Sellers or the Principals.
(b) If any Seller or Principal (i) willfully or
intentionally breaches any representation, warranty or covenant
under this Agreement, willfully or intentionally fails to perform
any condition or obligation required to be performed hereunder, or
fails to disclose a material fact pertaining to the Assets or the
transactions contemplated by this Agreement to the Buyer; or (ii)
either elects not to sell the Assets to the Buyer pursuant to the
terms of this Agreement, sells or otherwise transfers the Assets
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or enters into an agreement (in principle or otherwise) with any
other person or entity to sell any shares of the capital stock or
membership interests of any Seller, to merge with or into, or
consolidate any Seller with any person or entity other than the
Buyer, to sell more than 10% of the Assets to any other person or
entity or to effect any other transaction with any other person or
entity that would preclude or otherwise frustrate the transfer of
the Assets to the Buyer (a "Willful Breach"), the Sellers will pay
to the Buyer the sum of $500,000, as liquidated damages, and
Sellers will pay the Buyer the additional sum of $500,000, which
the parties agree would be a reasonable estimate of Buyer's lost
opportunity cost.
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 Sellers and the Principals
shall be true 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 Sellers and the Principals 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 them 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 Sellers to
authorize or carry out this Agreement and to convey, assign,
transfer and deliver the Assets shall have been taken. Without
limiting the foregoing, promptly following delivery to the
Principals of a Prospectus relating to the sale of Buyer's Common
Stock (which is included in a Registration Statement which has
been declared effective by the SEC), the Sellers will hold a
meeting of their respective stockholders for purposes of approving
the consummation of the transactions contemplated by this
Agreement.
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 Sellers of the transactions contemplated by this Agreement and
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the operation of the Sellers' 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 Sellers shall have received all requisite consents
and approvals of all lenders, if any, lessors and other third
parties whose consent or approval is required in order for the
Sellers 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 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 Xxxxx & Xxxxxxx, counsel to the Sellers, dated as of
the Closing Date, in substantially the form attached hereto as
EXHIBIT 2, and as to such other matters as may be reasonably
requested by the Buyer or its counsel.
7.7 BOARD OF DIRECTORS AND SHAREHOLDER AND MEMBER AND
MANAGER APPROVAL. The Board of Directors and shareholders or
members and managers, as applicable, of each Seller shall have
duly authorized the transactions contemplated by this Agreement.
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.
7.9 UPDATE. The Sellers shall have provided the Buyer
with a true, correct and complete list and amount, as of the
Closing Date, of:
(a) the inventories (reflecting the items described in
Section 2.9 hereof), which, from a physical unit count, shall be
not greater than or less than, by 5%, of the amounts which would
be derived from a physical inventory, and which shall be as of a
date not more than two days prior to the Closing Date;
(b) the Fixed Assets;
(c) the Sellers' collection accounts, including an aging
thereof; and
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(d) the trade accounts payable and accrued liabilities
assumed pursuant to Subsection 1.4(a)(i) and (ii) hereof.
7.10 CASH AVAILABLE. On the Closing Date, the Sellers
will have an aggregate of $14,000 of cash on hand in the Stores
(which shall be allocated among the Stores as specified on
SCHEDULE E hereto), which shall be in secured cashboxes, and all
which cash will be transferred to the Buyer pursuant to the terms
of this Agreement. In addition, the Sellers will leave at each
store any amounts left by customers as deposits or prepayments, as
described in Section 2.21 of this Agreement.
7.11 PAYABLES. On the Closing Date, the Seller will
have no obligations to suppliers and vendors of goods and services
to the Business and other trade creditors of the Business which
are past due in accordance with their terms, and the aggregate
amount of all outstanding obligations to suppliers, vendors and
trade creditors shall in no event exceed $400,000, and all of
which obligations shall be current (i.e., outstanding for less
than 60 days, and not, by their terms, past due).
7.12 TAX HOLDBACK AGREEMENT. The Sellers and the Buyer
shall have entered into a tax holdback agreement pursuant to which
the Buyer shall hold back from the cash consideration payable to
each Seller the amount requested by the New Jersey Department of
Treasury (Bulk Sales Compliance Division) (or comparable
regulatory authorities in any other jurisdiction in which the
Assets are located) in connection with the sale of the Assets,
which amount shall be released after the Closing upon receipt for
all Sellers of tax clearance certificates for the Sellers dated
after the Closing Date. Such agreement shall be substantially in
the form and on the terms of EXHIBIT 3 hereto. The Buyer shall be
responsible for preparing, with the cooperation of the Sellers and
the Principals, the requisite notices to the New Jersey Department
of the Treasury.
7.13 CLOSING DELIVERIES. The Buyer shall have received
at or prior to the Closing each of the following documents:
(a) a xxxx of sale substantially in the form
attached hereto as EXHIBIT 4;
(b) such instruments of conveyance, assignment and
transfer, in form and substance 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;
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(c) such contracts, files and other data and
documents pertaining to the Assets or the Sellers' business as the
Buyer may reasonably request;
(d) copies of the general ledgers and books of
account of each Seller, and all federal, state and local income,
franchise, property and other tax returns filed by each Seller
with respect to the Assets since January 1, 1991;
(e) such certificates of each Seller's officers
and such other documents evidencing satisfaction of the conditions
specified in Section 7 as the Buyer shall reasonably request;
(f) a certificate of the Secretary of State of the
state of organization of each Seller as to the legal existence and
good standing of each Seller in such jurisdiction, and a
certificate of the Secretary of State of each jurisdiction in
which each Seller is qualified to transact business, as to the
good standing and foreign qualification of each Seller in each
such jurisdiction;
(g) certificates of the Secretary or other
appropriate offices of each Seller attesting to the incumbency of
such 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;
(h) estoppel certificates (in the form previously
approved by the Buyer) from each lessor from whom each Seller
leases real or personal property and instruments reflecting such
lessor's consent to the assumption of such lease by the Buyer and
representing that there are no outstanding claims against such
Seller under any such lease;
(i) the schedules listed in Subsection 7.9;
(j) such other documents, instruments or
certificates as the Buyer may reasonably request.
8. Conditions to Obligations of the Sellers
----------------------------------------
The obligations of the Sellers 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 Sellers:
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
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shall be true 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 Principals.
The Buyer shall have performed and complied in all material
respects 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 right of the Sellers to transfer the Assets.
8.6 OPINION OF COUNSEL. The Sellers 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 5, and as to such other matters as may be reasonably
requested by the Sellers or their counsel.
8.7 CLOSING DELIVERIES. The Sellers 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 Sellers shall reasonably
request;
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(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;
(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) The Instrument, and an Instrument of
Assumption of Liabilities executed by the Buyer and accepted by
the Sellers;
(e) payment of the Base Purchase Price;
(f) such other documents, instruments or
certificates as the Sellers may reasonably request.
9. Indemnification
---------------
9.1 BY THE BUYER AND THE SELLERS AND THE PRINCIPALS.
The Buyer on the one hand and the Sellers and the Principals,
jointly and severally, on the other hand, each hereby agree to
indemnify and hold 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 Sellers in
connection with each and all of the following:
(a) Any breach by the indemnifying party of any
representation or warranty made by it 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
statement, certificate or schedule furnished by the indemnifying
party pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement.
9.2A BY THE SELLERS AND THE PRINCIPALS. The Sellers and
the Principals, 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
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42
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 Sellers 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 in force in the jurisdictions
in which such laws may be applicable to either the Sellers or the
transactions contemplated by this Agreement, unless such claim
arises as a result of the failure by the Buyer to pay an Assumed
Liability;
(c) Any violation by any Seller of, or any failure
by the Sellers to comply with, any law, ruling, order, decree,
regulation or zoning, environmental or permit requirement
applicable to any Seller, the Assets or the business of the
Sellers, whether or not any such violation or failure to comply
has been disclosed to the Buyer, including any costs incurred by
the Buyer (i) in order to bring the Assets into compliance with
environmental laws as a consequence of noncompliance with such
laws on the Closing Date or (ii) in connection with the transfer
of the Assets;
(d) Any warranty claim or product liability claim
relating to any Seller's business or operation prior to the
Closing Date;
(e) Any Taxes of any Seller or any Principal;
(f) Any claims against, or liabilities or
obligations of, any Seller with respect to obligations under
Employee Plans, or for accrued vacation or severance pay, or for
accrued and unpaid wages or similar amounts; and
(g) Except for the Assumed Liabilities, any
claims, damages, or liabilities arising out of the conduct of the
business and operations of the Sellers, the Business or the
Stores, to the extent such claims accrue or arise out of facts or
circumstances occurring on or before to the Closing Date.
9.2B BY THE BUYER. The Buyer further agrees to
indemnify and hold harmless the Sellers and the Principals 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
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Sellers and the Principals, in connection with each and all of the
following:
(a) Any claims against, or liabilities or
obligations of, the Sellers specifically assumed by the Buyer
pursuant this Agreement;
(b) Any violation by the Buyer of, or any failure
by the Buyer to comply with, any law, ruling, order, decree,
regulation or zoning, environmental or permit requirement
applicable to the Buyer or its business, whether or not any such
violation or failure to comply has been disclosed to the Sellers;
(c) Any warranty claim or product liability claim
relating to the conduct of the Business after the Closing Date;
(d) Any Taxes of the Buyer (other than amounts
described in Section 9.2A(e) above);
(e) Any claim by a third party or government
regulatory agency contesting the adequacy, nature, timing or
manner of disclosure (or nondisclosure) of any information to the
public concerning the transactions contemplated by this Agreement,
except to the extent that such claim is based upon information
provided by the Sellers or Principals hereunder (or upon the
failure of the Sellers or Principals to disclose information
required to be disclosed hereunder); and
(f) Any claims, damages, or liabilities arising
out of the conduct of the business and operations of the Stores or
the Business, to the extent such claims accrue or arise out of
facts or circumstances occurring after the Closing Date.
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.
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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
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 Sellers or the Principals
hereunder shall be effected by payment of cash or delivery of a
cashier's or certified check in the amount of the indemnification
liability; provided that the Buyer shall have the right to offset
against amounts due from Buyer under the Instrument any amounts
due to Buyer hereunder.
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 third anniversary of the Closing Date, except for claims, if
any, asserted in writing prior to such third anniversary, 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 three-year period. Notwithstanding the above
claims resulting from the failure by any Seller or Principal to
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pay any Tax when due shall expire one year after any applicable
statute of limitations.
9.7 INDEMNIFICATION LIMITATIONS. Notwithstanding the
provisions of this Article 9 to the contrary, (i) the Sellers and
the Principals shall be liable for only that portion of the
aggregate damages payable by them hereunder which exceeds $25,000,
and (ii) the Buyer shall be liable for only that portion of the
aggregate damages payable by it hereunder which exceeds $25,000.
10. Post-Closing Agreements
------------------------
The Sellers and the Principals agree that from and after the
Closing Date:
10.1 Proprietary Information.
-----------------------
(a) Each of the Sellers and the Principals shall
hold in confidence, and use its best efforts to have all of its
officers, directors, managers, members and personnel hold in
confidence, all knowledge and information of a secret or
confidential nature with respect to the business of the Sellers
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 Sellers or the Principals.
(b) The Sellers agree 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, no Seller, Principal or any Affiliate of any of them
shall solicit any person who was an employee of any Seller on the
Closing Date to terminate his employment with the Buyer or to
become an employee of any Seller or hire any person who was such
an employee on the date hereof or on the Closing Date; provided,
that, subject to the provisions of Section 10.3 below, if Xxxxx
Xxxxxx voluntarily terminates his employment with the Buyer, any
other Principal shall thereafter be permitted to employ him.
10.3 Non-Competition Agreement.
-------------------------
(a) Without the prior approval of the Buyer, for
a period of five years after the Closing Date, neither the
Sellers, Xxxxxx Xxxxxxxx or Xxx Xxxxxx, nor any Affiliate thereof,
shall engage directly or indirectly in the retail videotape rental
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business, retail videotape rental industry, or retail videotape
rental market or the retail video game rental business, retail
video game rental industry or retail video game rental market in
the United States or any other country in which the Buyer or
Sellers conducted their business during the two years prior to the
Closing Date; provided that, nothing herein shall prevent the
Sellers, the Principals or their Affiliates from engaging in the
development, marketing or sale of software for use in video games.
Without the prior approval of the Buyer, for a period of
three years after the Closing Date, Xxxxx Xxxxxx shall not,
directly or indirectly, as an individual proprietor, partner,
stockholder, officer, employee, director, joint venturer,
investor, lender, or in any other capacity whatsoever (other than
as the holder of not more than one percent (1%) of the total
outstanding stock of any entity), establish, operate, build,
develop, acquire or purchase any retail video store that is within
five miles of any retail establishment owned or operated by the
Seller immediately prior to the Closing Date; provided that,
nothing shall prohibit Xxxxx Xxxxxx from being employed by an
entity which establishes, operates, builds, develops, acquires or
purchases a retail video in any such location if Xx. Xxxxxx does
not provide services to such entity at a location within the
radius proscribed above.
(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 Sellers and the Applicable
Principals agree 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 Sellers shall have the right for a period
of three years following the Closing Date (and for such longer
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period as may be reasonably necessary to enable the Sellers to
deal with applicable governmental agencies and regulators) to have
reasonable access to such books, records and accounts, including
financial and tax information, correspondence, production 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 involvement in the Business 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 Sellers pursuant to the terms of this
Agreement to the extent that any of the foregoing relates to the
Business 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. All of such books, records and accounts
(including tax and financial information, correspondence,
employment records and other records) shall be delivered by
Sellers to the Buyer on or before the Closing in a sealed box (the
"Box"). If the Buyer intends to gain access to the contents of
the Box for a legitimate business purpose, it shall provide not
less than 14 days' prior notice of such intention to the Sellers,
which notice shall indicate the Buyer's business reason. Sellers
shall, during the 14-day period following delivery of the notice,
seek to provide to the Buyer the information Buyer requires in
connection with such business reason, or to otherwise resolve any
request for information from a third party. If the Seller fails
to provide such information or otherwise resolve such third party
request, the Buyer shall be permitted to open the Box, review the
contents thereof and satisfy any such third party request. At the
end of such three-year period, the Buyer shall return to the
Sellers the Box and its contents.
(b) The Sellers, the Principals 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 Sellers to the Buyer and the operation thereof by the
Buyer.
10.5 USE OF NAME. The Sellers and the Principals agree
not to use the name "Super Video Store" or the service xxxx "More
Movies, More Copies, More Fun!" or any variation or derivation
thereof after the Closing Date in connection with any business
related to, competitive with, or an outgrowth of, the business
conducted by the Sellers on the date hereof.
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10.6 COOPERATION IN LITIGATION. Each party hereto will
fully cooperate with the others 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 Sellers prior to
or after the Closing Date (other than litigation or proceedings
arising out the transactions contemplated by this Agreement). The
party requesting such cooperation shall pay the reasonable out-of-
pocket expenses (including legal fees and disbursements), as
incurred, of the party providing such cooperation and of its
officers, directors, managers, members, 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,
managers, members, 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 September 30, 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
Sellers or the Principals under this Agreement, and the Sellers
and the Principals shall have no further obligation or liability
to the Buyer under this Agreement.
11.3 TERMINATION BY REASON OF BREACH. This Agreement
may be terminated by the Sellers, 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 any Seller or Principal or the failure of any Seller
or Principal 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 Sellers or the Buyer, as the case may
be, the Sellers shall be responsible for and shall pay (a) all
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sales, use and transfer taxes, if any, upon the sale or transfer
of any of the Assets hereunder, and (b) all governmental charges,
if any, upon the sale or transfer of any of the Assets hereunder.
If the Sellers shall fail to pay such amounts on a timely basis,
the Buyer shall notify and give the Sellers an opportunity to
contest such charges at the Sellers' expense. If, following any
such contest (or if the Sellers determine not to so contest such
charges), the Sellers fail to pay such charges, the Buyer may pay
such amounts to the appropriate governmental authority or
authorities, and the Sellers shall promptly reimburse the Buyer
for any amounts so paid by the Buyer.
13. Brokers
-------
13.1 FOR THE SELLERS. The Sellers and the Principals
represent and warrant that none of them has 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 Sellers and the Principals, jointly and
severally, agree 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 any Seller
or any Principal.
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 Sellers
against any claims or liabilities asserted against them 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 federal express or other reputable nationwide overnight
courier service, registered or certified mail, postage prepaid,
addressed as follows or to such other address of which the parties
may have given notice:
To any Seller: To all of the Principals, at
their respective addresses
If to any
Principal
(as applicable): Xx. Xxxxxx Xxxxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
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Xx. Xxx Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Mr. Xxxxx Xxxxxx
X.X. Xxx 00
Xxxx-Xxxxx, XX 00000
With a copy to: Xxxxx Xxxxx, Esq.
Xxxxx & Xxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxxxx, XX 00000
To the Buyer: West Coast Entertainment Corporation
0000 Xxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: President
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,
if delivered personally; (b) on the business day following
delivery to an overnight courier; (c) three business days after
being sent, if sent by registered or certified mail; or (d) on the
date of actual delivery, if sent by any other method.
15. Arbitration
-----------
(a) Except as provided in this Section 15(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 any party. The
arbitrator shall have a minimum of five years of experience in the
area of business relevant to the particular dispute. Each of the
two parties to the dispute (all Sellers and all Principals being
treated as one party for this purpose) 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
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parties shall share equally in the fees and expenses of the
arbitrator.
Notwithstanding the foregoing, any dispute as to the failure
of Buyer to deliver cash or stock at the times and in the amounts
specified under the Instrument shall be presented in a court of
law or equity, and shall not be submitted to arbitration
hereunder.
(b) The parties agree that any such arbitration will
occur in Philadelphia, 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 Sellers may not assign
their respective 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 or any Seller or Principal 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 Sellers and the Principals
may amend or modify this Agreement, in such manner as may be
agreed upon, by a written instrument executed by the Buyer and the
Principals.
(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.
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18. Expenses
--------
Except as otherwise expressly provided herein, the Buyer
(on the one hand) and the Sellers and the Principals (on the other
hand) shall each pay their own expenses in connection with this
Agreement and the transactions contemplated hereby. The Buyer
shall pay the costs and expenses of any audit conducted by, or at
the request of, the Buyer, and Sellers shall pay the costs and
expenses of any accounting services provided to the Sellers in
connection with the transactions contemplated hereby.
19. Legal Fees
----------
In the event that legal proceedings are commenced by the
Buyer against any Principal or any Seller, or by any Principal or
any 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 and any amendment hereto 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)
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of and on the date first above written.
(Corporate Seal) WEST COAST ENTERTAINMENT CORPORATION
ATTEST:
/s/ Xxxxx Xxxxxxxxx By: /s/ T. Xxxx Xxxxxxxx
------------------------- --------------------------------
Title: President
-----------------------------
PRINCIPALS:
/s/ Xxxxxx Xxxxxxxx
-----------------------------------
Xxxxxx Xxxxxxxx
/s/ Xxx Xxxxxx
-----------------------------------
Xxx Xxxxxx
/s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx
SELLERS:
(Corporate Seal) LARGE CORPORATION
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) LYNDHURST VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
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(Corporate Seal) KEARNY VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) NEW MILFORD VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) HILLSDALE VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) HACK VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) XXXX VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) BERGEN VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
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(Corporate Seal) XXXXXX VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) RAHWAY VIDEO INC.
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) WALL VIDEO INC.
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) MONT VIDEO INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
(Corporate Seal) SUPER VIDEO OF PARK RIDGE, INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
XXXXXXX VIDEO LLC
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
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(Corporate Seal) SUPER VIDEO MANAGEMENT CO., INC.
ATTEST:
/s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------- --------------------------------
Title: CEO
-----------------------------
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