EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this
30/th/ day of December, 1997, by and among XXXXX X. XXXXXXXXX, an individual
(the "Assignee"), and CD MANAGEMENT, INC., a Delaware corporation ("Assignor").
WITNESSETH
WHEREAS, Assignee has resigned his positions as President of Assignor
and as a Vice President of CD WAREHOUSE, INC. ("CD Warehouse"), effective as of
December 24, 1997; and
WHEREAS, Assignee has expressed his desire to return to his prior role
as a franchisee of CD Warehouse, by the acquisition from Assignor of certain
partnership interests in partnerships which act as franchisees of CD Warehouse;
and
WHEREAS, CD Warehouse and Assignor have accepted Assignee's
resignation and CD Warehouse has determined that it will permit Assignee to
return to his prior role as a franchisee; and
WHEREAS, in order to accomplish the foregoing objective, Assignor has
determined that it will sell the partnership interests in the partnerships
listed on Appendix "A" hereto (collectively, the "Partnerships") to Assignee,
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and
WHEREAS, Assignor's interest as the general partner or member of each
of the Partnerships is set forth in certain agreements, identified on Appendix
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"B" attached hereto (the "Partnership Agreements"), relating to the
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Partnerships; and
WHEREAS, it is acknowledged by and between Assignor and Assignee that,
prior to Assignor's ownership of the partnership interests being assigned
hereby, such partnership interests were owned by Assignee, and that in such
ownership role, Assignee was responsible for the: (i) organization of the
Partnerships; (ii) the general accounting and preparation of the financial
statements for the Partnerships and the filing of federal, state and local tax
returns on their behalf; (iii) communication with partners of the Partnerships;
and (iv) generally responsible for the adherence of the Partnerships with the
terms of the Partnership Agreements; and
WHEREAS, it is further acknowledged by and between Assignor and
Assignee that during the term of Assignor's ownership of the Partnership
interests being assigned hereby: (i) Assignee has been the President of Assignor
and, as the President, primarily responsible for Assignor's compliance with its
obligations under the Partnership Agreements; (ii) Assignee has been responsible
in his individual capacity for the general accounting and preparation of the
financial statements for the Partnerships and the filing of federal, state and
local tax returns on their behalf; (iii) Assignee has been generally responsible
as the President of Assignor for Assignor's communication with the Partnerships;
and (iv) Assignee has been generally responsible as the
President of Assignor for the discharge of Assignor's obligations to the
Partnerships and the Partnerships' adherence to the Partnership Agreements; and
WHEREAS, Assignor has agreed to enter into this Agreement to assign
all of Assignor's right, title, interest, duties and obligations in and to the
Partnership Agreements to Assignee and, in consideration therefor, among other
things, Assignee has agreed, from and after the Effective Date (as defined
herein) of this Agreement, to accept such assignment of the Partnership
Agreements and assume the duties and obligations of Assignor as the Managing
General Partner thereunder.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, covenants, warranties and agreements and upon the terms and
subject to the conditions hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
ASSIGNMENT AND ASSUMPTION
1.1 Assignment. As of the Effective Date, as defined in Section 1.4
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below, Assignor does hereby grant, bargain, sell, transfer, convey, assign and
deliver to Assignee all of Assignor's right, title, interest, duties and
obligations in and to the Partnership Agreements for an aggregate consideration
of fifty one thousand six hundred thirteen shares of common stock of CD
Warehouse, Inc.
1.2 Acceptance and Assumption. Assignee does hereby irrevocably accept
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such grant, bargain, sale, transfer, conveyance, assignment and delivery of all
of Assignor's right, title, interest, duties and obligations in and to the
Partnership Agreements, and does hereby assume all duties and obligations of
Assignor under the Partnership Agreements arising from and after the Effective
Date for an aggregate consideration of fifty one thousand six hundred thirteen
shares of common stock of CD Warehouse, Inc.
1.3 EFFECT OF ASSIGNMENT. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO
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THE CONTRARY, THIS AGREEMENT SHALL NOT CONSTITUTE AN ASSIGNMENT OF ANY OF THE
PARTNERSHIP AGREEMENTS IF AN ATTEMPTED ASSIGNMENT THEREOF, WITHOUT THE CONSENT
OF A THIRD PARTY THERETO, WOULD CONSTITUTE A BREACH THEREOF OR IN ANY WAY WOULD
ADVERSELY AFFECT THE RIGHTS OF ASSIGNEE THEREUNDER. IF SUCH CONSENT IS NOT
OBTAINED, OR IF AN ATTEMPT AT AN ASSIGNMENT THEREOF WOULD BE INEFFECTIVE OR
WOULD AFFECT THE RIGHTS OF ASSIGNOR THEREUNDER SO THAT ASSIGNEE WOULD NOT IN
FACT RECEIVE ALL SUCH RIGHTS, THEN ASSIGNOR WILL, AT ASSIGNEE'S OPTION (AND IN
ADDITION TO ANY OTHER RIGHTS ASSIGNEE MAY HAVE), COOPERATE WITH ASSIGNEE IN ANY
REASONABLE ARRANGEMENT DESIGNED TO PROVIDE FOR ASSIGNEE THE BENEFITS UNDER SUCH
PARTNERSHIP AGREEMENTS INCLUDING WITHDRAWAL AS THE GENERAL PARTNER OR
ENFORCEMENT FOR THE BENEFIT OF ASSIGNEE OF ANY AND ALL RIGHTS OF ASSIGNOR
AGAINST A THIRD PARTY THERETO ARISING OUT OF THE BREACH OR CANCELLATION BY SUCH
THIRD PARTY OR OTHERWISE.
1.4 Effective Date. The assignment of the Partnership Agreements by
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Assignor, and the acceptance of such assignment and the assumption of the duties
and obligations of Assignor under
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the Partnership Agreements by Assignee, all pursuant to this Agreement, shall be
effective as of the close of business on December 31, 1997 (the "Effective
Date").
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNEE
Assignee hereby makes the following representations and warranties, which
shall continue in effect after, and survive the date of, this Agreement and,
additionally, makes the following covenants:
2.1 Subject to the approval of the partners or members of the
Partnerships, the execution, delivery and performance of this Agreement are
within the legal capacity and power of Assignee and neither violate nor
constitute a default under the terms of any other agreement, document, or
instrument binding upon Assignee. This Agreement is a legal, valid and binding
obligation of Assignee enforceable in accordance with its terms, except insofar
as the enforcement hereof may be limited by bankruptcy, insolvency, moratorium
or similar laws affecting the enforcement of creditors' rights generally and
subject to equitable principles limiting the availability of specific
performance or other equitable remedies.
2.2 Assignee covenants to use his best efforts to obtain, on or before
January 7, 1998, all necessary consents of limited partners or other parties to
the Partnership Agreements, as may be necessary for Assignee to enter into or
consummate this Agreement. The name of each limited partner or other party to
the Partnership Agreements is listed in Schedule 2.2 attached hereto. Assignee
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will certify to Assignor in writing on or before January 8, 1998 whether all
necessary consents have been obtained. In the event that Assignee has not
obtained all necessary consents by such date, or if Assignee cannot certify to
Assignor by such date that all necessary consents have been obtained, then
Assignor and/or Assignee shall have the right, to be exercised on or before
January 9, 1998, to terminate this Agreement.
2.3 There are no actions, suits or proceedings, and Assignee has no
knowledge of any actions, suits or proceedings threatened, against Assignee or
the Partnerships, which would as of the date hereof prevent or substantially
hinder the consummation of the transactions contemplated by this Agreement.
Assignee in his capacity as the President of Assignor has in all material
respects substantially performed all obligations required to be performed under
the Partnership Agreements to date and is not in default in any material respect
under any of such Partnership Agreements. Further, to the best of Assignee's
knowledge, none of the parties to the Partnership Agreements are in breach of,
or default under, any of the Partnership Agreements, and to the best of
Assignee's knowledge, no event has occurred which, with the passage of time or
the giving of notice or both, would constitute a breach of, or default under,
any of the Partnership Agreements.
2.4 The financial information respecting each of the Partnerships, which
has been examined by Assignor, has been prepared by Assignee in accordance with
generally accepted accounting principles for the periods therein specified,
except that there is no disclosure of items customarily contained in footnotes
and such financial statements are not audited. To the knowledge of Assignee,
there will not be, as the date of this Agreement, any liability or obligation of
Assignor
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pertaining to any of the Partnerships or under the Partnership Agreements which
are not reflected or reserved against in the financial statements of the
Partnerships, except liabilities and/or obligations that do not have or might
reasonably be expected not to have, in the aggregate, a material and adverse
effect on the Partnerships or under the Partnership Agreements.
2.5 All required federal, state and local tax returns or appropriate
extension requests of the Partnerships have been filed.
2.6 The Partnerships maintain the same organizational validity, standing
and qualifications to do business under the laws of the state or states of their
formation and maintain the same requisite partnership power and authority to
carry on the business of the Partnerships as they did at the time they were
originally transferred by Assignee to Assignor.
2.7 Set forth in Schedule 2.7 is a description of Assignor's interest in
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each of the Partnerships, including, but not limited to, the percentage of any
back-in arrangements to which Assignor has any interest.
2.8 To the best of Assignee's knowledge, except as set forth on Schedule
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2.8, each of the Partnerships (a) has complied in all material respects with all
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laws and regulations applicable to its respective Partnership Agreement or with
respect to which compliance is a condition of engaging in the business of such
Partnership as currently conducted by such Partnership, including, but not
limited to, state and federal securities laws and regulations; (b) is in
compliance with all terms and conditions in all material respects with, and is
in possession of, from the appropriate agency, commission, board and
governmental body or authority, whether federal, state or local, all of the
required licenses, permits, authorizations, approvals, franchises and rights
which (i) are necessary for it to engage in the business of the Partnership as
currently conducted, and (ii) if not possessed by such Partnership would have a
material and adverse effect on the business of the Partnership; (c) is also in
compliance in all material respects with any and all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in those laws or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved by any appropriate agency, commission, board or
governmental body or authority, whether federal, state or local. Assignee has
not received notice of or is aware of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or plans
(other than changes of law, as to which no representation is made) which may
interfere with or prevent continued compliance by Assignee, Assignor or the
Partnerships with such laws, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, suit, proceeding,
hearing or investigation under such laws or which would have a material and
adverse effect on the financial condition, properties, prospects or operations
of the Partnerships.
2.09 As of the Effective Date, Assignee understands that he will acquire
all of Assignor's right, title, interest, duties and obligations in and to the
Partnership Agreements.
2.10 The consummation of the transactions contemplated by this Agreement
will not in any way limit or expand the rights, duties and obligations of the
limited partners under the
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Partnership Agreements. As to the limited partners, the Partnership Agreements
will remain in full force and effect.
2.11 As a condition of the execution of this Agreement in Article I,
Assignee covenants and agrees to pay, perform, discharge and satisfy when due,
from the Effective Date forward, all of the covenants, agreements and
obligations under the Partnership Agreements or Amendments which are applicable
to the general partner of each such Partnership.
2.12 Assignee, as the successor general/managing partner, agrees that, in
order to promote the goodwill and public image of the CD Warehouse System, in
addition to the local advertising obligation the Partnerships owe to CD
Warehouse, Inc. by virtue of the various franchise agreements entered into by
the Partnerships, Assignee, as general partner of the Partnerships shall, and to
the extent necessary seek approval of the limited partners, cause to be
contributed to the System Advertising Fund of CD Warehouse, Inc. three quarters
of one percent ( 3/4%) of the Gross Sales of each of the CD Warehouse Stores
operated by the Partnerships, payable on the tenth of each month together with
and in the same manner as the Royalty Fees owed to CD Warehouse, Inc. by the
Partnerships. Assignee further agrees to cause the Partnerships to participate
in, contribute to and pay their pro rata shares of expenses in accordance with
membership to any local advertising cooperative that has or will in the future
be established that advertises in any market where a CD Warehouse store operated
by the Partnerships is located.
2.13 Assignee, as the successor general/managing partner, covenants that,
within three (3) years of the Effective Date of this Agreement (the "Renovation
Date"), reasonable capital expenditures shall be made by the Partnerships to
renovate, modernize, remodel, repair, and redecorate each of the CD Warehouse
Store facilities, equipment and fixtures operated by the Partnerships so that
each of the CD Warehouse Stores operated by the Partnerships reflects the then-
current physical appearance for CD Warehouse Stores under the CD Warehouse
System as standardized by CD Warehouse, Inc. on the Renovation Date.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNOR
Assignor hereby makes the following representations and warranties, which
shall continue in effect and survive the date of this Agreement and,
additionally, makes the following covenants:
3.1 Assignor is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The execution, delivery and
performance of this Agreement (a) are within the legal capacity and power of
Assignor; (b) have been duly authorized by all requisite action on the part of
Assignee; (c) except for the approval of the partners or members of the
Partnerships, require the approval or consent of no other persons; and (d)
neither violate nor constitute a default under the terms of any other agreement,
document, or instrument binding upon Assignor. Subject to the approval of the
partners or members of the Partnerships, this Agreement is a legal, valid and
binding obligation of Assignor enforceable in accordance with its terms, except
insofar as the enforcement hereof may be limited by bankruptcy, insolvency,
moratorium, or similar
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laws affecting the enforcement of creditors' rights generally and subject to
equitable principles limiting the availability of specific performance or other
equitable remedies.
3.2 Assignor shall execute and deliver to Assignee all assignments,
endorsements and instruments of transfer as shall be necessary or appropriate to
carry out the intent of this Agreement and as shall be sufficient to vest in
Assignee all of Assignor's right, title, interest, duties and obligations in and
to the Partnership Agreements.
3.3 Assignor shall transfer all of Assignor's rights, titles and interests
in and to the Partnership Agreements.
3.4 Assignor hereby covenants and agrees to use its best efforts to obtain
from CD Warehouse, Inc. an acknowledgment, in the form attached hereto as
Appendix C, that CD Warehouse, Inc., as the franchisor, acknowledges and agrees
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that the franchise agreements underlying the partnership agreements are and
shall remain in full force and effect following the execution of this Agreement
and the transfer of any partnership interests hereunder.
ARTICLE IV
INDEMNIFICATION
4.1 Assignor hereby agrees to indemnify, defend and hold harmless
Assignee, his successors and assigns, from and against any and all loss, claims,
or damage, including reasonable attorneys' fees, which Assignee may suffer
either as a result of (a) the failure of Assignor to transfer to Assignee, on
the Effective Date, all right, title and interest of Assignor in and to the
Partnership Agreements; or (b) the breach of any representation or warranty of
Assignor contained herein. In the event Assignee is required to make any
payments hereunder or suffers any actual loss or damage with respect to the
matters set forth in this Section 4.1, Assignee shall be entitled to immediate
reimbursement by Assignor.
4.2 Assignee hereby agrees to indemnify, defend and hold harmless
Assignor, its successors and assigns, from and against any and all loss, claims,
or damage, including reasonable attorneys' fees, which Assignor may suffer
either as a result of: (a) any claims, demands, or causes of action whatsoever
which may hereafter be asserted against Assignor by any partner of the
Partnerships for matters which (i) arise out of the operation or functioning of
the Partnerships or under the Partnership Agreements and (ii) are attributable
to Assignor by the action or inaction of Assignee as the President and primary
responsible officer of Assignor; or (b) the breach of any representation or
warranty of Assignee contained herein. In the event Assignor is required to
make any payments hereunder or suffers any actual loss or damage with respect to
the matters set forth in this Section 4.2, Assignor shall be entitled to
immediate reimbursement by Assignee.
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ARTICLE V
MISCELLANEOUS
5.1 Expenses. Except as otherwise expressly provided herein, Assignee
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and Assignor shall each pay their own expenses in connection with the
preparation of this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, fees of their respective
counsel, auditors and other experts, whether or not such transactions be
consummated.
5.2 Further Assurances. Each of the parties hereto further agrees to
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execute such additional documents from time to time at the request of the other
party as may be reasonably necessary to accomplish the assignment or assumption
made herein.
5.3 Other Remedies. Except as otherwise provided herein, any and all
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remedies expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby or by law on such party, and the
exercise of any one remedy will not preclude the exercise of any other.
5.4 Use of Certain Terms. As used in this Agreement, the words "herein",
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"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular paragraph, subparagraph or other
subdivision.
5.5 Amendment, Modification and Waiver. This Agreement may be amended,
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modified, superseded, canceled or supplemented at any time by written agreement
of the parties hereto. Any failure by Assignor, on the one hand, or Assignee,
on the other hand, to comply with any term or provision of this Agreement may be
waived by Assignee or Assignor, respectively, at any time by an instrument in
writing signed by or on behalf of Assignee or Assignor, but such waiver or
failure to insist upon strict compliance with such term or provision shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure to comply.
5.6 Notices. All notices, requests, demands, waivers and other
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communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
by mail (certified or registered mail, return receipt requested), by reputable
overnight courier or by facsimile transmission (receipt of which is confirmed):
(a) If to Assignee, to:
Xxxxx X. XxxXxxxxx
0000 X. Xxxxxxx
Xxxxx 0000
XX-00
Xxxxxx, XX 00000
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with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx and Xxxxxxx Ltd.
00000 Xxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
(b) If to Assignor, to:
CD Management, Inc.
Attn: Xxxx X. Xxxxxxx,
Chairman of the Board of Directors
0000 Xxxxxxxxx Xxx
Xxxxxxxx Xxxx, XX 00000
with a copy to:
Xxxxx X. Day, Esq.
Day, Edwards, Federman, Propester & Xxxxxxxxxxx, P.C.
000 Xxxx Xxxxxx
00xx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
or to such other person or address as any party shall specify by notice in
writing, given in accordance with this Section 5.6 to the other parties hereto.
All such notices, requests, demands, waivers and communications shall be deemed
to have been given on the date on which so hand-delivered, on the third business
day following the date on which so mailed, on the next business day following
the date on which delivered to such overnight courier and on the date of such
facsimile transmission and confirmation, except for a notice of change of person
or address, which shall be effective only upon receipt thereof.
5.7 Governing Law. THE PARTIES HEREBY AGREE THAT THIS AGREEMENT HAS BEEN
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EXECUTED AND DELIVERED IN THE STATE OF OKLAHOMA AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS THEREOF. THIS AGREEMENT
SHALL NOT BE CONSTRUED FOR OR AGAINST A PARTY BECAUSE THAT PARTY PREPARED IT.
5.8 Counterparts. This Agreement may be executed in counterparts, each of
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which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5.9 Binding Effect; Assignment. This Agreement and all of the provisions
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hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, executors, successors and permitted assigns, but, except
as contemplated herein, neither this Agreement nor any
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of the rights, interests or obligations hereunder shall be assigned, directly or
indirectly, by Assignee or Assignor without the prior written consent of the
other party hereto.
5.10 Severability. Nothing contained herein shall be construed to require
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the commission of any act contrary to law. Should there be any conflict between
any provisions hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.
5.11 Entire Agreement. This Agreement constitutes the entire agreement
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and understanding of the parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement, or statement not so set forth herein.
5.12 Third-Party Beneficiaries. Except as otherwise expressly provided
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herein, this Agreement is not intended, and shall not be deemed, to confer upon
or give any person except the parties hereto and their respective successors and
permitted assigns, any remedy, claim, liability, reimbursement, cause of action
or other right under or by reason of this Agreement. The assumption by Assignee
of Assignor's obligations under the Partnership Agreements shall not create any
third party beneficiary rights.
5.13 Interpretation. The section headings contained in this Agreement are
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solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
5.14 Binding Arbitration. THE PARTIES STIPULATE IN ADVANCE THAT ALL
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DISPUTES OR CONTROVERSIES BETWEEN THE PARTIES ARISING FROM OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT WILL BE
SUBMITTED TO AND RESOLVED BY A BINDING ARBITRATION PROCEEDING HELD IN OKLAHOMA
COUNTY, OKLAHOMA AND CONDUCTED IN ACCORDANCE WITH THE THEN CURRENT RULES OF THE
AMERICAN ARBITRATION ASSOCIATION.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the day and year first set forth above.
ASSIGNEE:
XXXXX X. XXXXXXXXX
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Xxxxx X. XxxXxxxxx
ASSIGNOR:
CD MANAGEMENT, INC.
By:
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Xxxx X. Xxxxxxx,
Chairman of the Board of Directors
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AGREEMENT
List of Appendices and Schedules
APPENDICES:
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Appendix A List of Partnerships
Appendix B Partnership Agreements
Appendix C CD Warehouse, Inc. Acknowledgment
SCHEDULES:
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Schedule 2.2 Limited Partners
Schedule 2.7 Interest in Partnerships
Schedule 2.8 Compliance with Laws and Licenses, Franchises Permits
and Governmental Authorizations
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