EXHIBIT 2
AGREEMENT
This Agreement is made this 26 day June, 1996 by and between Blowout
Entertainment, Inc., a Delaware corporation ("BE"), and Rentrak Corporation, an
Oregon corporation ("Rentrak").
RECITALS
WHEREAS, BE desires to obtain third party financing in order to develop its
business and expand the number of retail video departments/stores (hereinafter
"BE Stores") it operates in WalMart, K-Mart and Ralph's Grocery Stores;
WHEREAS, certain lenders have expressed an unwillingness to loan money or
extend credit to, BE absent some form of guarantee of said indebtedness;
WHEREAS, BE is a 93% subsidiary of Rentrak and Rentrak is willing to
provide certain guarantees of BE's indebtedness on the terms and conditions set
forth below. The term "Rentrak Guarantee" shall mean any and all guarantees of
BE indebtedness provided by Rentrak, including any indebtedness of BE that is
subject to a repurchase obligation on Rentrak's part with respect to BE
cassettes;
NOW, THEREFORE, the parties hereby agree as follows with regard to the
terms and conditions under which Rentrak will provide Rentrak Guarantees:
1. Conditions. During the term of this Agreement, Rentrak commits to
provide BE with Rentrak Guarantees if, but only if, at the time BE submits its
request for such guarantee pursuant to this Agreement BE is in full compliance
with all of its obligations hereunder and each of the following conditions are
met by BE in form and substance satisfactory to Rentrak:
1.1 During the term hereof and while any Rentrak Guarantee remains
outstanding, BE shall provide Rentrak with a weekly accounting of any
outstanding indebtedness subject to a Rentrak Guarantee within ten (10) days of
the end of each week; said accountings shall be accompanied by a check payable
to Rentrak in the amount of .02% per week of any then outstanding indebtedness
subject to a Rentrak Guarantee as provided in Section 4.5 below.
1.2 BE is current in the payment of all of its monetary obligations
to Rentrak under any of its agreements with Rentrak and is in full compliance
with the terms and conditions of such agreements. This condition shall be deemed
waived and given no force or effect until BE has obtained financing approved by
BE's Board of Directors, at which time this condition shall become operative and
given full force and effect in this Agreement throughout the remainder of its
term.
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1.3 On a quarterly basis, at least forty-five (45) days prior to the
beginning of each calendar quarter, BE will submit written notice to Rentrak of
the following information relative to the next calendar quarter:
(a) the number of BE Stores scheduled to be opened by BE;
(b) the maximum amount anticipated to be drawn by BE on any
outstanding loans or other indebtedness subject to a Rentrak Guarantee; and
(c) the maximum amount for which Rentrak may be requested to
provide additional Rentrak Guarantees in the next quarter.
1.4 Within one hundred and eighty (180) days of the date of this
Agreement and while any Rentrak Guarantee is outstanding, BE will keep in effect
and provide evidence of key man insurance on the life of Xxxxx Xxxxx payable to
and listing Rentrak as sole beneficiary in the amount of $12 million. Rentrak
shall pay fifty percent (50%) of the premium due on this policy and upon the
termination of this Agreement and all outstanding Rentrak Guarantees.
1.5 Attached hereto are projection targets for (a) 1996 BE total store
income, (b) 1996 BE corporate overhead, and (c) BE net income for 1996, which
projection targets shall be updated and provided to Rentrak annually by BE on or
before April 1 each year ("Projections"). BE will provide Rentrak written
evidence of meeting the Projection targets on an annual basis, and a pro rata
basis at the time of any requested Rentrak Guarantee, which information shall
include financial information comparing actual results to projected results for
the relevant time period.
1.6 The terms of the requested Rentrak Guarantee shall be commercially
reasonable and shall be in the form of a payment guarantee or repurchase
obligation, and will not require Rentrak to grant a security interest or pledge
any of its assets to the lender.
1.7 No existing Rentrak Guarantee shall have been the subject of a
presentment, demand or otherwise called upon for payment by the beneficiary
thereof.
2. Term/Termination/Maximum Liability. Unless earlier terminated, Rentrak's
obligation to provide a Rentrak Guarantee shall expire the earlier of December
31, 1997, or when the total BE indebtedness (maximum amount of principal, plus
interest) subject to a Rentrak Guarantee reaches $12 million. In no event shall
Rentrak's liability under Rentrak Guarantees at any one time exceed $12 million
measured by the maximum amount of principal indebtedness available, plus
interest, to which a Rentrak Guarantee applies. Rentrak may upon thirty (30)
days prior written notice to BE terminate this Agreement and Rentrak's
obligations hereunder as to future guarantees. BE may upon thirty (30) days
notice to Rentrak terminate this Agreement and BE's obligations hereunder,
provided that BE supplies evidence satisfactory to Rentrak that BE has paid off
all indebtedness subject to any Rentrak Guarantees and has obtained an
unconditional release of Rentrak under said guarantees in form and substance
satisfactory to Rentrak. Notwithstanding the foregoing,
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expiration or termination of this Agreement shall not terminate those
obligations of BE expressly intended to survive, including those set forth in
Paragraphs 3 and 4.
3. Additional Remedy on Default. In the event of a default, breach, or
violation of any of the terms, covenants or conditions of this Agreement by BE
(including without limitation future to satisfy the conditions in Paragraph 1)
or of any outstanding indebtedness subject to a Rentrak Guarantee, then in
addition to any other rights and remedies Rentrak may have, in law or equity,
hereunder or under other agreements:
3.1 BE will immediately cease opening, and will not permit the
opening of, any additional BE Stores, effective within ten (10) days of receipt
of Rentrak's notice of default.
3.2 BE will immediately and unconditionally forfeit to Rentrak 100%
of all cooperative advertising funds committed but not yet credited to BE or
otherwise due from Rentrak and Rentrak shall be relieved of any obligation to
provide such cooperative advertising funds until the default is cured to the
satisfaction of Rentrak or expressly waived by Rentrak in writing. Upon curing
such default or obtaining a waiver thereof, BE shall not be entitled to a credit
or reinstatement of the cooperative advertising funds lost as a result of the
default.
4. Additional Covenants.
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4.1 During the term hereof and while any Rentrak Guarantee is
outstanding, BE will not operate or manage any video departments/stores at any
locations except Ralph's, K-Mart or Wal Mart without Rentrak's prior written
approval, which may be withheld in Rentrak's sole discretion.
4.2 During the term hereof, while any Rentrak Guarantee is
outstanding and for a 24-month period thereafter, BE will not sell, transfer or
convey any BE Stores to any third party, directly or indirectly, unless such
third party agrees to assume, pursuant to an assumption agreement in form and
substance satisfactory to Rentrak, and execute and be bound by the Rentrak
National Account Agreement, as amended, and then in effect between Rentrak and
BE and assume and be legally bound by the License Agreement, entered into by and
between Rentrak and BE, as amended, for the BE name, regardless of whether it
intends to use the xxxx.
4.3 If during the term of this Agreement or while any Rentrak
Guarantee remains outstanding, BE sells, transfers or closes any store for any
reason, all amounts received, directly or indirectly, as a result thereof shall
be directly applied within sixty (60) days of receipt either (a) to finance and
open other BE Stores per the Projections provided to Rentrak or (b) to pay down
indebtedness subject to Rentrak Guarantees.
4.4 BE will indemnify, defend and reimburse Rentrak for all amounts
paid or payable under a Rentrak Guarantee including attorneys' fees prior to
trial, at trial, and on appeal.
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4.5 During the term of this Agreement and/or while any Rentrak
Guarantee is outstanding BE agrees to pay Rentrak an amount equal to .02% per
week of any then outstanding indebtedness subject to a Rentrak Guarantee (the
"Guaranty Payment"), which amount shall be paid on or before the fifth day of
the week immediately following the week in which the payment was accrued. If
any Rentrak Guarantee remains in effect or is otherwise outstanding on or after
the 8th anniversary of the date hereof, the Guaranty Payment shall increase to
.04% and be paid to Rentrak as provided in the preceding sentence of this
Section 4.5.
4.6 During the term of this Agreement and/or while any Rentrak
Guarantee is outstanding, BE covenants and agrees to perform and comply with the
obigations set forth in Sections 1.1, 1.3, 1.4 and 1.5.
5. Miscellaneous.
5.1 Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties with respect to the subject matter
hereof and supersedes all prior understandings and agreements relating thereto,
written or oral.
5.2 No. Waiver. No waiver of compliance by one party of any provision
of this Agreement that the other party was obligated to comply with, is
effective unless in writing. No failure to exercise or delay in exercising any
right or remedy hereunder shall operate as waiver thereof. No express waiver
shall operate as a waiver or estoppel with respect to any subsequent or
continuing failure to comply.
5.3 Notices. All notices required or permitted under this Agreement
shall be in writing and may be sent by (a) overnight air courier service
properly addressed (in which case notice shall be deemed given on the second day
after delivery to the courier or when received by addressee, whichever is
earlier), (b) registered or certified mail, return receipt requested, postage
prepaid and properly addressed (in which case notice shall be deemed given when
received by addressee or on the fifth day after mailing date, whichever is
earlier), or (c) facsimile transmission to the number set forth below (in which
case notice shall be deemed given on the date of confirmed transmission) with a
follow-up copy sent by first class mail, postage prepaid.
BE: BlowOut Entertainment, Inc.
0000 X.X. 00xx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
Rentrak: Rentrak Corporaton
Attn: President
0000 X.X. 00xx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
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5.4 Amendments. No amendment or modification of this Agreement will
be binding unless made in writing and signed by all parties hereto.
5.5 No Assignment. BE shall not assign, delegate or otherwise
transfer, directly or indirectly, voluntarily, involuntarily or by operation of
law, any rights or obligations under the Agreement. Any purported assignment,
delegation or transfer in violation of this Section shall be null and void.
5.6 Governing Law/Attorney Fees. If any fees or costs are incurred
to enforce this Agreement, or if any suit or action is brought to enforce any
provision of this Agreement, or for damages for the breach of any of the terms
of this Agreement, the prevailing party shall be entitled, at trial and on
appeal, if any, to reasonable attorney fees as awarded by the court. This
Agreement is and shall be deemed accepted in Oregon and interpreted and enforced
in accordance with the laws of the State of Oregon applicable to contracts to be
made and to be performed entirely within this state. The parties hereto agree
that any suit, dispute, or action brought pursuant to this Agreement shall be
brought in the Circuit or District Court for the County of Multnomah, State of
Oregon, or the Federal Court for the District of Oregon.
5.7 No Third Party Beneficiaries. This Agreement does not create and
shall not be construed as creating any rights enforceable by any person not a
party to this Agreement.
BLOWOUT ENTERTAINMENT, INC. RENTRAK CORPORATION
By: /s/ Xxxxx Xxxxx By: /s/ Xxx Xxxxxx
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Xxxxx Xxxxx Xxx Xxxxxx
Its President Its President
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