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EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
AMONG
STARTIME CINEMA, INC.,
F.S.A. SUPER SAVER CINEMAS NO. 1, LTD.,
STARTIME PROPERTIES, INC.,
THE TRUST FORMED BY THAT CERTAIN
IRREVOCABLE DECLARATION OF TRUST
UNDER DEED DATED MAY 14, 1994
FOR THE BENEFIT OF STARTIME CINEMA, INC.,
XXXXX XXXXXX,
SCI ACQUISITION CORP.,
SILVER CINEMAS, INC.
AND
NATIONSBANC CAPITAL CORPORATION
DATED JANUARY 22, 1998
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TABLE OF CONTENTS
ARTICLE I - DEFINITIONS
1.1 Defined Terms................................................................................ 1
ARTICLE II - PURCHASE AND SALE OF PROPERTY
2.1 Agreement to Sell and Purchase............................................................... 8
2.2 Purchase Price............................................................................... 8
2.3 Purchase Price Allocation.................................................................... 9
2.4 Purchase Price Adjustments................................................................... 9
2.5 Escrow Agreement............................................................................. 12
2.6 Offsets Against the Escrow Amount and Future Payments........................................ 12
2.7 Sellers' Performance At and After Closing.................................................... 12
2.8 Purchaser Does Not Assume Any of Sellers'
Liabilities or Obligations Except for the Assumed Liabilities................................ 13
2.9 Noncompetition Agreement..................................................................... 13
2.10 Closing...................................................................................... 13
2.11 Subsequent Closings.......................................................................... 14
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1 Joint and Several Representations and
Warranties of the Sellers and the Indemnitors................................................ 15
3.1.1 Corporate Existence and Authority.............................................. 15
3.1.2 Subsidiaries................................................................... 15
3.1.3 Execution of Agreement......................................................... 15
3.1.4 Financial Statements........................................................... 16
3.1.5 Absence of Certain Liabilities................................................. 16
3.1.6 Absence of Changes............................................................. 16
3.1.7 Taxes.......................................................................... 18
3.1.8 Disputes and Litigation........................................................ 19
3.1.9 Compliance with Laws........................................................... 20
3.1.10 Insurance...................................................................... 20
3.1.11 Title to Properties............................................................ 20
3.1.12 Real Property and Real Property Leases......................................... 21
3.1.13 Equipment...................................................................... 21
3.1.14 Condition of Tangible Property................................................. 22
3.1.15 Inventory...................................................................... 22
3.1.16 Intangible Personal Property................................................... 22
3.1.17 Agreements..................................................................... 23
3.1.18 Indebtedness and Guaranties.................................................... 24
3.1.19 Books and Records.............................................................. 24
3.1.20 ERISA.......................................................................... 24
3.1.21 Employees...................................................................... 24
3.1.22 Governmental and Other Consents................................................ 26
3.1.23 Environmental Matters.......................................................... 26
3.1.24 Discounts and Gift Certificates................................................ 26
3.1.25 Full Disclosure................................................................ 26
3.1.26 Organization of the Trust...................................................... 27
3.1.27 Authority of Xxxxxx............................................................ 27
3.1.28 Authority of Indemnitors....................................................... 27
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3.1.29 Validity and Enforceability.................................................... 27
3.1.30 Insolvency..................................................................... 27
3.1.31 Cash Flow Figures.............................................................. 27
3.2 Representations and Warranties of Purchaser.................................................. 28
3.2.1 Organization and Good Standing................................................. 28
3.2.2 Authority...................................................................... 28
3.2.3 Validity and Enforceability.................................................... 28
ARTICLE IV - COVENANTS
4.1 The Sellers' and the Indemnitors' Covenants.................................................. 28
4.1.1 Access and Information......................................................... 28
4.1.2 Notices and Approvals.......................................................... 29
4.1.3 Information for Purchaser's Statements and Applications........................ 30
4.1.4 Termination of Employees....................................................... 30
4.1.5 Conduct of Business............................................................ 30
4.1.6 Preservation of Business....................................................... 31
4.1.7 Insurance...................................................................... 31
4.1.8 Contracts and Commitments...................................................... 31
4.1.9 Actions, Etc................................................................... 31
4.1.10 Repairs........................................................................ 31
4.1.11 Reports and Returns............................................................ 32
4.1.12 Indemnification of Purchaser................................................... 32
4.1.13 Compliance with Agreement...................................................... 35
4.1.14 Landlord Estoppel Certificates................................................. 36
4.1.15 Title Information.............................................................. 36
4.1.16 Additional Lender Requirements................................................. 36
4.1.17 Payment of Indebtedness........................................................ 36
4.1.18 Vote in Favor of Asset Sale.................................................... 37
4.1.19 Exclusive Dealing.............................................................. 37
4.1.20 Actions in the Event of a Noncompliance Circumstance........................... 37
4.2 Purchaser's Covenants........................................................................ 37
4.2.1 Nondisclosure of Information................................................... 37
4.2.2 Compliance with Agreement; Cooperation......................................... 37
4.2.3 Disclosure to the Corporation.................................................. 38
4.2.4 Indemnification by Purchaser................................................... 38
4.2.5 NCC Not Liable................................................................. 40
ARTICLE V - CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to Obligations of Purchaser............................................. 40
5.1.1 Representations and Warranties................................................. 40
5.1.2 Performance by the Indemnitors................................................. 40
5.1.3 Regulatory Approvals and Consents.............................................. 40
5.1.4 Opinion of the Seller's Counsel................................................ 40
5.1.5 Certificate of the Indemnitors................................................. 41
5.1.6 Absence of Regulation Changes.................................................. 41
5.1.7 Satisfaction with Review of Purchaser.......................................... 41
5.1.8 Approval of Instruments........................................................ 41
5.1.9 Good Standing.................................................................. 41
5.1.10 No Actions..................................................................... 42
5.1.11 No Court Orders................................................................ 42
5.1.12 Officers' Certificate.......................................................... 42
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5.1.13 Loan Agreements................................................................ 42
5.1.14 Deeds and Leases............................................................... 42
5.1.15 Releases....................................................................... 42
5.1.16 Stockholder Approval of Sale of Assets......................................... 43
5.1.17 Due Diligence.................................................................. 43
5.1.18 Estoppel Certificates.......................................................... 43
5.1.19 Phase I Environmental Reports and Surveys...................................... 43
5.1.20 Closing of Fee Owned Theaters.................................................. 43
5.1.21 Norwest Release................................................................ 43
5.2 Conditions Precedent to Obligations of the Indemnitors....................................... 43
5.2.1 Representations and Warranties................................................. 43
5.2.2 Performance by Purchaser....................................................... 43
5.2.3 Regulatory Approvals and Consents.............................................. 44
5.2.4 No Court Orders................................................................ 44
5.2.5 Opinion of Purchaser's Counsel................................................. 44
5.2.6 Certificate of Purchaser....................................................... 44
5.2.7 Stockholder Approval of Sale of Assets......................................... 44
5.2.8 Closing of Fee Owned Theaters.................................................. 44
5.2.9 Releases....................................................................... 44
ARTICLE VI - CLOSING AND DELIVERY OF DOCUMENTS
6.1 Closing...................................................................................... 45
6.1.1 Delivery by the Sellers........................................................ 45
6.1.2 Delivery by Purchaser.......................................................... 46
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.................................................................................. 47
7.2 Waiver and Amendment......................................................................... 48
ARTICLE VIII - MISCELLANEOUS
8.1 Expenses..................................................................................... 48
8.2 Notices...................................................................................... 48
8.3 Entire Agreement............................................................................. 49
8.4 Survival of Representations.................................................................. 50
8.5 Incorporated by Reference.................................................................... 50
8.6 Number and Gender of Words................................................................... 50
8.7 Specific Performance......................................................................... 50
8.8 Remedies Exclusive........................................................................... 50
8.9 Execution of Additional Documents............................................................ 50
8.10 Finders' and Related Fees.................................................................... 51
8.11 Titles....................................................................................... 51
8.12 No Third Party Beneficiary, Etc.............................................................. 51
8.13 Reformation; Severability.................................................................... 51
8.14 Binding Effect and Assignment................................................................ 51
8.15 Counterparts................................................................................. 51
8.16 Governing Law; Attorneys' Fees............................................................... 51
8.17 Dispute Resolution........................................................................... 52
8.18 Confidentiality.............................................................................. 53
8.19 Bulk Transfer................................................................................ 54
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INDEX TO EXHIBITS AND SCHEDULE
EXHIBITS
Fee Owned Theaters EXHIBIT A
Leased Theaters, Market Breakdown, Cash Flow and
Purchase Price Determination EXHIBIT B
Continuing Contracts EXHIBIT C
Escrow Agreement EXHIBIT D
Leases EXHIBIT E
Put Agreement EXHIBIT F
Allocation of Purchase Price EXHIBIT G
Memorandum of Approved Improvements and Betterments EXHIBIT H
Noncompetition Agreements EXHIBIT I
Financial Statements of the Corporation and Subsidiaries EXHIBIT J
List of Documents Delivered to Purchaser EXHIBIT K
Form of Estoppel Certificate EXHIBIT L
Legal Opinion of the Sellers' Counsel EXHIBIT M
Legal Opinion of Purchaser's Counsel EXHIBIT N
Assignment and Assumption Agreement (Leases) EXHIBIT O-1
Assignment and Assumption Agreement (Continuing Contracts) EXHIBIT O-2
Xxxx of Sale EXHIBIT P
Mutual Release EXHIBIT Q
[INTENTIONALLY OMITTED]
Cash Flow Figures EXHIBIT S
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DISCLOSURE SCHEDULE
Part 1 -- States in which the Corporation is qualified to do business
Part 2 -- Information concerning Subsidiaries of the Corporation
Part 3 -- Effects of execution of Agreement
Part 4 -- Liabilities not reflected on Balance Sheet
Part 5 -- Changes affecting the Corporation and Subsidiaries between the Balance Sheet Date and the Closing
Part 6 -- Certain information concerning the taxes of the Corporation and Subsidiaries
Part 7 -- Disputes and litigation pending against the Corporation and Subsidiaries
Part 8 -- Insurance of the Corporation and Subsidiaries
Part 9(a) -- Exceptions to good title to the properties of the Corporation and Subsidiaries
Part 9(b) -- Liens and financing statements filed on the properties of the Corporation and Subsidiaries
Part 10(a) -- List of real property and real property leases of the Corporation and Subsidiaries
Part 10(b) -- Violations by the Corporation and Subsidiaries with respect to their real properties
Part 11(a) -- List of equipment and equipment leases of the Corporation and Subsidiaries
Part 11(b) -- List of Property in need of repair
Part 12(a) -- List of intangible personal property of the Corporation and Subsidiaries
Part 12(b) -- Exceptions to exclusive ownership of the intangible personal property of the Corporation and Subsidiaries
Part 12(c) -- List of claims or demands against intangible personal property, including intellectual property,
of the Corporation and Subsidiaries
Part 13 -- List of agreements of the Corporation and Subsidiaries
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Part 14(a) -- List of indebtedness of the Corporation and Subsidiaries
Part 14(b) -- List of guarantees of or by the Corporation and Subsidiaries
Part 15 -- Books and Records
Part 16 -- List of "employee benefit plans"
Part 17 -- Employee agreements of the Corporation and Subsidiaries
Part 18 -- Consents required in connection with this Agreement
Part 19 -- Environmental Matters
Part 20 -- Changes in the financial condition of the Corporation and Subsidiaries
Part 21 -- Prepayment penalties and charges on loan agreements
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of January
22, 1998, is entered into by and among StarTime Cinema, Inc., a Nevada
corporation (the "CORPORATION"), F.S.A. Super Saver Cinemas No. 1, Ltd., a Texas
limited partnership ("SUPER SAVER"), StarTime Properties, Inc., a Nevada
corporation ("SPI"), the Trust formed by that certain Irrevocable Declaration of
Trust under deed dated May 14, 1994 for the benefit of StarTime Cinema, Inc.
(the "TRUST"), Xxxxx Xxxxxx, an individual residing in Texas ("XXXXXX"), SCI
Acquisition Corp., a Delaware corporation ("PURCHASER") and, for certain limited
purposes, Silver Cinemas, Inc., a Delaware corporation ("SILVER CINEMAS") and
NationsBanc Capital Corporation, a Texas corporation ("NCC"). The Corporation,
Super Saver and SPI are collectively referred to herein as "SELLERS."
R E C I T A L S:
WHEREAS, Sellers own and operate two theaters described in Exhibit A
attached hereto (the "FEE OWNED THEATERS") and operate certain other theaters
described in Exhibit B attached hereto (the "LEASED THEATERS"), for the
exhibition of motion pictures;
WHEREAS, Sellers desire to sell and transfer, and Purchaser desires to
purchase, certain of each Sellers' assets and liabilities related to the Fee
Owned Theaters pursuant to the terms and subject to the conditions set forth in
the Property Purchase Agreement (as hereinafter defined);
WHEREAS, Sellers desire to sell and transfer, and Purchaser desires to
purchase, certain of each Sellers' assets and liabilities related to the Leased
Theaters pursuant to the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, Purchaser desires to obtain from each of the Corporation and
Xxxxxx, and each of the Corporation and Xxxxxx is willing to deliver to
Purchaser, an agreement not to compete with Purchaser.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1. - DEFINITIONS
1.1. Defined Terms. The following terms used herein, unless the context
otherwise requires, shall be defined as follows:
1.1.1. "AAA" means the American Arbitration Association.
1.1.2. "Act" means the United States Securities Act of 1933, as
amended.
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1.1.3. "Affiliate" means, with respect to a specified Person, a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the Person specified.
1.1.4. "after due inquiry" means, with respect to any Person, that
such Person has the obligation to affirmatively seek out information on the
relevant subject matter from Xxxxxx, Xxxx Xxxxx, Xxxx Xxxxxxxx, Xxxx Xxxx, and
all the District and City Managers of Super Saver and, whether or not such
affirmative inquiry is made, such Person is deemed to have actual knowledge of
all information that could have been reasonably obtained from the people listed
above and the knowledge the people listed above is imputed to and deemed to be
the actual knowledge of such Person.
1.1.5. "Agreement" means this Asset Purchase Agreement, including
the Schedule and any exhibits hereto.
1.1.6. "Assignment and Assumption Agreements" has the meaning
ascribed thereto in Section 6.1.1(g).
1.1.7. "Assumed Liabilities" has the meaning ascribed thereto in
Section 2.8.
1.1.8. "Balance Sheet" means in the case of the Corporation and any
consolidated Subsidiary the audited consolidated balance sheet of the
Corporation dated as of December 31, 1996 prepared and certified by the
Corporation's Accountant.
1.1.9. "Balance Sheet Date" means in the case of the Corporation
and any consolidated Subsidiary, December 31, 1996.
1.1.10. "Cash Flow Figures" has the meaning ascribed thereto in
Section 3.1.31.
1.1.11. "Certificate" has the meaning ascribed thereto in Section
5.1.5.
1.1.12. "Class B Shares" means the 88,235 shares of Series B
Convertible Preferred Stock, $10.00 par value, of the Corporation.
1.1.13. "Closing" has the meaning ascribed thereto in Section 2.10.
1.1.14. "Closing Acceleration Conditions" means the conditions
precedent to the modification of the definition of Theaters as set forth in
clauses (i) and (ii) of Section 1.1.72 and all of
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the conditions precedent set forth in Article V (other than deliveries of
instruments to be made at Closing).
1.1.15. "Closing Date" has the meaning ascribed thereto in Section
2.10.
1.1.16. "Commitments and Surveys" mean all title insurance
commitments and all surveys requested by Purchaser with respect to any of the
Theaters.
1.1.17. "Continuing Contracts" means the oral agreement with
Sweetheart Cups to produce printed cups for use in the Theaters and agreements
relating to the operation and maintenance of the Property (excluding any film
exhibition agreements), which are described on Exhibit C; provided that, on the
Transfer Date, "Continuing Contracts" shall mean, and consist only of, those
Continuing Contracts set forth on Exhibit C related to the Theaters and Property
to be transferred on the Closing Date. Notwithstanding the foregoing, for the
purposes of Section 3.1, "Continuing Contracts" shall mean the oral agreement
with Sweetheart Cups to produce printed cups for use in the Theaters and
agreements relating to the operation and maintenance of the Property (excluding
any film exhibition agreements), which are described on Exhibit C.
1.1.18. "Corporation" means StarTime Cinema, Inc., a Nevada
corporation.
1.1.19. "Corporation's Accountant" means Coopers & Xxxxxxx LLP, the
independent public accountants of the Corporation.
1.1.20. "Xxxxxx" means Xxxxx Xxxxxx.
1.1.21. "Discount Tickets" means reduced admission tickets, group
tickets or so-called other "discount tickets" useable for admission into any
Theater, excluding free tickets issued in the ordinary course of business.
1.1.22. "employee benefit plan" has the meaning ascribed to it in
Section 3.1.20.
1.1.23. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
1.1.24. "Escrow Agent" means the escrow agent under the Escrow
Agreement.
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1.1.25. "Escrow Agreement" means the escrow agreement to be entered
into by and among the Indemnitors and Purchaser, pursuant to Section 2.5 and
attached hereto as Exhibit D.
1.1.26. "Escrow Agreements" mean the Escrow Agreement and the Term
Sheet Escrow Agreement.
1.1.27. "Escrow Amount" has the meaning ascribed thereto in Section
2.5.
1.1.28. "Estoppel Certificates" has the meaning ascribed thereto in
Section 4.1.14.
1.1.29. "Fee Owned Theaters" has the meaning ascribed thereto in
the Recitals.
1.1.30. "GAAP" means those accounting principles and practices
which are used in the United States and recognized as such by the American
Institute of Certified Public Accountants or any successor institute, acting
through its Accounting Principles Board or through the Financial Accounting
Standards Board or through other appropriate boards or committees thereof
applicable as of the date on which such principles are applied and which are
applied on a consistent basis throughout the periods involved so as to fairly
reflect the financial position, results of operations and operating cash flow on
a consolidated basis of the Corporation and the Subsidiaries.
1.1.31. "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder.
1.1.32. "Impositions" means all real estate taxes, special and
benefit assessments, sewer rents, water rates, personal property taxes, and all
other taxes, assessments and charges of every kind, which may affect the
Property or any part thereof by virtue of any present or future law of any
governmental authority.
1.1.33. "Indemnitors" means the Sellers and the Trust.
1.1.34. "Insolvent" means (a) with reference to an entity other
than a partnership, a financial condition such that the sum of such entity's
debts is greater than all of such entity's property, at a fair valuation,
exclusive of property transferred, concealed, or removed with intent to hinder,
delay, or defraud such entity's creditors; and (b) with reference to a
partnership, a financial condition such that the sum of such partnership's debts
is greater than the aggregate of, at a fair valuation (i) all of such
partnership's property, exclusive of property of the kind excluded in
subparagraph (a) of this paragraph; and (ii) the sum of the excess of the value
of each general partner's nonpartnership property, exclusive of property of the
kind excluded in subparagraph (a) of this paragraph, over such partner's
nonpartnership debts.
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1.1.35. "Intangible Property" means all intangible property now
or on the Closing Date owned by any Seller which pertains solely to the
Property, and specifically including all assignable business licenses,
assignable warranties, choses in action (including claims against Seating
Concepts, Inc. and/or its Affiliates), the Continuing Contracts (to the extent
such are assignable), telephone exchange numbers (to the extent such are
assignable), plans and specifications, blueprints, engineering information and
reports, theater names, the tradenames "Super Saver Cinema" and "Budget Cinema"
and governmental approvals.
1.1.36. "knowledge" means, with respect to any Person (other than
the Indemnitors), such Person's actual knowledge, and with respect to any one or
more of the Indemnitors, the actual knowledge of Xxxxxx "after due inquiry" (as
defined herein).
1.1.37. "Leased Premises" means the premises leased pursuant to the
Leases.
1.1.38. "Leased Theaters" has the meaning ascribed thereto in the
Recitals; provided that, on the Transfer Date, "Leased Theaters" shall mean, and
consist only of, those theaters set forth on Exhibit B for which assignments of
the related leases and any other consents or approvals have been obtained to
transfer such assets to Purchaser if, and only if: (i) with respect to each such
theater, 100% of the assignments of the related leases and any other consents or
approvals have been obtained for the other theaters owned by Sellers in the same
market as identified on Exhibit B in which such theater is located and (ii) the
aggregate "Purchase Price Determination" as set forth on Exhibit B from all
theaters described in clause (i) exceeds $12,229,500. Notwithstanding the
foregoing, for the purposes of Section 3.1, "Leased Theaters" shall mean all the
theaters set forth on Exhibit B.
1.1.39. "Leasehold Improvements" means all right, title and
interest of any Seller in and to the Leasehold Interests, and improvements
thereto of any kind and description now, or on the Closing Date, located on or
which are a part of the Leased Premises.
1.1.40. "Leasehold Interests" means all the interests, estates,
rights, privileges, titles, easements, options and appurtenances owned and in
any way pertaining to any Seller as tenant under the Leases.
1.1.41. "Leases" means the leases for the Leased Theaters and all
amendments and modifications thereof, all of which are described on Exhibit E
attached hereto; provided that, on the Transfer Date, "Leases" shall mean, and
consist only of, those Leases set forth on Exhibit E for which assignments of
the leases and any other consents or approvals have been obtained to transfer
such assets to Purchaser if, and only if, with respect to each such lease, 100%
of the assignments of the leases and any other consents or approvals have been
obtained for the other theaters owned by Sellers in the same market as
identified on Exhibit B in which the theater related to such lease is located
and (ii) the aggregate "Purchase Price Determination" as set forth on Exhibit B
from all theaters related to the leases described in clause (i) exceeds
$12,229,500. Notwithstanding the foregoing, for the purposes of Section 3.1 (and
the definitions of "Leased Premises," "Leasehold Improvements," "Leasehold
Interests," "Personal Property" and "Intangible Property" as such terms are used
in
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Section 3.1) shall mean all the leases for the Leased Theaters and all
amendments and modifications thereof, set forth on Exhibit E.
1.1.42. "Lien" means any mortgage, deed of trust, lien, pledge,
charge, adverse claim, security interest or encumbrance of any nature
whatsoever.
1.1.43. "Loss" has the meaning ascribed thereto in Section
4.1.12(b).
1.1.44. "Lyco" means Lyco Financial, Inc., a Texas corporation.
1.1.45. "NCC" means NationsBanc Capital Corporation, a Texas
corporation.
1.1.46. "Noncompetition Agreement" has the meaning ascribed thereto
in Section 2.9.
1.1.47. "Noncompetition Fees" has the meaning ascribed thereto in
Section 2.9.
1.1.48. "Noncompliance Circumstance" has the meaning ascribed
thereto in Section 4.2.3.
1.1.49. "Owner-Operated Theater" means those theaters listed on
Exhibit B the leases for which are not being transferred and assigned to
Purchaser on the Closing Date.
1.1.50. "Permitted Liens" means (a) liens, taxes and Impositions
due and payable after the Closing Date which are prorated pursuant to Section
2.4 and (b) the Permitted Title Exceptions.
1.1.51. "Permitted Title Exceptions" means (a) all matters
reflected in the Commitments and Surveys and (b) landlord liens; and taxes and
assessments which are to be prorated between Purchaser and Sellers pursuant to
Section 2.4 of this Agreement.
1.1.52. "Person" means an individual, corporation, association,
partnership, proprietorship, joint venture or other entity.
1.1.53. "Personal Property" means all tangible personal property
now or on the Closing Date owned (but excluding tangible personal property
disposed of in the ordinary course of business) by any Seller or located at or
used in the operation of the Leased Premises, including, but not limited to, any
supplies, service and concession equipment, heating, ventilating and cooling
equipment, fixtures, inventory, cleaning equipment and supplies, alarm systems,
screens, projection
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equipment, theater seats, cash registers, display cases, acoustical wall panels,
sound systems, speakers, office equipment and desks, popcorn poppers and storage
bins, linoleum, carpets, drapes, laundry tubs and trays, washers, dryers, ice
boxes, refrigerators, heating units, stoves, ovens, water heaters, incinerators,
furniture and furnishings, signs, poster boxes, soda dispensers, Theater
stationery and items with Theater logos and communication systems, now or on the
Closing Date affixed or attached to or placed upon or used in connection with
the operation of any of the Theaters; provided, however, that Personal Property
shall not include (a) accounts receivable, (b) cash (other than xxxxx cash
located at the Theaters at Closing) and cash equivalents (including certificates
of deposit, commercial paper, and investments in securities) on hand or in
banks, (c) the projection television located in the Green Bay, Wisconsin Theater
and (d) office equipment currently used in El Paso, Texas.
1.1.54. "Property" means the rights of the Sellers under the Leases
and the Continuing Contracts, the Leasehold Interests, the Leasehold
Improvements, the Personal Property and Intangible Property and all other
properties, assets and rights, tangible and intangible, owned by Sellers and not
otherwise included as Property that are necessary to perform, enforce or realize
the full benefits of the rights of the Sellers under the Leases and Continuing
Contracts, the Leasehold Interests, the Leasehold Improvements, the Personal
Property and the Intangible Property.
1.1.55. "Property Purchase Agreement" means that certain Property
Purchase Agreement by and among certain parties hereto and certain other parties
that are signatories thereto and dated as of the date hereof related to the
purchase of the Fee Owned Theaters.
1.1.56. "Proration Period" means the tax fiscal year in which the
Closing Date occurs.
1.1.57. "Purchase Price" means the difference between (i) the sum
of (y) $16,206,000 plus (z) any increase in the Purchase Price as a result of
the adjustments provided for in Section 2.4, less (ii) the sum of: (A) the
Escrow Amount and (B) any decrease in the Purchase Price as a result of the
adjustments provided for in Section 2.4.
1.1.58. "Purchaser" means SCI Acquisition Corp., a Delaware
corporation.
1.1.59. "Purchaser Indemnitees" has the meaning ascribed thereto in
Section 4.1.12(b).
1.1.60. "Put Agreement" means that certain Put Agreement as of the
date hereof between Purchaser and Super Saver a form of which is attached hereto
as Exhibit F related to an option of Super Saver to assign the lease relating to
the Forest Fair theater and the rights of Super Saver under that certain
management contract relating to the Eastgate (Cincinnati, Ohio) theater to
Purchaser at a price to be calculated pursuant to the terms of such Put
Agreement.
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1.1.61. "Related Parties" means, with respect to a Person, such
Person's officers, directors, assignees designated as a Related Party in writing
by such Person and controlled Affiliates.
1.1.62. "Schedule" means the Disclosure Schedule executed and
delivered by the Indemnitors to Purchaser at or prior to the date of this
Agreement and made a part hereof.
1.1.63. "Sellers" has the meaning ascribed thereto in the preamble.
1.1.64. "Silver Cinemas" means Silver Cinemas, Inc., a Delaware
corporation.
1.1.65. "SPI" means StarTime Properties, Inc., a Nevada
corporation.
1.1.66. "StarTime Indemnitees" has the meaning ascribed thereto in
Section 4.2.4(a).
1.1.67. "Stock Purchase Agreement" means the Stock Purchase
Agreement between the Corporation and NCC dated August 15, 1994.
1.1.68. "Subsequent Closing Date" has the meaning ascribed thereto
in Section 2.11.
1.1.69. "Subsidiary" or "Subsidiaries" means all corporations
(including SPI), partnerships (including Super Saver), associations, joint
ventures or other Persons (including the Trust) of which the Corporation or any
other Subsidiary owns not less than twenty percent (20%) of the voting
securities or other equity, but specifically excludes StarTime Entertainment -
Georgia L.L.C. and any other entity that (i) relates solely to the Roswell,
Georgia operations and (ii) neither owns nor has owned any of the Property or
any of the Property (as defined in the Property Purchase Agreement).
1.1.70. "Super Saver" means F.S.A. Super Saver Cinemas No. 1, Ltd.,
a Texas limited partnership.
1.1.71. "Tax Returns" has the meaning ascribed thereto in Section
3.1.7(a).
1.1.72. "Term Sheet Escrow Agreement" means that certain escrow
agreement dated July 31, 1997 by and among the Corporation, Silver Cinemas and
Norwest Bank El Paso, a national banking association, as escrow agent.
1.1.73. "Theaters" means a collective reference to the 26 locations
consisting of 196 screens for the exhibition of motion pictures as specially set
forth on Exhibit B; provided that, on the
16
Transfer Date, "Theaters" shall mean, and consist only of, those theaters set
forth on Exhibit B for which assignments of the related leases and any other
consents or approvals have been obtained to transfer such assets to Purchaser
if, and only if: (i) with respect to each such theater, 100% of the assignments
of the related leases and any other consents or approvals have been obtained for
the other theaters owned by Sellers in the same market as identified on Exhibit
B in which such theater is located and (ii) the aggregate "Purchase Price
Determination" as set forth on Exhibit B from all theaters described in clause
(i) exceeds $12,229,500. Notwithstanding the foregoing, for the purposes of
Section 3.1, "Theaters" shall mean all the theaters set forth on Exhibit B.
1.1.74. "Title Insurance Fees" has the meaning ascribed thereto in
Section 2.4(a)(i).
1.1.75. "Transaction Documents" means this Agreement, the Property
Purchase Agreement, the Assignment and Assumption Agreements, the Estoppel
Certificates, the Xxxx of Sale, the Escrow Agreements, the Noncompetition
Agreements, the Put Agreement, the Mutual Release and any exhibits or schedules
related thereto.
1.1.76. "Transfer Date" means a date (a) upon which the Closing
Acceleration Conditions are satisfied and fulfilled or, if permissible, waived
by the relevant party and (b) which is the earlier of: (i) February 26, 1998 or
(ii) such date not later than March 27, 1998 as Purchaser may determine.
1.1.77. "Trust" means the trust formed by that certain Irrevocable
Declaration of Trust under deed dated May 14, 1994 for the benefit of StarTime
Cinema, Inc.
ARTICLE 2. - PURCHASE AND SALE OF PROPERTY
2.1. Agreement to Sell and Purchase. On the terms and subject to the
conditions of this Agreement, on the Closing Date, the Sellers agree to sell,
convey, transfer, assign and deliver to Purchaser, and Purchaser agrees to
purchase from Sellers, all of the Property.
2.2. Purchase Price. At Closing, Purchaser shall pay and deliver in
immediately available funds by wire transfer, pursuant to wiring instructions
delivered by Sellers at least two days prior to the Closing, the Purchase Price
as follows:
NCC $3,000,000 plus accrued but unpaid dividends on the
Class B Shares
17
Norwest Bank An amount equal to the product of (i) the indebtedness
El Paso, N.A. outstanding at Closing multiplied by (ii) a fraction, the
numerator of which is the total Purchase Price payable on
the Closing Date and the denominator of which is the total
Purchase Price payable on the Closing Date if 100% of the
Theaters listed on Exhibit B and their related assets were
transferred at Closing to Purchaser (exclusive of prorations
and adjustments described in Section 2.4(a)(v) - (vii) and
Section 2.4(b) - (h))
Super Saver As allocated on Exhibit G with respect to the Theaters and
their related assets being transferred at Closing
Corporation The remainder of the Purchase Price
The payment to NCC pursuant to this Section 2.2 shall be against
delivery of the Class B Shares together with the certificates representing the
same and duly executed stock powers transferring such Class B Shares to the
Corporation.
2.3. Purchase Price Allocation. The Purchase Price will be allocated to
the Property as shown on Exhibit G, and each of the parties hereto shall report
this transaction for federal and, to the extent applicable, state and local
income tax purposes in accordance with the allocation shown on Exhibit G.
Purchaser and Sellers shall not take any position on any tax return inconsistent
with such allocation. Purchaser and Sellers shall prepare and timely file all
such reports and returns as may be required by Section 1060 of the Code to
report such allocation. The obligations set forth in this Section 2.3 shall
survive the Closing.
2.4. Purchase Price Adjustments.
(a) The Purchase Price payable at Closing shall be adjusted as
follows:
(i) downward by the amount of 50% of title insurance fees,
premiums and expenses incurred in connection with the procurement of
title insurance policies pursuant to Section 4.1.15 hereof up to the
difference between (A) $32,500 minus (B) actual adjustments to the
purchase price(s) previously paid pursuant to the Property Purchase
Agreement and the Put Agreement in respect of title insurance fees,
premiums and expenses (the "TITLE INSURANCE FEES");
(ii) upward in accordance with Section 4.2.3 up to a maximum of
$25,000;
(iii) upward by the sum of the amounts noted in the memorandums
listing the costs of certain improvements and betterments signed by both
the Corporation and Purchaser at or prior to Closing, a form of which is
attached hereto as Exhibit H;
(iv) downward, in the event that all the theaters listed on
Exhibit B are not being transferred on the Closing Date, by the sum of
the amounts set forth in Exhibit B under the column heading "Purchase
Price Determination" for each theater and its related assets in such
Exhibit that is not being transferred on the Closing Date;
(v) upward for any security deposits held by lessors under the
Leases and the Sellers' xxxxx cash at each Theater;
(vi) upward by a cash amount equal to Sellers' cost for all
inventory; and
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(vii) downward by the sum of the cash values of accrued vacations
assumed by Purchaser, if any, of employees hired at Closing by
Purchaser, which values will be set forth on an exhibit to be attached
hereto mutually agreed upon by the Corporation and Purchaser.
(b) The following items affecting the Property shall be
apportioned, adjusted or otherwise accounted for as provided below
between the Sellers and Purchaser as of the Closing Date on the basis of
the actual number of days elapsed (except as expressly provided below)
from the first day of any applicable period to the Closing Date:
(i) subject to paragraph (e) of this Section 2.4, rent,
additional rent, common area maintenance, taxes and insurance and any
other charges payable by the tenant under the Leases as follows:
(1) any charges payable on a monthly basis (whether or not
subject to year end adjustment) shall be prorated for the month in
which the Closing Date shall occur and any year end adjustment
thereof shall be paid by, or the refund from the lessor paid to,
Sellers and Purchaser in proportion to the aggregate amount of
their respective payments thereof made by Sellers prior to the
Closing Date and by Purchaser after the Closing Date, and
(2) Impositions under the Leases not payable monthly but
payable in full after the Closing at the end of a lease year or tax
fiscal year, as provided in the respective Leases, shall be
prorated as of the Closing Date, and each Seller will pay Purchaser
such Seller's share thereof within 15 days after Purchaser
furnishes such Seller the billing and substantiation thereof
received from each respective lessor or Purchaser will pay to each
Seller such Seller's share of a refund or reduction thereof within
15 days after Purchaser receives the payment or credit thereof from
each respective lessor; provided, however, that Purchaser will
obtain the Corporation's consent, not to be unreasonably withheld,
if Purchaser will obtain benefits which are not prorated between
the Sellers and Purchaser in connection with settling disputes
regarding charges that will be so prorated; and
(ii) payments owing or paid by the Sellers under the Leases to
merchants' associations or similar promotional organizations.
(c) general real property taxes and other Impositions imposed
upon or assessed against the Property (and not otherwise payable by any
Seller as tenant under the Leases directly to the lessors thereunder or
payable by such lessors without any obligation of payment on the part of
such Seller) shall be remitted to the collecting authorities by such
Seller if the same are due and payable on or before the Closing Date,
and by Purchaser if due and payable thereafter; provided, however, that
such real property taxes and other Impositions imposed upon or assessed
against the Property for the Proration Period shall be apportioned and
prorated between the Sellers and Purchaser on and as of the Closing Date
with Purchaser bearing the expense of that proportion of such
Impositions that the number of days in the Proration Period following,
and including the Closing Date bears to 365 and, to the extent not
theretofore paid by a Seller, each Seller will pay Purchaser such
Seller's share thereof within 15 days after Purchaser furnishes such
Seller the billing and substantiation thereof received from the
collecting authorities and provided further, that such Seller shall be
entitled to likewise participate on a prorata basis in any refund,
credit or reduction of such taxes or other Impositions.
19
(d) Sellers shall pay all utility costs in respect of the Leased
Premises (except to the extent the lessors are liable therefor under the
Leases or such costs are a part of a lease charge to be prorated
pursuant to clause (i) of paragraph (b) of this Section 2.4) incurred
prior to the Closing Date, and those incurred thereafter shall be paid
by Purchaser. If the utility charges for the last utility period cannot
be ascertained on the Closing Date, then at such subsequent date as all
utility bills for such utility period have been obtained, the parties
shall promptly pay their respective prorated amounts. Any deposits of
any Seller held by utility companies shall be paid to such Seller at
Closing by Purchaser, and Purchaser shall be responsible for making its
own deposits with the utility companies. Sellers shall cooperate with
Purchaser to make an orderly transition of utilities to Purchaser
without interruption of utility service; provided however, that nothing
herein shall obligate Sellers to incur utility costs after the Closing
Date or maintain utility deposits after the Closing Date.
(e) With respect to any percentage rent (as defined in the
respective Leases) or similar form of rent payment based upon gross
receipts payable under the Leases for the applicable period thereunder
during which the Lease assignments occur, the percentage rent (taking
into account any and all applicable credits or adjustments) shall be
prorated between the Purchaser and each Seller such that each party
shall pay when due that percent of the total percentage rent payable
which equals such party's respective gross receipts (as defined in the
respective Leases) divided by the total gross receipts for such period.
(f) Each Seller and Purchaser also shall make such other
adjustments or apportionments with respect to the Property as may be
necessary to carry out the intention of the parties hereto so that
Purchaser shall not be liable for matters accruing or occurring prior to
the Closing Date and that none of the Sellers shall be liable for
matters accruing or occurring from and after the Closing Date and that
Sellers shall bear all of the expenses and burdens, and shall be
entitled to all of the benefits and income (including any tax refunds or
adjustments), of and from ownership of the Property or operation of the
Theaters prior to the Closing Date and Purchaser shall bear all such
expenses and burdens and shall be entitled to all such benefits and
income of and from ownership of the Property and operation of the
Theaters from and after the Closing Date.
(g) The foregoing prorations shall be determined and payment
made from Purchaser to a Seller or from a Seller to Purchaser, as the
case may be, on the Closing Date using figures for such charges
currently being paid or charges from the preceding year if actual
figures are not available. Any adjustments to such prorations shall be
determined as soon as reasonably practicable after the Closing Date.
When actual figures for such charges become available, Purchaser shall
provide each Seller with all year end reports from the applicable
landlord and a corrected and definitive proration of such charges shall
be promptly made. In the event that such net charges for the year of
Closing exceed the amount estimated in such provisional proration, each
Seller shall pay Purchaser such Seller's prorata net shares of the
amount by which the actual charges exceed the estimated charges.
Similarly, in the event that such net charges from the year of Closing
are less than the amount estimated in such provisional proration,
Purchaser shall pay each Seller such Seller's prorata net share of the
amount by which the estimated charges exceeded the actual charges. Such
payments by a Seller or Purchaser, as the case may be, shall be made
within thirty (30) days of receipt of such actual figures for such
charges and substantiation thereof received from each charging party.
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(h) Discount Tickets and gift certificates issued by any Seller
prior to the Closing Date and presented by customers for admission to
the Theaters on or after the Closing Date shall be honored by Purchaser.
Purchaser shall (and hereby covenants and agrees to) be bound by all
free admission passes distributed prior to the Closing Date by any
Seller or such Seller's authorized agents to third parties. Sellers
shall be required to promptly reimburse Purchaser for any Discount
Tickets or gift certificates on a quarterly basis upon presentation of
such Discount Tickets or gift certificates; provided that in no event
shall Seller be required to reimburse Purchaser for Discount Tickets or
gift certificates presented to Seller after January 31, 1999.
2.5. Escrow Agreement. At Closing, Purchaser shall deposit Five Hundred
Thousand Dollars ($500,000) in immediately available funds in escrow (the
"Escrow Amount") to be released to the Sellers pursuant to the terms of the
Escrow Agreement, subject to the right of Purchaser to offset against the Escrow
Amount pursuant to Section 2.6 and to the provisions of the Escrow Agreement.
2.6. Offsets Against the Escrow Amount and Future Payments. Purchaser
shall be entitled to offset against the Escrow Amount or any amounts payable
pursuant to Section 2.11 for any liability of the Indemnitors to Purchaser
pursuant to the provisions of Section 2.4 or "finally determined" under Section
4.1.12 hereof. Any amounts offset pursuant to the provisions of this Section 2.6
shall be deducted from the Escrow Amount or the amounts payable pursuant to
Section 2.11. Any amounts required to be paid pursuant to the Escrow Agreement
or Section 2.11 may be withheld from the date of notification of any claim by
Purchaser for indemnification pursuant to Section 4.1.12 hereof until resolution
of such claim. Amounts in excess of Purchaser's claims for offset on the date of
any payment pursuant to the Escrow Agreement or Section 2.11 shall be paid to
Sellers. Any amount released from the Escrow Agreement whether to the Sellers,
or to Purchaser as an offset, shall include the interest accrued thereon.
2.7. Sellers' Performance At and After Closing. Each Seller hereby
covenants and agrees that at or after the Closing, as required, such Seller
shall:
(a) at the request of Purchaser, take all action reasonably
necessary to put Purchaser in actual possession of the Property, and execute and
deliver such further instruments of conveyance, sale, transfer and assignment,
and take such other action (including the filing of any UCC-3s) as may be
reasonably necessary to transfer to Purchaser any of the Property and confirm
the title of Purchaser to the Property subject to Permitted Title Exceptions.
Further, after Closing, should such Seller be a necessary party in order for
Purchaser to exercise its rights with respect to the Property, such Seller will
take reasonable efforts, at Purchaser's expense, to assist Purchaser therein;
(b) for a period of four years following the Closing Date, provide
Purchaser access to any operating records, accounting records, correspondence,
memoranda, and other records and data relating to the ownership or operation of
the Property, which are in such Seller's possession;
(c) subject to Section 4.1.12, indemnify and hold Purchaser
harmless from all charges or liabilities, other than the Assumed Liabilities,
incurred by such Seller prior to the Closing Date relating to the Property; and
21
(d) transfer or deliver to Purchaser any and all cash remittances
or property such Seller receives in respect of the Property to the extent that
such receipts are in respect of a period after the Closing.
2.8. Purchaser Does Not Assume Any of Sellers' Liabilities or
Obligations Except for the Assumed Liabilities. Each Seller, at Closing, will
transfer all of the Property to Purchaser free and clear of any and all Liens
except for (each of the following items collectively referred to as the "Assumed
Liabilities"):
(a) obligations and liabilities of such Seller initially arising,
and related solely to the period, after the Closing Date under and relating to
the Leases and the Continuing Contracts which are assigned to Purchaser and
included in the Property;
(b) Permitted Title Exceptions;
(c) Permitted Liens; and
(d) That portion of the prorated items arising post-Closing for
which the Purchaser has agreed to pay in Section 2.4 hereof.
Except as expressly set forth herein, Purchaser shall not assume any
other obligations or liabilities of any Seller or of such Sellers' businesses or
any liabilities (including contingent liabilities) attendant to, or arising from
or relating to the ownership of, any of the Property which may have occurred
prior to the Closing or any liabilities arising from or related to actions taken
or omitted under the Property and subject to Section 4.1.12 each Seller shall
indemnify Purchaser with respect to such Seller's liabilities.
2.9. Noncompetition Agreement. Subject to the terms and conditions set
forth herein, each of the Corporation and Xxxxxx shall execute and deliver at
Closing a noncompetition agreement substantially in the form attached hereto as
Exhibit I (each a "Noncompetition Agreement"). In consideration for the
Noncompetition Agreements to be executed and delivered by the Corporation and
Xxxxxx to the Purchaser, Purchaser shall pay fees (the "Noncompetition Fees") on
the Closing Date in immediately available funds to the Corporation and Xxxxxx in
the amount of $50,000 and $144,000, respectively.
2.10. Closing. Unless this Agreement is terminated and the transactions
contemplated herein abandoned pursuant to Section 7.1 and subject to the
satisfaction or, if permissible, waiver of the conditions set forth in Article
V, the consummation of the transactions contemplated by this Agreement (the
"Closing") shall take place (i) at the offices of C. Xxxxxxx Xxxxxxxx, El Paso,
Texas, at 11:00 A.M. local time on a date to be specified by Purchaser and
Sellers, but the Closing shall take place on, excluding March 6, 1998, the first
Friday (and be effective as of the close of business on the previous day) four
business days after the Transfer Date or (ii) at such other time and place as
Purchaser and the Corporation shall agree upon in writing. The date on which the
Closing occurs is referred to herein as the "Closing Date."
22
2.11. Subsequent Closings. Subject to Closing, Purchaser shall purchase,
and Sellers shall sell, the rights of Sellers under the applicable lease for
each Owner-Operated Theater on a date (each a "Subsequent Closing Date") within
five business days of the date when, with respect to each such Owner-Operated
Theater, 100% of the assignments of the leases and any other consents or
approvals (including a Memorandum of Lease) have been obtained for such
Owner-Operated Theater and the other Owner-Operated Theaters owned by Sellers in
the same market as identified on Exhibit B in which such Owner-Operated Theater
is located at a purchase price equal to the aggregate "Purchase Price
Determination" as set forth on Exhibit B for all the Owner-Operated Theaters
being transferred on each such Subsequent Closing Date (less applicable
adjustments, if any, as provided for in Section 2.4 or any offsets as provided
in Section 2.6); provided however, Purchaser shall not have any obligation to
purchase, and Sellers shall not have any obligation to sell, any Owner-Operated
Theaters after December 31, 1998. As of the date hereof, each Subsequent Closing
Date and any relevant subsequent dates, the Owner-Operated Theaters being
transferred on such Subsequent Closing Date shall be deemed to be included
within the definitions of "Theaters" and "Leased Theaters" and the leases
related to such Owner-Operated Theaters shall be deemed to be included within
the definition of "Leases" for all applicable purposes hereunder including, but
not limited to, Indemnitors' covenants contained in Section 4.1 (including, but
not limited to, indemnification under Section 4.1.12). In addition, each
Subsequent Closing Date shall be deemed to be a "Closing Date" for all purposes
hereunder. Purchaser shall grant to Seller at the Closing a perpetual (except as
provided herein) license to use the tradenames "Super Saver Cinema" and "Budget
Cinema" (i) at the Owner-Operated Theaters until the Subsequent Closing Date; if
ever, related to such Owner-Operated Theater and (ii) at the theaters subject to
the Put Agreement until the date, if ever, such theaters are transferred to
Purchaser.
Notwithstanding anything in this Agreement to the contrary, conditions
precedent to the obligations of the Purchaser to consummate the purchase of any
Owner-Operated Theater on any Subsequent Closing Date shall include (i)
Indemnitors' representations and warranties being true and correct as of the
date hereof and as of the Closing Date, (ii) Indemnitors' representations and
warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.6(d), 3.1.6(h),
3.1.6(i), 3.1.6(j), 3.1.6(p), 3.1.6(q), 3.1.10, 3.1.11, 3.1.12, 3.1.23, 3.1.25
and 3.1.30 being true and correct as of the date as of the date of such
Subsequent Closing Date with respect to the Owner-Operated Theaters and their
related assets being transferred on such Subsequent Closing Date, (iii) the
Owner-Operated Theaters and their related assets being transferred on such
Subsequent Closing Date being in as good of operating condition as of such
Subsequent Closing Date as on the Closing Date, (iv) delivery of the items
required by Section 6.1.1(a), (b), (c), (d) except clause (ii), (g), (h), (j),
(k), (m) and (n) and (v) delivery of the purchase price described in this
Section 2.11 less any adjustments or offsets.
ARTICLE 3. - REPRESENTATIONS AND WARRANTIES
3.1. Joint and Several Representations and Warranties of the Sellers and
the Indemnitors. To induce Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, the Sellers and the
Indemnitors, jointly and severally, represent and warrant, as of the date
hereof, as follows:
3.1.1. Corporate Existence and Authority. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. It has all requisite corporate power, franchises,
licenses, permits and authority to own its properties and assets
23
and to carry on its business as it has been and is being conducted. The
Corporation is qualified to do business as a foreign corporation and is in good
standing in each state, nation or other jurisdiction listed on Part 1 of the
Schedule, being each state, nation or other jurisdiction wherein the character
of the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary.
3.1.2. Subsidiaries. Part 2 of the Schedule lists each and every
Subsidiary and the Subsidiary's form of business organization, state of
incorporation or other organization, number of shares or nature and extent of
interests outstanding, and the number of shares or extent of interests
outstanding owned by the Corporation or each Subsidiary. Each Subsidiary, other
than Super Saver and the Trust, is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power, franchises, licenses,
permits and authority to own its properties and assets and to carry on its
business as it has been and is being conducted. Super Saver is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Texas and has all requisite partnership power, franchises,
licenses, permits and authority to own its properties and assets and to carry on
its business as it has been and is being conducted. The Trust is a trust duly
formed and validly existing under the laws of the State of Texas and has all
requisite trust power, franchises, licenses, permits and authority to own its
properties and assets and to carry on its business as it has been and is being
conducted. Each Subsidiary is qualified to do business in the respective states,
nations and other jurisdictions listed on Part 2 of the Schedule, being each
state, nation or other jurisdiction in which the character of the properties
owned or held under lease by it or the nature of the business conducted by it
makes such qualification necessary. Except as indicated on Part 2 of the
Schedule, each Subsidiary is a consolidated Subsidiary for the purposes of the
Balance Sheet and the financial statements referred to in Section 3.1.4 hereof.
3.1.3. Execution of Agreement. Except as disclosed in Part 3 of the
Schedule, the execution and delivery of this Agreement and the other Transaction
Documents by the each of the Indemnitors does not, and the consummation by each
of the Indemnitors of the transactions contemplated hereby and thereby will not:
(a) violate, conflict with, modify or cause any default under or acceleration of
(or give any party any right to declare any default or acceleration upon notice
or passage of time or both), in whole or in part, any charter, article of
incorporation, certificate of incorporation, bylaw, Lien, indenture, lease,
agreement, instrument, order, injunction, decree, judgment, law, rule,
regulation or any other restriction of any kind or character to which any of the
Indemnitors is a party or by which any of them or any of their properties is
bound (including the Stock Purchase Agreement); (b) result in the creation of
any Lien on any property or asset (whether real, personal, mixed, tangible or
intangible), right, contract, agreement or business of the Indemnitors; (c)
violate any law, rule or regulation applicable to the Indemnitors or the
Indemnitors or (d) permit any federal or state regulatory agency to impose any
restrictions or limitations of any nature on the Indemnitors or any of their
respective activities.
3.1.4. Financial Statements. Attached as Exhibit J hereto are the
following financial statements: (a) the consolidated financial statements of the
Corporation and the Subsidiaries (including, without limitation, statements of
earnings, balance sheets as of the Balance Sheet Date and statements of changes
in financial position, statements of stockholders' equity, and all notes
relating thereto for the fiscal year then ended), which financial statements
have been audited and certified by the Corporation's Accountants; (b) the
consolidated financial statements of the Corporation and the Subsidiaries, for
the ten (10) months ended October 31, 1997, which financial statements shall
24
have been certified by the chief financial officer of the Corporation and are in
the form normally prepared by such officer for presentation to the board of
directors of the Corporation; and (c) the Balance Sheet. To the Indemnitors'
knowledge, all of the financial statements referred to in this Section 3.1.4
present fairly the financial condition of the Corporation and the Subsidiaries
and the results of their operations at the dates and for the periods covered
thereby. Such financial statements have been prepared in conformity with GAAP,
except as otherwise expressly disclosed in such financial statements. For the
periods covered by the financial statements referred to in subsections (a), (b)
and (c) of this Section 3.1.4, neither the Corporation nor any Subsidiary had
any material nonrecurring items of income.
3.1.5. Absence of Certain Liabilities. To the Indemnitors'
knowledge, as of the Balance Sheet Date, the Corporation and the Subsidiaries
had no liabilities or obligations of any nature (whether absolute, accrued,
contingent, due or to become due) except as and to the extent reflected and
fully reserved against in the Balance Sheet other than those liabilities and
obligations set forth on Part 4 of the Schedule and, except as disclosed in Part
4 of the Schedule, since the Balance Sheet Date, the Corporation and
Subsidiaries have incurred no liabilities or obligations of any nature other
than in the ordinary course of business and consistent with past practice.
3.1.6. Absence of Changes. Except as expressly provided in this
Agreement or as set forth on Part 5 of the Schedule in alphabetical order
corresponding to the following subsections, since the Balance Sheet Date there
has not been:
(a) Any change or aggregate of changes known to the Indemnitors
in the condition (financial or otherwise), business, operations,
liquidity, property, assets, liabilities, obligations or prospects of
the Corporation and Subsidiaries resulting in a reduction of five
percent (5%) of the net worth of the Corporation;
(b) Any merger, consolidation or statutory share exchange or
agreement to merge, consolidate or enter into a statutory share exchange
by the Corporation or any Subsidiary with another Person, or any
purchase of or investment in or agreement to purchase or invest by the
Corporation or any Subsidiary in the business of another Person;
(c) Any amendment to the Articles of Incorporation, Certificate
of Incorporation, partnership agreement or Bylaws of the Corporation or
any Subsidiary;
(d) Any General Increase in the compensation or rate of
compensation payable or to become payable to any of their hourly
employees or salaried employees ("GENERAL INCREASE" for purposes hereof
shall mean any increase applicable to a class or group of employees and
does not include increases granted to individual employees for merit,
length of service, change in position or responsibility or other reasons
applicable to specific employees and not generally to a class or group
thereof);
(e) Any mortgage, pledge or other subjection to any Lien or
option of any property, asset, right or business of the Corporation or
any Subsidiary, other than (i) Liens for taxes not yet due and payable,
(ii) any continuing statutory landlord's Lien for rent not yet due and
payable, (iii) those incurred in the ordinary course of business and
(iv) those identified on Part 5 of the Schedule;
25
(f) Any incurrence of any indebtedness, obligations or
liabilities (whether absolute, accrued, contingent, known or unknown,
due or to become due) by the Corporation or any Subsidiary except (i)
those arising in the ordinary course of business and consistent with
past practice outstanding when all such indebtedness, obligations and
liabilities are aggregated or (ii) those to be paid in full on or before
Closing;
(g) Any assumptions, guarantees or endorsements by the
Corporation or any Subsidiary of the obligations of any Person, except
(i) in the ordinary course of business and consistent with past practice
or (ii) those to be paid in full on or before Closing;
(h) Any actions taken or transactions entered into by the
Corporation or any Subsidiary involving the Theaters and more than
$12,500 per Theater, other than in the ordinary course of business and
consistent with past practice, or any capital expenditures or
commitments therefor in excess of $12,500 per Theater; in each case,
other than indebtedness, obligations or liabilities allowed for in
paragraph (f) above;
(i) Any creations, renewals, changes or terminations, or any
notice of any proposed renewal, change or termination of any Continuing
Contract or any contract by which the Property is bound;
(j) To the Indemnitors' knowledge, any action or inaction which
has caused or will cause a breach or default in any contract, agreement,
obligation, lease or license to which the Corporation or any Subsidiary
is a party or by which the Corporation or any Subsidiary or their
property is bound and which is being assumed by Purchaser pursuant
hereto;
(k) Any sale, assignment, lease, abandonment or other disposition
by the Corporation or any Subsidiary of any real property, or any sale,
assignment, transfer, license, lapse, or other disposition by the
Corporation or any Subsidiary of any trademark, trade name, copyright
(or pending application for any trademark or copyright), or other
intangible asset;
(l) Any sale, assignment or transfer of any contract, agreement,
lease, or asset by the Corporation or any Subsidiary, except in the
ordinary course of business and consistent with past practice;
(m) To the Indemnitors' knowledge, any violation by the
Corporation or any Subsidiary of, or any charge against the Corporation
or any Subsidiary for alleged violations of, any governmental laws,
rules, regulations or standards, including, without limitation, unlawful
employment practices, occupational health and safety standards, and
environmental control standards;
(n) To the Indemnitors' knowledge, any labor dispute, or threat
of a labor dispute, or any attempt or threat of any attempt by a union
to organize any employees of the Corporation or any Subsidiary who are
not now covered under an existing union or collective bargaining
agreement;
(o) Any material failure by the Corporation or any Subsidiary to
replenish inventories and supplies in a normal and customary manner
consistent with prior practice; any purchase commitment by the
Corporation or any Subsidiary in excess of the normal, ordinary and
usual requirements of business or at any price in excess of the then
current market price or upon terms and conditions more onerous than
those usual and customary in the Corporation's or any Subsidiary's
business;
26
(p) Any arrangement for Discount Tickets or other similar
arrangements (excluding free passes in the ordinary course of business);
or
(q) Any significant action taken or transaction entered into by
the Corporation or any Subsidiary other than in the ordinary course of
business, which do or could result in material indebtedness or material
liability (including contingent liability) after Closing.
3.1.7. Taxes. Except as set forth on Part 6 of the Schedule in
alphabetical order corresponding to the following subsections:
(a) The Corporation and Subsidiaries have duly filed all required
federal, state, local and other tax returns, notices and reports
(including, without limitation, income, property, sales, use, franchise,
capital stock, excise, value added, employees' income withholding,
social security and unemployment tax returns, notices and reports)
heretofore due (collectively the "TAX RETURNS"), and all such Tax
Returns are correct, accurate and complete in all material respects;
(b) All deposits required to be made by the Corporation and
Subsidiaries with respect to any tax (including, without limitation,
estimated income, franchise and employee withholding taxes) have been
duly made;
(c) No audits of the Tax Returns of the Corporation and
Subsidiaries are currently being conducted or are currently pending by
the United States Internal Revenue Service or any other taxing
authority;
(d) All taxes, assessments, fees, penalties, interest and other
governmental charges with respect to each of the Corporation and
Subsidiaries which have become due and payable by the Balance Sheet Date
have been paid in full or adequately reserved against on the Balance
Sheet, and all taxes, assessments, fees, penalties, interest and other
governmental charges which have become due and payable subsequent to the
Balance Sheet Date have been paid in full or adequately reserved against
on its books of account and the amounts reflected on the Balance Sheet
and such books are sufficient for the payment of all unpaid federal,
state, local, foreign and other taxes, fees and assessments (including,
without limitation, income, property, sales, use, franchise, capital
stock, excise, value added, employees' income withholding, social
security and unemployment taxes), and all interest and penalties thereon
with respect to the periods then ended and for all periods prior
thereto;
(e) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any
tax or deficiency against the Corporation or any Subsidiary, nor are
there any actions, suits, proceedings, investigations or claims now
pending against the Corporation or any Subsidiary in respect of any tax
or assessment, or any matters under discussion with any federal, state,
local or foreign authority relating to any taxes or assessments, or any
claims for additional taxes or assessments asserted by any such
authority, and, to the Indemnitors' knowledge, there is no basis for the
assertion of any additional taxes or assessments against the Corporation
or any Subsidiary; and
(f) Neither the Corporation nor any Subsidiary has ever filed a
consent pursuant to Section 341(f) of the United States Internal Revenue
Code.
27
3.1.8. Disputes and Litigation. Except as noted on Part 7 of the
Schedule: (a) there is no suit, action, litigation, proceeding, investigation,
claim, complaint or accusation pending or, to the Indemnitors' knowledge,
threatened against or affecting the Corporation or any Subsidiary or any of
their properties, assets or business or to which the Corporation or any
Subsidiary is a party, in any court or before any arbitrator of any kind or
before or by any governmental agency (including, without limitation, any
federal, state, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality), and no facts are known by the
Corporation or any Subsidiary which are reasonably likely to give rise to any
such suit, action, litigation, proceeding, investigation, claim, complaint or
accusation; (b) there is no pending or, to the Indemnitors' knowledge,
threatened change in any environmental, zoning or building laws, regulations or
ordinances which affect or could affect the Corporation or any Subsidiary or any
of their properties, assets or businesses, and the Indemnitors or the
Corporation do not know, and have no reasonable grounds to know, of any basis
for any such change; and (c) there is no outstanding order, writ, injunction,
decree, judgment or award by any court, arbitrator or governmental body against
or affecting the Corporation or any Subsidiary or any of their properties,
assets or business. Except as set forth on Part 7 of the Schedule, none of the
items nor aggregate of items listed on Part 7 of the Schedule would, if
adversely determined, materially and adversely affect the business, operations,
properties or financial position of the Corporation or any of the Subsidiaries.
To the Indemnitors' knowledge, there is no litigation, proceeding,
investigation, claim, complaint or accusation, formal or informal, or
arbitration pending, or any of the aforesaid threatened, or any contingent
liability which would give rise to any right of indemnification or similar right
on the part of any director or officer of the Corporation or any Subsidiary or
any such person's heirs, executors or administrators as against the Corporation
or any Subsidiary.
3.1.9. Compliance with Laws. To the Indemnitors' knowledge, the
Corporation and Subsidiaries have at all times been, and presently are, in full
compliance with any applicable federal, state, local, foreign and other laws,
rules and regulations other than those where noncompliance would not have a
material adverse effect on the Corporation, the Subsidiaries or their business,
and the Corporation and Subsidiaries have not received notice of any claimed
violation of any such law, rule or regulation. The Corporation and Subsidiaries
have filed all returns, reports and other documents and furnished all
information required or requested by any federal, state, local or foreign
governmental agency and all such returns, reports, documents and information are
true and complete in all respects. To the Indemnitors' knowledge, all permits,
licenses, orders, franchises and approvals of all federal, state, local and
foreign governmental or regulatory bodies required of the Corporation and
Subsidiaries for the conduct of their businesses have been obtained, no
violations are or have been recorded in respect of any such permits, licenses,
orders, franchises and approvals, and there is no litigation, proceeding,
investigation, arbitration, claim, complaint or accusation, formal or informal,
pending or threatened, which may revoke, limit, or question the validity,
sufficiency or continuance of any such permit, license, order, franchise or
approval. Such permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by the Corporation and
Subsidiaries.
3.1.10. Insurance. Part 8 of the Schedule sets forth a true and
complete list of all insurance policies (including the policy number, the name
of the insurer, the amounts of coverage, the premium rate, the cash value, if
any, the expiration date and the risks and losses insured against) maintained by
the Corporation and Subsidiaries on the Property, and copies of all such
policies, agreements, studies and analyses previously have been delivered to
Purchaser. All of the foregoing insurance policies are in full force and effect
and are fully paid as to all premiums heretofore due. Neither the Corporation
nor any Subsidiary has, to the Indemnitors' knowledge, failed to give any
28
notice or present any claim under such insurance policies in a timely fashion,
nor has the Corporation or any Subsidiary received any notification of the
cancellation of any of such policies or that any of them will not be renewed. To
the Indemnitors' knowledge and except as set forth on Part 8 of the Schedule,
there is no claim, demand or offset, or any state of facts or occurrence of
events which might form the basis of any claim, demand or offset, which may
increase the premiums or impair the full value of said insurance policies.
3.1.11. Title to Properties. The Property consists of (i) all of
the properties and assets reflected on the Balance Sheet, and (ii) all other
properties and assets presently carried on the Corporation's and the
Subsidiaries' books or used in their businesses at any time since the Balance
Sheet Date, except, in each case, properties and assets subsequently disposed of
in the ordinary course of business. Except as set forth in Part 9(a) of the
Schedule, the Corporation and Subsidiaries have title (good and marketable with
respect to real property) to the Property, free and clear of all Liens,
conditions and covenants, other than (x) Liens for taxes not yet due and
payable, (y) minor imperfections of title, if any, which do not interfere with
the present or proposed use of such Property or otherwise adversely affect the
Corporation or the Subsidiaries in the conduct of their respective businesses,
and (z) such other Liens, charges or encumbrances that may arise or be created
after the date of this Agreement that are incidental to the conduct of the
business of the Corporation and the Subsidiaries and are in the ordinary course
of such business or are contemplated by the terms of this Agreement as set forth
on Part 9(a) to the Schedule. Except as set forth in Part 9(b) of the Schedule
or otherwise specifically disclosed in this Agreement, there have not been filed
any Liens or financing statements under the applicable state Uniform Commercial
Code or other similar statute on the properties or assets, whether real,
personal or mixed, of the Corporation or any Subsidiary, nor has the Corporation
or any Subsidiary signed any security agreement or similar agreement authorizing
any secured party thereunder to file any such Lien or financing statement.
3.1.12. Real Property and Real Property Leases. Part 10(a) of the
Schedule contains a true and complete list of (i) all real property owned by the
Corporation and the Subsidiaries together with a summary description of the
buildings and improvements thereon and the method by which such real property is
depreciated for tax and book purposes, (ii) all real estate leases to which the
Corporation or any Subsidiary is a party together with a summary description of
the buildings and improvements thereon, the address of each property, the name
of each landlord and tenant and the expiration date of each lease, and (iii) all
other interests, if any, in real property owned or claimed by the Corporation or
any Subsidiary. To the Indemnitors' knowledge, the Corporation and Subsidiaries
have all easements and rights, including parking rights and easements for power
lines, water lines, roadways and other access, necessary to conduct the
businesses they now conduct and enjoy peaceful and undisturbed possession of all
properties occupied by them. Neither the whole nor any portion of any real
property owned, occupied or leased to or by the Corporation or any Subsidiary
has been rezoned or condemned or otherwise taken by any public authority and, to
the Indemnitors' knowledge, no such rezoning, condemnation or other taking is
threatened or contemplated. To the Indemnitors' knowledge, none of the real
properties owned, occupied or leased to or by the Corporation or any Subsidiary,
or the occupancy or operation thereof, constitutes a nuisance or violation of
any law or any building, zoning or other ordinance, code or regulation or any
private or public covenant or restriction, and no notice from any governmental
body or other Person has been served upon the Corporation or any Subsidiary
claiming any violation of any such law, ordinance, code, regulation, covenant or
restriction, or requiring or calling attention to the need for any work,
repairs, construction, alterations or installations on or in connection with any
of such properties which has not been complied with except to the extent set
forth in Part 10(b) of the Schedule. All leases of real
29
property to which the Corporation or any Subsidiary is a party are valid,
binding and in full force and effect, and, to the Indemnitors' knowledge, there
exists no default thereunder by any party thereto, nor any events which, with
notice or lapse of time, or both, would constitute a default, and all amounts
heretofore payable under such leases have been paid in full. True, correct and
complete copies of all deeds to the real property listed on Part 10(a) of the
Schedule and true, correct and complete copies of all real estate leases listed
on Part 10(a) of the Schedule, including all amendments, modifications, letter
agreements and assignments relating thereto have been previously delivered to
Purchaser.
3.1.13. Equipment. Part 11(a) of the Schedule contains a true and
complete list of (i) all equipment of the Corporation and the Subsidiaries
(having a cost basis in excess of $5,000 each) presently owned and used by the
Corporation and the Subsidiaries in their businesses; and (ii) all equipment
(including, but not limited to, trade fixtures and motor vehicles) leased by the
Corporation and the Subsidiaries, including the name and address of each lessor
and lessee, the expiration date of each lease, the monthly rent and any
additional rent payable under each such lease. To the Indemnitors' knowledge, no
party to any such lease is in default, each such lease is valid, binding, in
full force and effect, and enforceable in accordance with its terms. True,
correct and complete copies of all such leases, including all amendments,
modifications, letter agreements and assignments relating thereto have
previously been delivered to Purchaser.
3.1.14. Condition of Tangible Property. Except as set forth on
Part 11(b) of the Schedule, to the Indemnitors' knowledge, with the exception of
inventory, all tangible properties owned or used by the Corporation and
Subsidiaries, including, without limitation, all buildings, offices, theaters
and other structures owned or occupied by the Corporation and Subsidiaries and
all machinery, equipment, tools, fixtures and motor vehicles owned or used by
them, are in good operating condition, reasonable wear and tear excepted,
reasonably suitable for the purposes for which they are being utilized, and
sufficient for all current operations of the Corporation and the Subsidiaries.
3.1.15. Inventory. The inventories of each of the Corporation and
Subsidiaries shown on the Balance Sheet and inventories acquired by it
subsequent to the Balance Sheet Date consist solely of items of a quality and
quantity usable and salable in the normal course of its business.
3.1.16. Intangible Personal Property. Part 12(a) of the Schedule
contains a true and complete list and summary description of all trademarks,
service marks, trade names, and copyrights and applications for the foregoing,
all franchises, permits and other authorizations owned or used by the
Corporation and Subsidiaries, all licenses to which the Corporation or any
Subsidiary is a licensor or licensee, all non-competition covenants, and all
other intangible personal property owned or used by the Corporation and
Subsidiaries. Each of the Corporation and Subsidiaries validly owns or is
validly licensed under all intangible properties which are required or necessary
for the conduct of its business as now conducted, and except as set forth on
Part 12(b) of the Schedule, is the sole and exclusive owner of said properties,
free and clear of all Liens and has the unrestricted right to use said
properties, having not granted or entered into any agreement, covenant, license
or sublicense with respect thereto.
Except as set forth on Part 12(c) of the Schedule, no claims or
demands have been asserted against the Corporation or any Subsidiary with
respect to any such items of intangible property, and no proceedings have been
instituted, are pending or, to the Indemnitors' knowledge,
30
have been threatened which challenge the rights of the Corporation or any
Subsidiary with respect to any of such assets. To the Indemnitors' knowledge and
except as set forth on Part 12(c) of the Schedule, the businesses and operations
of the Corporation and Subsidiaries, and the use or publication by them of their
trademarks, trade names, and advertising literature and other intangible
personal properties do not involve infringement or claimed infringement of any
United States trademark, trade name, or copyright.
No director, officer, stockholder, employee, consultant,
distributor, representative, advisor, salesman or agent of the Corporation or
any Subsidiary owns, directly or indirectly, in whole or in part, any
trademarks, trade names, or copyrights, or applications for the foregoing, or
tangible personal property which the Corporation or any Subsidiary is presently
using or the use of which is necessary for the business of the Corporation or
any Subsidiary as now conducted. To the Indemnitors' knowledge, none of the
directors, officers, stockholders, employees, consultants, distributors, agents,
representatives, advisors or salesmen of the Corporation or any Subsidiary has
entered into any agreement regarding know-how, trade secrets, or prohibition or
restriction of competition, or solicitation of customers or any other similar
restrictive agreement or covenant, whether written or oral, with any Persons
other than the Corporation and Subsidiaries.
3.1.17. Agreements. Part 13 of the Schedule contains a true and
complete list of all oral and written contracts, agreements, commitments,
understandings and obligations to which the Corporation or any Subsidiary is a
party or by which any of them or their properties may be bound which are not
otherwise listed in the Schedule and which (a) involve obligations by any party
thereto in excess of $50,000; (b) extend beyond six months from the date of this
Agreement and are not terminable on thirty (30) days' notice or less without any
liability or continuing obligation on the part of the Corporation or any
Subsidiary (including any management, consulting or retainer agreement); (c)
contain any escalator, renegotiation or redetermination clause; (d) require the
consent of any party thereto to the consummation of the transactions
contemplated hereby; (e) contain covenants limiting the freedom of the
Corporation or any Subsidiary to compete in any line of business or with any
Person or in any geographical area; (f) contain any provision or option relating
to the acquisition by the Corporation or any Subsidiary of any business or
relating to the sale by the Corporation or any Subsidiary of any business; (g)
contain an agreement or commitment by the Corporation or any Subsidiary for a
material capital expenditure; (h) are contracts or agreements to which the
United States government is a party; or (i) contain any other agreement,
commitment, understanding or obligation which materially affects the business,
properties or assets of the Corporation or any Subsidiary. All of the aforesaid
agreements and all of the Continuing Contracts were entered into in the ordinary
course of business, are valid and binding agreements, in full force and effect
and enforceable in accordance with their respective terms, and, to the
Indemnitors' knowledge, there exists no breach or default, or any event which,
with notice or lapse of time or both, would constitute a breach or default, by
any party thereto. True and complete copies, including all amendments,
modifications, letter agreements and assignments relating thereto, of all of the
aforesaid written agreements and true and correct summaries of all such oral
agreements have previously been delivered to Purchaser.
To the Indemnitors' knowledge, neither the Corporation nor any
Subsidiary presently has, nor during the last five (5) years has had, directly
or indirectly, any type of contract, agreement, commitment, understanding or
obligation, whether written or oral, (i) with its customers or suppliers for the
sharing of fees, the rebating of the Corporation's or any Subsidiary's charges
to customers, kickbacks from customers or suppliers, or other similar
arrangements, or (ii) with any competitor regarding bidding for movie product or
product splitting; provided, the Corporation and the Subsidiaries have entered
into written video game rental agreements with the suppliers thereof that
31
provide for shared revenues from their operation and specific written and oral
rebate agreements with concession item suppliers that have been previously
disclosed to Purchaser. To the Indemnitors' knowledge, neither the Corporation
nor any Subsidiary is a party to or otherwise bound by any contract, obligation
or commitment to purchase above the current market price or to sell below its
current list price supplies, equipment, capital assets, inventories or services,
or any contract, obligation or commitment which upon completion will result in a
net loss to the Corporation or Subsidiary of more than $50,000.
3.1.18. Indebtedness and Guaranties. Part 14(a) of the Schedule
sets forth a true and complete list, including the names of the parties thereto
and summary description of the terms thereof, of all debt instruments, loan
agreements, indentures or other obligations, whether written or oral, relating
to indebtedness for borrowed money or money loaned to others to which the
Corporation or any Subsidiary is a party or obligor. Except as set forth on Part
14(b) of the Schedule, the Corporation has not guaranteed any dividend,
obligation or indebtedness of any Subsidiary or any other Person; nor has any
Subsidiary guaranteed any dividend, obligation or indebtedness of the
Corporation, any other Subsidiary or any other Person. All of the aforesaid
items were entered into in the ordinary course of business, are valid and
binding, in full force and effect and enforceable in accordance with their
respective terms and, to the Indemnitors' knowledge, there exists no breach or
default, or any event which with notice or lapse of time or both, would
constitute a breach or default by any party thereto.
3.1.19. Books and Records. Except as set forth on Part 15 of the
Schedule, each of the Corporation and Subsidiaries keeps its books, records and
accounts (including, without limitation, those kept for financial reporting
purposes and for tax purposes) in sufficient detail to accurately and fairly
reflect the transactions and dispositions of its assets, liabilities and
equities. The minute books of each of the Corporation and incorporated
Subsidiaries contain complete and accurate records of all of its stockholders'
and directors' meetings and of all action, with respect to the Corporation and
the Subsidiaries, taken by such stockholders and directors. The meetings of
directors and stockholders referred to in such minute books were duly called and
held, and the resolutions appearing in such minute books were duly adopted. The
signatures appearing on all documents contained in such minute books are the
true signatures of the persons purporting to have signed the same.
32
3.1.20. ERISA. Neither the Corporation nor any Subsidiary has any
"qualified" plans within the meaning of Section 401(a) of the Internal Revenue
Code of 1986 and, except as set forth in Part 16 of the Schedule, does not
maintain, administer or otherwise contribute to any "EMPLOYEE BENEFIT PLAN", as
defined in Section 3(3) of ERISA, which is subject to any provisions of ERISA
and covers any employee, whether active or retired, of the Corporation or any
Subsidiary.
3.1.21. Employees.
(a) Part 17 of the Schedule sets forth a true and complete list
of: (1) all collective bargaining agreements and other labor agreements
to which the Corporation or any Subsidiary is a party or by which any of
them may be bound; (2) all employment, profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consultant, retirement, welfare and incentive plans, agreements or
contracts, whether written or oral, to which the Corporation or any
Subsidiary is a party or by which any of them may be bound; (3) all
agreements and plans, whether written or oral, to which the Corporation
or any Subsidiary is a party and which constitute "fringe benefits" to
their employees or salesmen, including, without limitation, group life
and health insurance, vacation plans or programs, sick leave plans or
programs, termination or severance pay programs and employee discounts;
and (4) the name and current annual compensation of each director and
each officer of the Corporation and the Subsidiaries, and of each
employee or salesman thereof whose current annual salary and/or
estimated current annual commission is $25,000 or more, together with
such person's job title and amounts and forms of compensation and fringe
benefits. True and complete copies of all written, and correct summaries
of all oral, contracts, agreements, plans and programs set forth on Part
17 of the Schedule have previously been delivered to Purchaser.
(b) To the Indemnitors' knowledge, all of the aforesaid
contracts, agreements, plans and programs are in full compliance with
all applicable federal, state and local laws, and the Corporation and
Subsidiaries are in full compliance with all federal, state and local
laws respecting employment, wages and hours. Neither the Corporation nor
any Subsidiary is engaged in any unfair labor practice or discriminatory
employment practice and no complaint of any such practice against the
Corporation or any Subsidiary is filed or, to the Indemnitors'
knowledge, threatened to be filed with or by the National Labor
Relations Board or the Equal Employment Opportunity Commission, nor is
any grievance filed or, to the Indemnitors' knowledge, threatened to be
filed against the Corporation or any Subsidiary by any employee pursuant
to any collective bargaining or other employment agreement to which the
Corporation or any Subsidiary is a party. To the Indemnitors' knowledge,
the Corporation and the Subsidiaries are in full compliance with all
applicable federal and state laws and regulations respecting
occupational safety and health standards other than those where
noncompliance would not have a material adverse effect on the
Corporation, the Subsidiaries or their business, and the Corporation and
Subsidiaries have received no complaints from any federal or state
agency or regulatory body alleging violations of any such laws and
regulations.
(c) To the Indemnitors' knowledge, the Corporation and
Subsidiaries are in full compliance with the terms of all contracts,
agreements, plans and programs set forth on Part 17 of the Schedule.
Except as noted in Part 17 of the Schedule, the employment of all
persons and officers employed by the Corporation and the Subsidiaries is
terminable at will, without any penalty or severance obligation of any
kind on the part of the employer, and the consummation of the
transactions contemplated by this Agreement will not trigger any
payments to any officers, directors or employees of the Corporation or
any Subsidiary. All
33
sums due for employee compensation and benefits and all vacation time
owing to any employees have been duly and adequately accrued on the
books of the Corporation and Subsidiaries. To the Indemnitors'
knowledge, all employees of the Corporation and Subsidiaries are either
United States citizens or resident aliens specifically authorized to
engage in employment in the United States in accordance with all
applicable laws. The Indemnitors do not know, and have not been
informed, that any employee, consultant, distributor, representative,
advisor, salesman, agent, customer or supplier of the Corporation or any
Subsidiary will terminate his employment or cease to do business with
the Corporation or any Subsidiary after the Closing.
(d) To the Indemnitors' knowledge, neither the Corporation nor
any Subsidiary has experienced since the Balance Sheet Date, any labor
troubles or strife, work stoppages, slowdowns, or other interference
with or impairment of the businesses of the Corporation and Subsidiaries
by their employees. To the Indemnitors' knowledge, neither the
Corporation nor any Subsidiary has experienced since the Balance Sheet
Date, any union or collective bargaining organization efforts or
negotiations, or requests for negotiations, for any representation or
any labor contract relating to any employees of the Corporation or the
Subsidiaries not covered by a union or collective bargaining agreement
as of the Balance Sheet Date, except to the extent disclosed in Part 17
of the Schedule.
3.1.22. Governmental and Other Consents. Except as set forth on
Part 18 of the Schedule, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or other
Person is required on the part of the Corporation or any Subsidiary, the
stockholders of the Corporation, the Trust, SPI, or the partners of Super Saver
in connection with the execution or delivery of the Transaction Documents or the
consummation of the transactions contemplated hereby.
3.1.23. Environmental Matters. Except as set forth in Part 19 of
the Schedule and to the Indemnitors' knowledge, with respect to the real estate
owned or leased by the Corporation or any of the Subsidiaries, (i) all permits,
licenses, filings and approvals necessary for the lawful construction, occupancy
and operation of such real estate required by any federal, state, county,
regional or local authorities whose jurisdiction includes, in whole or in part,
environmental protection or matters pertaining to health, safety and welfare
have been obtained; (ii) none of such real estate contains any (a) asbestos in
any form, (b) urea formaldehyde foam insulation, (c) transformers or other
equipment which contain dielectric fluid containing levels of polychlorinated
biphenyls (PCBs) in excess of fifty parts per million, or (d) other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any federal, state, county, regional or local authority, except in compliance
with applicable law; and (iii) none of such real estate has been used at any
time in the past for any activities involving, directly or indirectly, the use,
generation, treatment, storage, spill or disposal of any hazardous or toxic
chemical, material, substance or waste, except in compliance with applicable
law.
3.1.24. Discounts and Gift Certificates. Any outstanding discount
or promotional tickets, gift certificates, prepaid tickets or admission passes
or any other arrangements allowing the holder thereof to reduced or free
admission to any of the Theaters will expire on or before December 31, 1998,
other than (i) those issued prior to December 1, 1997 and (ii) free passes
issued in the ordinary course of business.
34
3.1.25. Full Disclosure. As of the date of this Agreement, the
Indemnitors have, and at the Closing will have, disclosed in writing to
Purchaser all events, conditions or facts which, to the Indemnitors' knowledge,
materially affect the condition (financial or otherwise), business or prospects
of the Theaters. The Indemnitors have not now, and will not have at the Closing,
withheld from Purchaser knowledge of any events, conditions or facts which the
Indemnitors know may materially affect the condition (financial or otherwise),
business or prospects of the Theaters. No representation or warranty by the
Indemnitors in this Agreement, and no information contained in the Schedule, the
exhibits, lists, certificates and other instruments and documents furnished or
to be furnished to Purchaser pursuant hereto, contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary to make the statements and information contained herein or
therein not misleading. The Indemnitors shall execute and deliver to Purchaser
at Closing the Certificate described in Section 5.1.5. For the purposes of this
Section 3.1.25, events, conditions and facts which have effects aggregating less
than 5% of the transaction value is deemed not material.
3.1.26. Organization of the Trust. The Trust is a duly formed and
validly existing trust under the laws of the State of Texas.
3.1.27. Authority of Xxxxxx. Xxxxxx, in his individual capacity,
has full right, power and authority to enter into this Agreement and the other
Transaction Documents to which he is a party and to consummate the transactions
contemplated hereby and thereby.
3.1.28. Authority of Indemnitors. Each of the Indemnitors has
full right and power to enter into this Agreement and the other Transaction
Documents to which each is a party and to consummate the transactions
contemplated hereby and thereby. The execution by each of the Indemnitors of
this Agreement and the other Transaction Documents to which each is a party,
their delivery to Purchaser and the performance of their respective terms have
been fully authorized by the Board of Directors of the Corporation, the
stockholders and the Board of Directors of SPI, the partners of Super Saver and
the trustee of the Trust, as required, and no further corporate, partnership or
trust action will be necessary on their part to make this Agreement and the
other Transaction Documents to which each is a party valid and binding upon each
of the Indemnitors in accordance with their respective terms, other than the
stockholder approval required pursuant to Section 5.2.7. The execution and
delivery of this Agreement and the other Transaction Documents do not, and the
consummation of the transactions contemplated hereby and thereby will not,
result in a violation or breach of any term or provision of, nor constitute a
default under, the Corporation's or SPI's articles of incorporation or bylaws,
Super Saver's partnership agreement, the Trust's formation documents, or other
constituent documents, or any indenture, mortgage, deed of trust or other
material contract or agreement to which the Corporation, SPI, Super Saver or the
Trust is a party.
3.1.29. Validity and Enforceability. This Agreement and the other
Transaction Documents are valid and binding agreements, enforceable against the
Indemnitors, the Subsidiaries and Xxxxxx to the extent each is ostensibly a
party in accordance with their respective terms by Purchaser, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws and principles of equity affecting the
rights of creditors generally from time to time in effect.
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3.1.30. Insolvency. No Seller or Indemnitor is now Insolvent, nor
will any Seller or Indemnitor be rendered Insolvent by the occurrence of the
transactions contemplated hereby.
3.1.31. Cash Flow Figures.
(a) Sellers have provided cash flow figures (the "CASH FLOW
FIGURES") indicating gross revenues less direct operating expenses for
the Theaters operated by such Seller from November 1, 1996 through
October 31, 1997 in Exhibit S attached hereto.
(b) Each Seller's Cash Flow Figures are in accordance in all
material respects with the books and records of such Seller and, except
as stated therein, fairly represent said Cash Flow Figures for said
Theaters.
3.2. Representations and Warranties of Purchaser. To induce the Sellers
and the Indemnitors to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents, warrants and agrees as
of the date hereof as follows:
3.2.1. Organization and Good Standing. Silver Cinemas is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware. Purchaser is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware.
3.2.2. Authority. The execution by each of Silver Cinemas and
Purchaser of this Agreement and the other Transaction Documents to which each is
a party, their delivery to the Indemnitors and the performance of their
respective terms have been fully authorized by the Board of Directors of each of
Silver Cinemas and Purchaser and each of Silver Cinemas' and Purchaser's
stockholders, if required, and no further corporate action will be necessary on
their part to make this Agreement and the other Transaction Documents to which
each is a party valid and binding upon each of Silver Cinemas and Purchaser in
accordance with their respective terms. The execution and delivery of this
Agreement and the other Transaction Documents do not, and the consummation of
the transactions contemplated hereby and thereby will not, result in a violation
or breach of any term or provision of, nor constitute a default under, each of
Silver Cinemas' and Purchaser's respective articles or certificates of
incorporation or bylaws, or any indenture, mortgage, deed of trust or other
material contract or agreement to which either Silver Cinemas or Purchaser is a
party.
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3.2.3. Validity and Enforceability. This Agreement and the other
Transaction Documents are valid and binding agreements, enforceable against each
of Silver Cinemas and Purchaser to the extent each is ostensibly a party in
accordance with their respective terms by the Sellers, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws and principles of equity affecting the rights of
creditors generally from time to time in effect. The execution and performance
by each of Silver Cinemas and Purchaser of this Agreement and the other
Transaction Documents to which each is a party and the consummation of the
transactions contemplated hereby or thereby do not violate any statutory or
common law or rule or regulation or give rise to a cause of action of any type
in any Person (other than the parties to such agreements, upon a violation
hereof or thereof), which will result in any liability to the Sellers or the
stockholders of the Corporation.
ARTICLE 4. - COVENANTS
4.1. The Sellers' and the Indemnitors' Covenants. To induce Purchaser to
enter into this Agreement and to consummate the transactions contemplated
hereby, and without limiting any covenant, agreement, representation or warranty
made elsewhere in this Agreement, the Sellers and the Indemnitors covenant and
agree as follows:
4.1.1. Access and Information. Between the date of this Agreement
and the Closing Date, each of the Corporation and Subsidiaries will: (i) provide
to Purchaser and its officers, attorneys, accountants and other representatives,
during normal business hours, or otherwise if Purchaser deems necessary, free
and full access to all of the properties, assets, agreements, commitments,
books, records, accounts, tax returns and documents of the Corporation and
Subsidiaries and permit them to make copies thereof; (ii) furnish Purchaser and
its representatives with all information concerning the business, properties and
affairs of the Corporation and Subsidiaries as Purchaser requests and certified
by the officers of the Corporation, if requested; (iii) use their best efforts
to cause the Corporation's Accountants to make available to Purchaser and its
representatives all financial information relating to the Corporation and the
Subsidiaries requested, including all working papers pertaining to audits and
reviews made heretofore by such auditors; (iv) furnish Purchaser true and
complete copies of all financial and operating statements of the Corporation and
Subsidiaries; (v) permit access to customers and suppliers for consultation or
verification of any information obtained by Purchaser and use their best efforts
to cause such customers and suppliers to cooperate with Purchaser in such
consultation and in verifying such information; and (vi) cause their employees,
accountants and attorneys to make disclosure of all material facts known to them
affecting the financial condition and business operations of the Corporation and
Subsidiaries and to cooperate fully with any audit, review, investigation or
examination made by Purchaser and its representatives, including, without
limitation, with respect to:
(a) The books and records of the Corporation and Subsidiaries;
(b) The reports of state and federal regulatory examinations;
(c) Leases, contracts and commitments between the Corporation or
any Subsidiary and any other Person;
(d) Physical examination of any real properties owned by, or
leased to or by the Corporation or any Subsidiary;
37
(e) Physical examination of any real property upon which the
Corporation or any Subsidiary has a Lien; and
(f) Physical examination of any furniture, fixtures, equipment or
other personal property owned by or leased to or by the Corporation or
any Subsidiary.
4.1.2. Notices and Approvals. Each of the Sellers and Indemnitors
agrees: (a) to give, and to cause the Subsidiaries to give, all notices to third
parties (including their respective stockholders and limited and general
partners) which may be necessary or deemed desirable by Purchaser in connection
with this Agreement and the consummation of the transactions contemplated
hereby, (b) to use its best efforts to obtain, and to cause the Subsidiaries to
obtain, all federal and state governmental regulatory agency approvals,
consents, permits, authorizations, and orders necessary or deemed desirable by
Purchaser in connection with this Agreement and the consummation of the
transaction contemplated hereby and (c) to use its best efforts to obtain, and
to cause Subsidiaries to obtain, all consents and authorizations of any
governmental authorities or other third parties (including their respective
stockholders and limited and general partners) and lenders (including Norwest
Bank El Paso, N.A. and Frost National Bank, N.A.) necessary or deemed desirable
by Purchaser in connection with this Agreement and the consummation of the
transactions contemplated hereby. At least ten (10) business days prior to the
submission of any application with respect to any of the foregoing approvals,
consents, permits, authorizations and orders, the Corporation shall, and shall
cause any Subsidiary to, deliver a copy thereof to Purchaser. In the event
Purchaser shall request any modification in the form or content of any such
application, the Corporation shall, or shall cause any Subsidiary to, make such
change or modification and submit the application as modified or changed.
4.1.3. Information for Purchaser's Statements and Applications.
The Sellers shall, and shall cause the Subsidiaries and their employees,
accountants and attorneys to, cooperate fully with Purchaser in the preparation
of any statements or applications made by Purchaser to any federal or state
governmental regulatory agency in connection with this Agreement and the
transactions contemplated hereby and to furnish Purchaser with all information
concerning the Corporation and Subsidiaries necessary or deemed desirable by
Purchaser for inclusion in such statements and applications, including, without
limitation, all requisite financial statements and schedules. At the time any
such statement or application is filed and at such other times as Purchaser may
request, the Sellers shall provide Purchaser with a certificate executed by the
respective Corporation's or Subsidiary's executive officers confirming in such
detail as Purchaser may request the information concerning the Corporation or
Subsidiary which is contained in such statement or application.
4.1.4. Termination of Employees. On the Closing Date, each Seller
shall terminate all of its Theater level employees; provided, Purchaser may
elect to hire any of such employees. Each Seller will pay on or before the
Closing Date any accrued vacation pay earned prior to the Closing by any
employees of such Seller, other than those employees set forth on the Exhibit
described in Section 2.4(a)(vii).
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4.1.5. Conduct of Business.
(a) Except as otherwise specifically contemplated by this
Agreement and disclosed on the Schedule, from the date of this Agreement
and through the Closing, unless Purchaser has given its prior written
consent otherwise, each of the Sellers shall, and shall cause each
Subsidiary to, conduct its business and affairs only in the ordinary and
usual course and in the same manner in which they have heretofore been
conducted. Any purchases of equipment or fixtures from the date of this
Agreement through the Closing, shall be of equipment and fixtures of
comparable quality and standards as such items purchased prior to the
date of this Agreement. Without limiting the generality of the
foregoing, absent Purchaser's prior written consent, the Sellers shall
not, and shall not permit any Subsidiary to, take any action or omit to
take any action where such action or omission would by the terms of this
Agreement require an item to be listed on Part 5 of the Schedule in
order to make the representations herein true as of the date of such
action or omission.
(b) From and after the date hereof until the Closing or
termination of this Agreement pursuant to the terms hereof, each Seller,
without the prior written consent of Purchaser, shall not:
(i) encumber or permit the encumbrance by such Seller of the
Property owned or leased thereby, except for encumbrances that are
discharged on or before Closing;
(ii) dispose of or contract to dispose of any of the Property
owned or leased thereby, except for replacements or substitutes in the
ordinary course of business (but will not sell any of the Theaters
operated thereby); and
(iii) amend or terminate any of the Leases or Continuing
Contracts to which such Seller is a party.
4.1.6. Preservation of Business. From the date of this Agreement
and through the Closing, the Sellers shall use commercially reasonable efforts,
and shall cause the Subsidiaries to use commercially reasonable efforts, to
preserve and keep intact the respective business organizations of the
Corporation and Subsidiaries, to retain their respective officers, and to
preserve the goodwill of their respective employees, customers, suppliers and
all other persons having business relations with the Corporation or any
Subsidiary.
4.1.7. Insurance. From the date of this Agreement and through the
Closing, the Sellers shall, and shall cause the Subsidiaries to, continue in
force all existing insurance now carried by the Corporation and Subsidiaries.
39
4.1.8. Contracts and Commitments. From the date of this Agreement
and through the Closing, unless Purchaser has given its prior written approval,
the Sellers shall not, and shall not permit any Subsidiary to, enter into any
contract or commitment by which any of the Property is bound except contracts or
commitments in the ordinary and usual course of business not involving (i) an
expenditure in any one transaction in excess of $2,000; and (ii) the purchase of
a quantity of materials not reasonably anticipated (based on current operations)
to be consumed in less than six (6) months; and the Sellers shall not, and shall
not permit any Subsidiary to, make or incur any capital expenditures in an
aggregate amount in excess of $3,000, except for items of equipment on order on
the date hereof and set forth on Part 13 of the Schedule.
4.1.9. Actions, Etc. The Sellers shall promptly notify Purchaser
of any lawsuits, claims, proceedings or investigations which are threatened or
commenced against the Corporation or any Subsidiary or against any of their
employees, consultants, officers or directors, or, to the Indemnitors'
knowledge, their employees or consultants between the date of this Agreement and
the Closing Date and which may relate to, or affect, the business or assets of
the Corporation or any Subsidiary or the transactions contemplated hereby. From
the date of this Agreement and through the Closing, the Sellers shall, and shall
cause the Subsidiaries to, duly comply with all laws, regulations, ordinances,
orders, injunctions and decrees applicable to them, their properties, and the
conduct of their respective businesses, and with all covenants, terms and
conditions upon or under which any of their properties are held.
4.1.10. Repairs. From the date of this Agreement and through the
Closing, the Sellers shall, and shall cause the Subsidiaries to, maintain,
preserve and protect the property used in the conduct of the business of the
Corporation and Subsidiaries and, except as set forth on Part 11(b) to the
Schedule, keep the same in good repair, working order and condition and, from
time to time make, or cause to be made, all needful and proper repairs, renewals
and replacements thereto, subject to the limitation contained in Section 4.1.8
hereof, so that the business carried on in connection therewith may be
advantageously conducted at all times.
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4.1.11. Reports and Returns. The Sellers shall, and shall cause
the Subsidiaries to, duly and timely file all reports and returns required to be
filed with federal, state, local and other authorities prior to Closing,
including, without limitation, any federal income tax returns, which returns
shall be prepared in accordance with all regulatory requirements. The Sellers
shall, and shall cause the Subsidiaries to, promptly pay all federal, state,
foreign and local tax assessments and governmental charges levied or assessed
upon the Corporation and Subsidiaries or their properties prior to the date on
which penalties attach thereto and all lawful claims which, if unpaid when due
and payable, might become a Lien upon property of the Corporation or any
Subsidiary, except taxes, charges and claims being contested in good faith by
appropriate proceedings by the Corporation or a Subsidiary and for which
adequate reserves have been made on the books of the Corporation or the
Subsidiaries. The Sellers shall, and shall cause the Subsidiaries to, duly and
timely make all deposits required of the Corporation and Subsidiaries with
respect to any taxes (including, without limitation, employee withholding
taxes).
4.1.12. Indemnification of Purchaser.
(a) The sole remedy of Purchaser, its officers, directors,
representatives, shareholders, stockholders, lenders, assignees and
Affiliates against the Indemnitors and their Related Parties for any
Loss arising out of or related to this Agreement or the transactions
contemplated hereby (it being understood that claims for indemnification
by Purchaser or such other Persons under the (i) Property Purchase
Agreement shall be made, if at all, pursuant to Section 4.1.12 thereof
and (ii) Put Agreement shall be made, if at all, pursuant to Section
4.1.12 thereof) shall be a claim for indemnity made and enforced in
accordance with this Section 4.1.12. Each and every provision in this
Agreement has been independently bargained for and relied upon by
Purchaser.
(b) The Indemnitors jointly and severally agree to defend and
indemnify, reimburse and hold harmless Purchaser and its Related Parties
(collectively, the "PURCHASER INDEMNITEES") against and in respect of
any and all liability, damage, deficiency, loss, cost or expense
(including attorney's fees and costs of investigation), or diminution of
value, whether or not involving a third party claim (collectively, a
"LOSS") arising from (i) all third party claims to the extent that they
relate to (A) transactions contemplated herein to the extent that they
arise out of or relate to actions or omissions of Curley, Lyco, the
Indemnitors and/or the Subsidiaries, (B) the business currently or ever
conducted by the Sellers and the Subsidiaries to the extent that they
arise out of or relate to actions or omissions of Curley, Lyco, the
Indemnitors and/or the Subsidiaries and (C) the Property prior to
Closing to the extent that they arise out of or relate to actions or
omissions of Curley, Lyco, the Indemnitors and/or the Subsidiaries and
(ii) any untrue representation, breach of warranty or non-fulfillment of
any covenant contained herein or in any document, certificate or
instrument delivered to Purchaser hereunder made by the Indemnitors,
even though any such representation, warranty or covenant may have been
made by the Indemnitors in good faith and to their knowledge; provided,
however, that solely with respect to those representations and
warranties contained herein which have been specifically limited to the
Indemnitors' knowledge there shall be no indemnification obligations
under this Section 4.1.12(b) absent such knowledge. Without limiting the
foregoing, the Indemnitors agree to defend, indemnify, reimburse and
hold harmless each Purchaser Indemnitee against and in respect of any
Loss arising out of or related to:
41
(1) any claim for a finder's fee or brokerage or other
commission arising by reason of any services rendered or alleged to
have been rendered to or at the instance of any of the Indemnitors
or any Subsidiary with respect to this Agreement or any of the
transactions contemplated hereby;
(2) any liability to any federal, state or local taxing
authority for income taxes, excise taxes, sales taxes, franchise
taxes or other taxes or penalties incurred by the Corporation or
any Subsidiary on or prior to the Closing Date; and
(3) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, and Losses incident to any of the
foregoing or incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof, or in enforcing this
indemnity.
(c) Notwithstanding the preceding provisions concerning
indemnification of the Purchaser Indemnitees by the Indemnitors,
Purchaser hereby expressly agrees that the liabilities and obligations
of the Indemnitors under this Section 4.1.12 shall be expressly limited
as follows:
(1) the amount of any damages asserted by any Purchaser
Indemnitee pursuant to any indemnification claim made pursuant to
this Section 4.1.12 shall include the amount of tax liability, if
any, incurred by any Purchaser Indemnitee upon receipt of such
indemnification and be limited in each case to the total amount of
actual damages incurred by any Purchaser Indemnitee net of the then
present value (calculated at 6% per annum) of any related tax
benefit to the Purchaser Indemnitee, if any, resulting from such
claim;
(2) the Indemnitors shall not be liable for any increase in
any tax liability of the Purchaser Indemnitees (including, without
limitation, income, property, sales, use, franchise, capital stock,
excise, value added, employees' income withholding, social
security, unemployment taxes and all interest and penalties related
to any of such taxes) to the extent such increase in tax liability
to the Purchaser Indemnitees shall result from an audit or
enforcement action that in either case was voluntarily initiated by
Purchaser or its Affiliates;
(3) the Indemnitors shall not be required to defend,
indemnify or hold any Purchaser Indemnitee harmless from any claim
pursuant to Section 4.1.12(b)(ii) based upon any facts or
circumstances which were specifically disclosed by the Indemnitors
to Purchaser in this Agreement or in the Schedule or any exhibit
attached hereto or in any document delivered to Purchaser which is
specifically identified on Exhibit K attached hereto;
(4) the Indemnitors shall not be required to defend,
indemnify or reimburse or hold any Purchaser Indemnitee harmless
from any claim except to the extent that the total of all such
claims established pursuant to this Section 4.1.12, Section 4.1.12
of the Property Purchase Agreement and Section 4.1.12 of the Put
Agreement exceeds an aggregate amount of $25,000, subject to
reduction in accordance with Section 4.2.3; and
(5) Indemnitors shall not be liable for any breach of
representation, warranty, covenant or any other matter to the
extent that it resulted in an adjustment in the Purchase Price.
42
(d) In the event the income or other tax returns of the Purchaser
Indemnitee are audited after Closing by any taxing authority, the
Indemnitors shall have the right to participate at their own expense in
such audit and to contest in good faith and on behalf of the
taxpayer/entity any assessments for additional tax, interest or penalty
proposed or imposed by such taxing authority for which the Indemnitors
may be liable or responsible under this Section 4.1.12, providing the
Indemnitors post bond for any liability resulting from such contest.
(e) Each of the Indemnitors shall be so obligated under this
Section 4.1.12 and Section 4.1.12 of the Property Purchase Agreement and
Section 4.1.12 of the Put Agreement to the extent of an aggregate
maximum of an additional $3,200,000 over and above any and all offsets
against the Escrow Amount; provided, that the maximum aggregate amount
to be recovered by all Purchaser Indemnitees from the Indemnitors
collectively shall not exceed an additional $3,200,000 over and above
any and all offsets against the Escrow Amount and, provided further,
that any amounts paid by the Indemnitors (whether directly or by offset
of other payments due Indemnitors) pursuant to Section 4.1.12 of the
Property Purchase Agreement or Section 4.1.12 of the Put Agreement that
are not offset against the Escrow Amount shall be applied towards such
$3,200,000 limitation. Notwithstanding the foregoing, this paragraph (e)
shall not apply to any breach of Sections 3.1.11, 3.1.12 and 8.19
hereof.
(f) In the event any Person not a party to this Agreement shall
make a demand or claim, or file any lawsuit, which demand, claim or
lawsuit is likely to result in any of the forms of liability or Loss
described in this Section 4.1.12, then after prompt written notice by
any Purchaser Indemnitee to the Indemnitors of such demand, claim or
lawsuit, the Indemnitors shall retain counsel reasonably satisfactory to
Purchaser to defend such claim or action. Thereafter, any Purchaser
Indemnitee shall be permitted to participate in such defense at their
own expense. In the event the Indemnitors fail to respond to the prompt
written notice of any such demand, claim or lawsuit, or fail to retain
reasonably satisfactory counsel, then any Purchaser Indemnitee shall be
permitted to retain counsel and to conduct the defense of such demand,
claim or lawsuit as they may reasonably deem fit at the expense of the
Indemnitors. The above agreement of the Indemnitors to defend, indemnify
and hold harmless the Purchaser Indemnitees, shall include the cost and
expense of such counsel and defense as well as any Loss any Purchaser
Indemnitee may suffer arising out of such demand, claim or lawsuit
subject to the limitation set forth above. For the purposes of this
Section 4.1.12, "prompt written notice" shall mean that any Purchaser
Indemnitee, shall give written notice to counsel for the Indemnitors
designated in Section 8.2 of a demand, claim or lawsuit within thirty
(30) days after such demand, claim or lawsuit is brought to the
attention of a Purchaser Indemnitee, and in any event 15 days before any
pleading is due in any litigation.
(g) The Indemnitors agree that their agreement under this Section
4.1.12 to defend, indemnify, reimburse and hold harmless the Purchaser
Indemnitees will first be accomplished by an offset against the Escrow
Amount as provided in Section 2.6 hereof. For any and all amounts in
excess of the Escrow Amount, the Indemnitors agree to indemnify,
reimburse and hold harmless Purchaser Indemnitees from any Loss within
thirty (30) days after any such Loss shall be finally determined. Any
Loss under this Section 4.1.12 shall be deemed "finally determined" on
the earlier of (i) the date upon which the Indemnitors shall acknowledge
in writing to Purchaser that any claim for indemnity under this Section
4.1.12 has been properly made and is in the correct amount, or (ii) in
the event the Indemnitors shall contest any claim made by a Purchaser
Indemnitee or by any third party on the date any final judgment,
decision or award shall have been rendered by a court, arbitration board
or administrative agency of competent jurisdiction, or a settlement
shall have been consummated,
43
or the parties shall have arrived at a mutually binding agreement with
respect to such claim, as applicable. The indemnity hereunder shall
include any and all costs and expenses incurred by a Purchaser
Indemnitee pending any such final determination.
(h) These indemnification obligations of the Indemnitors shall
survive until, but only until, the first anniversary of the Closing;
provided, that the obligations of the Indemnitors for any claim made by
a Purchaser Indemnitee under this Section 4.1.12 prior to such first
anniversary, shall survive such first anniversary.
4.1.13. Compliance with Agreement. The Sellers shall not, and
shall not allow the Subsidiaries to, undertake any course of action inconsistent
with satisfaction of the conditions applicable to them set forth in this
Agreement, and the Sellers shall, and shall cause the Subsidiaries to, do all
such acts and take all such measures as may be reasonably appropriate as early
as practicable to comply with and satisfy (as applicable) the representations,
agreements, conditions and other provisions of this Agreement. The Sellers shall
give Purchaser prompt written notice of any change in any information contained
in the representations and warranties made in Section 3.1 hereof and on the
Schedule referred to therein and of any condition or event which constitutes a
default of any covenant or agreement of the Sellers made in Section 4.1 or in
any other section hereof and the Sellers shall have a continuing obligation to
promptly supplement or amend the Schedule with respect to any matter thereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Schedule; provided,
however, that for the purposes of the rights and obligations of the parties
hereunder, any such supplemental or amended disclosure shall not be deemed to
have been disclosed as of the date of this Agreement unless so agreed to in
writing by Purchaser. For the purposes of this Section 4.1.13, "prompt written
notice" shall mean notice given to Purchaser within five (5) days after the
occurrence of the event which by the terms of this Agreement requires such
change in information or constitutes such a default, or if such event occurs
within five (5) days prior to the Closing, then "prompt written notice" shall
mean written notice given prior to the Closing.
4.1.14. Landlord Estoppel Certificates. The Sellers shall deliver
to Purchaser not less than two (2) days prior to the Closing Date estoppel
certificates from the landlords of the Leased Premises and the acknowledgment
and consent from such landlords that Bankers Trust (or any substitute proposed
lender) is to be a lienholder secured by the Leased Premises (the "ESTOPPEL
CERTIFICATES") in the form attached hereto as Exhibit L.
4.1.15. Title Information. Purchaser, at the Sellers' cost and
expense to the extent that the Purchase Price is adjusted as set forth in
Section 2.4, shall cause a title company satisfactory to Purchaser and its
lender to deliver to Purchaser not less than fifteen (15) days prior to the
Closing Date a commitment for owner's and mortgagee's title insurance policies,
naming Purchaser as the insured party in amounts and with exceptions to title
acceptable to Purchaser, for each tract of real property constituting Property
owned or leased by any Seller, together with legible copies of all title
exceptions listed therein. Purchaser and its lender shall have ten (10) days
from receipt thereof to review and approve the status of title to such real
property. If Purchaser or its lender object to the status of title to such real
property, they shall so notify the Sellers in writing on or before the
expiration of such ten (10) day period, and the Sellers shall have the right but
not the obligation to cure such title objections prior to the Closing Date.
Purchaser shall have the right to terminate this Agreement in the event the
Sellers fail to cure on or before the Closing Date any title objection which (i)
materially interferes or
44
reasonably could materially interfere with the present use of the properties
subject thereto or (ii) its lender does not waive.
4.1.16. Additional Lender Requirements. Sellers shall deliver to
Purchaser not less than ten (10) days prior to the Closing Date the following
documents, in form and substance satisfactory to Purchaser and its lender, from
each lessor, and if appropriate each sublessor and mortgagee, if appropriate, of
property constituting Property being leased or subleased by the Sellers: (i)
landlord's agreement, (ii) memorandum of lease, (iii) subordination,
nondisturbance and attornment agreement, (iv) consent to assignment of lease and
(v) owner's/lessee's affidavit. The Corporation shall additionally deliver to
Purchaser not less than fifteen (15) days prior to the Closing Date full legal
descriptions and site plans for each tract of real property constituting
Property owned or leased by the Sellers, in form and substance satisfactory to
Purchaser and its lender.
4.1.17. Payment of Indebtedness. The Sellers shall deliver to
Purchaser not less than five (5) days prior to Closing, pay-off letters from
each note holder or other creditor in connection with any and all items of
indebtedness or other obligations of the Sellers as of the Closing Date the
payment or performance of which are secured by Liens, guaranties, pledges or
other encumbrances on tangible or intangible property of the Sellers and
specifically including Norwest Bank El Paso, N.A. and Frost National Bank, N.A.
Such pay-off letters shall set forth the exact pay-off amount for such items of
indebtedness through the Closing Date and indicate that payment of such amounts
shall be payment in full of the indebtedness and shall release the obligor of
any and all liability with respect to such items. The Sellers shall further
cause to be delivered into escrow at the Closing, fully executed releases of
such indebtedness and any and all Liens, guaranties, pledges or other
encumbrances associated therewith to be delivered upon payment in full by the
Sellers of such obligations.
4.1.18. Vote in Favor of Asset Sale. The Indemnitors will vote
all of the Shares owned by them in favor of approving the transactions
contemplated by this Agreement.
4.1.19. Exclusive Dealing. Indemnitors shall not, directly or
indirectly, through any agents, representatives or otherwise, solicit, accept,
or entertain offers from, negotiate with or in any manner encourage, accept or
consider any proposal of, or enter into any agreement with any Person other than
Purchaser relating to, the sale of the Property (or any material portion
thereof), whether through purchase, merger, consolidation or other business
combination.
4.1.20. Actions in the Event of a Noncompliance Circumstance. The
Indemnitors shall have until the earlier to occur of the Closing Date or fifteen
(15) days following delivery of notice of a Noncompliance Circumstance to cure
and correct any Noncompliance Circumstance prior to Closing and shall use their
reasonable efforts to effect such a cure or correction up to an aggregate of
$100,000 pursuant to Section 4.1.20 of this Agreement less amounts previously so
expended pursuant to Section 4.1.20 of the Property Purchase Agreement and the
Put Agreement.
4.2. Purchaser's Covenants. To induce the Indemnitors to enter into this
Agreement and to consummate the transactions contemplated hereby, and without
limiting any covenant, agreement,
45
representation or warranty made elsewhere in this Agreement, Purchaser covenants
and agrees as follows:
4.2.1. Nondisclosure of Information. Unless and until the
transactions contemplated by this Agreement are fully consummated, Purchaser
shall hold all data and information obtained with respect to the Corporation and
Subsidiaries in such degree of confidence as the Corporation and Subsidiaries
maintain such information and further agrees not to use such data or information
or disclose the same to others (i) except to Purchaser's accountants, attorneys,
lenders, agents and representatives, (ii) except as permitted by the
Corporation, (iii) except to the extent such information is published or is a
matter of public knowledge or used in connection with any securities statement
or offering circular prepared by Purchaser or any Affiliate thereof or (iv)
except as required by law. In the event this Agreement is terminated pursuant to
Section 7.1 hereof for any reason, Purchaser shall, within ten (10) days
following the date of such termination, deliver to the Corporation all written
information and copies thereof obtained by Purchaser or any of its
representatives referenced in (i) above at any time from the beginning of the
discussions between the Corporation and Purchaser of the transactions
contemplated herein.
4.2.2. Compliance with Agreement; Cooperation. Purchaser shall
not undertake any course of action inconsistent with satisfaction of the
conditions applicable to Purchaser set forth in this Agreement, and shall
cooperate and assist the Corporation, without expense to Purchaser, in all its
efforts and undertakings as early as practicable to comply with and satisfy (as
applicable) the representations, agreements, conditions and other provisions of
this Agreement applicable to the Purchaser, including, without limitation,
providing the Corporation with such financial and other information relating to
Purchaser as the Corporation may be required to deliver to the lenders, lessors
and sublessors of the Corporation or any Subsidiary in order to obtain the
releases, estoppel certificates and other consents contemplated by this
Agreement.
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4.2.3. Disclosure to the Corporation. Purchaser shall give the
Corporation prompt written notice of any information or other knowledge obtained
by Purchaser prior to Closing pursuant to its due diligence investigation or
otherwise that Purchaser considers to be either (a) inconsistent with or in
violation of any of the representations and warranties made by the Indemnitors
in Section 3.1 of this Agreement, or inconsistent with any information disclosed
on the Schedule, or (b) a condition or event which may constitute a default by
the Indemnitors or failure to comply with or fully perform any covenant or
agreement of the Indemnitors made in Section 4.1 or any other section of this
Agreement (hereafter referred to as a "NONCOMPLIANCE CIRCUMSTANCE"). Any amounts
previously spent pursuant to Section 4.1.20 of this Agreement, the Property
Purchase Agreement and the Put Agreement up to an aggregate of $25,000 to effect
such cure or correction (less any other amounts which have reduced the $25,000
deductible referred to in Section 4.1.12(c)(4) of this Agreement, the Property
Purchase Agreement and the Put Agreement) will (i) increase the Purchase Price
by such amounts (unless the purchase price under the Property Purchase Agreement
or Put Agreement was previously so increased by such amount) and (ii) further
reduce the $25,000 deductible referred to in Section 4.1.12(c)(4) of this
Agreement, the Property Purchase Agreement and the Put Agreement by such
amounts. In the event the Indemnitors fail to cure or correct such Noncompliance
Circumstance, Purchaser shall have the right to terminate this Agreement in
accordance with the provisions of Section 7.1. In the event Purchaser elects to
proceed to Closing, any such breach or failure to perform by the Indemnitors
shall be deemed to be waived by Purchaser and shall not constitute the basis for
any claim of indemnification or offset by Purchaser against the Indemnitors or
the Escrow Amount after Closing.
4.2.4. Indemnification by Purchaser.
(a) The sole remedy of the Indemnitors and Xxxxxx and their
Related Parties (collectively, the "STARTIME INDEMNITEES") and any of
their officers, directors, representatives, stockholders, lenders,
assignees and Affiliates against Purchaser, Silver Cinemas and their
Related Parties for any Loss arising out of or related to this Agreement
or the transactions contemplated hereby (it being understood that claims
for indemnification by the StarTime Indemnitees or such other Persons
under the (i) Property Purchase Agreement shall be made, if at all,
pursuant to Section 4.2.4 thereof and (ii) Put Agreement shall be made,
if at all, pursuant to Section 4.2.4 thereof) shall be a claim for
indemnity made and enforced in accordance with this Section 4.2.4.
(b) Purchaser shall defend, indemnify, reimburse, and hold
harmless, the StarTime Indemnitees from: (i) all third party claims
relating to the business conducted by Purchaser arising out of, or
relating to, actions or omissions of Purchaser after the Closing; and
(ii) any untrue representation, breach of warranty or non-fulfillment of
any covenant contained herein, in each case of Purchaser contained in
this Agreement, even though any such representation, warranty or
covenant may have been made by the Purchaser in good faith.
(c) Notwithstanding the preceding provisions concerning
indemnification by Purchaser, the StarTime Indemnitees hereby expressly
agree that the liabilities and obligations of Purchaser under this
Section 4.2.4 shall be expressly limited as follows:
(1) the amount of any damages asserted by the StarTime
Indemnitees pursuant to any indemnification claim made pursuant to
this Section 4.2.4 shall include the amount of tax liability, if
any, incurred by the StarTime Indemnitees upon receipt of such
indemnification and be limited in each case to the total amount of
actual damages incurred by the StarTime Indemnitees net of the then
present value (calculated
47
at 6% per annum) of any related tax benefit to the StarTime
Indemnitees, if any, resulting from such claim; and
(2) Purchaser shall not be required to defend, indemnify,
reimburse or hold the StarTime Indemnitees harmless from any claim
except to the extent that the total of all such claims established
pursuant to this Section 4.2.4, Section 4.2.4 of the Property
Purchase Agreement and Section 4.2.4 of the Put Agreement exceeds
an aggregate amount of $25,000.
(d) Purchaser shall be so obligated under this Section 4.2.4 and
Section 4.2.4 of the Property Purchase Agreement and Section 4.2.4 of
the Put Agreement to the extent of an aggregate maximum of $3,700,000;
provided, that the maximum aggregate amount to be recovered by all
StarTime Indemnitees from Purchaser and Silver Cinemas collectively
shall not exceed $3,700,000 and, provided further, that any amounts paid
by Purchaser or Silver Cinemas pursuant to Section 4.2.4 of the Property
Purchase Agreement or Section 4.2.4 of the Put Agreement shall be
applied towards such $3,700,000 limitation.
(e) In the event any Person not a party to this Agreement shall
make a demand or claim, or file any lawsuit, which demand, claim or
lawsuit is likely to result in any of the forms of liability or Loss
described in this Section 4.2.4, then after prompt written notice by any
StarTime Indemnitee to Purchaser of such demand, claim or lawsuit, the
Purchaser shall retain counsel reasonably satisfactory to the StarTime
Indemnitees to defend such claim or action. Thereafter, any StarTime
Indemnitee shall be permitted to participate in such defense at their
own expense. In the event Purchaser fails to respond to the prompt
written notice of any such demand, claim or lawsuit, or fails to retain
reasonably satisfactory counsel, then any StarTime Indemnitee shall be
permitted to retain counsel and to conduct the defense of such demand,
claim or lawsuit as they may reasonably deem fit at the expense of
Purchaser. The above agreement of Purchaser to defend, indemnify and
hold harmless the StarTime Indemnitees, shall include the cost and
expense of such counsel and defense as well as any Loss any StarTime
Indemnitee may suffer arising out of such demand, claim or lawsuit
subject to the limitation set forth above. For the purposes of this
Section 4.2.4, "prompt written notice" shall mean that any StarTime
Indemnitee, shall give written notice to Purchaser of a demand, claim or
lawsuit within thirty (30) days after such demand, claim or lawsuit is
brought to the attention of a StarTime Indemnitee, and in any event 15
days before any pleading is due in any litigation.
(f) These indemnification obligations of Purchaser shall survive
until, but only until, the first anniversary of the Closing; provided,
that the obligations of Purchaser for any claim made by the Corporation
under this Section 4.2.4 prior to such first anniversary shall survive
such first anniversary.
(g) Notwithstanding the foregoing, this Section 4.2.4 shall not
apply to Purchaser's failure to deliver the Purchase Price in accordance
with the terms of this Agreement.
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4.2.5. NCC Not Liable. Notwithstanding anything in this Agreement
or any other document or instrument executed in connection herewith to the
contrary, NCC shall have no liability whatsoever (other than as expressly
provided in the paragraph immediately preceding its signature hereto) under this
Agreement, including, but not limited to, no liability to Purchaser by virtue of
the redemption at Closing of the Class B Shares held by NCC.
ARTICLE 5. - CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to Obligations of Purchaser. The obligations
of Purchaser under this Agreement shall be subject to the fulfillment of each
and all of the following conditions at or before the Closing (unless an earlier
time is specified in this Agreement, in which case on or before such earlier
time), each of which is individually hereby deemed material, and any one or more
of which may be waived in writing by Purchaser:
5.1.1. Representations and Warranties. Each of the
representations, warranties and statements made by the Indemnitors contained in
this Agreement or in any certificate, schedule, exhibit or other document
delivered to Purchaser pursuant to the provisions hereof or in connection with
the transactions contemplated hereby shall be true and correct in all material
respects as of the date when made and shall be true and correct on and as of the
Closing to the same extent and with the same effect as if made on and as of the
Closing.
5.1.2. Performance by the Indemnitors. The Indemnitors shall have
fully performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them in all
material respects on or before the Closing (unless an earlier time is specified
in this Agreement, in which case on or before such earlier time), including,
without limitation, the execution and delivery by them of all documents and
instruments required under the terms of Section 6.1.1 of this Agreement.
5.1.3. Regulatory Approvals and Consents. There shall have been
duly and validly obtained all consents, approvals, authorizations, permits and
orders of all federal, state and other governmental regulatory agencies and
other Persons required in connection with this Agreement and the consummation of
the transactions contemplated hereby (including under the HSR Act), and all such
consents, approvals, authorizations, permits and orders shall be in full force
and effect as of the Closing.
5.1.4. Opinion of the Seller's Counsel. The Sellers shall have
delivered to Purchaser at the Closing the opinion of the Sellers' counsel,
Xxxxxxx Xxxxxx, which opinion shall be dated the Closing Date and addressed to
Purchaser. Such opinion shall be in substantially the form attached hereto as
Exhibit M.
5.1.5. Certificate of the Indemnitors. The Indemnitors shall have
provided to Purchaser a certificate (the "CERTIFICATE"), dated the Closing Date,
executed by each of the Indemnitors, and confirming, representing and warranting
to the reasonable satisfaction of Purchaser:
49
(i) the accuracy as of such date of the Indemnitors' representations and
warranties contained in this Agreement in all material respects or in any
statement, deed, schedule or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby as if such representations
and warranties were made as of the Closing Date, (ii) that the conditions set
forth in Section 5.1 of this Agreement have been satisfied or waived, and (iii)
that the Indemnitors have fully performed all covenants and agreements to be
performed by them in all material respects on or prior to the Closing. The sole
remedy of Purchaser, its officers, directors, representatives, stockholders,
lenders, assignees and affiliates against the Indemnitors and their Related
Parties for any Loss arising out of or related to this Certificate shall be a
claim for indemnity made and enforced in accordance with Section 4.1.12.
5.1.6. Absence of Regulation Changes. There shall not have been
any material adverse change in any federal, state or other laws, rules or
regulations relating to the taxation, business, activities or operations of the
Corporation and the Subsidiaries, and no such change shall be threatened.
5.1.7. Satisfaction with Review of Purchaser. Since September 30,
1997, there shall have been no change or changes in the Corporation's or any
Subsidiary's business, labor relations, financial condition, prospects,
properties, assets, liabilities or results of operations (or the occurrence of
any events which might reasonably be expected to result in any such change or
changes), other than seasonal changes historically experienced by the indoor
theater industry, which in the judgment of Purchaser or its lender, made in good
faith, has been or may be materially adverse to the Corporation or the
Subsidiary.
5.1.8. Approval of Instruments. Purchaser and its lender shall
have approved all lists, financial statements, certificates and other documents
to be delivered by the Indemnitors, the Subsidiaries, the stockholders of the
Corporation or SPI, the partners of Super Saver or their representatives
pursuant to the provisions of this Agreement and such approval by Purchaser
shall not be unreasonably withheld. Furthermore, without limiting the foregoing,
all other instruments and documents delivered to Purchaser pursuant to the
provisions of this Agreement, or incidental to the transactions contemplated
hereby, shall be satisfactory to Purchaser and its lender as to form, scope,
substance and execution and such approval by Purchaser shall not be unreasonably
withheld.
5.1.9. Good Standing. The Corporation shall have furnished to
Purchaser at the Closing certificates of the appropriate governmental officials,
dated within fifteen (15) days of the Closing Date, confirming that the
Corporation is in good standing, owes no taxes and is duly qualified to transact
business in the State of Nevada and in each jurisdiction listed on Part 1 of the
Schedule, and that each Subsidiary is in good standing, owes no taxes and is
duly qualified to transact business in each of its respective jurisdictions
listed on Part 2 of the Schedule, and such certificates shall be accompanied by
a certificate executed by the Secretary of the Corporation, dated the Closing
Date, stating that such certificates are true and correct.
5.1.10. No Actions. At and as of the Closing Date, no action,
suit, proceeding or investigation shall have been instituted and be continuing,
or have been threatened and be unresolved, before a court or before or by a
governmental body or agency with respect to the transactions
50
contemplated by this Agreement or which might have a materially adverse effect
on the assets, properties or businesses of the Corporation and Subsidiaries.
5.1.11. No Court Orders. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by any court or governmental regulatory agency directing that the
transactions contemplated herein or any of them not be consummated as herein
provided, or awarding damages or any other remedy to any Person with respect to
any of the transactions contemplated hereby.
5.1.12. Officers' Certificate. Purchaser shall have received a
certificate dated the Closing Date and signed by Xxxxxx and the Secretary of the
Corporation to the effect that except as noted on Part 20 of the Schedule, none
of the events described in Section 3.1.6 shall have occurred and to the further
effect that any liabilities or obligations of the Corporation and Subsidiaries
at the Closing Date, which were not reflected on the Balance Sheet, are set
forth on Part 20 of the Schedule and are liabilities or obligations incurred
only in the ordinary course of business subsequent to the Balance Sheet Date or
are liabilities contemplated by this Agreement.
5.1.13. Loan Agreements. The Corporation and the Subsidiaries
shall have previously delivered to Purchaser copies of all loan agreements,
notes, mortgages, deeds of trust, security agreements and other evidences of
indebtedness of the Corporation and Subsidiaries, together with a certificate of
each lender, mortgagee or creditor under such instruments to the effect that the
Corporation or Subsidiary, as the case may be, is in good standing with regard
thereto, that no default exists thereunder, and that none are subject to any
prepayment penalties or charges other than as disclosed in Part 21 of the
Schedule.
5.1.14. Deeds and Leases. The Corporation and the Subsidiaries
shall have previously delivered to Purchaser copies of all deeds and leases to
the real property used by the Corporation and Subsidiaries in the operation of
their businesses, copies of all equipment leases of which the Corporation or any
Subsidiary is a lessee and copies of all licenses of which the Corporation or
any Subsidiary is a licensee, along with certificates of each lessor or licensor
or other party to such agreement that such leases and licenses as of the Closing
Date are in effect, that the Corporation or Subsidiary, as the case may be, is
not in default under such lease or license.
5.1.15. Releases. The Sellers shall have delivered into escrow
fully executed releases of any and all items of indebtedness described in
Section 4.1.17 of this Agreement and all other items of indebtedness of the
Corporation and the Subsidiaries arising prior to the Closing and any and all
Liens or guaranties associated therewith. Further, the Indemnitors, Xxxxxx, Xxxx
Xxxxx, Xxxx Xxxx and Lyco shall have delivered a release which releases any and
all claims (other than those pursuant to the Transaction Documents) held or to
be held by the Indemnitors, Xxxxxx, Xxxx Xxxxx, Xxxx Xxxx and/or Lyco against
Purchaser and/or Silver Cinemas and their respective successors, assigns,
officers, directors, employees and agents in the form of Exhibit Q.
5.1.16. Stockholder Approval of Sale of Assets. On or before the
Closing, Sellers shall have obtained stockholder approval (or partner approval
in the case of Super Saver) of the
51
transactions contemplated hereby by their respective stockholders (or partners
in the case of Super Saver) in accordance with their articles of incorporation
and bylaws (or limited partnership agreement in the case of Super Saver) and the
laws of Nevada or Texas, as applicable.
5.1.17. Due Diligence. Satisfactory completion of Purchaser's due
diligence investigation.
5.1.18. Estoppel Certificates. The receipt by Purchaser of the
Estoppel Certificates.
5.1.19. Phase I Environmental Reports and Surveys. Purchaser
shall, at its sole cost and expense, receive, at least five business days prior
to Closing, Phase I Environmental Reports and surveys for each tract of real
property owned or leased by the Corporation or any Subsidiary, in form and
substance satisfactory to Purchaser and its lender.
5.1.20. Closing of Fee Owned Theaters. The closing of the sale of
the Fee Owned Theaters shall have occurred pursuant to the Property Purchase
Agreement.
5.1.21. Norwest Release. Purchaser shall have received from
Norwest Bank El Paso, N.A. a release of all of its claims against Purchaser
related to this Agreement and the transactions contemplated hereby in a form
satisfactory to Purchaser in its sole discretion.
5.2. Conditions Precedent to Obligations of the Indemnitors. The
obligations of the Indemnitors under this Agreement shall be subject to the
fulfillment of each and all of the following conditions at or before the Closing
(unless an earlier time is specified in this Agreement, in which case on or
before such specified time), each of which is individually hereby deemed
material, and any one or more of which may be waived in writing by the
Corporation:
5.2.1. Representations and Warranties. Each of the representations,
warranties and statements made by Purchaser contained in this Agreement and in
all other documents furnished by Purchaser or its representatives pursuant to
the provisions hereof, or in connection with the transactions contemplated
hereby, shall be true and correct in all material respects on and as of the
Closing to the same extent and with the same effect as if made on and as of the
Closing Date.
5.2.2. Performance by Purchaser. Purchaser shall have fully
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it in all material respects on or
before the Closing (unless an earlier time is specified in this Agreement, in
which case on or before such earlier time), including, without limitation, the
execution and delivery by it of all documents and instruments required under the
terms of Section 6.1.2 of this Agreement.
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5.2.3. Regulatory Approvals and Consents. There shall have been
duly and validly obtained all consents, approvals, authorizations, permits and
orders of all federal and state governmental regulatory agencies and other
Persons required in connection with this Agreement and the consummation of the
transactions contemplated hereby, and all such consents, approvals,
authorizations, permits and orders shall be in full force and effect as of the
Closing.
5.2.4. No Court Orders. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court or governmental body or authority directing that the
transactions provided for herein or any of them not be consummated as herein
provided, or awarding damages or any other remedy to any Person in connection
with any of the transactions contemplated herein.
5.2.5. Opinion of Purchaser's Counsel. Purchasers shall have
delivered to the Sellers at the Closing the opinion of Purchaser's counsel,
which opinion shall be dated the Closing Date and addressed to the Corporation.
Such opinion shall be in substantially the form attached hereto as Exhibit N.
5.2.6. Certificate of Purchaser. Purchaser shall have provided to
the Corporation a certificate, dated the Closing Date, executed by Purchaser,
and confirming, representing and warranting to the reasonable satisfaction of
the Corporation: (i) the accuracy as of such date of Purchaser's representations
and warranties contained in this Agreement in all material respects or in any
statement, deed, schedule or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby as if such representations
and warranties were made as of the Closing Date, (ii) that the conditions set
forth in Section 5.2 of this Agreement have been satisfied or waived, and (iii)
that Purchaser has fully performed all covenants and agreements to be performed
by it in all material respects on or prior to the Closing. The sole remedy of
the Indemnitors, their officers, directors, representatives, stockholders,
lenders, assignees and affiliates against the Purchaser and their Related
Parties for any Loss arising out of or related to such certificate shall be a
claim for indemnity made and enforced in accordance with Section 4.2.4.
5.2.7. Stockholder Approval of Sale of Assets. On or before the
Closing, Sellers shall have obtained stockholder approval (or partner approval
in the case of Super Saver) of the transactions contemplated hereby by their
respective stockholders (or partners in the case of Super Saver) in accordance
with their articles of incorporation and bylaws (or limited partnership
agreement in the case of Super Saver) and the laws of Nevada or Texas, as
applicable.
5.2.8. Closing of Fee Owned Theaters. The closing of the sale of
the Fee Owned Theaters shall have occurred pursuant to the Property Purchase
Agreement.
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5.2.9. Releases. Purchaser and Silver Cinemas shall have delivered
a release which releases any and all claims (other than those pursuant to the
Transaction Documents) held or to be held by Purchaser and/or Silver Cinemas
against the Indemnitors, Xxxxxx, Xxxx Xxxxx, Xxxx Xxxx and/or Lyco and their
respective successors, assigns, officers, directors, employees and agents in the
form of Exhibit Q.
ARTICLE 6. - CLOSING AND DELIVERY OF DOCUMENTS
6.1. Closing. At the Closing, the following shall occur as a single
integrated transaction:
6.1.1. Delivery by the Sellers. The Sellers shall deliver, or
cause to be delivered, to Purchaser the following:
(a) all deeds, bills of sale, assignments of licenses, UCC-3s and
permits (to the extent such are assignable), executory contracts,
leases, easements and rights of way, as applicable, in order to
effectively vest in Purchaser good and indefeasible title to the
Property free and clear of all liabilities and Liens, except for the
Permitted Title Exceptions, Permitted Liens and Assumed Liabilities.
(b) actual possession and operating control of the Property.
(c) (i) the consents of third parties necessary for the transfer
and assignment of the Property, including any required landlord's
consents to the assignment of all Leases with no adverse changes in the
terms and conditions thereof that existed on that date of execution of
this Agreement other than the release of Sellers from all obligations
and liabilities with respect to the Property as have been obtained by
Sellers and (ii) the Estoppel Certificates.
(d) evidence of the payment of (i) any and all government taxes
or other governmental charges with arise out of or relate to the
transfer of the Property, including any transfer, documentary stamp tax,
surtax, gross receipts, excise and title taxes and (ii) the subordinated
debt of the Corporation aggregating approximately $1.312 million. The
parties agree to cooperate in taking such steps as may be necessary or
appropriate in order to take advantage of any exceptions from any such
governmental taxes, or other charges which may be available with respect
to the transfer of the Property.
(e) The opinion of Sellers' counsel described in Section 5.1.4.
(f) The executed Escrow Agreements, the executed Noncompetition
Agreement and the executed Put Agreement.
(g) assignment and assumption agreements (the "ASSIGNMENT AND
ASSUMPTION AGREEMENTS") in the form of Exhibit O-1 and O-2, as
applicable, duly executed by Sellers.
(h) The Certificate identified in Section 5.1.5 hereof.
(i) The good standing certificates identified in Section 5.1.9
hereof.
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(j) Copies, certified or otherwise identified to Purchaser's
satisfaction, of all corporate or partnership documents that Purchaser
shall reasonably request, including resolutions of the board of
directors of the Corporation and the Subsidiaries and the general
partner of Super Saver and resolutions of the stockholders of the
Corporation and the Subsidiaries, dated on or before the date hereof to
authorize this Agreement, the related agreements and the transactions
and other acts contemplated either by this Agreement or the related
agreements.
(k) Xxxx of Sale from each Seller in the form of Exhibit P.
(l) The Indemnitors, Xxxxxx, Xxxx Xxxxx, Xxxx Xxxx and Lyco shall
execute and deliver a mutual release in the form of Exhibit Q which
releases any and all claims (other than those pursuant to the
Transaction Documents) held or to be held by the Indemnitors, Xxxxxx,
Xxxx Xxxxx, Xxxx Xxxx and Lyco against Purchaser and Silver Cinemas and
their respective successors, assigns, officers, directors, employees and
agents.
(m) All such instruments, documents, certificates and other
Transaction Documents as are required to be delivered by the Indemnitors
or their representatives pursuant to the provisions of this Agreement.
(n) Such other instruments, documents or information that
Purchaser reasonably requests in connection herewith and the
transactions contemplated hereby, in form and substance reasonably
satisfactory to Purchaser.
6.1.2. Delivery by Purchaser.
(a) Purchaser shall deliver (i) the Purchase Price as adjusted
pursuant to Section 2.4 and less the amount deposited with the Escrow
Agent pursuant to Section 2.5 and (ii) the Noncompetition Fees as
provided in Section 2.9 of this Agreement.
(b) Purchaser shall deliver, or cause to be delivered, to the
Corporation such instruments, documents, certificates and other
Transaction Documents as are required to be delivered by Purchaser or
its representatives pursuant to the provisions of this Agreement.
(c) Purchaser shall deliver, or cause to be delivered, to the
Corporation the opinion of Purchaser's counsel described in Section
5.2.5.
(d) Purchaser shall deliver the executed Escrow Agreements, the
executed Noncompetition Agreement and the executed Put Agreement.
(e) Assignment and Assumption Agreements in the applicable form
duly executed by Purchaser.
(f) Purchaser shall deliver, or cause to be delivered, such other
instruments, documents or information that the Corporation reasonably
requests in connection herewith and the transactions contemplated
hereby, in form and substance reasonably satisfactory to the
Corporation.
(g) Purchaser and Silver Cinemas shall execute and deliver a
mutual release in the form of Exhibit Q which releases any and all
claims (other than those pursuant to the
55
Transaction Documents) held or to be held by Purchaser and Silver
Cinemas against the Indemnitors, Xxxxxx, Xxxx Xxxxx, Xxxx Xxxx and Lyco
and their respective successors, assigns, officers, directors, employees
and agents.
ARTICLE 7. - TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) at any time prior to the Closing Date by the mutual written
consent of all of the parties;
(b) by Purchaser at any time in the event of a breach or default
by the Indemnitors or any one of them in the observance or in the timely
performance of any of their obligations or representations and
warranties hereunder which is not waived by Purchaser and which remains
uncured upon the earlier to occur of (i) fifteen (15) days following
delivery of written notice of such breach or default or (ii) the Closing
Date;
(c) by the Corporation at any time in the event of a breach or
default by Purchaser in the observance or in the timely performance of
any of its obligations or representations and warranties hereunder which
is not waived by the Corporation and remains uncured upon the earlier to
occur of (i) fifteen (15) days following delivery of written notice of
such breach or default or (ii) the Closing Date;
(d) by Purchaser if the Closing shall not have occurred by 5:00
P.M., Dallas time, on March 27, 1998, if Purchaser is not on said date
in default in the observance or in the due and timely performance of any
of its obligations hereunder;
(e) by the Corporation if the Closing shall not have occurred by
5:00 P.M., Dallas time, on March 27, 1998, if the Corporation on said
date is not in default in the observance or in the due and timely
performance of any of its obligations hereunder;
(f) by Purchaser if any of the conditions precedent to
obligations of Purchaser to consummate the transactions provided for
herein shall have become impossible to satisfy (a wilful material breach
of this Agreement by any Seller shall be deemed to be one determination
that such conditions are impossible to satisfy for purposes of this
paragraph); or
(g) by Sellers if any of the conditions precedent to obligations
of the Indemnitors to consummate the transactions provided for herein
shall have become impossible to satisfy (a wilful material breach of
this Agreement by Purchaser shall be deemed to be one determination that
such conditions are impossible to satisfy for purposes of this
paragraph); or
No termination under this Section 7.1 shall be effective unless and
until the terminating party gives written notice of such termination to the
other party. Notwithstanding the foregoing, termination of this Agreement shall
not relieve any party from its liability for the breach hereunder (subject to
all the limitations on liability set forth herein), prior to termination, of its
covenants or agreements or any of its representations or warranties being untrue
prior to termination.
56
7.2. Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be waived, but only
by a written instrument signed by the party entitled to the benefits thereof.
The failure or delay of any party at any time or times to require performance of
any provision hereof or to exercise its rights with respect to any provision
hereof shall in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any condition, or of
the breach of any term, provision, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty. No modification or amendment of
this Agreement shall be valid and binding unless it be in writing and signed by
all the parties hereto.
ARTICLE 8. - MISCELLANEOUS
8.1. Expenses. Except as otherwise specifically provided for herein,
whether or not the transactions contemplated hereby are consummated, each of the
parties hereto shall bear all taxes of any nature (including, without
limitation, income, franchise, transfer and sales taxes) and all fees and
expenses relating to or arising from its compliance with the various provisions
of this Agreement and such party's covenants to be performed hereunder, and
except as otherwise specifically provided for herein, each of the parties hereto
agrees to pay all of its own expenses (including, without limitation, attorneys
and accountants' fees and printing expenses) incurred in connection with this
Agreement, the transactions contemplated hereby, the negotiations leading to the
same and the preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior to Closing.
It is specifically understood and agreed that all fees for legal services
rendered by legal counsel for the Corporation, the Subsidiaries, Xxxxxx, the
stockholders of the Corporation and SPI and the partners of Super Saver shall be
paid or accrued prior to the Closing Date by the Corporation.
8.2. Notices. Any notice, request, instruction or other document
required by the terms of this Agreement, or deemed by any of the parties hereto
to be desirable, to be given to any other party hereto shall be in writing and
shall be given by prepaid telex or telecopy or delivered or mailed by certified
mail, postage prepaid, with return receipt requested, to the following
addresses:
If to the Sellers Xxxxx Xxxxxx
or the Indemnitors: StarTime Cinema, Inc.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xx Xxxx, Xxxxx 00000
Telecopy: 915.542.2945
With a copy to Xxxxxxx X. Xxxxxx
Counsel to the 0000 XxXxx Xxxxxx
Xxxxxxxxxxx: Xxxxx 000
Xxxxxx, Xxxxx 00000
57
Telecopy: 512.347.0394
If to Xxxxxx: Xxxxx Xxxxxx
0000 Xxxx Xxxxxx
Xx Xxxx, Xxxxx 00000
Telecopy: 915.585.9571
With a copy to C. Xxxxxxx Xxxxxxxx
Counsel for Xxxxxx: 000 Xxxxx Xxxxxx
Xxxxx 000
Xx Xxxx, Xxxxx 00000
Telecopy: 915.532.7073
If to Purchaser: Xxxxxx X. Xxxxx
President
Silver Cinemas, Inc.
0000 Xxxxxxxx Xxxx
Xxxxx 000, XX 00
Xxxxxx, Xxxxx 00000
Telecopy: 972.503.9013
With a copy to Xxxx X. Xxxxxx, Esq.
Counsel for Purchaser: Xxxxxx and Xxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Telecopy: 214.651.5940
The persons and addresses set forth above may be changed from time to
time by a notice sent as aforesaid. If notice is given by delivery in accordance
with the provisions of this Section 8.2, said notice shall be conclusively
deemed given at the time of such delivery. If notice is given by mail in
accordance with the provisions of this Section 8.2, such notice shall be
conclusively deemed given upon the third business day following deposit thereof
in the United States mail. If notice is given by telex or telecopy in accordance
with the provisions of this Section 8.2, such notice shall be conclusively
deemed given upon receipt with a confirming fax response.
8.3. Entire Agreement. This Agreement, together with the Schedule and
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof except for Section 8 of that certain Term Sheet among
Silver Cinemas, the Trust, Xxxxxx, the Corporation, Lyco, Super Saver, Xxxx
Xxxxx and Xxxx Xxxx dated as of July 31, 1997, the Term Sheet Escrow Agreement
and the other Transaction Documents. Except as provided in the preceding
sentence, no understanding, promise, inducement, statement of intention,
representation, warranty, covenant or condition, written or oral, express or
implied, whether by statute or otherwise, has been made by any party hereto
which is not embodied in this Agreement, or in the Schedule or exhibits hereto
or the written statements, certificates, or other documents delivered pursuant
hereto or in connection with the transactions contemplated hereby, and no party
hereto shall be bound by or liable for any alleged understanding, promise,
inducement, statement, representation, warranty, covenant or condition not so
set forth.
58
8.4. Survival of Representations. All statements of fact (including
financial statements) contained in the Schedule, the exhibits, the certificates
or any other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective party hereunder. All
representations, warranties, agreements and covenants hereunder shall survive
the Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the parties or of any information a party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any party hereto. The sole effect of the survival of such representations and
warranties shall be to support a claim for indemnity under Sections 4.1.12 or
4.2.4 for untrue representations or breach of warranty, subject to the
limitations set forth in Sections 4.1.12 and 4.2.4.
8.5. Incorporated by Reference. The Schedule, the exhibits and all
documents (including, without limitation, all financial statements) delivered as
part hereof or incident hereto are incorporated as a part of this Agreement by
reference.
8.6. Number and Gender of Words. When the context so requires in this
Agreement, words of any gender shall include either or both of the other genders
and the singular number shall include the plural.
8.7. Specific Performance. The Indemnitors acknowledge that a breach of
this Agreement by the Indemnitors will cause irreparable harm to Purchaser for
which there may be no adequate remedy at law, and the Indemnitors agree that
Purchaser shall be entitled, in addition to its other remedies specifically
described in this Agreement, to specific performance by the Indemnitors of this
Agreement.
8.8. Remedies Exclusive. The remedies provided in this Agreement are the
sole and exclusive remedies available to Purchaser and the Indemnitors arising
out of or in any way connected with this Agreement.
8.9. Execution of Additional Documents. Each party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
8.10. Finders' and Related Fees. Each of the parties hereto is
responsible for, and shall indemnify the other against, any claim by any third
party to a fee, commission, bonus or other remuneration arising by reason of any
services alleged to have been rendered to or at the instance of said party to
this Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
8.11. Titles. The titles of the articles, sections and subsections of
this Agreement are for convenience of reference only and shall not be considered
a part of or affect the construction or
59
interpretation of any provisions of this Agreement. References to "Sections"
herein are references to sections of this Agreement. The words "herein,"
"hereof," "hereto" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision.
8.12. No Third Party Beneficiary, Etc. There shall be no third party
beneficiary of this Agreement, other than as provided in Sections 4.1.12 and
4.2.4. Neither the availability of, nor any limit on, any remedy hereunder shall
limit the remedies of any party hereto against third parties.
8.13. Reformation; Severability. In case any provision hereof shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement thereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. If such provision is not capable of
reformation, it shall be severed from this agreement and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.14. Binding Effect and Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns. This Agreement,
and the rights and obligations created hereunder, may not be transferred or
assigned by the Indemnitors without the prior consent of Purchaser or by
Purchaser without the prior consent of the Corporation except that Purchaser may
assign its rights under this Agreement to a wholly-owned subsidiary; however, no
assignment shall serve to relieve or release the assigning party from liability
under this Agreement. Notwithstanding anything to the contrary set forth herein,
nothing shall prohibit Purchaser granting a Lien at or after Closing to its
lender in and to Purchaser's rights pursuant to this Agreement and such lender
shall have the right to exercise any and all of Purchaser's rights and remedies
hereunder.
8.15. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
8.16. Governing Law; Attorneys' Fees. This Agreement and any related
agreements shall be governed by, construed, interpreted and applied in
accordance with the laws of the State of Texas, without giving effect to any
conflict of laws rules that would refer the matter to the laws of another
jurisdiction.
Subject to Section 8.17, each party hereto hereby irrevocably submits to
the exclusive jurisdiction of the United States District Court for the Southern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in Xxxxxx County, for the purposes of any action arising
out of this Agreement or any related agreements, or the subject matter hereof or
thereof, brought by any other party.
Subject to Section 8.17, to the extent permitted by applicable law, each
party hereby waives and agrees not to assert, by way of motion, as a defense or
otherwise in any such action, any claim
60
(i) that it is not subject to the jurisdiction of the above-named courts, (ii)
that the action is brought in an inconvenient forum, (iii) that it is immune
from any legal process with respect to itself or its property, (iv) that the
venue of the suit, action or proceeding is improper or (v) that this Agreement
or any related agreement, or the subject matter hereof or thereof, may not be
enforced in or by such courts.
The prevailing party in any action or proceeding relating to this
Agreement or any related agreement shall be entitled to recover reasonable
attorneys' fees and other costs from the non-prevailing parties, in addition to
any other relief to which such prevailing party may be entitled.
8.17. Dispute Resolution.
(a) Arbitration. All disputes and controversies of every kind and
nature between the parties hereto arising out of or in connection with
this Agreement (including without limitation this Article VIII) or any
related agreements (except the Noncompetition Agreements) as to the
construction, validity, interpretation or meaning, performance,
non-performance, enforcement, operation, or breach, shall be submitted
to arbitration pursuant to the following procedures:
(i) Except as modified hereby, the arbitration shall be
governed by the Commercial Arbitration Rules the AAA including
the Supplementary Procedures for Large Complex Disputes. After a
dispute or controversy arises, any party may, in a written notice
delivered to the other party, demand such arbitration. Such
notice shall designate the name of the arbitrator (who shall be
an impartial person who is an attorney with at least 15 years of
experience in business law) appointed by such party demanding
arbitration, together with a statement of the matter in
controversy in reasonable detail.
(ii) Within 30 days after receipt of such demand, the other
party shall, in a written notice delivered to the other party,
name such party's arbitrator (who shall be an impartial person
who is an attorney with at least 15 years of experience in
business law). If such party fails to name an arbitrator, then
the second arbitrator shall be named by the AAA. The two
arbitrators so selected shall name a third arbitrator (who shall
be an impartial person who is an attorney with at least 15 years
of experience in business law) within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so
appointed, the third arbitrator shall be appointed by the AAA. If
any arbitrator appointed hereunder shall die, resign, refuse, or
become unable to act before an arbitration decision is rendered,
then the vacancy shall be filled by the methods set forth in this
Section for the original appointment of such arbitrator.
(iii) Each party shall bear its own arbitration costs and
expenses. The arbitration hearing shall be held in Houston, Texas
at a location designated by a majority of the arbitrators. The
substantive laws of the State of Texas (excluding conflict of
laws provisions) and the Federal Arbitration Act shall apply.
(iv) The arbitration hearing shall be concluded within ten
(10) days unless otherwise ordered by the arbitrators and the
written award thereon shall be made within fifteen (15) days
after the close of submission of evidence. An award rendered by a
majority of the arbitrators appointed pursuant hereto shall be
final and binding on all parties to the proceeding, shall resolve
the question of costs of the arbitrators, legal
61
fees and expenses and all related matters, and judgment on such
award may be entered and enforced by any party in any court of
competent jurisdiction.
(v) Except as set forth in Section 8.17(b), the parties
stipulate that the provisions of this Section shall be a complete
defense to any suit, action or proceeding instituted in any
federal, state or local court or before any administrative
tribunal with respect to any controversy or dispute arising out
of this Agreement or any related agreements. The arbitration
provisions hereof shall, with respect to such controversy or
dispute, survive the termination or expiration of this Agreement
or any related agreements.
Except as required by law, the parties hereto and the arbitrators
may not disclose the existence or results of any arbitration hereunder
without the prior written consent of the other party; nor will any party
hereto disclose to any third party any confidential information
disclosed by any other party hereto in the course of an arbitration
hereunder without the prior written consent of such other party.
(b) Emergency Relief. Notwithstanding anything in this Section
8.17 to the contrary and subject to the provisions of Section 8.16, any
party may seek from a court any provisional remedy or injunctive relief
that may be necessary to protect any rights or property of such party
pending the establishment of the arbitral tribunal or its determination
of the merits of the controversy. The prevailing party in any proceeding
based upon this Agreement shall be entitled to reasonable attorney's
fees and arbitral and court costs, in addition to any other recoveries
allowed by law.
8.18. Confidentiality. Commencing on the date of this Agreement and
until: (i) the end of the five (5) year period following termination of this
Agreement pursuant to Article VII or (ii) Closing, Purchaser and the Indemnitors
will maintain in confidence, and will cause their respective directors,
officers, employees, agents, and advisors (the "Representatives") to maintain in
confidence, any written, oral, electronic, or other information of every kind
(including all analyses, compilations, forecasts, studies or other documents
prepared by a receiving party that contain or in any way reflect Confidential
Information) that has been or may be furnished by either party or its
Representatives obtained in confidence (the "Confidential Information") from
another party to this Agreement (the "Disclosing Party"), and will not use, and
will cause their respective Representatives not to use, any such information
except for the purpose of this Agreement or in connection with any legal
proceedings between any of the parties, unless (a) such information is already
known to such party and such party is not bound by a duty of confidentiality or
such information becomes publicly available through no fault of such party, (b)
the use of such information is necessary in making any release, report, filing
(including filings with the SEC) or obtaining any consent or approval required
for the consummation of the transactions contemplated by the Agreement, (c) the
furnishing or use of such information is required by any legal proceedings or
(d) the furnishing or use of such information is required in connection with a
public offering or private placement of securities. Each party shall only reveal
Confidential Information of the Disclosing Party to the receiving party's
Representatives (a) who reasonably need to have the Confidential Information for
purposes of evaluating the transactions contemplated hereby and (b) who are
aware of the confidential nature of the Confidential Information and of this
Section 8.18. Each party shall cause its Representatives to observe the
restrictions of this Section 8.18 and shall be responsible for any breach of
this Section 8.18 by its Representatives. If this Agreement is terminated for
any reason, each party must promptly return to the Disclosing Party all
Confidential Information obtained from the Disclosing
62
Party that is by nature returnable, and each receiving party will thereafter
continue to comply with its obligations under this Section 8.18.
8.19. Bulk Transfer. The parties hereby waive the applicable provisions,
if any, of the Uniform Commercial Code relating to Bulk Transfers in the states
in which the Theaters are located, and the Indemnitors hereby indemnify
Purchaser from the Sellers' failure to comply with such provisions with respect
to the Sellers.
63
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first written hereinabove.
STARTIME CINEMA, INC.
By:
Name:
Title:
F.S.A. SUPER SAVER CINEMAS NO. 1, LTD.
By:
Name:
Title:
STARTIME PROPERTIES, INC.
By:
Name:
Title:
THE TRUST FORMED BY THAT CERTAIN
IRREVOCABLE DECLARATION OF TRUST UNDER
DEED DATED MAY 14, 1994, FOR THE BENEFIT
OF STARTIME CINEMA, INC.
By its Trustee:
Xxxxx Xxxxxx
XXXXX XXXXXX
SCI ACQUISITION CORP.
By:
Name:
Title:
64
Silver Cinemas, Inc., a Delaware corporation, hereby executes this
Agreement solely for the purpose of unconditionally guaranteeing the performance
of this Agreement by SCI Acquisition Corp., a Delaware corporation. Silver
Cinemas represents and warrants that the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action on the part
of Silver Cinemas and is valid, binding and enforceable against Silver Cinemas,
Inc. in accordance with its terms.
SILVER CINEMAS, INC.
By:
Name:
Title:
NCC hereby irrevocably (except as expressly set forth below): (i)
consents to the negotiation, execution, undertaking and delivery (including all
actions in furtherance thereof) by all parties to this Agreement and the
transactions contemplated hereby, (ii) agrees to accept $3 million, plus any
accrued and unpaid dividends on the Class B Shares, in immediately available
funds at the Closing as the total consideration for the purchase or redemption
of all of its Class B Shares, and all right, title and interest that it may have
to the Corporation and its Subsidiaries or their respective assets and (iii)
waives any right that it may have to any other sum or amount pursuant to the
Stock Purchase Agreement and the related agreements and instruments or otherwise
(including, but not limited to, its Put (as such term is defined in the Stock
Purchase Agreement)). NCC represents and warrants that the execution and
delivery of this Agreement has been duly authorized by all necessary corporate
action on the part of NCC and is valid, binding and enforceable against NCC in
accordance with its terms. Notwithstanding anything contained in this paragraph,
the consent and waiver of NCC contained herein is revocable at the option of NCC
by written notice to the other parties to this Agreement at any time prior to
the Closing if one of the following events occurs: (i) a petition for relief
under the United States Bankruptcy Code is filed by one of the Sellers, or is
filed against one of the Sellers by a party other than NCC or its Affiliates and
such petition is not dismissed within ninety (90) days; or (ii) the Closing does
not occur by March 27, 1998. In the event that NCC revokes its consent and
waiver pursuant to the terms of this paragraph, the rights of NCC under the
Stock Purchase Agreement shall continue in effect, although the parties shall be
returned to the status quo ante and the Put shall neither be exercisable by
reason of this Agreement nor the transactions contemplated hereby.
NATIONSBANC CAPITAL CORPORATION
By:
Name:
Title:
65
SCHEDULE
Part 1 States of Business Qualification
Part 2 Subsidiaries
Part 3 Effects of Execution of Agreement
Part 4 Liabilities Not Reflected on Balance Sheet
Part 5 Changes
Part 6 Taxes
Part 7 Disputes and Litigation
Part 8 Insurance
Part 9(a) Title to Properties
Part 9(b) Liens & Financing Statements
Part 10(a) Real Property & Real Property Leases
Part 10(b) Violations
Part 11(a) Equipment & Equipment Leases
Part 11(b) List of Property in need of repair
Part 12(a) Intangible Personal Property
Part 12(b) Exceptions to Exclusive Ownership
Part 12(c) Adverse Claims
Part 13 Agreements
Part 14(a) Indebtedness
Part 14(b) Guarantees
Part 15 Books and Records
Part 16 Employee Benefit Plans
Part 17 Employee Agreements
Part 18 Consents Required
Part 19 Environmental Matters
Part 20 Changes in Financial Condition
Part 21 Prepayment Penalties and Charges on Loan Agreements
