EXHIBIT B
[RESTRUCTURED DEBT AGREEMENT]
RESTRUCTURED DEBT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this 25th
day of March, 1998, by and between RENTRAK CORPORATION, an Oregon corporation,
having its principal place of business at One Airport Center, 0000 X.X.
Xxxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxx 00000 ("Rentrak"), MORTCO, INC., an Oregon
corporation and a wholly-owned subsidiary of Rentrak, having its principal place
of business at One Airport Center, 0000 X.X. Xxxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxx
00000 ("Mortco"), VIDEO CITY, INC., a Delaware corporation, having its principal
place of business at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxx 00000
("VCI"), XXXXXXXX ONE, INC., a California corporation, having its principal
place of business at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxx 00000
("Xxxxxxxx"), and ADVENTURES IN VIDEO, INC., a Minnesota corporation, having its
principal place of business at 0000 000xx Xxxx, X.X., Xxxx Xxxxxx, Xxxxxxxxx
00000 ("AIV").
RECITALS
A. Rentrak distributes pre-recorded videocassettes pursuant to a lease
arrangement known as Pay-Per-Transaction/SM/ (the "PPT System");
B. VCI and Xxxxxxxx are both engaged in the business of leasing, renting
and selling pre-recorded videocassettes and currently participate in the PPT
System pursuant to the following Rentrak National Account Agreements:
1. VCI participates in the PPT System pursuant to a Rentrak National
Account Agreement, which was originally entered into by Xxx Video
City, Inc. on December 16, 1994, and was amended and supplemented
by a First Addendum, dated December 16, 1994, a Second Addendum,
dated August 24, 1995, and a Third Addendum, dated June 19, 1996,
which National Account Agreement was expressly assumed by VCI
pursuant to an Assumption Agreement, dated January 7, 1997, in
connection with the merger of Xxx Video City, Inc. into VCI, and
was further amended and supplemented by a Fourth Addendum, dated
July 11, 1997 (collectively the "VCI PPT Agreement");
2. Xxxxxxxx participates in the PPT System pursuant to a Rentrak
National Account Agreement entered into on December 16, 1994, as
amended and supplemented by a First Addendum, dated December 16,
1994, a Second Addendum, dated August 24, 1995, and a Third
Addendum, dated July 11, 1997 (collectively the "Xxxxxxxx PPT
Agreement"); and
C. AIV previously participated in the PPT System pursuant to a Rentrak
National Account Agreement entered into on July 17, 1992, as amended and
supplemented by an
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Agreement, dated July 21, 1992, and a Letter Agreement, dated April 2, 1993
(collectively the "AIV PPT Agreement"), which Rentrak terminated by written
notice on June 14, 1996;
D. VCI desires to acquire Xxxxxxxx, AIV and three other corporations,
namely KDDJ Investments, Inc., a Minnesota corporation ("KDDJ"), Leptis Magna,
Inc., dba Video Unlimited, a Colorado corporation, ("Leptis"), and Old Republic
Entertainment, Inc., a California corporation ("Old Republic");
E. VCI desires to structure the acquisitions of Xxxxxxxx, AIV, KDDJ,
Leptis, and Old Republic (individually a "Subsidiary" and collectively the
"Subsidiaries") as reverse triangular mergers, whereby each of the Subsidiaries
would become a wholly-owned subsidiary of VCI;
F. VCI acknowledges and agrees that, as of March 6, 1998, it owed Rentrak
at least $587,368.36 under the VCI PPT Agreement, which sum was comprised of (i)
$464,234.10 in past due accounts receivable, based on accounts receivable
invoiced through February 28, 1998, including interest computed through March 6,
1998; (ii) $31,570.00 in lost late fee revenues; and (iii) $91,564.26 in
accounts receivable that were not then due and payable, based on accounts
receivable invoiced through February 28, 1998. VCI further acknowledges and
agrees that, as of March 23, 1998, it owes Rentrak an additional $514,692.26
under a Promissory Note executed by VCI in favor of Rentrak on February 28, 1997
(the "1997 VCI Note"), including interest and late fees computed through March
23, 1998.
X. Xxxxxxxx acknowledges and agrees that, as of March 6, 1998, it owed
Rentrak at least $106,928.97 under the Xxxxxxxx PPT Agreement, which sum was
comprised of (i) $77,024.72 in past due accounts receivable, based on accounts
receivable invoiced through February 28, 1998, including interest computed
through March 6, 1998; and (ii) $29,904.25 in accounts receivable that were not
then due and payable, based on accounts receivable invoiced through February 28,
1998. Xxxxxxxx further acknowledges and agrees that, as of March 23, 1998, it
owes Rentrak an additional $1,273,505.57, which sum is comprised of (i) a
$4,155.92 PPT Deficiency (as defined in the Xxxxxxxx PPT Agreement) for calendar
year 1996, including interest calculated through March 23, 1998; (ii)
$1,048,385.27 under a Revolving Credit Agreement, dated December 16, 1994, and a
Senior Secured Revolving Note executed by Xxxxxxxx in connection therewith on
December 16, 1994 (the "1994 Xxxxxxxx Note"), including interest computed
through March 23, 1998; and (iii) $220,964.38 under a Loan Agreement, dated July
11, 1997 (the "1997 Loan Agreement"), of which $215,964.38 is owing under the
1997 Loan Agreement and a Promissory Note executed by Xxxxxxxx in connection
therewith on July 11, 1997 (the "1997 Xxxxxxxx Note"), including interest
computed through March 23, 1998, and $5,000.00 is owing under Article III of the
1997 Loan Agreement for reimbursement of legal expenses;
H. VCI and Xxxxxxxx acknowledge and agree that they both owe a PPT
Deficiency (as defined in their respective PPT Agreements) for calendar year
1997, the amount of which has not yet been calculated, and that they owe other
additional amounts to Rentrak under their respective
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PPT Agreements; that the enumeration of the foregoing amounts shall not be
construed or operate as a release of VCI's and Xxxxxxxx'x obligation to pay all
additional amounts determined to be due, including interest, late fees and
related charges; and that Rentrak is not waiving any of its rights and remedies
with respect to collecting any such additional amounts when due;
I. Rentrak has filed a lawsuit against AIV in the United States District
Court for District of Oregon (Case No. CV98-04-HA) seeking to recover certain
past due accounts receivable and other amounts owing by AIV under the AIV PPT
Agreement (the "AIV Lawsuit");
J. Rentrak and AIV have compromised, settled and resolved all matters at
issue in the AIV Lawsuit, subject to consummation of the transactions
contemplated herein, and AIV acknowledges and agrees that it owes Rentrak the
sum of $389,900.00 under the terms of such settlement;
K. VCI, Xxxxxxxx and AIV desire to work out an arrangement with Rentrak
with respect to restructuring the above-identified indebtedness that they owe to
Rentrak, excluding the current accounts receivable not yet due and payable,
whereby (i) Rentrak would consent to VCI's acquisition of the Subsidiaries, (ii)
VCI would pay Rentrak the sum of $810,496.36 in cash, and issue a promissory
note in the principal sum of $200,000.00 upon closing such acquisitions, and
(iii) Rentrak would cancel certain indebtedness owing by Xxxxxxxx and AIV in
exchange for certain shares of VCI stock being issued to Mortco, and a
promissory note being issued to Mortco; and
L. Rentrak is willing to restructure the above-identified indebtedness
owing by VCI, Xxxxxxxx and AIV, excluding the current accounts receivable not
yet payable, based on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
in reliance on and subject to the terms, conditions, representations,
warranties, covenants and agreements contained herein, the parties agree as
follows:
1. RESTRUCTURING SPECIFIC INDEBTEDNESS OWING TO RENTRAK BY XXXXXXXX AND AIV.
1.1 ISSUANCE OF VCI SHARES. At Closing VCI shall issue to Mortco and,
subject to and in reliance upon the representations, warranties, covenants,
terms and conditions of this Agreement, Mortco shall accept from VCI, a total of
665,112 shares of VCI's authorized and
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unissued voting common stock (the "VCI Shares") in consideration of Rentrak's
cancellation of the following indebtedness owing by Xxxxxxxx and AIV:
1.1.1 CANCELLATION OF SPECIFIC INDEBTEDNESS OWING BY XXXXXXXX. VCI
shall issue 470,162 shares of its authorized and unissued voting common stock to
Mortco in exchange for Rentrak's cancellation of an aggregate of $940,324.31 of
indebtedness owing by Xxxxxxxx, which represents:
(a) $77,024.72 owed in past due accounts receivable as of March
6, 1998, based on accounts receivables invoiced through February 28, 1998,
including interest computed through March 6, 1998, and a $4,155.92 PPT
Deficiency for calendar year 1996, including interest computed through
March 23, 1998;
(b) $220,964.38 owing under the 1997 Xxxxxxxx Note, including
interest computed through March 23, 1998, and an additional $5,000.00 owing
under the 1997 Loan Agreement for reimbursement of legal expenses; and
(c) $638,179.29 of the $1,048,385.27 balance owing under the
1994 Xxxxxxxx Note, including interest calculated through March 23, 1998.
1.1.2 CANCELLATION OF SPECIFIC INDEBTEDNESS OWING BY AIV. VCI shall
issue 194,950 shares of its authorized and unissued voting common stock to
Mortco in exchange for Rentrak's cancellation of the $389,900.00 that AIV owes
to Rentrak under the terms of the settlement of the AIV Lawsuit.
1.2 PROMISSORY NOTE FROM XXXXXXXX. At Closing Rentrak and Xxxxxxxx shall
convert the remaining $410,205.98 of the balance owing under the 1994 Xxxxxxxx
Note into a new Promissory Note in the form attached hereto as Exhibit A (the
"Xxxxxxxx Note"), and Xxxxxxxx shall pay such $410,205.98 in strict compliance
with the terms of such Xxxxxxxx Note.
1.3 CASH AND PROMISSORY NOTE FROM VCI. At Closing VCI shall pay
$810,496.36 to Rentrak in readily available funds at Closing, which represents
(i) $264,234.10 of the $464,234.10 owed by VCI in past due accounts receivable
as of March 6, 1998, based on accounts receivable invoiced through February 28,
1998, including interest and late fees computed through March 6, 1998; (ii)
$31,570.00 owing by VCI in lost late fee revenues; and (iii) $514,692.26 owing
by VCI under the 1997 VCI Note, including interest and late fees computed
through March 23, 1998. At Closing VCI shall issue a Promissory Note to Mortco
in the principal sum of $200,000.00, in the form attached hereto as Exhibit B
(the "VCI Note"), which represents the balance owed by VCI in past due accounts
receivable as of March 6, 1998, based on accounts receivable invoiced through
February 28, 1998, including interest and late fees computed through March 6,
1998.
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1.4 CLOSING. The transactions contemplated by this Agreement, specifically
including without limitation the issuance of the VCI Shares to Rentrak as
contemplated by Section 1.1 above, shall be closed (the "Closing")
simultaneously with the closing of VCI's acquisition of the five Subsidiaries on
or about March 24, 1998, at the Law Offices of Xxxx & Xxxxx, 0000 Xxxxxxx Xxxx
Xxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, or at such other time, date and
place as the parties hereto shall mutually agree in writing. The date on which
the Closing shall occur is herein referred to as the "Closing Date."
1.5 ACTIONS TO BE TAKEN AT CLOSING. The parties agree to take the
following actions at Closing, each of which shall be conditional on completion
of all other actions and all of which shall be deemed to take place
simultaneously:
1.5.1 CLOSING OF VCI'S ACQUISITIONS OF SUBSIDIARIES. VCI shall close
on the acquisition of each Subsidiary in strict compliance with the terms and
conditions set forth in the Merger Agreements attached hereto as Exhibits C-1
through C-5.
1.5.2 DELIVERY OF CERTIFICATES REPRESENTING THE VCI SHARES. VCI shall
issue and deliver to Mortco a stock certificate evidencing the 665,112 shares of
voting common stock being issued to Mortco under Section 1.1, registered in
Mortco's name.
1.5.3 STOCK LEGEND. The stock certificate delivered to Mortco in
compliance with Section 1.5.2 shall bear a legend, prominently stamped or
printed thereon, reading substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS (THE "ACTS"), HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACTS IS IN
EFFECT WITH REGARD THERETO OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. AN OPINION OF COUNSEL SHALL, UPON REQUEST
BY VCI, BE FURNISHED OPINING AS TO THE AVAILABILITY OF AN EXEMPTION.
1.5.4 PAYMENT BY VCI TO RENTRAK. VCI shall pay the sum of $810,496.36
to Rentrak by wire transfer to an account designated by Rentrak.
1.5.5 OTHER AGREEMENTS. The parties shall, as applicable, execute and
deliver the following agreements at Closing:
(a) LOAN AGREEMENT, XXXXXXXX PROMISSORY NOTE, AND VCI PROMISSORY
NOTE. Xxxxxxxx shall execute the Xxxxxxxx Note and the Loan Agreement
attached hereto as Exhibits A and D, respectively, and deliver th e
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same to Mortco at Closing. VCI shall execute the VCI Note and deliver
the same to Rentrak at Closing.
(b) SUBORDINATED SECURITY AGREEMENTS AND GUARANTY. VCI shall
grant to Rentrak and Mortco a security interest in all of its
properties and assets, as security for the timely payment and
performance of the Xxxxxxxx Note, the VCI Note, and the Loan
Agreement, based on the terms and conditions set forth in the
Subordinated Security Agreement attached hereto as Exhibit E (the "VCI
Security Agreement"). Xxxxxxxx shall grant to Rentrak and Mortco a
security interest in all of its property and assets, as security for
the timely payment and performance of the Xxxxxxxx Note, the VCI Note,
the Xxxxxxxx Loan Agreement, the Xxxxxxxx PPT Agreement, the
VCI/Subsidiaries PPT Agreement, and certain other obligations owing
from Xxxxxxxx to Rentrak and Mortco, based on the terms and conditions
set forth in the Subordinated Security Agreement attached hereto as
Exhibit F (the "Xxxxxxxx Security Agreement"). VCI and Xxxxxxxx shall
execute their respective Security Agreements and deliver the same to
Rentrak and Mortco at Closing. VCI shall unconditionally and
irrevocably guarantee payment of the Xxxxxxxx Note, and certain other
obligations owing by the Subsidiaries to Rentrak and Mortco, in strict
compliance with the terms and conditions of the Guaranty attached
hereto as Exhibit G (the "Guaranty"), which VCI shall execute and
deliver to Mortco at Closing.
(c) VCI/SUBSIDIARIES PPT AGREEMENT. VCI and each Subsidiary
shall execute the new Rentrak Chain or Multiple Store Account
Agreement and First Addendum to Rentrak Chain or Multiple Store
Account Agreement attached hereto as Exhibit H (collectively the
"VCI/Subsidiaries PPT Agreement") and deliver the same to Rentrak at
Closing.
(d) REGISTRATION RIGHTS AGREEMENT. VCI shall grant to Mortco,
with respect to the VCI Shares being issued to Mortco under Section
1.1 above and the VCI shares being issued to Mortco in connection with
VCI's acquisition of Xxxxxxxx, the registration rights set forth in
the Registration Rights Agreement attached hereto as Exhibit I (the
"Registration Rights Agreement"). VCI shall execute the Registration
Rights Agreement and deliver the same to Mortco at Closing.
(e) RESTATED WARRANTS. Xxx Video City, Inc., which merged with
and into VCI on January 7, 1997, granted two separate warrants to
Rentrak to purchase certain shares of its common stock, the terms and
conditions of which are set forth in a Warrant Certificate, dated
August 24, 1995 (the "First Warrant"), and a Warrant Certificate,
dated June 19, 1996 (the "Second Warrant"). VCI assumed, as a result
of the merger, all obligations of Xxx Video City, Inc. under the First
Warrant and the Second Warrant. Rentrak has assigned, as of the date
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hereof, all of its right, title and interest in the First Warrant and
the Second Warrant to Mortco. The terms and conditions of the First
Warrant are restated in a new Warrant Certificate attached hereto as
Exhibit J (the "First Restated Warrant") and the terms and conditions
of the Second Warrant are restated in a new Warrant Certificate
attached hereto as Exhibit K (the "Second Restated Warrant"), which
VCI shall execute and deliver to Rentrak at Closing.
(f) SETTLEMENT AGREEMENT. Rentrak, AIV, and Xxxxx Xxxxxxxxx
shall execute the Settlement Agreement attached hereto as Exhibit L at
Closing.
1.5.6 ADDITIONAL DELIVERIES. The parties hereto shall execute and
deliver all other documents and certificates required to be delivered at Closing
pursuant to this Agreement.
1.6 CANCELLATION OF NOTES. Rentrak and Xxxxxxxx shall, effective on the
satisfaction of all the conditions precedent set forth in Section 4.1 and the
Closing of the transactions contemplated by this Agreement, cancel the Revolving
Credit Agreement, dated December 16, 1994, and the 1994 Xxxxxxxx Note executed
by Xxxxxxxx on connection therewith; the Loan Agreement, dated July 11, 1997,
and the 1997 Xxxxxxxx Note executed by Xxxxxxxx in connection therewith; and the
1997 VCI Note, all which instruments shall thereafter be deemed null and void
and of no further binding force and effect.
1.7 CONSENT TO SALE OF VCI FILM LIBRARY. Effective on the satisfaction of
all the conditions precedent set forth in Section 4.1 and the Closing of the
transactions contemplated by this Agreement, Rentrak consents to the sale of
VCI's rights in the motion picture titles listed in Schedule 1.7, which consent
VCI must obtain pursuant to Section 6.1 of that certain Stock Purchase
Agreement, dated December 16, 1994, by and between Mortco and Xxx Video City,
Inc., the terms of which VCI expressly assumed under that certain Assumption
Agreement, dated January 7, 1997, by and between Rentrak, Mortco, and Prism
Entertainment Corporation (nka VCI).
2. REPRESENTATIONS AND WARRANTIES OF VCI, XXXXXXXX AND AIV. As a material
inducement to Rentrak and Mortco to enter into this Agreement, VCI, Xxxxxxxx and
AIV, jointly and severally, make the following representations and warranties to
Rentrak and Mortco:
2.1 ORGANIZATION AND STANDING. VCI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
Xxxxxxxx is a corporation duly organized, validly existing and in good standing
under the laws of the State of California; AIV is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota;
KDDJ is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota; Leptis is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado; and Old Republic is a corporation duly organized, validly existing and
in good standing under the laws of the State of California. VCI and each
Subsidiary have all requisite corporate power and authority for the ownership
and
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operation of their properties and for the carrying on of their business as now
conducted or as now proposed to be conducted. VCI and each Subsidiary is duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in all jurisdictions wherein the character of the property owned
or leased, or the nature of the activities conducted by it makes such licensing
or qualification necessary.
2.2 AUTHORIZATION; CORPORATE ACTION. VCI and each Subsidiary, as
applicable, have all necessary corporate power and authority, and have taken all
corporate action required, to enter into, execute and deliver this Agreement and
all other agreements and instruments contemplated herein, including all Exhibits
attached hereto (collectively the "Related Documents"), to fully perform their
obligations hereunder and thereunder, and to carry out and consummate the
transactions contemplated hereby and thereby. This Agreement and the Related
Documents have been duly executed and delivered by duly authorized officers of
VCI and each Subsidiary, as applicable, and are the legal, valid, and binding
obligations of VCI and each Subsidiary, as applicable, enforceable in accordance
with their terms. A sufficient number of authorized but unissued shares of
voting common stock of VCI have been reserved by appropriate corporate action in
connection with the prospective exercise of the Restated Warrant, and the
issuance of the VCI Shares is not, and the issuance of the shares upon exercise
of the First Restated Warrant and Second Restated Warrant will not, be subject
to preemptive rights or other preferential rights in any present or future
shareholders of VCI and will not conflict with any provision of any agreement or
instrument to which VCI is a party or by which it or its property is bound.
2.3 CAPITALIZATION; STATUS OF CAPITAL STOCK. The authorized capital stock
of VCI consists solely of 20,000,000 shares of voting common stock, $.01 par
value, of which an aggregate of 9,773,927 shares are presently issued and
outstanding. After giving effect to the transactions described herein, an
aggregate of 11,859,039 shares of VCI common stock will be issued and
outstanding. All of the outstanding shares of capital stock of VCI have been
duly authorized, are validly issued, and are fully paid and nonassessable. The
VCI Shares, when issued and delivered in accordance with the terms of this
Agreement, and the shares to be issued to Mortco upon exercise of the First
Restated Warrant and the Second Restated Warrant, when issued in accordance with
the terms of the First Restated Warrant and the Second Restated Warrant, will be
duly authorized, validly issued, fully paid and nonassessable, and free and
clear of all claims, pledges, liens, encumbrances and restrictions of every
kind. Except as otherwise set forth in Schedule 2.3, no options, warrants,
subscriptions or purchase rights of any nature to acquire from VCI or any
Subsidiary shares of capital stock or other securities are authorized, issued or
outstanding, nor is VCI or any Subsidiary obligated in any other manner to issue
shares of its capital stock or other securities except as contemplated by this
Agreement. Except as set forth in Schedule 2.3, there are no agreements,
understandings, trusts or other collaborative arrangements or understandings
concerning the voting of the capital stock of VCI or any Subsidiary. There are
no agreements, understandings, trusts or other understandings concerning
transfers of the capital stock of VCI or any Subsidiary, except as contemplated
by this Agreement. The offer and sale of all capital stock and other securities
of VCI and each Subsidiary issued before the Closing complied with or were
exempt from all applicable federal
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and state securities laws and no stockholder has a right of rescission with
respect thereto. VCI shall own, upon closing on the acquisition of each
Subsidiary in compliance with the Merger Agreements attached hereto as Exhibits
C-1 through C-5, all of the issued and outstanding capital stock of each
Subsidiary.
2.4 REGISTRATION RIGHTS. Except as set forth in Schedule 2.4, neither VCI
nor any Subsidiary has granted any registration rights of any kind or nature,
including but not limited to piggy-back registration rights, to any person or
entity and has not otherwise agreed to register any of its authorized or
outstanding securities under the Securities Act of 1933.
2.5 ARTICLES OF INCORPORATION, BYLAWS AND CORPORATE RECORDS. VCI has
delivered to Rentrak a true and complete copy of VCI's and each Subsidiary's
Articles of Incorporation, and a true and complete copy of VCI's and each
Subsidiary's Bylaws, as amended and in effect on the date hereof, certified by
the Secretary of VCI and each Subsidiary, as applicable. The corporate minute
book of VCI and each Subsidiary contains true and complete records of all
meetings of, and all corporate action taken by, their respective Board of
Directors (and any committees thereof) and shareholders since the date of their
incorporation, including all actions taken by written consents in lieu of
meetings. The stock books of VCI and each Subsidiary, including stock ledgers
and stock transfer records, are true, correct and complete.
2.6 SUBSIDIARIES. Neither VCI nor any Subsidiary own, directly or
indirectly, any capital stock or other equity, ownership or proprietary interest
in any corporation, limited liability company, partnership, association, trust,
joint venture or other entity, except as will result from the consummation of
the transactions contemplated herein.
2.7 FINANCIAL STATEMENTS. The books of account and records of VCI and each
Subsidiary are true, correct and complete in all material respects, fairly and
accurately reflect their income, expenses, assets and liabilities, and provide a
fair and accurate basis for the preparation of their financial statements and
tax returns. VCI's unaudited financial statements for the nine-month period
ending October 31, 1997, including without limitation VCI's balance sheet,
related statement of income and retained earnings for the nine-month period then
ended and statement of cash flow (collectively the "VCI Financial Statements");
Xxxxxxxx'x unaudited balance sheet and related statement of income for the year
ending December 31, 1997 (collectively the "Xxxxxxxx Financial Statements");
AIV's unaudited balance sheet and related statement of income for the year
ending December 31, 1997 (collectively the "AIV Financial Statements"); KDDJ's
unaudited balance sheet and related statement of income for the year ending
December 31, 1997 (collectively the "KDDJ" Financial Statements"); Leptis'
unaudited balance sheet and related statement of income for the year ending
December 31, 1997 (collectively the "Leptis Financial Statements"); and Old
Republic's unaudited balance sheet and related statement of income for the six-
month period ending December 31, 1997 (collectively the "Old Republic Financial
Statements"), are set forth in Schedule 2.7. The VCI Financial Statements, the
Xxxxxxxx Financial Statements, the AIV Financial Statements, the KDDJ Financial
Statements, the Leptis Financial Statements, and the Old Republic Financial
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Statements (including any related notes and schedules) are true, correct, and
complete; fairly present VCI's and each Subsidiary's financial condition at the
dates thereof and the results of its operations for the periods then ended; and
have been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior accounting periods. Since October 31,
1997, there has been no material adverse change in the business, assets or
condition, financial or otherwise, or in the operations or prospects, of VCI.
Since December 31, 1997, there has been no material adverse change in the
business, assets or condition, financial or otherwise, or in the operations or
prospects, of Xxxxxxxx, AIV, KDDJ, Leptis, or Old Republic.
2.8 NO UNDISCLOSED LIABILITIES. VCI has no debts, liabilities or
obligations of any nature whatsoever, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise, other than (i) those
liabilities fully and adequately reflected or reserved against on the VCI
Financial Statements, or in the notes thereto, and (ii) those liabilities
incurred in the ordinary course of business consistent with past practices since
October 31, 1997. Each of Xxxxxxxx, AIV, KDDJ, Leptis and Old Republic has no
debts, liabilities or obligations of any nature whatsoever, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise,
other than (i) those liabilities fully and adequately reflected or reserved
against on the Xxxxxxxx Financial Statements, the AIV Financial Statements, the
KDDJ Financial Statements, the Leptis Financial Statements, and the Old Republic
Financial Statements, or in the notes thereto, and (ii) those liabilities
incurred in the ordinary course of business consistent with past practices since
December 31, 1997.
2.9 ACTIVITIES SINCE BALANCE SHEET DATE. Except as set forth in Schedule
2.9, since December 31, 1997, each of Xxxxxxxx, AIV, KDDJ, Leptis and Old
Republic has not, and since October 31, 1997, VCI has not: (i) suffered any
material adverse change in its financial condition, liabilities, assets,
business or prospects; (ii) suffered any destruction, damage to, or loss of any
asset (whether or not covered by insurance) that materially and adversely
affects its financial condition, business or prospects; (iii) incurred any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), except in the ordinary course of business consistent with past
practices; (iv) permitted any of its assets to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any kind;
(v) sold, transferred or otherwise disposed of any of its assets, tangible or
intangible, or any interest therein, except in the ordinary course of business
consistent with past practices; (vi) declared, set aside or paid any dividend or
made any other distribution in respect to its capital stock, or redeemed,
purchased or otherwise acquired any shares of its capital stock; (vii) issued or
sold any shares of its capital stock of any class; (viii) increased its
indebtedness for borrowed money, or made any loan, advance or guaranty to or for
the benefit of any person or entity; (ix) otherwise conducted its business or
entered into any agreement, contract, commitment or transaction, except in the
usual and ordinary manner and in the ordinary course of business; or (x) agreed,
whether or not in writing, to do any of the foregoing.
2.10 TITLE TO ASSETS. Except as set forth in Schedule 2.10, VCI and each
Subsidiary owns outright and holds good and marketable title to all of their
assets and properties, tangible
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and intangible, of every nature and description, free and clear of restrictions
on or conditions to transfer or assignment, and free and clear of all liens,
pledges, charges, and encumbrances of any nature whatsoever.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The execution and delivery of this
Agreement and the Related Documents, the consummation of the transactions
contemplated hereby and thereby, and the performance by VCI and each Subsidiary
of its obligations hereunder and thereunder will not (i) violate any provision
of VCI's or any Subsidiary's Articles of Incorporation or Bylaws; (ii) violate,
conflict with or result in the breach of any of the terms of, result in a
modification of the effect of, give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both constitute) a
default under, any contract or other agreement to which VCI or any Subsidiary is
a party or by or to which VCI or any Subsidiary is bound or subject; (iii)
violate any order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon, VCI or
any Subsidiary or upon the securities, properties or business of VCI or any
Subsidiary; or (iv) violate any statute, law or regulation of any jurisdiction
as such statute, law or regulation relates to VCI or any Subsidiary or to the
securities, properties or business of VCI or any Subsidiary. VCI and each
Subsidiary is in full compliance in all respects with the terms and provisions
of its Articles of Incorporation and Bylaws, as amended and in effect as of the
date hereof, and in compliance in all material respects with the terms and
provisions of all leases, agreements and other instruments by which it is bound
or to which it or any of its respective properties or assets are subject.
2.12 BROKERS AND FINDERS. Neither VCI nor any Subsidiary has employed any
broker or finder in connection with the transactions contemplated by this
Agreement, or taken any action that would give rise to a valid claim against any
party for a brokerage commission, finder's fee, or other like payment
(collectively "Fees"), except for Xxxx Xxxxxx of Sphere Capital Corporation. VCI
and each Subsidiary, jointly and severally, agree to defend, indemnify and hold
Rentrak and Mortco harmless from any Fees to Xxxx Xxxxxx or Sphere Capital
Corporation, or any other person or entity claimed to be engaged by VCI or any
Subsidiary in connection with the transactions contemplated by this Agreement.
2.13 EMPLOYMENT AND LABOR RELATIONS MATTERS. VCI and each Subsidiary have
paid or made provision for the payment of all salaries and wages accrued through
the date hereof. VCI and each Subsidiary has complied with all labor and
employment laws, including all Federal, state and local laws and regulations
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes. Neither VCI nor any Subsidiary is a
party to, nor otherwise subject to, any collective bargaining or other agreement
covering wages, hours, and terms of employment of their respective employees.
2.14 CONTRACTS AND COMMITMENTS. Schedule 2.14 contains a true and complete
list and description of all contracts, agreements, commitments and undertakings
of any nature, written or oral, of VCI and each Subsidiary, each of which
involves future payments,
Page 11 - RESTRUCTURED DEBT AGREEMENT
performance of services, or delivery of goods or materials to or by VCI or any
Subsidiary of an aggregate amount of value in excess of $50,000, or which
otherwise is material to the respective operations, assets, business or
financial condition of VCI or any Subsidiary (collectively, the "Material
Contracts"). All of the Material Contracts listed on Schedule 2.14 are in full
force and effect and are binding upon VCI and each Subsidiary, as applicable,
and the other parties thereto; VCI and each Subsidiary, as applicable, have
fully performed all of their obligations thereunder; and there exists no default
or event of default or event, occurrence, condition or act which, with the
giving of notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default thereunder.
2.15 COMPLIANCE WITH LAWS. VCI and each Subsidiary is now and has at all
times been in compliance in all material respects with all laws, rules,
regulations, codes, ordinances, requirements, decrees and orders applicable to
their respective businesses. Neither VCI nor any Subsidiary is under
investigation or charged with any violation or alleged violation of any federal,
state, local or other law or regulation which would have any material adverse
effect on its business, prospects, financial condition, operation, property, or
affairs.
2.16 THIRD-PARTY AND GOVERNMENTAL APPROVALS. All authorizations, consents,
and approvals of, and licenses, exemptions of or filings or registrations with,
all third-parties, courts or governmental departments, commissions, boards,
bureaus, agencies or instrumentalities, domestic or foreign, that are necessary
for the execution and delivery by VCI and each Subsidiary, as applicable, of
this Agreement and the Related Documents, for the offer, issue, sale and
delivery of VCI Shares, or for the performance by VCI and each Subsidiary, as
applicable, of their respective obligations under this Agreement and the Related
Documents, have been obtained.
2.17 LITIGATION. Except as set forth in Schedule 2.17, there is no
litigation or governmental proceeding or investigation pending or, to the best
knowledge of VCI and each Subsidiary, after due inquiry, threatened against VCI
or any Subsidiary, affecting any of their respective properties or assets, nor,
to the best knowledge of VCI and each Subsidiary, after due inquiry, has there
occurred any event or does there exist any condition on the basis of which any
such litigation, proceeding or investigation might properly be instituted.
Neither VCI nor any Subsidiary is in default with respect to any order, writ,
injunction, decree, ruling or decision of any court commission, board, or other
government agency.
2.18 TAXES. VCI and each Subsidiary have accurately prepared and timely
filed all federal, state, and other tax returns required by law to be filed by
it, has paid or made provision for the payment of all taxes shown to be due and
all additional assessments, and adequate provisions have been made and are
reflected in their respective Financial Statements for all current taxes and
other charges to which they are subject and which are not currently due and
payable. After due inquiry, neither VCI nor any Subsidiary knows of any
additional assessments or adjustments pending or threatened against them for any
period, nor of any basis for any such assessments or adjustments.
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2.19 INTELLECTUAL PROPERTY RIGHTS. The conduct of VCI's and each
Subsidiary's business does not infringe or conflict with, and has not in the
past infringed or conflicted with, and neither VCI nor any Subsidiary is in
receipt of any notice or complaint of conflict with or infringement of, or
misappropriation of the asserted rights of others in, any patents, trademarks,
copyrights, trade secrets, or other intellectual property rights.
2.20 ERISA. Neither VCI nor any Subsidiary presently maintain or contribute
to, and have never in the past maintained or contributed to, any employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"), whether or not such employee benefit plan is otherwise
exempt from the provisions of ERISA.
2.21 INSURANCE COVERAGE. VCI and each Subsidiary maintains insurance
policies, including fire and casualty insurance policies, worker's compensation
insurance policies, and public liability insurance policies, that are
customarily carried by comparable businesses that insure VCI and each
Subsidiary, and their respective properties and businesses against such losses
and risks, and in such amounts as in their best judgment are customary and
acceptable for the nature and extent of its business.
2.22 BOOKS AND RECORDS. VCI's and each Subsidiary's books of account,
ledgers, order books, records and documents accurately and completely reflect
all material information relating to their respective businesses, the location
and collection of their assets, and the nature of all transactions giving rise
to their obligations and accounts receivable.
2.23 CONFLICTS OF INTEREST. No officer, director or stockholder of VCI or
any Subsidiary, or any affiliate, as such term is defined in Rule 405 under the
Securities Act of 1933 ("Affiliates"), of any such entities, has any direct or
indirect interest (i) in any entity which does business with VCI or any
Subsidiary, (ii) in any property, asset or right which is used by VCI or any
Subsidiary in the conduct of its business, or (iii) in any contractual
relationship with VCI or any Subsidiary other than as an employee.
2.24 SECURITIES LAWS. VCI has complied and will comply with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the VCI Shares and the shares to be issued upon exercise of the Restated
Warrant.
2.25 STORE LEASES. Schedule 2.25 sets forth all real property leased by VCI
and each Subsidiary, including the location of the leased property (the
"Leases"). Each of the Leases listed on Schedule 2.25 is in full force and
effect and is binding upon VCI and each Subsidiary, as applicable, and on the
other parties thereto; VCI and each Subsidiary, as applicable, have fully
performed all of their obligations thereunder, including paying all rents and
payments due to date thereunder in full; and there exists no default or event of
default or event, occurrence, condition
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or act which, with the giving of notice, the lapse of time or the happening of
any other event or condition, would become a default or event of default
thereunder.
2.26 DISCLOSURE. Neither this Agreement, the Related Documents, nor any
other agreement, document, certificate or written statement furnished to
Rentrak, Mortco, or their counsel, by or on behalf of VCI or any Subsidiary in
connection with the transactions contemplated hereby or thereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading.
There is no fact within the knowledge of VCI or any Subsidiary which has not
been disclosed herein or in writing by them to Rentrak and Mortco and which
materially adversely affects, or in the future in their opinion may, insofar as
they can now foresee, materially adversely affect the business, properties,
assets or condition, financial or otherwise, of VCI or any Subsidiary.
3. REPRESENTATIONS AND WARRANTIES OF MORTCO. As a material inducement to VCI,
Xxxxxxxx, and AIV to enter into this Agreement, Mortco makes the following
representations and warranties:
3.1 INVESTMENT INTENT. Mortco is acquiring the VCI Shares for its own
account and not with the view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933 (the "1933 Act"). Mortco acknowledges that VCI Shares have not been
registered under the 1933 Act or any state securities laws, and that such shares
may not be resold without registration under the 1933 Act or applicable state
securities laws or an exemption therefrom. Mortco is an "Accredited Investor" as
that term is defined in Rule 501(a) of Regulation D promulgated under the 1933
Act and has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment to be made by
it hereunder.
3.2 AUTHORIZATION. This Agreement and the Related Documents have been duly
authorized by all necessary corporate action on the part of Mortco and Rentrak,
as the case may be, and have been duly executed and delivered by Mortco and
Rentrak, and are valid and binding agreements, enforceable in accordance with
their terms.
3.3 NO BROKERS OR FINDERS. Neither Mortco nor Rentrak have employed any
broker or finder in connection with the transactions contemplated by this
Agreement, or taken any action that would give rise to a valid claim against any
party for a brokerage commission, finder's fee, or other like payment.
4. CONDITIONS OF CLOSING.
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF RENTRAK AND MORTCO. The
obligations of Rentrak and Mortco to consummate the transactions contemplated by
this Agreement, are subject, in Rentrak's and Mortco's sole discretion, to the
fulfillment of each of the following
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conditions precedent on or prior to the Closing Date, any of which may be waived
in whole or in part by Rentrak and Mortco:
4.1.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of VCI, Xxxxxxxx and AIV under this Agreement shall be true and
correct in all respects at and as of the Closing Date with the same effect as
though made on and as of the Closing Date.
4.1.2 COMPLIANCE WITH AGREEMENT. VCI and each Subsidiary, as
applicable, shall have performed and complied with all agreements or conditions
required by this Agreement and the Related Documents to be performed and
complied with by them prior to or as of the Closing Date, specifically including
without limitation taking all actions required under Section 1.5 above.
4.1.3 SIMULTANEOUS CLOSING OF VCI'S ACQUISITIONS OF SUBSIDIARIES. VCI
shall have simultaneously closed on the acquisition of each Subsidiary in strict
compliance with the terms and conditions set forth in the Merger Agreements
attached hereto as Exhibits C-1 through C-5. VCI shall have issued and delivered
to Mortco, in connection with VCI's acquisition of Xxxxxxxx, a stock certificate
evidencing 9,900 shares of VCI's authorized and unissued voting common stock,
fully paid and nonassessable.
4.1.4 NO EVENT OF DEFAULT. No condition or event which would
constitute an Event of Default (as such term is defined in Section 7.1), or
which, after notice or lapse of time or both, would constitute an Event of
Default, shall exist at the time of Closing.
4.1.5 CLOSING CERTIFICATE. VCI, Xxxxxxxx and AIV shall have each
delivered to Rentrak and Mortco, a certificate, duly signed by their respective
Presidents or Chief Executive Officers, dated as of the Closing Date, certifying
that the conditions specified in Sections 4.1.1, 4.1.2, 4.1.3 and 4.1.4 have
been satisfied and fulfilled.
4.1.6 OPINION OF COUNSEL. VCI, Xxxxxxxx and AIV shall have delivered
to Rentrak and Mortco an opinion of counsel for VCI, Xxxxxxxx and AIV in form
and substance satisfactory to Rentrak and Mortco, dated as of the Closing Date.
4.1.7 EXECUTION AND DELIVERY OF DOCUMENTS. VCI, Xxxxxxxx, AIV, KDDJ,
Leptis, Old Republic, and Xxxxx Xxxxxxxxx, as applicable, shall have executed
and delivered to Rentrak and Mortco this Agreement and all other documents
required to be executed and delivered at Closing hereunder, specifically
including without limitation the Xxxxxxxx Note, the VCI Note, the Loan
Agreement, the VCI Security Agreement, the Xxxxxxxx Security Agreement, the
Guaranty, the VCI/Subsidiaries PPT Agreement, the Registration Rights Agreement,
the First Restated Warrant, the Second Restated Warrant, and the Settlement
Agreement, attached hereto as Exhibits X, X, X, X, X, X, X, X, X, X and L
respectively.
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4.1.8 QUALIFICATION UNDER STATE SECURITIES LAWS. All registrations,
qualifications, permits and approvals required under applicable state and
federal securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of VCI Shares and shall have been
obtained.
4.1.9 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
and actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transactions shall be satisfactory in form and
substance to Rentrak and Mortco. VCI shall have delivered to Mortco (i) a
certificate from the Secretary of the State of Delaware to the effect that VCI
is incorporated and in good standing in Delaware; (ii) a certificate from the
Secretary of State of the State of California to the effect that Xxxxxxxx is
incorporated and in good standing in California; and (iii) a copy of the
resolutions of the Board of Directors of VCI, Xxxxxxxx and AIV, respectively,
approving this Agreement and the Related Documents and the transactions
contemplated hereby and thereby, certified by their respective Secretaries as
being true and correct.
4.1.10 NO LITIGATION. No suit, action, governmental proceeding or
order shall have been instituted or threatened which makes the transactions
contemplated hereby illegal or otherwise prohibited or otherwise seeks to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement.
4.1.11 THIRD-PARTY CONSENTS. All consents and approvals from parties
to contracts or other agreements with VCI or any Subsidiary that may be required
in connection with the performance by VCI and each Subsidiary of their
obligations under this Agreement or the continuance of such contracts or other
agreements with VCI or any Subsidiary after the Closing shall have been
obtained.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF VCI, XXXXXXXX AND AIV. The
obligations of VCI, Xxxxxxxx and AIV to consummate the transactions contemplated
by this Agreement are subject, in the discretion of VCI, Xxxxxxxx and AIV, to
the fulfillment prior to or on the Closing Date of each of the following
conditions, any of which may be waived in whole or in part by VCI, Xxxxxxxx and
AIV:
4.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Mortco under this Agreement shall be true and correct in all
respects at and as of the Closing Date with the same effect as though made on
and as of the Closing Date.
4.2.2 COMPLIANCE WITH AGREEMENT. Rentrak and Mortco shall have
performed and complied with all agreements or conditions required by this
Agreement to be performed and complied with by it prior to or as of the Closing
Date.
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4.2.3 SIMULTANEOUS CLOSING OF VCI'S ACQUISITIONS OF SUBSIDIARIES. VCI
shall have simultaneously closed on the acquisition of each Subsidiary in strict
compliance with the terms and conditions set forth in the Merger Agreements
attached hereto as Exhibits C-1 through C-5.
4.2.4 EXECUTION AND DELIVERY OF DOCUMENTS. Rentrak and Mortco, as the
case may be, shall have executed this Agreement and all other documents required
to be executed and delivered by them at Closing hereunder.
4.2.5 NO LITIGATION. No suit, action, governmental proceeding or order
shall have been instituted or threatened which makes the transactions
contemplated hereby illegal or otherwise prohibited or otherwise seeks to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement.
5. AFFIRMATIVE COVENANTS OF XXXXXXXX. VCI and Xxxxxxxx hereby jointly and
severally covenant and agree that, unless Mortco shall otherwise give its prior
written consent, which consent may be withheld in its sole discretion, Xxxxxxxx
shall perform and VCI shall cause Xxxxxxxx to perform, all of the following
covenants, which shall be deemed continuing covenants:
5.1 CORPORATE EXISTENCE. Xxxxxxxx shall maintain and preserve its
corporate existence in good standing and all rights, franchises and other
authorizations adequate for the conduct of its business.
5.2 BOOKS OF ACCOUNT AND RESERVES. Xxxxxxxx shall keep books of record and
account in which full, true and correct entries are made of all of its dealings,
business and affairs, in accordance with generally accepted accounting
principles, consistently applied. Xxxxxxxx will employ a nationally recognized
accounting firm as its independent accountants. Xxxxxxxx will have annual audits
made by such independent public accountants in the course of which such
accountants shall make such examinations, in accordance with generally accepted
auditing standards, as will enable them to give reports or opinions with respect
to the financial statements of Xxxxxxxx.
5.3 FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. Xxxxxxxx shall
deliver to Mortco:
(a) Within five days of their availability, but in any event within
20 days after the close of each month starting March 1998, an unaudited
consolidated balance sheet of VCI as of the end of such month, together
with the related unaudited consolidated statement of the results of
operation (which shall also set forth by way of comparison the budgeted
figures), and statements of changes in financial position and stockholders'
equity for such month and for the period from the beginning of the fiscal
year to the end of such month and, in comparative form, figures for the
corresponding periods of the previous fiscal year, all in reasonable detail
and certified by an authorized accounting
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officer of VCI to be accurate to the best of his knowledge and belief,
subject to year-end adjustments;
(b) Within five days of their availability, but in any event within
90 days after the end of each fiscal year, an audited consolidated balance
sheet of VCI, as of the end of such fiscal year, together with the related
consolidated statements of income and retained earnings and changes in
financial position for such fiscal year, setting forth in comparative form
figures for the previous fiscal year, all in reasonable detail and duly
certified by VCI's independent public accountants, which accountants shall
have given VCI an opinion, unqualified as to the scope of the audit,
regarding such statements;
(c) Within five days after Xxxxxxxx learns of the commencement or
threatened commencement of any material suit, legal or equitable, or of any
material administrative, arbitration or other proceeding against Xxxxxxxx
or its business, assets or properties, written notice of the nature and
extent of such suit or proceeding;
(d) Within ten days after Xxxxxxxx learns of any material change in
Xxxxxxxx'x management, competition, financial condition or properties,
written notice of the nature and extent of such change;
(e) Promptly after the submission thereof to Xxxxxxxx, copies of all
reports and recommendations submitted by independent public accountants in
connection with any annual or interim audit of the accounts of Xxxxxxxx
made by such accountants; and
(f) With reasonable promptness, such other financial data relating to
the business, affairs and financial condition of Xxxxxxxx as is available
to Xxxxxxxx and as from time to time Mortco may reasonably request.
5.4 INSPECTION. Xxxxxxxx shall (upon receipt of reasonable notice) permit
Mortco and any of its officers or employees, or any outside representatives
designated by it and reasonably satisfactory to Xxxxxxxx, to visit and inspect
at Mortco's expense, any of the properties of Xxxxxxxx including their books and
records (and to make extracts therefrom) and to discuss its affairs, finances
and accounts with its officers, except with respect to trade secrets and similar
confidential information, all to such reasonable extent and at such reasonable
times and intervals as Mortco may reasonably request without disruption of
Xxxxxxxx'x operations.
5.5 PAYMENT OF TAXES AND MAINTENANCE OF PROPERTIES. Xxxxxxxx shall:
(a) pay and discharge promptly, or cause to be paid and discharged
promptly when due and payable, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or upon any of its
property, real, personal or mixed, or upon any part thereof, as well as all
material claims of any kind (including claims for labor, material and
supplies) which, if unpaid, might by law become a lien or charge upon
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its property; provided, however, that Xxxxxxxx shall not be required to pay
any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings and if Xxxxxxxx shall have set aside on
its books, reserves (segregated to the extent required by generally
accepted accounting principles) deemed adequate by it with respect thereto;
and
(b) maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time to
time make, or cause to be made, all repairs and renewals and replacements
which in the opinion of Xxxxxxxx are necessary and proper so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
5.6 INSURANCE. Xxxxxxxx shall:
(a) keep or cause all of its insurable property or properties to be
kept insured against loss or damage against fire and other business risks
in such amounts as is customary for similar businesses of comparable size;
(b) maintain public liability insurance against claims for personal
injury, death or property damage suffered by others upon or in or about any
premises occupied by Xxxxxxxx or occurring as a result of its maintenance
or operation of any automobiles, trucks or other vehicles or other
facilities; and
(c) maintain all such workers' compensation or similar insurance as
may be required under the laws of any state or jurisdiction in which
Xxxxxxxx may be engaged in business.
5.7 FILING OF REPORTS. Xxxxxxxx will, from and after such time as it has
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "1934 Act") or has securities registered pursuant to the
Securities Act, make timely filing of such reports as are required to be filed
by it with the SEC so that Rule 144 under the Securities Act will be available
to the security holders of Xxxxxxxx who are otherwise able to take advantage of
the provisions of such Rule.
5.8 PAYMENT OF INDEBTEDNESS AND DISCHARGE OF OBLIGATIONS. Xxxxxxxx shall
pay or cause to be paid the principal of and interest and premium, if any, on
all Indebtedness for Borrowed Money heretofore or hereafter incurred or assumed
by it when and as the same shall become due and payable. Xxxxxxxx shall
faithfully observe, perform and discharge all of the material covenants,
conditions and obligations which are imposed on it by any and all indentures and
other agreements securing or evidencing such Indebtedness for Borrowed Money or
pursuant to which such Indebtedness for Borrowed Money is issued, and will not
permit the continuance of any act or omission which is, or under the provisions
thereof may be declared to be, a default thereunder, unless such default is
waived pursuant to the provisions thereof. As used in this
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Agreement, the term "Indebtedness" means all items, except items of capital
stock and surplus and reserves which are mere segregations of surplus, which
would be included on the liability side of the consolidated balance sheet of
Xxxxxxxx in accordance with generally accepted accounting principles as of the
date on which Indebtedness is to be determined. As used in this Agreement the
term "Indebtedness for Borrowed Money" includes only indebtedness incurred as
the result of a direct borrowing of money and shall not include Indebtedness
incurred with respect to trade accounts.
6. NEGATIVE COVENANTS. VCI and Xxxxxxxx hereby, jointly and severally,
covenant and agree that, unless Mortco otherwise gives its prior written
consent, which consent may be withheld in its sole discretion, Xxxxxxxx shall
not permit, and VCI shall cause Xxxxxxxx not to permit, any of the following to
be done:
6.1 SALE OF BUSINESS, MERGER, OR CONSOLIDATION, ETC. Xxxxxxxx shall not
liquidate, dissolve or sell, lease or otherwise dispose of more than 10% of its
assets, or consolidate with, participate in a share exchange with, or merge into
any other corporation or entity, or permit any other corporation or entity to
consolidate or merge into it or commence any proceeding therefor.
6.2 DIVIDENDS ON OR REDEMPTION OF COMMON STOCK. Xxxxxxxx shall not declare
or pay any dividend, either in cash or property, or make any other distribution
on any shares of its stock or purchase, redeem, retire or otherwise acquire for
any consideration, any shares of stock.
6.3 COMPENSATION TO CERTAIN EMPLOYEES. Xxxxxxxx shall not pay any
compensation, whether by way of salaries, bonuses, fees, participation in
pension or profit sharing plans or otherwise, to its officers and directors in
excess of the respective amounts being paid on the date hereof, plus 20%.
6.4 ISSUANCE OF STOCK AND RIGHTS TO ACQUIRE STOCK. Xxxxxxxx shall not
issue any shares of stock of Xxxxxxxx of any class and shall not authorize,
issue or grant any options, warrants, conversion rights or other rights to
purchase or acquire any shares of stock of Xxxxxxxx of any class.
6.5 OTHER RESTRICTIONS. Xxxxxxxx shall not:
(a) make loans or advances to any third party or Affiliate, which
individually or in the aggregate, exceed $50,000 (including without
limitation to any officer, director, employee or stockholder of Xxxxxxxx)
or become a guarantor or surety or pledge credit with respect to any
obligation, other than pursuant to Section 6.8 of this Agreement, that
exceeds $50,000 on any undertaking of a third party or Affiliate;
(b) purchase or invest in the stock or obligations of any other
person, firm or corporation whose principal business is unrelated to the
retail video business;
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(c) purchase, acquire, lease or transfer any property to, or
otherwise deal with, in the ordinary course of business or otherwise, VCI
or any Affiliate of Xxxxxxxx or VCI, except on an arm's length basis in
transactions which are on no less favorable terms to Xxxxxxxx than would be
the case in a similar transaction with an unaffiliated Person; or
(d) fail to perform or breach any of Xxxxxxxx'x respective
obligations, agreements or representations and warranties under the
Xxxxxxxx PPT Agreement, the VCI/Subsidiaries PPT Agreement, or any other
agreement with Mortco or Rentrak.
6.6 REGISTRATION RIGHTS. Xxxxxxxx shall not give to any stockholder the
right to cause a registration with the Securities and Exchange Commission of the
sale of such stockholders' securities.
6.7 ARTICLES AND BYLAWS. Xxxxxxxx shall not amend its Articles or Bylaws
or otherwise change or modify its capital structure.
6.8 BORROWED MONIES. Xxxxxxxx shall not create, incur, assume, guarantee
or be or remain liable with respect to any Indebtedness for Borrowed Money,
other than Indebtedness that is subordinate pursuant to a Subordination
Agreement, in form and substance satisfactory to Mortco, to the Indebtedness
contemplated in the Related Documents, except for the Indebtedness described in
Schedule 6.9.
6.9 RESTRICTIONS ON ENCUMBRANCES. Xxxxxxxx shall not create, make, incur,
assume or permit to exist any mortgage, pledge, lien, security interest,
encumbrance or charge of any kind upon any of its properties or assets, whether
now owned or hereafter acquired, except the following:
(a) mortgages, pledges, liens, security interests and other
encumbrances securing any Indebtedness owing to Mortco or Rentrak and the
Indebtedness described on Schedule 6.9;
(b) Personal Property Purchase Money Encumbrances;
(c) Xxxxxxx'x, materialmen's and similar liens imposed by operation
of law.
For purposes of this Agreement, the term "Personal Property Purchase Money
Encumbrances" means all mortgages, security interests, liens and other
encumbrances existing upon any personal property at the time of its acquisition
by Xxxxxxxx or placed upon property being acquired by Xxxxxxxx to secure a
portion of the purchase price thereof; provided, however, that no such mortgage,
security interest, lien, encumbrance, agreement or arrangement shall extend to
or cover any other property of Xxxxxxxx; and provided further that that
aggregate principal amount of the Indebtedness secured by any such mortgage,
security interest, lien, encumbrance, agreement or arrangement shall at no time
exceed (i) the cost (including the principal amount of such
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Indebtedness, whether or not assumed) to Xxxxxxxx of the property subject
thereto, or (ii) the fair market value of such property at the time of purchase.
6.10 CONFIDENTIALITY. VCI, Xxxxxxxx and AIV, and their respective agents
and representatives shall treat as strictly confidential and shall not, without
express written consent of Rentrak and Mortco, disclose to any third party any
of the specific terms and conditions concerning the transactions contemplated by
this Agreement, including, but not limited to, the identity of Rentrak or Mortco
with respect thereto, or in any other agreement or document referred to herein,
including, but not limited to, the Related Documents. Rentrak and Mortco may, in
the exercise of their sole discretion, disclose the existence of the
transactions consummated pursuant to this Agreement and the Related Documents
and upon the request of Rentrak or Mortco, VCI, Xxxxxxxx and AIV shall confirm
the same. This restriction, however, shall not prevent VCI, Xxxxxxxx or AIV from
disclosing the terms and conditions of this Agreement and the Related Documents
pursuant to Court order. In the event Xxxxxxxx engages in an initial public
offering of its securities, Rentrak and Mortco agree not to unreasonably
withhold their consent with respect to disclosures that are required under
federal and state securities laws, provided that Xxxxxxxx exercises its best
efforts to uphold and abide by its obligations with respect to confidentiality
as provided herein, including but not limited to, seeking confidential treatment
by the SEC with respect to disclosures concerning this Agreement, the Related
Documents, Rentrak or Mortco.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. For purposes of this Agreement, any one or more of
the following events shall constitute an event of default hereunder ("Event of
Default"):
7.1.1 If any representation or warranty made by or on behalf of VCI,
Xxxxxxxx or AIV in this Agreement or the Related Documents, or in any
certificate, report or other instrument delivered under or pursuant to any term
thereof, shall prove to have been untrue or incorrect in any respect as of the
date of this Agreement or as of the Closing; or
7.1.2 Failure by VCI or any Subsidiary to strictly comply with any
term, condition or covenant of this Agreement, the Related Documents, or any
other agreement between VCI and Rentrak and/or Mortco, or between any Subsidiary
and Rentrak and/or Mortco; or
7.1.3 Dissolution, termination of existence, insolvency on a balance
sheet basis, or business failure of VCI or any Subsidiary, the commencement by
VCI or any Subsidiary of a voluntary case under the federal bankruptcy laws or
under other federal or state law relating to insolvency or debtor's relief; the
entry of a decree or order for relief against VCI or any Subsidiary in an
involuntary case under the federal bankruptcy laws or under any other applicable
federal or state law relating to debtor's relief; the appointment or the consent
by VCI or any Subsidiary to the appointment of receiver, trustee, or custodian
of VCI or any Subsidiary, or of any of VCI's or any Subsidiary's property; an
assignment for the benefit of creditors by
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VCI or any Subsidiary, or VCI's or any Subsidiary's failure generally to pay its
debts as such debts become due.
7.2 REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence of an Event of
Default as herein defined, Rentrak and Mortco shall be entitled to all remedies
available at law or equity and may protect and enforce its rights hereunder by
suit in equity or action at law. It is agreed that in the event of any such
action, the prevailing party shall be entitled to receive all reasonable fees,
costs and expenses incurred, including without limitation such reasonable fees
and expenses of attorneys at trial and on appeal.
7.3 REMEDIES CUMULATIVE. No right, power or remedy conferred upon Rentrak
and Mortco shall be exclusive, and each such right, power or remedy shall be
cumulative and in addition to every other right, power or remedy, whether
conferred hereby or now or hereafter available at law or in equity or by statute
or otherwise.
7.4 REMEDIES NOT WAIVED. No course of dealing between VCI, any Subsidiary,
and Rentrak and/or Mortco, and no delay in exercising any right, power or remedy
conferred hereby, shall operate as a waiver of or otherwise prejudice any such
right, power or remedy.
8. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.
8.1 SURVIVAL. Notwithstanding any right of Rentrak or Mortco to fully
investigate the affairs of VCI and each Subsidiary and notwithstanding any
knowledge of facts determined or determinable by Rentrak or Mortco pursuant to
such investigation or right of investigation, Rentrak and Mortco have the right
to rely fully upon the representations, warranties, covenants, indemnities and
agreements of VCI, Xxxxxxxx, and AIV contained in or made pursuant to this
Agreement or the Related Documents (including all Exhibits and Schedules
thereto) or in any certificate, document or statement delivered pursuant thereto
(collectively the "Ancillary Documents"). All representations, warranties,
covenants, indemnities and agreements of the parties contained in or made
pursuant to this Agreement, the Related Documents or the Ancillary Documents
shall survive the Closing.
8.2 OBLIGATION TO INDEMNIFY. VCI, Xxxxxxxx, and AIV, jointly and
severally, shall indemnify, defend and hold harmless Rentrak and Mortco, and
their respective directors, officers, employees, affiliates, successors and
assigns (collectively, the "Indemnitees") from and against any and all losses,
liabilities, damages, deficiencies, costs or expenses (including interest,
penalties and reasonable attorneys' fees and disbursements) ("Losses") that are
suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may become subject at any time (whether or not such Losses relate to
any third party claim) and which arise from or as a result of, or are directly
or indirectly connected with:
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(a) any inaccuracy in or any breach of any representation or warranty
made by VCI or any Subsidiary in this Agreement, the Related Documents or
the Ancillary Documents; or
(b) any breach of any covenant or obligation of VCI or any Subsidiary
contained in this Agreement, the Related Documents or the Ancillary
Documents.
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This document (including the Exhibits and Schedules
attached hereto) is the entire, final and complete Agreement and understanding
of the parties with respect to the transactions contemplated hereby, and
supersedes and replaces all written and oral agreements and understandings
heretofore made or existing by and between the parties or their representatives
with respect thereto.
9.2 WAIVER. No waiver of any provision of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
9.3 BINDING EFFECT. All rights, remedies and liabilities herein given to
or imposed upon the parties shall extend to, inure to the benefit of and bind,
as the circumstances may require, the parties and their respective heirs,
personal representatives, administrators, successors and permitted assigns.
9.4 NOTICES. Any notice of other communication required or permitted under
this Agreement shall be in writing and shall be deemed given on the date of
transmission when sent by telex or facsimile transmission, on the third business
day after the day of mailing when mailed by certified mail, postage prepaid,
return receipt requested, from within the United States, or on the date of
actual delivery, whichever is the earliest, and shall be sent to the parties at
the addresses shown on the first page of this Agreement, address, or at such
other address as the party may hereafter designate by written notice to the
others:
9.5 AMENDMENT. No supplement, modification or amendment of this Agreement
shall be valid, unless the same is in writing and signed by all parties hereto.
9.6 SEVERABILITY. In the event any provision or portion of this Agreement
is held to be unenforceable or invalid by any court of competent jurisdiction,
the remainder of this Agreement shall remain in full force and effect and shall
in no way be affected or invalidated thereby.
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9.7 SURVIVAL OF COVENANTS. Any covenants the full performance of which are
not required before Closing shall survive the Closing and be fully enforceable
thereafter in accordance with their terms.
9.8 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. This Agreement and all
other agreements contemplated hereunder, including the Related Documents, and
the rights of the parties hereunder and thereunder shall be governed, construed
and enforced in accordance with by the laws of the State of Oregon, without
regard to its conflict of law principles. Any suit or action arising out of or
in connection with this Agreement or the Related Documents, or any breach hereof
or thereof, shall be brought and maintained exclusively in the federal or state
courts in Portland, Oregon. The parties hereby irrevocably submit to the
exclusive jurisdiction of such courts for the purpose of such suit or action and
hereby expressly and irrevocably waive, to the fullest extent permitted by law,
any objection it may now or hereafter have to the venue of any such suit or
action in any such court and any claim that any such suit or action has been
brought in an inconvenient forum. VCI, Xxxxxxxx and AIV hereby irrevocably waive
their right to a jury trial in any claim or cause of action based upon or
arising out of this Agreement or the Related Documents or any dealings between
VCI, Xxxxxxxx and AIV and Rentrak and/or Mortco relating to this Agreement or
the Related Documents.
9.9 SCHEDULES. All Schedules to this Agreement shall be deemed an integral
part of this Agreement and shall be incorporated herein by this reference as
though set forth in full.
9.10 SPECIFIC PERFORMANCE. Each party's obligations under this Agreement
are unique. If any party should default in its obligations under this Agreement,
the parties each acknowledge that it would be extremely impracticable to measure
the resulting damages and, accordingly, the nondefaulting party, in addition to
any other available rights or remedies, may xxx in equity for specific
performance, and the parties each expressly waive the defense that a remedy in
damages will be adequate.
9.11 RECITALS. The "Recitals" set forth at the beginning of this Agreement
are true and accurate and are incorporated herein by this reference as though
set forth in full.
9.12 CAPTIONS. The caption headings of the sections and subsections of this
Agreement are for convenience of reference only and are not intended to be, and
should not be construed as, a part of this Agreement.
9.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute a single agreement.
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9.14 CROSS-REFERENCES. Unless expressly stated otherwise herein, all
references in this Agreement to sections, exhibits, and schedules refer to
sections, exhibits, and schedules of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate as of the day and year first above written.
VIDEO CITY, INC. RENTRAK CORPORATION
By: By:
Title: Xxx Xxxxxx, President
XXXXXXXX ONE INC. MORTCO, INC.
By: By:
Title: Xxx Xxxxxx, President
ADVENTURES IN VIDEO, INC.
By:
Title:
Page 26 - RESTRUCTURED DEBT AGREEMENT
