EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 22 day of April 1999 by and among VIDEOLAND, INC. an Oregon corporation
(the "Seller"), VIDEO CITY, INC., a Delaware corporation (the "Parent") and
BLOCKBUSTER INC., a Delaware corporation (the "Purchaser").
R E C I T A L S:
(a) The Seller operates 50 videocassette rental and sales stores (the
"Stores") located in the States of Washington and Oregon (the "Territory"),
which are described on Schedule I attached hereto.
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(b) The Seller and the Parent desire to sell to the Purchaser and the
Purchaser desires to purchase from the Seller, upon the terms and subject to the
conditions set forth herein, substantially all of the assets, properties and
business of the Seller relating to the Stores, and by doing so to acquire the
videocassette rental and sale business conducted in the Stores, together with
other ancillary businesses, presently conducted by the Seller in the Stores.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements, and subject to the conditions herein contained and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
Purchase and Sale of Assets
1.1 Purchased Assets. At the Closing (as defined in Section 3.1),
the Seller shall sell, convey, transfer, assign and deliver to the Purchaser and
the Purchaser shall purchase from the Seller, free and clear of all liens,
mortgages, pledges, security interests, claims, assessments, restrictions,
encumbrances and charges of every kind (collectively, "Liens"), on the terms and
subject to the conditions set forth in this Agreement, all of the assets and
properties of every kind and description, whether real, personal or mixed,
tangible or intangible, whether accrued, contingent or otherwise, owned, leased
or licensed by the Seller which relate to the ownership, business or operation
of the Stores or otherwise used or useable by Seller in the ownership, business
or operation of the Stores, wherever located (except those assets of the Seller
which are specifically excluded from this sale by Section 1.2) as shall exist on
the Closing Date (as defined in Section 3.1), whether or not appearing on the
Last Balance Sheet (as hereinafter defined) (collectively, the "Purchased
Assets"). Without limiting the generality of the foregoing, the Purchased Assets
shall include the following:
1.1.1 all machinery, equipment, tools, supplies, leasehold
improvements, construction in progress, furniture and fixtures located at the
Stores or used in the business or operation of the Stores (the "Purchased Fixed
Assets");
1.1.2 all inventories of the Seller, including videocassettes (which
for all purposes under this Agreement shall include game cartridges), compact
discs, video compact discs, laser discs, beverages, confections or other food or
magazines held for rental or sale and any other assets of the
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Seller relating to the ownership, business or operation of the Stores (the
"Purchased Inventory");
1.1.3 all receivables of the Seller, including all trade accounts
receivable arising from sales or rental of inventory in the ordinary course of
business, notes receivable and insurance proceeds receivable relating to the
ownership, business or operation of the Stores (the "Purchased Receivables");
1.1.4 all of the interest of and the rights and benefits accruing to
the Seller as lessee under (i) the leases of real property and all improvements
thereto and buildings thereon, described on Schedule 4.6.2 (the "Purchased
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Leasehold Premises"); and (ii) all leases or rental agreements covering
machinery, equipment, tools, supplies, furniture and fixtures and other fixed
assets relating to the ownership, business or operation of the Stores, including
those described on Schedule 1.1.4 (the leasehold rights described in clauses (i)
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and (ii) are collectively referred to as the "Purchased Leasehold Rights");
1.1.5 all of the rights and benefits accruing to the Seller under all
sales orders, sales contracts, supply contracts, service agreements, purchase
orders and purchase commitments made by the Seller in the ordinary course of
business, all other agreements to which the Seller is a party or by which it is
bound and all other choses in action, causes of action and other rights of every
kind of the Seller, in each case, which relate to the ownership, business or
operation of the Stores;
1.1.6 all operating data and records of the Seller relating to the
ownership, business or operation of the Stores, including customer lists and
records, financial, accounting and credit records, correspondence, budgets and
other similar documents and records (the "Purchased Records");
1.1.7 all of the proprietary rights (if any) of the Seller relating
to the ownership, business or operation of the Stores which are not included as
part of the Excluded Assets (as defined in Section 1.2), including all
trademarks, trade names, patents, patent applications, licenses thereof, trade
secrets, technology, know-how, formulae, designs and drawings, computer
programs, computer software, slogans, copyrights, processes, operating rights,
other licenses and permits, and other similar intangible property and rights, in
each case, relating to the ownership, business or operation of the Stores (the
"Purchased Proprietary Rights");
1.1.8 all cash in the drawers at the Stores, which shall not be less
than $1,000 per Store;
1.1.9 all prepaid and deferred items of the Seller, including prepaid
rent, utilities, common area maintenance ("CAM") charges, taxes and unbilled
charges and security and other deposits relating to the ownership, business or
operation of the Stores (provided, however, that certain of these assets will be
prorated in accordance with Section 2.8);
1.1.10 all insurance proceeds paid or payable to the Seller and all
claims made by the Seller relating to property or equipment used in the
ownership, business or operation of the Stores which has been repaired, replaced
or restored by or for the benefit of the Seller prior to the Closing Date;
1.1.11 all of the Seller's right, title and interest in and to all of
the intangibles of the Seller that relate solely to the ownership, business or
operation of the Stores which are not included as part of the Excluded Assets;
and
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1.1.12 subject to Section 2.9, all inventory ordered prior to Closing
for which the "street date" is on or after the Closing.
1.2 Excluded Assets. Notwithstanding anything to the contrary in
Section 1.1, the Purchased Assets shall exclude the following assets ("Excluded
Assets") of the Seller:
1.2.1 the Purchase Price (as defined in Section 2.1.1) and the
Seller's other rights under this Agreement;
1.2.2 any shares of capital stock of the Seller which are owned and
held by the Seller as treasury shares;
1.2.3 the corporate minute books, stock records, any other books and
records of the Seller relating solely to internal corporate matters, and any
other books and records not related to the Stores or the ownership, business or
operation of the Stores;
1.2.4 except as provided in Section 1.1.9 and in each case determined
as of 11:59 p.m. on the day prior to the Closing Date, all of the Seller's cash
in any of the Seller's bank or savings accounts; letters of credit or other
similar items of the Seller; any stocks, bonds, certificates of deposit and
similar investments of the Seller; and any other cash equivalents of the Seller
determined as of the Closing Date;
1.2.5 the personal effects and other personal property including the
equipment, furniture and signage (which includes solely the face of the signage
that contains the Seller's name or other proprietary rights not included as part
of the Purchased Assets and excludes any poles, support or other structure to
which the face of the signage is affixed or attached) identified on
Schedule 1.2.5;
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1.2.6 all "employee benefit plans" within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and any bonus, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, vacation, severance, disability,
death benefit, hospitalization or insurance plan providing benefits to any
present or former Store Employees (as defined in Section 4.20.1) or any other
trades or businesses under common control with the Seller within the meaning of
Section 4001(b)(1) of ERISA maintained by any such entity or as to which any
such entity has any liability or obligation (collectively, the "Employee Benefit
Plans");
1.2.7 all of Seller's inventory that is leased from or subject to any
buy-back or contingency program of a third-party;
1.2.8 subject to Section 10.6, all of Seller's right, title and
interest in and to "Video City, Inc." and "Videoland, Inc.";
1.2.9 all of the assets and properties relating to the Excluded
Stores. For purposes of this Agreement, the term "Excluded Stores" shall mean
(prior to the Closing Date) the five videocassette rental and retail stores of
the Seller described in Schedule 1.2.9, provided, however, that the Seller has
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informed the Purchaser that within 60 days following the Closing Date, the
Seller will cease operations and close three of the Excluded Stores, and
therefore, for all purposes of this Agreement and the transactions contemplated
hereby, for the 60-day period following the Closing Date, the term "Excluded
Stores" shall mean the five videocassette rental and retail stores described on
Schedule 1.2.9, and thereafter, Excluded Stores shall mean only those two
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videocassette rental and
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retail stores which are indicated on Schedule 1.2.9 as remaining stores
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following the Closing Date; and
1.2.10 all of Seller's assets that are not related to the ownership,
business or operation of the Stores, or that are not otherwise used or usable by
the Seller in the ownership, business or operation of the Stores.
1.3 Assignment of Contracts. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an assignment of
any claim, contract, license, franchise, lease, commitment, sales order, sales
contract, supply contract, service agreement, purchase order or purchase
commitment if an attempted assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way adversely affect
the rights of the Purchaser thereunder. If such consent is not obtained, or if
an attempted assignment thereof would be ineffective or would affect the rights
of the Seller thereunder so that the Purchaser would not in fact receive all
such rights, the Seller will cooperate with the Purchaser in any reasonable
arrangement, including actions taken by the Purchaser under the powers vested in
it pursuant to Section 10.2, designed to provide for the Purchaser the benefits
under such claims, contracts, licenses, franchises, leases, commitments, sales
orders, sales contracts, supply contracts, service agreements, purchase orders
or purchase commitments, including enforcement for the benefit of the Purchaser
of any and all rights of the Seller against a third party thereto arising out of
the breach or cancellation by such third party or otherwise.
ARTICLE 2
Purchase Price; Assumption of Liabilities
2.1 Purchase Price. As consideration for the Purchased Assets, at
the Closing the Purchaser shall, subject to and upon the terms and conditions
set forth in this Agreement, deliver, in the manner provided in Section 3.2.2,
an amount in cash equal to the Purchase Price, subject to any Purchase Price
adjustments made in accordance with Section 2.1.2.
2.1.1 Purchase Price. As used herein, the term "Purchase Price" shall
mean the sum of SIXTEEN MILLION, TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($16,200,000.00).
2.1.2 Purchase Price Adjustments.
(a) Videocassette Inventory. If the actual number of videocassettes
held for rental and for sale (but excluding the "new" retail videocassette
inventory) and included as part of the Purchased Inventory (the "Actual Number
of Tapes") is less than the Minimum Number of Tapes (as defined in Section
4.7.3), then the Purchase Price shall be decreased as follows:
(i) The Purchase Price shall be decreased by an amount
equal to the result obtained by multiplying (A) the difference between
the Minimum Number of Tapes and the Actual Number of Tapes by (B)
$25.00 (which dollar amount is the agreed upon value of a
videocassette for the sole purpose of this Purchase Price adjustment).
(ii) The determination of the Actual Number of Tapes shall
be made by the Purchaser promptly following the Closing Date (the "
Tape Inventory Calculation"), and a copy of the Tape Inventory
Calculation shall be delivered to the Seller promptly following its
completion. The Seller may, at its option, participate in or appoint a
representative to participate in the Purchaser's determination of the
Actual Number of Tapes.
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(iii) Any decrease in the Purchase Price pursuant to this
Section 2.1.2(a) shall be accomplished by the release from the Held
Back Amount (as defined in Section 3.2.2) of an amount in cash equal
to the result obtained by multiplying the difference between the
Minimum Number of Tapes and the Actual Number of Tapes by $25.00.
(b) Retail Inventory. If the actual number of new retail
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videocassettes held for sale and included as part of the Purchased
Inventory (the "Actual Retail Inventory") is less than the Minimum Retail
Inventory (as defined in Section 4.7.3), then the Purchase Price shall be
decreased as follows:
(i) The Purchase Price shall be decreased by an amount
equal to the result obtained by multiplying (A) the difference between
the Minimum Retail Inventory and the Actual Retail Inventory by (B)
$20.00 (which dollar amount is the agreed upon value of a
videocassette for the sole purpose of this Purchase Price adjustment).
(ii) The determination of the Actual Retail Inventory shall
be made by the Purchaser promptly following the Closing Date (the
"Retail Inventory Calculation"), and a copy of the Retail Inventory
Calculation shall be delivered to the Seller promptly following its
completion. The Seller may, at its option, participate in or appoint a
representative to participate in the Purchaser's determination of the
Actual Retail Inventory.
(iii) Any decrease in the Purchase Price pursuant to this
Section 2.1.2(b) shall be accomplished by the release from the Held
Back Amount of an amount in cash equal to the result obtained by
multiplying the difference between the Minimum Retail Inventory and
the Actual Retail Inventory by $20.00.
2.1.3 No Prejudice. Any adjustment to the Purchase Price under
Section 2.1.2 shall be without prejudice to any rights or remedies which
the Purchaser may have under any other provision of this Agreement.
2.2 Assumed Liabilities. As of the Closing Date, the Purchaser
shall assume and agree to pay, discharge and perform when lawfully due only
those obligations of the Seller under the leases, contracts and agreements (the
"Assumed Contracts") set forth on Schedule 2.2 relating to the period beginning
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on, or arising out of events occurring on or after, the Closing Date and any
obligations to be assumed by the Purchaser in accordance with Section 2.9 (the
"Assumed Liabilities"). Schedule 2.2 identifies, as to each Assumed Contract
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listed thereon, (i) whether the consent of the other party thereto is required,
(ii) whether notice must be provided to any party thereto (and the length of
such notice) and (iii) whether any payments are required (and the amount of
those payments), in each case, in order for that Assumed Contract to continue in
full force and effect upon the consummation of the transactions contemplated by
this Agreement, and (iv) whether the Assumed Contract can be canceled by the
other party without liability to the other party as a result of the consummation
of the transactions contemplated hereby.
2.3 Excluded Liabilities. Notwithstanding anything to the contrary
in Section 2.2 or in any other provision of this Agreement or any schedule or
exhibit hereto, the Purchaser shall not assume any liabilities, obligations, or
commitments (the "Excluded Liabilities") of Seller or any of its Affiliates (as
defined in Section 10.4.2), or which in any manner relates to or arises out of
the operation or the business of the Stores or the ownership of the Purchased
Assets during any period prior to the Closing Date other than those obligations
and commitments constituting the Assumed Liabilities. Other than the Assumed
Liabilities, the Purchaser shall not assume, directly or indirectly, any
liabilities, obligations or commitments
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of the Seller, the Parent or any of their respective Affiliates
and shall not be liable therefor. Without limiting the foregoing, the Excluded
Liabilities shall include the following liabilities, contracts, commitments and
other obligations of the Seller:
2.3.1 any liability or obligation of the Seller or any other person
or entity (each a "Person") of any kind, absolute or contingent, known or
unknown, not expressly agreed to be assumed pursuant to the provisions of
Section 2.2;
2.3.2 any liability or obligation that arises out of the transactions
contemplated by this Agreement or results from any breach or default by the
Seller or the Parent under this Agreement or any agreement, certificate or
other document or instrument that may be executed or delivered in
connection with this Agreement or the transactions contemplated hereby, or
any liability or obligation where the existence, imposition, nature or
extent of such liability or obligation gives rise to or constitutes a
breach or default by the Seller or the Parent under this Agreement or any
other agreement, certificate or other document or instrument that may be
executed or delivered in connection with this Agreement or the transactions
contemplated hereby;
2.3.3 any liability or obligation relating to income, franchise,
sales, use, payroll, unemployment or withholding taxes of the Seller,
including any interest or penalties related thereto;
2.3.4 any liability or obligation relating to indebtedness for
borrowed money of the Seller;
2.3.5 any liability or obligation relating to those assets of the
Seller which are specifically excluded from this sale by Section 1.2,
including, without limitation, any liabilities or obligations under any
Employee Benefit Plans;
2.3.6 any liability or obligation relating to any default under any
of the Assumed Contracts set forth on Schedule 2.2 by the Seller or by any
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party thereto if the default arises out of or relates to events occurring
prior to the Closing Date;
2.3.7 any liability or obligation of the Seller relating to any
Hazardous Substance (as defined in Section 4.18.1) (including any
investigation, clean-up or other remedial action related thereto) that
arises out of or results from any act, omission, occurrence or state of
facts prior to the Closing;
2.3.8 any liability or obligation of the Seller relating to any
disease, illness or injury that arises out of or results from any act,
omission, occurrence or state of facts prior to the Closing;
2.3.9 any liability or obligation relating to employees of the Seller
that relate to the time period prior to the Closing Date or arise out of
events occurring prior to the Closing Date, including any severance, sick,
holiday or vacation pay obligation and any compensation required to be paid
and benefits required to be provided under any employee benefit plan of the
Seller;
2.3.10 any liability or obligation relating to any products sold by
the Seller prior to the Closing or any services performed by the Seller
prior to the Closing;
2.3.11 any liability or obligation relating to any violation of any
law, statute, rule or regulation by the Seller or any stockholder,
director, officer, employee or agent of the Seller that arises out of or
results from the Closing or any act, omission, occurrence or state of facts
prior to
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the Closing; and
2.3.12 any liability or obligation of the Seller to any of its
stockholders.
2.4 No Expansion of Third Party Rights. The (i) assumption by the
Purchaser of the Assumed Liabilities, (ii) transfer by the Seller of the Assumed
Liabilities and (iii) limitations in the description of Excluded Liabilities in
Section 2.3 shall in no way expand the rights or remedies of any third party
against the Purchaser or the Seller as compared to the rights and remedies which
such third party would have had against the Seller had the Purchaser not assumed
such liabilities. Without limiting the generality of the preceding sentence, the
assumption by the Purchaser of the Assumed Liabilities shall not create any
third party beneficiary rights.
2.5 Allocation of the Purchase Price. The Purchase Price shall be
temporarily allocated among each item or class of the Purchased Assets as
specifically set forth on or determined pursuant to Schedule 2.5, which
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allocation is intended to comply with Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code") and the regulations promulgated thereunder.
Upon finalizing the allocation or in the event any adjustment is made to the
Purchase Price pursuant to Section 2.1.2, the Purchaser shall amend the
allocation and submit to the Seller a new allocation. The Seller and the
Purchaser agree that this revised allocation will be used on the Form 8594 and
any other notice or filing required pursuant to Section 1060 of the Code.
2.6 Tax Treatment. The Purchaser and the Seller intend that the
transactions contemplated by this Agreement be treated as taxable transactions
under the Code pursuant to Section 1001.
2.7 Sales Tax. The Seller agrees that it promptly shall pay all
sales or similar taxes required to be paid by reason of the sale by the Seller
to the Purchaser of the Purchased Assets pursuant to this Agreement, based upon
the allocation provided for in Section 2.5, and the Seller agrees to provide the
Purchaser, within 30 days following the Closing Date, with evidence of the
payment of such taxes.
2.8 Proration of Certain Items. Real and/or personal property taxes
relating to the Purchased Assets, rent and CAM charges due under the Leases (as
defined in Section 4.6.2) included in the Purchased Assets, utilities relating
solely to the Stores and other accrued but unpaid (as of the Closing Date)
expenses which are customarily prorated shall be prorated as of the Closing Date
such that the Seller is responsible for such expenses accruing prior to the
Closing and the Purchaser is responsible for such expenses accruing from and
after the Closing. Any proration shall be made within 30 days after the Closing
Date based upon actual bills (or, if not available, based upon good faith
estimates) for such prorated expenses.
2.9 Inventory Orders. From the date of this Agreement through the
Closing Date, the Seller shall not make any buy orders of inventory for the
Stores that either will be received after the Closing Date or will be received
before the Closing Date but have a "street date" after the Closing Date, without
the prior written consent of the Purchaser. Notwithstanding anything to the
contrary in this Agreement, the Purchaser shall not be liable for and will not
assume any liabilities or obligations of the Seller relating to any inventory
ordered and received by the Seller prior to the Closing Date. Subject to the
Purchaser's prior written approval of any buy order made by the Seller, the
Purchaser shall assume all liabilities and obligations relating to all inventory
ordered by the Seller and either received after the Closing Date or received
before the Closing Date but having a "street date" after the Closing Date.
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ARTICLE 3
Closing
3.1 Time and Place of the Closing. The closing of the sale of the
Purchased Assets shall take place via facsimile and mail as of the first Monday
that is at least five business days following the later of (a) expiration or
early termination of the waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act"), (b) receipt of all other consents, authorizations,
approvals, licenses or permits of any governmental authority ("Governmental
Consents") deemed necessary by the Purchaser and the Seller to proceed with the
Closing, or (c) receipt of all consents, approvals, amendments and estoppels
from third parties (including, without limitation, landlords) (collectively,
"Third-Party Consents") deemed necessary by the Purchaser with respect to the
Closing, or such other date, time and place as the parties may agree. In this
Agreement, such event is referred to as the "Closing" and such date and time are
referred to as the "Closing Date." The Closing shall be effective as of 12:01
a.m., Central Time, on the Closing Date.
3.2 Procedure at the Closing. At the Closing, the parties shall
take the following actions and all such actions shall be deemed to have occurred
simultaneously:
3.2.1 The Seller's Deliveries.
(a) The Seller shall deliver to the Purchaser such deeds, bills of
sale, endorsements, assignments (including separate lease assignments),
releases and other instruments, in such form as in each case is
satisfactory to the Purchaser, as shall be sufficient to vest in the
Purchaser, good and marketable title to the Purchased Assets, free and
clear of any Liens.
(b) The Seller shall deliver to the Purchaser a certificate of good
standing of the Seller issued by the appropriate officer of the state in
which the Seller is incorporated and each state in which the Stores are
located, in each case dated not earlier than ten days prior to the Closing
Date.
(c) The Seller shall deliver to the Purchaser, in connection with
the assignment of the Leases and where otherwise necessary or appropriate,
consents and estoppel certificates, in form and substance satisfactory to
the Purchaser.
(d) The Seller shall deliver to the Purchaser evidence reasonably
satisfactory to the Purchaser of the consent or approval of each Person
that is a party to each Assumed Contract identified in Schedule 2.2, whose
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consent or approval shall be required in order to permit the consummation
of the transactions contemplated by this Agreement;
(e) The Seller shall deliver to the Purchaser copies of (i)
resolutions adopted by the board of directors and shareholders of the
Seller authorizing the transactions contemplated by this Agreement and (ii)
the charter and bylaws of the Seller, as in effect on the Closing Date,
certified in each case by the secretary or assistant secretary of the
Seller.
(f) The Seller shall deliver to the Purchaser an opinion dated the
Closing Date from counsel for the Seller, in substantially the form
attached hereto as Exhibit A.
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(g) The Seller shall execute and deliver a receipt acknowledging
receipt of the Purchase Price.
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(h) The Seller shall execute and deliver the Xxxx of Sale,
Assignment and Assumption Agreement, in substantially the form attached
hereto as Exhibit B.
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(i) The Seller shall deliver to the Purchaser a certificate dated
as of the Closing Date executed by an officer of the Seller, in form and
substance reasonably satisfactory to the Purchaser to the effect that the
conditions set forth in Section 8.1 have been satisfied.
3.2.2 The Purchaser's Deliveries.
(a) The Purchaser shall deliver the Purchase Price in the following
manner: (i) the Purchaser shall set aside and hold, in accordance with
Section 12.2, an amount equal to 5% of the Purchase Price (such amount
being referred to herein as the "Held Back Amount"), and (ii) the Purchaser
shall deliver, by wire transfer to an account identified at least five
business days prior to the Closing, to the Seller an amount in cash equal
to the Purchase Price minus the Held Back Amount.
(b) The Purchaser shall execute and deliver the Xxxx of Sale,
Assignment and Assumption Agreement, in substantially the form attached
hereto as Exhibit B.
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(c) The Purchaser shall deliver to the Seller a certificate of an
officer of the Purchaser certifying that the Purchased Inventory to be
purchased by the Purchaser hereunder is being acquired by the Purchaser for
resale or rental in the ordinary course of the Purchaser's business.
(d) The Purchaser shall deliver to the Seller a certificate dated
as of the Closing Date executed by an executive officer of the Purchaser,
in form and substance reasonably satisfactory to the Seller to the effect
that the conditions set forth in Section 9.1 have been satisfied.
ARTICLE 4
Representations and Warranties of the Seller
To induce the Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereunder, the Seller and the Parent, jointly and
severally represent and warrant, which representations and warranties shall
survive the Closing as provided in Section 12.1, the following:
4.1 Organization, Power and Authority; Subsidiaries;
Capitalization. The Seller is a corporation duly organized, validly existing and
is in good standing under the laws of the State of Oregon and has all requisite
corporate power and authority (i) to own or lease its properties and to carry on
its business as it is now being conducted; (ii) to enter into this Agreement and
each other agreement, document or instrument required to be executed by it in
accordance with this Agreement and to sell, convey, transfer, assign and deliver
the Purchased Assets to the Purchaser as provided herein; and (iii) to carry out
the other transactions and agreements contemplated by this Agreement. The Seller
is legally qualified to transact business as a foreign corporation and is in
good standing in the State of Washington. The Parent owns 100% of the issued and
outstanding shares of capital stock of the Seller. The Seller does not own, of
record or beneficially, any capital stock or equity interest or investment in
any corporation, partnership, joint venture, association or business entity.
4.2 Due Authorization; Binding Obligation; No Conflicts; Consents.
The execution, delivery and performance of this Agreement and each of the other
agreements contemplated hereby and the consummation of the transactions
contemplated hereby have been duly authorized by all
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necessary corporate action of the Seller and the Parent. This Agreement has been
duly executed and delivered by the Seller and the Parent and is a valid and
binding obligation of the Seller and the Parent, enforceable against each of
them in accordance with its terms, subject as to enforceability to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
similar laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). The execution and delivery of this Agreement by
the Seller and the Parent does not, and the consummation of the transactions
contemplated herein will not, (i) contravene any provision of the Seller's or
the Parent's charter or bylaws; (ii) violate or conflict with any federal, state
or local law, statute, ordinance, rule, regulation or any decree, writ,
injunction, judgment or order of any court or administrative or other
governmental body or of any arbitration award which is either applicable to,
binding upon or enforceable against the Seller, the Parent or the Purchased
Assets; (iii) conflict with, result in any breach of, or constitute a default
(or an event which would, with the passage of time or the giving of notice or
both, constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any mortgage, contract, agreement, lease,
license, indenture, will, trust or other instrument which is either binding upon
or enforceable against the Seller, the Parent or the Purchased Assets; (iv)
violate any legally protected right arising in the ownership, business or
operation of the Stores of any Person or give to any Person a right or claim
against the Purchaser or the Purchased Assets; (v) result in or require the
creation or imposition of any Lien upon or with respect to the Purchased Assets;
or (vi) require any Governmental Consent or Third-Party Consent (other than (A)
as required under the HSR Act, (B) the consents of the landlords under the
Leases, which will be obtained by the Seller prior to Closing and (C) the
consent of BankBoston Retail Finance Inc., which will be obtained by the Seller
and the Parent prior to the Closing).
4.3 Financial Statements. The Seller previously has furnished to
the Purchaser the following financial statements, including the notes pertaining
thereto (the "Financial Statements"), of the Seller:
(a) balance sheets at December 31, 1996 and 1997;
(b) balance sheet at September 30, 1998 (the "Last Balance Sheet");
(c) statements of income and cash flow for the years ended December
31, 1996 and 1997; and
(d) statement of income for the nine-month period ended September
30, 1998.
The Financial Statements present fairly and are true, correct and complete
statements of the financial position of the Seller at and as of the periods
indicated therein, and they have been prepared in accordance with generally
accepted accounting principles consistently applied; the Financial Statements
have been certified by the Chief Financial Officer of the Seller to such affect,
such certification being attested to by the Secretary of the Seller. The books
and records of the Seller properly and accurately reflect all material
transactions, properties, assets and liabilities of the Seller.
4.4 Liabilities. The Seller has no liabilities or obligations,
whether known or unknown, accrued, absolute, contingent or otherwise affecting
or relating to the Stores or the Purchased Assets, except: (i) to the extent
reflected in or taken into account in determining net worth in the Last Balance
Sheet and not heretofore paid or discharged; (ii) to the extent specifically set
forth in or incorporated by express reference to Schedule 4.4; and (iii) normal
------------
liabilities incurred in the ordinary course of business since the date of the
Last Balance Sheet.
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4.5 Tax Matters.
4.5.1 The Seller has timely filed all sales and property tax returns
and reports affecting the Stores or the Purchased Assets which are required
to be filed by it, and all such tax returns and reports which have been
filed are accurate and complete. There are no tax liens upon any property
or assets of the Stores or the Purchased Assets. There are no outstanding
agreements or waivers extending the statute of limitations applicable to
any sales or property tax returns of the Seller affecting the Stores or the
Purchased Assets for any period.
4.5.2 All taxes and other assessments and levies which the Seller was
required by law to withhold or to collect relating to the Stores or the
Store Employees have been duly withheld and collected and have been paid
over to the proper governmental authority or are being held by the Seller
in separate bank accounts for such payment.
4.5.3 There are no legal, administrative or tax proceedings pursuant
to which the Seller is or could be made liable for any taxes, penalties,
interest, or other charges, the liability for which could extend to the
Purchaser as transferee of the business of the Stores or the Purchased
Assets. None of the Purchased Assets directly or indirectly secures any
debt the interest on which is exempt from tax under (S) 103(a) of the Code,
and none of the Purchased Assets are "tax-exempt use property" within the
meaning of (S) 168(h) of the Code.
4.6 Real Estate.
4.6.1 The Seller owns no real estate.
4.6.2 Schedule 4.6.2 contains an accurate and complete description of
--------------
the lease agreements with respect to the Purchased Leasehold Premises and
all amendments, modifications and supplements thereto and assignments
thereof (as amended, modified or supplemented, the "Leases") and sets
forth: (i) the lessor and lessee thereof and the date and term of each
Lease; (ii) the location, including the address, thereof; (iii) a brief
description (including size and function) of the principal improvements and
buildings thereon, all of which are within the property, set-back and
building lines of the Purchased Leasehold Premises, (iv) the rent payable,
security deposit (if any) and renewal terms for the Purchased Leasehold
Premises and (v) the commencement and termination dates of each Lease. A
true and complete copy of each Lease has been delivered to the Purchaser
prior to the date hereof. Schedule 4.6.2 also sets forth a description (i)
--------------
of the nature and amount of all Liens (including environmental Liens) on,
and subleases of, the Seller's interest in the Purchased Leasehold Premises
and (ii) of all non-disturbance agreements in favor of the tenants under
the Leases. Each Lease constitutes a valid and binding obligation of the
Seller and is in full force and effect. The Seller is not in default under
or breach of any Lease and no event has occurred which with the passage of
time or the giving of notice or both would cause a breach of, or default
under, any Lease by the Seller. To the best of the Seller's or the Parent's
knowledge, there is no breach of, or default under, or anticipated breach
of, or default under, any Lease by any other party to such Lease and no
event has occurred which with the passage of time or the giving of notice
or both would cause a breach of, or default under, any Lease by any other
party to such Lease. The Seller has full legal power and authority to
assign its rights under the Leases to the Purchaser.
4.6.3 The Seller has valid leasehold interests in the Purchased
Leasehold Premises, free and clear of any Liens, covenants and easements,
subleases or title defects of any nature whatsoever, except for (i) Liens
set forth on Schedule 4.6.2; (ii) Liens for real estate taxes not yet
--------------
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due and payable; and (iii) such imperfections of title and encumbrances, if
any, as are not material in character, amount or extent and do not detract
from the value, or interfere with the present use, of such properties or
otherwise impair business operations in any respect. Except as set forth on
Schedule 4.6.3, there are no parties in possession of any portion of the
--------------
Purchased Leasehold Premises other than Seller, whether as lessees,
sublessees, licensees or tenants at will.
4.6.4 The portions of the buildings located on the Purchased
Leasehold Premises that are used in the Seller's ownership, business or
operation of the Stores are each in good operating condition, normal wear
and tear excepted, and are sufficient to satisfy the Seller's current and
reasonably anticipated normal videocassette rental and sales levels and
other business activities conducted by the Seller at the Stores.
4.6.5 Each of the Purchased Leasehold Premises: (i) has direct access
to public roads or access to public roads by means of a perpetual access
easement, such access being sufficient to satisfy the current and
reasonably anticipated normal transportation requirements of the Seller's
business as presently conducted at such parcel; and (ii) is served by all
drainage, storm and sanitary services and utilities in such quantity and
quality as are sufficient to satisfy the current normal videocassette
rental and sales levels and business activities as conducted at such
parcel.
4.6.6 The Seller has not received notice of or is aware of (i) any
condemnation proceeding with respect to any portion of the Purchased
Leasehold Premises or any access thereto, and, to the best of the Seller's
or the Parent's knowledge, no proceeding is contemplated by any
governmental authority; or (ii) any special assessment which may affect any
of the Purchased Leasehold Premises, and, to the best of the Seller's or
the Parent's knowledge, no such special assessment is contemplated by any
governmental authority.
4.6.7 All rents, additional rents, percentage rents and all other
charges payable under the Leases have been paid.
4.6.8 The use which the Seller makes of the Purchased Leasehold
Premises and, to the Seller's or the Parent's knowledge, the Purchased
Leasehold Premises comply with all applicable laws and governmental
requirements in all material respects. The Seller has obtained all
requisite zoning, utility, building, health and operating permits from the
applicable governmental authorities having jurisdiction over the Purchased
Leasehold Premises which have not been otherwise obtained by the landlords
of the Purchased Leasehold Premises, except for those permits that would
not have a material adverse effect on the business or operation of the
Stores, and, to the Seller's or the Parent's knowledge, there is nothing
that could jeopardize any of those permits. There are no facts known to
Seller which would prevent any portion of the Purchased Leasehold Premises
from being occupied after the Closing in substantially the same manner as
before or as it was occupied by the Seller prior to the Closing.
4.6.9 Seller has paid, or shall have paid prior to Closing, all
amounts owing to any architect, contractor, subcontractor or materialman
for labor or materials performed, rendered or supplied to or in connection
with the Purchased Leasehold Premises. Schedule 4.6.9 sets forth a true and
--------------
complete list of all construction, architect, engineering and other similar
agreements relating to uncompleted construction projects entered into by
Seller in connection with any Purchased Leasehold Premises. Seller has
heretofore delivered to Purchaser true and complete copies of such
construction agreements. All contributions required to have been paid by a
landlord or Seller in connection with the construction of, or modification
to, any Purchased Leasehold Premises have been paid.
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4.7 Good Title to and Condition of the Purchased Assets.
4.7.1 The Seller has good and marketable title to all of the
Purchased Assets (other than the Purchased Leasehold Rights), free and
clear of any Liens other than the Liens held by BankBoston Retail Finance
Inc. and Xxxxxx Entertainment Inc. and described on Schedule 4.7.1, which
--------------
Liens will be released by BankBoston Retail Finance Inc. and Xxxxxx
Entertainment Inc. on or before the Closing Date.
4.7.2 The Purchased Fixed Assets of the Seller currently in use or
necessary for normal rental and sales levels are in good operating
condition, normal wear and tear excepted.
4.7.3 The Purchased Inventory (which includes videocassettes
capitalized as depreciable assets) consists of items of a quality and
quantity usable and saleable in the ordinary course of the Seller's
business relating to the Stores and, except for videocassette rental
inventory, at values in the aggregate not materially less than the values
at which such items are carried on its books. Videocassettes held for
rental at the Stores as of the Closing Date do not include any unreasonable
accumulation of slow moving videocassettes or videocassettes of below
standard quality. All of the Purchased Inventory is located at the Stores
or is out on rental in the ordinary course of business. As of the Closing
Date, the aggregate number of (i) videocassettes held for rental or for
sale (but excluding the "new" retail videocassette inventory) and included
as part of the Purchased Inventory shall not be less than 400,000 (the
"Minimum Number of Tapes") and (ii) new retail videocassette inventory held
for sale and included as part of the Purchased Inventory shall not be less
than 16,934 (the "Minimum Retail Inventory").
4.8 Receivables. The Seller has no accounts receivable, notes
receivable or insurance proceeds receivable relating to the ownership, business
or operation of the Stores other than certain delinquent customer accounts, a
listing of which is set forth on Schedule 4.8. All of the Purchased Receivables
------------
are valid and legally binding in all material respects and represent bona fide
transactions and arose in the ordinary course of business of the Seller,
provided that the foregoing shall not be deemed a warranty of the collectability
of the Purchased Receivables. The Seller has no knowledge of any facts or
circumstances generally which would result in any material increase in the
uncollectability of the Purchased Accounts Receivable in excess of the reserves
reflected on the Last Balance Sheet.
4.9 Licenses and Permits. The Seller possesses all licenses and
required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for the ownership, business or operation of the
Stores, except for those Permits that would not have a material adverse effect
on the business or operation of the Stores. All of the Permits are valid and in
full force and effect. The Seller is in compliance with all requirements of the
Permits, and no proceeding is pending or, to the best of the Seller's or the
Parent's knowledge, threatened to revoke or amend any of the Permits.
Schedule 4.9 contains a complete list of all the Permits. Except as indicated on
------------
Schedule 4.9, none of the Permits is or will be impaired or in any way affected
------------
by the execution and delivery of this Agreement or the consummation of the
transactions contemplated herein.
4.10 Proprietary Rights.
4.10.1 The Purchased Proprietary Rights include all proprietary rights
relating to the ownership, business or operation of the Stores which, if
Seller did not possess such proprietary rights, would have an adverse
effect on the business, financial condition or results of operations of the
Stores. Schedule 4.10.1 contains an accurate and complete list of all of
---------------
the Purchased Proprietary Rights.
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4.10.2 Except as set forth on Schedule 4.10.2, (i) the Seller owns all
---------------
right, title and interest in and to all of the Purchased Proprietary
Rights; (ii) there have been no claims made against the Seller for the
assertion of the invalidity, abuse, misuse, or enforceability of any such
rights, and, to the best of the Seller's or the Parent's knowledge, there
are no grounds for the same; (iii) the Seller has not received a notice of
conflict with the asserted rights of others within the last three years;
and (iv) the conduct of the Seller's business relating to the Stores has
not infringed upon any asserted rights of any Person, and the Seller is not
aware of any infringement by any Person of any of the Purchased Proprietary
Rights.
4.11 Adequacy of the Purchased Assets; Relationships with Customers
and Suppliers. The Purchased Assets constitute, in the aggregate, all of the
property necessary for the conduct of the business of the Seller relating to the
Stores in the manner in which and to the extent to which it is currently being
conducted. The Seller knows of no written or oral communication, fact, event or
action which exists or has occurred prior to the date of this Agreement which
would tend to indicate that:
4.11.1 any current customer of the Stores which accounted for over 1%
of the total consolidated revenue of the Stores for the year ended December
31, 1998 will terminate its business relationship with the Seller; or
4.11.2 any current supplier to the Stores of items essential to the
conduct of its business, which items cannot be replaced by the Stores at
comparable cost to the Seller and the loss of which would have an adverse
effect on the business or operations of the Stores, will terminate its
business relationship with the Seller. Neither the Seller nor any of its
Affiliates has any direct or indirect interest in any customer, supplier or
competitor of the Stores, or in any Person from whom or to whom the Stores
lease real or personal property, or in any Person with whom the Stores are
doing business. The Seller is not restricted by agreement from carrying on
its business anywhere in the world.
4.12 Documents of and Information with Respect to the Seller.
4.12.1 Schedule 4.12 is an accurate and complete list of the
-------------
following, in each case, which relates to the ownership, business or
operation of the Stores: (i) each policy of insurance in force with respect
to the assets and properties of the Seller and each of the performance or
other surety bonds maintained by the Seller in the conduct of its business;
(ii) each loan, credit agreement, guarantee, security agreement or similar
document or instrument to which the Seller is a party or by which it or the
Purchased Assets are otherwise bound; (iii) each lease of personal property
to which the Seller is a party or by which it is bound, (iv) any other
agreement, contract or commitment to which the Seller is a party or by
which it is bound which involves a future commitment by the Seller in
excess of $5,000 per year and which cannot be terminated without liability
on 30 days or less notice; (v) the name and current annual salary of each
Store Employee of the Seller and the profit sharing, bonus or any other
form of compensation paid or payable by the Seller to or for the benefit of
each Store Employee for the year ended December 31, 1998, and any
employment or other agreement of the Seller with any of the Store
Employees; and (vi) the name of each bank in which the Seller has an
account or safe deposit box relating to the Stores, the name in which the
account or box is held and the names of all persons authorized to draw
thereon or to have access thereto. The Seller has previously furnished the
Purchaser with an accurate and complete copy of each such agreement,
contract or commitment listed in Schedule 4.12. There has not been any
-------------
breach of or default in any obligation to be performed under any such
instrument. All of such instruments are valid, binding and enforceable and
in full force and effect in accordance with their
-14-
respective terms.
4.12.2 The Seller is not a party to any oral or written agreement,
plan or arrangement with any of the Store Employees (A) the benefits of
which are contingent upon or result from, or the terms of which are
materially altered as a result of, the occurrence of a transaction
involving the Seller of the nature of any of the transactions contemplated
by this Agreement, (B) providing severance benefits or other benefits after
the termination of employment or other contractual relationship regardless
of the reason for such termination and regardless of whether such
termination is before or after a change of control, (C) under which any
Person may receive payments subject to the tax imposed by Section 4999 of
the Code or (D) any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
4.12.3 The Seller carries insurance, which is adequate in character
and amount, with reputable insurers, covering all of the Purchased Assets,
and it has provided all required performance or other surety bonds. All
premiums and other payments which have become due under the policies of
insurance listed on Schedule 4.12 have been paid in full, all of such
-------------
policies are now in full force and effect and the Seller has not received
notice from any insurer, agent or broker of the cancellation of, or any
increase in premium with respect to, any of such policies or bonds. Except
as set forth on Schedule 4.12, the Seller has not received any notification
-------------
from any insurer, agent or broker denying or disputing any claim made by
the Seller or denying or disputing any coverage for any such claim or the
amount of any claim. Except as set forth on Schedule 4.12, the Seller has
-------------
no claim against any of its insurers under any of such policies pending or
anticipated and there has been no occurrence of any kind which would give
rise to any such claim.
4.13 Litigation. Except as set forth on Schedule 4.13, there are no
-------------
actions, suits, claims, inquiries, governmental investigations or arbitration
proceedings (collectively, "Proceedings") pending or, to the best of the
Seller's knowledge, threatened against or affecting the Seller relating in any
way to the Stores or any of the Purchased Assets or Assumed Liabilities that
could result in the incurrence of expenses, losses, costs, deficiencies,
liabilities, penalties, charges and damages (including actual, punitive and
consequential damages) in excess of the Litigation Materiality Amount (as
hereinafter defined). Except as set forth on Schedule 4.13, there are no
-------------
Proceedings which question the validity or enforceability of this Agreement or
any action contemplated herein, and there is no basis for any of the foregoing.
There are no outstanding orders, decrees or stipulations issued by any federal,
state, local or foreign judicial or administrative authority in any Proceeding
to which the Seller is or was a party and which relate to the Stores or which
affect the Purchased Assets or Assumed Liabilities. As used in this Section
4.13, the term Litigation Materiality Amount means $1,000 for any individual
Proceeding and $5,000 for all Proceedings considered in the aggregate.
4.14 Records. The Seller's records included as part of the Purchased
Assets are accurate and complete in all material respects and there are no
material matters as to which appropriate entries have not been made in such
records. A record of all action taken by the stockholders and the board of
directors of the Seller which relate to the Stores and all minutes of their
meetings are contained in the minute books of the Seller and are accurate and
complete. The records book and stock ledger of the Seller contain an accurate
and complete record of all issuances, transfers and cancellations of shares of
capital stock of the Seller.
4.15 No Adverse Change. Since the date of the Last Balance Sheet,
there has not been (i) any change in the business or properties of the Stores,
or in the financial condition of the Stores, other
-15-
than changes occurring in the ordinary course of business which have not had an
adverse effect on the business, properties, financial condition, business
prospects or operating results of the Stores; or (ii) to the best of the
Seller's or the Parent's knowledge, any threatened or prospective event or
condition of any character whatsoever which could adversely affect the Purchased
Assets or the business, financial condition, business prospects or results of
operations of the Stores.
4.16 Absence of Certain Acts or Events. Except as disclosed in
Schedule 4.16, since the date of the Last Balance Sheet, the Seller has not (i)
-------------
authorized or issued any of its shares of capital stock (including any held in
its treasury) or any other securities; (ii) declared or paid any dividend or
made any other distribution of or with respect to its shares of capital stock or
other securities or purchased or redeemed any shares of its capital stock or
other securities; (iii) paid any bonus or increased the rate of compensation of
any of the Store Employees; (iv) sold or transferred any of its assets relating
to the Stores other than in the ordinary course of business; (v) made or
obligated itself to make capital expenditures with respect to the Stores
aggregating more than $5,000; (vi) made any payment in respect of the Excluded
Liabilities other than in the ordinary course of business; (vii) incurred any
material obligations or liabilities (including any indebtedness) or entered into
any material transaction relating to the ownership, business or operation of the
Stores, except for this Agreement and the transactions contemplated hereby;
(viii) suffered any theft, damage, destruction or casualty loss in excess of
$5,000 with respect to the Stores; (ix) suffered any extraordinary losses with
respect to the Stores; or (x) waived any right of material value relating to the
ownership, business or operation of the Stores.
4.17 Compliance with Laws.
4.17.1 The Seller is in compliance with all laws, regulations and
orders applicable to it relating to the Stores or the Purchased Assets. The
Seller has not been cited, fined or otherwise notified of any asserted past
or present failure to comply with any laws relating to the Stores and, to
the best of the Seller's or the Parent's knowledge, no proceeding with
respect to any such violation is contemplated.
4.17.2 Neither the Seller nor, to the Seller's or the Parent's
knowledge, any employee of the Seller has made any payment of funds in
connection with the ownership, business or operation of the Stores
prohibited by law, and no funds have been set aside to be used in
connection with the ownership, business or operations of the Stores for any
payment prohibited by law.
4.17.3 The Seller is and at all times has been in full compliance with
the terms and provisions of the Immigration Reform and Control Act of 1986
(the "Immigration Act") with respect to the Store Employees. With respect
to each Employee (as defined in 8 C.F.R. 274a.1(f)) of the Seller at the
Stores for whom compliance with the Immigration Act by the Seller as
Employer is required, the Seller has supplied to the Purchaser an accurate
and complete copy of (i) each Store Employee's Form I-9 (Employment
Eligibility Verification Form) and (ii) all other records, documents or
other papers prepared, procured and/or retained by the Seller pursuant to
the Immigration Act. The Seller has not been cited, fined, served with a
Notice of Intent to Fine or with a Cease and Desist Order, nor has any
action or administrative proceeding been initiated or, to the best of the
Seller's or the Parent's knowledge, threatened against the Seller by reason
of any actual or alleged failure to comply with the Immigration Act with
respect to the Store Employees.
4.18 Environmental Matters.
4.18.1 The Seller has not transported, stored, handled, treated or
disposed, nor has it allowed or arranged for any third parties to
transport, store, handle, treat or dispose of Hazardous
-16-
Substances or other waste to or at any location other than a site lawfully
permitted to receive such Hazardous Substances or other waste for such
purposes, nor has it performed, arranged for or allowed by any method or
procedure such transportation, storage, treatment or disposal in
contravention of any laws or regulations. The Seller has not stored,
handled, treated or disposed of, or allowed or arranged for any third
parties to store, handle, treat or dispose of, Hazardous Substances or
other waste upon property owned or leased by it, except as permitted by
law. For purposes of this Section 4.18, the term "Hazardous Substances"
shall mean and include: (i) any "Hazardous Substance," "Pollutant" or
"Contaminant" as defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section 9601, et
seq., or the regulations promulgated thereunder ("CERCLA"); (ii) any "Solid
Waste" or "Hazardous Waste" as those terms are defined in the Solid Waste
Disposal Act, as amended, 42 U.S.C. Section 6901 et seq., or in applicable
state or local law; (iii) any substance containing petroleum, as that term
is defined in Section 9001(8) of the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6991(8) or in 40 C.F.R. Section 280.1;
or (iv) any other substance, material or waste for which any governmental
authority with any jurisdiction over the Purchased Assets requires special
handling in its generation, handling, use, collection, storage, treatment
or disposal.
4.18.2 To the Seller's or the Parent's knowledge, there has not
occurred, nor is there presently occurring, a Release, threatened Release,
or migration of any Hazardous Substance to, from, on, into or beneath any
parcel of the Purchased Leasehold Premises. For purposes of this Section
4.19, the term "Release" shall have the meaning given it in CERCLA.
4.18.3 The Seller has not shipped, transported or disposed of, nor has
it allowed or arranged, by contract, agreement or otherwise, for any third
parties to ship, transport or dispose of, any Hazardous Substance from the
Stores to a site which, pursuant to CERCLA or any similar state law, (i)
has been placed on the National Priorities List or its state equivalent;
(ii) the Environmental Protection Agency or the relevant state agency has
proposed or is proposing to place on the National Priorities List or its
state equivalent or (iii) the Environmental Protection Agency or the
relevant state or local agency has or is investigating. The Seller has not
received notice, and neither the Seller nor the Parent has any knowledge of
any facts which could give rise to any notice, that the Seller is a
potentially responsible party for a federal or state environmental cleanup
site or for corrective action under CERCLA or any other applicable law or
regulation. The Seller has not submitted nor was required to submit any
notice pursuant to Section 103(c) of CERCLA with respect to the Purchased
Leasehold Premises. The Seller has not received any written or oral request
for information in connection with any federal or state environmental
cleanup site. The Seller has not been required to or has not undertaken any
response or remedial actions or clean-up actions of any kind relating to
the Stores at the request of any federal state or local governmental
entity, or at the request of any other person or entity.
4.18.4 The Seller does not use, and has not used, any Underground
Storage Tanks and, to the Seller's or the Parent's knowledge, there are not
now nor, have there ever been any Underground Storage Tanks on the
Purchased Leasehold Premises. For purposes of this Section 4.18, the term
"Underground Storage Tanks" shall have the meaning given it in the Resource
Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.).
4.18.5 To the Seller's or the Parent's knowledge, there is no physical
condition existing on the Purchased Leasehold Premises nor are there any
physical conditions existing on any other property that may have been
impacted by the use of the Purchased Leasehold Premises which could give
rise to any remedial obligation or liability under any Environmental Laws
or which could
-17-
result in any liability to any third party claiming damage to person or
property as a result or consequence of said physical condition. For
purposes of this Section 4.18, the term "Environmental Laws" shall mean any
and all laws, statutes, ordinances, rules, regulations, orders, or
determinations relating to the prevention of pollution or the protection of
the environment or human health and safety.
4.18.6 The Seller is not responsible under any of the Leases for
asbestos abatement or removal and, to the Seller's or the Parent's
knowledge, except as listed on Schedule 4.18.6, there is not installed,
---------------
placed, deposited, stored, disposed of or located on the Purchased
Leasehold Premises any asbestos in any form.
4.18.7 To the Seller's or the Parent's knowledge, there is not
installed, placed, deposited, stored, disposed of nor located on the
Purchased Leasehold Premises any polychlorinated biphenyls ("PCBs") nor
turbines, compressors, transformers, capacitors, ballasts, or other
equipment which contain fluid containing PCBs.
4.18.8 There are no laws, regulations, ordinances, licenses, permits
or orders relating to any environmental or worker safety matters requiring
any work, repairs, construction or capital expenditures with respect to the
assets or properties of the Stores. There are no violations of any
Environmental Laws relating to (i) to the Seller's or the Parent's
knowledge, the Purchased Leasehold Premises or any property or parcel
adjacent thereto, or (ii) the Seller's use of the Purchased Leasehold
Premises.
4.18.9 Schedule 4.18.9 identifies (i) all environmental audits,
---------------
assessments or occupational health studies undertaken by the Seller, the
Parent or their respective agents or, to the best of the Seller's or the
Parent's knowledge, undertaken by governmental authorities relating to or
affecting the Stores or any of the Purchased Leasehold Premises; (ii) the
results of any ground, water, soil, air or asbestos monitoring undertaken
by the Seller, the Parent or their respective agents or, to the best of the
Seller's or the Parent's knowledge, undertaken by governmental authorities
relating to or affecting the Stores or any of the Purchased Leasehold
Premises; (iii) all written communications between the Seller or the Parent
and environmental agencies relating to the Stores; and (iv) all citations
issued under the Occupational Safety and Health Act (29 U.S.C. Sections 651
et seq.) relating to or affecting the Stores or any of the Purchased
Leasehold Premises.
4.19 Labor and Employee Relations. The Seller is not a party to or
bound by any collective bargaining agreement or any other agreement with a labor
union or other collective bargaining representative, and there has been no
effort by any labor union or other collective bargaining representative during
the 24 months prior to the date hereof to organize any Store Employees into one
or more collective bargaining units. There is not pending or, to the best of the
Seller's or the Parent's knowledge, threatened any labor dispute, strike or work
stoppage which affects or which may affect the business or operations of the
Stores or which may interfere with its continued operation. The Seller (A) is
not engaged, nor has it since January 1, 1995, engaged, in any unfair labor
practices, and has no, and has not had since January 1, 1995, any unfair labor
practice charges or complaints before the National Labor Relations Board pending
or, to the best of the Seller's or the Parent's knowledge, threatened against
it, and (B) has no, and has not had since January 1, 1995, any grievances,
arbitrations, or other proceedings arising or asserted to arise under any
collective bargaining agreement, pending or, to the best of the Seller's or the
Parent's knowledge threatened, against it. There has been no strike, walkout or
work stoppage involving any of the Store Employees during the 24 months prior to
the date hereof. Neither the Seller nor the Parent is aware that any executive
or key employee or group of employees relating to the Stores has any plans to
terminate his, her or their employment with the Seller. The Seller (i) is, and
has always been since January 1, 1995, in
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substantial compliance with all applicable laws and regulations regarding labor
and employment practices which relate to the Stores, including, without
limitation, terms and conditions of employment, equal employment opportunity,
employee compensation, employee benefits, affirmative action, wages and hours,
plant closing and mass layoff, occupational safety and health, immigration,
workers' compensation, disability, unemployment compensation, child labor,
whistleblower laws or other employment or labor relations laws, and (ii) has no,
and has not had since January 1, 1995, any charges, complaints, or proceedings
before the Equal Employment Opportunity Commission, Department of Labor or any
other governmental authority responsible for regulating labor or employment
practices which relate to the Stores, pending, or, to the best of the Seller's
or the Parent's knowledge, threatened against it other than as set forth in
Schedule 4.19.
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4.20 Employee Benefits.
4.20.1 Schedule 4.20.1 contains a list of the following, which list
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shall be updated by the Seller as of Closing:
(a) separately by location, of the names, job titles and current
salary or wage rates of all of Seller's employees at the Stores ("Store
Employees") and their hourly rate or yearly salary, together with a summary
of all bonus, incentive compensation or other additional compensation or
similar benefits paid to each Store Employee for the 1998 calendar year and
estimated for the 1999 calendar year.
(b) separately by location, the names, job titles and current
salary or wage rates of all independent contractors, consultants, employees
of third party employment agencies, and leased employees who perform
services for the Stores.
4.20.2 Schedule 4.20.2 sets forth a true and complete list of all (i)
---------------
employee benefit plans, arrangements or policies (whether or not subject to
ERISA), including without limitation any stock option, stock purchase,
pension, deferred compensation, bonus, incentive, health, cafeteria,
flexible spending, vacation pay, severance pay plan, policy or arrangement
for the Store Employees and (ii) any employment, severance or consulting
agreement maintained or contributed to by Seller for any current or former
Store Employee (collectively, the "Plans").
4.20.3 Except as set forth on Schedule 4.20.3:
---------------
(a) None of the Seller, the Parent or any Store has communicated
to present or former Store Employees, or formally adopted or authorized,
any additional Plan, or any change in or termination of any existing Plan.
(b) Each Plan has been operated and administered, in all material
respects, in accordance with its terms, the terms of any applicable
collective bargaining agreement, and all applicable laws.
(c) Each Plan that is a "group health plan" subject to the
continuation coverage requirements of Section 4980B of the Code and Part 6
of Title I of ERISA ("COBRA") has been operated and administered, in all
material respects, in accordance with such requirements.
4.20.4 None of the Purchased Assets are subject to a Lien under ERISA
or the Code.
4.20.5 No Plan is a "multiemployer plan" within the meaning of
Section 3(37)(a) of
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ERISA and Seller does not have any outstanding liability, contingent or
otherwise, with respect to such Plan.
4.20.6 No event has occurred and no condition exists that could be
reasonably expected to subject Purchaser to any fine, tax, penalty or other
liability, arising under, or with respect to any Plan, or any other
employee benefit plan maintained by Seller for employees other than Store
Employees.
4.21 Affiliate Relationships. There are no contracts or other
arrangements involving the Stores in which any shareholder, officer, director or
Affiliate of the Seller or the Parent has a financial interest, including
indebtedness to the Seller relating to the Stores which will continue following
the Closing.
4.22 No Brokers. Neither the Seller nor the Parent has employed any
broker, agent or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement.
4.23 Solvency. The Seller is not now insolvent, nor will the Seller
be rendered insolvent by the consummation of the transactions contemplated by
this Agreement. In addition, immediately after giving effect to the transactions
contemplated by this Agreement (a) the Seller will be able to pay its debts as
they become due, (b) the Seller will not have unreasonably small capital and
will not have insufficient capital with which to conduct its present or proposed
business and (c) taking into account pending and threatened litigation, final
judgments against the Seller in actions for money damages are not reasonably
anticipated to be rendered at a time when, or in amounts such that, the Seller
will be unable to satisfy any such judgments promptly in accordance with their
terms (taking into account the maximum probable amount of such judgments in any
such actions and the earliest reasonable time at which such judgments might be
rendered). The cash available to the Seller, after taking into account all other
anticipated uses of the cash of the Seller, will be sufficient to pay all
judgments promptly in accordance with their terms. The Seller is receiving
reasonably equivalent value in exchange for the Purchased Assets and Assumed
Liabilities being conveyed and transferred to Purchaser, and the transactions
contemplated by this Agreement are not being undertaken with any intent to
hinder, delay or defraud any creditor of the Seller. As used in this Section
4.23, (x) the term "insolvent" means that the sum of the present fair saleable
value of the Seller's assets does not and/or will not exceed its debts and other
probable liabilities, and (y) the term "debts" includes any legal liability,
whether matured or unmatured, liquidated or unliquidated, absolute, fixed or
contingent, disputed or undisputed or secured or unsecured.
4.24 Accuracy of Information Furnished by the Seller and the
Parent. No representation, statement or information made or furnished by the
Seller or the Parent to the Purchaser, in or pursuant to this Agreement and the
other information and statements referred to herein and previously furnished by
the Seller or the Parent to the Purchaser pursuant hereto, contains or shall
contain any untrue statement of a material fact or omits or shall omit any
material fact necessary to make the information contained therein not
misleading.
ARTICLE 5
Representations and Warranties of the Purchaser
To induce the Seller and the Parent to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Purchaser represents and
warrants to Seller and the Parent, which representations and warranties shall
survive the Closing for a period of three years, the following:
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5.1 Organization, Power and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
enter into this Agreement and all other agreements contemplated hereby and to
perform its obligations hereunder and thereunder.
5.2 Due Authorization; Binding Obligation; No Conflicts. The
execution, delivery and performance of this Agreement and all other agreements
contemplated hereby and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action of the Purchaser.
This Agreement has been duly executed and delivered by the Purchaser and is a
valid and binding obligation of the Purchaser, enforceable in accordance with
its terms, subject as to enforceability to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, and similar laws affecting
creditors' rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity). Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) contravene any
provision of the certificate of incorporation or bylaws of the Purchaser; (ii)
violate or conflict with any federal, state or local law, statute, ordinance,
rule, regulation or any decree, writ, injunction, judgment or order of any court
or administrative or other governmental body or of any arbitration award which
is either applicable to, binding upon or enforceable against the Purchaser;
(iii) conflict with, result in any breach of or default (or an event which
would, with the passage of time or the giving of notice or both, constitute a
default) under any material mortgage, contract, agreement, lease, license,
indenture, trust or other instrument which is either binding upon or enforceable
against the Purchaser; or (iv) require the consent, approval or authorization of
any governmental authority or any other Person (other than under the HSR Act).
ARTICLE 6
Covenants of the Seller
6.1 Reasonable Efforts. The Seller will use reasonable efforts to
cause to be satisfied as soon as practicable and prior to the Closing Date all
of the conditions set forth in Article 8 to the obligation of the Purchaser to
purchase the Purchased Assets hereunder.
6.2 Conduct of Business Pending the Closing. From and after the
execution and delivery of this Agreement and until the Closing Date, except as
otherwise provided by the prior written consent of the Purchaser:
6.2.1 The Seller will conduct its business and operations of the
Stores in the manner in which the same have heretofore been conducted, and
will use its best efforts in each case with respect to the Purchased Assets
and the ownership, business or operation of the Stores, to (i) preserve its
business organization intact; (ii) keep available to the Purchaser the
services of its officers, employees, agents and distributors; (iii)
preserve its relationships with customers, suppliers and others having
dealings with the Seller; (iv) ensure that there is no material diminution
in the quality, quantity and condition of the Seller's basic stock
inventory (including, without limitation, the Seller's videocassette and
video game inventory); and (v) refrain from selling the Purchased Assets,
except in the ordinary course of business.
6.2.2 The Seller will maintain all of the Purchased Assets in
customary repair, order and condition, reasonable wear and use and damage
by unavoidable casualty excepted, and will maintain insurance of the types
and in such amounts upon all of the Purchased Assets and with respect to
the conduct of its business at the Stores as are in effect on the date of
this Agreement;
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6.2.3 The Seller will not, in each case with respect to the Purchased
Assets and the ownership, business and operation of the Stores, (i) pay any
bonus or increase the rate of compensation of any of its Store Employees,
except in the ordinary course of business, (ii) enter into any new
employment agreement or amend any existing employment agreement with any
salaried Store Employees with an annual salary of greater than $50,000,
(iii) establish any new employee benefit plan or amend any existing
employee benefit plan, or (iv) waive any right of material value;
6.2.4 The Seller will not enter, in each case with respect to the
Purchased Assets and the ownership, business and operation of the Stores,
into (i) any renewals or extensions of any Purchased Leasehold Premises, or
any agreement for any new lease; (ii) any new contract or other commitment,
except in the ordinary course of business; or (iii) any agreements for the
purchase or sale of real property;
6.2.5 The Seller will not commence or agree to the commencement of
any new construction or improvements to any Purchased Leasehold Premises
other than in the ordinary course of business, in any event not to exceed
$5,000;
6.2.6 The Seller will not make or pay any non-cash distributions or
dividends; and
6.2.7 The Seller will not fail to remit to the Purchaser any amounts
relating to tenant improvements with respect to the Purchased Leasehold
Premises immediately upon receipt by the Seller unless the Seller is using
those funds to complete the improvements for which the funds relate and
completion of those improvements actually occurs prior to the Closing Date.
6.3 Access to the Seller's Properties and Records. From and after
the execution and delivery of this Agreement, the Seller will afford to
representatives of the Purchaser access, during normal business hours and upon
reasonable notice, to the Seller's premises and personnel sufficient to enable
the Purchaser to inspect the Purchased Assets and review the business affairs of
the Stores, and the Seller will furnish to such representatives during such
period all such information relating to the foregoing investigation as the
Purchaser may reasonably request; provided, however, that any furnishing of such
--------- -------
information to the Purchaser and any investigation by the Purchaser shall not
affect the right of the Purchaser to rely on the representations and warranties
made by the Seller in or pursuant to this Agreement.
6.4 No Disclosure. Without the prior written consent of the
Purchaser, neither the Seller nor the Parent will, prior to the Closing Date,
disclose the existence, or any term or condition, of this Agreement to any
Person, except as may be required under the federal securities laws or other
applicable law, and further, such disclosure may be made to any lender or other
Person in a business relationship with the Seller to whom such disclosure is
necessary in order to satisfy any of the conditions to the consummation of the
purchase of the Purchased Assets which are set forth in this Agreement.
6.5 No Other Discussions. The Seller and the Parent agree that from
and after the date of this Agreement until the Closing Date or earlier
termination of this Agreement, the Seller, the Parent and their respective
Affiliates, officers, directors, employees, shareholders, partners, members,
agents and representatives, either alone or together, (i) will not initiate or
encourage the initiation by others of discussions or negotiations with third
parties or respond to solicitations by third parties relating to any merger,
sale or other disposition of any substantial part of the shares of capital stock
of the Seller or the Purchased Assets (except in the ordinary course of business
with respect to sales of inventory), (ii) will immediately notify the Purchaser
if any third party attempts to initiate any such solicitation,
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discussion or negotiation with the Seller, the Parent or any of their respective
Affiliates, officers, directors, managers, employees, shareholders, partners,
members, agents or representatives and (iii) will not enter into any agreement
with respect thereto with any third party.
ARTICLE 7
Covenants of the Purchaser
7.1 Reasonable Efforts. The Purchaser will use reasonable efforts
to cause to be satisfied as soon as practicable and prior to the Closing Date
all of the conditions set forth in Article 9 to the obligation of the Seller to
sell the Purchased Assets hereunder.
7.2 No Disclosure. Without the prior written consent of the Seller,
the Purchaser will not, except as required by applicable law, prior to the
Closing Date, disclose the existence of any term or condition of this Agreement
to any Person, other than Purchaser's Affiliates (including Viacom Inc.) and any
other Person in a business relationship with the Purchaser to whom such
disclosure is necessary in order to satisfy any of the conditions to the
consummation of the purchase of the Purchased Assets which are set forth in this
Agreement.
7.3 Confidentiality. Purchaser shall hold in confidence, and shall
ensure that its directors, officers, employees, subsidiaries and representatives
(including, without limitation, auditors, legal advisors and financial advisors)
(collectively, the "Purchaser Representatives") hold in confidence, all
information relating to the Stores provided to Purchaser or the Purchaser
Representatives (collectively, the "Confidential Information"), and shall not
disclose the Confidential Information to any third party, except as may be
required by applicable law and except for information that (i) is or becomes
generally available to the public or the video rental and retail industry, (ii)
becomes available to the Purchaser or any Purchaser Representative on a non-
confidential basis from a source which to Purchaser's knowledge is entitled to
disclose the information to Purchaser or the Purchaser Representative, (iii) was
known to Purchaser or any Purchaser Representative prior to its disclosure by
the Seller or (iv) is developed by Purchaser or any Purchaser Representative
without the benefit of the Confidential Information.
ARTICLE 8
Conditions to Obligations of the Purchaser
The obligation of the Purchaser to purchase the Purchased Assets and
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions, any or all of which the Purchaser shall have the right to waive at
its sole option:
8.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Seller contained in this
Agreement shall be true and correct in all respects, at and as of the date of
this Agreement and shall be repeated as of the Closing Date with the same force
and effect as though made at and as of that time. The Seller shall have
performed and complied with all of its obligations and agreements required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date.
8.2 Receipt of Consents Required Under Real Property Leaseholds.
All consents, authorizations, licenses, amendments or approvals of, or notices
to, the parties to any of the Purchased Leasehold Premises in which such
consent, amendment, approval or notice is required for the
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consummation of the transactions contemplated by this Agreement shall (a) have
been obtained, (b) not have been rescinded, revoked, withdrawn or otherwise
invalidated, and (c) have been shown by written evidence satisfactory to the
Purchaser. The form and substance of such consents, amendments, approvals or
notices shall be reasonably satisfactory to the Purchaser.
8.3 Governmental Consents. All Governmental Consents required for
the consummation of the transactions contemplated by this Agreement (including
expiration or early termination of the waiting period under the HSR Act) shall
(a) have been obtained, (b) not have been rescinded, revoked, withdrawn or
otherwise invalidated, and (c) have been shown by written evidence satisfactory
to the Purchaser.
8.4 Actions or Proceedings. No action, suit, proceeding or
investigation by or before any court, administrative agency or other
governmental authority shall have been instituted or threatened by any Person
other than the Purchaser or any of its Affiliates to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
8.5 Closing Deliveries. All of the deliveries required to be made
by Seller under Section 3.2.1 shall have been made.
8.6 Excluded Inventory. All leased inventory or inventory subject
to any buy-back or contingency programs located at the Stores shall be removed
from the Stores by the Seller.
8.7 Purchaser's Investigation. The investigation ("Purchaser's
Investigation") by the Purchaser and its representatives in connection with the
proposed transactions shall not have caused the Purchaser or its representatives
during the 30-day period commencing on the date of this Agreement, to become
aware of any facts or circumstances relating to the business, operations,
assets, properties, liabilities, employees, financial condition or results of
operations of the Stores, or any of the Purchased Assets, that, in the sole and
absolute discretion of the Purchaser, make it inadvisable for the Purchaser to
proceed with the transactions contemplated by this Agreement.
ARTICLE 9
Conditions to Obligations of the Seller
The obligations of the Seller and the Parent to sell the Purchased Assets
and to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions, any or all of which the Seller and the Parent shall have
the right to waive at their sole option:
9.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Purchaser contained in
this Agreement shall be true and correct in all respects at and as of the date
of this Agreement and be repeated on and as of the Closing Date with the same
force and effect as though made at and as of that time. The Purchaser shall have
performed and complied in all material respects with all of its obligations and
agreements required by this Agreement to be performed or complied with by it at
or prior to the Closing Date.
9.2 Governmental Consents. All Governmental Consents required for
the consummation of the transactions contemplated by this Agreement (including
expiration or early termination of the waiting period under the HSR Act) shall
(a) have been obtained, (b) not have been rescinded, revoked, withdrawn or
otherwise invalidated, and (c) have been shown by written evidence
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satisfactory to the Purchaser.
9.3 Actions or Proceedings. No action, suit, proceeding or
investigation by or before any court, administrative agency or other
governmental authority shall have been instituted or threatened by any Person
other than the Seller or any of its Affiliates to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
9.4 Closing Deliveries. All of the deliveries required to be made
by Purchaser under Section 3.2.2 shall have been made.
ARTICLE 10
Certain Actions After the Closing
10.1 Delivery of Property Received by the Seller After Closing. From
and after the Closing, the Purchaser shall have the right and authority to
collect, for the account of the Purchaser, all receivables and other items which
shall be transferred or are intended to be transferred to the Purchaser as part
of the Purchased Assets as provided in this Agreement, and to endorse with the
name of the Seller any checks or drafts received on account of any receivables
or other items of the Purchased Assets. The Seller agrees that it will transfer
or deliver to the Purchaser, promptly after the receipt thereof, any cash or
other property which the Seller receives after the Closing Date in respect of
any claims, contracts, licenses, leases, commitments, sales orders, purchase
orders, receivables of any character or any other items transferred or intended
to be transferred to the Purchaser as part of the Purchased Assets under this
Agreement.
10.2 The Purchaser Appointed Attorney for the Seller. Effective at
the Closing Date, the Seller hereby constitutes and appoints the Purchaser, its
successors and assigns, the true and lawful attorney of the Seller, in the name
of either the Purchaser or the Seller (as the Purchaser shall determine in its
sole discretion) but for the benefit of the Purchaser, (i) to institute and
prosecute all proceedings which the Purchaser may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in or to the
Purchased Assets as provided for in this Agreement; (ii) to defend or compromise
any and all actions, suits or proceedings in respect of any of the Purchased
Assets, and to do all such acts and things in relation thereto as the Purchaser
shall deem advisable; and (iii) to take all action which the Purchaser may
reasonably deem proper in order to provide for the Purchaser the benefits under
any of the Purchased Assets where any required consent of another party to the
sale or assignment thereof to the Purchaser pursuant to this Agreement shall not
have been obtained. The Seller acknowledges that the foregoing powers are
coupled with an interest and shall be irrevocable. The Purchaser shall be
entitled to retain for its own account any amounts collected pursuant to the
foregoing powers, including any amounts payable as interest in respect thereof.
10.3 Execution of Further Documents. From and after the Closing,
upon the reasonable request of the Purchaser, the Seller shall execute,
acknowledge and deliver all such further acts, deeds, bills of sale,
assignments, transfers, conveyances, powers of attorney and assurances as may be
required to convey and transfer to and vest in the Purchaser and protect its
right, title and interest in all of the Purchased Assets, and as may be required
or otherwise appropriate to carry out the transactions contemplated by this
Agreement.
10.4 Employment by the Purchaser of the Seller's Employees.
10.4.1 The Purchaser shall have no obligation to employ any of the
Persons currently employed by the Seller. On or prior to the Closing Date,
the Purchaser may offer employment to
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the Store Employees best qualified for employment with the Purchaser, at
the sole discretion of the Purchaser. Any offers of employment extended by
the Purchaser to any of the Store Employees shall be on terms and
conditions that the Purchaser shall determine in its sole discretion, and
the Purchaser shall have absolutely no obligation to continue, or institute
any replacement or substitution for, any vacation, severance, incentive,
bonus, profit sharing, pension or other employee benefit plan or program of
the Seller, nor assume any liability for entitlements under the Family and
Medical Leave Act of 1993. 29 U.S.C. (S)(S) 2601 et seq. or analogous state
statutes. Any of the Store Employees not hired by the Purchaser prior to or
on the Closing Date shall be terminated by the Seller as of the Closing
Date. The Seller shall compensate the Store Employees for all amounts due
to them for compensated absences accrued as of the Closing Date including,
but not limited to, vacation, holiday and sick pay benefits.
10.4.2 Except with the written consent of the Purchaser, neither the
Seller, nor any of its Affiliates shall solicit or cause, directly or
indirectly, to be solicited, nor attempt to induce, for a period of three
years following the Closing Date, any Store Employee employed by the Seller
at or at any time within 180 days prior to the Closing Date, unless that
Person was not offered employment by the Purchaser, (i) to refuse an offer
of employment from the Purchaser, (ii) if an offer of employment with the
Purchaser is accepted, to terminate his or her employment with the
Purchaser, or (iii) to work, directly or indirectly, with or for the Seller
or any of its Affiliates. As used in this Agreement, the term "Affiliate"
means, with respect to a specified Person, any other Person which directly
or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified and,
with respect to any natural Person, shall include all Persons related to
that Person by blood or marriage.
10.4.3 Seller shall be responsible for any continuation of group
health coverage required under COBRA with respect to any Store Employee or
former Store Employee, or any "qualified beneficiary" of any Store
Employee, who incurs a "qualifying event" prior to that Store Employee's
date of hire by the Purchaser, including any such qualifying event incurred
by reason of the Store Employee's termination of employment with the
Seller.
10.4.4 The Seller agrees to pay and be responsible for all liability,
cost or expense for severance, termination indemnity payments, salary
continuation, special bonuses and like costs arising under the Seller's
severance plans, policies or arrangements, with respect to any Store
Employee or former Store Employee, including but not limited to any such
liability, cost or expense that arises out of or relating to the
transactions described in or contemplated by this Agreement. The Seller
agrees to pay and be responsible for all liability, cost, expense and
sanctions resulting from any failure to comply with the WARN Act, or any
similar state or local law, in connection with the consummation of the
transactions described in or contemplated by this Agreement.
10.5 Restrictive Covenants.
10.5.1 To assure that the Purchaser will realize the value and
goodwill inherent in the Purchased Assets, the Seller agrees with the
Purchaser that neither the Seller nor any of its Affiliates shall:
(a) directly or indirectly, for a period of three years following
the Closing Date, (i) engage in (as an owner, partner, employee, agent,
consultant or otherwise) any business which owns and/or operates any retail
store that is engaged in the rental, sale and/or distribution of movies
and/or video games (the "Excluded Business") in the States of Washington
and Oregon (but
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excluding (x) the Excluded Stores, provided, however, that neither the
Seller nor the Parent may expand or relocate the Excluded Stores beyond the
size and location existing as of the Closing Date, and (y) the existing or
anticipated mail order and Internet business of the Seller or the Parent
relating to videocassette rental and sales, provided, however, that such
activities do not constitute "doing business" in the States of Washington
and Oregon under applicable state laws currently in effect on the date of
this Agreement), or (ii) acquire or retain any financial interest having a
fair value in excess of the lesser of $5,000,000 in, or 5% of the equity
of, any business which is engaged in the Excluded Business in the States of
Washington and Oregon;
(b) directly or indirectly, for a period of three years following
the Closing Date: (i) induce any customer of the Stores at the Closing Date
to patronize any business similar to the Excluded Business; (ii) canvass,
solicit or accept from any customer of the Stores at the Closing Date any
business similar to the Excluded Business; (iii) request or advise any
Person which is a customer of the Stores at the Closing Date to withdraw,
curtail or cancel that customer's business with the Purchaser; (iv) induce
or attempt to influence any employee of the Purchaser to terminate his or
her employment; or (v) disclose or communicate to any other Person the
names of past or present customers of the Stores or any names of past or
present employees of the Stores; or
(c) directly or indirectly, at any time following the Closing Date,
in any way utilize, disclose, copy, reproduce or retain in its possession
any of the Purchased Proprietary Rights or the Purchased Records.
10.5.2 The Seller agrees and acknowledges that the restrictions
contained in Section 10.5.1 are reasonable in scope and duration and are
necessary to protect the Purchaser after the Closing Date. If, however, any
provision of Section 10.5.1, as applied to any party or to any
circumstances, is adjudged by a court to be invalid or unenforceable, the
same will in no way affect any other provision of Section 10.5.1 or any
other part of this Agreement, the application of that provision in any
other circumstances or the validity or enforceability of this Agreement. If
any such provision, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination will have the power
to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form that provision will then
be enforceable and will be enforced. Upon breach of any provision of
Section 10.5.1, the Purchaser will be entitled to injunctive relief, since
the remedy at law would be inadequate and insufficient. In addition, the
Purchaser will be entitled to such damages as it can show it has sustained
by reason of such breach.
10.6 Right to Use Name. The Seller hereby grants to the Purchaser at
no cost the non-exclusive, non-transferable right to use the "Video City" and/or
"Videoland" names for a period not to exceed 90 days following the Closing Date
solely for the purpose of conducting the Transition Activities. For purposes of
this Section 10.6, the term "Transition Activities" shall include (i) the use of
the existing signage whether located inside or outside the Stores, (ii) the use
of any packaging currently used by the Seller in connection with the
videocassette rental and retail sales, (iii) the use of the Video City or
Videoland name in any correspondence to any customer, supplier or other third
party having a business relationship with the Seller relating to the ownership,
business or operation of the Stores prior to the Closing Date, and (iv) any
other activities that are reasonably necessary for the Purchaser to transition
the business and operation of the Stores from Seller to Purchaser. The Purchaser
agrees that its use of the Video City and/or Videoland name pursuant to this
right does not give the Purchaser any ownership interest or any other interest
in or to such names, other than the rights granted in this Section 10.6.
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ARTICLE 11
Termination
11.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date:
(a) by written agreement of the parties hereto;
(b) by Purchaser if all Governmental Consents (including
expiration or early termination of the required waiting period under
the HSR Act) or all Third-Party Consents have not been received on or
prior to July 30, 1999;
(c) by Purchaser at any time prior to the 30th day following
the date of his Agreement for any reason or no reason as a result of
Purchaser's Investigation;
(d) by Purchaser if a default or breach shall be made by Seller
with respect to the due and timely performance of any of Seller's
covenants and agreements contained in this Agreement, or the accuracy
of any of the Seller's representations and warranties contained in
this Agreement, which cannot be cured or which has not been waived by
Purchaser prior to July 30, 1999; or
(e) by Purchaser or Seller if the transactions contemplated by
this Agreement have not been consummated by July 30, 1999, unless such
date shall be extended by the mutual written consent of the parties
hereto.
11.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to this Article 11, this Agreement shall become void and have
no effect, without any liability in respect of or in connection with the
transactions contemplated hereby on the part of any party to this Agreement or
any of their respective officers, directors, employees, agents, representatives
or Affiliates, except (a) as specified in Section 13.16 or (b) for any expenses,
losses, liabilities, penalties, charges and damages (including attorneys'
expenses and disbursements) suffered by Purchaser resulting from Seller's
default or breach of any of its covenants and agreements contained in this
Agreement.
ARTICLE 12
Indemnification
12.1 Agreement by the Seller and the Parent to Indemnify.
The Seller and the Parent, jointly and severally, agree that they will indemnify
and hold the Purchaser and each officer, director, employee, consultant,
stockholder and Affiliate of the Purchaser (the "Purchaser Indemnified Parties")
harmless in respect of the aggregate of all Indemnifiable Damages (as defined in
Section 12.1.1) of the Purchaser.
12.1.1 "Indemnifiable Damages" of the Purchaser Indemnified
Parties means, without duplication, the aggregate of all expenses, losses,
costs, deficiencies, liabilities, penalties, charges and damages (including
court costs and related counsel and paralegal fees and expenses) incurred
or suffered by the Purchaser Indemnified Parties, on a pre-tax basis, to
the extent (i) resulting from any breach of a representation or warranty of
the Seller or the Parent in or pursuant to Article 4 or elsewhere herein;
(ii) resulting from any breach of the covenants or agreements of the Seller
or the Parent in this Agreement; (iii) resulting from the Seller's
operation or control of the Stores prior to the Closing Date, including any
and all liabilities arising under the Assumed Liabilities which relate to
events occurring prior to the Closing Date; (iv) resulting from the failure
of the Seller to pay, discharge or perform any liability or obligation of
the Seller which is not expressly assumed by the
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Purchaser pursuant to this Agreement or resulting from any dispute
concerning any such liability or obligation; or (v) resulting from the
failure of the Seller to comply with applicable Bulk Transfer Provisions
(as defined in Section 13.12).
12.1.2 Without limiting the generality of the foregoing, with respect
to the measurement of Indemnifiable Damages, the Purchaser Indemnified
Parties shall have the right to be put in the same financial position as
each would have been in had each of the representations and warranties of
the Seller and the Parent been true and complete and had each of the
covenants and agreements of the Seller and the Parent been fully performed
in full.
12.1.3 Each of the representations and warranties made by the Seller
and the Parent in this Agreement or pursuant hereto, shall survive for a
period of three years following the Closing Date, notwithstanding any
investigation at any time made by or on behalf of the Purchaser Indemnified
Parties, and upon the expiration of the three-year period such
representations and warranties shall expire except as follows: (i) the
representations and warranties of the Seller and the Parent contained in
Sections 4.5 and 4.20 shall expire at the time the period of limitations
expires for the assessment by the applicable taxing authority of additional
taxes with respect to which the representations and warranties relate; (ii)
the representations and warranties of the Seller and the Parent contained
in Sections 4.17 and 4.18 shall expire at the time the latest period of
limitations expires for the enforcement by an applicable governmental
authority of any remedy with respect to which the particular representation
or warranty relates; and (iii) the representations and warranties of the
Seller and the Parent contained in Sections 4.1, 4.2 and 4.7.1 shall not
expire but shall continue indefinitely. No claim for the recovery of
Indemnifiable Damages with respect to representations and warranties may be
asserted by the Purchaser Indemnified Parties against the Seller or the
Parent or their successors in interest after such representations and
warranties shall thus expire; provided, however, that claims for
Indemnifiable Damages first asserted in writing within the applicable
period shall not thereafter be barred.
12.1.4 The Purchaser acknowledges and consents that its exclusive
remedy for breach of any representation, warranty, covenant or agreement
made by the Seller and the Parent in or pursuant to this Agreement, until
the same shall be exhausted or terminated in accordance with the terms of
this Agreement, shall be the recovery by setoff against the Held Back
Amount pursuant to Section 12.2 hereof. Notwithstanding the foregoing, upon
either the exhaustion or termination of the Held Back Amount in accordance
with the terms of this Agreement, the Purchaser Indemnified Parties may
thereupon seek to recover by any legal means Indemnifiable Damages directly
from the Seller, the Parent or any of their successors in interest.
12.2 Security for the Seller's Indemnification Obligation. As
security for the obligations of the Seller's and the Parent's indemnification
obligations under Section 12.1, at the Closing, the Purchaser shall set aside
and deposit in an interest-bearing account designated for the benefit of the
Seller, the Held Back Amount.
12.2.1 The Purchaser may set off against the Held Back Amount any
Indemnifiable Damages which any of the Purchaser Indemnified Parties is
entitled to recover under Section 12.1, subject, however, to the following
terms and conditions:
(a) A Purchaser Indemnified Party shall give written notice to the
Seller of the Purchaser Indemnified Party's claim for Indemnifiable
Damages, which notice shall set forth in reasonable detail (i) the amount
of Indemnifiable Damages which the Purchaser Indemnified Party claims to
have sustained by reason thereof and (ii) the basis of the claim therefor;
provided that the
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failure of the Purchaser Indemnified Party to exercise promptness in such
notification shall not amount to a waiver of that claim unless the
resulting delay materially prejudices the position of the Seller with
respect to the claim;
(b) The setoff shall be effected on the later to occur of the
expiration of 15 business days from the date of the Purchaser Indemnified
Party's notice (the "Notice of Contest Period") or, if the claim is
contested, the date the dispute is resolved;
(c) If, prior to the expiration of the Notice of Contest Period,
the Seller shall notify the Purchaser Indemnified Party in writing of its
intention to dispute the claim and if the dispute is not resolved within 30
days after expiration of that period (the "Resolution Period"), then the
dispute shall be resolved in accordance with Section 12.5;
12.2.2 The Purchaser agrees to deliver to the Seller no later than six
months from the Closing Date any Held Back Amount then held by the
Purchaser unless there remains any unresolved claim for Indemnifiable
Damages as to which notice has been given as provided in this Section 12.2,
in which event any Held Back Amount remaining on deposit after that claim
shall have been satisfied shall be returned to the Seller promptly after
the time of satisfaction.
12.2.3 The remedies provided for in this Section 12.2 shall be in
addition to and not in lieu of any other remedies available to the
Purchaser under this Agreement.
12.3 Agreement by the Purchaser to Indemnify. Purchaser agrees that
it will indemnify and hold the Seller, the Parent and each of their respective
officers, directors, employees, consultants, stockholders and Affiliates (the
"Seller Indemnified Parties") harmless in respect of the aggregate of all Seller
Indemnifiable Damages. For purposes of this Section 12.3, the term "Seller
Indemnifiable Damages" of the Seller Indemnified Parties means, without
duplication, the aggregate of all expenses, losses, costs, deficiencies,
liabilities, penalties, charges and damages (including court costs and related
counsel and paralegal fees and expenses) incurred or suffered by the Seller
Indemnified Parties, on a pre-tax basis to the extent (i) resulting from a
breach of a representation or warranty of the Purchaser in or pursuant to
Article 5 or elsewhere herein, (ii) resulting from any breach of the covenants
or agreements of Purchaser in this Agreement, or (iii) resulting from the
operation or control of the Stores by Purchaser following the Closing Date,
including any and all liabilities arising under the Assumed Liabilities which
relate to events occurring on or after the Closing Date.
12.4 Limitations. Notwithstanding any of the provisions contained in
this Article 12 or otherwise, neither the Seller and the Parent on the one hand,
nor the Purchaser on the other hand, shall have any liability to the other party
pursuant to this Article 12 unless and until the aggregate amount of the
Indemnifiable Damages or the Seller Indemnifiable Damages, as the case may be,
shall exceed $20,000 (the "Basket"), provided, however, that once the Basket
limitation has been exceeded by an indemnifying party, that indemnifying party
will be liable for the full amount of all claims for Indemnifiable Damages or
Seller Indemnifiable Damages, as the case may be, including the Basket and any
amount in excess thereof, and provided further that the Basket limitation shall
not apply to any offset made by the Purchaser against the Held Back Amount that
relates to any Purchase Price adjustments made in accordance with Section 2.1.2,
which offset rights may be exercised or realized upon with respect to all
Purchase Price Adjustments whether or not the Basket limitation has been
exceeded. Notwithstanding any of the provisions contained in this Article 12 or
otherwise, in no event shall the aggregate amount of either the Indemnifiable
Damages or the Seller Indemnifiable Damages exceed $16,200,000.
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12.4 Arbitration. Any controversy or claim arising pursuant to this
Article 12 shall be submitted to and resolved by a committee of three
arbitrators, one appointed by the Seller, one appointed by the Purchaser and one
appointed by the other two so appointed. The party instituting such arbitration
shall give notice to that effect to the other party, which notice shall specify
the arbitrator appointed by such party. Within 20 days after the giving of such
notice, the other party shall give notice specifying the arbitrator appointed by
that party and promptly thereafter, the two arbitrators so appointed shall meet
and designate the third arbitrator. The arbitration proceeding will commence
promptly thereafter, and the arbitrators shall abide by the then current
commercial rules of J*A*M*S/Endispute. The arbitration proceeding shall be held
in Dallas, Texas, unless the parties agree in writing to the contrary. The
determination of the arbitrators shall be conclusive upon the parties to the
arbitration. The parties agree to act in compliance therewith, and judgment upon
the same may be entered in any court having jurisdiction thereof. The
arbitrators shall give written notice to the parties to the arbitration stating
the determination of the arbitrators and shall furnish to each party to the
arbitration a signed copy of such determination. Each party shall bear its own
expenses of the arbitration proceeding, and the expenses of the third arbitrator
shall be borne equally by the Seller and the Purchaser.
12.5 Tax Related Adjustments. The Seller, the Parent and the
Purchaser agree that any payment of Indemnifiable Damages made hereunder will be
treated by the parties on their tax returns as an adjustment to the Purchase
Price. If, notwithstanding such treatment by the parties, any payment of
Indemnifiable Damages is determined to be taxable income rather than an
adjustment to the Purchase Price by any taxing authority, then the Seller and
the Parent shall indemnify the Purchaser for any taxes payable by the Purchaser
or any subsidiary by reason of the receipt of such payment (including any
payments under this Section 12.4), determined at an assumed marginal tax rate
equal to the highest marginal tax rate then in effect for corporate taxpayers in
the relevant jurisdiction.
ARTICLE 13
Miscellaneous
13.1 Transaction Expenses. The Purchaser will indemnify and hold
harmless the Seller from the commission, fee or claim of any Person employed or
retained or claiming to be employed or retained by the Purchaser to bring about,
or to represent it in, the transactions contemplated hereby. The Seller and the
Parent will indemnify and hold harmless the Purchaser from the commission, fee
or claim of any Person employed or retained or claiming to be employed or
retained by the Seller or the Parent to bring about, or to represent it in the
transactions contemplated hereby.
13.2 Amendment and Modification. The parties hereto may amend,
modify and supplement this Agreement in such manner as may be agreed upon by
them in writing.
13.3 Entire Agreement. This Agreement, including the exhibits and
schedules, contains the entire agreement of the parties hereto with respect to
the purchase of the Purchased Assets and the other transactions contemplated
herein, and supersedes all prior understandings and agreements (oral or written)
of the parties with respect to the subject matter hereof. The parties expressly
represent and warrant that in entering into this Agreement they are not relying
on any prior representations made by any other party concerning the terms,
conditions or effects of this Agreement which terms, conditions or effects are
not expressly set forth herein. Any reference herein to this Agreement shall be
deemed to include the schedules and exhibits.
13.4 Interpretation. When a reference is made in this Agreement to
an article, section, paragraph, clause,
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schedule or exhibit, such reference shall be to an article, section, paragraph,
clause, schedule or exhibit of this Agreement unless otherwise indicated. The
headings contained herein and on the schedules are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or the schedules. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Time shall be of the essence in this Agreement.
13.5 Execution in Counterpart. This Agreement may be executed by
facsimile signature and in any number of counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
13.6 Notices. Any notice, consent, approval, request,
acknowledgment, other communications or information to be given or made
hereunder to any of the parties by any other party shall be in writing and
delivered personally or sent by certified mail, postage prepaid, as follows:
If to the Seller, addressed to:
Video City, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Counsel
With copies to:
Xxxx & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
If to the Purchaser, addressed to:
Blockbuster Inc.
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: General Counsel
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given on the date it is so delivered, and any notice delivered by registered or
certified mail shall be deemed to have been given on the date it is received.
13.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein.
13.8 Confidentiality; Publicity. Except as may be required by law or
as otherwise permitted or expressly contemplated herein, no party hereto or
their respective Affiliates, employees, agents and representatives shall
disclose to any third party the subject matter or terms of this Agreement
without the prior consent of the other parties hereto. No press release or other
public announcement related to this
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Agreement or the transactions contemplated hereby will be issued by any party
hereto without the prior approval of the other parties, except that any party
may make such public disclosure which it believes in good faith to be required
by law or by the terms of any listing agreement with a securities exchange (in
which case such party will consult with the other parties prior to making such
disclosure).
13.9 Severability. Subject to the provisions of Section 10.5.2, if
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the greatest extent possible.
13.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior consent of the other parties; provided, however, that
upon notice to the Seller and without releasing the Purchaser from any of its
obligations or liabilities hereunder, the Purchaser may assign or delegate any
or all of its rights or obligations under this Agreement to any Affiliate of the
Purchaser.
13.11 Parties in Interest. This Agreement shall inure to the benefit
of, be binding upon and be enforceable by and against the Seller and the
Purchaser and their respective successors and permitted assigns, and nothing
herein expressed or implied shall be construed to give any other person any
legal or equitable rights hereunder, except as expressly set forth herein.
13.12 Bulk Transfer. Subject to the Purchaser Indemnified Parties'
right of indemnification pursuant to Article 12, the Purchaser and the Seller
hereby waive compliance with any state's Uniform Commercial Code - Bulk Transfer
provisions ("Bulk Transfer Provisions"), which may be applicable to the
transactions contemplated hereby.
13.13 Additional Representations. Each party hereto expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself or himself of the terms,
contents, conditions and effects of this Agreement; (b) said party has relied
solely and completely upon its own judgment in executing this Agreement; (c)
said party has had the opportunity to seek and has obtained the advice of
counsel before executing this Agreement; (d) said party has acted voluntarily
and of its own free will in executing this Agreement; (e) said party is not
acting under duress, whether economic or physical, in executing this Agreement;
and (f) this Agreement is the result of arm's-length negotiations conducted by
and among the parties and their counsel.
13.14 No Waiver Relating to Claims for Fraud. The liability of any
party under Article 12 shall be in addition to, and not exclusive of any other
liability that such party may have at law or equity based on such party's
fraudulent acts or omissions. None of the provisions set forth in this
Agreement, including but not limited to the provisions set forth in Section
12.1.3 (relating to limitations on the period of time during which a claim for
indemnification may be brought), or 12.1.4 (relating to recourse against the
Held Back Amount), shall be deemed a waiver by any party to this Agreement of
any right or remedy which such party may have at law or equity based on any
other party's fraudulent acts or omissions, nor shall any such provisions limit,
or be deemed to limit, (i) the amounts of recovery sought or awarded in any such
claim for fraud, (ii) the time period during which a claim for fraud may be
brought, or (iii) the recourse which any such party may seek against another
party with respect to a claim for fraud; provided, that with respect to such
rights and remedies at law or equity, the parties further acknowledge and agree
that
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none of the provisions of this Section 13.14 nor any reference to this Section
13.14 throughout this Agreement, shall be deemed a waiver of any defenses which
may be available in respect of actions or claims for fraud, including but not
limited to, defenses of statutes of limitations or limitations of damages.
13.15 Director and Officer Liability. The directors, officers and
stockholders of (i) the Purchaser and its Affiliates and (ii) the Parent and the
Seller (other than the Parent) shall not have any personal liability or
obligation arising under this Agreement (including any claims that any party to
this Agreement may assert) other than as an assignee of this Agreement.
13.16 Expenses and Obligations. Except as otherwise expressly
provided in this Agreement or as provided by law, all costs and expenses
incurred by the parties hereto in connection with the consummation of the
transactions contemplated hereby shall be borne solely and entirely by the party
which has incurred such expense. In the event of a dispute between the parties
in connection with this Agreement and the transactions contemplated hereby, each
of the parties hereto hereby agrees that the prevailing party shall be entitled
to reimbursement by the other party of reasonable legal fees and expenses
incurred in connection with any action or proceeding.
13.17 Waiver of Compliance. Any failure of the Purchaser on the one
hand, or the Seller, on the other hand, to comply with any obligation, covenant,
agreement or condition contained herein may be waived only if set forth in an
instrument in writing signed by the party or parties to be bound thereby, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any other failure.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the day and year first above written.
BLOCKBUSTER INC.
By: /s/ Xxxx Xxxxxx
________________________________
Name: Xxxx Xxxxxx
________________________________
Title: Executive Vice President
________________________________
VIDEOLAND, INC.
By: /s/ Xxxxxx X. Xxx
________________________________
Name: Xxxxxx X. Xxx
________________________________
Title: President
________________________________
VIDEO CITY, INC.
By: /s/ Xxxxxx X. Xxx
________________________________
Name: Xxxxxx X. Xxx
________________________________
Title: Chief Executive Officer
________________________________
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INDEX OF SCHEDULES
TO
ASSET PURCHASE AGREEMENT
Schedule I - Store Locations
Schedule 1.1.4 - Lease or Rental Agreements for Personal Property
Schedule 1.2.5 - Excluded Personal Property, Equipment, Furniture, Etc.
Schedule 1.2.9 - Excluded Stores
Schedule 2.2 - Assumed Contracts
Schedule 2.5 - Purchase Price Allocation
Schedule 4.4 - Exceptions to Liabilities
Schedule 4.6.2 - Lease Agreements; Liens on Purchased Leasehold Premises
Schedule 4.6.3 - Parties in Possession of Purchased Leasehold Premises
Schedule 4.6.9 - Agreements Related to Construction in Progress
Schedule 4.7.1 - Liens on Purchased Assets
Schedule 4.8 - Receivables
Schedule 4.9 - Licenses and Permits
Schedule 4.10.1 - Purchased Proprietary Rights
Schedule 4.10.2 - Exceptions to Purchased Proprietary Rights
Schedule 4.12 - Documents and Information
Schedule 4.13 - Litigation
Schedule 4.16 - Acts or Events Since Last Balance Sheet
Schedule 4.18.6 - Asbestos Located on Purchased Leasehold Premises
Schedule 4.18.9 - Environmental Audits
Schedule 4.19 - Labor and Employee Relations
Schedule 4.20.1 - Store Employees
Schedule 4.20.2 - Employee Benefit Plans
Schedule 4.20.3 - Exceptions to Employee Benefit Plans
Exhibit A - Form of Legal Opinion of Seller's and the Parent's Counsel
Exhibit B - Form of Xxxx of Sale, Assignment and Assumption Agreement
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