EXHIBIT 2
PURCHASE AGREEMENT
THIS AGREEMENT is made effective as of the 1st day of April, 1997 by
and among Video Update Canada Inc., an Ontario corporation and wholly owned
subsidiary of Video Update Inc., a Delaware corporation having its principal
place of business at 3100 World Trade Center, 00 Xxxx Xxxxxxx Xxxxxx, Xx. Xxxx,
Xxxxxxxxx 00000 ("Video Update"), Hill and Xxxxxxx Retail Corp., a British
Columbia corporation having its principal place of business at 000 X Xxxxx
Xxxxxxxx, Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0 ("HCRC"), and the
individuals listed at the foot of this Agreement, which individuals are the sole
stockholders of HCRC (the "Stockholders") (HCRC and the Stockholders are
hereinafter referred to collectively as the "Sellers").
RECITALS
WHEREAS, The Sellers own all of the assets used or useful in the video
rental business known as "Superior Video" ("Superior") carried out at the 27
stores (the "Stores") listed on the attached Exhibit A;
WHEREAS, Video Update wishes to acquire from the Sellers, and the
Sellers wish to transfer to Video Update, the Assets (as defined below) in
exchange for which Video Update shall issue and transfer certain consideration
on the terms and conditions set forth below; and
WHEREAS, the parties intend that this Agreement shall constitute a
complete transfer to Video Update of all of the Assets.
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the premises and the mutual representations, warranties and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. PURCHASE OF SUPERIOR ASSETS.
1.1 PURCHASE OF ASSETS. Subject to the terms, provisions and conditions
of this Agreement and upon the basis of the representations and warranties made
herein, at the Escrow Closing (as defined below) the Sellers shall assign and
transfer to Video Update all their right, title and interest in and to the
following assets used or usable in connection with the Superior business carried
on at the Stores and otherwise, except as specifically set forth on Schedule 1.1
(the "Assets"):
(a) All tangible property, wherever located, including without
limitation, inventory, leaseholds, leasehold improvements, security systems,
racking, fixtures, equipment, furniture, office furnishings, office equipment,
computers and peripherals, including but not limited to the tangible property
described on Schedule 1.1(a);
(b) All accounts or customer receivables, including, but not
limited to, those described on Schedule 1.1(b);
(c) All trade secrets, "know how," confidential information
and data;
(d) All customer lists, vendor lists, data bases, catalogues,
brochures, art work, sales literature, advertising buys, advertising material,
promotional material and other selling material related to Superior's customers
or marketing efforts;
(e) All books and records of the Superior business, including,
without limitation, all movie rental records, customer credit applications, all
invoices, purchase orders, files, documents, papers, computer files and/or other
records of any description and in any medium which pertain in any way to the
Superior business;
(f) All rights and obligations of the Sellers under all
material agreements as set forth on Schedule 1.1(f) and under all warranties,
licenses, governmental permits or licenses of any description, distribution and
franchise agreements, equipment leases, sales orders and purchase orders;
(g) All rights as a member in any cooperative association
and/or "buying group" and all supplier information;
(h) All rights, as licensee or otherwise, to use and employ in
its business existing computer systems, together with all associated hardware,
software, documentation, computer files and back up files;
(i) All rights to Superior's telephone number(s), fax
number(s), telex address(es) (if any), lock box(es) (if any) and post office box
address(es); and
(j) All other assets, tangible and intangible, wherever
located, related to and owned by the Sellers in connection with the Superior
business.
1.2 NO ASSUMPTION OF LIABILITIES. Video Update shall not be deemed by
anything in this Agreement to have assumed any liabilities of the Sellers of any
kind, character or nature and the indemnification provisions of Section 4 shall
apply with respect to any and all liabilities not expressly assumed by Video
Update in this Agreement.
1.3 PURCHASE PRICE.
(a) Consideration. At the Escrow Closing Date (as defined in
Section 1.4 below), Video Update shall:
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(i) pay to the Escrow Agent (as defined below) by
wire or certified check the sum of Twelve Million Five Hundred Thousand
Canadian Dollars ($12,500,000 (Cdn.)) (the "Cash Consideration"), which
amount shall be held in escrow by The Bank of America, Illinois (the
"Escrow Agent") in accordance with the Escrow Agreement annexed hereto
as Exhibit B (the "Escrow Agreement"); and
(ii) arrange for the issuance and delivery, within
five (5) business days following receipt of the Approval (as
hereinafter defined) and in accordance with the Sellers' instructions,
of Fifty Thousand (50,000) shares (the "Video Update Shares") of Class
A Common Stock, $.01 par value per share (the "Common Stock"), of Video
Update, Inc.
("VUI").
The Cash Consideration and Video Update Shares referenced herein
together with any closing adjustments agreed among the parties shall be the
total consideration (the "Purchase Price") for the Assets.
(b) Allocation of Purchase Price. The parties agree on the
allocation of the Purchase Price set forth in Schedule 1.3 for the Assets and
neither party shall take any position inconsistent with such allocation with any
taxing authority or other third party.
1.4 CLOSING.
(a) The signing of this Agreement has taken place at the
offices of VUI at St. Xxxx, Minnesota, or by facsimile transmission, on or
before the 1st day of April 1997 (the "Escrow Closing" or "Escrow Closing
Date"), notwithstanding the fact that the parties have not yet obtained the
approval of Investment/Industry/Heritage Canada for the transactions
contemplated by this Agreement (the "Approval"). All proceedings have been taken
and all documents have been executed and delivered by all parties at the Escrow
Closing and have been deemed to have been taken and executed simultaneously, and
no proceedings shall be deemed to have been taken nor any documents executed or
delivered until all have been taken, executed and delivered. At the Escrow
Closing:
(i) The Sellers have delivered to the Escrow Agent
all executed documents including without limitation, lease assignments
(without the consents of landlords (the "Landlords' Consents"), where
applicable) and bills of sale, necessary to transfer all right, title
and interest in and to the Assets to Video Update (which documents,
together with the documents referenced in Sections 1.4(a) (ii) through
(iv) below may hereinafter be referred to as the "Closing Documents"),
and Video Update has arranged for the issuance and delivery to the
Escrow Agent of the Purchase Price on the terms set forth in Section
1.3 hereof;
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(ii) The Sellers have delivered to Video Update all
documents of the Superior business not previously delivered to Video
Update including, without limitation, the final report of the Sellers'
independent accountants for the year ended November 30, 1996 and the
interim unaudited financial statements for the period ended January 31,
1997;
(iii) The Sellers have delivered an opinion of their
counsel dated the Escrow Closing Date in substantially the form set
forth in Exhibit C;
(iv) Video Update and the Sellers have entered into a
Management Services Agreement in the form annexed hereto as Exhibit D
(the "Management Agreement");
(v) Video Update and the Sellers have entered into
the Escrow Agreement;
(vi) Video Update and the Sellers have delivered an
election under section 167 of Part IX of the Excise Tax Act (Canada),
as now in effect, to be filed with Revenue Canada after the Release
Date;
(vii) The Sellers have delivered to Video Update
evidence satisfactory to Video Update that all taxes required to be
paid by the Sellers under the Retail Sales Tax Act of Ontario (the
"Retail Sales Tax Act") and similar legislation in the provinces in
which the Assets are located have been paid and, in the case of the
Retail Sales Tax Act, the delivery of a certificate issued under
section 6 of that statute as soon as practicable following the Escrow
Closing Date but in any event prior to the Release Date, which covers
all periods up to and including the Escrow Closing Date, shall
constitute satisfactory evidence for the purposes of the taxes required
to be paid under that statute.
(b) Following the Escrow Closing, on the fifth business day
following the issuance of the Approval, or such other date as agreed upon by the
parties (the "Release Date"), the Closing Documents and Purchase Price, less ten
percent (10%) of the Cash Consideration (the "Holdback Amount") shall be
released from escrow in accordance with the Escrow Agreement and the
transactions contemplated herein shall be given full force and effect and the
transactions contemplated hereby shall be formally closed, subject to:
(i) the fulfillment by the Sellers, or waiver by
Video Update, of the following conditions on the Release Date:
a. Representations and Warranties of the
Sellers to be True and Correct. The representations and
warranties of the Sellers set forth in Article Two hereof
shall be true and correct in all respects on the Release Date
with the same effect as though made at such time, including
without limitation, all representations as to liens or
encumbrances of or relating to the Assets. The Sellers shall
have performed all obligations and complied with all covenants
and conditions required
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by this Agreement to be performed or complied with by them or
it at or prior to the Release Date. The Sellers shall have
delivered to Video Update a certificate substantially in the
form of Exhibit E hereto, dated the Release Date and signed by
the Sellers evidencing compliance with this Section.
b. Opinion of Counsel to the Sellers. Video
Update shall have received an opinion from counsel to the
Sellers, dated the Release Date and in form and substance
satisfactory to Video Update in substantially the form of
Exhibit C.
c. No Material Change in the Business of
Superior. From the date of execution of this Agreement until
the Release Date, no material adverse change (individually or
in the aggregate) in the business, assets or prospects of the
Superior business shall have occurred and been caused by any
action, or failure to act when required to act, of any of the
Sellers. From the date of execution of this Agreement until
the Release Date, the Sellers shall not have entered into any
material agreement relating to the Assets or the Stores
without the prior written consent of Video Update; and
d. Legal Proceedings. No action or
proceeding by or before any court or any governmental body
(including any action by any landlord to terminate or
otherwise prevent Video Update from obtaining the use of any
Superior store location) shall have been instituted or
threatened to restrain, prohibit or invalidate the
transactions contemplated by this Agreement that might affect
the right of Video Update to own, control or use the Assets
after the Release Date or which, either individually or in the
aggregate, might be materially adverse to the operations,
business, financial condition or prospects of the Superior
business or Video Update.
(ii) the fulfillment by Video Update, or waiver by
the Sellers, of the following condition on or before the Release Date:
a. Representations and Warranties of Video
Update to be True and Correct. The representations and
warranties of Video Update under Article Three hereof shall be
true and correct in all respects at the Release Date with the
same effect as though made at such time. Video Update shall
have performed all obligations and complied with all covenants
and conditions required by this Agreement to be performed or
complied with by it prior to the Release Date. Video Update
shall have executed and delivered to the Sellers a certificate
of Video Update in the form of Exhibit F annexed hereto, dated
the Release Date and signed by an authorized officer to all
such effects.
(c) The Holdback Amount shall be released to the Sellers by
the Escrow Agent at the instruction of Video Update on the fifth business day
following the Release Date, provided that Video Update is reasonably satisfied
that the Assets have been transferred to Video Update in
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accordance with the terms of this Agreement (the "Holdback Condition"). In the
event that Video Update is not so satisfied, then Video Update and the Sellers
shall appoint a mutually acceptable arbitrator within seven business days
following the Release Date to determine whether the Holdback Condition has been
satisfied by the Sellers.
(d) If the Release Date has not occurred on or before June 30,
1997, then at the option of either party, the Closing Documents and Purchase
Price held by the Escrow Agent shall be returned to the parties who submitted
them in accordance with the Escrow Agreement, and this Agreement shall be
terminated and of no further force or effect.
(e) Where required, the Sellers agree to solicit and obtain
the Landlords' Consents from the landlords of the Stores and the Escrow Agent's
obligation to release the Closing Documents and the Purchase Price shall not be
relieved or diminished in the event that Video Update has not obtained all of
the Landlords' Consents on or prior to the date that the Escrow Agent is
obligated to release such items. The Sellers agree to use their best efforts to
obtain all of the Landlords' Consents.
(f) Following the Release Date, Video Update will pay all
retail sales taxes applicable to it as purchaser of the Assets as contemplated
under this Agreement.
(g) Within ten (10) business days following the Escrow Closing
Date, Video Update will count the videotape and video game inventory (the "Video
Inventory") included in the Assets. If any discrepancy exists between the count
conducted by Video Update and the count provided in the Schedules to this
Agreement, Video Update shall notify the Sellers of such discrepancy on the 11th
business day following the Escrow Closing Date. If such notification is not made
in a timely manner, Video Update shall not dispute at anytime thereafter the
count of the number of Video Inventory delivered hereunder. This Section 1.4(g)
relates solely to the count of the Video Inventory and does not affect any of
the representations and warranties made by the Sellers in Section 2 of this
Agreement, all of which shall remain in full force and effect.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers, jointly and severally, represent and warrant to
Video Update, upon which representations and warranties Video Update relies, and
which representations and warranties shall survive the Escrow Closing, as
follows:
2.1 OWNERSHIP OF ASSETS. The Sellers (i) are the sole owners of all of
the Assets and (ii) have good and marketable title to the Assets with full and
absolute authority to transfer the Assets to Video Update and (iii) none of the
Assets is subject to any mortgage, pledge, lien, security interest, lease,
charge, encumbrance, objection, claim or joint ownership except as set forth on
Schedule 2.1.
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2.2 AUTHORIZATION. HCRC is a corporation duly organized, validly
existing and in good standing under the laws of the Province of British
Columbia, and has full power to enter into this Agreement and to consummate the
transactions contemplated thereby. This Agreement has been duly and validly
authorized, executed, and delivered by each of the Sellers. This Agreement and
all other agreements and obligations entered into and undertaken in connection
with the transactions contemplated hereby to which each of the Sellers is a
party constitute the valid and legally binding obligations of each of the
Sellers, as applicable, enforceable against them in accordance with their
respective terms except insofar as enforceability may be limited by bankruptcy,
insolvency, or similar laws affecting the rights of creditors and general
equitable principles. The execution, delivery and performance by the Sellers of
this Agreement and the agreements provided for herein, and the consummation by
the Sellers of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate the
provisions of any by-law, charter, law, rule or regulation applicable to
Sellers; (b) violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (c) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any indebtedness, contract,
lease, license, permit, lien, charge or encumbrance upon the properties or
assets of the Superior business pursuant to, any indenture, mortgage, deed of
trust or other instrument or agreement to which any of the Sellers is a party or
by which any of the Assets is or may be bound or subject.
2.3 AUDITED FINANCIAL STATEMENTS.
(a) Superior Financial Statements. Annexed as Schedule 2.3(a)
are true and complete copies of management's final audited financial statements
as of November 30, 1996 and management's interim unaudited financial statements
as of January 31, 1997 (the "Financial Statements"). All such Financial
Statements are in accordance with the books and records of the Superior
business, and (i) present fairly and correctly the financial position of the
Superior business as of the respective dates and for the respective periods
indicated, (ii) include all required adjustments, and (iii) except as noted in
the preparation notes to the interim unaudited financial statements for the two
month period ended January 31, 1997, have been prepared in accordance with
Canadian generally accepted accounting principles applied on a basis consistent
with prior periods and practices.
(b) No Adverse Changes or Undisclosed Liabilities; Promotional
Activity. Except as set forth on Schedule 2.3(b), since November 30, 1996,
neither of the following has occurred or arisen, whether or not in the ordinary
course of business: (i) any material adverse change in the assets, financial
condition, operations or business of Superior, or (ii) any event, condition or
state of facts of any character known to the Sellers which might materially and
adversely affect the results of operations, business, financial condition or
prospects of the Superior business. Except as set forth on Schedule 2.3(b) no
liabilities or obligations, fixed, accrued, contingent or otherwise, exist with
respect to or in connection with the Assets or the Stores (including any default
or other liability for unpaid claims or debts under any lease) that are not
fully reflected or provided for on,
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or disclosed in the notes to, the Financial Statements except liabilities and
obligations incurred in the ordinary course of business since November 30, 1996.
Except as set forth on Schedule 2.3(b), none of the promotions and promotional
activities of the Sellers with respect to the Superior business shall obligate
Video Update, directly or indirectly, to continue such promotions or provide
anything of value to any party in connection with the same or in connection with
any other promotions or promotional activity of the Sellers after the Release
Date.
2.4 ACCOUNTS RECEIVABLE; INVENTORIES. Except as set forth on Schedule
2.4, (i) any accounts receivable reflected on the Financial Statements have been
collected or are collectible in the amounts shown, subject to a reasonable
allowance for doubtful accounts as set forth in the Financial Statements; (ii)
the inventories shown on the Financial Statements and the inventories acquired
since January 31, 1997 all as described on attached Schedule 2.4 consist of
items of a quantity and quality usable, rentable, or salable in the normal
course of the business of Superior; and (iii) the value at which the inventories
are carried on the Financial Statements reflect the lower of the Seller's cost
or net realizable market value.
2.5 TAX MATTERS.
(a) Except as set forth on Schedule 2.5 attached hereto, the
Sellers have paid all income taxes, capital gains taxes, withholding taxes,
capital taxes, sales and use taxes, goods and services taxes, business taxes, ad
valorem taxes, property taxes, excise taxes, customs and import duties, imposts,
rates, levies, assessments and fees, and all other taxes of every kind,
character or description, including all interest, fines, and penalties relating
thereto, imposed by any governmental or quasi-governmental authority, domestic
or foreign, whether federal, provincial, state, territorial or municipal
(collectively the "Taxes") required to be paid by the Sellers with respect to
Superior or the Assets for all periods prior to the Escrow Closing Date. No
outstanding assessments, reassessments, notices of determination, or notices of
any kind whatsoever, or increases in tax rates with respect to any such Taxes
exist. All reports, returns and other documents relating to or covering all such
Taxes, which are due or required to be filed at or prior to the date of Escrow
Closing have been duly filed or caused to be filed;
(b) None of the income tax returns for Taxes of HCRC, the
Stockholder or Superior has been audited by any taxing authority. No action,
suit, proceeding, audit, investigation or claim is pending or threatened in
respect of any Taxes for which any of the Sellers is liable, nor has any
deficiency or claim for any Taxes been proposed or asserted. No waiver of any
statute of limitations with respect to any taxation year has been executed by
the Sellers; and no agreement, waiver or consent providing for an extension of
time with respect to the assessment, reassessment or other determination of any
Taxes against the Sellers, and no power of attorney granted by the Sellers with
respect to any matters relating to Taxes is currently in force.
(c) The Sellers are not and will not be non-residents of
Canada for purposes of the Income Tax Act (Canada) (the "Income Tax Act") on the
Escrow Closing Date.
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(d) HCRC is a registrant for purposes of Part IX of the Excise
Tax Act (Canada), as now in effect (the "ETA"), whose registration number is
11983 8209 RT, and is not a financial institution within the meaning of the ETA;
and the Assets constitute all or substantially all of the property that can
reasonably be regarded as being necessary for Video Update to be capable of
carrying on the Seller's business as contemplated by section 167 of the ETA.
(e) All applicable retail sales tax was paid by the Sellers on
the initial acquisition of its tangible personal property and none of such
assets has been transferred at any time on a tax exempt basis under section 13
of regulation 1013 of the Retail Sales Tax Act of Ontario.
(f) The Sellers acknowledge and agree that, notwithstanding
completion of the transaction contemplated by this Agreement, the Sellers shall
continue to have sole responsibility and liability for the payment of tax
pursuant to the Employer Health Tax Act of Ontario or any similar legislation in
respect of all remuneration paid to employees of the Sellers in respect of
services provided during the period up to the Release Date (the "Pre-Release
Remuneration"), whether or not the same is paid by the Sellers or Video Update
and whether or not before or after the Release Date, provided, however, that the
Sellers shall not be liable for the payment of such tax during the period
between the Escrow Closing Date and the Release Date, but solely to the extent
that the Sellers are not in control of the payments that are required to be
made. At the written request of the Sellers, Video Update shall provide the
Sellers with particulars of all payments made by Video Update to employees of
the Sellers as Pre-Release Remuneration.
2.6 REQUIRED CONSENTS, NO DEFAULT. Except as described in Schedule 2.6,
neither the execution and delivery of this Agreement nor compliance by any of
the Sellers with its terms and provisions will require the affirmative consent,
approval, order or authorization of or any registration, declaration or filing
with any third party or authority. None of the Sellers is in default under
(notwithstanding the passage of time or notice) or in violation of any provision
of any indenture, mortgage, lease, loan or other agreement to which any is a
party or is bound or to which any of their properties is subject.
2.7 LITIGATION. Except as set forth on Schedule 2.7 attached hereto (a)
no action, suit or proceeding to which any of the Sellers is a party (either as
a plaintiff or defendant) is pending or threatened before any court or
governmental agency, authority, body or arbitrator and there is no basis for any
such action, suit or proceeding; (b) neither of the Sellers nor any officer,
director or employee of HCRC or Superior has been permanently or temporarily
enjoined by any order, judgment or decree of any court or any governmental
agency, authority or body from engaging in or continuing any conduct or practice
in connection with the business, assets, or properties of the Sellers or
Superior; and (c) there is not in existence on the date hereof any order,
judgment or decree of any court, tribunal or agency enjoining or requiring any
of the Sellers to take any action of any kind with respect to the business,
assets or properties of Superior.
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2.8 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker,
person or firm has or will have, as a result of any act or omission of any
Seller or any of its affiliates, any right, interest or valid claim against
Video Update for any commission, fee or other compensation or similar fee as a
finder or broker in connection with the transactions contemplated by this
Agreement.
2.9 COPIES OF DOCUMENTS. Upon request, the Sellers will make available
or cause Superior to make available for inspection and copying by Video Update
or its attorneys or accountants true and correct copies of all documents
referred to in this Section or in any schedule or exhibit delivered by any
Seller to Video Update in connection with this Agreement and any other
agreements and records of the Superior business that Video Update requests.
2.10 GOVERNMENTAL CONSENTS. Except as set forth on Schedule 2.10, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental or provincial
authority is required to be obtained or made by any Seller in connection with
the execution and delivery of this Agreement or the sale and delivery of the
Assets, as contemplated by this Agreement, except such filings as shall have
been made prior to and shall be effective on and as of the Escrow Closing.
2.11 COMPLIANCE WITH AGREEMENTS AND LAWS. The Sellers have all
requisite licenses, permits and certificates, including environmental, health
and safety permits, from federal, provincial and local authorities necessary to
conduct the Superior business as currently conducted (collectively, the
"Permits"). The business of Superior as conducted through the date hereof has
not violated any federal, provincial, local or foreign laws, regulations or
orders (including, but not limited to, any of the foregoing relating to
employment discrimination, occupational safety, environmental protection,
hazardous waste, conservation, or corrupt practices). Except as set forth on
Schedule 2.11, no Seller has had notice or communication from any federal,
provincial or local governmental or regulatory authority or otherwise of any
such violation or noncompliance.
2.12 EMPLOYEE RELATIONS.
(a) With respect to the operation of the Superior business,
the Sellers are in compliance with all federal, provincial, state and municipal
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and it is not engaged in any unfair labor
practice, and there are no arrears in the payment of wages or social security
taxes.
(b) Except as set forth on Schedule 2.12 attached hereto:
(i) none of the employees of the Sellers are
represented by any labor union;
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(ii) there is no unfair labor practice complaint
against the Sellers or the Superior business pending before any
federal, provincial or local agency; and
(iii) there is no pending labor strike or other
material labor trouble affecting the Superior business (including,
without limitation, any organizational drive).
(c) All liabilities in respect of employees have or shall have
been paid to the Escrow Closing, including, but not limited to, premium
contributions, remittance and assessments for unemployment insurance, employer
health tax, Canada Pension Plan, income tax, workers' compensation and any other
employment related legislation, accrued wages, taxes, salaries, commissions and
employment benefit plan payments. There are no outstanding, pending, threatened
or anticipated assessments, actions, causes of action, claims, complaints,
demands, orders, prosecutions or suits against the Sellers, its directors,
officers or agents, pursuant to or under any applicable rules, regulations,
orders or laws, including, but not limited to, Canada Pension Plan, unemployment
insurance, income tax, employer health tax, employment standards, labour
relations, occupational health and safety, human rights, workers' compensation
and pay equity.
2.13 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 2.13 attached hereto, since January 31, 1997 no Seller has entered into
any transaction that is not in the usual and ordinary course of business. Other
than as specifically described on Schedule 2.13, no Seller is a party to any
material leases, contracts, franchises or commitments or agreements to enter
into any of the same, written or oral, extending beyond the Escrow Closing.
2.14 SUPERIOR PERSONNEL INFORMATION. Schedule 2.14 attached hereto is a
true and complete list, as of the date of this Agreement, setting forth:
(a) The names of all persons, if any, holding powers of
attorney from the Sellers, and a summary statement of the terms thereof;
(b) The name and address of each bank or other institution in
which the Sellers has established an account for investment, deposit, checking,
savings or borrowing, or through which credit is extended, a brief description
thereof, and the names and titles of authorized signers and limits, if any;
(c) The names of all employees of the Sellers with respect to
the Superior business, for whom the Sellers shall have provided to Video Update
addresses, annual compensation and social security numbers, and all independent
contractors, consultants, subcontractors with whom the Sellers have any legal
obligations, and more specifically any legal obligations that may affect the
Assets, extending beyond the Escrow Closing Date or any legal obligation that
may result in a claim against Video Update arising from any relationships during
the 12 months preceding the date of this Agreement, and the social insurance
numbers and their commission and monies owed or paid by the Sellers to such
independent contractors, consultants and subcontractors during said 12 month
period.
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All of the Sellers' independent contractors, consultants and subcontractors have
been treated as such by the Sellers and have not been and never have been
treated as employees of the Sellers for which any withholding taxes or other
applicable tax may be due from the Sellers.
(d) All contracts or terms, whether written or oral, pursuant
to which the Sellers have been or are receiving services.
2.15 DISCLOSURE. No representation or warranty by any of the Sellers
(individually or collectively) in this Agreement, nor any statement, certificate
or Schedule furnished or to be furnished to Video Update by or on behalf of any
of the Sellers pursuant to or in connection with this Agreement nor any document
or certificate delivered to Video Update pursuant to or in connection with this
Agreement contains or will contain any untrue or misleading statement of a
material fact or omits or will omit to state a material fact reasonably related
to the transactions covered by this Agreement, and all such representations and
warranties are and on the Escrow Closing will be accurate and complete in all
material respects.
3. REPRESENTATIONS AND WARRANTIES OF VIDEO UPDATE.
Video Update represents and warrants to the Sellers, upon which
representations and warranties the Sellers rely, as follows:
3.1 ORGANIZATION AND RELATED MATTERS. Video Update is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has full corporate power to enter into this
Agreement and to consummate the transactions contemplated hereby.
3.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and performance
of this Agreement by Video Update have been duly and validly authorized and
approved by the Board of Directors of Video Update and no other proceedings on
the part of Video Update are necessary to authorize the execution, delivery and
performance of this Agreement by Video Update.
4. INDEMNIFICATION
4.1 SUBJECTS INDEMNIFIED AGAINST BY THE SELLERS. The Sellers, jointly
and severally, agree to defend, indemnify and hold harmless Video Update
(including any director, officer, employee, representative or agent), and its
successors and assigns, from and against any and all damages, losses and
expenses suffered by Video Update, or any subsidiary or parent of Video Update,
resulting from (i) any breach of warranty or agreement or non-fulfillment of any
obligation on the part of the Sellers (individually or together) under this
Agreement (including the Schedules and Exhibits to this Agreement), (ii) any
misrepresentation in this Agreement or in any Schedule, Exhibit, certificate or
other instrument furnished by the Sellers to Video Update hereunder or any
failure to state herein or in any such Schedule, Exhibit, certificate or
instrument any fact required by
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the terms hereof or therein to be stated or necessary to be stated in order to
make the statements made herein or therein not misleading, (iii) all demands,
assessments, judgments, settlements, reasonable costs and legal and other
expenses arising from or in connection with any action, suit, proceeding or
claim by any third party resulting in damage or loss to Video Update or any
subsidiary or parent of Video Update as a consequence of any such
misrepresentation, breach of warranty or nonfulfillment of obligation, and (iv)
the matters described on Schedule 2.7 entitled Litigation.
4.2 CONDITIONS TO INDEMNIFICATION. The obligations and liabilities of
the Sellers hereunder with respect to their respective indemnities pursuant to
this Section, resulting from any claim or other assertion of liability by third
parties, shall be subject to the following terms and conditions:
(a) Video Update or any of its subsidiaries or its parent
seeking indemnification (the "Indemnified Party") shall give the Sellers or
Seller, as the case may be (the "Indemnifying Party"), notice in writing within
sixty (60) days of (i) any claim or potential claim, (ii) the commencement of
any action or proceeding, or (iii) the occurrence of any other event giving rise
to indemnification rights under this Section. The individual or corporation
receiving notice of such claim, commencement of such action or proceeding or the
occurrence of such event shall give the Indemnifying Party written notice of
such claim, the commencement of such action or proceeding or the occurrence of
such event and, in each case, the basis therefor, provided, however, that
failure to give such notice within such sixty (60) day period shall not affect
the liability of the Indemnifying Party under this Agreement unless the failure
to give such notice within such time period materially adversely affects the
Indemnifying Party's ability to defend itself against the claim giving rise to
Indemnified Party's claim for indemnification or to cure the default giving rise
to such claim. With respect to threatened or asserted claims of third parties,
the Indemnifying Party shall have the right to control the defense of such claim
by counsel of its own choosing, provided that the Indemnified Party shall have
the option at its expense to cooperate in such defense with counsel of its
choosing. If the Indemnified Party is named as a party against which claim is
asserted or action or proceeding is commenced, the Indemnifying Party shall have
the right (i) to defend any such claim, action or proceeding brought by a third
party of which notice has been delivered pursuant hereto and, (ii) to compromise
or settle such claim, action or proceeding brought by a third party of which
notice has been delivered pursuant hereto. In the event that the Indemnified
party shall undertake to compromise, settle or defend any such asserted
liability, it shall promptly notify the Indemnifying Party of its intention to
do so and the terms of such compromise or settlement, and the Indemnifying Party
agrees to cooperate in the compromise of, or defense against, any such asserted
liability. In any event, the Indemnified Party shall have the right at their own
expense to participate in any claim, action or proceeding which is being
defended by another party.
(b) If the Indemnifying Party within thirty (30) days after
notice of a claim hereunder fails to defend such claim, the Indemnified Party
shall be entitled to undertake the defense, compromise or settlement of such
claim at the reasonable expense of and for the account and risk
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of the Indemnifying Party subject to the right of the Indemnifying Party to
cooperate in the defense of such claim at any time prior to the settlement,
compromise or final determination thereof.
(c) The Indemnifying Party will not, without Indemnified
Party's written consent, settle or compromise any claim or consent to any entry
or judgment which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnified Party of a release from all
liability with respect to such claim, provided, however, that should the
Indemnified Party assume the control of the defense of a claim, the Indemnified
Party shall have the authority to settle or compromise any claim or consent to
any entry of judgment, without the Indemnifying Party's prior consent.
4.3 PAYMENT FOR INDEMNIFICATION. The Sellers shall pay to Video Update
the amount of established claims for indemnification within fifteen (15) days
after the establishment thereof (the "Due Date") in cash or by certified check.
Video Update may set off the amount of any claim (or cancel Video Update Shares
in respect of such claim) due it from the Sellers against any amount due to the
Sellers, including without limitation the Holdback Amount. Any amounts not paid
by the Sellers when due under this Section shall bear interest from the Due Date
thereof until the date paid at the prime interest rate per annum, as published
in The Wall Street Journal, plus three percent (3%).
4.4 SURVIVAL OF INDEMNIFICATION. The indemnification provided in this
Section shall survive the Escrow Closing.
4.5 INTENT OF PARTIES. The parties hereto intend for the
indemnification provisions of this Section to be construed as a full
indemnification in accordance with its terms, notwithstanding the use of any
"substantial" or "material" standard contained elsewhere in this Agreement. Any
remedies of Video Update shall be cumulative and not exclusive. Specifically,
but not by way of limitation, the parties make no attempt to limit any claims
based on common law fraud or other similar remedies.
5. DISCLOSURE OF INFORMATION
(a) With respect to the operations of Superior, each of the Sellers
recognizes and acknowledges that (i) all plans, systems, methods, designs,
procedures, books and records relating to the operations, personnel and
practices (whether instituted or commenced prior or subsequent to the date
hereof) of the Superior business at the Stores, and (ii) all other records,
documents and information concerning Superior's business activities, practices,
and procedures at the Stores, may constitute valuable, special and unique assets
of the business of Superior to be acquired by Video Update. Each of the Sellers
therefore covenants and agrees that he or she or it will not, following the date
of this Agreement, disclose any part thereof that is confidential to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever.
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(b) Each of the Sellers acknowledges that the restrictions contained in
this Section, in view of the nature of the Superior business, are reasonable and
necessary to protect its legitimate interests, and that any violation thereof
could result in irreparable injuries to Video Update. Each of the Sellers
therefore acknowledges that, in the event of a breach or threatened breach of
the provisions of this paragraph by the Sellers, Video Update shall be entitled
to request from any court of competent jurisdiction, preliminary and permanent
injunctive relief restraining the Sellers from disclosing any such records,
documents or information.
6. REGISTRATION RIGHTS
(a) For purposes of this Section:
(i) The term "1933 Act" means the Securities Act of 1933, as
amended;
(ii) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the 1933 Act and the declaration or
ordering of effectiveness of such registration statement (other than in
connection with a merger or pursuant to Form X-0, X-0, or S-8 or any
other comparable registration statement);
(iii) The term "Registrable Securities" means the Video Update
Shares issued pursuant to this Agreement and any common stock or other
securities of VUI issued as a dividend or other distribution with
respect to, or in exchange, in conversion of or in replacement of, the
Video Update Shares;
(iv) The term "Holder" means the entity or entities to whom
the Registrable Securities are issued pursuant to this Agreement;
(v) The term "Company" means Video Update, Inc., a Delaware
corporation.
(b) From and after the Release Date and continuing for two (2) years
thereafter, on any one occasion, if any, that the Company contemplates a public
offering of shares of its Common Stock to be registered under the 1933 Act, the
Company shall so notify the Holder in writing at least five (5) business days
prior to the filing of a registration statement in respect of the offering of
its intention to do so. If the Holder gives written notice to the Company,
within five (5) business days of the receipt of such notice from the Company, of
its desire to have any of the Registrable Securities included in such
registration statement, it may, subject to the provisions of this Section, have
the Registrable Securities included in such registration statement.
(c) In the case of any registration effected pursuant to this Section,
the Holder shall bear all additional registration and qualification fees and
expenses (including underwriters' discounts, commissions and expenses), but not
legal, accounting or printing expenses of such registration, with
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such additional expenses of the registration being borne by all Holders pro-rata
on the basis of the amount of securities so registered; provided, however, that
if any such cost or expense is attributable solely to one selling Holder and
does not constitute a normal cost or expense of such registration, such cost or
expense shall be allocated to that selling Holder. In addition, each selling
Holder shall bear the fees and costs of any separate counsel it may select.
(d) Notwithstanding the foregoing, with respect to any underwritten
offering, if the managing underwriter or underwriters of any offering, in its
sole discretion, determines that the number of Registrable Securities proposed
to be included in the registration statement and sold by the Holders would
materially and adversely affect the successful marketing of the securities
proposed to be registered and sold for the account of the Company, then the
number of Registrable Securities to be offered for the account of the Holders
shall be reduced (or, if necessary, excluded) to the extent necessary to reduce
the total amount of the securities to be included in the offering to the amount
recommended by the managing underwriter or underwriters and the securities so
included shall be apportioned pro rata among all stockholders holding
registration rights with the Company according to the total amount of
Registrable Securities of the Company owned by such stockholder and for which
registration is requested, compared to the total amount of securities to be
registered on behalf of such stockholders.
(i) In the case of a registration of which the Company is
given notice pursuant to this Section, if such registration is for an
underwritten offering and the underwriter determines not to include all
of the Registrable Securities requested to be registered in the
underwriting, the balance of such shares permitted to be included in
the registration shall, at the request of the Holders thereof, and
subject to the approval of the managing underwriter, be included in the
registration statement, provided that the Holders thereof agree not to
dispose of such shares until a date reasonably determined by the
underwriter pursuant to a "Lock-Up Agreement" or "Standstill Agreement"
in a form satisfactory to the underwriter, provided such "Lock-up
Agreement" or "Standstill Agreement" shall not exceed one hundred
eighty (180) days. Notwithstanding the foregoing, if a Holder owns five
percent (5%) or more of the Company's Common Stock (including shares
issuable pursuant to the exercise of Class A Warrants, Class B
Warrants, and/or stock options that have been granted under the
Company's stock option plans) that is issued and outstanding at the
time of an offering contemplated in this Section, then such Holder
shall agree not to dispose of his shares until a date reasonably
determined by the underwriter pursuant to a "Lock-Up Agreement" or
"Standstill Agreement" in a form satisfactory to the underwriter, and
such "Lock-Up Agreement" or "Standstill Agreement" shall not be subject
to the one hundred eighty (180) day limit described above. The Company
shall have the right to designate the managing underwriter in respect
of a public offering pursuant to this Section.
(e) Whenever required under this Section to effect the registration of
any Registrable Securities, the Company shall:
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(i) Prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement with respect to such
Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective; provided,
however, that in connection with any proposed registration intended to
permit an offering of any securities from time to time, the Company
shall in no event be obligated to cause any such registration to remain
effective for more than one hundred eighty (180) days.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement.
(iii) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered
by the registration statement, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such states or jurisdictions, and further provided that (anything
in this Agreement to the contrary notwithstanding with respect to the
bearing of expenses) if any jurisdiction in which the securities are to
be qualified shall require that expenses incurred in connection with
the qualification of the securities in that jurisdiction be borne by
selling shareholders, then such expenses shall be payable by selling
shareholders pro-rata, to the extent required by such jurisdiction.
(f) It shall be a condition precedent to the obligations of the Company
to take any action pursuant to this Section that the Holders hereby agree not to
sell, transfer, pledge, hypothecate or encumber the Video Update Shares held by
them for a period of thirteen months from the date of this Agreement.
(g) Whenever the Registrable Securities are to be registered pursuant
to this Section, the Holder shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such Registrable Securities as the Company or its
counsel shall request and as shall be required in connection with the action to
be taken by the Company.
(h) In the event any Registrable Securities are included in a
registration statement under this Section:
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(i) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder requesting or joining in a registration,
any underwriter (as defined in the 0000 Xxx) for it, and each person,
if any, who controls such Holder or underwriter within the meaning of
the 1933 Act, against any losses, claims, damages, or liabilities,
joint or several, to which they may become subject under the 1933 Act
or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based on any untrue
or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading or arise out of
any violation by the Company of any rule or regulation promulgated
under, or any provision of, the 1933 Act applicable to the Company and
relating to action or inaction required of the Company in connection
with any such registration; and will reimburse each such Holder, such
underwriter, or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section shall
not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the
written consent of the Company (which consent shall not be unreasonably
withheld) nor shall the Company be liable in any such case for any such
loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity
with information furnished in connection with registration by any such
Holder, underwriter, or controlling person.
(ii) To the extent permitted by law, each Holder requesting
or joining in a registration will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed
the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, and each agent and any
underwriter for the Company (within the meaning of the 0000 Xxx)
against any losses, claims, damages, or liabilities to which the
Company or any such director, officer, controlling person, agent, or
underwriter may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages, or liabilities to which the
Company or any such director, officer, controlling person, agent, or
underwriter may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case
-18-
to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration statement,
preliminary or final prospectus, or amendments or supplements thereto,
in reliance upon and in conformity with information furnished by such
Holder for use in connection with such registration, and each such
Holder will reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, controlling person,
agent, or underwriter in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that
the indemnity agreement contained in this Section shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld).
(iii) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this subsection, notify the
indemnifying party who shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume the defense thereof
with counsel mutually satisfactory to the parties. The failure to
notify an indemnifying party promptly of the commencement of any such
action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified
party under this subsection, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may
have to any indemnified party otherwise than under this Section.
(i) The registration rights of the Holders under this Section may not
be transferred to any transferee of any Registrable Securities without the
Company's prior written consent.
(j) In consideration for the Company agreeing to its obligations under
this Section, the Holders whose Registrable Securities are included in any
registration of the Company's securities shall agree, upon the request of the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of such underwriters, for
such period of time (not to exceed ninety (90) days) from the effective date of
such registration as the underwriters may specify.
(k) Notwithstanding anything to the contrary in this Section, the
Company shall not be required to register any Registrable Securities that, at
the time such registration would occur, (i) may be sold pursuant to Rule 144 or
any other exemption from registration under the 1933 Act or (ii) have already
been registered.
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7. RESTRICTIVE COVENANT
(a) HCRC agrees that for a period of three (3) years from the Escrow
Closing, neither it nor its respective successors or assigns shall engage
directly as a principal or indirectly as (i) an advisor, (ii) an agent (whether
a salesperson or otherwise), (iii) a broker, or (iv) a partner, coventurer,
stockholder or other proprietor owning directly or indirectly more than five
percent (5%) interest in any firm, corporation, partnership, trust, association,
or other organization, in the sale, rental or service of any asset, part or
product rented, sold, offered, featured or otherwise included in the business of
Superior prior to the Escrow Closing, within a twenty (20) mile radius of (x)
any of the Stores identified on Exhibit A, (y) any of the franchise locations
identified on Schedule 1.1(f), or (z) any other stores of Video Update or VUI
located in Canada as set forth on Exhibit G annexed hereto; provided, however,
that HCRC may continue to operate its head office located at 000 X Xxxxx
Xxxxxxxx, Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0 so long as such location
does not house a retail video store.
(b) HCRC acknowledges that the restrictions contained in this Section,
in view of the nature of the business in which Video Update is engaged, are
reasonable and necessary to protect the legitimate interests of Video Update,
and that any violation thereof could result in irreparable injuries to Video
Update. HCRC further acknowledge and agree that, in the event of a breach or
threatened breach of the restrictions of this Section, by HCRC, Video Update
shall be entitled to request from any court of competent jurisdiction,
preliminary and permanent injunctive relief restraining it (or its respective
successors, assigns, or transferees) from any violation of the foregoing.
(c) Nothing herein shall be construed as prohibiting Video Update from
pursuing any other remedies available for such breach or threatened breach,
including recovery of damages and an equitable accounting of all earnings,
profits and other benefits arising from such violation, from HCRC.
(d) Each of the Sellers acknowledges the intention that Video Update
shall have the broadest possible protection of the value of the business of
Video Update in the trade areas set forth above (to the extent that the business
is actively conducted in any such trade area as of the Escrow Closing)
consistent with public policy, and it will not violate the intent of the parties
if any court of competent jurisdiction should determine, in an appropriate
decree, that, consistent with established precedent of the forum state or
province, the public policy of such state or province requires a more limited
restriction in geographical area or duration of the aforesaid covenant.
8. GENERAL
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the Sellers contained herein or in any
Schedule, Exhibit or certificate delivered hereunder shall survive the Escrow
Closing Date, shall remain in full force and effect and shall be unaffected by
any investigation made by Video Update hereunder. All covenants and agreements
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contained herein which are to be performed or fulfilled after the Escrow Closing
Date shall survive and remain in full force and effect.
8.2 PRESS RELEASES. Unless approved in advance by Video Update, neither
of the Sellers shall issue any press release or written statement for general
circulation relating to the transactions contemplated hereby, except as required
by law in the opinion of their counsel.
8.3 PAYMENT OF EXPENSES. Whether or not the transactions contemplated
hereby are consummated, Video Update shall pay its own expenses, and the Sellers
shall pay their own expenses, in connection with the negotiation, authorization,
preparation, execution and performance of this Agreement, including, without
limitation, all fees and expenses of investment banking firms, agents,
representatives, counsel and accountants.
8.4 GOVERNING LAW. This Agreement shall be governed in all respects,
whether as to validity, construction, capacity, performance or otherwise, by the
internal laws of the State of Minnesota in which it has been executed and in
which it has a situs, without regard to its conflict of laws provisions. If any
provision of this Agreement shall be held invalid by a court with jurisdiction
over the parties to this Agreement, then and in that event such provision shall
be deleted from the Agreement, which shall then be construed to give effect to
the remaining provisions thereof. Each of the Sellers consents to the exclusive
jurisdiction of the courts of the Province of Ontario, and any federal or
provincial court located therein, and to the appropriateness of the venue of
such courts, in connection with any dispute which may arise pursuant to this
Agreement or is related to the transactions contemplated hereby.
8.5 NOTICES. Any payments, notices or other communications required or
permitted hereunder shall be given in writing and deemed to have been properly
given if and when delivered personally or if sent by facsimile transmission or
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
if to Video Update or VUI: Video Update, Inc.
0000 Xxxxx Xxxxx Xxxxxx
00 Xxxx Xxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx,
Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to: Xxxxxxxx X. Xxxxxxx, Esquire
X'Xxxxxx, Broude & Xxxxxxx
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
if to HCRC: Hill and Xxxxxxx Retail Corp.
000 X Xxxxx Xxxxxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Xxxxx Xxxx, President
Facsimile: (000) 000-0000
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or if to the Stockholders: Xxxxx Xxxx
000-000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Xxxxxxxx Xxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Xxx Xxxxxxx
0000 Xxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
in each case with a copy to: Xxxxxxx X. Xxxxxxx, Esquire
Cundari & Company Law Corporation
First Bank Tower
No. 000, 000-0xx Xxxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Facsimile: (000) 000-0000
or such other address as shall be furnished in writing by any party, and any
such payment, notice or communication shall be deemed to have been made or given
on the date of actual receipt.
8.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors,
assigns, heirs, executors, administrators and legal representatives, provided,
however, that no Seller shall assign any of his, her or its rights or delegate
any of its obligations hereunder to any party without the prior written consent
of Video Update.
8.7 HEADINGS. The descriptive headings of the several Sections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
8.8 COUNTERPARTS. This Agreement may be executed originally or by
facsimile and in one or more counterparts, all of which together shall be
considered one and the same agreement.
8.9 WAIVER. The failure of any party to this Agreement at any time or
times to required performance of any provision hereof shall in no manner affect
such party's right at a later time to enforce the same. No waiver by any party
of any condition, or of the breach of any term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such
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condition or breach or a waiver of any other condition or the breach of any
other term, covenant, representation or warranty of this Agreement.
8.10 ENTIRE AGREEMENT. This Agreement together with its Exhibits and
Schedules contain the entire agreement among the parties hereto with respect to
the transactions contemplated herein, and supersedes all prior agreements and
understandings, whether written or oral, among the parties hereto with respect
to the subject matter of this Agreement.
8.11 ADDITIONAL ACTIONS. Video Update and the Sellers agree to execute
and deliver such other documents, certificates, agreements and other writings,
including, but not limited to, any consents required to complete the transfer of
the rights and benefits of the Sellers under the lease, franchise and other
agreements listed in the Schedules to this Agreement, and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been signed by a duly authorized
officer of Video Update and by each of the Sellers as of the day and year first
above written.
VIDEO UPDATE CANADA INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxx
President
HILL AND XXXXXXX RETAIL CORP.
By: /s/ Xxxxx Xxxx
-----------------------------
Xxxxx Xxxx
President
XXXXX XXXX
/s/ Xxxxx Xxxx
--------------------------------
XXXXXXXX XXXX
/s/ Xxxxxxxx Xxxx
--------------------------------
XXX XXXXXXX
/s/ Xxx Xxxxxxx
--------------------------------
SOLELY WITH RESPECT TO SECTION 6:
VIDEO UPDATE, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxx
Chief Executive Officer
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LIST OF EXHIBITS AND SCHEDULES
EXHIBIT TITLE
------- -----
A List of Stores
B Escrow Agreement
C Opinion of Counsel to Sellers
D Management Services Agreement
E Release Date Certificate for Sellers
F Release Date Certificate for Video Update
G List of Video Update Stores Located in Canada
SCHEDULE TITLE
-------- -----
1.1 Excluded Assets
1.1(a) Tangible Property
1.1(b) Accounts and Customer Receivables
1.1(f) Material Agreements
1.3(b) Allocation of Purchase Price
2.1 Encumbrances on Assets
2.3(a) Financial Statements
2.3(b) Statement of Adverse Changes, Undisclosed Liabilities and
Promotional Activities
2.4 Exceptions to Accounts Receivable and Usable Inventory
2.5 Exceptions to Tax Payments
2.6 Required Consents
2.7 Litigation
2.10 Governmental Consents
2.11 List of Violations or Non-compliance with Agreements and Laws
2.12 List of Labor Unions, Unfair Practices and other Labor Matters
2.13 List of Transactions Not in the Ordinary Course of Business and Contracts
Extending Beyond the Escrow Closing
2.14 List of Powers of Attorney, Deposit Accounts, Signing Authorities, and of
Employees and Service Contracts
Copies of the Exhibits and Schedules will be provided to the Commission upon request.
